LOAN AND SECURITY AGREEMENT

 

BETWEEN

 

ACF FINCO I LP

 

AND

 

JOHN KEELER & CO. INC.

(d/b/a Blue Star Foods)

 

Effective Date: August 31, 2016

 

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE 1. DEFINITIONS. 1 ARTICLE 2. THE LOANS. 1 2.1. Revolving Credit;
Revolving Credit Note. 1 2.2. Conditions to Loans and Advances. 1 2.3.
Overadvances. 3 2.4. Reserves. 3 2.5. Manner of Revolving Credit Borrowing;
Notice of Borrowing. 3 2.6. Collections; Lockbox; Blocked Account. 4 2.7.
Crediting of Funds. 4 2.8. Records of Lender. 5 2.9. Payment on Revolving Credit
Termination Date; Termination of Advances. 5 ARTICLE 3. INTEREST AND FEES. 5
3.1. Interest. 5 3.2. Facility Fee. 6 3.3. Collateral Management Fee. 6 3.4.
Intentionally Omitted. 6 3.5. Field Examination Fees; Appraisals. 6 3.6.
Intentionally Omitted. 6 3.7. Liquidated Damages. 6 3.8. Computation of Interest
and Fees. 7 ARTICLE 4. COLLATERAL AND SECURITY INTEREST. 7 4.1. Grant of
Security Interest. 7 4.2. Nature of Security Interest. 7 4.3. Perfection and
Protection of Security Interest. 8 4.4. Limited License. 9 4.5. Rights of Lender
as Secured Party. 9 4.6. Communication with Account Debtors. 9 4.7. Confirmatory
Written Assignments. 9 4.8. Lender’s Right to Perform Borrower’s Obligations. 10
ARTICLE 5. REPRESENTATIONS. 10 5.1. Organization, Qualification and Structure.
10 5.2. Legally Enforceable Agreement. 10 5.3. Name and Address. 10 5.4.
Location of Collateral. 11 5.5. Title; Liens; Permitted Liens. 11 5.6. Existing
Indebtedness. 11 5.7. Financial Statements. 11 5.8. Solvent Financial Condition.
11 5.9. General Intangibles, Patents, Trademarks, Copyrights and Licenses. 11
5.10. Existing Business Relationships. 12 5.11. Investment Company Act: Federal
Reserve Board Regulations. 12 5.12. Anti-Money Laundering and Terrorism
Regulations. 12 5.13. Tax Returns. 12 5.14. Litigation. 13

 

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5.15. ERISA Matters. 13 5.16. O.S.H.A. 13 5.17. Environmental Matters. 13 5.18.
Labor Disputes. 13 5.19. Location of Bank and Securities Accounts. 13 5.20.
Compliance With Laws. 13 5.21. Capital Structure. 14 5.22. No Other Violations.
14 5.23. Full Disclosure. 14 5.24. Survival of Representations. 14 ARTICLE 6.
FINANCIAL INFORMATION TO BE DELIVERED TO LENDER. 15 6.1. Borrowing Base
Certificates. 15 6.2. A/R and A/P Aging; Perpetual Inventory Report. 15 6.3.
Ineligible Receivables/Ineligible Inventory. 15 6.4. Annual Financial
Statements; Compliance Certificates. 15 6.5. Monthly Financial Statements;
Compliance Certificates. 16 6.6. Inventory Counts and Reports. 16 6.7.
Projections. 16 6.8. Customer and Vendor Lists. 16 6.9. Insurance. 16 6.10. Tax
Returns. 16 6.11. Other Information. 16 ARTICLE 7. AFFIRMATIVE COVENANTS. 16
7.1. Use of Loan Proceeds. 16 7.2. Business and Existence; Trade Names. 16 7.3.
Taxes. 17 7.4. Compliance with Laws. 17 7.5. Maintain Properties; Insurance. 17
7.6. Business Records. 19 7.7. Delivery of Documents and Instruments. 19 7.8.
Name Change; Organizational Change; Creation of Affiliates. 20 7.9. Change of
Offices; Records. 20 7.10. Change of Fiscal Year. 20 7.11. Access to Books and
Records. 20 7.12.  Solvency. 20 7.13. Notice to Lender. 20 7.14. Payments to
Customs Brokers, etc. 22 7.15. Retention of Turnaround Management Consultant. 22
7.16. Post-Closing Covenants. 22 ARTICLE 8. NEGATIVE COVENANTS. 22   8.1.
Indebtedness. 22 8.2. Mergers; Consolidations; Acquisitions. 22 8.3. Change of
Management; Change of Control. 22 8.4. Sale or Disposition. 22 8.5. Real
Property Defaults. 23 8.6. Liens and Encumbrances. 23 8.7. Dividends and
Distributions; Payment of Indebtedness; Amendments. 23 8.8. Guaranties;
Contingent Liabilities. 23 8.9. Removal of Collateral. 23

 

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8.10. Transfer of Notes or Accounts. 23 8.11. Settlements. 24 8.12. Change of
Business. 24 8.13. Change of Accounting Practices. 24 8.14. Inconsistent
Agreement. 24 8.15. Loan or Advances; Personal Expenses. 24 8.16. Investments.
24 8.17. Bank Accounts. 24 8.18. Compensation. 24 8.19. Transactions with
Affiliates. 24 8.20.  Capital Expenditures. 25 8.21. Fixed Charge Coverage
Ratio. 25 ARTICLE 9. EVENTS OF DEFAULT; REMEDIES OF LENDER. 26 9.1. Events of
Default. 26 9.2. Continuation of Events of Default. 28 9.3. Rights and Remedies
with Respect to Loans and Advances. 28 9.4. Rights and Remedies with Respect to
Collateral. 28 ARTICLE 10.GENERAL PROVISIONS. 31 10.1. Rights and Remedies
Cumulative. 31 10.2. Reinstatement. 31 10.3. Successors and Assigns. 32 10.4.
Notice. 32 10.5. Strict Performance. 32 10.6. Waiver. 32 10.7. Construction of
Agreement. 32 10.8. Expenses; Taxes. 32 10.9. Interest, Fees and Reimbursements
Charged to Revolving Credit. 33 10.10. Marketing and Advertising. 33 10.11.
Waiver of Right to Jury Trial. 34 10.12.  Indemnification by Borrower. 34 10.13.
Savings Clause for Indemnification. 35 10.14. Lender’s Performance. 35 10.15.
Entire Agreement; Amendments; Lender’s Consent. 35 10.16. Cross Default; Cross
Collateralization. 35 10.17. Execution in Counterparts. 36 10.18. Severability
of Provisions. 36 10.19. Governing Law; Consent to Jurisdiction. 36 10.20. Rules
of Construction. 37

 

Schedules and Exhibits

 

Definitions Schedule

Disclosure Schedule

Exhibit A: Form of Notice of Borrower

Exhibit B: Form of Borrowing Base Certificate

Exhibit C: Form of Compliance Certificate

 

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This LOAN AND SECURITY AGREEMENT (together with all Schedules and Exhibits
hereto, and all amendments, modifications and supplements hereto, and all
restatements hereof, from time to time, pursuant to the terms hereof,
collectively, this “Agreement”) between ACF FINCO I LP, a Delaware limited
partnership (“Lender”), and JOHN KEELER & CO. INC., a Florida corporation doing
business as Blue Star Foods (“Borrower”), is dated the date of execution by
Lender on the signature page of this Agreement (the “Effective Date”).

 

RECITALS:

 

Borrower has requested Lender to extend loans to Borrower consisting of a
revolving credit facility to support Borrower’s working capital needs and for
other purposes as described in this Agreement. Lender is willing to extend such
loans to Borrower subject to the terms and conditions set forth in this
Agreement.

 

AGREEMENT:

 

ARTICLE 1. DEFINITIONS.  

 

Unless defined in the introductory paragraph, above, in the Recitals, above, in
the body of this Agreement, or in the Exhibits or other Schedules hereto,
capitalized terms have the meanings given to such terms in the Definitions
Schedule. The Definitions Schedule also provides meanings for certain other
phrases used in this Agreement (whether or not capitalized). Each term defined
in the singular shall be interpreted in a collective manner when used in the
plural, and each term defined in the plural shall be interpreted in an
individual manner when used in the singular.

 

ARTICLE 2. THE LOANS.

 

2.1. Revolving Credit; Revolving Credit Note. Subject to the terms and
conditions of this Agreement and as long as no Default or Event of Default then
exists, on Borrower’s request prior to the Revolving Credit Termination Date
Lender shall lend to Borrower under a revolving credit facility (the “Revolving
Credit”) an aggregate principal sum equal to the Borrowing Capacity. The maximum
principal amount of any Advance shall not exceed an amount equal to the amount
of the Borrowing Capacity less the aggregate amount of all Obligations then
outstanding. Within the limits of the Borrowing Capacity, and subject to terms
and conditions of this Agreement, prior to the Revolving Credit Termination Date
Borrower may borrow, repay and reborrow the principal amount of the Revolving
Credit. Borrower’s obligation to pay the principal of, and interest on, Advances
made to Borrower and the Revolving Credit shall be evidenced by an Authenticated
promissory note in form and content acceptable to Lender (the “Revolving Credit
Note”).

 

2.2. Conditions to Loans and Advances. Lender’s obligation to make any Loan or
Advance under this Agreement is subject to the following conditions precedent
that must be satisfied on and as of the date of such Loan or Advance and after
giving effect to such Loan or Advance:

 

(a) Conditions Precedent to Initial Loans and Advances. Each of the following is
a condition precedent to Lender making the initial Loans and Advances hereunder:

 

(i) This Agreement and the other Loan Documents and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender;

 

(ii) All requisite corporate action and proceedings in connection with this
Agreement and the other Loan Documents shall be satisfactory in form and
substance to Lender, and Lender shall have received all information and copies
of all documents, including Borrower’s Charter Documents and corporate
resolutions, certified by appropriate corporate officers or Governmental Units;

 

 

 

 

(iii) Since the date of the most recent audited financial statements of Borrower
provided to Lender prior to the Effective Date, no event or circumstance shall
have occurred which has had, or which could reasonably be expected to have, a
Material Adverse Change;

 

(iv) Lender shall have received evidence, in form and substance satisfactory to
Lender, that Lender has valid perfected and first-priority security interests in
and Liens upon the Collateral and any other property which is intended to be
security for the Obligations or the liability of Borrower or any Guarantor, any
in respect thereof, subject only to Permitted Liens;

 

(v) Lender shall have received a final payoff letter from any Person whose
outstanding Indebtedness is to be satisfied by remittance of proceeds of the
Loans and Advances to be made on the Effective Date;

 

(vi) Lender shall have received, in form and substance satisfactory to Lender,
all consents, waivers, acknowledgments and other agreements from third Persons
which Lender may deem necessary or desirable in order to permit, protect and
perfect its security interests in the Collateral or to effectuate the provisions
or purposes of this Agreement and the other Loan Documents, including
acknowledgments by lessors of Lender’s Lien in the Collateral, waivers by such
Persons of any security interests, Liens or other claims by such Persons to the
Collateral and agreements permitting Lender access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with the
Collateral;

 

(vii) Lender shall have received evidence of insurance and all lenders loss
payee endorsements required hereunder and under the other Loan Documents, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as lenders loss payee;

 

(viii) Lender shall have received, in form and substance satisfactory to Lender,
such opinion letters of counsel to Borrower with respect to the Loan Documents
and such other matters as Lender may request;

 

(ix) The Borrowing Capacity (as determined by Lender on the Effective Date)
shall be at least $150,000 after giving pro forma effect to the initial Loans
and Advances made or to be made in connection hereunder;

 

(x) Lender shall have received evidence of payment of the Florida documentary
stamp tax in the amount of $2,450;

 

(xi) Lender shall have completed its business, financial and legal due diligence
of Borrower and Guarantor, including a roll-forward of its previous field
examination, in each case with results satisfactory to Lender;

 

(xii) Lender shall have received such other agreements, documents, instruments
and other items as it may require, including, without limitation, all items on
the closing checklist delivered by Lender or its counsel to Borrower or its
counsel.

