-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AyrCVN4I6IBG5ppIr1wncoIZXLAPd46nU+pBv/yZjgr+1TD9m9y/BnPhPCZtJ+0W 6IXq60G0oY7DYUGvqd5ioA== 0000070415-03-000020.txt : 20030819 0000070415-03-000020.hdr.sgml : 20030819 20030819155858 ACCESSION NUMBER: 0000070415-03-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GP STRATEGIES CORP CENTRAL INDEX KEY: 0000070415 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 131926739 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07234 FILM NUMBER: 03855820 BUSINESS ADDRESS: STREET 1: 777 WESTCHESTER AVENUE STREET 2: FOURTH FLOOR CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 914-249-9700 MAIL ADDRESS: STREET 1: 777 WESTCHESTER AVENUE STREET 2: FOURTH FLOOR CITY: WHITE PLAINS STATE: NY ZIP: 10604 FORMER COMPANY: FORMER CONFORMED NAME: NATIONAL PATENT DEVELOPMENT CORP DATE OF NAME CHANGE: 19920703 10-Q 1 gp10q.txt GPX 10Q - JUNE 30, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------------------------------------ Commission File Number: 1-7234 ------------------------------------------------- GP STRATEGIES CORPORATION - ------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Delaware 13-1926739 - ------------------------------------ ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 777 Westchester Avenue, White Plains, NY 10604 - ----------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (914) 249-9700 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period) that the registrant was required to file such reports and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12(b)-2 of the Exchange Act). Yes No X Indicate the number of shares outstanding of each of issuer's classes of common stock as of August 11, 2003: Common Stock 16,161,902 shares Class B Capital 1,200,000 shares GP STRATEGIES CORPORATION AND SUBSIDIARIES TABLE OF CONTENTS Page No. Part I. Financial Information Item 1. Financial Statements (Unaudited) Consolidated Condensed Balance Sheets - June 30, 2003 and December 31, 2002 1 Consolidated Condensed Statements of Operations- Three Months and Six Months Ended June 30, 2003 and 2002 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 2003 and 2002 4 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 21 Item 3. Quantitative and Qualitative Disclosure About Market Risk 29 Item 4. Controls and Procedures 29 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 30 Signatures 32 PART I. FINANCIAL INFORMATION GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands)
June 30, December 31, 2003 2002 --------- ------------- ASSETS (unaudited) Current assets - -------------- Cash and cash equivalents $ 827 $ 1,516 Accounts and other receivables 24,499 26,708 Inventories 1,425 1,380 Costs and estimated earnings in excess of billings on uncompleted contracts 13,451 14,177 Prepaid expenses and other current assets 4,472 4,079 ---------- ---------- Total current assets 44,674 47,860 ---------- --------- Investments, marketable securities and note receivable 11,552 14,130 Property, plant and equipment, net 7,552 8,299 Intangible assets Goodwill 57,542 57,491 Patents and licenses, net 708 755 ---------- ----------- 58,250 58,246 ---------- ---------- Deferred tax asset 11,439 10,846 Other assets 5,923 5,524 ---------- ----------- $139,390 $144,905 ======== ========
See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Continued) (in thousands)
June 30, December 31, 2003 2002 ---------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) Current liabilities: Current maturities of long-term debt $ 1,200 $ 3,610 Short-term borrowings 21,230 22,058 Accounts payable and accrued expenses 16,708 17,552 Billings in excess of costs and estimated earnings on uncompleted contracts 3,551 3,860 -------- ---------- Total current liabilities 42,689 47,080 ------- --------- Long-term debt less current maturities 2,513 3,302 Other non-current liabilities 1,131 1,541 Stockholders' equity Common stock 161 154 Class B capital stock 12 12 Additional paid in capital 194,572 189,988 Accumulated deficit (96,736) (93,167) Accumulated other comprehensive income (619) 460 Note receivable from stockholder (4,095) (4,095) Treasury stock, at cost (238) (370) --------- ------------ Total stockholders' equity 93,057 92,982 --------- ---------- $139,390 $144,905 ======== ========
See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share data)
Three months Six months ended June 30, ended June 30, 2003 2002 2003 2002 Sales $36,038 $ 39,242 $72,125 $ 79,468 Cost of sales 31,725 34,337 63,984 69,115 ------ -------- ------ ------ Gross margin 4,313 4,905 8,141 10,353 ------- --------- ------- ------ Executive incentive compensation bonus (1,000) (1,000) Non-cash debt conversion expense, net (622) (622) Other selling, general & administrative expenses (4,741) (4,737) (9,164) (9,277) ------- ------- --------- ------- Total selling, general & administrative expenses (6,363) (4,737) (10,786) (9,277) ------- --------- ------- ------- Interest expense (592) (675) (1,188) (1,429) Investment and other income (loss), net 502 (303) 662 (738) Gain on marketable securities 138 846 212 1,286 Restructuring (charge) reversal (218) 140 (218) 354 --------- ------- ----------- -------- (Loss) income before income taxes (2,220) 176 (3,177) 549 Income tax expense (646) (113) (392) (281) --------- -------- ----------- --------- Net (loss) income $(2,866) $ 63 $(3,569) $ 268 ======== ======== ======= ========= Net (loss) income per share: Basic and diluted $ (.17) $ (.01) $ (.21) $ - ========= ========= ========== ============= Dividends per share none none none none ========== ========= =========== =========
See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Six months ended June 30, 2003 2002 ------- ------- Cash flows from operations: Net (loss) income $(3,569) $ 268 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 1,758 1,320 Non-cash debt conversion expense, net 622 Issuance of stock for retirement savings plan 628 394 Non-cash (credit) charge to compensation and consultant fees (306) 240 (Income) loss on equity investments (307) 1,086 Restructuring charge (reversal) 218 (354) Gain on marketable securities (212) (1,286) Changes in other operating items 1,784 (2,142) -------- -------- Net cash provided by (used in) operating activities 616 (474) --------- --------- Cash flows from investing activities: Proceeds from sale of marketable securities 752 1,883 Proceeds from note receivable 500 Additions to property, plant and equipment (398) (344) Increase in investments and other assets, net (1,043) (880) ---------- ---------- Net cash (used in) provided by investing activities (189) 659- ----------- ---------- Cash flows from financing activities: Net proceeds from sale of Common Stock 7,950 Net proceeds from sale of Class B Stock 1,260 Proceeds for exercised stock options 377 Repayment of short-term borrowings (828) (8,213) Repayments of long-term debt (559) (349) ----- --------- Net cash (used in) provided by financing activities (1,010) 648 ---------- -------- Effect of exchange rate changes on cash and cash equivalents (106) (268) ----------- ---------
GP STRATEGIES CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued) (Unaudited) (in thousands)
Six months ended June 30, 2003 2002 -------- --------- Net (decrease) increase in cash and cash equivalents $ (689) $ 565 Cash and cash equivalents at the beginning of the period 1,516 1,705 -------- -------- Cash and cash equivalents at the end of the period $ 827 $ 2,270 ======== ======== Cash paid during the periods for: Interest $ 699 $ 1,066 ======= ======== Income taxes $ 231 $ 228 ======= =========
See accompanying notes to the consolidated condensed financial statements. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation GP Strategies Corporation (the "Company") currently has three operating business segments. Two of these segments, the Manufacturing & Process Segment and the IT Segment, are managed through the Company's principal operating subsidiary General Physics Corporation ("GP") and the third segment through its operating subsidiary MXL Industries ("MXL"). GP is a global workforce development company that improves the effectiveness of organizations by providing training, management consulting, e-Learning solutions and engineering services that are customized to meet the needs of specific clients. Clients include Fortune 500 companies, manufacturing, process and energy companies, and other commercial and governmental customers. The accompanying Consolidated Condensed Balance Sheet at June 30, 2003 and the Consolidated Condensed Statements of Operations and Cash Flows for the periods ended June 30, 2003 and 2002 have not been audited, but have been prepared in conformity with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These Consolidated Condensed Financial Statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2002 as presented in our Annual Report on Form 10-K. In the opinion of management, this interim information includes all material adjustments, which are of a normal and recurring nature, necessary for a fair presentation. The results for the 2003 interim periods are not necessarily indicative of results to be expected for the entire year. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) 2. Earnings per share Earnings (loss) per share (EPS) for the three and six month periods ended June 30, 2003 and 2002 are as follows (in thousands, except per share amounts):
Three months Six months ended June 30, ended June 30, -------------------------- --------------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Basic and Diluted EPS Net (loss) income $(2,866) $ 63 $(3,569) $ 268 -------- --------- -------- -------- Weighted average shares outstanding basic 17,247 15,035 16,866 14,444 Weighted average shares outstanding diluted 17,724 15,189 17,343 14,599 ------ ------ ------ ------ Basic and diluted net (loss) income per share (a) (b) $ (.17) $ (.01) $ (.21) $ - --------- -------- -------- ---------
Basic earnings (loss) per share are based upon the weighted average number of common shares outstanding, including Class B common shares, during the period. Class B common stockholders have the same rights to share in profits and losses and liquidation values as common stock holders. Diluted earnings (loss) per share is based upon the weighted average number of common shares outstanding during the period, assuming the issuance of common shares for all dilutive potential common shares outstanding. (a) For the three and six months ended June 30, 2003 presentation of the dilutive effect of stock options, warrants and convertible notes, which totaled 476,379 shares are not included since they are anti-dilutive. (b) At June 30, 2002, the Company had a put option obligation of $495,000. This amount has been recorded in additional paid in capital in the Consolidated Condensed Balance Sheets. The addition to the liability of $225,000 and $255,000 in the three and six months ended June 30, 2002, respectively, are deemed to be a dividend for purposes of the basic and diluted (loss) income per share calculation. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 3. Long-term debt Long-term debt consists of the following (in thousands): June 30, December 31,
2003 2002 --------- ---------- Mortgage on MXL Pennsylvania facility $ 1,455 $ 1,505 Mortgage on MXL Illinois facility 1,199 1,212 Senior subordinated debentures 404 558 6% convertible exchangeable notes (a) 2,640 Other 655 997 --------- --------- 3,713 6,912 Less current maturities (1,200) (3,610) -------- --------- $ 2,513 $ 3,302 ======== ========
(a) On April 23, 2003, the Company entered into an agreement (the "Exchange Agreement") with the Holders of the 6% Convertible Exchangeable Notes due June 30, 2003 (the "HMS Notes") to exchange the HMS Notes plus related accrued interest to date for 554,000 shares of the Company's Common Stock. The original agreement provided that the HMS Notes, at the option of the Holders, could be exchanged for 19.9% of the outstanding capital stock of HMS, or into shares of the Company's Common Stock at a conversion rate of $7.50 per share. As a result, in accordance with the provisions of SFAS Statement No. 84, Induced Conversions of Convertible Debt, the Company recorded debt conversion expense, net of approximately $622,000, which is included in selling, general and administrative expenses. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 4. Comprehensive (loss) income The following are the components of comprehensive (loss) income (in thousands):
Three months ended Six months ended June 30, June 30, ------------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net (loss) income $(2,866) $ 63 $(3,569) $ 268 -------- --------- -------- --------- Other comprehensive loss before tax: Net unrealized loss on available-for-sale-securities (135) (3,900) (1,599) (8,904) Foreign currency translation adjustment (45) (415) (106) (268) ----------- ---------- --------- ---------- Other comprehensive loss before tax (180) (4,315) (1,705) (9,172) Income tax benefit relating to items of other comprehensive income 54 1,524 626 3,459 ---------- --------- --------- --------- Comprehensive loss, net of tax $(2,992) $ (2,728) $(4,648) $ (5,445) ======== ======== ======== =========
The components of accumulated other comprehensive income (loss) are as follows: June 30, December 31,
2003 2002 ---- ---- Net unrealized gain on available-for-sale-securities $1,081 $2,680 Foreign currency translation adjustment (1,255) (1,149) ------- ------ Accumulated other comprehensive (loss) income before tax (174) 1,531 Accumulated income tax expense related to items of other comprehensive loss (445) (1,071) -------- ------ Accumulated other comprehensive (loss) income, net of tax $ (619) $ 460 ======== ======
GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 5. Short-term borrowings On August 14, 2003, GP and GP's subsidiary SkillRight, Inc. ("SkillRight") entered into a new two-year $25 million Revolving Credit Facility (the "Credit Agreement") with a new bank, the proceeds of which were used to repay the Company's existing credit facility. The Credit Agreement is secured by certain of the assets of GP, Skillright and MXL. The Credit Agreement also provides for an unsecured guaranty from the Company. The interest rate on the Credit Agreement is at the Eurodollar plus 3.00%, (which as of August 14, 2003 is approximately 4%). Based upon the financial performance of GP, the interest rate can be reduced. The Credit Agreement contains covenants with respect to GP's minimum tangible net worth, leverage ratio, interest coverage ratio and its ability to make capital expenditures. The Credit Agreement also contains certain restrictive covenants including, a prohibition on future acquisitions, incurrence of debt and the payment of dividends. The Company is also subject to certain restrictive covenants including, limitations on future acquisitions. There is currently approximately $15,000,000 outstanding under the facility and approximately $3,700,000 is available to be borrowed under the facility. As of June 30, 2003, the current amount outstanding under the then existing current facility is $21,230,000. 6. Business segments The operations of the Company currently consist of three business segments, by which the Company is managed. The Company's principal operating subsidiary is GP. GP operates in two business segments. The Manufacturing & Process Segment provides technology based training, engineering, consulting and technical services to leading companies in the automotive, steel, power, oil and gas, chemical, energy, pharmaceutical and food and beverage industries, as well as to the government sector. The Information Technology Segment provides IT training programs and solutions, including Enterprise Solutions and comprehensive career training and transition programs. The Optical Plastics Segment, which consists of MXL, manufactures and distributes coated and molded plastic products. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 6. Business segments (continued) The management of the Company does not allocate the following items by segment: Investment and other income, net, interest expense, selling, general and administrative expenses, depreciation and amortization expense, income tax expense, significant non-cash items and long-lived assets. There are deminimis inter-segment sales. The reconciliation of gross margin to net (loss) income is consistent with the presentation on the Consolidated Condensed Statements of Operations. The following tables set forth the sales and gross margin of each of the Company's operating segments (in thousands):
Three months ended Six months ended June 30, June 30, ------------------------- ---------------------- 2003 2002 2003 2002 ------- -------- ------- ------- Sales Manufacturing and Process $32,349 $34,401 $64,587 $69,566 Information Technology 1,637 2,127 3,270 4,432 Optical Plastics 2,052 2,714 4,268 5,470 --------- --------- --------- --------- $36,038 $39,242 $72,125 $79,468 ------- ------- ------- ------- Gross margin Manufacturing and Process $ 3,601 $4,259 $ 6,696 $8,849 Information Technology 305 (54) 675 258 Optical Plastics 407 700 770 1,246 --------- -------- -------- --------- $ 4,313 $4,905 $8,141 $10,353 ======= ====== ====== =======
GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 6. Business segments (Continued) Information about the Company's sales in different geographic regions, which are attributed to countries based on location of customers, is as follows (in thousands): Three months ended Six months ended June 30, June 30, ------------------------ ------------------------ 2003 2002 2003 2002 ------- --------- -------- ------- United States $33,755 $36,367 $66,075 $73,946 Canada 66 432 618 731 United Kingdom 1,576 1,845 3,415 3,618 Latin America 641 598 2,017 1,173 ------- --------- -------- --------- $36,038 $39,242 $72,125 $79,468 ------- ------- ------- ------- Information about the Company's identifiable assets in different geographic regions, is as follows (in thousands): June 30, December 31, 2003 2002 ---- ---- United States $134,053 $137,303 Canada 521 3,076 United Kingdom 3,280 3,301 Latin America and other 1,536 1,225 ----------- ---------- $139,390 $144,905 -------- -------- 7. Restructuring charges During 1999 and 2000, the Company adopted restructuring plans, primarily related to its IT business segment. During the six month period ended June 30, 2003 the Company utilized $378,000 of the restructuring reserve and recorded $254,000 of other adjustments to the reserve. Of the remaining total restructuring reserve balance of $1,077,000 at June 30, 2003 and $1,141,000 at December 31, 2002, $145,000 and $221,000, respectively, were included in GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 7. Restructuring charges (continued) accounts payable and accrued expenses and $932,000 and $920,000, respectively, were included in other non-current liabilities in the Consolidated Condensed Balance Sheet. The remaining components of the restructuring reserve at June 30, 2003 and December 31, 2002 consist solely of lease and related obligations. Lease obligations are presented at their fair value, net of assumed sublets. 8. Goodwill and intangible assets The components of goodwill and intangible assets as of June 30, 2003 and December 31, 2002 are as follows (in thousands): June 30, December 31, 2003 2002 --------- ------------ Unamortized intangible assets: Goodwill $57,542 $57,491 ======= ======= Amortized intangible assets: Patents and licenses $ 1,348 $ 1,348 Less: accumulated depreciation 640 593 --------- -------- Patents and licenses, net $ 708 $ 755 ========= ========= Goodwill increased as of June 30, 2003 due to additional contingent payments made for previous acquisitions as well as the impact of foreign currency fluctuations. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 9. Investments, marketable securities and note receivable In March 2003, the Company and Inteferon Sciences, Inc. ("ISI") entered into an agreement whereby the Company agreed to receive shares of common stock of Hemispherx Biopharma Inc. ("HEB") with a market value of $425,000 (the "Guaranteed Shares") in full settlement of all of ISI's debt obligations (the "ISI Debt"). The Company retained all of its rights in the collateral under the ISI Debt until its receipt of the Guaranteed Shares. The Company received the shares in the second quarter of 2003. The agreement obligates HEB to register the Guaranteed Shares, sets limits on the amount of shares the Company may sell and requires HEB to pay the Company an amount equal to the number of Guaranteed Shares remaining unsold on September 11, 2005 multiplied by $1.59. The Company currently has an 8% senior unsecured note receivable from Five Star Products, Inc. ("FSP") due September 30, 2004 in the amount of $4,000,000 (the "Five Star Note"). On June 20, 2003, the Company entered into an Agreement of Subordination and Assignments (the "Subordination Agreement") with FSP that permits the annual repayment of principal on the Five Star Note. On June 27, 2003, the Company received a partial repayment from FSP in the amount of $500,000, reducing the outstanding principal amount of the note from $4,500,000 to $4,000,000, the balance currently outstanding as of June 30, 2003. In July 2003, the Company received an additional repayment of $500,000, further reducing the outstanding principal from $4,000,000 to $3,500,000. Under the Subordination Agreement, FSP is permitted to make a further repayment in the amount of $200,000 during the remainder of 2003. In the second quarter of 2003, HMS completed a private placement offering pursuant to which HMS raised approximately $12 million in gross proceeds from the sale of Series B preferred stock. As part of such transaction, the Company was granted an option (the "HMS Option") until June 30, 2004 to purchase up to $5 million of Series B preferred stock at the offering price of $.72 per share. For the HMS Option, the Company valued the option using the Black-Scholes model and recorded approximately $500,000 of income which is included in Investments and other income (loss), net for the quarter and six months ended June 30, 2003. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 10. Litigation On January 3, 2001, the Company commenced an action alleging that MCI Communications Corporation ("MCI"), MCI's Systemhouse subsidiaries ("Systemhouse") , and Electronic Data Systems Corporation, as successor to Systemhouse, committed fraud in connection with the Company's 1998 acquisition of Learning Technologies from the defendants for $24.3 million. The Company seeks actual damages in the amount of $117.9 million plus interest, punitive damages in an amount to be determined at trial, and costs. The complaint, which is pending in the New York State Supreme Court (the "State Court"), alleges that the defendants created a doctored budget to conceal the poor performance of the United Kingdom operation of Learning Technologies. The complaint also alleges that the defendants represented that Learning Technologies would continue to receive new business from Systemhouse even though the defendants knew that the sale of Systemhouse to EDS was imminent and that such new business would cease after such sale. In February 2001, the defendants filed answers denying liability. No counterclaims against the plaintiffs have been asserted. Although discovery had not yet been completed, defendants made a motion for summary judgment, which was submitted in April 2002. The motion was denied by the State Court due to the MCI bankruptcy (described below), but with leave granted to the other defendants to renew. One of the defendants, MCI, filed for bankruptcy protection in July 2002. As a result, the action is stayed as to MCI. The Company and General Physics both filed timely Proofs of Claim in the United States Bankruptcy Court against MCI and WorldCom, Inc., et al. On or around April 22, 2003, MCI served objections to the Proofs of Claim filed by the Company and General Physics. On May 15, 2003 the Company and General Physics submitted their opposition to the objections. The Company and General Physics subsequently made a motion in Bankruptcy Court to lift the automatic stay to permit the litigation to proceed against MCI in State Court. MCI opposed the motion, which is scheduled to be heard by the Bankruptcy Court on September 23, 2003. The defendants other than MCI made an application to the State Court to stay the action until a later-commenced arbitration, alleging breach of the acquisition agreement and related agreements, is concluded. In a decision dated May 9, 2003, the State Court granted the motion and stayed the fraud action pending the outcome of the arbitration of the claim based on breach of the acquisition agreement. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 10. Litigation (continued) The Company has filed an appeal from the order staying the action. In the meantime, the arbitration is proceeding. Before the action was stayed, the parties engaged in non-binding mediation which did not result in a settlement. The Company is not a party to any legal proceeding, the outcome of which is believed by management to have a reasonable likelihood of having a material adverse effect upon the financial condition of the Company. 11. Financial guarantees On March 23, 2003, the Company extended its guarantee of up to $1,800,000 of GSES's debt pursuant to GSES's credit facility. GSES's credit facility was scheduled to expire on March 23, 2003, however, was extended until March 31, 2004. In consideration for the extension of the guarantee, the Company received 150,000 shares of GSES common stock with a value of $180,000. A deferred credit of $180,000 has been recorded for the receipt of these shares which will amortize to income over the term of the guarantee. During the second quarter of 2003, the Company recorded $45,000 of income. 12. Stock based compensation In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS No. 123" ("SFAS No. 148"), and the transition guidance and annual disclosure provisions are effective for the Company for the quarterly interim periods beginning in 2003. SFAS No. 148 amends SFAS Statement No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation" and provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, the statement amends the disclosure requirements of SFAS No. 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used. The Company continues to account for stock-based compensation using APB Opinion No. 25 and has not adopted the recognition provisions of SFAS No. 123, as amended by SFAS No. 148. The Company has adopted the disclosure provisions of SFAS No. 148 for the 2003 fiscal year. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 12. Stock based compensation (continued) Proforma net income and earnings (loss) per share as if the Company recorded compensation expense based upon the fair value of stock-based awards have been presented in accordance with the provisions of SFAS No 123, for the three months and six months ended June 30, 2003 and 2002 are as follows (in thousands, except per share amounts):
Three months Six Months ended June 30, ended June 30, 2002 2003 2003 2002 ---- ---- ---- ---- Net (loss) income As reported $(2,866) $ 63 $(3,569) $ 268 Proforma $(3,161) $(318) $(3,965) $(487) Basic and Diluted earnings (loss) per share As reported $ (.17) $(.01) $(.21) $ - Proforma $ (.19) $(.02) $(.24) $ (.03)
Pro forma net (loss) reflects only options granted since 1995. Therefore, the full impact of calculating compensation cost for stock options under SFAS No. 123 is not reflected in the pro forma net (loss) amounts presented above because compensation cost is reflected over the options' vesting period and compensation cost for options granted prior to January 1, 1995 is not considered. At June 30, 2003 and 2002, the per share weighted-average fair value of stock options granted was $2.89 and $2.68, respectively, on the date of grant using the modified Black-Scholes option-pricing model with the following weighted-average assumptions: 2003 expected dividend yield 0%, risk-free interest rate of 2.45%, expected volatility of 78.76% and an expected life of 4.0 years; 2002 expected dividend yield 0%, risk-free interest rate of 4.35%, expected volatility of 73.27% and an expected life of 5.71 years. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 13. Related party transactions Pursuant to the incentive compensation agreement entered into in 2002, Jerome I. Feldman is eligible to receive from the Company up to five payments in an amount of $1 million each, based on the closing price of the Company's common stock sustaining increasing specified levels over periods of at least 10 consecutive trading days. On each of June 11, 2003 and July 23, 2003, Mr. Feldman earned an incentive payment of $1 million each, which payments will be made in December 2003. To the extent there are any outstanding loans from the Company to Mr. Feldman at the time an incentive payment is payable, the Company will set off the payment of such incentive payment first against the outstanding accrued interest under such loans and next against any outstanding principal. The Company recorded compensation expense of $1 million in the second quarter ended June 30, 2003, which is included in selling, general and administrative expense. Although the set-off of the payment earned on June 11, 2003 and July 23, 2003 will take place in December 2003, for accounting purposes the set-offs will be deemed to have occurred on the dates earned. Therefore, as of June 30, 2003, $4,095,000 of Mr. Feldman's loan was outstanding and the Company applied the first $1million earned by Mr. Feldman against accrued interest. As of July 23, 2003, the Company applied the second $1million against the remaining $163,000 of accrued interest, which resulted in the outstanding balance of the loan being reduced by $837,000 from $4,095,000 at June 30th to $3,258,000 as of July 23, 2003. 14. Subsequent events Pursuant to a Note and Warrant Purchase Agreement dated August 8, 2003, the Company issued and sold to four Gabelli funds $7,500,000 aggregate principal amount of 6% Conditional Subordinated Notes due 2008 (the "Notes") and 937,500 warrants ("GP Warrants"), each entitling the holder thereof to purchase (subject to adjustment) one share of the Company's common stock. The aggregate purchase price for the Notes and GP Warrants was $7,500,000. The Notes mature August 2008 with interest at the rate of 6% per annum payable semi-annually commencing on December 31, 2003. The Notes are secured by a mortgage on the Company's property located in Pawling, New York. At any time that less than $1,875,000 principal amount of Notes are outstanding, the Company may defease the obligations secured by the mortgage and obtain a release of the lien of the mortgage by depositing with an agent for the Noteholders bonds or government securities with an investment grade rating by a nationally recognized rating agency which, without reinvestment, will provide cash on the maturity date of the Notes in an amount not less than the outstanding principal amount of the Notes. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 14. Subsequent events (continued) The GP Warrants have an exercise price of $8.00 per share and are exercisable at any time until August 2008. The exercise price may be paid in cash, by delivery of Notes, or a combination of the two. The GP Warrants contain anti-dilution provisions for stock splits, reorganizations, mergers, and similar transactions. The Company has agreed to file a registration statement to register the resale of the shares of its common stock issuable on exercise of the GP Warrants, and to certain other registration rights in favor of the holders of the GP Warrants. In July 2002, the Company announced that it was actively considering a spin-off of certain of its non-core assets, including MXL, into a separate corporation named National Patent Development Corporation ("NPDC"). In the spin-off, it is contemplated that each holder of the Company's common stock will receive one share of NPDC common stock for each share of the Company's common stock or Class B capital stock held. The Note and Warrant Purchase Agreement provides that, on completion of the spin-off, NPDC will issue warrants ("NPDC Warrants") to the holders of the GP Warrants. The NPDC Warrants will entitle the holders to purchase, in the aggregate, a number of shares of NPDC common stock equal to 8% of the number of shares outstanding at completion of the spin-off, subject to reduction for any GP Warrants exercised prior to the spin-off. The NPDC Warrants will be issued to the holders of the GP Warrants on the record date for the spin-off, and allocated among them pro-rata based on the respective number of GP Warrants held by them on such date. The exercise price of the GP Warrants will be adjusted to take into account the spin-off and issuance of the NPDC Warrants by multiplying the exercise price of the GP Warrants in effect immediately prior to the spin-off by a fraction, the numerator of which is the average closing price of GP common stock over the 20 consecutive trading days commencing on the record date of the spin-off, and the denominator is the sum of the average closing prices of GP common stock and NPDC common stock over the same period (assuming the issuance in the spin-off of one share of NPDC common stock for each share of the Company's common stock or Class B capital stock held). The exercise price of the NPDC Warrants will be 160% of the average closing price of the NPDC common stock over the 20 consecutive trading days commencing on the record date of the spin-off. The NPDC Warrants will be exercisable at any time after their exercise price is calculated through August 2008. The NPDC Warrants will have similar anti-dilution provisions. NPDC has agreed to provide the holders of the NPDC Warrants with registration rights similar to those provided by the Company to the holders of the GP Warrants. GP STRATEGIES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) 14. Subsequent events (continued) In connection with the spin-off, the Company intends to contribute the Pawling property, subject to the mortgage, to MXL. MXL will assume the mortgage, but without liability for repayment of the Notes or any other obligations of the Company under the Note and Warrant Purchase Agreement (other than foreclosure on such property). If there is a foreclosure on the mortgage for payment of the Notes, the Company has agreed to indemnify MXL for loss of the value of the property. The spin-off is still subject to certain conditions, including certain SEC filings. If the spin-off does not occur by January 2005, the Noteholders will have the right to require the Company to redeem the Notes. There can be no assurance that the spin-off will be consummated. GP STRATEGIES CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The Company has three operating business segments. Two of these segments, the Manufacturing & Process Segment and the IT Segment, are managed through the Company's principal operating subsidiary General Physics Corporation and the third segment through its operating subsidiary MXL Industries. In addition, the Company holds a number of investments in publicly held companies, including Millennium Cell Inc., GSE Systems and Five Star Products, an investment in a private company Hydro Med Sciences and also owns certain real estate. General Physics is a global workforce development company that improves the effectiveness of organizations by providing training, management consulting, e-Learning solutions and engineering services that are customized to meet the specific needs of clients. Clients include Fortune 500 companies, manufacturing, process and energy companies, and other commercial and governmental customers. For the quarter ended June 30, 2003, the Company had a net loss before income taxes of $2,220,000 compared to net income before income taxes of $176,000 for the quarter ended June 30, 2002. The loss in the second quarter of 2003 was primarily a result of an executive incentive compensation bonus of $1,000,000, a debt conversion expense, net, of approximately $622,000 related to the conversion of the Company's Convertible Exchangeable Notes, and a restructuring charge of $218,000. The income for the second quarter of 2002 was primarily attributable to a $846,000 gain from the sale of securities of Millennium Cell, Inc., and a non-cash credit of $311,000 relating to the Company's Millennium Cell Deferred Compensation Plan, offset by a non-cash equity loss of $596,000 on HMS. The Company's three operating business segments had decreased operating margins in the quarter ended June 30, 2003, compared to the quarter ended June 30, 2002 due to the reduction in sales. For the six months ended June 30, 2003, the Company had a loss before income taxes of $3,177,000 compared to income before income taxes of $549,000 for the six months ended June 30, 2002. The six months ended June 30, 2003 included an executive incentive compensation bonus of $1,000,000, a debt conversion expense, net of approximately $622,000 related to the conversion of the Convertible Exchangeable Notes, and a restructuring charge of $218,000 offset by a $212,000 gain from the sale of securities of Millennium Cell, Inc., and a non-cash credit of $321,000 relating to the Millennium Cell Deferred Compensation Plan. The income before income taxes for the six months ended June 30, 2002 included a $1,286,000 gain from the sale of shares of Millennium Cell, Inc. and a non-cash credit of $868,000 relating to the Millennium Cell Deferred Compensation Plan, offset by a non-cash equity loss of $1,331,000 on HMS. Three months ended Six months ended June 30, June 30, --------------------- --------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Sales Manufacturing and Process $32,349 $34,401 $64,587 $69,566 Information Technology 1,637 2,127 3,270 4,432 Optical Plastics 2,052 2,714 4,268 5,470 ------- --------- --------- --------- $36,038 $39,242 $72,125 $79,468 ======= ======= ======= ======= For the quarter and six months ended June 30, 2003, sales decreased by $3,204,000 and $7,343,000 respectively, from the corresponding periods in 2002. The decrease in sales was primarily attributable to a continued reduction in sales from the automotive division of the Manufacturing and Process Segment, as well as decreased sales from certain high tech clients. The Information Technology and the Optical Plastic Segment's sales continue to decline primarily due to the overall continued downturn in the economy.
Three months ended Six months ended June 30, June 30, ------------------------------------- ---------------------------------- 2003 % 2002 % 2003 % 2002 % ---- - ---- - ---- - ---- - Gross margin Manufacturing and Process $3,601 11.1 $ 4,259 12.4 $6,696 10.4 $ 8,849 12.7 Information Technology 305 18.6 (54) 675 20.6 258 5.8 Optical Plastics 407 19.8 700 25.8 770 18.0 1,246 22.8 ------- ---- -------- ---- ------ ---- --------- ---- $4,313 12.0 $ 4,905 12.5 $8,141 11.3 $10,353 13.0 ====== ==== ======= ==== ====== ==== ======= ====
Consolidated gross margin of $4,313,000 or 12.0% of sales for the quarter ended June 30, 2003, decreased by $592,000, compared to the consolidated gross margin of $4,905,000, or 12.5% of sales for the quarter ended June 30, 2002. For the six months ended June 30, 2003, gross margin decreased by $2,212,000 from $10,353,000 to $8,141,000. The decreased gross margin in both the quarter and six months ended June 30, 2003 occurred within the Manufacturing and Process and Optical Plastics Segments, as a result of a reduction in sales for the periods. The increased gross margin in both the quarter and six months ended June 30, 2003 for the Information Technology Segment was a direct result of cost reduction initiatives within the segment and the Company's continued efforts to control costs on existing contracts. The overall gross margin percentage decreased slightly for the three months and six months ended June 30, 2003 due to reduced revenues without the ability to reduce certain fixed costs. Selling, general and administrative expenses For the quarter ended June 30, 2003, selling, general and administrative (SG&A) expenses were $6,363,000 compared to $4,737,000 in the second quarter of 2002. The increase in SG&A of $1,626,000 is primarily attributable to an executive incentive compensation bonus of $1,000,000, a debt conversion expense, net of approximately $622,000 related to the conversion of the Company's Convertible Exchangeable Notes, a reduction in the non-cash credit relating to the Deferred Compensation Plan of $295,000, offset by a reduction in SG&A expenses of approximately $290,000 due to the Company's continued efforts to reduce costs through reductions in personnel, office rental costs and other operating expenses. For the six months ended June 30, 2003, SG&A expenses increased by $1,509,000 from $9,277,000 to $10,786,000 primarily as a result of an executive incentive compensation bonus of $1,000,000, a debt conversion expense, net of approximately $622,000, a reduction in the non-cash credit relating to the Deferred Compensation Plan of $547,000, offset by a reduction in SG&A expenses of approximately $660,000 due to the Company's efforts to reduce operating expenses. Interest expense For the quarter ended June 30, 2003, interest expense decreased by $83,000 compared to the quarter ended June 30, 2002. For the six months ended June 30, 2002, there was a decrease in interest expense of $241,000 from $1,429,000 to $1,188,000. The decreased interest expense in 2003 was attributable to both a decrease in the Company's outstanding indebtedness and a reduction in interest rates offset by increased fees. Investment and other income (loss), net For the quarter and six months ended June 30, 2003, investment and other income (loss), net was $502,000 and $662,000 as compared to $(303,000) and $(738,000) for the quarter and six months ended June 30, 2002. The income in 2003 was primarily attributable to non-cash equity realized in connection with the HMS option as compared to equity losses recognized on HMS of $596,000 and $1,331,000 for comparable periods in 2002 and on interest income on loans receivable and other income of $104,000 and $355,000, respectively. Income taxes For the quarter and six months ended June 30, 2003, the Company recorded an income tax expense of $646,000 and $392,000, which represents the Company's applicable federal, state and local, and foreign tax expense for these periods. In the quarter and six months ended June 30, 2002, the Company recorded an income tax expense of $113,000 and $281,000, which represents the applicable federal, state and local, and foreign tax expense for these periods. Liquidity and capital resources On August 14, 2003,GP and GP's subsidiary SkillRight, Inc. ("SkillRight") entered into a new two-year $25 million Revolving Credit Facility (the "Credit Agreement") with a new bank, the proceeds of which were used to repay the Company's existing credit facility. The Credit Agreement is secured by certain of the assets of GP, Skillright and MXL. The Credit Agreement also provides for an unsecured guaranty from the Company. The interest rate on the Credit Agreement is at the Eurodollar plus 3.00%, (which as of August 14, 2003 is approximately 1%). Based upon the financial performance of GP, the interest rate can be reduced. The Credit Agreement contains covenants with respect to GP's minimum tangible net worth, leverage ratio, interest coverage ratio and its ability to make capital expenditures. The Credit Agreement also contains certain restrictive covenants including a prohibition on future acquisitions, incurrence of debt and the payment of dividends. The Company is also subject to certain restrictive covenants including limitations on future acquisitions. There is currently approximately $15,000,000 outstanding under the facility and $3,700,000 is available to be borrowed under the facility. As of June 30, 2003, the current amount outstanding under the prior credit facility is $21,230,000. Due to the Company's subsidiaries entering into a new Credit Agreement on August 14, 2003, described above, the Company anticipates writing off approximately $800,000 of unamortized deferred financing costs in the third quarter of 2003 relating to the prior credit facility. Pursuant to a Note and Warrant Purchase Agreement dated August 8, 2003, the Company issued and sold to four Gabelli Funds, $7,500,000 aggregate principal amount of 6% Conditional Subordinated Notes due 2008 (the "Notes") and 937,500 warrants ("GP Warrants"), each entitling the holder thereof to purchase (subject to adjustment) one share of the Company's common stock. The aggregate purchase price for the Notes and GP Warrants was $7,500,000. The Notes mature August 2008 with interest payable semi-annually commencing on December 31, 2003. The Notes are secured by a mortgage on the Company's property located in Pawling, New York. At any time that less than $1,875,000 principal amount of Notes are outstanding, the Company may defease the obligations secured by the mortgage and obtain a release of the lien of the mortgage by depositing with an agent for the Noteholders bonds or government securities with an investment grade rating by a nationally recognized rating agency which, without reinvestment, will provide cash on the maturity date of the Notes in an amount not less than the outstanding principal amount of the Notes. The GP Warrants have an exercise price of $8.00 per share and are exercisable at any time until August 2008. The exercise price may be paid in cash, by delivery of Notes, or a combination of the two. The GP Warrants contain anti-dilution provisions for stock splits, reorganizations, mergers, and similar transactions. The Company has agreed to file a registration statement to register the resale of the shares of its common stock issuable on exercise of the GP Warrants, and to certain other registration rights in favor of the holders of the GP Warrants. In July 2002, the Company announced that it was actively considering a spin-off of certain of its non-core assets, including MXL, into a separate corporation named National Patent Development Corporation ("NPDC"). In the spin-off, it is contemplated that each holder of the Company's common stock will receive one share of NPDC common stock for each share of the Company's common stock or Class B capital stock held. The Note and Warrant Purchase Agreement provides that, on completion of the spin-off, NPDC will issue warrants ("NPDC Warrants") to the holders of the GP Warrants. The NPDC Warrants will entitle the holders to purchase, in the aggregate, a number of shares of NPDC common stock equal to 8% of the number of shares outstanding at completion of the spin-off, subject to reduction for any GP Warrants exercised prior to the spin-off. The NPDC Warrants will be issued to the holders of the GP Warrants on the record date for the spin-off, and allocated among them pro-rata based on the respective number of GP Warrants held by them on such date. The exercise price of the GP Warrants will be adjusted to take into account the spin-off and issuance of the NPDC Warrants, as specified in the Note and Warrant Purchase Agreement. The exercise price of the NPDC Warrants will be 160% of the average closing price of the NPDC common stock over the 20 consecutive trading days commencing on the record date of the spin-off. The NPDC Warrants will be exercisable at any time after their exercise price is calculated through August 2008. The NPDC Warrants will have anti-dilution provisions similar to the GP Warrants. NPDC has agreed to provide the holders of the NPDC Warrants with registration rights similar to those provided by the Company to the holders of the GP Warrants. The spin-off is still subject to certain conditions, including certain SEC filings. If the spin-off does not occur by January, 2005, the Noteholders will have the right to require the Company to redeem to the Notes. There can be no assurance that the spin-off will be consummated. The Company currently has an 8% senior unsecured note receivable from Five Star Products, Inc. ("FSP") due September 30, 2004 in the amount of $4,000,000 (the "Five Star Note"). On June 20, 2003, the Company entered into an Agreement of Subordination and Assignments (the "Subordination Agreement") with FSP that permits the annual repayment of principal on the Five Star Note. On June 27, 2003, the Company received a partial repayment from FSP in the amount of $500,000, reducing the outstanding principal amount of the note from $4,500,000 to $4,000,000, the balance currently outstanding as of June 30, 2003. In July 2003, the Company received an additional repayment of $500,000, further reducing the outstanding principal from $4,000,000 to $3,500,000. Under the Subordination Agreement, FSP is permitted to make a further repayment in the amount of $200,000 during the remainder of 2003. On March 23, 2000, the Company agreed to guarantee up to $1,800,000 of GSES's debt pursuant to GSES's credit facility. GSES's credit facility would have expired on March 23, 2003, however the facility was extended until March 31, 2004. In consideration for the extension of the guarantee, the Company received 150,000 shares of GSES common stock, with a value of $180,000. A deferred credit of $180,000 has been recorded for the receipt of these shares which will amortize to income over the term of the guarantee. During the second quarter of 2003, the Company recorded $45,000 of income. At June 30, 2003, the Company had cash and cash equivalents totaling $827,000. The Company believes that cash generated from operations, borrowing availability under the new credit agreement and cash generated from its sale of marketable securities will be sufficient to fund the working capital and other needs of the Company. For the six months ended June 30, 2003, the Company's working capital increased by $1,205,000 to $1,985,000. The decrease in cash and cash equivalents of $689,000 for the six months ended June 30, 2003 resulted primarily from cash provided by operating activities of $616,000 offset by cash used in investing activities of $189,000 and financing activities of $1,010,000. Recent accounting pronouncements In June 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations, which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities that have legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development or normal use of the asset. This statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. This statement is effective for the Company in fiscal 2003. The application of SFAS No. 143 did not have and is not expected to have a material impact on the Company's Consolidated Financial Statements. During April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS No. 145"). Among other items, SFAS No. 145 updates and clarifies existing accounting pronouncements related to reporting gains and losses from the extinguishment of debt and certain lease modifications that have economic effects similar to sale-leaseback transactions. The provisions of SFAS No. 145 are generally effective for fiscal years beginning after May 15, 2002, with earlier adoption of certain provisions encouraged. The application of SFAS No. 145 did not have and is not expected to have a material impact on the Company's Consolidated Financial Statements. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). This Statement requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The Company is required to adopt the provisions of SFAS No. 146 for exit or disposal activities, if any, initiated after December 31, 2002. Although the Company believes the adoption of SFAS No. 146 will not impact the consolidated financial position or results of operations, it can be expected to impact the timing of liability recognition associated with future exit activities, if any. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of SFAS No. 123" ("SFAS No. 148"),and the transition guidance and annual disclosure provisions are effective for the Company for the quarterly interim periods beginning in 2003. SFAS No. 148 amends SFAS Statement No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation" and provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, the statement amends the disclosure requirements of SFAS No. 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based compensation and the effect of the method used. The Company continues to account for stock-based compensation using APB Opinion No. 25 and has not adopted the recognition provisions of SFAS No. 123, as amended by SFAS No. 148. The Company has adopted the disclosure provisions of SFAS No. 148 for the 2003 fiscal year. In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. In particular, this Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative. It also clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. SFAS No. 149 is generally effective for contracts entered into or modified after June 30, 2003 and is not expected to have an impact on the Company's Consolidated Financial Statements. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how a company classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify certain financial instruments as a liability (or as an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003.The adoption of SFAS No. 150 did not have an impact on the Company's Consolidated Financial Statements. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others" ("FIN No. 45"). FIN No. 45 elaborates on the disclosures for interim and annual reports regarding obligations under certain guarantees issued by a guarantor. Under FIN No. 45, the guarantor is required to recognize a liability for the fair value of the obligation undertaken in issuing the guarantee at the inception of a guarantee. The recognition and measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements for FIN No. 45 are effective for interim and annual financial statements issued after December 15, 2002. The Company applied the provisions of FIN No. 45 for its financial guarantee entered into in the first quarter of 2003. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN No. 46"). FIN No. 46 explains how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. FIN No. 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. The provisions of FIN No. 46 are effective immediately for all entities with variable interests in variable interest entities created after December 31, 2002. The provisions of FIN No. 46 are effective for public entities with a variable interest in a variable interest entity created prior to January 1, 2003 no later than the end of the first annual reporting period beginning after June 15, 2003. The Company has evaluated its interests in certain entities to determine if any such entities will require consolidation under FIN No. 46, and has determined that, at this time, it is not necessary to consolidate any such entities. In November 2002, the EITF reached a consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." This Issue provides guidance on when and how to separate elements of an arrangement that may involve the delivery or performance of multiple products, services and rights to use assets into separate units of accounting. The guidance in the consensus is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The transition provision allows either prospective application or a cumulative effect adjustment upon adoption. The adoption of Issue No. 00-21 did not have an impact on the Company's Consolidated Financial Statements. Forward-looking statements The forward-looking statements contained herein reflect managements' current expectations regarding future growth, results of operations, performance and business prospects and opportunities. Wherever possible, words such as "anticipate," "believe," "plan," "expect" and similar expressions have been used to identify these forward- looking statements. These statements reflect the Company's current beliefs and are based on information currently available to the Company. Except as otherwise required by federal securities law, the company is not obligated to update or revise these forward-looking statements to reflect new events or circumstances. Accordingly, these statements are subject to certain risks and uncertainties which could cause the Company's actual growth, results, performance and business prospects and opportunities to differ from those expressed in, or implied by these statements, including, but not limited to, those risks and uncertainties detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. GP STRATEGIES CORPORATION AND SUBSIDIARIES QUALIFICATION RELATING TO FINANCIAL INFORMATION Item 3. Quantitative and Qualitative Disclosure About Market Risk We have no material changes to the disclosure on this matter made in our report on Form 10-K for the fiscal year ended December 31, 2002. Item 4. Controls and Procedures a. Evaluation of disclosure controls and procedures. The Company's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of a date within ninety days before the filing date of this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's current disclosure controls and procedures are effective, providing them with material timely information relating to the Company required to be disclosed in the reports the Company files or submits under the Exchange Act. b. Changes in internal controls. There have not been any significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. There were no significant deficiencies or material weaknesses and therefore no corrective actions were taken. GP STRATEGIES CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.0 Note and Warrant Purchase Agreement dated August 8, 2003 among GP Strategies Corporation, National Patent Development Corporation and Gabelli Funds, LLC. 10.01 Form of GP Strategies Corporation 6% Conditional Subordinated Note due 2008 dated August 14, 2003. 10.02 Form of GP Strategies Corporation Warrant Certificate dated August 14, 2003. 10.03 Form of National Patent Development Corporation Warrant Certificate dated August 14, 2003. 10.04 Mortgage Security Agreement and Assignment of Leases dated August 14, 2003 between GP Strategies Corporation and Gabelli Funds, LLC. 10.05 Registration Rights Agreement dated August 14, 2003 between GP Strategies Corporation and Gabelli Funds, LLC. 10.06 Registration Rights Agreement dated August 14, 2003 between National Patent Development Corporation and Gabelli Funds, LLC. 10.07 Indemnity Agreement dated August 14, 2003 by GP Strategies Corporation for the benefit of National Patent Development Corporation and MXL Industries, Inc. 10.08 Subordination Agreement dated August 14, 2003 among GP Strategies Corporation, Gabelli Funds LLC, as Agent on behalf of the holders of the Company's 6% Conditional Subordinated Notes due 2008 and Wachovia Bank, National Association. 10.09 Amended and Restated Incentive Compensation Agreement dated June 11, 2003 between GP Strategies Corporation and Jerome I. Feldman. 10.10 Financial and Security Agreement dated August 13, 2003 by and between General Physics Corporation, MXL Industries, Inc. and Wachovia Bank, National Association. 10.11 Guaranty of Payment Agreement dated August 13, 2003 by GP Strategies Corporation for the benefit of Wachovia Bank, National Association. 10.12 Limited Guaranty of Payment Agreement dated August 13, 2003 by MXL Industries, Inc. for the benefit of Wachovia Bank, National Association. 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Act of 1934. 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Act of 1934. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. b. Reports Form 8-K filed on May 15, 2003 reporting event under Item 12. GP STRATEGIES CORPORATION AND SUBSIDIARIES June 30, 2003 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed in its behalf by the undersigned thereunto duly authorized. GP STRATEGIES CORPORATION DATE: August 18, 2003 BY: Scott N. Greenberg President & Chief Financial Officer DATE: August 18, 2003 BY: Jerome I. Feldman Chief Executive Officer EX-10 3 ex10.txt GABELLI NOTE AND WARRANT PURCHASE AGREEMENT Exhibit 10.0 GP STRATEGIES CORPORATION AND NATIONAL PATENT DEVELOPMENT CORPORATION NOTE AND WARRANT PURCHASE AGREEMENT Dated August 8, 2003 TABLE OF CONTENTS Page I. The Exchange.............................................................1 1.1. Authorization of Notes and GP Warrants..........................1 1.2. Terms of the Exchange...........................................1 1.3. Closing.........................................................2 1.4. Issue of NPDC Warrants..........................................2 II. Conditions to Obligations of the Purchaser...............................3 2.1. Accuracy of Representations; Compliance with Conditions; No Default...................................................3 2.2. GP Secretary's Certificate......................................3 2.3. GP Incumbency Certificate.......................................3 2.4. NPDC Secretary's Certificate....................................4 2.5. NPDC Incumbency Certificate.....................................4 2.6. MXL Secretary's Certificate.....................................4 2.7. MXL Incumbency Certificate......................................4 2.8. Opinions of Counsel.............................................4 2.9. Transaction Documents...........................................4 2.10. Legal Action....................................................4 2.11. No Governmental Action..........................................5 2.12. NYSE Listing....................................................5 2.13. Payment of Fees.................................................5 2.14. Bank Consent....................................................5 2.15. Title Insurance, Etc............................................5 2.16. No Material Adverse Change......................................5 III. Conditions to the Obligations of GP and NPDC.............................6 3.1. Accuracy of Representations and Compliance with Conditions......6 3.2. Legal Action....................................................6 3.3. No Governmental Action..........................................6 3.4. NYSE Listing....................................................6 3.5. Bank Consent....................................................6 IV. Representations and Warranties of GP.....................................6 4.1. Organization and Qualification..................................6 4.2. SEC Reports.....................................................7 4.3. Capitalization..................................................7 4.4. Litigation and Claims...........................................7 4.5. Authority to Sell; Enforceability; Valid Issuance...............7 4.6. No Conflicts....................................................8 4.7. No Registration Required........................................8 4.8. No Event of Default.............................................9 4.9. Title to Premises...............................................9 4.10. Environmental Matters...........................................9 4.11. GP Taxes...................................................... 10 4.12. Broker's or Finder's Commissions; Financial Advisory Fees......10 4.13. Solvency...................................................... 10 4.14. Permits....................................................... 10 4.15. Subsidiaries...................................................10 4.16. Disclosure.....................................................10 V. Representations and Warranties of NPDC..................................11 5.1. Organization and Qualification.................................11 5.2. Capitalization; MXL............................................11 5.3. Litigation and Claims..........................................11 5.4. Authority to Sell; Enforceability; Valid Issuance..............11 5.5. No Conflicts...................................................12 5.6. No Registration Required.......................................12 5.7. NPDC Taxes.....................................................13 5.8. Broker's or Finder's Commissions; Financial Advisory Fees......13 5.9. Disclosure.....................................................13 VI. Representations and Warranties of MXL...................................13 6.1. Organization and Qualification.................................13 6.2. Authority; Enforceability......................................13 6.3. No Conflicts...................................................14 6.4. Title to Premises..............................................14 6.5. Disclosure.....................................................14 VII. Representations and Warranties of the Purchasers........................15 7.1. Authority to Buy...............................................15 7.2. Non-Distributive Intent........................................15 7.3. Information and Experience.....................................15 7.4. Purchaser Status...............................................15 7.5. Broker's or Finder's Commissions; Financial Advisory Fees......15 VIII. Covenants and Agreements............................................15 8.1. Advice of Changes..........................................16 8.2. Furnish Future Information.................................16 8.3. Mortgage...................................................16 8.4. No Liability...............................................17 8.5. Transfer Restrictions......................................17 8.6. Bank Consent...............................................18 8.7. Title Insurance............................................18 8.8. NYSE Listing...............................................18 8.9. Warrant Purchase...........................................18 8.10. Spin-Off...................................................18 8.11. Subordination Agreement....................................18 IX. Agent...............................................................18 9.1. Appointment and Authority..................................18 9.2. Performance of Duties and Obligations......................22 9.3. Liquidation................................................23 9.4. Successor Agent............................................23 9.5. Fees and Expenses of Agent.................................23 9.6. Indemnification............................................23 X. Indemnification.....................................................24 10.1. General 24 10.2. Indemnity Procedures.......................................24 10.3. Exclusivity................................................26 XI. Termination.........................................................26 11.1. Termination................................................26 11.2. Effect of Termination......................................27 XII. Miscellaneous.......................................................27 12.1. Costs and Expenses.........................................27 12.2. Further Actions............................................27 12.3. Entire Understanding.......................................27 12.4. Amendments and Waivers.....................................27 12.5. Notices 27 12.6. No Waiver; Remedies Cumulative.............................29 12.7. Binding Effect.............................................29 12.8. No Third Party Beneficiaries...............................30 12.9. Separability...............................................30 12.10. Headings 30 12.11. Counterparts; Governing Law................................30 XIII. Definitions.........................................................30 LIST OF EXHIBITS AND SCHEDULES Exhibit A - Form of Note Exhibit B - Form of GP Warrant Exhibit C - Form of NPDC Warrant Exhibit D - Form of Mortgage Exhibit E - Form of GP Registration Rights Agreement Exhibit F - Form of NPDC Registration Rights Agreement Exhibit G - Form of Indemnity Agreement Exhibit H - Form of Opinion of Andrea Kantor, Esq. Exhibit I - Form of Opinion of Duane Morris LLP Exhibit J - Form of Opinion of Counsel to NPDC Exhibit K - Form of Subordination Agreement Schedule 1.2 - Purchasers Schedule 2.15 - Scheduled Encumbrances Schedule 4.15 - GP Subsidiaries Schedule 4.16 - Disclosure Documents NOTE AND WARRANT Purchase Agreement Agreement, dated August 8, 2003, among GP Strategies Corporation, a Delaware corporation ("GP"), National Patent Development Corporation, a Delaware corporation ("NPDC"), MXL Industries, Inc., a Delaware corporation ("MXL"), the purchasers set forth on the signature pages hereto (the "Purchasers"), and Gabelli Funds, LLC, as agent ("Agent"). The Purchasers desire to acquire the Notes, the GP Warrants, and, upon the completion of the Spin-Off of NPDC by GP, the NPDC Warrants (each as defined below), in exchange for cash as hereinafter provided, and GP and NPDC desire to effect such exchange. Certain capitalized terms used in this Agreement are defined in Article XIII; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. I. The Exchange 1.1. Authorization of Notes and GP Warrants. (a) GP has authorized the issue and sale of $7,500,000 aggregate principal amount of its 6% Conditional Subordinated Notes due 2008. Such 6% Conditional Subordinated Notes due 2008 shall be substantially in the form set forth in Exhibit A and are herein referred to individually as a "Note" and collectively as the "Notes," which terms shall also include any notes delivered in exchange or replacement therefor. (b) GP has also authorized the issue and sale of 937,500 warrants, each entitling the holder thereof to purchase (subject to adjustment as provided therein) one share ("GP Warrant Shares") of GP Common Stock. Such warrants shall be evidenced by warrant certificates substantially in the form set forth in Exhibit B ("GP Warrant Certificates," which term shall also include any warrant certificates delivered in exchange or replacement therefor) and are herein referred to individually as a "GP Warrant" and collectively as the "GP Warrants." (c) NPDC has authorized the issue of up to the NPDC Warrant Amount of warrants, each entitling the holder thereof to purchase (subject to adjustment as provided therein) one share ("NPDC Warrant Shares") of NPDC Common Stock. Such warrants shall be evidenced by warrant certificates in the form set forth in Exhibit C ("NPDC Warrant Certificates," which term shall also include any warrant certificates delivered in exchange or replacement therefor) and are herein referred to individually as an "NPDC Warrant" and collectively as the "NPDC Warrants." 1.2. Terms of the Exchange. On the basis of the representations, warranties, covenants, and agreements contained in this Agreement and subject to the terms and conditions of this Agreement, at the Closing (as defined below), GP shall issue and sell to each of the Purchasers, and each of the Purchasers will purchase from GP, (a) a Note in the principal amount specified opposite such Purchaser's name in Schedule 1.2 and (b) a number of GP Warrants specified opposite such Purchaser's name in Schedule 1.2, at a purchase price for such Note and GP Warrants collectively equal to 100% of the principal amount of such Note. The obligations of each Purchaser hereunder are several and not joint obligations and no Purchaser shall have any obligation or liability to any person for the performance or non-performance by any other Purchaser hereunder. 1.3. Closing. (a) The closing of the transactions contemplated by Section 1.2 (the "Closing") shall take place at the offices of Duane Morris LLP, 380 Lexington Avenue, New York, New York, at 10:00 a.m. local time on the second Business Day after the condition in Section 2.14 has been satisfied (the "Closing Date"). The Closing may occur at such different place, different time, or different date as GP, NPDC, the Purchasers, and the Agent agree in writing. (b) At the Closing, GP shall deliver to each Purchaser, against delivery by such Purchaser to GP or its order, by wire transfer of immediately available funds, of payment of the full purchase price for the Note and GP Warrants to be purchased by such Purchaser: (i) a Note in the principal amount to be purchased by such Purchaser, dated the Closing Date, and registered in the name of such Purchaser; and (ii) a GP Warrant Certificate representing the GP Warrants to be purchased by such Purchaser, dated the Closing Date, and registered in the name of such Purchaser. (c) At the Closing, GP, NPDC, the Purchasers, and the Agent, as applicable, shall deliver the following: (i) A Mortgage, Security Agreement and Assignment of Leases (the "Mortgage"), substantially in the form set forth in Exhibit D; (ii) A GP Registration Rights Agreement (the "GP Registration Rights Agreement"), substantially in the form set forth in Exhibit E; (iii) An NPDC Registration Rights Agreement (the "NPDC Registration Rights Agreement"), substantially in the form set forth in Exhibit F; (iv) An Indemnity Agreement (the "Indemnity Agreement"), substantially in the form set forth in Exhibit G; and (v) Each certificate or other document required to be delivered by such party pursuant to Article II or III. 1.4. Issue of NPDC Warrants. On the basis of the representations, warranties, covenants, and agreements contained in this Agreement and subject to the terms and conditions of this Agreement, and in consideration of the contemplated contribution of assets by GP to NPDC in connection with the Spin-Off, NPDC, effective as of the Spin-Off Date, will issue, to each holder (a "GP Warrant Holder") of record of GP Warrants outstanding on the NPDC Warrant Record Date, a number of NPDC Warrants equal to the greatest whole number of NPDC Warrants equal to or less than the NPDC Warrant Amount multiplied by a fraction, the numerator of which is the number of GP Warrants held by such GP Warrant Holder on the NPDC Warrant Record Date and the denominator of which is 937,500. On or as soon as practicable after the Spin-Off Date but in no event later than the fifth Business Day after such date, NPDC shall deliver to each GP Warrant Holder an NPDC Warrant Certificate representing the NPDC Warrants to which such GP Warrant Holder is entitled pursuant to this Section 1.4. II. Conditions to Obligations of the Purchaser The obligations of each of the Purchasers at the Closing are subject, at the option of the Purchasers, to the following conditions: 2.1. Accuracy of Representations; Compliance with Conditions; No Default. All representations and warranties of GP, NPDC, or MXL contained in this Agreement shall be accurate when made and, in addition, shall be accurate as of the Closing as though such representations and warranties were then made in exactly the same language by GP, NPDC, or MXL and regardless of knowledge or lack thereof on the part of GP, NPDC, or MXL or changes beyond its control and without giving effect to any supplement or notice given pursuant to Section 8.1 hereof; as of the Closing, GP, NPDC, and MXL shall have performed and complied with all covenants and agreements and satisfied all conditions required by this Agreement to be performed and complied with by either of them at or before such time; no condition or event has occurred or is continuing or will result from execution and delivery of this Agreement or the other Transaction Documents which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both; and the Purchasers shall have received certificates executed by the chief executive officer and the chief financial officer of each of GP, NPDC, and MXL, dated the Closing Date, to that effect. 2.2. GP Secretary's Certificate. The Purchasers and Agent shall have received on the Closing Date a certificate of the Secretary or an Assistant Secretary of GP which shall certify that attached thereto are true and complete copies of (a) the Certificate of Incorporation of GP, as amended to such date, (b) the By-laws of GP as in effect on such date, and (c) the resolutions of the Board of Directors of GP evidencing approval of this Agreement, the Notes, the GP Warrants, the GP Registration Rights Agreement, the Mortgage, and the Indemnity Agreement and the matters and transactions contemplated hereby and thereby. 2.3. GP Incumbency Certificate. The Purchasers and Agent shall have received on the Closing Date a certificate of the Secretary or an Assistant Secretary of GP which shall certify the names of the officers of GP authorized to sign this Agreement, the Notes, the GP Warrants, the GP Registration Rights Agreement, and the Mortgage, and any other documents or certificates to be delivered pursuant to this Agreement by GP, together with the true signatures of such officers. The Purchasers and Agent may conclusively rely on such certificate until the Agent shall receive a further certificate of the Secretary or an Assistant Secretary of GP canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate. 2.4. NPDC Secretary's Certificate. The Purchasers and Agent shall have received on the Closing Date a certificate of the Secretary or an Assistant Secretary of NPDC which shall certify that attached thereto are true and complete copies of (a) the Certificate of Incorporation of NPDC, as amended to such date, (b) the By-laws of NPDC as in effect on such date, and (c) the resolutions of the Board of Directors of NPDC evidencing approval of this Agreement, the NPDC Warrants, the NPDC Registration Rights Agreement, and the Indemnity Agreement and the matters and transactions contemplated hereby and thereby. 2.5. NPDC Incumbency Certificate. The Purchasers and Agent shall have received on the Closing Date a certificate of the Secretary or an Assistant Secretary of NPDC which shall certify the names of the officers of NPDC authorized to sign this Agreement, the NPDC Warrants, and the NPDC Registration Rights Agreement, and any other documents or certificates to be delivered pursuant to this Agreement by NPDC, together with the true signatures of such officers. The Purchasers and Agent may conclusively rely on such certificate until the Agent shall receive a further certificate of the Secretary or an Assistant Secretary of NPDC canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate. 2.6. MXL Secretary's Certificate. The Purchasers and Agent shall have received on the Closing Date a certificate of the Secretary or an Assistant Secretary of MXL which shall certify that attached thereto are true and complete copies of (a) the Certificate of Incorporation of MXL, as amended to such date, (b) the By-laws of MXL as in effect on such date, and (c) the resolutions of the Board of Directors of MXL evidencing approval of this Agreement and the matters and transactions contemplated hereby. 2.7. MXL Incumbency Certificate. The Purchasers and Agent shall have received on the Closing Date a certificate of the Secretary or an Assistant Secretary of MXL which shall certify the names of the officers of MXL authorized to sign this Agreement, and any other documents or certificates to be delivered pursuant to this Agreement by MXL, together with the true signatures of such officers. The Purchasers and Agent may conclusively rely on such certificate until the Agent shall receive a further certificate of the Secretary or an Assistant Secretary of MXL canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate. 2.8. Opinions of Counsel. The Purchasers shall have received on the Closing Date the opinions of Andrea Kantor, Esq., and Duane Morris LLP, each counsel to GP, NPDC, and MXL, dated as of such date, substantially in the forms set forth in Exhibits H and I, respectively. 2.9. Transaction Documents. The Transaction Documents other than the NPDC Warrants shall have been duly authorized, executed, and delivered by GP, NPDC, and MXL, as applicable, at or prior to the Closing and at the Closing shall be in full force and effect. 2.10. Legal Action. There shall not have been instituted or threatened any legal proceeding relating to, or seeking to prohibit or otherwise challenge the consummation of, the transactions contemplated by this Agreement, or to obtain substantial damages with respect thereto or which, individually or in the aggregate, has, had, or could reasonably be expected to have a Material Adverse Effect on GP, NPDC, or MXL. 2.11. No Governmental Action. There shall not have been any action taken, or any law, rule, regulation, order, or decree proposed, promulgated, enacted, entered, enforced, or deemed applicable to the transactions contemplated by this Agreement by any federal, state, local, or other governmental authority or by any court or other tribunal, including the entry of a preliminary or permanent injunction, which makes any of the transactions contemplated by this Agreement illegal or prohibits, restricts, or delays consummation of any of the transactions contemplated by this Agreement or which, individually or in the aggregate, has, had, or could reasonably be expected to have a Material Adverse Effect on GP, NPDC, or MXL. 2.12. NYSE Listing. The New York Stock Exchange shall, at or prior to the Closing, have listed or approved the listing on official notice of issuance of the GP Warrant Shares. 2.13. Payment of Fees. GP shall have paid the costs and expenses identified in Section 12.1 as to which the Purchasers give GP notice prior to the Closing. 2.14. Bank Consent. GP shall have obtained at or prior to the Closing the consent to the transactions contemplated by this Agreement of GP's bank lenders (the "Banks"), including the release of the Banks' existing lien (the "Existing Lien") on the Premises (as defined in the Mortgage). 2.15. Title Insurance, Etc. GP, at its expense, shall have obtained and delivered to the Purchasers (a) a preliminary title report and a mortgagee's title insurance policy (the "Title Policy") issued by a reputable national title insurance company (the "Title Company") and (b) Uniform Commercial Code, litigation, bankruptcy, and judgment searches showing no liens, judgments, financing statements, or other security interests of record affecting the Premises except those matters described in Schedule 2.15, the Existing Lien (which shall be subject to the condition set forth in Section 2.14), liens securing the Notes, and such other matters as may be approved in writing by the Purchasers. The Title Policy shall be in form and content reasonably satisfactory to the Purchasers; shall insure that the Mortgage is a valid first lien against the Premises, subject to only the matters set forth in Schedule 2.15 and such other exceptions as may have been approved in writing by Purchasers, and that GP has good and marketable fee simple title to the Premises; shall contain such endorsements and affirmative insurance as the Purchasers may reasonably require; and shall afford the broadest coverage that is customarily afforded by the Title Company to mortgagees of similar property located in the New York. 2.16. No Material Adverse Change. Since the date of this Agreement, no event shall have occurred which individually or in the aggregate, has, had, or could reasonably be expected to have a Material Adverse Effect on GP, NPDC, or MXL. III. Conditions to the Obligations of GP and NPDC The obligations of GP and NPDC under this Agreement are subject, at the option of GP and NPDC, to the following conditions: 3.1. Accuracy of Representations and Compliance with Conditions. All representations and warranties of the Purchasers contained in this Agreement shall be accurate when made and, in addition, shall be accurate as of the Closing as though such representations and warranties were then made in exactly the same language by the Purchasers and regardless of knowledge or lack thereof on the part of the Purchasers or changes beyond their control; as of the Closing the Purchasers shall have performed and complied with all covenants and agreements and satisfied all conditions required to be performed and complied with by any of them at or before such time by this Agreement; and GP and NPDC shall have received a certificate or certificates of the Purchasers, dated the Closing Date, to that effect. 3.2. Legal Action. There shall not have been instituted or threatened any legal proceeding relating to, or seeking to prohibit or otherwise challenge the consummation of, the transactions contemplated by this Agreement, or to obtain substantial damages with respect thereto. 3.3. No Governmental Action. There shall not have been any action taken, or any law, rule, regulation, order, or decree proposed, promulgated, enacted, entered, enforced, or deemed applicable to the transactions contemplated by this Agreement by any federal, state, local, or other governmental authority or by any court or other tribunal, including the entry of a preliminary or permanent injunction, which makes any of the transactions contemplated by this Agreement illegal or prohibits, restricts, or delays consummation of any of the transactions contemplated by this Agreement. 3.4. NYSE Listing. The New York Stock Exchange shall, at or prior to the Closing, have listed or approved the listing on official notice of issuance of the GP Warrant Shares. 3.5. Bank Consent. GP shall have obtained at or prior to the Closing the consent to the transactions contemplated by this Agreement of the Banks, including the release of the Existing Lien. IV. Representations and Warranties of GP GP represents and warrants to the Purchasers as follows: 4.1. Organization and Qualification. GP is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, with all requisite power and authority to own, lease, license, and use its properties and assets and to carry on the business in which it is engaged. GP is duly qualified to transact the business in which it is engaged and is in good standing as a foreign corporation in every jurisdiction in which its ownership, leasing, licensing, or use of property or assets or the conduct of its business makes such qualification necessary, except as would not be reasonably likely to have a Material Adverse Effect on GP. 4.2. SEC Reports. GP has delivered to the Purchasers true and correct copies of its Annual Report on Form 10-K for the year ended December 31, 2002 (the "Form 10-K"), Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, all Current Reports on Form 8-K filed with the SEC since the filing of the Form 10-K, and its Proxy Statement dated June 10, 2002 (collectively, the "SEC Reports"). None of the SEC Reports when filed with the SEC contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading. From the date of the last SEC Report to the Closing Date, no event has occurred which individually or in the aggregate, has, had, or could reasonably be expected to have a Material Adverse Effect on GP. 4.3. Capitalization. The authorized capital stock of GP consists of 25,000,000 shares of GP Common Stock and 2,800,000 shares of GP Class B Stock, of which as of the date of this Agreement 16,159,702 shares of GP Common Stock and 1,200,000 shares of GP Class B Stock are outstanding. Each of such outstanding shares of GP Common Stock and GP Class B Stock is validly authorized, validly issued, fully paid, and nonassessable, and has not been issued and is not owned or held in violation of any preemptive right of stockholders. Other than as contemplated by this Agreement and the other Transaction Documents and as disclosed in the SEC Reports, there is no commitment, plan, or arrangement to issue, and no outstanding option, warrant, or other right calling for the issuance of, any share of capital stock of GP or any security or other instrument convertible into, exercisable for, or exchangeable for capital stock of GP. Other than as disclosed in the SEC Reports, there is outstanding no security or other instrument convertible into or exchangeable for capital stock of GP. 4.4. Litigation and Claims. Except as disclosed in the SEC Reports, there is no litigation, arbitration, claim, governmental or other proceeding (formal or informal), or investigation pending or, to the knowledge of GP, threatened, with respect to GP or any GP Subsidiary (as defined below) which has, had, or is reasonably likely to have a Material Adverse Effect on GP. 4.5. Authority to Sell; Enforceability; Valid Issuance. GP has all requisite power and authority to execute, deliver, and perform this Agreement and the other Transaction Documents to be executed, delivered, and performed by it. All necessary corporate proceedings of GP have been duly taken to authorize the execution, delivery, and performance by GP of this Agreement and the other Transaction Documents to be executed, delivered, and performed by it. Each of this Agreement and the other Transaction Documents to be executed, delivered, and performed by GP has been duly authorized by GP and this Agreement has been, and at the Closing the other Transaction Documents to be executed, delivered, and performed by GP will be, duly executed and delivered by GP. Each of this Agreement and the other Transaction Documents to be executed, delivered, and performed by GP constitutes or will constitute the legal, valid, and binding obligation of GP and is or will be enforceable as to GP in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or other laws of general application affecting enforcement of creditors' rights, (b) for general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Section 2.10 of the GP Registration Rights Agreement may be limited by applicable laws. All GP Warrant Shares have been reserved for issuance and, when issued and delivered on exercise of the GP Warrants and payment therefor in accordance with the GP Warrants or in accordance with the Notes, will be validly authorized, validly issued, fully paid, and nonassessable and will not have been issued in violation of any preemptive right of stockholders. Each Purchaser or other Person receiving GP Warrant Shares upon exercise of GP Warrants in accordance with their terms will receive good title to such shares, free and clear of all liens, security interests, pledges, charges, encumbrances, stockholders' agreements, and voting trusts, other than (x) those imposed by the Purchaser or other Person receiving the same, (y) restrictions on transfer under applicable securities laws, and (z) as provided in the GP Warrant Certificate or Note, as applicable. 4.6. No Conflicts. No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by GP for the execution, delivery, or performance by GP of this Agreement or the other Transaction Documents to be executed, delivered, and performed by GP, except for the filing of a Form D under the Securities Act and as may be required under state securities laws. No consent of any party to any contract, agreement, instrument, lease, or license (collectively, "Contracts") to which GP or any GP Subsidiary is a party, or to which it or any of its businesses, properties, or assets are subject, is required for the execution, delivery, or performance of this Agreement or the other Transaction Documents to be executed, delivered, and performed by GP, other than the consent and release of the Banks as referred to in Section 3.5; and, if such consent is obtained, the execution, delivery, and performance by GP of this Agreement and the other Transaction Documents to be executed, delivered, and performed by GP will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under, entitle any party to rights and privileges that such party was not receiving or entitled to receive immediately before this Agreement was executed under, or create any obligation on the part of GP or any GP Subsidiary that it was not paying or obligated to pay immediately before this Agreement was executed under, any term of any such Contract, or result in the creation of any lien (except as set forth in the Mortgage) on any of GP's or any GP Subsidiary's properties or assets, or violate or result in a breach of any term of the certificate of incorporation (or other charter document) or by-laws of GP or any GP Subsidiary, or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on GP or any GP Subsidiary or to which it or any of its businesses, properties, or assets are subject, in each case except as would not be reasonably likely to have a Material Adverse Effect on GP. 4.7. No Registration Required. Assuming the continuing accuracy of the representations and warranties of the Purchasers contained in Article VII hereof, the offer, sale and issuance of (a) the Notes, (b) the GP Warrants, and (c) upon exercise of the GP Warrants in accordance with their terms, the GP Warrant Shares will be exempt from the registration requirements of the Securities Act. 4.8. No Event of Default. There exists no event of default under the terms and provisions of any instrument, agreement, or contract pertaining to any indebtedness of GP, including Senior Indebtedness (as defined in the Note), and to GP's knowledge there exists no event or condition which, with due notice or lapse of time or both, would constitute such an event of default. 4.9. Title to Premises. GP has on the date hereof, and, if the Contemplated Conveyance has not taken place, will have at the Closing, an indefeasible estate in fee simple in the portion of the Premises which constitutes real property and GP owns on the date hereof, and, if the Contemplated Conveyance has not taken place, will own at the Closing, good title to the portion of the Premises which constitutes personal property, in each case and to GP's knowledge, subject only to the encumbrances set forth on Schedule 2.15, the Existing Lien, liens securing the Notes, and such other matters as may be approved in writing by the Purchasers. No person has asserted a claim against GP or, to GP's knowledge, has threatened to assert a claim against GP or the Premises that would, if such claim were upheld, result in an encumbrance to the Premises (other than an encumbrance set forth on Schedule 2.15, the Existing Lien, liens securing the Notes, or such other matters as may be approved in writing by the Purchasers) which would materially adversely affect the value, use or enjoyment of the Premises, and there are no facts known to GP that would allow such a claim to be successfully asserted. Subject to obtaining the consent and release of the Banks as referred to in Section 3.5, (a) GP has on the date hereof, and, if the Contemplated Conveyance has not taken place, will have at the Closing, good right, full power, and lawful authority to convey and mortgage to the Agent and grant to the Agent a security interest in the same, in the manner and form set forth in the Mortgage; (b) subject to the Permitted Encumbrances and other Liens (as such terms are defined in the Mortgage) permitted pursuant to the Mortgage, the Mortgage will, at the time of its delivery to Agent, and thereafter be a valid and enforceable and, upon recordation, perfected first mortgage lien on the Premises; and (c) GP shall and will warrant and forever defend the title to the Premises unto Agent against the claims of all Persons whomsoever. 4.10. Environmental Matters. To the knowledge of GP, except as set forth in the Environmental Report, (a) there are no Hazardous Materials or underground storage tanks in, on, or under the Premises, except those that are both (i) in compliance with Environmental Laws and with permits issued pursuant thereto (if such permits are required), if any, and (ii) in amounts not in excess of that necessary to operate the Premises; (b) there are no past, present, or threatened Releases of Hazardous Materials in violation of any Environmental Law and which would require remediation by a governmental authority in, on, under, or from the Premises; (c) there is no threat of any Release of Hazardous Materials migrating to the Premises ; (d) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Premises; (e) GP does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a governmental entity) relating to Hazardous Materials in, on, under, or from the Premises; and (f) GP has truthfully and fully provided to the Purchasers, in writing, any and all information relating to environmental conditions in, on, under, or from the Premises known to GP or contained in GP's files and records, including but not limited to any reports relating to Hazardous Materials in, on, under, or migrating to or from the Premises and/or to the environmental condition of the Premises. 4.11. GP Taxes. GP has filed all federal, state, local, and foreign tax returns, informational returns, and excise tax returns which are required to have been filed by it, and there have been paid all taxes shown to be due and payable on such returns and all other material taxes and assessments payable by it, unless any such tax or assessment is being diligently contested in good faith and GP has adequately reserved against such tax or assessment on its books and financial statements in accordance with GAAP, in each case except as would not be reasonably likely to have a Material Adverse Effect on GP. No material tax liens have been filed and no material claims are being asserted with respect to any such taxes as of the date hereof. No material tax assessment against GP has been proposed and all of its tax liabilities are adequately provided for on its books and financial statements in accordance with GAAP. 4.12. Broker's or Finder's Commissions; Financial Advisory Fees. No broker's or finder's fee or commission or financial advisory or similar fees will be payable by GP or any of its affiliates with respect to the issuance and sale of the Notes, the GP Warrants, or the NPDC Warrants or otherwise in connection with the transactions contemplated by the Transaction Documents. 4.13. Solvency. GP is and shall be Solvent both before and after giving effect to the transactions contemplated by this Agreement and the other Transaction Documents to be effected on or prior to the Closing Date. 4.14. Permits. GP has all franchises, permits, licenses, and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which, individually or in the aggregate, has, had, or could reasonably be expected to have a Material Adverse Effect on GP. 4.15. Subsidiaries. The only subsidiaries of GP which are significant, as defined in Regulation S-X promulgated by the SEC, are those subsidiaries listed on Schedule 4.15 (the "GP Subsidiaries"). 