Exhibit 10.11

 

FOURTH AMENDMENT TO

LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS

 

THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND LOAN DOCUMENTS
(“Amendment”) is entered into as of March 30, 2018 (“Effective Date”), between
PEN BRANDS LLC, an Ohio limited liability company f/k/a Nanofilm, Ltd.
(“Borrower”) and MBANK, a Michigan banking corporation, as assignee of Mackinac
Commercial Credit, LLC, a Michigan limited liability company (together with its
successors and assigns, the “Lender”).

 

RECITALS

 

A. Lender and Borrower entered into a Loan and Security Agreement dated April 4,
2014, as amended by a First Amendment to Loan and Security Agreement dated
effective as of April 4, 2015, a Second Amendment to Loan and Security Agreement
dated effective as of April 3, 2017, and a Third Amendment to Loan and Security
Agreement and Loan Documents dated effective as of October 17, 2017 (as so
amended, the “Loan Agreement”), together with various other documents, written
agreements, certificates and instruments between Lender and Borrower, among
others, in connection therewith (collectively, as amended or modified from time
to time, the “Loan Documents”), including without limitation, the Amended and
Restated Revolving Credit Loan Note dated April 3, 2017, made by Borrower in
favor of Lender, in the original principal amount of $1,500,000 (as amended or
modified from time to time, the “Revolving Note”). All capitalized terms not
defined herein shall have the same meanings ascribed to such terms in the Loan
Agreement.

 

B. Lender and Borrower have agreed to modify the terms and conditions of the
Loan Agreement and other Loan Documents and Borrower and Lender wish to set
forth their agreement regarding the foregoing in this Amendment.

 

NOW, THEREFORE, in consideration of the mutual covenants, conditions, and
provisions as hereinafter set forth, the parties hereto agree as follows:

 

1. Modifications to Loan Agreement.

 

(a) Maturity Date. The definition of “Maturity Date” as set forth in Paragraph
2(e) of the Term Sheet to the Loan Agreement is hereby amended to the “Earlier
of Demand or July 3, 2018”.

 

(b) Renewal. Section 2(e) of the Loan Agreement is hereby amended and restated
in its entirety to read as follows:

 

“(e) Term; Automatic Renewal. The term of this Agreement and of the Loan shall
be on Demand, but if Demand is not made, then no later than the date set forth
on the Term Sheet (the “Maturity Date”). Notwithstanding anything to the
contrary or inconsistent contained herein, provided no Default exists, the
Maturity Date, as extended to July 3, 2018 pursuant to the Fourth Amendment to
Loan and Security Agreement and Loan Documents dated March 30, 2018, will
automatically be further extended one time for one (1) year (“Renewal Term”),
unless either party notifies the other party in writing of its intent not to so
extend such Maturity Date at least sixty (60) days prior thereto. If such
Maturity Date is extended, Borrower shall pay to Lender a renewal fee in the
amount of one percent (1.0%) of the Maximum Loan Amount, which shall be due and
payable on or before the beginning of the Renewal Term.”

 

(c) Limited Guaranty. Simultaneously with this Amendment, the Borrower shall
cause each of Scott E. Rickert and Jeanne Rickert to execute and deliver a
Limited Guaranty to Lender constituting their unconditional guaranty of the
Obligations associated with the Purchase Order Advances, in form and substance
satisfactory to the Lender (the “Limited Guaranty”). In connection therewith,
the following amendments are hereby made to the Loan Agreement:

 

(i) The definition of “Guarantor” in Section 1(o) of the Loan Agreement is
hereby amended and restated to read as follows:

 

“Guarantor” means, individually and collectively, the Individual Guarantor, the
Corporate Guarantor, and the Limited Guarantors.

 

(ii) The following definition is hereby added to Section 1 of the Loan Agreement
in appropriate alphabetical sequence:

 

 

 

 

“Limited Guarantor” shall mean each of Scott E. Rickert, an individual, and
Jeanne Rickert, an individual, and “Limited Guarantors” shall mean both of the
foregoing.

