Exhibit 10.1

 

Execution Version

 

SENIOR SECURED LOAN AND SECURITY AGREEMENT

 

between

 

Crumbs Holdings LLC

 

and

 

Crumbs Bake Shop, Inc.

 

as Borrowers, and

 

Fischer Enterprises, L.L.C.,

as Lender

 

 

 

January 20, 2014

 

 

 

 

TABLE OF CONTENTS

 

    Page       Section 1. Definitions. 1       1.1 Defined Terms 1       Section
2. The Loan. 7       2.1 Term Loan 7 2.2 Notes 7       Section 3. Interest. 7  
    Section 4. Payment. 8       4.1 Payments of Obligations. 8 4.2 Manner of
Payments 8 4.3 Payment Authorization 8 4.4 Voluntary Prepayment 8 4.5 Mandatory
Prepayments. 8 4.6 Fees 9 4.7 Use of Proceeds 9 4.8 Change in Law 9 4.9 Nature
and Extent of Each Borrower’s Liability. 10       Section 5. Conversion. 11    
  5.1 Option to Convert 11 5.2 Conversion Right 12 5.3 Mechanics of Conversion
12 5.4 Adjustment of Conversion Price 12 5.5 Principal Market Regulation 12    
  Section 6. Management Rights of Lender. 14       6.2 Executive Officer 14    
  Section 7. Conditions Precedent. 15       7.1 Conditions to Tranche I Loan. 15
7.2 Conditions to Tranche II Loan. 16       Section 8. Collateral. 16       8.1
Grant of Security Interest 16 8.2 No Assumption of Liability 16 8.3 Agreements
Regarding Accounts 17 8.4 Cross Collateralization and Cross Default 17 8.5
Financing Statement; Further Assurances 17 8.6 Post-Funding Covenants 17      
Section 9. Representations and Warranties of Lender 17

 

 

 

 

9.1 No Public Sale or Distribution 17 9.2 Accredited Investor Status 17 9.3
Information 18 9.4 Transfer or Resale 18 9.5 Legends 18       Section 10.
Representations and Warranties of Borrowers 19       10.1 Legal Status 19 10.2
Subsidiaries 19 10.3 Authorization and Validity 19 10.4 No Conflict 19 10.5 No
Consents 20 10.6 Indebtedness; Priority 20 10.7 Title to Properties 20 10.8
Taxes 20 10.9 Litigation 20 10.10 Compliance with Laws 20 10.11 Compliance with
Environmental Laws 20 10.12 Locations of Collateral 20 10.13 Financial
Statements 21 10.14 Liabilities 21 10.15 Intellectual Property 21 10.16
Capitalization 21 10.17 Internal Controls and Procedures 22 10.18 Complete
Disclosure 22 10.19 No Breaches 22       Section 11. Affirmative Covenants 22  
    11.1 Payment of Indebtedness 22 11.2 Cash Management System 22 11.3
Existence 23 11.4 Compliance with Laws; Licenses 23 11.5 Taxes 23 11.6
Collateral 23 11.7 Inspection 24 11.8 Insurance 24 11.9 Maintenance of Employee
Benefit Plans 24 11.10 Reporting Obligations. 24       Section 12. Negative
Covenants 26       12.1 Existence of Liens 26 12.2 Sale of Assets 26 12.3
Changes in Structure 26 12.4 Distributions 26 12.5 Limitations on Other
Indebtedness 27 12.6 Loans and Investments 27 12.7 Subsidiaries 27

 

ii

 

 

12.8 Transactions with Affiliates 27 12.9 Collection of Accounts 27 12.10
Compensation 27 12.11 Leases 27 12.1 Change in Control 27       Section 13.
Omitted 28       Section 14. Events of Default 28       14.1 Non-Payment of
Loans 28 14.2 Breach of Covenant 28 14.3 Business Plan 28 14.4 Failure to pay
Taxes 28 14.5 Guaranty 28 14.6 Breach of Representation or Warranty 28 14.7
Change in Control 28 14.8 Destruction of Collateral 28 14.9 Insolvency 28 14.10
Dissolution 29 14.11 Levy Judgment 29 14.12 Cross-Default 29 14.13 Failure of
Perfection 29 14.14 Nasdaq Delisting 29       Section 15. Remedies 29      
Section 16. License 30       Section 17. Miscellaneous. 30       17.1 Failure or
Indulgence Not Waiver 30 17.2 Modification 30 17.3 Omitted 31 17.4
Indemnification 31 17.5 Notices 31 17.6 Severability 32 17.7 Construction 32
17.8 Applicable Law 32 17.9 Assignability 32 17.10 Counterparts 32 17.11 Further
Assurances 32 17.12 Attorneys’ Fees 32 17.13 Usury 33 17.14 Integration 33 17.15
Time 33 17.16 VENUE 33 17.17 WAIVER OF JURY TRIAL 33

 

iii

 

 

EXHIBITS           Exhibit A-1: Tranche I Note   Exhibit A-2: Tranche II Note  
Exhibit B: Form of Insurance Requirements   Exhibit C: Membership Interest
Pledge Agreement   Exhibit D: Grant of Security Interest in Trademarks   Exhibit
E: Deposit Account Control Agreement   Exhibit F: Conversion Notice   Exhibit G:
Registration Rights Agreement         SCHEDULES           Schedule 1.1: Existing
Indebtedness   Schedule 1.2: Existing Liens   Schedule 4.7: Use of Proceeds  
Schedule 10.2: Subsidiaries   Schedule 10.4 No Conflict   Schedule 10.5: No
Consents   Schedule 10.7: Leased Real Property   Schedule 10.9: Litigation  
Schedule 10.12: Locations of Collateral   Schedule 10.15: Intellectual Property
  Schedule 10.16: Capitalization   Schedule 10.19: No Breaches   Schedule 11.1:
Payment of Indebtedness  

 

iv

 

 

SENIOR SECURED LOAN AND SECURITY AGREEMENT

 

THIS SENIOR SECURED LOAN AND SECURITY AGREEMENT (this “Agreement”) is made as of
January 20, 2014, between Crumbs Holdings LLC, a Delaware limited liability
company (“Crumbs Holdings”), Crumbs Bake Shop, Inc., a Delaware corporation
(“Crumbs,” together with Crumbs Holding, collectively, the “Borrowers” and each
a “Borrower”), and Fischer Enterprises, L.L.C., an Oklahoma limited liability
company (“Lender”), with respect to the following:

 

A.           Borrowers have requested that Lender grant to Borrowers the credit
accommodations set forth in this Agreement; and

 

B.           Lender has agreed to grant such credit accommodations, subject to
the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

In consideration of the mutual covenants and agreements in this Agreement, and
intending to be legally bound hereby, Lender and each Borrower jointly and
severally agree as follows:

 

Section 1.          Definitions.

 

1.1           Defined Terms. Capitalized terms used in this Agreement (including
all schedules and exhibits to this Agreement) and not otherwise defined have the
meanings set forth in this Section 1.

 

“Borrower” and “Borrowers” have the meaning set forth in the preamble to this
Agreement.

 

“Business Combination Agreement” means that certain Business Combination
Agreement dated as of January 9, 2011, by and among Crumbs, 57th Street Merger
Sub LLC, Crumbs Holdings, the members of Crumbs Holdings set forth on the
signature pages thereto, and the representatives of Crumbs Holdings, as amended
on each of February 18, 2011, March 17, 2011 and April 7, 2011.

 

“Business Day” means any day other than a Saturday, Sunday, or a federal or
state holiday or other day on which Lender or commercial banks in Oklahoma are
customarily closed or are required to close under federal Laws or the Laws of
the State of Oklahoma.

 

“Business Plan” means the 2014 business plan delivered by Borrowers to Lenders
on the Tranche I Closing Date for the Borrowers’ operation of the Borrowers’
business, as may be modified from time to time by mutual consent of the
Borrowers and Lender.

 

1

 

 

“Change in Control” means (i) “person” or “group” of related persons (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes
the record or beneficial owner, directly or indirectly, of more than 50% of the
total voting power of the Voting Stock of Crumbs (or its successor by merger,
consolidation, or purchase of all or substantially all of its assets), (ii) the
first day on which a majority of the seats on the board of directors (or similar
governing body) of any Borrower ceases to be occupied by Persons who were
members of the board of directors on the Tranche I Closing Date, (iii) the sale,
lease, transfer or other disposition in one or a series of related transactions,
of 50% or more of the assets of any Borrower, (iv) a merger, consolidation or
other business combination of Crumbs (or any Subsidiary or Subsidiaries that
alone or together represent all or substantially all of Crumb’s consolidated
business at that time) or any successor or other entity holding all or
substantially all of the assets of Crumbs and its Subsidiaries that results in
the stockholders of Crumbs (or such Subsidiary or Subsidiaries) or any successor
or other entity holding all or substantially all of the assets of Crumbs and its
Subsidiaries or the surviving entity thereof, as applicable, immediately before
the consummation of such transaction or a series of related transactions
holding, directly or indirectly, less than 50% of the voting power of Crumb’s or
any successor, other entity or surviving entity thereof, as applicable,
immediately following the consummation of the transaction or series of related
transactions, (iv) the first day Crumbs ceases to own, directly or indirectly,
approximately 84% of the outstanding equity interests of Crumbs Holdings (which
may reduced below such amount in the event of the issuance of any Contingency
Consideration under the terms of the Business Combination Agreement and shall
not constitute a Change of Control for purposes of this definition), or (v) the
first day Crumbs Holdings ceases to own, directly or indirectly, 100% of the
outstanding equity interest of any Subsidiary.

 

“Change in Law” means the occurrence, after the date hereof, of (a) the
adoption, taking effect or phasing in of any Law, rule, regulation or treaty;
(b) any change in any Law, rule, regulation or treaty or in the administration,
interpretation or application thereof; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any governmental authority.

 

“Collateral” means all of each Borrower’s Equipment, Inventory, Accounts,
Chattel Paper, General Intangibles, Goods, Documents, Fixtures, Deposit
Accounts, Instruments, Investment Property, Letter of Credit Rights, Software,
Commercial Tort Claims, money, Intellectual Property, Incidental Rights, and all
other property of each Borrower pledged as security for the Obligations in any
Loan Document, including, without limitation, the Borrowers’ equity interest in
each of the Subsidiaries, in each case, whether owned now or acquired after the
date of this Agreement, and including all proceeds thereof, all substitutions
therefor, and all books and records related thereto; provided, however, the term
“Collateral” shall not include the Southeastern CD.

 

“Control Agreement” means an agreement among Lender, each Borrower and a
third-party depository institution, in form and substance satisfactory to
Lender, granting Lender “control” (as such term is defined in the UCC) over the
deposit accounts of such Borrower maintained at such depository institution and
in substantially the form attached at Exhibit E or in another form reasonably
satisfactory to Lender.

 

“Copyrights” means all rights under applicable law associated with works of
authorship, including but not limited to copyrights, moral rights, mask-works,
and computer software (excluding commercially available software).

 

2

 

 

“Environmental Laws” means all federal, state, local or foreign laws relating to
pollution or protection or human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or waste into the environment, or otherwise relating to
the manufacture, processing, distribution,, use, treatment, storage, disposal,
transport or handling of hazardous substances or wastes.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.

 

“GAAP” means generally accepted accounting principles in effect in the United
States from time to time.

 

“Grant of Security Interest in Trademarks” means that Grant of Security Interest
in Trademarks in substantially the form at Exhibit D.

 

“Guarantor” means any existing or future Subsidiary of Borrower that executes a
Guaranty and Security Agreement.

 

“Guaranty and Security Agreement” means any Guaranty and Security Agreement
executed in connection with this Agreement in favor of Lender guarantying the
Obligations and granting a security interest in the Guarantor’s collateral, as
such agreement may be amended from time to time.

 

"Incidental Rights" means (a) all books and records relating to the Equipment,
contracts, contract rights, licenses, sublicenses, computer tapes, catalogues,
advertisements, source codes, computer programs, computer cards and computer
disks, Accounts, Inventory and any of the other items or types of Collateral;
(b) all indemnities, guaranties or warranties relating to the ownership,
construction, rental, operation, maintenance, use or repair of the Equipment or
other items or types of Collateral, (c) all telephone numbers assigned to
Borrowers, (d) all governmental filings, permits, approvals or licenses relating
to the ownership, use or operating of the Equipment and Inventory; and (e)
contract files, right-of-way files and engineering files relating primarily
thereto.

 

“Indebtedness” means (a) all items that would be included as liabilities on a
balance sheet in accordance with GAAP, including capital leases, but excluding
trade payables incurred and being paid in the ordinary course of business, (b)
all contingent obligations, and (c) all reimbursement obligations in connection
with letters of credit issued.

 

“Intellectual Property” means the Copyrights, Know-How, Patents, and Trademarks.

 

“Know-How” means all technical and business knowledge, proprietary information,
data, processes, techniques, methods of manufacturing, methods of operation,
drawings, designs, blueprints, databases, draft patent applications, invention
disclosures, research and development projects, operating manuals, manufacturing
and quality control procedures, non-commercial software, trade secrets, plans,
accumulated experience, plant and tool design, installation instructions and raw
material specifications, formulations, techniques, drawings, unpatented
inventions (including inventions conceived prior to the date hereof but not
documented as of the date hereof), advertising procedures, sales promotion
literature, customer lists, and price lists, in each case to the extent
protectable under applicable law.

 

3

 

 

“Laws” means all statutes, laws, ordinances, regulations, orders, writs,
injunctions, or decrees of the United States, any state or commonwealth, any
municipality, any foreign country, any territory or possession, or any
municipal, state, commonwealth, federal, foreign, territorial or other
sovereign, governmental entity, governmental department, court, commission,
board, bureau, agency or instrumentality.

 

“Leases” means any lease agreements for the lease of real property by a Borrower
or Subsidiary and each of the lease agreements set forth on Schedule 10.7.

 

“Leasehold Mortgages” means, in a form reasonable acceptable to Lender,
leasehold mortgages for each of the Leases.

 

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

 

“Loan Documents” means this Agreement, the Notes, Guaranty and Security
Agreement, Leasehold Mortgages, Grant of Security Interest in Trademarks,
Control Agreement, Membership Interest Pledge Agreement, Registration Rights
Agreement, all financing statements perfecting a security interest under the
Uniform Commercial Code, each other agreement, document or instrument executed
pursuant to any of the foregoing, and all renewals and extensions of, or
amendments or supplements to, or restatements of, any of the foregoing from time
to time in effect.

 

“Material Adverse Effect” means any set of circumstances or events occurring
after the date of this Agreement that (a) would have any material adverse effect
upon the validity or enforceability of any of the Loan Documents, (b) is or
could reasonably be expected to become material and adverse to the business
condition (financial or otherwise), assets, properties, or operations of any
Borrower, (c) could reasonably be expected to materially impair the ability of
any Borrower to fulfill its obligations under the Loan Documents, or (d) causes
an Event of Default or an event that with the giving of notice or passage of
time, or both, would constitute an Event of Default.

 

“Maturity Date” means, unless and until Lender elects to convert the outstanding
balance of the Loan to common equity, the earliest to occur of: (a) acceleration
of the Obligations due to the occurrence of an Event of Default, or (b) July 1,
2016.

 

“Membership Interest Pledge Agreement” means the Membership Interest Pledge
Agreement in substantially the form attached at Exhibit C.

 

“Notes” means the Tranche I Note and Tranche II Note.

 

“Obligations” means all obligations, liabilities and indebtedness (monetary or
otherwise, including post-petition and default interest, whether allowed or not)
of Borrowers arising under this Agreement or any other Loan Document and all
other obligations of Borrowers to Lender of any nature whatsoever, including,
without limitation, for principal, interest, fees, costs, expenses,
indemnification, and legal fees, whether direct or indirect (including those
acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising.

 

4

 

 

"Patents" means all domestic and foreign letters design and utility patent and
patent applications (including without limitation all provisional, design,
divisional, renewal, re-exam, reissue, substitute, continuation,
continuations-in-part and convention applications, all other patent applications
or utility model applications or issued patents or utility models claiming
priority therefrom or otherwise related thereto, and any and all letters patent
and utility models, reissues, reexaminations, and extensions of letters patent
and utility models granted thereon, and every priority right that is or may be
predicted upon or arise from therefrom or based thereon) (including, without
limitation, patents and patent applications in the United States Patent and
Trademark Office, or in any similar office or agency of the United States or any
other country or any political subdivision thereof).

 

“Permitted Indebtedness” means the Obligations and each of the following:

 

(a)          trade payables arising in the ordinary course of business;

 

(b)          purchase money Indebtedness in an amount not exceeding $50,000.00
in the aggregate;

 

(c)          contingent obligations (i) arising from endorsements of payment
items for collection or deposit in the ordinary course of business or (ii)
incurred in the ordinary course of business with respect to surety, appeal or
performance bonds or other similar obligations;

 

(d)          Indebtedness disclosed in the SEC Documents; and

 

(e)          the Indebtedness set forth on Schedule 1.1.

 

“Permitted Liens” means liens in favor of Lender and each of the following:

 

(a)          liens for purchase money Indebtedness not exceeding $50,000.00 in
the aggregate;

 

(b)          liens for taxes not yet due and payable, or which are being
diligently contested in good faith by proper proceedings;

 

(c)          mechanics, warehouseman’s, and other similar liens arising in the
ordinary course of business for obligations not yet due and payable;

 

(d)          easements, rights-of-way, restrictions, covenants and other
agreements with respect to real property that do not secure any monetary
obligation and do not materially interfere with a Borrower’s business;

 

(e)          normal and customary rights of setoff upon deposits in favor of
depository institutions, and liens of a collecting bank on payment items in the
course of collection; and

 

(f)          the liens set forth on Schedule 1.2.

 

5

 

 

“Person” means, whether or not capitalized, any individual, partnership,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, limited liability company, governmental authority,
or other entity of any nature.

 

“Principal Market” means the Nasdaq Capital Market or such other exchange on
which the shares of Common Stock of the Company are listed.

 

“Registration Rights Agreement” means that certain registration rights
agreement, dated as of the date of this Agreement by and among Crumbs and the
Lender relating to, among other things, the registration of the Conversion
Shares issuable upon conversion of the Notes in the form attached at Exhibit G.

 

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

 

“SEC Documents” means all reports, schedules, forms, statements and other
documents filed by Crumbs with the SEC pursuant to the reporting requirements of
the 1934 Act prior to the date hereof.

 

“Southeastern CD” means that certain Certificate of Deposit in the amount of
$500,000.00 securing the obligations of Crumbs Holdings under the Commercial
Loan Agreement, between Southeastern Bank and Crumbs Holdings dated May 5, 2011,
as amended from time to time.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture,
limited liability company, or other business entity of which a majority of the
shares of securities or other interests having ordinary voting power for the
election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly or indirectly, through one of more intermediaries, or both,
by such Person. Unless otherwise specified, all references in this Agreement to
a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries
of Borrowers.

 

“Tax Receivable Agreement” means that certain Tax Receivable Agreement dated as
of May 5, 2011, by and among Crumbs, Crumbs Holdings, and the members of Crumbs
Holdings set forth on the signature pages thereto and such other parties who
have become members subsequent thereto.

 

"Trademarks" means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, dba's,
internet domain names, trade dress, trade styles, designs, logos and other
source or business identifiers and all general intangibles of like nature, now
or hereafter owned, adopted, acquired or used by any Grantor (including, without
limitation, all domestic and foreign trademarks, service marks, collective
marks, certification marks, trade names, business names, dba's, internet domain
names, trade dress, trade styles, designs, logos and other source or business
identifiers), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks or associated
therewith.

 

6

 

 

“Tranche I Loan” has the meaning set forth in Section 2.1.

 

“Tranche I Note” means the convertible promissory note in the original principal
amount of $3,500,000, plus the Lending Fee, in the form attached at Exhibit A-1.

 

“Tranche II Loan” has the meaning set forth in Section 2.1.

 

“Tranche II Note” means the convertible promissory note in the original
principal amount of $1,500,000, plus the Lending Fee if so elected by Borrowers,
in the form attached at Exhibit A-2.

 

“UCC” means the Uniform Commercial Code, as amended and in effect in the State
of Oklahoma.

 

(b)          UCC Terms. The following capitalized terms shall have the meanings
set forth in the UCC: Equipment, Inventory, Accounts, Chattel Paper, General
Intangibles, Goods, Documents, Fixtures, Deposit Accounts, Instruments,
Investment Property, Letter-of-credit Rights, and Commercial Tort Claims.

 

Section 2.          The Loan.

 

2.1           Term Loan. Subject to the terms and conditions of this Agreement,
Lender agrees to make a term loan to Borrowers in the original principal amount
of $5,000,000.00 (the “Loan”). The Loan consists of two tranches. Subject to
Section 7.1, the first tranche (“Tranche I Loan”) shall be in the original
principal amount of $3,500,000.00, plus the Lending Fee, and shall be funded on
January 21, 2014. Subject to Section 7.2, the second tranche (“Tranche II Loan”)
shall be in the original principal amount of $1,500,000.00, plus the Lending Fee
if so elected by Borrowers, and shall be funded on or before April 1, 2014.
Principal amounts of the Loan that are repaid may not be reborrowed. Principal
amounts of the Loan that are repaid may not be reborrowed.

 

2.2           Notes. The Loan shall be evidenced by the Tranche I Note and
Tranche II Note.

 

Section 3.          Interest.

 

3.1           Subject to Sections 3.2 and 17.13, the unpaid principal of the
Loan shall bear interest at the rate of 7% per annum. Interest will be computed
on the basis of a 360-day year of twelve 30-day months. Interest will be payable
quarterly on January 1, April 1, July 1, and October 1 (each, an “Interest
Payment Date”) either (a) entirely in cash, or (b) entirely by increasing the
principal amount of the outstanding Notes by the amount of interest due for such
quarter (the “PIK Interest Option”). Borrowers shall be deemed to have elected
to pay interest by the PIK Interest Option (such interest shall be referred to
as “PIK Interest”) unless Lender has received a cash payment for the full amount
of interest due for such quarter by the Interest Payment Date. Borrowers shall
make any amendment to the Notes requested in writing by Lender to evidence such
PIK Interest (it being understood that the lack of such amendment shall in no
way affect the Notes being legal and valid evidence of any such PIK Interest).
Any PIK Interest shall constitute principal of the Notes and shall accrue
interest as such.

 

7

 

 

3.2           Subject to Section 17.13, upon the occurrence and during the
continuance of an Event of Default, the unpaid principal of the Loan shall bear
interest at the rate of 18% per annum.