 

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(b) Conditions Precedent to All Loans and Advances. Without limiting any other
provision of this Agreement, Lender shall have no obligation to make any Loans
or Advances unless each of the following is satisfied in the sole opinion of
Lender, on and as of the date of such Loan or Advance and after giving effect to
such Loan or Advance:

 

(i) The representations set forth in ARTICLE 5 and in the other Loan Documents
shall be true and complete in all material respects (except that if such
representation is subject to a materiality, “Material Adverse Change” or similar
qualifier, it shall be true and correct in all respects) on and as of such date
as if made on and as of such date (except to the extent any such representation
expressly relates to any earlier and/or specified date);

 

(ii) No Default or Event of Default shall have occurred and be continuing;

 

(iii) No Material Adverse Change shall have occurred; and

 

(iv) No Overadvance shall have occurred and be continuing.

 

Borrower’s acceptance of each Loan or Advance under this Agreement shall
constitute a confirmation by Borrower, on and as of the date of such Loan or
Advance and after giving effect to such Loan or Advance, of the satisfaction of
the conditions precedent set forth above, including (A) the accuracy and
completeness of the representations set forth in ARTICLE 5 and in the other Loan
Documents, (B) Borrower’s satisfaction of the covenants and agreements set forth
in ARTICLE 6, ARTICLE 7 and ARTICLE 8 and in the other Loan Documents, and (C)
the absence of any Default or Event of Default. Borrower shall confirm such
matters by delivery to Lender of an Authenticated Compliance Certificate as
provided in Section 6.4 and Section 6.5, and if requested by Lender by delivery
of a Compliance Certificate with any Notice of Borrowing requesting an Advance.

 

2.3. Overadvances. Lender shall not be required to make any Advance at any time
in a principal amount that would, when aggregated with the amount of the
Obligations then outstanding, exceed the Borrowing Capacity. If the Obligations
of Borrower to Lender incurred under the Revolving Credit exceed the Borrowing
Capacity for any reason (the amount of such excess to be referred to as an
“Overadvance”), then (a) such Overadvance will constitute an Advance for
purposes of this Agreement, (b) payment of such Overadvance will be secured by
the Collateral, (c) Borrower shall immediately repay the amount of such
Overadvance without notice or demand by Lender, and (d) Lender may in Lender’s
sole discretion refrain from making any additional Advances until the
Overadvance has been repaid to Lender in full. Any funding of an Overadvance
shall not constitute a waiver of the Event of Default caused thereby.

 

2.4. Reserves. Lender may at any time establish one or more reserves
(“Reserves”) under the Revolving Credit in Lender’s permitted discretion. A
Reserve may limit the Borrowing Capacity, reduce the Borrowing Base, or
otherwise restrict Borrower’s ability to borrow under the Revolving Credit.
Lender shall endeavor to notify Borrower promptly after the establishment of any
Reserve; provided, however, under no circumstance shall the delivery or receipt
of any such notice constitute a condition to Lender’s establishment of any
Reserve.

 

2.5. Manner of Revolving Credit Borrowing; Notice of Borrowing. Borrower shall
request each Advance by delivering an Authenticated Notice of Borrowing to
Lender (a) by facsimile, or (b) by electronic transmission including, without
limitation, e-mail. Borrower must verify Lender’s receipt of each Notice of
Borrowing by telephone confirmation, or upon Borrower’s request by Borrower’s
receipt of confirming e-mail from Lender. Subject to the terms and conditions of
this Agreement, Lender shall deliver the amount of the Advance requested in the
Notice of Borrowing for credit to any account of Borrower (other than a payroll
account) at a bank in the United States of America as Borrower may specify in
writing by wire transfer of immediately available funds (i) on the same day of
Lender’s receipt of the Notice of Borrowing if Lender verifies that the Notice
of Borrowing was received by Lender on or before 11 a.m. Eastern Time on a
Banking Day, or (ii) on the Banking Day immediately following Lender’s receipt
of the Notice of Borrowing if Lender verifies that the Notice of Borrowing was
received by Lender after 11 a.m. Eastern Time on a Banking Day, or Lender
verifies that the Notice of Borrowing was received by Lender on any day that is
not a Banking Day. Lender shall charge to the Revolving Credit Lender’s usual
and customary fees for the wire transfer of each Advance.

 

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2.6. Collections; Lockbox; Blocked Account.

 

(a) Promptly after the Effective Date, Borrower shall instruct all Account
Debtors to forward all payments of Receivables by check to one or more lockboxes
(each, a “Lockbox”) established by Lender with a financial institution
acceptable to Lender (the “Depository Bank”) and shall instruct all Account
Debtors paying Receivables by wire transfer or other electronic payment to make
such payments to a “Blocked Account” (defined below). Borrower shall require
each customer making a payment of a Receivable by check or other instrument to
make such check or instrument payable to the order of Borrower. Collected funds
in a Lockbox shall be deposited into one or more accounts with the Depository
Bank established by Lender and subject to Lender’s sole dominion and control
(including, but not limited to the sole power of withdrawal) (each, a “Blocked
Account”). The agreement(s) relating to each Blocked Account between Lender, the
Depository Bank and Borrower shall be in form and content reasonably
satisfactory to Lender.

 

(b) All Proceeds of Collateral received by Borrower, including cash, checks,
drafts, notes, acceptances or other forms of payment, and whether Proceeds of
Receivables, Inventory, insurance claims, or other otherwise, shall be received
by Borrower in trust for Lender. Borrower shall deliver all Proceeds of
Collateral in Borrower’s possession to the Blocked Account immediately after
receipt, in precisely the form received (except for the endorsement or
assignment of Borrower where necessary).

 

(c) Borrower shall instruct Persons processing or collecting any credit card
payments or Proceeds of Receivables on behalf of Borrower to deliver such
payments or Proceeds to the Blocked Account promptly, but not less frequently
than once every week.

 

2.7. Crediting of Funds. Each Banking Day Lender shall withdraw available funds
from the Blocked Account, deposit such funds in the Settlement Account, and
credit available funds received in the Settlement Account to the payment of the
Obligations. Lender shall credit to the payment of the Obligations any other
form of funds received by Lender in the Settlement Account for which Lender has
received notice that such funds are collected and available to Lender (i) on the
same day of Lender’s receipt of such notice if such notice is received by Lender
on or before 2 p.m. Eastern Time on a Banking Day, and (ii) on the Banking Day
immediately following Lender’s receipt of such notice if such notice is received
by Lender after 2 p.m. Eastern Time on a Banking Day, or if such notice is
received by Lender on a day that is not a Banking Day. In the absence of an
Event of Default, all funds credited to the repayment of the Obligations will be
applied in the following order:

 

(a) to unpaid fees and expenses;

 

(b) to unpaid interest;

 

(c) the outstanding principal balance of the Revolving Credit; and

 

(d) to all other Obligations in such order as Lender shall elect.

 

Upon the occurrence and during the continuation of an Event of Default Lender
shall credit available funds received in the Settlement Account to the repayment
of the Obligations in such order and in such amounts as Lender determines in
Lender’s sole discretion.

 

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All funds credited to the payment of the Obligations are conditional upon final
payment to Lender in cash or solvent credits of the items giving rise to such
funds. If any item credited to the payment of the Obligations is not paid to
Lender or payment thereof is rescinded or required to be returned by Lender, the
amount of any credit given for such item shall be charged to the balance of the
Obligations whether or not the item is returned. For the purpose of computing
interest on the Obligations, interest shall continue to accrue on the amount of
any funds credited to the payment of the Obligations by Lender for a period of
two (2) Banking Days after the date so credited.

 

2.8. Records of Lender. Lender shall maintain Records relating to the
Obligations, Loans and Advances (including schedules maintained electronically)
containing such annotations as Lender deems appropriate, including but not
limited to annotations regarding the dates and amounts of Advances, the
principal balance of any Loan, and the dates and amounts of repayments of any
Loans, and shall account to Borrower monthly. In the absence of manifest error
each Record of any annotations delivered to Borrower shall be conclusive and
binding upon Borrower unless Borrower delivers to Lender written notice of any
objection within ten (10) Banking Days of receipt. If Borrower disputes the
accuracy of any Record or annotation, Borrower’s notice shall specify in detail
the particulars of its basis for contending that such Record or annotation is
inaccurate. No failure of Lender to render any Record or in making any
annotation shall affect the obligation of Borrower to pay and perform the
Obligations pursuant to the terms of this Agreement and the other Loan
Documents.

 

2.9. Payment on Revolving Credit Termination Date; Termination of Advances. On
the Revolving Credit Termination Date Borrower shall pay to Lender in cash the
entire outstanding principal balance of the Revolving Credit, plus all accrued
and unpaid interest thereon, plus all fees, costs, expenses and other amounts
payable to Lender in connection with the Revolving Credit, plus all other
Obligations payable to Lender pursuant to the terms of this Agreement and the
other Loan Documents. Lender shall not be obligated to make or continue to
extend any Advance or continue any Loan to Borrower under the Revolving Credit
after the Revolving Credit Termination Date.

 

ARTICLE 3. INTEREST AND FEES.

 

3.1. Interest. Borrower shall pay to Lender interest on the outstanding
principal amount of the Revolving Credit until Full Payment of the Obligations.
Interest shall accrue daily on the daily unpaid principal amount of the
Revolving Credit, and Borrower shall pay interest to Lender monthly in arrears
commencing on the first Banking Day of the calendar month immediately following
the Effective Date and on the first Banking Day of each calendar month
thereafter and on the Revolving Credit Termination Date. The interest rate on
the Revolving Credit shall equal:

 

(a) if no Default or Event of Default has occurred and is continuing, the
Revolving Credit Rate; and

 

(b) if a Default or an Event of Default has occurred and is continuing, the
Default Rate.

 

Notwithstanding anything to the contrary in this Agreement or any other Loan
Document, in no event shall any interest paid to Lender on the Revolving Credit
exceed an amount that would cause the interest rate on the Revolving Credit to
exceed the maximum rate permitted by applicable law. Any amount of interest paid
to Lender that is finally and irrevocably determined by a court of competent
jurisdiction to exceed the maximum interest payable on the Revolving Credit
under applicable law shall be, at Lender’s sole discretion, applied to the
outstanding principal amount of the Revolving Credit, any fees, expenses or
other amounts payable hereunder, or returned by Lender to Borrower promptly
thereafter.

 

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3.2. Facility Fee. Borrower shall pay to Lender a fee (the “Facility Fee”) in an
amount equal to (a) on the Effective Date, one percent (1.00%) of the Revolving
Credit Limit and (b) on the first (1st) day of each of the Contract Years
commencing in Fiscal Year 2017 and 2018, one-half of one percent (0.50%) of the
Revolving Credit Limit. The Facility Fee shall be earned in full on the
Effective Date and on the first (1st) day of each subsequent Contract Year. In
the absence of the occurrence and continuation of an Event of Default, the
Facility Fee otherwise payable on the Effective Date shall be paid in five (5)
equal monthly installments on the Effective Date and on the first day of each
calendar month thereafter until fully paid. Upon the Revolving Credit
Termination Date, Borrower shall immediately pay to Lender the portion of the
Facility Fee remaining unpaid for the then current Contract Year.

 

3.3. Collateral Management Fee. Borrower shall pay to Lender monthly a
collateral management fee (the “Collateral Management Fee”) in an amount equal
to $2,500. The Collateral Management Fee shall be earned in full on the
Effective Date and on the first (1st) day of each calendar month thereafter
until Full Payment of the Obligations. In the absence of the occurrence and
continuation of an Event of Default the Collateral Management Fee shall be paid
in arrears commencing on the first Banking Day of the calendar month immediately
following the Effective Date and on the first Banking Day of each calendar month
thereafter until Full Payment of the Obligations.

 

3.4. Unused Line Fee. Borrower shall pay to Lender monthly an unused line fee at
a rate equal to one-half of one percent (0.5%) per annum, applied to the amount
by which the Revolving Credit Limit exceeds the average daily principal balance
of the outstanding Advances during the immediately preceding month (or part
thereof) while this Agreement is in effect and for so long thereafter as any of
the Obligations are outstanding, which fee shall be payable in arrears on the
first (1st) day of each month and on the Revolving Credit Termination Date.

 

3.5. Field Examination Fees; Appraisals. Borrower shall be liable for and
promptly reimburse Lender for all fees, costs and expenses (including standard
fees charged by Lender’s internal field examiners) associated with periodic
field examinations and appraisals of Collateral performed by Lender and/or
Lender’s agents, all as deemed necessary by Lender in its permitted discretion,
and shall pay to Lender the then standard amount charged by Lender per person
per day ($1,000 per person per day as of the Effective Date) for each day that
an employee or agent of Lender shall be engaged in a field examination, plus
reasonable expenses. Prior to the occurrence of a Default or Event of Default in
no event shall Borrower be liable for or reimburse Lender for such fees, costs
or expenses to the extent Lender performs more than three (3) field examinations
and two (2) appraisals in any calendar year. Borrower acknowledges and agrees
that during the continuation of a Default or Event of Default Borrower shall be
liable for and shall reimburse Lender for all reasonable fees, costs and
expenses of all field examinations and appraisals conducted by Lender and/or its
agents, without limit and regardless of the number of field examinations or
appraisals conducted by Lender or its agents in any calendar year.

