EXHIBIT 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (as amended, modified, supplemented, renewed or
restated from time to time, the “Agreement”) is made as of March 22, 2013,
between INVENTURE FOODS, INC., a Delaware corporation, (“Inventure”),  and BN
FOODS INC., a Colorado corporation, BOULDER NATURAL FOODS, INC., an Arizona
corporation, LA COMETA PROPERTIES, INC., an Arizona corporation, POORE BROTHERS
- BLUFFTON, LLC, a Delaware limited liability company, RADER FARMS, INC., a
Delaware corporation, and TEJAS PB DISTRIBUTING, INC., an Arizona corporation,
(together with Inventure, each a “Borrower” and collectively, “Borrower”, as the
context may require), and U.S. BANK NATIONAL ASSOCIATION, a national banking
association (“U.S. Bank”).

 

RECITAL

 

Borrower and U.S. Bank entered into a Loan Agreement (Revolving Line of Credit
Loan and Term Loan) dated as of May 16, 2007 and a Term Loan Agreement dated as
of June 28, 2007 (collectively, and as amended, restated, replaced, supplemented
or otherwise modified from time to time, the “Prior Agreement”), pursuant to
which U.S. Bank, extended certain term and revolving loans to Borrower. 
Borrower has requested that U.S. Bank make additional loans, advances,
extensions of credit and/or other financial accommodations to or for the benefit
of Borrower, and U.S. Bank is willing to do so on the terms and conditions set
forth in this Agreement.  Each Borrower acknowledges that they will derive a
substantial benefit from the loans, advances, extensions of credit and/or other
financial accommodations to be provided by U.S. Bank hereunder and each Borrower
acknowledges that they will receive at least a reasonably equivalent value from
the loans, advances, extensions of credit and/or other financial accommodations
to be provided by U.S. Bank hereunder in exchange for their various obligations
to U.S. Bank and in exchange for the various security interests and liens
granted by them to U.S. Bank, all as set forth in this Agreement and the other
Financing Agreements (as defined below).

 

NOW, THEREFORE, in consideration of the foregoing and of the terms and
conditions contained in this Agreement, and of any loans or extensions of credit
or other financial accommodations at any time made to or for the benefit of
Borrower by U.S. Bank, Borrower and U.S. Bank agree as follows:

 

1                                         DEFINITIONS.

 

1.1                               General Definitions.  When used herein, the
following capitalized terms shall have the meanings indicated, whether used in
the singular or the plural:

 

“Accounts” shall mean all present and future rights (including without
limitation, rights under any Margin Accounts) of Borrower to payment for
Inventory or other Goods sold or leased or for services rendered, which rights
are not evidenced by Instruments or Chattel Paper, regardless of whether such
rights have been earned by performance and any other “accounts” (as defined in
the Code).

 

“Account Debtor” shall mean any Person that is obligated on or under an Account
or a General Intangible.

 

“Adjusted Monthly LIBOR Rate” shall mean with respect to each day, the rate
determined by dividing the Monthly LIBOR Rate in effect on such day by 1.00
minus the LIBOR Reserve Percentage.

 

“Affiliate” shall mean any Person: (a) that directly or indirectly, through one
or more intermediaries, controls or is controlled by, or is under common control
with, Borrower; (b) that directly or beneficially owns or holds ten percent
(10%) or more of any class of the voting equity interest of Borrower; (c) ten
percent (10%) or more of the voting equity interest of which is owned directly
or beneficially or held by Borrower; or (d) that is a director, officer, agent
or employee of Borrower.

 

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“Applicable Margin” shall mean with respect to Line of Credit Advances which are
Base Rate Loans or LIBOR Rate Loans, with respect to fees for non-use of the
Line of Credit Loan Commitments, or with respect to fees for the issuance of
Letters, the rates per annum set forth below for the then applicable Financial
Performance Level:

 

Financial
Performance Level

 

Base Rate Loans

 

LIBOR Rate Loans
LC Fees

 

Non-Use Fees

 

Level 1

 

0.0

%

1.125

%

0.150

%

Level 2

 

0.0

%

1.250

%

0.175

%

Level 3

 

0.0

%

1.375

%

0.200

%

Level 4

 

0.0

%

1.625

%

0.250

%

Level 5

 

0.0

%

1.750

%

0.325

%

 

The initial Financial Performance Level shall be Level 2.  U.S. Bank will review
Borrower’s financial performance as of each fiscal quarter end, beginning with
fiscal quarter end March 31, 2013, after its receipt of Borrower’s financial
statements and Compliance Certificate as of the end of such fiscal quarter, and
will confirm Borrower’s determination as to Borrower’s Financial Performance
Level based on such fiscal quarter.  As so confirmed by U.S. Bank, Borrower’s
Financial Performance Level will determine the Applicable Margin effective for
the three month period beginning on the twentieth day of the second month
following the end of such fiscal quarter.  If U.S. Bank does not receive such
quarter end statements on or before the date they are due in accordance with
Section 7.1, Borrower’s Financial Performance Level shall be deemed to be Level
5 beginning with the twentieth day of the second month following the end of such
fiscal quarter and shall remain at Level 5 until the 15th Business Day after
such financial statements are received by U.S. Bank and a determination by U.S.
Bank that a different Financial Level shall apply during the remainder of the
three month period.

 

“Asset Coverage Ratio” shall mean, for any date of determination, the ratio of
(a) the sum of (i) the consolidated book value of Borrower’s Accounts, plus
(ii) the consolidated book value of Borrower’s Inventory, minus (iii) Producer
Payables; divided by (b) the sum of (i) the aggregate principal amount of the
Line of Credit Loan Liabilities, and (ii) the aggregate amount of the LC
Obligations.

 

“Available Amount” shall mean, at any time, an amount equal to (a) the Line of
Credit Loan Commitment minus (b) the sum of (i) the aggregate principal amount
of the Line of Credit Loan Liabilities, and (ii) the aggregate amount of the LC
Obligations.

 

“Bank Products” means any of the following services or facilities extended to
Borrower by U.S. Bank or any of its affiliates: (a) credit cards, letters of
credit or leases; (b) cash management, including controlled disbursement
services, automatic clearing house transfer of funds and overdrafts; and
(c) facilities and services extended under Rate Protection Agreements.

 

“Bank Products Agreements” means all documents and agreements relating to Bank
Products.

 

“Bank Products Obligations” means, with respect to any Person, all obligations
and liabilities of such Person under any Bank Products Agreements.

 

“Base Rate” shall mean the greater of (a) the Prime Rate, or (b) the Adjusted
Monthly LIBOR Rate in effect and reset each New York Banking Day plus 2.00%.

 

“Base Rate Loan” shall mean any Loan that accrues interest with reference to the
Base Rate.

 

“Business Day” shall mean any day of the year on which commercial banks in New
York, New York are not required or authorized to close.

 

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“Cash” shall mean for any date of determination, in respect of any Borrower,
cash as defined in the Audit and Accounting Guides issues by the American
Institute of Certified Public Accountants of the United States of America (as
amended from time to time) which includes as at the date of this agreement
currency on hand, demand deposits with financial institutions, and other similar
deposit accounts.”

 

“Cash Balances” shall mean for any date of determination, the sum of Cash and
Cash Equivalents, not exceeding, in the aggregate, Five Hundred Thousand and
No/100 Dollars ($500,000.00).

 

“Cash Equivalents” shall mean for any date of determination, in respect of any
Borrower, cash as defined in the Audit and Accounting Guides issues by the
American Institute of Certified Public Accountants of the United States of
America (as amended from time to time) which includes short term instruments
having not more than three (3) months to final maturity and highly liquid
instruments readily convertible to known amounts of cash.”

 

“Change of Control” shall mean, (a) as to Inventure, (i) the voting stock of
Inventure shall cease to be publicly traded, or (ii) more than 50% of the voting
stock of Inventure is owned or controlled, directly or indirectly by one Person
or an affiliated group of Persons, and (b) as to each other Borrower, the voting
stock or voting or controlling equity interest of such Borrower shall cease to
be wholly owned by Inventure, except as the result of a merger or asset
consolidation with Inventure (with Inventure as the surviving entity) or another
Borrower.

 

“Closing Date” shall mean the date of this Agreement.

 

“Collateral” shall mean any and all real or personal property in which U.S. Bank
may at any time have a lien or security interest under or pursuant to
Section 5.1 or otherwise to secure the Liabilities.

 

“Commitment” shall mean, the commitment of U.S. Bank to lend and to issue
Letters under the Line of Credit and/or the commitment of U.S. Bank to lend
under the Term Loan A and the Term Loan B.

 

“Default” shall mean the occurrence or existence of: (a) an event which, through
the passage of time or the service of notice or both, would (assuming no action
is taken by Borrower or any other Person to cure the same) mature into a Matured
Default; or (b) an event which requires neither the passage of time nor the
service of notice to mature into a Matured Default.

 

“Deposit Accounts” shall mean, (a) all deposit accounts (as defined in the Code)
of Borrower now or hereafter maintained with U.S. Bank, and (b) deposit accounts
(as defined in the Code) at other banks or financial institutions as identified
or described in any other Financing Agreement, including but not limited to any
control agreement.

 

“Documents” shall mean any and all warehouse receipts, bills of lading or
similar documents of title relating to Goods in which Borrower at any time has
an interest and any other “documents” (as defined in the Code).

 

“Dollars” and “$” shall mean lawful currency of the United States of America.

 

“EBITDA” shall mean, for any period of determination, the consolidated net
income of Borrower before provision for income taxes, interest expense
(including without limitation, implicit interest expense on capitalized leases),
depreciation expense, amortization expense and other non-cash expenses or
charges, excluding (to the extent included): (a) non-operating gains (including
without limitation, extraordinary or nonrecurring gains, gains from
discontinuance of operations and gains arising from the sale of assets other
than Inventory) during the applicable period; and (b) similar non-operating
losses during such period.

 

“Equipment” shall mean any and all Goods, other than Inventory (including
without limitation, equipment, machinery, motor vehicles, implements, tools,
parts and accessories) that are at any time owned by Borrower, together with any
and all accessions, parts and appurtenances and any other “equipment” (as
defined in the Code).

 

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“Farm Products” shall mean all personal property of Borrower used or for use in
farming or livestock operations, including without limitation, seed and
harvested or un-harvested crops of all types and descriptions, whether annual or
perennial and including trees, vines and the crops growing thereon, native
grass, grain, feed, feed additives, feed ingredients, feed supplements,
fertilizer, hay, silage, supplies (including without limitation, chemicals,
veterinary supplies and related Goods), livestock of all types and descriptions
(including without limitation, the offspring of such livestock and livestock in
gestation) and any other “farm products” (as defined in the Code).

 

“Financial Performance Level” shall mean the applicable level of Borrower’s
financial performance determined in accordance with the table set forth below.

 

Financial

 

 

Performance

 

 

Level

 

Leverage Ratio

Level 1

 

Less than or equal to 1.00 to 1.0

Level 2

 

Greater than 1.00 to 1.0 but less than or equal to 1.50 to 1.0

Level 3

 

Greater than 1.50 to 1.0 but less than or equal to 2.00 to 1.0

Level 4

 

Greater than 2.00 to 1.0 but less than or equal to 2.75 to 1.0

Level 5

 

Greater than 2.75 to 1.0

 

“Financing Agreements” shall mean all agreements, instruments and documents,
including without limitation, this Agreement, the Master Lease Agreement, the
documents and agreements related to the Master Lease Agreement and the documents
and agreements related to the Mortgage Loan, and all security agreements, loan
agreements, notes, letter of credit applications, letters of credit guarantees,
mortgages, deeds of trust, subordination agreements, pledges, powers of
attorney, consents, assignments, contracts, notices, leases, financing
statements and all other written matter at any time executed by, on behalf of or
for the benefit of Borrower and delivered to U.S. Bank, including without
limitation, the Schedules, together with all amendments and all agreements and
documents referred to therein or contemplated thereby, and all Bank Products
Agreements.

 

“Fixed Charge Coverage Ratio” shall mean, for the then preceding four fiscal
quarters, the ratio of Borrower’s: (a) (i) EBITDA during such period, minus
(ii) the amount of cash income taxes paid during such period, minus (iii) the
amount of cash dividends or distributions paid and the amount paid to redeem
capital stock or other equity interests during such period, minus (iv) fifty
percent (50%) of the amount of Borrower’s consolidated depreciation during such
period, plus (v) the amount of rent and other lease expense under operating
leases and Synthetic Leases during such period; divided by (b) (i) the amount of
principal paid (or due to be paid if not paid on or before the original due
date) by Borrower during such period with respect to long term debt (including
capitalized leases), excluding payments that were due and counted as of their
original due date, plus (ii) the amount of cash interest paid by Borrower during
such period (including without limitation, implicit interest expense on
capitalized leases), plus (iii) the amount of rent and other lease payments
under operating leases and Synthetic Leases paid during such period.

 

“Funded Debt” shall mean, for any date of determination, Borrower’s consolidated
outstanding principal amount of all interest bearing indebtedness (including
without limitation, capitalized leases, interest bearing accounts payable and,
without duplication, the undrawn amount of all outstanding letters of credit
(including without limitation, the Letters)).

 

“GAAP” shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

 

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“General Intangibles” shall mean all of Borrower’s present and future right,
title and interest in and to any customer deposit accounts, deposits, rights
related to prepaid expenses, chose in action, causes of action and all other
intangible personal property of every kind and nature (other than Accounts),
including without limitation, Payment Intangibles, beneficial interests in
trusts, corporate or other business records, inventions, designs, patents,
patent applications, trademarks, trade names, trade secrets, goodwill,
registrations, copyrights, licenses, franchises, customer lists, tax refunds,
tax refund claims, customs claims, guarantee claims, contract rights, membership
interests, partnership interests, cooperative memberships or patronage benefits,
obligations payable to Borrower for capital stock or other claims against any
Owners, rights to any government subsidy, set aside, diversion, deficiency or
disaster payment and any security interests or other security held by or granted
to Borrower to secure payment by any Account Debtor of any of the Accounts, and
any other “general intangibles” (as defined in the Code).

 

“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including without limitation, any arbitration panel, any court, any commission,
any agency or any instrumentality of the foregoing.

 

“Governmental Requirement” shall mean any material law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement of
any federal, state, county, municipal, parish, provincial or other Governmental
Authority or any department, commission, board, court, agency or any other
instrumentality of any of them (including any of the foregoing that relate to
environmental standards or controls and occupational safety and health standards
or controls).

 

“Immediately Available Funds” shall mean funds with good value on the day and in
the city in which payment is received.

 

“Inventory” shall mean any and all Goods which shall at any time constitute
“inventory” (as defined in the Code) or Farm Products of Borrower, wherever
located (including without limitation, Goods in transit and Goods in the
possession of third parties), or which from time to time are held for sale,
lease or consumption in Borrower’s business, furnished under any contract of
service or held as raw materials, work in process, finished inventory or
supplies (including without limitation, packaging and/or shipping materials).

 

“IRC” shall mean the Internal Revenue Code of 1986, as amended, as at any time
in effect, together with all regulations and rulings thereof or thereunder
issued by the Internal Revenue Service.

 

“LC Obligations” shall mean, at any time, an amount equal to the aggregate
undrawn and unexpired amount of the outstanding Letters.

 

“Letter” or “Letters” shall mean a documentary or standby letter of credit
issued for the account of Borrower pursuant to Section 2.1.6 (or under the Prior
Agreement) or all of such letters of credit, respectively.

 

“Leverage Ratio” shall mean, as of any date of determination, the ratio of
Borrower’s: (a) Net Funded Debt; divided by (b) EBITDA for the then preceding
four fiscal quarters.

 

“Liabilities” shall mean any and all liabilities, obligations and indebtedness
of Borrower to U.S. Bank of any and every kind and nature, at any time owing,
arising, due or payable and howsoever evidenced, created, incurred, acquired or
owing, whether primary, secondary, direct, contingent, fixed or otherwise
(including without limitation LC Obligations, Bank Products Obligations, fees,
charges and obligations of performance) and whether arising or existing under
this Agreement or any of the other Financing Agreements or by operation of law.

 

“LIBOR Rate” shall mean the LIBOR rate or LIBOR Rate as described or defined in
any Note.

 

“LIBOR Rate Loan” shall mean any Loan that accrues interest with reference to
any LIBOR Rate.