 

Section 4.          Payment.

 

4.1           Payments of Obligations.

 

(a)          Loan. All outstanding Obligations owing with respect to the Loan
shall be due and payable on the Maturity Date.

 

(b)          Other Obligations. All other Obligations owing from Borrowers to
Lender from time to time pursuant to the Loan Documents shall be payable on
demand, but in any event shall be due and payable on the Maturity Date.

 

4.2           Manner of Payments

 

. All payments of Obligations shall be made in United States Dollars, without
offset, counterclaim or defense of any kind, free and clear of (and without any
deduction for) taxes in immediately available funds at the office specified by
Lender not later than 12:00 p.m., Oklahoma City, Oklahoma time on the date due.
Funds received after such hour shall be deemed to have been received on the
following Business Day.

 

4.3           Payment Authorization

 

. In the event a payment is late or an Event of Default occurs, each Borrower
authorizes Lender, in its sole discretion, to charge such Borrower’s accounts to
make any payments of principal and interest.

 

4.4           Voluntary Prepayment

 

. Borrowers may prepay the Obligations in whole or in part and without penalty
if Lender does not elect to convert the Loan after receiving at least 30 days
prior written notice from Borrower of its intent to prepay the Obligations (a
“Voluntary Prepayment Notice”).

 

4.5           Mandatory Prepayments.

 

(a)          Asset Sale. On any date on which any Borrower receives proceeds
from any sale of any of the Collateral (other than inventory in the ordinary
course of business), Borrowers shall apply an amount equal to 100% of such
proceeds to the prepayment of the Loan, net of any costs and expenses incurred
by any such Borrower in connection with any such sale.

 

(b)          Casualty Events. Not later than three Business Days following the
receipt by any Borrower of the proceeds of insurance, any condemnation award, or
other compensation in respect of any loss or damage to, or any condemnation or
other taking of property, Borrowers shall apply an amount equal to 100% of such
proceeds to the prepayment of the Loans; unless the Borrower or any Subsidiary
of Borrower is required to use such insurance proceeds by the terms of any real
property lease to be used for the restoration of the location subject to such
lease or by any equipment lease for the repair or replacement of any personal
property subject to such lease or the payment of such insurance proceeds to the
lessor under such lease.

 

8

 

 

4.6           Fees. Borrowers shall pay to Lender:

 

(a)          a lending fee as the Loan is funded in the amount equal to 1% of
the Loan (the “Lending Fee”), such fee is payable for the Tranche I Loan on the
Tranche I Closing Date and for the Tranche II Loan on the Tranche II Closing
Date, and the Lending Fee shall, at the option of Borrowers, be capitalized,
when earned, and added to the principal balance of the Loan; and

 

(b)          in immediately available funds on the Tranche I Closing Date, all
of the costs and expenses incurred by Lender in connection with the execution
and delivery of the Loan Documents, including applicable mortgage taxes and
related closing charges and the fees and expenses of Lender’s legal counsel and
other professionals in connection with the negotiation, preparation, and closing
of the Loan, as such amounts can be estimated or ascertained at the Tranche I
Closing Date; provided, however, any fees related to the post-funding
obligations described in Section 8.6 or otherwise accrued in connection with the
closing of the Tranche II Loan shall be paid on the Tranche II Closing Date, as
such amounts can be estimated or ascertained at that time.

 

4.7           Use of Proceeds. Borrowers shall use the proceeds of the Loan for
the payment of operating expenses, working capital needs, and other
restructuring costs consistent with Schedule 4.7. The proceeds of the Loan shall
not be used for payments to shareholders of Crumbs or for distributions to
members of Crumbs Holdings.

 

4.8           Change in Law. If any Change in Law shall (a) subject Lender to
any Tax with respect to any Loan or Loan Document, or change the basis of
taxation of payments to Lender in respect thereof; or (b) impose on Lender or
any other condition, cost or expense affecting the Loans or any Loan Document
and the result thereof shall be to increase the cost to Lender of making or
maintaining the Loans or to reduce the amount of any sum received or receivable
by Lender hereunder (whether of principal, interest or any other amount) then,
upon request by Lender, Borrowers will pay to Lender such additional amount or
amounts as will compensate Lender for such additional costs incurred or
reduction suffered.

 

9

 

 

4.9           Nature and Extent of Each Borrower’s Liability.

 

(a)          Joint and Several Liability. Each Borrower agrees that it is
jointly and severally liable for, and absolutely and unconditionally guarantees
to Lender the prompt payment and performance of, all Obligations and all
agreements under the Loan Documents. Each Borrower agrees that its guaranty
obligations hereunder constitute a continuing guaranty of payment and
performance and not of collection, that such obligations shall not be discharged
until full payment of the Obligations, and that such obligations are absolute
and unconditional, irrespective of: (a) the genuineness, validity, regularity,
enforceability, subordination or any future modification of, or change in, any
Obligations or Loan Document, or any other document, instrument or agreement to
which any obligor is or may become a party or be bound; (b) the absence of any
action to enforce this Agreement (including this Section) or any other Loan
Document, or any waiver, consent or indulgence of any kind by Lender with
respect thereto; (c) the existence, value or condition of, or failure to perfect
a lien or to preserve rights against, any security or guaranty for the
Obligations or any action, or the absence of any action, by Lender in respect
thereof (including the release of any security or guaranty); (d) the insolvency
of any obligor; (e) any election by Lender in an Insolvency Proceeding for the
application of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or
grant of a Lien by any other Borrower, as debtor-in-possession under Section 364
of the Bankruptcy Code or otherwise; (g) the disallowance of any claims of
Lender against any obligor for the repayment of any Obligations under Section
502 of the Bankruptcy Code or otherwise; or (h) any other action or
circumstances that might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, except full payment of all Obligations.

 

(b)          Each Borrower expressly waives all rights that it may have now or
in the future under any statute, at common law, in equity or otherwise, to
compel Lender to marshal assets or to proceed against any obligor, other Person
or security for the payment or performance of any Obligations before, or as a
condition to, proceeding against such Borrower. Each Borrower waives all
defenses available to a surety, guarantor or accommodation co-obligor other than
full payment of all Obligations, including the benefit of 12 Okla. Stat. § 686
and 15 Okla. Stat. §§ 334,338, and 340, and any amendments thereof. It is agreed
among each Borrower and Lender that the provisions of this Section 4.9 are of
the essence of the transaction contemplated by the Loan Documents and that, but
for such provisions, Lender would decline to make the Loans. Each Borrower
acknowledges that its guaranty pursuant to this Section is necessary to the
conduct and promotion of its business, and can be expected to benefit such
business.

 

(c)          Lender may, in its discretion, pursue such rights and remedies as
it deems appropriate, including realization upon Collateral by judicial
foreclosure or non judicial sale or enforcement, without affecting any rights
and remedies under this Section 4.9. If, in taking any action in connection with
the exercise of any rights or remedies, Lender shall forfeit any other rights or
remedies, including the right to enter a deficiency judgment against any
Borrower or other Person, whether because of any applicable Laws pertaining to
“election of remedies” or otherwise, each Borrower consents to such action and
waives any claim based upon it, even if the action may result in loss of any
rights of subrogation that any Borrower might otherwise have had. Any election
of remedies that results in denial or impairment of the right of Lender to seek
a deficiency judgment against any Borrower shall not impair any other Borrower’s
obligation to pay the full amount of the Obligations. Lender may bid all or a
portion of the Obligations at any foreclosure or trustee’s sale or at any
private sale, and the amount of such bid need not be paid by Lender but shall be
credited against the Obligations. The amount of the successful bid at any such
sale, whether Lender or any other Person is the successful bidder, shall be
conclusively deemed to be the fair market value of the Collateral, and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the Obligations guaranteed
under this Section 4.9, notwithstanding that any present or future Law or court
decision may have the effect of reducing the amount of any deficiency claim to
which Lender might otherwise be entitled but for such bidding at any such sale.

 

10

 

 

(d)          Notwithstanding anything herein to the contrary, each Borrower’s
liability under this Section 4.9 shall be limited to the greater of (i) all
amounts for which such Borrower is primarily liable, as described below, and
(ii) such Borrower’s Allocable Amount.

 

(e)          If any Borrower makes a payment under this Section 4.9 of any
Obligations (other than amounts for which such Borrower is primarily liable) (a
“Guarantor Payment”) that, taking into account all other Guarantor Payments
previously or concurrently made by any other Borrower, exceeds the amount that
such Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Guarantor Payments in the same proportion that
such Borrower’s Allocable Amount bore to the total Allocable Amounts of all
Borrowers, then such Borrower shall be entitled to receive contribution and
indemnification payments from, and to be reimbursed by, each other Borrower for
the amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment. The “Allocable
Amount” for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this Section 4.9 without rendering such
payment voidable under Section 548 of the Bankruptcy Code or under any
applicable state fraudulent transfer or conveyance act, or similar statute or
common law.

 

(f)          Nothing contained in this Section 4.9 shall limit the liability of
any Borrower to pay Loans made directly or indirectly to that Borrower
(including Loans advanced to any other Borrower and then re-loaned or otherwise
transferred to, or for the benefit of, such Borrower), and all accrued interest,
fees, expenses and other related Obligations with respect thereto, for which
such Borrower shall be primarily liable for all purposes hereunder. Lender shall
have the right, at any time in its good faith credit judgment, to condition
Loans upon a separate calculation of the Borrowing Base and to restrict the
disbursement and use of such Loans to such Borrower.

 

(g)          Each Borrower hereby subordinates any claims, including any rights
at Law or in equity to payment, subrogation, reimbursement, exoneration,
contribution, indemnification or set off, that it may have at any time against
any other obligor, howsoever arising, to the full payment of all Obligations.

 

Section 5.          Conversion.

 

5.1           Option to Convert. The Notes are convertible into validly issued,
fully paid and non-assessable shares of Crumbs’ common stock, par value $.0001
per share (the “Common Stock”) on the terms and conditions set forth in this
Section 5.

 

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5.2           Conversion Right. At any time or times on or after the date of the
Notes, Lender shall be entitled to convert any portion of the outstanding and
unpaid principal and accrued and unpaid interest on the Notes into validly
issued, fully paid and non-assessable shares of Common Stock (“Conversion
Shares”) in accordance with Section 5 at a rate of $.66 per share (the
“Conversion Rate”). Crumbs shall not issue any fraction of a share of Common
Stock upon any conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, Crumbs shall round such fraction of a share
of Common Stock up to the nearest whole share. Crumbs shall pay any and all
transfer, stamp, issuance and similar taxes that may be payable with respect to
the issuance and delivery of Common Stock upon conversion of any amount of the
Notes.

 

5.3           Mechanics of Conversion. To convert any amount of the Notes into
shares of Common Stock on any date, Lender shall deliver (whether via facsimile
or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such
date, a copy of an executed notice of conversion in the form attached hereto as
Exhibit F (the “Conversion Notice”) to Crumbs. Within one (1) trading days after
its receipt of the Conversion Notice, Crumbs shall instruct its transfer agent
to deliver to Lender certificates representing the number of shares of Common
Stock issuable by reason of such conversion in the name or names and such
denomination or denominations as the Lender may specify.

 

5.4           Adjustment of Conversion Price. If Crumbs, at any time after the
issuance of the Notes, subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the conversion price in effect
immediately prior to such subdivision will be proportionately reduced. If
Crumbs, at any time after the issuance of the Notes, combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares
of Common Stock into a smaller number of shares, the conversion price in effect
immediately prior to such combination will be proportionately increased.

 

5.5           Principal Market Regulation.

 

(a)          Notwithstanding the foregoing provisions of this Section 5, at no
time may all or a portion of the Notes be converted if the number of shares of
Common Stock to be issued pursuant to such conversion would exceed, when
aggregated with all other shares of Common Stock or other voting stock owned by
Lender at such time, the number of shares of Common Stock which would result in
Lender beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) more than 19.99% of all of the Common
Stock outstanding at such time (the “Exchange Cap”), except that such limitation
shall not apply in the event that Crumbs obtains the approval of its
stockholders as required by the applicable rules of the NASDAQ Capital Market
for issuances of Common Stock in excess of such amount. Until such approval is
obtained, Lender shall not be issued and Crumbs shall not issue upon conversion
of the Notes, shares of Common Stock which would result in Lender beneficially
owning shares of Common Stock in an amount in excess of the Exchange Cap.
Additionally, pursuant to the NASDAQ Capital Market rules, Lender acknowledges
that the Conversion Shares acquired prior to Stockholder Approval (as defined
below) may not be voted for the Resolutions at the Stockholder Meeting (each as
defined below). For the avoidance of doubt, the requirement to obtain
Shareholder Approval as set forth in this Section 5.5 to issue a number of
shares of Common Stock which would result in Lender beneficially owning shares
of Common Stock in an amount in excess of the Exchange Cap shall apply
irrespective of whether or not the Principal Market is the NASDAQ Capital
Market.

 

12

 

  

(b)          Crumbs shall provide each stockholder entitled to vote at the next
annual meeting of stockholders of Crumbs (the “Stockholder Meeting”), to be held
on or about June 10, 2014, a proxy statement (the “Proxy Statement”) soliciting
each such stockholder’s affirmative vote at the Stockholder Meeting for adoption
of resolutions (the “Resolutions”) approving the issuance of all of the
Conversion Shares in accordance with applicable law, the provisions of the
Crumbs’ bylaws and the rules and regulations of the Principal Market (the
“Stockholder Approval”). Crumbs shall use its commercially reasonable efforts to
solicit its stockholders’ adoption of the Resolutions and to cause the Board of
Directors of Crumbs to recommend to the stockholders that they adopt the
Resolutions. The Proxy Statement shall contain such disclosures relating to the
Resolutions and the issuance of the Conversion Shares required by the SEC’s
Schedule 14A and reasonably acceptable to the Lender after review by McAfee &
Taft A Professional Corporation at the expense of Crumbs. If Stockholder
Approval is required pursuant to this Section 5.5(b) and, despite the Company’s
reasonable best efforts, the Stockholder Approval is not obtained at a
Stockholder Meeting, then Crumbs shall cause an additional Stockholder Meeting
to be held each calendar quarter thereafter until Stockholder Approval is
obtained.

 

(c)          Voting Agreement. If Stockholder Approval is required pursuant to
Section 5.5(b), then (i) Crumbs will execute, and will use its reasonable best
efforts to cause each of Stephen Z. Fass, Julian R. Geiger, John D. Ireland,
Edwin H. Lewis, EHL Holdings LLC, Mark D. Klein, Frederick G. Kraegel, Leonard
O. Potter, Kirk Alan Rose, Jeffrey D. Roseman, Shanna Goldstone, Robin Sepe,
Edwin Leong, Barry Mirowsky and Eric Wesolowski (collectively, the “Principal
Stockholders”) to execute, a voting agreement, in form and substance
satisfactory to Lender (the “Voting Agreement”), pursuant to which, among other
things, each Principal Stockholder will agree, from and after the date of this
Agreement and until the Stockholder Approval is obtained, to vote or cause to be
voted (including by written consent, if applicable) at the Stockholder Meeting
all of the voting securities of Crumbs that are beneficially owned by such
Principal Stockholder and entitled to vote thereon (A) in favor of the adoption
of the Resolutions and (B) against any resolution that, if adopted, would be
inconsistent with the Resolutions, and (ii) Crumbs (A) shall use its reasonable
best efforts to effectuate the transactions contemplated by the Voting
Agreement, (B) shall not amend, waive or terminate any provision of the Voting
Agreement, (C) and shall enforce the provisions of the Voting Agreement in
accordance with its terms, including, without limitation, by promptly using its
best efforts to seek specific performance of the terms of the Voting Agreement
in accordance with the terms thereof upon the breach by any of the Principal
Stockholders of any provisions thereof. The Principal Stockholders hold
approximately 27.87% of the issued and outstanding share of Common Stock of the
Company.

 

13

 

 

(d)          Limitations on Conversion. Notwithstanding anything to the contrary
contained in this Agreement, prior to March 31, 2016 the Notes shall not be
convertible by the Lender, and Crumbs shall not effect any conversion of the
Notes or otherwise issue any shares of Common Stock pursuant hereto, to the
extent (but only to the extent) that after giving effect to such conversion, the
Lender (together with its affiliates) would beneficially own in excess of 34.99%
(the “Maximum Percentage Cap”) of the Common Stock; provided, that, the Maximum
Percentage Cap shall not apply following the receipt by Lender of a Voluntary
Prepayment Notice or a Change in Control Notice from Borrowers or following the
acceleration of the maturity of the Obligations following an Event of Default.

 

Section 6.          Management Rights of Lender.

 

6.1           Board of Directors. Following the Tranche I Closing Date and for
so long as any of the Notes remain outstanding (the “Representation Period”),
Lender shall have the right, at any time, to: (a) appoint a representative (the
“Observer”) to attend any and all meetings of the Board of Directors of Crumbs,
and (b) subject to Lender’s satisfaction of the Ownership Threshold (as defined
below), designate one (1) director candidate for appointment to the Board of
Directors of Crumbs.  Following the Tranche II Closing Date and throughout the
Representation Period, Lender shall have the right, at any time, to designate a
second director candidate for appointment to the Board of Directors of Crumbs;
provided, that, the foregoing designation rights shall be subject to the
satisfaction of any applicable corporate governance standards and other legal
requirements of the Principal Market.  The audit, nomination and compensation
committees of Crumbs may each exclude the Observer from their respective
proceedings at the discretion of the respective committee. The director
candidates designated by Lender are referred to herein individually as a “Lender
Candidate.” Upon Lender’s designation of a Lender Candidate pursuant to this
Section 6.1, Crumb’s Board of Directors shall take all reasonably necessary
action to appoint the Lender Candidate to the Board of Directors of Crumbs,
provided that in doing so the current size of the Board of Directors shall
either be maintained or reduced, to serve until the next annual meeting of
Crumbs stockholders. The Nominating and Corporate Governance Committee of the
Board of Directors shall nominate each Lender Candidate for election to the
Crumb’s Board of Directors at each meeting of the Company’s stockholders held
during the Representation Period at which directors are to be elected commencing
with the first annual meeting of Crumb’s stockholder after which a Lender
Candidate has been designated by Lender, and the Board shall recommend to the
stockholders currently scheduled that such Lender Candidate be elected at such
meeting. As used herein, Lender shall be deemed to satisfy the “Ownership
Threshold” if Lender or its affiliates (x) is a holder of a Note and (y)
beneficially owns (as defined in Rule 13d-3 of the Exchange Act) in excess of
5.0% of the Common Stock of the Company. Any such Lender Candidate that becomes
a member of the Board of Directors of Crumbs, shall also serve as a member of
the Board of Managers of Holdings.

  

6.2           Executive Officer

 

. On or prior to Tranche II Closing Date, Borrower shall hire an executive
officer, on such terms as shall be mutually agreeable by Crumbs and Lender, to
assist in Borrowers’ management relating to co-branding and franchising matters.

  

14

 

 

Section 7.          Conditions Precedent.

 

7.1           Conditions to Tranche I Loan. The Lender shall not be required to
make the Tranche I Loan until the date (the “Tranche I Closing Date”) on which
the following conditions have been satisfied or waived in writing by Lender:

 

(a)          No Event of Default. No Event of Default shall exist or result from
the making of the Loan, and no event shall have occurred, or shall occur with
the making of the Loan, that with the giving of notice or passage of time, or
both, would constitute an Event of Default.

 

(b)          Representations and Warranties. The representations and warranties
in this Agreement that are qualified by a reference to materiality or Material
Adverse Effect shall be true and accurate as of the Tranche I Closing Date, and
the representations and warranties in this Agreement that are not qualified by a
reference to materiality or Material Adverse Effect shall be true and accurate
in all material respects as of the Tranche I Closing Date.

 

(c)          Documents. This Agreement and the Tranche I Note, Guaranty and
Security Agreement, Grant of Security Interest in Trademarks, Membership
Interest Pledge Agreement, and Registration Rights Agreement shall be duly
authorized, executed, and delivered to Lender.

 

(d)          Certificates of Insurance. Lender shall have received the
certificates of insurance referred to in Section 11.8.

 

(e)          Financing Statement. UCC-1 financing statements naming each
Borrower as debtor and Secured Party as Lender shall be properly filed with the
Secretary of State of the State of Delaware, and each Borrower shall have
provided to Lender such evidence as Lender may reasonably require to evidence
the first priority of Lender’s security interest.

 

(f)          Secretary’s Certificate. Lender shall have received a certificate
of the secretary, manager or other responsible officer of each Borrower
certifying (i) copies Borrower’s organizational documents, (ii) copies of
resolutions of the members, managers, or directors, as applicable, of each
Borrower authorizing the transactions contemplated in this Agreement and the
other Loan Documents, and (iii) the title, name and signature of each person
authorized to sign the Loan Documents on behalf of each Borrower.

 

(g)          Certificate of Good Standing. Lender shall have received a
certificate of the appropriate Secretary of State certifying the existence and
good standing of each Borrower in the state of such Borrower’s organization.

 

(h)          Fees and Expenses. Borrowers shall have paid all fees and expenses
required by Section 4.6 of this Agreement and any other Loan Documents.

 

15

 

 

(i)          Other Documents. Lender shall have received such other agreements,
documents, instruments and certificates as it may reasonably request.

 

7.2           Conditions to Tranche II Loan. Lender shall not be required to
make the Tranche II Loan or grant any other accommodation to Borrowers until the
date (the “Tranche II Closing Date”) on which the following conditions have been
satisfied or waived in writing by Lender:

 

(a)          No Event of Default. No Event of Default shall exist or result from
the making of the Loan and no event shall have occurred, or occur with the
making of the Loan, that with the giving of notice or passage of time, or both,
would constitute an Event of Default.

 

(b)          Representations and Warranties. The representations and warranties
in this Agreement that are qualified by a reference to materiality or Material
Adverse Effect shall be true and accurate as of Tranche II Closing Date, and the
representations and warranties in this Agreement that are not qualified by a
reference to materiality or Material Adverse Effect shall be true and accurate
in all material respects as of the Tranche II Closing Date.

 

(c)          Other Documents. Lender shall have received the Tranche II Note and
such other agreements, documents, instruments and certificates as it may
reasonably request.

 

(d)          Performance Obligations. Borrowers shall have operated their
business substantially in accordance with the Business Plan and shall have hired
an executive officer pursuant to Section 6.2 of this Agreement.

 

(e)          Material Adverse Effect. No event shall have occurred or
circumstance exist that has or could reasonably be expected to have a Material
Adverse Effect that were not previously disclosed to Lender by Borrower.

 

Section 8.          Collateral.