4.16. Disclosure. None of the factual information concerning GP and the GP Subsidiaries set forth in the SEC Reports or delivered pursuant to this Agreement, the other Transaction Documents, or the other documents set forth on Schedule 4.16 contains as of its date, certification, or delivery any untrue statement of a material fact, and all such factual information (taken as a whole) does not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. V. Representations and Warranties of NPDC NPDC represents and warrants to the Purchasers as follows: 5.1. Organization and Qualification. NPDC is, and on the Spin-Off Date will be, a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, with all requisite power and authority to own, lease, license, and use its properties and assets and to carry on the business in which it is engaged. NPDC is, and on the Spin-Off Date will be, duly qualified to transact the business in which it is engaged and is or will be in good standing as a foreign corporation in every jurisdiction in which its ownership, leasing, licensing, or use of property or assets or the conduct of its business makes such qualification necessary, except as would not be reasonably likely to have a Material Adverse Effect on NPDC 5.2. Capitalization; MXL. Immediately after the Spin-Off, NPDC Common Stock will constitute the only shares of capital stock of NPDC outstanding. On the Spin-Off Date, each of such outstanding shares of NPDC Common Stock will be validly authorized, validly issued, fully paid, and nonassessable, and will not have been issued and will not be owned or held in violation of any preemptive right of stockholders. Other than as contemplated by this Agreement and the other Transaction Documents, the Spin-Off, and options contemplated to be issued to employees of NPDC, there is no commitment, plan, or arrangement to issue, and no outstanding option, warrant, or other right calling for the issuance of, any share of capital stock of NPDC or any security or other instrument convertible into, exercisable for, or exchangeable for capital stock of NPDC. On the Spin-Off Date, there will be outstanding no security or other instrument convertible into or exchangeable for capital stock of NPDC. At the time of the Contemplated Conveyance (as defined below), MXL will be a wholly-owned subsidiary of NPDC. 5.3. Litigation and Claims. Except as disclosed in the SEC Reports, there is no litigation, arbitration, claim, governmental or other proceeding (formal or informal), or investigation pending or, to the knowledge of NPDC, threatened, with respect to NPDC or any NPDC Subsidiary, which individually or in the aggregate, has, had, or could reasonably be expected to have a Material Adverse Effect on NPDC. 5.4. Authority to Sell; Enforceability; Valid Issuance. NPDC has all requisite power and authority to execute, deliver, and perform this Agreement and the other Transaction Documents to be executed, delivered, and performed by it. All necessary corporate proceedings of NPDC have been or prior to the Spin-Off Date will have been duly taken to authorize the execution, delivery, and performance by NPDC of this Agreement and the other Transaction Documents to be executed, delivered, and performed by it. Each of this Agreement and the other Transaction Documents to be executed, delivered, and performed by NPDC has been or prior to the Spin-Off Date will have been duly authorized by NPDC and this Agreement has been, and at the Closing or the Spin-Off Date the other Transaction Documents to then be executed, delivered, and performed by NPDC will be, duly executed and delivered by NPDC. Each of this Agreement and the other Transaction Documents to be executed, delivered, and performed by NPDC constitutes or will constitute the legal, valid, and binding obligation of NPDC and is or will be enforceable as to NPDC in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, (b) for general principles of equity that restrict the availability of equitable remedies, and (c) to the extent that the enforceability of the indemnification provisions of Section 2.10 of the NPDC Registration Rights Agreement may be limited by applicable laws. On the Spin-Off Date, all NPDC Warrant Shares will have been reserved for issuance and, when issued and delivered on exercise of the NPDC Warrants and payment therefor in accordance with the NPDC Warrants, will be validly authorized, validly issued, fully paid, and nonassessable and will not have been issued in violation of any preemptive right of stockholders. Each Purchaser or other Person receiving NPDC Warrant Shares upon exercise of GP Warrants in accordance with their terms will receive good title to such shares, free and clear of all liens, security interests, pledges, charges, encumbrances, stockholders' agreements, and voting trusts, other than (x) those imposed by the Purchaser or other Person receiving the same, (y) restrictions on transfer under applicable securities laws, and (z) as provided in the NPDC Warrant Certificate. 5.5. No Conflicts. No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by NPDC for the execution, delivery, or performance by NPDC of this Agreement or the other Transaction Documents to be executed, delivered, and performed by NPDC, except as may be required under federal or state securities laws, pursuant to the rules of such securities exchange or market on which the NPDC Warrant Shares may be listed or quoted, and for filings of such amendment to NPDC's certificate of incorporation as may be necessary to authorize the NPDC Warrant Shares. No consent of any party to any contract, agreement, instrument, lease, or license (collectively, "NPDC Contracts") to which NPDC or any NPDC Subsidiary is a party, or to which it or any of its businesses, properties, or assets are subject, is required for the execution, delivery, or performance of this Agreement or the other Transaction Documents to be executed, delivered, and performed by NPDC; and the execution, delivery, and performance by NPDC of this Agreement and the other Transaction Documents to be executed, delivered, and performed by NPDC will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under, entitle any party to rights and privileges that such party was not receiving or entitled to receive immediately before this Agreement was executed under, or create any obligation on the part of NPDC or any NPDC Subsidiary that it was not paying or obligated to pay immediately before this Agreement was executed under, any term of any such NPDC Contract, or result in the creation of any lien (except as set forth in the Mortgage) on any of NPDC's or any NPDC Subsidiary's properties of assets, or violate or result in a breach of any term of the certificate of incorporation (or other charter document) or by-laws of NPDC or NPDC Subsidiary, or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on NPDC or any NPDC Subsidiary or to which it or any of its businesses, properties, or assets are subject, in each case except as would not be reasonably likely to have a Material Adverse Effect on NPDC. 5.6. No Registration Required. Assuming the continuing accuracy of the representations and warranties of the Purchasers contained in Article VII hereof, the offer, sale and issuance of the NPDC Warrants and, upon exercise of the NPDC Warrants in accordance with their terms, the NPDC Warrant Shares will be exempt from the registration requirements of the Securities Act. 5.7. NPDC Taxes. NPDC has filed all federal, state, local, and foreign tax returns, informational returns, and excise tax returns which are required to have been filed by it, and there have been paid all taxes shown to be due and payable on such returns and all other material taxes and assessments payable by it, unless any such tax or assessment is being diligently contested in good faith and NPDC has adequately reserved against such tax or assessment on its books and financial statements in accordance with GAAP, in each case except as would not be reasonably likely to have a Material Adverse Effect on NPDC. No material tax liens have been filed and no material claims are being asserted with respect to any such taxes as of the date hereof. No material tax assessment against NPDC has been proposed and all of its tax liabilities are adequately provided for on its books and financial statements in accordance with GAAP. 5.8. Broker's or Finder's Commissions; Financial Advisory Fees. No broker's or finder's fee or commission or financial advisory or similar fees will be payable by NPDC or any of its affiliates with respect to the issuance and sale of the Notes, the GP Warrants, or the NPDC Warrants or otherwise in connection with the transactions contemplated by the Transaction Documents. 5.9. Disclosure. None of the factual information concerning NPDC and the NPDC Subsidiaries set forth in the SEC Reports or delivered pursuant to this Agreement, the other Transaction Documents, or the other documents set forth on Schedule 4.16 contains as of its date, certification, or delivery any untrue statement of a material fact, and all such factual information (taken as a whole) does not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. VI. Representations and Warranties of MXL MXL represents and warrants to the Purchasers as follows: 6.1. Organization and Qualification. MXL is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, with all requisite power and authority to own, lease, license, and use its properties and assets and to carry on the business in which it is engaged. MXL is duly qualified to transact the business in which it is engaged and is or will be in good standing as a foreign corporation in every jurisdiction in which its ownership, leasing, licensing, or use of property or assets or the conduct of its business makes such qualification necessary, except as would not be reasonably likely to have a Material Adverse Effect on MXL. 6.2. Authority; Enforceability. MXL has all requisite power and authority to execute, deliver, and perform this Agreement. All necessary corporate proceedings of MXL have been or prior to the Contemplated Conveyance will have been duly taken to authorize the execution, delivery, and performance by MXL of this Agreement. This Agreement has been duly authorized, executed, and delivered by MXL. This Agreement constitutes the legal, valid, and binding obligation of MXL and is enforceable as to MXL in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws of general application affecting enforcement of creditors' rights, and (b) for general principles of equity that restrict the availability of equitable remedies. 6.3. No Conflicts. No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration or filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by MXL for the execution, delivery, or performance by MXL of this Agreement. No consent of any party to any contract, agreement, instrument, lease, or license (collectively, "MXL Contracts") to which MXL or any MXL Subsidiary is a party, or to which it or any of its businesses, properties, or assets are subject, is required for the execution, delivery, or performance of this Agreement; and the execution, delivery, and performance by MXL of this Agreement will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under, entitle any party to rights and privileges that such party was not receiving or entitled to receive immediately before this Agreement was executed under, or create any obligation on the part of MXL or any MXL Subsidiary that it was not paying or obligated to pay immediately before this Agreement was executed under, any term of any such MXL Contract, or result in the creation of any lien (except as set forth in the Mortgage) on any of MXL's or any MXL Subsidiary's properties of assets, or violate or result in a breach of any term of the certificate of incorporation (or other charter document) or by-laws of MXL or MXL Subsidiary, or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on MXL or any MXL Subsidiary or to which it or any of its businesses, properties, or assets are subject, in each case except as would not be reasonably likely to have a Material Adverse Effect on MXL. 6.4. Title to Premises. After the Contemplated Conveyance, MXL will have an indefeasible estate in fee simple in the portion of the Premises which constitutes real property and MXL will own good title to the portion of the Premises which constitutes personal property, in each case and to MXL's knowledge, subject only to the encumbrances set forth on Schedule 2.15, the Existing Lien (if the Contemplated Conveyance occurs prior to the release of the Existing Lien), liens securing the Notes, and such other matters as may be approved in writing by the Purchasers. 6.5. Disclosure. None of the factual information concerning MXL and the MXL Subsidiaries set forth in the SEC Reports or delivered pursuant to this Agreement, the other Transaction Documents, or the other documents set forth on Schedule 4.16 contains as of its date, certification, or delivery any untrue statement of a material fact, and all such factual information (taken as a whole) does not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading. VII. Representations and Warranties of the Purchasers Each Purchaser, severally and not jointly, represents and warrants to the other parties hereto as follows: 7.1. Authority to Buy. Such Purchaser has all requisite power and authority to execute, deliver, and perform this Agreement. All necessary proceedings of such Purchaser have been duly taken to authorize the execution, delivery, and performance of this Agreement by such Purchaser. This Agreement has been duly executed and delivered by such Purchaser, is the legal, valid, and binding obligation of such Purchaser, and is enforceable as to such Purchaser in accordance with its terms. 7.2. Non-Distributive Intent. Such Purchaser is acquiring the Securities to be acquired by it for its own account (and not for the account of others) for investment and not with a view to the distribution thereof in violation of the Securities Act. The Purchaser understands that it may not sell or otherwise dispose of the Securities in the absence of either a registration statement under the Securities Act or an exemption from the registration provisions of the Securities Act. 7.3. Information and Experience. Purchaser acknowledges receipt of the SEC Reports. Purchaser has made such inquiry concerning GP and NPDC and their business and personnel as such Purchaser deemed necessary and appropriate in connection with its investment in GP and NPDC contemplated hereby. The officers of GP and NPDC have made available to such Purchaser any and all written information which it has requested and have answered to such Purchaser's satisfaction all inquiries made by such Purchaser. Such Purchaser has sufficient knowledge and experience in investing in companies similar to GP and NPDC so as to be able to evaluate the risks and merits of its investments in GP and NPDC and is able financially to bear the risks thereof. 7.4. Purchaser Status. Such Purchaser is an accredited investor within the definition set forth in Rule 501(a) under the Securities Act and an investment company registered under the Investment Company Act of 1940, as amended. 7.5. Broker's or Finder's Commissions; Financial Advisory Fees. No broker's or finder's fee or commission or financial advisory or similar fees will be payable by any of the Purchasers with respect to the issuance and sale of the Notes, the GP Warrants, or the NPDC Warrants or otherwise in connection with the transactions contemplated by the Transaction Documents. Each Purchaser agrees to indemnify GP and NPDC and hold each of them harmless against any loss, cost, claim or liability (including reasonable attorneys' fees and reasonable disbursements for the investigation and defense of claims) arising out of or relating to any such actual or alleged broker's or finder's fee or commission. VIII. Covenants and Agreements The parties covenant and agree as follows: 8.1. Advice of Changes. Until the Closing or the termination of this Agreement, each of GP, NPDC, and MXL will immediately advise the Purchasers in a detailed written notice of any fact or occurrence or any pending or threatened occurrence of which any of them obtains knowledge and which (if existing and known at the date of the execution of this Agreement) would have been required to be set forth or disclosed in or pursuant to this Agreement, which (if existing and known at any time prior to or at the Closing) would make the performance by any party of a covenant contained in this Agreement impossible or make such performance materially more difficult than in the absence of such fact or occurrence, or which (if existing and known at the time of the Closing) would cause a condition to any party's obligations under this Agreement not to be fully satisfied. Any such notice or disclosure shall be given no effect in satisfying any of the conditions of Section 2.1 hereof. 8.2. Furnish Future Information. After the Closing, GP shall deliver to the holders of the Notes and the GP Warrants, for so long as such Persons own any Notes or GP Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices, and proxy statements sent by it to its stockholders, all regular and periodic reports filed by it with any securities exchange or with the SEC, and all material press releases. After the Spin-Off Date, NPDC shall deliver to the holders of the NPDC Warrants, for so long as such Persons own any NPDC Warrants, promptly upon their becoming available, copies of all financial statements, reports, notices, and proxy statements sent by it to its stockholders, all regular and periodic reports filed by it with any securities exchange or with the SEC, and all material press releases. 8.3. Mortgage. (a) Each Purchaser and other Security Holder acknowledges and agrees that, in contemplation of the Spin-Off, GP shall have the right to convey the Premises to MXL, which at the time of such conveyance will be a wholly-owned subsidiary of NPDC (such conveyance is referred to herein as the "Contemplated Conveyance"). GP will give prompt notice to the Agent of the occurrence of the Contemplated Conveyance. Whether or not the Spin-Off or the Contemplated Conveyance has occurred, any extension of, or increase in the principal amount of, interest rate on, or other charges on, the Notes or any other amendment, extension, waiver, or modification to the Notes or other Transaction Documents which increases the obligations secured by the Mortgage must be agreed upon in writing by each of GP, the Agent, and MXL to be effective. (b) In connection with the Contemplated Conveyance, and subject to Section 39 of the Mortgage, MXL will, at the sole cost of MXL, (i) execute such documents and take such other actions as may be necessary to assume the Mortgage and all of the obligations and liabilities of GP arising thereunder, provided, however, that it is expressly understood and agreed that such assumption will be made subject to the provisions of Section 8.4 hereof and (ii) deliver or cause to be delivered an endorsement to the Title Policy or a side letter from the Title Company (in either case, provided that the same is available at nominal cost), in form reasonably acceptable to the Agent, insuring to the Agent that (A) MXL is the fee owner of the Premises and (B) the Mortgage, as assumed by MXL, is a valid and subsisting first priority lien against the Premises subject only to the Permitted Encumbrances. (c) Each Security Holder which holds any Notes agrees that, if GP or MXL shall tender full payment of the outstanding principal amount of the Notes, together with all interest and other sums due thereunder, as contemplated by Section 17(a) of the Mortgage, such Security Holder will promptly surrender to the tenderor and endorse (without recourse) all Notes held by such Security Holder as contemplated by such Section 17(a). 8.4. No Liability. Each Purchaser and other Security Holder acknowledges and agrees that, notwithstanding anything to the contrary contained in this Agreement or in any of the other Transaction Documents, except as provided otherwise in this Section 8.4, (a) neither MXL nor any MXL Related Party (other than GP) shall have any personal liability for (i) the payment of any sum of money which is or may be payable by GP hereunder or under any Note, the Mortgage, the GP Warrants, or the GP Registration Rights Agreement, including, but not limited to, the repayment of the Notes, or (ii) the performance or discharge of any covenants, obligations, or undertakings of GP hereunder or under any Note, the Mortgage, the GP Warrants, or the GP Registration Rights Agreement, and no monetary or deficiency judgment shall be sought or enforced against MXL or any MXL Related Party (other than GP) with respect thereto, notwithstanding any conveyance or transfer of the Premises to MXL or any assumption of the Mortgage by MXL, and (b) neither MXL nor any MXL Related Party (other than NPDC) shall have any personal liability for (i) the payment of any sum of money which is or may be payable by NPDC hereunder or under the NPDC Warrants or the NPDC Registration Rights Agreement, or (ii) the performance or discharge of any covenants, obligations, or undertakings of NPDC hereunder or under the NPDC Warrants or the NPDC Registration Rights Agreement, and no monetary or deficiency judgment shall be sought or enforced against MXL or any MXL Related Party (other than NPDC) with respect thereto, notwithstanding any conveyance or transfer of the Premises to MXL or any assumption of the Mortgage by MXL; provided, however, that a judgment may be sought against MXL or any MXL Related Party to enforce the rights of the Agent in, to, or against the Premises, and the Agent shall have full recourse to and the right to proceed against the Premises. Nothing contained herein shall impair the validity of GP's obligations under the Notes or in any way affect or impair the lien of the Mortgage, or the right of the Agent to enforce any and all rights and remedies under and by virtue of the Notes, this Agreement, or any other Transaction Document, including, without limitation, naming MXL as a party defendant in any foreclosure action, or limit the Agent from pursuing or seeking to enforce the rights of the Agent against any third parties, including any guarantor, indemnitor, or surety under any guaranty or indemnity delivered in connection with this Agreement, the Notes, or any other Transaction Document or otherwise in connection with the Notes. 8.5. Transfer Restrictions. Each Purchaser and other Security Holder acknowledges and agrees that the Securities are subject to restrictions on transfer as set forth in the Notes, GP Warrants, GP Registration Rights Agreement, NPDC Warrants, and NPDC Registration Rights Agreement. 8.6. Bank Consent. GP shall use its commercially reasonable efforts to obtain at or prior to the Closing the Banks' consent to the transactions contemplated by this Agreement, including the release of the Existing Lien. 8.7. Title Insurance. GP shall use its commercially reasonable efforts to purchase, at or prior to the Closing, the Title Policy in accordance with Section 2.15. 8.8. NYSE Listing. GP shall use its commercially reasonable efforts to cause The New York Stock Exchange, at or prior to the Closing, to have listed or approved the listing on official notice of issuance of the GP Warrant Shares. 8.9. Warrant Purchase. If any party shall terminate this Agreement pursuant to Section 11.1(e) and the condition set forth in Section 2.14 shall not have been satisfied on or prior to the date notice of termination is given, each of the Purchasers shall have the right, by giving notice to GP not more than ten days after the date notice of termination is given, to elect to purchase the number of GP Warrants specified opposite such Purchaser's name in Schedule 1.2, at a purchase price for each such GP Warrant equal to $4.213, and not to purchase the Notes. Any Purchaser exercising such right shall also be entitled to receive NPDC Warrants under the circumstances and in the manner set forth in Section 1.4. If any Purchaser exercises such right, the parties agree to modify, as promptly as practical, this Agreement (including, without limitation, the corresponding terms and conditions with respect to closing deliveries, payments, covenants, and indemnities), the GP Warrants, the NPDC Warrants, the GP Registration Rights Agreement, the NPDC Registration Rights Agreement, and the Indemnity Agreement to the extent necessary to effectuate such transaction. 8.10. Spin-Off. GP shall not consummate the Spin-Off unless, on the Spin-Off Date, the Agent shall have received the opinion of counsel to NPDC, dated as of such date, substantially in the form set forth in Exhibit J. 8.11. Subordination Agreement. If any person holding or proposing to provide Senior Indebtedness so requests, each Security Holder which holds any Notes shall (and authorizes the Agent on such Security Holder's behalf to) at GP's expense enter into a subordination agreement (a "Subordination Agreement") contemplated by Section 7(d) of the Notes, confirming and supplementing the provisions of Section 7 of the Notes, and containing such terms as are customarily included in such a subordination agreement and are reasonably satisfactory to the Agent, in such form as may be reasonably requested by such person. Without limiting the generality of the foregoing, each Security Holder which holds any Notes shall (and authorizes and directs the Agent on such Security Holder's behalf to) at GP's expense enter into a Subordination Agreement substantially in the form set forth in Exhibit K. IX. Agent 9.1. Appointment and Authority. (a) Each Purchaser and each Security Holder hereby appoints the Agent as its agent, to act on its behalf, with respect to this Agreement and the other Transaction Documents. Agent hereby accept such appointment and hereby agrees that all actions taken by it in connection with this Agreement and the other Transaction Documents shall be taken on behalf of and for the benefit of the Purchasers or the Security Holders, as applicable. Each Purchaser and each Security Holder hereby irrevocably authorizes the Agent to take such action on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are specifically delegated to the Agent by the terms hereof or thereof, together with such other powers as are reasonably incidental thereto. Without limiting the foregoing, the Agent shall have full and irrevocable authority on behalf of each Purchaser and each Security Holder, without notice or prior consent, to: (i) accept and give notices and other communications relating to this Agreement or the other Transaction Documents; (ii) waive any ministerial provision of this Agreement or the other Transaction Documents; (iii) modify or amend this Agreement or the other Transaction Documents for ministerial purposes; (iv) administer the debt evidenced by the Notes on a day-to-day basis; (v) execute any instrument or document that the Agent may determine is necessary or desirable in the exercise of his authority under this Article IX, including, but not limited to, any easement, restrictive covenant, reciprocal easement agreement, or other similar document, provided, however, that, the Agent shall not, without the consent of holders of a majority of the outstanding principal amount of the Notes, execute any such instrument or document if such execution will result in an adverse affect on the Premises; (vi) execute in the name of and on behalf of each and every holder of the Notes any and all (A) assignments, releases, substitute instruments, and other documents necessary or appropriate to carry out the intent of Section 27 of the Mortgage concerning defeasance of the Mortgage and (B) supplemental or substitute mortgages, supplemental or substitute notes, and other documents necessary or appropriate to carry out the intent of Section 38 of the Mortgage concerning splitting of the Mortgage and the loan secured thereby; and, if necessary or appropriate in connection therewith, the holders shall deliver their respective Notes to the Agent for surrender or amendment in connection therewith; and (vii) execute in the name of and on behalf of each and every holder of the Notes a Subordination Agreement and, upon the execution of a Subordination Agreement, the Agent shall have all of the authority, rights, responsibilities, duties, and obligations hereunder with respect to such Subordination Agreement as the Agent has with respect to the Notes. (b) The Agent shall also have full and irrevocable authority on behalf of the Purchasers and the Security Holders: (i) prior to the Closing, with the prior consent of Purchasers which, pursuant to Schedule 1.2, are to purchase a majority of the principal amount of the Notes, to waive any condition to closing or other provision of, to modify, or to amend this Agreement, other than modifications or amendments to the purchase price to be paid by the Purchasers or to the principal amount of Notes to be bought by any Purchaser; (ii) following the Closing, with the prior consent of the holders of a majority of the outstanding principal amount of Notes, to waive any provision of, to modify, or to amend this Agreement, or deal with the other parties to this Agreement, settle any dispute relating to the terms of this Agreement or act in connection with all matters arising out of, based upon, or in connection with this Agreement and the transactions contemplated hereby; (iii) with the prior consent of the holders of a majority of the outstanding principal amount of Notes, to waive any provision of, to modify, or to amend the Notes, the Mortgage, or, to the extent relating thereto, this Agreement, or deal with the other parties to the Notes, the Mortgage, or, to the extent relating thereto, this Agreement, settle any dispute relating to the terms of the Notes, the Mortgage, or, to the extent relating thereto, this Agreement or act in connection with all matters arising out of, based upon, or in connection with such agreements and the transactions contemplated thereby, provided, however, that no such amendment or waiver shall, unless signed by the holder or purchaser of any Note affected thereby, (A) reduce the principal of or rate of interest on any Note or any fees thereunder or (B) postpone the date fixed for any payment of principal of or interest on any Note; (iv) with the prior consent of the holders of a majority of the outstanding GP Warrants, to waive any provision of, to modify, or to amend the GP Warrants or, to the extent relating thereto, this Agreement; or deal with the other parties to the GP Warrants or, to the extent relating thereto, this Agreement, settle any dispute relating to the terms of the GP Warrants or, to the extent relating thereto, this Agreement, or act in connection with all matters arising out of, based upon, or in connection with such agreements and the transactions contemplated thereby; (v) with the prior consent of the Majority Holders (as defined in the GP Registration Rights Agreement), to waive any provision of, to modify, or to amend the GP Registration Rights Agreement or, to the extent relating thereto, this Agreement; or deal with the other parties to the GP Registration Rights Agreement or, to the extent relating thereto, this Agreement, settle any dispute relating to the terms of the GP Registration Rights Agreement or, to the extent relating thereto, this Agreement, or act in connection with all matters arising out of, based upon, or in connection with such agreements and the transactions contemplated thereby; (vi) with the prior consent of the holders of a majority of the outstanding NPDC Warrants, to waive any provision of, to modify, or to amend the NPDC Warrants or, to the extent relating thereto, this Agreement; or deal with the other parties to the NPDC Warrants or, to the extent relating thereto, this Agreement, settle any dispute relating to the terms of the NPDC Warrants or, to the extent relating thereto, this Agreement, or act in connection with all matters arising out of, based upon, or in connection with such agreements and the transactions contemplated thereby; and (vii) with the prior consent of the Majority Holders (as defined in the NPDC Registration Rights Agreement), to waive any provision of, to modify, or to amend the NPDC Registration Rights Agreement or, to the extent relating thereto, this Agreement; or deal with the other parties to the NPDC Registration Rights Agreement or, to the extent relating thereto, this Agreement, settle any dispute relating to the terms of the NPDC Registration Rights Agreement or, to the extent relating thereto, this Agreement, or act in connection with all matters arising out of, based upon, or in connection with such agreements and the transactions contemplated thereby. (c) The Agent agrees that, upon receipt of written notice to act executed by (i) Purchasers which, pursuant to Schedule 1.2, are to purchase a majority of the principal amount of the Notes (if prior to the Closing) or the holders of a majority of the outstanding principal amount of the Notes (if following the Closing), with respect to this Agreement; (ii) holders of a majority of the outstanding principal amount of the Notes, with respect to the Notes or the Mortgage; (iii) holders of a majority of the outstanding GP Warrants, with respect to the GP Warrants; (iv) holders of a majority of the outstanding NPDC Warrants, with respect to the NPDC Warrants; (v) Majority Holders (as defined in the GP Registration Rights Agreement) with respect to the GP Registration Rights Agreement; and (vi) Majority Holders (as defined in the NPDC Registration Rights Agreement) with respect to the NPDC Registration Rights Agreement, Agent shall take any and all actions as so directed by such Persons. (d) Notwithstanding anything to the contrary contained herein, the Agent shall not, without the prior consent of holders of a majority of the outstanding principal amount of the Notes: (i) send out any notice of default under the Mortgage to the Mortgagor (as defined in the Mortgage); (ii) amend, restate, or otherwise modify, in any material respect, the Mortgage or any of the other Debt Documents (as defined in the Mortgage) to which the Agent is a party; (iii) release the Premises from the lien of the Mortgage (other than in connection with Section 26 of the Mortgage) or release any other collateral securing the Obligations; or (iv) release any obligor under the Notes or Debt Documents. (e) After the Agent obtains knowledge of an event of default under and as defined in the Mortgage, the Agent shall not exercise any remedies available to the Agent under the Mortgage or otherwise available at law or in equity without the prior consent of holders of a majority of the outstanding principal amount of the Notes; provided, however, that, immediately following the Agent obtaining knowledge of such an event of default, the Agent shall notify such holders of such event of default and shall consult with such holders with respect to the action to be taken and remedies to be exercised by the Agent in connection with such event of default. If, within 20 days after the Agent obtains knowledge of the occurrence of such an event of default, holders of a majority of the outstanding principal amount of the Notes have not agreed upon the action to be taken and remedies to be exercised by the Agent in connection with such event of default, the Agent shall commence to foreclose the Mortgage and shall diligently prosecute such foreclosure in accordance with the terms thereof. 9.2. Performance of Duties and Obligations. In performing its functions and duties hereunder on behalf of the Security Holders, the Agent shall exercise the same care and skill as it would exercise in dealing with securities held for its own account. Neither the Agent nor any of its directors, officers, employees, or other agents shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Transaction Documents, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent (a) may consult with legal counsel and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith and in accordance with the advice of such experts; (b) makes no representation or warranty to any Security Holder as to, and shall not be responsible to any Security Holder for, any recital, statement, representation, or warranty made in or in connection with this Agreement or the other Transaction Documents or in any written or oral statement (including a financial or other such statement), instrument, or other document delivered in connection herewith or therewith or furnished to any Security Holder by or on behalf of GP, NPDC, or MXL; (c) shall have no duty to ascertain or inquire into GP's, NPDC's, or MXL's performance or observance of any of the covenants or conditions contained herein or to inspect any of the property (including the books and records) of GP, NPDC, or MXL or to inquire into the existence or possible existence of any Event of Default; (d) shall not be responsible to any Security Holder for the due execution, legality, validity, enforceability, effectiveness, genuineness, sufficiency, collectability, or value of this Agreement or the other Transaction Documents or any instrument or document executed or issued pursuant hereto or in connection herewith, except to the extent that such may be dependent on the due authorization and execution by the Agent itself; (e) except as expressly provided herein in respect of information and data furnished to the Agent for distribution to the Security Holder, shall have no duty or responsibility, either initially or on a continuing basis, to provide to any Security Holder any information with respect to GP, NPDC, or MXL, whether coming into its possession before the date hereof or at any time or times thereafter; and (f) shall incur no liability under or in respect of this Agreement or the other Transaction Documents for, and shall be entitled to rely and act upon, any notice, consent, certificate or other instrument or writing (which may be by e-mail, facsimile (telecopier), telegram, cable, or other electronic means) believed by it to be genuine and correct and to have been signed or sent by the proper party or parties. 9.3. Liquidation. After any acceleration of any of amounts due and owing under the Notes, all monies or other assets received by the Agent, as repayments of any of the Notes, proceeds of exercise of the security interest provided by the Mortgage, or otherwise, shall be applied first to the Agent for any Agent fees and expenses then due and payable under this Agreement until such fees and expenses are paid in full, and then to the holders of the Notes for their percentage shares of all principal, interest, and other amounts then due and payable from GP until such principal, interest, and other amounts are paid in full. 9.4. Successor Agent. The Agent may resign at any time by giving 30 days written notice thereof to the Security Holders, GP, NPDC, and MXL. Upon any such resignation, the Security Holders, with prior written notice to GP, NPDC, and MXL, shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after such notice of resignation, then the retiring Agent may (but shall not be required to) appoint a successor Agent, upon notice to the Security Holders, GP, NPDC, and MXL. Upon the acceptance by a successor Agent of its appointment as Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Agent in its capacity as such, without further act, deed or conveyance. Upon the effective date of resignation of a retiring Agent, such Agent shall be discharged from its duties under this Agreement or the Transaction Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. 9.5. Fees and Expenses of Agent. GP shall pay to the Agent from time to time such reasonable fee for its services as agent as GP and the Agent shall agree in writing. GP shall reimburse the Agent promptly upon request for all reasonable disbursements, advances, and expenses incurred or made by or on behalf of it in addition to the fee for its services. Such expenses may include the reasonable compensation, disbursements, and expenses of the Agent's agents, counsel, and other persons not regularly in its employ. 9.6. Indemnification. (a) The Security Holders and GP, jointly and severally, shall indemnify the Agent from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, and disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in such capacity in any way relating to or arising out of this Agreement or the other Transaction Documents or any action taken or omitted to be taken by the Agent in such capacity hereunder or under the other Transaction Documents; provided, that neither any of the Security Holders nor GP shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements resulting from the Agent's gross negligence or willful misconduct. Without limiting the generality of the foregoing, each of the Security Holders and GP agrees to reimburse the Agent, promptly on demand, for any out-of-pocket expenses (including counsel fees and disbursements) incurred by the Agent in connection with the preparation, execution, administration, or enforcement of, or the preservation of any rights under, this Agreement or the other Transaction Documents. (b) Without limiting Section 9.6(a), as among GP and the Security Holders: (i) GP shall be solely liable for, and shall reimburse the Security Holders for, and indemnify and hold the Security Holders harmless from and against, any claim by the Agent for the fees and expenses of the Agent for which GP is responsible under Section 9.5. (ii) The Security Holders shall be solely liable for, and shall reimburse GP for, and indemnify and hold GP harmless from and against, any claim by the Agent under Section 9.6(a) resulting from any action taken or omitted to be taken at the direction of the Security Holders, or any of them (except for the fees and expenses provided in Section 9.5), or any dispute among the Security Holders. The liability of the Security Holders under this Section 9.6(b)(ii) shall be joint and several and shall be allocated among the Security Holders on a pro rata basis based upon the outstanding principal amounts of the Notes. (iii) In any circumstance not provided for in Section 9.6(b)(i) or (ii), GP, on the one hand, and the Security Holders, on the other, shall contribute to the liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, and disbursements for which any of them may be liable under Section 9.6(a) based on all relevant equitable considerations, including the relative fault of GP and the Security Holders in the aggregate in connection with the facts which resulted in such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, and disbursements. X. Indemnification 10.1. General. Each of GP, NPDC, and MXL (the "indemnifying party") shall indemnify and hold harmless each Purchaser and its affiliates, officers, directors, trustees, stockholders, employees, agents, and representatives (each, an "indemnified party") from and against any and all liabilities, claims, demands, actions, suits, losses, damages, costs, and expenses (including, without limitation, reasonable attorneys' fees, and any and all expenses whatsoever incurred in investigating, preparing, or defending against any litigation, commenced or threatened, or any claim whatsoever, any and all amounts paid in settlement of any claim or litigation, and any of the foregoing arising out of or relating to the enforcement of this Article X) (collectively, "Damages"), based upon or arising out of a breach of any covenant, agreement, representation, or warranty made by the indemnifying party in this Agreement or the other Transaction Documents. 10.2. Indemnity Procedures. (a) An indemnified party seeking indemnification under this Agreement in respect of, arising out of, or involving a claim or demand made by any person or governmental authority against the indemnified party based upon or arising out of a breach of any covenant, agreement, representation, or warranty made by the indemnifying party in this Agreement or the other Transaction Documents (a "Third Party Claim") shall notify the indemnifying party in writing of the Third Party Claim within 10 days after receipt by the indemnified party of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided under this Agreement, except to the extent the indemnifying party shall have been prejudiced by such failure. Thereafter, the indemnified party shall deliver to the indemnifying party, promptly after the indemnified party's receipt thereof, copies of all notices and documents (including court papers) received by the indemnified party relating to the Third Party Claim. (b) The indemnifying party shall have the right, within 30 days after being so notified, to assume the defense of such Third Party Claim with counsel reasonably satisfactory to the indemnified party. In any such proceeding the defense of which the indemnifying party shall have so assumed, the indemnified party shall have the right to participate therein and retain its own counsel at its own expense unless (i) the indemnified party and the indemnifying party shall have mutually agreed to the retention of such counsel, (ii) the indemnified party shall have reasonably concluded on the basis of an opinion of its counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party, or (iii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party, and representation of both parties by the same counsel would be inappropriate in the opinion of the indemnified party's counsel due to actual or potential differing interests between them; in any such case, one such separate counsel may be retained by all indemnified parties as a group at the indemnifying party's expense. To the extent that the settlement of such a Third Party Claim, the defense of which has been assumed by the indemnifying party, involves the payment of money only, the indemnifying party shall have the right, in consultation with the indemnified party, to settle those aspects dealing only with the payment of money, provided that the indemnifying party pays such money and such settlement includes a general release from the other parties to such Third Party Claim in favor of the indemnified party. In connection with any such defense or settlement, the indemnifying party shall not enter into a consent decree involving injunctive or non-monetary relief or consent to an injunction without the indemnified party's prior written consent, which consent shall not be unreasonably withheld. (c) The indemnified party at the indemnifying party's expense shall cooperate in all reasonable respects with the indemnifying party in connection with any Third Party Claims and the defense or compromise thereof. Such cooperation shall include at the indemnifying party's expense the retention and (upon the indemnifying party's request) the provision to the indemnifying party of records and information reasonably relevant to the Third Party Claim which are not confidential, making employees available on a mutually convenient basis to provide additional information, and explanation of any material provided under this Agreement. If the indemnifying party shall have assumed the defense of a Third Party Claim, the indemnified party shall not admit any liability with respect to, or settle, compromise, or discharge, the Third Party Claim, without the indemnifying party's prior written consent, which consent shall not be unreasonably withheld; provided, that admissions of facts which a party may reasonably be required to make shall not be deemed to be admissions of liability. 10.3. Exclusivity. The indemnification provided by this Article X shall be the sole remedy (other than termination of this Agreement pursuant to Article XI or declaring an Event of Default) for any matters relating to Third Party Claims; provided, that this Section 10.3 shall not prohibit injunctive relief if available under applicable law. XI. Termination 11.1. Termination. This Agreement may be terminated at any time prior to any Closing: (a) by mutual written consent executed by GP, NPDC, MXL, and the Purchasers; (b) by GP, by notice given to the Purchasers in writing, without liability to GP, NPDC, or MXL on account of such termination (providing GP, NPDC, and MXL are not otherwise in default or in breach of this Agreement), if (i) any of the conditions to GP and NPDC's obligations under this Agreement shall not have been satisfied or waived in writing by GP and NPDC prior to the Closing or (ii) the Purchasers shall have failed to perform in any material respect their covenants or agreements contained herein required to be performed prior to the Closing, or shall have breached any of their representations or warranties contained herein, in each instance in a material respect (and provided that GP and NPDC shall afford the Purchasers at least 15 Business Days notice of and opportunity to cure such breach), unless such failure is attributable to the breach by GP or NPDC of any of its obligations to consummate the transactions contemplated hereby or of any of its other obligations hereunder; (c) by the Purchasers, acting jointly, by notice given to GP, NPDC, and MXL in writing, without liability to the Purchasers on account of such termination (providing the Purchasers are not otherwise in default or in breach of this Agreement), if (i) any of the conditions to the Purchasers' obligations under this Agreement shall not have been satisfied or waived in writing by the Purchasers prior to the Closing or (ii) GP, NPDC, or MXL shall have failed to perform in any material respect its covenants or agreements contained herein required to be performed prior to the Closing, or shall have breached any of its representations or warranties contained herein, in each instance in a material respect (and provided that the Purchasers shall afford GP, NPDC, and MXL at least 15 Business Days notice of and opportunity to cure such breach), unless such failure is attributable to the breach by the Purchasers of any of their obligations to consummate the transactions contemplated hereby or of any of their other obligations hereunder; (d) by any of GP, NPDC, or the Purchasers, by notice given to the other parties in writing, without liability, if the transactions contemplated hereby shall violate any non-appealable final order, decree, or judgment of any governmental authority having competent jurisdiction or if there shall be a statute, rule, or regulation that makes the transactions contemplated hereby illegal or otherwise prohibited provided that the party seeking to terminate this Agreement under this Section 11.1(d) shall have used reasonable commercial efforts to avoid the issuance of any such order, decree, or judgment; or (e) by any of GP, NPDC, or the Purchasers, by notice given to the other parties in writing, without liability, if the Closing shall not occur on or prior to the date which falls 60 days following the date of this Agreement. 11.2. Effect of Termination. Upon any termination of this Agreement pursuant to Section 11.1 this Agreement shall become wholly void and of no further force or effect (except Section 8.9, this Section 11.2, and Article XII) and none of the parties shall have any liability or obligation to the others arising out of this Agreement except for any liability arising from a party's breach of this Agreement prior to such termination. XII. Miscellaneous 12.1. Costs and Expenses. GP agrees to pay on demand all costs and expenses of the Purchasers in connection with the preparation, execution and delivery of this Agreement and the other Transaction Documents, and the other instruments and documents to be delivered hereunder (including the reasonable fees and out-of-pocket expenses of Paul, Hastings, Janofsky & Walker LLP, counsel for the Purchasers, with respect thereto), in an amount not to exceed $100,000. 12.2. Further Actions. At any time and from time to time, each party agrees, at its expense, to take such actions and to execute and deliver such documents as may be reasonably necessary to effectuate the purposes of this Agreement. 12.3. Entire Understanding. This Agreement and the Exhibits and Schedules hereto set forth the entire understanding of the parties with respect to the subject matter hereof and supersede all existing agreements among them concerning such subject matter. 12.4. Amendments and Waivers. Any provisions of this Agreement may be modified, amended, or waived if, but only if, such modification, amendment or waiver is in writing and is signed by GP, NPDC, MXL, and each of the Purchasers or, subject to Section 9.1, the Agent; provided that the Agent shall be required to consent to any modification, amendment, or waiver of the rights or duties of the Agent; and provided, further, that, after the Spin-Off Date, the signature of GP, NPDC, or MXL on such modification, amendment, or waiver shall only be required if such modification, amendment, or waiver adversely affects GP, NPDC, or MXL, respectively; and provided, further, that the signature of GP, NPDC, or MXL on the modification, amendment, or waiver of Article IX shall only be required if such modification, amendment, or waiver adversely affects GP, NPDC, or MXL, respectively. 12.5. Notices. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by Federal Express, Express Mail, or similar overnight delivery or courier service, or delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given, (a) if to GP: GP Strategies Corporation 777 Westchester Avenue White Plains, NY 10604 Attn: General Counsel Facsimile No. (914) 249-9745 .........with a copy to Robert J. Hasday, Esquire Duane Morris LLP 380 Lexington Avenue New York, NY 10168 Facsimile No. (212) 692-1020 (b) if to NPDC: c/o GP Strategies Corporation 777 Westchester Avenue White Plains, NY 10604 Attn: General Counsel Facsimile No. (914) 249-9745 .........with a copy to Robert J. Hasday, Esquire Duane Morris LLP 380 Lexington Avenue New York, NY 10168 Facsimile No. (212) 692-1020 (c) if to MXL: c/o GP Strategies Corporation 777 Westchester Avenue White Plains, NY 10604 Attn: General Counsel Facsimile No. (914) 249-9745 .........with a copy to Robert J. Hasday, Esquire Duane Morris LLP 380 Lexington Avenue New York, NY 10168 Facsimile No. (212) 692-1020 (d) if to any Purchaser: to the address set forth for such Purchaser on the signature pages hereto, with a copy to the Agent (except to the extent such notice may be given by notice to the Agent). (e) if to the Agent: Gabelli Funds, LLC One Corporate Center Rye, New York 10580 Attn: Bruce N. Alpert Facsimile No. (914) 921-5118 .........with a copy to Gabelli Funds, LLC One Corporate Center Rye, New York 10580 Attn: James E. McKee Facsimile No. (914) 921-5384 or to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 12.5. Any notice shall be deemed given at the time of receipt thereof. 12.6. No Waiver; Remedies Cumulative. Any waiver by any party of a breach of any term of this Agreement shall not operate as or be construed to be a waiver of any other breach of that term or of any breach of any other term of this Agreement. The failure of a party or the Agent to insist upon strict adherence to any term of this Agreement on one or more occasions will not be considered a waiver or deprive that party or the Agent of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. The rights, powers, and remedies of the Agent or any Purchaser or Security Holder provided in this Agreement and the other Transaction Documents are cumulative and not exclusive of any right, power, or remedy provided by law or equity. 12.7. Binding Effect. No party may sell, assign, transfer, or otherwise convey any of its rights or delegate any of its duties under this Agreement, except as hereinafter provided, and this Agreement shall be binding upon and inure to the benefit of the parties hereto and the respective permitted successors, assigns, and personal representatives of the parties. Any attempted sale, assignment, transfer, conveyance, or delegation in violation of this Section 12.7 shall be void. The provisions of this Agreement shall inure to the benefit of each indemnified party and its successors and assigns (if not a natural person) and his assigns, heirs, and personal representatives (if a natural person). 12.8. No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement (except as provided in Article IX, Section 12.7, and the other Transaction Documents). 12.9. Separability. If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. 12.10. Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 12.11. Counterparts; Governing Law. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. XIII. Definitions "Business Day" means any day which is not a Saturday or Sunday and is not a day on which banking institutions are generally authorized or obligated to close in the City of New York, New York. "Environmental Law" means any present federal, state, and local laws, statutes, ordinances, rules, regulations, standards, policies, and other government directives or requirements, as well as common law, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act, that apply to GP or the Premises and relate to Hazardous Materials. "Event of Default" shall have the meaning set forth in the Notes. "Environmental Report" means the written report of VERTEX Engineering Services, Inc., dated July 30, 2001, resulting from the environmental site assessments of the Premises delivered to Purchasers, together with the related reliance letter dated July 24, 2003. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America, applied on a consistent basis both as to classification of items and amounts. "GP Class B Stock" means the Class B Capital Stock, par value $.01 per share, of GP. "GP Common Stock" means the Common Stock, par value $.01 per share, of GP. "Hazardous Materials" shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel, and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Premises is prohibited by any federal, state, or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material," "hazardous waste," "toxic substance," "toxic pollutant," "contaminant," or "pollutant" within the meaning of any Environmental Law. "Material Adverse Effect" means (a) with respect to GP, any change or changes or effect or effects that individually or in the aggregate are materially adverse to (i) the assets, business, operations, income, prospects, or condition (financial or otherwise) of GP and the GP Subsidiaries, taken as a whole, or (ii) the ability of GP to fulfill its obligations under this Agreement or any of the other Transaction Documents; (b) with respect to NPDC in relation to the period prior to the Spin-Off Date, any change or changes or effect or effects that individually or in the aggregate are materially adverse to (i) the assets, business, operations, income, prospects, or condition (financial or otherwise) of GP and the GP Subsidiaries, taken as a whole, or (ii) the ability of NPDC to fulfill its obligations under this Agreement or any of the other Transaction Documents; (c) with respect to NPDC in relation to the period after the Spin-Off Date, any change or changes or effect or effects that individually or in the aggregate are materially adverse to (i) the assets, business, operations, income, prospects, or condition (financial or otherwise) of NPDC and the NPDC Subsidiaries, taken as a whole, or (ii) the ability of NPDC to fulfill its obligations under this Agreement or any of the other Transaction Documents; (d) with respect to MXL in relation to the period prior to the Spin-Off Date, any change or changes or effect or effects that individually or in the aggregate are materially adverse to (i) the assets, business, operations, income, prospects, or condition (financial or otherwise) of GP and the GP Subsidiaries, taken as a whole, or (ii) the ability of MXL to fulfill its obligations under this Agreement; and (e) with respect to MXL in relation to the period after the Spin-Off Date means any change or changes or effect or effects that individually or in the aggregate are materially adverse to (i) the assets, business, operations, income, prospects, or condition (financial or otherwise) of MXL and the MXL Subsidiaries, taken as a whole, or (ii) the ability of MXL to fulfill its obligations under this Agreement. "MXL Related Party" mean any direct or indirect shareholder, employee, officer, director, agent, or representative of MXL. "MXL Subsidiaries" means the GP Subsidiaries contemplated to be transferred to MXL in connection with the Spin-Off. "NPDC Common Stock" means the Class A Common Stock, par value $.01 per share, of NPDC. "NPDC Subsidiaries" means MXL and the other GP Subsidiaries contemplated to be transferred to NPDC in connection with the Spin-Off. "NPDC Warrant Amount" means a number equal to 8% of the number of shares of NPDC Common Stock outstanding upon completion of the Spin-Off. "NPDC Warrant Record Date" shall mean the date selected by GP for determining the holders of record of GP Warrants entitled to receive NPDC Warrants in accordance with Section 1.4, which date shall not be more than five Business Days prior to the Spin-Off Date. "Original Issue Date" of any Note shall have the meaning set forth in such Note. "Person" means any individual, partnership, limited liability company, corporation, joint venture, trust, association, or other entity, domestic or foreign, and his, her, or its respective heirs, executors, administrators, legal representatives, successors, and assigns where the context of this Agreement so permits. "Related Agreements" means the Mortgage, the GP Registration Rights Agreement, the NPDC Registration Rights Agreement, and the Indemnity Agreement. "Release" of any Hazardous Materials includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials. "SEC" means the Securities and Exchange Commission. "Securities" means the Notes, the GP Warrants, the NPDC Warrants, and, on exercise of the GP Warrants or NPDC Warrants in accordance with their terms, the GP Warrant Shares or NPDC Warrant Shares, respectively. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Holder" means a holder of any Securities. "Solvent" means, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities (including contingent liabilities) of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liabilities of such Person on its debts as they become absolute and mature, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature, and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's assets would constitute unreasonably small capital. For such purposes, any contingent liability (including guaranties, pending litigation, pension plan liabilities, and claims for federal, state, local, and foreign taxes, if any) is valued at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Spin-Off" means the contemplated spin-off of NPDC by GP, as generally described in GP's press release dated July 11, 2002. "Spin-Off Date" means the date on which the distribution of the shares of NPDC to the stockholders of GP pursuant to the Spin-Off is effective. "Transaction Documents" means this Agreement, the Related Agreements, the Notes, the GP Warrants, and the NPDC Warrants. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. GP STRATEGIES CORPORATION By ------------------------------------------ Name: Title: NATIONAL PATENT DEVELOPMENT CORPORATION By ------------------------------------------ Name: Title: MXL INDUSTRIES, INC. By ------------------------------------------ Name: Title: Purchasers THE GABELLI SMALL CAP GROWTH FUND By ------------------------------------------ Name: Title: THE GABELLI CONVERTIBLE SECURITIES AND INCOME FUND INC. By ------------------------------------------ Name: Title: THE GABELLI EQUITY INCOME FUND By ------------------------------------------ Name: Title: THE GABELLI ABC FUND By ------------------------------------------ Name: Title: Agent GABELLI FUNDS, LLC By ------------------------------------------ Name: Title: EX-10 4 ex101.txt GPS FORM OF NOTE Exhibit 10.1 EXHIBIT A THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND, AMONG OTHER RESTRICTIONS, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT GP STRATEGIES CORPORATION 6% Conditional Subordinated Note due 2008 No.__________ Original Issue Date: _______, 2003 GP STRATEGIES CORPORATION, a Delaware corporation ("GP"), for value received, hereby promises to pay to _________________________________________, with an address at _________________________________________, or registered assigns (the "Holder"), the principal amount of __________________________ Dollars ($_______________) on the Maturity Date (as defined below), and, subject to the terms and conditions hereof, to pay interest on the unpaid principal balance hereof at the rate (calculated on the basis of a 360-day year consisting of twelve 30-day months) of 6% per annum from the date hereof until the Maturity Date. Accrued interest on the unpaid principal balance hereof shall be payable semi-annually on the 30th day of June and the 31st day of December in each year, commencing on December 31, 2003 (each such date and the Maturity Date being an "Interest Payment Date"). In no event shall any interest to be paid hereunder exceed the maximum rate permitted by law. In any such event, this Note shall automatically be deemed amended to permit interest charges at an amount equal to, but no greater than, the maximum rate permitted by law. This note was issued with "original issue discount." The following information is provided pursuant to Section 1275 of the Internal Revenue Code of 1986, as amended, and the applicable Treasury Regulations promulgated thereunder: issue price: $______ per $1,000; principal amount at maturity: $__________; stated redemption price at maturity: $_______; yield to maturity: ___% (compounded ____________); total amount of "original issue discount": $______ per $1,000 principal amount at maturity. 1. Offering; Agent. (a) This Note was issued by GP in an offering of $7,500,000 principal amount of 6% Conditional Subordinated Notes due 2008 (collectively, the "Notes") pursuant to the Note and Warrant Purchase Agreement, dated August 8, 2003 (the "Purchase Agreement"), among GP, its wholly-owned subsidiaries National Patent Development Corporation, a Delaware corporation ("NPDC"), and MXL Industries, Inc., a Delaware corporation ("MXL"), Gabelli Funds, LLC, as agent (the "Agent"), and the purchasers named therein. Capitalized terms used and not otherwise defined herein have the meanings as defined in the Purchase Agreement. (b) The Holder, by accepting this Note, appoints and authorizes the Agent as the agent of the Holder, to take such action as agent on its behalf and to exercise such powers as are delegated to the Agent by the terms of the Purchase Agreement, the Mortgage, and this Note. Without limiting the foregoing, the Holder acknowledges that this Note may be amended by action of the Agent, with the consent of holders of a majority of the then-outstanding principal amount of the Notes, and that the Holder will be bound by any such amendment; provided, that no such amendment shall, unless signed by the Holder of this Note, (i) reduce the principal of or rate of interest on this Note or any fees hereunder, (ii) postpone the date fixed for any payment of principal of or interest on this Note or (iii) modify the provisions of this sentence. 2. Payments. (a) Principal of, and any accrued and unpaid interest on, this Note, together with fees thereon and all costs and expenses outstanding hereunder, shall be due and payable in full on the date (the "Maturity Date") which is five years after the Original Issue Date. (b) Interest on this Note shall accrue from and on the most recent Interest Payment Date to which interest has been paid or, if no interest has been paid on this Note, from the Original Issue Date, to, but excluding, the next Interest Payment Date, and, subject to the terms and conditions hereof, shall be payable in arrears on each Interest Payment Date. (c) If any Interest Payment Date falls on a day that is not a Business Day (as defined below), the payment (of principal or interest or both) due on such Interest Payment Date will be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date. "Business Day" means any day which is not a Saturday or Sunday and is not a day on which banking institutions are generally authorized or obligated to close in the City of New York, New York. (d) Payments of principal and interest on this Note to be made on any Interest Payment Date shall be made by wire transfer (except that payments may be made by check if the Holder has not provided GP appropriate wire instructions), without deduction, set-off or counterclaim, sent to the Holder of record of this Note on the Record Date (as defined below) relating to such Interest Payment Date. All payments will be delivered to the address set forth therefor on the note register described below, and will be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. For purposes of determining the holders of record entitled to receive payment on any Interest Payment Date, GP may fix a record date (the "Record Date"), which shall be not more than five Business Days prior to such Interest Payment Date. If GP does not otherwise establish a Record Date relating to any Interest Payment Date, the Record Date shall be the Business Day prior to such Interest Payment Date; and, if GP establishes any such other Record Date, GP shall give the Holder notice of such Record Date not less than two Business Days prior to such Record Date. Notwithstanding the foregoing, the Record Date relating to the Maturity Date shall be the Maturity Date. (e) If the Spin-Off has not occurred prior to the date (the "Redemption Trigger Date") which is 18 months after the Original Issue Date, the Holder, at its option, not later than 45 days after the Redemption Trigger Date, may require GP to redeem this Note in whole, but not in part, at the Redemption Price. If the Holder desires to exercise such right, the Holder shall, not later than 45 days after the Redemption Trigger Date, give notice of such exercise to GP, specifying in such notice if the Holder desires that the Redemption Price equal the amount set forth in Section 2(e)(i), in which case such notice shall be accompanied by this Note, or if the Holder desires that the Redemption Price equal the amount set forth in Section 2(e)(ii), in which case such notice shall be accompanied by the number of GP Warrants specified therein, duly endorsed for transfer, and this Note. No Notes shall be required to be redeemed if such notice and delivery are not made in such 45-day period. The closing of any redemption of this Note pursuant to this Section 2(e) shall occur on the date 75 days after the Redemption Trigger Date, on which date the Redemption Price shall become due and payable and shall be paid in full in the manner described in Section 2(d) above. The "Redemption Price" of this Note shall mean (i) if the Holder does not deliver and surrender to GP, as provided above, the number of GP Warrants specified in Section 2(e)(ii), $________, plus accrued and unpaid interest on, this Note as of the date of payment, or (ii) if the Holder delivers and surrenders to GP, as provided above, a number of GP Warrants equal to the principal amount of this Note multiplied by 0.125, the principal amount at maturity of, plus accrued and unpaid interest on, this Note as of the date of payment. (f) Except as provided in Section 2(e), GP may not prepay all or any part of this Note. (g) All payments on this Note shall be applied first to accrued interest hereon and the balance to the payment of principal hereof. (h) The obligations to make the payments provided for in this Note are absolute and unconditional and not subject to any defense, set-off, deduction, counterclaim, rescission, recoupment or adjustment whatsoever. GP hereby expressly waives demand and presentment for payment, notice of non-payment, notice of dishonor, protest, notice of protest, bringing of suit and diligence in taking any action to collect any amount called for hereunder, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission with respect to the collection of any amount called for hereunder. Time is of the essence of this Note. (i) The amount of all principal and (to the extent permitted by then applicable law) all interest which is not paid when due (whether on a stated payment date or by acceleration) shall bear interest, from the time such amount becomes due until payment thereof in full, at a rate which is equal to the 10% or the maximum rate of interest, if lower, permitted by applicable law. 3. Security and Defeasance Option. This Note is secured by the Mortgage, dated the Original Issue Date, executed by GP to and Agent for the benefit of the holders of the Notes; provided that the Mortgagor (as defined in the Mortgage) has the right and option to obtain a release of the Premises (as defined in the Mortgage) from the lien of the Mortgage and substitute other collateral therefor, or obtain an assignment of the Mortgage and Notes in substitution for a substitute note and other collateral, in each case in accordance with the terms and provisions of Section 27 of the Mortgage. 4. NPDC and MXL Obligations. Notwithstanding anything to the contrary in this Note or any of the other Transaction Documents (as defined in the Purchase Agreement), (a) NPDC shall have no obligations with respect to this Note other than to issue the NPDC Warrants on the Spin-Off as set forth in the Purchase Agreement and (b) MXL shall have no obligations with respect to this Note other than as set forth in the Mortgage. 5. Events of Default. The occurrence of any of the following events (whatever the reason for such default and whether it shall be voluntary or involuntary or by operation of law or otherwise) shall constitute an event of default (an "Event of Default"): (a) A default in the payment or prepayment of the principal on this Note, when and as the same shall become due and payable, whether at stated maturity, by acceleration, by notice of redemption or otherwise. (b) A default in the payment or prepayment of any interest on this Note, when and as the same shall become due and payable, which default shall continue for a period of five Business Days after the date fixed for the making of such interest payment. (c) A failure by GP, NPDC, or MXL, as applicable, to perform or observe any covenant or agreement contained in the Purchase Agreement or this Note within 30 days after the giving of notice by the Agent of such failure (or, if such failure is not capable of being remedied within such period, for such longer period, not to exceed 60 days, as it is reasonably necessary to effect a remedy so long as GP continues to diligently pursue remedy of such failure). (d) (i) Any representation or warranty in the Purchase Agreement shall be untrue or incorrect as of the date when made (or deemed to be repeated), (ii) the failure of such representation or warranty to be true and correct has a material adverse effect on the value of the Notes or the rights and benefits of the Holders under the Notes or the Mortgage and (iii) if the event or circumstance leading to such untrue or incorrect representation is capable of remedy, the same has not been remedied by GP, NPDC, or MXL, as applicable, to the Agent's satisfaction, within 30 days after giving of notice by the Agent of such breach. (e) The occurrence of an Event of Default as defined in the Mortgage. (f) The entry by a court of (i) a decree or order for relief in respect of GP in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law; or (ii) a decree or order adjudging GP a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of GP under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of GP or of any substantial part of the property of GP, or ordering the winding up or liquidation of the affairs of GP, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 days; or (g) (i) The commencement by GP of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or of any other case or proceeding, to be adjudicated a bankrupt or insolvent; (ii) the consent by GP (A) to the entry of a decree or order for relief in respect of GP in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or (B) to the commencement of any bankruptcy or insolvency case or proceeding against GP; (iii) the filing by GP of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law; (iv) the consent by GP to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of GP, or of any substantial part of any property of GP; (v) the making by GP of an assignment for the benefit of creditors; or (vi) the admission by GP in writing of its inability to pay its debts generally as they become due; (h) GP or any of its material subsidiaries shall fail to make any payment when due (whether by stated maturity, required prepayment, acceleration, demand or otherwise) with respect to any indebtedness (including any Senior Indebtedness) beyond any period of grace provided with respect thereto, which individually or together with other such indebtedness as to which any such failure exists has an aggregate outstanding principal amount equal to or greater than $3,500,000 ("Material Indebtedness"); or any breach, default or event of default shall occur with respect to, or any condition shall exist under any instrument, agreement or indenture pertaining to, any such Material Indebtedness, beyond any stated period of grace, if any, provided with respect thereto, if the effect thereof is to cause an acceleration, mandatory redemption, a requirement that GP or any of its material subsidiaries offer to purchase such Material Indebtedness or other required repurchase of such Material Indebtedness, or permit the holder(s) of such Material Indebtedness to accelerate the maturity of such Material Indebtedness or require a redemption or other repurchase of such Material Indebtedness; or any such Material Indebtedness shall be otherwise declared to be due and payable (by acceleration or otherwise) or required to be prepaid, redeemed or otherwise repurchased by GP or any of its material subsidiaries (other than by a regularly scheduled required prepayment) prior to the stated maturity thereof. (i) Final judgment for the payment of money shall be rendered by a court of competent jurisdiction against GP or any of its material subsidiaries, and such entity shall not discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereof, within 45 days from the date of entry thereof and within said period of 45 days, or such longer period during which execution of such judgment shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal, and such judgment together with all other such judgments shall exceed in the aggregate $1,000,000 in excess of applicable insurance coverage. (j) (i) GP or, after the conveyance and transfer of the Premises to MXL, MXL shall cease to (A) be seized of an indefeasible estate in fee simple in the portion of the Premises which constitutes real property or (B) own good title to the portion of the Premises which constitutes personal property, in each case, subject only to the Permitted Encumbrances (as defined in the Mortgage); (ii) GP or, after the conveyance and transfer of the Premises to MXL, MXL shall cease to have good right, full power and lawful authority to convey and mortgage to Mortgagee (as defined in the Mortgage) and grant to Mortgagee a security interest in the same, in the manner and form set forth in the Mortgage; or (iii) except for the Permitted Encumbrances and other Liens (as defined in the Mortgage) permitted pursuant to the Mortgage, the Mortgage shall cease to be a valid and enforceable and, upon recordation, perfected first mortgage lien on the Premises. 6. Remedies Upon Default. (a) Upon the occurrence, and during the continuance, of an Event of Default specified in Section 5(a) or 5(b), the Holder of this Note may declare all or any part of the unpaid principal amount of this Note, and all interest accrued and unpaid thereon, and all fees, costs, expenses, indemnities and other obligations payable under this Note to be immediately due and payable, without presentment, demand, notice, protest or other formalities of any kind, all of which are hereby expressly waived by GP. (b) Upon the occurrence, and during the continuance, of an Event of Default other than an Event of Default specified in Section 5(a), 5(b), 5(f), or 5(g), the Agent or holders of at least 25% in the aggregate principal amount of the Notes then outstanding may, and the Agent at the request of such holders shall, declare all or any part of the unpaid principal amount of such Notes, and all interest accrued and unpaid thereon, and all fees, costs, expenses, indemnities and other obligations payable under this Note, to be immediately due and payable, without presentment, demand, notice, protest or other formalities of any kind, all of which are hereby expressly waived by GP. (c) Upon the occurrence of an Event of Default specified in Section 5(f) or 5(g), all of the principal amount then outstanding of, and all interest accrued and unpaid on, the Notes, and all fees, costs, expenses, indemnities and other obligations payable under the Notes, shall automatically become immediately due and payable without presentment, demand, notice, protest or other formalities of any kind, all of which are hereby expressly waived by GP. (d) The Holder may institute such actions or proceedings in law or equity or both, in aid of the exercise of any power granted in this Note, and may proceed to enforce the payment of all sums due upon this Note and any other obligations under this Note, and such further amounts as shall be sufficient to cover the costs and expenses of collection (including reasonable counsel fees and disbursements), or to enforce any other legal or equitable right of the Holder and may prosecute and enforce its claims against all assets of GP, subject to Section 7. (e) No remedy conferred in this Note upon the Holder is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. (f) No course of dealing between GP and any Holder, and no delay or failure in exercising any rights under this Note in respect thereof, shall operate as a waiver of any of the rights of any Holder. 7. Conditional Subordination. (a) Subject to the rights of the Holder under the Mortgage, and if, and only to the extent that, the proceeds received by the Holder as a result of the foreclosure of the lien of Mortgage are insufficient to fully satisfy this Note and all interest accrued and unpaid thereon, and all fees, costs, expenses, indemnities and other obligations payable under this Note, the remaining indebtedness evidenced by this Note shall be subordinate in right of payment to the Senior Indebtedness. "Senior Indebtedness" shall mean all indebtedness of GP, and guarantees of indebtedness by GP, to banks and other commercial finance institutions for money borrowed or credit extended from such finance institutions, including all loans, advances, liabilities, debit balances, obligations, covenants and duties relating to any such debt for money borrowed, whether direct or indirect, absolute or contingent, secured or unsecured, due or to become due, now existing or hereafter arising, and whether created directly or acquired by assignment, negotiation or otherwise, and all interest, fees, charges, expense and attorney's fees for which GP is or becomes liable with respect thereto, but shall not, in any case, include the Notes or any obligations relating thereto. "Senior Indebtedness" shall not include, to the extent constituting indebtedness, any (i) indebtedness that is expressly subordinate or junior in right of payment to any Senior Indebtedness, (ii) indebtedness which, when incurred and without respect to any election under Section 1111(b) of title 11 of the United States Code (as now and hereinafter in effect, including any successor to such statute and any other applicable insolvency or other similar law of any jurisdiction), is without recourse to GP, (iii) indebtedness which is represented by any capital stock of GP, (iv) indebtedness for goods, materials or services purchased in the ordinary course of business or indebtedness consisting of trade payables or other current liabilities (other than the current portion of any long-term indebtedness which would constitute Senior Indebtedness but for the operation of this Section 7(a)(iv)) or operating lease rental payments, (v) indebtedness or other obligations of or amounts owed by GP for compensation to employees or for services rendered to GP, (vi) any liability for federal, state, local or other taxes owed or owing by GP and (vii) indebtedness of GP to any of its subsidiaries or affiliates. (b) If, upon the occurrence and during the continuance of an event of default (a "Senior Default") under any agreement, note, mortgage, security agreement or other instrument evidencing or securing Senior Indebtedness resulting in the declaration by any person entitled to do so that an event of default has occurred with respect to such Senior Indebtedness or that monies due under such Senior Indebtedness are payable earlier than the due date for the payment thereof, any holder of such Senior Indebtedness or other Person entitled to do so sends a notice (a "Blockage Notice") to the Agent invoking the provisions of this Section 7(b), then, except as provided in Section 7(c), no payment or distribution of any kind in respect of this Note shall be made by GP, or accepted by any Holder (a "Payment Block"), unless and until such Senior Default is cured or such Blockage Notice is revoked in accordance with the terms of the applicable documents pertaining to it. (c) Notwithstanding the provisions of Section 7(b), (i) the failure by GP, following the giving of a Blockage Notice, to pay any interest, principal or other amount on this Note when the same become due shall constitute an Event of Default under this Note; and (ii) for as long as a Payment Block exists hereunder, the Holder may, at its option: (A) declare all or any part of the unpaid principal amount of this Note and all interest accrued and unpaid thereon, and all fees, costs, expenses, indemnities and other obligations payable under this Note, to be immediately due and payable, without presentment, demand, notice, protest or other formalities of any kind, all of which are hereby expressly waived by GP, and (B) foreclose the lien of the Mortgage and exercise any of the other rights and remedies available to the Holder under the Mortgage following the occurrence of an event of default under the Mortgage, provided, however, that if the remedies referred to in this Section 7(c)(ii)(B) are insufficient to fully satisfy this Note and all interest accrued and unpaid thereon, and all fees, costs, expenses, indemnities and other obligations payable under this Note, then all remaining unpaid indebtedness evidenced by this Note shall remain subordinated to the Senior Indebtedness in the manner set forth in this Article 7 and in any Subordination Agreement (as defined below). (d) If any person holding or proposing to provide Senior Indebtedness so requests, the Holder shall (and authorizes the Agent on the Holder's behalf to) at GP's expense enter into a subordination agreement (a "Subordination Agreement") confirming and supplementing the provisions of this Section 7, and containing such terms as are customarily included in such a subordination agreement and are reasonably satisfactory to the Agent, in such form as may be reaso nably requested by such person. 8. Registration and Transfer. (a) GP shall maintain books for the registration and transfer of the Notes. (b) Prior to due presentment for registration of transfer of this Note, GP may deem and treat the registered Holder as the absolute owner thereof. GP shall be entitled to treat the registered holder of any Note on the note register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Note on the part of any other person, and shall not be liable for any registration or transfer of the Notes which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. (c) This Note has not been registered under the Securities Act of 1933, as amended (the "Securities Act"). Without limiting the foregoing, the Holder shall not make any disposition of this Note unless: (i) each transferee is an accredited investor, as such term is defined in Regulation D promulgated under the Securities Act, and has indicated in the Form of Assignment attached hereto as Exhibit A (the "Form of Assignment") the basis on which such transferee is an accredited investor; (ii) such disposition is (A) to an investment company registered under the Investment Company Act of 1940, as amended, which is advised by Gabelli Funds, LLC, (B) of all of the Notes held by such Holder or (C) to one or more transferees each of whom, after giving effect to such disposition, will hold at least $500,000 principal amount of the Notes; and (iii) (A) each transferee has agreed in writing to be bound by the terms of this Note and the Purchase Agreement, including, without limitation, the provisions thereof with respect to the Agent and the obligations as a Security Holder (as defined in the Purchase Agreement) under the Purchase Agreement, (B) the Holder shall have notified GP of the proposed disposition and (C) the Holder shall have furnished GP with an opinion of counsel (which opinion may be delivered by in-house counsel of Holder) in the form set forth as Exhibit B, or otherwise reasonably satisfactory to GP, that such disposition will not require registration of this Note under the Securities Act, provided that no such opinion shall be required if such transfer is pursuant to (I) Rule 144(k) promulgated under the Securities Act or (II) Rule 144A promulgated under the Securities Act. The execution and delivery of the Form of Assignment by the transferor and transferee indicating the satisfaction of the requirements of Sections 8(c)(i), (ii), (iii)(A), (iii)(B), and, if applicable, (iii)(C)(I) or (iii)(C)(II) shall be sufficient to satisfy such requirements (except (other than with respect to Section 8(c)(iii)(C)(II)) to the extent GP has notified the Holder promptly after receipt of such Form of Assignment that to GP's knowledge such requirements are not met, specifying in such notice the reason GP believes such requirements are not met). (d) Each Note shall be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under other applicable securities laws): THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND, AMONG OTHER RESTRICTIONS, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT (e) GP shall register upon its books any permitted transfer of this Note, upon surrender of same to GP with a written instrument of transfer, in the form attached as Exhibit A, duly executed by the registered Holder or by a duly authorized attorney thereof and (unless being transferred to GP) by the transferee or by a duly authorized attorney thereof, together with such other documents as may be required for such transfer as provided above. Upon any such registration of transfer, new Note(s) shall be issued to the transferee(s) and the surrendered Note shall be canceled by GP. This Note may also be exchanged, at the option of the Holder, for new Notes representing in the aggregate the principal amount of this Note then outstanding. (f) Upon receipt by GP of reasonable evidence of the ownership of and the loss, theft, destruction, or mutilation of this Note and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to GP, or, in the case of mutilation, upon surrender and cancellation of the mutilated Note, GP shall execute and deliver in lieu thereof a new Note representing the principal amount of such Note then outstanding. (g) GP shall, upon becoming aware of the same, promptly notify the Agent of (i) the occurrence of any Event of Default or any event or circumstance which, with the giving of notice, lapse of time, or both, would constitute an Event of Default and (ii) any action taken or proposed to be taken by GP in connection therewith. (h) Upon any transfer of this Note in accordance with this Section 8, the transferee shall be entitled to all of the benefits enjoyed by the transferor under the Purchase Agreement and the Mortgage, and the transferor shall be relieved of any obligations under the Purchase Agreement arising after the date of such transfer. 9. Miscellaneous. (a) This Note shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles governing conflicts of law. (b) Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by Federal Express, Express Mail or similar overnight delivery or courier service or delivered (in person or by telecopy, telex or similar telecommunications equipment) against receipt to the party to whom it is to be given, (i) if to GP, at its address at 777 Westchester Avenue, Fourth Floor, White Plains, New York 10604, Attention: Chief Executive Officer, (ii) if to the Holder, at its address set forth on the first page hereof, or (iii) in either case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 9(b). Any notice shall be deemed given at the time of receipt thereof. (c) No course of dealing and no delay or omission on the part of the Holder in exercising any right or remedy shall operate as a waiver thereof or otherwise prejudice the Holder's rights, powers or remedies. No right, power or remedy conferred by this Note upon the Holder shall be exclusive of any other right, power or remedy referred to herein or now or hereafter available at law, in equity, by statute or otherwise, and all such remedies may be exercised singly or concurrently. IN WITNESS WHEREOF, GP has caused this Note to be executed and dated the day and year first above written. GP STRATEGIES CORPORATION By: _________________________ Name: Title: EX-10 5 ex102.txt GPS FORM OF WARRANT Exhibit 10.2 EXHIBIT B THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND, AMONG OTHER RESTRICTIONS, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SUCH ACT ___________ GP Warrants GP STRATEGIES CORPORATION WARRANT CERTIFICATE This warrant certificate ("GP Warrant Certificate") certifies that, for value received, [PURCHASER] or registered assigns (the "Holder") is the owner of the number of warrants ("GP Warrants") specified above, each of which entitles the Holder to subscribe for and purchase, at any time during the Exercise Period (as hereinafter defined), one fully paid and non-assessable share of Common Stock, $.01 par value ("GP Common Stock"), of GP Strategies Corporation, a Delaware corporation ("GP"), at an initial purchase price of $8.00 per share of GP Common Stock, subject to adjustment as hereinafter provided. 1. Issue; Exercise Price; Agent 1.1 The GP Warrants evidenced hereby are part of the issue of 937,500 GP Warrants pursuant to the Note and Warrant Purchase Agreement (the "Purchase Agreement"), dated August 8, 2003, among GP, its wholly-owned subsidiaries National Patent Development Corporation, a Delaware corporation ("NPDC"), and MXL Industries, Inc., a Delaware corporation, the purchasers named therein, and Gabelli Funds, LLC, as agent (the "Agent"), relating to the issue of the GP Warrants and GP's 6% Conditional Subordinated Notes due 2008 (the "Notes"). 1.2 Each GP Warrant entitles the Holder to subscribe for and purchase one share of GP Common Stock at an initial purchase price of $8.00 per share, subject to adjustment as hereinafter provided (the "Exercise Price"). The Exercise Price and number of shares of GP Common Stock issuable upon exercise of each GP Warrant (the "GP Warrant Shares") are subject to adjustment as provided below. 1.3 Each Holder, by accepting this GP Warrant Certificate, appoints and authorizes the Agent as the agent of the Holder, to take such action as agent on its behalf and to exercise such powers as are delegated to the Agent by the terms of the Purchase Agreement. Without limiting the foregoing, each Holder acknowledges that the GP Warrants may be amended by action of the Agent, with the consent of holders of a majority of the then-outstanding GP Warrants, and that all Holders of GP Warrants will be bound by any such amendment. 2. Exercise; Expiration Date 2.1 The GP Warrants are exercisable, at the option of the Holder, at any time after the Closing Date (as defined in the Purchase Agreement) (the "Original Issue Date") and on or before the Expiration Date (the "Exercise Period"), upon surrender of this GP Warrant Certificate to GP together with a duly completed notice of exercise, in the form attached hereto as Exhibit A (the "Notice of Exercise"), and payment, in the manner provided below, of an amount equal to the Exercise Price multiplied by the number of GP Warrants to be exercised. Such delivery shall be made at GP's office at 777 Westchester Avenue, Fourth Floor, White Plains, New York 10604, or such other place as may be designated by GP by notice to the Holder. The "Exercise Date" shall mean the date on which such Notice of Exercise and payment are delivered to GP. 2.2 The "Expiration Date" shall mean 5:00 p.m. New York time on the fifth anniversary of the Original Issue Date or, if such date is not a Business Day, then 5:00 p.m. New York time the next following Business Day. "Business Day" shall mean any date which in the State of New York is not a holiday or a day on which banks are authorized to close. 2.3 The Exercise Price for any GP Warrants shall be paid by delivery to GP, together with the Notice of Exercise, of (a) a certified or cashier's check or checks, in lawful money of the United States of America, (b) Notes, duly endorsed, in an integral multiple of $1,000 principal amount, valued as provided below, or (c) combination of the foregoing, all at the option of the Holder. The amount of the Exercise Price paid by delivery of any Notes (the "Note Payment Amount") shall be equal to the principal amount thereof plus any accrued and unpaid interest thereon to the Exercise Date, except that, if the Exercise Date is after a record date for payment of interest on the Notes but prior to the payment date thereof, the interest payable on such payment date on the Notes so delivered shall not be included in the Note Payment Amount and shall be paid on such payment date in accordance with the terms of the Notes. If the Note Payment Amount of the Notes delivered by the Holder exceeds the Exercise Price for the GP Warrants being exercised, the greatest amount of Notes in an integral multiple of $1,000 with a Note Payment Amount not greater than such aggregate Exercise Price shall be deemed to have been delivered, and GP shall execute and deliver a new Note for the remaining principal amount of such Notes. 2.4 Upon each exercise of the Holder's rights to purchase GP Warrant Shares, the Holder shall be deemed to be the holder of record of the GP Warrant Shares issuable upon such exercise, notwithstanding that the transfer books of GP shall then be closed or certificates representing such GP Warrant Shares shall not then have been actually delivered to the Holder. As soon as practicable, but no later than five Business Days, after each such exercise, GP shall issue and deliver to the Holder a certificate or certificates for the GP Warrant Shares issuable upon such exercise, registered in the name of the Holder. In the case of exercise of less than all the GP Warrants represented by this GP Warrant Certificate, GP shall cancel this GP Warrant Certificate upon the surrender hereof and shall execute and deliver to the Holder a new GP Warrant Certificate for the balance of such GP Warrants. 2.5 The issuance of any GP Warrant Shares or other securities upon the exercise of GP Warrants and the delivery of certificates or other instruments representing such securities shall be made without charge to the Holder for any tax or other charge in respect of such issuance. GP shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and GP shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to GP the amount of such tax or shall have established to the satisfaction of GP that such tax has been paid. 2.6 No fractional shares of GP Common Stock will be issued in connection with any exercise hereof of GP Warrants, but, in lieu of such fractional shares, GP shall make a cash payment therefor in an amount equal to the product of the applicable fraction and the Current Market Price (as defined below) as of the Exercise Date. 3. Registration and Transfer 3.1 GP shall maintain a register (the "Register") for the registration and transfer of the GP Warrants and the registration and transfer of GP Warrant Shares. 3.2 Prior to due presentment for registration of transfer of this GP Warrant Certificate, or the GP Warrant Shares issued upon exercise of the GP Warrants evidenced hereby, GP may deem and treat the registered Holder thereof on the Register as the absolute owner thereof. GP shall be entitled to treat the registered holder of any GP Warrant on the Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such GP Warrant on the part of any other person, and shall not be liable for any registration or transfer of GP Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. 3.3 Neither the GP Warrants evidenced hereby nor the GP Warrant Shares issuable upon exercise hereof have been registered under the Securities Act of 1933, as amended (the "Securities Act"). The Holders are entitled to the benefits of the Registration Rights Agreement, dated _____________, 2003 (the "Registration Rights Agreement"), made by GP in favor of the Holders. The Registration Rights Agreement provides, among other things, for certain restrictions on the disposition of the GP Warrants and the GP Warrant Shares, and each Holder, by acceptance of a GP Warrant Certificate, accepts the restrictions and other provisions of the Registration Rights Agreement. Without limiting the foregoing: (a) No Holder may make any disposition of GP Warrants unless such disposition is (i) to an investment company registered under the Investment Company Act of 1940, as amended, which is advised by Gabelli Funds, LLC, (ii) of all of the GP Warrants held by such Holder, (iii) to one or more transferees each of whom, after giving effect to such disposition, will hold at least 50,000 GP Warrants, or (iv) required to enable such Holder to comply with any legal or regulatory restrictions. (b) In addition, no Holder shall make any disposition of any GP Warrants or GP Warrant Shares unless: (i) (A) each transferee is an accredited investor, as such term is defined in Regulation D promulgated under the Securities Act, and has indicated in the Form of Assignment attached hereto as Exhibit B (the "Form of Assignment") the basis on which such transferee is an accredited investor, (B) each transferee has agreed in writing to be bound by the terms of this GP Warrant Certificate, the Registration Rights Agreement, and the Purchase Agreement, including, without limitation, the provisions thereof with respect to the Agent and the obligations as a Security Holder (as defined in the Purchase Agreement) under the Purchase Agreement, (C) such Holder shall have notified GP of the proposed disposition, and (D) such Holder shall have furnished GP with an opinion of counsel (which opinion may be delivered by in-house counsel of Holder) in the form set forth as Exhibit C, or otherwise reasonably satisfactory to GP, that such disposition will not require registration of the securities to be disposed of under the Securities Act, provided that no such opinion shall be required if such transfer is pursuant to (I) Rule 144(k) promulgated under the Securities Act or (II) Rule 144A promulgated under the Securities Act; or (ii) in the case of a disposition of GP Warrant Shares, such disposition is pursuant to and in compliance with Rule 144 promulgated under the Securities Act, provided that GP may require that such Holder shall have furnished GP with an opinion of counsel (which opinion may be delivered by in-house counsel of Holder) in the form set forth as Exhibit C, or otherwise reasonably satisfactory to GP, that such disposition is in accordance with such Rule, provided that no such opinion shall be required if such transfer is pursuant to Rule 144(k) promulgated under the Securities Act; or (iii) in the case of a disposition of GP Warrant Shares, there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement. The execution and delivery of the Form of Assignment by the transferor and transferee indicating the satisfaction of the requirements of Sections 3.3(a), (b)(i)(A), (b)(i)(B), (b)(i)(C), and, if applicable, (b)(i)(D)(I) or (b)(i)(D)(II) shall be sufficient to satisfy such requirements with respect to the transfer of GP Warrants (except (other than with respect to Section 3(b)(i)(D)(II)) to the extent GP has notified the Holder promptly after receipt of such Form of Assignment that to GP's knowledge such requirements are not met, specifying in such notice the reason GP believes such requirements are not met). 