 

“LIBOR Reserve Percentage” shall mean the maximum effective percentage in effect
on any day as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements (including, without
limitation, supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding.

 

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“Line of Credit Loan Commitment” shall mean Thirty Million Dollars
($30,000,000), as such amount may be reduced or terminated from time to time
pursuant to Sections 2.8 or 9.1.

 

“Line of Credit Loan Liabilities” shall mean all of the Liabilities other than:
(i) the LC Obligations; (ii) the principal and interest owing under the Term
Loan A; (iii) the principal and interest owing under the Term Loan B; (iv) the
principal and interest owing under the Term Loan C; (v) the principal and
interest owing under the Term Loan D; (vi) the principal and interest owing
under the Mortgage Loan; and (vii) amounts owing under the Master Lease
Agreement.

 

“Margin Accounts” shall mean, collectively, all Commodity Accounts and all
Commodity Contracts.

 

“Marks” shall mean all marks or names owned or licensed by the Borrower that are
used or are hereafter used on or in connection with the Inventory.

 

“Marks Affiliate” shall mean with respect to any party, its respective direct or
indirect ultimate parent company, if any, and any company, firm or other entity
controlled by or under common control with, whether directly or indirectly, said
party or its parent company, but only so long as said ownership or control shall
continue.  For the purposes of this paragraph, “control” means either (i) the
ownership either directly or indirectly of more than fifty percent (50%) of the
voting shares of the relevant company, firm or other entity or (ii) the right to
elect the majority of directors of the relevant company, firm or other entity
and in either case, where such control may be exercised without the consent of
any third party.

 

“Master Lease Agreement” shall mean the Master Lease Agreement dated April 19,
2010, by and among one or more of Borrower and Equipment Finance (as successor
to U.S. Bancorp Equipment Finance).

 

“Matured Default” shall mean the occurrence or existence of any one or more of
the following events: (a) Borrower fails to pay any principal pursuant to any of
the Financing Agreements at the time such principal or interest becomes due or
is declared due, (ii) Borrower fails to pay any interest pursuant to any of the
Financing Agreements at the time such interest becomes due or is declared due
and fails to cure such non-payment within the period provided for in the
relevant Financing Agreement or, if no such cure period is provided for, within
ten (10) days after such interest payment became due or was declared due;
(b) Borrower fails to pay any of the Liabilities (other than principal and
interest) on or before ten (10) days after such Liabilities become due or are
declared due; (c) Borrower fails or neglects to perform, keep or observe any of
the covenants, conditions, promises or agreements contained in Sections 8.1, 8.2
or 8.4; (d) Borrower fails or neglects to perform, keep or observe any of the
covenants, conditions, promises or agreements contained in this Agreement or in
any of the other Financing Agreements (other than those covenants, conditions,
promises and agreements referred to or covered in (a), (b), and (c) above), and
such failure or neglect continues for more than thirty (30) days after such
failure or neglect first occurs, provided, however, that such grace period shall
not apply, and a Matured Default shall be deemed to have occurred and to exist
immediately if such failure or neglect may not, in U.S. Bank’s reasonable
determination, be cured by Borrower during such thirty (30) day grace period;
(e) the Available Amount, as calculated in accordance with the definition
thereof, results in a negative amount and Borrower fails to pay to U.S. Bank,
within ten (10) days after U.S. Bank notifies Borrower that the Available Amount
is a negative amount, Immediately Available Funds necessary to cause the
Available Amount to be not less than zero; (f) any warranty or representation at
any time made by or on behalf of Borrower in connection with this Agreement or
any of the other Financing Agreements is untrue or incorrect in any material
respect, or any schedule, certificate, statement, report, financial data,
notice, or writing furnished at any time by or on behalf of Borrower to U.S.
Bank is untrue or incorrect in any material respect on the date as of which the
facts set forth therein are stated or certified; (g) a judgment in excess of
$1,000,000 is rendered against Borrower and such judgment remains unsatisfied or
un-discharged and in effect for sixty (60) consecutive days without a stay of
enforcement or execution, provided, however, that this clause (g) shall not
apply to any judgment to the extent Borrower is insured and with respect to
which the insurer has admitted liability in writing for such judgment; (h) all
or any part of the assets of Borrower or any guarantor of any of the Liabilities
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors; (i) a proceeding under any bankruptcy, reorganization,
arrangement of debt, insolvency, readjustment of debt or receivership law or
statute is filed against Borrower or any guarantor of any of the Liabilities and
such proceeding is not dismissed within sixty (60) days of the date of its
filing, or a proceeding under any bankruptcy, reorganization, arrangement of
debt, insolvency, readjustment of debt or receivership law or statute is filed
by Borrower or any

 

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guarantor of any of the Liabilities, or Borrower or any guarantor of the
Liabilities makes an assignment for the benefit of creditors; (j) Borrower or
any guarantor of any of the Liabilities voluntarily or involuntarily dissolves
or is dissolved, terminates or is terminated or dies; (k) Borrower is enjoined,
restrained, or in any way prevented by the order of any court or any
administrative or regulatory agency or by the termination or expiration of any
permit or license, from conducting all or any material part of Borrower’s
business affairs; (l) Borrower or any guarantor of any of the Liabilities fails
to make any payment due or otherwise defaults on any obligation for borrowed
money owing to a Person other than U.S. Bank, that is outstanding in an
aggregate amount exceeding $1,000,000, and the effect of such failure or default
is to cause or permit the holder of such obligation or a trustee to cause such
obligation to become due prior to its date of maturity; (m) any guarantor of any
of the Liabilities asserts the invalidity of their guaranty, purports to
terminate their guaranty or purports to limit the application thereof to then
existing Liabilities; (n) U.S. Bank makes an expenditure under Section 10.3;
(o) the occurrence of a non-curable breach or default or a matured default under
any other agreement at any time in existence between Borrower, an Affiliate
(other than an agent or employee) or a guarantor of any of the Liabilities, and
U.S. Bank; (p) U.S. Bank at any time reasonably determines that U.S. Bank is
insecure with respect to the amount or quality of Collateral for the
Liabilities, or that such change has occurred in the condition or affairs
(financial or otherwise) of Borrower as, in the reasonable opinion of U.S. Bank,
materially affects Borrower’s ability to make prompt payment on the Liabilities
or materially impairs or is likely to materially impair the value of the
Collateral, including without limitation, the occurrence of such events as would
in U.S. Bank’s reasonable opinion create the possibility that, in accordance
with any federal, state or local law, or in accordance with any contract by
which Borrower is bound, any Person could assert liens or setoffs against the
Collateral; or (q) the occurrence of a Change of Control.

 

“Maturity Date” shall mean, as applicable, the earlier of: (a) as to the Line of
Credit, the Termination Date; (b) as to the Term Loan A, the Term Loan A
Maturity Date; (c) as to the Term Loan B, the Term Loan B Maturity Date; (d) as
to the Term Loan C, the Term Loan C Maturity Date; (e) as to the Term Loan D,
the Term Loan D Maturity Date; or (f) in each case, the earlier date of
termination in whole of the Commitments pursuant to Sections 2.3(c), 2.8 or 9.1;
or (g) in each case, the earlier date of the TGIF Early Maturity Date.

 

“Monthly LIBOR Rate”  shall mean, with respect to any date of determination, the
average offered rate for deposits in United States dollars for delivery of such
deposits on a one-month basis, which appears on Reuters Screen LIBOR01 Page (or
any successor thereto) as of 11:00 A.M., London time (or such other time as of
which such rate appears), or the rate for such deposits determined by U.S. Bank
at such time based on such other published service of general application as
shall be selected by U.S. Bank for such purpose.

 

“Mortgage Loan” shall mean, the loan by U.S. Bank to La Cometa Properties, Inc.,
made on or about November 30, 2006, secured by property located in Wells
County, Indiana, in the amount of Two Million Four Hundred Thousand Dollars
($2,400,000) which Borrower has paid down to One Million Nine Hundred Ninety
Three Thousand Seven Hundred Thirteen and 40/100 Dollars ($1,993,713.40) as of
January 15, 2013.

 

“Note” or “Notes” shall mean any one of the Line of Credit Note, the Term Note
A, the Term Note B, the Term Note C or the Term Note D or all of the Line of
Credit Note, the Term Note A, the Term Note B, the Term Note C or the Term Note
D, respectively.

 

“Net Funded Debt” shall mean, for any date of determination, Funded Debt less
Cash Balances.

 

“Owner” shall mean any Person who is a holder of Borrower’s capital stock or
holds a partnership or membership interest in Borrower.

 

“Person” shall mean any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government (whether
national, federal, state, provincial, county, city, municipal or otherwise,
including without limitation, any instrumentality, division, agency, body or
department thereof).

 

“Prime Rate” shall mean the prime rate announced by U.S. Bank from time to time,
which is a base rate that U.S. Bank from time to time establishes and which
serves as the basis upon which effective rates of interest are calculated for
those loans which make reference thereto.  The Prime Rate is not necessarily the
lowest rate offered by U.S. Bank.

 

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“Producer Payables” shall mean all amounts at any time payable by Borrower
(whether or not the subject of a deferred payment arrangement) for purchases of
perishable agricultural commodities that are the subject of the Perishable
Agricultural Commodities Act, or that are payable by Borrower for the purchase
of Inventory that is secured by any lien, security interest or imposition of
trust, in each case that are not the subject of a lien waiver or subordination
agreement in form and substance acceptable to U.S. Bank.

 

“Property” shall mean those premises owned or operated by Borrower, including
without limitation, the real property described in Borrower’s mortgage(s) and/or
deed(s) of trust referred to in Section 5.1.

 

“Rate Protection Agreement” means, collectively, any currency or interest rate
swap, cap, collar or similar agreement or arrangements designed to protect
against fluctuations in interest rates or currency exchange rates entered into
by Borrower under which the counterparty to such agreement is (or at the time
such Rate Protection Agreement was entered into, was) U.S. Bank or an affiliate
of U.S. Bank.

 

“Subordinated Debt” shall mean the consolidated, subordinated, unsecured debt of
Borrower that is subordinated to the Liabilities in accordance with a
subordination agreement or subordination agreements, in form and substance
acceptable to U.S. Bank.

 

“Subsidiary” means as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person.  Unless otherwise qualified,
all references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall
refer to a Subsidiary or Subsidiaries of Borrower.

 

“Synthetic Lease” means any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product where such
transaction is considered borrowed money indebtedness for tax purposes but is
classified as an operating lease under GAAP.

 

“Term Loan A Maturity Date” shall mean March 22, 2020.

 

“Term Loan B Maturity Date” shall mean as to each Loan under the Term Loan B,
the date selected by Borrower at the time of such Loan, which shall be the
fifth, sixth or seventh anniversary of the date on which U.S. Bank first makes a
Term Loan B Advance to Borrower, as set forth in each Term Note B.

 

“Term Loan C Maturity Date” shall mean May 31, 2014.

 

“Term Loan D Maturity Date” shall mean July 1, 2017.

 

“TGIF Early Maturity Date” shall mean, in the event that the expiration date for
Borrower’s License Agreement with TGI Friday’s is not renewed or extended prior
to December 31, 2013, for a term beyond the Termination Date, the date that is
thirty (30) days prior to the date of the expiration of said License Agreement.

 

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1.2                               Index to Other Definitions.  When used herein,
the following capitalized terms shall have the meanings given in the indicated
portions of this Agreement:

 

Term

 

Location

Advance, Advances

 

Section 2.7

Agreement

 

Introduction

Beneficiary

 

Section 2.1.6

Benefit Plans

 

Section 6.20

Borrower

 

Introduction

Broker

 

Section 5.15

Code

 

Section 1.4

Compliance Certificate

 

Section 7.1

Default Rate

 

Section 2.2

Equipment Collateral

 

Section 3.1

Equipment Finance

 

Section 3.1

Eligible Investor Notes

 

Section 3.4

Eligible Prepaid Expenses

 

Section 3.3

Environmental Laws

 

Section 6.10

ERISA

 

Section 6.20

Excess

 

Section10.20

Funding End Date

 

Section 2.1.3

LC Fee

 

Section 2.5

Line of Credit

 

Section 2.1.1

Line of Credit Advances

 

Section 2.1.1

Line of Credit Note

 

Section 2.1.1

Loan, Loans

 

Section 2.7

Loan Account

 

Section 2.6

Non-Use Fee

 

Section 2.5

Prior Agreement

 

Recital

Schedules

 

Section 3.1

Term Loan A

 

Section 2.1.2

Term Loan A Advance

 

Section 2.1.2

Term Loan B

 

Section 2.1.3

Term Loan B Advance

 

Section 2.1.3

Term Loan C

 

Section 2.1.4

Term Loan C Advance

 

Section 2.1.4

Term Loan D

 

Section 2.1.5

Term Loan D Advance

 

Section 2.1.5

Term Note A

 

Section 2.1.2

Term Note B

 

Section 2.1.3

Term Note C

 

Section 2.1.4

Term Note D

 

Section 2.1.5

Termination Date

 

Section 2.1.1

UETA

 

Section 10.28

U.S. Bank

 

Introduction

 

1.3                               Accounting Terms.  Any accounting terms used
in this Agreement which are not specifically defined in this Agreement shall
have the meanings customarily given them in accordance with GAAP, as
consistently applied as of the date of this Agreement.

 

1.4                               Others Defined in Arizona Uniform Commercial
Code.  All other terms contained in this Agreement (which are not specifically
defined in this Agreement) shall have the meanings set forth in the Uniform
Commercial Code of Arizona (“Code”) to the extent the same are used or defined
therein, specifically including, but not limited to the following: Chattel
Paper, Commercial Tort Claims, Commodity Accounts, Commodity Contracts,
Electronic Chattel Paper, Goods, Instruments, Investment Property, Letter of
Credit Rights, Payment Intangibles, Securities Accounts and Tangible Chattel
Paper.

 

2                                         LOANS, LETTERS OF CREDIT AND FEES.

 

2.1                               Loans and Letters of Credit.  Subject to all
of the terms and conditions contained in this Agreement, U.S. Bank agrees to
make the following extensions of credit to or for the benefit of Borrower:

 

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2.1.1                     Line of Credit.  U.S. Bank agrees to make advances
(“Line of Credit Advances”) to Borrower from time to time from and after the
date of this Agreement, through and including the earlier of the Maturity Date
or March 22, 2018 (“Termination Date”), in amounts up to the then current
Available Amount (“Line of Credit”).  The Line of Credit Advances shall be
evidenced by and repayable in accordance with the terms of Borrower’s promissory
note (“Line of Credit Note”).  If and to the extent U.S. Bank is permitted to
make Advances to or for the account of Borrower in accordance with the terms of
this Agreement or any other Financing Agreement, U.S. Bank, in its sole and
absolute discretion and without any obligation to do so, may elect to make Line
of Credit Advances to Borrower in excess of the Available Amount, and any such
Line of Credit Advances shall also be governed by the terms hereof (including,
without limitation, clause (e) of the definition of Matured Default).  U.S. Bank
shall also have the option, in its sole discretion and without any obligation to
do so, to extend the Termination Date for the making of Line of Credit
Advances.  In the event that U.S. Bank elects to extend such Termination Date,
U.S. Bank shall give notice to Borrower pursuant to Section 10.19.

 

2.1.2                     Term Loan A.  U.S. Bank agrees to advance (“Term Loan
A Advance”) to Borrower the principal sum of Eight Million Five Hundred Thousand
Dollars ($8,500,000) (“Term Loan A”).  The Term Loan A shall be evidenced by and
repayable in accordance with the terms of Borrower’s promissory note (“Term Note
A”).  Amounts representing Term Loan A Advances that have been repaid by
Borrower may not be reborrowed.

 

2.1.3                     Term Loan B.  U.S. Bank agrees to make advances (“Term
Loan B Advances”) to Borrower from time to time from and after the date of this
Agreement, as approved by and subject to the delivery of such information,
documents and Schedules as may be required by Equipment Finance through and
including December 31, 2013 (“Funding End Date”) in amounts up to Five Million
Dollars ($5,000,000) (“Term Loan B”).  Each Term Loan B Advance shall be
evidenced by and repayable in accordance with the terms of Borrower’s promissory
note (in each case, a “Term Note B”), substantially in the form attached as
Exhibit 2A.  Amounts representing Term Loan B Advances that have been repaid by
Borrower may not be reborrowed.