 

8.1           Grant of Security Interest. To secure the prompt payment and
performance of all Obligations, each Borrower hereby grants to Lender a first
priority lien and continuing security interest in all of such Borrower’s
Collateral.

 

8.2           No Assumption of Liability. The security interests granted by this
Agreement are given as security only and shall not subject Lender to, or in any
way modify, any obligation or liability of any Borrower relating to any of the
Collateral.

 

16

 

 

8.3           Agreements Regarding Accounts. Except as otherwise provided
herein, the Borrower, at its own expense, will diligently attempt to collect
upon all sums due the Borrower upon its accounts and contract rights. At any
time, regardless of the existence of a default and without notice to Borrowers,
Lender may give notice to account debtors of the assignment of a Borrower’s
Accounts to Lender and require that the Accounts be paid directly to Lender,
whether or not the amounts owed to such Borrower by the account debtors so
notified exceed the amount of the Obligations. Borrower will from time to time
and as often as requested by the Lender, promptly execute and deliver to the
Lender one or more specific written assignments of any one or more Accounts or
contract rights Lender may select or designate, assigning the same to Lender. In
each instance in which Lender may elect hereunder to effect direct collection of
any one or more accounts or contract rights of the Borrower, Lender shall also
be entitled to take possession of all books and records of the Borrower relating
to such Account(s) or contract rights and the Borrower will not in any manner
take or suffer any action to be taken to hinder, delay, or interfere with Lender
's attempts to effect collection.

 

8.4           Cross Collateralization and Cross Default. Each of the Notes is
cross-collateralized and cross-defaulted with the other to the fullest extent
permitted by applicable Law.

 

8.5           Financing Statement; Further Assurances. Lender is authorized to
file, and promptly on request, Borrowers shall deliver such financing
statements, assignments, notices and other documents and instruments as it shall
deem necessary or appropriate to perfect and continue the perfection of the
security interests in the Collateral, or otherwise to give effect to the intent
of this Agreement.

 

8.6           Post-Funding Covenants. Promptly following the initial funding
under the Tranche I Loan, Borrowers shall use their commercially reasonable
efforts, and shall cause their Subsidiaries, to (i) obtain all the necessary
consents required for Lender and Borrower to execute and record Leasehold
Mortgages on each Borrower’s and each Subsidiary’s Leases, and (ii) to assist
Lender in obtaining Control Agreements for each Borrower’s Deposit Accounts. The
failure to obtain any such consents shall not constitute an Event of Default
hereunder.

 

Section 9.          Representations and Warranties of Lender. Lender represents
and warrants to the Borrowers as follows:

 

9.1           No Public Sale or Distribution. Lender (i) is acquiring the Notes,
and (ii) upon conversion of the Notes will acquire the Conversion Shares (and
with the Notes, collectively, the “Securities”) issuable upon conversion of the
Notes, in each case, for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof in violation
of applicable securities laws, except pursuant to sales registered or exempted
under the 1933 Act; provided, however, by making the representations herein,
Lender does not agree, or make any representation or warranty, to hold any of
the Securities for any minimum or other specific term and reserves the right to
dispose of the Conversion Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.

 

9.2           Accredited Investor Status. Lender is an “accredited investor” as
that term is defined in Rule 501(a) of Regulation D, as amended, under the 1933
Act.

 

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9.3           Information. Lender and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Borrowers which have been requested by Lender. Lender and its advisors, if any,
have been afforded the opportunity to ask questions of the Borrowers. Lender
understands that its investment in the Notes and Conversion Shares involves a
high degree of risk. Lender has sought such accounting, legal and tax advice as
it has considered necessary to make an informed investment decision with respect
to its acquisition of the Notes and Conversion Shares.

 

9.4           Transfer or Resale. Lender understands that except as provided in
the Registration Rights Agreement (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws and,
accordingly, are characterized as “restricted securities” under the U.S. federal
securities laws inasmuch as they are being acquired from the Borrowers in a
transaction not involving a public offering and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, (B)
Lender shall have delivered to Crumbs (if requested by Crumbs) an opinion of
counsel to Lender, in a form reasonably acceptable to Crumbs, to the effect that
such Notes or Conversion Shares to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
Lender provides Crumbs with reasonable assurance that such Notes and Conversion
Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A
promulgated under the 1933 Act (or a successor rule thereto) (collectively,
“Rule 144”); (ii) any sale of the Notes and Conversion Shares made in reliance
on Rule 144 may be made only in accordance with the terms of Rule 144, and
further, if Rule 144 is not applicable, any resale of the Notes and Conversion
Shares under circumstances in which the seller (or the Person (as defined below)
through whom the sale is made) may be deemed to be an underwriter (as that term
is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC promulgated
thereunder.

 

9.5           Legends. Lender understands that the Securities shall bear any
legend as required by the “blue sky” laws of any state and a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of stock certificates for the Conversion Shares):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER
(IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE
TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

18

 

 

Section 10.         Representations and Warranties of Borrowers. Each Borrower
jointly and severally represents and warrants to Lender as follows:

 

10.1         Legal Status. Crumbs Holdings is a limited liability company duly
formed and existing in good standing under the Laws of the State of Delaware.
Crumbs is a corporation duly incorporated and existing in good standing under
the Laws of the State of Delaware. Each Subsidiary is a limited liability
company duly formed and existing in good standing under the Laws of such
Subsidiary’s state of incorporation. Each Borrower and Subsidiary is qualified
or licensed to do business, and is in good standing as a foreign limited
liability company or corporation, as applicable, in each of the jurisdictions in
which the failure to so qualify or to be so licensed would reasonably be
expected to have a Material Adverse Effect.

 

10.2         Subsidiaries. Other than as set forth in Schedule 10.2, no Borrower
or Subsidiary owns any voting or economic interests in any other Person.

 

10.3         Authorization and Validity. The execution, delivery and performance
of the Loan Documents have been duly authorized by all necessary organizational
action. Each Loan Document is an enforceable obligation of each Borrower in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar Laws affecting the enforcement of creditors’
rights generally. The Board of Director’s of Crumbs authorized and approved
Lender becoming an interested stockholder under Section 203 of the Delaware
General Corporation Law as a result of Lender’s acquisition of the common stock
of Crumbs through payment of PIK interest or conversion of the Note.

 

10.4         No Conflict. Except as set forth on Schedule 10.4, the execution,
delivery, and performance by each Borrower of this Agreement and the other Loan
Documents, including the conversion of the Notes to common stock of Crumbs Bake
Shop, Inc., do not and will not:

 

(a)          conflict with the terms of the certificate of formation or limited
liability company agreement of each Borrower and Subsidiary;

 

(b)          violate any provision of any judgment, decree, or order of any
court or governmental authority by which any Borrower or Subsidiary is bound, or
any provision of any Law or regulation applicable to any Borrower or Subsidiary;

 

(c)          result in a breach of, or constitute a default under, any contract,
obligation, indenture, or other instrument to which any Borrower or Subsidiary
is a party or by which any Borrower or Subsidiary may be bound, except where
such breach of or default under would not reasonably be expected to have a
Material Adverse Effect; or

 

(d)          result in or require the imposition of any lien or encumbrance on
any of any Borrower’s or Subsidiary’s property.

 

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10.5         No Consents. Except as set forth on Schedule 10.5 or which have
been obtained, the execution, delivery, and performance by each Borrower and
Subsidiary of this Agreement, including the conversion of the Notes to Common
Stock of Crumbs, do not and will not require any authorization, approval, or
other action by, or notice to or filing with, any governmental authority,
regulatory body, or any other Person, except for any disclosure filing
obligations Crumbs has to the SEC.

 

10.6         Indebtedness; Priority. No Borrower or Subsidiary has any
outstanding Indebtedness, except Permitted Indebtedness. Except for Permitted
Liens, No Borrower or Subsidiary has granted a lien or security interest in, or
otherwise pledged, any of the Collateral to any third party, and the Collateral
is free and clear of all liens and encumbrances of any kind.

 

10.7         Title to Properties. Each Borrower and Subsidiary has, as
applicable, good, marketable and indefeasible title to (or valid leasehold
interests in) all of its material real and personal property free and clear of
all liens, charges, security interests and other encumbrances, except Permitted
Liens. Schedule 10.7 sets forth a complete list of all real property owned or
leased by Borrowers or any Subsidiary.

 

10.8         Taxes. Each Borrower and Subsidiary has filed all federal, state,
and local tax returns and other reports that such Borrower or Subsidiary is
required by Law to file, and has paid, or made provision for the payment of, all
taxes upon it, its income and its properties that are due and payable, except to
the extent (i) being contested diligently and in good faith by proper
proceedings, (ii) that would not have a Material Adverse Effect if such
proceedings were to be adversely determined, and (iii) that such Borrower or
Subsidiary has delivered written notice thereof to Lender.

 

10.9         Litigation. Except as set forth on Schedule 10.9 or as disclosed in
the SEC Documents, there are no suits, proceedings, claims, or disputes pending
or, to the knowledge of any Borrower, threatened against or affecting any
Borrower or Subsidiary or any of a Borrower’s or Subsidiary’s assets or
properties that (a) relate to any of the Loan Documents or the transactions
contemplated thereby, or (b) if adversely determined, could reasonably be
expected to have a Material Adverse Effect.

 

10.10         Compliance with Laws. Each Borrower and Subsidiary is in
compliance in all material respects with all Laws and regulations applicable to
each Borrower and Subsidiary, and their business and properties.

 

10.11         Compliance with Environmental Laws. Crumbs and its Subsidiaries
(i) are in compliance with all Environmental Laws in all material respects, (ii)
have all permits, licenses or other approvals required of them under
Environmental Laws to conduct their respective business, and (iii) are in
material compliance with the terms and conditions of any such permit, license or
approval where, in each of the foregoing clauses (i), (ii) and (iii), the
failure to so comply would reasonably be expected to have a Material Adverse
Effect.

 

10.12         Locations of Collateral. Schedule 10.12 sets forth an accurate and
complete list of each location where any Collateral is stored.

 

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10.13         Financial Statements. The unaudited financial statements of Crumbs
dated as of September 30, 2013 filed with the SEC, together with the related
notes, fairly present in all material respects the financial condition of Crumbs
and its Subsidiaries as of the dates indicated and the results of operations and
changes in cash flows for the periods therein specified in conformity with GAAP
consistently applied throughout the periods involved, subject to year-end
adjustments; and, except as disclosed therein, there are no material off-balance
sheet arrangements or any other relationships with unconsolidated entities or
other Persons, that may have a material current or, to Crumbs’ knowledge,
material future effect on its financial condition, results of operations,
liquidity, capital expenditures, capital resources or significant components of
revenue or expenses.

 

10.14         Liabilities. No Borrower or Subsidiary has any material
liabilities, fixed or contingent, that are not reflected in the financial
statements delivered to Lender or that have not otherwise been disclosed in
writing to Lender or as disclosed in the SEC Documents.

 

10.15         Intellectual Property. Except as would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect, each
Borrower and Subsidiary owns or has the right to use pursuant to a valid and
enforceable written license, implied license or other legally enforceable right,
all of the Intellectual Property that is necessary to conduct its business as
currently conducted (the “Borrower Intellectual Property”). Except as disclosed
in the Schedule 10.15, there is no outstanding or pending, or, to the knowledge
of Borrowers, threatened in writing action, suit, other proceeding or claim by
any third Person challenging or contesting the validity, scope, use, ownership,
enforceability, or other rights of each Borrower in or to, (i) as of the date of
this Agreement, any Borrower Intellectual Property, and (ii) as of any other
date, any material Borrower Intellectual Property, and no Borrower or Subsidiary
has received any written notice regarding, any such action, suit, or other
proceeding. No Borrower or Subsidiary has infringed or misappropriated any
material rights of others, except as would not reasonably be expected to have a
Material Adverse Effect. As of the date of this Agreement, there is no pending
or, to the knowledge of Borrowers, threatened action, suit, other proceeding or
claim by others that any Borrower or Subsidiary infringes upon, violates or uses
the Intellectual Property rights of others without authorization, and no
Borrower or Subsidiary has received any written notice regarding, any such
action, suit, other proceeding or claim.

 

10.16         Capitalization. Schedule 10.16 sets forth (i) the amounts of
authorized, issued and outstanding shares of all capital stock of Crumbs, and
(ii) all outstanding warrants, options, rights, units, or other instruments
exercisable or convertible into equity securities of Crumbs. All of the issued
and outstanding shares of capital stock of Crumbs are duly authorized and
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state and foreign securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities that have not been waived in writing; the Notes and
the Conversion Shares, have been duly authorized and the Conversion Shares, when
issued, delivered and paid for in accordance with the terms of the Notes will
have been validly issued and will be fully paid and nonassessable. Except as set
forth on Schedule 10.16, there are no preemptive rights or other rights to
subscribe for or to purchase, or any restriction upon the voting or transfer of
any shares of common stock issuable upon conversion of the Notes pursuant to the
organizational documents of Borrowers or its Subsidiaries or any agreement to
which Crumbs or any of its Subsidiaries is a party or by which Crumbs or any of
its Subsidiaries is bound. As of the date of this Agreement, all of the issued
and outstanding equity interests of each of Crumbs’ Subsidiaries have been duly
and validly authorized and issued and are fully paid and nonassessable, and
Crumbs owns of record and beneficially, free and clear of any claims, Liens
(other than Permitted Liens) and voting proxies, all of the issued and
outstanding equity interests of its Subsidiaries, other than Crumbs Holdings.

 

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10.17         Internal Controls and Procedures. Crumbs maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorization; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for material assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

 

10.18         Complete Disclosure. No Loan Document contains any untrue
statement of a material fact or fails to disclose any material fact. No Borrower
has failed to disclose to Lender in writing any fact or circumstance of which
the Borrowers are aware, that could reasonably be anticipated to have a Material
Adverse Effect.

 

10.19         No Breaches. Except as disclosed on Schedule 10.19, no event has
occurred on the part of the Borrowers or any of their respective Subsidiaries,
which, with notice or lapse of time or both, would constitute such breach or
other default in the performance of any agreement or condition contained in any
agreement under which each Borrower or any such Subsidiary may be bound, or to
which any of its assets is subject, including defaults in the payment of rent
under certain of the real property leases of the Borrowers or their respective
Subsidiaries, except for such breaches or defaults as would not reasonably be
expected to have a Material Adverse Effect.

 

Section 11.         Affirmative Covenants. Until all Obligations have been
satisfied in full, each Borrower shall comply with the following covenants:

 

11.1         Payment of Indebtedness. Except as set forth on Schedule 11.1, each
Borrower shall, and shall cause each of its Subsidiaries to, promptly pay all of
its Indebtedness as it becomes due, except to the extent that any such
Indebtedness (other than the Obligations) is being contested diligently and in
good faith and for which reserves or other provisions (if any) required by GAAP
shall have been made.

 

11.2         Cash Management System. Each Borrower shall, and shall cause each
of its Subsidiaries to, use a cash management system that is substantially
similar to the cash management system in place at the time of the Tranche I
Closing Date.

 

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11.3         Existence. Except with respect to the closing of certain locations
at which certain Subsidiaries of the Borrower conducts business (the “Store
Closings”), each Borrower shall do or cause to be done, and shall cause each of
its Subsidiaries to do or cause to be done, all things necessary to preserve,
renew, and keep in full force and effect its existence, continue to conduct and
operate its business as being conducted and operated presently, and comply with
the provisions of its organizational documents. Each Borrower will, and shall
cause each of its Subsidiaries to, become and remain qualified to conduct
business in each jurisdiction where the nature of the business or ownership of
property by the Borrower or Subsidiary may require such qualification.

 

11.4         Compliance with Laws; Licenses. Each Borrower shall, and shall
cause each of its Subsidiaries to, comply in all material respects with all
Laws, rules, regulations and orders applicable to such Borrower or Subsidiary,
their business or their properties, where the failure to do so would have a
Material Adverse Effect. Each Borrower shall, and shall cause each of its
Subsidiaries to, maintain all licenses, permits, governmental approvals, rights,
privileges, and franchises necessary for the conduct of its business. Upon
request by Lender, Borrower shall provide Lender with certificates of the
appropriate Secretary of State certifying the existence and good standing of
each Subsidiary in its state of organization.

 

11.5         Taxes. Each Borrower shall, and shall cause each of its
Subsidiaries to, pay when due all federal, state and local taxes, assessments
and governmental charges or levies imposed upon it or upon its income or profits
or upon any of its properties, except, to the extent contested diligently and in
good faith by proper proceedings that stay the imposition of any penalty, fine
or lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with
GAAP.

 

11.6         Collateral. Except in the case of any Store Closings:

 

(a)          Location of Collateral. Other than as set forth on Schedule 10.12,
each Borrower shall, and shall cause each of its Subsidiaries to, maintain all
Collateral at a location that is either owned by such Borrower or Subsidiary or
leased by such Borrower or Subsidiary.

 

(b)          Records with respect to Collateral. Each Borrower shall, and shall
cause each of its Subsidiaries to, keep accurate and complete records of such
Borrower’s or Subsidiary’s Collateral, including, acquisitions and dispositions
of such Collateral, and shall submit the records to Lender upon request.

 

(c)          Defense of Title to Collateral. Each Borrower shall, and shall
cause each of its Subsidiaries to, at all times, defend such Borrower’s or
Subsidiary’s title to the Collateral and the lien of Lender in such Collateral
against all Persons, claims and demands.

 

(d)          Disposition of Collateral. Except for the sale of inventory in the
ordinary course of business, no Borrower shall, and shall cause each of its
Subsidiaries not to, sell, lease or otherwise dispose of any Collateral without
the prior written consent of Lender, other than replacement of Collateral that
is worn, damaged or obsolete with items of like function and value, if the
replacement Collateral is acquired substantially contemporaneously with such
disposition and is free of liens.

 

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(e)          Condition of Collateral. Each Borrower shall, and shall cause each
of its Subsidiaries to, maintain the Collateral in good operating condition and
repair, and make all necessary replacements and repairs so that the value and
operating efficiency of such Collateral shall be preserved at all times,
reasonable wear and tear excepted. Each Borrower shall, and shall cause each of
its Subsidiaries to, keep all of its Collateral from being affixed to any real
property.

 

(f)          Intellectual Property. Each Borrower shall, and shall cause each of
its Subsidiaries to, take all action necessary or advisable to maintain and
preserve all of the Intellectual Property.

 

(g)          Deposit Accounts. Each Borrower shall, and shall cause each of its
Subsidiaries to, maintain all of its Deposit Accounts in an insured account at a
commercial bank and is organized under the Laws of the United States of America
or any state thereof. In addition, if the funds in the Southeastern CD are
released, Borrowers shall cause such funds to be deposited directly into a
Deposit Account that is covered by an existing Control Agreement.

 

11.7         Inspection. Each Borrower shall, and shall cause each of its
Subsidiaries to, permit Lender from time to time, subject (except where a
default exists) to reasonable notice, to visit and inspect the Collateral and
the other properties and operations of such Borrower or Subsidiary, inspect and
audit such Borrower’s or Subsidiary’s books and records, and discuss with its
officers, employees, agents, accountants and advisors such Borrower’s or
Subsidiary’s business, assets, prospects and results of operations. Borrowers
will reimburse Lender for all its reasonable charges, costs and expenses
incurred in connection with any of the foregoing.

 

11.8         Insurance. Each Borrower shall, and shall cause each of its
Subsidiaries to, maintain and keep in force the insurance policies described on
Exhibit B or such other insurance policies as may be reasonably required by
Lender from time to time. The insurance policies of each Borrower and Subsidiary
shall contain an endorsement, in form and substance satisfactory to Lender,
describing Lender as additional insured or loss payees, as applicable, and
providing that the insurance company shall give Lender 30 days prior written
notice (10 days in the event of cancellation for non-payment of premiums) before
such policies are altered, canceled or expired.

 

11.9         Maintenance of Employee Benefit Plans. Each Borrower will, and
shall cause each of its Subsidiaries to, maintain each employee benefit plan as
to which it may have any material liability or responsibility in material
compliance with ERISA and all other applicable Laws.

 

11.10      Reporting Obligations.

 

(a)          Monthly Reports. Within 20 days after the close of each calendar
month, Borrowers shall provide to Lender an unaudited balance sheet of Crumbs on
a consolidated basis and the related statements of income and shareholders’
equity for such month, together with a certification by a responsible financial
officer that such financial statements are complete and correct, present the
financial conditions at the end of such period and the results of its operation
during such period in accordance with GAAP, consistently applied, and
certifying, in a form satisfactory to Lender, that Borrowers have not been and
are not then in default as to any of the covenants contained in this Agreement
or any of the Loan Documents and that there was no known Event of Default (or
specifying those Events of Default of which he or she is aware).

 

24

 

 

(b)          Quarterly Reports. Within 45 days after the close of each fiscal
quarter of Borrowers, Borrowers shall provide to Lender an unaudited balance
sheet of Crumbs on a consolidated basis and the related statements of income and
shareholders’ equity for such fiscal quarter, together with a certification by a
responsible financial officer that such financial statements are complete and
correct, present the financial conditions at the end of such period and the
results of its operation during such period in accordance with GAAP,
consistently applied, and certifying, in a form satisfactory to Lender, that
Borrowers have not been and are not then in default as to any of the covenants
contained in this Agreement or any of the Loan Documents and there was no known
Event of Default (or specifying those Events of Default of which he or she is
aware).

 

(c)          Annual Reports. Within 90 days after the close of each fiscal year
of each Borrower, Borrowers shall provide to Lender an audited balance sheet of
Crumbs on a consolidated basis and the related statements of income and
shareholders’ equity for such fiscal year, together with a certification by a
responsible financial officer that such financial statements are complete and
correct, present the financial conditions at the end of such period and the
results of its operation during such period in accordance with GAAP,
consistently applied, and certifying, in a form satisfactory to Lender, that
such Borrowers have not been and are not then in default as to any of the
covenants contained in this Agreement or any of the Loan Documents and there was
no known Event of Default (or specifying those Events of Default of which he or
she is aware).

 

(d)          Tax Returns. Within 10 days of the filing of each of each
Borrower’s annual state or federal tax returns, such Borrower shall provide to
Lender a true and correct copy of such tax return.

 

(e)          Notice of Litigation. Immediately following any Borrower’s
knowledge thereof, Borrowers shall deliver to Lender written notice of any
litigation that is pending or threatened against any Borrower or any Subsidiary
that, if adversely determined, would (a) materially impair the ability of the
Borrower to carry on its business substantially as now conducted, (b) materially
and adversely affect the condition (financial or otherwise) of the Borrower, or
(c) result in monetary damages in excess of $100,000, the Borrower will give
Lender a written notice specifying the nature thereof and what actions, if any,
the Borrower is taking and proposes to take with respect thereto.