 

3.6. Intentionally Omitted.

 

3.7. Liquidated Damages. Subject to the terms and conditions of this Agreement,
Borrower shall have the right prior to the third (3rd) anniversary of the
Effective Date and upon not less than thirty (30) calendar days’ advance written
notice to Lender (a “Principal Reduction Notice”) to prepay in full the entire
outstanding principal balance of the Revolving Credit, all accrued and unpaid
interest thereon, all fees, costs, expenses and other amounts payable to Lender
in connection with the Revolving Credit, and all other Obligations payable to
Lender under this Agreement and the other Loan Documents. A Principal Reduction
Notice shall be irrevocable when delivered to Lender and upon the full, final
and indefeasible payment to Lender of all Obligations following such Principal
Reduction Notice, the Revolving Credit shall be terminated and all obligations
of Lender to extend credit to Borrower under the Revolving Credit shall
terminate.

 

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If prior to the third (3rd) anniversary of the Effective Date (a) Borrower
prepays all Obligations outstanding in full pursuant to the foregoing paragraph,
or (b) pursuant to the terms of this Agreement or any other Loan Document,
either (i) Lender demands repayment of the outstanding Obligations in whole or
in part, or (ii) repayment of the outstanding Obligations are otherwise
accelerated in whole or in part, then (c) at the time of such prepayment,
repayment, demand or acceleration, and in addition to the principal balance of
the Revolving Credit, all accrued and unpaid interest thereon, all fees, costs,
expenses and other amounts payable to Lender in connection with the Revolving
Credit, and all other Obligations paid to Lender under this Agreement and the
other Loan Documents, Borrower shall pay liquidated damages to Lender in an
amount equal to the Revolving Credit Limit multiplied by (i) three percent
3.00%) if such prepayment, repayment, demand or acceleration occurs prior to the
first (1st) anniversary of the Effective Date, (ii) one percent (1.00%) if such
prepayment, repayment, demand or acceleration occurs on or after the first (1st)
anniversary of the Effective Date but prior to the second (2nd) anniversary of
the Effective Date, and (iii) one-half of one percent (0.50%) if such
prepayment, repayment, demand or acceleration occurs on or after the second
(2nd) anniversary of the Effective Date but prior to the date that is ten (10)
calendar days in advance of the third (3rd) anniversary of the Effective Date.

 

Lender and Borrower each hereby acknowledges and agrees that it would be
impractical and extremely difficult to ascertain Lender’s actual damages from
early termination of the Revolving Credit, and that the above liquidated damages
have been arrived at by mutual agreement of Lender and Borrower as to a
reasonable calculation of Lender’s lost profits as a result of early termination
of the Revolving Credit. Lender and Borrower each further hereby acknowledges
and agrees that the liquidated damages provided above are intended to be fair
and reasonable approximations of Lender’s actual damages from early termination
of the Revolving Credit, are presumed to be the amount of damages sustained by
Lender as a result of such early termination, are reasonable under the
circumstances currently existing, and that the liquidated damages are not
intended to be penalties.

 

3.8. Computation of Interest and Fees. All interest and fees under this
Agreement shall be computed on the basis of a year consisting of three hundred
sixty (360) days for the number of days actually elapsed.

 

ARTICLE 4. COLLATERAL AND SECURITY INTEREST.

 

4.1. Grant of Security Interest. As security for the full, final and
indefeasible payment to Lender in cash and performance of the Obligations,
Borrower hereby pledges to Lender, and grants to Lender a continuing general
lien upon and security interest in and to the Collateral. Borrower acknowledges
and agrees that Collateral securing any purchase money security interest in
favor of Lender also secures all non-purchase money security interests in favor
of Lender.

 

4.2. Nature of Security Interest. The pledge, lien and security interest granted
to Lender pursuant to this Agreement shall continue in full force and effect
until Full Payment of the Obligations, notwithstanding the termination of any
other Loan Document (in whole or in part), the termination of Lender’s
obligations to extend credit to Borrower under this Agreement or any other Loan
Document, the full or partial termination (whether by prepayment, demand or
acceleration) of any Loan, or that the Revolving Credit may from time to time be
temporarily in a credit position. Any balances to the credit of Borrower in the
possession of Lender, and any other Property or assets of Borrower in the
possession of Lender, shall be held by Lender as Collateral, and applied in
whole or partial satisfaction of the Obligations when due, subject to the terms
of this Agreement.

 

7

 

 

4.3. Perfection and Protection of Security Interest.

 

(a) Borrower will execute and deliver to Lender security agreements, assignments
(including, without limitation, assignments of specific Accounts, Receivables,
Certificates Of Title, Chattel Paper, Documents, Instruments, Goods, Inventory,
Equipment and General Intangibles), control agreements, mortgages, deeds of
trust, collateral assignments, and other documents and instruments as Lender may
at any time reasonably request to establish, evidence, attach, perfect, or
protect any Lien granted to Lender. Borrower authorizes Lender to file all
financing statements (including, without limitation, describing the Collateral
as “all assets” or “all personal property,” whether owned or hereafter
acquired), and all continuations or amendments thereof, to establish, evidence
attach, perfect or protect any Lien granted to Lender in the Collateral.
Borrower agrees that subject to Borrower’s rights under Section 9-509(d)(2) of
the UCC, Borrower is not and shall not be authorized to file any financing
statement or amendment, termination or corrective statement with respect to any
financing statement filed by Lender, or with respect to any continuation or
amendment thereof, without the prior written consent of Lender.

 

(b) Borrower will perform any and all actions requested by Lender in Lender’s
permitted discretion to establish, attach, perfect or protect any Lien of Lender
in Inventory, including without limitation, placing and maintaining signs,
appointing custodians, maintaining stock Records and transferring Inventory to
warehouses. Upon Lender’s request, Borrower shall record Lender’s security
interest on any Certificate Of Title for any Collateral that is a motor vehicle.
Borrower hereby appoints Lender, and Lender’s designee(s), as Borrower’s
attorney-in-fact (i) to execute and deliver notices of lien, financing
statements, assignments, and any other documents, instruments, notices, and
agreements necessary for the establishment, attachment, perfection or protection
of any Lien of Lender in any Collateral, (ii) to endorse the name of Borrower on
any checks, notes, drafts or other forms of payment or security consisting of
Collateral that may come into the possession of Lender or any Affiliate of
Lender, (iii) following the occurrence and during the continuation of an Event
of Default, to sign Borrower’s name on invoices or bills of lading, drafts
against customers, notices of assignment, verifications and schedules relating
to Collateral, (iv) following the occurrence and during the continuation of an
Event of Default (A) to notify the Post Office authorities to change the address
of delivery of mail to an address designated by Lender, and (B) to open and
dispose of mail addressed to Borrower, and (v) generally, to do all things
reasonably necessary to carry out the purposes and intent of this Agreement. The
powers granted herein, being coupled with an interest, are irrevocable, and
Borrower approves and ratifies all acts of the attorney(s)-in-fact consistent
with the foregoing. Neither Lender nor any attorney(s)-in-fact shall be liable
for any act or omission, error in judgment or mistake of law so long as the same
does not constitute gross negligence or willful misconduct of Lender, as
determined in a final, non-appealable judgment of a court of competent
jurisdiction.

 

(c) Borrower shall cooperate with, and take such actions as required by, Lender
in obtaining waivers or subordinations in favor of Lender as Lender may
reasonably require from third parties having any interest in any Collateral and
Borrower shall cooperate with, and take such actions as required by, Lender in
obtaining “control” of Collateral consisting of Deposit Accounts, electronic
Chattel Paper, Investment Property, or Letter-Of-Credit Rights as provided in
Sections 9-104 through 9-107, inclusive, of the UCC. If any Inventory is in the
possession or control of any third party other than a purchaser in the ordinary
course of business or a public warehouseman where the warehouse receipt is in
the name of or held by Borrower, Borrower shall notify such Person of the Lien
of Lender therein and instruct such person or persons to hold such Inventory for
the account and benefit of Lender and subject to Lender’s instructions. Borrower
will deliver to Lender warehouse receipts covering any Inventory located in
warehouses showing Lender as the beneficiary thereof and will also cooperate
with Lender in obtaining from warehousemen and bailees agreements relating to
the release of warehouseman’s and bailee’s liens on Inventory as Lender may
reasonably request.

 

8

 

 

(d) Borrower acknowledges and agrees that the security interest granted to
Lender pursuant to this Agreement shall specifically include a security interest
in all Commercial Tort Claims arising after the Effective Date, and in order to
permit Lender to perfect its security interest in each such Commercial Tort
Claim Borrower shall promptly deliver to Lender copies of all summonses,
complaints, responses, motions and other pleadings filed by or against Borrower
after the date hereof so that Lender may file a Uniform Commercial Code
financing statement relating to each such Commercial Tort Claim.

 

4.4. Limited License. Regardless of whether Lender’s security interests in and
to any of the General Intangibles has attached or is perfected, until Full
Payment of the Obligations, Borrower hereby irrevocably grants to Lender a
royalty-free, non-exclusive license to use Borrower’s General Intangibles during
the continuation of an Event of Default, including all trademarks, copyrights,
patents and other proprietary and intellectual property rights, labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks
and advertising matter, and any Property of a similar nature, as it pertains to
the Collateral in connection with the (a) advertisement for, and sale or other
disposition of, any finished goods Inventory by Lender in accordance with the
provisions of this Agreement, (b) manufacture, assembly, completion, preparation
and advertising for sale or other disposition of any unfinished Inventory by
Lender in accordance with the provisions of this Agreement, (c) sale, lease,
license or other disposition of Collateral by Lender in accordance with the
provisions of this Agreement, and Borrower’s rights under all licenses and any
franchise, sales, distribution and supply agreements shall inure to Lender’s
benefit for such purposes.

 

4.5. Rights of Lender as Secured Party. At all times prior to Full Payment of
the Obligations, Lender shall have, in addition to all other rights, powers,
remedies and privileges of Lender under this Agreement (a) all rights, powers,
remedies and privileges granted to a Secured Party under the UCC, (b) all
rights, powers, remedies and privileges with respect to Collateral granted to
Lender under the other Loan Documents, and (c) all rights, powers, remedies and
privileges of Lender with respect to the Collateral available under applicable
law.

 

4.6. Communication with Account Debtors. Borrower authorizes Lender, at any time
and without notice to or the consent of Borrower, to communicate directly with
customers of Borrower and Account Debtors of Borrower by whatever means Lender
shall elect for the purpose of verifying information supplied by Borrower to
Lender with respect to Receivables pursuant to this Agreement. If a customer or
an Account Debtor is a Governmental Unit, Lender shall be specifically
authorized to communicate directly with each contract officer of such
Governmental Unit in order to confirm matters relating to Borrower’s business
with such Governmental Unit or contract, including, but not limited to, the
validity of Receivables owing to Borrower by such Governmental Unit, the award
rating of Borrower, whether such Governmental Unit has declared Borrower to have
defaulted on such business arrangement or contract, the continuing effectiveness
of such business arrangement or contract and such other information as Lender
deems reasonably necessary to determine the validity, amount and/or
collectability of each Receivable under such business arrangement or contract.
Upon Lender’s request at any time Borrower shall provide Lender with a list of
the addresses, telephone and facsimile numbers of its Account Debtors.

 

4.7. Confirmatory Written Assignments. Upon Lender’s request at any time after
the occurrence and during the continuance of an Event of Default, Borrower shall
promptly execute and deliver a confirmatory written assignment to Lender of any
Receivables then existing or any Receivable thereafter created. Borrower’s
failure to execute or deliver any such assignment shall not affect or limit any
Lien or other right of Lender in and to such Receivable.