3.4 Each GP Warrant Certificate, and each certificate representing GP Warrant Shares, shall be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under other applicable securities laws): THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND, AMONG OTHER RESTRICTIONS, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SUCH ACT 3.5 GP shall register in the Register any permitted transfer of a GP Warrant Certificate, upon surrender of same to GP with a written instrument of transfer, in the form attached as Exhibit B, duly executed by the registered Holder or by a duly authorized attorney thereof and (unless being transferred to GP) by the transferee or by a duly authorized attorney thereof together with such other documents as may be required for such transfer as provided above. Upon any such registration of transfer, new GP Warrant Certificate(s) shall be issued to the transferee(s) and the surrendered GP Warrant Certificate shall be canceled by GP. A GP Warrant Certificate may also be exchanged, at the option of the Holder, for new GP Warrant Certificates representing in the aggregate the number of GP Warrants evidenced by the GP Warrant Certificate surrendered. 3.6 Upon receipt by GP of reasonable evidence of the ownership of and the loss, theft, destruction, or mutilation of any GP Warrant Certificate and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to GP, or, in the case of mutilation, upon surrender and cancellation of the mutilated GP Warrant Certificate, GP shall execute and deliver in lieu thereof a new GP Warrant Certificate representing an equal number of GP Warrants. 3.7 Upon any transfer of GP Warrants or GP Warrant Shares pursuant to Section 3.3(b)(i), the transferee shall be entitled to all of the benefits enjoyed by the transferor under the Purchase Agreement and the Registration Rights Agreement, and the transferor shall be relieved of any obligations under the Purchase Agreement arising after the date of such transfer. 4. Stock Fully Paid; Reservation of Shares; Covenants 4.1 GP covenants that it will at all times reserve and keep available out of its authorized GP Common Stock, solely for the purpose of issue upon exercise of the GP Warrants, such number of GP Warrant Shares as shall then be issuable upon the exercise of all outstanding GP Warrants. 4.2 GP covenants that all GP Warrant Shares issued upon exercise of the GP Warrants shall be duly and validly issued and, upon payment for such shares as set forth herein, fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issue thereof, and that upon issuance such shares shall be listed on each national securities exchange, if any, on which the other shares of outstanding GP Common Stock of GP are then listed. 4.3 GP shall not by any action, including, without limitation, amending its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other action, avoid or seek to avoid the observance or performance of any of the terms of this GP Warrant Certificate, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against impairment. 4.4 In case GP shall at any time (a) declare a stock dividend upon the GP Class B Stock payable in shares of GP Class B Stock or (b) make any distribution upon the GP Class B Stock payable in shares of GP Class B Stock or (c) subdivide the outstanding shares of GP Class B Stock into a greater number of shares or (d) combine the outstanding shares of GP Class B Stock into a smaller number of shares, then and in any of such events GP shall make, declare, or effect a similar but ratable stock dividend or distribution or subdivision or combination of the shares of GP Common Stock but payable in shares of GP Common Stock. 5. Adjustment of Exercise Price and Number of GP Warrant Shares 5.1 The number of GP Warrant Shares or other securities or assets issuable upon the exercise of each GP Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger, or Sale. (i) If GP, at any time after August 8, 2003 and prior to the Expiration Date or such earlier date that no GP Warrants are outstanding (the "Adjustment Period"), shall do any of the following (each a "Triggering Event"): (A) consolidate with or merge into any other Person and GP shall not be the continuing or surviving corporation of such consolidation or merger; (B) permit any other Person to consolidate with or merge into GP and GP shall be the continuing or surviving Person but, in connection with such consolidation or merger, any capital stock of GP shall be changed into or exchanged for securities of any other Person or cash or any other property (excluding issuance by GP of its capital stock in a merger or consolidation so long as the outstanding capital stock of GP is not changed or exchanged); (C) transfer all or substantially all of its properties or assets to any other Person; (D) effect a capital reorganization or reclassification of its capital stock; or (E) enter into any other transaction similar to any of the foregoing (provided that a Triggering Event shall not include a consolidation or merger to which any subsidiary of GP is a party so long as GP is not also a party to such consolidation or merger), then, and in the case of each such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this GP Warrant Certificate, the Holder of the GP Warrants represented by this GP Warrant Certificate shall be entitled (F) upon the exercise hereof at any time after the consummation of such Triggering Event, with respect to any GP Warrants which are not exercised prior to such Triggering Event, or are not redeemed in connection with such Triggering Event, to receive at the Exercise Price in effect at the time immediately prior to the consummation of such Triggering Event, the securities, cash, and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised such GP Warrants immediately prior thereto, subject to adjustments and increases (subsequent to such corporate action) as nearly equivalent as possible to the adjustments and increases provided for in this Section 5, or (G) to sell such GP Warrants (or, at such Holder's election, a portion thereof) to the Person continuing after or surviving such Triggering Event, or to GP (if GP is the continuing or surviving Person), at a sales price payable in cash or Marketable Securities or a combination thereof (as determined by such Person or GP, as the case may be) equal to (I) the sum of the amount of cash and the fair market value (as determined in the good faith judgment of the Board of Directors of GP) of the property and/or securities to which a holder of the number of shares of GP Common Stock which would otherwise have been delivered upon the exercise of such GP Warrants (or the portion thereof so sold) would have been entitled upon the effective date or closing of any such Triggering Event less (II) an amount equal to the aggregate Exercise Price in effect immediately prior to such Triggering Event applicable to all of such GP Warrants (or the portion thereof so sold). (ii) Notwithstanding anything contained in this GP Warrant Certificate to the contrary, GP will not effect any Triggering Event unless, prior to the consummation thereof, (A) each Person (other than GP) which may be required to deliver any securities, cash, or property upon the exercise of GP Warrants, as provided herein, or otherwise under this GP Warrant Certificate, shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder, (I) the obligations of GP under this GP Warrant Certificate (and, if GP shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release GP from, any continuing obligations of GP under this GP Warrant Certificate) and (II) the obligation to deliver to such Holder such shares of securities, cash, or property as, in accordance with the provisions of Section 5.1(a)(i), such Holder shall be entitled to receive, and (B) such Person shall have delivered to such Holder an opinion of counsel for such Person (which may be in-house counsel), which counsel shall be reasonably satisfactory to such Holder, stating that this GP Warrant Certificate shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this Section 5.1(a)) shall be applicable to the securities, cash, or property which such Person may be required to deliver upon any exercise of the GP Warrants or the exercise of any rights provided in this GP Warrant Certificate. (b) Subdivision or Combination of Shares. If GP, at any time during the Adjustment Period, shall subdivide or combine any shares of GP Common Stock, (i) in case of subdivision of shares, the number of GP Warrant Shares issuable upon exercise of each GP Warrant immediately prior to such subdivision shall be proportionately increased (as at the effective date of such subdivision or, if GP shall take a record of the holders of the GP Common Stock for the purpose of so subdividing, as at the applicable record date, whichever is earlier) to reflect the increase in the total number of shares of GP Common Stock outstanding as a result of such subdivision, or (ii) in the case of a combination of shares, the number of GP Warrant Shares issuable upon exercise of each GP Warrant immediately prior to such subdivision shall be proportionately reduced (as at the effective date of such combination or, if GP shall take a record of the holders of the GP Common Stock for the purpose of so combining, as at the applicable record date, whichever is earlier) to reflect the reduction in the total number of shares of GP Common Stock outstanding as a result of such combination. (c) Stock Dividends. If GP, at any time during the Adjustment Period, shall pay a dividend in, or make any other distribution to its stockholders (without consideration therefor) of, shares of GP Common Stock, the number of GP Warrant Shares issuable upon exercise of each GP Warrant shall be adjusted, as at the date GP shall take a record of the holders of GP's capital stock for the purpose of receiving such dividend or other distribution (or, if no such record is taken, as at the date of such payment or other distribution), such that each GP Warrant shall thereafter evidence the right to purchase a number of GP Warrant Shares determined by multiplying the number of GP Warrant Shares issuable upon the exercise of each GP Warrant in effect immediately prior to such record date (or if no such record is taken, then immediately prior to such payment or other distribution) by a fraction, (i) the numerator of which shall be the total number of shares of GP Common Stock outstanding immediately after such dividend or distribution (plus, in the event that GP paid cash for fractional shares, the number of additional shares which would have been outstanding had GP issued fractional shares in connection with said dividends) and (ii) the denominator of which shall be the total number of shares of GP Common Stock outstanding immediately prior to such dividend or distribution. (d) Spin Off. Upon completion of the Spin-Off (as defined in the Purchase Agreement), the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the Spin-Off by a fraction, (i) the numerator of which is the Current Market Price immediately after the Spin-Off and (ii) the denominator of which is the sum of (A) the Current Market Price immediately after the Spin-Off and (B) the product obtained by multiplying the NPDC Market Price (as defined below) by the number of shares of Class A Common Stock (or other security) of NPDC issuable in the Spin-Off to the holder of one share of GP Common Stock. (e) Other Distributions. If GP, at any time during the Adjustment Period, shall distribute to all holders of GP Common Stock, or all holders of GP Common Stock shall otherwise become entitled to receive, shares of capital stock of GP (other than dividends or distributions on the GP Common Stock referred to in Section 5.1(c)), evidences of its indebtedness, cash, assets (other than dividends or distributions payable in shares of GP Common Stock, and other than as referred to in Section 5.1(d)), rights, options, or warrants providing the right to subscribe for or purchase any shares of GP's capital stock or evidences of its indebtedness, or securities convertible into or exchangeable for shares of GP Common Stock, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such event by a fraction, (i) the numerator of which shall be the Current Market Price on the record date for the determination of shareholders entitled to receive such distribution, less the fair market value (as determined in good faith by the Board of Directors of GP) of the portion of the shares of GP's capital stock other than GP Common Stock, evidences of indebtedness, assets, or such rights, options, warrants, or convertible securities, or the amount of such cash, distributable with respect to each share of GP Common Stock, and (ii) the denominator of which shall be the Current Market Price on such record date. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactively as of the record date for the determination of shareholders entitled to receive such distribution. (f) Adjustment of Shares. Upon each adjustment of the Exercise Price as a result of Section 5.1(e), each GP Warrant shall thereafter evidence the right to purchase, at the Exercise Price as adjusted as provided therein, a number of GP Warrant Shares equal to the product obtained by multiplying (i) the number of shares issuable upon exercise of one GP Warrant prior to such adjustment by (ii) a fraction, the numerator of which is the Exercise Price in effect immediately prior to such adjustment and the denominator of which is the Exercise Price in effect immediately after such adjustment. No such adjustment of the number of GP Warrant Shares deliverable on exercise of the GP Warrants shall be made in connection with the adjustment of the Exercise Price provided for in Section 5.1(d). (g) Adjustment of Exercise Price. All calculations under this Section 5.1 shall be made to the nearest cent or to the nearest one-ten thousandth of a share, as the case may be; provided, however that, no adjustment in the Exercise Price shall be required if such adjustment is less than $.01; and provided, further, that any adjustments which by reason of this Section 5.1(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (h) Changes to GP Warrant Certificate. Anything in this Section 5.1 to the contrary notwithstanding, GP shall be entitled, but shall not be required, to make such changes in the number of GP Warrant Shares issuable upon the exercise of each GP Warrant, or in the Exercise Price, in addition to those required by this Section 5.1, as GP in its discretion shall determine to be advisable so that any dividend or distribution in shares of GP Common Stock, subdivision, reclassification, or combination of shares of GP Common Stock, issuance of rights, warrants, or options to purchase GP Common Stock, or distribution of shares of stock other than GP Common Stock, cash, evidences of indebtedness or assets, or convertible or exchangeable securities made by GP to the holders of the GP Common Stock shall not result in any tax to the holders of the GP Common Stock or securities convertible into GP Common Stock. (i) Other Action Affecting GP Common Stock. If, during the Adjustment Period, GP shall take any action affecting the GP Common Stock, other than an action described in any of Sections 5.1(a) through (e), inclusive, and the failure to make any adjustment would not fairly protect the purchase rights represented by this GP Warrant Certificate in accordance with the essential intent and principle of this Section 5.1, then the number of GP Warrant Shares issuable upon exercise of each GP Warrant and the Exercise Price, as applicable, shall be adjusted in such manner and at such time as the Board of Directors of GP may in good faith determine to be equitable in the circumstances. 5.2 Notice of Adjustments. Whenever the Exercise Price or the number of GP Warrant Shares issuable upon the exercise of each GP Warrant is adjusted as provided in this Section 5 hereof (for purposes of this Section 5.2, each an "adjustment"), GP shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Exercise Price or the number of GP Warrant Shares issuable upon the exercise of each GP Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder at the address of the Holder shown on the Register, promptly after each adjustment. Any dispute between GP and the Holder with respect to the matters set forth in such certificate may at the option of the Holder be submitted to the independent accounting firm then regularly engaged by GP, which firm shall be requested to deliver a written opinion as to such matters to GP and the Holder within 30 days after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The fees and expenses of such accounting firm shall be paid by GP. 5.3 If, at any time after the Original Issue Date and prior to the end of the Adjustment Period, GP shall: (a) pay any dividend or make any distribution on the GP Common Stock; (b) issue any rights, warrants, or other securities to all holders of GP Common Stock entitling them to purchase any additional shares of GP Common Stock or any other rights, warrants, or other securities; (c) effect any reclassification or change of the outstanding GP Common Stock, or any consolidation, merger, sale, lease, or conveyance of property described in Section 5.1; or (d) effect any liquidation, dissolution, or winding-up of GP; then, and in any one or more of such cases, GP shall mail written notice thereof to the Holder at the Holder's address as it shall appear in the Register, mailed at least 10 days prior to (i) the date as of which the holders of record of shares of GP Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined or (ii) the date on which any such reclassification, change, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective. 5.4 The form of GP Warrant Certificate need not be changed because of any change in the Exercise Price or the number of GP Warrant Shares or other securities or assets issuable upon the exercise of a GP Warrant, and GP Warrant Certificates issued before or after such change may state the same Exercise Price, the same number of GP Warrants, and the same number of GP Warrant Shares issuable upon exercise of GP Warrants as are stated in the GP Warrant Certificates theretofore issued. GP may, however, at any time, in its sole discretion, make any change in the form of GP Warrant Certificate that it may deem appropriate in view of any such change and that does not affect the substance thereof, and any GP Warrant Certificates thereafter issued or countersigned, whether in exchange or substitution for an outstanding GP Warrant Certificate or otherwise, may be in the form as so changed. 5.5 In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for or other date relating to a specified event, and in the case of an adjustment under Section 5.1(d), GP may elect to defer, until the occurrence of such event or, in the case of the Spin-Off, the determination of the adjusted Exercise Price, issuing to the Holder, if the Holder exercised GP Warrants after such record or other date, the shares of GP Common Stock, if any, issuable upon such exercise over and above the number of GP Warrant Shares, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that GP shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares. 6. Definitions 6.1 For purpose of this GP Warrant Certificate, the following terms have the following meanings: "Current Market Price" on any date shall mean the average of the daily closing prices of the GP Common Stock for the 20 consecutive trading days immediately preceding the date in question, except that, for purposes of Section 5.1(d) only, the "Current Market Price" shall mean the average of the daily closing prices of the GP Common Stock over the 20 consecutive trading days commencing on the record date for the Spin-Off. The "NPDC Market Price" shall mean the average of the daily closing prices of the Class A Common Stock of NPDC (or any other security issued in the Spin-Off to the holder of one share of GP Common Stock) over the 20 consecutive trading days commencing on the record date for the Spin-Off. The closing price of the GP Common Stock or Class A Common Stock of NPDC (or any other security issued in the Spin-Off to the holder of one share of GP Common Stock) for each day shall be the last reported sales price regular way of such stock or, if no such reported sale of such stock takes place on such day, the closing bid price regular way of such stock, in either case on the principal national securities exchange (including, for purposes hereof, Nasdaq) on which the GP Common Stock or Class A Common Stock of NPDC (or any other security issued in the Spin-Off to the holder of one share of GP Common Stock), respectively, is listed or admitted to trading or, if such stock is not listed or admitted to trading on any national securities exchange, the highest reported closing bid price for such stock as furnished by the Nasdaq or a similar organization if Nasdaq is no longer reporting such information. If on any such date the GP Common Stock or Class A Common Stock of NPDC (or any other security issued in the Spin-Off to the holder of one share of GP Common Stock), as the case may be, is not listed or admitted to trading on any United States national securities exchange and is not quoted by Nasdaq or any similar organization, the fair value of a share of such stock on such date, as determined in good faith by the Board of Directors of GP, whose determination shall be conclusive absent manifest error, shall be used. "Person" means an individual, a corporation, a partnership, a trust, a limited liability company, an unincorporated organization, or a government organization or an agency or political subdivision thereof. "Marketable Securities" means securities of a class which are registered under the Securities Act, whether or not such securities are actually registered under the Securities Act, so long as such securities may be registered under the Securities Act pursuant to currently exercisable demand registration rights. 7. Miscellaneous 7.1 The Holder of any GP Warrant shall not have, solely on account of such status, any rights of a stockholder of GP, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of GP, except as provided in this GP Warrant Certificate. 7.2 This GP Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New York. 7.3 GP stipulates that the remedies at law of the Holder in the event of any default or threatened default by GP in the performance of or compliance with any of the terms of this GP Warrant Certificate are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. Time is of the essence in this GP Warrant Certificate. 7.4 This GP Warrant Certificate, the GP Warrants, and all other rights evidenced hereby shall inure to the benefit of and be binding upon the permitted successors and assigns of GP, the Holder, and (to the extent provided herein) the holders of GP Warrant Shares issued pursuant hereto, and shall be enforceable by any such Holder or holder of GP Warrant Shares. 7.5 If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this GP Warrant Certificate, but this GP Warrant Certificate shall be construed as if such unenforceable provision had never been contained herein. 7.6 The headings of the Sections of this GP Warrant Certificate are for convenience of reference only and shall not, for any purpose, be deemed a part of this GP Warrant Certificate. IN WITNESS WHEREOF, GP has caused this GP Warrant Certificate to be duly executed by its officers thereunto duly authorized and its corporate seal to be affixed hereon, as of this ______ day of ______, 200_. GP STRATEGIES CORPORATION By: __________________________________ Name: Title: Attest: - --------------------------------- Name: Title: EX-10 6 ex103.txt NPD FORM OF WARRANT Exhibit 10.3 EXHIBIT C THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND, AMONG OTHER RESTRICTIONS, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SUCH ACT ___________ NPDC Warrants NATIONAL PATENT DEVELOPMENT CORPORATION WARRANT CERTIFICATE This warrant certificate ("NPDC Warrant Certificate") certifies that, for value received, [PURCHASER] or registered assigns (the "Holder") is the owner of the number of warrants ("NPDC Warrants") specified above, each of which entitles the Holder subscribe for and to purchase, at any time during the Exercise Period (as hereinafter defined), one fully paid and non-assessable share of Class A Common Stock, $.01 par value ("NPDC Common Stock"), of National Patent Development Corporation, a Delaware corporation ("NPDC"), at an initial purchase price as determined as set forth below, subject to adjustment as hereinafter provided. 1. Issue; Exercise Price; Agent 1.1 The NPDC Warrants evidenced hereby are part of the issue of a number of NPDC Warrants as determined pursuant to the Note and Warrant Purchase Agreement (the "Purchase Agreement"), dated August 8, 2003, among NPDC, its parent GP Strategies Corporation, a Delaware corporation, MXL Industries, Inc., a Delaware corporation, the purchasers named therein, and Gabelli Funds, LLC, as agent (the "Agent"). 1.2 Each NPDC Warrant entitles the Holder to subscribe for and purchase one share of NPDC Common Stock at an initial purchase price equal to 160% of the Current Market Price (as defined below), subject to adjustment as hereinafter provided (the "Exercise Price"). The Exercise Price and number of shares of NPDC Common Stock issuable upon exercise of each NPDC Warrant (the "NPDC Warrant Shares") are subject to adjustment as provided below. 1.3 Each Holder, by accepting this NPDC Warrant Certificate, appoints and authorizes the Agent as the agent of the Holder, to take such action as agent on its behalf and to exercise such powers as are delegated to the Agent by the terms of the Purchase Agreement. Without limiting the foregoing, each Holder acknowledges that the NPDC Warrants may be amended by action of the Agent, with the consent of holders of a majority of the then-outstanding NPDC Warrants, and that all Holders of NPDC Warrants will be bound by any such amendment. 2. Exercise; Expiration Date 2.1 The NPDC Warrants are exercisable, at the option of the Holder, at any time after the last day of the Exercise Price Measurement Period (as defined below) and on or before the Expiration Date (the "Exercise Period"), upon surrender of this NPDC Warrant Certificate to NPDC together with a duly completed notice of exercise, in the form attached hereto as Exhibit A (the "Notice of Exercise"), and payment, in the manner provided below, of an amount equal to the Exercise Price multiplied by the number of NPDC Warrants to be exercised. Such delivery shall be made at NPDC's office at 777 Westchester Avenue, Fourth Floor, White Plains, New York 10604, or such other place as may be designated by NPDC by notice to the Holder. The "Exercise Date" shall mean the date on which such Notice of Exercise and payment are delivered to NPDC. 2.2 The "Expiration Date" shall mean 5:00 p.m. New York time on the fifth anniversary of the Closing Date (as defined in the Purchase Agreement) or, if such date is not a Business Day, then 5:00 p.m. New York time the next following Business Day. "Business Day" shall mean any date which in the State of New York is not a holiday or a day on which banks are authorized to close. 2.3 The Exercise Price for any NPDC Warrants shall be paid by delivery to NPDC, together with the Notice of Exercise, of a certified or cashier's check or checks, in lawful money of the United States of America. 2.4 Upon each exercise of the Holder's rights to purchase NPDC Warrant Shares, the Holder shall be deemed to be the holder of record of the NPDC Warrant Shares issuable upon such exercise, notwithstanding that the transfer books of NPDC shall then be closed or certificates representing such NPDC Warrant Shares shall not then have been actually delivered to the Holder. As soon as practicable, but no later than five Business Days, after each such exercise, NPDC shall issue and deliver to the Holder a certificate or certificates for the NPDC Warrant Shares issuable upon such exercise, registered in the name of the Holder. In the case of exercise of less than all the NPDC Warrants represented by this NPDC Warrant Certificate, NPDC shall cancel this NPDC Warrant Certificate upon the surrender hereof and shall execute and deliver to the Holder a new NPDC Warrant Certificate for the balance of such NPDC Warrants. 2.5 The issuance of any NPDC Warrant Shares or other securities upon the exercise of NPDC Warrants and the delivery of certificates or other instruments representing such securities shall be made without charge to the Holder for any tax or other charge in respect of such issuance. NPDC shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of any certificate in a name other than that of the Holder and NPDC shall not be required to issue or deliver any such certificate unless and until the person or persons requesting the issue thereof shall have paid to NPDC the amount of such tax or shall have established to the satisfaction of NPDC that such tax has been paid. 2.6 No fractional shares of NPDC Common Stock will be issued in connection with any exercise hereof of NPDC Warrants, but, in lieu of such fractional shares, NPDC shall make a cash payment therefor in an amount equal to the product of the applicable fraction and the Current Market Price as of the Exercise Date. 3. Registration and Transfer 3.1 NPDC shall maintain a register (the "Register") for the registration and transfer of the NPDC Warrants and the registration and transfer of NPDC Warrant Shares. 3.2 Prior to due presentment for registration of transfer of this NPDC Warrant Certificate, or the NPDC Warrant Shares issued upon exercise of the NPDC Warrants evidenced hereby, NPDC may deem and treat the registered Holder thereof in the Register as the absolute owner thereof. NPDC shall be entitled to treat the registered holder of any NPDC Warrant on the Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such NPDC Warrant on the part of any other person, and shall not be liable for any registration or transfer of NPDC Warrants which are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. 3.3 Neither the NPDC Warrants evidenced hereby nor the NPDC Warrant Shares issuable upon exercise hereof have been registered under the Securities Act of 1933, as amended (the "Securities Act"). The Holders are entitled to the benefits of the Registration Rights Agreement, dated ____________, 2003 (the "Registration Rights Agreement"), made by NPDC in favor of the Holders. The Registration Rights Agreement provides, among other things, for certain restrictions on the disposition of the NPDC Warrants and the NPDC Warrant Shares, and each Holder, by acceptance of a NPDC Warrant Certificate, accepts the restrictions and other provisions of the Registration Rights Agreement. Without limiting the foregoing: (a) No Holder may make any disposition of NPDC Warrants unless such disposition is (i) to an investment company registered under the Investment Company Act of 1940, as amended, which is advised by Gabelli Funds, LLC, (ii) of all of the NPDC Warrants held by such Holder, (iii) to one or more transferees each of whom, after giving effect to such disposition, will hold a number of NPDC Warrants at least equal to one-fifteenth of the number of NPDC Warrants originally issued, or (iv) required to enable such Holder to comply with any legal or regulatory restrictions. (b) In addition, no Holder shall make any disposition of any NPDC Warrants or NPDC Warrant Shares unless: (i) (A) each transferee is an accredited investor, as such term is defined in Regulation D promulgated under the Securities Act, and has indicated in the Form of Assignment attached hereto as Exhibit B (the "Form of Assignment") the basis on which such transferee is an accredited investor, (B) each transferee has agreed in writing to be bound by the terms of this NPDC Warrant Certificate, the Registration Rights Agreement, and the Purchase Agreement, including, without limitation, the provisions thereof with respect to the Agent and the obligations as a Security Holder (as defined in the Purchase Agreement) under the Purchase Agreement, (C) such Holder shall have notified NPDC of the proposed disposition, and (D) such Holder shall have furnished NPDC with an opinion of counsel (which opinion may be delivered by in-house counsel of Holder) in the form set forth as Exhibit C, or otherwise reasonably satisfactory to NPDC, that such disposition will not require registration of the securities to be disposed of under the Securities Act, provided that no such opinion shall be required if such transfer is pursuant to (I) Rule 144(k) promulgated under the Securities Act or (II) Rule 144A promulgated under the Securities Act; or (ii) in the case of a disposition of NPDC Warrant Shares, such disposition is pursuant to and in compliance with Rule 144 promulgated under the Securities Act, provided that NPDC may require that such Holder shall have furnished NPDC with an opinion of counsel (which opinion may be delivered by in-house counsel of Holder) in the form set forth as Exhibit C, or otherwise reasonably satisfactory to NPDC, that such disposition is in accordance with such Rule, provided that no such opinion shall be required if such transfer is pursuant to Rule 144(k) promulgated under the Securities Act; or (iii) in the case of a disposition of NPDC Warrant Shares, there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement. The execution and delivery of the Form of Assignment by the transferor and transferee indicating the satisfaction of the requirements of Sections 3.3(a), (b)(i)(A), (b)(i)(B), (b)(i)(C), and, if applicable, (b)(i)(D)(I) or (b)(i)(D)(II) shall be sufficient to satisfy such requirements with respect to the transfer of NPDC Warrants (except (other than with respect to Section 3(b)(i)(D)(II)) to the extent NPDC has notified the Holder promptly after receipt of such Form of Assignment that to NPDC's knowledge such requirements are not met, specifying in such notice the reason NPDC believes such requirements are not met). 3.4 Each NPDC Warrant Certificate, and each certificate representing NPDC Warrant Shares, shall be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under other applicable securities laws): THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND, AMONG OTHER RESTRICTIONS, HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD, OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM REGISTRATION, UNDER SUCH ACT 3.5 NPDC shall register in the Register any permitted transfer of a NPDC Warrant Certificate, upon surrender of same to NPDC with a written instrument of transfer, in the form attached as Exhibit B, duly executed by the registered Holder or by a duly authorized attorney thereof and (unless being transferred to NPDC) by the transferee or by a duly authorized attorney thereof, together with such other documents as may be required for such transfer as provided above. Upon any such registration of transfer, new NPDC Warrant Certificate(s) shall be issued to the transferee(s) and the surrendered NPDC Warrant Certificate shall be canceled by NPDC. A NPDC Warrant Certificate may also be exchanged, at the option of the Holder, for new NPDC Warrant Certificates representing in the aggregate the number of NPDC Warrants evidenced by the NPDC Warrant Certificate surrendered. 3.6 Upon receipt by NPDC of reasonable evidence of the ownership of and the loss, theft, destruction, or mutilation of any NPDC Warrant Certificate and, in the case of loss, theft, or destruction, of indemnity reasonably satisfactory to NPDC, or, in the case of mutilation, upon surrender and cancellation of the mutilated NPDC Warrant Certificate, NPDC shall execute and deliver in lieu thereof a new NPDC Warrant Certificate representing an equal number of NPDC Warrants. 3.7 Upon any transfer of NPDC Warrants or NPDC Warrant Shares pursuant to Section 3.3(b)(i), the transferee shall be entitled to all of the benefits enjoyed by the transferor under the Purchase Agreement and the Registration Rights Agreement, and the transferor shall be relieved of any obligations under the Purchase Agreement arising after the date of such transfer. 4. Stock Fully Paid; Reservation of Shares; Covenants 4.1 NPDC covenants that it will at all times reserve and keep available out of its authorized NPDC Common Stock, solely for the purpose of issue upon exercise of the NPDC Warrants, such number of NPDC Warrant Shares as shall then be issuable upon the exercise of all outstanding NPDC Warrants. 4.2 NPDC covenants that all NPDC Warrant Shares issued upon exercise of the NPDC Warrants shall be duly and validly issued and, upon payment for such shares as set forth herein, fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issue thereof, and that upon issuance such shares shall be listed on each national securities exchange, if any, on which the other shares of outstanding NPDC Common Stock of NPDC are then listed. 4.3 NPDC shall not by any action, including, without limitation, amending its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other action, avoid or seek to avoid the observance or performance of any of the terms of this NPDC Warrant Certificate, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder hereof against impairment. 4.4 In case NPDC shall at any time (a) declare a stock dividend upon the NPDC Class B Common Stock payable in shares of NPDC Class B Common Stock or (b) make any distribution upon the NPDC Class B Common Stock payable in shares of NPDC Class B Common Stock or (c) subdivide the outstanding shares of NPDC Class B Common Stock into a greater number of shares or (d) combine the outstanding shares of NPDC Class B Common Stock into a smaller number of shares, then and in any of such events NPDC shall make, declare, or effect a similar but ratable stock dividend or distribution or subdivision or combination of the shares of NPDC Common Stock but payable in shares of NPDC Common Stock. 5. Adjustment of Exercise Price and Number of NPDC Warrant Shares 5.1 The number of NPDC Warrant Shares or other securities or assets issuable upon the exercise of each NPDC Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of certain events as follows: (a) Recapitalization, Reorganization, Reclassification, Consolidation, Merger, or Sale. (i) If NPDC, at any time after the Spin-Off Date (as defined in the Purchase Agreement) while any NPDC Warrants are outstanding, shall do any of the following (each a "Triggering Event"): (A) consolidate with or merge into any other Person and NPDC shall not be the continuing or surviving corporation of such consolidation or merger; (B) permit any other Person to consolidate with or merge into NPDC and NPDC shall be the continuing or surviving Person but, in connection with such consolidation or merger, any capital stock of NPDC shall be changed into or exchanged for securities of any other Person or cash or any other property (excluding issuance by NPDC of its capital stock in a merger or consolidation so long as the outstanding capital stock of NPDC is not changed or exchanged); (C) transfer all or substantially all of its properties or assets to any other Person; (D) effect a capital reorganization or reclassification of its capital stock; or (E) enter into any other transaction similar to any of the foregoing (provided that a Triggering Event shall not include a consolidation or merger to which any subsidiary of NPDC is a party so long as NPDC is not also a party to such consolidation or merger), then, and in the case of each such Triggering Event, proper provision shall be made so that, upon the basis and the terms and in the manner provided in this NPDC Warrant Certificate, the Holder of the NPDC Warrants represented by this NPDC Warrant Certificate shall be entitled. (F) upon the exercise hereof at any time after the consummation of such Triggering Event, with respect to any NPDC Warrants which are not exercised prior to such Triggering Event, or are not redeemed in connection with such Triggering Event, to receive at the Exercise Price in effect at the time immediately prior to the consummation of such Triggering Event, the securities, cash, and property to which such Holder would have been entitled upon the consummation of such Triggering Event if such Holder had exercised such NPDC Warrants immediately prior thereto, subject to adjustments and increases (subsequent to such corporate action) as nearly equivalent as possible to the adjustments and increases provided for in this Section 5, or (G) to sell such NPDC Warrants (or, at such Holder's election, a portion thereof) to the Person continuing after or surviving such Triggering Event, or to NPDC (if NPDC is the continuing or surviving Person), at a sales price payable in cash or Marketable Securities or a combination thereof (as determined by such Person or NPDC, as the case may be) equal to (I)the sum of the amount of cash and the fair market value (as determined in the good faith judgment of the Board of Directors of NPDC) of the property and/or securities to which a holder of the number of shares of NPDC Common Stock which would otherwise have been delivered upon the exercise of such NPDC Warrants (or the portion thereof so sold) would have been entitled upon the effective date or closing of any such Triggering Event less (II)an amount equal to the aggregate Exercise Price in effect immediately prior to such Triggering Event applicable to all of such NPDC Warrants (or the portion thereof so sold). (ii) Notwithstanding anything contained in this NPDC Warrant Certificate to the contrary, NPDC will not effect any Triggering Event unless, prior to the consummation thereof, (A) each Person (other than NPDC) which may be required to deliver any securities, cash, or property upon the exercise of NPDC Warrants, as provided herein, or otherwise under this NPDC Warrant Certificate, shall assume, by written instrument delivered to, and reasonably satisfactory to, the Holder, (I) the obligations of NPDC under this NPDC Warrant Certificate (and, if NPDC shall survive the consummation of such Triggering Event, such assumption shall be in addition to, and shall not release NPDC from, any continuing obligations of NPDC under this NPDC Warrant Certificate) and (II) the obligation to deliver to such Holder such shares of securities, cash, or property as, in accordance with the provisions of Section 5.1(a)(i), such Holder shall be entitled to receive, and (B) such Person shall have delivered to such Holder an opinion of counsel for such Person (which may be in-house counsel), which counsel shall be reasonably satisfactory to such Holder, stating that this NPDC Warrant Certificate shall thereafter continue in full force and effect and the terms hereof (including, without limitation, all of the provisions of this Section 5.1(a)) shall be applicable to the securities, cash, or property which such Person may be required to deliver upon any exercise of the NPDC Warrants or the exercise of any rights provided in this NPDC Warrant Certificate. (b) Subdivision or Combination of Shares. If NPDC, at any time after the Spin-Off Date while any NPDC Warrants are outstanding, shall subdivide or combine any shares of NPDC Common Stock, (i) in case of subdivision of shares, the number of NPDC Warrant Shares issuable upon exercise of each NPDC Warrant immediately prior to such subdivision shall be proportionately increased (as at the effective date of such subdivision or, if NPDC shall take a record of the holders of the NPDC Common Stock for the purpose of so subdividing, as at the applicable record date, whichever is earlier) to reflect the increase in the total number of shares of NPDC Common Stock outstanding as a result of such subdivision, or (ii) in the case of a combination of shares, the number of NPDC Warrant Shares issuable upon exercise of each NPDC Warrant immediately prior to such subdivision shall be proportionately reduced (as at the effective date of such combination or, if NPDC shall take a record of the holders of the NPDC Common Stock for the purpose of so combining, as at the applicable record date, whichever is earlier) to reflect the reduction in the total number of shares of NPDC Common Stock outstanding as a result of such combination. (c) Stock Dividends. If NPDC, at any time after the Spin-Off Date while any NPDC Warrants are outstanding, shall pay a dividend in, or make any other distribution to its stockholders (without consideration therefor) of, shares of NPDC Common Stock, the number of NPDC Warrant Shares issuable upon exercise of each NPDC Warrant shall be adjusted, as at the date NPDC shall take a record of the holders of NPDC's capital stock for the purpose of receiving such dividend or other distribution (or, if no such record is taken, as at the date of such payment or other distribution), such that each NPDC Warrant shall thereafter evidence the right to purchase a number of NPDC Warrant Shares determined by multiplying the number of NPDC Warrant Shares issuable upon the exercise of each NPDC Warrant in effect immediately prior to such record date (or if no such record is taken, then immediately prior to such payment or other distribution) by a fraction, (i) the numerator of which shall be the total number of shares of NPDC Common Stock outstanding immediately after such dividend or distribution (plus, in the event that NPDC paid cash for fractional shares, the number of additional shares which would have been outstanding had NPDC issued fractional shares in connection with said dividends) and (ii) the denominator of which shall be the total number of shares of NPDC Common Stock outstanding immediately prior to such dividend or distribution. (d) Other Distributions. If NPDC, at any time after the Spin-Off Date, shall distribute to all holders of NPDC Common Stock, or all holders of NPDC Common Stock shall otherwise become entitled to receive, shares of capital stock of NPDC (other than dividends or distributions on the NPDC Common Stock referred to in Section 5.1(c)), evidences of its indebtedness, cash, assets (other than dividends or distributions payable in shares of NPDC Common Stock), rights, options, or warrants providing the right to subscribe for or purchase any shares of NPDC's capital stock or evidences of its indebtedness, or securities convertible into or exchangeable for shares of NPDC Common Stock, the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to such event by a fraction, (i) the numerator of which shall be the Current Market Price on the record date for the determination of shareholders entitled to receive such distribution, less the fair market value (as determined in good faith by the Board of Directors of NPDC) of the portion of the shares of NPDC's capital stock other than NPDC Common Stock, evidences of indebtedness, assets, or such rights, options, warrants, or convertible securities, or the amount of such cash, distributable with respect to each share of NPDC Common Stock, and (ii) the denominator of which shall be the Current Market Price on such record date. Such adjustment shall be made whenever any such distribution is made, and shall become effective retroactively as of the record date for the determination of shareholders entitled to receive such distribution. (e) Adjustment of NPDC Warrant Shares. Upon each adjustment of the Exercise Price as a result of Section 5.1(d), each NPDC Warrant shall thereafter evidence the right to purchase, at the Exercise Price as adjusted as provided therein, a number of Warrant Shares equal to the product obtained by multiplying (i) the number of shares issuable upon exercise of one NPDC Warrant prior to such adjustment by (ii) a fraction, the numerator of which is the Exercise Price in effect immediately prior to such adjustment and the denominator of which is the Exercise Price in effect immediately after such adjustment. (f) Adjustment Exercise Price. All calculations under this Section 5.1 shall be made to the nearest cent or to the nearest one-ten thousandth of a share, as the case may be; provided, however that, no adjustment in the Exercise Price shall be required if such adjustment is less than $.01; and provided, further, that any adjustments which by reason of this Section 5.1(f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. (g) Changes to NPDC Warrant Certificate. Anything in this Section 5.1 to the contrary notwithstanding, NPDC shall be entitled, but shall not be required, to make such changes in the number of NPDC Warrant Shares issuable upon the exercise of each NPDC Warrant, or in the Exercise Price, in addition to those required by this Section 5.1, as NPDC in its discretion shall determine to be advisable so that any dividend or distribution in shares of NPDC Common Stock, subdivision, reclassification, or combination of shares of NPDC Common Stock, issuance of rights, warrants, or options to purchase NPDC Common Stock, or distribution of shares of stock other than NPDC Common Stock, cash, evidences of indebtedness or assets, or convertible or exchangeable securities made by NPDC to the holders of the NPDC Common Stock shall not result in any tax to the holders of the NPDC Common Stock or securities convertible into NPDC Common Stock. (h) Other Action Affecting NPDC Common Stock. If, after the Spin-Off Date, NPDC shall take any action affecting the NPDC Common Stock, other than an action described in any of Sections 5.1(a) through (d), inclusive, and the failure to make any adjustment would not fairly protect the purchase rights represented by this NPDC Warrant Certificate in accordance with the essential intent and principle of this Section 5.1, then the number of NPDC Warrant Shares issuable upon exercise of each NPDC Warrant and the Exercise Price, as applicable, shall be adjusted in such manner and at such time as the Board of Directors of NPDC may in good faith determine to be equitable in the circumstances. 5.2 Notice of Adjustments. Whenever the Exercise Price or the number of NPDC Warrant Shares issuable upon the exercise of each NPDC Warrant is adjusted as provided in this Section 5 hereof (for purposes of this Section 5.2, each an "adjustment"), NPDC shall cause its Chief Financial Officer to prepare and execute a certificate setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Board made any determination hereunder), and the Exercise Price or the number of NPDC Warrant Shares issuable upon the exercise of each NPDC Warrant after giving effect to such adjustment, and shall cause copies of such certificate to be delivered to the Holder at the address of the Holder shown on the Register, promptly after each adjustment. Any dispute between NPDC and the Holder with respect to the matters set forth in such certificate may at the option of the Holder be submitted to the independent accounting firm then regularly engaged by NPDC, which firm shall be requested to deliver a written opinion as to such matters to NPDC and the Holder within 30 days after submission to it of such dispute. Such opinion shall be final and binding on the parties hereto. The fees and expenses of such accounting firm shall be paid by NPDC. 5.3 If, at any time after the Spin-Off Date and prior to the expiration or exercise of the NPDC Warrants, NPDC shall: (a) pay any dividend or make any distribution on the NPDC Common Stock; (b) issue any rights, warrants, or other securities to all holders of NPDC Common Stock entitling them to purchase any additional shares of NPDC Common Stock or any other rights, warrants, or other securities; (c) effect any reclassification or change of the outstanding NPDC Common Stock, or any consolidation, merger, sale, lease, or conveyance of property described in Section 5.1; or (d) effect any liquidation, dissolution, or winding-up of NPDC; then, and in any one or more of such cases, NPDC shall mail written notice thereof to the Holder at the Holder's address as it shall appear in the Register, mailed at least 10 days prior to (i) the date as of which the holders of record of shares of NPDC Common Stock to be entitled to receive any such dividend, distribution, rights, warrants, or other securities are to be determined or (ii) the date on which any such reclassification, change, consolidation, merger, sale, lease, conveyance of property, liquidation, dissolution, or winding-up is expected to become effective. 5.4 The form of NPDC Warrant Certificate need not be changed because of any change in the Exercise Price or the number of NPDC Warrant Shares or other securities or assets issuable upon the exercise of a NPDC Warrant, and NPDC Warrant Certificates issued before or after such change may state the same Exercise Price, the same number of NPDC Warrants, and the same number of NPDC Warrant Shares issuable upon exercise of NPDC Warrants as are stated in the NPDC Warrant Certificates theretofore issued. NPDC may, however, at any time, in its sole discretion, make any change in the form of NPDC Warrant Certificate that it may deem appropriate in view of any such change and that does not affect the substance thereof, and any NPDC Warrant Certificates thereafter issued or countersigned, whether in exchange or substitution for an outstanding NPDC Warrant Certificate or otherwise, may be in the form as so changed. 5.5 In any case in which this Section 5 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, NPDC may elect to defer, until the occurrence of such event, issuing to the Holder, if the Holder exercised NPDC Warrants after such record date, the shares of NPDC Common Stock, if any, issuable upon such exercise over and above the number of NPDC Warrant Shares, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment; provided, however, that NPDC shall deliver to the Holder a due bill or other appropriate instrument evidencing the Holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment. 6. Definitions. 6.1 For purpose of this NPDC Warrant Certificate, the following terms have the following meanings: The "Current Market Price" on any date shall mean the average of the daily closing prices of the NPDC Common Stock for the 20 consecutive trading days immediately preceding the date in question, except that, for purposes of Section 1.2 only, the "Current Market Price" shall mean the average of the daily closing prices of the NPDC Common Stock over the 20 consecutive trading days commencing on the record date for the Spin-Off (as defined in the Purchase Agreement) (the "Exercise Price Measurement Period"). The closing price of the NPDC Common Stock for each day shall be the last reported sales price regular way of such stock or, if no such reported sale of such stock takes place on such day, the closing bid price regular way of such stock, in either case on the principal national securities exchange (including, for purposes hereof, Nasdaq) on which the NPDC Common Stock is listed or admitted to trading or, if such stock is not listed or admitted to trading on any national securities exchange, the highest reported closing bid price for such stock as furnished by the Nasdaq or a similar organization if Nasdaq is no longer reporting such information. If on any such date the NPDC Common Stock is not listed or admitted to trading on any United States national securities exchange and is not quoted by Nasdaq or any similar organization, the fair value of a share of such stock on such date, as determined in good faith by the Board of Directors of NPDC, whose determination shall be conclusive absent manifest error, shall be used. "Person" means an individual, a corporation, a partnership, a trust, a limited liability company, an unincorporated organization, or a government organization or an agency or political subdivision thereof. "Marketable Securities" means securities of a class which are registered under the Securities Act, whether or not such securities are actually registered under the Securities Act, so long as such securities may be registered under the Securities Act pursuant to currently exercisable demand registration rights. 7. Miscellaneous 7.1 The Holder of any NPDC Warrant shall not have, solely on account of such status, any rights of a stockholder of NPDC, either at law or in equity, or to any notice of meetings of stockholders or of any other proceedings of NPDC, except as provided in this NPDC Warrant Certificate. 7.2 This NPDC Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New York. 7.3 NPDC stipulates that the remedies at law of the Holder in the event of any default or threatened default by NPDC in the performance of or compliance with any of the terms of this NPDC Warrant Certificate are not and will not be adequate and that, to the fullest extent permitted by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise. Time is of the essence in this NPDC Warrant Certificate. 7.4 This NPDC Warrant Certificate, the NPDC Warrants, and all other rights evidenced hereby shall inure to the benefit of and be binding upon the permitted successors and assigns of NPDC, the Holder, and (to the extent provided herein) the holders of NPDC Warrant Shares issued pursuant hereto, and shall be enforceable by any such Holder or holder of NPDC Warrant Shares. 7.5 If, in any action before any court or agency legally empowered to enforce any provision contained herein, any provision hereof is found to be unenforceable, then such provision shall be deemed modified to the extent necessary to make it enforceable by such court or agency. If any such provision is not enforceable as set forth in the preceding sentence, the unenforceability of such provision shall not affect the other provisions of this NPDC Warrant Certificate, but this NPDC Warrant Certificate shall be construed as if such unenforceable provision had never been contained herein. 7.6 The headings of the Sections of this NPDC Warrant Certificate are for convenience of reference only and shall not, for any purpose, be deemed a part of this NPDC Warrant Certificate. IN WITNESS WHEREOF, NPDC has caused this NPDC Warrant Certificate to be duly executed by its officers thereunto duly authorized and its corporate seal to be affixed hereon, as of this ______ day of ________, 200_. NATIONAL PATENT DEVELOPMENT CORPORATION By: __________________________________ Name: Title: Attest: - --------------------------------- Name: Title: EXHIBIT A NOTICE OF EXERCISE The undersigned hereby irrevocably elects to exercise, pursuant to Section 2 of the NPDC Warrant Certificate accompanying this Notice of Exercise, _______ NPDC Warrants of the total number of NPDC Warrants owned by the undersigned pursuant to the accompanying NPDC Warrant Certificate (and, if such number of NPDC Warrants is less than all of the NPDC Warrants covered by the accompanying NPDC Warrant Certificate, that a new NPDC Warrant Certificate for the balance of such NPDC Warrants be registered in the name of, and delivered to, the undersigned at the address stated below), and herewith makes payment of the Exercise Price of such shares in full by delivery of $__________ by certified or cashier's check. Dated: _________________ -------------------------------------- Name of Holder -------------------------------------- Signature -------------------------------------- If executed in a representative or fiduciary capacity, print name and title of individual executing this notice on behalf of the Holder NOTE: The above signature should correspond exactly with the name on the first page of this NPDC Warrant Certificate or with the name of the assignee appearing in the Form of Assignment -------------------------------------- Social Security or Tax Identification Number of Holder Address of Holder: -------------------------------------- -------------------------------------- -------------------------------------- EXHIBIT B FORM OF ASSIGNMENT (To be executed by the registered holder if such holder desires to transfer the attached Warrant.) FOR VALUE RECEIVED, ______________________ (the "Holder") hereby sells, assigns, and transfers unto Name ________________________________ Address_______________________________ -------------------------------------- -------------------------------------- Social Security or Tax Identification Number: -------------------------------------- ____ NPDC Warrants, as defined in and represented by the accompanying NPDC Warrant Certificate, together with all right, title, and interest therein, and does hereby irrevocably constitute and appoint _______________ attorney to transfer such NPDC Warrants on the books of NPDC Strategies Corporation ("NPDC"), with full power of substitution. ? [CHECK IF APPLICABLE] The undersigned is transferring the above NPDC Warrants pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Section 4(1) of such Securities Act, and in connection therewith represents that neither the undersigned, nor any person acting on behalf of the undersigned, has solicited or will solicit any offer or published or will publish any advertisement to sell or has offered to sell or will offer to sell all or any part of such NPDC Warrants to any person or persons so as to bring the sale of such NPDC Warrants by the undersigned within the registration provisions of such Securities Act. ? [CHECK IF APPLICABLE] The undersigned is transferring the above NPDC Warrants pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144(k) promulgated under such Securities Act, and in connection therewith represents that the undersigned is not, and within the three months prior hereto has not been, an affiliate of NPDC within the meaning of such Rule. 9 ? [CHECK IF APPLICABLE] The undersigned is transferring the above NPDC Warrants pursuant to the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A promulgated under such Securities Act. Dated: _________________ -------------------------------------- Name of Holder -------------------------------------- Signature -------------------------------------- If executed in a representative or fiduciary capacity, print name and title of individual executing this notice on behalf of the Holder NOTE: The above signature should correspond exactly with the name on the first page of this NPDC Warrant Certificate -------------------------------------- Social Security or Tax Identification Number of Holder Address of Holder: -------------------------------------- -------------------------------------- -------------------------------------- Each undersigned transferee, by execution hereof, (i) represents and warrants to NPDC that (a) such transferee is an accredited investor, as such term is defined in the Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the provision or provisions of such definition as indicated below, (b) if box (B) below is checked, the undersigned is an investment company registered under the Investment Company Act of 1940, as amended, which is advised by Gabelli Funds, LLC, (c) if box (C) below is checked, the undersigned is a qualified institutional buyer, as such term is defined in Rule 144A promulgated under the Securities Act, and is acquiring the NPDC Warrants transferred hereby pursuant to such Rule 144A, (d) unless the undersigned transferee is an investment company referred to in clause (b) above, or is acquiring all of the NPDC Warrants held by the Holder, the undersigned will hold, after giving effect to the transfer effected hereby, not less than one-fifteenth of the number of NPDC Warrants originally issued by NPDC on the Spin-Off Date (as defined in the NPDC Warrant Certificate), (e) the undersigned is acquiring the NPDC Warrants, and will acquire any NPDC Warrant Shares (as defined in the NPDC Warrant Certificate), for investment and without a view to a distribution other than pursuant to a registration statement under the Securities Act and applicable state securities laws, or an exemption therefrom, and (f) the name, address, and social security or tax identification number of the undersigned are as set forth above, and (ii) agrees to be bound by the terms of the NPDC Warrant Certificate, the Registration Rights Agreement, and the Purchase Agreement (each as defined in the NPDC Warrant Certificate), including, without limitation, the provisions thereof with respect to the Agent (as defined in such Purchase Agreement) and the obligations as a Security Holder (as defined in the Purchase Agreement) under the Purchase Agreement. The undersigned is an accredited investor under the following provisions: ___ (i) a bank as defined in Section 3(a)(2) of the Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors; ___ (ii) a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; 10 ___ (iii) an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring NPDC Warrants or NPDC Warrant Shares, with total assets in excess of $5,000,000; ___ (iv) a director or executive officer of NPDC; ___ (v) a natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1,000,000; ___ (vi) a natural person who had an individual income (not including his or her spouse's income) in excess of $200,000 in the last two years or joint income with his or her spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching such income level in the current year; ___ (vii) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring NPDC Warrants or NPDC Warrant Shares, whose purchase is directed by a person having such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks entailed in the purchase of the NPDC Warrants or NPDC Warrant Shares; or ___ (viii) an entity in which all of the equity owners are accredited investors (if this alternative is checked, the undersigned must identify how each equity owner is qualified as an accredited investor). (B) ? [CHECK, IF APPLICABLE] The undersigned is an investment company registered under the Investment Company Act of 1940, as amended, which is advised by Gabelli Funds, LLC (C) ? [CHECK, IF APPLICABLE] The undersigned is a qualified institutional buyer, as such term is defined in Rule 144A promulgated under the Securities Act, and is acquiring the NPDC Warrants transferred hereby pursuant to such Rule 144A Dated: _________________ -------------------------------------- Name of Transferee -------------------------------------- Signature -------------------------------------- If executed in a representative or fiduciary capacity, print name and title of individual executing this notice on behalf of the transferee NOTE: The above signature should correspond exactly with the name set forth above EXHIBIT C FORM OF OPINION REGARDING TRANSFER [In-house Counsel letterhead] GP Strategies Corporation 777 Westchester Avenue, 4th Floor White Plains, NY 10604 [Name/address of transfer agent] Ladies and Gentlemen: I am [insert title of opinion giver] for [insert name of transferor] ("Seller"), and have acted as in-house counsel of Seller in connection with the sale and transfer (the "Transaction") by Seller to [insert buyer's name] (the "Transferee") of [ ] warrants (the "Warrants") for the purchase of shares of Class A Common Stock (the "Common Stock"), par value $0.01 per share]/[[ ] shares (the "Shares") of Class A Common Stock (the "Common Stock"), par value $0.01 per share] issued by National Patent Development Corporation, a Delaware corporation (the "Company"). Capitalized terms used and not otherwise defined herein shall have the meaning ascribed to them in the Note and Warrant Purchase Agreement, dated as of July __, 2003, by and among the Company, GP, MXL, the Agent (each as defined therein) and the Purchasers listed in Schedule 1.2 thereof (the "Purchase Agreement"). In connection with this opinion, I have examined copies of the following documents: (a) the Purchase Agreement, (b) the Note, (c) the GP Warrant Certificate, (d) the NPDC Warrant Certificate, (e) the GP Registration Rights Agreement, (f) the NPDC registration Rights Agreement (the documents set forth in (a) thorough (f) being the "Transaction Documents"), and (g) [Form of Assignment dated [ ] from Seller to Transferee, a copy of which is attached hereto as Exhibit A (the "Form of Assignment")] /[stock certificate number [ ] evidencing [ ] the Shares and the accompanying stock power executed by the Seller to effect the transfer of the Shares to Transferee, copies of which are attached hereto as Exhibit A (the "Stock Documents")]. I have also examined such certificates of public officials, such certificates of officers of Seller and Transferee, the originals (or copies thereof) of such other documents and records of the Seller, and such other documents and instruments as I have deemed necessary or appropriate for purposes of this opinion. In addition I have examined such matters of law as I have deemed necessary or appropriate for purposes of this opinion In rendering my opinion, I have assumed the genuineness of all signatures on all documents so examined, the authenticity of all documents, records and instruments submitted to me as originals and the conformity with the original documents, records and instruments of all such documents, records and instruments submitted to me as copies and the legal capacity to sign of all individuals executing such documents. I have not independently verified the foregoing assumptions. I have also assumed that there are no oral modifications or written agreements or understandings which limit, modify or otherwise alter the terms, provisions and conditions of, or relate to, the transactions contemplated by the Transaction Documents. As to various questions of fact material to my opinion, I have assumed and have relied without independent investigation upon the accuracy and completeness of the above-mentioned certificates and documents and upon the representations and warranties contained in the Transaction Documents. [Rule 144 Documents and Assumptions Applicable to Sale of Common Stock Only] [I have also received a copy of written correspondence indicating that the Seller has filed a notice on Form 144, dated [ ] (the "Form 144"), with the Securities and Exchange Commission in connection with the sale of the Shares. The Form 144 indicates that (i) the Seller intends to sell the Shares, all of which were acquired from [ ] (the "Prior Holder") on [ ], (ii) the Seller has not sold any shares of Common Stock during the three months preceding the filing of the Form 144, and (iii) the aggregate number of shares of Common Stock outstanding is [ ]. I also received a copy of a written representation letter, dated [ ] (the "Broker's Letter"), from [ ] (the "Broker") indicating that the sale of the Shares was made in a "brokers' transaction"1 as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), and that the Broker did not solicit or arrange for the solicitation of orders to buy the Shares in anticipation of the sale of the Shares.2 The Common Stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Company has been subject to the reporting requirements of Section 13 of the Exchange Act for a period of at least 90 days immediately preceding the sales of the Securities. ] [4(1)1/2 Assumptions Applicable to Transfer of Common Stock or Warrants] [I have further assumed, with your permission and without independent investigation, that (i) Transferee has had a full opportunity to ask questions and receive answers from the Seller and the Company with respect to matters necessary for it to make an informed investment decision regarding the [Shares/Warrants] and the Company and (ii) all of the proceeds of the Transaction will inure solely to the benefit of the Seller and no portion thereof will inure to the benefit of the Company. I have relied with your permission and without independent investigation on Transferee's representations set forth in the Form of Assignment3 that (i) Transferee acquires the [Shares/Warrants] for its own account and not with a view towards the distribution or resale thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act") and (ii) neither Seller nor any agent on its behalf has solicited or will solicit any offers or published or will publish any advertisement to sell or has offered to sell or will offer to sell all or any part of the [Shares/Warrants] to any person or persons so as to bring the sale of such [Shares/Warrants] by Seller within the registration provisions of the Securities Act. For purposes of this opinion, I have also assumed, without independent investigation, as indicated by the legends thereon, that before the Transaction the [Shares/Warrants] were "restricted securities" as that term is construed under Rule 144 under the Securities Act.] Based upon and in reliance on the foregoing, and subject to the limitations heretofore and hereinafter expressly set forth, I am of the opinion that the sale and transfer of the [Shares/Warrants] by the Seller to Transferee does not require registration under the Securities Act. My opinion is limited to the Federal laws of the United States of America and I do not express any opinion as to the laws of any other state or jurisdiction. No opinion is expressed as to the effect that the law of any other jurisdiction might have upon the subject matter of the opinion expressed herein under conflicts of laws principles or otherwise. Except for the opinions set forth in the paragraph immediately above, I express no opinions and no opinions should be implied. I render no opinion with respect to antitrust laws, environmental laws, state securities laws or the law of fiduciary duty. Except as expressed in the paragraph immediately above, I express no opinion with respect to securities laws. The opinion expressed herein is intended solely for your benefit in connection with the transfer of the [Shares/Warrants] as described above and may not be relied upon or used by or circulated, quoted or otherwise referred to any other person or entity or for any other reason. This opinion speaks only as of the date hereof and is limited to matters expressly stated herein and the law as in effect on the date hereof. I disclaim any undertaking to advise you of changes in law or facts that may be brought to my attention after the date hereof. Very truly yours, - -------- 1 If transaction is effected through a "market maker" as that term is defined in Rule 144, revise this paragraph accordingly. 2 This opinion should be modified to reflect any change to laws governing such matters between the date of the Purchase Agreement and the time of its delivery. 3 In the case of a transfer of Shares where no Form of Assignment is provided, please replace the reference to the Form of Assignment with reference to officer certificates which the opinion giver should obtain from the Transferee and Seller. EX-10 7 ex104.txt MORTGAGE SECURITY AGREEMENT Exhibit 10.4 EXHIBIT D MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES Dated: As of __________, 2003 Made Between GP STRATEGIES CORPORATION as mortgagor - and - GABELLI FUNDS, LLC, as agent as mortgagee LOCATION OF PREMISES Street Address: City or Town of: Pawling County of: Dutchess State of: New York Tax Map, Town of Pawling: Portion of Grid ID No. 11-6857-00-742079-00 Grid ID No. 11-6856-00-964851-00 Grid ID No. 11-6857-00-962100-00 After recording, please return to: Paul, Hastings, Janofsky & Walker 75 East 55th Street New York, New York 10022 Attention: Frank Cannone, Esq. TABLE OF CONTENTS Page SECTION 1. Defined Terms...................................................4 SECTION 2. Payment of and Performance of Obligations.......................6 SECTION 3. Representation of Title; Permitted Encumbrances.................7 SECTION 4. Operating the Premises; Status of Premises......................7 SECTION 5. Liens...........................................................8 SECTION 6. Taxes...........................................................8 SECTION 7. Insurance Coverage..............................................9 SECTION 8. Insurance Policies..............................................9 SECTION 9. Compliance with Law............................................10 SECTION 10 Proceeds of Insurance..........................................10 SECTION 11 Condemnation and Eminent Domain................................11 SECTION 12 Assignment of Leases and Rents.................................12 SECTION 13 Leases.........................................................13 SECTION 14 Security Agreement.............................................13 SECTION 15 Restrictions on Transfer; Maintenance of Existence.............15 SECTION 16 Events of Default..............................................15 SECTION 17 Foreclosure....................................................16 SECTION 18 Right of Possession............................................18 SECTION 19 Receiver.......................................................19 SECTION 20 Proceeds of Foreclosure Sale...................................19 SECTION 21 Waiver of Right of Redemption and Other Rights.................20 SECTION 22 Successors and Assigns.........................................20 SECTION 23 Subrogation....................................................20 SECTION 24. Governing Law.................................................20 SECTION 25. Captions and Pronouns.........................................21 SECTION 26. Release.......................................................21 SECTION 27. Defeasance....................................................21 SECTION 28. Mortgage Recording Tax; Transfer Tax..........................24 SECTION 29. Exempt Transaction Under Truth-in-Lending.....................24 SECTION 30. Notice........................................................25 SECTION 31. No Waiver.....................................................25 SECTION 32. Descriptive Headings, Etc.....................................25 SECTION 33. Terminology...................................................25 SECTION 34. Waiver of Jury Trial..........................................25 SECTION 35. Severability..................................................25 SECTION 36. Further Assurances............................................25 SECTION 37. Amendment.....................................................26 SECTION 38. Severance of the Loan.........................................26 SECTION 39. Limited Recourse..............................................26 SECTION 40. Construction of Covenants.....................................26 SECTION 41. Lien Law......................................................26 SECTION 42. Environmental Representations, Warranties, Covenants; Environmental Indemnity.....................................26 SECTION 43. Conveyance of the Premises; Limitation on Modification of the Obligations............................................28 SECTION 44. Mortgagee as Agent for Holders................................28 SECTION 45. Miscellaneous.................................................28 MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES (this "Mortgage") made as of the ____ day of _________, 2003, between GP STRATEGIES CORPORATION, a Delaware corporation ("GP"), formerly known as National Patent Development Corporation, having an address at 777 Westchester Avenue, White Plains, NY 10604 and GABELLI FUNDS, LLC, a New York limited liability company, as agent for the Holders (as defined below) ("Mortgagee"), having an address at One Corporate Center, Rye, NY 10580; W I T N E S S E T H : - - - - - - - - - - WHEREAS, GP is the fee owner of that certain real property located in the Town of Pawling, County of Dutchess, State of New York, and more particularly described in Schedule A attached hereto and made a part hereof (the "Land"), and the buildings and other improvements located thereon; WHEREAS, GP is a party to a certain unrecorded Note and Warrant Purchase Agreement, dated as of August 8, 2003 (as modified and supplemented and in effect from time to time, being herein called the "Purchase Agreement"), among GP, its wholly owned subsidiaries National Patent Development Corporation, a Delaware corporation ("NPDC"), and MXL Industries, Inc., a Delaware corporation ("MXL"), the purchasers named therein (the "Purchasers") and Mortgagee, as agent, which Purchase Agreement calls for, among other things, the issuance of GP's 6% Conditional Subordinated Notes due 2008 (the "Notes") in the aggregate original principal amount of $7,500,000; WHEREAS, Mortgagee is the agent for the holders from time to time of the Notes (the "Holders"); WHEREAS, it is a condition to the performance of the Holders' and Mortgagee's obligations under the Purchase Agreement that GP's obligation to pay the Obligations (as hereinafter defined) be secured by, among other things, this Mortgage, given to Mortgagee as agent on behalf of the Holders; WHEREAS, all things necessary to make this Mortgage the valid and legally binding obligation of GP in accordance with its terms, for the uses and purposes herein set forth, have been done and performed; NOW, THEREFORE, in consideration of the sum of TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and to better secure the payment and performance to Mortgagee of the Obligations, GP, or its successors as owner of the premises as hereinafter provided (GP or such successor, in such capacity, being herein referred to as the "Mortgagor"), hereby agrees as follows: THAT Mortgagor shall pay to the Holders the sums due and owing pursuant to the Notes and secured by this Mortgage; and THAT Mortgagor, by these presents and by the execution and delivery of this Mortgage, DOES HEREBY GRANT, REMISE, RELEASE, ASSIGN, LIEN, MORTGAGE AND CONVEY unto Mortgagee, its successors and assigns forever, as agent on behalf of the Holders, with power of sale, the Land; together with all right, title and interest of Mortgagor in and to the following described property, rights and interests all of which are hereby pledged primarily and on a parity with the Land and not secondarily (and are, together with the Land, the "Premises"): TOGETHER WITH all buildings, structures and improvements of every nature whatsoever now or hereafter situated on the Land (including but not limited to all underground and other parking facilities located in or on the Land, all landscaped areas and all areas utilized for recreational activities) including all extensions, additions, improvements, betterments, renewals, substitutions and replacements to and proceeds of any of the foregoing (collectively, the "Improvements"); TOGETHER WITH all right, title and interest of Mortgagor, if any, in and to the land lying in the bed of any streets, roads or avenues, opened or proposed, in front of or adjoining the Land to the center line thereof, and in and to any strips or gores of land adjoining thereto and the air space and right to use said air space above the Land; TOGETHER WITH all right, title and interest of Mortgagor, if any, in and to all easements, rights of way, gores of land, streets, ways, alleys, passages, sewer and drainage rights, waters, water courses, water rights and powers, air rights, lateral support rights, oil, gas and mineral rights and all estates, rights, titles, interests, privileges, liberties, tenements, hereditaments and appurtenances whatsoever, in any way belonging, relating or appertaining to the Land, or which hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired by Mortgagor, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof, and all the estate, right, title, interest, property, possession, claim and demand whatsoever, at law as well as in equity, of Mortgagor in and to the same; TOGETHER WITH all right, title and interest of Mortgagor in and to any and all leases now or hereafter on or affecting the Premises, whether written or oral, and all licenses and other agreements for use or occupancy of the Premises (collectively, the "Leases"), together with all security therefor and deposits thereunder and all guaranties thereof and all monies payable thereunder; TOGETHER WITH all rents, awards, deposits (other than security deposits in respect of Leases), issues, profits, payments, income, revenues, proceeds, reimbursements and/or receipts derived from the Premises or the use, operation or ownership thereof (collectively, "Receipts"); TOGETHER WITH all right, title and interest of Mortgagor, if any, in and to all fixtures, machinery, appliances, equipment, furniture, and articles of personal property of every nature whatsoever now or hereafter located in or on, attached to, forming a part of or used or intended to be used in connection with the Land or the Improvements or the operation thereof (except that this Mortgage shall not create a lien on any items of personal property which are owned by utilities or by contractors performing work at the Premises or which are owned by tenants who are in possession pursuant to a Lease and may be removed by such tenants at or prior to the expiration or termination of such Lease), if any, in and to all renewals, replacements or proceeds thereof or articles in substitution therefor, whether or not the same are or shall be attached to the Land or the Improvements in any manner; it being mutually agreed that all of the aforesaid property placed on the Land or the Improvements shall, so far as permitted by law, be deemed to be fixtures, a part of the realty, and security for the Obligations; notwithstanding the agreement and declaration herein expressed that certain articles of property form a part of the realty covered by this Mortgage and be appropriated to its use and deemed to be realty, to the extent that such agreement and declaration may not be effective and that any of said articles may constitute goods (as said term is used in the Uniform Commercial Code of the State of New York, as the same may hereafter be amended from time to time (the "Code")) or other personal property, this instrument shall constitute a security agreement, creating a security interest in such goods and other personal property, as collateral, in Mortgagee as a secured party and Mortgagor as debtor, all in accordance with said Code or other applicable law as more particularly set forth in Section 14 hereof; TOGETHER WITH all rights in and proceeds from policies of insurance maintained with respect to (or otherwise insuring) Mortgagor or the Premises or the business conducted thereat (including, without limitation, the Receipts therefrom); TOGETHER WITH all refunds of Taxes (as hereinafter defined) which Mortgagor is presently or hereafter entitled to receive; TOGETHER WITH all right, title, and interest of Mortgagor in and to (i) all other contracts affecting the ownership, possession, operation, alterations, management and services furnished to the Premises (the "Contracts"), including all amendments, supplements, and revisions thereof, and all security and other deposits thereunder, together with all of Mortgagor's rights and remedies thereunder and the benefit of all covenants and warranties thereon, (ii) all drawings, designs, layouts, surveys, plats, plans, specifications and test results prepared by any architect, engineer, contractor or other consultant, including any amendments, supplements, and revisions thereof and the right to use and enjoy the same, (iii) all Permits (as hereinafter defined), to the extent assignable, and (iv) the right to appropriate and use any and all trade names used or to be used in connection with the Premises, provided, however, that permission is hereby given to Mortgagor, so long as no Event of Default has occurred hereunder, to continue to exercise the rights and powers under the Contracts and to enjoy the benefits thereof, subject to such further restrictions with respect thereto as may otherwise be contained herein or in the other documents now or hereafter evidencing or securing the indebtedness under the Notes (the "Debt Documents"); TOGETHER WITH all judgments, awards of damages and settlements hereafter made resulting from condemnation or the taking of the Premises or any portion thereof under the power of eminent domain, conversion, voluntary or involuntary, of the Premises, or any part thereof, into cash or liquidated claims and proceeds of any sale, option or contract to sell the Premises or any portion thereof (and any deposit thereunder); and Mortgagor shall not without Mortgagee's prior consent adjust or compromise any such matters and Mortgagor hereby authorizes Mortgagee to claim, collect and receive such proceeds, to give proper receipts and acquaintances therefor, and, after deducting expenses of collection, to apply (unless this Mortgage expressly provides otherwise with respect thereto) the net proceeds as a credit upon any portion, as selected by Mortgagee, of the Obligations, notwithstanding the fact that the same may not then be due and payable or that the Obligations are otherwise adequately secured; and TOGETHER WITH all of Mortgagor's right, title and interest in all proceeds, both cash and non-cash, of the foregoing. TO HAVE AND TO HOLD the same, unto Mortgagee, its successors and assigns, forever, for the purposes herein set forth, subject, however, to the terms and conditions herein. MORTGAGOR FURTHER COVENANTS AND AGREES AS FOLLOWS: SECTION 1.........Defined Terms. (a) As used in this Mortgage, the terms set forth below shall have the following meanings, such definitions to be applicable equally to the singular and plural forms of such terms: "Affiliate" of any specified Person shall mean any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person. "Awards" shall have the meaning ascribed thereto in Section 11 hereof. "Code" shall have the meaning ascribed thereto in the Granting Clause hereof. "Collateral" shall have the meaning ascribed thereto in Section 14 hereof. "Contemplated Conveyance" shall have the meaning ascribed thereto in Section 43 hereof. "Contracts" shall have the meaning ascribed thereto in the Granting Clause hereof. "Control" means, when used with respect to any specific Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities, beneficial interests, by contract or otherwise. The definition is to be construed to apply equally to variations of the word "Control" including "Controlled," "Controlling" or "Controlled by." "Debt Documents" shall have the meaning ascribed thereto in the Granting Clause hereof. "Events of Default" shall have the meaning ascribed thereto in Section 16 hereof. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Holders" shall have the meaning ascribed thereto in the Recitals hereto. "Improvements" shall have the meaning ascribed thereto in the Granting Clause hereof. "Independent" shall mean a Person who (i) does not have any direct financial interest or any indirect financial interest in Mortgagor, or in any Affiliate of Mortgagor or any constituent partner, shareholder, member or beneficiary of Mortgagor, and (ii) does not derive more than five percent (5%) of its revenues from any Person described in clause (i) above, and (iii) is not connected with Mortgagor or any Affiliate of Mortgagor as an officer, employee, promoter, underwriter, trustee, partner, director, member or person performing similar functions. Whenever it is herein provided that any Independent Person's opinion, letter or certificate shall be provided, such opinion, letter or certificate shall state that the Person executing the same has read this definition and is Independent within the meaning hereof. "Insurance Policies" shall have the meaning ascribed thereto in Section 7 hereof. "Land" shall have the meaning ascribed thereto in the Recitals hereto. "Leases" shall have the meaning ascribed thereto in the Granting Clause hereof. "Legal Requirements" means, with respect to any Person or property, the common law and all federal, state, local and foreign laws, rules and regulations, orders, ordinances, judgments, decrees and other legal requirements or determinations of any Governmental Authority or arbitrator, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Lien" shall mean a mortgage, pledge, lien, security interest (including, without limitation, a purchase money security interest), encumbrance, charge, attachment, levy, distraint or other judicial process. "Maturity Date" shall mean the maturity date set forth in the Notes. "Mortgage" shall have the meaning ascribed thereto in the introductory paragraph hereto. "Mortgagee" shall have the meaning ascribed thereto in the introductory paragraph hereto. "Mortgagor" shall have the meaning ascribed thereto in the Recitals hereof. "Notes" shall have the meaning ascribed thereto in the Recitals hereto. "Notices" shall have the meaning ascribed thereto in Section 30 hereof. "Obligations" shall mean GP's obligation to pay the principal, interest and any other sums payable in respect of the Notes. "Permits" shall mean all permits, licenses, consents, certificates of occupancy and other authorizations with regard to lawful occupancy and operation of the Improvements. "Permitted Encumbrances" shall mean the encumbrances listed on Schedule B of the Title Policy and any encumbrances disclosed in Section 2.15 of the Purchase Agreement. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "Power of Sale" shall have the meaning ascribed thereto in Section 17 hereof. "Premises" shall have the meaning ascribed thereto in the Granting Clause hereof. "Purchase Agreement" shall have the meaning ascribed thereto in the Recitals hereto. "Purchasers" shall have the meaning ascribed thereto in the Recitals hereto. "Receipts" shall have the meaning ascribed thereto in the Granting Clause hereof. "Restoring" shall have the meaning ascribed thereto in Section 10 hereof. "Secured Party" shall have the meaning ascribed thereto in the Code. "Taxes" shall have the meaning ascribed thereto in Section 6 hereof. "Title Insurer" shall mean [TITLE INSURER]. "Title Policy" shall mean that certain title insurance policy, dated the date hereof, issued by the Title Insurer to Mortgagee under Policy No. [INSERT TITLE POLICY NUMBER] in the amount of the Obligations. "Transfer" shall have the meaning ascribed thereto in Section 15 hereof. All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Purchase Agreement. SECTION 2. Payment of and Performance of Obligations. Mortgagor shall (a) pay the Obligations at the times and in the manner provided in the Notes and (b) duly and punctually perform and observe, at the times and in the manner provided therein, all of the terms, provisions, conditions, covenants and agreements on Mortgagor's part to be performed or observed as provided in the Notes and this Mortgage. All sums payable by Mortgagor hereunder shall be paid without demand, counterclaim, offset, deduction or defense. As of the date hereof, Mortgagor waives all rights now or hereafter conferred by statute or otherwise to any such demand, setoff or deduction. SECTION 3. Representation of Title; Permitted Encumbrances. Mortgagor represents, warrants and covenants that (a) at the time of the delivery of this Mortgage, Mortgagor is seized of an indefeasible estate in fee simple in the portion of the Premises which constitutes real property and Mortgagor owns good title to the portion of the Premises which constitutes personal property, in each case, subject only to the Permitted Encumbrances; (b) Mortgagor has good right, full power and lawful authority to convey and mortgage to Mortgagee and grant to Mortgagee a security interest in the same, in the manner and form aforesaid; (c) except for the Permitted Encumbrances and other Liens permitted pursuant to this Mortgage, this Mortgage is, and will remain a valid and enforceable and, upon recordation, perfected first mortgage lien on the Premises; and (d) Mortgagor shall and will warrant and forever defend the title to the Premises unto Mortgagee against the claims of all Persons whomsoever. SECTION 4. Operating the Premises; Status of Premises. (a) Mortgagor shall pay all operating costs of the Premises. (b) Without the prior written consent of Mortgagee and except as permitted pursuant to the Purchase Agreement, Mortgagor shall not cause, suffer or permit any unlawful use of, or nuisance to exist upon, the Premises. (c) Mortgagor shall cause the Premises to be maintained in a good and safe condition and repair. The Improvements and the personal property at the Premises shall not be removed, demolished or materially altered (except for normal replacement of the personal property) without the consent of Mortgagee unless the same does not have a material adverse effect on the value of the Premises or the security of this Mortgage. Without the prior written consent of Mortgagee, Borrower shall not initiate, join in or consent to any change in any private restrictive covenant, zoning law or other public or private restriction, limiting or defining the uses which may be made of the Property or any part thereof, if such action or consent will have a material adverse effect on the value of the Premises or the security of this Mortgage. (d) Mortgagor shall not commit or suffer any waste of the Premises or make any change in the use of the Premises which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Premises, or take any action that might invalidate or give cause for cancellation of any of the Insurance Policies (as defined below). Mortgagor will not, without the prior written consent of Mortgagee, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof. (e) [Intentionally Reserved.] (f) The present and contemplated use and occupancy of the Premises is in full compliance in all material respects with all applicable zoning ordinances, building codes, land use laws and other similar laws. SECTION 5. Liens. (a) Mortgagor shall not create or suffer or permit any Lien to attach to or be filed against all or any portion of the Premises. For the purposes of this Mortgage, the term "Lien" shall mean a mortgage, pledge, lien, security interest (including, without limitation, a purchase money security interest), encumbrance, charge, attachment, levy, distraint or other judicial process. (b) Without limiting the generality of Section 5(a) hereof, Mortgagor shall not suffer or permit any mechanic's lien to be filed or otherwise asserted against the Premises, and will discharge the same, or cause the same to be discharged, by payment, bonding or otherwise within thirty (30) days after receiving notice of the filing of such lien. SECTION 6. Taxes. (a) Payment. Subject to Section 6(b) hereof, Mortgagor shall pay or cause to be paid promptly when due and before any penalty attaches, all general and special taxes, assessments, water charges, sewer charges, excises, levies, fees (including, without limitation, license, permit and inspection fees) and other fees, taxes, charges and assessments of every kind and nature whatsoever, general, special, ordinary or extraordinary, levied or assessed against, or which may become a Lien upon, the Premises or any part thereof or any interest therein or any receipts or any obligation or instrument secured hereby or which may arise in respect of the use, possession or operation of the Premises and whether or not assessed against Mortgagor, and all interest and penalties which may be payable with respect thereto, except income taxes and franchise taxes (collectively, "Taxes"). Taxes may be paid in installments if permitted by Legal Requirements. Subject to Section 6(b) hereof, Mortgagor shall furnish to Mortgagee receipts therefor as soon as possible, but in any event within thirty (30) days after the date the same are due; and shall discharge any claim or lien relating to Taxes upon the Premises, other than matters expressly permitted by the terms hereof. (b) Contest. Mortgagor may, in good faith and with due diligence, contest or cause to be contested by appropriate legal proceeding, the validity or amount of any such Taxes as provided in Section 6(a) hereof, provided that (i) no Event of Default has occurred and is continuing (unless the Taxes have been paid under protest or Mortgagor has deposited the security required under clause (v) below), (ii) such proceeding shall suspend the collection of the Taxes from Mortgagor and from the Premises or Mortgagor shall have paid all of the Taxes under protest, (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument encumbering the Premises to which Mortgagor is subject and shall not constitute a default thereunder, (iv) neither the Premises nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, cancelled or lost, and (v) Mortgagor shall have deposited with Mortgagee adequate reserves for the payment of the Taxes, together with all interest and penalties thereon, unless Mortgagor has paid all of the Taxes under protest, or, if such Taxes are not deposited with Mortgagor or paid under protest, Mortgagor shall have furnished the security as may be required in the proceeding to insure the payment of any contested Taxes, together with all interest and penalties thereon. SECTION 7. Insurance Coverage. Mortgagor will insure Mortgagor and the Premises against such perils and hazards listed in, and will maintain, the following described policies of insurance without cost to Mortgagee (the "Insurance Policies"). (a) Property insurance against loss and damage by all risks of physical loss or damage to the Improvements; and (b) Commercial general liability insurance, including death, bodily injury and broad form property damage coverage with a combined single limit in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for any policy year. SECTION 8. Insurance Policies. (a) All Insurance Policies shall be issued by companies licensed or authorized to issue insurance in the State in which the Land is located and shall name Mortgagee as an additional insured. All Insurance Policies shall provide that the coverage shall not be modified without (30) days' advance written notice to Mortgagee. Mortgagor may obtain any insurance required by Section 7 hereof through blanket policies, provided, however, that such blanket policies shall separately set forth the amount of insurance in force with respect to the Premises (which shall not be reduced by reason of events occurring on property other than the Premises) and shall afford all the protections to Mortgagee as are required under Section 7 hereof and this Section 8. Mortgagor will deliver insurance certificates executed by the insurer or its authorized agent evidencing all Insurance Policies to Mortgagee and, in case of Insurance Policies about to expire, Mortgagor will deliver insurance certificates evidencing all Insurance Policies prior to the date of expiration executed by the insurer or its authorized agent evidencing that the insurance required hereunder is being maintained under such policy. Mortgagor shall furnish Mortgagee receipts for the payment of premiums on such insurance policies as and when due or other evidence of such payment reasonably satisfactory to Mortgagee. The Insurance Policy described in Section 7(a) above shall name Mortgagee, as agent for the Holders, as an additional named insured and the Insurance Policy described in Section 7(a) above shall provide that all proceeds be payable to Mortgagee, as agent for the Holders. The Insurance Policy referred to in Section 7(a) above shall also contain: (i) a standard "non-contributory mortgagee" endorsement or its equivalent relating, inter alia, to recovery by Mortgagee notwithstanding the negligent or willful acts or omission of Mortgagee; (ii) to the extent available at commercially reasonable rates, a waiver of subrogation endorsement as to Mortgagee; and (iii) an endorsement providing for a deductible per loss of an amount not more than that which is customarily maintained by prudent owners of similar properties in the general vicinity of the Premises, but in no event in excess of $10,000. All Insurance Policies shall contain (i) a provision that such Insurance Policies shall not be cancelled or terminated, without at least thirty (30) days' prior written notice to Mortgagee in each instance; and (ii) if premiums are paid in installments, include effective waivers by the insurer of all claims for Insurance Premiums (defined below) against any loss payees, additional insureds and named insureds (other than Mortgagor). Certificates of insurance with respect to all renewal and replacement Insurance Policies shall be delivered to Mortgagee not less than twenty (20) days prior to the expiration date of any of the Policies required to be maintained hereunder, which certificates shall bear notations evidencing payment of applicable premiums (the "Insurance Premiums"). Originals or certificates of such replacement Insurance Policies shall be delivered to Mortgagee promptly after Mortgagor's receipt thereof but in any case within thirty (45) days after the effective date thereof. If Mortgagor fails to maintain and deliver to Mortgagee the certificates of insurance required by this Mortgage, upon ten (10) days' prior notice to Mortgagor, Mortgagee may procure such insurance at Mortgagor's sole cost and expense. (b) Mortgagor shall comply with all insurance requirements described in Section 7 and this Section 8 and shall not bring or keep or permit to be brought or kept any article upon any of the Premises or cause or permit any condition to exist thereon which would be prohibited by an insurance requirement, or would invalidate the insurance coverage required hereunder to be maintained by Mortgagor on or with respect to any part of the Premises pursuant to this Section 7 of this Mortgage or this Section 8. SECTION 9. Compliance with Law. (a) Mortgagor will, within the time frames provided by such Legal Requirements, promptly comply with all material Legal Requirements applicable to the Premises, or the use and operation thereof. (b) Mortgagor will maintain all material Permits in full force and effect and comply with all material conditions and requirements of all Permits. (c) Mortgagor will have the right to contest the validity or application of any Legal Requirements with respect to the Premises by appropriate legal proceedings, so long as: (i) such legal proceedings shall be prosecuted in good faith and with due diligence by Mortgagor, (ii) such proceeding shall not subject Mortgagee or Mortgagor to the risk of any criminal or material civil liability and (iii) neither the Premises nor any part thereof shall be affected in any material adverse way as a result of such proceeding and (iv) Mortgagor will, upon a final determination of such contest, take all steps necessary to comply with any Legal Requirements arising therefrom. SECTION 10. Proceeds of Insurance. Mortgagor will give Mortgagee prompt notice of any material loss or damage to the Premises, and: (a) In case of loss or damage covered by any of the Insurance Polices, (i) Mortgagee (or, after entry of decree of foreclosure, the purchaser at the foreclosure sale or decree creditor, as the case may be) is hereby authorized, if an Event of Default has occurred, to settle and adjust any claim under such Insurance Policies without the consent of Mortgagor; and (ii) if no Event of Default has occurred, Mortgagor shall have the sole right to settle and adjust such claim; provided, however, that in either case Mortgagee shall, and is hereby authorized to, collect and receive any such insurance proceeds up to the amount of the Obligations; and the reasonable expenses incurred by Mortgagee in the adjustment and collection of such insurance proceeds shall be additional Obligations, and shall be reimbursed to Mortgagee upon demand or, at Mortgagee's option, in the event and to the extent sufficient proceeds are available, shall be deducted by Mortgagee from said insurance proceeds prior to any other application thereof. Each insurance company which has issued an Insurance Policy is hereby authorized and directed to make payment up to the amount of the Obligations for all losses covered by such Insurance Policy to Mortgagee alone, and not to Mortgagee and Mortgagor jointly. Mortgagor agrees to execute all documents and make all deliveries required in order to permit adjustment and payment of insurance proceeds as provided above. (b) The proceeds of Insurance Policies consequent upon any casualty shall be either (i) if an Event of Default shall be continuing hereunder, applied by Mortgagee to reduce the Obligations, in such order or manner as Mortgagee may elect; or (ii) paid to Mortgagor and, to the extent required by the provisions of Section 10(c) hereof, Mortgagor shall apply such proceeds to the cost of restoring, repairing, replacing or rebuilding (collectively, "Restoring") the loss or damage caused by the casualty. Any application of proceeds pursuant to this Section 10(b) to pay principal outstanding under the Notes shall not subject Mortgagor to the obligation to pay any prepayment premium. (c) To the extent that insurance proceeds are made available to Mortgagor and are sufficient for such purposes, Mortgagor hereby covenants to diligently proceed to restore, repair, replace or rebuild the Improvements to the extent required to comply with all applicable Legal Requirements. (d) Any portion of the insurance proceeds remaining after payment as provided above shall be paid to Mortgagor or as ordered by a court of competent jurisdiction. (e) Any insurance proceeds at any time held by Mortgagee shall be held in a segregated interest bearing account for the benefit of Mortgagor. (f) In the event of foreclosure of the Mortgage or other transfer of title to the Premises in extinguishment of the Obligations, all right, title and interest of Mortgagor in and to any Insurance Policies, to the extent applicable to the Premises (including, without limitation, the right to a refund of insurance premiums and all rights to the proceeds thereof), then in force shall pass to the purchaser of the Premises in foreclosure or the grantee of a deed in lieu of foreclosure, and Mortgagor hereby appoints Mortgagee its attorney-in-fact, in Mortgagor's name, to assign and transfer all such policies and proceeds to such purchaser or grantee, such appointment coupled with an interest with full power of substitution. SECTION 11. Condemnation and Eminent Domain. (a) Any and all awards up to the amount of the Obligations (the "Awards") heretofore or hereafter made or to be made by any governmental or other lawful authority for the taking by condemnation or eminent domain, of all or any part of the Premises (including any award from the United States government at any time after the allowance of a claim therefor, the ascertainment of the amount thereof, and the issuance of a warrant for payment thereof), or the proceeds from a transfer in lieu of such condemnation or eminent domain are hereby assigned by Mortgagor to Mortgagee, which Awards Mortgagee is hereby authorized to collect and receive from the condemnation authorities, and Mortgagee is hereby authorized to give appropriate receipts and acquittances therefor, and Mortgagee is hereby appointed as Mortgagor's attorney-in-fact, coupled with an interest, to collect such Awards. Mortgagor shall give Mortgagee prompt notice of the actual or threatened commencement of any condemnation or eminent domain proceedings affecting all or any part of the Premises and shall deliver to Mortgagee copies of any and all papers served in connection with any such proceedings. Mortgagor further agrees to make, execute, and deliver to Mortgagee, upon request, any and all further assignments and other instruments reasonably necessary for the purpose of validly and sufficiently assigning all Awards and other compensation hereafter made to Mortgagor for any taking, either permanent or temporary, under any such proceeding and all proceeds paid from a sale in lieu of such taking, and to facilitate Mortgagee's collection and receipt of the same. If notwithstanding the foregoing provisions any Award or other compensation described above is nonetheless paid to Mortgagor, Mortgagor shall hold such monies in trust for the benefit of Mortgagee and shall immediately pay the same to Mortgagee. Neither Mortgagor nor Mortgagee may settle or compromise any claim for or right to receive any Award (or related compensation) or its rights under any proceeding with respect thereto without the prior written consent of the other. Notwithstanding any taking (including, without limitation, any transfer made in lieu of such taking), the Obligations shall not be reduced by reason of such taking (or transfer in lieu thereof) unless and until any Award (or related compensation) shall have been actually received and applied by Mortgagee to such Obligations and then only to such extent. Mortgagee shall not be limited to any interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate set forth in the Notes. (b) In the event of any partial taking of the Premises or any interest in the Premises (or transfer in lieu thereof) which leaves the Premises (after taking into account any Restoring to be performed) as an architectural and economic unit of the same character and not materially less valuable than the same was prior to the taking, provided no Event of Default shall have occurred, then the Award and other compensation paid in connection therewith shall be disbursed to Mortgagor and Mortgagor shall Restore the Premises to the extent required by Section 10(c) hereof. In the event of any taking (or transfer in lieu thereof), other than a taking (or transfer in lieu thereof) under which the Award (or other compensation) is required to be disbursed to Mortgagor as provided in the immediately preceding sentence, then any Award (and related compensation) shall be applied against the Obligations in such order or manner as Mortgagee shall elect. Any application of any Award (or other compensation) pursuant to this Section 11 to pay principal outstanding under the Notes shall not subject Mortgagor to the obligation to pay any prepayment premium. SECTION 12. Assignment of Leases and Rents Mortgagor hereby absolutely and presently sells, assigns and transfers unto Mortgagee the Leases and all of the Receipts. Without limiting the foregoing, prior to the occurrence of an Event of Default, Mortgagee hereby grants to Mortgagor a license to collect the Receipts and to act under the Leases, subject, however, to the further conditions and limitations with respect thereto contained herein. Upon the occurrence of an Event of Default, and whether or not a receiver has been sought or appointed and whether or not Mortgagee has taken possession of the Premises, the aforesaid license shall automatically terminate, and Mortgagee may collect all Receipts, and apply the Receipts so collected in their entirety to, at Mortgagee's option, Taxes, insurance premiums, costs of repair, alteration and/or Restoration of the Premises, utility charges and other costs of operating, maintaining or leasing the Premises and/or to the Obligations (in such order and manner as Mortgagee may elect), after deducting Mortgagee's reasonable costs and expenses of collection of such Receipts (including, without limitation, reasonable attorneys' fees). Nothing herein contained shall be construed as constituting Mortgagee a "mortgagee-in-possession" in the absence of the taking of actual possession of the Premises by Mortgagee. Possession by a court-appointed receiver will not be considered possession by Mortgagee. From time to time, following Mortgagee's written request therefor, Mortgagor will furnish Mortgagee with executed copies of each of the Leases. SECTION 13. Leases. Unless consented to by Mortgagee, which consent shall not be unreasonably withheld, Mortgagor shall not enter into, modify, amend, terminate, or consent to the cancellation or surrender of, any Lease for any portion of the Premises nor collect any rent or other payment under any Lease for any portion of the Premises more than one month in advance of the due date thereof. In addition to any other right or remedy contained herein or in any other Debt Document, Mortgagee shall have all of the rights against lessees of the Premises or any part thereof as are set forth in Section 291-f of the Real Property Law of New York. SECTION 14. Security Agreement Mortgagee and Mortgagor agree that this Mortgage shall constitute a Security Agreement within the meaning of the Code, as the same may be amended from time to time, with respect to (i) any and all sums at any time on deposit for the benefit of Mortgagee or held by Mortgagee (whether deposited by or on behalf of Mortgagor or anyone else) pursuant to any of the provisions of this Mortgage and (ii) any personal property included in the granting clauses of this Mortgage and all replacements, substitutions for, additions to, and proceeds of such personal property (collectively, the "Collateral"), and that a security interest in and to the Collateral is hereby granted to Mortgagee, and the Collateral and all of Mortgagor's right, title and interest therein are hereby assigned to Mortgagee, all to secure payment of the Obligations. All of the terms, provisions, conditions and agreements contained in this Mortgage pertain and apply to the Collateral as fully and to the same extent as to any other property comprising the Premises; and the following provisions of this Section 14 shall not limit the applicability of any other provision of this Mortgage but shall be in addition thereto: (a) The Collateral is to be used by Mortgagor (being the Debtor as that term is defined in the Code) solely for business purposes. (b) The Collateral will be kept at the Premises, and, except for the removal of any portion which is simultaneously replaced with equivalent materials or which is worn out, obsolete or no longer useful in connection with the operation of the Premises or as otherwise permitted by the Purchase Agreement or any other Debt Document, will not be removed therefrom without the consent of Mortgagee (being the Secured Party). The Collateral may be affixed to the Premises but will not be affixed to any other real estate. (c) Except for financing statements representing interests permitted under any other Debt Document, no financing statement (other than financing statements showing Mortgagee as the sole secured party) covering any of the Collateral or any proceeds thereof is on file in any public office; and Mortgagor will, at its own cost and expense, execute and deliver to Mortgagee, upon demand, such financing statements and continuation statements with respect thereto reasonably required by Mortgagee and will do all such acts and things as Mortgagee may at any time or from time to time reasonably request or as may be necessary or appropriate to establish and maintain a first priority perfected security interest in the Collateral as security for the Obligations; and Mortgagor will pay the cost of filing or recording such financing statements, continuation statements or other documents, and this instrument, in all public offices wherever filing or recording is reasonably deemed by Mortgagee to be necessary. (d) Upon an Event of Default hereunder, Mortgagee shall have, in addition to any other remedies set forth herein or available at law or in equity, the remedies of a secured party under the Code, including, without limitation, the right to take immediate and exclusive possession of the Collateral, or any part thereof, and for that purpose may, so far as Mortgagor can give authority therefor, with or without judicial process, enter (if this can be done without breach of the peace), upon any place which the Collateral or any part thereof may be situated and remove the same therefrom (provided, however, that if the Collateral is affixed to real estate, such removal shall be subject to the conditions stated in the Code); and Mortgagee shall be entitled to hold, maintain, preserve and prepare the Collateral for sale, until disposed of, or may propose to retain the Collateral subject to Mortgagor's right of redemption in satisfaction of Mortgagor's obligations, as provided in the Code. Upon an Event of Default hereunder, Mortgagee may render the Collateral unusable without removal and may dispose of the Collateral on the Premises. Upon an Event of Default hereunder, Mortgagee may require Mortgagor to assemble the Collateral and make it available to Mortgagee for its possession at a place to be designated by Mortgagee. Mortgagee will give Mortgagor notice of the time and place of any public sale of the Collateral or of the time after which any private sale or any other intended disposition thereof is to be made. The requirements of notice shall be met if such notice is mailed, by United States Mail or equivalent, postage prepaid, to the address of Mortgagor hereinafter set forth at least ten (10) days before the time of the sale or disposition. Mortgagee may buy at any public sale and, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, Mortgagee may buy at private sale. Any such sale may be held as part of and in conjunction with any foreclosure sale of the Premises, the Premises including all or any portion of the Collateral to be sold as one lot if Mortgagee so elects. The net proceeds realized upon any such disposition, after deduction for the actual reasonable expenses of retaking, holding, preparing for sale, selling or the like and the reasonable attorneys' fees incurred by Mortgagee, shall be applied against the Obligations, in such order and manner as Mortgagee shall elect. (e) The terms and provisions contained in this Section 14 shall, unless the context otherwise requires, have the meanings and be construed as provided in the Code. (f) This Mortgage is intended to be a financing statement within the purview of Section 9-102 of the Code with respect to the Collateral and the goods described herein, which goods are or may become fixtures relating to the Premises. The addresses of Mortgagor (Debtor) and Mortgagee (Secured Party) are as first set forth above. (g) The filing of any financing statement with respect to the Collateral (or any portion thereof) and the provisions of this Section 14 (and similar provisions elsewhere in this Mortgage or the other Debt Documents relating to the Collateral) shall never be construed as in anywise derogating from or impairing this declaration and hereby stated intention of the parties hereto, that everything used in connection with the production of income from the Premises and/or adapted for use therein and/or which is described or reflected in this Mortgage is, and at all times and for all purposes and in all proceedings, both legal and equitable, shall be regarded as part of the real estate irrespective of whether any such item is physically attached to the Improvements. However, the filing of any financing statements and the provisions of this Section 14 are intended to cover any Collateral to the extent that the above-stated intention and declaration may not be fully effective or to the extent Mortgagee otherwise determines that it is in its best interest to proceed against all or any portion of the Collateral as personal property rather than real estate. SECTION 15. Restrictions on Transfer; Maintenance of Existence. (a) Except for the Contemplated Conveyance as described in Section 43 hereof, Mortgagor shall not, without the prior written consent of Mortgagee, create, effect, consent to, suffer to exist or permit any conveyance, sale, assignment, transfer, lien, pledge, mortgage, security interest or other encumbrance or alienation (each a "Transfer") of the Premises or any portion thereof or any interest therein. (b) Mortgagor will at all times preserve its existence and will obtain and maintain in full force and effect its qualification to do business in the State in which the Land is located. SECTION 16. Events of Default. If one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever, and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any Governmental Authority or otherwise: (a) An Event of Default shall occur under the Notes; or (b) Failure by Mortgagor to duly keep, perform and observe any material covenant in this Mortgage (unless same constitutes an Event of Default under any other clause of this Section 16, in which case, the grace or cure period, if any, set forth in such other clause shall govern) within thirty (30) days after Mortgagee gives Mortgagor written notice of such failure; provided, however, that in the event such failure is not susceptible of cure within such thirty (30) day period and Mortgagor shall have diligently commenced to cure such failure, in good faith, within such thirty (30) day period and thereafter diligently and expeditiously proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall require Mortgagor in the exercise of due diligence to cure such failure, it being agreed that, unless otherwise agreed in writing by Mortgagee in its sole discretion, (i) in the case of any such failure under Section 42(a) or Section 42(b), no such extension shall be for a period in excess of one hundred twenty (120) days, and (ii) in any other case, no such extension shall be for a period in excess of sixty (60) days; or (c) If any material representation or warranty made by Mortgagor in this Agreement shall be untrue, incorrect or misleading in any material respect when made; or (d) The entry by a court of (i) a decree or order for relief in respect of Mortgagor in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law; or (ii) a decree or order adjudging Mortgagor a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of Mortgagor under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of Mortgagor or of any substantial part of the property of Mortgagor, or ordering the winding up or liquidation of the affairs of Mortgagor, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of sixty (60) days; or (e) (i) The commencement by Mortgagor of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or of any other case or proceeding, to be adjudicated a bankrupt or insolvent; (ii) the consent by Mortgagor (A) to the entry of a decree or order for relief in respect of Mortgagor in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or (B) to the commencement of any bankruptcy or insolvency case or proceeding against Mortgagor; (iii) the filing by Mortgagor of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law; (iv) the consent by Mortgagor to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of Mortgagor, or of any substantial part of any property of Mortgagor; (v) the making by Mortgagor of an assignment for the benefit of creditors; or (vi) the admission by Mortgagor in writing of its inability to pay its debts generally as they become due; then, Mortgagee is hereby authorized and empowered, at its option and without affecting the lien hereby created or the priority of said lien or any other right of Mortgagee hereunder, (i) to declare, without further notice, all Obligations to be immediately due and payable with interest thereon, whether or not such Event of Default shall be thereafter remedied by Mortgagor, and (ii) to exercise any right, power or remedy provided by this Mortgage, the Notes, any of the other Debt Documents or by law or in equity. SECTION 17. Foreclosure. (a) When an Event of Default shall have occurred and is continuing or the Obligations shall become due, Mortgagee shall have the right to foreclose the lien hereof in accordance with the laws of the State in which the Land is located; provided that Mortgagee shall first give written notice to Mortgagor of its intention to foreclose the lien hereof. Notwithstanding the foregoing, Mortgagee hereby agrees that (i) it shall not sell the Premises pursuant to a foreclosure (including foreclosure in accordance with the Power of Sale, as such term is defined below) under this Section 17 until at least sixty (60) days after the date of the notice delivered by Mortgagee in accordance with the immediately preceding sentence and (ii) until consummation of the foreclosure sale, either GP or MXL shall have the right to tender full payment of the outstanding principal amount of the Notes, together with all interest and other sums due thereunder, and, upon receipt by the Holders of such payment, (i) the Holders shall surrender and endorse (without recourse) the original Notes, as directed by the party making such payment, and (ii) Mortgagee shall deliver to Mortgagor a release of this Mortgage in recordable form. In the event that neither GP nor MXL shall have tendered full payment of the outstanding principal amount of the Notes, together with all interest and other sums due thereunder within such sixty (60) day period, then Mortgagee may thereafter immediately proceed to sell the Premises in accordance with the terms of this Mortgage. Mortgagee's agreement to allow such sixty (60) day repayment period shall in no way limit or delay Mortgagee's ability to commence and pursue any foreclosure action. In any suit to foreclose the lien hereof, there shall be allowed and included as additional Obligations in the decree of sale, all reasonable expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee, including reasonable attorneys' fees, as reasonably necessary to prosecute such suit. (b) Where foreclosure sale is permitted as described above, Mortgagee is hereby authorized and empowered to: (i) to the extent permitted by and in accordance with the applicable provisions of law, as the same may be amended, with respect to real property, sell, assign, transfer and deliver the whole or, from time to time, any part of the Premises, or any interest in any part thereof, at any private sale or by public auction, with or without demand, advertisement or notice of the time or place of sale or adjournment thereof or otherwise, for cash, on credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as Mortgagee in its sole and absolute discretion may determine pursuant to a power of sale in accordance with Section 1401 et seq. of the Real Property Actions and Proceedings Law of New York or otherwise (such empowerment and procedure being hereinafter referred to as the "Power of Sale"), or (ii) foreclose the lien hereof for such indebtedness, or such part thereof, by judicial action. With respect to the Power of Sale, Mortgagee may postpone sale of all or any portion of the Premises by announcement at the time and place of sale, and, from time to time thereafter, may further postpone such sale by announcement at the time and place fixed at the preceding postponement. Mortgagee shall deliver to the purchaser its deed or other appropriate instrument transferring title to the Premises, or the interest therein so sold, but without any covenant or warranty, express or implied. The recitals in such instrument of any matter or act shall be conclusive proof of the truthfulness thereof. In case of any sale under this Mortgage, by virtue of judicial proceedings, Power of Sale, or otherwise, the Premises may be sold in one parcel and as an entirety or in such parcels, manner or order as Mortgagee in its sole discretion may elect. (c) If a foreclosure sale is made as to part, but not all of the Obligations, such sale may be subject to the continuing lien of this Mortgage for the unmatured part of the Obligations. Any sale pursuant to a partial foreclosure shall not in any manner affect the unmatured part of the Obligations (and Mortgagee's rights to conduct subsequent foreclosure sales with respect thereto), but, as to such unmatured part of the Obligations, the lien hereof shall remain in full force and effect as if no foreclosure sale had been made under the provisions of this Section 17. Notwithstanding the filing of any action for partial foreclosure or entry of a decree of sale therein, Mortgagee may elect at any time prior to a foreclosure sale pursuant to such decree, to discontinue such partial foreclosure and to accelerate the entire Obligations by reason of the Events of Default upon which such partial foreclosure was predicated or by reason of any other Event of Default, and proceed with full foreclosure proceedings. (d) In any action to foreclose the lien or liens of this Mortgage, including a partial foreclosure, no defense (other than a defense which denies the existence or sufficiency of the material facts upon which the action is grounded), counterclaim (other than a compulsory counterclaim or a counterclaim alleging the repayment in full of the Obligations) or setoff shall be available to Mortgagor. If any defense or counterclaim, other than one permitted by the preceding sentence, is raised in such foreclosure action, such defense or counterclaim shall be dismissed; provided, however, if such defense or counterclaim is based on a claim which could be tried in an action for money damages, such claim may be brought in a separate action which shall not thereafter be consolidated with the foreclosure action. The bringing of any such separate action for money damages shall not be deemed to afford any grounds for staying the foreclosure action. (e) Mortgagee, or any nominee of Mortgagee, may be a purchaser of the Premises or a portion thereof or any interest therein at any sale thereof, and may apply to the purchase price all or any part of the Obligations in lieu of payment in cash of the amount of such Obligations applied. Any such purchaser shall, upon any such purchase, acquire good title to the properties so purchased, free of the lien of this Mortgage and free of all rights of redemption in Mortgagor. SECTION 18. Right of Possession. When an Event of Default has occurred and is continuing or when the Obligations shall otherwise become due, Mortgagor shall, forthwith upon demand of Mortgagee, surrender to Mortgagee, and Mortgagee shall be entitled to take actual possession of, the Premises or any part thereof, personally, by its agent or attorneys or have a receiver placed in possession pursuant to court order, and Mortgagee, in its discretion, personally, by its agents or attorneys or the receiver, if any, may enter upon and take and maintain possession of all or any part of the Premises, together with all documents, books, records, papers, and accounts of Mortgagor, and may exclude Mortgagor, and any agents and servants thereof wholly therefrom and may, on behalf of Mortgagor, or in its own name as Mortgagee and under the powers herein granted take any and all actions in connection with the operation, maintenance, management and use of the Premises including, without limitation: (a) hold, operate, manage, and control all or any part of the Premises and conduct the business thereof, if any, with full power to use such measures, legal or equitable, as in its discretion may be deemed proper or necessary to enforce the payment or security of the Receipts, including without limitation actions for recovery of rent, actions in forcible detainer, and actions in distress for rent, all without notice to Mortgagor; (b) cancel or terminate any Lease or sublease of all or any part of the Premises for any cause or on any ground that would entitle Mortgagor to cancel the same; (c) elect to disaffirm any Lease or sublease of all or any part of the Premises made subsequent to this Mortgage in violation of the terms of the Purchase Agreement; (d) extend or modify any then existing Leases and make new Leases of all or any part of the Premises, which extensions, modifications, and new Leases may provide for terms to expire, or for options to lessees to extend or renew terms to expire, beyond the Maturity Date, it being understood and agreed that any such Leases, and the options or other such provisions to be contained therein, shall be binding upon Mortgagor, all Persons whose interests in the Premises are subject to the lien hereof, and the purchaser or purchasers at any foreclosure sale, notwithstanding any redemption, reinstatement, discharge of the Obligations, satisfaction of any foreclosure decree, or issuance of any certificate of sale or deed to any such purchaser; (e) make all necessary or proper repairs, decoration, renewals, replacements, alterations, additions, betterments, and improvements in 15 connection with the Premises as may seem judicious to Mortgagee, insure and reinsure the Premises and all risks incidental to Mortgagee's possession, operation, and management thereof, and receive all Receipts; (f) enter into any management, leasing or brokerage agreements covering the Premises in accordance with the terms of the Purchase Agreement and the other Debt Documents; and/or (g) after allowing a fee for the collection thereof (including lease commissions and other compensation and expenses of seeking and procuring tenants and entering into Leases) and for the management of the Premises, apply the net income to the payment of Taxes, insurance premiums, costs described in clause (e) above, costs of operating and maintaining the Premises and other charges applicable to the Premises, or in reduction of the Obligations in such order and manner as Mortgagee shall select. Nothing herein contained shall be construed as constituting Mortgagee a mortgagee in possession in the absence of the actual taking of possession of the Premises. Mortgagor shall and does hereby agree to indemnify and hold harmless Mortgagee of and from any and all liability, actual loss or damage which it may or might incur by reason of its performance of any action authorized under this Section 18 (other than liability, loss or damage caused by the gross negligence or willful misconduct of Mortgagee or its employees, officers, representatives, contractors or agents, provided that the same are acting in their capacity as such) and of and from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements of Mortgagor. Should Mortgagee incur any such liability, actual loss or damage by its performance or nonperformance of actions authorized by this Section 18, or in the defense of any such claims or demands, the amount thereof, including reasonable costs, expenses and attorneys' fees shall be Obligations and Mortgagor shall reimburse Mortgagee therefor immediately upon demand. SECTION 19. Receiver. Mortgagee, in any action to foreclose this Mortgage or upon the occurrence of any Event of Default hereunder, shall be at liberty, without notice, to apply for the appointment of a receiver of the Premises, and shall be entitled to the appointment of such receiver as a matter of right, without regard to the value of the Premises as security for the Obligations, or the solvency or insolvency of any person then liable for the payment of the Obligations. SECTION 20. Proceeds of Foreclosure Sale. The proceeds of any foreclosure sale of the Premises shall be distributed and applied in the following order of priority: (a) First, to payment of all costs and expenses incident to the foreclosure proceedings, including, without limitation, all such items as are mentioned in Section 18(a) hereof; (b) Second, to all sums expended under the terms hereof, not then repaid, with accrued interest at the rate provided herein; (c) Third, to all other sums which under the terms hereof constitute Obligations other than the principal and interest payable under the Notes in such order as Mortgagee shall elect, with interest thereon as herein provided; (d) Fourth, to all principal and interest payable under the Notes in such order as Mortgagee shall elect; and (e) Fifth, the remainder, if any, to the Person or Persons legally entitled thereto. SECTION 21. Waiver of Right of Redemption and Other Rights. To the full extent permitted by law, Mortgagor hereby covenants and agrees that it will not at any time insist upon or plead, or in any manner whatsoever claim or take any advantage of, any stay, exemption or extension law or any so-called "moratorium law" now or at any time hereafter in force, nor claim, take or insist upon any benefit or advantage of or from any law now or hereafter in force providing for the valuation or appraisement of the Premises, or any part thereof, prior to any sale or sales thereof to be made pursuant to any provisions herein contained, or to any decree, judgment or order of any court of competent jurisdiction; or claim or exercise any rights under any statute now or hereafter in force to redeem the property, or any part thereof, or relating to the marshaling thereof, upon foreclosure sale or other enforcement hereof. To the full extent permitted by law, Mortgagor hereby expressly waives any and all rights to reinstatement and redemption, on its own behalf, on behalf of all Persons claiming or having an interest (direct or indirect) by, through or under Mortgagor and on behalf of each and every Person acquiring any interest in or title to the Premises subsequent to the date hereof, it being the intent hereof that any and all such rights of reinstatement and redemption of Mortgagor and such other Persons, are and shall be deemed to be hereby waived to the full extent permitted by applicable law. To the full extent permitted by law, Mortgagor hereby waives any statute of limitations applicable to this Mortgage or the other Debt Documents. SECTION 22. Successors and Assigns. (a) Successors and Assigns. This Mortgage and each and every covenant, agreement and other provision hereof shall be binding upon Mortgagor and its successors and assigns as owner of the Premises, including MXL upon completion of the Contemplated Conveyance, and shall inure to the benefit of Mortgagee and its successors and assigns. (b) Covenants Run With Land; Successor Owners. All of the covenants of this Mortgage shall run with the Land and be binding upon successor owners of the Premises or any portion thereof. If the ownership of the Premises or any portion thereof becomes vested in a Person or Persons other than Mortgagor, Mortgagee may, without notice to Mortgagor, deal with such successor or successors in interest of Mortgagor with reference to this Mortgage and the Obligations in the same manner as with Mortgagor without in any way releasing or discharging Mortgagor from its obligations hereunder. The word "Mortgagor" when used herein shall include the original Mortgagor named in the first paragraph hereof, the original Mortgagor's successors and assigns and all owners from time-to-time of the Premises claiming by, through or under Mortgagor. Nothing in this Section 22 shall vary or negate the effect of the provisions of Section 8.3 or 8.5 of the Purchase Agreement. SECTION 23. Subrogation. If any part of the Obligations is used directly or indirectly to pay off, discharge or satisfy, in whole or in part, any prior lien or encumbrance upon the Premises or any part thereof, then, to the extent permitted by law, Mortgagee shall be subrogated to the rights of the holder thereof in and to such other lien or encumbrance and any additional security held by such holder, and shall have the benefit of the priority of the same. SECTION 24. Governing Law. The place of negotiation, execution and delivery of this Mortgage is the State of New York. This Mortgage shall be governed by and construed and enforced in accordance with the laws of the State of New York. It is the intent of the parties hereto that the provisions of Section 5-1401 of the General Obligations Law of the State of New York apply to this Mortgage. SECTION 25. Captions and Pronouns. (a) The captions and headings of the various sections of this Mortgage are for convenience only, and are not to be construed as confining or limiting in any way the scope or intent of the provisions hereof. Whenever the context requires or permits, the singular shall include the plural, the plural shall include the singular, and the masculine, feminine and neuter shall be freely interchangeable. (b) Wherever reference is made in this Mortgage to the Notes, this Mortgage or any other Debt Document, the same shall be deemed to refer to such document as the same may have been amended or modified. SECTION 26. Release. If Mortgagor (or any other Person) shall fully pay to Mortgagee all principal outstanding under the Notes, all interest accrued thereon and all other sums owing under the Notes and this Mortgage, Mortgagee shall release this Mortgage and the lien hereof by proper instrument(s) or, at Mortgagor's sole cost and expense and upon request of Mortgagor, assign this Mortgage, the lien hereof, and the Notes to such Person or Persons as Mortgagor shall elect and Mortgagor shall pay all reasonable costs and expenses, including reasonable attorney's fees, in connection with the preparation, recordation and filing thereof. SECTION 27. Defeasance. (a) Mortgagor shall have the right, at any time after the date on which the outstanding principal amount of the Notes has been reduced to $1,875,000.00, to voluntarily defease the entire Obligations and obtain a release of the lien of the Mortgage by providing Mortgagee with the Defeasance Collateral (hereinafter, a "Defeasance Event"), subject to the satisfaction of the following conditions precedent: (i) Mortgagor shall provide Mortgagee not less than ten (10) days notice (or such shorter period of time if permitted by Mortgagee in its sole discretion) specifying the date (the "Defeasance Date") on which the Defeasance Event is to occur; (ii) Mortgagor shall deposit the Defeasance Collateral into the Defeasance Collateral Account and otherwise comply with the provisions of Sections 27(b) and 27(c) hereof; (iii) Mortgagor shall execute and deliver to Mortgagee a Security Agreement in respect of the Defeasance Collateral Account and the Defeasance Collateral; and (iv) Mortgagor shall pay all reasonable costs and expenses of Mortgagee incurred in connection with the Defeasance Event, including Mortgagee's reasonable attorneys' fees and expenses. (b) If Mortgagor has elected to defease the Notes and the requirements of this Section 27 have been satisfied, the Premises shall be released from the lien of the Mortgage and the Defeasance Collateral pledged pursuant to the Security Agreement shall be the sole source of collateral securing the Notes. In connection with the release of the lien of the Mortgage, Mortgagor shall submit to Mortgagee, not less than five (5) days prior to the Defeasance Date (or such shorter time as permitted by Mortgagee in its sole discretion), a release of lien (and related Debt Documents) for execution by Mortgagee. Such release shall be in a form which is (i) appropriate in the jurisdiction in which the Premises is located and (ii) satisfactory to a prudent Mortgagee. In addition, Mortgagor shall provide all other documentation Mortgagee reasonably requires to be delivered by Mortgagor in connection with such release. Mortgagor shall pay all reasonable costs and expenses associated with the release of the lien of the Mortgage, including Mortgagee's reasonable attorneys' fees. (c) If Mortgagor has specified in the notice delivered pursuant to Section 27(a)(i) hereof that it desires to effectuate a Defeasance Event in a manner which will permit the assignment of the Notes and the Mortgage to a new mortgagee providing a portion of the funds necessary to acquire the Defeasance Collateral in order to save mortgage recording tax, Mortgagor and Mortgagee shall cooperate to effect such proposed assignment in the following manner: Mortgagee (and the Holders, if required by Mortgagor) shall assign the Notes and the Mortgage, each without covenant or warranty of any nature, express or implied, to such new mortgagee designated by Mortgagor; provided that Mortgagor (i) has executed and delivered to such new mortgagee a new note to be secured by the Defeasance Collateral pursuant to the Security Agreement between Mortgagor and such new mortgagee (such new note to have the same term, interest rate, unpaid principal balance and all other material terms and conditions of the Notes), which new note, together with the Security Agreement and the rights of such new mortgagee in and to the Defeasance Collateral, shall be assigned by such new mortgagee to Mortgagee simultaneously with and in consideration of the assignment of the Notes and the Mortgage (and other Debt Documents, if requested by Mortgagor) by Mortgagee to such new mortgagee and (ii) has complied with all other provisions of this Section 27 to the extent not inconsistent with this Section 27(c). In addition, any such assignment shall be conditioned on the following: (A) payment by Mortgagor of the reasonable expenses of Mortgagee incurred in connection therewith, including Mortgagee's reasonable attorneys' fees for the preparation of such assignment; (B) Mortgagor shall have caused the delivery of an executed Statement of Oath under Section 275 of the New York Real Property Law; (C) such new mortgagee shall materially modify the Notes such that they shall be treated as a new loan for federal tax purposes; (D) such an assignment is not then prohibited by any federal, state or local law, rule, regulation, order or by any other Governmental Authority; and (E) Mortgagor shall be responsible for all mortgage recording taxes, recording fees and other similar charges payable in connection with any such assignment. Mortgagee agrees that the assignment of the Notes and the Mortgage (and other documents, if applicable) to the new mortgagee and the assignment of the new note, the Defeasance Collateral and the Security Agreement by the new mortgagee to Mortgagee shall be accomplished by an escrow closing conducted through an escrow agent reasonably satisfactory to Mortgagee and pursuant to an escrow agreement reasonably satisfactory to Mortgagee in form and substance. (d) Defeasance Collateral Account. On or before the date on which Mortgagor delivers the Defeasance Collateral, Mortgagor shall open at any Eligible Institution the defeasance collateral account (the "Defeasance Collateral Account") which shall at all times be an Eligible Account. The Defeasance Collateral Account shall contain only (i) Defeasance Collateral, and (ii) cash from interest and principal paid on the Defeasance Collateral. All cash from interest and principal payments paid on the Defeasance Collateral shall be paid over to Mortgagee on each semi-annual payment date and applied first to accrued and unpaid interest and then to principal. Any cash from interest and principal paid on the Defeasance Collateral not needed to pay accrued and unpaid interest or principal shall be retained in the Defeasance Collateral Account as additional collateral for the Obligations. Mortgagor shall cause the Eligible Institution at which the Defeasance Collateral is deposited to enter into an agreement with Mortgagor and Mortgagee, reasonably satisfactory to Mortgagee, pursuant to which such Eligible Institution shall agree to hold and distribute the Defeasance Collateral in accordance with this Mortgage. The Successor Mortgagor (as defined below) shall be the owner of the Defeasance Collateral Account and shall report all income accrued on Defeasance Collateral for federal, state and local income tax purposes in its income tax return. Mortgagor shall prepay all costs and expenses associated with opening and maintaining the Defeasance Collateral Account. Mortgagee shall not in any way be liable by reason of any insufficiency in the Defeasance Collateral Account. (e) Successor Mortgagor. In connection with a Defeasance Event under this Section 27, Mortgagor shall establish or designate, or Mortgagee, at its option, may designate, a successor entity (the "Successor Mortgagor") which shall be a single purpose bankruptcy remote entity which may be owned directly or indirectly by Mortgagor. The Successor Mortgagor shall not be required to have any independent directors. Mortgagor (including GP, whether or not GP is then the owner of the Premises) shall transfer and assign all obligations, rights and duties under and to the Notes, together with the Defeasance Collateral to such Successor Mortgagor. Such Successor Mortgagor shall assume the obligations under the Notes and the Security Agreement and Mortgagor shall be relieved of its obligations under such documents. Mortgagor shall pay a minimum of $1,000 to any such Successor Mortgagor as consideration for assuming the obligations under the Notes and the Security Agreement. Mortgagor shall pay all out-of-pocket costs and expenses incurred by Mortgagee, including Mortgagee's reasonable attorney's fees and expenses, incurred in connection therewith. (f) Additional Definitions. The following capitalized terms used in this Section 27 shall have the means set forth below: "Defeasance Collateral" shall mean U.S. Obligations or bonds with an investment grade rating by Moody's, Fitch or another nationally recognized rating agency, which, without reinvestment, will provide payment on the Maturity Date in an amount not less than the outstanding principal amount of the Notes on the Defeasance Date. "U.S. Obligations" shall mean direct full faith and credit obligations of the United States of America that are not subject to prepayment, call or early redemption. "Security Agreement" shall mean a security agreement in form and substance that would be reasonably satisfactory to a prudent lender pursuant to which Mortgagor grants Mortgagee a perfected, first priority security interest in the Defeasance Collateral Account and the Defeasance Collateral. "Eligible Account" shall mean a separate and identifiable account from all other funds held by the holding institution that is either (i) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (ii) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company is subject to regulations substantially similar to 12 C.F.R. ss.9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument. "Eligible Institution" shall mean a depository institution or trust company insured by the Federal Deposit Insurance Corporation the short term unsecured debt obligations or commercial paper of which are rated at least "A-1" by S&P, "P-1" by Moody's Investors Service, Inc. ("Moody's"), and "F-1+" by Fitch, Inc. ("Fitch") in the case of accounts in which funds are held for thirty (30) days or less (each a "Short Term Rating") or, in the case of Letters of Credit or accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least "AA" by Fitch and S&P and "Aa2" by Moody's (each a "Long Term Rating"). SECTION 28. Mortgage Recording Tax; Transfer Tax. (a) Mortgagor agrees that if, by the laws of the United States of America, or of any state or political subdivision having jurisdiction over Mortgagor, any stamp, mortgage recording or other tax (other than real estate taxes) is due or becomes due in respect of the issuance of the Notes, the execution and delivery of the Purchase Agreement or the execution, delivery or recording of this Mortgage (or any mortgage consolidated hereby) or any assignment of leases and rents given as security for the Notes or is otherwise required to be paid to enforce this Mortgage or to foreclose the lien hereof, Mortgagor covenants and agrees to pay such tax at the time and in the manner required by any such law. (b) Mortgagor covenants and agrees that, in the event of a sale of the Premises or other transfer, it will duly complete, execute and deliver to the applicable taxing authority or recording officer (with copies to Mortgagee), all forms and supporting documentation required by such taxing authority or recording officer to estimate and fix any and all applicable state and local real estate transfer taxes, including, without limitation, any real estate transfer taxes payable under Article 31 of the New York State Tax Law or under Title 11, Chapter 21 of the Administrative Code of the City of New York, if applicable, or any successor provisions thereto (collectively, "Transfer Taxes") by reason of such sale or other transfer or recording of the deed evidencing such sale or other transfer. This subsection (b) shall apply only if this Mortgage remains outstanding after any such sale or transfer. Mortgagor shall pay all Transfer Taxes that may hereafter become due and payable with respect to any Transfer, and in default thereof Mortgagee may pay the same and the amount of such payment shall be added to the debt evidenced by the Notes and, unless incurred in connection with a foreclosure of this Mortgage, be secured by this Mortgage. The provisions of this Section 28(b) shall survive any Transfer and the delivery of the deed in connection with any Transfer. SECTION 29. Exempt Transaction Under Truth-in-Lending. Mortgagor and Mortgagee agree that the obligations secured hereby are an exempt transaction under the Truth-in-Lending Act, 15 U.S.C., ss. 1601 et seq. SECTION 30. Notice. All notices, reports, demands, consents, approvals and requests required or permitted hereunder ("Notices") shall be given to the parties hereto at their respective addresses set forth above in accordance with Section 12.5 of the Purchase Agreement. SECTION 31. No Waiver. Mortgagee's rights, powers, privileges and remedies under or in connection with this Mortgage are cumulative and not exclusive and shall not be waived, precluded or limited by any failure or delay in the exercise thereof or by the parties exercise thereof or by any course of dealing between Mortgagor and Mortgagee. No notice to or demand on Mortgagor in any case shall entitle Mortgagor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the right of Mortgagee to any other or further action in any circumstances without notice or demand. SECTION 32. Descriptive Headings, Etc. The descriptive headings used in this Mortgage are for convenience only and shall not be deemed to affect the meaning or construction of any provision hereof. SECTION 33. Terminology. All personal pronouns used in this Mortgage, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Sections in this Mortgage are for convenience only, and neither limit nor amplify the provisions of this Mortgage, and all references in this Mortgage to Sections, Subsections, paragraphs, clauses or subclauses shall refer to the corresponding Section, Subsection, paragraph, clause or subclause of this Mortgage, unless specific reference is made to the articles, sections or other subdivisions of another document or instrument. SECTION 34. Waiver of Jury Trial. EACH OF MORTGAGOR AND MORTGAGEE, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS ANY SUCH PERSON MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS MORTGAGE OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF MORTGAGOR OR MORTGAGEE RELATING TO THE OBLIGATIONS AND/OR THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS MORTGAGE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR MORTGAGEE ACCEPTING THIS MORTGAGE. SECTION 35. Severability. In the event that any of the covenants, agreements, terms or provisions contained herein shall be invalid, illegal or unenforceable in any respect, the validity of the remaining covenants, agreements, terms and provisions contained herein shall be in no way affected, prejudiced or disturbed thereby. SECTION 36. Further Assurances. At any time, and from time to time, upon Mortgagee's request, Mortgagor shall make, execute and deliver, or cause to be made, executed and delivered, to Mortgagee and, where appropriate, shall cause to be recorded or filed, and from time to time thereafter to be re-recorded and refiled, at such time and in such offices and places as shall be deemed desirable by Mortgagee as Mortgagee may reasonably consider necessary or desirable in order to effectuate, or to continue and preserve the obligations of Mortgagor under this Mortgage, such documents and/or instruments as Mortgagee may reasonably request. SECTION 37. Amendment. Neither this Mortgage nor any provision hereof may be changed, waived, discharged, modified or terminated orally, but only by an instrument in writing signed by the party against whom enforcement is sought. Nothing contained in this Mortgage shall be construed to amend, modify, alter, change or supersede the terms and provisions of the Purchase Agreement or any of the other Debt Documents. SECTION 38. Severance of the Loan. The Mortgage and the Notes may, at any time until the same be fully paid and satisfied, at the sole election of Mortgagee, be split or divided into two or more notes and two or more mortgages constituting liens on the Premises or portions thereof in such principal amounts as may be agreed upon, but in no event to exceed the aggregate principal amount evidenced by the Notes and secured, or which under any contingency may be secured, by the Mortgage. Mortgagor, upon request of Mortgagee, shall execute, acknowledge and deliver to Mortgagee and/or its designee or designees such documents as may be necessary to effectuate the foregoing, including, without limitation, such supplemental or substitute mortgages and supplemental or substitute notes as Mortgagee may require. If the splitting of the lien is at Mortgagor's request, Mortgagor shall pay all reasonable expenses in connection with the making and recording of such documents, including recording fees, mortgage recording taxes, if any, the reasonable fees of Mortgagee's attorneys, fees and expenses relating to examination of title and title insurance premiums, if any. SECTION 39. Limited Recourse. The provisions of Section 8.4 of the Purchase Agreement are incorporated herein as if the same were fully set forth herein. SECTION 40. Construction of Covenants. All covenants hereof shall be construed as affording to Mortgagee rights additional to and not exclusive of the rights conferred under the provisions of Sections 254 and 273 of the Real Property Law of the State of New York, or any other applicable law. In the event of any conflict, inconsistency or ambiguity between the provisions of this Mortgage and the provisions of subsection 4 of Section 254 of the Real Property Law of New York, the provisions of this Mortgage shall control. SECTION 41. Lien Law. Mortgagor, in compliance with Section 13 of the Lien Law of the State of New York, will receive the advances secured by this Mortgage, and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of improvement and will apply the same first to the payment of the cost of improvement before using any part of the total of the same for any other purpose. SECTION 42. Environmental Representations, Warranties, Covenants; Environmental Indemnity. (a) Mortgagor represents and warrants, to the best knowledge of Mortgagor and except as set forth in the Environmental Report, that: (i) there are no Hazardous Materials (defined below) or underground storage tanks in, on, or under the Premises, except those that are both (A) in compliance with Environmental Laws (defined below) and with permits issued pursuant thereto (if such permits are required), if any, and (B) in amounts not in excess of that necessary to operate the Premises; (ii) there are no past, present or threatened Releases (defined below) of Hazardous Materials in violation of any Environmental Law and which would require remediation by a governmental authority in, on, under or from the Premises; (iii) there is no threat of any Release of Hazardous Materials migrating to the Premises; (iv) there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Premises; (v) Mortgagor does not know of, and has not received, any written or oral notice or other communication from any person or entity (including but not limited to a governmental entity) relating to Hazardous Materials in, on, under or from the Premises; and (vi) Mortgagor has truthfully and fully provided to Mortgagee, in writing, any and all information relating to environmental conditions in, on, under or from the Premises known to Mortgagor or contained in Mortgagor's files and records, including but not limited to any reports relating to Hazardous Materials in, on, under or migrating to or from the Premises and/or to the environmental condition of the Premises. (b) Mortgagor covenants and agrees that for so long as Mortgagor owns, manages, is in possession of, or otherwise controls the operation of the Premises (i) all uses and operations on or of the Premises, whether by Mortgagor or any other person or entity, shall be in compliance, in all material respects, with all Environmental Laws and permits issued pursuant thereto; (ii) there shall be no Releases of Hazardous Materials in, on, under or from the Premises; (iii) there shall be no Hazardous Materials in, on, or under the Premises, except those that are both (A) in compliance with all Environmental Laws in all material respects and with permits issued pursuant thereto, if and to the extent required, and (B) (x) in amounts not in excess of that necessary to operate the Premises or (y) fully disclosed to and approved by Mortgagee in writing; (iv) Mortgagor shall keep the Premises free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Mortgagor or any other person or entity (the "Environmental Liens"); and (vi) Mortgagor shall notify Mortgagee promptly after (A) Mortgagor becomes aware of any spill or other release of any Hazardous Material at, in, on, under or about the Premises which is required to be reported to a Governmental Authority under any Environmental Law or (B) Mortgagor receives any notice from any Governmental Authority that the Premises fails to comply with an Environmental Law. Mortgagor shall provide Mortgagee with copies of all notices and other communications to or from any Governmental Authority which pertain to Environmental Law as applicable to the Premises, including, without limitation, any violation of or non-compliance with Environmental Law, or any spill, release or remediation. (c) Mortgagor will indemnify and hold harmless Mortgagee and the Holders from and against any and all actual losses, penalties, fines, liabilities, damages, costs, or expenses arising out of the presence, disposal, spillage, discharge, emission, leakage or release of any Hazardous Material which is at, in, on, under, about, from or affecting the Premises. The aforesaid indemnification and other obligations of Mortgagor under this Section 42 shall be subject to the provisions of Section 8.4 of the Purchase Agreement. (d) For the purposes of this Section 42 the following terms shall have the following meanings: "Environmental Law" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other government directives or requirements, as well as common law, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act and the Resource Conservation and Recovery Act, that apply to Mortgagor or the Premises and relate to Hazardous Materials. "Hazardous Materials" shall mean petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls ("PCBs") and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Premises is prohibited by any federal, state or local authority; any substance that requires special handling; and any other material or substance now or in the future defined as a "hazardous substance," "hazardous material", hazardous waste", toxic substance", "toxic pollutant", "contaminant", or pollutant" within the meaning of any Environmental Law. "Release" of any Hazardous Materials includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Materials. SECTION 43. Conveyance of the Premises; Limitation on Modification of the Obligations. GP shall have the right to convey the Premises to MXL, which at the time of such conveyance will be a wholly owned subsidiary of NPDC, in contemplation of the Spin-Off, as such term is defined in the Purchase Agreement (such conveyance, the "Contemplated Conveyance"). Mortgagor will give prompt notice to Mortgagee of the occurrence of the Contemplated Conveyance. Pursuant to the Purchase Agreement, for the benefit of MXL, GP, NPDC, Mortgagee and the Security Holders have agreed that, whether or not the Spin-Off or the Contemplated Conveyance has occurred, any extension of, or increase in the principal amount of, interest rate on or other charges on, the Notes or any other amendment, extension, waiver, or modification to the Notes or other Transaction Documents which increases the obligations secured by this Mortgage must be agreed upon in writing by each of GP, Mortgagee and MXL to be effective. In connection with the Contemplated Conveyance and subject to Section 39 hereof, MXL will, at the sole cost of MXL, (a) execute such documents and take such other actions as may be necessary to assume this Mortgage and all of the obligations and liabilities of GP arising hereunder, provided, however, that it is expressly understood and agreed that such assumption will be made subject to the provisions of Section 8.4 of the Purchase Agreement and (b) deliver or cause to be delivered an endorsement to the Title Policy or a side letter from the Title Company (in either case, provided that the same is available at nominal cost to Mortgagor), in form reasonably acceptable to Mortgagee, insuring to Mortgagee that (i) MXL is the fee owner of the Premises and (ii) this Mortgage, as assumed by MXL, is a valid and subsisting first priority lien against the Premises subject only to the Permitted Encumbrances. SECTION 44. Mortgagee as Agent for Holders. Pursuant to the Purchase Agreement, the Holders have appointed the Mortgagee as their agent with respect to this Mortgage and Mortgagee hereby agrees, that all actions taken by Mortgagee in connection with this Mortgage shall be taken on behalf of and for the benefit of the Holders. Mortgagee shall comply with the terms and provisions of Section 9.1 of the Purchase Agreement and such Section 9.1 is hereby incorporated by reference as if such Section 9.1 were fully set forth herein. SECTION 45. Miscellaneous. (a) NOTWITHSTANDING ANY PROVISION SET FORTH HEREIN TO THE CONTRARY, THE MAXIMUM AMOUNT OF PRINCIPAL INDEBTEDNESS SECURED BY THIS MORTGAGE AT EXECUTION, OR WHICH UNDER ANY CONTINGENCY MAY BECOME SECURED HEREBY AT ANY TIME HEREAFTER, IS U.S. $7,500,000 PLUS ALL INTEREST PAYABLE UNDER THE NOTE AND ALL AMOUNTS EXPENDED BY MORTGAGEE AFTER DEFAULT BY MORTGAGOR: (A) FOR THE PAYMENT OF TAXES, CHARGES OR ASSESSMENTS WHICH MAY BE IMPOSED BY LEGAL REQUIREMENTS UPON THE PREMISES; (B) TO MAINTAIN THE INSURANCE REQUIRED UNDER THIS MORTGAGE; AND (C) FOR ANY EXPENSES INCURRED IN UPHOLDING THE LIEN OF THIS MORTGAGE, INCLUDING, BUT NOT LIMITED TO, THE EXPENSE OF ANY LITIGATION TO PROSECUTE OR DEFEND THE RIGHTS AND LIEN CREATED BY THIS MORTGAGE. (b) All covenants hereof shall be construed as affording to Mortgagee rights in addition to and not exclusive of the rights conferred under the provisions of Sections 254, 271 and 291-f of the Real Property Law of the State of New York or any other applicable legal requirement. (c) Mortgagor represents and warrants that this Mortgage does not encumber real property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units having their own separate cooking facilities. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Mortgagor and Mortgagee have duly executed this agreement the day and year first above written. MORTGAGOR: GP STRATEGIES CORPORATION, a Delaware corporation By: Name: Title: MORTGAGEE: GABELLI FUNDS, LLC, as agent By: Name: Title: EX-10 8 ex105.txt REGISTRATION RIGHTS AGREEMENT - GPX Exhibit 10.5 EXHIBIT E GP STRATEGIES CORPORATION REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement, dated ________, 2003 (the "Original Issue Date"), between GP Strategies Corporation, a Delaware corporation ("GP"), and Gabelli Funds, LLC, as agent (the "Agent") for the Holders (as hereinafter defined). WHEREAS, pursuant to a Note and Warrant Purchase Agreement, dated as of August 8, 2003 (the "Purchase Agreement"), among GP, its wholly-owned subsidiaries National Patent Development Corporation and MXL Industries, Inc., the purchasers named therein (the "Purchasers"), and the Agent, GP is on the Original Issue Date issuing to the Purchasers certain Notes and GP Warrants to purchase GP's Common Stock; and WHEREAS, as a condition to the purchase of such Notes and GP Warrants, the Purchasers have required that GP extend to them certain registration rights as provided in this Agreement; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises set forth in this Agreement and in the Purchase Agreement, the parties hereto, intending to be legally bound, agree as follows: Section 1. General 1.1 Definitions. As used in this Agreement, in addition to terms defined elsewhere herein, the following terms shall have the following respective meanings: (a) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. (b) "Form S-3" means such form under the Securities Act (including Rule 415 thereunder) as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by GP with the SEC. (c) "GP Common Stock" means GP's Common Stock, par value $.01 per share. (d) "GP Warrants" has the meaning as defined in the Purchase Agreement. (e) "GP Warrant Shares" means the shares of GP Common Stock issued or issuable upon exercise of the GP Warrants. (f) "Holder" means each Purchaser and each other person to whom rights under this Agreement are transferred as permitted by Section 2.11, so long as such Purchaser or other person owns of record Registrable Securities or GP Warrants exercisable for Registrable Securities. (g) "Majority Holders" means Holders who own, or on exercise of all then outstanding GP Warrants would own, a majority of the Registrable Securities then outstanding owned by all Holders. (h) "Notes" has the meaning as defined in the Purchase Agreement. (i) "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. (j) "Registrable Securities" means the GP Warrant Shares and any shares of capital stock of GP issued as (or issuable upon the conversion or exercise of any warrant, right, or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the GP Warrant Shares (but not any shares of capital stock of National Patent Development Corporation issued in the Spin-Off (as defined in the Purchase Agreement)), provided that Registrable Securities shall not include any securities (i) sold to the public pursuant to a registration statement or Rule 144, (ii) sold in a private transaction in which the transferor's rights under this Agreement are not assigned, or (iii) which are eligible for sale under paragraph (k) of Rule 144. (k) "Registrable Securities then outstanding" shall be the number of shares determined by calculating the total number of GP Warrant Shares that are Registrable Securities and either (i) are then issued and outstanding or (ii) are issuable pursuant to then outstanding GP Warrants. (l) "Registration Expenses" shall mean all expenses incurred by GP in complying with Sections 2.2, 2.3, and 2.4, hereof, including, without limitation, all registration and filing fees, printing expenses, escrow fees, listing fees, fees and disbursements of counsel for GP, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses (including reasonable fees and disbursements of underwriter's counsel in connection with blue sky qualifications and filings), and the expense of any special audits and/or comfort letters incident to or required by any such registration (but excluding the compensation of regular employees of GP). (m) "Rule 144" means Rule 144 promulgated by the SEC under the Securities Act. (n) "SEC" means the Securities and Exchange Commission. (o) "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. (p) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to a sale of Registrable Securities. Section 2. Restrictions On Transfer; Registration. 2.1 Restrictions on Transfer. No Holder shall make any disposition of all or any portion of the GP Warrants or GP Warrant Shares except as permitted by the GP Warrants. 2.2 Form S-3 Registration. GP shall use its best efforts to prepare and file, as promptly as practicable, and in any event within 60 days, after the Original Issue Date, with the SEC a registration statement on Form S-3 or on such form as is then available under the Securities Act covering the Registrable Securities held by the Holders. 2.3 Demand Registration. (a) Subject to the conditions of this Section 2.3, if GP receives a request from Holders who own, or on exercise of all GP Warrants would own, 25% of the Registrable Securities then outstanding (the "Initiating Holders") that GP file a registration statement under the Securities Act covering the registration of all or a part of such Initiating Holders' Registrable Securities, then GP shall, within 15 days of the receipt thereof, give notice of such request to all Holders, and use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that the Initiating Holders request to be registered and all Registrable Securities owned by any other Holder which notifies GP in writing, within 30 days after receipt of GP's notice contemplated in this Section 2.3, that it intends to participate in the demand registration (such notification to include the number of Registrable Securities sought to be included and the intended method or methods of distribution of such Registrable Securities), subject to and in accordance with the terms, conditions, procedures, and limitations contained in this Agreement. The Initiating Holders may at any time prior to the effective date of the registration statement relating to a requested registration under this Section 2.3 revoke their request by providing written notice to GP, in which case the Registration Expenses will be borne in accordance with Section 2.6. (b) GP shall not be required to effect a registration pursuant to this Section 2.3: (i) prior to 120 days after the Original Issue Date, so long as GP is in compliance with its obligations under Section 2.2, or at any time when a registration statement filed pursuant to Section 2.2 is effective under the Securities Act; (ii) after GP has effected two registrations pursuant to this Section 2.3, provided, however, that a registration shall not count as having been effected unless and until it has become effective, and unless and until the Holders participating in such registration shall have had the opportunity to register and sell 100% of the Registrable Securities initially requested to be registered pursuant thereto, except that a registration the request for which has been revoked shall count as having been effected unless the revocation is based upon material adverse information concerning GP of which the Initiating Holders were not aware at the time of their request; (iii) during the period starting with the date of filing of, and ending on the date 90 days following the effective date of, a registration statement pertaining to any underwritten public offering made pursuant to this Section 2.3; provided that GP makes reasonable and diligent good faith efforts to cause such registration statement to become effective; or (iv) during the period starting with the date of filing of, and ending on the date 90 days following the effective date of, a registration statement pertaining to any underwritten public offering in which the Holders were given the opportunity to participate pursuant to Section 2.4 for not less than 20% of the amount of the offering; provided that GP uses best efforts to cause such registration statement to become effective. (c) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise GP as a part of their request made pursuant to Section 2.3 and GP shall include such information in its written notice to the Holders referred to in Section 2.3(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by GP and approved by Holders of a majority of the Registrable Securities to be included in such underwriting. Notwithstanding any other provision of this Section 2.3 to the contrary, if the underwriter advises GP that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then GP shall so advise all Holders of Registrable Securities electing to participate in the registration under this Section 2.3, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such electing Holders (including the Initiating Holders). If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to GP and the underwriter, delivered at least 10 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. 2.4 Piggyback Registrations. (a) GP shall notify all Holders at least 30 days prior to the filing of any registration statement under the Securities Act for a public offering of securities of GP (including, but not limited to, registration statements relating to secondary offerings of securities of GP, but excluding registration statements relating to employee benefit plans or corporate reorganizations or other transactions under Rule 145 of the Securities Act) and will afford each such Holder an opportunity to include in such registration statement all or part of the Registrable Securities held by such Holder; provided, that no such notice shall be required, and this Section 2.4 shall not be applicable, at any time when the registration statement filed under Section 2.2 is effective. Such notice shall (i) offer each Holder the opportunity to register such number of Registrable Securities as it may request and (ii) describe such securities and specify the form and manner and other relevant facts involved in such proposed registration (including, without limitation, if known, the price at which such securities are reasonably expected to be sold to the public, whether or not such registration will be in connection with an underwritten offering and, if so, the identity of the managing underwriter, whether such underwritten offering will be pursuant to a "best efforts" or "firm commitment" underwriting, and, if known, the amount of underwriting discount reasonably expected to be incurred in connection therewith). Each Holder desiring to include in any such registration statement all or part of the Registrable Securities held by it shall, within 15 days after receipt of the above-described notice from GP, so notify GP in writing. Such notice shall state the number of Registrable Securities which such Holder requests to be included in such registration and the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by GP, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by GP, all upon the terms and conditions set forth herein. (b) If the registration statement under which GP gives notice under this Section 2.4 is for an underwritten offering, the right of any Holder to be included in a registration pursuant to this Section 2.4 shall be conditioned upon the Holder's participation in the underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by GP. Notwithstanding any other provision of this Section 2.4, if the underwriter determines in good faith that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities), then GP shall so advise all participating Holders, and the number of securities that may be included in the underwriting shall be allocated first, to GP; second, to the participating Holders and to any other stockholders of GP having comparable rights, on a pro rata basis based on the total number of Registrable Securities requested to be sold by all such Holders and such other stockholders; and third, to any other stockholders of GP (other than Holders and any other stockholders of GP having comparable rights) on a pro rata basis. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to GP and the underwriter, delivered at least 10 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. (c) GP shall have the right to terminate or withdraw any registration initiated by it under this Section 2.4 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by GP in accordance with Section 2.6. 2.5 Suspension of Registration. Under any registration statement filed pursuant to Section 2 hereof, GP may restrict disposition of Registrable Securities, and Holders will not be able to dispose of such Registrable Securities, if GP shall have delivered a certificate signed by an officer of GP stating that in the good faith judgment of the Board of Directors of GP a delay in the disposition of such Registrable Securities is necessary because GP has determined that such sales would require public disclosure by GP of material nonpublic information that is not included in such registration statement. In the event of the delivery of such certificate, GP shall use its best efforts to amend such registration statement or amend or supplement the related prospectus as necessary, and take all other actions necessary, to allow the proposed sale to take place as promptly as possible (or, if in the reasonable judgment of the Board of Directors of GP disclosure of such event would be detrimental to GP, promptly after the earlier of (a) the date that disclosure of such event would not be detrimental to GP and (b) 90 days after the date of such certificate, provided, however, that such right to delay the sales of Registrable Securities may be exercised by GP not more than once in any 12-month period and that, in each such case, the delay in the sale of the Registrable Securities included in the registration statement shall not exceed 120 days from the date of the certificate). 2.6 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration pursuant to Section 2.2, 2.3, or 2.4 shall be borne by GP. All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. GP shall not, however, be required to pay for expenses of (a) any registration begun pursuant to Section 2.3, the request for which has been subsequently withdrawn by the Holders, unless (i) the withdrawal is based upon material adverse information concerning GP of which the Holders were not aware at the time of such request or (ii) the Initiating Holders agree to forfeit one of their requested registrations under Section 2.3, in which event such right shall be forfeited by all Holders, or (b) more than one registration initiated under Section 2.3 (other than any such registration the request for which is withdrawn as described in Section 2.6(a)(i)). If GP is not required to pay the Registration Expenses, such expenses shall be borne by the Holders requesting such registration in proportion to the number of shares for which registration was requested; and, if GP has previously paid any such expenses, such Holders shall promptly reimburse GP therefore. 2.7 Obligations of GP. Whenever required to register any Registrable Securities, GP shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective. (b) Use its best efforts to keep such registration statement effective (i) in the case of a registration statement filed under Section 2.2, until the earliest to occur of (A) the date on which all Registrable Securities have been sold pursuant to such registration statement or Rule 144 and (B) the date on which no Registrable Securities remain outstanding, and (ii) in the case of a registration statement under Section 2.3 or 2.4, for up to 90 days (or three years if the registration statement is on Form S-3), as requested by the Holders of a majority of the Registrable Securities registered thereunder, or, if earlier, until the Holder or Holders have completed the distribution related thereto. (c) Prepare and file with the SEC such amendments (including post effective amendments and supplemental opinions of counsel, if required) and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 32 Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in Section 2.7(b). (d) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request to facilitate the disposition of Registrable Securities owned by them. (e) Use its best efforts to register and qualify the Registrable Securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holders to consummate the disposition of the Registrable Securities owned by such Holder in such jurisdictions; provided that GP shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (f) Use its best efforts to cause the Registrable Securities covered by such registration statement to be registered or qualified with or approved by such other governmental agencies or authorities (including, without limitation, state securities commissions) as may be necessary to enable the Holder or Holders thereof to consummate the disposition of such Registrable Securities. (g) Notify each Holder, promptly after GP shall receive notice thereof, of the date and time the registration statement and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such registration statement has been filed. (h) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and, at the request of any such Holder, subject to Section 2.5, deliver a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (i) Within a reasonable time before each filing of the registration statement or any amendment or supplement thereto with the SEC, furnish to one counsel, selected by the Holders of a Majority of the Registrable Securities included therein, copies of such documents proposed to be filed, which documents shall be subject to the reasonable approval of such counsel. (j) Use its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement and, if one is issued, immediately notify each selling Holder of the receipt of such notice and use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment. (k) Make available to each selling Holder and any attorney, accountant, or other agent or representative retained by any such selling Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents, and properties of GP, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause GP's officers, directors, and employees to supply all information requested by any such Inspector in connection with such registration statement, subject, in each case, to such confidentiality agreements as GP shall reasonably request. (l) Use its best efforts to cause the securities covered by such registration statement to be listed on any securities exchange or quoted on any quotation system on which similar securities issued by GP are then listed or quoted. (m) Otherwise use its best efforts to cooperate with the SEC and other regulatory agencies and take all reasonable actions and execute and deliver or cause to be executed and delivered all documents reasonably necessary to effect the registration of any securities under this Agreement. (n) Provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement. (o) If such registration involves an underwritten offering, obtain and furnish a comfort letter, dated the effective date of such registration statement, and the date of the closing under the underwriting agreement, signed by GP's independent public accountants and addressed to the Holders, in customary form and covering such matters as are customarily covered by comfort letters by independent public accountants in such public offerings and such other financial matters as the holders of a majority of the Registrable Securities being sold in such registration may reasonably request. (p) If such registration involves an underwritten offering, furnish a legal opinion of GP's counsel, dated the date of the closing under the underwriting agreement and addressed to the Holders, with respect to the registration statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and other documents relating thereto, in customary form and covering such matters as are customarily covered by legal opinions of issuers' counsel in such public offerings. (q) During the period when a prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the SEC pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act. 2.8 Termination of Registration Rights. A Holder's registration rights shall expire if all Registrable Securities held by and issuable to such Holder may be sold under SEC Rule 144 during any 90 day period. 2.9 Furnishing Information. It shall be a condition precedent to the obligations of GP to take any action pursuant to Section 2.2, 2.3, or 2.4 that the selling Holders shall furnish to GP such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. 2.10 Indemnification. If any Registrable Securities are included in a registration statement under Section 2.2, 2.3, or 2.4: (a) To the extent permitted by law, GP will indemnify and hold harmless each Holder and the partners, members, officers, directors, trustees, stockholders, employees, and agents of each Holder, any underwriter (as defined in the Securities Act) for such Holder, and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions, or violations (collectively a "Violation") by GP: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by GP of the Securities Act, the Exchange Act, or any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law in connection with the offering covered by such registration statement; and GP will pay as incurred to each such Holder, partner, member, officer, director, trustee, stockholder, employee, agent, underwriter, or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 2.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of GP, which consent shall not be unreasonably withheld, nor shall GP be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, trustee, stockholder, employee, agent, underwriter, or controlling person. With respect to any untrue statement or alleged untrue statement made in, or omission or alleged omission from, any preliminary prospectus, any Rule 430A prospectus, or any prospectus, the indemnity agreement contained in this Section 2.10(a) with respect to such preliminary prospectus, Rule 430A prospectus, or prospectus, to the extent it is based on the claim of a person who purchased securities directly from a person, shall not inure to the benefit of such person (or to the benefit of any of its partners, members, officers, directors, trustees, stockholders, employees, agents, or counsel, or any person controlling such person ) if the prospectus (or the prospectus as amended or supplemented if GP shall have filed with the SEC any amendment or supplement thereto) which shall have been furnished to such person prior to the time it sent written confirmation of or otherwise confirmed such sale to such purchaser does not contain such statement, alleged statement, omission, or alleged omission and a copy of the prospectus (or the prospectus as amended or supplemented if GP shall have filed with the SEC any amendment or supplement thereto) shall not have been sent or given to such purchaser and such purchaser shall not otherwise have received a copy thereof at or prior to the written confirmation of such sale. (b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration is being effected, indemnify and hold harmless GP, each of its directors, its officers, and each person, if any, who controls GP within the meaning of the Securities Act, any underwriter, and any other Holder selling securities under such registration statement or any of such other Holder's partners, members, officers, directors, trustees, stockholders, employees, agents, or any person who controls such Holder, against any losses, claims, damages, or liabilities (joint or several) to which GP or any such person may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder specifically for use in connection with such registration; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by GP or any such person in connection with investigating or defending any such loss, claim, damage, liability, or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 2.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity obligation of any Holder under this Section 2.10 exceed the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration statement. (c) Promptly after receipt by an indemnified party under this Section 2.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.10. (d) If the indemnification provided for in this Section 2.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages, or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage, or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage, or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.10 were determined by pro rata allocation or any other method of allocation which does not take into account the equitable consideration referred to in this Section 2.10(d). (e) The obligations of GP and the Holders under this Section 2.10 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 2.11 Assignment of Registration Rights. A Holder may assign such Holder's rights under this Agreement, including, without limitation, its rights to cause GP to register Registrable Securities pursuant to this Section 2, to any person to whom GP Warrants or Registrable Securities are transferred in compliance with the restrictions of this Agreement, the GP Warrants, and the Purchase Agreement, provided that (a) in the case of a transfer of Registrable Securities, such transferee (i) is a subsidiary, parent, general partner, limited partner, member, or affiliate of such Holder or an investment company registered under the Investment Company Act of 1940, as amended, advised by Gabelli Funds, LLC or (ii) acquires at least 50,000 shares of Registrable Securities (as adjusted for stock splits, stock dividends, combinations, reorganizations, reclassifications, and other similar events), (b) the transferor, within ten days after such transfer, furnishes to GP written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, and (c) such transferee agrees in writing to be subject to all restrictions set forth in this Agreement. 2.12 Rule 144. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, GP agrees to use its best efforts to, at all times at which any Registrable Securities are eligible for sale under Rule 144 (other than paragraph (k) thereof): (a) make and keep public information available, as those terms are understood and defined in Rule 144 or any similar or analogous rule promulgated under the Securities Act; (b) file with the SEC, in a timely manner, all reports and other documents required of GP under the Exchange Act; (c) furnish to each Holder, forthwith upon request, a written statement by GP as to its compliance with the reporting requirements of Rule 144 and of the Exchange Act, a copy of the most recent annual or quarterly report of GP, and such other reports and documents as such Holder may reasonably request to sell Registrable Securities under Rule 144; and (d) cooperate with each Holder in good faith to enable such Holder to deliver, promptly upon any sale of Registrable Securities (or securities which, in the absence of eligibility for sale under Rule 144, would be Registrable Securities) by such Holder under Rule 144 under the Securities Act, certificates representing such securities which shall not contain any restrictive legend. Section 3. Miscellaneous. 3.1 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. 3.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the permitted successors, assigns, heirs, executors, and administrators of the parties hereto; provided, however, that prior to the receipt by GP of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, GP may deem and treat the person listed as the holder of such securities in its records as the absolute owner and holder of such securities for all purposes. 3.3 Entire Agreement. This Agreement, the GP Warrants, the Purchase Agreement, and the other documents delivered pursuant thereto set forth the entire understanding of the parties with respect to the subject matter hereof and supersede all existing agreements among them concerning such subject matter. 3.4 Severability. If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. 3.5 Amendment and Waiver. (a) Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), by written instrument executed by GP and the Agent with the written consent of Majority Holders. Any amendment or waiver effected in accordance with this Section 3.5 shall be binding upon each Holder and GP. (b) Any waiver of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 3.6 Notices and Consents. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given (a) in the case of GP, to its address at 777 Westchester Avenue, Fourth Floor, White Plains, New York 10604, or (b) in the case of any Holder, to its address as set forth in GP's books and records (or, in either case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 3.6). Any notice shall be deemed given at the time of receipt thereof. 3.7 Specific Performance. In addition to any other remedy provided at law or equity, the parties hereto shall be entitled to specific performance of this Agreement. 3.8 Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 3.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. The transmission by facsimile by each party of a signed counterpart copy of this Agreement to the other party shall be deemed proof of signature of the original and the signed facsimile so transmitted shall be deemed an original for the purposes of this Agreement. 