 

(f)          Notice of Default. Immediately following any Borrower’s knowledge
of any default or Event of Default under any Loan Document, Borrowers shall
deliver to lender written notice of the default or Event of Default together
with a reasonably detailed description thereof and what actions, if any, the
Borrower is taking and propose to take with respect thereto.

 

25

 

 

(g)          Change in Control Notice. Borrowers shall provide Lender with 30
day written notice prior to any Change in Control, specifying in reasonable
detail the event or transaction expected to cause such Change in Control (the
“Change in Control Notice”).

 

(h)          Other Information. Promptly upon request, each Borrower shall
provide Lender with any other information or reports that Lender reasonably
requests.

 

Section 12.          Negative Covenants. Each Borrower jointly and severally
covenants and agrees with Lender, so long as the Obligations remain outstanding,
as follows:

 

12.1         Existence of Liens. No Borrower shall, nor shall it cause any of
its Subsidiaries to, create, assume or suffer to exist any mortgage, pledge,
security interest, encumbrance, lien, charge or deposit arrangement, or and
other arrangement having the practical effect of the foregoing on any of the
assets of Borrowers or any Subsidiary, including any leasehold mortgage on the
Leases, except for (a) Permitted Liens, and (b) liens in favor of Lender
securing the Indebtedness under the Loan.

 

12.2         Sale of Assets. No Borrower shall, nor shall it cause any of its
Subsidiaries to, sell, transfer, convey, or otherwise dispose of, whether
pursuant to a single transaction or a series of transactions, any of its
material assets, other than in accordance with the ordinary course of business
and with respect to any Store Closings.

 

12.3         Changes in Structure. Except as contemplated in the Business Plan,
in the case of any Store Closings or as otherwise consented to in writing by
Lender, no Borrower shall, nor shall it cause any of its Subsidiaries to: (i)
merge or consolidate with any Person (or enter into any merger or consolidation
agreement or plan), or permit any such merger or consolidation with it; (ii)
sell all or substantially all of its assets; (iii) make any material change in
the nature of or manner in which it conducts its business; (iv) amend its
certificate of formation or limited liability company agreement or its
certificate of incorporation or bylaws, as applicable; (v) except pursuant to
this Agreement, issue any Indebtedness convertible into any equity interest;
(vi) issue any equity interests or rights convertible into equity interests; or
(vii) agree to do any of the foregoing.

 

12.4         Distributions. Except for distributions or dividends paid (i) by
any Subsidiary to Crumbs Holdings, (ii) by Crumbs Holdings to its members, (iii)
in accordance with the Tax Receivable Agreement, and (iv) required under Crumbs
Holdings’ Third Amended and Restated Operating Agreement, no Borrower shall, nor
shall it cause any of its Subsidiaries to, pay any dividends, or make any
distribution of cash or property or similar payments, or incur or permit to
exist and lien or restriction on any such payments (except for restrictions and
liens arising under the Loan Documents).

 

26

 

 

12.5         Limitations on Other Indebtedness. No Borrower shall, nor shall it
cause any of its Subsidiaries to, create, incur, assume, become or be liable in
any manner in respect of, or suffer to exist, any Indebtedness whether evidenced
by a note, bond, debenture, agreement, letter of credit or similar or other
obligation, or accept any deposits or advances of any kind, other than the
Permitted Debt.

 

12.6         Loans and Investments. No Borrower shall, nor shall it cause any of
its Subsidiaries to, make any loans to, or investments in, any Person, except
for (a) advances to employees for travel expenses and similar items in the
ordinary course of business and (b) extensions of trade credit in the ordinary
course of business.

 

12.7         Subsidiaries. No Borrower shall, nor shall it cause any of its
Subsidiaries to, form or acquire any Subsidiary.

 

12.8         Transactions with Affiliates. No Borrower shall, nor shall it cause
any of its Subsidiaries to, enter into or permit to exist any transaction or
series of transactions with any Subsidiary or an officer, director, or
shareholder thereof, other than (i) payment of reasonable compensation
(including benefits) to and reimbursement of reasonable expenses of officers,
directors and managers, including managers' fees and managers' reimbursable
expenses, and (ii) except as otherwise specifically limited in this Agreement,
other transactions which are entered into in the ordinary course of such
Person's business and further provided that any such permitted affiliated,
inter-company or equity interest owner debt or receivables are and remain fully
subordinate to the Indebtedness under the Loan in written instruments reasonably
acceptable to Lender.

 

12.9         Collection of Accounts. Each Borrower shall, and shall cause its
Subsidiaries to, collect its Accounts in the ordinary course of business, and
will not, nor shall it cause any of its Subsidiaries to, make any discount,
credit, rebate or other reduction in the original amount owing except, prior to
an Event of Default, for ordinary course reductions in accordance with such
Borrower’s or Subsidiary’s existing policies.

 

12.10       Compensation. No Borrower shall, and shall cause its Subsidiaries
not to, without the prior written consent of Lender, increase the compensation
or salary of any director or officer of any Borrower or Subsidiary above the
amount of such officer’s or director’s compensation or salary at the time of the
Tranche I Closing Date.

 

12.11       Leases. No Borrower shall, and shall cause its Subsidiaries not to,
without the prior written consent of Lender, enter into any lease or real
property with an annual obligation of more than $50,000.

 

12.12       Change in Control. No Borrower shall, and shall cause its
Subsidiaries not to, enter into any transaction or series of related
transactions that result in a Change in Control under this Agreement unless
Borrowers shall have first delivered a Change of Control Notice to Lender.

 

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Section 13.         Omitted.

 

Section 14.        Events of Default. The occurrence of any of the following
shall constitute an “Event of Default:”

 

14.1         Non-Payment of Loans. The failure of Borrowers to pay any
principal, interest or other Obligation due under any of the Loan Documents when
due and payable, and such failure continues for ten days.

 

14.2         Breach of Covenant. The failure of Borrowers or any Subsidiary to
perform or observe in any material respect any other covenant or agreement set
forth herein or in any of the other Loan Documents for a period of 30 days after
notice of such failure, or if the Borrowers or any Subsidiary have commenced to
diligently cure such default, within such additional time period as may be
needed to cure such default.

 

14.3         Business Plan. A substantial failure by Borrowers to comply with a
material term of the Business Plan for a period of 15 days after notice of such
failure or if the Borrowers have commenced to diligently cure such default,
within such additional time period as may be needed to cure such default;
provided, that, if Borrowers fail to substantially comply with the material
terms of the Business Plan three times in any twelve-month period, Lender may
declare an immediate default.

 

14.4         Failure to pay Taxes. The failure of a Borrower or any Subsidiary
to pay when due all federal, state and local taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any of
its properties, except, to the extent contested diligently and in good faith by
proper proceedings that stay the imposition of any penalty, fine or lien
resulting from the non-payment thereof.

 

14.5         Guaranty. The occurrence of any default or breach under any
Guaranty after the passage of any applicable notice and cure periods.

 

14.6         Breach of Representation or Warranty. Any representation,
statement, certificate, schedule, or report made or furnished to Lender by or on
behalf of Borrowers or any Subsidiary pursuant to the terms of this Agreement
being false in any material respect at the time it was made.

 

14.7         Change in Control. The occurrence of any Change in Control or the
failure to deliver the Change in Control Notice.

 

14.8         Destruction of Collateral. A loss, theft, damage or destruction
occurs with respect to any Collateral, and the amount not covered by insurance
exceeds $100,000.

 

14.9         Insolvency. Any Borrower or Subsidiary shall make an assignment for
the benefit of creditors, or if bankruptcy proceedings or other proceedings for
relief under any bankruptcy Law or any Law for the relief of debtors shall be
instituted by or against it and, if instituted against it, the same is not
dismissed within 60 days of the filing thereof.

 

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14.10       Dissolution. Any order, judgment, or decree shall be entered against
any Borrower or Subsidiary decreeing its involuntary dissolution or split up and
such order shall remain undischarged and unstayed for a period in excess of 60
days; or any Borrower or Subsidiary shall otherwise dissolve or cease to exist,
except in connection with any Store Closings or any Subsidiary that no longer
maintains any operations or holds any assets.

 

14.11       Levy Judgment. An attachment or garnishment writ, or the like, is
levied against all or any portion of the assets of Borrower or any Subsidiary or
a judgment for the payment of money is rendered against any Borrower or
Subsidiary and within 60 days from the entry of judgment has not been
discharged, bonded or stayed pending appeal or, if any such judgment is affirmed
on appeal, has not been discharged or bonded within 60 days from the entry of
the final order of affirmance on appeal.

 

14.12       Cross-Default. A default or event of default shall occur in any
Indebtedness of any Borrower or a Guarantor in excess of $100,000.

 

14.13       Failure of Perfection. The security interests granted by any
Borrower to Lender shall for any reason fail or cease to create a valid and
perfected and, except to the extent otherwise permitted by this Agreement, first
priority lien in favor of Lender.

 

14.14       Nasdaq Delisting. The failure of the Common Stock to be listed on
the Nasdaq Capital Market.

 

Section 15.         Remedies. If an Event of Default shall occur, then during
the continuance thereof:

 

15.1         All Obligations, notwithstanding any term of this Agreement or the
other Loan Documents to the contrary, shall at Lender’s option and without
further notice become immediately due and payable, without presentment, demand,
protest or notice of dishonor, all of which are hereby expressly waived by each
Borrower;

 

15.2         Lender shall have all rights, powers and remedies available under
this Agreement and the other Loan Documents or accorded by Law, including,
without limitation, the right to resort to any or all security for the
Obligations and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable Law;

 

15.3         Lender may require each Borrower to assemble Collateral at such
Borrower’s expense, and make it available to Lender at a place designated by
Lender;

 

15.4         Lender may enter any premises where Collateral is located and,
without charge by Borrower, use the Collateral in the operation of Borrower’s
business or store Collateral on such premises until the sale or other
disposition of the Collateral (which sale may be conducted on such premises);

 

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15.5         Each Borrower agrees that 10 days’ notice of any proposed sale or
other disposition of Collateral by Lender shall be reasonable. Lender shall have
the right to sell, lease or otherwise dispose of any Collateral for cash, credit
or any combination thereof, and Lender may purchase any Collateral at public or,
if permitted by Law, private sale and, in lieu of actual payment of the purchase
price, may set off the amount of such price against the Obligations. All rights,
powers and remedies of Lender in connection with the Obligations may be
exercised at any time by Lender and from time to time after the occurrence of an
Event of Default, are cumulative and not exclusive, and shall be in addition to
any other rights, powers or remedies provided by Law or equity.

 

15.6         Notwithstanding the forgoing provisions of this Section 15, upon
the occurrence of any event that constitutes an Event of Default, Lender agrees
prior to exercising any of its remedies hereunder, to negotiate in good faith
with Borrowers in an attempt to address such Event of Default in a manner
reasonably satisfactory to Lender and Borrowers so as to result in the Lender’s
agreement to forbear from the exercise of its remedies hereunder; provided,
that, nothing contained herein shall obligate the Lender to forbear from
exercising such remedies, which shall only arise pursuant to a forbearance or
similar agreement between the Lender and Borrowers.

 

Section 16.         License. Each Borrower, on behalf of itself and its
Subsidiaries, hereby irrevocably constitutes and appoints Lender and any officer
or agent of Lender, with full power of substitution, as such Borrower’s or its
Subsidiary’s true and lawful attorney-in-fact with full irrevocable power and
authority in the place and stead of such Borrower or Subsidiary or in Lender's
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments that may be necessary or useful to accomplish the purposes of this
Agreement and the other Loan Documents, and, without limiting the generality of
the foregoing, hereby gives such attorneys the power and right, on behalf of
Borrower and Borrower’s Subsidiaries, without notice to or assent by such
Borrower or its Subsidiaries, to do the following: (i) to indorse and collect
any cash proceeds of the Collateral, (ii) to apply the proceeds of any
Collateral received by Lender to the Obligations, and (iii) to discharge past
due taxes, assessments, charges, fees or liens on the Collateral. Borrowers
shall reimburse Lender on demand for any payment made or any expense incurred by
Lender in connection therewith, provided that this authorization shall not
relieve Borrowers of any of their obligations under any of the Loan Documents.

 

Section 17.         Miscellaneous.

 

17.1         Failure or Indulgence Not Waiver. No failure or delay on the part
of Lender in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof or
of any other right, power or privilege. All rights and remedies existing under
this Agreement and the other Loan Documents are cumulative, and not exclusive of
any rights or remedies otherwise available.

 

17.2         Modification. No modification, amendment or waiver of any provision
of this Agreement or the other Loan Documents, nor the consent to any departure
by Borrowers therefrom, shall in any event be effective unless the same shall
have been approved by Lender and shall be in writing signed by the Lender and,
with respect to any amendment, the Borrowers. Such waiver or consent shall then
be effective only in the specific instance and for the purpose for which given.
No notice to or demand on Borrowers in any case shall entitle Borrowers to any
other or further notice or demand in the same, similar or other circumstances.

 

30

 

 

17.3         Omitted.

 

17.4         Indemnification. Borrowers shall indemnify Lender and all of its
officers, employees, directors, attorneys, agents, affiliates, successors and
assigns (each, an “Indemnitee”) against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses (including
the fees, charges and disbursements of any counsel for any Indemnitee), incurred
by any Indemnitee or asserted against any Indemnitee by any third party or by
Borrowers or any Guarantor arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement, any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) any Loan
or the use or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of hazardous materials on or from any property owned
or operated by Borrowers or any of their subsidiaries, or any environmental
liability related in any way to Borrowers or any of their subsidiaries, or (iv)
any actual or prospective claims, litigation, investigation or proceeding
relating to any of the foregoing, whether based on contract, tort or any other
theory, whether brought by a third party or by Borrowers or any Guarantor, and
regardless of whether any Indemnitee is party thereto..

 

17.5         Notices. Except as otherwise expressly provided herein, any notice
herein required or permitted to be given shall be in writing and shall be deemed
effective when delivered personally, by certified mail, return receipt
requested, or by FedEx or other national overnight courier to the appropriate
party at the address set forth below (or at such other address as may be
designated by either party in a written notice sent in accordance with this
section):

 

If to Borrowers: Crumbs Bake Shop, Inc.   Crumbs Holdings LLC   110 West 40th
Street   New York, NY 10018   Attn: Ed Slezak     with a copy to: Cole, Schotz,
Meisel, Forman & Leonard, P.A.   Court Plaza North   25 Main Street  
Hackensack, NJ 07601   Attn: Marc P. Press, Esq.     If to Lender: Fischer
Enterprises, L.L.C.   15209 Grayson Drive   Edmond, OK 73013   Attn: S. Scott
Fischer     With a copy to: McAfee & Taft A Professional Corporation   10th
Floor, Two Leadership Square   211 N. Robinson   Oklahoma City, OK 73102   Attn:
Louis J. Price

 

31

 

 

17.6         Severability. In case any provision in this Agreement or the other
Loan Documents shall be invalid, illegal or unenforceable, such provision shall
be severable from the remainder of such contract and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

17.7         Construction. The rule of construction that a document is to be
construed most strictly against the party who drafted the document shall not be
applicable because all parties participated in the preparation of this Agreement
and the other Loan Documents. “Includes” and “including” are not limiting.
References to exhibits shall be to exhibits to this Agreement.

 

17.8         Applicable Law. The Laws of the State of Oklahoma shall govern this
Agreement and the other Loan Documents, and the legal relations between the
parties without giving effect to any conflict of Law provision (whether of the
State of Oklahoma or any other jurisdiction) that would cause the application of
the Law of any other jurisdiction.

 

17.9         Assignability. No Borrower may assign its rights or obligations
under this Agreement or the other Loan Documents to any other Person without the
prior written consent of the other party, and any attempted assignment in
violation hereof shall be null and void ab initio.

 

17.10       Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement. The exchange of copies of this Agreement and of
signature pages by facsimile transmission shall constitute effective execution
and delivery of this Agreement and may be used in lieu of the original Agreement
for all purposes.

 

17.11       Further Assurances. At any time or from time to time upon the
request of Lender, each Borrower will, and will take affirmative steps to cause
third parties to, execute and deliver such further documents and do such other
acts and things as Lender may reasonably request in order to effect fully the
purposes of this Agreement and the other Loan Documents and to provide for the
payment of the Obligations in accordance with the terms of this Agreement and
the other Loan Documents.

 

17.12       Attorneys’ Fees. In the event any party institutes any action or
proceeding to enforce the terms and conditions of this Agreement or the other
Loan Documents, the prevailing party shall be entitled to reasonable attorneys’
fees and costs.

 

32

 

 

17.13       Usury. It is the intention of Borrowers and Lender to comply with
applicable usury Laws. Therefore, notwithstanding any provisions to the contrary
in this Agreement or in any other Loan Document, neither this Agreement nor any
other Loan Document shall require the payment or permit the collection of
interest in excess of the maximum amount permitted by Law. If compliance with
this Agreement or any other Loan Document would result in a violation of
applicable usury Law, the amount of the payment obligation imposed by this
Agreement or any other Loan Document shall be reduced to the maximum amount
permitted by Law. If Lender receives any payment of interest, or receives any
payment or transfer that is deemed to be interest by applicable Law, in an
amount that exceeds applicable Law, the amount in excess of the limit imposed by
law shall be applied to reduce the principal amount owing under this Agreement
or the other Loan Document. If the amount received in excess of the limit
imposed by Law exceeds the unpaid principal balance due to Lender under this
Agreement, the excess amount shall be refunded without interest to Borrowers.

 

17.14       Integration. This Agreement and the other Loan Documents reflect the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, whether before or after the date hereof, except in a
writing executed by the parties hereto and referring specifically to this
Agreement. From time to time prior to the payment in full of the Obligations,
Borrower and Lender may conduct discussions and negotiations with respect to
Loans and the Loan Documents. Borrower agrees that no part of such discussions
or negotiations should be understood as an offer to contract or to alter the
terms of the Loan or the Loan Documents prior to the execution of a definitive
written agreement. Prior to the execution of a definitive written agreement,
Borrower shall not act in reliance on any statement of Lender or its officers.
No single officer of Lender is authorized to approve any change to the terms of
the Loans or the Loan Documents without prior approval in accordance with
Lender’s policies and procedures.

 

17.15       Time. Time is of the essence of this Agreement and the Loan.

 

17.16       VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN THE DISTRICT COURT OF OKLAHOMA COUNTY, OKLAHOMA, OR IN THE
UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA. BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY ACCEPTS THE JURISDICTION
OF SUCH COURTS. THIS AGREEMENT SHALL NOT AFFECT THE RIGHT OF LENDER TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY BORROWER IN ANY OTHER
JURISDICTION ALLOWED BY LAW. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.

 

17.17       WAIVER OF JURY TRIAL. EACH BORROWER AND LENDER VOLUNTARILY,
KNOWINGLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN ANY BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR THE LOAN. THIS PROVISION IS A MATERIAL
INDUCEMENT TO LENDER TO MAKE THE LOAN.

 

33

 

 

EXECUTED as of the date first written above.

 

“BORROWERS”     CRUMBS BAKE SHOP, INC., a Delaware corporation      
By:/s/Edward M. Slezak   Name: Edward M. Slezak   Title: Interim Chief Executive
Officer       CRUMBS HOLDINGS LLC, a Delaware limited liability company      
By:/s/Edward M. Slezak   Name: Edward M. Slezak   Title: Interim Chief Executive
Officer    

“LENDER”

        FISCHER ENTERPRISES, L.L.C., an Oklahoma limited liability company      
By:/s/ Scott Fischer         S. Scott Fischer, Chief Operating Officer

  

[Signature Page to Senior Secured Loan and Security Agreement]

 

 

 

 

EXHIBIT A-1

 

TRANCHE I NOTE
(Convertible)

 

$3,535,000.00 January 20, 2014   Oklahoma City, Oklahoma

 

Each of the undersigned, for value received jointly and severally promises to
pay to the order of Fischer Enterprises, L.L.C. (“Lender”) at 15209 Grayson
Drive, Edmond, Oklahoma 73013, or such other office as Lender may designate from
time to time, the aggregate principal amount of $3,535,000.00, together with
interest thereon at the rates set forth below.

 

This Note is the “Tranche I Note” referred to in, and evidences indebtedness
incurred under, and is subject to the terms and provisions of, the Senior
Secured Loan and Security Agreement, dated as of January 20, 2014 (as amended,
restated, supplemented or otherwise modified from time to time, the “Loan
Agreement;” terms not otherwise defined have the meanings assigned to them in
the Loan Agreement), between the undersigned and Lender. Reference is made to
the Loan Agreement for a statement of the terms and provisions under which this
Note may or must be paid prior to its due date or its due date accelerated.

 

Each of the undersigned further jointly and severally promises to pay interest
on the unpaid principal amount of the Loan from the date of such Loan until the
Loan is paid in full, payable at the rate of 7% per annum. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Interest will
be payable quarterly on January 1, April 1, July 1 and October 1 (each, an
“Interest Payment Date”) either (a) entirely in cash, or (b) entirely by
increasing the principal amount of the outstanding Notes by the amount of
interest due for such quarter (the “PIK Interest Option”). Borrowers shall be
deemed to have elected to pay interest by the PIK Interest Option unless Lender
has received a cash payment for the full amount of interest due for such quarter
by the Interest Payment Date. During the continuance of an Event of Default,
interest hereunder shall payable at the rate of 18% per annum. Payments of both
principal and interest are to be made in lawful money of the United States of
America.

 

Borrowers shall make any amendment to the Notes requested in writing by Lender
to evidence such PIK Interest (it being understood that the lack of such
amendment shall in no way affect the Notes being legal and valid evidence of any
such PIK Interest). Any PIK Interest shall constitute principal of the Notes and
shall accrue interest as such.

 

Except as otherwise set forth in the Loan Agreement from time to time, all
outstanding principal and accrued but unpaid interest shall be due and payable
on the earliest to occur of: (a) acceleration of the Obligations due to the
occurrence of an Event of Default, or (b) July 1, 2016. This Note is convertible
into validly issued, fully paid and non-assessable shares of Crumbs’ common
stock, par value $.0001 per share on the terms and conditions set forth in the
Loan Agreement.