 

9

 

 

4.8. Lender’s Right to Perform Borrower’s Obligations. In the event that
Borrower shall fail to purchase or maintain insurance, or to pay any tax,
assessment, charge or levy of any Governmental Unit, except as the same may be
Properly Contested, or in the event that any Lien on any Collateral not
specifically permitted by the terms of this Agreement shall not be paid in full
or discharged, or in the event that Borrower shall fail to perform or comply
with any other covenant, promise or Obligation to Lender hereunder or under any
other Loan Document, Lender may, but shall not be required to, perform, pay,
satisfy, discharge or bond the same for the account of Borrower, and all monies
so paid by Lender, including reasonable attorneys’ fees and expenses incurred by
Lender in connection therewith, shall be treated as an Advance.

 

ARTICLE 5. REPRESENTATIONS.

 

5.1. Organization, Qualification and Structure.

 

(a) Borrower is and except as described in the Disclosure Schedule always has
been a corporation duly organized and existing under the laws of the State of
Florida. Borrower’s federal tax identification number is 65-0580744 and
Borrower’s registration or filing number with the State of Florida is
P95000038151. Borrower is qualified to do business in every jurisdiction where
the nature of its business requires it to be so qualified unless the failure to
so qualify could not reasonably be expected to result in a Material Adverse
Change.

 

(b) Except as set forth in the Disclosure Schedule (i) Borrower has no
subsidiaries or Affiliates that are not natural persons, and (ii) during the
preceding five (5) years (A) Borrower has not acquired, been acquired by, or
merged, consolidated, combined or amalgamated with or into, any other Person, in
whole or in part (whether by purchase or sale of securities and/or assets, by
assumption of liabilities, or by merger or otherwise), (B) Borrower has not
liquidated, sold or disposed of any subsidiary or Affiliate (whether by sale or
assignment of securities and/or assets or otherwise), and (C) Borrower has not
engaged in any joint venture or partnership with any other Person.

 

5.2. Legally Enforceable Agreement. The execution, delivery and performance of
this Agreement, each of the other Loan Documents and each of the other
agreements, instruments and documents to be delivered by Borrower in connection
with this Agreement or any other Loan Document, and the creation of all Liens in
favor of Lender pursuant to this Agreement and any other Loan Document (a) are
within Borrower’s organizational power, (b) have been duly authorized by all
necessary or proper actions of or pertaining to Borrower (including the consent
of directors, officers, managers, partners, shareholders and/or members, as
applicable), (c) are not in contravention of (i) any agreement or indenture to
which Borrower is a party or by which Borrower is bound, or (ii) Borrower’s
Charter Documents, or (iii) any provision of law, or (iv) any order, writ,
judgment, injunction, or decree of any court of competent jurisdiction binding
on Borrower or its property, and (d) do not require the consent or approval of
any Governmental Unit or any other Person that has not been obtained, and each
such consent or approval obtained by Borrower has been furnished to Lender prior
to the Effective Date. Upon the execution and delivery thereof, this Agreement
and each of the other Loan Documents shall constitute the legal, valid and
binding obligation of Borrower, enforceable in accordance with its terms, except
as such enforceability may be limited by equitable principles or any applicable
bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights
generally.

 

5.3. Name and Address. During the preceding five (5) years, Borrower has not
been known by and has not used any other name, whether corporate, fictitious or
otherwise, except as set forth on the Disclosure Schedule. The Disclosure
Schedule lists all real property owned or leased by Borrower, and if leased, the
correct name and address of the landlord and the date and term of the applicable
lease. Borrower’s chief executive office is at the address identified as such in
the Disclosure Schedule and Borrower maintains no other offices or facilities
except as described in the Disclosure Schedule.

 

10

 

 

5.4. Location of Collateral.

 

The Disclosure Schedule lists:

 

(a) all places at which Records relating to the Collateral, including, but not
limited to, all Documents and Instruments relating to Receivables and Inventory,
are maintained by Borrower or by any other Person;

 

(b) except for In Transit Inventory, all places where Borrower maintains, or
will maintain, Inventory, and whether the premises are owned or leased by
Borrower or whether the premises are the premises of a warehouseman, bailee or
other third party, and if owned by a third party, the name and address of such
third party; and

 

(c) to the extent located at any address not otherwise disclosed in response to
paragraph (b) above, each other location at which Borrower’s equipment is
located, and whether the premises are owned or leased by Borrower or whether the
premises are the premises of a bailee or other third party, and if owned by a
third party, the name and address of such third party.

 

5.5. Title; Liens; Permitted Liens. Except for Permitted Liens, Borrower has
good and marketable title to the Collateral and is the sole owner thereof.
Except as set forth on the Disclosure Schedule none of the Collateral is subject
to any prohibition against encumbering, granting a security interest in or to,
pledging, hypothecating or assigning the same or requires notice or consent to
any Person in connection therewith. Upon the execution and delivery of this
Agreement and the other Loan Documents and the filing of any UCC financing
statements deemed necessary by Lender, Lender shall have a first priority
perfected security interest in the Collateral, subject only to Permitted Liens.

 

5.6. Existing Indebtedness. Borrower has no existing Indebtedness except the
Indebtedness described in the Disclosure Schedule or as is otherwise permitted
under Section 8.1.

 

5.7. Financial Statements. The financial statements of Borrower described on the
Disclosure Schedule, copies of which have been delivered to Lender, fairly
present Borrower’s financial condition and results of operations as of the dates
and for the periods covered, contain no Material misstatements, and there has
been no Material Adverse Change since such dates. Borrower has no material
contingent liabilities, liabilities for delinquent taxes (whether or not being
Properly Contested by Borrower), unusual forward or long-term commitments, or
material unrealized or unanticipated losses or expenses from any unfavorable
commitments that have not been disclosed in such financial statements or the
notes thereto.

 

5.8. Solvent Financial Condition. Borrower is Solvent.

 

5.9. General Intangibles, Patents, Trademarks, Copyrights and Licenses. Borrower
owns or is licensed to use all rights, title and interests in and to all General
Intangibles, including but not limited to patents, trademarks, service marks,
trade names, copyrights, licenses and intellectual property, necessary for the
conduct of Borrower’s business on the Effective Date and planned future conduct
of its business without any conflict with the rights of others. All General
Intangibles owned or used by Borrower in Borrower’s operations or the conduct of
its business as of the Effective Date are listed on the Disclosure Schedule and
indicate the owner of such General Intangible and a description of the rights of
Borrower to use such General Intangible if not owned by Borrower.

 

5.10. Existing Business Relationships. Except as described in the Disclosure
Schedule there exists no actual or threatened termination, cancellation or
limitation of, or any adverse modification or change in, the business
relationship of Borrower with any supplier, customer or group of customers that
individually or in the aggregate could result in a Material Adverse Change.

 

11

 

 

5.11. Investment Company Act: Federal Reserve Board Regulations. Borrower is not
an “investment company”, or an “affiliated person” of, or “promoter” or
“principal underwriter” for, an “investment company”, as such terms are defined
in the Investment Company Act of 1940, as amended (15 U.S.C. §§ 80(a)(1), et
seq.). The making of the Loans under this Agreement by Lender, the application
of the proceeds and repayment thereof by Borrower and the performance of the
transactions contemplated by this Agreement will not violate any provision of
such Act, or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder. Borrower does not own any margin security as that term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
and the proceeds of the Loans made pursuant to this Agreement will be used only
for the purposes contemplated under this Agreement. None of the proceeds of the
Loans will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin security
or for any other purpose which might constitute any of the Loans under this
Agreement a “purpose credit” within the meaning of said Regulation U or
Regulation T or X of the Federal Reserve Board. Borrower will not take, or
permit any agent acting on its behalf to take, any action which might cause this
Agreement or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.

 

5.12. Anti-Money Laundering and Terrorism Regulations. Borrower: (a) is familiar
with all applicable Anti-Terrorism Laws; (b) acknowledges that its transactions
are subject to applicable Anti-Terrorism Laws; (c) will comply in all material
respects with all applicable Anti-Terrorism Laws, including, if appropriate, the
USA Patriot Act; (d) acknowledges that Lender’s performance hereunder is also
subject to Lender’s compliance with all applicable Anti-Terrorism Laws,
including the USA Patriot Act; (e) acknowledges that neither it nor its
Affiliates are Blocked Persons; (f) acknowledges that Lender will not conduct
business with any Blocked Person; (g) will not (i) conduct any business or
engage in any transaction or dealing with any Blocked Person, including, without
limitation, the making or receiving of any contribution of funds, goods or
services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise
engage in any transaction relating to, any Property or interests in Property
blocked pursuant to Executive Order No. 13224, other applicable OFAC regulations
or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in Executive Order No.
13224, other applicable OFAC regulations or other Anti-Terrorism Law; (h) shall
provide to Lender all such information about Borrower’s ownership, officers,
directors, business structure and, to the extent not prohibited by applicable
law or agreement, customers, as Lender may reasonably require; and (i) will take
such other action as Lender may reasonably request in connection with Lender’s
obligations described in clause (d) above.

 

5.13. Tax Returns. Borrower and, to Borrower’s knowledge, each Significant
Holder of Borrower’s Equity Interests, has filed all federal, state and local
tax returns required to be filed, or has received an extension for such filing
from the appropriate taxing authority, and has paid all taxes shown thereon to
be due including interest and penalties or has provided adequate reserves
therefor. No assessments have been made against Borrower by any taxing authority
nor has any penalty or deficiency been made by any such authority. Except as
disclosed to Lender in writing, no federal, state or local income tax return of
Borrower, or to Borrower’s knowledge of any Significant Holder of Borrower’s
Equity Interests, is presently being examined by the Internal Revenue Service or
any applicable state or local taxing authority, and the results of any prior
examination by the Internal Revenue Service or any state or local taxing
authority is not being Properly Contested by Borrower, or to Borrower’s
knowledge by such Significant Holder.

 

5.14. Litigation. Except as disclosed in the Disclosure Schedule, as of the
Effective Date, no action or proceeding at law, in equity or otherwise is
pending, or to the knowledge of Borrower is threatened, by or before any
Governmental Unit, or before any arbitrator or panel of arbitrators (a) against
Borrower, (b) to Borrower’s knowledge against any Guarantor, if any, or (c) by
Borrower as plaintiff, as counter-claimant or otherwise pursuant to which
Borrower has asserted claims for damages, and Borrower has not, and to
Borrower’s knowledge no Guarantor, if any, has, accepted liability for any
matter described on the Disclosure Schedule.

 

12

 

 

5.15. ERISA Matters. The Disclosure Schedule lists all “Employee Benefit Plans”
(as such term is defined in ERISA) offered by Borrower to any of its employees,
officers and directors, and indicates whether any such plan is a defined benefit
pension plan. If any Employee Benefit Plan is a defined benefit plan: (a) the
present value of all accrued vested benefits under such defined benefit plan
(calculated on the basis of the actuarial valuation for the plan) did not
exceed, as of the date of the most recent actuarial valuation for such defined
benefit plan, the fair market value of the assets of such plan allocable to such
benefits, (b) Borrower is not aware of any information since the date of the
most recent actuarial valuation that would affect the information contained
therein, (c) such defined benefit plan has not incurred an “accumulating funding
deficiency” (as that term is defined in Section 302 of ERISA or Section 412 of
the Code) whether or not waived, or Borrower has made all “minimum required
contributions” (as such term is defined in Section 303 of ERISA or Section 430
of the Code) to such defined benefit plan, (d) no liability to the Pension
Benefit Guaranty Corporation (other than required premiums which have become due
and payable, all of which have been paid) has been incurred with respect to such
defined benefit plan, and (e) there has not been any Reportable Event which
presents a risk of termination of the defined benefit plan by the Pension
Benefit Guaranty Corporation. Borrower has not engaged in any transaction that
would subject Borrower to tax, penalty or liability for prohibited transactions
imposed by ERISA or the Code.

 

5.16. O.S.H.A. Borrower has complied in all Material respects with, and its
facilities, business, leaseholds, equipment and other property are in Material
compliance with, the provisions of the Federal Occupational Safety and Health
Act and all rules and regulations promulgated thereunder, and all federal, state
and local governmental rules, ordinances and regulations similar thereto. Except
as disclosed to Lender in writing, there are no outstanding citations, notices
or orders of non-compliance issued to Borrower or relating to its facilities,
business, leaseholds, equipment or other property under the Federal Occupational
Safety and Health Act, any rule or regulation promulgated thereunder, or any
similar state or local Governmental Rules.

 

5.17. Environmental Matters. Except as disclosed in the Disclosure Schedule,
Borrower is in Material compliance with all Environmental Laws.

 

5.18. Labor Disputes. There is no pending, or to Borrower’s knowledge
threatened, labor dispute which could result in a Material Adverse Change.