3.10 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof. GP STRATEGIES CORPORATION By:_________________________ Name: Title: AGENT GABELLI FUNDS, LLC By:_________________________ Name: Title: NY\224976.5 EX-10 9 ex106.txt REGISTRATION RIGHTS AGREEMENT - NPD Exhibit 10.6 EXHIBIT F NATIONAL PATENT DEVELOPMENT CORPORATION REGISTRATION RIGHTS AGREEMENT Registration Rights Agreement, dated ________, 2003 (the "Original Issue Date"), between National Patent Development Corporation, a Delaware corporation ("NPDC"), and Gabelli Funds, LLC, as agent (the "Agent") for the Holders (as hereinafter defined). WHEREAS, pursuant to a Note and Warrant Purchase Agreement, dated as of August 8, 2003 (the "Purchase Agreement"), among NPDC, its parent GP Strategies Corporation ("GP"), MXL Industries, Inc., the purchasers named therein (the "Purchasers"), and the Agent, relating to the purchase by the Purchasers of certain notes and warrants (the "GP Warrants") of GP, NPDC has agreed to issue, to the then holders of the GP Warrants, warrants (the "NPDC Warrants") to purchase NPDC Class A Common Stock; and WHEREAS, as a condition to the purchase of such notes and GP Warrants, the Purchasers have required that NPDC extend to them certain registration rights as provided in this Agreement; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises set forth in this Agreement and in the Purchase Agreement, the parties hereto, intending to be legally bound, agree as follows: Section 1. General 1.1 Definitions. As used in this Agreement, in addition to terms defined elsewhere herein, the following terms shall have the following respective meanings: (a) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. (b) "Form S-3" means such form under the Securities Act (including Rule 415 thereunder) as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by NPDC with the SEC. (c) "Holder" means each Purchaser and each other person to whom rights under this Agreement are transferred as permitted by Section 2.11, so long as such Purchaser or other person owns of record (i) prior to the Spin-Off Date, GP Warrants, or (ii) after the Spin-Off Date, Registrable Securities or NPDC Warrants exercisable for Registrable Securities. (d) "Majority Holders" means Holders who (i) prior to the Spin-Off Date, own a majority of the outstanding GP Warrants, or (ii) after the Spin-Off Date, own, or on exercise of all then outstanding NPDC Warrants would own, a majority of the Registrable Securities then outstanding owned by all Holders. (e) "NPDC Common Stock" means NPDC's Class A Common Stock, par value $0.01 per share. (f) "NPDC Warrants" has the meaning as defined in the Purchase Agreement. (g) "NPDC Warrant Shares" means the shares of NPDC Common Stock issued or issuable upon exercise of the NPDC Warrants. (h) "Notes" has the meaning as defined in the Purchase Agreement. (i) "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of effectiveness of such registration statement or document. (j) "Registrable Securities" means the NPDC Warrant Shares and any shares of capital stock of NPDC issued as (or issuable upon the conversion or exercise of any warrant, right, or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the NPDC Warrant Shares , provided that Registrable Securities shall not include any securities (i) sold to the public pursuant to a registration statement or Rule 144, (ii) sold in a private transaction in which the transferor's rights under this Agreement are not assigned, or (iii) which are eligible for sale under paragraph (k) of Rule 144. (k) "Registrable Securities then outstanding" shall be the number of shares determined by calculating the total number of NPDC Warrant Shares that are Registrable Securities and either (i) are then issued and outstanding or (ii) are issuable pursuant to then outstanding NPDC Warrants; except that, prior to the Spin-Off Date, such number shall mean the number of outstanding GP Warrants. (l) "Registration Expenses" shall mean all expenses incurred by NPDC in complying with Sections 2.2, 2.3, and 2.4, hereof, including, without limitation, all registration and filing fees, printing expenses, escrow fees, listing fees, fees and disbursements of counsel for NPDC, reasonable fees and disbursements of a single special counsel for the Holders, blue sky fees and expenses (including reasonable fees and disbursements of underwriter's counsel in connection with blue sky qualifications and filings), and the expense of any special audits and/or comfort letters incident to or required by any such registration (but excluding the compensation of regular employees of NPDC). (m) "Rule 144" means Rule 144 promulgated by the SEC under the Securities Act. (n) "SEC" means the Securities and Exchange Commission. (o) "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. (p) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to a sale of Registrable Securities. (q) "Spin-Off Date" has the meaning as defined in the Purchase Agreement. Section 2. Restrictions On Transfer; Registration. 2.1 Restrictions on Transfer. No Holder shall make any disposition of all or any portion of the NPDC Warrants or NPDC Warrant Shares except as permitted by the NPDC Warrants. 2.2 Form S-3 Registration. NPDC shall use its best efforts to prepare and file, as promptly as practicable, and in any event within 60 days, after the date on which NPDC is eligible to file Form S-3 for this purpose, with the SEC a registration statement on Form S-3 or on such form as is then available under the Securities Act covering the Registrable Securities held by the Holders. 2.3 Demand Registration. (a) Subject to the conditions of this Section 2.3, if NPDC receives a request from Holders who own, or on exercise of all NPDC Warrants would own, 25% of the Registrable Securities then outstanding (the "Initiating Holders") that NPDC file a registration statement under the Securities Act covering the registration of all or a part of such Initiating Holders' Registrable Securities, then NPDC shall, within 15 days of the receipt thereof, give notice of such request to all Holders, and use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Registrable Securities that the Initiating Holders request to be registered and all Registrable Securities owned by any other Holder which notifies NPDC in writing, within 30 days after receipt of NPDC's notice contemplated in this Section 2.3, that it intends to participate in the demand registration (such notification to include the number of Registrable Securities sought to be included and the intended method or methods of distribution of such Registrable Securities), subject to and in accordance with the terms, conditions, procedures, and limitations contained in this Agreement. The Initiating Holders may at any time prior to the effective date of the registration statement relating to a requested registration under this Section 2.3 revoke their request by providing written notice to NPDC, in which case the Registration Expenses will be borne in accordance with Section 2.6. (b) NPDC shall not be required to effect a registration pursuant to this Section 2.3: (i) during the period of 120 days commencing on the date on which NPDC becomes eligible to use Form S-3 as contemplated by Section 2.2, so long as NPDC is in compliance with its obligations under Section 2.2, or at any time when a registration statement filed pursuant to Section 2.2 is effective under the Securities Act; (ii) after NPDC has effected two registrations pursuant to this Section 2.3, provided, however, that a registration shall not count as having been effected unless and until it has become effective, and unless and until the Holders participating in such registration shall have had the opportunity to register and sell 100% of the Registrable Securities initially requested to be registered pursuant thereto, except that a registration the request for which has been revoked shall count as having been effected unless the revocation is based upon material adverse information concerning NPDC of which the Initiating Holders were not aware at the time of their request; (iii) during the period starting with the date of filing of, and ending on the date 90 days following the effective date of, a registration statement pertaining to any underwritten public offering made pursuant to this Section 2.3; provided that NPDC makes reasonable and diligent good faith efforts to cause such registration statement to become effective; or (iv) during the period starting with the date of filing of, and ending on the date 90 days following the effective date of, a registration statement pertaining to any underwritten public offering in which the Holders were given the opportunity to participate pursuant to Section 2.4 for not less than 20% of the amount of the offering; provided that NPDC uses best efforts to cause such registration statement to become effective. (c) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise NPDC as a part of their request made pursuant to Section 2.3 and NPDC shall include such information in its written notice to the Holders referred to in Section 2.3(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by NPDC and approved by Holders of a majority of the Registrable Securities to be included in such underwriting. Notwithstanding any other provision of this Section 2.3 to the contrary, if the underwriter advises NPDC that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities) then NPDC shall so advise all Holders of Registrable Securities electing to participate in the registration under this Section 2.3, and the number of shares that may be included in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such electing Holders (including the Initiating Holders). If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to NPDC and the underwriter, delivered at least 10 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. 2.4 Piggyback Registrations. (a) NPDC shall notify all Holders at least 30 days prior to the filing of any registration statement under the Securities Act for a public offering of securities of NPDC (including, but not limited to, registration statements relating to secondary offerings of securities of NPDC, but excluding registration statements relating to employee benefit plans or corporate reorganizations or other transactions under Rule 145 of the Securities Act) and will afford each such Holder an opportunity to include in such registration statement all or part of the Registrable Securities held by such Holder; provided, that no such notice shall be required, and this Section 2.4 shall not be applicable, at any time when the registration statement filed under Section 2.2 is effective. Such notice shall (i) offer each Holder the opportunity to register such number of Registrable Securities as it may request and (ii) describe such securities and specify the form and manner and other relevant facts involved in such proposed registration (including, without limitation, if known, the price at which such securities are reasonably expected to be sold to the public, whether or not such registration will be in connection with an underwritten offering and, if so, the identity of the managing underwriter, whether such underwritten offering will be pursuant to a "best efforts" or "firm commitment" underwriting, and, if known, the amount of underwriting discount reasonably expected to be incurred in connection therewith). Each Holder desiring to include in any such registration statement all or part of the Registrable Securities held by it shall, within 15 days after receipt of the above-described notice from NPDC, so notify NPDC in writing. Such notice shall state the number of Registrable Securities which such Holder requests to be included in such registration and the intended method of disposition of the Registrable Securities by such Holder. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by NPDC, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by NPDC, all upon the terms and conditions set forth herein. (b) If the registration statement under which NPDC gives notice under this Section 2.4 is for an underwritten offering, the right of any Holder to be included in a registration pursuant to this Section 2.4 shall be conditioned upon the Holder's participation in the underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by NPDC. Notwithstanding any other provision of this Section 2.4, if the underwriter determines in good faith that marketing factors require a limitation of the number of securities to be underwritten (including Registrable Securities), then NPDC shall so advise all participating Holders, and the number of securities that may be included in the underwriting shall be allocated first, to NPDC; second, to the participating Holders and to any other stockholders of NPDC having comparable rights, on a pro rata basis based on the total number of Registrable Securities requested to be sold by all such Holders and such other stockholders; and third, to any other stockholders of NPDC (other than Holders and any other stockholders of NPDC having comparable rights) on a pro rata basis. If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to NPDC and the underwriter, delivered at least 10 business days prior to the effective date of the registration statement. Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration. (c) NPDC shall have the right to terminate or withdraw any registration initiated by it under this Section 2.4 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by NPDC in accordance with Section 2.6. 2.5 Suspension of Registration. Under any registration statement filed pursuant to Section 2 hereof, NPDC may restrict disposition of Registrable Securities, and Holders will not be able to dispose of such Registrable Securities, if NPDC shall have delivered a certificate signed by an officer of NPDC stating that in the good faith judgment of the Board of Directors of NPDC a delay in the disposition of such Registrable Securities is necessary because NPDC has determined that such sales would require public disclosure by NPDC of material nonpublic information that is not included in such registration statement. In the event of the delivery of such certificate, NPDC shall use its best efforts to amend such registration statement or amend or supplement the related prospectus as necessary, and take all other actions necessary, to allow the proposed sale to take place as promptly as possible (or, if in the reasonable judgment of the Board of Directors of NPDC disclosure of such event would be detrimental to NPDC, promptly after the earlier of (a) the date that disclosure of such event would not be detrimental to NPDC and (b) 90 days after the date of such certificate, provided, however, that such right to delay the sales of Registrable Securities may be exercised by NPDC not more than once in any 12-month period and that, in each such case, the delay in the sale of the Registrable Securities included in the registration statement shall not exceed 120 days from the date of the certificate). 2.6 Expenses of Registration. Except as specifically provided herein, all Registration Expenses incurred in connection with any registration pursuant to Section 2.2, 2.3, or 2.4 shall be borne by NPDC. All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the holders of the securities so registered pro rata on the basis of the number of shares so registered. NPDC shall not, however, be required to pay for expenses of (a) any registration begun pursuant to Section 2.3, the request for which has been subsequently withdrawn by the Holders, unless (i) the withdrawal is based upon material adverse information concerning NPDC of which the Holders were not aware at the time of such request or (ii) the Initiating Holders agree to forfeit one of their requested registrations under Section 2.3, in which event such right shall be forfeited by all Holders, or (b) more than one registration initiated under Section 2.3 (other than any such registration the request for which is withdrawn as described in Section 2.6(a)(i)). If NPDC is not required to pay the Registration Expenses, such expenses shall be borne by the Holders requesting such registration in proportion to the number of shares for which registration was requested; and, if NPDC has previously paid any such expenses, such Holders shall promptly reimburse NPDC therefore. 2.7 Obligations of NPDC. Whenever required to register any Registrable Securities, NPDC shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective. (b) Use its best efforts to keep such registration statement effective (i) in the case of a registration statement filed under Section 2.2, until the earliest to occur of (A) the date on which all Registrable Securities have been sold pursuant to such registration statement or Rule 144 and (B) the date on which no Registrable Securities remain outstanding, and (ii) in the case of a registration statement under Section 2.3 or 2.4, for up to 90 days (or three years if the registration statement is on Form S-3), as requested by the Holders of a majority of the Registrable Securities registered thereunder, or, if earlier, until the Holder or Holders have completed the distribution related thereto. (c) Prepare and file with the SEC such amendments (including post effective amendments and supplemental opinions of counsel, if required) and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement for the period set forth in Section 2.7(b). (d) Furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request to facilitate the disposition of Registrable Securities owned by them. (e) Use its best efforts to register and qualify the Registrable Securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holders to consummate the disposition of the Registrable Securities owned by such Holder in such jurisdictions; provided that NPDC shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (f) Use its best efforts to cause the Registrable Securities covered by such registration statement to be registered or qualified with or approved by such other governmental agencies or authorities (including, without limitation, state securities commissions) as may be necessary to enable the Holder or Holders thereof to consummate the disposition of such Registrable Securities. (g) Notify each Holder, promptly after NPDC shall receive notice thereof, of the date and time the registration statement and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such registration statement has been filed. (h) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and, at the request of any such Holder, subject to Section 2.5, deliver a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (i) Within a reasonable time before each filing of the registration statement or any amendment or supplement thereto with the SEC, furnish to one counsel, selected by the Holders of a Majority of the Registrable Securities included therein, copies of such documents proposed to be filed, which documents shall be subject to the reasonable approval of such counsel. (j) Use its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement and, if one is issued, immediately notify each selling Holder of the receipt of such notice and use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at the earliest possible moment. (k) Make available to each selling Holder and any attorney, accountant, or other agent or representative retained by any such selling Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents, and properties of NPDC, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause NPDC's officers, directors, and employees to supply all information requested by any such Inspector in connection with such registration statement, subject, in each case, to such confidentiality agreements as NPDC shall reasonably request. (l) Use its best efforts to cause the securities covered by such registration statement to be listed on any securities exchange or quoted on any quotation system on which similar securities issued by NPDC are then listed or quoted. (m) Otherwise use its best efforts to cooperate with the SEC and other regulatory agencies and take all reasonable actions and execute and deliver or cause to be executed and delivered all documents reasonably necessary to effect the registration of any securities under this Agreement. (n) Provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement. (o) If such registration involves an underwritten offering, obtain and furnish a comfort letter, dated the effective date of such registration statement, and the date of the closing under the underwriting agreement, signed by NPDC's independent public accountants and addressed to the Holders, in customary form and covering such matters as are customarily covered by comfort letters by independent public accountants in such public offerings and such other financial matters as the holders of a majority of the Registrable Securities being sold in such registration may reasonably request. (p) If such registration involves an underwritten offering, furnish a legal opinion of NPDC's counsel, dated the date of the closing under the underwriting agreement and addressed to the Holders, with respect to the registration statement, each amendment and supplement thereto, the prospectus included therein (including the preliminary prospectus) and other documents relating thereto, in customary form and covering such matters as are customarily covered by legal opinions of issuers' counsel in such public offerings. (q) During the period when a prospectus is required to be delivered under the Securities Act, promptly file all documents required to be filed with the SEC pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act. 2.8 Termination of Registration Rights. A Holder's registration rights shall expire if all Registrable Securities held by and issuable to such Holder may be sold under SEC Rule 144 during any 90 day period. 2.9 Furnishing Information. It shall be a condition precedent to the obligations of NPDC to take any action pursuant to Section 2.2, 2.3, or 2.4 that the selling Holders shall furnish to NPDC such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. 2.10 Indemnification. If any Registrable Securities are included in a registration statement under Section 2.2, 2.3, or 2.4: (a) To the extent permitted by law, NPDC will indemnify and hold harmless each Holder and the partners, members, officers, directors, trustees, stockholders, employees, and agents of each Holder, any underwriter (as defined in the Securities Act) for such Holder, and each person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions, or violations (collectively a "Violation") by NPDC: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by NPDC of the Securities Act, the Exchange Act, or any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law in connection with the offering covered by such registration statement; and NPDC will pay as incurred to each such Holder, partner, member, officer, director, trustee, stockholder, employee, agent, underwriter, or controlling person any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided however, that the indemnity agreement contained in this Section 2.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of NPDC, which consent shall not be unreasonably withheld, nor shall NPDC be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, partner, member, officer, director, trustee, stockholder, employee, agent, underwriter, or controlling person. With respect to any untrue statement or alleged untrue statement made in, or omission or alleged omission from, any preliminary prospectus, any Rule 430A prospectus, or any prospectus, the indemnity agreement contained in this Section 2.10(a) with respect to such preliminary prospectus, Rule 430A prospectus, or prospectus, to the extent it is based on the claim of a person who purchased securities directly from a person, shall not inure to the benefit of such person (or to the benefit of any of its partners, members, officers, directors, trustees, stockholders, employees, agents, or counsel, or any person controlling such person ) if the prospectus (or the prospectus as amended or supplemented if NPDC shall have filed with the SEC any amendment or supplement thereto) which shall have been furnished to such person prior to the time it sent written confirmation of or otherwise confirmed such sale to such purchaser does not contain such statement, alleged statement, omission, or alleged omission and a copy of the prospectus (or the prospectus as amended or supplemented if NPDC shall have filed with the SEC any amendment or supplement thereto) shall not have been sent or given to such purchaser and such purchaser shall not otherwise have received a copy thereof at or prior to the written confirmation of such sale. (b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the securities as to which such registration is being effected, indemnify and hold harmless NPDC, each of its directors, its officers, and each person, if any, who controls NPDC within the meaning of the Securities Act, any underwriter, and any other Holder selling securities under such registration statement or any of such other Holder's partners, members, officers, directors, trustees, stockholders, employees, agents, or any person who controls such Holder, against any losses, claims, damages, or liabilities (joint or several) to which NPDC or any such person may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder specifically for use in connection with such registration; and each such Holder will pay as incurred any legal or other expenses reasonably incurred by NPDC or any such person in connection with investigating or defending any such loss, claim, damage, liability, or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section 2.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity obligation of any Holder under this Section 2.10 exceed the net proceeds received by such Holder from the sale of Registrable Securities pursuant to such registration statement. (c) Promptly after receipt by an indemnified party under this Section 2.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 2.10. (d) If the indemnification provided for in this Section 2.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages, or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage, or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage, or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.10 were determined by pro rata allocation or any other method of allocation which does not take into account the equitable consideration referred to in this Section 2.10(d). (e) The obligations of NPDC and the Holders under this Section 2.10 shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Agreement. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. 2.11 Assignment of Registration Rights. A Holder may assign such Holder's rights under this Agreement, including, without limitation, its rights to cause NPDC to register Registrable Securities pursuant to this Section 2, to any person to whom (a) prior to the Spin-Off Date, GP Warrants are transferred, or (b) after the Spin-Off Date, NPDC Warrants or Registrable Securities are transferred, in either case, in compliance with the restrictions of this Agreement, the GP Warrants or the NPDC Warrants, as the case may be, and the Purchase Agreement, provided that (i) in the case of a transfer of Registrable Securities, such transferee (A) is a subsidiary, parent, general partner, limited partner, member, or affiliate of such Holder or an investment company registered under the Investment Company Act of 1940, as amended, advised by Gebelli Fund, LLC or (B) acquires a number of shares of Registrable Securities at least equal to one-fifteenth of the number of NPDC Warrants originally issued (as adjusted for stock splits, stock dividends, combinations, reorganizations, reclassifications, and other similar events), (ii) the transferor, within ten days after such transfer, furnishes to NPDC written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, and (iii) such transferee agrees in writing to be subject to all restrictions set forth in this Agreement. 2.12 Rule 144. With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, NPDC agrees to use its best efforts to, at all times at which any Registrable Securities are eligible for sale under Rule 144 (other than paragraph (k) thereof): (a) make and keep public information available, as those terms are understood and defined in Rule 144 or any similar or analogous rule promulgated under the Securities Act; (b) file with the SEC, in a timely manner, all reports and other documents required of NPDC under the Exchange Act; (c) furnish to each Holder, forthwith upon request, a written statement by NPDC as to its compliance with the reporting requirements of Rule 144 and of the Exchange Act, a copy of the most recent annual or quarterly report of NPDC, and such other reports and documents as such Holder may reasonably request to sell Registrable Securities under Rule 144; and (d) cooperate with each Holder in good faith to enable such Holder to deliver, promptly upon any sale of Registrable Securities (or securities which, in the absence of eligibility for sale under Rule 144, would be Registrable Securities) by such Holder under Rule 144 under the Securities Act, certificates representing such securities which shall not contain any restrictive legend. Section 3. Miscellaneous. 3.1 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. 3.2 Successors and Assigns. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the permitted successors, assigns, heirs, executors, and administrators of the parties hereto; provided, however, that prior to the receipt by NPDC of adequate written notice of the transfer of any Registrable Securities specifying the full name and address of the transferee, NPDC may deem and treat the person listed as the holder of such securities in its records as the absolute owner and holder of such securities for all purposes. 3.3 Entire Agreement. This Agreement, the NPDC Warrants, the Purchase Agreement, and the other documents delivered pursuant thereto set forth the entire understanding of the parties with respect to the subject matter hereof and supersede all existing agreements among them concerning such subject matter. 3.4 Severability. If any provision of this Agreement is invalid, illegal, or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. 3.5 Amendment and Waiver. (a) Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), by written instrument executed by NPDC and the Agent with the written consent of Majority Holders. Any amendment or waiver effected in accordance with this Section 3.5 shall be binding upon each Holder and NPDC. (b) Any waiver of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing. 3.6 Notices and Consents. Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by Federal Express, Express Mail, or similar overnight delivery or courier service or delivered (in person or by telecopy, telex, or similar telecommunications equipment) against receipt to the party to whom it is to be given (a) in the case of NPDC, to its address at 777 Westchester Avenue, Fourth Floor, White Plains, New York 10604, or (b) in the case of any Holder, to its address as set forth in NPDC's books and records (or, in either case, to such other address as the party shall have furnished in writing in accordance with the provisions of this Section 3.6). Any notice shall be deemed given at the time of receipt thereof. 3.7 Specific Performance. In addition to any other remedy provided at law or equity, the parties hereto shall be entitled to specific performance of this Agreement. 3.8 Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 3.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. The transmission by facsimile by each party of a signed counterpart copy of this Agreement to the other party shall be deemed proof of signature of the original and the signed facsimile so transmitted shall be deemed an original for the purposes of this Agreement. 3.10 Pronouns. All pronouns contained herein, and any variations thereof, shall be deemed to refer to the masculine, feminine or neutral, singular or plural, as to the identity of the parties hereto may require. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof. NATIONAL PATENT DEVELOPMENT CORPORATION By:_________________________ Name: Title: AGENT GABELLI FUNDS, LLC By:_________________________ Name: Title: NY\163973.5 EX-10 10 ex107.txt INDEMNITY AGREEMENT Exhibit 10.7 EXHIBIT G INDEMNITY AGREEMENT Indemnity Agreement (this "Agreement"), dated as of ______, 2003, by GP Strategies Corporation, a Delaware corporation ("GP"), for the benefit of National Patent Development Corporation, a Delaware corporation ("NPDC"), and MXL Industries, Inc., a Delaware corporation ("MXL"). WHEREAS, GP is a party to a certain Note and Warrant Purchase Agreement, dated as of August 8, 2003 (as modified and supplemented and in effect from time to time, the "Purchase Agreement"), among GP, NPDC, MXL, the purchasers named therein (the "Purchasers") and Gabelli Funds, LLC, as agent (the "Agent"), which Purchase Agreement calls for, among other things, the issuance of GP's 6% Conditional Subordinated Notes due 2008 (the "Notes") in the aggregate original principal amount of $7,500,000, to be secured by, among other things, a Mortgage, Security Agreement and Assignment of Leases, of even date herewith (as modified and supplemented and in effect from time to time, being herein called the "Mortgage"), by GP to the Agent encumbering certain property owned by GP and located in the Town of Pawling, County of Dutchess, State of New York (the "Premises"), and more particularly described in the Mortgage; and WHEREAS, GP, NPDC, and MXL anticipate that GP will convey the Premises to MXL in contemplation of the Spin-Off (as defined in the Purchase Agreement), and in connection with such conveyance MXL will assume the Mortgage in accordance with the provisions of the Purchase Agreement (the "Contemplated Conveyance"), and want to provide that, notwithstanding any consummation of the Contemplated Conveyance, GP will bear certain risks and liabilities associated with the Premises and the Mortgage; and WHEREAS, it is a condition to the execution of the Purchase Agreement by NPDC and MXL that GP execute this Agreement; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, GP hereby agrees and covenants as follows: 1. Certain Definitions. (a) "Indemnified Losses" shall mean damages, losses, liabilities, costs, expenses, obligations, penalties, fines, impositions, fees, levies, claims, litigation, demands, causes of action, defenses, judgments, suits, proceedings, disbursements or expenses (including, without limitation, reasonable attorneys' fees and disbursements incurred in connection with any of the matters with respect to which NPDC or MXL is indemnified hereunder or in connection with the enforcement of this Agreement) of any kind and nature whatsoever. (b) All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Purchase Agreement. 2. Indemnified Liabilities. GP, at its sole cost and expense, hereby irrevocably and unconditionally agrees to defend, protect, indemnify and hold NPDC and MXL harmless from and against any and all Indemnified Losses incurred by NPDC or MXL relating to, resulting from or otherwise attributable to, directly or indirectly: (a) Taxes (as defined in the Mortgage) payable with respect to the period prior to satisfaction or release of the Mortgage; (b) Insurance Policies (as defined in the Mortgage) payable with respect to the period prior to satisfaction or release of the Mortgage; (c) any amounts (including, without limitation, any penalties or fines) payable under New York Tax Law Article 11 (whether arising as of the date hereof or subsequent to the date hereof) in connection with the Mortgage or any severed or substitute mortgage executed pursuant to Section 27 of the Mortgage or Section 38 of the Mortgage; (d) any Transfer Taxes (as defined in the Mortgage) payable in connection with the Contemplated Conveyance; (e) foreclosure of the Mortgage (or any severed or substitute mortgage) or the security interest against the Defeasance Collateral (as defined in the Mortgage) in payment of the indebtedness under the Notes, and in such event the Indemnified Losses will include the loss of the value of the Premises or Defeasance Collateral, provided that, in the case of any foreclosure resulting from default under the Mortgage or Security Agreement (as defined in the Mortgage) by MXL which is not caused by a default of GP, GP (i) shall not be required to indemnify NPDC or MXL for any Indemnified Losses to the extent incurred in defending a claim of default by MXL, (ii) shall be entitled to defer payment for loss of the value of the Premises under this Agreement until the original Maturity Date (as defined in the Notes) and (iii) shall pay MXL interest on the amount so deferred at the rate and at the times set forth in the Notes during the period of such deferral; and (f) application of any proceeds of the Premises, including without limitation, Receipts (as defined in the Mortgage), proceeds of insurance and condemnation awards, to the indebtedness secured by the Mortgage to the extent not covered by Section 2(e) of this Agreement. 3. Payments. (a) Any payment by GP hereunder shall be made within five days after demand therefor by NPDC or MXL. If GP fails to make payment of any amount required to be paid by GP hereunder when payment is due, interest shall accrue on the amount of the payment from and after the due date until payment is paid to NPDC or MXL at the rate set forth in the Notes. (b) The obligations of GP hereunder shall specifically include the obligation to expend its own funds, to incur costs in its own name and to perform all actions as may be necessary to protect NPDC and MXL from the necessity of expending their own funds, incurring costs or performing any actions in connection with the matters for which NPDC or MXL is entitled to indemnification pursuant to this Agreement, and, if NPDC or MXL nonetheless expends its own funds or incurs any such cost or expense, to pay or reimburse NPDC or MXL therefor. (c) All payments provided for hereunder shall be effectively made to NPDC or MXL at NPDC's principal office in White Plains, New York (or as NPDC or MXL shall otherwise direct) in lawful money of the United States of America (in immediately available funds), and without setoff or counterclaim of any nature. 4. Notices. All notices, reports, demands, consents, approvals and requests required or permitted hereunder ("Notices") shall be given to the parties hereto at their respective addresses set forth above in accordance with Section 12.5 of the Purchase Agreement. 5. Survival. Notwithstanding anything to the contrary contained in this Agreement or in any other Transaction Document, this Agreement shall (a) remain in full force and effect and survive the consummation of the Contemplated Conveyance and (b) continue in full force and effect after satisfaction or release of the Mortgage with respect to any Indemnified Losses arising from any of the matters covered by this Agreement incurred prior to such satisfaction or release. 6. Nature of Obligations. The obligations of GP hereunder are direct, immediate and primary obligations and liabilities (and not secondary obligations and liabilities) and these obligations shall be absolute and unconditional, irrespective of (a) any illegality, invalidity or unenforceability of or defect in any provision of the Transaction Documents, or of any obligation of GP or any other Person thereunder, (b) the absence of any action to enforce the same and (c) any other circumstance which might otherwise constitute a defense available to, or discharge of, a guarantor or surety of any type. 7. Liability Not Limited. The liability of GP under this Agreement shall in no way be limited or impaired by (a) any amendment, modification or severance of, or substitution for, the Mortgage or any Security Agreement, or any alteration or change in value or condition of the Premises or the Defeasance Collateral, (b) any extensions of time for performance required by the Mortgage or any Security Agreement, (c) any alteration, sale or transfer of all or any part of the Premises, any change in the Defeasance Collateral or any sale or other disposition by GP of its direct or indirect ownership interests in NPDC or MXL (including by the Spin-Off), (d) the release of any other Person from performance or observance of any of the agreements, covenants, terms or conditions contained in any of the Transaction Documents by operation of law, voluntary act or otherwise, (e) the release or substitution in whole or in part of any security for the Notes, (f) NPDC or MXL exercising or refraining from exercising any rights against any other Person, (g) NPDC or MXL settling or compromising the liability of any Person hereunder or under the Transaction Documents or (h) NPDC or MXL applying any sums by whomsoever paid or howsoever realized to any liability or liabilities of MXL under the Mortgage, as NPDC or MXL may elect, including liabilities which are not Indemnified Losses, regardless of what liability or liabilities of GP remain unpaid; and in any of these cases, whether with or without notice to any GP and with or without consideration. 8. Waivers. GP hereby (a) waives and relinquishes all rights and remedies accorded by applicable law to indemnitors and guarantors and (b) waives notice of acceptance of this Agreement and notice of any liability to which it may apply, and waives diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment or notice of any kind in connection with this Agreement. GP further waives, to the maximum extent permitted by law, (c) the defense of the statute of limitations in any action hereunder or for the collection or the performance of the Indemnified Losses, (d) any defense that may arise by reason of (i) the incapacity, lack of authority, death or disability of GP, NPDC, MXL or any other Person, (ii) the revocation or repudiation of any of the Transaction Documents by any Person, or (iii) the unenforceability in whole or in part of the Transaction Documents and (e) the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against or by NPDC or MXL; it being the intention hereof that GP shall remain liable as principal, to the extent set forth herein, notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable discharge of any indemnitor or guarantor. 9. Payment of Expenses, Etc. GP agrees to pay for all out-of-pocket costs and expenses of NPDC or MXL arising in connection with (a) defending against any of the Indemnified Losses and (b) the enforcement of this Agreement (including, without limitation, the reasonable fees and disbursements of counsel for NPDC or MXL). 10. Amendments and Waivers. Any provisions of this Agreement may be modified, amended or waived if, but only if, such modification, amendment or waiver is in writing and is signed by GP, NPDC, and MXL. 11. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws. 12. Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. 13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and the respective successors and assigns of the parties. 14. Waiver Of Jury Trial. GP AND, BY ITS ACCEPTANCE OF THIS AGREEMENT, NPDC HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY COURSE OF CONDUCT COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF GP, NPDC, OR MXL RELATING TO THE TRANSACTION WHICH IS THE SUBJECT OF THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR NPDC AND MXL ACCEPTING THIS AGREEMENT. 15. Separability. If any provision of this Agreement is invalid, illegal or unenforceable, the balance of this Agreement shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. IN WITNESS WHEREOF, GP has duly executed this agreement as of the day and year first above written. GP STRATEGIES CORPORATION By: --------------------------------- Name: Title: EX-10 11 ex108.txt SUBORDINATION AGREEMENT Exhibit 10.8 EXHIBIT K SUBORDINATION AGREEMENT THIS SUBORDINATION AGREEMENT is made this _____ day of August, 2003, among GP STRATEGIES CORPORATION, a corporation organized under the laws of the State of Delaware (the "Company"), Gabelli Funds LLC, as Agent (the "Agent"), on behalf of the holders of the Company's 6% Conditional Subordinated Notes due 2008 (the "Subordinated Notes," such holders being the "Subordinated Creditors" and each holder being a "Subordinated Creditor"), and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, its successors and assigns (the "Lender"). RECITALS A. General Physics Corporation, a Delaware corporation (the "Borrower"), has entered into a Financing and Security Agreement with Lender dated August __, 2003 (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement") pursuant to which the Lender has agreed to provide certain credit facilities to the Borrower (the "Loans"). B. The Company has executed and delivered to the Lender a Guaranty of Payment Agreement guarantying all of the Borrower's Obligations (as defined in the Financing Agreement) to the Lender. C. Under the terms of the Financing Agreement, the execution and delivery of this Agreement is a condition precedent to the Lender's obligation to continue to make the Loans and extend the Credit Facilities (as defined in the Financing Agreement). AGREEMENTS NOW, THEREFORE, in consideration of the foregoing and to induce the Lender from time to time to make, extend or continue loans, credits or other financial accommodations to the Borrower, the Subordinated Creditor and the Company severally represent and agree with the Lender as follows: ARTICLE I DEFINITIONS Section 1.1 Specific Definitions. As used in this Agreement, the terms defined in the preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings: "Bankruptcy Code" means Title 11 of the United States Code, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "Blockage Notice" means a notice from the Lender to the Agent stating that an Event of Default exists under the Senior Indebtedness. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State are authorized or required to close. "Financing Documents" means the collective reference to each and every note, instrument, security agreement, pledge agreement, guaranty agreement, mortgage, deed of trust, indemnity deed of trust, loan agreement, hypothecation agreement, indemnity agreement, letter of credit application, assignment, or any other document (whether similar or dissimilar to any of the foregoing) previously, simultaneously or hereafter executed and delivered by the Borrower or any other Person, singly or jointly with another Person or Persons, in connection with any of the Senior Indebtedness, including, without limitation, the "Financing Documents" as defined in the Financing Agreement, all as amended, modified, restated, substituted, extended and renewed at any time and from time to time. "Insolvency Proceeding" means any receivership, conservatorship, general meeting of creditors, insolvency or bankruptcy proceeding, assignment for the benefit of creditors, or any proceeding or action by or against the Company for any relief under any bankruptcy or insolvency law or other laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, dissolution, liquidation, compositions or extensions, or the appointment of any receiver, intervenor or conservator of, or trustee, or similar officer for, the Company or any substantial part of its properties or assets, including, without limitation, proceedings under the Bankruptcy Code, or under other similar federal, state or local statute, laws, rules and regulations, all whether now or hereafter in effect. "Lien" means any mortgage, deed of trust, deed to secure debt, grant, pledge, security interest, assignment, encumbrance, judgment, financing statement, lien or charge of any kind, whether perfected or unperfected, avoidable or unavoidable, consensual or non-consensual including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "Mortgage" means the Mortgage, Security Agreement and Assignment of Leases dated ___________________, 2003 executed and delivered by the Company to the Agent to secure the Subordinated Indebtedness which is a lien on the property located in Dutchess County, New York. "Person" means an individual, a corporation, a partnership, a joint venture, a trust, an unincorporated association, a government or political subdivision or agency thereof or any other entity. "Security" means the Security set forth in EXHIBIT A attached hereto and made a part hereof. "Senior Indebtedness" means all indebtedness, liabilities and obligations of the Company to the Lender of every kind and nature whatsoever, whether now existing or hereafter arising or created at any time, including, without limitation, the guaranty of the "Obligations," and further includes, without limitation, such indebtedness, liabilities and obligations of the Company to the Lender (and to any Person which replaces financing provided by the Lender) (a) which are direct, indirect, contingent, primary, secondary, alone, jointly with others, acquired directly or by assignment, due, to become due, unsecured, secured, future advances, incurred or assumed, (b) which relate to or arise from guaranties, indemnifications or other similar agreements in favor of third parties made by the Lender at the request or for the benefit of the Company, (c) which are claims of subrogation, indemnification, reimbursement or contribution of the Lender against the Company or any other Person relating in any manner to obligations of the Company or the Security, (d) which are claims of whatever nature and whenever arising on account of the avoidance of payments or other transfers to or for the benefit of the Lender in Insolvency Proceedings or otherwise, or (e) which are claims (including, without limitation, claims arising or accruing after the commencement of Insolvency Proceedings by or against the Company or any assets of the Company, whether or not such claims are allowed) for principal, interest, expense payments, liquidation costs, or attorneys' fees and expenses, all of the foregoing whether arising under contract, by tort, at law, in equity or otherwise. "Standstill Period" shall mean any period during which the Company is subject to any Insolvency Proceeding and also any period commencing from the date of a Blockage Notice from the Lender and continuing until the Senior Indebtedness is paid and satisfied in full (or until the event of default giving rise to such Blockage Notice is sooner cured within any applicable grace period or cured with the unconditional permission of the Lender). "State" means the State of New York. "Subordinated Indebtedness" means any and all existing and future indebtedness, liabilities and obligations of the Company to the Subordinated Creditors under the Subordinated Notes. Section 1.2 Other Definitional Provisions. Unless otherwise defined herein, all terms used herein which are defined by the New York Uniform Commercial Code shall have the same meanings as assigned to them by the New York Uniform Commercial Code unless and to the extent varied by this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit references are references to sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. Reference to any one or more of the Financing Documents and any of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified. References to this Agreement include all Exhibits hereto. ARTICLE II SUBORDINATION Section 2.1 Subordinated Indebtedness. 2.1.1 Subordination. The Subordinated Creditors hereby subordinate and postpone the payment of all of the Subordinated Indebtedness to and in favor of the indefeasible and full payment in cash of the Senior Indebtedness; provided, however, the Subordinated Creditors shall have limited rights to receive payment of the Subordinated Indebtedness as provided in Section 2.1.2 and Section 2.2.3 below. 2.1.2 Payments. Until all of the Senior Indebtedness has been fully and indefeasibly paid in cash and there is no agreement between the Company and the Lender under which the Lender is required to or may make loans or provide other financial accommodations, the Subordinated Creditor shall not, without the prior written consent of the Lender, except as permitted by the provisions of EXHIBIT B attached hereto and made a part hereof, ask, demand, accelerate, declare a default under, sue for, set off, accept or receive any payment of all or any part of the Subordinated Indebtedness; provided, however, the Subordinated Creditor may receive any payments described in EXHIBIT C attached hereto and made a part hereof. Section 2.2 Security. 2.2.1 Security for Subordinated Indebtedness. The Subordinated Creditor and the Company agree, represent and warrant that the Subordinated Indebtedness is not, and shall not be, secured in any way directly or indirectly by any Security, other than the Mortgage, the lien thereof and the property encumbered thereby and any UCC financing statement filed in connection therewith. 2.2.2 Subordination of Liens other than Mortgage. The Subordinated Creditors hereby subordinate the lien and priority of the Subordinated Creditors' existing and future Liens and other interests, if any, in and to the Security to the Lender's existing and future interest in the Security notwithstanding the time of attachment of the interests of the Lender or the Subordinated Creditors or the time the Senior Indebtedness or the Subordinated Indebtedness is incurred; provided, however, the Lender acknowledges and agrees that Subordinated Creditors' interest in the Mortgage, and the Lien thereof, shall not be subordinated to Lender's existing and future interest in the Security. Notwithstanding anything to the contrary contained in this Agreement, under applicable law or otherwise, in the event that the Liens of the Lender are at any time unperfected with respect to any or all of the Security, the lack of perfection by the Lender as to any such Security shall not affect the validity, enforceability or priority of any Lien on the Security in favor of the Subordinated Creditors. In any such event, the Liens of the Subordinated Creditors shall have priority over any and all other Liens in favor of any third party with respect to the Security (including, but not limited to any trustee under the Bankruptcy Code), and the Lender hereby appoints and constitutes the Subordinated Creditors as the Lender's agent and bailee for purposes of perfection of the Liens of the Lender in the Security such that the Lien in favor of the Subordinated Creditors in the Security shall be held by the Subordinated Creditors for the benefit of the Lender and the proceeds of any disposition of the Security shall be and are in all respects subject to the priority of right to payment and satisfaction of first, the Senior Indebtedness and then, the Subordinated Indebtedness. The lien priorities provided in this Section shall not be altered or otherwise affected by any amendment, modification, supplement, extension, renewal, restatement or refinancing of either the Senior Indebtedness or the Subordinated Indebtedness, nor by any action or inaction which the Lender or the Subordinated Creditors may take or fail to take in respect of the Security, except as otherwise provided above in this subsection. 2.2.3 No Action by Subordinated Creditor. Except to the extent permitted by this Agreement, until the Senior Indebtedness has been fully and indefeasibly paid in cash and there exists no agreement between the Company and the Lender under which the Lender is required to or may make loans or provide other financial accommodations, the Subordinated Creditors shall not, without the prior written consent of the Lender, ask, demand, assign, declare a default under, sue for, liquidate, sell, foreclose, set off, collect, accept a surrender, receive any proceeds, petition, commence or otherwise initiate any Insolvency Proceedings (or join any other Person in so doing) against the Company or its assets, commence any action or proceeding to contest the provisions of this Agreement or the priority of the Lien or other interest of the Lender in the Security, or otherwise realize or seek to realize upon all or any part of the Security. Except to the extent permitted by this Agreement, in no event shall the Subordinated Creditors: (a) take possession, by replevin or otherwise, of the Company's personal property or render the Company's equipment unusable; (b) give notices to the Company's account debtors; (c) require the Company's personal property to be assembled or made available to the Subordinated Creditor; or (d) pursue any action with respect to any Security with respect to which the Lender has a Lien. 2.2.4 Releases, Etc. In the event the Lender may from time to time execute releases, partial releases, terminations, reconveyances, subordinations or other documents releasing or otherwise limiting the Lender's interests in the Security, the Agent agrees to execute and deliver at the same time such further documents as the Lender may require to effect a corresponding change to the Subordinated Creditor's position in the same Security. 2.2.5 Exercise of Remedies. The Lender shall have the exclusive right to exercise and enforce all privileges and rights with respect to the Security according to the Lender's discretion and the exercise of the Lender's business judgment, including, without limitation, the exclusive right to take or retake control or possession of such Security and to hold, prepare for sale, process, sell, lease, dispose of, or liquidate such Security. 2.2.6 Disposition of Security. Only the Lender shall have the right to restrict or permit, or approve or disapprove, the sale, transfer or other disposition of Security. To the extent applicable in connection with such sale, transfer or other disposition, the Agent will, promptly upon the request of the Lender, release or otherwise terminate any Subordinated Creditor's Liens, if any, upon the Security. The Agent will promptly deliver such releases, acknowledgements and other documents as the Lender may require in connection therewith. Section 2.3 Further Representations and Warranties. The Company represents and warrants to the Lender that true, correct and complete copies of all documents relating to the Subordinated Indebtedness in effect as of the date hereof have been furnished to the Lender. The Agent represents and warrants to Lender that: (a) true, correct and complete copies of this Agreement have been furnished to each Subordinated Creditor; (b) the execution, delivery and performance of this Agreement by the Agent is within its authorization by the Subordinated Creditors; and (c) this Agreement has been properly executed and delivered by the Agent on behalf of the Subordinated Creditors and constitutes the valid and legally binding obligations of the Subordinated Creditors and is fully enforceable against the Subordinated Creditors in accordance with its terms. Section 2.4 Further Documents. The Agent and the Company agree they shall promptly execute such further documents and acknowledgements (including, without limitation, amendments to and releases of financing statements and other documents of record) as the Lender may reasonably require to confirm or evidence their respective obligations and the Lender's rights under this Agreement. ARTICLE III DISTRIBUTIONS AND RECEIPTS Section 3.1 Distributions, Etc. 3.1.1 Application of Proceeds. In the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the assets of the Company or the proceeds thereof to creditors of the Company or to the holders of any indebtedness, liabilities and obligations of the Company, by reason of the liquidation, dissolution or other winding up of the Company or Company's business, or in the event of any sale or Insolvency Proceedings with respect to the Company or its assets, then in any such event, any payment, distribution or benefit of any kind whatsoever or character, either in cash, securities or other property, whether or not on account of the Security, which shall be payable, deliverable or receivable upon or with respect to all or any part of the Subordinated Indebtedness (other than on account of the Mortgage, the lien thereof, or the property encumbered thereby) shall be paid or delivered directly to the Lender for application to the Senior Indebtedness (whether due or not due and in such order and manner as the Lender may elect and including, without limitation any interest accruing subsequent to the commencement of any such event or Insolvency Proceedings) until the Senior Indebtedness shall have been fully and indefeasibly paid in cash and satisfied. 3.1.2 Insolvency Proceedings. In connection with any Insolvency Proceedings, the Subordinated Creditor hereby irrevocably authorizes and empowers the Lender, and irrevocably appoints the Lender the Subordinated Creditor's attorney-in-fact to, with respect to the Subordinated Indebtedness other than with respect to any secured claim of the Subordinated Creditors within the meaning of Section 506 of the Bankruptcy Code arising in connection with the Mortgage, the lien thereof, or the property encumbered thereby, (a) demand, sue for, collect and receive every payment or distribution and give acquittance therefor, (b) enforce claims comprising Subordinated Indebtedness in the name of the Lender, or the name of the Subordinated Creditor, by proof of debt, proof of claim, suit or otherwise; (c) collect any assets of the Company distributed, dividended or applied by way of dividend or payment, or any such securities issued, on account of Subordinated Indebtedness and apply the same, or the proceeds of any realization upon the same, to Senior Indebtedness (whether due or not due in such order and manner as the Lender may elect) until all Senior Indebtedness shall have been indefeasibly paid in full in cash; (d) vote claims compromising Subordinated Indebtedness to accept or reject any plan of partial or complete liquidation, reorganization, arrangement, composition or extension, provided, however, that the foregoing shall not preclude the Subordinated Creditors from exercising any rights they may have under Section 1111(b) of the Bankruptcy Code; (e) take generally any action which the Agent or the Subordinated Creditors might otherwise take; and (f) take such other actions in the Lender's own name or in the name of the Agent or the Subordinated Creditors or otherwise, as the Lender may deem necessary or advisable to carry out the provisions of this Agreement. 3.1.3 Execution of Additional Documents. The Agent hereby agrees to execute and deliver to the Lender such other documents or other instruments as may be reasonably requested by the Lender to confirm the obligations of the Subordinated Creditors under this Agreement. Section 3.2 Receipts by Subordinated Creditor. Should any payment or distribution not permitted by the provisions of this Agreement, or property or proceeds thereof, be received by the Agent or any Subordinated Creditor upon or with respect to all or any part of the Subordinated Indebtedness and/or the Security prior to the full payment and satisfaction of the Senior Indebtedness, the Agent or such Subordinated Creditor will promptly deliver the same to the Lender in precisely the form received (except for the endorsement or assignment of the Agent or such Subordinated Creditor when the Lender deems appropriate), for application to the Senior Indebtedness (whether due or not due and in such order and manner as the Lender may elect), and, until so delivered, the same shall be held in trust by the Agent or such Subordinated Creditor as property of the Lender. In the event of the failure of the Agent or such Subordinated Creditor to make any such endorsement or assignment, the Lender, or any of its officers or employees on behalf of the Lender, is hereby irrevocably authorized in its own name or in the name of the Agent or such Subordinated Creditor to make the same, and is hereby appointed the Agent or such Subordinated Creditor's attorney-in-fact for those purposes, that appointment being coupled with an interest and irrevocable. ARTICLE IV ADDITIONAL AGREEMENTS Section 4.1 Consents, Waivers, Etc. Agent hereby consents that at any time and from time to time and with or without consideration, the Lender may, without further consent of or notice to the Agent or the Subordinated Creditors and without in any manner affecting, impairing, lessening or releasing any of the provisions of this Agreement, renew, extend, change the manner, time, place and terms of payment of, sell, exchange, release, substitute, surrender, realize upon, modify, waive, grant indulgences with respect to and otherwise deal with in any manner: (a) all or any part of the Senior Indebtedness; (b) all or any of the Financing Documents to which it is a party; (c) all or any part of any property at any time included within the Security; and (d) any Person at any time primarily or secondarily liable for all or any part of the Senior Indebtedness and/or any collateral and Security therefor, all as if this Subordination Agreement and any interest which the Subordinated Creditors have in the Security did not exist. Agent hereby waives demand, presentment for payment, protest, notice of dishonor and of protest with respect to the Senior Indebtedness, the Subordinated Indebtedness and/or the Security, notice of acceptance of this Agreement, notice of the making of any of the Senior Indebtedness and notice of default under any of the Financing Documents. Section 4.2 Continuing Agreement. This is a continuing Subordination Agreement until all of the Senior Indebtedness has been fully and indefeasibly paid in cash, until all of the Senior Indebtedness and all of the Subordinated Creditor's obligations to the Lender have been performed and satisfied, until the Lender has no obligation or agreement to allow further Senior Indebtedness and until the Lender has terminated this Agreement in writing. Without implying any limitation on the foregoing, if at any time any payment or assets distributed or paid over, or portion thereof, made by, or for the account of, the Company, by any Subordinated Creditor or otherwise on account of any of the Senior Indebtedness is set aside by any court or trustee having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored or returned by the Lender to the Company or any other Person under any Insolvency Proceedings or otherwise, the Agent and the Company hereby agree that this Agreement shall continue and remain in full force and effect or be reinstated, as the case may be, all as though any such payment had not been made and this Agreement had at all times remained in effect. Section 4.3 No Third Party Beneficiaries. The provisions of this Agreement are solely for the benefit of the Lender, its successors and assigns, and to any Person which, with the Lender's concurrence, replaces financing provided by the Lender and there are no other parties or Persons whatsoever (including, without limitation, the Company and its successors and assigns) who are intended to be benefited in any manner whatsoever by this Agreement. Section 4.4 If any of the Senior Indebtedness should be transferred or assigned by the Lender, this Agreement will inure to the benefit of the Lender's transferee or assignee to the extent of such transfer or assignment, provided that the Lender shall continue to have the unimpaired right to enforce this Agreement as to any of the Senior Indebtedness not so transferred or assigned. Section 4.5 Actions Upon Breach. 4.5.1 Company's Defense. If the Agent or any Subordinated Creditor, contrary to this Agreement, commences or participates in any action or proceeding against the Company or the Security, the Company may interpose as a defense or dilatory plea the making of this Agreement, and the Lender may intervene and interpose such defense or plea in the Lender's name or in the name of the Company. Should the Agent or such Subordinated Creditor, contrary to this Agreement, in any way attempt to enforce payment of the Subordinated Indebtedness or any part thereof or to realize upon the Security or any part thereof, either the Lender (in its own name or in the name of the Company), the Company itself, or the Lender and the Company, may restrain the Agent or such Subordinated Creditors from so doing, it being understood and agreed by the Agent and the Subordinated Creditors that (a) the Lender's and/or the Company's damages from its actions may at that time be difficult to ascertain and may be irreparable, and (b) the Agent and the Subordinated Creditors waive any defense that the Company and/or that the Lender cannot demonstrate damage and/or can be made whole by the awarding of damages. The Agent and the Subordinated Creditors hereby irrevocably authorize and empower the Lender, and irrevocably appoint the Lender, as the Agents' and the Subordinated Creditors' attorney-in-fact for the purpose of executing and delivering such assignments, endorsements, releases, other instruments and other documents which the Agent or the Subordinated Creditors are or may be required to execute and deliver under the terms of this Agreement. 4.5.2 Equitable Relief for Lender. If any one or more of the Agent, any Subordinated Creditor or the Company, contrary to this Agreement, makes, attempts to or threatens to make or receive any payment, take any action with respect to the Security or take any action contrary to this Agreement, or fails to take any action required by this Agreement, the Lender may obtain relief by injunction, specific performance and/or other appropriate equitable relief, it being understood and agreed by the Agent, the Subordinated Creditors and the Company that (a) the Lender's damages from its actions may at that time be difficult to ascertain and may be irreparable and (b) the Agent, the Subordinated Creditors and the Company waive any defense or claim that the Company and/or the Lender cannot demonstrate damage and/or can be made whole by the awarding of damages. 4.5.3 Costs and Expenses. The Company agrees to indemnify the Lender and to hold the Lender harmless for any and all reasonable costs and expenses (including, without limitation, reasonable attorney's fees) as they arise, relating to actions of the Agent, any Subordinated Creditor or the Company taken contrary to this Agreement. Section 4.6 Statement of Debt. The Company will, at any time or times (i) upon the request of the Lender, promptly furnish to the Lender a true, correct and complete statement of the outstanding Subordinated Indebtedness and (ii) upon the request of Agent, promptly furnish to Agent a true, correct and complete statement of the outstanding Senior Indebtedness. Section 4.7 Subrogation; Marshalling. The Subordinated Creditors shall not be subrogated to, or be entitled to any assignment of, any Senior Indebtedness or evidence of Senior Indebtedness or any Security until all Senior Indebtedness is indefeasibly paid and satisfied in full. The Subordinated Creditors hereby waive any and all rights to have any Security or any part thereof granted to the Lender marshaled in any Insolvency Proceedings or upon any foreclosure or other disposition of such Security by the Lender or otherwise. ARTICLE V MISCELLANEOUS Section 5.1 Notices. All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or two (2) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Company: GP Strategies Corporation 777 Westchester Avenue, 4th Floor White Plains, NY 10605 Attention: General Counsel Lender: Wachovia Bank, National Association MD3505 7 St. Paul Street, 2nd Floor Baltimore, Maryland 21202 Attention: Lucy Campbell Agent: Gabelli Funds, LLC One Corporate Center Rye, New York 10580 Attention: Bruce N. Alpert By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. Section 5.2 Additional Senior Indebtedness. Nothing herein contained shall obligate the Lender to grant credit to, or continue financing arrangements with, the Company. Section 5.3 Delay in Enforcement, etc. No delay or failure on the part of the Lender to exercise any of its rights or remedies hereunder or now or hereafter existing at law or in equity or by statute or otherwise, or any partial or single exercise thereof, shall constitute a waiver thereof. All such rights and remedies are cumulative and may be exercised singly or concurrently and the exercise of any one or more of them will not be a waiver of any other. No modification to or waiver of any of the Lender's rights and remedies under this Agreement or otherwise, and no modification or amendment of this Agreement, shall be deemed to be made by the Lender unless the same shall be in writing, duly signed on behalf of the Lender, and each such waiver, if any, shall apply only with respect to the specific instance involved and shall in no way impair the rights and remedies of the Lender hereunder in any other respect at any other time. Without limiting the generality of the foregoing, the Lender may proceed against the Company with or without proceeding against any guarantor, surety, indemnitor or any other Person who may be liable for all or any part of the Obligations, may proceed against all or any part of the Security, or may refrain taking all or any such action without affecting the agreements and obligations of the parties to this Agreement. Section 5.4 Successors and Assigns. This Agreement shall be binding upon the Subordinated Creditors and the Company and the Subordinated Creditors' and the Company's successors and assigns and shall inure to the benefit of the Lender and the Lender's successors and assigns, other holders of or obligees under the Senior Indebtedness and any Person which, with the Lender's concurrence replaces financing provided by the Lender. Section 5.5 Headings. The paragraph headings of this Agreement are for convenience only, and shall not limit or otherwise affect any of the terms hereof. Section 5.6 Applicable Law; Jurisdiction. 5.6.1 Applicable Law. The parties to this Agreement acknowledge and agree that this Agreement shall be governed by the laws of the State, as if this Agreement had been executed, delivered, administered and performed solely within the State even though for the convenience and at the request of the Agent or the Company, this Agreement may be executed elsewhere. 5.6.2 Submission to Jurisdiction. The parties to this Agreement irrevocably submit to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. The parties to this Agreement irrevocably waive, to the fullest extent permitted by law, any objection that either of them may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding and may be enforced in any court in which the applicable party is subject to jurisdiction, by a suit upon such judgment, provided that service of process is effected upon the applicable party in one of the manners specified in this Section or as otherwise permitted by applicable laws. 5.6.3 Service of Process. The parties to this Agreement hereby consent to process being served in any suit, action or proceeding of the nature referred to in this Section by the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, at the address designated in or pursuant to Section 5.1 (Notices). The parties to this Agreement irrevocably agree that such service (y) shall be deemed in every respect effective service of process in any such suit, action or proceeding, and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against the Agent, the Subordinate Creditors or the Company, as the case may be, in the courts of any jurisdiction or jurisdictions. IN WITNESS THEREOF, the signatures and seals of the Agent and of the Company are subscribed to this Agreement as of the date first written above. WITNESS/ATTEST: GABELLI FUNDS, LLC (On behalf of the Subordinated Creditors) _________________________ By:_________________________(SEAL) Name: Title: WITNESS/ATTEST: GP STRATEGIES CORPORATION _________________________ By:_________________________(SEAL) Name: Title: WITNESS/ATTEST: WACHOVIA BANK, NATIONAL ASSOCIATION _________________________ By:_________________________(SEAL) Name: Title: EX-10 12 ex109.txt AMENDED AND RESTATED COMPENSATION AGREEMENT Exhibit 10.9 AMENDED AND RESTATED INCENTIVE COMPENSATION AGREEMENT Amended and Restated Agreement, dated June 11, 2003, between GP Strategies Corporation, a Delaware corporation with principal executive offices at 777 Westchester Avenue, White Plains, NY 10604 (the "Company"), and Jerome I. Feldman, residing at 145 West Patent Road, Bedford Hills, New York 10507 ("Employee"). WHEREAS, Employee is a founder of the Company and has for many years been Chairman of the Board and Chief Executive Officer of the Company; WHEREAS, Section 5(b) of the Employment Agreement, dated as of June 1, 1999, as amended (the "Employment Agreement"), between the Company and Employee provides that the Company and Employee will negotiate in good faith to formulate an annual incentive based compensation arrangement based on the Company achieving certain financial milestones which will be fair and equitable to Employee and the Company and its stockholders; and WHEREAS, the Company and Employee have entered into an Agreement, dated as of May 3, 2002 (the "2002 Agreement"), to provide incentive compensation to Employee in a manner that closely aligns the amount of such compensation to the interests of the Company's stockholders and the enhancement of stockholder value; and WHEREAS, as of the time of the execution of this Agreement, no incentive compensation has been earned by Employee under the 2002 Agreement; and WHEREAS, the Company and Employee wish to amend and restate the 2002 Agreement to modify the timing of certain payments under the 2002 Agreement. NOW, THEREFORE, intending to be legally bound, and for and in consideration of the mutual covenants set forth herein, the parties hereto agree as follows: 1. Incentive Compensation. Employee shall be eligible to receive from the Company up to five payments (each, an "Incentive Payment"). The Employee will earn an Incentive Payment in an amount equal to $1 million on the first date that each of the following events occurs: (a) the closing price of the common stock, par value $0.01 per share, of the Company on the New York Stock Exchange (the "Closing Price") exceeds, for at least 10 consecutive trading days, $5.40 (the "First Incentive Payment"); provided that if the First Incentive Payment is not earned prior to May 3, 2004, the First Incentive Payment shall be earned on the date, if any, that the Second Incentive Payment (as defined below) is earned; (b) the Closing Price exceeds, for at least 10 consecutive trading days, $6.30 (the "Second Incentive Payment"); provided that if the Second Incentive Payment is not earned prior to the May 3, 2006, the Second Incentive Payment shall be earned on the date, if any, that the Third Incentive Payment (as defined below) is earned; (c) the Closing Price exceeds, for at least 10 consecutive trading days, $7.20 (the "Third Incentive Payment"); (d) the Closing Price exceeds, for at least 10 consecutive trading days, $8.10; and (e) the Closing Price exceeds, for at least 10 consecutive trading days, $9.00. Each Incentive Payment shall be paid on the date it is earned, except that any Incentive Payment earned prior to December 31, 2003 shall be paid on the last payroll payment date in 2003. 2. Set-off Against Loans. To the extent there are any outstanding loans from the Company to Employee at the time an Incentive Payment is payable, the Company will set off the payment of such Incentive Payment against the outstanding principal and interest under such loans. 3. Termination. This Agreement will terminate on the earlier to occur of (a) May 3, 2007 and (b) the date of termination of Employee's employment with the Company (other than termination by (i) the Company in breach of the Employment Agreement or (ii) Employee for Good Reason (as defined in the Employment Agreement)). Notwithstanding anything set forth in this Agreement to contrary, (A) no Incentive Payment shall be earned after the termination of this Agreement and (B) termination of this Agreement shall not affect the obligation of the Company to pay any Incentive Payment earned prior to such termination. 4. Employment. Notwithstanding anything set forth in this Agreement to contrary, nothing in this Agreement shall be construed as an agreement by the Company to employ the Employee for any period of time and, except as provided in the Employment Agreement, the Company shall have the right at any time to terminate the Employee with or without cause. 5. Miscellaneous. (a) The dollar amounts in Section 1 shall be equitably adjusted for stock splits, stock dividends, and similar transactions. (b) This Agreement shall not be assignable, in whole or in part, by either party without the prior written consent of the other party, and any attempted assignment without such prior written consent shall be void. (c) This Agreement constitutes the entire agreement between the parties pertaining to the subject matter hereof, and supersedes all prior and contemporaneous agreements, representations and understandings, written or oral, of the parties. (d) This Agreement may not be modified, amended, or supplemented except by a writing signed by each of the parties hereto. (e) This Agreement may be executed in counterparts each of which shall be deemed an original but both of which together shall constitute one and the same instrument. (f) This Agreement shall be governed by and interpreted under the internal laws of the State of New York, without regard to conflicts of laws principles. IN WITNESS WHEREOF, the parties have signed this Agreement on the date first set forth above. GP STRATEGIES CORPORATION By: ----------------------------------------- Name: Title: -------------------------------------------- Jerome I. Feldman EX-10 13 ex1010.txt FINANCIAL AND SECURITY AGREEMENT DATED AUGUST 13, 2003 Exhibit 10.10 FINANCING AND SECURITY AGREEMENT Dated August 13, 2003 By and Between GENERAL PHYSICS CORPORATION, MXL INDUSTRIES, INC. And WACHOVIA BANK, NATIONAL ASSOCIATION TABLE OF CONTENTS ARTICLE I DEFINITIONS 1 Section 1.1 Certain Defined Terms. 1 Section 1.2 Accounting Terms and Other Definitional Provisions. 19 ARTICLE II THE CREDIT FACILITIES 19 Section 2.1 The Revolving Credit Facility. 19 2.1.1 Revolving Credit Facility. 19 2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans. 20 2.1.3 Borrowing Base. 20 2.1.4 Borrowing Base Report. 21 2.1.5 Revolving Credit Note. 21 2.1.6 Mandatory Prepayments of Revolving Loan. 22 2.1.7 Optional Prepayments of Revolving Loan. 22 2.1.8 The Collateral Account. 22 2.1.9 Revolving Loan Account. 23 2.1.10 Revolving Credit Unused Line Fee. 23 Section 2.2 The Letter of Credit Facility. 23 2.2.1 Letters of Credit. 23 2.2.2 Letter of Credit Fees. 24 2.2.3 Terms of Letters of Credit. 24 2.2.4 Procedures for Letters of Credit. 25 2.2.5 Payments of Letters of Credit. 25 2.2.6 Change in Law; Increased Cost. 26 2.2.7 General Letter of Credit Provisions. 27 Section 2.3 Applicable Interest Rates. 28 Section 2.4 General Financing Provisions. 28 2.4.1 Borrowers' Representatives. 28 2.4.2 Use of Proceeds of the Revolving Loan. 29 2.4.3 Origination Fee. 29 2.4.4 Monitoring Fee. 29 2.4.5 Computation of Interest and Fees. 29 2.4.6 Maximum Interest Rate. 29 2.4.7 Payments. 30 2.4.8 Liens; Setoff. 30 2.4.9 Requirements of Law. 30 2.4.10 ACH Transactions and Swap Contracts. 31 2.4.11 Termination of Revolving Credit Facility. 31 2.4.12 Elimination of MXL Receivables from Borrowing Base. 31 ARTICLE III THE COLLATERAL 32 Section 3.1 Debt and Obligations Secured. 32 Section 3.2 Grant of Liens. 32 3.2.1 Borrower Collateral. 32 3.2.2 MXL Collateral 32 Section 3.3 Collateral Disclosure List. 33 Section 3.4 Personal Property. 33 Section 3.5 Record Searches. 34 Section 3.6 Costs. 34 Section 3.7 Release. 34 Section 3.8 Inconsistent Provisions. 35 ARTICLE IV REPRESENTATIONS AND WARRANTIES - Borrower 35 Section 4.1 Representations and Warranties. 35 4.1.1 Subsidiaries. 35 4.1.2 Existence. 35 4.1.3 Power and Authority. 35 4.1.4 Binding Agreements. 35 4.1.5 No Conflicts. 36 4.1.6 No Defaults, Violations. 36 4.1.7 Compliance with Laws. 36 4.1.8 Margin Stock. 36 4.1.9 Investment Company Act; Margin Stock. 36 4.1.10 Litigation. 37 4.1.11 Financial Condition. 37 4.1.12 Full Disclosure. 37 4.1.13 Indebtedness for Borrowed Money. 37 4.1.14 Subordinated Debt. 38 4.1.15 Taxes. 38 4.1.16 ERISA. 38 4.1.17 Title to Properties. 38 4.1.18 Patents, Trademarks, Etc. 39 4.1.19 Employee Relations. 39 4.1.20 Presence of Hazardous Materials or Hazardous Materials Contamination. 39 4.1.21 Perfection and Priority of Borrower Collateral. 40 4.1.22 No Suspension or Debarment. 40 4.1.23 Collateral Disclosure List. 40 4.1.24 Business Names and Addresses. 40 4.1.25 Equipment. 40 4.1.26 Accounts. 40 4.1.27 Compliance with Eligibility Standards. 41 Section 4.2 Survival; Updates of Representations and Warranties. 41 ARTICLE V REPRESENTATIONS AND WARRANTIES - MXL 41 Section 5.1 Representations and Warranties. 41 5.1.1 Existence. 41 5.1.2 Power and Authority. 41 5.1.3 Binding Agreements. 42 5.1.4 No Conflicts. 42 5.1.5 No Defaults, Violations. 42 5.1.6 Compliance with Laws. 42 5.1.7 Financial Condition. 42 5.1.8 Full Disclosure. 43 5.1.9 Perfection and Priority of MXL Collateral. 43 5.1.10 No Suspension or Debarment. 43 5.1.11 Collateral Disclosure List. 43 5.1.12 Business Names and Addresses. 44 5.1.13 Accounts. 44 5.1.14 Compliance with Eligibility Standards. 44 Section 5.2 Survival; Updates of Representations and Warranties. 44 ARTICLE VI CONDITIONS PRECEDENT 45 Section 6.1 Conditions to the Initial Advance and Initial Letter of Credit. 45 6.1.1 Organizational Documents - Borrower. 45 6.1.2 Opinion of Borrower's Counsel. 45 6.1.3 Organizational Documents - Guarantors. 46 6.1.4 Consents, Licenses, Approvals, Etc. 46 6.1.5 Note. 46 6.1.6 Financing Documents and Borrower Collateral. 47 6.1.7 Other Financing Documents. 47 6.1.8 Other Documents, Etc. 47 6.1.9 Payment of Fees. 47 6.1.10 Collateral Disclosure List. 47 6.1.11 Recordings and Filings. 47 6.1.12 Insurance Certificate. 47 6.1.13 Landlord's Waivers. 47 6.1.14 Field Examination. 48 6.1.15 Subordination Agreement. 48 6.1.16 Subordinated Indebtedness. 48 6.1.17 Blocked Account Agreements. 48 6.1.18 Borrowing Base Report. 48 Section 6.2 Conditions to all Extensions of Credit. 48 6.2.1 Compliance. 48 6.2.2 Borrowing Base. 48 6.2.3 Default. 49 6.2.4 Representations and Warranties. 49 6.2.5 Adverse Change. 49 6.2.6 Legal Matters. 49 ARTICLE VII COVENANTS 49 Section 7.1 Affirmative Covenants - Borrower. 49 7.1.1 Financial Statements. 49 7.1.2 Reports to SEC and to Stockholders. 51 7.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc. 51 7.1.4 Existence. 52 7.1.5 Compliance with Laws. 52 7.1.6 Preservation of Properties. 52 7.1.7 Line of Business. 53 7.1.8 Insurance. 53 7.1.9 Taxes. 53 7.1.10 ERISA. 53 7.1.11 Notification of Events of Default and Adverse Developments. 54 7.1.12 Hazardous Materials; Contamination. 55 7.1.13 Financial Covenants. 55 7.1.14 Collection of Receivables. 57 7.1.15 Assignments of Receivables. 57 7.1.16 Government Accounts. 57 7.1.17 Notice of Returned Goods, etc. 58 7.1.18 Equipment. 58 7.1.19 Defense of Title and Further Assurances. 58 7.1.20 Business Names; Locations. 59 7.1.21 Protection of Borrower Collateral. 59 7.1.22 Depository Relationship. 59 Section 7.2 Affirmative Covenants - MXL. 59 7.2.1 Financial Statements. 59 7.2.2 Recordkeeping, Rights of Inspection, Field Examination, Etc. 60 7.2.3 Existence. 61 7.2.4 Compliance with Laws. 61 7.2.5 Notification of Events of Default and Adverse Developments.62 7.2.6 Collection of Receivables. 62 7.2.7 Assignments of Receivables. 63 7.2.8 Government Accounts. 63 7.2.9 Notice of Returned Goods, etc. 63 7.2.10 Defense of Title and Further Assurances. 63 7.2.11 Business Names; Locations. 64 7.2.12 Protection of MXL Collateral. 64 Section 7.3 Negative Covenants - Borrower. 64 7.3.1 Capital Structure, Merger, Acquisition or Sale of Assets. 64 7.3.2 Subsidiaries. 65 7.3.3 Issuance of Stock. 65 7.3.4 Purchase or Redemption of Securities, Dividend Restrictions. 65 7.3.5 Indebtedness. 65 7.3.6 Investments, Loans and Other Transactions. 66 7.3.7 Stock of Subsidiaries. 67 7.3.8 Subordinated Indebtedness. 67 7.3.9 Liens; Confessed Judgment. 67 7.3.10 Other Businesses. 67 7.3.11 ERISA Compliance. 68 7.3.12 Prohibition on Hazardous Materials. 68 7.3.13 Method of Accounting; Fiscal Year. 68 7.3.14 Sale and Leaseback. 68 7.3.15 Disposition of Borrower Collateral. 68 Section 7.4 Negative Covenants - MXL. 69 7.4.1 Method of Accounting; Fiscal Year. 69 7.4.2 Disposition of MXL Collateral. 69 ARTICLE VIII DEFAULT AND RIGHTS AND REMEDIES 69 Section 8.1 Events of Default. 69 8.1.1 Failure to Pay. 69 8.1.2 Breach of Representations and Warranties. 69 8.1.3 Failure to Comply with Specific Covenants. 69 8.1.4 Failure to Comply with Covenants. 70 8.1.5 Default Under Other Financing Documents or Obligations. 70 8.1.6 Receiver; Bankruptcy. 70 8.1.7 Involuntary Bankruptcy, etc. 70 8.1.8 Judgment. 71 8.1.9 Execution; Attachment. 71 8.1.10 Default Under Other Borrowings. 71 8.1.11 Challenge to Agreements. 71 8.1.12 Material Adverse Change. 71 8.1.13 Contract Default, Debarment or Suspension. 71 8.1.14 Liquidation, Termination, Dissolution, etc. 72 Section 8.2 Remedies. 72 8.2.1 Acceleration. 72 8.2.2 Further Advances. 72 8.2.3 Uniform Commercial Code. 72 8.2.4 Specific Rights With Regard to Collateral. 73 8.2.5 Application of Proceeds. 74 8.2.6 Performance by Lender. 74 8.2.7 Other Remedies. 75 ARTICLE IX MISCELLANEOUS 75 Section 9.1 Notices. 75 Section 9.2 Amendments; Waivers. 76 Section 9.3 Cumulative Remedies. 77 Section 9.4 Severability. 78 Section 9.5 Assignments by Lender. 79 Section 9.6 Participations by Lender. 79 Section 9.7 Disclosure of Information by Lender. 79 Section 9.8 Successors and Assigns. 79 Section 9.9 Continuing Agreements. 80 Section 9.10 Enforcement Costs. 80 Section 9.11 Applicable Law; Jurisdiction. 80 9.11.1 Applicable Law. 80 9.11.2 Submission to Jurisdiction. 80 9.11.3 Service of Process. 81 Section 9.12 Duplicate Originals and Counterparts. 81 Section 9.13 Headings. 81 Section 9.14 No Agency. 81 Section 9.15 Date of Payment. 81 Section 9.16 Entire Agreement. 81 Section 9.17 Waiver of Trial by Jury. 82 Section 9.18 Liability of Lender. 82 Section 9.19 Indemnification. 82 Section 9.20 Confidentiality. 83 FINANCING AND SECURITY AGREEMENT THIS FINANCING AND SECURITY AGREEMENT (this "Agreement") is made this ___ day of August, 2003, by and between GENERAL PHYSICS CORPORATION, a corporation organized under the laws of the State of Delaware ("General Physics" or "the "Borrower"), MXL INDUSTRIES, INC., a corporation organized under the laws of the State of Delaware ("MXL") and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the "Lender"). RECITALS A. Borrower has applied to Lender for certain credit facilities consisting of (i) a revolving credit facility in the maximum principal amount of $25,000,000 and (ii) a letter of credit facility as part of that revolving credit facility, to be used by Borrower for the Permitted Uses described in this Agreement. B. MXL is an affiliate of Borrower and will provide a limited guaranty of repayment of the Obligations (as hereinafter defined). C. Borrower has requested that Lender accept receivables of MXL as collateral for the credit facilities and make advances to Borrower against the receivables of MXL. D. Lender is willing to make the credit facilities available to Borrower upon the terms and subject to the conditions set forth in this Agreement. AGREEMENTS NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. As used in this Agreement, the terms defined in the Preamble and Recitals hereto shall have the respective meanings specified therein, and the following terms shall have the following meanings: "Account" individually and "Accounts" collectively mean all presently existing or hereafter acquired or created accounts, accounts receivable, health-care insurance receivables, contract rights, notes, drafts, instruments, acceptances, chattel paper, leases and writings evidencing a monetary obligation or a security interest in, or a lease of, goods, all rights to payment of a monetary obligation or other consideration under present or future contracts (including, without limitation, all rights (whether or not earned by performance) to receive payments under presently existing or hereafter acquired or created letters of credit), or by virtue of property that has been sold, leased, licensed, assigned or otherwise disposed of, services rendered or to be rendered, loans and advances made or other considerations given, by or set forth in or arising out of any present or future chattel paper, note, draft, lease, acceptance, writing, bond, insurance policy, instrument, document or general intangible, and all extensions and renewals of any thereof, all rights under or arising out of present or future contracts, agreements or general interest in goods which gave rise to any or all of the foregoing, including all commercial tort claims, other claims or causes of action now existing or hereafter arising in connection with or under any agreement or document or by operation of law or otherwise, all collateral security of any kind (including, without limitation, real property mortgages and deeds of trust) Supporting Obligations, letter-of-credit rights and letters of credit given by any Person with respect to any of the foregoing, all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing and all equipment and general intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all Proceeds of the foregoing. "Account Debtor" means any Person who is obligated on a Receivable and "Account Debtors" mean all Persons who are obligated on the Receivables. "ACH Transactions" means any cash management or related services including the automatic clearing house transfer of funds by Lender for the account of Borrower pursuant to agreement or overdrafts. "Additional Borrower" means each Person that has executed and delivered an Additional Borrower Joinder Supplement that has been accepted and approved by the Lender. "Additional Borrower Joinder Supplement" means an Additional Borrower Joinder Supplement in substantially the form attached hereto as EXHIBIT A, with the blanks appropriately completed and executed and delivered by the Additional Borrower and accepted by General Physics on behalf of the Borrowers. "Adjustment Date" has the meaning described in Section 9.5 (Assignments by Lender). "Affiliate" means, with respect to any designated Person, any other Person, (a) directly or indirectly controlling, directly or indirectly controlled by, or under direct or indirect common control with the Person designated, (b) directly or indirectly owning or holding twenty percent (20%) or more of any equity interest in such designated Person, or (c) twenty percent (20%) or more of whose stock or other equity interest is directly or indirectly owned or held by such designated Person. For purposes of this definition, the term "control" (including with correlative meanings, the terms "controlling", "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or other equity interests or by contract or otherwise. "Agreement" means this Financing and Security Agreement, as amended, restated, supplemented or otherwise modified in writing in accordance with the provisions of Section 9.2 (Amendments; Waivers). "Applicable Margin" means the applicable rate per annum added, as set forth in Section 2.3 (Applicable Interest Rates), to the LIBOR Market Index Rate. "Applicable Rate" means the sum of (a) the Applicable Margin plus (b) the LIBOR Market Index Rate. "Assets" means at any date all assets that, in accordance with GAAP consistently applied, should be classified as assets on a consolidated balance sheet of Borrower and its Subsidiaries. "Assignee" means any Person to which Lender assigns all or any portion of its interests under this Agreement, any Commitment, and the Revolving Loan, in accordance with the provisions of Section 9.5 (Assignments by Lender), together with any and all successors and assigns of such Person; "Assignees" means the collective reference to all Assignees. "Bankruptcy Code" means Title 11 of the United States Code, as amended from time to time, and any successor Laws. "Blocked Account" means collectively the deposit accounts subject to the Blocked Account Agreements. "Blocked Account Agreements" means collectively the Blocked Account Agreement of even date herewith by and among Borrower, Lender and Fleet National Bank and the Blocked Account Agreement of even date herewith by and among Borrower, Lender and Bank of America, N. A., each as amended, modified, substituted, extended, and renewed from time to time. "Borrower" means each Person defined as a "Borrower" in the preamble of this Agreement and each Additional Borrower; "Borrowers" means the collective reference to all Persons defined as "Borrowers" in the preamble to this Agreement and all Additional Borrowers. "Borrower Collateral" means all property of Borrower subject from time to time to the Liens of this Agreement, any of the Security Documents and/or any of the other Financing Documents, together with any and all Proceeds thereof. "Borrowing Base" has the meaning described in Section 2.1.3 (Borrowing Base). "Borrowing Base Deficiency" has the meaning described in Section 2.1.3 (Borrowing Base). "Borrowing Base Report" has the meaning described in Section 2.1.4 (Borrowing Base Report). "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in the State are authorized or required to close. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank. "Capital Expenditure" means an expenditure (whether payable in cash or other property or accrued as a liability) for Fixed or Capital Assets, including, without limitation, the entering into of a Capital Lease. "Capital Lease" means with respect to any Person any lease of real or personal property, for which the related Lease Obligations have been or should be, in accordance with GAAP consistently applied, capitalized on the balance sheet of that Person. "Cash Equivalents" means (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit with maturities of one (1) year or less from the date of acquisition of, or money market accounts maintained with, Lender, any Affiliate of Lender, or any other domestic commercial bank having capital and surplus in excess of One Hundred Million Dollars ($100,000,000.00) or such other domestic financial institutions or domestic brokerage houses to the extent disclosed to, and approved by, Lender and (c) commercial paper of a domestic issuer rated at least either A-1 by Standard & Poor's Corporation (or its successor) or P-1 by Moody's Investors Service, Inc. (or its successor) with maturities of six (6) months or less from the date of acquisition. "Chattel Paper" means a record or records (including, without limitation, electronic chattel paper) that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, or a lease of specific goods; all Supporting Obligations with respect thereto; any returned, rejected or repossessed goods and software covered by any such record or records and all proceeds (in any form including, without limitation, accounts, contract rights, documents, chattel paper, instruments and general intangibles) of such returned, rejected or repossessed goods; and all Proceeds of the foregoing. "Closing Date" means the Business Day, in any event not later than August ____, 2003, on which Lender shall be satisfied that the conditions precedent set forth in Section 6.1 (Conditions to Initial Advance) have been fulfilled or otherwise waived by Lender. "Collateral" means the Borrower Collateral and the MXL Collateral. "Collateral Account" has the meaning described in Section 2.1.8 (The Collateral Account). "Collateral Disclosure List" has the meaning described in Section 3.3 (Collateral Disclosure List). "Commitment" means the Revolving Credit Commitment. "Compliance Certificate" means a periodic Compliance Certificate described in Section 7.1.1 (Financial Statements). "Commonly Controlled Entity" means an entity, whether or not incorporated, which together with Borrower would be deemed to be a "single employer" within the meaning of Internal Revenue Code ss. 414(b) or (c), and for the purpose of ERISA ss. 302 and/or Internal Revenue Code ss.ss. 412, 4971, 4977, 4980D, 4980E and/or each "applicable section" under Internal Revenue Code ss. 414(t)(2), within the meaning of the Internal Revenue Code ss. 414(b), (c) (m) or (o). "Copyrights" means and includes, in each case whether now existing or hereafter arising, all of Borrower's rights, title and interest in and to (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, copyright applications, and all renewals of any of the foregoing, (b) all income, royalties, damages and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past, current or future infringements of any of the foregoing, (c) the right to sue for past, present and future infringements of any of the foregoing, and (d) all rights corresponding to any of the foregoing throughout the world. "Credit Facility" means the Revolving Credit Facility or the Letter of Credit Facility, as the case may be, and "Credit Facilities" means collectively the Revolving Credit Facility and the Letter of Credit Facility and any and all other credit facilities now or hereafter extended under or secured by this Agreement. "Current Letter of Credit Obligations" has the meaning described in Section 2.2.5 (Payments of Letters of Credit). "Default" means an event which, with the giving of notice or lapse of time, or both, would reasonably be expected to constitute an Event of Default under the provisions of this Agreement. "Documents" means all documents of title or receipts, whether now existing or hereafter acquired or created, and all Proceeds of the foregoing. "Eligible Receivable" and "Eligible Receivables" mean, at any time of determination thereof, the unpaid portion of each account (net of any returns, discounts, claims, credits, charges, accrued rebates or other allowances, offsets, deductions, counterclaims, disputes or other defenses and reduced by the aggregate amount of all reserves, limits and deductions provided for in this definition and elsewhere in this Agreement) receivable in United States Dollars, provided each account conforms and continues to conform to the following criteria to the satisfaction of Lender: (a) the account arose in the ordinary course of business from a bona fide outright sale of goods or from services performed; (b) the account is a valid, legally enforceable obligation of the Account Debtor and requires no further act on the part of any Person under any circumstances to make the account payable by the Account Debtor; (c) the account is based upon an enforceable order or contract, written or oral, for Inventory shipped or services performed, and the same were shipped or performed in accordance with such order or contract; (d) if the account arises from the sale of Inventory, the Inventory the sale of which gave rise to the account has been shipped or delivered to the Account Debtor on an absolute sale basis and not on a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a sale or return basis, or on the basis of any other similar understanding; (e) if the account arises from the performance of services, such services have been fully rendered and do not relate to any warranty claim or obligation; (f) the account is evidenced by an invoice or other documentation in form acceptable to Lender, dated no later than is customary in the ordinary course of business and containing only terms normally offered by Borrower or MXL, as applicable; (g) the amount shown on the books of Borrower or MXL, as applicable, and on any invoice, certificate, schedule or statement delivered to Lender is owing to Borrower or MXL, as applicable, and no partial payment has been received unless reflected on the books of Borrower or MXL, as applicable, and deducted from the amount due; (h) the account is not outstanding more than ninety (90) days from the date of the invoice therefor or past due more than sixty (60) days after its due date, which shall not be later than sixty (60) days after the invoice date; (i) the account is not owing by any Account Debtor for which Lender has deemed fifty percent (50%) or more of such Account Debtor's other accounts (or any portion thereof) due to Borrower or MXL, as applicable, to be non-Eligible Receivables; (j) the account is not owing by an Account Debtor or a group of affiliated Account Debtors whose then existing accounts owing to Borrower or MXL, as applicable, exceed in aggregate face amount fifteen percent (15%) of Borrower's or MXL's, as applicable, total Eligible Receivables; provided, however, for the purposes of this subsection (j), each contract with any agency or division of the United States Government, shall be treated as though entered into with a separate Account Debtor; (k) the Account Debtor has not returned, rejected or refused to retain, or otherwise notified Borrower of any dispute concerning, or claimed nonconformity of, any of the Inventory or services from the sale or furnishing of which the account arose; provided, however, the Receivable shall be deemed ineligible only to the extent of the disputed amount; (l) the account is not subject to any present or contingent (and no facts exist which are the basis for any future) offset, claim, deduction or counterclaim, dispute or defense in law or equity on the part of such Account Debtor, or any claim for credits, allowances, or adjustments by the Account Debtor because of returned, inferior or damaged Inventory or unsatisfactory services, or for any other reason including, without limitation, those arising on account of a breach of any express or implied representation or warranty; provided, however, the Receivable shall be deemed ineligible only to the extent of the disputed amount; (m) the Account Debtor is not a Subsidiary or Affiliate of Borrower or MXL, as applicable, or an employee, officer, director or shareholder of Borrower or MXL, as applicable, or Affiliate of Borrower or MXL, as applicable; (n) the Account Debtor is not incorporated or primarily conducting business in any jurisdiction outside of the United States of America or Canada (excluding Quebec Province), unless the Account Debtor's obligations with respect to such account are secured by a letter of credit, guaranty or banker's acceptance having terms and from such issuers and confirmation banks as are acceptable to Lender in its sole and absolute discretion (which letter of credit, guaranty or banker's acceptance is subject to the perfected Lien of Lender); (o) as to which none of the following events has occurred with respect to the Account Debtor on such Account: death or judicial declaration of incompetency of an Account Debtor who is an individual; the filing by or against the Account Debtor of a request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as a bankrupt, winding-up, or other relief under the bankruptcy, insolvency, or similar laws of the United States, any state or territory thereof, or any foreign jurisdiction, now or hereafter in effect; the making of any general assignment by the Account Debtor for the benefit of creditors; the appointment of a receiver or trustee for the Account Debtor or for any of the assets of the Account Debtor, including, without limitation, the appointment of or taking possession by a "custodian," as defined in the Federal Bankruptcy Code; the institution by or against the Account Debtor of any other type of insolvency proceeding (under the bankruptcy laws of the United States or otherwise) or of any formal or informal proceeding for the dissolution or liquidation of, settlement of claims against, or winding up of affairs of, the Account Debtor; the sale, assignment, or transfer of all or any material part of the assets of the Account Debtor; the nonpayment generally by the Account Debtor of its debts as they become due; or the cessation of the business of the Account Debtor as a going concern; (p) Borrower or MXL, as applicable, is not indebted in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise), with the exception of customary credits, adjustments and/or discounts given to an Account Debtor by Borrower or MXL, as applicable, in the ordinary course of its business; provided, however, if in the ordinary course of business Borrower or MXL incurs obligations to an Account Debtor for goods or services, the account shall be deemed ineligible only to the extent of the amount of such payable due to the Account Debtor by Borrower or MXL, as applicable; (q) the account does not arise from services under or related to any warranty obligation or out of service charges, finance charges or other fees for the time value of money; (r) the account is not evidenced by chattel paper or an instrument of any kind and, except as may occur under subsection (n) above, is not secured by any letter of credit; (s) the title of Borrower or MXL, as applicable, to the account is absolute and is not subject to any prior assignment, claim, Lien, or security interest, except Permitted Liens; (t) no bond or other undertaking by a guarantor or surety has been or is required to be obtained, supporting the performance of Borrower or MXL, as applicable, or any other obligor in respect of any of Borrower's agreements or MXL's agreements, as applicable, with the Account Debtor or supporting the account and any of the Account Debtor's obligations in respect of the account; (u) Borrower or MXL, as applicable, has the full and unqualified right and power to assign and grant a security interest in, and Lien on, the account to Lender as security and collateral for the payment of the Obligations; (v) the account does not arise out of a contract with, or order from, an Account Debtor that, by its terms, forbids or makes void or unenforceable the assignment or grant of a security interest by Borrower or MXL, as applicable, to Lender of the account arising from such contract or order; (w) the account is subject to a Lien in favor of Lender, which Lien is perfected as to the account by the filing of financing statements and which Lien upon such filing constitutes a first priority security interest and Lien, subject to Permitted Liens; (x) the Inventory giving rise to the account was not, at the time of the sale thereof, subject to any Lien other than Permitted Liens; (y) no part of the account represents an advance or "up-front" billing for which work has not been performed or a retainage; and (z) Lender in the good faith exercise of its sole and absolute discretion has not deemed the account ineligible because of uncertainty as to the creditworthiness of the Account Debtor or because Lender otherwise considers the collateral value of such account to Lender to be impaired or its ability to realize such value to be insecure. In the event of any dispute, under the foregoing criteria, as to whether an account is, or has ceased to be, an Eligible Receivable, the decision of Lender in the good faith exercise of its sole and absolute discretion shall control. "Enforcement Costs" means all reasonable expenses, charges, costs and fees whatsoever of any nature whatsoever paid or incurred by or on behalf of Lender in connection with (a) any or all of the Obligations, this Agreement and/or any of the other Financing Documents, (b) the creation, perfection, collection, maintenance, preservation, defense, protection, realization upon, disposition, sale or enforcement of all or any part of the Borrower Collateral, the MXL Collateral, this Agreement or any of the other Financing Documents, including, without limitation, those costs and expenses more specifically enumerated in Section 3.6 (Costs) and/or Section 9.10 (Enforcement Costs), and further including, without limitation, amounts paid to lessors, processors, bailees, warehousemen, sureties, judgment creditors and others in possession of or with a Lien against or claimed against the Borrower Collateral or the MXL Collateral, and (c) the monitoring, administration, processing and/or servicing of any or all of the Obligations, the Financing Documents, the Borrower Collateral and/or the MXL Collateral. "Equipment" means all equipment, machinery, computers, chattels, tools, parts, machine tools, furniture, furnishings, fixtures and supplies of every nature, presently existing or hereafter acquired or created and wherever located, whether or not the same shall be deemed to be affixed to real property, and all of such types of property leased by Borrower and all of Borrower's rights and interests with respect thereto under such leases (including, without limitation, options to purchase), together with all accessions, additions, fittings, accessories, special tools, and improvements thereto and substitutions therefor and all parts and equipment which may be attached to or which are necessary or beneficial for the operation, use and/or disposition of such personal property, all licenses, warranties, franchises and General Intangibles related thereto or necessary or beneficial for the operation, use and/or disposition of the same, together with all Accounts, Chattel Paper, Instruments and other consideration received by Borrower on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all Proceeds of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "Event of Default" has the meaning described in ARTICLE VIII (Default and Rights and Remedies). "Facilities" means the collective reference to the loan, letter of credit, interest rate protection, foreign exchange risk, cash management, and other credit facilities now or hereafter provided to Borrower by Lender. "Fees" means, without duplication, the collective reference to each fee payable to Lender under the terms of this Agreement or under the terms of any of the other Financing Documents. "Financing Documents" means at any time collectively this Agreement, the Notes, the Security Documents, the Letter of Credit Documents, and any other instrument, agreement or document previously, simultaneously or hereafter executed and delivered by Borrower, any Guarantor and/or any other Person, singly or jointly with another Person or Persons, evidencing, securing, guarantying or in connection with this Agreement, any Note, any of the Security Documents, any of the Facilities, and/or any of the Obligations. "Fixed or Capital Assets" of a Person at any date means all assets which would, in accordance with GAAP consistently applied, be classified on the balance sheet of such Person as property, plant or equipment at such date. "GAAP" means generally accepted accounting principles in the United States of America in effect from time to time. "General Intangibles" means all general intangibles of every nature, whether presently existing or hereafter acquired or created, and without implying any limitation of the foregoing, further means all books and records, commercial tort claims, other claims (including without limitation all claims for income tax and other refunds), payment intangibles, Supporting Obligations, choses in action, claims, causes of action in tort or equity, contract rights, judgments, customer lists, software, Patents, Trademarks, licensing agreements, rights in intellectual property, goodwill (including goodwill of Borrower's business symbolized by and associated with any and all Trademarks, trademark licenses, Copyrights and/or service marks), royalty payments, licenses, letter-of-credit rights, letters of credit, contractual rights, the right to receive refunds of unearned insurance premiums, rights as lessee under any lease of real or personal property, literary rights, Copyrights, service names, service marks, logos, trade secrets, amounts received as an award in or settlement of a suit in damages, deposit accounts, interests in joint ventures, general or limited partnerships, or limited liability companies or partnerships, rights in applications for any of the foregoing, books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to any or all of the foregoing, all Supporting Obligations with respect to any of the foregoing, and all Equipment and General Intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records, and all Proceeds of the foregoing. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of government and any department, agency or instrumentality thereof. "Government Contracts" means any contract with the United States or any department, agency or instrumentality of the United States. "Guarantor" means GP Strategies Corporation, a corporation organized and existing under the laws of the State of Delaware ("GPX") or MXL, as the case may be and each of their respective successors and assigns, and "Guarantors" means GPX and MXL and their respective successors and assigns. "Guaranty" means collectively (a) that certain guaranty of payment for the benefit of Lender dated the date hereof from GPX, as the same may from time to time be extended, amended, restated or otherwise modified and (b) that certain limited guaranty of payment for the benefit of Lender dated the date hereof from MXL, as the same may from time to time be extended, amended, restated or otherwise modified. "Hazardous Materials" means (a) any "hazardous waste" as defined by the Resource Conservation and Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder; (b) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended from time to time, and regulations promulgated thereunder; and (c) any substance the presence of which on any property now or hereafter owned, acquired or operated by Borrower is prohibited by any Law similar to those set forth in this definition. "Hazardous Materials Contamination" means the contamination (whether presently existing or occurring after the date of this Agreement) by Hazardous Materials of any property owned, operated or controlled by Borrower or for which Borrower has responsibility, including, without limitation, improvements, facilities, soil, ground water, air or other elements on, or of, any property now or hereafter owned, acquired or operated by Borrower, and any other contamination by Hazardous Materials for which Borrower is responsible. "Indebtedness" of a Person means at any date the total liabilities of such Person at such time determined in accordance with GAAP consistently applied. "Indebtedness for Borrowed Money" of a Person means at any time the sum at such time of (a) Indebtedness of such Person for borrowed money or for the deferred purchase price of property or services, (b) any obligations of such Person in respect of letters of credit, banker's or other acceptances or similar obligations issued or created for the account of such Person, (c) Lease Obligations of such Person with respect to Capital Leases, (d) all liabilities secured by any Lien on any property owned by such Person, to the extent attached to such Person's interest in such property, even though such Person has not assumed or become personally liable for the payment thereof, (e) obligations of third parties which are being guarantied or indemnified against by such Person or which are secured by the property of such Person; (f) any obligation of such Person under an employee stock ownership plan or other similar employee benefit plan; (g) any obligation of such Person or a Commonly Controlled Entity to a Multiemployer Plan; and (h) any obligations, liabilities or indebtedness, contingent or otherwise, under or in connection with, any Swap Contract; but excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue (as determined in accordance with customary trade practices) or which are being disputed in good faith by such Person and for which adequate reserves are being provided on the books of such Person in accordance with GAAP. "Indemnified Parties" has the meaning set forth in Section 9.19 (Indemnification). "Instrument" means a negotiable instrument or any other writing which evidences a right to payment of a monetary obligation and is not itself a security agreement or lease and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment, and all Supporting Obligations with respect to any of the foregoing and all Proceeds with respect to any of the foregoing. "Interest Coverage Ratio" shall be defined as (a) earnings before deduction of interest and taxes paid divided by (b) the sum of interest and tax payments. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and the Income Tax Regulations issued and proposed to be issued thereunder. "Inventory" means all goods whether now owned or hereafter acquired and other personal property furnished under any contract of service or intended for sale or lease, including, without limitation, all raw materials, work-in-process, finished goods and materials and supplies of any kind, nature or description which are used or consumed in Borrower's or MXL's business or are or might be used in connection with the manufacture, packing, shipping, advertising, selling or finishing of such goods and other personal property and all licenses, warranties, franchises, General Intangibles, personal property and all documents of title or documents relating to the same, together with all Accounts, Chattel Paper, Instruments and other consideration received on account of the sale, lease or other disposition of all or any part of the foregoing, and together with all rights under or arising out of present or future Documents and contracts relating to the foregoing and all Proceeds of the foregoing. "Investment Property" means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract or commodity account and all Proceeds of, and Supporting Obligations with respect to, the foregoing. "Item of Payment" means each check, draft, cash, money, instrument, item, and other remittance in payment or on account of payment of the Receivables or otherwise with respect to any Borrower Collateral or MXL Collateral, including, without limitation, cash proceeds of any returned, rejected or repossessed goods, the sale or lease of which gave rise to a Receivable, and other proceeds of Borrower Collateral or MXL Collateral; and "Items of Payment" means the collective reference to all of the foregoing. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any Governmental Authority. "Lease Obligations" of a Person means for any period the rental commitments of such Person for such period under leases for real and/or personal property (net of rent from subleases thereof, but including taxes, insurance, maintenance and similar expenses which such Person, as the lessee, is obligated to pay under the terms of said leases, except to the extent that such taxes, insurance, maintenance and similar expenses are payable by sublessees), including rental commitments under Capital Leases. "Letter of Credit" and "Letters of Credit" shall have the meanings described in Section 2.2.1 (Letters of Credit). "Letter of Credit Agreement" means the collective reference to each letter of credit application and agreement substantially in the form of Lender's then standard form of application for letter of credit or such other form as may be approved by Lender, executed and delivered by Borrower in connection with the issuance of a Letter of Credit, as the same may from time to time be amended, restated, supplemented or modified and "Letter of Credit Agreements" means all of the foregoing in effect at any time and from time to time. "Letter of Credit Cash Collateral Account" has the meaning described in Section 2.2.3 (Terms of Letters of Credit). "Letter of Credit Documents" means any and all drafts under or purporting to be under a Letter of Credit, any Letter of Credit Agreement, and any other instrument, document or agreement executed and/or delivered by Borrower or any other Person under, pursuant to or in connection with a Letter of Credit or any Letter of Credit Agreement. "Letter of Credit Facility" means the facility established pursuant to Section 2.2 (Letter of Credit Facility). "Letter of Credit Fee" and "Letter of Credit Fees" have the meanings described in Section 2.2.2 (Letter of Credit Fees). "Letter of Credit Obligations" means all Obligations of Borrower with respect to the Letters of Credit and the Letter of Credit Agreements. "Letter-of-credit right" means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. "Liabilities" means at any date all liabilities that in accordance with GAAP consistently applied should be classified as liabilities on a consolidated balance sheet of Borrower and its Subsidiaries. "LIBOR Market Index Rate", for any day the rate (rounded to the next higher 1/100 of 1%) for 1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, provided, if such day is not a London business day, then the immediately preceding London business day (or if not so reported, then as determined by Lender from another recognized source or interbank quotation). "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing). "Loan Notice" has the meaning described in Section 2.1.2 (Procedure for Making Advances). "Lockbox" has the meaning described in Section 2.1.8 (The Collateral Account). "Maximum Rate" has the meaning described in Section 2.4.6 (Maximum Interest Rate). "Modified Interest Coverage Ratio" shall be defined as (a) earnings before deduction of interest and taxes paid divided by (b) interest. "Monitoring Fee" and "Monitoring Fees" have the meanings described in Section 2.4.4 (Monitoring Fee). "Multiemployer Plan" means a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "MXL Collateral" means all property of MXL subject from time to time to the Liens of this Agreement, any of the Security Documents and/or any of the other Financing Documents, together with any and all Proceeds thereof. "Net Worth" means the consolidated shareholders' equity, defined in accordance with GAAP, of Borrower and its Subsidiaries. "Notice" means a communication delivered in accordance with the terms of Section 9.1 (Notices). "Note" means the Revolving Credit Note, and "Notes" means collectively the Revolving Credit Note and any other promissory note which may from time to time evidence all or any portion of the Obligations. "NPDC" means National Patent Development Corporation, a Delaware corporation, and its successors and assigns. "Obligations" means, without duplication, all present and future indebtedness, duties, obligations, and liabilities, whether now existing or contemplated or hereafter arising, of Borrower to Lender under, arising pursuant to, in connection with and/or on account of the provisions of this Agreement, each Note, each Security Document, and/or any of the other Financing Documents, the Revolving Loan, any Swap Contract and/or any of the Facilities including, without limitation, the principal of, and interest on, each Note, late charges, the Fees, Enforcement Costs, and prepayment fees (if any), letter of credit reimbursement obligations, letter of credit fees or fees charged with respect to any guaranty of any letter of credit, regardless of whether such indebtedness, duties, obligations, and liabilities be direct, indirect, primary, secondary, joint, several, joint and several, fixed or contingent; and also means any and all renewals, extensions, substitutions, amendments, restatements and rearrangements of any such indebtedness, duties, obligations, and liabilities. "Origination Fee" has the meaning described in Section 2.4.3 (Origination Fee). "Outstanding Letter of Credit Obligations" has the meaning described in Section 2.2.3 (Terms of Letters of Credit). "Patents" means and includes, in each case whether now existing or hereafter arising, all of Borrower's rights, title and interest in and to (a) any and all patents and patent applications, (b) any and all inventions and improvements described and claimed in such patents and patent applications, (c) reissues, divisions, continuations, renewals, extensions and continuations-in-part of any patents and patent applications, (d) income, royalties, damages, claims and payments now or hereafter due and/or payable under and with respect to any patents or patent applications, including, without limitation, damages and payments for past and future infringements, (e) rights to sue for past, present and future infringements of patents, and (f) all rights corresponding to any of the foregoing throughout the world. "PBGC" means the Pension Benefit Guaranty Corporation. "Permitted Liens" means: (a) Liens for Taxes which are not delinquent or which Lender has determined in the exercise of its sole and absolute discretion (i) are being diligently contested in good faith and by appropriate proceedings, and such contest operates to suspend collection of the contested Taxes and enforcement of a Lien, (ii) Borrower or MXL, as applicable, has the financial ability to pay, with all penalties and interest, at all times without materially and adversely affecting Borrower or MXL, as applicable, and (iii) are not, and will not be with appropriate filing, the giving of notice or the passage of time alone, entitled to priority over any Lien of Lender; (b) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety bonds (other than bonds related to judgments or litigation), performance bonds and other obligations of a like nature incurred in the ordinary course of business; (c) Liens securing the Obligations; (d) judgment Liens to the extent the entry of such judgment does not constitute an Event of Default under the terms of this Agreement or result in the sale or levy of, or execution on, any of the Borrower Collateral or any of the MXL Collateral; (e) Liens existing as of the date hereof, including Liens securing the Subordinated Debt; (f) Liens securing Capital Leases that are otherwise permitted hereunder; (g) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person; (h) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person; and (i) such other Liens, if any, as are set forth on Schedule 4.1.21 attached hereto and made a part hereof and Schedule 5.1.9 attached hereto and made a part hereof. "Permitted Uses" means to refinance existing indebtedness owed to Fleet National Bank, LaSalle Business Credit, Inc. and Washington Mutual Bank, FA (the successor in interest to Dime Savings Bank of New York, FSB) and for general working capital purposes arising in the ordinary course of Borrower's business and to support the issuance of Letters of Credit. "Person" means and includes an individual, a corporation, a partnership, a joint venture, a limited liability company or partnership, a trust, an unincorporated association, a Governmental Authority, or any other organization or entity. "Plan" means any "pension plan" as defined in ERISA Section 3(2) maintained by the Borrower or a Commonly Controlled Entity in which the Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA and which is intended to qualify for favorable tax treatment pursuant to Internal Revenue Code Section 401(a). "Post-Default Rate" means the Applicable Rate in effect from time to time, plus three percent (3%) per annum. "Post-Expiration Date Letter of Credit" and "Post-Expiration Date Letters of Credit" have the meanings described in Section 2.2.3 (Terms of Letters of Credit). "Prepayment" means a Revolving Loan Mandatory Prepayment or a Revolving Loan Optional Prepayment, as the case may be, and "Prepayments" mean collectively all Revolving Loan Mandatory Prepayments and all Revolving Loan Optional Prepayments. "Pricing Ratio" means the Total Liabilities to Net Worth Ratio and the Interest Coverage Ratio, collectively. "Proceeds" has the meaning described in the Uniform Commercial Code as in effect from time to time. "Purchaser" has the meaning described in the Note and Warrant Purchase Agreement dated August 8, 2003 by and among GPX, NPDC, the purchasers party thereto and Gabelli Funds, LLC, as agent. "Receivable" means a now owned or hereafter owned, acquired or created Account, Chattel Paper, General Intangible or Instrument and all Proceeds thereof; and "Receivables" means all now or hereafter owned, acquired or created Accounts, Chattel Paper, General Intangibles and Instruments, and all Proceeds thereof. "Registered Organization" means an organization organized solely under the law of a single state or the United States and as to which the state or the United States must maintain a public record showing the organization to have been organized. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA or the regulations thereunder. "Responsible Officer" means, with respect to a Person, the chief executive officer or the president of such Person or, with respect to financial matters, the chief financial officer of such Person. "Revolving Credit Commitment" means the agreement of Lender relating to the making of the Revolving Loan and advances thereunder subject to and in accordance with the provisions of this Agreement. "Revolving Credit Commitment Period" means the period of time from the Closing Date to the Business Day preceding the Revolving Credit Termination Date. "Revolving Credit Committed Amount" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Credit Expiration Date" means August___, 2005, unless otherwise extended for successive periods of one (1) year beyond the then existing maturity date commencing as of the first anniversary date of this Agreement, by Lender in the exercise of its sole and absolute discretion. "Revolving Credit Facility" means the facility established by Lender pursuant to Section 2.1 (Revolving Credit Facility). "Revolving Credit Note" has the meaning described in Section 2.1.5 (Revolving Credit Note). "Revolving Credit Termination Date" means the earlier of (a) the Revolving Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment is terminated pursuant to Section 8.2 (Remedies) or otherwise. "Revolving Credit Unused Line Fee" and "Revolving Credit Unused Line Fees" have the meanings described in Section 2.1.10 (Revolving Credit Unused Line Fee). "Revolving Loan" has the meaning described in Section 2.1.1 (Revolving Credit Facility). "Revolving Loan Account" has the meaning described in Section 2.1.9 (Revolving Loan Account). "Revolving Loan Mandatory Prepayment" and "Revolving Loan Mandatory Prepayments" have the meanings described in Section 2.1.6 (Mandatory Prepayments of Revolving Loan). "Revolving Loan Optional Prepayment" and "Revolving Loan Optional Prepayments" have the meanings described in Section 2.1.7 (Optional Prepayment of Revolving Loan). "Security Documents" means collectively any assignment, pledge agreement, security agreement, mortgage, deed of trust, deed to secure debt, financing statement and any similar instrument, document or agreement under or pursuant to which a Lien is now or hereafter granted to, or for the benefit of, Lender on any real or personal property of any Person to secure all or any portion of the Obligations, all as the same may from time to time be amended, restated, supplemented or otherwise modified. "State" means the State of Maryland. "Subordinated Debt" means the 6% conditional secured subordinated notes due 2008 in the aggregate principal amount of $7,500,000 purchased by Purchaser. "Subordinated Debt Loan Documents" means any and all promissory notes, agreements, documents or instruments now or at any time evidencing, securing, guarantying or otherwise executed and delivered in connection with the Subordinated Debt, as the same may from time to time be amended, restated, supplemented or modified. "Subordinated Indebtedness" means all Indebtedness, including, without limitation, the Subordinated Debt, incurred at any time by Borrower, which is in amounts, subject to repayment terms, and subordinated to the Obligations, as set forth in one or more written agreements, all in form and substance satisfactory to Lender in its sole and absolute discretion. "Subordination Agreement" means that certain Subordination Agreement by and between Purchaser, Borrower and Lender, as the same may be from time to time amended, restated, supplemented or modified. "Subsidiary" means any corporation the majority of the voting shares of which at the time are owned directly by Borrower and/or by one or more Subsidiaries of Borrower. "Supporting Obligation" means a letter-of-credit right, secondary obligation or obligation of a secondary obligor or that supports the payment or performance of an account, chattel paper, document, general intangible, instrument or investment property. "Swap Contract" means any document, instrument or agreement between Borrower and Lender or any Affiliate of Lender, now existing or entered into in the future, relating to an interest rate swap transaction, forward rate transaction, interest rate cap, floor or collar transaction, any similar transaction, any option to enter into any of the foregoing, and any combination of the foregoing, which agreement may be oral or in writing, including, without limitation, any master agreement relating to or governing any or all of the foregoing and any related schedule or confirmation, each as amended from time to time. "Tangible Net Worth" means as to Borrower at any date of determination thereof, the sum at such time of: the Net Worth less the total of (a) all Assets which would be classified as intangible assets under GAAP consistently applied, (b) any revaluation or other write-up in book value of assets subsequent to the date of the most recent financial statements delivered to Lender, and (e) the amount of all loans and advances (exclusive of advances permitted under Section 7.3.6(a)) to, or investments in, any Person, excluding Cash Equivalents and deposit accounts maintained by Borrower with any financial institution. "Taxes" means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character (including all penalties or interest thereon), which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority on Borrower or any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits. "Trademarks" means and includes in each case whether now existing or hereafter arising, all of Borrower's rights, title and interest in and to (a) any and all trademarks (including service marks), trade names and trade styles, and applications for registration thereof and the goodwill of the business symbolized by any of the foregoing, (b) any and all licenses of trademarks, service marks, trade names and/or trade styles, whether as licensor or licensee, (c) any renewals of any and all trademarks, service marks, trade names, trade styles and/or licenses of any of the foregoing, (d) income, royalties, damages and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages, claims, and payments for past, present and future infringements thereof, (e) rights to sue for past, present and future infringements of any of the foregoing, including the right to settle suits involving claims and demands for royalties owing, and (f) all rights corresponding to any of the foregoing throughout the world. "Unbilled Receivables" means Receivables which otherwise qualify as Eligible Receivables but which shall be billed within fifteen (15) days after the last day of the prior month and are included in General Physics' General Ledger Account number 1160-0001 titled "Sales earned not billed". "Uniform Commercial Code" means, unless otherwise provided in this Agreement, the Uniform Commercial Code as adopted by and in effect from time to time in the State or in any other jurisdiction, as applicable. "Wholly Owned Subsidiary" means any corporation, all the shares of stock of all classes of which (other than directors' qualifying shares) at the time are owned directly or indirectly by Borrower and/or by one or more Wholly Owned Subsidiaries of Borrower. Section 1.2 Accounting Terms and Other Definitional Provisions. Unless otherwise defined herein, as used in this Agreement and in any certificate, report or other document made or delivered pursuant hereto, accounting terms not otherwise defined herein, and accounting terms only partly defined herein, to the extent not defined, shall have the respective meanings given to them under GAAP, as consistently applied to the applicable Person. All terms used herein which are defined by the Uniform Commercial Code shall have the same meanings as assigned to them by the Uniform Commercial Code unless and to the extent varied by this Agreement. The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, subsection, schedule and exhibit references are references to articles, sections or subsections of, or schedules or exhibits to, as the case may be, this Agreement unless otherwise specified. As used herein, the singular number shall include the plural, the plural the singular and the use of the masculine, feminine or neuter gender shall include all genders, as the context may require. Reference to any one or more of the Financing Documents shall mean the same as the foregoing may from time to time be amended, restated, substituted, extended, renewed, supplemented or otherwise modified. ARTICLE II THE CREDIT FACILITIES Section 2.1 The Revolving Credit Facility. 2.1.1 Revolving Credit Facility. Subject to and upon the provisions of this Agreement, Lender establishes a revolving credit facility in favor of Borrower. The aggregate of all advances under the Revolving Credit Facility is sometimes referred to in this Agreement as the "Revolving Loan". The principal amount of Twenty Five Million Dollars ($25,000,000) is the "Revolving Credit Committed Amount". During the Revolving Credit Commitment Period, Lender agrees to make advances under the Revolving Credit Facility in accordance with the provisions of this Agreement; provided that after giving effect to Borrower's request, the outstanding principal balance of the Revolving Loan and all Letter of Credit Obligations would not exceed the lesser of (a) the Revolving Credit Committed Amount or (b) the then most current Borrowing Base. Unless sooner paid, the unpaid Revolving Loan, together with interest accrued and unpaid thereon, and all other Obligations shall be due and payable in full on the Revolving Credit Expiration Date. 2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans. Borrower may borrow under the Revolving Credit Facility on any Business Day. Advances under the Revolving Loan shall be deposited to a demand deposit account of Borrower with Lender (or an Affiliate of Lender) or shall be otherwise applied as directed by Borrower, which direction Lender may require to be in writing. No later than 12:00 p.m. (Eastern Time) on the date of the requested borrowing, Borrower shall give Lender oral or written notice (a "Loan Notice") of the amount and (if requested by Lender) the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed in writing by Borrower within three (3) Business Days after the making of the requested advance under the Revolving Loan. Each Loan Notice shall be irrevocable. In addition, Borrower hereby irrevocably authorizes Lender at any time and from time to time, without further request from or notice to Borrower, to make advances under the Revolving Loan, and to establish, without duplication, reserves against the Borrowing Base, which Lender, in its sole and absolute discretion, deems necessary or appropriate to protect the interests of Lender, including, without limitation, advances and reserves under the Revolving Loan made to cover debit balances in the Revolving Loan Account, principal of, and/or interest on, the Revolving Loan, the Obligations (including, without limitation, any Letter of Credit Obligations), and/or Enforcement Costs, prior to, on, or after the termination of other advances under this Agreement, regardless of whether the outstanding principal amount of the Revolving Loan that Lender may advance or reserve hereunder exceeds the Revolving Credit Committed Amount or the Borrowing Base. Lender shall communicate to Borrower from time to time any action taken under this paragraph either orally or in writing. 2.1.3 Borrowing Base. As used in this Agreement, the term "Borrowing Base" means at any time, an amount equal to the aggregate of (a) eighty percent (80%) of the amount of Eligible Receivables of Borrower, (b) eighty percent (80%) of Borrower's Unbilled Receivables and (c) eighty percent (80%) of the amount of Eligible Receivables of MXL. The Borrowing Base shall be computed based on the Borrowing Base Report most recently delivered to and accepted by Lender in its sole and absolute discretion. In the event Borrower or MXL fails to furnish a Borrowing Base Report required by Section 2.1.4 (Borrowing Base Report), or in the event Lender believes that a Borrowing Base Report is no longer accurate, Lender may, in its sole and absolute discretion exercised from time to time and without limiting its other rights and remedies under this Agreement, suspend the making of or limit advances under the Revolving Loan. If at any time the total of the aggregate principal amount of the Revolving Loan and Outstanding Letter of Credit Obligations exceeds the Borrowing Base, a borrowing base deficiency ("Borrowing Base Deficiency") shall exist. Each time a Borrowing Base Deficiency exists, Borrower, at the sole and absolute discretion of Lender exercised from time to time, shall pay the Borrowing Base Deficiency ON DEMAND to Lender. Without implying any limitation on Lender's discretion with respect to the Borrowing Base, the criteria for Eligible Receivables contained in the respective definitions of Eligible Receivables are in part based upon the business operations of Borrower and MXL existing on or about the Closing Date and upon information and records furnished to Lender by Borrower and MXL. If at any time or from time to time hereafter, the business operations of Borrower or MXL change or such information and records furnished to Lender is incorrect or misleading, Lender in its discretion, may at any time and from time to time during the duration of this Agreement change such criteria or add new criteria. Lender shall communicate such changed or additional criteria to Borrower from time to time either orally or in writing. 2.1.4 Borrowing Base Report. Borrower will furnish to Lender no less frequently than monthly and at such other times as may be requested by Lender a report of the Borrowing Base (each a "Borrowing Base Report"; collectively, the "Borrowing Base Reports") in the form required from time to time by Lender, appropriately completed and duly signed. The Borrowing Base Report shall contain the amount and payments on the Receivables, both billed and unbilled, and the calculations of the Borrowing Base, all in such detail, and accompanied by such supporting and other information, as Lender may from time to time request. Upon Lender's request Borrower and MXL will provide Lender with (a) confirmatory assignment schedules; (b) copies of Account Debtor invoices; (c) evidence of shipment or delivery; and (d) such further schedules, documents and/or information regarding the Receivables, both billed and unbilled, as Lender may reasonably require. The items to be provided under this subsection shall be in form satisfactory to Lender, and certified as true and correct by a Responsible Officer (or by any other officers or employees of Borrower or MXL whom a Responsible Officer from time to time authorizes in writing to do so), and delivered to Lender from time to time solely for Lender's convenience in maintaining records of the Collateral. The failure of Borrower or MXL to deliver any of such items to Lender shall not affect, terminate, modify, or otherwise limit the Liens of Lender on the Collateral. 2.1.5 Revolving Credit Note. The obligation of Borrower to pay the Revolving Loan, with interest, shall be evidenced by a promissory note (as from time to time extended, amended, restated, supplemented or otherwise modified, the "Revolving Credit Note") substantially in the form of EXHIBIT B attached hereto and made a part hereof, with appropriate insertions. The Revolving Credit Note shall be dated as of the Closing Date, shall be payable to the order of Lender at the times provided in the Revolving Credit Note, and shall be in the principal amount of the Revolving Credit Committed Amount. Borrower acknowledges and agrees that, if the outstanding principal balance of the Revolving Loan outstanding from time to time exceeds the face amount of the Revolving Credit Note, the excess shall bear interest at the Post-Default Rate for the Revolving Loan and shall be payable, with accrued interest, ON DEMAND. The Revolving Credit Note shall not operate as a novation of any of the Obligations or nullify, discharge, or release any such Obligations or the continuing contractual relationship of the parties hereto in accordance with the provisions of this Agreement. 2.1.6 Mandatory Prepayments of Revolving Loan. Borrower shall make the mandatory prepayments (each a "Revolving Loan Mandatory Prepayment" and collectively, the "Revolving Loan Mandatory Prepayments") of the Revolving Loan at any time and from time to time in such amounts as is required pursuant to Section 2.1.3 (Borrowing Base) in order to cover any Borrowing Base Deficiency. 2.1.7 Optional Prepayments of Revolving Loan. Borrower shall have the option, at any time and from time to time, to prepay (each a "Revolving Loan Optional Prepayment" and collectively the "Revolving Loan Optional Prepayments") the Revolving Loan, in whole or in part without premium or penalty. 2.1.8 The Collateral Account. Borrower will deposit, or cause to be deposited, all Items of Payment to a bank account or bank accounts designated by Lender and from which Lender alone has power of access and withdrawal (collectively, the "Collateral Account"). In the case of any deposit that is made by Borrower manually (i.e., the payment is received by the Borrower rather than being delivered to the Lockbox or wired to the Collateral Account), such deposit shall be made not later than the next Business Day after the date of receipt of the Items of Payment. The Items of Payment shall be deposited in precisely the form received, except for the endorsements of Borrower where necessary to permit the collection of any such Items of Payment, Borrower hereby agreeing to make such endorsement. In the event Borrower shall fail to do so, Lender is hereby authorized by Borrower to make the endorsement in the name of Borrower. Prior to such a deposit, Borrower will not commingle any Items of Payment with any of the other funds or property of Borrower, but will hold them separate and apart in trust and for the account of Lender. Borrower shall direct its Account Debtors that all Items of Payment are to be either (a) wired to the Collateral Account or (b) mailed to one or more post-office boxes designated by Lender, or to such other additional or replacement post-office boxes pursuant to the request of Lender from time to time (collectively, the "Lockbox"). Lender shall have unrestricted and exclusive access to the Lockbox. Borrower hereby authorizes Lender to inspect all Items of Payment, endorse all Items of Payment in the name of Borrower, and deposit such Items of Payment in the Collateral Account. Lender reserves the right, exercised in its sole and absolute discretion from time to time, to provide to the Collateral Account credit prior to final collection of an Item of Payment and to disallow credit for any Item of Payment which is unsatisfactory to Lender. In the event Items of Payment are returned to Lender for any reason whatsoever, Lender may, in the exercise of its discretion from time to time, forward such Items of Payment a second time. Any returned Items of Payment shall be charged back to the Collateral Account, the Revolving Loan Account, or other account, as appropriate. Lender will apply the whole or any part of the collected funds credited to the Collateral Account (including funds received from the Blocked Account) against the Revolving Loan (or with respect to Items of Payment that are not proceeds of Accounts or after the occurrence and during the continuance of an Event of Default, against any of the Obligations) or credit such collected funds to a depository account of Borrower with Lender (or an Affiliate of Lender), the order and method of such application to be in the sole discretion of Lender. 2.1.9 Revolving Loan Account. Lender will establish and maintain a loan account on its books (the "Revolving Loan Account") to which Lender will (a) debit (i) the principal amount of each advance of the Revolving Loan made by Lender hereunder as of the date made, (ii) the amount of any interest accrued on the Revolving Loan as and when due, and (iii) any other amounts due and payable by Borrower to Lender from time to time under the provisions of this Agreement in connection with the Revolving Loan, including, without limitation, Enforcement Costs, Fees, late charges, and service, collection and audit fees, as and when due and payable, and (b) credit all payments made by Borrower to Lender on account of the Revolving Loan as of the date made including, without limitation, funds credited to the Revolving Loan Account from the Collateral Account. Lender may debit the Revolving Loan Account for the amount of any Item of Payment that is returned to Lender unpaid. All credit entries to the Revolving Loan Account are conditional and shall be readjusted as of the date made if final and indefeasible payment is not received by Lender in cash or solvent credits. Any and all periodic or other statements or reconciliations, and the information contained in those statements or reconciliations, of the Revolving Loan Account shall be final, binding and conclusive upon Borrower in all respects, absent manifest error, unless Lender receives specific written objection thereto from Borrower within thirty (30) Business Days after such statement or reconciliation shall have been sent by Lender. 2.1.10 Revolving Credit Unused Line Fee. Borrower shall pay to Lender a revolving credit facility fee (collectively, the "Revolving Credit Unused Line Fees" and individually, a "Revolving Credit Unused Line Fee") in an amount equal to three-eighths percent (3/8%) per annum of the average daily unused and undisbursed portion of the Revolving Credit Committed Amount in effect from time to time accruing during each quarter. The accrued and unpaid portion of the Revolving Credit Unused Line Fee shall be paid in arrears by Borrower to Lender on the first day of each September, December, March and June, commencing on the first such date following the date hereof, and on the Revolving Credit Termination Date. Section 2.2 The Letter of Credit Facility. 2.2.1 Letters of Credit. Subject to and upon the provisions of this Agreement, and as a part of the Revolving Credit Commitment, Borrower, upon the prior approval of Lender, may obtain standby letters of credit (as the same may from time to time be amended, supplemented or otherwise modified, each a "Letter of Credit" and collectively the "Letters of Credit") from Lender from time to time from the Closing Date until the Business Day preceding the Revolving Credit Termination Date. Borrower will not be entitled to obtain a Letter of Credit hereunder unless (a) after giving effect to the request, the outstanding principal balance of the Revolving Loan and of the Letter of Credit Obligations would not exceed the lesser of (i) the Revolving Credit Committed Amount or (ii) the most current Borrowing Base and (b) the sum of the aggregate face amount of the then outstanding Letters of Credit (including the face amount of the requested Letter of Credit) does not exceed One Million Dollars ($1,000,000) 2.2.2 Letter of Credit Fees. Prior to or simultaneously with the opening of each Letter of Credit, Borrower shall pay to Lender, a letter of credit fee (each a "Letter of Credit Fee" and collectively the "Letter of Credit Fees") in an amount equal to the customary fee charged commercial customers for a Letter of Credit from time to time. The Letter of Credit Fees shall be paid upon the opening of each Letter of Credit and upon each anniversary thereof, if any. In addition, Borrower shall pay to Lender all other reasonable and customary amendment, negotiation, processing, transfer or other fees to the extent and as and when required by the provisions of any Letter of Credit Agreement. All Letter of Credit Fees and all such other additional fees are included in and are a part of the "Fees" payable by Borrower under the provisions of this Agreement and are a part of the Obligations. 2.2.3 Terms of Letters of Credit. Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit Agreement, and (b) expire on a date not later than the Business Day preceding the Revolving Credit Expiration Date; provided, however, if any Letter of Credit does have an expiration date later than the Business Day preceding the Revolving Credit Termination Date (each a "Post-Expiration Date Letter of Credit" and collectively, the "Post-Expiration Date Letters of Credit"), effective as of the Business Day preceding the Revolving Credit Termination Date and without prior notice to or the consent of Borrower, Lender shall make advances under the Revolving Loan for the account of Borrower in the aggregate face amount of all such Letters of Credit. Lender shall deposit the proceeds of such advances into one or more non-interest bearing accounts with and in the name of Lender and over which Lender alone shall have exclusive power of access and withdrawal (collectively, the "Letter of Credit Cash Collateral Account"). The Letter of Credit Cash Collateral Account is to be held by Lender as additional collateral and security for any Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit. Borrower hereby assigns, pledges, grants and sets over to Lender a first priority security interest in, and Lien on, all of the funds on deposit in the Letter of Credit Cash Collateral Account, together with any and all proceeds and products thereof as additional collateral and security for the Letter of Credit Obligations relating to the Post-Expiration Date Letters of Credit. Borrower acknowledges and agrees that Lender shall be entitled to fund any draw or draft on any Post-Expiration Date Letter of Credit from the monies on deposit in the Letter of Credit Cash Collateral Account with notice to but without the consent of Borrower. Borrower further acknowledges and agrees that Lender's election to fund any draw or draft on any Post-Expiration Date Letter of Credit from the Letter of Credit Cash Collateral shall in no way limit, impair, lessen, reduce, release or otherwise adversely affect Borrower's obligation to pay any Letter of Credit Obligations under or relating to the Post-Expiration Date Letters of Credit. At such time as all Post-Expiration Date Letters of Credit have expired, all Obligations have been paid in full, and the Commitment has been terminated, any remaining funds on deposit in the Letter of Credit Cash Collateral Account shall be paid to Borrower. The aggregate face amount of all Letters of Credit at any one time outstanding and issued by Lender pursuant to the provisions of this Agreement, including, without limitation, any and all Post-Expiration Date Letters of Credit, plus the amount of any unpaid Letter of Credit Fees accrued thereon, and less the aggregate amount of all drafts issued under or purporting to have been issued under such Letters of Credit that have been paid by Lender and for which Lender has been reimbursed by Borrower in full in accordance with Section 2.2.5 (Payments of Letters of Credit) and the Letter of Credit Agreements, and for which Lender has no further obligation or commitment to restore all or any portion of the amounts drawn and reimbursed, is herein called the "Outstanding Letter of Credit Obligations". 2.2.4 Procedures for Letters of Credit. Borrower shall give Lender written notice at least five (5) Business Days prior to the date on which Borrower desires Lender to issue a Letter of Credit. Such notice shall be accompanied by a duly executed Letter of Credit Agreement specifying, among other things: (a) the name and address of the intended beneficiary of the Letter of Credit, (b) the requested face amount of the Letter of Credit, (c) whether the Letter of Credit is to be revocable or irrevocable, (d) the Business Day on which the Letter of Credit is to be opened and the date on which the Letter of Credit is to expire, (e) the terms of payment of any draft or drafts which may be drawn under the Letter of Credit, and (f) any other terms or provisions Borrower desires to be contained in the Letter of Credit. Such notice shall also be accompanied by such other information, certificates, confirmations, and other items as Lender may require to assure that the Letter of Credit is issued in accordance with the provisions of this Agreement and a Letter of Credit Agreement. In the event of any conflict between the provisions of this Agreement and the provisions of a Letter of Credit Agreement, the provisions of this Agreement shall prevail and control unless otherwise expressly provided in the Letter of Credit Agreement. Upon (x) receipt of such notice, (y) payment of all Letter of Credit Fees and all other Fees payable in connection with the issuance of such Letter of Credit, and (z) receipt of a duly executed Letter of Credit Agreement, Lender shall process such notice and Letter of Credit Agreement in accordance with its customary procedures and open such Letter of Credit on the Business Day specified in such notice. 2.2.5 Payments of Letters of Credit. Borrower hereby promises to pay to Lender, ON DEMAND and in United States Dollars, the following which are herein collectively referred to as the "Current Letter of Credit Obligations": (a) the amount which Lender has paid or will be required to pay under each draft or draw on a Letter of Credit, whether such demand be in advance of Lender's payment or for reimbursement for such payment; (b) any and all reasonable charges and expenses which Lender may pay or incur relative to the Letter of Credit and/or such draws or drafts; and (c) interest on the amounts described in (a) and (b) not paid by Borrower as and when due and payable under the provisions of (a) and (b) above from the day the same are due and payable until paid in full at the Post-Default Rate. In addition, Borrower hereby promises to pay any and all other Letter of Credit Obligations as and when due and payable in accordance with the provisions of this Agreement and the Letter of Credit Agreements. The obligation of Borrower to pay Current Letter of Credit Obligations and all other Letter of Credit Obligations shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which Borrower or any other account party may have or have had against the beneficiary of such Letter of Credit, Lender, or any other Person, including, without limitation, any defense based on the failure of any draft or draw to conform to the terms of such Letter of Credit, any draft or other document proving to be forged, fraudulent or invalid, or the legality, validity, regularity or enforceability of such Letter of Credit, any draft or other documents presented with any draft, any Letter of Credit Agreement, this Agreement, or any of the other Financing Documents, all whether or not Lender had actual or constructive knowledge of the same, and irrespective of any Collateral, security or guarantee therefor or right of offset with respect thereto and irrespective of any other circumstances whatsoever which constitutes, or might be construed to constitute, an equitable or legal discharge of Borrower for any Letter of Credit Obligations, in bankruptcy or otherwise; provided, however, that Borrower shall not be obligated to reimburse Lender for any wrongful payment under such Letter of Credit made as a result of Lender's gross negligence or willful misconduct. The obligation of Borrower to pay the Letter of Credit Obligations shall not be conditioned or contingent upon the pursuit by Lender or any other Person at any time of any right or remedy against any Person which may be or become liable in respect of all or any part of such obligation or against any Collateral, security or guarantee therefor or right of offset with respect thereto. The Letter of Credit Obligations shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any portion of the Letter of Credit Obligations is rescinded or must otherwise be restored or returned by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Person, or upon or as a result of the appointment of a receiver, intervenor, or conservator of, or trustee or similar officer for, any Person, or any substantial part of such Person's property, all as though such payments had not been made. 2.2.6 Change in Law; Increased Cost. If any change in any law or regulation or in the interpretation thereof by any court or other Governmental Authority charged with the administration thereof occurring after the date of this Agreement shall either (a) impose, modify or deem applicable any reserve, special deposit or similar requirement against Letters of Credit issued by Lender, or (b) impose on Lender any other condition regarding this Agreement or any Letter of Credit, and the result of any event referred to in clauses (a) or (b) above shall be to increase the cost to Lender of issuing, maintaining or extending the Letter of Credit or the cost to Lender of funding any obligation under or in connection with the Letter of Credit (other than a cost relating to net income, franchise or similar taxes), then, upon demand by Lender, Borrower shall immediately pay to Lender from time to time as specified by Lender, additional amounts which shall be sufficient to compensate Lender for such increased cost, together with interest on each such amount from the date demanded until payment in full thereof at a rate per annum equal to the then highest current rate of interest on the Revolving Loan. A certificate as to such increased cost incurred by Lender, submitted by Lender to Borrower, shall be conclusive, absent manifest error. 2.2.7 General Letter of Credit Provisions. Borrower consents to Lender's payment of any draft complying with the terms of any Letter of Credit irrespective of any instructions of Borrower to the contrary. As between Borrower and Lender, Borrower assumes all risks of the acts and omissions of the beneficiary and other users of any Letter of Credit. Lender and its respective branches, Affiliates and/or correspondents shall not be responsible for and Borrower hereby indemnifies and holds Lender and its respective branches, Affiliates and/or correspondents harmless from and against all liability, loss and expense (including reasonable attorney's fees and costs) incurred by Lender and/or its branches, Affiliates and/or correspondents relative to and/or as a consequence of (a) any failure by Borrower to perform the agreements hereunder and under any Letter of Credit Agreement, (b) any Letter of Credit Agreement, this Agreement, any Letter of Credit and any draft, draw and/or acceptance under or purported to be under any Letter of Credit, (c) any action taken or omitted by Lender and/or any of its respective branches, Affiliates and/or correspondents at the request of Borrower, (d) any failure or inability to perform in accordance with the terms of any Letter of Credit by reason of any control or restriction rightfully or wrongfully exercised by any de facto or de jure Governmental Authority, group or individual asserting or exercising governmental or paramount powers, and/or (e) any consequences arising from causes beyond the control of Lender and/or any of its respective branches, Affiliates and/or correspondents. Except for gross negligence or willful misconduct, Lender and its respective branches, Affiliates and/or correspondents, shall not be liable or responsible in any respect for any (a) error, omission, interruption or delay in transmission, dispatch or delivery of any one or more messages or advices in connection with any Letter of Credit, whether transmitted by cable, telegraph, mail or otherwise and despite any cipher or code which may be employed, and/or (b) action, inaction or omission which may be taken or suffered by it or them in good faith or through inadvertence in identifying or failing to identify any beneficiary or otherwise in connection with any Letter of Credit. Subject to the terms of the Letter of Credit, a Letter of Credit may be amended, modified or revoked only upon the receipt by Lender from Borrower and the beneficiary (including any transferee and/or assignee of the original beneficiary), of a written consent and request therefor. If any Laws, order of court and/or ruling or regulation of any Governmental Authority of the United States (or any state thereof) and/or any country other than the United States permits a beneficiary under a Letter of Credit to require Lender and/or any of its respective branches, Affiliates and/or correspondents to pay drafts under or purporting to be under a Letter of Credit after the expiration date of the Letter of Credit, Borrower shall reimburse Lender, as appropriate, for any such payment pursuant to provisions of Section 2.2.6 (Change in Law; Increased Cost). Except as may otherwise be specifically provided in a Letter of Credit or Letter of Credit Agreement, the laws of the State and the Uniform Customs and Practice for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 shall govern the Letters of Credit. The Laws, rules, provisions and regulations of the Uniform Customs and Practice for Documentary Credits are hereby incorporated by reference. In the event of a conflict between the Uniform Customs and Practice for Documentary Credits and the laws of the State, the Uniform Customs and Practice for Documentary Credits shall prevail. Section 2.3 Applicable Interest Rates. (a) Each advance of the Revolving Loan shall bear interest until maturity (whether by acceleration, declaration, extension or otherwise) at the Applicable Rate as determined in accordance with the provisions of this Section. (b) Notwithstanding the foregoing, following the occurrence and during the continuance of an Event of Default, at the option of Lender, all advances of the Revolving Loan and all other Obligations shall bear interest at the Post-Default Rate. (c) The Applicable Margin shall be 300 basis points per annum unless and until a change is required by the operation of Section 2.3(d). (d) Changes in the Applicable Margin shall be made not more frequently than quarterly based on the Pricing Ratio, determined by Lender subsequent to its review of the quarterly reports required by Section 7.1.1(c) (Quarterly Statements and Certificates), except that the first such determination shall be made based on Borrower's annual financial statements required by Section 7.1.1(a) (Annual Statements and Certificates) for Borrower's fiscal year ended December 31, 2003 and shall be effective as of the first day of the first month after Lender receives and reviews such statements. The Applicable Margin (expressed as basis points) shall vary depending upon the Pricing Ratio, as follows: Pricing Ratio Applicable Margin (both covenants achieved for two (2) consecutive quarters)
Total Liabilities to Net Worth Interest Coverage Ratio Equal to or less than 2.0 to 1.0 Greater than 2.5 to 1.0 275 basis points Equal to or less than 1.5 to 1.0 Greater than 2.5 to 1.0 250 basis points
Section 2.4 General Financing Provisions. 2.4.1 Borrowers' Representatives. Lender is hereby irrevocably authorized by Borrower to make advances under the Revolving Loan to Borrower pursuant to the provisions of this Agreement upon the written, oral or telephone request of any one or more of the Persons who is from time to time a Responsible Officer of Borrower under the provisions of the most recent certificate of corporate resolutions and/or incumbency of Borrower on file with Lender. Lender assumes no responsibility or liability for any errors, mistakes, and/or discrepancies in the oral, telephonic, written or other transmissions of any instructions, orders, requests and confirmations delivered by Borrower to Lender in connection with the Credit Facilities, any advance of the Revolving Loan, any Letter of Credit or any other transaction in connection with the provisions of this Agreement. 2.4.2 Use of Proceeds of the Revolving Loan. The proceeds of each advance under the Revolving Loan shall be used by Borrower for Permitted Uses, and for no other purposes except as may otherwise be agreed by Lender in writing. 2.4.3 Origination Fee. Borrower shall pay to Lender on or before the Closing Date a loan origination fee (the "Origination Fee") in the amount of Two Hundred Fifty Thousand Dollars ($250,000), which fee has been fully earned and is non-refundable. Prior to the date hereof Borrower has paid a portion of the Origination Fee in the amount of Seventy Five Thousand Dollars ($75,000); the balance due as of the date hereof is One Hundred Seventy Five Thousand Dollars ($175,000). 2.4.4 Monitoring Fee. Borrower shall pay to Lender a monthly monitoring fee in the amount of $700 (collectively, the "Monitoring Fees" and individually, a "Monitoring Fee") commencing on the first such date following the date hereof and continuing until the Revolving Credit Termination Date. Borrower authorizes Lender to debit demand deposit account number _____________________ or any other account with Lender (routing number 056-007604) designated in writing by Borrower, beginning as of the date hereof for any Monitoring Fee. Borrower further certifies that Borrower holds legitimate ownership of this account and preauthorizes this periodic debit as part of its right under said ownership. 2.4.5 Computation of Interest and Fees. All applicable Fees and interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. 2.4.6 Maximum Interest Rate. In no event shall any interest rate provided for hereunder exceed the maximum rate permissible for corporate borrowers under applicable law for loans of the type provided for hereunder (the "Maximum Rate"). If, in any month, any interest rate, absent such limitation, would have exceeded the Maximum Rate, then the interest rate for that month shall be the Maximum Rate, and, if in future months, that interest rate would otherwise be less than the Maximum Rate, then that interest rate shall remain at the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the Obligations, the total amount of interest paid or accrued under the terms of this Agreement is less than the total amount of interest which would, but for this Section, have been paid or accrued if the interest rates otherwise set forth in this Agreement had at all times been in effect, then Borrower shall, to the extent permitted by applicable law, pay Lender, an amount equal to the excess of (a) the lesser of (i) the amount of interest which would have been charged if the Maximum Rate had, at all times, been in effect or (ii) the amount of interest which would have accrued had the interest rates otherwise set forth in this Agreement, at all times, been in effect over (b) the amount of interest actually paid or accrued under this Agreement. In the event that a court determines that Lender has received interest and other charges hereunder in excess of the Maximum Rate, such excess shall be deemed received on account of, and shall automatically be applied to reduce, the Obligations other than interest, in the inverse order of maturity, and if there are no Obligations outstanding, Lender shall refund to Borrower such excess. 2.4.7 Payments. All payments of the Obligations, including, without limitation, principal, interest, Prepayments, and Fees, shall be paid by Borrower without setoff, recoupment or counterclaim to Lender in immediately available funds not later than 2:00 p.m. (Eastern Time) on the due date of such payment. All payments received by Lender after such time shall be deemed to have been received by Lender for purposes of computing interest and Fees and otherwise as of the next Business Day. Payments shall not be considered received by Lender until such payments are paid to Lender in immediately available funds to Lender's principal office in Baltimore, Maryland or at such other location as Lender may at any time and from time to time notify Borrower. Alternatively, at its sole discretion, Lender may charge any deposit account of Borrower at Lender or any Affiliate of Lender with all or any part of any amount due to Lender under this Agreement or any of the other Financing Documents to the extent that Borrower shall have not otherwise tendered payment to Lender. 2.4.8 Liens; Setoff. Borrower hereby grants to Lender as additional collateral and security for all of the Obligations, a continuing Lien on any and all monies, Investment Property, and other property of Borrower and any and all proceeds thereof, now or hereafter held or received by or in transit to, Lender, and/or any Affiliate of Lender, from or for the account of, Borrower, and also upon any and all deposit accounts (general or special) and credits of Borrower, if any, with Lender or any Affiliate of Lender, at any time existing, excluding any deposit accounts held by Borrower in its capacity as trustee for Persons who are not Affiliates of Borrower. Without implying any limitation on any other rights Lender may have under the Financing Documents or applicable Laws, during the continuance of an Event of Default, Lender is hereby authorized by Borrower at any time and from time to time, without notice to, or consent of, Borrower, to set off, appropriate, seize, freeze and apply any or all items hereinabove referred to against all Obligations then outstanding (whether or not then due), all in such order and manner as shall be determined by Lender in its sole and absolute discretion. 2.4.9 Requirements of Law. In the event that Lender shall have determined in good faith that (a) the adoption of any Capital Adequacy Regulation, or (b) any change in any Capital Adequacy Regulation or in the interpretation or application thereof or (c) compliance by Lender or any corporation controlling Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any central bank or Governmental Authority, does or shall have the effect of reducing the rate of return on the capital of Lender or any corporation controlling Lender, as a consequence of the obligations of Lender hereunder to a level below that which Lender or any corporation controlling Lender would have achieved but for such adoption, change or compliance (taking into consideration the policies of Lender and the corporation controlling Lender, with respect to capital adequacy) by an amount deemed by Lender, in its discretion, to be material, then from time to time, after submission by Lender to Borrower of a written request therefor and a statement of the basis for Lender's determination, Borrower shall pay to Lender ON DEMAND such additional amount or amounts in order to compensate Lender or its controlling corporation for any such reduction. 2.4.10 ACH Transactions and Swap Contracts. Borrower may request and Lender or its Affiliates may, in their sole and absolute discretion, provide ACH Transactions and Swap Contracts. In the event Borrower requests Lender or its Affiliates to procure ACH Transactions or Swap Contracts, then Borrower agrees to indemnify and hold Lender or its Affiliates harmless from any and all obligations now or hereafter owing to Lender or its Affiliates in connection with such ACH Transactions or Swap Contracts other than obligations arising as a result of Lender's or its Affiliates' gross negligence or willful misconduct. Borrower agrees to pay Lender or its Affiliates all amounts owing to Lender or its Affiliates pursuant to ACH Transactions and Swap Contracts. In the event Borrower shall not have paid to Lender or its Affiliates such amounts, Lender may cover such amounts by an advance under the Revolving Loan, which advance shall be deemed to have been requested by Borrower. Borrower acknowledges and agrees that the obtaining of ACH Transactions and Swap Contracts from Lender or its Affiliates (a) is in the sole and absolute discretion of Lender or its Affiliates and (b) is subject to all rules and regulations of Lender or its Affiliates. 2.4.11 Termination of Revolving Credit Facility. Borrower shall have the right to terminate or reduce the Revolving Credit Commitment, in whole or in part, upon at least thirty (30) Business Days prior written notice to Lender, without any premium or penalty; provided, however, that all Outstanding Letter of Credit Obligations shall be secured as provided in Section 2.2.3 (Terms of Letters of Credit). 2.4.12 Elimination of MXL Receivables from Borrowing Base. Notwithstanding anything else herein or in any of the Financing Documents, at Borrower's option and upon written notice from Borrower to Lender, the Borrowing Base shall be revised to eliminate MXL's Eligible Receivables; provided, however, Borrower shall make a Revolving Loan Mandatory Prepayment as required pursuant to Section 2.1.6 (Mandatory Prepayments) so that no Borrowing Base Deficiency exists as of the date of elimination of the MXL Eligible Receivables from the Borrowing Base. Upon such election and notice by Borrower and payment of any Borrowing Base Deficiency (a) all obligations of MXL related to the Borrowing Base and Eligible Receivables shall immediately terminate, (b) this Agreement shall be deemed modified to eliminate all references to MXL and any and all obligations of MXL under this Agreement or any of the other Financing Documents shall cease; (c) cease to require any financial reporting by MXL or NPDC as provided in any of the Financing Documents, and (d) at the sole cost of Borrower, Lender shall (i) void the Guaranty executed by MXL and (ii) terminate any Security Documents executed by MXL at the sole cost and expense of Borrower. ARTICLE III THE COLLATERAL Section 3.1 Debt and Obligations Secured. All property and Liens assigned, pledged or otherwise granted under or in connection with this Agreement (including, without limitation, those under Section 3.2 (Grant of Liens)) or any of the Financing Documents shall secure (a) the payment of all of the Obligations, including, without limitation, any and all Outstanding Letter of Credit Obligations, and (b) the performance, compliance with and observance by Borrower of the provisions of this Agreement and all of the other Financing Documents or otherwise under the Obligations. Section 3.2 Grant of Liens. 3.2.1 Borrower Collateral. (a) Borrower hereby assigns, pledges and grants to Lender, and agrees that Lender shall have a perfected and continuing security interest in, and Lien on, (a) all of Borrower's Accounts, Inventory, Chattel Paper, Documents, Instruments, Equipment, Investment Property, and General Intangibles (in which Borrower is permitted under the terms thereof to grant a security interest) and all of Borrower's deposit accounts with any financial institution with which Borrower maintains deposits, whether now owned or existing or hereafter acquired or arising, (b) all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an Account or Chattel Paper, (c) all insurance policies relating to the foregoing and the right to receive refunds of unearned insurance premiums under those policies, (d) all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to the foregoing and all Equipment and General Intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records; and (e) all Proceeds and products of the foregoing. Borrower further agrees that Lender shall have in respect thereof all of the rights and remedies of a secured party under the Uniform Commercial Code as well as those provided in this Agreement, under each of the other Financing Documents to which it is a party and under applicable Laws. (b) Borrower covenants and agrees that Borrower shall provide Lender with all necessary information and will execute and deliver such documents as are required to comply with the Federal Assignment of Claims Act of 1940 (31 U.S.C. ss.3727 and 41 U.S.C. ss.15), to perfect Lender's security interest in the Accounts arising under Government Contracts with a contract value equal to or greater than Fifty Thousand Dollars ($50,000) and such other Government Contracts as Lender may determine in its sole discretion. 3.2.2 MXL Collateral (a) MXL hereby assigns, pledges and grants to Lender, and agrees that Lender shall have a perfected and continuing security interest in, and Lien on, (a) all of MXL's Accounts, Chattel Paper, Documents, Instruments and, to the extent related to Accounts, General Intangibles (in which MXL is permitted under the terms thereof to grant a security interest), (b) all returned, rejected or repossessed goods, the sale or lease of which shall have given or shall give rise to an Account or Chattel Paper, (c) all books and records in whatever media (paper, electronic or otherwise) recorded or stored, with respect to the foregoing and all Equipment and General Intangibles necessary or beneficial to retain, access and/or process the information contained in those books and records; and (d) all Proceeds and products of the foregoing. MXL further agrees that Lender shall have in respect thereof all of the rights and remedies of a secured party under the Uniform Commercial Code as well as those provided in this Agreement, under each of the other Financing Documents to which it is a party and under applicable Laws. (b) MXL covenants and agrees that MXL shall provide Lender with all necessary information and will execute and deliver such documents as are required to comply with the Federal Assignment of Claims Act of 1940 (31 U.S.C. ss.3727 and 41 U.S.C. ss.15), to perfect Lender's security interest in the Accounts arising under Government Contracts with a contract value equal to or greater than Fifty Thousand Dollars ($50,000) and such other Government Contracts as Lender may determine in its sole discretion. Section 3.3 Collateral Disclosure List. On or prior to the Closing Date, Borrower, MXL and any Additional Borrower signing an Additional Borrower Joinder Supplement as of the Closing Date shall each deliver to Lender a list on the form provided by Lender (the "Collateral Disclosure List") which shall contain such information with respect to Borrower's, MXL's and Additional Borrower's business and personal property as Lender may require and shall be certified by a Responsible Officer of Borrower, MXL or Additional Borrower, as applicable. Promptly after demand by Lender, Borrower, MXL and Additional Borrower shall furnish to Lender an update of the information contained in the Collateral Disclosure List at any time and from time to time as may be reasonably requested by Lender. Section 3.4 Personal Property. Borrower acknowledges and agrees that it is the intention of the parties to this Agreement that Lender shall have a first priority, perfected Lien, in form and substance satisfactory to Lender and its counsel, on all of the Borrower Collateral, whether now owned or hereafter acquired, subject only to the Permitted Liens, if any. In furtherance of the foregoing: (a) On the Closing Date and without implying any limitation on the scope of Section 3.2 (Grant of Liens), Borrower shall deliver to Lender the originals of all of its letters of credit, Investment Property, Chattel Paper, Documents and Instruments and, if Lender so requires, shall execute and deliver separate pledge, assignment and security agreements in form and content acceptable to Lender, which pledge, assignment and security agreements shall assign, pledge and grant a Lien to Lender on all letters of credit, Investment Property, Chattel Paper, Documents, and Instruments. Notwithstanding the foregoing, Lender agrees that Borrower may retain possession of Investment Property with an aggregate value of less than One Hundred Thousand Dollars ($100,000) that is received from Account Debtors in payment of Receivables in lieu of cash. (b) In the event that Borrower shall acquire after the Closing Date any letters of credit, Investment Property, Chattel Paper, Documents, or Instruments, Borrower shall promptly so notify Lender and deliver the originals of all of the foregoing to Lender promptly and in any event within ten (10) days of each acquisition. (c) All letters of credit, Investment Property, Chattel Paper, Documents and Instruments shall be delivered to Lender endorsed and/or assigned as required by any pledge, assignment and security agreement and/or as Lender may require and, if applicable, shall be accompanied by blank irrevocable and unconditional stock or bond powers and/or notices as Lender may require. Section 3.5 Record Searches. As of the Closing Date and thereafter at the time any Financing Document is executed and delivered by Borrower pursuant to this Section, Lender shall have received, in form and substance satisfactory to Lender, such Lien or record searches with respect to Borrower and/or any other Person, as appropriate, and the property covered by such Financing Document showing that the Lien of such Financing Document will be a perfected first priority Lien on the property covered by such Financing Document subject only to Permitted Liens or to such other matters as Lender may approve. Section 3.6 Costs. ------ Borrower agrees to pay, as part of the Enforcement Costs and to the fullest extent permitted by applicable Laws, on demand all costs, fees and expenses incurred by Lender in connection with the taking, perfection, preservation, protection and/or release of a Lien on the Collateral, including, without limitation: (a) customary fees and expenses incurred in preparing Financing Documents from time to time (including, without limitation, reasonable attorneys' fees incurred in connection with preparing the Financing Documents, including, any amendments and supplements thereto); (b) all filing and/or recording taxes or fees; (c) all costs of Lien and record searches; (d) reasonable attorneys' fees in connection with all legal opinions required; and (e) all related costs, fees and expenses. Section 3.7 Release. Upon the indefeasible repayment in full in cash of the Obligations and performance of all Obligations under this Agreement and all other Financing Documents, and the termination and/or expiration of the Commitment, all Letters of Credit and all Outstanding Letter of Credit Obligations, or, in the case of Outstanding Letter of Credit Obligations, the cash collateralization thereof pursuant to Section 2.2.3 (Terms of Letters of Credit), upon Borrower's request and at Borrower's sole cost and expense, Lender shall release and/or terminate any Financing Document. Section 3.8 Inconsistent Provisions. In the event that the provisions of any Financing Document directly conflict with any provision of this Agreement, the provisions of this Agreement govern. ARTICLE IV REPRESENTATIONS AND WARRANTIES - Borrower Section 4.1 Representations and Warranties. Borrower represents and warrants to Lender, as follows: 4.1.1 Subsidiaries. Borrower has the Subsidiaries listed on the Collateral Disclosure List and no others. Each of the Subsidiaries is a Wholly Owned Subsidiary except as shown on the Collateral Disclosure List, which correctly indicates the nature and amount of Borrower's ownership interests therein. 4.1.2 Existence. Borrower (a) is a Registered Organization under the laws of the jurisdiction stated in the Preamble of this Agreement, (b) is in good standing under the laws of the jurisdiction in which it is organized, (c) has the power to own its property and to carry on its business as now being conducted, and (d) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary. Borrower is organized under the laws of only one (1) jurisdiction. 4.1.3 Power and Authority. Borrower has full power and authority to execute and deliver this Agreement and the other Financing Documents to which it is a party, to make the borrowings and request Letters of Credit under this Agreement and to incur and perform the Obligations whether under this Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by all proper and necessary action. No consent or approval of owners or any creditors of Borrower, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of Borrower, is required as a condition to the execution, delivery, validity or enforceability of this Agreement, or any of the other Financing Documents, or the performance by Borrower of the Obligations. 4.1.4 Binding Agreements. This Agreement and the other Financing Documents executed and delivered by Borrower have been properly executed and delivered and constitute the valid and legally binding obligations of Borrower and are fully enforceable against Borrower in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law. 4.1.5 No Conflicts. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by Borrower nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (a) Borrower's organizational or governing documents, (b) any existing mortgage, indenture, contract or agreement binding on Borrower or affecting its property, except for any conflict which could not have a materially adverse effect on Borrower, or (c) any applicable Laws. 4.1.6 No Defaults, Violations. (a) No Default or Event of Default has occurred and is continuing. (b) Neither Borrower nor any of its Subsidiaries is in default under or with respect to any obligation under any existing mortgage, indenture, contract or agreement binding on it or affecting its property in any respect which could be materially adverse to the business, operations, property or financial condition of the Borrower, or which could materially adversely affect the ability of the Borrower to perform its obligations under this Agreement or the other Financing Documents to which Borrower is a party. 4.1.7 Compliance with Laws. Neither Borrower nor any of its Subsidiaries is in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator, or any Governmental Authority affecting it or any of its properties, the violation of which could materially adversely affect the business, operations or properties of Borrower and its Subsidiaries taken as a whole. 4.1.8 Margin Stock. None of the proceeds of the Revolving Loan will be used, directly or indirectly, by Borrower or any Subsidiary for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry, any "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System or for any other purpose which might make the transactions contemplated in this Agreement a "purpose credit" within the meaning of Regulation U, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Securities Exchange Act of 1934 or the Small Business Investment Act of 1958, as amended, or any rules or regulations promulgated under any of such statutes. 4.1.9 Investment Company Act; Margin Stock. Neither Borrower nor any of its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, nor is it, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company within the meaning of said Act. Neither Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin stock" within the meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve System. 4.1.10 Litigation. Except as otherwise disclosed on Schedule 4.1.10 attached hereto and made a part hereof, there are no proceedings, actions or, to the knowledge of Borrower, investigations pending or, so far as Borrower knows, threatened before or by any court, arbitrator or any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of Borrower or any Subsidiary, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations of Borrower. 4.1.11 Financial Condition. The consolidated financial statements of Borrower dated December 31, 2002 and management prepared consolidated financial statements of Borrower dated June 30, 2003, are complete and correct and fairly present the financial position of Borrower and its Subsidiaries and the results of their operations and transactions in their surplus accounts as of the date and for the period referred to and have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved. There are no material liabilities, direct or indirect, fixed or contingent, of Borrower or its Subsidiaries as of the date of such financial statements that are not reflected therein or in the notes thereto. There has been no adverse change in the financial condition or operations of Borrower or its Subsidiaries since the date of such financial statements and to Borrower's knowledge no such adverse change is pending or threatened. Prior to the date hereof, neither Borrower nor any Subsidiary has guaranteed the obligations of, or made any investment in or advances to, any Person, except as disclosed in such financial statements or the schedules hereto. 4.1.12 Full Disclosure. The financial statements referred to in Section 4.1.11 (Financial Condition), the Financing Documents (including, without limitation, this Agreement), and the statements, reports or certificates furnished by Borrower in connection with the Financing Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to Borrower which Borrower has not disclosed to Lender in writing prior to the date of this Agreement with respect to the transactions contemplated by the Financing Documents that materially and adversely affects or in the future could, in the reasonable opinion of Borrower, materially adversely affect the condition, financial or otherwise, results of operations, business, or assets of Borrower and its Subsidiaries taken as a whole. 4.1.13 Indebtedness for Borrowed Money. Except for the Obligations and except as set forth in Schedule 4.1.13 attached hereto and made a part hereof, Borrower has no Indebtedness for Borrowed Money. Lender has received photocopies of all promissory notes evidencing any Indebtedness for Borrowed Money set forth in Schedule 4.1.13, together with any and all subordination agreements, other agreements, documents, or instruments securing, evidencing, guarantying or otherwise executed and delivered in connection therewith. 4.1.14 Subordinated Debt. None of the Subordinated Debt Loan Documents has been amended, supplemented, restated or otherwise modified except as otherwise disclosed to Lender in writing on or before the effective date of any such amendment, supplement, restatement or other modification. In addition, there does not exist any default or any event which upon notice or lapse of time or both would constitute a default under the terms of any of the Subordinated Debt Loan Documents. 4.1.15 Taxes. Each of Borrower and its Subsidiaries has filed all returns, reports and forms for Taxes that, to the knowledge of Borrower, are required to be filed, and has paid all Taxes as shown on such returns or on any assessment received by it, to the extent that such Taxes have become due, unless and to the extent only that such Taxes, assessments and governmental charges are currently contested in good faith and by appropriate proceedings by Borrower, such Taxes are not the subject of any Liens other than Permitted Liens, and adequate reserves therefor have been established as required under GAAP. All tax liabilities of Borrower were as of the date of audited financial statements referred to in Section 4.1.11 (Financial Condition), and are now, adequately provided for on the books of Borrower or its Subsidiaries, as appropriate. No tax liability has been asserted by the Internal Revenue Service or any state or local authority against Borrower for Taxes in excess of those already paid. 4.1.16 ERISA. With respect to any Plan, and except to the extent that the failure of any of the following statements to be accurate would not result in a material liability to Borrower: (a) no "accumulated funding deficiency" as defined in Code ss.412 or ERISA ss.302 has occurred, whether or not that accumulated funding deficiency has been waived; (b) no Reportable Event has occurred other than events for which reporting has been waived under applicable PBGC regulations; (c) no termination of any plan subject to Title IV of ERISA has occurred; (d) neither Borrower nor any Commonly Controlled Entity has incurred a "complete withdrawal" within the meaning of ERISA ss.4203 from any Multiemployer Plan; (e) neither Borrower nor any Commonly Controlled Entity has incurred a "partial withdrawal" within the meaning of ERISA ss.4205 with respect to any Multiemployer Plan; (f) no Multiemployer Plan to which Borrower or any Commonly Controlled Entity has an obligation to contribute is in "reorganization" within the meaning of ERISA ss.4241 nor has notice been received by Borrower or any Commonly Controlled Entity that such a Multiemployer Plan will be placed in "reorganization". 4.1.17 Title to Properties. Borrower has good and marketable title to the Borrower Collateral and the properties and assets reflected in the balance sheets described in Section 4.1.11 (Financial Condition) to the extent such property and assets have not been disposed of in the ordinary course of business since the date of such balance sheets and excluding any real property. 4.1.18 Patents, Trademarks, Etc. Each of Borrower and its Subsidiaries owns, possesses, or has the right to use all necessary Patents, licenses, Trademarks, Copyrights, permits and franchises to own its properties and to conduct its business as now conducted, without known conflict with the rights of any other Person. Any and all obligations to pay royalties or other charges with respect to such properties and assets are properly reflected on the financial statements described in Section 4.1.11 (Financial Condition). 