 

2.1.4                     Term Loan C.  Under the Prior Agreement, U.S. Bank has
advanced to Borrower the principal sum of Six Million Dollars ($6,000,000) which
Borrower has paid down to One Million Seventy One Thousand Four Hundred Twenty
Eight and 67/100 Dollars ($1,071,428.67) (the amount advanced and unpaid under
the Prior Agreement, the “Term Loan C Advance” and also referred to as the “Term
Loan C”).  The Term Loan C shall be evidenced by and repayable in accordance
with the terms of Borrower’s promissory note (“Term Note C”).  Amounts
representing the Term Loan C Advance that have been repaid by Borrower may not
be reborrowed.

 

2.1.5                     Term Loan D.  Under the Prior Agreement, U.S. Bank has
advanced to Borrower the principal sum of Four Million Dollars ($4,000,000)
which Borrower has paid down to Two Million Nine Hundred Seventy Three Thousand
Five Hundred Eighty Nine and 68/100 Dollars ($2,973,589.68) (the amount advanced
and unpaid under the Prior Agreement, the “Term Loan D Advance” and also
referred to as the “Term Loan D”).  The Term Loan D shall be evidenced by and
repayable in accordance with the terms of Borrower’s promissory note (“Term Note
D”).  Amounts representing the Term Loan D Advance that have been repaid by
Borrower may not be reborrowed.

 

2.1.6                     Letters of Credit.  U.S. Bank further agrees to issue
its irrevocable letters of credit for the account of Borrower in amounts up to
the lesser of: (a) Two Million Dollars ($2,000,000) minus the then outstanding
LC Obligations; or (b) the then current Available Amount, with an expiration
date not later than six months after the Termination Date, for the benefit of
one or more beneficiaries to be named by Borrower (the “Beneficiary”, whether
one or more), in form and substance reasonably acceptable to U.S. Bank.  If U.S.
Bank has received documents purporting to draw under a Letter that U.S. Bank
believes conform to the requirements of the Letter, or if U.S. Bank has decided
that it will comply with Borrower’s written or oral request of authorization to
pay a drawing on any Letter that U.S. Bank does not believe conforms to the
requirements of the Letter, or if U.S. Bank has decided that it will not pay a
drawing on any Letter for any reason, U.S. Bank will notify Borrower of that
fact.  An amount equal to the amount of such drawing shall be paid by a Line of
Credit Advance initiated by U.S. Bank on the date such drawing is made.  The
obligation of Borrower to repay U.S. Bank for any Line of Credit Advance made to
fund such drawing, shall be absolute, unconditional and irrevocable, shall
continue notwithstanding any termination of this Agreement, and shall be paid
strictly in accordance with the terms of this Agreement, notwithstanding any of
the following:

 

(a)                                 Any lack of validity or enforceability of
any Letter;

 

(b)                                 The existence of any claim, setoff, defense
or other right which Borrower may have or claim at any time against any
Beneficiary, transferee or holder of any Letter (or any Person for whom any such
Beneficiary, transferee or holder may be acting), U.S. Bank or any other Person,
whether in connection with a Letter, this Agreement, the transactions
contemplated hereby, or any unrelated transaction; or

 

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(c)                                  Any statement or any other document
presented under any Letter proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect whatever so long as such statement or document appeared to comply
with the terms of the Letter.

 

None of U.S. Bank or any of the officers, directors or employees of U.S. Bank
shall be liable or responsible for, and the obligations of Borrower to U.S. Bank
shall not be impaired by:

 

(d)                                 The use that may be made of any Letter or
for any acts or omissions of any Beneficiary, transferee or holder thereof in
connection therewith;

 

(e)                                  The validity, sufficiency or genuineness of
documents, or of any endorsements thereon, even if such documents or
endorsements should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged so long as such statement or document
appeared to comply with the terms of the Letter;

 

(f)                                   The acceptance by U.S. Bank of documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary; or

 

(g)                                  Any other action of U.S. Bank in making or
failing to make payment under any Letter if in good faith and in conformity with
applicable U.S. or foreign laws, regulations or customs.

 

Notwithstanding the foregoing, Borrower shall have a claim against U.S. Bank,
and U.S. Bank shall be liable to Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages suffered by Borrower
which Borrower proves were caused by U.S. Bank’s willful misconduct or gross
negligence in determining whether documents presented under any Letter comply
with the terms thereof.

 

If any Letter is issued and outstanding on the Maturity Date, Borrower shall
deposit with U.S. Bank, cash collateral in an amount equal to the LC Obligations
relating to such Letter.

 

2.2                               Default Rate.  Upon and after a Matured
Default and notice thereof to Borrower, Borrower shall, in lieu of the interest
rate set forth in any promissory note referred to herein, pay to U.S. Bank
interest from the date of the Matured Default at a per annum rate which is equal
to the Base Rate plus two percent (2%) (“Default Rate”) calculated on the
outstanding principal balance of the Liabilities until all of the Liabilities
are repaid in full.

 

2.3                               Prepayment.  Unless prepayment is restricted
by any promissory note evidencing any portion of the Liabilities, Borrower may,
at any time, without premium or penalty, prepay any portion or the entire
balance of the Liabilities.  Borrower shall have the right, upon at least five
Business Days’ written notice to U.S. Bank, to terminate the Line of Credit Loan
Commitment, (i) in whole, or (ii) in part, in a minimum amount of $1,000,000 and
an integral multiple of $1,000,000, but not to an amount less than $5,000,000;
provided, however, that any such termination shall be accompanied, (i) in the
case of a termination in whole, by payment of all other Liabilities (including
amounts due under the Term Loan A, the Term Loan B, the Term Loan C and the Term
Loan D) in full and the return or cash coverage of any Letter then outstanding,
or (ii) in the case of a partial termination, payment of the Line of Credit Loan
Liabilities to the extent necessary to cause the Available Amount to be not less
than zero.

 

2.4                               Purpose.  The purpose of the Line of Credit is
to provide funds for Borrower’s working capital, capital expenditures, permitted
acquisitions, and other lawful corporate purposes.  The purpose of the Term Loan
A is to provide financing of Borrower’s various food processing and warehouse
equipment purchased from 2010-2012, to be further defined with invoices and
proof of payment documentation, and including accessories and replacements
relating thereto.   The purpose of the Term Loan B is to provide funds from the
Closing Date to the Funding End Date for Borrower’s purchase of food processing,
packaging, warehouse, and other related equipment to be further defined with
specific invoices, including accessories and replacements relating thereto.

 

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2.5                               Loan and Letter of Credit Fees.

 

(a)                                 Up-Front Fees.  Borrower agrees to pay to
U.S. Bank the following fees: (i) a fee in respect of the Line of Credit in the
amount of Thirty Five Thousand Dollars ($35,000) on the Closing Date; (ii) a fee
in respect of the Term Loan A in the amount of Eight Thousand Five Hundred
Dollars ($8,500) upon demand by Equipment Finance; and (iii) a fee in respect of
the Term Loan B in the amount of Five Thousand Dollars ($5,000) upon demand by
Equipment Finance.  Each of the foregoing fees shall be fully earned on the
Closing Date and, at the option of U.S. Bank, shall be paid by U.S. Bank
initiated Line of Credit Advances pursuant to Section 2.1.

 

(b)                                 Non-Use Fee.  Borrower agrees to pay to U.S.
Bank a quarterly non-use fee (“Non-Use Fee”) from the Closing Date to the
Maturity Date, calculated using the Applicable Margin and applied to the daily
average Available Amount.  The quarterly Non-Use Fee shall be due and payable in
arrears with respect to the prior quarter on the first day of each January,
April, July and October hereafter through the Maturity Date.  A pro-rated
Non-Use Fee shall be due and payable on the first day of the quarter following
the Closing Date and on the Maturity Date.  Each quarterly Non-Use Fee shall be
earned as it accrues and, at the option of U.S. Bank, shall be paid by Line of
Credit Advances pursuant to Section 2.1, without prior demand by U.S. Bank.

 

(c)                                  Letter of Credit Fees.  With respect to
Letters, Borrower agrees to pay to U.S. Bank, a quarterly letter of credit fee
(“LC Fee”), payable in arrears with respect to the prior quarter on the first
day of each January, April, July and October, in respect of each Letter issued
hereunder (or under the Prior Agreement), calculated using the Applicable Margin
and applied to the aggregate daily average amount available to be drawn under
all Letters outstanding during such quarter.  Pro-rated LC Fees shall be due and
payable on the first day of the quarter following the Closing Date, on the
Maturity Date and, with respect to a Letter that terminates, on the date such
Letter terminates.  Borrower shall also pay to U.S. Bank, the normal and
customary processing fees charged by U.S. Bank in connection with the issuance
of or drawings under each such Letter.  Each LC Fee and processing fee shall be
fully earned as it accrues and, at the option of U.S. Bank, shall be paid by
Line of Credit Advances pursuant to Section 2.1, without prior demand by U.S.
Bank.

 

(d)                                 Calculation of Fees.  The fees payable under
this Section 2.5 which are based on an annual percentage rate shall be
calculated by U.S. Bank on the basis of a 360-day year, for the actual days
(including the first day but excluding the last day) occurring in the period for
which such fee is payable. Each determination by U.S. Bank of fees payable under
this Section 2.5 shall be conclusive and binding for all purposes, absent
manifest error.

 

(e)                                  Fees Not Interest.  The fees described in
this Agreement represent compensation for services rendered and to be rendered
separate and apart from the lending of money or the provision of credit and do
not constitute compensation for the use, detention, or forbearance of money, and
the obligation of Borrower to pay each fee described herein shall be in addition
to, and not in lieu of, the obligation of Borrower to pay interest, other fees
described in this Agreement, and expenses otherwise described in this Agreement.
Fees shall be payable when due in Dollars and in Immediately Available Funds.
All fees shall be non-refundable.

 

2.6                               Borrower’s Loan Account.  U.S. Bank shall
maintain a loan account (“Loan Account”) on its books in which shall be
recorded: (a) all Advances made by U.S. Bank to Borrower pursuant to this
Agreement; (b) all payments made by or for the account of Borrower; and (c) all
other appropriate debits and credits as provided in this Agreement, including
without limitation, all fees, charges, expenses and interest.  All entries in
Borrower’s Loan Account shall be made in accordance with U.S. Bank’s customary
accounting practices as in effect from time to time.  Borrower promises to pay
the amount reflected as owing by and under its Loan Account and all other
obligations hereunder as such amounts become due or are declared due pursuant to
the terms of this Agreement.

 

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2.7                               Statements.  All Line of Credit Advances, Term
Loan A Advances, Term Loan B Advances, Term Loan C Advances and Term Loan D
Advances (collectively “Advances” and individually, an “Advance” and also
sometimes referred to in each case as a “Loan” and collectively the “Loans”), to
Borrower, and all other debits and credits provided for in this Agreement, shall
be evidenced by entries made by U.S. Bank in its internal data control systems
showing the date, amount and reason for each such debit or credit.  Until such
time as U.S. Bank shall have rendered to Borrower written statements of account,
the balance in Borrower’s Loan Account, as set forth on U.S. Bank’s most recent
printout, shall be rebuttable presumptive evidence of the amounts due and owing
U.S. Bank by Borrower.  On or about the last day of each calendar month, U.S.
Bank shall mail to Borrower a statement setting forth the balance of Borrower’s
Loan Account, including without limitation, principal, interest, expenses and
fees.  Each such statement shall be subject to subsequent adjustment by U.S.
Bank but shall, absent manifest errors or omissions, be presumed correct and
binding upon Borrower and shall constitute an account stated unless, within
sixty (60) days after receipt of any statement from U.S. Bank, Borrower shall
deliver to U.S. Bank written objection specifying the error or errors, if any,
contained in such statement.

 

2.8                               Termination of Agreement.  U.S. Bank shall
have the right, without notice to Borrower, to terminate the Commitments
immediately upon a Matured Default.  In addition, the Commitments shall be
deemed immediately terminated and all of the Liabilities shall be immediately
due and payable, without notice to Borrower, on the Termination Date if U.S.
Bank elects not to extend the Termination Date pursuant to Section 2.1.1.  In
the event the Commitment is terminated, the remainder of this Agreement shall
remain in full force and effect until the payment in full of the Liabilities and
the termination of any Letters.  Notwithstanding the foregoing, in the event
that a proceeding under any bankruptcy, reorganization, arrangement of debt,
insolvency, readjustment of debt or receivership law or statute is filed by or
against Borrower or any guarantor of any of the Liabilities, or Borrower or any
guarantor of any of the Liabilities makes an assignment for the benefit of
creditors, the Commitment shall be deemed to be terminated immediately, and all
of the Liabilities shall be due and payable, provided, however, that in the
event such proceeding against Borrower or any guarantor of any of the
Liabilities is dismissed within sixty (60) days of the date of its filing then
the Commitments shall be deemed to be reinstated as of the date the order of
dismissal becomes final and U.S. Bank is given notice thereof, and provided,
however, the reimbursement of U.S. Bank as provided for in this Agreement shall
continue with respect to any post-petition drawings under any Letters.  This
Agreement shall terminate when the Commitments are terminated, any Letters
issued hereunder (or under the Prior Agreement) have terminated and the
Liabilities have been indefeasibly paid in full.

 

2.9                               Contribution Agreement.  As an inducement to
U.S. Bank to make Advances and extend credit to each Borrower, each Borrower
agrees to indemnify and hold the other harmless from and each shall have a
continuing right of contribution against each other Borrower, if and to the
extent that a Borrower makes or is caused to make disproportionate payments of
the Liabilities in excess of that Borrower’s Proportionate Share (as defined
below), from dispositions of its assets or otherwise.  These indemnification and
contribution obligations shall be unconditional and continuing obligations of
each Borrower and shall not be waived, rescinded, modified, limited or
terminated in any way whatsoever without the prior written consent of U.S. Bank,
in its sole discretion.  For purposes hereof, the Proportionate Share of a
Borrower shall mean a fraction, in which the numerator is the net worth of a
Borrower (defined as the fair salable value of its assets minus its liabilities,
other than the Liabilities and its contribution obligations hereunder) on the
date of the determination with regard to such payments and the denominator is
the consolidated net worth of every Borrower (as so defined) on such date.

 

3                                         Terms and Schedules Related to
Equipment Purchases.

 

3.1                               U.S. Bank Equipment Finance.  All requests for
Term Loan A Advances or Term Loan B Advances shall be directed to U.S. Bank
Equipment Finance, a division of U.S. Bank, having offices at PO Box 230789,
Portland, OR 97281-0789 (hereinafter called “Equipment Finance” and sometimes
referred to in the Schedule(s) as “Secured Party”).  The Liabilities shall
include any amounts set forth on any Schedule to this Agreement (the
“Schedule(s)”) and, without limiting the generality of Section 5.1 or other
terms of this Agreement relating to Collateral, Borrower grants a security
interest in the property specified in any Schedule (or any related document)
hereunder wherever located, and any and all proceeds thereof, insurance
recoveries, and all replacements, additions, accessions, accessories and
substitutions thereto or therefor (herein referred to as “Equipment Collateral”)
to Equipment Finance and to the successors and assigns thereof to secure the
payment and performance of the Liabilities.

 

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3.2                               Equipment Finance Transactions.  This
Agreement and any Schedule hereunder (a “Transaction”) supersede all prior
agreements and understandings relating to the same subject matter, except in any
case where Equipment Finance takes an assignment from a vendor of its security
interest in the same Equipment Collateral, in which case the terms of the
Transaction shall be incorporated into the assigned agreement and shall prevail
over any inconsistent terms therein but shall not be construed to create a new
contract.  If any of the Financing Agreements are delivered to Equipment Finance
by facsimile transmission or by Adobe Acrobat (or equivalent) attachment to an
e-mail message, such documents (and signatures thereon) shall be treated as, and
have the same force and effect as, originals.  By providing any telephone
number, now or in the future, for a cell phone or other wireless device,
Borrower expressly consents to receiving communications, regardless of their
purpose, at that number, including, but not limited to, prerecorded or
artificial voice message calls, text messages, and calls made by an automatic
dialing system from Equipment Finance and its affiliates and agents. These calls
and messages may incur access fees from Borrower’s provider.