 

5.19. Location of Bank and Securities Accounts. The Disclosure Schedule lists
all deposit, checking and other bank accounts, and all securities and other
investment accounts, maintained with any financial institution or securities
intermediary and all other similar accounts maintained by Borrower
(collectively, “Bank Accounts”), together with a description thereof.

 

5.20. Compliance With Laws. Borrower is in Material compliance with all
Governmental Rules applicable to it, its ownership or use of its Property and
the operation and conduct of its business. In addition to, and without limiting
the generality of the foregoing, Borrower represents and warrants that:

 

(a) no Inventory has been produced in violation of the Fair Labor Standards Act
“(“FLSA”);

 

(b) Borrower is in Material compliance with all Governmental Rules and other
applicable laws relating to the manufacturing, processing, packing, holding,
labeling, importing, sale and distribution of food, including fresh or frozen
crab or crabmeat and any other wild or farm-raised fish or fish products,
including the Federal Food, Drug, and Cosmetic Act (the “FD&C Act”), 21 U.S.C. §
301 et seq., the Lacey Act, 16 U.S.C. § 3372 et seq., the Magnuson-Stevens
Fishery Conservation and Management Act (the “Magnuson-Stevens Act”), 16 U.S.C.
§ 1801 et seq., the 1946 Agricultural Marketing Act (the “AMA”), 7 U.S.C. § 1621
et seq., the Tariff Act of 1930, 19 U.S.C. § 1304 et seq., and the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002 (the
“Bioterrorism Act”);

 

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(c) Borrower is in Material compliance with all Governmental Rules and other
applicable laws relating to the labeling, marking, marketing, branding, and
advertising of food, including, but not limited to, fresh or frozen crab or
crabmeat and any other wild or farm-raised fish or fish products, including the
FD&C Act, the Fair Packaging and Labeling Act, 15 U.S.C. § 1451 et seq., the
Lacey Act, all Governmental Rules set forth in Title 21 of the Code of Federal
Regulations; the Seafood List of the Food and Drug Administration (“FDA”), and
all Governmental Rules regarding disclosures or labels regarding the country of
origin of any food product, and the method of production of any fish or
shellfish;

 

(d) Borrower is not, and at no time during the three years prior to the
Effective Date, been subject to any investigation, proceeding, citation,
penalty, fine, assessment, inquiry, consent decree, or any other enforcement
action of any kind by the FDA or any other Governmental Unit relating to the
manufacturing, processing, packing, holding, labeling, importing, sale or
distribution of food, including fresh or frozen crab or crabmeat and any other
wild or farm-raised fish or fish products, including the receipt of (i) a FDA
import alert or an order or directive requiring detention of any Inventory
without physical examination, or (ii) a Notice of Violation, FDA Form 483, an
inspection report noting deficiencies of any kind, a warning letter, or any
other similar communication from any Governmental Unit.

 

5.21. Capital Structure. The Disclosure Schedule describes (a) Borrower’s
holders of Equity Interests of record and the number and type of Equity
Interests held by each such Person, and (b) all holders of subscriptions,
warrants, options, convertible securities, and other rights (fixed, contingent
or otherwise) to purchase or otherwise acquire Equity Interests, and the number
and type of Equity Interests that may be acquired by each such Person.

 

5.22. No Other Violations. Borrower is not in violation of any term or provision
of its Charter Documents, and no event or condition or series of events or
conditions has or have occurred or is or are continuing which constitutes or
results in (or would constitute or result in, with the giving of notice, lapse
of time or other condition) (a) a breach of, or a default under, Borrower’s
Charter Documents or (b) the imposition of any Lien on any Collateral.

 

5.23. Full Disclosure. No information contained in any Loan Document, the
financial statements or any written statement furnished by or on behalf of
Borrower under any Loan Document, or to induce Lender to execute the Loan
Documents, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.

 

5.24. Survival of Representations. All representations of Borrower contained in
this Agreement and in the other Loan Documents shall be true, accurate and
complete at the time of Borrower’s execution of this Agreement, shall be true,
accurate and complete on the Effective Date, and shall be true, accurate and
complete on the date of each Advance and Loan made to Borrower. Lender’s right
to bring an action for breach of any such representation or to exercise any
right, remedy, power or privilege under this Agreement or any other Loan
Document based upon the breach of any such representation shall survive the
execution, delivery and acceptance of this Agreement and each other Loan
Document, and the closing of the transactions described in this Agreement until
Full Payment of the Obligations.

 

14

 

 

ARTICLE 6. FINANCIAL INFORMATION TO BE DELIVERED TO LENDER. Borrower covenants
and agrees that at all times prior to Full Payment of the Obligations, Borrower
shall deliver to Lender, or shall cause to be delivered to Lender:

 

6.1. Borrowing Base Certificates. A satisfactorily completed and Authenticated
Borrowing Base Certificate together with accompanying sales journals, cash
receipts journals and detailed sales credit reports (a) contemporaneously with
each request for an Advance, (b) if no Advance was requested in a calendar week,
on or before Tuesday of the following week prepared as of the preceding week
end, and (c) monthly (within five (5) calendar days after the end of each
calendar month, prepared as of the end of such month). In addition, Borrower
shall provide to Lender with each Borrowing Base Certificate a report showing in
reasonable detail all sales to Account Debtors (i) on consignment or on
approval, under all bill and hold, guaranteed sale, sale or return, billing in
advance of shipment, and other “pre-billing” arrangements, and (ii) under all
payment plans, scheduled installment plans, extended payment terms or on any
other repurchase or return basis. On Lender’s request, Borrower shall also
furnish to Lender copies of invoices to customers and related shipping and
delivery receipts or warehouse receipts for all Inventory covered by each such
invoice.

 

6.2. A/R and A/P Aging; Perpetual Inventory Report. (a) Weekly (on or before
Tuesday of the following week prepared as of the preceding week end) a summary
report of Borrower’s agings of accounts receivable and accounts payable (each,
based on the respective invoice dates), and (b) monthly (within five (5)
calendar days after the end of each month, prepared as of the end of such month)
a detailed report of Borrower’s agings of accounts receivable and accounts
payable (each, based on the respective invoice dates), and a perpetual inventory
report setting forth the quantity, type, lot identification number, cost and
aging of Borrower’s Inventory, all of which shall be set forth in form and
substance satisfactory to Lender.

 

6.3. Ineligible Receivables/Ineligible Inventory. (a) Weekly (on or before
Tuesday of the following week prepared as of the preceding week end) and monthly
(within five (5) calendar days after the end of each calendar month, prepared as
of the end of such month) a report showing Borrower’s Receivables that are not
Eligible Receivables and showing Borrower’s Inventory that is not Eligible
Inventory, and (b) monthly (within five (5) calendar days after the end of each
calendar month, prepared as of the end of such month), an inventory roll-forward
summary margin analysis report.

 

6.4. Annual Financial Statements; Compliance Certificates. No later than April
30 of each Fiscal Year, a copy of audited annual financial statements of
Borrower prepared by an independent certified public accountant in accordance
with GAAP consisting of a balance sheet, statements of operations and retained
earnings, statements of cash flow, acceptable to Lender in its permitted
discretion, together with a satisfactorily completed and Authenticated
Compliance Certificate prepared as of and for the end of such Fiscal Year. If
Borrower’s independent certified public accountant has prepared footnotes to
accompany any such financial statements, Borrower shall deliver such footnotes
to Lender contemporaneously with Borrower’s delivery of the associated financial
statements to Lender. The financial statements delivered to Lender pursuant to
this Section 6.4 shall fairly present Borrower’s financial condition and results
of operations as of the dates and for the periods covered, and shall not contain
any Material misstatements.

 

6.5. Monthly Financial Statements; Compliance Certificates. Within thirty (30)
calendar days after the end of each calendar month, financial statements
consisting of balance sheets, statements of operations and retained earnings and
statements of cash flow, prepared by management of Borrower as of and for the
end of such calendar month, in accordance with GAAP (except for the absence of
footnotes), together with a satisfactorily completed and Authenticated
Compliance Certificate prepared as of and for the end of such calendar month.
The financial statements delivered to Lender pursuant to this Section 6.5 shall
fairly present Borrower’s financial condition and results of operations as of
the dates and for the periods covered, and shall not contain any Material
misstatements.

 

6.6. Inventory Counts and Reports. At least monthly, cycle counts of Inventory
performed in a manner consistent with Borrower’s practices as of the Effective
Date, with corresponding adjustments to Borrowers’ records to reflect the
results of such count, the results of which shall be delivered to Lender in such
form and with such detail as Lender may reasonably request; provided, that
Lender may require (and Borrower shall promptly perform upon notice from Lender)
a physical Inventory count in the event any adjustments made as result of such
cycle counts are materially different from adjustments made by Borrower
historically as a result of such counts.

 

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6.7. Projections. No later than December 31 of each Fiscal Year, monthly
financial projections for the next Fiscal Year and annual projections for each
succeeding Fiscal Year ending on or prior to the Revolving Credit Termination
Date, in form satisfactory to Lender.

 

6.8. Customer and Vendor Lists. At least annually and upon Lender’s reasonable
request, a list of all of Borrower’s customers and vendors, including the
addresses, telephone and facsimile numbers, if any, of each customer and vendor
as of such date.

 

6.9. Insurance. Annually, no later than thirty (30) calendar days prior to the
renewal date of each of Borrower’s insurance policies, evidence of insurance
with respect to such insurance in form and content satisfactory to Lender and
otherwise in compliance with Section 7.5 of this Agreement, and upon Lender’s
request, the original insurance policy.

 

6.10. Tax Returns. Annually, within ten (10) calendar days of filing, (a) copies
of Borrower’s federal and state tax returns and (b) each Guarantor’s federal and
state tax returns.

 

6.11. Other Information. Such other information relating to the financial
condition of Borrower, or any Property or Collateral of Borrower in, on or
respect to which Lender may have a Lien, as Lender may from time to time
reasonably request.

 

ARTICLE 7. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that at all
times prior to Full Payment of the Obligations, Borrower shall:

 

7.1. Use of Loan Proceeds. Use all proceeds of Loans and Advances for Borrower’s
working capital and transaction expenses in addition to the refinancing of
Indebtedness owing by Borrower to AloStar Bank of Commerce on the Effective
Date. Borrower shall not, directly or indirectly, use the proceeds of the Loans
or Advances, or lend, contribute or otherwise make available such proceeds to
any subsidiary, joint venture partner or other Person, (i) to fund any
activities or business of or with any Person, or in any country or territory,
that, at the time of such funding, is, or whose government is, the subject of
sanctions pursuant to any Anti-Terrorism Laws, or (ii) in any other manner that
would result in a violation of sanctions under any Anti-Terrorism Laws by any
Person (including any Person participating in the Loans or Advances, whether as
underwriter, advisor, investor, or otherwise).

 

7.2. Business and Existence; Trade Names. Preserve and maintain Borrower’s
separate existence and rights, privileges and franchises, and except for trade
names described in the Disclosure Schedule transact business in Borrower’s own
name and invoice all of Borrower’s Receivables in Borrower’s own name.

 

7.3. Taxes. Pay and discharge all taxes, assessments, charges, levies and
encumbrances imposed upon Borrower, Borrower’s income or Borrower’s profits or
upon any Property of Borrower by any Governmental Unit prior to the date on
which penalties attach thereto, except where the same is being Properly
Contested.

 

7.4. Compliance with Laws. Comply in all Material respects with all Governmental
Rules applicable to Borrower including, without limitation, all laws and
regulations regarding the collection, payment and deposit of employees’ income,
unemployment and Social Security taxes, all Environmental Laws and all
applicable provisions of ERISA, the Code, and any other applicable laws, rules
or regulations relating to the compensation of employees and funding of employee
pension plans, and Governmental Rules of the U.S. Food and Drug Administration;
notwithstanding the foregoing, Borrower will take such actions as to ensure that
Borrower’s representations contained in Section 5.12 are true and accurate at
all times prior to Full Payment of the Obligations.

 

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(b) Without limiting paragraph (a), above, Borrower shall comply in all Material
respects with all applicable law and Governmental Rules relating to: (i) food
production, processing, safety, contamination or adulteration, (ii) cleanliness,
maintenance and other requirements relating to food production facilities or
employees, (iii) handling, storage, processing and sale of food products,
including without limitation any labeling, advertising or other product
disclosure laws, and (iv) any other Governmental Rule that may impact the
conduct of Borrower’s business or its products.