4.1.19 Employee Relations. Except as disclosed on Schedule 4.1.19 attached hereto and made a part hereof, (a) neither Borrower nor any Subsidiary thereof nor any of Borrower's or Subsidiary's employees is subject to any collective bargaining agreement, (b) no petition for certification or union election is pending with respect to the employees of Borrower or any Subsidiary and no union or collective bargaining unit has sought such certification or recognition with respect to the employees of Borrower, (c) there are no strikes, slowdowns, work stoppages or controversies pending or, to the best knowledge of Borrower after due inquiry, threatened between Borrower and its employees, and (d) neither Borrower nor any Subsidiaries is subject to an employment contract, severance agreement, commission contract, consulting agreement or bonus agreement. Hours worked and payments made to the employees of Borrower have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from Borrower or for which any claim may be made against Borrower, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on its books. The consummation of the transactions contemplated by the Financing Agreement or any of the other Financing Documents, will not give rise to a right of termination or right of re-negotiation on the part of any union under any collective bargaining agreement to which Borrower is a party or by which it is bound. 4.1.20 Presence of Hazardous Materials or Hazardous Materials Contamination. To the best of Borrower's knowledge, (a) no Hazardous Materials are located on any real property owned, controlled or operated by Borrower or for which Borrower is, or is claimed to be, responsible, except for reasonable quantities of necessary supplies for use by Borrower in the ordinary course of its current line of business and stored, used and disposed in accordance with applicable Laws, except for any non-compliance which individually or in the aggregate could not have a material adverse affect on Borrower or any of its Subsidiaries taken as a whole; and (b) no property owned, controlled or operated by Borrower or for which Borrower has, or is claimed to have, responsibility has ever been used as a manufacturing, storage, or dump site for Hazardous Materials except in compliance with applicable Laws, except for any non-compliance which individually or in the aggregate could not have a material adverse affect on Borrower or any of its Subsidiaries taken as a whole nor is affected by Hazardous Materials Contamination at any other property except for any such Hazardous Materials that individually or in the aggregate could not have a material adverse affect on Borrower or any of its Subsidiaries taken as a whole. 4.1.21 Perfection and Priority of Borrower Collateral. Lender has, or upon execution and recording of this Agreement and the Security Documents will have, and will continue to have as security for the Obligations, a valid and perfected Lien on and security interest in all Borrower Collateral, free of all other Liens, claims and rights of third parties whatsoever except Permitted Liens, including, without limitation, those described on Schedule 4.1.21 attached hereto and made a part hereof. 4.1.22 No Suspension or Debarment. Neither Borrower nor, to the knowledge of Borrower, any Affiliate nor any of their respective directors, officers or employees has received any notice of, or information concerning, any proposed, contemplated or initiated suspension or debarment, be it temporary or permanent, due to an administrative or a statutory basis, of Borrower or any Affiliate by any Governmental Authority. Borrower further warrants and represents that neither Borrower nor, to the knowledge of Borrower, any Affiliate has defaulted under any Government Contract which default would be a basis of terminating such Government Contract. 4.1.23 Collateral Disclosure List. The information contained in the Collateral Disclosure List delivered by Borrower is complete and correct in all material respects. Such Collateral Disclosure List completely and accurately identifies (a) the type of entity, the state of organization and the chief executive office of Borrower, (b) each other place of business of Borrower, (c) the location of all books and records pertaining to the Borrower Collateral, and (d) each location, other than the foregoing, where any of the Borrower Collateral is located. 4.1.24 Business Names and Addresses. In the five (5) years preceding the date hereof, Borrower has not changed its name, identity or corporate structure, has not conducted business under any name other than its current name, and has not conducted its business in any jurisdiction other than those disclosed on the Collateral Disclosure List. 4.1.25 Equipment. All Equipment is personalty and is not and will not be affixed to real estate in such manner as to become a fixture or part of such real estate. No equipment is held by Borrower on a sale on approval basis. 4.1.26 Accounts. With respect to all Accounts of Borrower and to the best of Borrower's knowledge (a) they are genuine, and in all respects what they purport to be, and are not evidenced by a judgment, an Instrument, or Chattel Paper (unless such judgment has been assigned and such Instrument or Chattel Paper has been endorsed and delivered to Lender); (b) they represent bona fide transactions completed in accordance with the terms and provisions contained in the invoices, purchase orders and other contracts relating thereto, and the underlying transaction therefor is in all material respects in accordance with all applicable Laws; (c) the amounts shown on Borrower's books and records, with respect thereto are actually and absolutely owing to Borrower and are not contingent or subject to reduction for any reason other than regular discounts, credits or adjustments allowed by Borrower in the ordinary course of its business; (d) no payments have been or shall be made thereon except payments turned over to Lender by Borrower; (e) all Account Debtors thereon have the capacity to contract; and (f) the goods sold, leased or transferred or the services furnished giving rise thereto are not subject to any Liens except Permitted Liens. 4.1.27 Compliance with Eligibility Standards. Each Account of Borrower included in the calculation of the Borrowing Base does and will at all times that it is included in the Borrowing Base meet and comply with all of the standards for Eligible Receivables. With respect to those Accounts of Borrower which Lender has deemed Eligible Receivables (a) to the knowledge of Borrower, there are no facts, events or occurrences which could materially impair the validity, collectibility or enforceability thereof or tend to reduce the amount payable thereunder; and (b) there are no proceedings or actions known to Borrower that are threatened or pending against any Account Debtor which might result in any material adverse change in the Borrowing Base. Section 4.2 Survival; Updates of Representations and Warranties. All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the Closing Date, the making of any advance under the Revolving Loan and extension of credit made hereunder, and the incurring of any other Obligations and shall be deemed to have been made at the time of each request for, and again at the time of the making of, each advance under the Revolving Loan or the issuance of each Letter of Credit, except that the representations and warranties which relate to the financial statements which are referred to in Section 4.1.11 (Financial Condition), shall also be deemed to cover financial statements furnished from time to time to Lender pursuant to Section 7.1.1 (Financial Statements). ARTICLE V REPRESENTATIONS AND WARRANTIES - MXL Section 5.1 Representations and Warranties. MXL represents and warrants to Lender, as follows: 5.1.1 Existence. MXL (a) is a Registered Organization under the laws of the jurisdiction stated in the Preamble of this Agreement, (b) is in good standing under the laws of the jurisdiction in which it is organized, (c) has the power to own its property and to carry on its business as now being conducted, and (d) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary. MXL is organized under the laws of only one (1) jurisdiction. 5.1.2 Power and Authority. MXL has full power and authority to execute and deliver this Agreement, and the other Financing Documents to which it is a party and to incur and perform its obligations whether under this Agreement, the other Financing Documents or otherwise, all of which have been duly authorized by all proper and necessary action. No consent or approval of owners or any creditors of MXL, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of MXL, is required as a condition to the execution, delivery, validity or enforceability of this Agreement, or any of the other Financing Documents, or the performance by MXL of its obligations. 5.1.3 Binding Agreements. This Agreement and the other Financing Documents executed and delivered by MXL have been properly executed and delivered and constitute the valid and legally binding obligations of MXL and are fully enforceable against MXL in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties, and general principles of equity regardless of whether applied in a proceeding in equity or at law. 5.1.4 No Conflicts. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by MXL nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (a) MXL's organizational or governing documents, (b) any existing mortgage, indenture, contract or agreement binding on MXL or affecting its property, except for any conflict which could not have a materially adverse effect on MXL, or (c) any applicable Laws. 5.1.5 No Defaults, Violations. (a) No Default or Event of Default has occurred and is continuing. (b) MXL is not in default under or with respect to any obligation under any existing mortgage, indenture, contract or agreement binding on it or affecting its property in any respect which could be materially adverse to its business, operations, property or financial condition, or which could materially adversely affect its ability to perform its obligations under this Agreement or the other Financing Documents to which MXL is a party. 5.1.6 Compliance with Laws. MXL is not in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator, or any Governmental Authority affecting it or any of its properties, the violation of which could materially adversely affect the business, operations or properties of Borrower and its Subsidiaries taken as a whole. 5.1.7 Financial Condition. The financial statements of MXL dated June 30, 2003, are complete and correct and fairly present the financial position of MXL and the results of its operations and transactions in its surplus accounts as of the date and for the period referred to and have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved. There are no material liabilities, direct or indirect, fixed or contingent, of MXL as of the date of such financial statements that are not reflected therein or in the notes thereto. There has been no adverse change in the financial condition or operations of MXL since the date of such financial statements and to MXL's knowledge no such adverse change is pending or threatened. Prior to the date hereof, MXL has not guaranteed the obligations of, or made any investment in or advances to, any Person, except as disclosed in such financial statements or as otherwise permitted hereunder. 5.1.8 Full Disclosure. The financial statements referred to in Section 5.1.7 (Financial Condition), the Financing Documents (including, without limitation, this Agreement), and the statements, reports or certificates furnished by MXL in connection with the Financing Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to MXL which MXL has not disclosed to Lender in writing prior to the date of this Agreement with respect to the transactions contemplated by the Financing Documents that materially and adversely affects or in the future could, in the reasonable opinion of MXL, materially adversely affect the condition, financial or otherwise, results of operations, business, or assets of Borrower and its Subsidiaries taken as a whole. 5.1.9 Perfection and Priority of MXL Collateral. Lender has, or upon execution and recording of this Agreement and the Security Documents will have, and will continue to have as security for the Obligations, a valid and perfected Lien on and security interest in all MXL Collateral, free of all other Liens, claims and rights of third parties whatsoever except Permitted Liens, including, without limitation, those described on Schedule 5.1.9 attached hereto and made a part hereof. 5.1.10 No Suspension or Debarment. Neither MXL nor, to the knowledge of MXL, any Affiliate nor any of their respective directors, officers or employees has received any notice of, or information concerning, any proposed, contemplated or initiated suspension or debarment, be it temporary or permanent, due to an administrative or a statutory basis, of MXL or any Affiliate by any Governmental Authority. MXL further warrants and represents that neither MXL nor, to the knowledge of MXL, any Affiliate has defaulted under any Government Contract which default would be a basis of terminating such Government Contract. 5.1.11 Collateral Disclosure List. The information contained in the Collateral Disclosure List delivered by MXL is complete and correct in all material respects. Such Collateral Disclosure List completely and accurately identifies (a) the type of entity, the state of organization and the chief executive office of MXL, (b) each other place of business of MXL, (c) the location of all books and records pertaining to the MXL Collateral, and (d) each location, other than the foregoing, where any of the MXL Collateral is located. 5.1.12 Business Names and Addresses. In the five (5) years preceding the date hereof, MXL has not changed its name, identity or corporate structure, has not conducted business under any name other than its current name, and has not conducted its business in any jurisdiction other than those disclosed on the Collateral Disclosure List delivered by MXL. 5.1.13 Accounts. With respect to all Accounts of MXL and to the best of MXL's knowledge (a) they are genuine, and in all respects what they purport to be, and are not evidenced by a judgment, an Instrument, or Chattel Paper (unless such judgment has been assigned and such Instrument or Chattel Paper has been endorsed and delivered to Lender); (b) they represent bona fide transactions completed in accordance with the terms and provisions contained in the invoices, purchase orders and other contracts relating thereto, and the underlying transaction therefor is in all material respects in accordance with all applicable Laws; (c) the amounts shown on MXL's books and records, with respect thereto are actually and absolutely owing to MXL and are not contingent or subject to reduction for any reason other than regular discounts, credits or adjustments allowed by MXL in the ordinary course of its business; (d) no payments have been or shall be made thereon except payments turned over to Lender by MXL; (e) all Account Debtors thereon have the capacity to contract; and (f) the goods sold, leased or transferred or the services furnished giving rise thereto are not subject to any Liens except Permitted Liens. 5.1.14 Compliance with Eligibility Standards. Each Account of MXL included in the calculation of the Borrowing Base does and will at all times that it is included in the Borrowing Base meet and comply with all of the standards for Eligible Receivables. With respect to those Accounts of MXL which Lender has deemed Eligible Receivables (a) to the knowledge of MXL, there are no facts, events or occurrences which could materially impair the validity, collectibility or enforceability thereof or tend to reduce the amount payable thereunder; and (b) there are no proceedings or actions known to MXL that are threatened or pending against any Account Debtor which might result in any material adverse change in the Borrowing Base. Section 5.2 Survival; Updates of Representations and Warranties. All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the Closing Date, the making of any advance under the Revolving Loan and extension of credit made hereunder, and the incurring of any other Obligations and shall be deemed to have been made at the time of each request for, and again at the time of the making of, each advance under the Revolving Loan or the issuance of each Letter of Credit, except that the representations and warranties which relate to the financial statements which are referred to in Section 5.1.7 (Financial Condition), shall also be deemed to cover financial statements furnished from time to time to Lender pursuant to Section 7.2.1 (Financial Statements). ARTICLE VI CONDITIONS PRECEDENT Section 6.1 Conditions to the Initial Advance and Initial Letter of Credit. The making of the initial advance under the Revolving Loan and the issuance of the initial Letter of Credit is subject to the fulfillment on or before the Closing Date of the following conditions precedent in a manner satisfactory in form and substance to Lender and its counsel: 6.1.1 Organizational Documents - Borrower. Lender shall have received: (a) a certificate of good standing certified by the Secretary of State, or other appropriate Governmental Authority, of the state of formation of Borrower; (b) a certified copy from the appropriate Governmental Authority under which Borrower is organized, of Borrower's organizational documents and all recorded amendments thereto; (c) a certificate of qualification to do business certified by the Secretary of State or other Governmental Authority of each jurisdiction required by Section 4.1.2(d) (Existence); and (d) a certificate dated as of the Closing Date by the Secretary or an Assistant Secretary of Borrower covering: (i) true and complete copies of Borrower's organizational and governing documents and all amendments thereto; (ii) true and complete copies of the resolutions of its Board of Directors authorizing (A) the execution, delivery and performance of the Financing Documents to which it is a party, (B) the borrowings hereunder, and (C) the granting of the Liens contemplated by this Agreement and the Financing Documents to which Borrower is a party; (iii) the incumbency, authority and signatures of the officers of Borrower authorized to sign this Agreement and the other Financing Documents to which Borrower is a party; and (iv) the identity of Borrower's current directors. 6.1.2 Opinion of Borrower's Counsel. Lender shall have received the favorable opinion of counsel for Borrower addressed to Lender. 6.1.3 Organizational Documents - Guarantors. Lender shall have received for each of Guarantors: (a) a certificate of good standing certified by the Secretary of State, or other appropriate Governmental Authority, of the state of formation of the Guarantor; (b) a certificate of qualification to do business certified by the Secretary of State or other Governmental Authority of each jurisdiction required by Section 5.1.1(d) (Existence); (c) a certificate dated as of the Closing Date by the Secretary or an Assistant Secretary of the Guarantor covering: (i) true and complete copies of the Guarantor's organizational and governing documents and all amendments thereto; (ii) true and complete copies of the resolutions of the Board of Directors of the Guarantor authorizing the execution, delivery and performance of the Financing Documents to which the Guarantor is a party and the granting of the Liens (if applicable) contemplated by any of the Financing Documents to which the Guarantor is a party; (iii) the incumbency, authority and signatures of the officers of the Guarantor authorized to sign the Guaranty and all other Financing Documents to which the Guarantor is a party; (iv) the identity of the Guarantor's current directors; and (d) the favorable opinion of counsel for the Guarantor addressed to Lender. 6.1.4 Consents, Licenses, Approvals, Etc. Lender shall have received copies of all consents, licenses and approvals, required in connection with the execution, delivery, performance, validity and enforceability of the Financing Documents, and such consents, licenses and approvals shall be in full force and effect. 6.1.5 Note. Lender shall have received the Revolving Credit Note, conforming to the requirements hereof and executed by a Responsible Officer of Borrower and attested by a duly authorized representative of Borrower. 6.1.6 Financing Documents and Borrower Collateral. Borrower shall have executed and delivered the Financing Documents to be executed by it, and shall have delivered original Chattel Paper, Instruments, Investment Property, and related Borrower Collateral and all opinions and other documents contemplated by ARTICLE III (The Collateral). 6.1.7 Other Financing Documents. In addition to the Financing Documents to be delivered by Borrower, Lender shall have received the Guaranty and all other Financing Documents duly executed and delivered by Persons other than Borrower. 6.1.8 Other Documents, Etc. Lender shall have received such other certificates, opinions, documents and instruments confirmatory of or otherwise relating to the transactions contemplated hereby as may have been reasonably requested by Lender. 6.1.9 Payment of Fees. Lender shall have received payment of any Fees due on or before the Closing Date. 6.1.10 Collateral Disclosure List. Borrower, MXL and each Additional Borrower as of the Closing Date each shall have delivered a Collateral Disclosure List required under the provisions of Section 3.3 (Collateral Disclosure List) duly executed by a Responsible Officer of Borrower, MXL or each Additional Borrower, as applicable. 6.1.11 Recordings and Filings. Borrower and MXL shall have: (a) authorized, executed and/or delivered all Financing Documents required to be filed, registered or recorded in order to create, in favor of Lender, a perfected Lien in the Collateral (subject only to the Permitted Liens) in form and in sufficient number for filing, registration, and recording in each office in each jurisdiction in which such filings, registrations and recordations are required, and (b) delivered such evidence as Lender deems satisfactory that all necessary filing fees and all recording and other similar fees, and all Taxes and other expenses related to such filings, registrations and recordings will be or have been paid in full. 6.1.12 Insurance Certificate. Lender shall have received insurance certificates in accordance with the provisions of Section 7.1.8 (Insurance). 6.1.13 Landlord's Waivers. Lender shall have received a waiver from the landlord of the Elkridge, Maryland location leased by Borrower in form reasonably acceptable to Lender and its counsel in their sole and absolute discretion. 6.1.14 Field Examination. Lender shall have completed a field examination of Borrower's and MXL's business, operations and income, the results of which field examination shall be in all respects acceptable to Lender in its sole and absolute discretion and shall include reference discussions with key customers and vendors. 6.1.15 Subordination Agreement. Lender shall have received the fully executed Subordination Agreement in form and content acceptable to Lender. Lender shall have received and approved copies of the fully executed Subordinated Debt Loan Documents, all of which must be in form and content acceptable to Lender. 6.1.16 Subordinated Indebtedness. Lender shall have received a certificate signed by a Responsible Officer of Borrower, certifying to Lender that Borrower (a) has received the proceeds of the Subordinated Debt and has applied the same to such purposes as has been previously disclosed to, and approved by, Lender and (b) has delivered to Lender a true and correct photocopy of all Subordinated Debt Loan Documents. 6.1.17 Blocked Account Agreements. Lender shall have received the fully executed Blocked Account Agreements in form and content acceptable to Lender. 6.1.18 Borrowing Base Report. Lender shall have received a current Borrowing Base Report. Section 6.2 Conditions to all Extensions of Credit. The making of all advances under the Revolving Loan and the issuance of all Letters of Credit is subject to the fulfillment of the following conditions precedent in a manner satisfactory in form and substance to Lender and its counsel: 6.2.1 Compliance. Borrower and MXL shall have complied and shall then be in compliance with all terms, covenants, conditions and provisions of this Agreement and the other Financing Documents that are binding upon it. 6.2.2 Borrowing Base. Borrower shall have furnished all Borrowing Base Reports required by Section 2.1.4 (Borrowing Base Report), there shall exist no Borrowing Base Deficiency, and as evidence thereof, Borrower shall have furnished to Lender such reports, schedules, certificates, records and other papers as may be requested by Lender, and Borrower shall be in compliance with the provisions of this Agreement both immediately before and immediately after the making of the advance requested. 6.2.3 Default. There shall exist no Event of Default or Default hereunder. 6.2.4 Representations and Warranties. The representations and warranties of Borrower and MXL contained among the provisions of this Agreement shall be true and with the same effect as though such representations and warranties had been made at the time of the making of, and of the request for, each advance under the Revolving Loan or the issuance of each Letter of Credit, except that the representations and warranties which relate to financial statements which are referred to in Section 4.1.11 (Financial Condition) and Section 5.1.7 (Financial Condition), shall also be deemed to cover financial statements furnished from time to time to Lender pursuant to Section 7.1.1 (Financial Statements) and Section 7.2.1 (Financial Statements). 6.2.5 Adverse Change. No adverse change shall have occurred in the condition (financial or otherwise), operations or business of Borrower that would, in the good faith judgment of Lender, materially impair the ability of Borrower to pay or perform any of the Obligations. 6.2.6 Legal Matters. All legal documents incident to each advance under the Revolving Loan and each of the Letters of Credit shall be reasonably satisfactory to counsel for Lender. ARTICLE VII COVENANTS Section 7.1 Affirmative Covenants - Borrower. So long as any of the Obligations (or the Commitment) shall be outstanding hereunder, Borrower agrees with Lender as follows: 7.1.1 Financial Statements. Borrower shall furnish to Lender: (a) Annual Statements and Certificates. Borrower shall furnish to Lender as soon as available, but in no event more than one hundred twenty (120) days after the close of each fiscal year of Borrower, (i) a copy of the annual financial statement in reasonable detail satisfactory to Lender relating to Borrower and its Subsidiaries, prepared in accordance with GAAP and examined and certified by KPMG LLP or such other independent certified public accountants satisfactory to Lender, which financial statement shall include a consolidated balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year and consolidated and consolidating statements of income, cash flows and changes in shareholders equity of Borrower and its Subsidiaries for such fiscal year, (ii) a copy of the annual financial statement in reasonable detail satisfactory to Lender relating to Borrower and its Subsidiaries, prepared in accordance with GAAP by Borrower, which financial statement shall include a consolidated and consolidating balance sheet of Borrower and its Subsidiaries as of the end of such fiscal year, (iii) a Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT C, as may be amended from time to time, containing a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, a certification that no change has occurred to the information contained in the Collateral Disclosure List (except as set forth in a schedule attached to the certification), and a cash flow projection report, each prepared by a Responsible Officer of Borrower in a format acceptable to Lender and (iii) a management letter in the form prepared by Borrower's independent certified public accountants. (b) Independent Auditors Report. Borrower shall furnish to Lender as soon as available, but in no event more than one hundred twenty (120) days after the close of Borrower's fiscal years, a letter or opinion of the accountant who examined and certified the annual financial statement relating to Borrower and its Subsidiaries (i) stating whether anything in such accountant's examination has revealed the occurrence of a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto and (ii) acknowledging that Lender will rely on the statement and that Borrower knows of the intended reliance by Lender. (c) Quarterly Statements and Certificates. Borrower shall furnish to Lender as soon as available, but in no event more than forty-five (45) days after the close of Borrower's fiscal quarters, consolidated and consolidating balance sheets and income statements of Borrower and its Subsidiaries as of the close of such period, consolidated cash flows and changes in shareholders equity statements for such period, projected cash flow on a quarterly basis and projected income statements, and a Compliance Certificate, in substantially the form attached to this Agreement as EXHIBIT C, containing a detailed computation of each financial covenant in this Agreement which is applicable for the period reported, a certification that no change has occurred to the information contained in the Collateral Disclosure List (except as set forth on a schedule attached to the certification), and a cash flow projection report, each prepared by a Responsible Officer of Borrower in a format acceptable to Lender, all as prepared and certified by a Responsible Officer of Borrower and accompanied by a certificate of that officer stating whether, to the best of his or her knowledge, any event has occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (d) Monthly reports. Borrower shall furnish to Lender within twenty (20) days after the end of each fiscal month, a Borrowing Base Report with respect to Borrower and a report containing the following information: (i) a detailed aging schedule of all Receivables by Account Debtor as of the end of the previous month and the fifteenth (15th) day of the current month, in such detail, and accompanied by such supporting information, as Lender may from time to time reasonably request; (ii) a detailed aging of all accounts payable by supplier, in such detail, and accompanied by such supporting information, as Lender may from time to time reasonably request; (iii) a listing of all Unbilled Receivables as of the end of the previous month and as of the fifteenth (15th) day of the current month, showing the billing status of such Unbilled Receivables; and (iv) such other information as Lender may reasonably request. (e) Annual Budget and Projections. Borrower shall furnish to Lender as soon as available, but in no event later than forty-five (45) days before the end of each fiscal year a consolidated budget on a quarterly basis for the following fiscal year. (f) Additional Reports and Information. Borrower shall furnish to Lender promptly, such additional information, reports or statements as Lender may from time to time reasonably request. 7.1.2 Reports to SEC and to Stockholders. Borrower will furnish to Lender, promptly upon the filing or making thereof, at least one (l) copy of all financial statements, reports, notices and proxy statements sent by Borrower to its stockholders, and of all regular and other reports filed by Borrower with any securities exchange or with the Securities and Exchange Commission. 7.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc. (a) Borrower shall, and shall cause each of its Subsidiaries to, maintain (i) a standard system of accounting in accordance with GAAP, and (ii) proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its properties, business and activities. (b) Prior to an Event of Default, Borrower shall, and shall cause each of its Subsidiaries to, permit authorized representatives of Lender to visit and inspect the properties of Borrower and its Subsidiaries, up to three (3) times per year during normal business hours, to review, audit, check and inspect the Borrower Collateral, to review, audit, check and inspect Borrower's other books of record and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of Borrower and/or any Subsidiaries, with the officers, directors, employees and other representatives of Borrower and/or any Subsidiaries and their respective accountants. The annualized cost of the audits is not anticipated to exceed $15,000 per year. (c) Subsequent to the occurrence of an Event of Default and during the continuance thereof, Borrower shall, and shall cause each of its Subsidiaries to, permit authorized representatives of Lender to visit and inspect the properties of Borrower and its Subsidiaries, to review, audit, check and inspect the Borrower Collateral at any time with or without notice, to review, audit, check and inspect Borrower's other books of record at any time with or without notice and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of Borrower and/or any Subsidiaries, with the officers, directors, employees and other representatives of Borrower and/or any Subsidiaries and their respective accountants, all at such times and as often as Lender may request. (d) Borrower hereby irrevocably authorizes and directs all accountants and auditors employed by Borrower and/or any Subsidiaries at any time prior to the repayment in full of the Obligations to exhibit and deliver to Lender copies of any and all of the financial statements, trial balances, management letters, or other accounting records of any nature of Borrower and/or any Subsidiaries in the accountant's or auditor's possession, and to disclose to Lender any information they may have concerning the financial status and business operations of Borrower and its Subsidiaries. Further, Borrower hereby authorizes all Governmental Authorities to furnish to Lender copies of reports or examinations relating to Borrower and/or any Subsidiaries, whether made by Borrower or otherwise. (e) Any and all costs and expenses incurred by, or on behalf of, Lender in connection with the conduct of the foregoing, including, without limitation, travel, lodging, meals, and other expenses for each auditor employed by Lender for inspections of the Borrower Collateral and Borrower's operations, shall be part of the Enforcement Costs and shall be payable to Lender upon demand. Borrower acknowledges and agrees that such expenses may include, but shall not be limited to, any and all out-of-pocket costs and expenses of Lender's employees and agents in, and when, traveling to Borrower's facilities. 7.1.4 Existence. Except as otherwise permitted under Section 7.3.1 (Capital Structure, etc.), Borrower shall (a) maintain, and cause each of its Subsidiaries to maintain, its existence in good standing in the jurisdiction in which it is organized and in each other jurisdiction where it is required to register or qualify to do business if the failure to do so in such other jurisdiction might have a material adverse effect on the ability of Borrower to perform the Obligations, on the conduct of Borrower's operations, on Borrower's financial condition, or on the value of, or the ability of Lender to realize upon, the Borrower Collateral and (b) remain a Registered Organization under the laws of the jurisdiction stated in the Preamble of this Agreement. 7.1.5 Compliance with Laws. Borrower shall comply, and cause each of its Subsidiaries to comply, with all applicable Laws and observe the valid requirements of Governmental Authorities, the non-compliance with or the non-observance of which might have a material adverse effect on the ability of Borrower to perform the Obligations, on the conduct of Borrower's operations, on Borrower's financial condition, or on the value of, or the ability of Lender to realize upon, the Borrower Collateral. 7.1.6 Preservation of Properties. Subject to the terms of any applicable leases and limited to the extent of the tenant's obligations thereunder, Borrower will, and will cause each of its Subsidiaries to, at all times (a) maintain, preserve, protect and keep its properties, including, but not limited to the Borrower Collateral, whether owned or leased, in good operating condition, working order and repair (ordinary wear and tear excepted), and from time to time will make all repairs, maintenance, replacements, additions and improvements thereto necessary to maintain such properties in good operating condition, working order and repair, and (b) do or cause to be done all things necessary to preserve and to keep in full force and effect its material franchises, leases of real and personal property, trade names, Patents, Trademarks, Copyrights and permits which are necessary for the orderly continuance of its business. 7.1.7 Line of Business. Borrower will continue to engage substantially only in the business of providing training, training administration/outsourcing, e-learning, management consulting, engineering and technical products and services. 7.1.8 Insurance. Borrower will, and will cause each of its Subsidiaries to, at all times maintain with "A" or better rated insurance companies such insurance as is required by applicable Laws and such other insurance, in such amounts, of such types and against such risks, hazards, liabilities, casualties and contingencies as are usually insured against in the same geographic areas by business entities engaged in the same or similar business. Without limiting the generality of the foregoing, Borrower will, and will cause each of its Subsidiaries to, keep adequately insured all of its property against loss or damage resulting from fire or other risks insured against by extended coverage and maintain public liability insurance against claims for personal injury, death or property damage occurring upon, in or about any properties occupied or controlled by it, or arising in any manner out of the businesses carried on by it. Borrower shall deliver to Lender on the Closing Date (and thereafter on each date there is a material change in the insurance coverage) a certificate of a Responsible Officer of Borrower containing a detailed list of the insurance then in effect and stating the names of the insurance companies, the types, the amounts and rates of the insurance, dates of the expiration thereof and the properties and risks covered thereby. 7.1.9 Taxes. Except to the extent that the validity or amount thereof is being contested in good faith and by appropriate proceedings, Borrower will, and will cause each of its Subsidiaries to, pay and discharge all Taxes prior to the date when any interest or penalty would accrue for the nonpayment thereof which, if unpaid, could have a material adverse effect on Borrower's business or operation. 7.1.10 ERISA. Borrower will, and will cause each of its Commonly Controlled Entities to, comply with the funding requirements of ERISA ss. 302with respect to Plans for its respective employees. Borrower will not permit with respect to any Plan (a) any prohibited transaction or transactions under ERISA or the Internal Revenue Code, which results, or may result, in any material liability of Borrower and/or any Subsidiary and/or Affiliate, or (b) any Reportable Event if, upon termination of the Plan or Plans with respect to which one or more such Reportable Events shall have occurred, there is or would be any material liability of Borrower and/or any Subsidiary and/or Affiliate to the PBGC. Upon Lender's request, Borrower will deliver to Lender a copy of the most recent actuarial report, financial statements and annual report completed with respect to any Plan. 7.1.11 Notification of Events of Default and Adverse Developments. Borrower shall promptly notify Lender upon obtaining knowledge of the occurrence of: (a) any Event of Default; (b) any Default; (c) any litigation instituted or threatened against Borrower or its Subsidiaries and of the entry of any judgment or Lien (other than any Permitted Liens) against any of the assets or properties of Borrower or any Subsidiary where the claims against Borrower or any of its Subsidiaries exceed Five Hundred Thousand Dollars ($500,000) and are not covered by insurance; (d) any event, development or circumstance whereby the financial statements furnished hereunder fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operational results of Borrower or any of its Subsidiaries; (e) any judicial, administrative or arbitral proceeding pending against Borrower or any of its Subsidiaries and any judicial or administrative proceeding known by Borrower to be threatened against it or any of its Subsidiaries that, if adversely decided, could materially adversely affect its financial condition or operations (present or prospective); (f) the receipt by Borrower or any of its Subsidiaries of any notice, claim or demand from any Governmental Authority which alleges that Borrower or any Subsidiary is in violation of any of the terms of, or has failed to comply with any applicable Laws regulating its operation and business, including, but not limited to, the Occupational Safety and Health Act and the Environmental Protection Act; (g) any default under any Government Contract to which Borrower is a party, any event which if not corrected could give rise to a default under any Government Contract to which Borrower is a party, or any event under any Government Contract with a contract value of One Million Dollars ($1,000,000) or greater, which if not corrected could give rise to a termination for convenience; and (h) any other development in the business or affairs of Borrower and any of its Subsidiaries that may be materially adverse to such Persons taken as a whole; in each case describing in detail satisfactory to Lender the nature thereof and the action Borrower proposes to take with respect thereto. 7.1.12 Hazardous Materials; Contamination. Borrower agrees to undertake the following with respect to any matter that could materially adversely affect Borrower or its Subsidiaries taken as a whole: (a) give notice to Lender immediately upon Borrower's acquiring knowledge of the presence of any Hazardous Materials or any Hazardous Materials Contamination on any property owned, operated or controlled by Borrower or for which Borrower is, or is claimed to be, responsible except to the extent such claims arise out of or relate to any gross negligence or willful misconduct of Lender (provided that such notice shall not be required for Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course (including, without limitation, quantity) of Borrower's line of business expressly described in this Agreement), with a full description thereof; (b) promptly comply with any Laws requiring the removal, treatment or disposal of Hazardous Materials or Hazardous Materials Contamination and provide Lender with satisfactory evidence of such compliance; (c) provide Lender, within thirty (30) days after a demand by Lender, with a bond, letter of credit or similar financial assurance evidencing to Lender's satisfaction that the necessary funds are available to pay the cost of removing, treating, and disposing of such Hazardous Materials or Hazardous Materials Contamination and discharging any Lien which may be established as a result thereof on any property owned, operated or controlled by Borrower or for which Borrower is, or is claimed to be, responsible; and (d) as part of the Obligations, defend, indemnify and hold harmless the Indemnified Parties from any and all claims which may now or in the future (whether before or after the termination of this Agreement) be asserted against the Indemnified Parties as a result of the presence of any Hazardous Materials or any Hazardous Materials Contamination on any property owned, operated or controlled by Borrower or for which Borrower is, or is claimed to be, responsible except to the extent such claims arise out of or relate to any gross negligence or willful misconduct of Lender. Borrower acknowledges and agrees that this indemnification shall survive the termination of this Agreement and the Commitment and the payment and performance of all of the other Obligations. 7.1.13 Financial Covenants. (a) Tangible Net Worth. Borrower will maintain, at all times, a Tangible Net Worth equal to but not less than the following:
Period Amount Closing Date through December 30, 2003 $1,500,000 December 31, 2003 through December 30, 2004 $10,000,000 December 31, 2004 through December 30, 2005 $10,000,000 plus 50% of net after tax income for the fiscal year ending 12/31/2004 December 31, 2005 through December 30, 2006 Tangible Net Worth required hereunder as of December 31, 2005 plus 50% of net after tax income for the fiscal year then ending
As of each December 31 commencing December 31, 2005, the minimum Tangible Net Worth to be maintained for the succeeding 364 days, shall be the sum of (a) the Tangible Net Worth as of the preceding December 31 plus (b) fifty percent (50%) of net after tax income for the fiscal year then ending. (b) Total Liabilities to Net Worth. Borrower shall maintain, at all times from the Closing Date through December 30, 2003, a ratio of Total Liabilities to Net Worth not greater than 1.75 to 1.0 (c) Total Liabilities to Tangible Net Worth. Borrower shall maintain, at all times during the periods indicated below, a ratio of Total Liabilities to Tangible Net Worth so that it is not more than the following:
Period Ratio December 31, 2003 through December 30, 2004 Equal to but not greater than 3.25 to 1.0 December 31, 2004 and at all times thereafter Equal to but not greater than 2.50 to 1.0 (d) Interest Coverage Ratio.
(i) Borrower shall maintain, at all times, an Interest Coverage Ratio of not less than the following:
Period Ratio Closing Date through December 31, 2003 Equal to but not less than 1.50 to 1.0 March 31, 2004 and at all times thereafter Equal to but not less than 2.00 to 1.0
(ii) Borrower shall maintain, at all times, a Modified Interest Coverage Ratio equal to but not less than 2.00 to 1.00 from Closing through December 31, 2003. (e) Capital Expenditures. Borrower will not directly or indirectly (by way of the acquisition of the securities of a Person or otherwise), make any Capital Expenditures in the aggregate in the fiscal year ending December 31, 2003 exceeding Seven Hundred Fifty Thousand Dollars ($750,000) or in the aggregate in any fiscal year thereafter exceeding One Million Dollars ($1,000,000). 7.1.14 Collection of Receivables. Until such time that Lender shall notify Borrower of the revocation of such privilege in accordance with the next sentence, Borrower shall at its own expense have the privilege for the account of, and in trust for, Lender of collecting its Receivables and shall completely service all of the Receivables including (a) the billing, posting and maintaining of complete records applicable thereto, (b) the taking of such action with respect to the Receivables as Lender may request or in the absence of such request, as Borrower may deem advisable; and (c) the granting, in the ordinary course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to a Receivable and may take such other actions relating to the settling of any Account Debtor's claim as may be commercially reasonable. Lender may, at its option, at any time or from time to time after and during the continuance of an Event of Default hereunder, revoke the collection privilege given in this Agreement to Borrower by either giving notice of its assignment of, and lien on the Borrower Collateral to the Account Debtors or giving notice of such revocation to Borrower. Lender shall not have any duty to, and Borrower hereby releases Lender from all claims of loss or damage caused by the delay or failure to collect or enforce any of the Receivables or to preserve any rights against any other party with an interest in the Borrower Collateral. Lender shall be entitled at any time and from time to time to confirm and verify Receivables. 7.1.15 Assignments of Receivables. Borrower will promptly, upon request, execute and deliver to Lender written assignments, in form and content acceptable to Lender, of specific Receivables or groups of Receivables; provided, however, the Lien and/or security interest granted to Lender under this Agreement shall not be limited in any way to or by the inclusion or exclusion of Receivables within such assignments. Receivables so assigned shall secure payment of the Obligations and are not sold to Lender whether or not any assignment thereof, which is separate from this Agreement, is in form absolute. Borrower agrees that neither any assignment to Lender nor any other provision contained in this Agreement or any of the other Financing Documents shall impose on Lender any obligation or liability of Borrower with respect to that which is assigned and Borrower hereby agrees to indemnify Lender and hold Lender harmless from any and all claims, actions, suits, losses, damages, costs, expenses, fees, obligations and liabilities which may be incurred by or imposed upon Lender by virtue of the assignment of and Lien on Borrower's rights, title and interest in, to, and under the Borrower Collateral. 7.1.16 Government Accounts. Borrower will immediately notify Lender if any of the Receivables arise out of Government Contracts for which, pursuant to the provisions of Section 3.2 (Grant of Liens), Borrower is obligated to execute documents and take steps required by Lender in order that all moneys due and to become due under such contracts shall be assigned to Lender and notice thereof given to the Governmental Authority under the Federal Assignment of Claims Act. 7.1.17 Notice of Returned Goods, etc. Borrower will promptly notify Lender of the return, rejection or repossession of any goods sold or delivered in respect of any Receivables, and of any claims made in regard thereto to the extent that the aggregate purchase price of any such goods in any given calendar month exceeds in the aggregate One Hundred Thousand Dollars ($100,000.00) in any given calendar month. 7.1.18 Equipment. Borrower shall (a) maintain all Equipment as personalty, (b) not affix any Equipment to any real estate in such manner as to become a fixture or part of such real estate, and (c) shall hold no Equipment on a sale on approval basis. Borrower hereby declares its intent that, notwithstanding the means of attachment, no goods of Borrower hereafter attached to any realty shall be deemed a fixture, which declaration shall be irrevocable, without Lender's consent, until all of the Obligations have been paid in full and the Commitment and all Letters of Credit have been terminated or have expired. 7.1.19 Defense of Title and Further Assurances. Subject to the terms of any applicable leases, at its expense, Borrower will defend the title to the Borrower Collateral (and any part thereof), and will immediately execute, acknowledge and deliver any renewal, affidavit, deed, assignment, security agreement, certificate or other document which Lender may require in order to perfect, preserve, maintain, continue, protect and/or extend the Lien granted to Lender under this Agreement or under any of the other Financing Documents and the first priority of that Lien, subject only to the Permitted Liens. Borrower hereby authorizes the filing of any financing statement or continuation statement required under the Uniform Commercial Code. Borrower will from time to time do whatever Lender may reasonably require by way of obtaining, executing, delivering, and/or filing landlords' waivers, notices of assignment and other notices and amendments and renewals thereof and Borrower will take any and all steps and observe such formalities as Lender may require, in order to create and maintain a valid Lien upon, pledge of, or paramount security interest in, the Borrower Collateral, subject to the Permitted Liens. Borrower shall pay to Lender on demand all taxes, costs and expenses incurred by Lender in connection with the preparation, execution, recording and filing of any such document or instrument. To the extent that the proceeds of any of the Accounts or Receivables of Borrower are expected to become subject to the control of, or in the possession of, a party other than Borrower or Lender, Borrower shall cause all such parties to execute and deliver on the Closing Date security documents or other documents as requested by Lender and as may be necessary to evidence and/or perfect the security interest of Lender in those proceeds. Borrower hereby irrevocably appoints Lender as Borrower's attorney-in-fact, with power of substitution, in the name of Lender or in the name of Borrower or otherwise, for the use and benefit of Lender, but at the cost and expense of Borrower and without notice to Borrower, to execute and deliver any and all of the instruments and other documents and take any action which Lender may require pursuant the foregoing provisions of this Section 7.1.19. 7.1.20 Business Names; Locations. Borrower will notify and cause each of its Subsidiaries to notify Lender not less than fifteen (15) days prior to (a) any change in the name under which Borrower or the applicable Subsidiary conducts its business, (b) any change of the location of the chief executive office of Borrower or the applicable Subsidiary, (c) the opening of any new place of business or the closing of any existing place of business, and (d) any change in the location of the places where the books and records, or any part thereof, are kept. 7.1.21 Protection of Borrower Collateral. Subject to the terms of any applicable leases, Borrower agrees that Lender may at any time following the occurrence and during the continuance of an Event of Default take such steps as Lender deems reasonably necessary to protect the interest of Lender in, and to preserve the Borrower Collateral, including, the hiring of such security guards or the placing of other security protection measures as Lender deems appropriate, may employ and maintain at any of Borrower's premises a custodian who shall have full authority to do all acts necessary to protect the interests of Lender in the Borrower Collateral and may lease warehouse facilities to which Lender may move all or any part of the Borrower Collateral to the extent commercially reasonable. Borrower agrees to cooperate fully with Lender's efforts to preserve the Borrower Collateral and, subject to the terms of any applicable leases, will take such actions to preserve the Borrower Collateral as Lender may reasonably direct. All of Lender's expenses of preserving the Borrower Collateral, including any reasonable expenses relating to the compensation and bonding of a custodian, shall be part of the Enforcement Costs. 7.1.22 Depository Relationship. Borrower shall maintain its primary depository and cash management relationship with Lender at all times during the term of the Revolving Loan. Section 7.2 Affirmative Covenants - MXL. So long as any of the Obligations (or the Commitment) shall be outstanding hereunder, MXL agrees with Lender as follows: 7.2.1 Financial Statements. MXL shall furnish to Lender: (a) Annual Statements and Certificates. MXL shall furnish to Lender as soon as available, but in no event more than one hundred twenty (120) days after the close of each fiscal year of MXL, a copy of the annual financial statement in reasonable detail satisfactory to the Lender relating to GPX and its Subsidiaries, prepared in accordance with GAAP and examined and certified by KPMG LLP or such other independent certified public accountants satisfactory to Lender, which financial statement shall include an audited consolidated and unaudited consolidating balance sheet of GPX and its Subsidiaries as of the end of such fiscal year and audited consolidated and unaudited consolidating statements of income, cash flows and changes in shareholders equity of GPX and its Subsidiaries for such fiscal year. From and after the date that MXL becomes a subsidiary of NPDC, as soon as available, but in no event more than one hundred twenty (120) days after the close of each fiscal year of NPDC, a copy of the annual financial statement in reasonable detail satisfactory to Lender relating to NPDC and its Subsidiaries, prepared in accordance with GAAP and examined and certified by Eisner LLP or such other independent certified public accountants satisfactory to Lender, which financial statement shall include a consolidated balance sheet of NPDC and its Subsidiaries as of the end of such fiscal year and consolidated statements of income, cash flows and changes in shareholders equity of NPDC and its Subsidiaries for such fiscal year. (b) Quarterly Statements and Certificates. As soon as available, but in no event more than forty-five (45) days after the close of MXL's fiscal quarters, balance sheets of MXL as of the close of such period and income statements for such period, each prepared by a Responsible Officer of MXL in a format acceptable to Lender, all as prepared and certified by a Responsible Officer of MXL and accompanied by a certificate of that officer stating whether, to the best of his or her knowledge, any event has occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (c) Monthly reports. MXL shall furnish to Lender within twenty (20) days after the end of each fiscal month, a Borrowing Base Report with respect to MXL and a report containing the following information: (i) a detailed aging schedule of all Receivables by Account Debtor as of the end of the previous month, in such detail, and accompanied by such supporting information, as Lender may from time to time reasonably request; (ii) a detailed aging of all accounts payable by supplier, in such detail, and accompanied by such supporting information, as Lender may from time to time reasonably request; and (iii) such other information as Lender may reasonably request. (d) Annual Budget and Projections. MXL shall furnish to Lender as soon as available, but in no event later than forty-five (45) days before the end of each fiscal year a consolidated and consolidating budget on a quarterly basis for the following fiscal year. (e) Additional Reports and Information. MXL shall furnish to Lender promptly, such additional information, reports or statements as Lender may from time to time reasonably request. 7.2.2 Recordkeeping, Rights of Inspection, Field Examination, Etc. (a) MXL shall maintain (i) a standard system of accounting in accordance with GAAP, and (ii) proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its properties, business and activities. (b) Prior to an Event of Default, MXL shall permit authorized representatives of Lender to visit and inspect the properties of MXL, up to three (3) times per year during normal business hours, to review, audit, check and inspect the MXL Collateral, to review, audit, check and inspect MXL's other books of record and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of MXL, with the officers, directors, employees and other representatives of MXL and their respective accountants. (c) Subsequent to the occurrence of an Event of Default and during the continuance thereof, MXL shall permit authorized representatives of Lender to visit and inspect the properties of MXL, to review, audit, check and inspect the MXL Collateral at any time with or without notice, to review, audit, check and inspect MXL's other books of record at any time with or without notice and to make abstracts and photocopies thereof, and to discuss the affairs, finances and accounts of MXL, with the officers, directors, employees and other representatives of MXL and its accountants, all at such times and as often as Lender may request. (d) MXL hereby irrevocably authorizes and directs all accountants and auditors employed by MXL at any time prior to the repayment in full of the Obligations to exhibit and deliver to Lender copies of any and all of the financial statements, trial balances, management letters, or other accounting records of any nature of MXL in the accountant's or auditor's possession, and to disclose to Lender any information they may have concerning the financial status and business operations of MXL. Further, MXL hereby authorizes all Governmental Authorities to furnish to Lender copies of reports or examinations relating to MXL, whether made by MXL or otherwise. (e) Any and all costs and expenses incurred by, or on behalf of, Lender in connection with the conduct of the foregoing, including, without limitation, travel, lodging, meals, and other expenses for each auditor employed by Lender for inspections of the MXL Collateral and MXL's operations, shall be part of the Enforcement Costs and shall be payable to Lender upon demand. MXL acknowledges and agrees that such expenses may include, but shall not be limited to, any and all out-of-pocket costs and expenses of Lender's employees and agents in, and when, traveling to MXL's facilities. 7.2.3 Existence. MXL shall (a) maintain its existence in good standing in the jurisdiction in which it is organized and in each other jurisdiction where it is required to register or qualify to do business if the failure to do so in such other jurisdiction might have a material adverse effect on the ability of MXL to perform the Obligations, on the conduct of MXL's operations, on MXL's financial condition, or on the value of, or the ability of Lender to realize upon, the MXL Collateral and (b) remain a Registered Organization under the laws of the jurisdiction stated in the Preamble of this Agreement. 7.2.4 Compliance with Laws. MXL shall comply with all applicable Laws and observe the valid requirements of Governmental Authorities, the non-compliance with or the non-observance of which might have a material adverse effect on the conduct of MXL's operations, on MXL's financial condition, or on the value of, or the ability of Lender to realize upon, the MXL Collateral. 7.2.5 Notification of Events of Default and Adverse Developments. MXL shall promptly notify Lender upon obtaining knowledge of the occurrence of: (a) any event, development or circumstance whereby the financial statements furnished hereunder fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operational results of MXL; (b) any default under any Government Contract to which MXL is a party, any event which if not corrected could give rise to a default under any Government Contract to which MXL is a party, or any event under any Government Contract with a contract value of One Million Dollars ($1,000,000) or greater, which if not corrected could give rise to a termination for convenience; and (c) any other development in the business or affairs of MXL that may be materially adverse when taken as a whole with the Borrower; in each case describing in detail satisfactory to Lender the nature thereof and the action MXL proposes to take with respect thereto. 7.2.6 Collection of Receivables. Until such time that Lender shall notify MXL of the revocation of such privilege in accordance with the next sentence, MXL shall at its own expense have the privilege for the account of, and in trust for, Lender of collecting its Receivables and shall completely service all of the Receivables including (a) the billing, posting and maintaining of complete records applicable thereto, (b) the taking of such action with respect to the Receivables as Lender may request or in the absence of such request, as MXL may deem advisable; and (c) the granting, in the ordinary course of business, to any Account Debtor, any rebate, refund or adjustment to which the Account Debtor may be lawfully entitled, and may accept, in connection therewith, the return of goods, the sale or lease of which shall have given rise to a Receivable and may take such other actions relating to the settling of any Account Debtor's claim as may be commercially reasonable. Lender may, at its option, at any time or from time to time after and during the continuance of an Event of Default hereunder, revoke the collection privilege given in this Agreement to MXL by either giving notice of its assignment of, and lien on the MXL Collateral to the Account Debtors or giving notice of such revocation to MXL. Lender shall not have any duty to, and MXL hereby releases Lender from all claims of loss or damage caused by the delay or failure to collect or enforce any of the Receivables or to preserve any rights against any other party with an interest in the MXL Collateral. Lender shall be entitled at any time and from time to time to confirm and verify Receivables. 7.2.7 Assignments of Receivables. MXL will promptly, upon request, execute and deliver to Lender written assignments, in form and content acceptable to Lender, of specific Receivables or groups of Receivables; provided, however, the Lien and/or security interest granted to Lender under this Agreement shall not be limited in any way to or by the inclusion or exclusion of Receivables within such assignments. Receivables so assigned shall secure payment of the Obligations and are not sold to Lender whether or not any assignment thereof, which is separate from this Agreement, is in form absolute. MXL agrees that neither any assignment to Lender nor any other provision contained in this Agreement or any of the other Financing Documents shall impose on Lender any obligation or liability of MXL with respect to that which is assigned and MXL hereby agrees to indemnify Lender and hold Lender harmless from any and all claims, actions, suits, losses, damages, costs, expenses, fees, obligations and liabilities which may be incurred by or imposed upon Lender by virtue of the assignment of and Lien on MXL's rights, title and interest in, to, and under the MXL Collateral. 7.2.8 Government Accounts. MXL will immediately notify Lender if any of the Receivables arise out of Government Contracts for which, pursuant to the provisions of Section 3.2 (Grant of Liens), MXL is obligated to execute documents and take steps required by Lender in order that all moneys due and to become due under such contracts shall be assigned to Lender and notice thereof given to the Governmental Authority under the Federal Assignment of Claims Act. 7.2.9 Notice of Returned Goods, etc. MXL will promptly notify Lender of the return, rejection or repossession of any goods sold or delivered in respect of any Receivables, and of any claims made in regard thereto to the extent that the aggregate purchase price of any such goods in any given calendar month exceeds in the aggregate One Hundred Thousand Dollars ($100,000.00) in any given calendar month. 7.2.10 Defense of Title and Further Assurances. Subject to the terms of applicable leases, at its expense, MXL will defend the title to the MXL Collateral (and any part thereof), and will immediately execute, acknowledge and deliver any renewal, affidavit, deed, assignment, security agreement, certificate or other document which Lender may require in order to perfect, preserve, maintain, continue, protect and/or extend the Lien granted to Lender under this Agreement or under any of the other Financing Documents and the first priority of that Lien, subject only to the Permitted Liens. MXL hereby authorizes the filing of any financing statement or continuation statement required under the Uniform Commercial Code. MXL will from time to time do whatever Lender may reasonably require by way of obtaining, executing, delivering, and/or filing landlords' waivers, notices of assignment and other notices and amendments and renewals thereof and MXL will take any and all steps and observe such formalities as Lender may require, in order to create and maintain a valid Lien upon, pledge of, or paramount security interest in, the MXL Collateral, subject to the Permitted Liens. MXL shall pay to Lender on demand all taxes, costs and expenses incurred by Lender in connection with the preparation, execution, recording and filing of any such document or instrument. To the extent that the proceeds of any of the Accounts or Receivables of MXL are expected to become subject to the control of, or in the possession of, a party other than MXL or Lender, MXL shall cause all such parties to execute and deliver on the Closing Date security documents or other documents as requested by Lender and as may be necessary to evidence and/or perfect the security interest of Lender in those proceeds. MXL hereby irrevocably appoints Lender as MXL's attorney-in-fact, with power of substitution, in the name of Lender or in the name of MXL or otherwise, for the use and benefit of Lender, but at the cost and expense of MXL and without notice to MXL, to execute and deliver any and all of the instruments and other documents and take any action which Lender may require pursuant the foregoing provisions of this Section. 7.2.11 Business Names; Locations. MXL will notify Lender not less than fifteen (15) days prior to (a) any change in the name under which MXL conducts its business, (b) any change of the location of the chief executive office of MXL, (c) the opening of any new place of business or the closing of any existing place of business, and (d) any change in the location of the places where the books and records, or any part thereof, are kept. 7.2.12 Protection of MXL Collateral. Subject to the terms of any applicable leases, MXL agrees that Lender may at any time following the occurrence and during the continuance of an Event of Default take such steps as Lender deems reasonably necessary to protect the interest of Lender in, and to preserve the MXL Collateral, including, the hiring of such security guards or the placing of other security protection measures as Lender deems appropriate, may employ and maintain at any of MXL's premises a custodian who shall have full authority to do all acts necessary to protect the interests of Lender in the MXL Collateral and may lease warehouse facilities to which Lender may move all or any part of the MXL Collateral to the extent commercially reasonable. MXL agrees to cooperate fully with Lender's efforts to preserve the MXL Collateral and, subject to the terms of any applicable leases, will take such actions to preserve the MXL Collateral as Lender may reasonably direct. All of Lender's expenses of preserving the MXL Collateral, including any reasonable expenses relating to the compensation and bonding of a custodian, shall be part of the Enforcement Costs. Section 7.3 Negative Covenants - Borrower. So long as any of the Obligations or the Commitment shall be outstanding hereunder, Borrower agrees with Lender as follows: 7.3.1 Capital Structure, Merger, Acquisition or Sale of Assets. Except for the dissolution of Subsidiaries in Canada and Brazil, Borrower will not alter or amend its capital structure, authorize any additional class of equity, issue any stock or equity of any class, enter into any merger or consolidation or amalgamation, windup or dissolve itself (or suffer any liquidation or dissolution) or acquire all or substantially all the assets of any Person, or sell, lease or otherwise dispose of any of its assets (except as provided in Section 7.3.15 (Disposition of Borrower Collateral)). Any consent of Lender to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition. 7.3.2 Subsidiaries. Borrower will not create or acquire any Subsidiaries other than the Subsidiaries identified on the Collateral Disclosure List, unless such Subsidiaries execute an Additional Borrower Joinder Supplement or Borrower pledges all of the issued and outstanding stock owned in the Subsidiaries that are domestic Subsidiaries and sixty six percent (66%) of all of the issued and outstanding stock owned in the Subsidiaries that are foreign Subsidiaries, as required by Lender in its sole discretion. 7.3.3 Issuance of Stock. Borrower will not issue any capital stock or, other than in the ordinary course of business in connection with compensation of employees and directors, grant any option or right to purchase any of its capital stock. 7.3.4 Purchase or Redemption of Securities, Dividend Restrictions. Borrower will not purchase, redeem or otherwise acquire any shares of its capital stock or warrants now or hereafter outstanding, declare or pay any dividends thereon (other than stock dividends), apply any of its property or assets to the purchase, redemption or other retirement of, set apart any sum for the payment of any dividends on, or for the purchase, redemption, or other retirement of, make any distribution by reduction of capital or otherwise in respect of, any shares of any class of capital stock of Borrower, or any warrants, permit any Subsidiary to purchase or acquire any shares of any class of capital stock of, or warrants issued by, Borrower, make any distribution to stockholders or set aside any funds for any such purpose, and not prepay, purchase or redeem any Indebtedness for Borrowed Money other than the Obligations; provided, however, if no Default exists or would result from the payment thereof, Borrower may make payments to GPX (a) for taxes due in connection with the operations of Borrower, (b) for interest due in connection with the Subordinated Debt and (c) for payments permitted under Section 7.3.6(g). 7.3.5 Indebtedness. Borrower will not, and will not permit any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness for Borrowed Money, or permit any Subsidiary to do so, except: (a) the Obligations; (b) accounts payable arising in the ordinary course; (c) Indebtedness secured by Permitted Liens; (d) Subordinated Indebtedness; (e) Indebtedness of Subsidiaries permitted under Section 7.3.6 (Investments, Loans, etc.); and (f) Indebtedness of Borrower existing on the date hereof and reflected on Schedule 7.3.5 attached hereto and made a part hereof. 7.3.6 Investments, Loans and Other Transactions. Except as otherwise provided in this Agreement, Borrower will not, and will not permit any of its Subsidiaries to, (a) make, assume or acquire any investment in any real property (unless used in connection with its business and treated as a Fixed or Capital Asset of Borrower or the Subsidiary) or any Person, whether by stock purchase, capital contribution, acquisition of indebtedness of such Person or otherwise (including, without limitation, investments in any joint venture or partnership), (b) guaranty or otherwise become contingently liable for the Indebtedness or obligations of any Person, (c) make any loans or advances, or otherwise extend credit to any Person, or (d) enter into or participate in any transaction with any Affiliate, Guarantor or Affiliate of Guarantor or, except in the ordinary course of business, with the officers, directors, employees and other representatives of Borrower and/or any Subsidiary, except: (a) any advance to an officer or employee of Borrower or any Subsidiary for travel or other business expenses in the ordinary course of business, provided that the aggregate amount of all such advances by Borrower and its Subsidiaries (taken as a whole) outstanding at any time shall not exceed One Hundred Thousand Dollars ($100,000); (b) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) any investment in Cash Equivalents, which are pledged to Lender as collateral and security for the Obligations; (d) trade credit extended to customers in the ordinary course of business; (e) management fees paid to GPX or NPDC in an amount not to exceed $1,000,000 in any fiscal year, provided no Event of Default exists or would result from such payment; (f) loans made to Subsidiaries from and after the Closing Date in an amount not to exceed $1,500,000 in the aggregate at any time outstanding; (g) payment to GPX for costs and expenses related to the spin-off of NPDC and MXL to the extent actually incurred, but in no event to exceed $250,000; (h) payment to MXL of a fee in an amount acceptable to Lender for the continuation of its limited guaranty of the Obligations from and after the date of the spin-off of NPDC and MXL; and (i) guarantees, loans, investments (including investments in joint ventures) or advances existing on the date hereof and reflected on Schedule 7.3.6 attached hereto and made a part hereof. 7.3.7 Stock of Subsidiaries. Except for the dissolution of Subsidiaries in Canada and Brazil, Borrower will not sell or otherwise dispose of any shares of capital stock of any Subsidiary (except in connection with a merger or consolidation of a Wholly Owned Subsidiary into Borrower or another Wholly Owned Subsidiary or with the dissolution of any Subsidiary) or permit any Subsidiary to issue any additional shares of its capital stock except pro rata to its stockholders. 7.3.8 Subordinated Indebtedness. Borrower will not, and will not permit any Subsidiary to make: (a) any payment of principal of, or interest on, any of the Subordinated Indebtedness, including, without limitation, the Subordinated Debt, if a Default or an Event of Default then exists hereunder or would result from such payment; (b) any payment of the principal or interest due on the Subordinated Indebtedness as a result of acceleration thereunder or a mandatory prepayment thereunder; (c) any amendment or modification of or supplement to the documents evidencing or securing the Subordinated Indebtedness; or (d) payment of principal or interest on the Subordinated Indebtedness other than when due (without giving effect to any acceleration of maturity or mandatory prepayment). 7.3.9 Liens; Confessed Judgment. Borrower agrees that it (a) will not create, incur, assume or suffer to exist any Lien upon any of its properties or assets, whether now owned or hereafter acquired, or permit any Subsidiary so to do, except for Liens securing the Obligations and Permitted Liens, (b) will not agree to, assume or suffer to exist any provision in any instrument or other document for confession of judgment, cognovit or other similar right or remedy, (c) will not allow or suffer to exist any Permitted Liens to be superior to Liens securing the Obligations, (d) will not enter into any contracts for the consignment of goods, will not execute or suffer the filing of any financing statements or the posting of any signs giving notice of consignments, and will not, as a material part of its business, engage in the sale of goods belonging to others, and (e) will not allow or suffer to exist the failure of any Lien described in the Security Documents to attach to, and/or remain at all times perfected on, any of the property described in the Security Documents. 7.3.10 Other Businesses. Borrower and its Subsidiaries will not engage directly or indirectly in any business other than its current line of business described in Section 7.1.7 (Line of Business). 7.3.11 ERISA Compliance. Except to the extent that the occurrence of any of the following could not result in a material liability to Borrower, neither Borrower nor any Commonly Controlled Entity shall: (a) engage in or permit any "prohibited transaction" (as defined in ERISA); (b) cause any "accumulated funding deficiency" as defined in ERISA and/or the Internal Revenue Code; (c) terminate any Plan in a manner which could result in the imposition of a lien on the property of Borrower pursuant to ERISA; (d) terminate or consent to the termination of any Multiemployer Plan; or (e) incur a complete or partial withdrawal with respect to any Multiemployer Plan. 7.3.12 Prohibition on Hazardous Materials. Borrower shall not place, manufacture or store or permit to be placed, manufactured or stored any Hazardous Materials on any property owned, operated or controlled by Borrower or for which Borrower is responsible other than Hazardous Materials placed or stored on such property in accordance with applicable Laws in the ordinary course of Borrower's business except for any non-compliance which would not result in a material adverse effect on the Borrower. 7.3.13 Method of Accounting; Fiscal Year. Borrower will not: (a) change the method of accounting employed in the preparation of any financial statements furnished to Lender under the provisions of Section 7.1.1 (Financial Statements), unless required to conform to GAAP and on the condition that Borrower's accountants shall furnish such information as Lender may request to reconcile the changes with Borrower's prior financial statements. (b) change its fiscal year from a year ending on December 31. 7.3.14 Sale and Leaseback. None of Borrower or its Subsidiaries will directly or indirectly enter into any arrangement to sell or transfer all or any substantial part of its fixed assets and thereupon or within one (1) year thereafter rent or lease the assets so sold or transferred. 7.3.15 Disposition of Borrower Collateral. Borrower will not sell, discount, allow credits or allowances, transfer, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Borrower Collateral, except, prior to an Event of Default, dispositions expressly permitted elsewhere in this Agreement, the sale of Inventory and licensing of intellectual property in the ordinary course of business, and the sale of unnecessary or obsolete Equipment, but only if the proceeds of the sale of such Equipment are (a) used to purchase similar Equipment to replace the unnecessary or obsolete Equipment or (b) immediately turned over to Lender for application to the Obligations in accordance with the provisions of this Agreement. Section 7.4 Negative Covenants - MXL. So long as any of the Obligations or the Commitment shall be outstanding hereunder, MXL agrees with Lender as follows: 7.4.1 Method of Accounting; Fiscal Year. MXL will not: (a) change the method of accounting employed in the preparation of any financial statements furnished to Lender under the provisions of Section 7.2.1 (Financial Statements), unless required to conform to GAAP and on the condition that MXL shall furnish such information as Lender may request to reconcile the changes with MXL's prior financial statements. (b) change its fiscal year from a year ending on December 31. 7.4.2 Disposition of MXL Collateral. MXL will not sell, discount, allow credits or allowances, transfer, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the MXL Collateral described in Section 3.2.2 (MXL Collateral), except, prior to an Event of Default, dispositions expressly permitted elsewhere in this Agreement. ARTICLE VIII DEFAULT AND RIGHTS AND REMEDIES Section 8.1 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" under the provisions of this Agreement: 8.1.1 Failure to Pay. The failure of Borrower to pay any of the Obligations as and when due and payable in accordance with the provisions of this Agreement, the Notes and/or any of the other Financing Documents. 8.1.2 Breach of Representations and Warranties. Any representation or warranty made in this Agreement or in any report, statement, schedule, certificate, opinion (including any opinion of counsel for Borrower), financial statement or other document furnished in connection with this Agreement, any of the other Financing Documents, or the Obligations, shall prove to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. 8.1.3 Failure to Comply with Specific Covenants. The failure of Borrower or MXL to perform, observe or comply with any covenant, condition or agreement contained in Section 7.1.4 (Existence - Borrower), Section 7.1.8 (Insurance) or Section 7.2.3 (Existence - MXL), which failure continues uncured for a period of thirty (30) days after Notice from Lender to Borrower. 8.1.4 Failure to Comply with Covenants. The failure of Borrower or MXL to perform, observe or comply with any covenant, condition or agreement contained in this Agreement not otherwise referred to in this Section 8.1. 8.1.5 Default Under Other Financing Documents or Obligations. A default shall occur under any of the other Financing Documents or under any other Obligations, and such default is not cured within any applicable grace period provided therein. 8.1.6 Receiver; Bankruptcy. Borrower or any Subsidiary shall (a) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or any of its property, (b) admit in writing its inability to pay its debts as they mature, (c) make a general assignment for the benefit of creditors, (d) be adjudicated a bankrupt or insolvent, (e) file a voluntary petition in bankruptcy or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (f) by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days, or (g) by any act indicate its consent to, approval of or acquiescence in any order, judgment or decree by any court of competent jurisdiction or any Governmental Authority enjoining or otherwise prohibiting the operation of a material portion of Borrower's or any Subsidiary's business or the use or disposition of a material portion of Borrower's or any Subsidiary's assets. 8.1.7 Involuntary Bankruptcy, etc. An order for relief shall be entered in any involuntary case brought against Borrower or any Subsidiary under the Bankruptcy Code, or (b) any such case shall be commenced against Borrower or any Subsidiary and shall not be dismissed within sixty (60) days after the filing of the petition, or (c) an order, judgment or decree under any other Law is entered by any court of competent jurisdiction or by any other Governmental Authority on the application of a Governmental Authority or of a Person other than Borrower or any Subsidiary (i) adjudicating Borrower, or any Subsidiary bankrupt or insolvent, or (ii) appointing a receiver, trustee or liquidator of Borrower or of any Subsidiary, or of a material portion of Borrower's or any Subsidiary's assets, or (iii) enjoining, prohibiting or otherwise limiting the operation of a material portion of Borrower's or any Subsidiary's business or the use or disposition of a material portion of Borrower's or any Subsidiary's assets, and such order, judgment or decree continues unstayed and in effect for a period of thirty (30) days from the date entered. 8.1.8 Judgment. Unless adequately insured in the opinion of Lender, the entry of a final judgment for the payment of money involving more than $500,000 against Borrower or any Subsidiary, and the failure by Borrower or such Subsidiary to discharge the same, or cause it to be discharged, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. 8.1.9 Execution; Attachment. Any execution or attachment shall be levied against the Collateral, or any part thereof, and such execution or attachment shall not be set aside, discharged or stayed within thirty (30) days after the same shall have been levied. 8.1.10 Default Under Other Borrowings. Default shall be made with respect to any Indebtedness for Borrowed Money (other than the Revolving Loan) with an outstanding principal amount of greater than $500,000 if the default is a failure to pay at maturity or if the effect of such default is to accelerate the maturity of such Indebtedness for Borrowed Money or to permit the holder or obligee thereof or other party thereto to cause such Indebtedness for Borrowed Money to become due prior to its stated maturity. 8.1.11 Challenge to Agreements. Borrower or any Guarantor shall challenge the validity and binding effect of any provision of any of the Financing Documents or shall state its intention to make such a challenge of any of the Financing Documents or any of the Financing Documents shall for any reason (except to the extent permitted by its express terms) cease to be effective or to create a valid and perfected first priority Lien (except for Permitted Liens) on, or security interest in, any of the Collateral purported to be covered thereby. 8.1.12 Material Adverse Change. Lender in its sole discretion determines in good faith that a material adverse change has occurred in the financial condition of Borrower or the value of the Collateral taken as a whole. 8.1.13 Contract Default, Debarment or Suspension. Default shall be made under any Government Contract with, or any Government Contract is terminated for default by, the United States or any individual department, agency or instrumentality of the United States with which the Borrower has contracts in the aggregate at that point in time with a value in excess of $10,000,000, or if Borrower is debarred or suspended, whether temporarily or permanently, by the United States or any department, agency or instrumentality of the United States. 8.1.14 Liquidation, Termination, Dissolution, etc. Borrower shall liquidate, dissolve or terminate its existence or shall suspend or terminate a substantial portion of its business operations or any change occurs in the control of Borrower without the prior written consent of Lender. Section 8.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, Lender may, in the exercise of its sole and absolute discretion from time to time, exercise any one or more of the following rights, powers or remedies: 8.2.1 Acceleration. Lender may declare any or all of the Obligations to be immediately due and payable, notwithstanding anything contained in this Agreement or in any of the other Financing Documents to the contrary, without presentment, demand, protest, notice of protest or of dishonor, or other notice of any kind, all of which Borrower hereby waives. 8.2.2 Further Advances. Lender may from time to time without notice to Borrower suspend, terminate or limit any further advances, loans or other extensions of credit under the Commitment, under this Agreement and/or under any of the other Financing Documents. Further, upon the occurrence of an Event of Default or Default specified in Section 8.1.6 (Receiver; Bankruptcy) or Section 8.1.7 (Involuntary Bankruptcy, etc.), the Revolving Credit Commitment and any agreement in any of the Financing Documents to provide additional credit and/or to issue Letters of Credit shall immediately and automatically terminate and the unpaid principal amount of the Notes (with accrued interest thereon) and all other Obligations then outstanding, shall immediately become due and payable without further action of any kind and without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived by Borrower. 8.2.3 Uniform Commercial Code. Lender shall have all of the rights and remedies of a secured party under the applicable Uniform Commercial Code and other applicable Laws. Upon demand by Lender, Borrower shall assemble the Collateral and make it available to Lender, at a place designated by Lender. Subject to the terms of any applicable leases, Lender or its agents may without notice from time to time enter upon Borrower's or MXL's premises to take possession of the Collateral, to remove it, to render it unusable, to process it or otherwise prepare it for sale, or to sell or otherwise dispose of it. Any written notice of the sale, disposition or other intended action by Lender with respect to the Collateral which is sent by regular mail, postage prepaid, to Borrower or MXL at the address set forth in Section 9.1 (Notices), or such other address of Borrower or MXL which may from time to time be shown on Lender's records, at least ten (10) days prior to such sale, disposition or other action, shall constitute commercially reasonable notice to Borrower of MXL, as applicable. Lender may alternatively or additionally give such notice in any other commercially reasonable manner. Nothing in this Agreement shall require Lender to give any notice not required by applicable Laws. If any consent, approval, or authorization of any state, municipal or other Governmental Authority or of any other Person or of any Person having any interest therein, should be necessary to effectuate any sale or other disposition of the Collateral, Borrower and MXL agree to execute all such applications and other instruments, and to take all other action, as may be required in connection with securing any such consent, approval or authorization. Borrower and MXL each recognizes that Lender may be unable to effect a public sale of all or a part of the Collateral consisting of Investment Property by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and other applicable Federal and state Laws. Lender may, therefore, in its discretion, take such steps as it may deem appropriate to comply with such Laws and may, for example, at any sale of the Collateral consisting of securities restrict the prospective bidders or purchasers as to their number, nature of business and investment intention, including, without limitation, a requirement that the Persons making such purchases represent and agree to the satisfaction of Lender that they are purchasing such securities for their account, for investment, and not with a view to the distribution or resale of any thereof. Borrower covenants and agrees to do or cause to be done promptly all such acts and things as Lender may request from time to time and as may be necessary to offer and/or sell the securities or any part thereof in a manner which is valid and binding and in conformance with all applicable Laws. Upon any such sale or disposition, Lender shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral consisting of securities so sold. 8.2.4 Specific Rights With Regard to Collateral. In addition to all other rights and remedies provided hereunder or as shall exist at law or in equity from time to time, Lender may (but shall be under no obligation to), without notice to Borrower or MXL, and Borrower and MXL each hereby irrevocably appoints Lender as its attorney-in-fact, with power of substitution, in the name of Lender and/or in the name of Borrower, MXL or otherwise, for the use and benefit of Lender, but at the cost and expense of Borrower and without notice to Borrower or MXL: (a) request any Account Debtor obligated on any of the Accounts to make payments thereon directly to Lender, with Lender taking control of the Proceeds thereof; (b) compromise, extend or renew any of the Collateral or deal with the same as it may deem advisable; (c) make exchanges, substitutions or surrenders of all or any part of the Collateral; (d) copy, transcribe, or remove from any place of business of Borrower, MXL or any Subsidiary all books, records, ledger sheets, correspondence, invoices and documents, relating to or evidencing any of the Collateral or without cost or expense to Lender, subject to the terms of any applicable leases, make such use of Borrower's, MXL's or any Subsidiary's place(s) of business as may be reasonably necessary to administer, control and collect the Collateral; (e) repair, alter or supply goods if necessary to fulfill in whole or in part the purchase order of any Account Debtor; (f) demand, collect, receipt for and give renewals, extensions, discharges and releases of any of the Collateral; (g) institute and prosecute legal and equitable proceedings to enforce collection of, or realize upon, any of the Collateral; (h) settle, renew, extend, compromise, compound, exchange or adjust claims in respect of any of the Collateral or any legal proceedings brought in respect thereof; (i) endorse or sign the name of Borrower upon any Items of Payment, certificates of title, Instruments, Investment Property, stock powers, documents, documents of title, financing statements, assignments, notices, or other writing relating to or part of the Collateral and on any proof of claim in bankruptcy against an Account Debtor; (j) clear Inventory through customs in Lender's or, as applicable, Borrower's or MXL's name and to sign and deliver to customs officials powers of attorney in Borrower's or MXL's name for such purpose; (k) notify the Post Office authorities to change the address for the delivery of mail to Borrower to such address or Post Office Box as Lender may designate and receive and open all mail addressed to Borrower; and (l) take any other action necessary or beneficial to realize upon or dispose of the Collateral or to carry out the terms of this Agreement. 8.2.5 Application of Proceeds. Any proceeds of sale or other disposition of the Collateral will be applied by Lender to the payment first of any and all Enforcement Costs, and any balance of such proceeds will be applied to the Obligations in such order and manner as Lender shall determine. If the sale or other disposition of the Collateral fails to fully satisfy the Obligations, Borrower shall remain liable to Lender for any deficiency. 8.2.6 Performance by Lender. Lender without notice to or demand upon Borrower and without waiving or releasing any of the Obligations or any Default or Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of Borrower, and may enter upon the premises of Borrower for that purpose and take all such action thereon as Lender may consider necessary or appropriate for such purpose, subject to the terms of any applicable leases, and Borrower hereby irrevocably appoints Lender as its attorney-in-fact to do so, with power of substitution, in the name of Lender, in the name of Borrower or otherwise, for the use and benefit of Lender, but at the cost and expense of Borrower and without notice to Borrower. All sums so paid or advanced by Lender together with interest thereon from the date of payment, advance or incurring until paid in full at the Post-Default Rate and all costs and expenses, shall be deemed part of the Enforcement Costs, shall be paid by Borrower to Lender on demand, and shall constitute and become a part of the Obligations. 