 

3.3                               Late Charges; Dishonored Checks.  If any of
the obligations remains overdue for more than five (5) days, Borrower hereby
agrees to pay on demand, as a late charge, an amount equal to the lesser of
(i) five percent (5.0%) of each such overdue amount; or (ii) the maximum
percentage of any such overdue amount permitted by applicable law as a late
charge.  Borrower agrees that the amount of such late charge represents a
reasonable estimate of the cost to Equipment Finance of processing a delinquent
payment and that the acceptance of any late charge shall not constitute a waiver
of default with respect to the overdue amount or prevent Equipment Finance from
exercising any other available rights and remedies.  If any payment is made by
check and such check is returned to Equipment Finance for any reason, including
without limitation, insufficient funds in Borrower’s account, then Borrower
shall be assessed a fee equal to the lesser of $30.00 or the maximum permitted
by applicable law, in addition to any other late charge or any other fee which
may be applicable.

 

3.4                               Equipment Collateral.  Without limiting the
other terms of this Agreement and the other Financing Agreements relating to
Collateral the following shall be specifically applicable to the Equipment
Collateral.  The Equipment Collateral shall be kept primarily at the
location(s) shown on the Schedule(s) hereunder (unless the Equipment Collateral
is mobile, in which case it may be moved in the ordinary course of business),
and Borrower shall give prompt written notice to Equipment Finance of any change
in the location(s) of the Equipment Collateral.  Notwithstanding the foregoing,
the Equipment Collateral shall not be moved outside the United States without
Equipment Finance’s prior written consent. The Equipment Collateral is not
attached, and Borrower shall not permit the Equipment Collateral to become
attached, to real estate in such a way that it would be considered part of the
realty or designated a “fixture.”  Notwithstanding any presumption of applicable
law, and irrespective of any manner of attachment, the Equipment Collateral
shall not be deemed real property but shall retain its character as personal
property.  However, Borrower shall at the option of Equipment Finance furnish
the latter with waiver(s) in recordable form, signed by all persons having an
interest in the real estate, of any interest in the Equipment Collateral which
is or might be deemed to be prior to Equipment Finance’s interest.  Borrower
shall use the Equipment Collateral for business purposes only and operate it by
qualified personnel in accordance with applicable manufacturers’ and regulatory
maintenance and performance standards.  Borrower shall adhere to reasonable
practices for Borrower’s industry and the type of Equipment Collateral, for
security against terrorism and other risks.  Borrower shall keep the Equipment
Collateral in good working order, condition and repair and shall not waste or
destroy the Equipment Collateral or any part thereof; Borrower shall keep the
Equipment Collateral appropriately protected from the elements, and shall
furnish all required parts and servicing (including any contract service
necessary to maintain the benefit of any warranty of the manufacturer); and
Borrower shall not use the Equipment Collateral in violation of any statute,
ordinance, regulation or order.  Equipment Finance may examine and inspect the
Equipment Collateral and any and all books and records of Borrower related to
the Equipment Collateral during business hours upon reasonable notice; such
right of inspection shall include the right to copy Borrower’s books and records
related to the Equipment Collateral and to converse with Borrower’s officers,
employees, agents, and independent accountants about the Equipment Collateral. 
EQUIPMENT FINANCE MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT
HAS IN THE EQUIPMENT COLLATERAL AND/OR ARISING UNDER THIS AGREEMENT.  BORROWER
SHALL, UPON THE DIRECTION OF EQUIPMENT FINANCE:  1) EXECUTE ALL DOCUMENTS
NECESSARY TO EFFECTUATE SUCH ASSIGNMENT AND, 2) PAY DIRECTLY AND PROMPTLY TO
EQUIPMENT FINANCE’S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET-OFF, ALL
AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS.  EQUIPMENT
FINANCE’S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF
EQUIPMENT FINANCE HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF
EQUIPMENT FINANCE HEREUNDER.  ALL REFERENCES HEREIN TO EQUIPMENT FINANCE SHALL
INCLUDE EQUIPMENT FINANCE’S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE
CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF
THAT ARISE PRIOR TO THE

 

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DATE OF THE ASSIGNMENT AND ARE RETAINED BY THE ASSIGNOR EQUIPMENT FINANCE). 
BORROWER SHALL NOT ASSERT AGAINST EQUIPMENT FINANCE’S ASSIGNEE ANY DEFENSE,
COUNTERCLAIM OR SET-OFF WHICH BORROWER MAY HAVE AGAINST EQUIPMENT FINANCE. 
BORROWER SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS OR
OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING ALL OR
ANY PART OF THE EQUIPMENT COLLATERAL WITHOUT THE PRIOR WRITTEN CONSENT OF
EQUIPMENT FINANCE, WHICH SHALL NOT BE UNREASONABLY WITHHELD.  IN CONNECTION WITH
THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION, A
FEE SHALL BE ASSESSED EQUAL TO $3,500 PLUS REASONABLE OUT-OF-POCKET EXPENSES
INCURRED BY EQUIPMENT FINANCE.  In the event that Equipment Finance has
consented to any lease of the Equipment Collateral, Borrower hereby assigns and
grants to Equipment Finance a security interest in any and all rights under any
lease(s), to secure all obligations to Equipment Finance, and Borrower shall
deliver to Equipment Finance the original of such lease(s).  Borrower hereby
appoints Equipment Finance as its attorney-in-fact to sign Borrower’s name and
to make non-material amendments (including completing and conforming the
description of the Equipment Collateral) on any document in connection with this
Agreement, including any document necessary for processing vehicle
certificate(s) of title, and to obtain, adjust and settle any insurance required
by this Agreement and to endorse any drafts in connection with such insurance.

 

4                                         CONDITIONS TO ADVANCES.

 

Notwithstanding any other provisions to the contrary contained in this
Agreement, the making of any Advance or the issuance of any Letter provided for
in this Agreement shall be conditioned upon the following:

 

4.1                               Approval of U.S. Bank Counsel.  Legal matters,
if any, relating to each such Advance shall have been reviewed by and shall be
satisfactory to counsel for U.S. Bank.

 

4.2                               Compliance.  All representations and
warranties contained in this Agreement shall be true on and as of the date of
the making of such Advance as if such representations and warranties had been
made on and as of such date, and no Default or Matured Default shall have
occurred and be continuing or shall exist.

 

4.3                               Documentation.  Borrower shall have executed
and/or delivered to U.S. Bank all of the documents listed on the List of Closing
Documents attached as Exhibit 4A, in form and substance acceptable to U.S. Bank.

 

4.4                               Post Closing Documentation Requirement.  On or
before date indicated, Borrower shall have executed and/or delivered to U.S.
Bank, the documents listed on the List of Closing Documents attached as
Exhibit 4B in form and substance reasonably acceptable to U.S. Bank.  The
Borrower’s failure to comply with this Section 4.4, shall (in addition to being
a failure of a condition to further Advances), constitute a Matured Default.

 

4.5                               Schedules.  With respect to the Term Loan A
and the Term Loan B, Borrower shall have executed and delivered to Equipment
Finance any and all Schedules as may be required by Equipment Finance with
respect to Equipment Collateral, and in the case of the Term Loan B, a Term Note
B for each Term Loan B Advance.

 

5                                         SECURITY.

 

5.1                               Security Interests and Liens.  To secure the
payment and performance of the Liabilities, Borrower hereby grants to U.S. Bank
a continuing security interest in and to the following property and interests in
property of Borrower, whether now owned or existing or hereafter acquired or
arising and wherever located: all Accounts, Inventory, Equipment, Farm Products,
Goods, General Intangibles, Payment Intangibles, Commercial Tort Claims
(specifically described as those Commercial Tort Claims which are proceeds of
any of the other herein described collateral), Deposit Accounts, Margin
Accounts, Commodity Accounts, Commodity Contracts, Securities
Accounts, Investment Property, Instruments, Letter of Credit Rights, Documents,
Chattel Paper, Electronic Chattel Paper, Tangible Chattel Paper, all accessions
to, substitutions for, and all replacements, products and proceeds of the
foregoing (including without limitation, proceeds of insurance policies insuring
any of the foregoing), all books and records pertaining to any of the foregoing
(including without limitation, customer lists, credit files, computer programs,
printouts and other computer materials and records), and all insurance policies
insuring any of the

 

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foregoing.  Radar Farms, Inc. agrees to continue to grant to U.S. Bank, liens
against its leasehold interests in the Property located in the State of
Washington, which liens shall continue to be evidenced by Borrower’s Leasehold
Deed of Trust (which shall be amended in conjunction with this Agreement and
which may be hereafter amended).  If required by Section 5.15, Borrower agrees
to grant to U.S. Bank an Assignment of Commodity Accounts and Commodity
Contracts.  If at any time after the date of this Agreement any Subsidiary is
formed or acquired (as permitted in accordance with Section 8.2), then such
Subsidiary shall promptly execute and deliver to U.S. Bank, a guaranty
(including representations, warranties and covenants similar to those set forth
in this Agreement), security agreements, pledge agreements, mortgages, deeds of
trust and such other agreements, documents, instruments and opinions of counsel
as U.S. Bank may require and in form and substance acceptable to U.S. Bank, in
order to cause such Subsidiary to be jointly and severally liable for the
Liabilities and in order to cause substantially all of the assets of such
Subsidiary to be Collateral.

 

5.2                               Endorsement by U.S. Bank.  Borrower authorizes
U.S. Bank to endorse, in Borrower’s name, any item, however received by U.S.
Bank, representing payment on or other proceeds of any of the Collateral.

 

5.3                               Delivery of Warehouse Receipts to U.S. Bank. 
In the event that Inventory with an aggregate book value in excess of $1,000,000
becomes the subject of a negotiable or nonnegotiable warehouse receipt, said
warehouse receipt shall, upon written request of U.S. Bank, be promptly
delivered to U.S. Bank with such endorsements and assignments as are necessary
to vest title and possession in U.S. Bank.  Provided that a Matured Default does
not then exist and would not be created thereby, U.S. Bank shall return such
warehouse receipts to Borrower within two (2) Business Days of Borrower’s
request, but only for purposes of negotiation, delivery or exchange in the
ordinary course of Borrower’s business, and provided, however, that Borrower
shall comply with such terms and conditions deemed appropriate by U.S. Bank to
secure the return to U.S. Bank of the proceeds of such warehouse receipts, where
such return of proceeds would be required in accordance with Borrower’s
obligations to U.S. Bank under the Financing Agreements.

 

5.4                               Preservation of Collateral and Perfection of
Security Interests.  U.S. Bank is authorized to file UCC-1 financing statements
and amendments thereto in accordance with the Code.  Borrower shall execute and
deliver to U.S. Bank, concurrently with the execution of this Agreement and at
any time hereafter, all other financing statements (such as fixture filings or
effective financing statements or other documents, as U.S. Bank may reasonably
request, in a form satisfactory to U.S. Bank, to perfect and keep perfected the
security interest in the Collateral granted by Borrower to U.S. Bank and
otherwise to protect and preserve the Collateral and U.S. Bank’s security
interests. In each case Borrower shall be obligated to pay the cost of filing or
recording the same in all public offices deemed necessary by U.S. Bank.  Should
Borrower fail to do so, U.S. Bank is authorized to sign any such financing
statements (that may require a signature) as Borrower’s agent.  Borrower further
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement. 
To the extent required by Equipment Finance to perfect U.S. Bank’s security
interest in any Equipment covered by certificates of title, Borrower shall
ensure that all such certificates of title are properly noted or endorsed by the
appropriate state officials whenever such notation or endorsement is, in U.S.
Bank’s sole determination, either permitted or required as a condition to
perfection.

 

5.5                               Loss of Value of Collateral.  Borrower shall
immediately notify U.S. Bank of any material loss or decrease in the value of
the Collateral.

 

5.6                               Collection of Accounts; Power of Attorney. 
Upon and during the continuation of a Matured Default, Borrower agrees, upon
U.S. Bank’s demand, to establish a lockbox into which Account Debtors shall make
payments to be applied to the Liabilities pursuant to Section 10.14.  Upon and
during the continuation of a Matured Default, Borrower designates, makes,
constitutes and appoints U.S. Bank (and all Persons designated by U.S. Bank) as
Borrower’s true and lawful attorney-in-fact, with power, in Borrower’s or U.S.
Bank’s name, to: (a) demand payment of Accounts; (b) enforce payment of Accounts
by legal proceedings or otherwise; (c) exercise all of Borrower’s rights and
remedies with respect to proceedings brought to collect an Account; (d) sell or
assign any Account upon such terms, for such amount and at such time or times as
U.S. Bank deems advisable; (e) settle, adjust, compromise, extend or renew any
Account; (f) discharge and release any Account; (g) take control in any manner
of any item of payment or proceeds of any Account; (h) prepare, file and sign
Borrower’s name upon any items of payment or proceeds and deposit the same to
U.S. Bank’s account on account of the Liabilities; (i) endorse Borrower’s name
upon any Chattel Paper, Document, Instrument, invoice, warehouse receipt, bill
of lading, or

 

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similar Document or agreement relating to any Account or any other Collateral;
(j) sign Borrower’s name on any verification of Accounts and notices to Account
Debtors; (k) prepare, file and sign Borrower’s name on any proof of claim in
bankruptcy or similar proceeding against any Account Debtor; and (l) do all acts
and things which are necessary, in U.S. Bank’s sole discretion, to sell,
transfer or otherwise obtain the proceeds of any Collateral or otherwise to
fulfill Borrower’s obligations under this Agreement.  The foregoing power of
attorney is coupled with an interest and is therefore irrevocable.

 

5.7                               Account Covenants.  Borrower shall: 
(a) promptly upon Borrower’s learning thereof, inform U.S. Bank, in writing, of
any material delay in Borrower’s performance of any of Borrower’s obligations to
any Account Debtor or of any assertion of any material claims, offsets or
counterclaims by any Account Debtor; (b) not permit or agree to any extension,
compromise or settlement or make any change or modification of any kind or
nature in excess of $1,000,000 with respect to any Account without the prior
written consent of U.S. Bank; and (c) promptly upon Borrower’s learning thereof,
furnish to and inform U.S. Bank of all material adverse information relating to
the financial condition of any Account Debtor if Accounts attributable to such
Account Debtor aggregate in excess of $1,000,000.

 

5.8                               Account Records and Verification Rights. 
Borrower represents and warrants to and covenants with U.S. Bank that Borrower
now keeps and at all times shall keep correct and accurate records relating to
the Accounts and the financial and payment records of the Account Debtors, all
of which records shall be available upon demand during Borrower’s usual business
hours to any of U.S. Bank’s officers, employees or agents.  Any of U.S. Bank’s
officers, employees or agents shall have the right at any time, in U.S. Bank’s
name, in the name of a fictional nominee or in the name of Borrower, to verify
the validity, amount or any other matter relating to any Accounts, by mail,
telephone, telegraph or otherwise.  Borrower shall promptly notify U.S. Bank of
any amounts that are in dispute for any reason in excess of $1,000,000 which are
due and owing from an Account Debtor.

 

5.9                               Notice to Account Debtors.  U.S. Bank may, in
U.S. Bank’s sole discretion, at any time or times upon or during the
continuation of a Matured Default, and without prior notice to Borrower, notify
any or all Account Debtors and Persons in possession of Inventory that the
Accounts have been assigned to U.S. Bank and that U.S. Bank has been granted a
security interest therein and may direct any or all Account Debtors to make all
payments upon the Accounts directly to U.S. Bank or to a lockbox to be
established pursuant to Section 5.6.  U.S. Bank shall furnish Borrower with a
copy of such notice.

 

5.10                        Inventory Records.  Borrower represents and warrants
to and covenants with U.S. Bank that Borrower now keeps and at all times shall
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower’s costs and selling prices of
Inventory and daily withdrawals and additions of Inventory, all of which records
shall be available on demand during Borrower’s usual business hours to any of
U.S. Bank’s officers, employees or agents.

 

5.11                        Special Collateral.  Immediately upon Borrower’s
receipt thereof and upon request by U.S. Bank, Borrower shall (except as
provided for in Section 5.3 with regard to warehouse receipts) deliver or cause
to be delivered to U.S. Bank, with such endorsements and assignments as are
necessary to vest title and possession in U.S. Bank, all Chattel
Paper, Instruments and Documents which Borrower now owns or which Borrower may
at any time acquire.  Borrower shall promptly mark all copies of such Chattel
Paper, Instruments and Documents to show that they are subject to U.S. Bank’s
security interest.