 

7.5. Maintain Properties; Insurance.

 

(a) Maintain its Properties in good condition and repair at all times; preserve
its Properties from loss, damage, or destruction of any nature whatsoever; keep
all of its Properties insured with insurance companies licensed to do business
in the state where such Property is located against loss or damage by fire or
other risk under extended coverage endorsement and against theft, burglary, and
pilferage together with such other hazards, and in such amounts, as Lender may
from time to time reasonably request; and defend its title to the Collateral and
Lender’s Liens thereon against all Persons, claims and demands, other than
Permitted Liens.

 

(b) Borrower shall obtain and maintain in full force and effect at all times
prior to Full Payment of the Obligations: (i) insurance covering the Collateral
against all risks to which the Collateral is exposed, including loss, damage,
fire, theft, and all other such risks, in such amounts, with such companies,
under such policies and in such form as shall be satisfactory to Lender, and
(ii) liability insurance and such other types of insurance as Lender may require
(such as products liability, product recall, worker’s compensation, cyber
liability, and business interruption insurance), in each case against such
risks, in such amounts, with such companies, under such policies and in such
form as shall be satisfactory to Lender. Borrower shall promptly notify its
insurers and Lender with complete and updated information regarding material
changes in Borrower’s business (including any changes in Borrower’s product
lines or customer concentrations, growth in Borrower’s revenue, or any
acquisitions by Borrower) and, if requested by Lender, Borrower shall obtain
increased insurance coverage or obtain coverage from other insurers as a result
of any such changes.

 

(c) Borrower covenants and agrees to satisfy the following additional
requirements with respect to each insurance policy required to be maintained in
accordance with this Section 7.5:

 

(i) All insurance premiums on all policies must be paid as and when due and
payable, consistent with the past practices of Borrower. All premiums owing for
the current policy term are to be paid on or before the due dates applicable to
such premiums;

 

(ii) No insurance policy required hereunder shall be permitted to provide for
premium assessments to be made against Lender;

 

(iii) Borrower shall provide the following prior to the effective date of such
policy: (i) an ACORD 25 or equivalent certificate of liability insurance and
(ii) an ACORD 28 or equivalent certificate of property insurance;

 

(iv) Prior to the renewal date of each insurance policy required hereunder,
Borrower shall provide certificates of insurance providing evidence that the
policies have been renewed on forms ACORD 28 and ACORD 25;

 

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(v) Borrower shall provide promptly upon Lender’s request complete copies of the
insurance policies providing the coverage required hereunder;

 

(vi) Each property policy and to the extent possible, each liability policy
shall contain a provision providing not less than thirty (30) days’ prior
written notice to Lender of cancellation and not less than ten (10) days’ prior
written notice to Lender of cancellation for non-payment of premium;

 

(vii) A waiver of subrogation shall be provided on all liability policies of
insurance waiving rights of recovery against Lender; and

 

(viii) Lender is to be named (A) the first lender loss payee with respect to the
property insurance coverage, and (B) an additional insured with respect to
general liability and umbrella or excess liability insurances, as follows:

 

ACF FinCo I LP, and its successors and assigns

560 White Plains Road

4th Floor, Suite 400

Tarrytown, NY 10591

 

(d) Borrower shall direct all insurers under such policies of insurance to pay
all proceeds of insurance policies directly to Lender. Borrower irrevocably
makes, constitutes and appoints Lender (and each officer, employee or agent
designated by Lender) as Borrower’s true and lawful attorney-in-fact for the
purpose of (i) making, settling and adjusting such claims under all such
policies of insurance if Borrower fails to make such claim within fifteen (15)
calendar days after any casualty or fails to diligently prosecute such claim,
(ii) endorsing the name of Borrower on any check, draft, instrument or other
item of payment pertaining to the Collateral received by Borrower or Lender
pursuant to any such policies of insurance, and (iii) upon the occurrence and
during the continuation of an Event of Default, making all determinations and
decisions with respect to such policies of insurance as they relate to the
Collateral. Borrower agrees to provide Lender with prompt written notice of any
change, amendment or modification to any insurance policy.

 

(e) With respect to any claim for Proceeds of insurance insuring any Collateral,
Lender is authorized to collect such proceeds and, in Lender’s permitted
discretion: (i) apply such proceeds against the Revolving Credit and the other
Obligations, whether or not then due, or (ii) allow Borrower to use such
Proceeds, or a part thereof, to repair any damage or restore, replace or rebuild
the Property that was the subject of such proceeds; provided, however, that
notwithstanding the foregoing provisions, as to proceeds of insurance for
Equipment constituting Collateral, if, as determined by Lender in Lender’s
permitted discretion, (A) no Default or Event of Default has occurred and is
continuing, (B) the damaged Property can be repaired, restored, replaced or
rebuilt to an economical unit of the same character and not less valuable than
such Property was prior to such damage and destruction with the Proceeds of the
insurance held by Lender, and (C) the Obligations will at all times be
collateralized with respect to the Obligations to the same extent as prior to
such damage and destruction, then Lender shall hold the Proceeds of such
insurance (provided that no Default or Event of Default has occurred and is
continuing or occurs, at which time Lender may apply such proceeds to the
Obligations in such amounts and in such manner as determined by Lender in its
permitted discretion) make them available to Borrower for repair, restoration,
replacement or rebuilding of such Property; provided that, such repaired,
restored, replaced or rebuilt Property shall be free and clear of all Liens
except Permitted Liens, and subject to such other terms and conditions as Lender
may determine in Lender’s permitted discretion; and, further provided, that
while in possession of such funds Lender shall not be required to invest the
same (except in a non-interest bearing commercial money market account of Lender
in which Lender has a first priority perfected security interest) or to hold
such funds separate and apart from Lender’s other funds. Notwithstanding
anything herein to the contrary, at any time that a Default or Event of Default
has occurred and is continuing, if Lender receives proceeds of insurance or is
holding proceeds of insurance theretofore received by Lender, Lender may apply
the same to the Obligations at any time and from time to time as it may
determine in Lender’s sole discretion. If no Default or Event of Default has
occurred and is continuing and Borrower has been permitted to apply insurance
proceeds to repair, restore, replace or rebuild Property, then Lender will
return any insurance proceeds to Borrower which Lender continues to hold after
any such repair, restoration, replacement or rebuilding of such Property is
completed to Lenders’ satisfaction as determined in Lender’s permitted
discretion.

 

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(f) If Borrower fails to provide Lender with evidence of the insurance coverage
required by this Agreement, Lender may purchase insurance, at Borrower’s
expense, to protect Lender’s interests in the Collateral. This insurance may,
but need not, protect the interests of Borrower. The coverage that Lender
purchases may not pay any claim that Borrower may make or any claim that is made
against Borrower in connection with the Collateral. Borrower may later cancel
any insurance purchased by Lender, but only after providing Lender with evidence
that Borrower has obtained insurance as required by this Agreement. If Lender
purchases insurance for the Collateral, Borrower will be responsible for, and
shall reimburse Lender for, all costs of such insurance, including interest and
any other charges that may be imposed in connection with the placement of such
insurance, until the effective date of the cancellation or expiration of the
insurance. Lender may add the cost of any insurance purchased by Lender pursuant
to this paragraph to the Obligations, and Borrower acknowledges and agrees that
the cost of any such insurance may be more than the cost of insurance that
Borrower may be able to obtain on its own.

 

7.6. Business Records. Keep adequate records and books of account with respect
to Borrower’s business activities in which proper entries are made in accordance
with sound bookkeeping practices reflecting all financial transactions of
Borrower. Borrower shall maintain full, accurate and complete Records respecting
Receivables, Inventory (including a perpetual inventory reporting system), and
all other Collateral at all times. Borrower shall maintain all of its Bank
Accounts as set forth on the Disclosure Schedule.

 

7.7. Delivery of Documents and Instruments. Appropriately endorse and
immediately deliver to Lender all notes, trade acceptances, Instruments and
Documents included in or evidencing the Proceeds of any Receivables, and all
Documents of title and Chattel Paper, whether or not negotiable, covering any
Inventory; provided, that Documents issued in connection with In-Transit
Inventory originating from a location outside the United States may be delivered
by the Vendor (or carrier engaged by such Vendor) directly to Borrower so long
as Borrower forwards all original counterparts of such Document to the Eligible
Logistics Provider engaged to facilitate the importation of such In-Transit
Inventory not later than three (3) Banking Days after Borrower’s receipt
thereof. Borrower acknowledges that Borrower waives protest regardless of the
form of the endorsement on any note, trade acceptance, Instrument, Document,
Document of title or Chattel Paper delivered to Lender.

 

7.8. Name Change; Organizational Change; Creation of Affiliates. Provide Lender
with not fewer than thirty (30) calendar days’ notice in an Authenticated Record
prior to any proposed (a) change in Borrower’s state of organization or
organizational structure, (b) change of Borrower’s name, (c) use of any trade
name or fictitious name, “d/b/a” or other similar designation not described in
the Disclosure Schedule, (d) creation of any Affiliate under the control of
Borrower, or (e) transaction or series of transactions pursuant to which
Borrower would become an Affiliate under the control of any other Person.

 

7.9. Change of Offices; Records. Provide Lender with not fewer than thirty (30)
calendar days’ notice in an Authenticated Record prior to any change of
Borrower’s chief executive office or any office where Borrower maintains its
Records (including computer printouts and programs) with respect to Receivables
or any other Collateral.

 

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7.10. Change of Fiscal Year. Provide Lender with not fewer than ninety (90)
calendar days’ notice in an Authenticated Record prior to any change of
Borrower’s Fiscal Year.

 

7.11. Access to Books and Records. Provide Lender with access to Borrower’s
books and Records and permit Lender to copy and inspect such books and Records
as Lender may reasonably request to enable Lender to monitor the Loans and the
Collateral. Lender may examine and inspect the Inventory, Equipment or other
Collateral and may examine, inspect and copy all books and Records with respect
thereto at any time during Borrower’s normal business hours (a) in the absence
of a Default or Event of Default, upon reasonable notice to Borrower, and (b)
following the occurrence and during the continuation of a Default or Event of
Default, without notice.

 

7.12. Solvency. Continue to be Solvent.

 

7.13. Notice to Lender. Provide Lender with immediate telephonic notice
(followed by notice in an Authenticated Record) after becoming aware of any of
the following:

 

(a) the happening of any event, occurrence or condition, or series of events,
occurrences or conditions, that would cause any representation contained in
ARTICLE 5 to be untrue, inaccurate or misleading;

 

(b) the existence of a Default or an Event of Default;

 

(c) the happening of any event, occurrence or condition, or series of events,
occurrences or conditions, that has resulted in, or that may reasonably be
expected to result in, a Material Adverse Change;

 

(d) any dispute that may arise between Borrower and any Governmental Unit,
including any action relating to any tax liability of Borrower, in connection
with which Borrower would be liable (as damages, penalties, fines, costs or
expenses, or any combination of the foregoing) for a Material amount if
adversely determined;

 

(e) any labor controversy resulting in or threatening to result in a strike or
work stoppage against Borrower in connection with which Borrower would suffer
Material damages;

 

(f) any proposal by any Governmental Unit to acquire any Material Property of
Borrower;

 

(g) a violation or alleged violation of any Governmental Rules (including
O.S.H.A., the FLSA, any Environmental Laws, or U.S. Food and Drug Administration
regulations);

 

(h) the location of any Collateral other than at Borrower’s place(s) of business
as described in the Disclosure Schedule;

 

(i) any cancellation, default, non-renewal, acceleration, draw upon, termination
or other event (as applicable) with respect to any letter of credit, bond, note
or other financial accommodation in a Material face amount or Material principal
amount issued or made to, or in favor of, any other Person, for which Borrower
has agreed to or is obligated to repay, or to reimburse or indemnify the issuer
thereof, the creditor with respect thereto or any other Person, in whole or in
part (a “Third Party Obligation”), whether such obligation of Borrower arises by
reason of the extension of credit, the opening, guaranteeing or confirming of a
letter of credit, any loan, guaranty, indemnification, or any other manner,
whether direct or indirect (including if acquired by purchase, assignment or
otherwise), absolute or contingent;

 

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(j) the commencement of any proceeding by a Governmental Unit or litigation,
suit, action or proceeding, at law or in equity (i) against Borrower as
defendant, co-defendant, third party defendant or otherwise, involving money or
Property of a Material amount, or (ii) by Borrower as plaintiff, as
counter-claimant or otherwise pursuant to which Borrower has asserted claims for
damages of a Material amount;

 