 

Exhibit A-1 to LSA
Tranche I Note

 

 

This Note is made under and governed by the law of the State of Oklahoma
applicable to contracts made and to be performed entirely within such state.
Each of the undersigned, any other party liable with respect to the Loan and any
and all endorsers and accommodation parties, and each one of them, if more than
one, waive any and all presentment, demand, notice of dishonor, protest, and all
other notices and demands in connection with the enforcement of the Lender’s
rights under this Note, the Loan Agreement and the other Loan Documents, except
as otherwise specifically provided for therein.

 

[Signature Page Follows]

 

2

 

 

EXECUTED as of the date first written above.

 

CRUMBS BAKE SHOP, INC., a Delaware corporation         By:     Name:     Title:
   

 

CRUMBS HOLDINGS LLC, a Delaware
limited liability company         By:     Name:     Title:    

 

Exhibit A-1 to LSA
Tranche I Note

 

 

EXHIBIT A-2

 

TRANCHE II NOTE
(Convertible)

 

$1,500,000.00 ______________, 2014   Oklahoma City, Oklahoma

 

Each of the undersigned, for value received jointly and severally promises to
pay to the order of Fischer Enterprises, L.L.C. (“Lender”) at 15209 Grayson
Drive, Edmond, Oklahoma 73013, or such other office as Lender may designate from
time to time, the aggregate principal amount of $1,500,000.00, together with
interest thereon at the rates set forth below.

 

This Note is the “Tranche II Note” referred to in, and evidences indebtedness
incurred under, and is subject to the terms and provisions of, the Senior
Secured Loan and Security Agreement, dated as of January 20, 2014 (as amended,
restated, supplemented or otherwise modified from time to time, the “Loan
Agreement;” terms not otherwise defined have the meanings assigned to them in
the Loan Agreement), between the undersigned and Lender. Reference is made to
the Loan Agreement for a statement of the terms and provisions under which this
Note may or must be paid prior to its due date or its due date accelerated.

 

Each of the undersigned further jointly and severally promises to pay interest
on the unpaid principal amount of the Loan from the date of such Loan until the
Loan is paid in full, payable at the rate of 7% per annum. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Interest will
be payable quarterly on January 1, April 1, July 1, and October 1 (each, an
“Interest Payment Date”) either (a) entirely in cash, or (b) entirely by
increasing the principal amount of the outstanding Notes by the amount of
interest due for such quarter (the “PIK Interest Option”). Borrowers shall be
deemed to have elected to pay interest by the PIK Interest Option unless Lender
has received a cash payment for the full amount of interest due for such quarter
by the Interest Payment Date. During the continuance of an Event of Default,
interest hereunder shall payable at the rate of 18% per annum. Payments of both
principal and interest are to be made in lawful money of the United States of
America.

 

Borrowers shall make any amendment to the Notes requested in writing by Lender
to evidence such PIK Interest (it being understood that the lack of such
amendment shall in no way affect the Notes being legal and valid evidence of any
such PIK Interest). Any PIK Interest shall constitute principal of the Notes and
shall accrue interest as such.

 

Except as otherwise set forth in the Loan Agreement from time to time, all
outstanding principal and accrued but unpaid interest shall be due and payable
on the earliest to occur of: (a) acceleration of the Obligations due to the
occurrence of an Event of Default, or (b) July 1, 2016. This Note is convertible
into validly issued, fully paid and non-assessable shares of Crumbs’ common
stock, par value $.0001 per share on the terms and conditions set forth in the
Loan Agreement.

 

Exhibit A-2 to LSA
Tranche II Note

 

 

This Note is made under and governed by the law of the State of Oklahoma
applicable to contracts made and to be performed entirely within such state.
Each of the undersigned, any other party liable with respect to the Loan and any
and all endorsers and accommodation parties, and each one of them, if more than
one, waive any and all presentment, demand, notice of dishonor, protest, and all
other notices and demands in connection with the enforcement of the Lender’s
rights under this Note, the Loan Agreement and the other Loan Documents, except
as otherwise specifically provided for therein.

 

[Signature Page Follows]

 

2

 

 

EXECUTED as of the date first written above.

 

CRUMBS BAKE SHOP, INC., a Delaware corporation

        By:     Name:     Title:          

CRUMBS HOLDINGS LLC, a Delaware

limited liability company

        By:     Name:     Title:    

 

Exhibit A-2 to LSA
Tranche II Note

 

 

EXHIBIT B

 

INSURANCE REQUIREMENTS

 

1.Special Perils Insurance.

 

(a)Borrower will maintain property insurance against all risks of loss
customarily covered by “All Risk” or “Special Perils Form” policies as available
in the insurance market (the “Special Perils Insurance”).

 

(b)Each Special Perils Insurance policy shall cover at least 100% of the
replacement value of all material properties of Borrower.

 

(c)Any Special Perils Insurance policy shall contain an agreed amount
endorsement or a coinsurance waiver and replacement cost value endorsement
without reduction for depreciation.

 

2.Liability Insurance.

 

(a)Borrower shall maintain the following insurance for personal injury, bodily
injury, death, accident, and property damages (collectively, the “Liability
Insurance”):

 

(i)Public liability insurance, including commercial general liability insurance,
and

 

(ii)Umbrella liability insurance as necessary.

 

(b)Liability Insurance shall provide coverage of at least $1,000,000 per
occurrence and $2,000,000 in annual aggregate.

 

(c)Liability Insurance shall include coverage for liability arising from
premises and operations, elevators, escalators, independent contractors,
contractual liability, and products and completed operations.

 

3.Statutory Employees’ Insurance. Borrower shall maintain workers’ compensation
and disability insurance as required by law.

 

4.Policy Requirements.

 

(a)Borrower shall obtain all Required Insurance from domestic carrier(s)
authorized to do business in the State of Oklahoma and reasonably satisfactory
to Lender with:

 

(i)A claims paying ability of not less than “A” (or the equivalent) by S&P and
one other rating agency satisfactory to Lender, and

 

(ii)“A X” or better financial strength rating by AM Best.

 

Exhibit B to LSA
Insurance Requirements

 

 

(b)Borrower shall obtain Lender’s reasonable approval of the amounts,
deductibles, endorsements, form, insureds, loss payees, risk coverage, and
sublimits for all required insurance.

 

(c)All required insurance shall contain such provisions as are ordinary and
customary in commercial loans similar to this Loan to protect Lender’s interest,
including endorsements to negate any coinsurance Borrower shall pay the premiums
for all required insurance when due and payable. Borrower shall not finance
premiums under any arrangement that could, upon nonpayment, lead to premature
cancellation of any required insurance.

 

5.Blanket Coverage. Borrower may provide any required insurance under a blanket
policy or policies provided that the blanket policy otherwise meets all
requirements for required insurance and is otherwise acceptable to Lender.

 

6.Protection of Lender’s Interest.

 

(a)Borrower shall cause its insurance carrier to give Lender the following
protections in each insurance policy (or an endorsement) as follows:

 

(i)an agreement not to change the deductible, coverage limit(s). or other
term(s) of the policy, if the policy would thereafter cease to comply with the
Loan Agreement;

 

(ii)a waiver of any right to claim any premiums and commissions against Lender;
provided that the policy need not waive the requirement that the premium be paid
in order for a claim to be paid to the insured; and

 

(iii)an agreement to allow Lender to pay premiums to continue the policy upon
notice of cancellation for nonpayment.

 

(b)Every Property Insurance policy shall by its terms remain valid and insure
the Lender’s interest regardless of any:

 

(i)Named insured’s act, failure to act, negligence, or violation of warranties,
declarations, or conditions;

 

(ii)Occupancy of use of the property for purposes more hazardous than those
permitted; or

 

(iii)Exercise of any of Lender’s remedies.

 

Exhibit B to LSA
Insurance Requirements

 

   

Execution Version

 

EXHIBIT C

 

MEMBERSHIP INTEREST PLEDGE AGREEMENT

 

THIS MEMBERSHIP INTEREST PLEDGE AGREEMENT (this "Agreement") is made as of
January 20, 2014, between Crumbs Holdings LLC, a Delaware limited liability
company (“Pledgor”) and Fischer Enterprises, L.L.C., an Oklahoma limited
liability company (“Lender”), with reference to the following:

 

A.           Pledgor owns one hundred percent (100%) of the issued and
outstanding units of membership interests in each of the companies set forth on
Exhibit A (the “Pledged Entities”);

 

B.           Crumbs Bake Shop, Inc., a Delaware corporation (“Crumbs”), and
Pledgor, each as a borrower, and Lender are parties to that certain Senior
Secured Loan and Security Agreement, dated as of January 20, 2014 (such
agreement, as amended, restated, supplemented or otherwise modified from time to
time, being hereinafter referred to as the "Loan Agreement"), pursuant to which
Lender has extended in favor of the Borrowers certain credit facilities;

 

C.           It is a condition precedent to the obligations of Lender under the
Loan Agreement that Pledgor shall have granted to Lender a first priority
security interest in and a lien on all of the outstanding membership units and
interests of the Pledged Entities owned by Pledgor and in which Pledgor have any
interest at any time; and

 

D.           Pledgor has determined that the execution, delivery and performance
of this Agreement directly benefits and is in the best interest of and supported
by valuable consideration received by Pledgor.

 

NOW, THEREFORE, in consideration of the credit to be extended pursuant to the
Loan Agreement, and as a material inducement therefor, and for other good and
valuable consideration, the Pledgor hereby covenants and agrees with Lender as
follows:

 

ARTICLE I

DEFINITIONS

 

1.1          Certain Terms. Any capitalized terms used herein (including in the
recitals hereto) and not otherwise defined shall have the meaning assigned that
term in the Loan Agreement. The following terms used herein shall have the
meanings indicated:

 

"Charter Documents" means the (i) Articles or Organization or Certificate of
Formation, as applicable, (ii) Operating Agreement, and (iii) all other
documents governing the formation and governance of each Pledged Entity.

 

"Collateral" means (i) the Membership Interests, (ii) all of Pledgor's rights
and benefits (but not any of Pledgor’s duties or obligations) under any
agreement (whether oral or written and whether now existing or hereafter entered
into) for the sale of the Membership Interests to the extent of the Obligations
owed to Lender, (iii) all of Pledgor’s rights to payment arising from any sale,
transfer or other disposition of the Membership Interests to the extent of the
Obligations owed to Lender, and (iv) all Proceeds of the foregoing.

 

1

 

 

Execution Version

 

"Membership Interests" means the entire interest of Pledgor in and to the
Pledged Entities, including (i) the entire membership interest of Pledgor in and
to the Pledged Entities, including all common and preferred membership and
equity ownership interest therein, (ii) Pledgor’s share of the profits and
losses of the Pledged Entities, (iii) Pledgor’s revenue interest in the Pledged
Entities, and all other associated rights to receive distributions from the
Pledged Entities (whether in cash or in-kind and whether ordinary, liquidating
or otherwise), (iv) all payments and distributions (whether in cash or in-kind
and whether ordinary, liquidating or otherwise) from time to time made upon or
with respect to Pledgor’s interest, and all other amounts due and payable, or to
become due and payable, on account of such interests, (v) Pledgor’s distributive
share of assets of the Pledged Entities upon liquidation or termination, (vi)
Pledgor’s right to vote or participate in the management of the Pledged
Entities, (vii) Pledgor’s capital interest or capital account (however
designated) in the Pledged Entities, and all rights of Pledgor with respect
thereto and all earnings, income and profits therefrom, (viii) any additional
interests in the Pledged Entities, respectively, from time to time acquired by
Pledgor and all rights of Pledgor with respect to such additional interests and
all earnings, income and profits therefrom, and (ix) all other rights and
interests of Pledgor in and to the Pledged Entities (whether arising under the
Charter Documents, by law or otherwise).

 

"Operating Agreement" means the operating agreement or company agreement of each
of the Pledged Entities.

 

"Proceeds" means all proceeds of the Collateral, including (i) all amounts paid
or payable to Pledgor upon any sale, transfer or other disposition by Pledgor of
all or any portion of the Membership Interests, and (ii) all proceeds in the
form of accounts, collections, contract rights, documents, instruments, chattel
paper, general intangibles or payment intangibles relating in whole or in part
to the Collateral.

 

1.2          Terms Defined in UCC. Terms used herein that are defined in Article
9 of the UCC have the respective meanings set forth therein.

 

ARTICLE II

GRANT AND CONTINUATION OF SECURITY INTEREST

 

2.1          Security Interest. To secure the Obligations, Pledgor does hereby
pledge, transfer and assign unto Lender, and grant to Lender a continuing, first
priority security interest in, the Collateral. Such security interest is granted
as security only and shall not subject Lender or other holders from time to time
of the Obligations to, or transfer or in any way affect or modify, any
obligation or liability of Pledgor with respect to the Membership Interests.

 

2.2          Obligations Secured. The Collateral and the security interest
therein created by this Agreement shall secure the full and punctual payment of
the Obligations, including the Notes, as well as all sums expended or advanced
by Lender pursuant to any term or provision of this Agreement.

 

2

 

 

Execution Version

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Pledgor represents and warrants to Lender as follows:

 

3.1          Ownership. Pledgor has good and indefeasible title to the
Membership Interests owned by Pledgor, free and clear of any lien or encumbrance
of any kind, except for the security interest created by this Agreement or the
Loan Agreement. The Membership Interests constitute a one hundred percent (100%)
unit ownership interest in the Pledged Entities and entitle Pledgor to receive
one hundred percent (100%) of the profits and losses of the Pledged Entities.

 

3.2          Charter Documents. The Operating Agreement of each of the Pledged
Entities is in full force and effect and has not been amended or modified in any
respect other than to the extent permitted by Section 4.1 of this Agreement.
Pledgor has made or paid all capital contributions required or requested to be
made to the Pledged Entities contemplated by the Charter Documents thereof.
Pledgor is not in default in the payment or performance of Pledgor’s liabilities
or obligations under the Charter Documents, nor has Pledgor committed any
material breach of the Charter Documents. No event of dissolution specified in
the Charter Documents has occurred, nor has any other action been taken to
dissolve or terminate any of the Pledged Entities.

 

3.3          No Prior Filings. No financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
UCC filing office, except such as may have been filed in favor of Lender
pursuant to this Agreement and the Loan Agreement.

 

3.4          Certificates. The Membership Interests in each of the Pledged
Entities are not represented and evidenced by any form of certificate or other
similar instrument or writing; provided, however, in the event any such
certificate or other instrument or writing hereafter evidences or memorializes
such Membership Interests in the Pledged Entities, they will be promptly
delivered to the possession of Lender within ten (10) days along with such
executed membership powers in blank as requested by Lender.

 

3.5          Authorization. This Agreement has been duly authorized, executed
and delivered by Pledgor and constitutes the legal, valid and binding obligation
of Pledgor, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally, and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.

 

3.6          Status of Security Interest. Upon its execution of this Agreement
and filing of an appropriate UCC financing statement authorized to be filed by
Pledgor and describing the Collateral, Lender will have a valid, first, and
prior perfected security interest in and to the Membership Interests and all
other Collateral.

 

3.7          Approvals. No authorization, approval or other action by, and no
notice to or filing with, any Person is required which has not been taken (i)
for the grant by Pledgor of the security interest hereunder, (ii) for Pledgor’s
execution, delivery or performance of this Agreement, (iii) for the perfection
of the security interest created hereunder, or (iv) except for such notices as
are required by the UCC or any other Loan Document, for the exercise by Lender
of its rights and remedies hereunder. Following the occurrence of any default of
an Obligation, any transfer or proposed transfer of the Membership Interests by
Lender, whether by public or private sale of the Collateral, will not be subject
to any restrictions on transfer or rights of first refusal, including any which
may be set forth in the Charter Documents.

 

3

 

 

Execution Version

 

ARTICLE IV

COVENANTS

 

Pledgor covenants and agrees with Lender that, until the Obligations have been
paid and satisfied in full:

 

4.1          Amendments of Charter Documents. Pledgor will not, without the
prior written consent of Lender (which may be withheld by Lender in the exercise
of its reasonable discretion), cause, permit or consent to any amendment or
modification of any Charter Document which would have the effect of reducing the
Membership Interests.

 

4.2          Restriction on Encumbrances. Pledgor will not create, incur, or
permit to be placed, imposed, or continued upon the Collateral any security
interest, encumbrance, or other Lien of any type or nature whatsoever, other
than security interests in favor of Lender.

 

4.3          Transfer of Membership Interests. Pledgor will not sell, transfer,
pledge or otherwise encumber the Membership Interests or any other property
included in the Collateral unless in connection with such transfer the
Obligations are fully satisfied by Pledgor.

 

4.4          Further Assurances. Pledgor will, at Pledgor’s sole expense and in
such manner and form as Lender may reasonably require, execute, deliver, file,
and record any financing statement, specific assignment or other paper and take
any other action that may be necessary or commercially reasonable, or that
Lender may reasonably request, in order to create, preserve, perfect, or
validate the security interest created hereunder or to enable Lender to exercise
and enforce its rights hereunder with respect to any of the Collateral. To the
extent permitted by applicable law, Pledgor hereby authorizes Lender to execute
and file, in the name of Pledgor or otherwise, UCC financing statements which
Lender in its sole discretion may deem necessary or appropriate to further
perfect the security interest created hereunder.

 

4.5          Perfection Against Distributions. In the event Pledgor receives, by
virtue of being or having been an owner of any of the Collateral, any notes or
other instruments or certificates with respect to the Membership Interests,
Pledgor will receive the same in trust for the benefit of Lender, will
immediately notify Lender of such receipt, and will immediately take all such
actions and execute all such documents as Lender deems reasonably necessary or
appropriate to continue or create first and prior perfected Liens in favor of
Lender covering such notes or other instruments or certificates.

 

4.6          Limitation on Distributions. Pledgor agrees, covenants, and
stipulates with Lender that Pledgor will not, without the prior written consent
of Lender, take any distributions from the Pledged Entities if and to the extent
an Event of Default has occurred under the Loan Agreement or any other Loan
Document that remains uncured.

 

ARTICLE V

GENERAL AUTHORITY AND POWERS AND REMEDIES UPON DEFAULT

 

5.1          Right to Receive Distributions. If a default of any Obligation
shall have occurred and be continuing under this Agreement or the Loan
Agreement, Lender shall have the right to receive all payments and distributions
made upon or with respect to the Collateral, and Pledgor agrees to take all such
action as Lender may deem necessary or appropriate to give effect to such right.

 

4

 

 

Execution Version

 

5.2          General Authority. Pledgor hereby irrevocably appoints Lender as
Pledgor’s true and lawful attorney-in-fact, with full power of substitution, in
the name of Pledgor, Lender or otherwise, for the sole use and benefit of Lender
and the holders of the Obligations, but at Pledgor’s expense, to the extent
permitted by law, to exercise, at any time and from time to time while a default
of any Obligation has occurred and is continuing without timely cure under this
Agreement or the Loan Agreement, all or any of the following powers with respect
to all or any of the Collateral:

 

(a)          to ask, demand, sue for, collect, receive and give acquittance and
receipts for any and all monies due or to become due upon or by virtue thereof;

 

(b)          to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper in connection with clause (a) preceding; and

 

(c)          to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto.

 

5.3          Remedies Upon Default. If a default of any Obligation shall have
occurred and be continuing without timely cure by Pledgor, Lender may exercise
all the rights of a Lender under the UCC, including the right to sell the
Collateral or any part thereof at public or private sale or at any broker's
board for cash, upon credit or for future delivery, and at such price or prices
as Lender may deem satisfactory. Lender, instead of exercising the power of sale
herein conferred, may proceed by a suit or suits at law or in equity to
foreclose the security interest created hereunder and sell the Collateral, or
any portion thereof, under a judgment or decree of a court or courts of
competent jurisdiction.

 

5.4          Provisions Concerning Sale of Collateral. Lender or any other
holder of the Obligations may be the purchaser of any or all of the Collateral
sold at any public sale (or, 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, at any private sale) and thereafter hold the same
absolutely, free from any right to claim of whatsoever kind. Lender is
authorized, in connection with any such sale, (i) to restrict the prospective
bidders on or purchasers of any of the Collateral to a limited number of
sophisticated investors who will represent and agree that they are purchasing
for their own account for investment and not with a view to the distribution or
sale of any of such Collateral and (ii) to impose other limitations or
conditions in connection with any such sale as Lender deems necessary or
advisable in order to comply with law. Pledgor covenants and agrees that Pledgor
will execute and deliver such documents and take the other actions which Lender
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale, Lender shall have the right to deliver,
assign, and transfer to the purchaser thereof the Collateral so sold. Each
purchaser at any such sale shall hold the Collateral so sold absolutely free
from any claim or right of Pledgor of whatsoever kind, including any equity or
right of redemption of Pledgor. Pledgor, to the extent permitted by law, hereby
specifically waive all rights of redemption, stay or appraisal which Pledgor
have or may have under any law now existing or hereafter enacted. Pledgor agrees
that 10 days' written notice from Lender to Pledgor of Lender's intention to
make any such public or private sale shall constitute "reasonable authenticated
notification" within the meaning of Section 9-611(b) of the UCC. At any such
sale, the Collateral may be sold in one lot as an entirety or in separate
parcels, as Lender may determine reasonably appropriate. Lender shall not be
obligated to make any such sale pursuant to any such notice. Lender may, without
notice or publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the same may
be so adjourned.

 

5

 

 

Execution Version

 

5.5          Waivers by Pledgor. If a default of any Obligation shall have
occurred and be continuing beyond any applicable cure period, neither the
Pledgor nor any Person claiming by, through or under Pledgor, to the extent
Pledgor may lawfully so agree, shall claim or seek to take advantage of any
appraisement, valuation, stay, extension, or redemption law now or hereafter in
force in any locality where any of the Collateral is situated for purposes of
applicable law, in order to prevent or hinder the enforcement of this Agreement,
or the absolute sale of the Collateral, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchaser thereto; and
Pledgor in Pledgor’s own right and for all who may claim under them, hereby
waives, to the full extent that they may lawfully do so, the benefit of all such
laws and any and all right to have the Collateral marshaled upon any enforcement
of the security interest herein granted, and agrees that Lender or any court
having jurisdiction to enforce the security interest may sell the Collateral in
parts or as an entirety.

 

5.6          Application of Proceeds. Lender shall apply the proceeds of any
foreclosure sale or other realization upon the Collateral as follows (as
modified, if necessary, by the requirements of applicable law):

 

(a)          First, to the payment of all costs and expenses of any foreclosure
and collection hereunder and all proceedings in connection therewith, including
reasonable fees and expenses of its agents and counsel;

 

(b)          Then, to the reimbursement of Lender for all disbursements made by
Lender for taxes, assessments or Liens superior to the security interest and
which Lender shall deem expedient to pay;

 

(c)          Then, to the reimbursement of Lender for any other disbursements
made by, or expenses incurred by, Lender in accordance with the terms hereof;

 

(d)          Then, to or among the amounts of fees, interest and principal then
owing and unpaid in respect of the Obligations in accordance with the provisions
of the Notes and other Loan Documents; and

 

(e)          The remainder of the proceeds, if any, shall be paid to Pledgor.