 

5.12                        Remittance of Proceeds to U.S. Bank.  Except as
otherwise provided in Section 5.6, in the event any proceeds of any Collateral
(other than proceeds of Inventory or Accounts received in the ordinary course of
business) shall come into the possession of Borrower (or any of Borrower’s
Owners, directors, officers, managers, employees, agents or any Persons acting
for or in concert with Borrower), Borrower or such Person shall receive, as the
sole and exclusive property of U.S. Bank, and as trustee for U.S. Bank, all
monies, checks, notes, drafts and all other payments for and/or other proceeds
of Collateral, and no later than the first Business Day following receipt,
Borrower shall remit the same (or cause the same to be remitted), in kind, to
U.S. Bank or to such agent or agents (at such agent’s or agents’ designated
address or addresses) as are appointed by U.S. Bank for that purpose, to be
applied to the Liabilities pursuant to Section 10.14.

 

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5.13                        Safekeeping of Collateral.  U.S. Bank shall not be
responsible for:  (a) the safekeeping of the Collateral; (b) any loss or damage
to the Collateral; (c) any diminution in the value of the Collateral; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency or any
other Person relating to the Collateral.  All risk of loss, damage, destruction
or diminution in value of the Collateral shall be borne by Borrower.

 

5.14                        Sales and Use of Collateral.  Except as set forth in
this Section, in Section 3 (with respect to Equipment Collateral) or in
Section 8.6, Borrower shall not sell, lease, transfer or otherwise dispose of
any Collateral.  So long as there shall not have occurred and be continuing a
Matured Default, Inventory may be sold, stored and shipped by Borrower in the
ordinary course of Borrower’s business, but shall not otherwise be taken or
removed from Borrower’s premises or approved third party locations, except for
raw materials or work in process for the purpose of conversion into finished
Goods.  Upon and during the occurrence of a Matured Default and if U.S. Bank so
notifies Borrower in writing, neither Inventory nor any other Collateral shall
be sold or taken or removed from Borrower’s premises or approved third party
locations, except with the prior written consent of U.S. Bank and upon payment
of an amount equivalent to the value of the Collateral to be sold or removed,
such amounts to be paid to U.S. Bank to be applied upon the Liabilities.  So
long as a Matured Default shall not have occurred and be continuing, Collateral
may be used by Borrower in the ordinary course of Borrower’s business, subject
to U.S. Bank’s continuing security interest.  Upon and during the continuation
of a Matured Default and if U.S. Bank so notifies Borrower in writing,
Collateral shall not be used except with the prior written consent of U.S. Bank.

 

5.15                        Margin Accounts.  If Borrower establishes or at any
time maintains a Margin Account with a balance in excess of $1,000,000, such
Margin Account shall be kept with a broker designated by Borrower and reasonably
acceptable to U.S. Bank (“Broker”).  Borrower represents and warrants to U.S.
Bank that:  (a) Borrower is now the owner, free and clear of all liens, security
interests and encumbrances, except for those in favor of U.S. Bank or Broker, of
any and all Margin Accounts which are listed in any financial statements or
books and records of Borrower as being the property of Borrower; and (b) except
as otherwise permitted by this Agreement, Borrower owns no open futures
positions which are not either covered by existing, unsold Inventory or covered
by reciprocal contracts for future delivery of the product by reliable sellers,
or directly related to Inventory which Borrower plans to purchase in the
ordinary course of Borrower’s business. If Borrower establishes or at any time
maintains a Margin Account with a balance in excess of $1,000,000, Borrower, the
Broker and U.S. Bank will execute an Assignment of Commodity Accounts and
Commodity Contracts.  All of U.S. Bank’s rights under such Assignment of
Commodity Accounts and Commodity Contracts shall be in addition to U.S. Bank’s
rights hereunder, and shall also apply to any Margin Accounts that are
maintained, in violation of this Agreement, with any Person other than the
Broker.  Borrower warrants that the Margin Accounts will be used solely for the
hedging of Borrower’s investments in Inventory and not for speculative purposes.

 

5.16                        Trademark License.  Borrower grants to U.S. Bank as
of the effective date of this Agreement, and U.S. Bank accepts for the term of
this Agreement, a non-exclusive world-wide royalty-free license to use the Marks
on or in connection with the marketing, distribution and sale of Inventory upon
and during the continuance of a Matured Default, subject to the terms of this
Agreement.  U.S. Bank shall have no right to grant sublicenses under this grant;
provided, however, U.S. Bank may grant a sublicense to a Marks Affiliate. 
Borrower shall not assign any right, title or interest in and to any of the
Marks without the prior written consent of U.S. Bank, but may grant
non-exclusive licenses to use the Marks in the ordinary course of its business. 
The license shall be effective as of the Closing Date and shall remain in full
force and effect until the earlier to occur of: (a) the first date after the
occurrence of a Matured Default on which U.S. Bank has completed its liquidation
of any Inventory bearing the Marks, or (b) the date on which all of the
Liabilities have been Paid in Full.  Upon termination of the license, U.S. Bank
agrees to immediately discontinue all use of the Marks, including any colorable
imitations thereof.  U.S. Bank acknowledges and agrees that Borrower is the
owner of the Marks, that all use of the Marks inures to the benefit of Borrower,
that it will not take any action which is inconsistent with Borrower’s ownership
of the Marks and that upon the termination of the license, all rights in the
Marks, including the goodwill connected therewith, shall remain the property of
Borrower, subject to any assignments thereof to which U.S. Bank has given its
prior written consent.  U.S. Bank recognizes the value of the good will
associated with the Marks and, in such connection, acknowledges that such good
will exclusively belongs to Borrower, subject to the security interest therein
in favor of U.S. Bank and subject to any assignments thereof to which U.S. Bank
has given its prior written consent.  Borrower shall be solely responsible and
may exercise its sole discretion in deciding whether to apply for and prosecute
trademark applications for the Marks, and whether to maintain any registrations
that may or have issued therefor.  In the case of any infringement of the Marks,
Borrower shall have complete discretion whether to institute proceedings against

 

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such third party for infringement of such trademarks, and such other related
counts as are available and reasonable, such proceedings to be controlled by
Borrower.  U.S. Bank shall join in such proceedings only if required by law, and
in such event, the attorneys’ fees and other costs, reasonably incurred by U.S.
Bank shall be reimbursed by Borrower in accordance with Section 10.2.  At the
request of Borrower, U.S. Bank agrees to be represented in such proceedings by
the attorney representing Borrower.  Upon and during the continuance of a
Matured Default, any recovery from such proceeding attributable to infringement
by a third party using a mark confusingly similar to the Marks, whether by
judgment or settlement, shall be applied to the Liabilities, with any remainder
of the recovery after full satisfaction of all the Liabilities, going to
Borrower.

 

5.17                        Real Property.  Borrower shall pay all costs
associated with the recording of the Amendment to Leasehold Deed of Trust
referred to in Section 5.1, together with any subsequent amendments thereto,
with the appropriate authorities, and shall take all other actions requested by
U.S. Bank in order to vest in U.S. Bank a perfected lien on the leasehold in
each such parcel of real property described therein, subject to no other liens,
claims or encumbrances, except those expressly acknowledged thereby.

 

5.18                        Title Insurance.  Borrower shall cooperate with U.S.
Bank to obtain delivery to U.S. Bank of title insurance, insuring U.S. Bank’s
mortgagee’s interest, in accordance with the title insurance commitment
delivered to U.S. Bank pursuant to Section 4.3, which cooperation shall be
deemed to include without limitation, doing all things necessary to satisfy the
requirements set forth in said title insurance commitment or other requirements
of the issuer thereof (including without limitation, the payment of premiums). 
U.S. Bank shall have the right to request such title insurance commitment
updates at such times as U.S. Bank, in its sole discretion, shall deem
appropriate, and shall have the right to instruct the issuer of the title
insurance commitment to set forth as added requirements such things as would be
necessary to eliminate added exceptions to coverage.

 

6                                         WARRANTIES.

 

Borrower represents and warrants that:

 

6.1                               Litigation and Proceedings.  Except as set
forth on Part 1 of Exhibit 6A, no judgments are outstanding against Borrower,
nor is there pending or threatened any litigation, contested claim, or
governmental proceeding by, against or with respect to Borrower as of the date
of this Agreement.  After the date of this Agreement, no judgments are
outstanding against Borrower, nor is there pending or threatened any litigation,
contested claim, or governmental proceeding by, against or with respect to
Borrower, (a) except to the extent they relate back to matters disclosed on
Part 1 of Exhibit 6A (for example, a disclosed claim results in a judgment that
could be anticipated from the description of a disclosed claim), and (b) except
for judgments and pending or threatened litigation, contested claims and
governmental proceedings which are not, in the aggregate, material to Borrower’s
financial condition, results of operations or business.

 

6.2                               Other Agreements.  Except as set forth on
Part 2 of Exhibit 6A, Borrower is not in default under any contract, lease or
commitment to which Borrower is a party or by which Borrower is bound except
those defaults which are not, in the aggregate, material to Borrower’s financial
condition, results of operations or business.  Borrower knows of no dispute,
except as set forth on Part 2 of Exhibit 6A, relating to any contract, lease, or
commitment except those disputes which are not, in the aggregate, material to
Borrower’s financial condition, results of operations or business.

 

6.3                               Licenses, Patents, Copyrights, Trademarks and
Trade Names.  Part 3 of Exhibit 6A sets forth all of Borrower’s (a) federal,
state and foreign patents, (b) registered copyrights, trademarks and trade
names, (c) applications for any registrations of patents, copyrights, trademarks
and trade names, and (d) written license agreements authorizing Borrower to use
intellectual property owned by others (other than click through, shrink wrap or
similar license agreements), as updated from time to time by Borrower.  Except
as set forth on Part 3 of Exhibit 6A, there is no action, proceeding, claim or
complaint pending or, to Borrower’s knowledge, threatened to be brought against
Borrower by any Person which could reasonably be expected to jeopardize any of
Borrower’s interest in any of the foregoing patents, copyrights, trademarks,
trade names, applications or licenses, except those which are not, in the
aggregate, material to Borrower’s financial condition, results of operations or
business.

 

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6.4                               Collateral.  Except as permitted under
Section 8.1 and except as set forth on Part 4 of Exhibit 6A, all of the
Collateral is free and clear of all security interests, liens, claims and
encumbrances.  No Goods held by Borrower on consignment or under sale or return
contracts have been represented to be Inventory and no amounts receivable by
Borrower in respect of the sale of such Goods (except markups or commissions
which have been fully earned by Borrower) have been represented to be Accounts. 
All Producer Payables which are owing to suppliers of any of the Collateral have
been paid when due, other than those being contested in good faith by Borrower,
and no Person to whom such Producer Payables are owed has demanded turnover of
any Collateral or proceeds thereof.   Borrower has adequate procedures in place
to ensure that Collateral purchased by Borrower is free of security interests in
favor of Persons other than U.S. Bank in accordance with the Federal Food
Security Act.  Borrower will furnish, at U.S. Bank’s request, the names and
addresses of all Persons who supply Inventory to Borrower or who deliver Goods
to Borrower on consignment or under sale or return contracts.

 

6.5                               Location of Assets; Chief Executive Office.
 The chief executive office of Borrower is located at 5415 East High Street,
Suite 350, Phoenix, AZ  85054 and Borrower’s assets (including without
limitation, Inventory and Equipment) are all located in the locations set forth
on Part 5 of Exhibit 6A as updated from time to time by Borrower.  As of the
execution of this Agreement, the books and records of Borrower, and all of
Borrower’s Chattel Paper and records of account are located at the chief
executive office of Borrower.  If Borrower shall intend to make any change in
any of such locations, Borrower shall notify U.S. Bank at least 30 days prior to
such change.

 

6.6                               Tax Liabilities.  Borrower has filed all
federal, state and local tax reports and returns required by any law or
regulation to be filed by Borrower and has either duly paid all taxes, duties
and charges indicated to be due on the basis of such returns and reports or has
made adequate provision for the payment thereof, and the assessment of any
material amount of additional taxes in excess of those paid and reported is not
reasonably expected.  The reserves for taxes reflected on Borrower’s balance
sheet are adequate in amount for the payment of all liabilities for all taxes
(whether or not disputed) of Borrower accrued through the date of such balance
sheet.  There are no material unresolved questions or claims concerning any tax
liability of Borrower, except as described on Part 6 of Exhibit 6A.

 

6.7                               Indebtedness and Producer Payables.  Except as
contemplated by this Agreement, as disclosed on Part 7 of Exhibit 6A and as
disclosed on the financial statements identified in Section 6.14, Borrower has
no other indebtedness, contingent obligations or liabilities, outstanding bonds,
letters of credit or acceptances to any other Person or loan commitments from
any other Person, other than accounts payable incurred in the ordinary course of
business.

 

6.8                               Other Names.  Borrower has not, during the
preceding five (5) years, been known by or used any names other than those
disclosed on Part 8 of Exhibit 6A.

 

6.9                               Affiliates.  Borrower has no Affiliates, other
than its directors, officers, agents and employees and those Persons disclosed
on Part 9 of Exhibit 6A as updated from time to time by Borrower, and the legal
relationships of Borrower to each such Affiliate are accurately and completely
described thereon.

 

6.10                        Environmental Matters.  Except as disclosed on
Part 10 of Exhibit 6A, (a) Borrower has not received any notice to the effect,
and does not have any knowledge, that the Property or its operations are not in
compliance with any of the requirements of applicable federal, state and local
environmental, health and safety statutes and regulations (“Environmental Laws”)
or are the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any toxic or hazardous
waste or substance into the environment, which noncompliance or remedial action
could have a material adverse effect on the business, operations, Property,
assets or conditions (financial or otherwise) of Borrower; (b) there have been
no releases of hazardous materials at, on or under the Property that, singly or
in the aggregate could have a material adverse effect on the business,
operations, Property, assets or conditions (financial or otherwise) of Borrower;
(c) there are no underground storage tanks, active or abandoned, including
without limitation petroleum storage tanks, on or under the Property that,
singly or in the aggregate could have a material adverse effect on the business,
operations, Property, assets or conditions (financial or otherwise) of Borrower;
and (d) no conditions exist at, on or under the Property which, with the giving
of notice, would rise to any material liability under any Environmental Laws.

 

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6.11                        Existence.  Each Borrower is duly organized and in
good standing under the laws of the State of its incorporation or organization,
as applicable, and is duly qualified to do business and is in good standing in
all states where such qualification is necessary, except for those jurisdictions
in which the failure so to qualify would not, in the aggregate, have a material
adverse effect on Borrower’s financial condition, results of operations or
business.

 

6.12                        Authority.  The execution and delivery by Borrower
of this Agreement and all of the other Financing Agreements and the performance
of Borrower’s obligations hereunder and thereunder: (a) are within Borrower’s
powers; (b) are duly authorized by Borrower’s board of directors or board of
managers (as applicable) and, if necessary, Borrower’s Owners (and their
respective governing boards, members or governing persons, as applicable);
(c) are not in contravention of the terms of Borrower’s articles of
incorporation, bylaws, articles or certificate of organization, or operating
agreements (as applicable); (d) are not in contravention of any law or laws, or
of the terms of any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower or any of Borrower’s property is bound; (e) do not
require any consent, registration or approval of any Governmental Authority or
of any other Person, except such consents or approvals as have been obtained;
(f) do not contravene any contractual restriction or Governmental Requirement
binding upon Borrower; and (g) will not, except as contemplated or permitted by
this Agreement, result in the imposition of any lien, charge, security interest
or encumbrance upon any property of Borrower under any existing indenture,
mortgage, deed of trust, loan or credit agreement or other material agreement or
Instrument to which Borrower is a party or by which Borrower or any of
Borrower’s property may be bound or affected.  Borrower shall deliver to U.S.
Bank, upon U.S. Bank’s request, a written opinion of counsel as to the matters
described in the foregoing clauses (a) through (g).

 

6.13                        Binding Effect.  This Agreement and all of the other
Financing Agreements set forth the legal, valid and binding obligations of
Borrower and are enforceable against Borrower in accordance with their
respective terms.