(k) if any Proceeds of Receivables shall include, or any of the Receivables
shall be evidenced by, notes, trade acceptances or Instruments or Documents, or
if any Inventory is covered by any Certificate of Title or Chattel Paper,
whether or not negotiable;

 

(l) any breach or other violation or claim of a breach or violation of Section
7.4(b); or any voluntary or involuntary recall by Borrower of any Inventory sold
by Borrower;

 

(m) Borrower’s creation or acquisition of any intellectual property used by
Borrower in its operations or the conduct of its business that is not otherwise
described in any patent security agreement or trademark security agreement
previously delivered to Lender;

 

(n) Borrower’s receipt of any notice from the Internal Revenue Service or any
applicable state or local taxing authority regarding (i) any claimed deficiency
regarding any federal, state or local income tax return of Borrower or any
Significant Holder of Borrower’s Equity Interests, (ii) any tax lien, or (iii)
an audit or other examination of any such tax return;

 

(o) the commencement of any action or proceeding at law or in equity against
Borrower involving potential liability in a Material amount, any material
changes in any existing action or proceeding, or any judgment entered against
Borrower or its assets;

 

(p) any damage to or destruction of any Collateral in a Material amount, or the
happening of any event, occurrence or condition, or series of events,
occurrences or conditions, that has caused, or that may cause, a Material loss
or depreciation in the value of any Collateral or a Material loss or decline in
the value of insured Property or the existence of an event justifying a Material
claim under any insurance; provided, however, the provisions of this paragraph
(m) shall not apply to (i) obsolete, worn out or surplus Property, (ii)
Equipment replaced in the Ordinary Course of Business of Borrower, and (iii)
Inventory disposed of in the Ordinary Course of Business of Borrower;

 

7.14. Payments to Customs Brokers, etc. Pay in a timely manner all applicable
duties, freight, charges and like fees and charges of U.S. Customs, Eligible
Logistics Providers, and other customs brokers, freight forwarders, carriers and
warehousemen.

 

7.15. Retention of Turnaround Management Consultant. Continue to retain Conway
MacKenzie as Borrower’s turnaround management consultant for a period of no less
than ninety (90) days after the Effective Date.

 

7.16. Post-Closing Covenants.

 

(a) On or before September 30, 2016 received (and delivered evidence to Lender
of Borrower’s receipt) the proceeds of the Additional Specified Subordinated
Indebtedness.

 

(b) In addition to paragraph (a), above, comply with all of the covenants and
agreements contained in the Post-Closing Letter.

 

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ARTICLE 8. NEGATIVE COVENANTS. Borrower covenants and agrees that at all times
prior to Full Payment of the Obligations, Borrower shall not:

 

8.1. Indebtedness. Create, incur, assume or suffer to exist, voluntarily or
involuntarily, any Indebtedness, except (a) Obligations to Lender, (b) trade
debt incurred in the Ordinary Course of Business of Borrower; (c) purchase money
financing and equipment leases with a principal amount not to exceed either
individually or in the aggregate $100,000 in any Fiscal Year; (d) existing
Indebtedness described on the Disclosure Schedule and the Specified Subordinated
Indebtedness, and (e) extensions, renewals and replacements of any Indebtedness
described in clauses (b) through (d), inclusive, of this Section 8.1 that do not
increase the outstanding principal amount thereof.

 

8.2. Mergers; Consolidations; Acquisitions. Enter into any transaction or series
of transactions that directly or indirectly would constitute a merger,
consolidation, reorganization or recapitalization with any other Person; take
any action in contemplation of dissolution or liquidation; conduct any part of
its business through any Affiliate or other Person; or acquire substantially all
of the equity interests or assets of any Person, whether by merger,
consolidation, purchase of equity interests or otherwise.

 

8.3. Change of Management; Change of Control. (a) Allow a change in the
ownership structure of Borrower, whether by the issuance, sale, transfer,
exchange, assignment or other direct or indirect hypothecation of Equity
Interests, or by the issuance of subscriptions, warrants, options, convertible
securities, or other rights (fixed, contingent or otherwise) to purchase or
otherwise acquire Equity Interests, or (b) permit any person other than (i) John
R. Keeler to hold the office of chief executive officer of Borrower (or to
perform the duties generally associated with such office as existing on the
Effective Date) or (ii) Christopher Constable to hold the office of chief
financial officer of Borrower (or to perform the duties generally associated
with such office as existing on the Effective Date), in each case unless a
replacement reasonably acceptable to Lender is appointed within sixty (60)
calendar days.

 

8.4. Sale or Disposition. Sell or otherwise dispose of all or any Collateral or
other Property, or grant any Person an option to acquire any Collateral or other
Property, except for (a) obsolete, worn out or surplus Property disposed of in
the Ordinary Course of Business of Borrower, (b) Equipment replaced in the
Ordinary Course of Business of Borrower, and (c) Inventory sold in the Ordinary
Course of Business of Borrower.

 

8.5. Real Property Defaults. Permit any landlord, mortgagee, trustee under deed
of trust, warehouseman, bailee or lienholder to declare a default under any
lease, mortgage, deed of trust, warehousing or bailee agreement or Lien on real
estate owned or leased by Borrower or in which Borrower maintains any
Collateral, which default remains uncured after the lesser of (a) any stated
cure period, if any, relating to such default stated in the applicable lease,
mortgage, deed of trust, warehouse agreement, bailment agreement or lien
instrument, or (b) a period of thirty (30) calendar days after its occurrence,
unless such default is being Properly Contested by Borrower.

 

8.6. Liens and Encumbrances. Grant, permit or suffer to exist the imposition of
any Lien on any Collateral, except for Liens in favor of Lender and other
Permitted Liens.

 

8.7. Dividends and Distributions; Payment of Indebtedness; Amendments. Except as
expressly permitted under this Section 8.7, (i) pay any cash dividends or
profits to any current or former holder of its Equity Interests, (ii) make any
distribution or return of capital in cash or other Property to any current or
former holder of its Equity Interests, (iii) make any payment or distribution in
cash or other Property to any current or former holder of its Equity Interests
in connection with any direct or indirect redemption or purchase of Equity
Interests entered into on or prior to the date hereof, (iv) directly or
indirectly purchase or redeem any of its Equity Interests, or retire any of its
Equity Interests, or take any action which would have an effect equivalent to
any of the foregoing, (v) pay any principal, interest, or other amount in
connection with any Indebtedness (other than the Obligations) not permitted
pursuant to Section 8.1, or (vi) amend or modify any provision of any instrument
or agreement evidencing or securing the Specified Subordinated Indebtedness or
pay any principal of or interest on any Specified Subordinated Indebtedness
other than as expressly permitted under the Specified Subordination Agreement.

 

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(b) So long as no Default or Event of Default shall have occurred and be
continuing, and so long as Borrower is qualified as an “S” corporation for
federal or applicable state tax purposes, Borrower may make distributions to
holders of its Equity Interests in amounts sufficient to enable such Persons to
pay applicable federal and state income taxes which are directly attributable to
the net income of Borrower in any Fiscal Year (each a “Tax Distribution”), which
distributions shall be made pro rata based on a percentage of owned Equity
Interests and shall be calculated based on the assumption that the income of
each holder of Equity Interests will be taxed at the maximum rate permissible
under federal or such state law, as applicable.

 

8.8. Guaranties; Contingent Liabilities. Assume, guarantee, endorse,
contingently agree to purchase, assume or otherwise become liable for the
Indebtedness of any Person, except (a) by the endorsement of negotiable
instruments for deposit or collection or similar transactions in the Ordinary
Course of Business of Borrower and (b) unsecured guarantees in existence on the
Effective Date that are described in the Disclosure Schedule.

 

8.9. Removal of Collateral. Remove, or cause or permit to be removed, any of the
Collateral from the premises where such Collateral is currently located and
described in the Disclosure Schedule, except (a) for sales of Inventory in the
Ordinary Course of Business of Borrower, (b) dispositions of worn-out, obsolete
or surplus Equipment in the Ordinary Course of Business of Borrower, and (c)
off-site repairs of Equipment in the Ordinary Course of Business of Borrower.

 

8.10. Transfer of Notes or Accounts. (a) Sell, assign, transfer, or otherwise
dispose of any Account, or any Chattel Paper, Letter-Of-Credit Rights,
promissory note or other Instrument payable to Borrower or evidencing any
Account, or (b) accept or negotiate any discount on any Account, promissory note
or other Instrument payable to Borrower except in the Ordinary Course of
Business of Borrower.

 

8.11. Settlements. Compromise, settle or adjust any Material claim relating to
any Collateral except in the Ordinary Course of Business of Borrower.

 

8.12. Change of Business. Cause or permit a change in the nature of its business
as conducted on the Effective Date.

 

8.13. Change of Accounting Practices. Change its accounting principles or
practices as in effect on the Effective Date in any respect, except for changes
in accounting principles as may be required by changes in GAAP for which
Borrower has provided prior written notice to Lender in an Authenticated Record.

 

8.14. Inconsistent Agreement. Enter into any agreement that would be violated by
the payment or performance of the Obligations or Borrower’s other liabilities
and obligations under this Agreement or any other Loan Document.

 

8.15. Loan or Advances; Personal Expenses. Make any loans or advances to any
Person, or make any payments or pay any liabilities, costs or expenses, of or on
behalf of any other Person (collectively, “third party expenses”), whether such
third party expenses have arisen or have been incurred on or prior to the date
of this Agreement, or arise or are incurred after the date hereof, except for
(a) loans to Borrower’s Affiliates described in the Disclosure Schedule, (b)
loans to employees of Borrower in the ordinary course in an aggregate
outstanding amount not to exceed $20,000 at any time, and (c) advances for or
reimbursements of business-related expenses incurred by employees of Borrower in
the ordinary course, including but not limited to business expenses for food,
lodging, travel and credit card charges.

 

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8.16. Investments. Make any investment in any Person or Affiliate after the
Effective Date, whether in the form of equity interests (including, but not
limited to, subscriptions, warrants, options or other rights convertible into
equity interests), Indebtedness (including Indebtedness that is convertible into
equity interests), any combination of equity interests and Indebtedness, or
otherwise.

 

8.17. Bank Accounts. Open or maintain any deposit, checking, operating or other
bank account, or similar money handling account, with any bank or other
financial institution except for those accounts identified in the Disclosure
Schedule, or close or permit to be closed any of the accounts listed in the
Disclosure Schedule, in each case without Lender’s prior written consent, and
then only after Borrower has implemented agreements with such bank or financial
institution and Lender in form and substance acceptable to Lender.

 

8.18. Compensation. Increase the total compensation paid to John R. Keeler (or
any of his relatives), including salaries, withdrawals, fees, bonuses,
commissions, drawing accounts and other payments, whether directly or
indirectly, in money or otherwise, during any calendar year of Borrower during
the term of this Agreement in an aggregate amount in excess of $250,000,
exclusive of any payments of interest on the Specified Subordinated Notes
expressly permitted under the Specified Subordination Agreement.

 

8.19. Transactions with Affiliates.

(a)

 

(a) Make, enter into or otherwise undertake any transaction with any Affiliate,
unless such transaction (i) is a purchase of Inventory by Borrower from Bacolod
in the Ordinary Course of Business of Borrower that otherwise complies with
paragraph (b), below, (ii) is a payment of rent to John Keeler Real Estate
Holdings, Inc. in the Ordinary Course of Business of Borrower and consistent
with the terms of the real Property lease in effect on the Effective Date, (iii)
is a payment of Borrower in respect of the Specified Subordinated Indebtedness
so long as such payment is expressly permitted under the Specified Subordination
Agreement, (iv) is a repayment of Indebtedness owed to Borrower by Strike the
Gold Foods, Ltd., (v) is an unsecured guaranty of Indebtedness of an Affiliate
permitted under Section 8.8, (vi) is a loan to an employee of Borrower permitted
under Section 8.15, or (vii) (A) has been approved or otherwise consented to
pursuant to the applicable terms of Borrower’s Charter Documents, (B) has been
approved by at least a majority of the disinterested directors of Borrower
entitled to approve or vote on such transaction after being informed of the
material terms of such transaction, and (C) is at least as favorable to Borrower
as a similar transaction entered into at arms’ length with an unrelated third
party.