 

2. Modifications to Revolving Note. The definition of “Due Date” as set forth on
the top of page 1 of the Revolving Note is hereby amended to mean the “Maturity
Date” as defined in the Loan Agreement.

 

3. Modifications to Revolving Credit Loan Rider #1.

 

(a) Advances. The first paragraph of Section 2.A of the Revolving Credit Loan
Rider #1 is hereby amended and restated in its entirety to read as follows:

 

“Advances. Subject to the terms of the Agreement, Lender may, in its sole
discretion and upon Borrower’s request, make Advances to Borrower in an amount
(hereinafter referred to as the “Gross Availability”) which is the lesser of (a)
the Maximum Loan Amount as set forth on the Term Sheet or (b) an amount equal to
the sum of (i) the applicable Percentage Advance Rate as set forth on the Term
Sheet times the face amount (less maximum discounts, credits and allowances
which may be taken by or granted to Receivable Debtors in connection therewith)
of Eligible Receivables; plus (ii) the lesser of (1) the Inventory Cap as set
forth on the Term Sheet, or (2) the sum of (A) the applicable Percentage Advance
Rate as set forth on the Term Sheet times the value of Borrower’s Eligible Raw
Materials (less freight and container costs) calculated at the lower of cost or
market value, plus (B) the applicable Percentage Advance Rate as set forth on
the Term Sheet times the value of Borrower’s Eligible Finished Goods (less
freight and container costs) calculated at the lower of cost or market value;
plus (iii) the Borrowing Base; plus (iv) the balance in the Borrowing Base Cash
Collateral Account; plus (v) upon the request of Borrower to include Eligible
Purchase Orders in the calculation hereof, the Purchase Order Advance Amount
with respect to such Eligible Purchase Orders; provided that (A) a request for a
Purchase Order Advance Amount shall not be made more than three (3) times during
the term of the Agreement, (B) no Purchase Order Advance Amount may be included
in the calculation of “Gross Availability” until Advances made in reliance on
any prior Purchase Order Advance Amount have been repaid in full, and (C) each
Purchase Order Advance Amount may only be included in the calculation of “Gross
Availability” for a period of not more than thirty (30) days. Borrower hereby
agrees that failure to repay any Advances made in reliance upon a Purchase Order
Advance Amount within such 30-day period shall constitute a Default under the
Agreement. All Advances hereunder may be borrowed, repaid and reborrowed by
Borrower during the term of the Agreement. All Advances and amounts payable
pursuant to this Rider shall constitute part of the Obligations.”

 

(b) Definitions. The following definitions are hereby added to Section 1 of the
Revolving Credit Loan Rider #1 in appropriate alphabetical sequence:

 

“Eligible Purchase Order” shall mean a Purchase Order, which satisfies the
following conditions as determined by Lender in its sole discretion:

 

(i) upon fulfillment of the Purchase Order, an Eligible Receivable shall be
created that is due and owing from a Receivable Debtor deemed creditworthy by
the Lender, and upon fulfillment, the Purchase Order shall cease to be an
Eligible Purchase Order;

 

(ii) Borrower shall have delivered to Lender a copy of the Purchase Order and
such other documents and instruments required by Lender in connection therewith;

 

(iii) Borrower shall have delivered to Lender a non-refundable advance fee in
the amount of $1,500.00, with respect to the Purchase Order Advance Amount
request that includes that Eligible Purchase Order;

 

(iv) the Inventory associated with such Purchase Order is not otherwise included
in the calculation of “Advances” under Section 2.A of this Rider; and

 

(v) the Purchase Order is otherwise acceptable to the Lender.

 

“Purchase Order” shall mean a binding purchase order received by Borrower from a
customer for finished goods Inventory in the ordinary course of business.

 

“Purchase Order Advance Amount” means, the lesser of (i) $200,000 and (ii) the
aggregate face amount of the Eligible Purchase Orders supporting such Purchase
Order Advance Amount.