 

6.14                        Correctness of Financial Statements.  The financial
statements delivered from time to time by Borrower to U.S. Bank present fairly
the financial condition of Borrower, and have been prepared in accordance with
GAAP consistently applied.  Since the date of the most recent financial
statements delivered to U.S. Bank there has been no materially adverse change in
the condition or operations of Borrower.

 

6.15                        Employee Controversies.  There are no controversies
pending or threatened between Borrower or any of Borrower’s employees, other
than employee grievances arising in the ordinary course of Borrower’s business
or which are not, in the aggregate, material to Borrower’s financial condition,
results of operations or business.

 

6.16                        Compliance with Laws and Regulations.  Borrower is
in compliance with all Governmental Requirements relating to the business
operations and the assets of Borrower, except for violations of Governmental
Requirements which would not have a material adverse effect on the value of the
Collateral or U.S. Bank’s interest in any of the Collateral and, in the
aggregate, would not have a material adverse effect on Borrower’s financial
condition, results of operations or business.

 

6.17                        Account Warranties.  Borrower warrants and
represents to U.S. Bank that:  (a) except as disclosed to U.S. Bank from time to
time in writing, all Accounts which are at any time reflected on Borrower’s
financial statements delivered to U.S. Bank pursuant to Section 7.1 are genuine,
in all respects what they purport to be, have not been reduced to any judgment,
are evidenced by not more than one executed original agreement, contract or
document, and represent undisputed, bona fide transactions completed in
accordance with the terms and conditions of any related document; (b) the
Accounts have not been pledged, sold or assigned to any Person other than U.S.
Bank; and (c) except as disclosed to U.S. Bank from time to time in writing,
Borrower has no knowledge of any fact or circumstance which would impair the
validity or collectibility of any of the Accounts that in the aggregate are
material in amount.

 

6.18                        Inventory Warranties.  Borrower warrants and
represents to U.S. Bank that:  (a) except for Goods covered by Documents which
have been delivered to U.S. Bank, and except as promptly disclosed to U.S. Bank
from time to time in writing, all Inventory is located on the premises described
in Section 6.5 or is in transit; and (b) except as promptly disclosed to U.S.
Bank from time to time in writing, all Inventory shall be of good and
merchantable quality, free from any defects which might affect the market value
of such Inventory.

 

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6.19                        Solvency.  Borrower is solvent, able to pay
Borrower’s debts generally as such debts mature, and has capital sufficient to
carry on Borrower’s business and all businesses in which Borrower is about to
engage.  The saleable value of Borrower’s total assets at a fair valuation, and
at a present fair saleable value, is greater than the amount of Borrower’s total
obligations to all Persons (taking into account, as applicable, rights of
contribution, subrogation and indemnity with regard to obligations shared with
others).  Borrower will not be rendered insolvent by the execution or delivery
of this Agreement or of any of the other Financing Agreements or by the
transactions contemplated hereunder or thereunder.

 

6.20                        Pension Reform Act.  No events, including without
limitation, any “reportable event” or “prohibited transactions,” as those terms
are defined in the Employee Retirement Income Security Act of 1974 as the same
may be amended from time to time (“ERISA”), have occurred in connection with any
type of plan, arrangement, association or fund covered by ERISA in which any
personnel of Borrower or an Affiliate which is under common control with
Borrower (within the meaning of applicable provisions of the IRC) participate
(“Benefit Plans”).  The Benefit Plans are otherwise in compliance with all
applicable provisions of ERISA and the IRC and meet the minimum funding
standards of ERISA and the IRC.

 

6.21                        Margin Security.  Borrower does not own any margin
security and none of the loans advanced hereunder shall be used for the purpose
of purchasing or carrying any margin securities or for the purpose of reducing
or retiring any indebtedness which was originally incurred to purchase any
margin securities or for any other purpose not permitted by Regulations T, U or
X of the Board of Governors of the Federal Reserve System.

 

6.22                        Survival of Warranties.  All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall continue to
be true and correct (subject to the qualifications set forth therein) from the
date of this Agreement until the Liabilities shall be paid in full and U.S. Bank
shall cease to be committed to make loans under this Agreement.

 

7                                         AFFIRMATIVE COVENANTS.

 

Borrower covenants and agrees that so long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) so long as
U.S. Bank remains committed to make Loans or issue Letters under this Agreement:

 

7.1                               Financial and Other Information.  Except as
otherwise expressly provided for in this Agreement, Borrower shall keep proper
books of record and account in which full and true entries will be made of all
dealings and transactions of or in relation to the business and affairs of
Borrower, in accordance with generally accepted accounting principles
consistently applied, and Borrower shall cause to be furnished to U.S. Bank,
from time to time and in a form acceptable to U.S. Bank, such information as
U.S. Bank may reasonably request, including without limitation, the following:

 

(a) as soon as practicable and in any event within ninety (90) days after the
end of each fiscal year of Borrower, (i) audited consolidated statements of
income, retained earnings and cash flow of Borrower for each year, and a
consolidated balance sheet of Borrower for such year, setting forth in each
case, in comparative form, corresponding figures as of the end of the preceding
fiscal year, all in reasonable detail and satisfactory in scope to U.S. Bank and
certified to Borrower by such independent public accountants as are selected by
Borrower and satisfactory to U.S. Bank, whose opinion shall be in scope and
substance satisfactory to U.S. Bank, and (ii) and (ii) a compliance certificate
of the chief financial officer of Borrower in substantially the form attached as
Exhibit 7A (“Compliance Certificate”);

 

(b) as soon as practicable and in any event within forty five (45) days after
the end of each quarterly accounting period in each fiscal year of Borrower:
(i) consolidated financial statements in the 10-Q form as presented to the
Securities and Exchange Commission, and certified as accurate by the chief
financial officer of Borrower, and (ii) a Compliance Certificate, with the
fiscal year end Compliance Certificate to be considered “preliminary” and
subject to change with the results of the fiscal year end audit;

 

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(c) as soon as practicable and in any event within forty five (45) days after
the end of each monthly accounting period in each fiscal year of Borrower:
consolidated statements of income and retained earnings of Borrower for such
monthly period, and a consolidated balance sheet of Borrower as of the end of
such monthly period, all in reasonable detail and certified as accurate by the
chief financial officer of Borrower; and

 

(d) as soon as practicable and in any event not later than thirty (30) days
prior the end of each fiscal year, an annual budget for Borrower for the
following fiscal year.

 

7.2                               Conduct of Business.  Except as contemplated
by this Agreement, Borrower shall:  (a) maintain Borrower’s existence and
maintain in full force and effect all licenses, bonds, franchises, leases,
patents, contracts and other rights necessary to the conduct of Borrower’s
business; (b) continue in, and limit Borrower’s operations to, the same general
line of business as that presently conducted by Borrower; (c) comply with all
Governmental Requirements, except for such violations of Governmental
Requirements which would not, in the aggregate, have a material adverse effect
on Borrower’s financial condition, results of operations or business; (d) keep
and conduct Borrower’s business separate and apart from the business of
Borrower’s Affiliates; and (e) otherwise do all things necessary to make the
Representations and Warranties set forth in Section 6 of this Agreement true and
correct (subject to the qualifications set forth therein) at all times.

 

7.3                               Maintenance of Properties.  Borrower shall
keep Borrower’s real estate, leaseholds, equipment and other fixed assets in
good condition, repair and working order, normal wear and tear excepted, and
shall not allow Borrower’s chief executive office or any of the Collateral to be
moved from the locations set forth in Section 6.5 (or to be placed on
consignment) without the written consent of U.S. Bank, which consent shall not
be unreasonably withheld.  Borrower shall keep the Inventory in good and
merchantable condition and shall, as applicable, clean, feed, shelter, store,
secure, refrigerate, water, medicate, fumigate, fertilize, cultivate, irrigate,
prune, process and otherwise maintain the Inventory in accordance with the
standards and practices adhered to generally by others in the same businesses as
Borrower.

 

7.4                               Borrower’s Liability Insurance.  Borrower
shall maintain, at Borrower’s expense, such liability insurance (including as
applicable commercial general liability insurance, products liability insurance
and workman’s compensation insurance) as is ordinarily maintained by other
companies in similar businesses.  All such policies of insurance shall be in
form and with insurers reasonably acceptable to U.S. Bank and evidence thereof,
together, shall be provided to U.S. Bank within ten (10) days of Borrower’s
receipt of the same.

 

7.5                               Borrower’s Property Insurance.  Subject to the
requirements of applicable law, Borrower shall bear the full risk of loss from
any cause of any nature whatsoever in respect to the Collateral.  At Borrower’s
own cost and expense, Borrower shall keep all Collateral insured, with carriers,
and in amounts reasonably acceptable to U.S. Bank, against the hazards of fire,
theft, collision, spoilage, hail, those covered by extended or all risk coverage
insurance and such others as may be reasonably required by U.S. Bank.  Borrower
shall cause to be delivered to U.S. Bank the insurance policies or proper
certificates evidencing the same.  Such policies shall provide in a manner
satisfactory to U.S. Bank that any losses under such policies shall be payable
first to U.S. Bank, as U.S. Bank’s interest may appear.  Each such policy shall
include a provision for written notice to U.S. Bank not less than thirty (30)
days prior to any cancellation or expiration and show U.S. Bank, as mortgagee
and loss payee as provided in a form of loss payable endorsement in form and
substance satisfactory to U.S. Bank.  In the event of any loss covered by any
such policy in excess of $1,000,000, the carrier named in such policy is
directed by Borrower to make payment for such loss to U.S. Bank, and not to
Borrower.  Borrower makes, constitutes and appoints U.S. Bank (and all Persons
designated by U.S. Bank) as Borrower’s true and lawful agent and
attorney-in-fact, with power to make, settle or adjust claims in any amount if a
Matured Default has occurred and is continuing, and in excess of $1,000,000 if
no Matured Default has occurred and is continuing, under such policies of
insurance (provided, however, that so long as no Matured Default has occurred
and is continuing, U.S. Bank shall consult with Borrower prior to finally
making, settling or adjusting claims under such policies of insurance in excess
of $1,000,000 and will not settle such claims without Borrower’s consent, which
consent will not be unreasonably withheld).  The foregoing power of attorney is
coupled with an interest and is therefore irrevocable.  If payment as a result
of any insurance losses in any amount if a Matured Default has occurred and is
continuing, and in excess of $1,000,000 if no Matured Default has occurred and
is continuing, shall be paid by check, draft or other Instrument payable to
Borrower, or to Borrower and U.S. Bank jointly, U.S. Bank may endorse the name
of Borrower on such check, draft or other Instrument, and may do such other
things as U.S. Bank may deem advisable to reduce the same to cash.  Subject to

 

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the provisions of Borrower’s Leasehold Deed of Trust referred to in Section 5.1,
all loss recoveries received by U.S. Bank on account of any such insurance may
be applied and credited by U.S. Bank to the Liabilities.  U.S. Bank shall pay to
Borrower any unapplied or unused surplus of insurance proceeds.  Borrower shall
pay to U.S. Bank, on demand, the amount of any deficiency in the Collateral
reasonably determined by U.S. Bank to exist after the application of insurance
proceeds to the Liabilities.  If Borrower fails to procure insurance as provided
in this Agreement, or to keep the same in force, or fails to perform any of
Borrower’s other obligations pursuant to this Section 7.5, then U.S. Bank may,
at the option of U.S. Bank, and without obligation to do so, obtain such
insurance and pay the premium thereon for the account of Borrower, or make
whatever other payments U.S. Bank may deem appropriate to protect its security
for the Liabilities.  Any such payments shall be additional Liabilities, payable
on demand and secured by the Collateral.  To the extent the provisions relating
to insurance in the Leasehold Deed of Trust are different from the provisions
relating to insurance in this Section 7.5, the provisions relating to insurance
in the mortgage, deed of trust, leasehold mortgage or leasehold deed of trust
shall be controlling with respect to the Property covered thereby.

 

7.6                               Financial Covenants and Ratios.  (a) Borrower
shall maintain at the end of each fiscal quarter of Borrower:  (i) a Leverage
Ratio of not more than 3.25 to 1.0; and (ii) a Fixed Charge Coverage Ratio of
not less than 1.20 to 1.0, and (b) Borrower shall maintain at the end of each
fiscal quarter of Borrower at which the sum of (i) the aggregate principal
amount of the Line of Credit Loan Liabilities, and (ii) the aggregate amount of
the LC Obligations is in excess of $12,500,000, an Asset Coverage Ratio of not
less than 1.75 to 1.0.

 

7.7                               Benefit Plans.  Borrower shall:  (a) keep in
full force and effect any and all Benefit Plans which are presently in existence
or may, from time to time, come into existence under ERISA, unless such Benefit
Plans can be terminated without material liability to Borrower in connection
with such termination (as distinguished from any continuing funding obligation);
(b) make contributions to all Benefit Plans in a timely manner and in an amount
sufficient to comply with the requirements of ERISA; (c) comply with all
requirements of ERISA which relate to such Benefit Plans; and (d) notify U.S.
Bank immediately upon receipt by Borrower of any notice of the institution of
any proceeding or other action relating to any Benefit Plans that would
reasonably be expected to have a material adverse effect on Borrower or its
financial condition.

 

7.8                               Notice of Suit, Adverse Change in Business or
Default.  Borrower shall, as soon as possible, and in any event within five
(5) days after Borrower learns of the following, give written notice to U.S.
Bank of: (a) any proceeding being instituted or threatened to be instituted by
or against Borrower in any federal, state, local or foreign court or before any
commission or other regulatory body (federal, state, local or foreign) for which
claimed damages exceed $1,000,000; (b) any material adverse change in the
business, assets or condition, financial or otherwise, of Borrower; and (c) the
occurrence of any Default.

 

7.9                               Use of Proceeds.  Borrower shall use Advances
only for the purposes stated in Section 2.4 and for no other purpose.

 

8                                         NEGATIVE COVENANTS.

 

Borrower covenants and agrees that so long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) so long as
U.S. Bank remains committed to make Loans or issue Letters under this Agreement
(unless U.S. Bank shall give U.S. Bank’s prior written consent):

 

8.1                               Encumbrances.  Except for those liens,
security interests and encumbrances presently in existence and reflected in
Borrower’s financial statements referred to in Section 6.14 and disclosed in
Exhibit 6A under Section 6.4, Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, capitalized lease, levy,
assessment, attachment, seizure, writ, distress warrant, or other encumbrance of
any nature whatsoever on or with regard to any of Borrower’s assets (including
without limitation, the Collateral) other than:  (a) liens securing the payment
of taxes, either not yet due or the validity of which is being contested in good
faith by appropriate proceedings, and as to which Borrower shall, if appropriate
under generally accepted accounting principles, have set aside on Borrower’s
books and records adequate reserves; (b) liens securing deposits under workmen’s
compensation, unemployment insurance, social security and other similar laws, or
securing the performance of bids, tenders, contracts (other than for the
repayment of borrowed money) or leases, or securing indemnity, performance or
other similar bonds for the performance of bids, tenders, contracts (other than
for the

 

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repayment of borrowed money) or leases, or securing statutory obligations or
surety bonds, or securing indemnity, performance or other similar bonds in the
ordinary course of Borrower’s business, which are not past due; (c) liens
securing appeal bonds securing judgments not in excess of $1,000,000; (d) liens
and security interests in favor of U.S. Bank; (e) liens securing the interests
of Broker in any Margin Account; (f) zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of Borrower’s real property,
and other liens, security interests and encumbrances on property which are
subordinate to the liens and security interests of U.S. Bank and which do not,
in U.S. Bank’s sole determination: (i) materially impair the use of such
property, or (ii) materially lessen the value of such property for the purposes
for which the same is held by Borrower; and (g) purchase money security
interests securing amounts relating to such items of equipment as are
specifically consented to by U.S. Bank (provided that no such purchase money
security interests shall extend to or cover other property of Borrower other
than the items of equipment so acquired).