 

5.7          Enforcement of Obligations. Nothing in this Agreement shall affect
or impair the unconditional and absolute right of Lender to enforce the
Obligations as and when the same shall become due and payable in accordance with
the terms of the Notes or other Loan Documents, whether by acceleration or
otherwise, and subject to any applicable Pledgor cure rights.

 

6

 

 

Execution Version

 

ARTICLE VI

MISCELLANEOUS

 

6.1          Amendments. No change, amendment, modification, cancellation or
discharge of any provision of this Agreement shall be valid unless consented to
in writing by Lender and Pledgor.

 

6.2          Assignment of Rights. Lender shall have the right to assign all or
any portion of its rights in this Agreement to any subsequent holder or holders
of the Notes or any portion thereof in accordance with the terms and provisions
of the Notes.

 

6.3          Parties in Interest. As and when used herein, the term "Pledgor"
shall mean and include Pledgor’s successors and permitted assigns, and the term
"Lender" shall mean and include Lender's successors and assigns, and all
covenants and agreements herein shall be binding upon and insure to the benefit
of Pledgor and Lender and their respective successors and assigns, provided that
Pledgor shall not have any right to assign Pledgor’s rights or duties hereunder
to any other Person without the written consent of Lender.

 

6.4          GOVERNING LAW. THIS AGREEMENT WILL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OKLAHOMA EXCEPT ONLY TO
THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR NONPERFECTION, AND
PRIORITY OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF OKLAHOMA.

 

6.5          Notices. All notices, notifications, requests and demands required
or authorized hereunder shall be made in accordance with and subject to the
notice provisions of the Loan Agreement. Notices served in person will be
effective and deemed given when delivered; notices sent by certified mail will
be effective and deemed given three (3) Business Days after being deposited in
the U.S. mail, postage prepaid; notices sent by overnight courier for next day
delivery will be effective and deemed given on the next Business Day after being
delivered to the courier service; and notices transmitted by fax will be deemed
given when sent, as indicated by the sender's written confirmation of
transmission.         

 

6.6          Financing Statement. Lender shall be entitled at any time to file a
photographic or other reproduction of this Agreement as a financing statement or
otherwise file a UCC Financing Statement in accordance with the applicable
provisions of the UCC.

 

6.7          Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.

 

[Signature Page Follows]

 

7

 

 

IN WITNESS WHEREOF, Pledgor has executed and delivered this Membership Interest
Pledge Agreement to and in favor of Lender, as of the date first stated above.

 

  CRUMBS HOLDINGS LLC, a Delaware limited liability company         By:    
Name:     Title:  

 

[Signature Page to Membership Pledge Agreement]

 

 

 

 

EXHIBIT A

 

Pledged Entities

 

oCrumbs 17th Street, LLC, a District of Columbia limited liability company

oCrumbs 42nd Street, LLC, a New York limited liability company

oCrumbs 92nd Street, LLC, a New York limited liability company

oCrumbs Americana, LLC, a California limited liability company

oCrumbs Beverly Hills, LLC, a California limited liability company

oCrumbs Broad Street, LLC, a New York limited liability company

oCrumbs Broadway LLC, a New York limited liability company

oCrumbs Brooklyn Heights LLC, a New York limited liability company

oCrumbs Calabasas, LLC, a California limited liability company

oCrumbs Catering LLC, a New York limited liability company

oCrumbs Clarendon LLC, a Virginia limited liability company

oCrumbs Columbia LLC, a New York limited liability company (f/k/a Crumbs 125th
Street, LLC)

oCrumbs Columbus LLC, a New York limited liability company

oCrumbs Downtown II, LLC, a New York limited liability company

oCrumbs East Bakeshop II, LLC, a New York limited liability company

oCrumbs East End, LLC, a District of Columbia limited liability company

oCrumbs E-Commerce LLC, a New York limited liability company

oCrumbs Federal Street LLC, a Delaware limited liability company

oCrumbs Garment Center LLC, a New York limited liability company

oCrumbs Grand Central LLC, a New York limited liability company

oCrumbs Greenvale LLC, a New York limited liability company

oCrumbs Greenwich, LLC, a Connecticut limited liability company

oCrumbs Hoboken, LLC, a New Jersey limited liability company

oCrumbs Hollywood LLC, a California limited liability company

oCrumbs Huntington LLC, a New York limited liability company

oCrumbs II, LLC, a New York limited liability company

oCrumbs International Place, LLC, a Delaware limited liability company

oCrumbs L Street, LLC, a District of Columbia limited liability company

oCrumbs Larchmont, LLC, a California limited liability company

oCrumbs LaSalle, LLC, an Illinois limited liability company

oCrumbs L’Enfant Plaza, LLC, a District of Columbia limited liability company

oCrumbs Lexington LLC, a New York limited liability company

oCrumbs Madison LLC, a New York limited liability company

oCrumbs Malibu, LLC, a California limited liability company

oCrumbs Newark LLC, a New Jersey limited liability company

oCrumbs New Canaan, LLC, a California limited liability company

oCrumbs Oak Park, LLC, an Illinois limited liability company

oCrumbs Park Avenue LLC, a New York limited liability company

oCrumbs Park Avenue South, LLC, a New York limited liability company

oCrumbs Queens Center, LLC, a New York limited liability company

oCrumbs Retail Bake Shops, LLC, a Delaware limited liability company (f/k/a
Crumbs Fulton Street, LLC

 

Exhibit A

Membership Interest Pledge Agreement

 

 

 

 

oCrumbs Ridgewood, LLC, a New Jersey limited liability company

oCrumbs Rittenhouse Square, LLC, a Delaware limited liability company

oCrumbs River North, LLC, an Illinois limited liability company

oCrumbs Sixth Avenue, LLC, a New York limited liability company

oCrumbs South Clark, LLC, an Illinois limited liability company

oCrumbs Stamford, LLC, a Connecticut limited liability company

oCrumbs Third Avenue LLC, a New York limited liability company

oCrumbs Times Square LLC, a New York limited liability company

oCrumbs Union Square LLC, a New York limited liability company

oCrumbs Union Station LLC, a District of Columbia limited liability company

oCrumbs Wall Street II, LLC, a New York limited liability company

oCrumbs West Madison, LLC, an Illinois limited liability company

oCrumbs Westfield LLC, a New Jersey limited liability company

oCrumbs Westport, LLC, a Connecticut limited liability company

oCrumbs Wholesale II, LLC, a New York limited liability company

oCrumbs Woodbury LLC, a New York limited liability company

 

Exhibit A

Membership Interest Pledge Agreement

 

 

 

      

Execution Version

 

EXHIBIT D

 

GRANT OF SECURITY INTEREST IN TRADEMARK

 

This GRANT OF SECURITY INTEREST IN TRADEMARK (“Trademark Security Interest”) is
made as of the 20th day of January, 2014 by and between Crumbs Holdings LLC, a
Delaware limited liability company (“Debtor”), and Fischer Enterprises, L.L.C.,
an Oklahoma limited liability company (“Secured Party”).

 

RECITALS

 

A.           Secured Party, Debtor and Crumbs Bake Shop, Inc. are parties to
that certain Senior Secured Loan and Security Agreement dated concurrently
herewith (such agreement, as amended, restated, supplemented or otherwise
modified from time to time, the “Loan Agreement”), pursuant to which the Debtor
has agreed to grant a security interest in the Collateral, including, without
limitation, United States Trademark Registration Nos. 3,696,945 for the mark
SERVING SMILES DAILY filed October 30, 2008; 3,717,588 for the mark MADE BY
HAND. BAKED WITH LOVE filed October 24, 2008; 3,720,870 for the mark CRUMBS BAKE
SHOP (and design) filed October 24, 2008; and 3,720,871 for the mark CRUMBS BAKE
SHOP (and design) (collectively, the “Trademark Registrations”), as well as
United States Trademark Application Serial Nos. 85/826,907 for the mark CRUMBS
BAKE SHOP (and design) filed January 18, 2013; 86/066,657 for the mark CRUMBS
filed September 17, 2013; 86/066,667 for the mark CRUMBS BAKE SHOP filed
September 17, 2013; and 86/072,025 for the mark CRUMBS GLUTEN FREE filed
September 23, 2013 (collectively, the “Trademark Applications”);

 

B.           For purposes of this Trademark Security Interest, capitalized terms
used but not defined herein shall have the meanings set forth in the Loan
Agreement; and

 

C.           Secured Party and Debtor desire to execute a separate Trademark
Security Interest specifically directed to the Trademark Registrations and
Trademark Applications that is suitable for recordation in the Assignment
Division of the U.S. Patent and Trademark Office.

 

NOW, THEREFORE, in accordance with the Loan Agreement, and in consideration of
the premises and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed that:

 

1.          Grant of Security Interest. Debtor hereby assigns, grants, transfers
and conveys to Secured Party a security interest in all of Debtor’s right, title
and interest in and to the Collateral, including but not limited to the
Trademark Registrations and Trademark Applications, together with the goodwill
of the business connected with the use of and symbolized by the Trademark
Registrations and Trademark Applications, and all proceeds and products of the
Trademark Registrations and Trademark Applications, and all causes of action
arising prior to or after the date hereof for infringement of the Trademark
Registrations and Trademark Applications or unfair competition regarding the
same, to secure the prompt and complete payment and performance of Obligations
under the Loan Agreement. Debtor hereby irrevocably authorizes Secured Party at
any time and from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction, including but not limited to the Assignment
Division of the U.S. Patent and Trademark Office, any initial financing
statements and amendments thereto that indicate the Collateral as all assets of
Debtor or words of similar effect, to the extent that a security interest in the
Collateral can be perfected by such filing.

 

 

 

 

2.          Governing Law. This Trademark Security Interest shall be governed by
and construed under the laws of the State of Oklahoma, without regard to the
conflicts of law provisions thereof.

 

3.          Conflict. The rights and remedies of the Secured Party with respect
to the security interest granted herein are without prejudice and are in
addition to those set forth in the Loan Agreement, all terms and provisions of
which are incorporated herein by reference. In the event of a conflict between
the terms and conditions of this Trademark Security Interest and the terms and
conditions of the Loan Agreement, the terms and conditions of the Loan Agreement
shall govern, supercede, and prevail.

 

4.          Successors. This Trademark Security Interest and the covenants and
agreements herein contained shall inure to the benefit of Secured Party, its
successors, and assigns, and shall be binding upon Debtor, its successors, and
assigns.

 

5.          Counterparts. This Trademark Security Interest may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

 

IN WITNESS WHEREOF, Secured Party and Debtor have caused this instrument to be
executed as of the date first above written.

 

SECURED PARTY:             Fischer Enterprises, L.L.C., an Oklahoma limited
liability company         By:     Name: S. Scott Fischer   Title: Chief
Operating Officer       DEBTOR:             Crumbs Holdings LLC, a Delaware
limited liability company         By:     Name:     Title:  

 

 

 

  

EXHIBIT E

 

DEPOSIT ACCOUNT CONTROL AGREEMENT

 

Post Closing Delivery

 

Exhibit E to LSA
Deposit Account Control Agreement

 

 

EXHIBIT F

 

CONVERSION NOTICE
FOR CRUMBS BAKE SHOP, INC.

 

Reference is made to that certain Senior Secured Loan and Security Agreement
dated as of January ___, 2014 (the “Loan Agreement”), between Crumbs Holdings
LLC (“Crumbs Holdings”) and Crumbs Bake Shop, Inc. (the “Company”, together with
Crumbs Holdings, collectively, the “Borrowers”), and Fischer Enterprises, L.L.C.
(“Lender”), pursuant to which the Borrowers issued a Tranche I Promissory Note
and a Tranche II Promissory Note, each in favor of Lender (collectively, the
“Notes” and each a “Note”). In accordance with the Loan Agreement and the Notes,
the Lender hereby elects to convert the Conversion Amount (as defined in the
Loan Agreement) of the Note indicated below into shares of Common Stock, $0.0001
par value per share (the “Common Stock”) of the Company, as of the date
specified below:

 

Date of Conversion:           Aggregate principal to be converted:          
Aggregate accrued and unpaid Interest and accrued and unpaid late charges with
respect to such portion of the aggregate principal and such aggregate interest
to be converted:           AGGREGATE CONVERSION AMOUNT TO BE CONVERTED:        
  Please confirm the following information:           Conversion Price:        
  Number of shares of Common Stock to be issued:    

 

Exhibit F to LSA
Conversion Notice

 

 

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

 

Issue to:                       Facsimile Number:       Holder:       By:      
Title:  

  

Dated:  

 

Account Number:  

(if electronic book entry transfer)       Transaction Code Number:     (if
electronic book entry transfer)

 

Exhibit F to LSA
Conversion Notice

 

 

EXHIBIT G

     

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into as
of this 20th day of January, 2014 by and among Crumbs Bake Shop, Inc., a
Delaware corporation (the “Company”), and Fischer Enterprises, L.L.C., the
“Lender” under that certain Senior Secured Loan and Security Agreement, dated as
of January 20, 2014, by and among the Company and Crumb Holdings LLC, as
“Borrowers”, and the Lender (the “Loan Agreement”).

 

RECITALS

 

A.           In connection with the Loan Agreement, the Lender has agreed, upon
the terms and subject to the conditions of the Loan Agreement to make a Loan in
an aggregate principal amount of $5,000,000 to the Borrowers that will be
evidenced by a Tranche I Note and a Tranche II Note (as each such term is
defined in the Loan Agreement) which will be convertible into Conversion Shares
(as defined in the Loan Agreement) in accordance with the terms of the Loan
Agreement.

 

B.           To induce the Lender to make available the Loan under the Loan
Agreement, the Company has agreed to provide certain registration rights to
Lender under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the “
1933 Act “), and applicable state securities laws.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the Lender
hereby agree as follows:

 

1.          Certain Definitions.

 

In addition to those terms defined above and elsewhere in this Agreement, the
terms set forth below shall, for purposes of this Agreement, have the respective
meanings indicated. Capitalized terms used but not defined herein shall have the
respective meanings specified in the Loan Agreement.

 

“Common Stock” means the Company’s common stock, par value $0.0001 per share,
and any securities into which such shares may hereinafter be reclassified.

 

“Prospectus” means (i) the prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus, and (ii) any “free writing prospectus” as defined
in Rule 405 under the 1933 Act.

 

 

 

 

“Register,” “registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

 

“Registrable Securities” means (i) the Conversion Shares, and (ii) any capital
stock of the Company issued or issuable with respect to the Conversion Shares or
the Notes, including, without limitation, (1) as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise and (2)
shares of capital stock of the Company into which the shares of Common Stock are
converted or exchanged and shares of capital stock of a successor entity into
which the shares of Common Stock are converted or exchanged, in each case,
without regard to any limitations on conversion of the Notes; provided that a
security shall cease to be a Registrable Security upon (A) sale of such
Registrable Security pursuant to a Registration Statement or Rule 144 under the
1933 Act, (B) with respect to a Registrable Security held by any particular
Person, when such Person is permitted to sell such Registrable Security without
restriction pursuant to Rule 144, (C) when the Registrable Security is resold to
the Company for cash, or (D) when the Registrable Security otherwise ceases to
be outstanding.

 

“Registration Statement” means any registration statement of the Company filed
under the 1933 Act that covers the resale of any of the Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Shelf Registration” means an offering of Registrable Securities made on a
delayed or continuous basis pursuant to Rule 415 under the 1933 Act.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

 

2

 

 

2.          Registration.

 

(a)          Demand Registration Rights.

 

(i)          At any time following the closing of the purchase and sale of the
Notes contemplated by the Loan Agreement, the Company shall receive a request
(each such request shall be referred to herein as a “Demand Registration”) from
the Lender that the Company effect the registration under the Securities Act of
the number of Registrable Securities designated by Lender but of not less than
10% of the outstanding Registrable Securities, and specifying the intended
method of disposition thereof (which may include a Shelf Registration provided
that the Company is eligible to use Rule 415 for the purposes thereof), then the
Company shall use its commercially reasonable efforts to effect, as
expeditiously as possible, the registration under the Securities Act of all
Registrable Securities for which Lender has requested registration under this
Section 2(a)(i), all to the extent necessary to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities to be registered. At any time prior to the effective date of the
registration statement relating to such registration, Lender may revoke such
request by providing reasonable written notice to the Company revoking such
request.

 

(ii)         Demand Registrations pursuant to this Section 2(a) are subject to
the following limitations:

 

(A)         The Lender shall be entitled to have a total of two (2) Demand
Registrations effected on Form S-1 (including any successor form, “Form S-1”) or
Form S-3 (including any successor Form, “Form S-3”) at any time when the Company
is eligible to use such form. A Demand Registration effected on Form S-1 shall
not reduce the number of available Demand Registrations pursuant to the
foregoing sentence if a registration statement with respect thereto does not
become effective under the Securities Act and remain effective for at least one
hundred eighty (180) days; provided that such registration statement shall not
be considered a Demand Registration if, after such registration statement
becomes effective, such registration statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or other governmental
agency or court.

 

(B)         Upon notice to the Lender, the Company may postpone effecting a
registration pursuant to this Section 2(a) on one occasion during any period of
six consecutive months for a reasonable time specified in the notice but not
exceeding thirty (30) days (which period may not be extended or renewed), if (i)
an investment banking firm of recognized national standing shall advise the
Company and Lender in writing that effecting the registration would materially
and adversely affect an offering of securities of the Company the preparation of
which had then been commenced or (ii) the Company is in possession of material
non-public information the disclosure of which would be required by the
registration during the period specified in such notice the Company reasonably
believes would not be in the best interests of the Company.

 

(iii)        The Company shall use its reasonable best efforts to have the
Registration Statement declared effective as soon as practicable. The Company
shall notify the Lender by facsimile or e-mail as promptly as practicable, and
in any event, within twenty-four (24) hours, after any Registration Statement is
declared effective and shall simultaneously provide the Lender with copies of
any related Prospectus to be used in connection with the sale or other
disposition of the securities covered thereby.

 

3

 

 

(iv)        For not more than twenty (20) consecutive days or for a total of not
more than forty-five (45) days in any twelve (12) month period, the Company may
suspend the use of any Prospectus included in any Registration Statement
contemplated by this Section in the event that the Company determines in good
faith that such suspension is necessary to (A) delay the disclosure of material
non-public information concerning the Company, the disclosure of which at the
time is not, in the good faith opinion of the Company, in the best interests of
the Company or (B) amend or supplement the affected Registration Statement or
the related Prospectus so that such Registration Statement or 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,
in the case of the Prospectus in light of the circumstances under which they
were made, not misleading (an “Allowed Delay”); provided that the Company shall
promptly (a) notify Lender in writing of the commencement of an Allowed Delay,
but shall not (without the prior written consent of Lender) disclose to Lender
any material non-public information giving rise to an Allowed Delay, (b) advise
the Lender in writing to cease all sales under the Registration Statement until
the end of the Allowed Delay and (c) use its reasonable best efforts to
terminate an Allowed Delay as promptly as practicable.

 

(v)         If at any time the SEC takes the position that the offering of some
or all of the Registrable Securities in a Registration Statement is not eligible
to be made on a delayed or continuous basis under the provisions of Rule 415
under the 1933 Act or requires Lender to be named as an “underwriter”, the
Company shall use its best efforts to persuade the SEC that the offering
contemplated by the Registration Statement is a valid secondary offering and not
an offering “by or on behalf of the issuer” as defined in Rule 415 and that
Lender is not an “underwriter”. The Lender shall have the right to participate
or have its counsel participate in any meetings or discussions with the SEC
regarding the SEC’s position and to comment or have its counsel comment on any
written submission made to the SEC with respect thereto. No such written
submission shall be made to the SEC to which the Lender’s counsel reasonably
objects. In the event that, despite the Company’s best efforts and compliance
with the terms of this Section 2(a)(v), the SEC refuses to alter its position,
the Company shall (i) remove from the Registration Statement such portion of the
Registrable Securities (the “Cut Back Shares”) and/or (ii) agree to such
restrictions and limitations on the registration and resale of the Registrable
Securities as the SEC may require to assure the Company’s compliance with the
requirements of Rule 415 (collectively, the “SEC Restrictions”); provided,
however, that the Company shall not agree to name Lender as an “underwriter” in
such Registration Statement without the prior written consent of Lender.

 

4

 

 

(b)          Right to Piggyback Registration.

 

(i)          If at any time following the date of this Agreement that any
Registrable Securities remain outstanding (A) there is not one or more effective
Registration Statements covering all of the Registrable Securities and (B) the
Company proposes for any reason to register any shares of Common Stock under the
1933 Act (other than pursuant to a registration statement on Form S-4 or Form
S-8 (or a similar or successor form)) with respect to an offering of Common
Stock by the Company for its own account or for the account of any of its
stockholders, it shall at each such time promptly give written notice to the
Lender of its intention to do so (but in no event less than thirty (30) days
before the anticipated filing date) and, to the extent permitted under the
provisions of Rule 415 under the 1933 Act, include in such registration all
Registrable Securities with respect to which the Company has received written
request from Lender for inclusion therein within fifteen (15) days after receipt
of the Company’s notice (a Piggyback Registration”). Such notice shall offer the
Lender the opportunity to register such number of shares of Registrable
Securities as Lender may request and shall indicate the intended method of
distribution of such Registrable Securities.

 

(ii)         Notwithstanding the foregoing, (A) if such registration involves an
underwritten public offering, the Lender must sell its Registrable Securities
to, if applicable, the underwriter(s) at the same price and subject to the same
underwriting discounts and commissions that apply to the other securities sold
in such offering (it being acknowledged that the Company shall be responsible
for other expenses as set forth in Section 2(b)) and subject to the Lender
entering into customary underwriting documentation for selling stockholders in
an underwritten public offering, and (B) if, at any time after giving written
notice of its intention to register any Registrable Securities pursuant to
Section 2(b)(i) and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to cause such registration statement to become effective under the
1933 Act, the Company shall deliver written notice to the Lender and, thereupon,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration.