 

 

 

 

4. Representations. Borrower represents and warrants to Lender (and Lender
relies upon such representations and warranties in entering into this Amendment)
as follows:

 

(a) Organizational Documents; No Membership Changes. Since October 17, 2017,
there have been no amendments to the Articles of Organization or Operating
Agreement of the Borrower;

 

(b) Representations Still True. The representations in the Loan Agreement and
contained in all other Loan Documents remain true, and Borrower reaffirms such
representations, in all respects as of the date hereof;

 

(c) No Events of Default. No Event of Default has occurred and is continuing as
of the date hereof and no event or condition which, with the giving of notice,
the lapse of time, or both, would constitute an Event of Default, has occurred
and is continuing as of the date hereof; and

 

(d) Execution, Delivery and Performance. Execution, delivery and performance of
this Amendment and any other documents and instruments required under this
Amendment or the Loan Agreement are within Borrower’s powers, have been duly
authorized, are not in contravention of law or the terms of the organizational
documents of the Borrower, and do not require the consent or approval of any
governmental body, agency, or authority, and this Amendment and any other
documents and instruments required under this Amendment or the Loan Agreement
when executed will be valid and binding in accordance with their terms.

 

5. Conditions to Effectiveness. The effectiveness of this Amendment shall be
subject to satisfaction of the following conditions:

 

(a) Amendment Documents. Borrower shall have executed and delivered, or cause to
be executed and delivered to Lender, this Amendment (including the
acknowledgement and agreement to the amendments contained herein of the
Guarantors), the Limited Guaranty, and all other documents and instruments
required by Lender in connection with this Amendment, all to be in form and
content satisfactory to Lender.

 

(b) Lender Expenses. Borrower shall have paid to Lender all of Lender’s fees,
costs and expenses (including without limitation, attorneys’ fees) incurred in
connection with the preparation, negotiation and closing of this Amendment.

 

6. Effect of Amendment. Except for the amendments set forth in this Amendment,
the Loan Agreement and all other Loan Documents shall remain unchanged and in
full force and effect. Nothing in this Amendment is intended, or shall be
construed, to constitute a novation or an accord and satisfaction of any of
Borrower’s obligations under or in connection with the Loan Agreement or any
other Loan Document.

 

7. Miscellaneous.

 

(a) Entire Agreement. This Amendment, together with the Loan Agreement and other
Loan Documents constitutes the entire agreement and understanding among the
parties relating to the subject matter hereof, and supersedes all prior
proposals, negotiations, agreements and understandings relating to such subject
matter. In entering into this Amendment, Borrower acknowledges that it is
relying on no statement, representation, warranty, covenant or agreement of any
kind made by the Lender or any employee or agent of Lender, except for the
agreements of Lender set forth herein.

 

(b) Binding Effect. This Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns,
provided that no party other than Lender may assign any of its rights or
obligations hereunder without the prior written consent of Lender.

 

(c) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MICHIGAN APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE.

 

(d) Counterparts; Facsimile or Electronic Signatures. This Amendment may be
executed in multiple counterparts, each of which shall be deemed to be an
original and all of which when taken together shall constitute one and the same
instrument. A facsimile or PDF signature shall be effective as an original
signature.

 

[Signatures on following page]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
and delivered as of the date first hereinabove set forth.

 

BORROWER:

 

PEN BRANDS LLC,

an Ohio limited liability company

 

By: /s/ Anne Marie Thomas     Anne Marie Thomas   Title: President  

 

LENDER:         MBANK,   a Michigan banking corporation         By: /s/ Edward
P. Lewan     Edward P. Lewan   Title: President  

 

ACKNOWLEDGEMENT OF GUARANTOR

 

Scott E. Rickert, guarantor under that certain Validity Guaranty dated April 4,
2014 in favor of Lender (the “Validity Guaranty”), and PEN, Inc., a Delaware
corporation, a guarantor under that certain Corporate Guaranty dated May 1, 2015
(the “Corporate Guaranty”), each acknowledge the above Amendment and agrees that
their respective Guaranty shall continue in full force and effect.

 

  GUARANTOR:         /s/ Scott Rickert   Scott E. Rickert, an individual        
PEN, INC.   a Delaware corporation         By: /s/ Scott Rickert     Scott E.
Rickert    Title: Chief Executive Officer