 

8.2                               Consolidations, Mergers or Acquisitions. 
Borrower shall not recapitalize or consolidate with, merge with, or otherwise
acquire (including by the formation or acquisition of a Subsidiary) all or
substantially all of the assets or properties of any other Person, except: (a) a
Borrower may acquire the assets of or merge with another Borrower; and
(b) provided that no Matured Default has occurred and is continuing or would
result thereby, (i) Borrower may make other acquisitions or enter into other
mergers, not to exceed $2,000,000 in the aggregate of exchange or transfer value
in any fiscal year of Borrower (excluding the $10,000,000 single acquisition
permitted below) and (ii) Borrower may make other acquisitions or enter into
other mergers, not to exceed $10,000,000 in the aggregate of exchange or
transfer value in a single transaction in any one fiscal year of Borrower,
subject to a pro forma Leverage Ratio not to exceed 2.50 to 1.0 after giving
effect to the transaction, provided, in each case, that a merger involving
Inventure, Inventure is the survivor of any such merger, and in the case of a
merger involving any other Borrower, a Change of Control does not occur.

 

8.3                               Deposits, Investments, Advances or Loans. 
Borrower shall not make or permit to exist deposits, investments, advances or
loans (other than loans existing on the date of the execution of this Agreement
and disclosed to U.S. Bank in writing on or prior to such date) in or to
Affiliates or any other Person, except:  (a) investments in short term direct
obligations of the United States Government; (b) investments in certificates of
deposit issued by a bank satisfactory to U.S. Bank in U.S. Bank’s reasonable
determination, (c) loans to officers, directors, employees, Owners or Affiliates
as and when permitted by Section 8.8; (d) Deposit Accounts; and (e) other demand
deposits not to exceed $100,000 in the aggregate.  Borrower shall not permit to
exist any other depository account for the receipt of payments in respect of
Collateral of any type whatever, except the account referred to in Section 5.6.

 

8.4                               Indebtedness.  Except for those obligations
and that indebtedness presently in existence and reflected in Borrower’s
financial statements referred to in Section 6.14 or referred to in Section 6.7,
Borrower shall not incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any obligations or indebtedness, direct or
indirect, fixed or contingent, including obligations under capitalized leases,
except:  (a) the Liabilities; (b) obligations secured by liens or security
interests permitted under Section 8.1 or contingent obligations permitted under
Section 8.5; and (c) trade obligations, Producer Payables and normal accruals in
the ordinary course of Borrower’s business not yet due and payable, or with
respect to which Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings, and then only to the extent that Borrower
has set aside on Borrower’s books adequate reserves, if appropriate under
generally accepted accounting principles.

 

8.5                               Guaranties and Other Contingent Obligations. 
Except as permitted under Section 8.4, Borrower shall not guaranty, endorse or
otherwise in any way become or be responsible for obligations of any other
Person, whether by agreement to purchase the indebtedness of such Person or
through the purchase of Goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purpose of paying or
discharging any indebtedness or obligation of such Person or otherwise, except: 
(a) for endorsements of negotiable Instruments for collection in the ordinary
course of business; and (b) that Borrower may indemnify Borrower’s officers,
directors and managers to the extent permitted under the laws of the State in
which Borrower is incorporated or organized, as applicable, and may indemnify
(in the customary manner) underwriters and any selling shareholders in
connection with any public offering of Borrower’s securities.

 

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8.6                               Disposition of Property.  Except as permitted
by Section 5.14, or except for the disposition of obsolete or worn out property
in the ordinary course of business, Borrower shall not sell, lease, transfer or
otherwise dispose of the Collateral.

 

8.7                               Intentionally Omitted.

 

8.8                               Loans to Affiliates.  Except for advances for
travel and expenses to Borrower’s officers, directors, managers, general
partners or employees in the ordinary course of Borrower’s business, Borrower
shall not make any loans to any Affiliates or Owners of Borrower.

 

8.9                               Distributions in Respect of Equity, Prepayment
of Debt.  Borrower shall not directly or indirectly:  (a) pay any dividends or
make any distributions in respect of or redeem any of Borrower’s equity
interests, except that Borrower may, provided that no Matured Default has
occurred and is continuing or would result therefrom, make such distributions as
are necessary to reflect the amount of income tax liability passed through to
Borrower’s Owners; or (b) prepay any principal, interest or other payments on or
in connection with any indebtedness of Borrower other than the Liabilities.

 

8.10                        Amendment of Organizational Documents.  Borrower
shall not amend Borrower’s articles of incorporation, bylaws, articles or
certificate of organization, operating agreements or any other agreement,
instrument or document affecting Borrower’s organization, management or
governance or form any Subsidiaries, except, in each case, to facilitate a
merger or acquisition permitted by Section 8.2.

 

8.11                        Use of Names.  Except as set forth in this
Section 8.11, Borrower shall not use any trademarks or trade names with respect
to Inventory except for such trademarks or trade names as have been properly
licensed to U.S. Bank.  Borrower may package Inventory for sale to customers
using those customer’s trademarks or trade names provided that: (a) the customer
is creditworthy, in the reasonable determination of U.S. Bank; and (b) the
Inventory so packaged is covered by a purchase order from the customer (or is
reasonably expected by Borrower to be covered by a purchase order from the
customer within 10 days of the date the Inventory is ready to be sold).

 

9                                         DEFAULT AND RIGHTS AND REMEDIES.

 

9.1                               Liabilities.  Except as provided in
Section 2.8 (regarding automatic termination of the Commitment and acceleration
of the Liabilities in certain events), upon a Matured Default, any or all of the
Liabilities may, at the option of U.S. Bank, and without demand or notice of any
kind, be declared, and thereupon shall become, immediately due and payable, and,
at the option of U.S. Bank, the Commitment shall be terminated.

 

9.2                               Rights and Remedies Generally.  Upon a Matured
Default, U.S. Bank shall have, in addition to any other rights and remedies
contained in this Agreement or in any of the other Financing Agreements, all of
the rights and remedies of a secured party under the Code or other applicable
laws, all of which rights and remedies shall be cumulative and nonexclusive, to
the extent permitted by law.  In addition to all such rights and remedies, the
sale, lease or other disposition of all or any part of the Collateral by U.S.
Bank after a Matured Default, may be for cash, credit or both, and U.S. Bank may
purchase all or any part of the Collateral at public or, if permitted by law,
private sale, and in lieu of actual payment of such purchase price, may setoff
the amount of such purchase price against the Liabilities then owing.  Any sales
of the Collateral may involve the sale of portions of the Collateral at
different times, and at different locations, and may, at U.S. Bank’s option, be
held at a site or sites different from the site at which all or any part of the
Collateral is located.  Any such sales, at U.S. Bank’s option, may be in
conjunction with or separate from the foreclosure of any mortgage or deed of
trust on any Collateral consisting of real property, and may be adjourned from
time to time with or without notice.  U.S. Bank may, in its sole discretion,
cause the Collateral to remain on Borrower’s premises, at Borrower’s expense,
pending sale or other disposition of the Collateral.  U.S. Bank shall have the
right to conduct such sales on Borrower’s premises, at Borrower’s expense, or
elsewhere, on such occasion or occasions as U.S. Bank may see fit.

 

9.3                               Entry upon Premises.  Upon a Matured Default,
U.S. Bank shall have the right to enter upon the premises of Borrower at which
any of the Collateral is located (or is believed to be located) without
incurring any obligation to pay rent to Borrower, or any other place or places
where the Collateral is located (or is believed to be located) and kept, and
remove the Collateral therefrom to the premises of U.S. Bank or any agent of
U.S. Bank, for

 

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such time as U.S. Bank may desire, in order to effectively collect or liquidate
the Collateral, or U.S. Bank may require Borrower to assemble the Collateral and
make it available to U.S. Bank at a place or places to be designated by U.S.
Bank which is reasonably convenient to both parties.  Borrower expressly agrees
that U.S. Bank may, if necessary to gain occupancy to the premises at which
Collateral is located (or is believed to be located), without further notice to
Borrower:  (a) hire Borrower’s employees to assist in the loading and
transportation of such Collateral; (b) utilize Borrower’s equipment for use in
such operation; (c) cut or otherwise temporarily move or remove any barbed wire
or other fencing or similar boundary-maintenance devices; and (d) pick or
otherwise render inoperative any locks on any property not customarily inhabited
by people.  Borrower agrees that any such actions authorized by this
Section shall be authorized and not a breach of the peace if U.S. Bank takes
reasonable efforts to safeguard all of Borrower’s property.

 

9.4          Sale or Other Disposition of Collateral by U.S. Bank.  Any notice
required to be given by U.S. Bank of a sale, lease or other disposition or other
intended action by U.S. Bank with respect to any of the Collateral which is
deposited in the United States mail, postage prepaid and duly addressed to
Borrower at the address specified in Section 10.19, at least ten (10) Business
Days prior to such proposed action, shall constitute fair and commercially
reasonable notice to Borrower of any such action.  The net proceeds realized by
U.S. Bank upon any such sale or other disposition, after deduction for the
expense of retaking, holding, preparing for sale, selling or the like, and the
reasonable legal fees and expenses and other proper fees and expenses incurred
by U.S. Bank in connection therewith, shall be applied toward satisfaction of
the Liabilities.  U.S. Bank shall account to Borrower for any surplus realized
upon such sale or other disposition, and Borrower shall remain liable for any
deficiency.  The commencement of any action, legal or equitable, or the
rendering of any judgment or decree for any deficiency, shall not affect U.S.
Bank’s security interest in the Collateral until the Liabilities shall have been
paid in full.

 

9.5          Waiver of Demand.  Borrower expressly waives demand, presentment,
protest, and notice of nonpayment, notice of intent to accelerate and notice of
acceleration.  Borrower also waives the benefit of all valuation, appraisal and
exemption laws (including homestead exemptions).

 

9.6          Waiver of Notice.  Upon the occurrence and during the continuation
of any Matured Default, Borrower waives, to the fullest extent permitted by
applicable law, all rights to notice and hearing of any kind prior to the
exercise by U.S. Bank of U.S. Bank’s rights to repossess the Collateral without
judicial process or to replevy, attach or levy upon the Collateral.

 

10           MISCELLANEOUS.

 

10.1        Timing of Payments.  For purposes of determining the outstanding
balance of the Liabilities, including without limitation, the computations of
interest which may from time to time be owing to U.S. Bank, the receipt by U.S.
Bank of any check or any other item of payment whether through a blocked account
or lockbox described in Section 5.6 or otherwise, shall not be treated as a
payment on account of the Liabilities until such check or other item of payment
is actually received by U.S. Bank and is paid to U.S. Bank in cash or a cash
equivalent.  Notwithstanding the terms of this Agreement or any other Financing
Agreement, if the due date of any payment falls on a day that is not a Business
Day, such payment may be made and shall not be considered late if made on the
next succeeding Business Day.

 

10.2        Attorneys’ Fees and Costs.  If at any time U.S. Bank employs counsel
in connection with protecting or perfecting U.S. Bank’s security interest in the
Collateral or in connection with any matters contemplated by or arising out of
this Agreement, whether:  (a) to commence, defend, or intervene in any
litigation or to file a petition, complaint, answer, motion or other pleading;
(b) to take any other action in or with respect to any suit or proceeding
(bankruptcy or otherwise); (c) to consult with officers of U.S. Bank to advise
U.S. Bank or to draft documents for U.S. Bank in connection with any of the
foregoing or in connection with any release of U.S. Bank’s claims or security
interests or any proposed extension, amendment or refinancing of the
Liabilities; (d) to protect, collect, lease, sell, take possession of, or
liquidate any of the Collateral; or (e) to attempt to enforce or to enforce any
security interest in any of the Collateral, or attempt to enforce or to enforce
any rights of U.S. Bank to collect any of the Liabilities; then in any of such
events, all of the reasonable attorneys’ fees arising from such services, and
any  related expenses, costs and charges, including without limitation, all fees
of all paralegals, legal assistants and other staff employed by such attorneys
whether outside U.S. Bank or in U.S. Bank’s legal department, together with
interest at the highest interest rate then payable by Borrower under this
Agreement or any other Financing Agreement, shall constitute additional
Liabilities, payable on demand and secured by the Collateral.  This Section 10.2
shall survive the termination of this Agreement.

 

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10.3        Expenditures by U.S. Bank.  In the event that Borrower shall fail to
pay taxes, insurance, assessments, costs or expenses which Borrower is, under
any of the terms hereof or of any of the other Financing Agreements, required to
pay, or fails to keep the Collateral free from other security interests, liens
or encumbrances, except as permitted herein, U.S. Bank may, in U.S. Bank’s sole
discretion and without obligation to do so, make expenditures for any or all of
such purposes, and the amount so expended, together with interest at the highest
interest rate then payable by Borrower under this Agreement or any other
Financing Agreement, shall constitute additional Liabilities, payable on demand
and secured by the Collateral.

 

10.4        U.S. Bank’s Costs and Expenses as Additional Liabilities.  Borrower
shall reimburse U.S. Bank for all expenses and fees paid or incurred in
connection with the documentation, negotiation and closing of the loans and
other financial accommodations described in this Agreement (including without
limitation, filing fees, recording fees, document or recording taxes, search
fees, appraisal fees and expenses, and the fees and expenses of U.S. Bank’s
attorneys, paralegals, and legal assistants, whether outside U.S. Bank or in
U.S. Bank’s legal department, and whether such expenses and fees are incurred
prior to or after the Closing Date).  Borrower further agrees to reimburse U.S.
Bank for all expenses and fees paid or incurred in connection with the
documentation of any renewal or extension of the Loans, any additional financial
accommodations, or any other amendments to this Agreement.  All costs and
expenses incurred by U.S. Bank with respect to such negotiation and
documentation, together with interest at the highest interest rate then payable
by Borrower under this Agreement or any other Financing Agreement, shall
constitute additional Liabilities, payable on demand and secured by the
Collateral.

 

10.5        Claims and Taxes.  Borrower agrees to indemnify and hold U.S. Bank
harmless from and against any and all claims, demands, liabilities, losses,
damages, penalties, costs, obligations, actions, judgments, suits, disbursements
and expenses (including without limitation, reasonable attorneys’ fees) relating
to or in any way arising out of the possession, use, operation or control of any
of Borrower’s assets, or in any way arising out of or related to this Agreement
or the other Financing Agreements, which agreement to indemnify and hold U.S.
Bank harmless shall survive the termination of this Agreement.  Borrower shall
pay or cause to be paid all license fees, bonding premiums and related taxes and
charges, and shall pay or cause to be paid all of Borrower’s real and personal
property taxes, assessments and charges and all of Borrower’s franchise, income,
unemployment, use, excise, old age benefit, withholding, sales and other taxes
and other governmental charges assessed against Borrower, or payable by
Borrower, at such times and in such manner as to prevent any penalty from
accruing or any lien or charge from attaching to Borrower’s property, provided,
however, that Borrower shall have the right to contest in good faith, by an
appropriate proceeding promptly initiated and diligently conducted, the
validity, amount or imposition of any such tax, and upon such good faith contest
to delay or refuse payment thereof, if: (a) Borrower establishes adequate
reserves to cover such contested taxes; and (b) such contest does not have a
material adverse effect on the financial condition of Borrower, the ability of
Borrower to pay any of the Liabilities, or the priority or value of U.S. Bank’s
security interests in the Collateral.

 

10.6        Custody and Preservation of Collateral.  U.S. Bank shall be deemed
to have exercised reasonable care in the custody and preservation of any of the
Collateral in U.S. Bank’s possession if U.S. Bank takes such action for that
purpose as Borrower shall request in writing, but failure by U.S. Bank to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure by U.S. Bank to preserve or protect any right
with respect to such Collateral against prior parties, or to do any act with
respect to the preservation of such Collateral not so requested by Borrower,
shall of itself be deemed a failure to exercise reasonable care in the custody
or preservation of such Collateral.

 

10.7        Inspection.  U.S. Bank (by and through its officers and employees),
or any Person designated by U.S. Bank in writing, shall have the right from time
to time, to call at Borrower’s place or places of business (or any other place
where Collateral or any information as to Collateral is kept or located) during
reasonable business hours, and, without hindrance or delay, to: (a) inspect,
audit, check and make copies of and extracts from Borrower’s books, records,
journals, orders, receipts and any correspondence and other data relating to
Borrower’s business or to any transactions between the parties to this
Agreement; (b) make such verification concerning the Collateral as U.S. Bank may
consider reasonable under the circumstances; and (c) review operating
procedures, review maintenance of property and discuss the affairs, finances and
business of Borrower with Borrower’s officers, employees or directors.