 

(iii)        If, in connection with any underwritten public offering for the
account of the Company or for stockholders of the Company that have contractual
rights to require the Company to register shares of Common Stock, the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in a Registration Statement because, in the
judgment of such underwriter(s), marketing or other factors dictate such
limitation is necessary to facilitate such offering, then the Company shall be
obligated to include in the Registration Statement only such limited portion of
the Registrable Securities with respect to which each Lender has requested
inclusion hereunder as such underwriter(s) shall permit; provided, however, that
the Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
to inclusion of such securities in the Registration Statement or are not
entitled to pro rata inclusion with the Registrable Securities; and provided
further that, after giving effect to the immediately preceding proviso, any
exclusion of Registrable Securities shall be made pro rata with holders of other
securities having the right to include such securities in the Registration
Statement.

 

5

 

 

3.          Company Obligations. The Company will use its reasonable best
efforts to effect the registration of the Registrable Securities in accordance
with the terms hereof, and pursuant thereto the Company will, as expeditiously
as possible:

 

(a)          use its reasonable best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a period
that will terminate upon the earlier of (i) the date on which all Registrable
Securities covered by such Registration Statement as amended from time to time,
have been sold, and (ii) the date on which all Registrable Securities covered by
such Registration Statement may be sold without restriction pursuant to Rule 144
by the holders thereof (the “Effectiveness Period”) and advise the Lender in
writing when the Effectiveness Period has expired;

 

(b)          prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be necessary
to keep the Registration Statement effective for the Effectiveness Period and to
comply with the provisions of the 1933 Act and the 1934 Act with respect to the
distribution of all of the Registrable Securities covered thereby;

 

(c)          provide copies to and permit counsel designated by Lender to review
each Registration Statement and all amendments and supplements thereto no fewer
than seven (7) days prior to their filing with the SEC and not file any document
to which such counsel reasonably objects;

 

(d)          furnish to the Lender and its legal counsel (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company (but not later than two (2) Business Days after the filing date,
receipt date or sending date, as the case may be) one (1) copy of any
Registration Statement and any amendment thereto, each preliminary prospectus
and Prospectus and each amendment or supplement thereto, and each letter written
by or on behalf of the Company to the SEC or the staff of the SEC, and each item
of correspondence from the SEC or the staff of the SEC, in each case relating to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
and (ii) such number of copies of a Prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
as Lender may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by Lender that are covered by the related
Registration Statement;

 

(e)          use its reasonable best efforts to (i) prevent the issuance of any
stop order or other suspension of effectiveness and, (ii) if such order is
issued, obtain the withdrawal of any such order at the earliest possible moment;

 

6

 

 

(f)          prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the Lender and
its counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such jurisdictions requested by the Lender and do any and all other
commercially reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(f), (ii) subject itself to general taxation in any
jurisdiction where it would not otherwise be so subject but for this Section
3(f), or (iii) file a general consent to service of process in any such
jurisdiction;

 

(g)          use its reasonable best efforts to cause all Registrable Securities
covered by a Registration Statement to be listed on each securities exchange,
interdealer quotation system or other market on which similar securities issued
by the Company are then listed;

 

(h)          immediately notify the Lender, at any time prior to the end of the
Effectiveness Period, upon discovery that, or upon the happening of any event as
a result of which, the Prospectus includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing, and promptly prepare, file with the SEC and furnish
to such holder a supplement to or an amendment of such Prospectus as may be
necessary so that 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 light of the
circumstances then existing;

 

(i)          otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934 Act,
including, without limitation, Rule 172 under the 1933 Act, file any final
Prospectus, including any supplement or amendment thereof, with the SEC pursuant
to Rule 424 under the 1933 Act, promptly inform the Lender in writing if, at any
time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as a result thereof, the Lender is
required to deliver a Prospectus in connection with any disposition of
Registrable Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve (12) months, beginning
after the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act,
including Rule 158 promulgated thereunder (for the purpose of this subsection
3(i), “Availability Date” means the 45th day following the end of the fiscal
quarter that includes the effective date of such Registration Statement, except
that, if quarter is the last quarter of the Company’s fiscal year, “Availability
Date” means the 90th day after the end of such fiscal year);

 

7

 

 

(j)          with a view to making available to the Lender the benefits of Rule
144 (or its successor rule) and any other rule or regulation of the SEC that may
at any time permit the Lender to sell Registrable Securities to the public
without registration, the Company covenants and agrees to: (i) make and keep
public information available, as those terms are understood and defined in Rule
144, until the earlier of (A) six months after the date all of the Registrable
Securities may be sold without restriction by the holders thereof pursuant to
Rule 144 or any other rule of similar effect or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under the
1934 Act; and (iii) furnish to Lender upon request, as long as Lender owns any
Registrable Securities, (A) a written statement by the Company that it has
complied with the reporting requirements of the 1934 Act, (B) a copy of the
Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form
10-Q, and (C) such other information as may be reasonably requested in order to
avail Lender of any rule or regulation of the SEC that permits the selling of
any such Registrable Securities without registration.

 

(k)          The Company will pay all expenses associated with effecting the
registration of the Registrable Securities, including filing and printing fees,
the Company’s counsel and accounting fees and expenses, costs associated with
clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, and fees and expenses of one counsel to the Lender, but
excluding discounts, commissions, fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals with respect to the
Rcgistrable Securities being sold.

 

4.            Due Diligence Review; Information. The Company shall make
available, during normal business hours, for inspection and review by the
Lender, advisors to and representatives of the Lender (who may or may not be
affiliated with the Lender and who are reasonably acceptable to the Company),
all financial and other records, all SEC Filings (as defined in the Loan
Agreement) and other filings with the SEC, and all other corporate documents and
properties of the Company as may be reasonably necessary for the purpose of such
review, and cause the Company’s officers, directors and employees, within a
reasonable time period, to supply all such information reasonably requested by
the Lender or any such representative, advisor or underwriter in connection with
such Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Lender and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement; provided, however, that
the Company shall not disclose material nonpublic information to the Lender, or
to advisors to or representatives of the Lender, unless prior to disclosure of
such information the Company identifies such information as being material
nonpublic information and provides the Lender, such advisors and representatives
with the opportunity to accept or refuse to accept such material nonpublic
information for review and any Lender wishing to obtain such information enters
into an appropriate confidentiality agreement with the Company with respect
thereto.

 

8

 

 

5.           Obligations of the Lender.

 

(a)          Lender shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the intended method
of disposition of the Registrable Securities held by it, as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least five (5) Business Days prior to the first
anticipated filing date of any Registration Statement, the Company shall notify
Lender of the information the Company requires from Lender if Lender elects to
have any of the Registrable Securities included in the Registration Statement.
Lender shall provide such information to the Company at least two (2) Business
Days prior to the first anticipated filing date of such Registration Statement
if Lender elects to have any of the Registrable Securities included in the
Registration Statement.

 

(b)          Lender, by its acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of a Registration Statement hereunder, unless
Lender has notified the Company in writing of its election to exclude all of its
Registrable Securities from such Registration Statement.

 

(c)          Lender agrees that, upon receipt of any notice from the Company of
either (i) the commencement of an Allowed Delay pursuant to Section 2(a)(iv) or
(ii) the happening of an event pursuant to Section 3(h) hereof, Lender will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the Lender is
advised by the Company that such dispositions may again be made.

 

9

 

 

6.           Indemnification.

 

(a)          Indemnification by the Company. The Company will indemnify and hold
harmless Lender and its officers, directors, members, employees and agents,
successors and assigns, and each other Person, if any, who controls Lender
within the meaning of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement or omission or alleged omission of any
material fact contained in any Registration Statement, any preliminary
Prospectus or final Prospectus, or any amendment or supplement thereof; (ii) any
blue sky application or other document executed by the Company specifically for
that purpose or based upon written information furnished by the Company filed in
any state or other jurisdiction in order to qualify any or all of the
Registrable Securities under the securities laws thereof (any such application,
document or information herein called a “Blue Sky Application”); (iii) the
omission or alleged omission to state in a Blue Sky Application a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (iv) any violation by the Company or its agents of any rule or
regulation promulgated under the 1933 Act applicable to the Company or its
agents and relating to action or inaction required of the Company in connection
with such registration; or (v) any failure to register or qualify the
Registrable Securities included in any such Registration Statement in any state
where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company will undertake such registration or qualification on an
Lender’s behalf and will reimburse such Lender, and each such officer, director
or member and each such controlling Person for 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
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by Lender or any such controlling Person
in writing specifically for use in such Registration Statement or Prospectus.

 

(b)          Indemnification by the Lender. Lender agrees to indemnify and hold
harmless, to the fullest extent permitted by law, the Company, its directors,
officers, employees, stockholders and each Person who controls the Company
(within the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expense (including reasonable attorney fees) resulting from any
untrue statement of a material fact or any omission of a material fact required
to be stated in the Registration Statement or Prospectus or preliminary
Prospectus or amendment or supplement thereto or necessary to make the
statements therein not misleading, to the extent, but only to the extent that
such untrue statement or omission is contained in any information furnished in
writing by Lender to the Company specifically for inclusion in such Registration
Statement or Prospectus or amendment or supplement thereto. In no event shall
the liability of Lender be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by Lender in connection with any claim
relating to this Section 6 and the amount of any damages such Lender has
otherwise been required to pay by reason of such untrue statement or omission)
received by Lender upon the sale of the Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.

 

10

 

 

(c)          Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided that any Person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such Person unless (a) the indemnifying party
has agreed to pay such fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and employ counsel reasonably
satisfactory to such Person or (c) in the reasonable judgment of any such
Person, based upon written advice of its counsel, a conflict of interest exists
between such Person and the indemnifying party with respect to such claims (in
which case, if the Person notifies the indemnifying party in writing that such
Person elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such Person); and provided, further, that the failure of
any indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys at any time for all such indemnified parties. No indemnifying party
will, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that 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 of such claim or litigation.

 

(d)          Contribution. If for any reason the indemnification provided for in
the preceding paragraphs (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified therein,
then the indemnifying party shall contribute to the amount paid or payable by
the 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
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. No Person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled to
contribution from any Person not guilty of such fraudulent misrepresentation. In
no event shall the contribution obligation of a holder of Registrable Securities
be greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder in connection with any claim relating to this Section 6 and
the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities giving rise
to such contribution obligation.

 

11

 

 

7.           Miscellaneous.

 

(a)          Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Lender. Any amendment or waiver
effected in accordance with this Section 7(a) shall be binding upon each holder
of any Registrable Securities at the time outstanding, each future holder of any
Registrable Securities, and the Company. The Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of the Lender.

 

(b)          Notices. All notices and other communications provided for or
permitted hereunder shall be made as set forth in Section 15.5 of the Loan
Agreement.

 

(c)          Assignments and Transfers by Lender. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Lender and its
respective successors and assigns. Lender may transfer or assign, in whole or
from time to time in part, to one or more Persons its rights hereunder in
connection with the transfer of Registrable Securities by Lender to such Person,
provided that Lender complies with all laws applicable thereto and provides
written notice of assignment to the Company promptly after such assignment is
effected.

 

(d)          Assignments and Transfers by the Company. This Agreement may not be
assigned by the Company (whether by operation of law or otherwise) without the
prior written consent of the Lender, provided, however, that in the event that
the Company is a party to a merger, consolidation, share exchange or similar
business combination transaction in which the Common Stock is converted into the
equity securities of another Person, from and after the effective time of such
transaction, such Person shall, by virtue of such transaction, be deemed to have
assumed the obligations of the Company hereunder, the term “Company” shall be
deemed to refer to such Person and the term “Registrable Securities” shall be
deemed to include the securities received by the Lender in connection with such
transaction unless such securities are otherwise freely tradable by the Lender
after giving effect to such transaction.

 

(e)          Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

 

12

 

 

(f)          Counterparts; Facsimile. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The exchange of copies of
this Agreement and of signature pages by facsimile or PDF transmission shall
constitute effective execution and delivery of this Agreement as to the parties
hereto and may be used in lieu of an original of this Agreement for all
purposes. Signatures of the parties hereto transmitted by facsimile or PDF
transmission shall be deemed to be their original signatures for all purposes.

 

(g)          Titles and Subtitles; Construction. The titles and subtitles used
in this Agreement are used for convenience only. They form no part of this
Agreement and shall not affect its construction or interpretation. All
references to Sections, subsections, paragraphs, clauses or other subdivisions
in this Agreement refer to the corresponding Sections, subsections, paragraphs,
clauses or other subdivisions of this Agreement. All words used in this
Agreement shall be construed to be of such gender or number as the circumstances
require. As used in this Agreement, the words “hereby”, “herein”, hereof’,
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular provision of this Agreement.

 

(h)          Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof but shall be interpreted as if it were written so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law which
renders any provisions hereof prohibited or unenforceable in any respect.

 

(i)          Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.

 

(j)          Entire Agreement. This Agreement and the Loan Agreement, together
with its Exhibits and Schedules, constitute the entire agreement among the
parties hereof with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.

 

13

 

 

(k)          Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of Oklahoma without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of Oklahoma located in Oklahoma County
and the United States District Court for the Western District of Oklahoma for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party hereto
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS
THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

[Signature Page Follows]

 

14

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized officers to execute this Agreement as of the date first above
written.

 

The Company: CRUMBS BAKE SHOP, INC.         By:       Name: Edward M. Slezak    
Title:  Interim Chief Executive Officer

 

The Lender: FISCHER ENTERPRISES, L.L.C.         By:       Name: S. Scott Fischer
    Title:  Chief Operating Officer

 

 

 

  

SCHEDULE 1

 

Existing Indebtedness

 

1.          Pursuant to Section 4.4 of Crumbs Holdings’ Third Amended and
Restated Limited Liability Company Agreement, dated May 5, 2011 (the “LLC
Agreement”), Crumbs Holdings is obligated under certain circumstances to make
pro rata quarterly Tax Distributions (as defined in the LLC Agreement) to its
members in an amount equal to the excess of (i) the Assumed Tax Liability (as
defined in the LLC Agreement) for the applicable quarterly estimated tax period
over (ii) Tax Distributions (as defined in the LLC Agreement) made by Crumbs
with respect to the calendar year of which such quarterly estimated tax period
is a part.

 

2.          Crumbs entered into a Tax Receivable Agreement, dated as of May 5,
2011, with Crumbs Holdings and the Members (the “Tax Receivable Agreement”) that
provides for the payment by Crumbs to the Members (as defined in paragraph 1 of
Schedule 10.16 below) of up to 75% of the amount of the tax benefits, if any,
that Crumbs is deemed to realize as a result of (i) the existing tax basis in
the assets of Crumbs Holdings on the date of the Merger (as defined in paragraph
1 of Schedule 10.16 below), (ii) any increases in such tax basis and (iii)
certain other tax benefits related to Crumbs Holdings entering into the Tax
Receivable Agreement, including tax benefits attributable to payments under the
Tax Receivable Agreement. These payment obligations are obligations of Crumbs
and not of Crumbs Holdings. For purposes of the Tax Receivable Agreement, the
benefit deemed realized by Crumbs will be computed by comparing the actual
income tax liability of Crumbs Holdings (calculated with certain assumptions) to
the amount of such taxes that Crumbs would have been required to pay had there
been no increase to the tax basis of the assets of Crumbs Holdings as a result
of the purchase or exchanges, had there been no tax benefit from the tax basis
in the intangible assets of Crumbs Holdings on the date of the Merger and had
Crumbs not entered into the Tax Receivable Agreement. The term of the Tax
Receivable Agreement will continue until all such tax benefits have been
utilized or expired, unless Crumbs exercises its right to terminate the Tax
Receivable Agreement for an amount based on the agreed payments remaining to be
made under the Tax Receivable Agreement or Crumbs breaches any of its material
obligations under the Tax Receivable Agreement, in which case all obligations
will generally be accelerated and due as if Crumbs had exercised its right to
terminate the Tax Receivable Agreement.

 

3.          In lieu of security deposits required pursuant to the terms of
several operating leases, Crumbs Holdings has chosen to obtain letters of credit
issued by Southeastern Bank and JPMorganChase when such substitution is allowed
by the landlords.

 

a.           JPMorganChase has issued two letters of credit: (i) $68,000
(automatically renews each year through its expiration date of February 29,
2016); and (ii) $30,000 (automatically renews each year through its expiration
date of November 30, 2016).

 

 

 

 

b.           See below schedule of letters of credit issued by Southeastern
Bank.

 

Issue Date  Expires
Date  Auto
Renew  Days
Notice  Date
Financials
and
Memo
Needed
for
Renewal
Decision  Type  Amt   Most Recent Fee
Collected   Date Most Recent Fee
Collected 5/20/2008  5/20/2013  Y  60  02/19/13  F  $27,000.00   $400.00  
3/29/2013 6/11/2008  6/11/2013  Y  60  03/13/13  F  $17,500.00   $400.00  
3/29/2013 6/11/2008  6/11/2013  Y  60  03/13/13  F  $42,917.00   $435.00  
3/29/2013 6/18/2008  4/30/2013  N  60  01/30/13  F  $45,600.00   $456.00  
3/26/2012 6/19/2008  6/19/2013  Y  60  03/21/13  F  $15,000.00   $400.00  
3/29/2013 6/1/2008  6/1/2013  Y  60  03/03/13  F  $28,144.00   $400.00  
3/29/2013 6/1/2008  6/1/2013  Y  60  03/03/13  F  $9,440.00   $400.00  
3/29/2013 8/1/2008  8/1/2013  Y  30  06/02/13  F  $62,500.00   $625.00  
5/22/2012 8/1/2008  8/1/2013  Y  60  05/03/13  F  $24,300.00   $400.00  
3/29/2013 8/1/2008  8/1/2013  Y  60  05/03/13  F  $50,000.00   $500.00  
3/29/2013 *9/1/2008  9/1/2013  Y  60  06/03/13  F  $15,750.00   $400.00  
5/22/2012 5/4/2009  5/4/2013  Y  60  02/03/13  F  $7,500.00   $400.00  
3/29/2013 5/7/2009  5/7/2013  Y  60  02/06/13  F  $29,287.50   $400.00  
3/29/2013 5/13/2009  5/13/2013  Y  60  02/12/13  F  $43,749.99   $450.00  
3/29/2013 7/28/2009  7/28/2013  Y  60  04/29/13  F  $18,750.00   $400.00  
3/29/2013 3/3/2011  3/3/2014  Y  60  12/03/13  F  $40,000.00   $400.00  
3/29/2013                                                 $477,438.49         

 

*Letter of Credit to be cancelled prior to or soon after the date hereof

 

4.          On May 5, 2011, Crumbs Holdings entered into a Commercial Loan
Agreement with Southeastern Bank in connection with the letters of credit issued
by Southeastern Bank in the form of a $575,000 revolving line of credit, with a
variable rate based on the Wall Street Journal Prime Rate and secured by a
$575,000 Certificate of Deposit. On January 6, 2014, this Commercial Loan
Agreement was amended by that certain Loan Modification Agreement, reducing the
revolving line of credit from $575,000 to $500,000. On or around January 15,
2014, the line was reduced by $20,062 from $500,000 to $479,938. The Loan
Modification Agreement also replaced the $575,000 Certificate of Deposit with a
$500,000 Certificate of Deposit. On or around January 15, 2014, the Certificate
of Deposit was reduced by $20,062 to $479,938, which amount represents the
amount required to pay for the letter of credit calls from Americana at Brand
($10,416.67) and The Commons at Calabasas ($9,645.33). No amounts are
outstanding on the line of credit. Letters of credit amounting to $477,438.49
were reserved under this line of credit as of January 15, 2014.

 

2

 

 

SCHEDULE 1.2

 

Existing Liens

 

1.          Any liens filed in connection with any lease for any personal
property of a Borrower or any Subsidiaries.

 

2.

 

Jurisdiction   Debtor  

Secured

Party

  Collateral   Type  

Filing

Date

 

Filing

Number

DE   Crumbs Holdings, LLC   LCA Bank Corporation   All of the equipment
referenced in the Lease Agreement #124246-001, which Equipment is generally
described as: [Copier] and all proceeds (including cash, non-cash and insurance
proceeds), all accessions, additions and attachments, and all substitutions and
replacements.”   Original   01/06/2011   2011-0055288

 

3

 

 

SCHEDULE 4.7

 

Use of Proceeds

 

Proceeds of the Loan will be used for working capital purposes and to implement
the Business Plan.

 

4

 

 

SCHEDULE 10.2

 

Subsidiaries

 

oCrumbs 17th Street, LLC, a District of Columbia limited liability company

oCrumbs 42nd Street, LLC, a New York limited liability company

oCrumbs 92nd Street, LLC, a New York limited liability company

oCrumbs Americana, LLC, a California limited liability company

oCrumbs Beverly Hills, LLC, a California limited liability company

oCrumbs Broad Street, LLC, a New York limited liability company

oCrumbs Broadway LLC, a New York limited liability company

oCrumbs Brooklyn Heights LLC, a New York limited liability company

oCrumbs Calabasas, LLC, a California limited liability company

oCrumbs Catering LLC, a New York limited liability company

oCrumbs Clarendon LLC, a Virginia limited liability company

oCrumbs Columbia LLC, a New York limited liability company (f/k/a Crumbs 125th
Street, LLC)

oCrumbs Columbus LLC, a New York limited liability company

oCrumbs Downtown II, LLC, a New York limited liability company

oCrumbs East Bakeshop II, LLC, a New York limited liability company

oCrumbs East End, LLC, a District of Columbia limited liability company

oCrumbs E-Commerce LLC, a New York limited liability company

oCrumbs Federal Street LLC, a Delaware limited liability company

oCrumbs Garment Center LLC, a New York limited liability company

oCrumbs Grand Central LLC, a New York limited liability company

oCrumbs Greenvale LLC, a New York limited liability company

oCrumbs Greenwich, LLC, a Connecticut limited liability company

oCrumbs Hoboken, LLC, a New Jersey limited liability company

oCrumbs Hollywood LLC, a California limited liability company

oCrumbs Huntington LLC, a New York limited liability company

oCrumbs II, LLC, a New York limited liability company

oCrumbs International Place, LLC, a Delaware limited liability company

oCrumbs L Street, LLC, a District of Columbia limited liability company

oCrumbs Larchmont, LLC, a California limited liability company

oCrumbs LaSalle, LLC, an Illinois limited liability company

oCrumbs L’Enfant Plaza, LLC, a District of Columbia limited liability company

oCrumbs Lexington LLC, a New York limited liability company

oCrumbs Madison LLC, a New York limited liability company

oCrumbs Malibu, LLC, a California limited liability company

oCrumbs Newark LLC, a New Jersey limited liability company

oCrumbs New Canaan, LLC, a California limited liability company

oCrumbs Oak Park, LLC, an Illinois limited liability company

oCrumbs Park Avenue LLC, a New York limited liability company

 

5

 

 

oCrumbs Park Avenue South, LLC, a New York limited liability company

oCrumbs Queens Center, LLC, a New York limited liability company

oCrumbs Retail Bake Shops, LLC, a Delaware limited liability company (f/k/a
Crumbs Fulton Street, LLC

oCrumbs Ridgewood, LLC, a New Jersey limited liability company

oCrumbs Rittenhouse Square, LLC, a Delaware limited liability company

oCrumbs River North, LLC, an Illinois limited liability company

oCrumbs Sixth Avenue, LLC, a New York limited liability company

oCrumbs South Clark, LLC, an Illinois limited liability company

oCrumbs Stamford, LLC, a Connecticut limited liability company

oCrumbs Third Avenue LLC, a New York limited liability company

oCrumbs Times Square LLC, a New York limited liability company

oCrumbs Union Square LLC, a New York limited liability company

oCrumbs Union Station LLC, a District of Columbia limited liability company

oCrumbs Wall Street II, LLC, a New York limited liability company

oCrumbs West Madison, LLC, an Illinois limited liability company

oCrumbs Westfield LLC, a New Jersey limited liability company

oCrumbs Westport, LLC, a Connecticut limited liability company

oCrumbs Wholesale II, LLC, a New York limited liability company

oCrumbs Woodbury LLC, a New York limited liability company

 

6

 

 

SCHEDULE 10.4

 

No Conflict

 

1.          Consents required by the Buyers of those certain Notes purchased in
accordance with that certain Securities Purchase Agreement dated April 29, 2013
and amended on May 9, 2013, by and among Crumbs and each of the Buyers (as such
terms are defined in the Securities Purchase Agreement).