8.2.7 Other Remedies. Lender may from time to time proceed to protect or enforce its rights by an action or actions at law or in equity or by any other appropriate proceeding, whether for the specific performance of any of the covenants contained in this Agreement or in any of the other Financing Documents, or for an injunction against the violation of any of the terms of this Agreement or any of the other Financing Documents, or in aid of the exercise or execution of any right, remedy or power granted in this Agreement, the Financing Documents, and/or applicable Laws. Lender is authorized to offset and apply to all or any part of the Obligations all moneys, credits and other property of any nature whatsoever of Borrower now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with, Lender or any Affiliate of Lender. ARTICLE IX MISCELLANEOUS Section 9.1 Notices. All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or five (5) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Borrower: General Physics Corporation 6095 Marshalee Drive Suite 300 Elkridge, Maryland 21075 Attention: Sharon Esposito-Mayer with a copy to: General Physics Corporation 6095 Marshalee Drive Suite 300 Elkridge, Maryland 21075 Attention: Kenneth L. Crawford with a copy to: Patricia F. Brennan, Esquire Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 MXL: MXL Industries, Inc. 777 Westchester Avenue, 4th Floor White Plains, NY 10605 Attention: Frank Yohe with a copy to: General Physics Corporation 6095 Marshalee Drive Suite 300 Elkridge, Maryland 21075 Attention: Scott N. Greenberg Executive Vice President and a copy to: Patricia F. Brennan, Esquire Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Lender: Wachovia Bank, National Association MD4305 7 Saint Paul Street, 2nd Floor Baltimore, Maryland 21202 Attention: Lucy C. Campbell with a copy to: Kathleen M. Donahue, Esquire Troutman Sanders LLP 1660 International Drive, Suite 600 McLean, Virginia 22102 By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. Section 9.2 Amendments; Waivers. This Agreement and the other Financing Documents may not be amended, modified, or changed in any respect except by an agreement in writing signed by Lender, Borrower and, so long as MXL is a party to this Agreement, MXL. No waiver of any provision of this Agreement or of any of the other Financing Documents or consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in writing signed by Lender. No course of dealing between Borrower and Lender and no act or failure to act from time to time on the part of Lender shall constitute a waiver, amendment or modification of any provision of this Agreement or any of the other Financing Documents or any right or remedy under this Agreement, under any of the other Financing Documents or under applicable Laws. Without implying any limitation on the foregoing: (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as Lender may specify in any such instrument. (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto. (c) No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstance. (d) No failure or delay by Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude Lender from exercising any such right, power or remedy at any time or times. (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount. Section 9.3 Cumulative Remedies. The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as Lender shall determine, subject to the provisions of this Agreement, and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle Lender to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing and subject to the terms of this Agreement, Lender may: (a) proceed against Borrower with or without proceeding against any other Person (including, without limitation, any one or more of Guarantors) who may be liable (by endorsement, guaranty, indemnity or otherwise) for all or any part of the Obligations; (b) proceed against Borrower with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations; (c) without reducing or impairing the obligation of Borrower and without notice, release or compromise with any guarantor or other Person liable for all or any part of the Obligations under the Financing Documents or otherwise; (d) without reducing or impairing the obligations of Borrower and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral; (ii) approve the making of advances under the Revolving Loan under this Agreement; (iii) waive any provision of this Agreement or the other Financing Documents; (iv) exercise or fail to exercise rights of set-off or other rights; or (e) accept partial payments or extend from time to time the maturity of all or any part of the Obligations. Section 9.4 Severability. In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action: (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby; (b) the obligation to be fulfilled shall be reduced to the limit of such validity; (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of Lender, all of the Obligations of Borrower to Lender shall become immediately due and payable; and (d) if the affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in material part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect. Section 9.5 Assignments by Lender. Lender may, without notice to or consent of Borrower, assign to any Person (each an "Assignee" and collectively, the "Assignees") all or a portion of the Commitment; provided, however, prior to any sale of the Loan, or any portion thereof, to an institution organized under the laws of a foreign jurisdiction, so long as no Event of Default exists and is continuing, Lender will provide notice to Borrower and Borrower will have the right to approve or disapprove the sale which approval shall not be unreasonably withheld, conditioned, or delayed, and provided further, however, that the notice and consent right provided to Borrower in the foregoing clause will only apply to the sale of an interest in the Loan as part of a portfolio management sale by Lender, and not any sale of Lender itself. Lender and its Assignee shall notify Borrower in writing of the date on which the assignment is to be effective (the "Adjustment Date"). On or before the Adjustment Date, Lender, Borrower and the Assignee shall execute and deliver a written assignment agreement in a form acceptable to Lender, which shall constitute an amendment to this Agreement to the extent necessary to reflect such assignment. Upon the request of Lender following an assignment made in accordance with this Section 9.5, Borrower shall issue new Notes to Lender and its Assignee reflecting such assignment, in exchange for the existing Notes held by Lender. In addition, notwithstanding the foregoing, Lender may at any time pledge all or any portion of Lender's rights under this Agreement, the Commitment or the Obligations to a Federal Reserve Bank. Section 9.6 Participations by Lender. Lender may at any time sell to one or more financial institutions participating interests in any of Lender's Obligations or Commitment; provided, however, that (a) no such participation shall relieve Lender from its obligations under this Agreement or under any of the other Financing Documents to which it is a party, (b) Lender shall remain solely responsible for the performance of its obligations under this Agreement and under all of the other Financing Documents to which it is a party, and (c) Borrower shall continue to deal solely and directly with Lender in connection with Lender's rights and obligations under this Agreement and the other Financing Documents. A participant shall have no rights vis-a-vis the Borrower under this Agreement. Section 9.7 Disclosure of Information by Lender. Subject to the provisions of Section 9.20 (Confidentiality), in connection with any sale, transfer, assignment or participation by Lender in accordance with Section 9.5 (Assignments by Lender) or Section 9.6 (Participations by Lender), Lender shall have the right to disclose to any actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and/or any of the other Financing Documents or otherwise. Section 9.8 Successors and Assigns. This Agreement and all other Financing Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Lender. Section 9.9 Continuing Agreements. All covenants, agreements, representations and warranties made by Borrower in this Agreement, in any of the other Financing Documents, and in any certificate delivered pursuant hereto or thereto shall survive the making by Lender of the Revolving Loan, the issuance of Letters of Credit and the execution and delivery of the Notes, shall be binding upon Borrower regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon Lender's request, and as a condition of the release of any one or more of the Security Documents, Borrower and other Persons obligated with respect to the Obligations shall provide Lender with such acknowledgments and agreements as Lender may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever in connection with the Obligations against Lender and/or any of its agents and others, or to the extent there are, the same are waived and released. Section 9.10 Enforcement Costs. Borrower shall pay to Lender on demand all Enforcement Costs, together with interest thereon from the earlier of the date incurred or advanced until paid in full at a per annum rate of interest equal at all times to the Post-Default Rate. Enforcement Costs shall be payable on demand. Without implying any limitation on the foregoing, Borrower shall pay, as part of the Enforcement Costs, upon demand any and all stamp and other Taxes and fees payable or determined to be payable in connection with the execution and delivery of this Agreement and the other Financing Documents and to save Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay any Taxes or fees referred to in this Section. The provisions of this Section shall survive the execution and delivery of this Agreement, the repayment of the other Obligations and shall survive the termination of this Agreement. Section 9.11 Applicable Law; Jurisdiction. 9.11.1 Applicable Law. Borrower and Lender acknowledge and agree that this Agreement shall be governed by the Laws of the State. 9.11.2 Submission to Jurisdiction. Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in the State over any suit, action or proceeding arising out of or relating to this Agreement or any of the other Financing Documents. Borrower irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon Borrower and may be enforced in any court in which Borrower is subject to jurisdiction, by a suit upon such judgment, provided that service of process is effected upon Borrower in one of the manners specified in this Section or as otherwise permitted by applicable Laws. 9.11.3 Service of Process. Borrower hereby consents to process being served in any suit, action or proceeding of the nature referred to in this Section by the mailing of a copy thereof by registered or certified mail, postage prepaid, return receipt requested, to Borrower at Borrower's address designated in or pursuant to Section 9.1 (Notices). Borrower irrevocably agrees that such service (y) shall be deemed in every respect effective service of process upon Borrower in any such suit, action or proceeding, and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon Borrower. Nothing in this Section shall affect the right of Lender to serve process in any manner otherwise permitted by law or limit the right of Lender otherwise to bring proceedings against Borrower in the courts of any jurisdiction or jurisdictions. Section 9.12 Duplicate Originals and Counterparts. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Section 9.13 Headings. The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. Section 9.14 No Agency. Nothing herein contained shall be construed to constitute Borrower as Lender's agent for any purpose whatsoever or to permit Borrower to pledge any of the credit of Lender. Lender shall not be responsible or liable for any shortage, discrepancy, damage, loss or destruction of any part of the Collateral wherever the same may be located and regardless of the cause thereof, unless as a result of Lender's gross negligence or willful misconduct. Lender shall not, by anything herein or in any of the Financing Documents or otherwise, assume any of Borrower's obligations under any contract or agreement assigned to Lender, and Lender shall not be responsible in any way for the performance by Borrower of any of the terms and conditions thereof. Section 9.15 Date of Payment. Should the principal of or interest on the Notes become due and payable on other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and in the case of principal, interest shall be payable thereon at the rate per annum specified in the Notes during such extension. Section 9.16 Entire Agreement. This Agreement is intended by Lender and Borrower to be a complete, exclusive and final expression of the agreements contained herein. Neither Lender nor Borrower shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement. Section 9.17 Waiver of Trial by Jury. BORROWER, MXL AND LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER, MXL AND LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. This waiver is knowingly, willingly and voluntarily made by Borrower, MXL and Lender, and Borrower, MXL and Lender hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. Borrower, MXL and Lender further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel. Section 9.18 Liability of Lender. Borrower and MXL each hereby agrees that Lender shall not be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by Lender in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations. By inspecting the Collateral or any other properties of Borrower or MXL or by accepting or approving anything required to be observed, performed or fulfilled by Borrower or MXL or to be given to Lender pursuant to this Agreement or any of the other Financing Documents, Lender shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by Lender. Section 9.19 Indemnification. Borrower and MXL each agrees to indemnify and hold harmless, Lender, Lender's parent and Affiliates and Lender's parent's and Affiliates' officers, directors, shareholders, employees and agents (each an "Indemnified Party," and collectively, the "Indemnified Parties"), from and against any and all claims, liabilities, losses, damages, costs and expenses (whether or not such Indemnified Party is a party to any litigation), including without limitation, reasonable attorney's fees and costs and costs of investigation, document production, attendance at depositions or other discovery, incurred by any Indemnified Party with respect to, arising out of or as a consequence of (a) this Agreement or any of the other Financing Documents, including without limitation, any failure of Borrower to pay when due (at maturity, by acceleration or otherwise) any principal, interest, fee or any other amount due under this Agreement or the other Financing Documents, or any other Event of Default (b) the use by Borrower of any proceeds advanced hereunder; (c) the transactions contemplated hereunder; or (d) any claim, demand, action or cause of action being asserted against (i) Borrower, MXL or any of their Affiliates by any other Person, or (ii) any Indemnified Party by Borrower or MXL in connection with the transactions contemplated hereunder. Notwithstanding anything herein or elsewhere to the contrary, neither Borrower or MXL shall not be obligated to indemnify or hold harmless any Indemnified Party from any liability, loss or damage resulting from the gross negligence, willful misconduct or unlawful actions of such Indemnified Party. Any amount payable to Lender under this Section will bear interest at the Post-Default Rate from the due date until paid. Section 9.20 Confidentiality. Lender understands that some of the information furnished to it pursuant to this Agreement and the other Financing Documents may be received by it prior to the time that such information shall have been made public, and Lender hereby agrees that it will keep, and will direct its officers and employees to keep, all the information provided to it pursuant to this Agreement and the other Financing Documents confidential prior to its becoming public subject, however, to (a) disclosure to officers, directors, employees, representatives, agents, auditors, consultants, advisors, lawyers and Affiliates of Lender, in the ordinary course of business, (b) disclosure to such officers, directors, employees, agents and representatives of a prospective assignee or participant as need to know such information in connection with the evaluation of a possible participation in the Commitment (who will be informed of the confidential nature of the material), or (c) the obligations of Lender or a participant under applicable Law, or pursuant to subpoenas or other legal process, to make information available to governmental agencies and examiners or to others and the right of Lender to use such information in proceedings to enforce their rights and remedies hereunder or under any other Financing Documents or in any proceeding against Lender in connection with this Agreement or under any other Financing Document or the transactions contemplated hereunder or thereunder. Notwithstanding the foregoing, each of Lender, Borrower and any assignee or participant hereunder (and each employee, representative or other agent of such parties) may disclose to any and all Persons, without limitation of any kind, the tax treatment and any facts that may be relevant to the tax structure of the transaction; provided, however, that no such Person shall disclose any information that is not relevant to understanding the tax treatment and structure of the transaction (including the identity of any party and any information that could lead another to determine the identity of any party), or any information to the extent that such disclosure could result in a violation of any federal or state securities law or any stock exchange regulation. IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this Agreement under their respective seals as of the day and year first written above. WITNESS OR ATTEST: GENERAL PHYSICS CORPORATION _________________________ By:____________________________(Seal) Name: Scott N. Greenberg Title: Executive Vice President WITNESS OR ATTEST: MXL INDUSTRIES, INC. _________________________ By:____________________________(Seal) Name: Scott N. Greenberg Title: Executive Vie President WITNESS: WACHOVIA BANK, NATIONAL ASSOCIATION _________________________ By:____________________________(Seal) Name: Lucy C. Campbell Title: Vice President EX-10 14 ex1011.txt GPX GUARANTY OF PAYMENT AGREEMENT Exhibit 10.11 GUARANTY OF PAYMENT AGREEMENT THIS GUARANTY OF PAYMENT AGREEMENT (this "Agreement") is made this _____ day of August, 2003, by GP STRATEGIES CORPORATION, a corporation organized under the laws of the State of Delaware (the "Guarantor") for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the "Lender"). RECITALS A. General Physics Corporation, a corporation organized under the laws of the State of Delaware (the "Borrower") has applied to the Lender for a revolving credit facility in the maximum principal amount of $25,000,000 and a letter of credit facility as a part of the revolving credit facility (the "Loan"), which is to be advanced pursuant to the terms of a Financing and Security Agreement of even date herewith (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement") by and between the Borrower and the Lender. B. All defined terms used in this Agreement and not defined herein shall have the meaning given to such terms in the Financing Agreement. C. The Guarantor has requested that the Lender enter into the Financing Agreement with the Borrower and make the credit facilities described in the Financing Agreement available to the Borrower. D. The Lender has required, as a condition to entering into the Financing Agreement, that the Guarantor execute this Agreement as additional security for the payment and performance of the Obligations. NOW, THEREFORE, in order to induce the Lender to enter into the Financing Agreement, the Guarantor covenants and agrees with the Lender as follows: ARTICLE I THE GUARANTY Section 1.1 Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to the Lender: (a) the due and punctual payment in full (and not merely the collectibility) of the Obligations when due and payable, all according to the terms of any promissory note evidencing all or any part of the Obligations and the other Financing Documents; and (b) the due and punctual performance of all of the other terms, covenants and conditions contained in the Financing Documents. Section 1.2 Guaranty Unconditional. The obligations and liabilities of the Guarantor under this Agreement shall be absolute and unconditional, irrespective of the genuineness, validity, priority, regularity or enforceability of the Financing Agreement, any promissory note evidencing all or any part of the Obligations, or any of the other Financing Documents or any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor expressly agrees that the Lender may, in its sole and absolute discretion, without notice to or further assent of the Guarantor and without in any way releasing, affecting or in any way impairing the obligations and liabilities of the Guarantor hereunder: (a) waive compliance with, or any defaults under, or grant any other indulgences under or with respect to any of the Financing Documents; (b) modify, amend, change or terminate any provisions of any of the Financing Documents, other than any Financing Document to which the Guarantor is a party; (c) grant extensions or renewals of or with respect to any promissory note evidencing all or any part of the Obligations, any of the other Financing Documents or any of the Obligations; (d) effect any release, subordination, compromise or settlement in connection with any promissory note evidencing all or any part of the Obligations, any of the other Financing Documents, or any of the Obligations; (e) agree to the substitution, exchange, release or other disposition of the Collateral or any part thereof, or any other collateral for the Obligations or to the subordination of any lien or security interest therein; (f) make advances for the purpose of performing any term, provision or covenant contained in the Financing Agreement or any of the other Financing Documents with respect to which the Borrower shall then be in default; (g) make future advances to the Borrower pursuant to the Financing Agreement or any of the other Financing Documents; (h) assign, pledge, hypothecate or otherwise transfer the Financing Agreement, any of the Financing Documents or this Agreement or any interest therein; (i) deal in all respects with the Borrower as if this Agreement were not in effect; and (j) effect any release, compromise or settlement with another guarantor. Section 1.3 Guaranty Primary. The obligations and liabilities of the Guarantor under this Agreement shall be primary, direct and immediate, shall not be subject to any counterclaim, recoupment, setoff, reduction or defense based upon any claim that the Guarantor may have against the Borrower, the Lender and/or any other guarantor and shall not be conditional or contingent upon pursuit or enforcement by the Lender of any remedies it may have against the Borrower with respect to any promissory note evidencing all or any part of the Obligations or any of the other Financing Documents, whether pursuant to the terms thereof or by operation of law. Without limiting the generality of the foregoing, the Lender shall not be required to make any demand upon the Borrower, or to sell the Collateral or otherwise pursue, enforce or exhaust its remedies against the Borrower or the Collateral either before, concurrently with or after pursuing or enforcing its rights and remedies hereunder. Any one or more successive or concurrent actions or proceedings may be brought against the Guarantor under this Agreement, either in the same action, if any, brought against the Borrower or in separate actions or proceedings, as often as the Lender may deem expedient or advisable. Without limiting the foregoing, it is specifically understood that any modification, limitation or discharge of any of the liabilities or obligations of the Borrower, any other guarantor or any obligor under any of the Financing Documents, arising out of, or by virtue of, any bankruptcy, arrangement, reorganization or similar proceeding for relief of debtors under federal or state law initiated by or against the Borrower or the Guarantor or any obligor under any of the Financing Documents shall not modify, limit, lessen, reduce, impair, discharge, or otherwise affect the liability of the Guarantor hereunder in any manner whatsoever, and this Agreement shall remain and continue in full force and effect. It is the intent and purpose of this Agreement that the Guarantor shall and does hereby waive all rights and benefits which might accrue to any other guarantor by reason of any such proceeding, and the Guarantor agrees that it shall be liable for the full amount of the obligations and liabilities under this Agreement, regardless of, and irrespective to, any modification, limitation or discharge of the liability of the Borrower, any other guarantor or any obligor under any of the Financing Documents, that may result from any such proceedings. Section 1.4 Certain Waivers by the Guarantor. The Guarantor hereby unconditionally, irrevocably and expressly waives: (a) presentment and demand for payment of the principal of or interest on any promissory note evidencing all or any part of the Obligations and protest of non-payment; (b) notice of acceptance of this Agreement and of presentment, demand and protest thereof; (c) notice of any default hereunder or under the Financing Agreement, or any of the other Financing Documents and notice of all indulgences; (d) notice of any increase in the amount of any portion of or all of the indebtedness guaranteed by this Agreement; (e) demand for observance, performance or enforcement of any of the terms or provisions of this Agreement, the Financing Agreement or any of the other Financing Documents; (f) all errors and omissions in connection with the Lender's administration of all indebtedness guaranteed by this Agreement, except errors and omissions resulting from acts of gross negligence or willful misconduct; (g) any right or claim of right to cause a marshalling of the assets of the Borrower; (h) any act or omission of the Lender (except acts or omissions from gross negligence or willful misconduct) which changes the scope of the Guarantor's risk hereunder; and (i) all other notices and demands otherwise required by law which the Guarantor may lawfully waive. Section 1.5 Reimbursement for Expenses. In the event the Lender shall commence any action or proceeding for the enforcement of this Agreement, then the Guarantor will reimburse the Lender, promptly upon demand, for any and all expenses incurred by the Lender in connection with such action or proceeding including, without limitation, reasonable attorneys' fees together with interest thereon at the Post-Default Rate. Section 1.6 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" under the provisions of this Agreement (individually, an "Event of Default" and collectively, the "Events of Default"): (a) The failure of the Guarantor to pay any of the Obligations as and when due and payable in accordance with the provisions of this Agreement. (b) Any representation or warranty made in this Agreement or in any report, statement, schedule, certificate, financial statement or other document furnished in connection with this Agreement, shall prove to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. (c) A default shall occur under 0(a) (Existence) which default shall continue for thirty (30) days after Notice from the Lender to the Guarantor. (d) The failure of the Guarantor to perform, observe or comply with any covenant, condition or agreement contained in this Agreement and not otherwise referred to in this Section 1.6. (e) A default shall occur under any of the other Financing Documents and such default is not cured within any applicable grace period provided therein. (f) The Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or any of its property, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (vi) by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days, or (vii) by any act indicate its consent to, approval of or acquiescence in any order, judgment or decree by any court of competent jurisdiction or any Governmental Authority enjoining or otherwise prohibiting the operation of a material portion of the Guarantor's business or the use or disposition of a material portion of the Guarantor's assets. (g) (i) An order for relief shall be entered in any involuntary case brought against the Guarantor under the Bankruptcy Code, or (ii) any such case shall be commenced against the Guarantor and shall not be dismissed within sixty (60) days after the filing of the petition, or (iii) an order, judgment or decree under any other Law is entered by any court of competent jurisdiction or by any other Governmental Authority on the application of a Governmental Authority or of a Person other than the Guarantor (A) adjudicating the Guarantor bankrupt or insolvent, or (B) appointing a receiver, trustee or liquidator of the Guarantor, or of a material portion of the Guarantor's assets, or (C) enjoining, prohibiting or otherwise limiting the operation of a material portion of the Guarantor's business or the use or disposition of a material portion of the Guarantor's assets, and such order, judgment or decree continues unstayed and in effect for a period of thirty (30) days from the date entered. (h) Unless adequately insured in the opinion of the Lender, the entry of a final judgment for the payment of money involving more than $500,000 against the Guarantor, and the failure by the Guarantor to discharge the same, or cause it to be discharged, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. (i) If the Lender in its sole discretion determines in good faith that a material adverse change has occurred in the financial condition of the Guarantor. (j) If the Guarantor shall liquidate, dissolve or terminate its existence without the prior written consent of the Lender. (k) An Event of Default, as defined in the Subordinated Debt Loan Documents, shall occur. Section 1.7 Rescission of Election to Accelerate. In the event the Lender shall elect to accelerate the maturity of any promissory note evidencing all or any part of the Obligations as to the Guarantor pursuant to the provisions of this Agreement, such election may be rescinded by written acknowledgment to that effect by the Lender; provided, however, that the acceptance of a partial payment on account of any promissory note evidencing all or any part of the Obligations shall not alone effect or rescind such election. Section 1.8 Subordination; Subrogation. In the event the Guarantor shall advance any sums to the Borrower, or in the event the Borrower has heretofore or shall hereafter become indebted to the Guarantor before the Obligations have been paid in full, all such advances and indebtedness shall be subordinate in all respects to the Obligations (the "Guarantor Subordinated Debt"). Any payment to the Guarantor on account of the Guarantor Subordinated Debt shall be collected and received by the Lender or the Guarantor in trust for the Lender and shall be paid over to the Lender on account of the Obligations without impairing or releasing the obligations of the Guarantor hereunder. Subsequent to the occurrence and during the continuance of an Event of Default, or if the payment thereof would cause an Event of Default, the Guarantor shall not ask, demand, receive, accept, sue for, set off, collect or enforce the Guarantor Subordinated Debt or any collateral and security therefor. The Guarantor represents and warrants to the Lender that the Guarantor Subordinated Debt is unsecured and agrees not to receive or accept any collateral or security therefor without the prior written permission of the Lender. The Guarantor shall not assign, transfer, hypothecate or dispose of the Guarantor Subordinated Debt while this Agreement is in effect. In the event of any sale, receivership, insolvency or bankruptcy proceeding, or assignment for the benefit of creditors, or any proceeding by or against the Borrower for any relief under any bankruptcy or insolvency law or other laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, compositions or extensions, then and in any such event any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon, or with respect to, all or any part of the Guarantor Subordinated Debt or otherwise shall be paid or delivered directly to the Lender for application to the obligations and liabilities of the Guarantor under this Agreement (whether due or not due and in such order and manner as the Lender may determine in the exercise of its sole discretion) until the obligations of the Guarantor hereunder shall have been fully paid and satisfied. Subsequent to the occurrence and during the continuance of an Event of Default, the Guarantor hereby irrevocably authorizes and empowers the Lender to demand, sue for, collect and receive every such payment or distribution on account of the Guarantor Subordinated Debt and give acquittance therefor and to file claims and take such other proceedings in the Lender's own name or in the name of the Guarantor or otherwise, as the Lender may deem necessary or advisable to carry out the provisions of this Agreement. The Guarantor hereby agrees to execute and deliver to the Lender such powers of attorney, assignments, endorsements or other instruments as may be requested by the Lender in order to enable the Lender to enforce any and all claims upon, or with respect to, the Guarantor Subordinated Debt, and to collect and receive any and all payments or distributions which may be payable or deliverable at any time upon or with respect thereto. So as to secure the performance by the Guarantor of the provisions of this Agreement, the Guarantor assigns, pledges and grants to the Lender a security interest in, and lien on, the Guarantor Subordinated Debt, all proceeds thereof and all and any security and collateral therefor. Upon the request of the Lender, the Guarantor shall endorse, assign and deliver to the Lender all notes, instruments and agreements evidencing, securing, guarantying or made in connection with the Guarantor Subordinated Debt. Nothing contained in this Agreement shall be construed to give the Guarantor any right of subrogation in or to the Obligations or any of the Financing Documents, or all or any part of the interest of the Lender therein, until the Obligations have been paid in full. Section 1.9 CONFESSED JUDGMENT. UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, THE GUARANTOR HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR FOR THE GUARANTOR IN ANY COURT OF RECORD AND CONFESS JUDGMENT AGAINST THE GUARANTOR WITHOUT PRIOR HEARING, IN FAVOR OF THE LENDER FOR, AND IN THE AMOUNTS OF, THE BALANCE THEN DUE UNDER ANY ONE OR MORE OF THE PROMISSORY NOTES EVIDENCING ALL OR ANY PART OF OBLIGATIONS, ALL ACCRUED AND UNPAID INTEREST THEREON, ALL OTHER AMOUNTS PAYABLE BY THE GUARANTOR TO THE LENDER UNDER THE TERMS OF THIS AGREEMENT, COSTS OF SUIT, AND ATTORNEYS' FEES OF TEN PERCENT (10%) OF THE UNPAID PRINCIPAL SUM. BY ITS ACCEPTANCE OF THIS AGREEMENT, THE LENDER AGREES THAT IN THE EVENT THE LENDER EXERCISES AT ANY TIME ITS RIGHT TO CONFESS JUDGMENT UNDER THIS AGREEMENT, THE LENDER SHALL USE ITS BEST EFFORTS TO OBTAIN LEGAL COUNSEL WHO WILL CHARGE THE LENDER FOR ITS SERVICES ON AN HOURLY BASIS, AT ITS CUSTOMARY HOURLY RATES AND ONLY FOR THE TIME AND REASONABLE EXPENSES INCURRED. IN NO EVENT SHALL THE LENDER ENFORCE THE LEGAL FEES PORTION OF A CONFESSED JUDGMENT AWARD FOR AN AMOUNT IN EXCESS OF THE FEES AND EXPENSES ACTUALLY CHARGED TO THE LENDER FOR SERVICES RENDERED BY ITS COUNSEL IN CONNECTION WITH SUCH CONFESSION OF JUDGMENT AND/OR THE COLLECTION OF SUMS OWED TO THE LENDER. IN THE EVENT THE LENDER RECEIVES, THROUGH EXECUTION UPON A CONFESSED JUDGMENT, PAYMENTS ON ACCOUNT OF ATTORNEYS' FEES IN EXCESS OF SUCH ACTUAL ATTORNEYS' FEES AND EXPENSES INCURRED BY THE LENDER, THEN, AFTER FULL REPAYMENT AND SATISFACTION OF ALL OF THE OBLIGATIONS, THE LENDER SHALL REFUND SUCH EXCESS AMOUNT TO THE GUARANTOR. THE GUARANTOR HEREBY RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION, AND OTHER RIGHTS TO WHICH THE GUARANTOR MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR OF ANY STATE OR POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY HEREAFTER BE ENACTED. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT JURISDICTIONS AS OFTEN AS THE LENDER SHALL DEEM NECESSARY AND DESIRABLE, FOR ALL OF WHICH THIS AGREEMENT SHALL BE A SUFFICIENT WARRANT. ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties. The Guarantor represents and warrants to the Lender as follows: 2.1.1 Good Standing. The Guarantor (a) is duly organized, existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power to own its property and to carry on its business as now being conducted, and (c) is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned by it therein or in which the transaction of its business makes such qualification necessary. 2.1.2 Power and Authority. The Guarantor has full power and authority to execute and deliver this Agreement and the other Financing Documents to which it is a party and to incur and perform the Obligations whether under this Agreement or the other Financing Documents, all of which have been duly authorized by all proper and necessary action under the governing documents of the Guarantor. No consent or approval of owners or any creditors of the Guarantor, and no consent, approval, filing or registration with or notice to any Governmental Authority on the part of the Guarantor, is required as a condition to the execution, delivery, validity or enforceability of this Agreement or the other Financing Documents or the performance by the Guarantor of the Obligations. 2.1.3 Binding Agreements. This Agreement and the other Financing Documents executed and delivered by the Guarantor have been properly executed and delivered and constitute the valid and legally binding obligations of the Guarantor and are fully enforceable against the Guarantor in accordance with their respective terms. 2.1.4 No Conflicts. Neither the execution, delivery and performance of the terms of this Agreement or of any of the other Financing Documents executed and delivered by the Guarantor nor the consummation of the transactions contemplated by this Agreement will conflict with, violate or be prevented by (a) the Guarantor's organizational documents, (b) any existing mortgage, indenture, contract or agreement binding on the Guarantor or affecting its property, or (c) any applicable Laws. 2.1.5 Compliance with Laws. The Guarantor is not in violation of any applicable Laws (including, without limitation, any Laws relating to employment practices, to environmental, occupational and health standards and controls) or order, writ, injunction, decree or demand of any court, arbitrator or any Governmental Authority affecting the Guarantor or any of its properties, the violation of which, considered in the aggregate, could materially adversely affect the business, operations or properties of the Guarantor. 2.1.6 Litigation. There are no proceedings, actions or, to the knowledge of the Guarantor, investigations pending or, so far as the Guarantor knows, threatened before or by any court, arbitrator or any Governmental Authority which, in any one case or in the aggregate, if determined adversely to the interests of the Guarantor, would have a material adverse effect on the business, properties, condition (financial or otherwise) or operations of the Guarantor. 2.1.7 Financial Condition. The financial statements of the Guarantor dated December 31, 2002 are complete and correct and fairly present the financial position of the Guarantor and its Subsidiaries and the results of their operations and transactions in its surplus accounts as of the date and for the period referred to and have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved. There are no material liabilities, direct or indirect, fixed or contingent, of the Guarantor or its Subsidiaries as of the date of such financial statements that are not reflected therein or in the notes thereto. There has been no adverse change in the financial condition or operations of the Guarantor and its Subsidiaries since the date of such financial statements and to the Guarantor's knowledge no such adverse change is pending or threatened. The representations and warranties contained in this Section shall also cover financial statements furnished from time to time to the Lender pursuant to Section 3.1 (Financial Statements). 2.1.8 Full Disclosure. The financial statements referred to in Section 2.1.7 (Financial Condition), the Financing Documents (including, without limitation, this Agreement), and the statements, reports or certificates furnished by the Guarantor in connection with the Financing Documents (a) do not contain any untrue statement of a material fact and (b) when taken in their entirety, do not omit any material fact necessary to make the statements contained therein not misleading. There is no fact known to the Guarantor which the Guarantor has not disclosed to the Lender in writing prior to the date of this Agreement which materially and adversely affects or in the future could, in the reasonable opinion of the Guarantor materially adversely affect the condition, financial or other wise, results of operations, business, or assets of the Guarantor and its Subsidiaries taken as a whole. 2.1.9 Financial Interest. The Guarantor has a financial interest in the Borrower and will derive a benefit from the Loan extended to and the Obligations incurred by the Borrower. 2.1.10 Subordinated Debt. None of the Subordinated Debt Loan Documents has been amended, supplemented, restated or otherwise modified except as otherwise disclosed to Lender in writing on or before the date hereof. In addition, there does not exist any default or any event which upon notice or lapse of time or both would constitute a default under the terms of any of the Subordinated Debt Loan Documents. Section 2.2 Survival; Updates of Representations and Warranties. All representations and warranties contained in or made under or in connection with this Agreement and the other Financing Documents shall survive the Closing Date, the making of any advance under the Financing Agreement and the incurring of any Obligations. ARTICLE III COVENANTS The Guarantor hereby covenants and agrees as follows: Section 3.1 Financial Statements. Guarantor shall furnish to Lender: (a) Annual Statements and Certificates. Guarantor shall furnish to Lender as soon as available, but in no event more than one hundred twenty (120) days after the close of each fiscal year of Guarantor, a copy of the annual audited financial statement in reasonable detail satisfactory to the Lender relating to the Guarantor and its Subsidiaries, prepared in accordance with GAAP and examined and certified by KPMG LLP or such other independent certified public accountants satisfactory to Lender, which financial statement shall include an audited consolidated and unaudited consolidating balance sheet of the Guarantor and its Subsidiaries as of the end of such fiscal year and audited consolidated and unaudited consolidating statements of income, cash flows and changes in shareholders equity of the Guarantor and its Subsidiaries for such fiscal year. (b) Quarterly Statements and Certificates. Guarantor shall furnish to Lender as soon as available, but in no event more than fifty (50) days after the close of Guarantor's fiscal quarters, consolidated balance sheets of the Guarantor and its Subsidiaries as of the close of such period, consolidated income, cash flows and changes in shareholders equity statements for such period, projected cash flow on a quarterly basis and projected income statements, each prepared by a Responsible Officer of the Guarantor in a format acceptable to the Lender and accompanied by a certificate of that officer stating whether, to the best of his or her knowledge, any event has occurred which constitutes a Default or an Event of Default hereunder, and, if so, stating the facts with respect thereto. (c) Annual Budget and Projections. Guarantor shall furnish to Lender as soon as available, but in no event later than forty-five (45) days before the end of each fiscal year a consolidated and consolidating budget on a quarterly basis for the following fiscal year. (d) Additional Reports and Information. Guarantor shall furnish to Lender promptly, such additional information, reports or statements as Lender may from time to time reasonably request. Section 3.2 Reports to SEC and to Stockholders. Guarantor will furnish to Lender, promptly upon the filing or making thereof, at least one (l) copy of all financial statements, reports, notices and proxy statements sent by Guarantor to its stockholders, and of all regular and other reports filed by Guarantor with any securities exchange or with the Securities and Exchange Commission. Section 3.3 Recordkeeping, Rights of Inspection, Field Examination, Etc. The Guarantor will (a) maintain or cause to be maintained full, complete, accurate and adequate records and books of account in accordance with generally accepted accounting principles consistently applied; (b) prior to the occurrence of an Event of Default, permit the Lender and its duly authorized agents, attorneys and accountants to inspect, examine, and copy its records and books of account during normal business hours up to three (3) times per year; and (c) subsequent to the occurrence and during the continuance of an Event of Default, permit the Lender and its duly authorized agents, attorneys and accountants to inspect, examine, and copy its records and books of account at all such times and as often as Lender may request. Section 3.4 Existence. Guarantor shall (a) maintain, and cause each of its Subsidiaries to maintain, its existence in good standing in the jurisdiction in which it is organized and in each other jurisdiction where it is required to register or qualify to do business if the failure to do so in such other jurisdiction might have a material adverse effect on the ability of Guarantor to perform the Obligations, on the conduct of Guarantor's operations, or on Guarantor's financial condition and (b) remain a Registered Organization under the laws of the jurisdiction stated in the Preamble of this Agreement. Section 3.5 Compliance with Laws. Guarantor shall comply, and cause each of its Subsidiaries to comply, with all applicable Laws and observe the valid requirements of Governmental Authorities, the non-compliance with or the non-observance of which might have a material adverse effect on the ability of Guarantor to perform the Obligations, on the conduct of Guarantor's operations or on Guarantor's financial condition. Section 3.6 Notification of Events of Default and Adverse Developments. Guarantor shall promptly notify Lender upon obtaining knowledge of the occurrence of: (a) any Event of Default; (b) any Default; (c) any litigation instituted or threatened against Guarantor or its Subsidiaries and of the entry of any judgment or Lien (other than any Permitted Liens) against any of the assets or properties of Guarantor or any Subsidiary where the claims against Guarantor or any of its Subsidiaries exceed Five Thousand Dollars ($500,000) and are not covered by insurance; (d) any event, development or circumstance whereby the financial statements furnished hereunder fail in any material respect to present fairly, in accordance with GAAP, the financial condition and operational results of Guarantor or any of its Subsidiaries; (e) any judicial, administrative or arbitral proceeding pending against Guarantor or any of its Subsidiaries and any judicial or administrative proceeding known by Guarantor to be threatened against it or any of its Subsidiaries that, if adversely decided, could materially adversely affect its financial condition or operations (present or prospective); (f) the receipt by Guarantor or any of its Subsidiaries of any notice, claim or demand from any Governmental Authority which alleges that Guarantor or any Subsidiary is in violation of any of the terms of, or has failed to comply with any applicable Laws regulating its operation and business, including, but not limited to, the Occupational Safety and Health Act and the Environmental Protection Act; and (g) any other development in the business or affairs of Guarantor and any of its Subsidiaries that may could have a materially adverse effect on the Guarantor and its Subsidiaries taken as a whole; in each case describing in detail satisfactory to Lender the nature thereof and the action Guarantor proposes to take with respect thereto. Section 3.7 Estoppel Certificates. Within ten (10) days following any request of the Lender so to do, the Guarantor will furnish the Lender and such other persons as the Lender may direct with a written certificate, duly acknowledged stating in detail whether or not any credits, offsets or defenses exist with respect to this Agreement. Section 3.8 Capital Structure, Merger, Acquisition or Sale of Assets. Other than the acquisition of stock in Five Star Products Group and the sale of Millenium Stock and Hemispherix Biopharma, Inc. stock, all listed on the NASDAQ, Guarantor will not enter into any merger or consolidation or amalgamation, windup or dissolve itself (or suffer any liquidation or dissolution) or acquire all or substantially all the assets of any Person, or sell, lease or otherwise dispose of any of its assets. Any consent of Lender to the disposition of any other assets may be conditioned on a specified use of the proceeds of disposition. Section 3.9 Investments, Loans and Other Transactions. Guarantor will not, and will not permit any of its Subsidiaries to, (a) make, assume, acquire or hold any investment in any real property (unless used in connection with its business and treated as a Fixed or Capital Asset of Guarantor or the Subsidiary) or any Person, whether by stock purchase, capital contribution, acquisition of indebtedness of such Person or otherwise (including, without limitation, investments in any joint venture or partnership), (b) guaranty or otherwise become contingently liable for the Indebtedness or obligations of any Person, (c) make any loans or advances, or otherwise extend credit to any Person, or (d) enter into or participate in any transaction with any Affiliate, Guarantor or Affiliate of Guarantor or, except in the ordinary course of business, with the officers, directors, employees and other representatives of Guarantor and/or any Subsidiary, except: (a) any advance to an officer or employee of Guarantor or any Subsidiary for travel or other business expenses in the ordinary course of business, provided that the aggregate amount of all such advances by Guarantor and its Subsidiaries (taken as a whole) outstanding at any time shall not exceed One Hundred Thousand Dollars ($100,000); (b) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) any investment in Cash Equivalents; and (d) guarantees, loans, investments or advances existing on the date hereof and reflected on Schedule 3.9 attached hereto and made a part hereof. Section 3.10 Stock of Subsidiaries. Other than the spin-off of NPDC and MXLcontemplated as of the date hereof, Guarantor will not sell or otherwise dispose of any shares of capital stock of any Subsidiary (except in connection with a merger or consolidation of a Wholly Owned Subsidiary into Guarantor or another Wholly Owned Subsidiary or with the dissolution of any Subsidiary) or permit any Subsidiary to issue any additional shares of its capital stock except pro rata to its stockholders. Section 3.11 Subordinated Indebtedness. Guarantor will not make: (a) any payment of principal of, or interest on, any of the Subordinated Indebtedness, including, without limitation, the Subordinated Debt, if a Default or an Event of Default then exists under the Obligations or would result from such payment; (b) any payment of the principal or interest due on the Subordinated Indebtedness as a result of acceleration thereunder or a mandatory prepayment thereunder; (c) any amendment or modification of or supplement to the documents evidencing or securing the Subordinated Indebtedness; or (d) payment of principal or interest on the Subordinated Indebtedness other than when due (without giving effect to any acceleration of maturity or mandatory prepayment). Section 3.12 Method of Accounting; Fiscal Year. Guarantor will not: (a) change the method of accounting employed in the preparation of any financial statements furnished to Lender under the provisions of Section 3.1 (Financial Statements), unless required to conform to GAAP and on the condition that Guarantor's accountants shall furnish such information as Lender may request to reconcile the changes with Guarantor's prior financial statements. (b) change its fiscal year from a year ending on December 31. ARTICLE IV MISCELLANEOUS Section 4.1 Notices. All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or five (5) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Guarantor: GP Strategies Corporation 777 Westchester Avenue, 4th Floor White Plains, NY 10605 Attention: Scott Greenberg, President with a copy to: Patricia F. Brennan, Esquire Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Lender: Wachovia Bank, National Association MD4305 7 Saint Paul Street, 2nd Floor Baltimore, Maryland 21202 Attention: Lucy C. Campbell By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. Section 4.2 Amendments; Waivers. This Agreement may not be amended, modified, or changed in any respect except by an agreement in writing signed by the Lender and the Guarantor. No waiver of any provision of this Agreement, nor consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing. No course of dealing between the Guarantor and the Lender and no act or failure to act from time to time on the part of the Lender shall constitute a waiver, amendment or modification of any provision of this Agreement or any right or remedy under this Agreement or under applicable Laws. Without implying any limitation on the foregoing: (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as the Lender may specify in any such instrument. (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto. (c) No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstance. (d) No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude the Lender from exercising any such right, power or remedy at any time or times. (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount. Section 4.3 Cumulative Remedies. The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Lender shall determine and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle the Lender to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing, the Lender may: (a) proceed against the Guarantor with or without proceeding against the Borrower or any other Person who may be liable for all or any part of the Obligations; (b) proceed against the Guarantor with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations; (c) without reducing or impairing the obligation of the Guarantor and without notice, release or compromise with any other Person liable for all or any part of the Obligations under the Financing Documents or otherwise; or (d) without reducing or impairing the obligations of the Guarantor and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral, (ii) approve the making of advances under the credit facilities under the Financing Agreement, (iii) waive any provision of this Agreement or the other Financing Documents, (iv) exercise or fail to exercise rights of set-off or other rights, or (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations. Section 4.4 Severability. In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action: (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby; (b) the obligation to be fulfilled shall be reduced to the limit of such validity; (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of the Lender, all of the Obligations shall become immediately due and payable; and (d) if the affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in material part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect. Section 4.5 Assignments by Lender. The Lender may, without notice to, or consent of, the Guarantor, sell, assign or transfer to or participate with any Person or Persons all or any part of the Obligations, and each such Person or Persons shall have the right to enforce the provisions of this Agreement and any of the other Financing Documents as fully as the Lender, provided that the Lender shall continue to have the unimpaired right to enforce the provisions of this Agreement and any of the other Financing Documents as to so much of the Obligations that the Lender has not sold, assigned or transferred. In connection with the foregoing, the Lender shall have the right to disclose to any such actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and any of the other Financing Documents or otherwise. Section 4.6 Successors and Assigns. This Agreement shall be binding upon the Guarantor and its successors and assigns, and shall inure to the benefit of the Lender and its successors and assigns. Section 4.7 Continuing Agreements. All covenants, agreements, representations and warranties made by the Guarantor in this Agreement and in any certificate delivered pursuant hereto shall survive the making by the Lender of advances and other extensions of credit under the Loan and the execution and delivery of each promissory note evidencing all or any part of the Obligations, shall be binding upon the Guarantor regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon the Lender's request, and as a condition of the release of any one or more of the Security Documents, the Guarantor and other Persons obligated with respect to the Obligations shall provide the Lender with such acknowledgments and agreements as the Lender may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever in connection with the Obligations against the Lender, its agents and others, or to the extent there are, the same are waived and released. Section 4.8 Applicable Law. The Guarantor and the Lender acknowledge and agree that this Agreement shall be governed by the Laws of the State. Section 4.9 Duplicate Originals and Counterparts. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Section 4.10 Headings; Etc. The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. The above Recitals are part of this Agreement. Section 4.11 No Partnership; Third Parties. Nothing contained in this Agreement shall be construed in a manner to create any relationship between the Guarantor and the Lender other than the relationship of guarantor and lender and the Guarantor and the Lender shall not be considered partners or co-venturers for any purpose. The terms and provisions of this Agreement are for the benefit of the Lender and its successors, assigns, endorsees and transferees and all persons claiming under or through it and no other person shall have any right or cause of action on account thereof. The Lender has no obligation to make any advance of any loan provided for in the Financing Agreement or otherwise for the benefit of the Guarantor; the Guarantor has no beneficial interest in the proceeds of any of the loans or otherwise under the Obligations or rights or claims under the Financing Agreement or any of the other Financing Documents. The obligations and liabilities of the Guarantor shall in no manner be affected by the actual use of the proceeds of the Loan or otherwise or whether the Lender waives any or all of the conditions to advances set forth in the Financing Agreement or any of the other Financing Documents. Section 4.12 Consent to Jurisdiction. The Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Maryland over any suit, action, or proceeding arising out of or relating to this Agreement. The Guarantor irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Guarantor and may be enforced in any court to the jurisdiction of which the Guarantor is subject, by a suit upon such judgment provided that service of process is effected upon the Guarantor in a manner specified in this Agreement or as otherwise permitted by applicable law. Section 4.13 Service of Process. The Guarantor hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Agreement by the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Guarantor at the Guarantor's address designated in Section 4.1 (Notices). The Guarantor irrevocably agrees that such service (y) shall be deemed in every respect to be effective service of process upon it in any such suit, action, or proceeding and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon the Guarantor. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against the Guarantor in the courts of any other appropriate jurisdiction or jurisdictions. Section 4.14 WAIVER OF TRIAL BY JURY. THE GUARANTOR AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE GUARANTOR AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PRO CEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. This waiver is knowingly, willingly and voluntarily made by the Guarantor and the Lender, and the Guarantor and the Lender hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Guarantor and the Lender further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel. Section 4.15 Liability of the Lender. The Guarantor hereby agrees that the Lender shall not be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by the Lender in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations. By inspecting the Collateral or any other properties of the Borrower or by accepting or approving anything required to be observed, performed or fulfilled by the Borrower or to be given to the Lender pursuant to this Agreement or any of the other Financing Documents, the Lender shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by the Lender. Section 4.16 Reinstatement. If at any time any payment, or portion thereof, made by, or for the account of, the Borrower or the Guarantor on account of any of the obligations and liabilities arising hereunder or under any of the Financing Documents is set aside by any court or trustee having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored or returned by the Lender to the Borrower or to the Guarantor under any insolvency, bankruptcy or other federal and/or state laws or as a result of any dissolution, liquidation or reorganization of the Borrower or upon, or as a result of, the appointment of any receiver, intervenor or conservator of, or trustee, or similar officer for, the Borrower or any substantial part of its properties or assets, the Guarantor hereby agrees that this Agreement shall continue and remain in full force and effect or be reinstated, as the case may be, all as though such payment(s) had not been made. Section 4.17 Complete and Final Expression of Agreement. This Agreement is intended by the Lender and the Guarantor to be a complete, exclusive and final expression of the agreements contained herein. Neither the Lender nor the Guarantor shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Agreement. The Lender and the Guarantor further agree that there are no conditions to the full effectiveness of this Agreement, unless otherwise expressly stated herein. The Guarantor has unconditionally delivered this Agreement to the Lender, and failure to sign this or any other guarantee by any other person shall not discharge the liability of the Guarantor hereunder. WITNESS the signature and seal of the Guarantor as of the day and year first above written. WITNESS OR ATTEST: GP STRATEGIES CORPORATION _________________________ By:__________________________(SEAL) Name: Title: STATE OF ____________, COUNTY OF ___________, TO WIT: I HEREBY CERTIFY, that on this _____ day of August, 2003, before me, a Notary Public of said State, personally appeared ________________________, who acknowledged himself to be the ___________________ of GP Strategies Corporation, a Delaware corporation, known to me (or satisfactorily proven) to be the person whose name is subscribed to the foregoing instrument and acknowledged that he executed the same for the purposes therein contained as the duly authorized ______________ of said corporation by signing the name of the corporation by himself as ______________. WITNESS my hand and Notarial Seal. ------------------------------ Notary Public My Commission Expires: EX-10 15 ex1012.txt MXL GUARANTY OF PAYMENT AGREEMENT Exhibit 10.12 LIMITED GUARANTY OF PAYMENT AGREEMENT THIS LIMITED GUARANTY OF PAYMENT AGREEMENT (this "Agreement") is made this _____ day of August, 2003, by MXL INDUSTRIES, INC., a corporation organized under the laws of the State of Delaware (the "Guarantor") for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (the "Lender"). RECITALS A. General Physics Corporation, a corporation organized under the laws of the State of Delaware (the "Borrower") has applied to the Lender for a revolving credit facility in the maximum principal amount of $25,000,000 and a letter of credit facility as a part of the revolving credit facility (the "Loan"), which is to be advanced pursuant to the terms of a Financing and Security Agreement of even date herewith (as amended, modified, restated, substituted, extended and renewed at any time and from time to time, the "Financing Agreement") by and between the Borrower and the Lender. B. All defined terms used in this Agreement and not defined herein shall have the meaning given to such terms in the Financing Agreement. C. The Guarantor has requested that the Lender enter into the Financing Agreement with the Borrower and make the credit facilities described in the Financing Agreement available to the Borrower. D. The Lender has required, as a condition to entering into the Financing Agreement, that the Guarantor execute this Agreement as additional security for the payment and performance of the Obligations. NOW, THEREFORE, in order to induce the Lender to enter into the Financing Agreement, the Guarantor covenants and agrees with the Lender as follows: ARTICLE I THE GUARANTY Section 1.1 Guaranty. The Guarantor hereby unconditionally and irrevocably guarantees to the Lender: (a) the due and punctual payment in full (and not merely the collectibility) of the Obligations when due and payable, all according to the terms of any promissory note evidencing all or any part of the Obligations and the other Financing Documents; and (b) the due and punctual performance of all of the other terms, covenants and conditions contained in the Financing Documents. Section 1.2 Guaranty Unconditional. The obligations and liabilities of the Guarantor under this Agreement shall be absolute and unconditional, irrespective of the genuineness, validity, priority, regularity or enforceability of the Financing Agreement, any promissory note evidencing all or any part of the Obligations, or any of the other Financing Documents or any other circumstance which might otherwise constitute a legal or equitable discharge of a surety or guarantor. The Guarantor expressly agrees that the Lender may, in its sole and absolute discretion, without notice to or further assent of the Guarantor and without in any way releasing, affecting or in any way impairing the obligations and liabilities of the Guarantor hereunder: (a) waive compliance with, or any defaults under, or grant any other indulgences under or with respect to any of the Financing Documents; (b) modify, amend, change or terminate any provisions of any of the Financing Documents other than any Financing Document to which Guarantor is a party; (c) grant extensions or renewals of or with respect to any promissory note evidencing all or any part of the Obligations, any of the other Financing Documents or any of the Obligations; (d) effect any release, subordination, compromise or settlement in connection with any promissory note evidencing all or any part of the Obligations, any of the other Financing Documents, or any of the Obligations; (e) agree to the substitution, exchange, release or other disposition of the Collateral or any part thereof, or any other collateral for the Obligations or to the subordination of any lien or security interest therein; (f) make advances for the purpose of performing any term, provision or covenant contained in the Financing Agreement or any of the other Financing Documents with respect to which the Borrower shall then be in default; (g) make future advances to the Borrower pursuant to the Financing Agreement or any of the other Financing Documents; (h) assign, pledge, hypothecate or otherwise transfer the Financing Agreement, any of the Financing Documents or this Agreement or any interest therein; (i) deal in all respects with the Borrower as if this Agreement were not in effect; and (j) effect any release, compromise or settlement with another guarantor. Section 1.3 Guaranty Primary. The obligations and liabilities of the Guarantor under this Agreement shall be primary, direct and immediate, shall not be subject to any counterclaim, recoupment, setoff, reduction or defense based upon any claim that the Guarantor may have against the Borrower, the Lender and/or any other guarantor and shall not be conditional or contingent upon pursuit or enforcement by the Lender of any remedies it may have against the Borrower with respect to any promissory note evidencing all or any part of the Obligations or any of the other Financing Documents, whether pursuant to the terms thereof or by operation of law. Without limiting the generality of the foregoing, the Lender shall not be required to make any demand upon the Borrower, or to sell the Collateral or otherwise pursue, enforce or exhaust its remedies against the Borrower or the Collateral either before, concurrently with or after pursuing or enforcing its rights and remedies hereunder. Any one or more successive or concurrent actions or proceedings may be brought against the Guarantor under this Agreement, either in the same action, if any, brought against the Borrower or in separate actions or proceedings, as often as the Lender may deem expedient or advisable. Without limiting the foregoing, it is specifically understood that any modification, limitation or discharge of any of the liabilities or obligations of the Borrower, any other guarantor or any obligor under any of the Financing Documents, arising out of, or by virtue of, any bankruptcy, arrangement, reorganization or similar proceeding for relief of debtors under federal or state law initiated by or against the Borrower or the Guarantor or any obligor under any of the Financing Documents shall not modify, limit, lessen, reduce, impair, discharge, or otherwise affect the liability of the Guarantor hereunder in any manner whatsoever, and this Agreement shall remain and continue in full force and effect. It is the intent and purpose of this Agreement that the Guarantor shall and does hereby waive all rights and benefits which might accrue to any other guarantor by reason of any such proceeding, and the Guarantor agrees that it shall be liable for the full amount of the obligations and liabilities under this Agreement, regardless of, and irrespective to, any modification, limitation or discharge of the liability of the Borrower, any other guarantor or any obligor under any of the Financing Documents, that may result from any such proceedings. Section 1.4 Certain Waivers by the Guarantor. The Guarantor hereby unconditionally, irrevocably and expressly waives: (a) presentment and demand for payment of the principal of or interest on any promissory note evidencing all or any part of the Obligations and protest of non-payment; (b) notice of acceptance of this Agreement and of presentment, demand and protest thereof; (c) notice of any default hereunder or under the Financing Agreement, or any of the other Financing Documents and notice of all indulgences; (d) notice of any increase in the amount of any portion of or all of the indebtedness guaranteed by this Agreement; (e) demand for observance, performance or enforcement of any of the terms or provisions of this Agreement, the Financing Agreement or any of the other Financing Documents; (f) all errors and omissions in connection with the Lender's administration of all indebtedness guaranteed by this Agreement, except errors and omissions resulting from acts of gross negligence or willful misconduct; (g) any right or claim of right to cause a marshalling of the assets of the Borrower; (h) any act or omission of the Lender (except acts or omissions due to gross negligence or willful misconduct) which changes the scope of the Guarantor's risk hereunder; and (i) all other notices and demands otherwise required by law which the Guarantor may lawfully waive. Section 1.5 Reimbursement for Expenses. In the event the Lender shall commence any action or proceeding for the enforcement of this Agreement, then the Guarantor will reimburse the Lender, promptly upon demand, for any and all expenses incurred by the Lender in connection with such action or proceeding including, without limitation, reasonable attorneys' fees together with interest thereon at the Post-Default Rate. Section 1.6 Events of Default. The occurrence of any one or more of the following events shall constitute an "Event of Default" under the provisions of this Agreement (individually, an "Event of Default" and collectively, the "Events of Default"): (a) The failure of the Guarantor to pay any of the Obligations as and when due and payable in accordance with the provisions of this Agreement. (b) Any representation or warranty made in this Agreement or in any report, statement, schedule, certificate, financial statement or other document furnished in connection with this Agreement, shall prove to have been false or misleading when made (or, if applicable, when reaffirmed) in any material respect. (c) The failure of the Guarantor to perform, observe or comply with any covenant, condition or agreement contained in this Agreement. (d) A default shall occur under any of the other Financing Documents and such default is not cured within any applicable grace period provided therein. (e) The Guarantor shall (i) apply for or consent to the appointment of a receiver, trustee or liquidator of itself or any of its property, (ii) admit in writing its inability to pay its debts as they mature, (iii) make a general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in bankruptcy or a petition or an answer seeking or consenting to reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take corporate action for the purposes of effecting any of the foregoing, or (vi) by any act indicate its consent to, approval of or acquiescence in any such proceeding or the appointment of any receiver of or trustee for any of its property, or suffer any such receivership, trusteeship or proceeding to continue undischarged for a period of sixty (60) days, or (vii) by any act indicate its consent to, approval of or acquiescence in any order, judgment or decree by any court of competent jurisdiction or any Governmental Authority enjoining or otherwise prohibiting the operation of a material portion of the Guarantor's business or the use or disposition of a material portion of the Guarantor's assets. (f) (i) An order for relief shall be entered in any involuntary case brought against the Guarantor under the Bankruptcy Code, or (ii) any such case shall be commenced against the Guarantor and shall not be dismissed within sixty (60) days after the filing of the petition, or (iii) an order, judgment or decree under any other Law is entered by any court of competent jurisdiction or by any other Governmental Authority on the application of a Governmental Authority or of a Person other than the Guarantor (A) adjudicating the Guarantor bankrupt or insolvent, or (B) appointing a receiver, trustee or liquidator of the Guarantor, or of a material portion of the Guarantor's assets, or (C) enjoining, prohibiting or otherwise limiting the operation of a material portion of the Guarantor's business or the use or disposition of a material portion of the Guarantor's assets, and such order, judgment or decree continues unstayed and in effect for a period of thirty (30) days from the date entered. (g) Unless adequately insured in the opinion of the Lender, the entry of a final judgment for the payment of money involving more than $500,000 against the Guarantor, and the failure by the Guarantor to discharge the same, or cause it to be discharged, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, or to secure a stay of execution pending appeal of such judgment. (h) If the Lender in its sole discretion determines in good faith that a material adverse change has occurred in the financial condition of the Guarantor. (i) If the Guarantor shall liquidate, dissolve or terminate its existence or any change occurs in the control of the Guarantor without the prior written consent of the Lender. Section 1.7 Rescission of Election to Accelerate. In the event the Lender shall elect to accelerate the maturity of any promissory note evidencing all or any part of the Obligations as to the Guarantor pursuant to the provisions of this Agreement, such election may be rescinded by written acknowledgment to that effect by the Lender; provided, however, that the acceptance of a partial payment on account of any promissory note evidencing all or any part of the Obligations shall not alone effect or rescind such election. Section 1.8 Subordination; Subrogation. In the event the Guarantor shall advance any sums to the Borrower, or in the event the Borrower has heretofore or shall hereafter become indebted to the Guarantor before the Obligations have been paid in full, all such advances and indebtedness shall be subordinate in all respects to the Obligations (the "Guarantor Subordinated Debt"). Any payment to the Guarantor on account of the Guarantor Subordinated Debt shall be collected and received by the Lender or the Guarantor in trust for the Lender and shall be paid over to the Lender on account of the Obligations without impairing or releasing the obligations of the Guarantor hereunder. Without the prior written consent of the Lender, the Guarantor shall not ask, demand, receive, accept, sue for, set off, collect or enforce the Guarantor Subordinated Debt or any collateral and security therefor. The Guarantor represents and warrants to the Lender that the Guarantor Subordinated Debt is unsecured and agrees not to receive or accept any collateral or security therefor without the prior written permission of the Lender. The Guarantor shall not assign, transfer, hypothecate or dispose of the Guarantor Subordinated Debt while this Agreement is in effect. In the event of any sale, receivership, insolvency or bankruptcy proceeding, or assignment for the benefit of creditors, or any proceeding by or against the Borrower for any relief under any bankruptcy or insolvency law or other laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, compositions or extensions, then and in any such event any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon, or with respect to, all or any part of the Guarantor Subordinated Debt or otherwise shall be paid or delivered directly to the Lender for application to the obligations and liabilities of the Guarantor under this Agreement (whether due or not due and in such order and manner as the Lender may determine in the exercise of its sole discretion) until the obligations of the Guarantor hereunder shall have been fully paid and satisfied. The Guarantor hereby irrevocably authorizes and empowers the Lender to demand, sue for, collect and receive every such payment or distribution on account of the Guarantor Subordinated Debt and give acquittance therefor and to file claims and take such other proceedings in the Lender's own name or in the name of the Guarantor or otherwise, as the Lender may deem necessary or advisable to carry out the provisions of this Agreement. The Guarantor hereby agrees to execute and deliver to the Lender such powers of attorney, assignments, endorsements or other instruments as may be requested by the Lender in order to enable the Lender to enforce any and all claims upon, or with respect to, the Guarantor Subordinated Debt, and to collect and receive any and all payments or distributions which may be payable or deliverable at any time upon or with respect thereto. So as to secure the performance by the Guarantor of the provisions of this Agreement, the Guarantor assigns, pledges and grants to the Lender a security interest in, and lien on, the Guarantor Subordinated Debt, all proceeds thereof and all and any security and collateral therefor. Upon the request of the Lender, the Guarantor shall endorse, assign and deliver to the Lender all notes, instruments and agreements evidencing, securing, guarantying or made in connection with the Guarantor Subordinated Debt. Nothing contained in this Agreement shall be construed to give the Guarantor any right of subrogation in or to the Obligations or any of the Financing Documents, or all or any part of the interest of the Lender therein, until the Obligations have been paid in full. Section 1.9 CONFESSED JUDGMENT. UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, THE GUARANTOR HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY THE LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR FOR THE GUARANTOR IN ANY COURT OF RECORD AND CONFESS JUDGMENT AGAINST THE GUARANTOR WITHOUT PRIOR HEARING, IN FAVOR OF THE LENDER FOR, AND IN THE AMOUNTS OF, THE BALANCE THEN DUE UNDER ANY ONE OR MORE OF THE PROMISSORY NOTES EVIDENCING ALL OR ANY PART OF OBLIGATIONS, ALL ACCRUED AND UNPAID INTEREST THEREON, ALL OTHER AMOUNTS PAYABLE BY THE GUARANTOR TO THE LENDER UNDER THE TERMS OF THIS AGREEMENT, COSTS OF SUIT, AND ATTORNEYS' FEES OF TEN PERCENT (10%) OF THE UNPAID PRINCIPAL SUM. BY ITS ACCEPTANCE OF THIS AGREEMENT, THE LENDER AGREES THAT IN THE EVENT THE LENDER EXERCISES AT ANY TIME ITS RIGHT TO CONFESS JUDGMENT UNDER THIS AGREEMENT, THE LENDER SHALL USE ITS BEST EFFORTS TO OBTAIN LEGAL COUNSEL WHO WILL CHARGE THE LENDER FOR ITS SERVICES ON AN HOURLY BASIS, AT ITS CUSTOMARY HOURLY RATES AND ONLY FOR THE TIME AND REASONABLE EXPENSES INCURRED. IN NO EVENT SHALL THE LENDER ENFORCE THE LEGAL FEES PORTION OF A CONFESSED JUDGMENT AWARD FOR AN AMOUNT IN EXCESS OF THE FEES AND EXPENSES ACTUALLY CHARGED TO THE LENDER FOR SERVICES RENDERED BY ITS COUNSEL IN CONNECTION WITH SUCH CONFESSION OF JUDGMENT AND/OR THE COLLECTION OF SUMS OWED TO THE LENDER. IN THE EVENT THE LENDER RECEIVES, THROUGH EXECUTION UPON A CONFESSED JUDGMENT, PAYMENTS ON ACCOUNT OF ATTORNEYS' FEES IN EXCESS OF SUCH ACTUAL ATTORNEYS' FEES AND EXPENSES INCURRED BY THE LENDER, THEN, AFTER FULL REPAYMENT AND SATISFACTION OF ALL OF THE OBLIGATIONS, THE LENDER SHALL REFUND SUCH EXCESS AMOUNT TO THE GUARANTOR. THE GUARANTOR HEREBY RELEASES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ALL ERRORS AND ALL RIGHTS OF EXEMPTION, APPEAL, STAY OF EXECUTION, INQUISITION, AND OTHER RIGHTS TO WHICH THE GUARANTOR MAY OTHERWISE BE ENTITLED UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR OF ANY STATE OR POSSESSION OF THE UNITED STATES OF AMERICA NOW IN FORCE AND WHICH MAY HEREAFTER BE ENACTED. THE AUTHORITY AND POWER TO APPEAR FOR AND ENTER JUDGMENT AGAINST THE GUARANTOR SHALL NOT BE EXHAUSTED BY ONE OR MORE EXERCISES THEREOF OR BY ANY IMPERFECT EXERCISE THEREOF AND SHALL NOT BE EXTINGUISHED BY ANY JUDGMENT ENTERED PURSUANT THERETO. SUCH AUTHORITY MAY BE EXERCISED ON ONE OR MORE OCCASIONS OR FROM TIME TO TIME IN THE SAME OR DIFFERENT JURISDICTIONS AS OFTEN AS THE LENDER SHALL DEEM NECESSARY AND DESIRABLE, FOR ALL OF WHICH THIS AGREEMENT SHALL BE A SUFFICIENT WARRANT. Section 1.10 Restriction on Liability. Notwithstanding anything contained herein to the contrary, but subject to the provisions of this Section and Section 2.4.12 of the Financing Agreement, the Lender agrees not to seek, take or obtain any deficiency judgment against the Guarantor and the Guarantor shall not be liable for any Obligations remaining unpaid in excess of the value of the MXL Collateral, except as otherwise expressly set forth below in this Section. The Guarantor shall be and remain personally liable for the following: (a) all loss, damage, cost and expense (including reasonable attorney's fees) suffered by the Lender as a result of a breach of the Guarantor's representations and warranties contained in this Agreement or as a result of the intentional waste of the MXL Collateral; and (b) all Proceeds (i) subsequent to the occurrence and during the continuation of any Event of Default or after the maturity of the Loan (whether by acceleration or otherwise) and (ii) not applied to the payment of the sums due under the Loan. In addition, nothing in this Section shall (i) be deemed in any way to be a release or impairment of the Note or of the liens and security interests created pursuant to the provisions of the Financing Agreement or any of the other Financing Documents; (ii) be deemed in any way to be a release or impairment of any of the Lender's rights or remedies set forth in the Financing Documents, at law or in equity; (iii) be deemed to be a waiver of any conditions contained in the Financing Documents; (iv) be deemed to prejudice the rights of the Lender to secure a deficiency judgment against any other Persons who have agreed or who may hereafter agree to be liable for the payment of the indebtedness evidenced by the Note; (v) be deemed to prejudice the rights of the Lender to secure a judgment against any other guarantor; or (vi) be deemed to be a waiver of any right which the Lender may have under the Bankruptcy Code to file a claim for the full amount of the Obligations owing to the Lender by the Guarantor pursuant to this Agreement or to require that all Collateral shall continue to secure all of the Obligations in accordance with the Financing Documents. ARTICLE II MISCELLANEOUS Section 2.1 Notices. All notices, requests and demands to or upon the parties to this Agreement shall be in writing and shall be deemed to have been given or made when delivered by hand on a Business Day, or five (5) days after the date when deposited in the mail, postage prepaid by registered or certified mail, return receipt requested, or when sent by overnight courier, on the Business Day next following the day on which the notice is delivered to such overnight courier, addressed as follows: Guarantor: MXL Industries, Inc. 777 Westchester Avenue, 4th Floor White Plains, NY 10605 Attention: Frank Yohe with a copy to: General Physics Corporation 6095 Marshalee Drive Suite 300 Elkridge, Maryland 21075 Attention: Scott N. Greenberg Executive Vice President and a copy to: Patricia F. Brennan, Esquire Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 Lender: Wachovia Bank, National Association MD4305 7 Saint Paul Street, 2nd Floor Baltimore, Maryland 21202 Attention: Lucy C. Campbell By written notice, each party to this Agreement may change the address to which notice is given to that party, provided that such changed notice shall include a street address to which notices may be delivered by overnight courier in the ordinary course on any Business Day. Section 2.2 Amendments; Waivers. This Agreement may not be amended, modified, or changed in any respect except by an agreement in writing signed by the Lender and the Guarantor. No waiver of any provision of this Agreement, nor consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing. No course of dealing between the Guarantor and the Lender and no act or failure to act from time to time on the part of the Lender shall constitute a waiver, amendment or modification of any provision of this Agreement or any right or remedy under this Agreement or under applicable Laws. Without implying any limitation on the foregoing: (a) Any waiver or consent shall be effective only in the specific instance, for the terms and purpose for which given, subject to such conditions as the Lender may specify in any such instrument. (b) No waiver of any Default or Event of Default shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereto. (c) No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstance. (d) No failure or delay by the Lender to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement or of any of the other Financing Documents, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver, amendment or modification of any such term, condition, covenant or agreement or of any such breach or preclude the Lender from exercising any such right, power or remedy at any time or times. (e) By accepting payment after the due date of any amount payable under this Agreement or under any of the other Financing Documents, the Lender shall not be deemed to waive the right either to require prompt payment when due of all other amounts payable under this Agreement or under any of the other Financing Documents, or to declare a default for failure to effect such prompt payment of any such other amount. Section 2.3 Cumulative Remedies. The rights, powers and remedies provided in this Agreement and in the other Financing Documents are cumulative, may be exercised concurrently or separately, may be exercised from time to time and in such order as the Lender shall determine and are in addition to, and not exclusive of, rights, powers and remedies provided by existing or future applicable Laws. In order to entitle the Lender to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required in this Agreement. Without limiting the generality of the foregoing, the Lender may: (a) proceed against the Guarantor with or without proceeding against the Borrower or any other Person who may be liable for all or any part of the Obligations; (b) proceed against the Guarantor with or without proceeding under any of the other Financing Documents or against any Collateral or other collateral and security for all or any part of the Obligations; (c) without reducing or impairing the obligation of the Guarantor and without notice, release or compromise with any other Person liable for all or any part of the Obligations under the Financing Documents or otherwise; or (d) without reducing or impairing the obligations of the Guarantor and without notice thereof: (i) fail to perfect the Lien in any or all Collateral or to release any or all the Collateral or to accept substitute Collateral, (ii) approve the making of advances under the credit facilities under the Financing Agreement, (iii) waive any provision of this Agreement or the other Financing Documents, (iv) exercise or fail to exercise rights of set-off or other rights, or (v) accept partial payments or extend from time to time the maturity of all or any part of the Obligations. Section 2.4 Severability. In case one or more provisions, or part thereof, contained in this Agreement or in the other Financing Documents shall be invalid, illegal or unenforceable in any respect under any Law, then without need for any further agreement, notice or action: (a) the validity, legality and enforceability of the remaining provisions shall remain effective and binding on the parties thereto and shall not be affected or impaired thereby; (b) the obligation to be fulfilled shall be reduced to the limit of such validity; (c) if such provision or part thereof pertains to repayment of the Obligations, then, at the sole and absolute discretion of the Lender, all of the Obligations shall become immediately due and payable; and (d) if the affected provision or part thereof does not pertain to repayment of the Obligations, but operates or would prospectively operate to invalidate this Agreement in whole or in material part, then such provision or part thereof only shall be void, and the remainder of this Agreement shall remain operative and in full force and effect. Section 2.5 Assignments by Lender. The Lender may, without notice to, or consent of, the Guarantor, sell, assign or transfer to or participate with any Person or Persons all or any part of the Obligations, and each such Person or Persons shall have the right to enforce the provisions of this Agreement and any of the other Financing Documents as fully as the Lender, provided that the Lender shall continue to have the unimpaired right to enforce the provisions of this Agreement and any of the other Financing Documents as to so much of the Obligations that the Lender has not sold, assigned or transferred. In connection with the foregoing, the Lender shall have the right to disclose to any such actual or potential purchaser, assignee, transferee or participant all financial records, information, reports, financial statements and documents obtained in connection with this Agreement and any of the other Financing Documents or otherwise. Section 2.6 Successors and Assigns. This Agreement shall be binding upon the Guarantor and its successors and assigns, and shall inure to the benefit of the Lender and its successors and assigns. Section 2.7 Continuing Agreements. All covenants, agreements, representations and warranties made by the Guarantor in this Agreement and in any certificate delivered pursuant hereto shall survive the making by the Lender of advances and other extensions of credit under the Loan and the execution and delivery of each promissory note evidencing all or any part of the Obligations, shall be binding upon the Guarantor regardless of how long before or after the date hereof any of the Obligations were or are incurred, and shall continue in full force and effect so long as any of the Obligations are outstanding and unpaid. From time to time upon the Lender's request, and as a condition of the release of any one or more of the Security Documents, the Guarantor and other Persons obligated with respect to the Obligations shall provide the Lender with such acknowledgments and agreements as the Lender may require to the effect that there exists no defenses, rights of setoff or recoupment, claims, counterclaims, actions or causes of action of any kind or nature whatsoever in connection with the Obligations against the Lender, its agents and others, or to the extent there are, the same are waived and released. Section 2.8 Applicable Law. The Guarantor and the Lender acknowledge and agree that this Agreement shall be governed by the Laws of the State. Section 2.9 Duplicate Originals and Counterparts. This Agreement may be executed in any number of duplicate originals or counterparts, each of such duplicate originals or counterparts shall be deemed to be an original and all taken together shall constitute but one and the same instrument. Section 2.10 Headings; Etc. The headings in this Agreement are included herein for convenience only, shall not constitute a part of this Agreement for any other purpose, and shall not be deemed to affect the meaning or construction of any of the provisions hereof. The above Recitals are part of this Agreement. Section 2.11 No Partnership; Third Parties. Nothing contained in this Agreement shall be construed in a manner to create any relationship between the Guarantor and the Lender other than the relationship of guarantor and lender and the Guarantor and the Lender shall not be considered partners or co-venturers for any purpose. The terms and provisions of this Agreement are for the benefit of the Lender and its successors, assigns, endorsees and transferees and all persons claiming under or through it and no other person shall have any right or cause of action on account thereof. The Lender has no obligation to make any advance of any loan provided for in the Financing Agreement or otherwise for the benefit of the Guarantor; the Guarantor has no beneficial interest in the proceeds of any of the loans or otherwise under the Obligations or rights or claims under the Financing Agreement or any of the other Financing Documents. The obligations and liabilities of the Guarantor shall in no manner be affected by the actual use of the proceeds of the Loan or otherwise or whether the Lender waives any or all of the conditions to advances set forth in the Financing Agreement or any of the other Financing Documents. Section 2.12 Consent to Jurisdiction. The Guarantor irrevocably submits to the jurisdiction of any state or federal court sitting in the State of Maryland over any suit, action, or proceeding arising out of or relating to this Agreement. The Guarantor irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to laying the venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Final judgment in any such suit, action, or proceeding brought in any such court shall be conclusive and binding upon the Guarantor and may be enforced in any court to the jurisdiction of which the Guarantor is subject, by a suit upon such judgment provided that service of process is effected upon the Guarantor in a manner specified in this Agreement or as otherwise permitted by applicable law. Section 2.13 Service of Process. The Guarantor hereby consents to process being served in any suit, action, or proceeding instituted in connection with this Agreement by the mailing of a copy thereof by certified mail, postage prepaid, return receipt requested, to the Guarantor at the Guarantor's address designated in Section 2.1 (Notices). The Guarantor irrevocably agrees that such service (y) shall be deemed in every respect to be effective service of process upon it in any such suit, action, or proceeding and (z) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon the Guarantor. Nothing in this Section shall affect the right of the Lender to serve process in any manner otherwise permitted by law or limit the right of the Lender otherwise to bring proceedings against the Guarantor in the courts of any other appropriate jurisdiction or jurisdictions. Section 2.14 WAIVER OF TRIAL BY JURY. THE GUARANTOR AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH THE GUARANTOR AND THE LENDER MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PRO CEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. This waiver is knowingly, willingly and voluntarily made by the Guarantor and the Lender, and the Guarantor and the Lender hereby represent that no representations of fact or opinion have been made by any individual to induce this waiver of trial by jury or to in any way modify or nullify its effect. The Guarantor and the Lender further represent that they have been represented in the signing of this Agreement and in the making of this waiver by independent legal counsel, selected of their own free will, and that they have had the opportunity to discuss this waiver with counsel. Section 2.15 Liability of the Lender. The Guarantor hereby agrees that the Lender shall not be chargeable for any negligence, mistake, act or omission of any accountant, examiner, agency or attorney employed by the Lender in making examinations, investigations or collections, or otherwise in perfecting, maintaining, protecting or realizing upon any lien or security interest or any other interest in the Collateral or other security for the Obligations. By inspecting the Collateral or any other properties of the Borrower or by accepting or approving anything required to be observed, performed or fulfilled by the Borrower or to be given to the Lender pursuant to this Agreement or any of the other Financing Documents, the Lender shall not be deemed to have warranted or represented the condition, sufficiency, legality, effectiveness or legal effect of the same, and such acceptance or approval shall not constitute any warranty or representation with respect thereto by the Lender. Section 2.16 Reinstatement. If at any time any payment, or portion thereof, made by, or for the account of, the Borrower or the Guarantor on account of any of the obligations and liabilities arising hereunder or under any of the Financing Documents is set aside by any court or trustee having jurisdiction as a voidable preference or fraudulent conveyance or must otherwise be restored or returned by the Lender to the Borrower or to the Guarantor under any insolvency, bankruptcy or other federal and/or state laws or as a result of any dissolution, liquidation or reorganization of the Borrower or upon, or as a result of, the appointment of any receiver, intervenor or conservator of, or trustee, or similar officer for, the Borrower or any substantial part of its properties or assets, the Guarantor hereby agrees that this Agreement shall continue and remain in full force and effect or be reinstated, as the case may be, all as though such payment(s) had not been made. Section 2.17 Complete and Final Expression of Agreement. This Agreement is intended by the Lender and the Guarantor to be a complete, exclusive and final expression of the agreements contained herein. Neither the Lender nor the Guarantor shall hereafter have any rights under any prior agreements pertaining to the matters addressed by this Agreement but shall look solely to this Agreement for definition and determination of all of their respective rights, liabilities and responsibilities under this Agreement. No course of dealing, course of performance or trade usage, and no parol evidence of any nature, shall be used to supplement or modify any terms of this Agreement. The Lender and the Guarantor further agree that there are no conditions to the full effectiveness of this Agreement, unless otherwise expressly stated herein. The Guarantor has unconditionally delivered this Agreement to the Lender, and failure to sign this or any other guarantee by any other person shall not discharge the liability of the Guarantor hereunder. WITNESS the signature and seal of the Guarantor as of the day and year first above written. WITNESS OR ATTEST: MXL INDUSTRIES, INC. _________________________ By:__________________________(SEAL) Name: Title: STATE OF ____________, COUNTY OF ___________, TO WIT: I HEREBY CERTIFY, that on this _____ day of Augsut, 2003, before me, a Notary Public of said State, personally appeared ________________________, who acknowledged himself to be the ___________________ of MXL Industries, Inc., a Delaware corporation, known to me (or satisfactorily proven) to be the person whose name is subscribed to the foregoing instrument and acknowledged that he executed the same for the purposes therein contained as the duly authorized ______________ of said corporation by signing the name of the corporation by himself as ______________. WITNESS my hand and Notarial Seal. ------------------------------ Notary Public My Commission Expires: EX-31 16 ex311.txt CFO CERTIFICATION PURSUANT TO RULE 13A-14 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14 OF THE SECURITIES ACT OF 1934 I, Jerome I. Feldman, Chief Executive Officer of GP Strategies Corporation certify that: 1. I have reviewed this quarterly report on Form 10Q of GP Strategies Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 18, 2003 Jerome I. Feldman Chief Executive Officer EX-31 17 ex312.txt CEO CERTIFICATION PURSUANT TO RULE 13A-14 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14 OF THE SECURITIES ACT OF 1934 I, Scott N. Greenberg, President and Chief Financial Officer of GP Strategies Corporation certify that: 1. I have reviewed this quarterly report on Form 10Q of GP Strategies Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 18. 2003 Scott N. Greenberg President and Chief Financial Officer EX-31 18 ex321.txt CFO CERTIFICATION PURSUANT TO SECTION 906 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of GP Strategies Corporation (the "Company") on Form 10-Q for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jerome I. Feldman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Jerome I. Feldman Chief Executive Officer August 18, 2003 EX-32 19 ex322.txt CFO CERTIFICATION PURSUANT TO SECTION 906 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of GP Strategies Corporation (the "Company") on Form 10-Q for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Scott N. Greenberg, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Scott N. Greenberg Chief Financial Officer August 18, 2003 -----END PRIVACY-ENHANCED MESSAGE-----