 

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Borrower agrees to pay to U.S. Bank $750 per auditor per day, plus all out of
pocket expenses reasonably incurred by or on behalf of U.S. Bank in making
inspections under this Section, paid by an U.S. Bank initiated Advance pursuant
to Section 2.1, without prior demand by U.S. Bank, provided that, unless a
Matured Default has occurred and is continuing, U.S. Bank may not conduct such
inspections more than once every six months.

 

10.8        Examination of Banking Records.  Borrower consents to the
examination by U.S. Bank, U.S. Bank’s officers, employees and agents, or any of
them, whether or not there shall have occurred a Default or a Matured Default,
of any and all of Borrower’s banking records, wherever they may be found, and
directs any Person which may be in control or possession of such records
(including without limitation, any bank, other financial institution, accountant
or lawyer) to provide such records to U.S. Bank and U.S. Bank’s officers,
employees and agents, upon their request.  Such examination may be conducted by
U.S. Bank with or without notice to Borrower at the option of U.S. Bank, any
such notice being waived by Borrower.

 

10.9        Governmental Reports.  Borrower shall furnish to U.S. Bank, upon the
reasonable request of U.S. Bank, copies of the reports of examinations or
inspections of Borrower by all Governmental Authorities, and if Borrower fails
to furnish such copies to U.S. Bank, Borrower authorizes all such Government
Authorities to furnish to U.S. Bank copies of their reports of examinations or
inspections of Borrower.

 

10.10      Reliance by U.S. Bank.  All covenants, agreements, representations
and warranties made by Borrower shall, notwithstanding any investigation by U.S.
Bank, be deemed to be material to and to have been relied upon by U.S. Bank.

 

10.11      Parties.  Whenever in this Agreement there is reference made to any
of the parties, such reference shall be deemed to include, wherever applicable,
a reference to the respective successors and assigns of Borrower and U.S. Bank. 
Borrower shall not assign any of it rights or delegate any of its duties under
this Agreement or any of the other Financing Agreements without the prior
written consent of U.S. Bank.

 

10.12      Applicable Law; Severability.  This Agreement shall be construed in
all respects in accordance with, and governed by, the laws and decisions of the
State of Arizona and the laws, regulations and decisions of the United States
applicable to national banks.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.

 

10.13      SUBMISSION TO JURISDICTION; WAIVER OF BOND AND TRIAL BY JURY.  WITH
RESPECT TO ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, DEMANDS, DEBTS,
DAMAGES, COSTS AND EXPENSES, WHATSOEVER, WHETHER BASED ON STATUTE, COMMON LAW,
PRINCIPLES OF EQUITY OR OTHERWISE, ARISING OUT OF ANY MATTER, THING OR EVENT
WHICH IS DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT, BORROWER CONSENTS TO
THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN MARICOPA
COUNTY, ARIZONA AND WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED ON
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY
SUCH COURT AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON BORROWER, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED
TO BORROWER AT THE ADDRESS SET FORTH IN SECTION 10.19.  SERVICE, SO MADE, SHALL
BE DEEMED TO BE COMPLETE UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) DAYS
AFTER THE SAME SHALL HAVE BEEN POSTED.  AT THE OPTION OF U.S. BANK, BORROWER
WAIVES, TO THE EXTENT PERMITTED BY LAW, TRIAL BY JURY, AND WAIVES ANY BOND OR
SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED
OF U.S. BANK.

 

10.14      Application of Payments Waiver.  Upon and during the continuance of a
Matured Default, notwithstanding any contrary provision contained in this
Agreement or in any of the other Financing Agreements, Borrower irrevocably
waives the right to direct the application of any and all payments at any time
received by U.S. Bank from Borrower or with respect to any of the Collateral,
and Borrower irrevocably agrees that U.S. Bank shall have the continuing
exclusive right to apply and reapply any and all payments received at any time,
whether with respect to the Collateral or otherwise, against the Liabilities, in
such manner as U.S. Bank may deem advisable, notwithstanding any entry by U.S.
Bank upon any of U.S. Bank’s books and records.

 

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10.15      Marshaling; Payments Set Aside.  U.S. Bank shall be under no
obligation to marshal any assets in favor of Borrower or against or in payment
of any or all of the Liabilities.  To the extent that Borrower makes a payment
or payments to U.S. Bank or U.S. Bank receives any payment or proceeds of the
Collateral for Borrower’s benefit or enforces U.S. Bank’s security interests or
exercises U.S. Bank’s rights of setoff, and such payment or payments or the
proceeds of such Collateral, enforcement or setoff or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

10.16      Section Titles.  The section titles contained in this Agreement shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties.

 

10.17      Continuing Effect.  This Agreement, U.S. Bank’s security interests in
the Collateral, and all of the other Financing Agreements shall continue in full
force and effect so long as any Liabilities shall be owed to U.S. Bank and (even
if there shall be no Liabilities outstanding) so long as U.S. Bank remains
committed to make Advances under this Agreement.

 

10.18      No Waiver.  U.S. Bank’s or Borrower’s failure at any time to require
strict performance by Borrower or U.S. Bank, respectively, of any provision of
this Agreement or the other Financing Agreements shall not waive, affect or
diminish any right of U.S. Bank or Borrower, respectively, to thereafter demand
strict compliance and performance therewith.  Any suspension or waiver by U.S.
Bank of any Default or Matured Default under this Agreement or any of the other
Financing Agreements, shall not suspend, waive or affect any other Default or
Matured Default under this Agreement or any of the other Financing Agreements,
whether the same is prior or subsequent and whether of the same or of a
different kind or character.  None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of
the other Financing Agreements and no Default or Matured Default under this
Agreement or any of the other Financing Agreements, shall be deemed to have been
suspended or waived by U.S. Bank unless such suspension or waiver is in writing
signed by an officer of U.S. Bank, and directed to Borrower specifying such
suspension or waiver.

 

10.19      Notices.  Except as otherwise expressly provided herein, any notice
required or desired to be served, given or delivered pursuant to this Agreement
shall be in writing, and shall be sent by manual delivery, facsimile
transmission, overnight courier or United States mail (postage prepaid)
addressed to the party to be notified as follows:

 

(a) If to U.S. Bank at:

 

U.S. Bank National Association

Food & Agribusiness Group

DN-CO-T7CS

950 Seventeenth Street, 7th Floor

Denver, Colorado  80202

Attn: Michael Ryno

 

with a copy to:

 

Campbell Killin Brittan & Ray, LLC

270 St. Paul Street, Suite 200

Denver, Colorado 80206

Attn: Michael D. Killin

 

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(b) If to Borrower at:

 

Inventure Foods, Inc.

5415 East High Street, Suite 350
Phoenix, AZ  85054

Attention:  Steve Weinberger

 

with a copy to:

 

Osborn Maledon PA

2929 North Central Avenue, 21st Floor

Phoenix, AZ 85012-2793

Attn: Chris Stachowiak

 

or, as to each party, addressed to such other address as shall be designated by
such party in a written notice to the other parties.  All such notices shall be
deemed given on the date of delivery if manually delivered, on the date of
sending if sent by facsimile transmission, on the first Business Day after the
date of sending if sent by overnight courier, or three (3) days after the date
of mailing if mailed.

 

10.20      Maximum Interest.  No agreements, conditions, provisions or
stipulations contained in this Agreement or in any of the other Financing
Agreements, or any Default or Matured Default, or any exercise by U.S. Bank of
the right to accelerate the payment of the maturity of principal and interest,
or to exercise any option whatsoever, contained in this Agreement or any of the
other Financing Agreements, or the arising of any contingency whatsoever, shall
entitle U.S. Bank to collect, in any event, interest exceeding the maximum
authorized by law, and in no event shall Borrower be obligated to pay interest
exceeding such rate, and all agreements, conditions or stipulations, if any,
which may in any event or contingency whatsoever operate to bind, obligate or
compel Borrower to pay a rate of interest exceeding the maximum allowed by law,
shall be without binding force or effect, at law or in equity, to the extent
only of the excess of interest over such maximum interest allowed by law.  In
the event any interest is charged in excess of the maximum allowed by law
(“Excess”), Borrower acknowledges and stipulates that any such charge shall be
the result of an accidental and bona fide error, and such Excess shall be,
first, applied to reduce the principal of any Liabilities due, and, second,
returned to Borrower, it being the intention of the parties not to enter at any
time into a usurious or otherwise illegal relationship.  Borrower and U.S. Bank
both recognize that, with fluctuations of index rates and applicable margins,
such an unintentional result could inadvertently occur.  By the execution of
this Agreement, Borrower covenants that: (a) the credit or return of any Excess
shall constitute the acceptance by Borrower of such Excess; and (b) Borrower
shall not seek or pursue any other remedy, legal or equitable, against U.S. Bank
based, in whole or in part, upon the charging or receiving of any interest in
excess of the maximum authorized by law.  For the purpose of determining whether
or not any Excess has been contracted for, charged or received by U.S. Bank, all
interest at any time contracted for, charged or received by U.S. Bank in
connection with the Liabilities shall be amortized, prorated, allocated and
spread in equal parts during the entire term of this Agreement.

 

10.21      Regulatory Changes.  If there shall occur any adoption or
implementation of, or change to, any Regulation, or interpretation or
administration thereof, which shall have the effect of imposing on U.S. Bank (or
U.S. Bank’s holding company) any increase or expansion of or any new:  tax
(excluding taxes on its overall income and franchise taxes), charge, fee,
assessment or deduction of any kind whatsoever, or reserve, capital adequacy,
special deposits or similar requirements against credit extended by, assets of,
or deposits with or for the account of U.S. Bank or other-conditions affecting
the extensions of credit under this Agreement; then Borrower shall pay to U.S.
Bank such additional amount as U.S. Bank deems necessary to compensate U.S. Bank
for any increased cost to U.S. Bank attributable to the extension(s) of credit
under this Agreement and/or for any reduction in the rate of return on U.S.
Bank’s capital and/or U.S. Bank’s revenue attributable to such extension(s) of
credit.  As used above, the term “Regulation” shall include any federal, state
or international law, governmental or quasi-governmental rule, regulation,
policy, guideline or directive (including but not limited to the Dodd-Frank Wall
Street Reform and Consumer Protection Act and enactments, issuances or similar
pronouncements by the Bank for International Settlements, the Basel Committee on
Banking Regulations and Supervisory Practices or any similar authority and any
successor thereto) that applies to U.S. Bank.  U.S. Bank’s determination of the
additional amount(s) due under this paragraph shall be binding in the absence of
manifest error, and such amount(s) shall be payable within 15 days of demand
and, if recurring, as otherwise billed by U.S. Bank.

 

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10.22      LIBOR Rate Loans.  Without limiting the generality of Section 10.21,
anything in this Agreement to the contrary notwithstanding, if U.S. Bank shall
determine that: (i) the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or that any central
bank or other Governmental Authority asserts that it is unlawful to fund or
maintain LIBOR Rate Loans (whether or not such assertion carries the force of
law), (ii) deposits in U.S. Dollars (in the applicable amounts) are not being
offered to it in the interbank eurodollar market for any requested period of
time, (iii) by reason of circumstances affecting the interbank eurodollar
market, adequate and reasonable means do not exist for ascertaining the LIBOR
Rate; (iv) the LIBOR Rate will not adequately and fairly reflect the cost to
U.S. Bank of funding its LIBOR Rate Loans or (v) the making or funding of LIBOR
Rate Loans is impracticable for U.S. Bank, the obligation of U.S. Bank to make
LIBOR Rate Loans shall be suspended until U.S. Bank shall notify the Borrower
that the circumstances causing such suspension no longer exist, and the existing
LIBOR Rate Loans shall automatically convert, on and as of the date of such
notification, into Base Rate Loans; provided that U.S. Bank represents and
warrants to Borrower that as of the Closing Date, it has no actual knowledge
that any of the circumstances set forth above exist.

 

10.23      Additional Advances.  All fees, charges, expenses, costs,
expenditures, obligations, liabilities, losses, penalties and damages incurred
or suffered by U.S. Bank and for which Borrower is bound to indemnify or
reimburse U.S. Bank under this Agreement (other than those which may be paid
without demand, by U.S. Bank initiated Advances pursuant to Section 2.1) may, at
the option of U.S. Bank, be paid by U.S. Bank initiated Advances pursuant to
Section 2.1 if such amounts remain unpaid for a period of ten (10) days after
U.S. Bank has made demand.

 

10.24      Loan Agreement Controls.  If there are any conflicts or
inconsistencies among this Agreement and any of the other Financing Agreements,
the provisions of this Agreement shall prevail and control.

 

10.25      Independence of Covenants.  All covenants under this Agreement and
the other Financing Agreements shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the occurrence of a Default or
a Matured Default if such action is taken or condition exists.

 

10.26      Binding Effect.  This Agreement and all of the other Financing
Agreements set forth the legal, valid and binding obligations of Borrower and
U.S. Bank and are enforceable against Borrower and U.S. Bank, respectively, in
accordance with their respective terms.  Should more than one Person be a
Borrower under this Agreement or any Note, the obligations of each such Person
shall be joint and several.  U.S. Bank may settle, release, compromise, collect
or otherwise liquidate the obligations of any Borrower, any guarantor of such
obligations, and any security or collateral for such obligations or for any such
guaranty, in any manner, without affecting or impairing the obligations of any
Borrower.  This Agreement amends and restates in its entirety the Prior
Agreement, and is made in substitution of the Prior Agreement and not in
satisfaction thereof.  This Agreement and the issuance of new Notes in
accordance herewith shall not be deemed to constitute a novation.

 

10.27      Set-off.  Upon and during the continuance of a Matured Default,
Borrower gives and confirms to U.S. Bank a right of set-off of all moneys,
securities and other property of Borrower (whether special, general or limited)
and the proceeds thereof, at any time delivered to remain with or in transit in
any manner to U.S. Bank, its correspondent or its agents from or for Borrower,
whether for safekeeping, custody, pledge, transmission, collection or otherwise
or coming into possession of U.S. Bank in any way, and also, any balance of any
deposit accounts and credits of Borrower with, and any and all claims of
security for the payment of all liabilities and obligations owed by Borrower to
U.S. Bank, contracted with or acquired by U.S. Bank, whether such liabilities
and obligations be joint, several, absolute, contingent, secured, unsecured,
matured or unmatured, and Borrower authorizes U.S. Bank at any time or times
upon and during the continuance of a Matured Default, without prior notice, to
apply such money, securities, other property, proceeds, balances, credits of
claims, or any part of the foregoing, to such liabilities in such amounts as it
may select, whether such liabilities and obligations be contingent, unmatured or
otherwise, and whether any collateral security in support thereof is deemed
adequate or not. The rights described herein shall be in addition to any
collateral security described in any separate agreement executed by Borrower.

 

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10.28      Counterparts and Facsimile Signatures; Electronic Records. This
Agreement, any other Financing Agreement and any subsequent amendment to any of
them may be executed in several counterparts, each of which shall be construed
together as one original.  Facsimile signatures on this Agreement, any other
Financing Agreement and any subsequent amendment to any of them shall be
considered as original signatures.  As related to this Agreement, (i) U.S. Bank
shall be permitted (i) to create electronic images and to destroy paper
originals of any imaged documents; (ii) any such images maintained by U.S. Bank
as a part of its normal business processes shall be given the same legal effect
as the paper originals; and (iii) when appropriate, U.S. Bank shall be permitted
to convert any instrument into a “transferable record” under the Uniform
Electronic Transactions Act (“UETA”), with the image of such instrument in U.S.
Bank’s possession constituting an “authoritative copy” under UETA.

 

10.29      Final Agreement. THIS WRITTEN AGREEMENT AND THE OTHER FINANCING
AGREEMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

 

INVENTURE FOODS, INC.

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

 

BN FOODS, INC.

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

 

BOULDER NATURAL FOODS, INC.

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

 

LA COMETA PROPERTIES, INC.

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

 

POORE BROTHERS —

 

BLUFFTON, LLC

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

`

RADER FARMS, INC.

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

 

TEJAS PB DISTRIBUTING, INC.

 

 

 

By

 

 

 

Steve Weinberger

 

 

Chief Financial Officer

 

 

 

U.S. BANK NATIONAL ASSOCIATION

 

 

 

By

 

 

Its

 

 

[Signature Page to Loan and Security Agreement]

 

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