 

2.          Any consents of any landlord or other Person, if required, in
connection with the Leasehold Mortgages.

 

3.           Waiver of Southeastern Bank of the covenant against Crumbs Holdings
incurring additional debt set forth in Section 6(F) of the Commercial Loan
Agreement (as more particularly defined in Paragraph 4 of Schedule1).

 

7

 

 

SCHEDULE 10.5

 

Consents

 

1.          See Schedule 10.4

 

2.          NASDAQ consent to the terms and conditions of the Agreement (see
Sections 5.5 and 6.1 of Agreement).

 

8

 

 

SCHEDULE 10.7

 

Leased Real Property

 

17th Street 888 17th Street NW   Washington DC 20006 6th Avenue 655 6th Avenue  
New York NY 10011 92nd Street 2476 Broadway   New York NY 10025 Americana 779
Americana Way   Glendale CA 91210 Beverly Hills 9465 Little Santa Monica
Boulevard   Beverly Hills CA 90210 Bridgewater Commons 400 Commons Way 2480
Bridgewater NJ 08807 Broad Street 40 Broad Street   New York NY 10004 Broadway
1675 Broadway   New York NY 10019 Brooklyn Heights 109 Montague Street  
Brooklyn Heights NY 11201 Bryant Park (42nd Street) 43 West 42nd Street   New
York NY 10036 Burlington Mall 76 Middlesex Turnpike 2010 Burlington MA 01803
Calabasas 4799 Commons Way E Calabasas CA 91302 Cherry Hill Mall 2000 Route 38
Suite 514 1855 Cherry Hill NJ 08002 Christiana Mall 132 Christiana Mall 5900
Newark DE 19702 Clarendon 2839 Clarendon Boulevard Market Common Arlington VA
22201 Columbia 2814 Broadway   New York NY 10025 Columbia Mall 10300 Little
Patuxent Parkway 5522 Columbia MD 21044 Columbus Avenue 775 Columbus Avenue  
New York NY 10025 Danbury Fair Mall 7 Backus Ave F-212 Danbury CT 06810 Deptford
Mall 1750 Deptford Center Road 2090 Deptford NJ 08096 East End 604 11th Street
NW   Washington DC 20001 Federal Street 176 Federal Street 3 Boston MA 02110
Freehold Raceway Mall 3710 Route 9 G-212 Freehold NJ 07728 Garden State Plaza 1
Garden State Plaza 1221A Paramus NJ 07652 Garment Center 1385 Broadway   New
York NY 10018 Grand Central 420 Lexington Avenue   New York NY 10170 Greenvale 5
Glen Cove Road   Greenvale NY 11548 Greenwich 48 West Putnam Avenue   Greenwich
CT 06830 Hoboken 409 Washington Street   Hoboken NJ 07030 Hollywood 6801
Hollywood Boulevard 127 Hollywood CA 90028 King of Prussia 160 N Gulph Road
2154D King of Prussia PA 19406 L Street 1107 19th Street NW   Washington DC
20036 Larchmont 216 N Larchmont Boulevard   Los Angeles CA 90004 L'Enfant Plaza
470 L'Enfant Plaza E SW 806 Washington DC 20024 Lexington Avenue 1418 Lexington
Avenue   New York NY 10128 Mall at Rockingham Park 1 Rockingham Park Blvd W115
Salem NH 03079 Natick Mall 1245 Worcester Street 2174 Natick MA 01760 Newark
Newark Airport Terminal C Newark NJ 07114 Northshore Mall RT 128N & RT 114E
KI-15 Peabody MA 01960 Oak Park 1100 Lake Street   Oak Park IL 60301 Palisades
Center 2502 Palisades Center Drive Z-16 West Nyack NY 10994 Park Avenue 2 Park
Avenue   New York NY 10016 Park City Center 142 Park City Center J0501 Lancaster
PA 17601 Pheasant Lane Mall 310 Daniel Webster Highway Suite 200 E153 Nashua NH
03060

 

9

 

 

Providence Place One Providence Place 7510 Providence RI 02903 Prudential Center
800 Boylston HC04 Boston MA 02199 Queens Center 90-15 Queens Boulevard  
Elmhurst NY 11373 Ridgewood 123 East Ridgewood Avenue   Ridgewood NJ 07450
Rittenhouse Square 133 S 18th Street   Philadelphia PA 19103 River North 346
North Clark Street   Chicago IL 60654 Rockaway Mall 301 Mount Hope Avenue 2025
Rockaway NJ 07866 Roosevelt Field 630 Old Country Road 4024 Garden City NY 11530
South Shore Plaza 250 Granite Street 1076 Braintree MA 02184 Stamford 1067 High
Ridge Road   Stamford CT 06905 Staten Island 2655 Richmond Ave 5513 Staten
Island NY 10314 Suburban Square 32 Parking Plaza,suite 101 06-101 Ardmore PA
19003 The Village (Downtown) 37 East 8th Street   New York NY 10003 Third Avenue
880 Third Avenue   New York NY 10022 Times Square 261 West 42nd Street   New
York NY 10036 Towson Town Center 825 Dulaney Valley Road 2080 Towson MD 21204
Tysons Corner Center 1961 Chain Bridge Road KSK3L McLean VA 22102 Union Square
124 University Place   New York NY 10003 Union Station 40 Massachusetts Avenue
NW   Washington DC 20002 Upper East Side (East Bakeshop II) 1379 Third Avenue  
New York NY 10075 Upper West Side (Crumbs II) 350 Amsterdam Avenue   New York NY
10024 Water Tower 835 N Michigan Ave 2C Chicago IL 60611 West Madison 303 West
Madison   Chicago IL 60606 Westfield 130 East Broad Street   Westfield NJ 07090
Westport 40-44 Post Road East   Westport CT 06880 White Marsh Mall 8200 Perry
Hall Blvd   Baltimore MD 21236 Willowbrook Mall 1400 Willowbrook Mall 5537 Wayne
NJ 07470 Woodbury 8285 Jericho Turnpike   Woodbury NY 11797 Maryland Corporate
Office 147 Main Street   Preston MD 21655 New York Corporate Office 110 West
40th Street Suite 2100, partial space on 2200 New York NY 10018

 

10

 

 

SCHEDULE 10.9

 

Litigation

 

1.          Shaker and Associates vs. Crumbs Oak Park, LLC d/b/a Crumbs Bake
Shop, In the Circuit Court of Cook County, IL, Municipal Department, First
District, Case No, 13MI 730675. Eviction Summons for Trial. Trial scheduled for
January 15, 2014, Rent amount claimed $59,676.91 (plus costs and attorneys’
fees).

 

2.          The Americana At Brand, LLC vs. Crumbs Americana, LLC, Los Angeles
Superior Court – Central District, Case No. BC529862 Unlawful Detainer –
Eviction. Rent amount claimed $21,339.75 (through December 1, 2013), with
additional damages of $588.55 per day.

 

3.          The Commons at Calabasas, LLC vs. Crumbs Calabasas, LLC, Los Angeles
Superior Court – Central District, Case No. BC529863, Unlawful Detainer –
Eviction. Rent amount claimed $14,575.19 (through December 1, 2013), with
additional damages of $447.84 per day.

 

4.          409 Washington Street, LLC vs. Crumbs Hoboken, Superior Court of New
Jersey Law Division: Special Civil Part, Hudson County, Docket No. Lt-. Rent and
other costs and fees claimed is $21,824.76.

 

5.          The Americana At Brand, LLC vs. Crumbs Americana, LLC and Crumbs
Holdings, Los Angeles Superior Court – Central District, Case No. BC532092.
Complaint for Breach of Lease and Breach of Guaranty. Plaintiff claims damages
of $1,500,000.

 

6.          The Commons at Calabasas, LLC vs. Crumbs Calabasas, LLC and Crumbs
Holdings LLC, Los Angeles Superior Court – Central District, Case No. BC532611.
Complaint for Breach of Lease and Breach of Guaranty. Plaintiff claims damages
of $1,000,000.

 

7.          Jennifer O’Reilly vs. Crumbs Holdings, LLC, Case No. 13-CV-2720, US
District Court for the Southern District of New York. Class Action Complaint,
pursuant to which the Collective Action Members claim they were misclassified as
“exempt” and were denied overtime compensation and “spread of hours”
compensation as required by federal and state wage and hour laws. On January 10,
2014, the parties jointly proposed to the Court an unspecified extension of the
discovery cutoff, with a status letter due to the Court within 60 days.

 

8.          Crumbs Larchmont, LLC received a Three Business Day Notice to Pay
Rent or Quit on January 10, 2014 from Larchmont Properties, Inc. The amount of
rent and other costs and fees claimed is $12,092.

 

11

 

 

9.          Crumbs Rittenhouse Square LLC received a call from its landlord on
January 13, 2014 that it will be proceeding with an eviction.

 

10.         Crumbs Retail Bake Shops, LLC received a Notice of Default from
Freehold Raceway Mall, Freemall Associates, LLC, dated January 9, 2014. The
amount of rent and other costs and fees claimed is $12,005.83.

 

11.         Crumbs Union Square received a Notice of Default from University
Place Assoc. LLC, dated January 8, 2014. The amount of rent and other costs and
fees claimed is $24,076.53.

 

12.         Crumbs Holdings LLC received a Notice of Default from Bridgewater
Commons Mall II, LLC, dated January 10, 2014. The amount of rent and other costs
and fees claimed is $24,372.01.

 

13.         Crumbs Holdings LLC received a Notice of Default from Natick Mall,
LLC, dated January 10, 2014. The amount of rent and other costs and fees claimed
is $25,670.91.

 

14.         Crumbs Retail Bake Shops, LLC, located at Tyson’s Corner Center,
received a Notice of Default from Tyson’s Corner Holdings LLC, dated January 9,
2014. The amount of rent and other costs and fees claimed is $12,093.60.

 

15.         Crumbs Retail Bake Shops, LLC, located at Palisades Center, West
Nyack NY, received a Notice of Lease Termination from Eklecco Newco LLC, dated
January 13, 2013. Demand is made therein for the sum of $704,528.67. A notice of
default had been sent on December 6, 2013.

 

16.         Crumbs 92nd Street received notice from 214 West 92nd Street Assoc,
LLC of default, dated January 8, 2014. The amount of rent and other costs and
fees claimed is $34,490.05.

 

12

 

 

SCHEDULE 10.12

 

Locations of Collateral

 

1.          See Schedule 10.7

 

2.          Vendor who stores certain fixtures: Pride Inc Heating & Air, 71
Winant Place Unit C, Staten Island NY 10309. This is not a leased property

 

3.          NJ Warehouse: MPD Logistics Inc., 5 Dwight Place, Fairfield NJ
07004. This is not a leased property.

 

13

 

 

SCHEDULE 10.15

 

Intellectual Property

 

None.

 

14

 

 

SCHEDULE 10.16

 

Capitalization

 

Capitalization of Crumbs:

 

Series A Voting Preferred Stock, $0.0001 per share   Shares Authorized  
1,000,000 Issued   234,000 Outstanding   234,000       Potentially Dilutive
Securities:     Reserved for issuance to members if Contingency Consideration
were to vest   440,000       Common Stock, $0.0001 per share     Authorized  
100,000,000 Issued   13,577,437 Outstanding   12,251,802       Potential for
Additional Issuance of Securities:     Authorized for issuance pursuant to
Equity Incentive Plan   578,295 Issuable upon exercise of outstanding warrants  
5,456,300 Reserved for conversion of New Crumbs Class B Exchangeable Units by
Crumbs Holdings’ Members   2,340,000 Reserved for issuance to members upon
exchange of Contingency Consideration that could be paid to members if such
Contingency Consideration were to vest   4,400,000 Reserved for senior
convertible note holders   8,448,107

 

1.          The outstanding shares of Series A Voting Preferred Stock (“Series A
Stock”) of Crumbs are held by the persons who were members of Crumbs Holdings
immediately prior to Crumbs’ 2011 merger transaction (the “Merger”) and Julian
Geiger, as a substituted member (collectively, the “Members”). The outstanding
shares of Series A Stock were issued contemporaneously with the issuance by
Crumbs Holdings of New Crumbs Class B Exchangeable Units (“Class B Units”) to
its Members. Each share of Series A Stock entitles its holder to cast 10 votes
on any matter submitted to the Crumbs’ stockholders. The Class B Units are
exchangeable for shares of Common Stock on a one-for-one basis. Upon the
exchange of a Class B Unit, the holder must also surrender 0.1 share of Series A
Stock for redemption by Crumbs at its then par value. 

 

15

 

 

2.          Contingency Consideration includes 440,000 shares of Series A Stock
of Crumbs and 4,400,000 Class B Units. Contingency Consideration will vest upon
satisfaction of certain stock price and/or EBIDTA targets as provided in that
certain Business Combination Agreement, dated as of January 9, 2011, as amended
on each of February 18, 2011, March 17, 2011 and April 7, 2011 (the “Business
Combination Agreement”), by and among Crumbs, 57th Street Merger Sub LLC, Crumbs
Holdings, the members of Crumbs Holdings set forth on the signature pages
thereto (the “Members”), and the representatives of Crumbs Holdings and the
Members.

 

3.          In addition to vesting upon reaching the stock price and/or EBIDTA
targets, all unvested Contingency Consideration will immediately vest if there
is a “Change of Control” of Crumbs or Crumbs Holdings. A “Change of Control”
will occur if, among other things, a person or group (within the meaning of
Rules 13d-3 and 13d-5 under the 1934 Act) (other than any combination of the
Permitted Holders or, in the case of Crumbs Holdings, Crumbs) shall obtain
beneficial ownership (as defined in Rules 13d-3 and 13d-5 under the 1934 Act) or
the voting stock of Crumbs or Crumbs Holdings representing more than 35% of the
voting power of the capital stock of Crumbs or Crumbs Holdings entitled to vote
for the election of directors of Crumbs or Crumbs Holdings other than directly
from a Permitted Holder in a transaction where the ultimate purchaser is known
to the Permitted Holder.

 

4.          Pursuant that certain Exchange and Support Agreement, dated as of
May 5, 2011, by and among Crumbs, Crumbs Holdings, and the other parties
thereto, as modified by that certain Accession Agreement, dated as of November
14, 2011, by and among Crumbs, Crumbs Holdings and Julian R. Geiger, (a) Crumbs
is entitled to receive New Crumbs Class A Voting Units upon the exchange of the
New Crumbs Class B Units by the holders thereof, (b) the holders of Common Stock
will be entitled to certain adjustments in respect of the Common Stock in the
event of certain dilutive actions, issuances or fundamental transactions
described therein by Crumbs Holdings in respect of its New Crumbs Class B Units,
and (c) the holders of New Crumbs Class B Units of Crumbs Holdings will be
entitled to certain adjustments in respect of the New Crumbs Class B Units in
the event of certain dilutive actions, issuances or fundamental transactions
described therein by Crumbs in respect of the Common Stock.

 

5.          Pursuant to the Amended and Restated Certificate of Designation in
respect of the Company’s Series A Stock, the holders of shares of Series A Stock
will be entitled to certain dividends and distributions in respect of the Series
A Stock in the event Crumbs declares any dividend or distribution on the Common
Stock in shares of Common Stock, Preferred Stock or securities convertible,
exercisable or exchangeable for Common Stock or Preferred Stock, unless such
dividend or distribution is approved by the written consent or affirmative vote
of the holders of at least two-thirds of the then outstanding shares of Series A
Stock.

 

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6.          Crumbs’ warrants provide that the number of shares covered thereby
and the exercise prices thereof shall be subject to adjustment in the event of
certain changes in the Common Stock by way of stock dividends, split-ups,
extraordinary dividends or other similar events. The strike price of the
warrants is $11.50.

 

7.          Crumbs’ Equity Incentive Plan, as amended (the “Amended Plan”)
contemplates that, in the event of any change in Crumbs’ corporate
capitalization, then the Compensation Committee, in its sole discretion, may
make substitutions or adjustments to the number of shares reserved for issuance
under the Amended Plan, the number of shares covered by awards then outstanding
under the Amended Plan, the limitations on awards under the Amended Plan, the
exercise price of outstanding options and such other equitable substitution or
adjustments as it may determine appropriate the Compensation Committee may make
substitutions or adjustments to the number of shares of Common Stock reserved
for issuance thereunder, the number of shares covered by awards then outstanding
thereunder, the limitations on awards thereunder, the exercise price of
outstanding options and such other equitable substitution or adjustments as it
may determine appropriate. There are no options to acquire shares of Common
Stock issued under the Amended Plan; only shares of restricted stock have been
granted.

 

8.          Pursuant to that certain Securities Purchase Agreement dated April
29, 2013 and amended on May 9, 2013, Crumbs authorized the issuance of senior
convertible notes, which notes are convertible into shares of Crumbs’ Common
Stock, in accordance with the terms of such notes.

 

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SCHEDULE 10.19

 

No Breaches

 

Certain of the Subsidiaries have failed to pay under the lease agreements they
are party to. A list of the store and location follows:

 

STORE   LANDLORD 17th STREET   888 17th Street Corp 92ND ST   C. Gershon &
Company AMERICANA   The Americana at Brand LLC BEVERLY HILLS   Sunvic Properties
BRIDGEWATER   Bridgewater Commons Mall II LLC BROOKLYN HEIGHTS   Italian Art
Iron Works, Inc. BURLINGTON   Bellwether Properties of Massachusetts LP
CALABASAS   The Commons at Calabasas, LLC CHERRY HILL MALL   Cherry Hill Center
LLC CHRISTIANA MALL   Christiana Mall, LLC CLARENDON   TIAA - CREF Market
Commons COLUMBIA   Larstrand Corporation COLUMBIA MALL   The Mall in Columbia
Business Trust COLUMBUS AVE   775 Columbus LLC DANBURY MALL   Danbury Mall, LLC
DEPTFORD MALL   Deptford Mall - Macerich Deptford LLC DOWNTOWN   Uniway
Partners, LP EAST (NEW 1379 3rd)   GMAC Commercial Mortgage EAST END   Jemal's
Square 320 LLC FEDERAL STREET   Federal Street 176 Holdings LLC FREEHOLD RACEWAY
  Freehold Raceway Mall/Freemall Associates LLC GARDEN STATE   Westland Garden
State Plaza LP GRAND CENTRAL   SL Green Management GREENWICH   Paradigm Realty
GREENVALE   Town Path Corner, LLC HOLLYWOOD   CIM/H&H Retail, LP fbo Key Corp
KING OF PRUSSIA   King of Prussia Associates LARCHMONT   Larchmont Properties,
Ltd. L STREET   1899 L Street Towers, LLC LaSALLE   134 N. LaSalle LLC L'ENFANT
PLAZA   Potomac Creek Associates LEXINGTON   134 East 93rd Street Associates
NATICK   Natick Mall, LLC NEW CANAAN   The Town of New Canaan NORTHSHORE MALL  
Mall at Northshore, LLC OAK PARK   Shaker Management Company PALISADES CENTER  
EklecCo NewCo LLC PARK AVENUE   PPF Off Two Park Ave Owner LLC PARK CITY CENTER
  Park City Center Business Trust PHEASANT LANE   Pheasant Lane Realty Trust

 

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PROVIDENCE PLACE   GGP - Providence Place LLC PRUDENTIAL CENTER   Boston
Properties Limited Partnership QUEENS CENTER   Queens Mall Limited Partnership
RIDGEWOOD   Caterina-Ridgewood, LLC RITTENHOUSE SQUARE   ADR 18th & Sansom, LLC
RIVER NORTH   Friedman Properties Ltd. ROCKAWAY   Rockaway Center Associates
ROCKINGHAM   Mall at Rockingham LLC SIXTH AVENUE   Olympic Funding, LLC STAMFORD
  Samuel Lotstein Realty Company, LLC STATEN ISLAND   GGP Staten Island Mall,
LLC SUBURBAN SQUARE   Amerishop Suburban L.P. TIMES SQUARE   Dream Team
Associates TOWSON TOWN CENTER   GGP THIRD AVE   Vandergrand Properties Co.
TYSONS CORNER   Tysons Corner Holdings LLC UNION SQUARE   University Place
Associates UNION STATION   Union Station Investco, LLC WALL STREET   67 Wall
Street Associates WATER TOWER   Water Tower Place LLC WEST MADISON   303 Madison
Chicago, LLC WESTPORT   Win Properties, Inc. WHITE MARSH   White Marsh Mall, LLC
WILLOWBROOK MALL   Willowbrook Mall, LLC WOODBURY   Kabro Assoc. of Woodbury LLC
HOLDINGS-NY OFFICE   Adams & Co. Real Estate LLC HOLDINGS-MD OFFICE   Preston
Strategies, LLC

 

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SCHEDULE 11.1

 

Payment of Indebtedness

 

See Schedule 10.19; provided, however, that Borrowers will pay all amounts due
and owing with respect to the Hoboken lease. Note that there may be additional
locations of the Subsidiaries which will be closed after the date hereof for
which lease payments would no longer be paid.

 

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