 

(b) Maintain a balance of prepaid deposits in respect of Borrower’s purchase of
Inventory from Bacolod that exceeds the amount set forth below for the test date
corresponding thereto:

 

Test Date  Amount  September 30, 2016  $1,300,000  October 31, 2016  $1,300,000 
November 30, 2016  $1,300,000  December 31, 2016  $1,100,000  January 31, 2017 
$1,100,000  February 28, 2017  $1,100,000  March 31, 2017  $900,000  April 30,
2017  $900,000  May 31, 2017  $900,000  June 30, 2017  $650,000  July 31, 2017 
$650,000  August 31, 2017  $650,000  September 30, 2017 and the last day of each
month thereafter  $350,000 

 

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On or before the six (6) month anniversary of the Effective Date and each six
(6) month anniversary thereafter, Borrower and Lender will review the amounts
set forth on the above table for each subsequent Test Date and endeavor to agree
to adjust such amounts based on Lender’s review of Borrower’s performance and
financial statements.

 

8.20. Capital Expenditures. Permit Unfunded Capital Expenditures to exceed,
individually or in the aggregate, an amount equal to $100,000 in any consecutive
twelve (12) month period.

 

8.21. Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as of
and for the last day of each calendar month, beginning with the calendar month
ending December 31, 2016, to be less than the amount set forth below for the
period corresponding thereto:

 

Period   Ratio  Six (6) calendar months ending December 31, 2016   1.10 to 1.00 
Seven (7) calendar months ending January 31, 2017   1.10 to 1.00  Eight (8)
calendar months ending February 28, 2017   1.10 to 1.00  Nine (9) calendar
months ending March 31, 2017   1.10 to 1.00  Ten (10) calendar months ending
April 30, 2017   1.10 to 1.00  Eleven (11) calendar months ending May 31, 2017 
 1.10 to 1.00  Twelve (12) calendar months ending June 30, 2017 and ending on
the last day of each month thereafter   1.10 to 1.00 

 

ARTICLE 9. EVENTS OF DEFAULT; REMEDIES OF LENDER.

 

9.1. Events of Default. The happening of any of the following events,
occurrences or conditions, or series of events, occurrences or conditions, shall
be an “Event of Default” (collectively, “Events of Default”) under this
Agreement:

 

(a) Borrower shall fail to pay the amount of any Obligation (whether principal,
interest, fees, costs, charges, expenses, or otherwise) in full when due
pursuant to the terms of this Agreement or any other Loan Document; or

 

(b) any representation contained in ARTICLE 5 of this Agreement, or any
representation or certification contained in any certificate, document or
instrument delivered to Lender pursuant to ARTICLE 6 of this Agreement, shall
have been inaccurate when made by Borrower or shall have been otherwise
breached; or

 

(c) Borrower shall fail to comply with any provision, term, covenant or
condition contained in Section 2.6, or ARTICLE 6, ARTICLE 7 or ARTICLE 8 of this
Agreement; or

 

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(d) other than with respect to the provisions, terms, covenants and conditions
contained in Section 2.6, or ARTICLE 6, ARTICLE 7 and ARTICLE 8 of this
Agreement, if Borrower shall fail to comply with any provision, term, covenant,
or condition contained in this Agreement, and such failure continues for a
period in excess of ten (10) Banking Days after the date that Borrower failed to
comply with such provision, term, covenant or condition, respectively; or

 

(e) the occurrence of any “default” or “event of default” under any other Loan
Document (as such terms are defined in the respective Loan Document), after
taking into consideration any applicable period of grace, notice and/or cure as
provided for in such Loan Document, if any; or

 

(f) Borrower shall (i) cease to be Solvent, (ii) make an assignment for the
benefit of its creditors, (iii) call a meeting of its creditors to obtain any
general financial accommodation, (iv) suspend business, or (v) commence any case
under any provision of the Bankruptcy Code, or under any federal, state, local
or other applicable law including provisions for reorganizations or
liquidations; or

 

(g) (i) if any case under any provision of the Bankruptcy Code, or under any
under federal, state, local or other applicable law including provisions for
reorganizations or liquidations, shall be commenced against Borrower, or (ii) if
a receiver, trustee or equivalent officer under the Bankruptcy Code, or under
any federal, state, local or other applicable law including provisions for
reorganizations or liquidations, shall be appointed for Borrower or for all or
any of the Collateral or for all or any of Borrower’s Property, and any of the
following events also occur in connection with such case or appointment: (A)
Borrower consents to the institution of such case or the appointment of such
receiver, trustee or equivalent officer, (B) the petition commencing such case
or appointment is not timely controverted, (C) the petition commencing such case
or appointment is not dismissed within sixty (60) calendar days of the date of
the filing thereof, (D) an interim trustee is appointed to take possession of
all or any substantial portion of the Property of, or to operate all or any
substantial portion of the business of, Borrower, or (E) an order for relief
shall have been issued or entered therein; provided that Lender shall have no
obligation to provide any Advance to Borrower during such sixty (60) calendar
day period specified in clause (C); or

 

(h) if any federal or state tax Lien is filed or recorded against Borrower and
is not bonded or discharged within fifteen (15) calendar days of the date of
filing or recording; or

 

(i) if a Material judgment shall be entered against Borrower in any action or
proceeding and shall not be stayed, vacated, bonded, paid or discharged within
twenty (20) calendar days of entry, except a judgment where the claim is fully
covered by insurance and the insurer has accepted full liability therefor in
writing and such writing has been delivered to Lender; or

 

(j) if, other than with respect to the Obligations (i) any Material Indebtedness
of Borrower shall be declared to be or shall become due and payable prior to its
stated maturity; or (ii) any obligation of Borrower with respect to any Material
Indebtedness shall not be paid or performed as and when the same becomes due; or
(iii) any payment by Borrower with respect to any Material Indebtedness shall be
declared to be or shall become due and payable prior to its stated maturity; or
(iv) there shall occur any event or condition which constitutes an event of
default under any mortgage, indenture, Instrument, agreement or evidence of
Indebtedness relating to any Material Indebtedness of Borrower the effect of
which is to permit the holder or the holders of such mortgage, indenture,
Instrument, agreement or evidence of Indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause the Indebtedness
evidenced thereby to become due prior to its stated maturity; or

 

(k) if Borrower becomes obligated to pay any Material amount under any Third
Party Obligation (other than a commercial letter of credit issued by Lender or
an Affiliate of Lender), or any Third Party Obligation is not renewed or
replaced on terms substantially similar to or more favorable to Borrower than
the original Third Party Obligation; or

 

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(l) the occurrence of any Reportable Event that could in Lender’s permitted
discretion result in the termination of any Employee Benefit Plan, or if a
trustee shall be appointed by a United States District Court or other court or
administrative tribunal to administer any Employee Benefit Plan, or if the
Pension Benefit Guaranty Corporation shall institute proceedings to terminate
any Employee Benefit Plan or to appoint a trustee to administer any Employee
Benefit Plan; or

 

(m) the occurrence of a loss, theft, damage or destruction with respect to any
Collateral in a Material amount not covered by insurance;

 

(n) any Guarantor repudiates, revokes or attempts to revoke its guaranty or any
Support Party repudiates, revokes or attempts to revoke its validity and support
agreement; Borrower, any Guarantor, any Support Party or third party denies or
contests the validity or enforceability of any Loan Documents or Obligations or
the perfection or priority of any Lien granted to lender; or any Loan Document
ceases to be in full force or effect for any reason (other than a waiver or
release by Lender);

 

(o) Borrower or any Guarantor or any of its respective officers is criminally
indicted or convicted for (i) a felony committed in the conduct of such Person’s
business, or (ii) violating any state or federal law (including the Controlled
Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of
War Materials Act) that could lead to forfeiture of any Material Property or any
Collateral; or

 

(p) there shall be a Material disruption in the supply of Inventory available to
Borrower from its suppliers; or

 

(q) with respect to any recall of Inventory sold by Borrower, (i) Borrower
voluntarily recalls any Inventory if the amount recalled that is not covered by
insurance exceeds $100,000, or (xxi) any other recall of Inventory occurs or is
required by any Governmental Unit if the amount recalled that is not covered by
insurance exceeds $100,000; or

 

(r) the commencement of any Material claim or proceeding is brought against
Borrower alleging any product defect or adulteration, whether such product is
subject to a recall or otherwise; or

 

(s) Borrower shall have failed to receive the proceeds of the Additional
Specified Subordinated Indebtedness required under Section 7.16(a) on or before
the date set forth therein; or

 

(t) the occurrence of any Material Adverse Change.

 

9.2. Continuation of Events of Default. For purposes of this Agreement, a
Default or an Event of Default shall be deemed to be continuing from the date of
occurrence of such Default or Event of Default until the earlier of (a) the
date, if any, Lender waives such Default or Event of Default in writing, or (b)
in the case of a Default, the date that Borrower cures such Default to Lender’s
satisfaction in Lender’s sole discretion within any period of cure expressly
provided in this Agreement.

 

9.3. Rights and Remedies with Respect to Loans and Advances.

 

(a) Termination of Lending Obligations. Upon the occurrence and during the
continuation of an Event of Default Lender may, in Lender’s sole discretion (i)
terminate any or all Loans and correspondingly terminate its obligations to
otherwise lend to or extend credit to Borrower under this Agreement, under any
Note and/or any other Loan Document, without prior notice to Borrower, and/or
(ii) increase the amount of interest payable on any Loan to the applicable
Default Rate, and/or (iii) increase any or all fees payable to Borrower under
this Agreement that may be increased upon the occurrence of an Event of Default
pursuant to the terms of this Agreement, and/or (iv) demand payment in full of
all or any portion of the Obligations or any Note (whether or not payable on
demand prior to such Event of Default), and/or (v) take all other and further
actions and avail itself of any and all rights, powers, remedies and privileges
available to Lender under this Agreement, any other Loan Document, under law or
in equity.

 

27

 

 

(b) Obligations Immediately Due. Notwithstanding the provisions of Section
9.3(a) immediately above, upon the occurrence of any Event of Default described
in Section 9.1(f) or Section 9.1(g), without notice, demand or other action by
Lender (i) all of Borrower’s Obligations to Lender, including but not limited
to, all outstanding and unpaid principal of each Loan, interest due thereon, and
all fees, costs and expenses payable with respect thereto, shall immediately
become due and payable whether or not payable on demand prior to such Event of
Default, and (ii) all interest payable on the Obligations shall immediately
increase to the applicable Default Rate, and (iii) all fees payable to Borrower
under this Agreement that may be increased upon the occurrence of an Event of
Default shall immediately increase to their applicable amount after an Event of
Default, (iv) all obligations to lend to or extend credit to Borrower under this
Agreement, under any Note and/or any other Loan Document shall immediately
terminate, and (v) Lender may take all other and further actions and avail
itself of any and all rights, powers, remedies and privileges available to
Lender under this Agreement, any other Loan Document, under law or in equity.

 

9.4. Rights and Remedies with Respect to Collateral. Without limiting any
rights, powers, remedies or privileges Lender may have pursuant to this
Agreement, under applicable law or otherwise, and in addition to all rights,
powers, remedies and privileges granted to Lender as a Secured Party under the
UCC, under applicable law or otherwise upon the occurrence and during the
continuation of an Event of Default:

 

(a) Notification of Account Debtors. (i) Lender may, and without any notice to,
consent of or any other action by Borrower (such notice, consent or other action
being expressly waived), notify Account Debtors of Lender’s security interest in
and to Accounts and Receivables and direct Account Debtors to make payment
directly to Lender without notice to, consent of, or any other action by
Borrower, or (ii) Borrower, at the request of Lender, shall notify Account
Debtors of Lender’s security interest in Borrower’s Accounts and Receivables and
direct Account Debtors to make payment directly to Lender. Borrower hereby
authorizes Account Debtors to make payments directly to Lender and to rely on
notice from Lender without further inquiry. Lender may on Borrower’s behalf
endorse all items of payment received by Lender that are payable to Borrower for
the purposes described above.

 

(b) Collections; Modifications of Terms. Lender may but shall be under no
obligation to (i) notify all appropriate parties that the Collateral, or any
part thereof, has been assigned to Lender; (ii) demand, sue for, collect and
give receipts for and take all necessary or desirable steps to collect any
Collateral or Proceeds in its or Borrower’s name, and apply any such collections
against the Obligations in such amounts and in such order as Lender determines
in Lender’s sole discretion; (iii) take control of any Collateral and any cash
and non-cash Proceeds of any Collateral; (iv) enforce, compromise, extend, renew
settle or discharge any rights or benefits of Borrower with respect to or in and
to any Collateral, or deal with the Collateral as Lender may deem advisable; and
(v) make any compromises, exchanges, substitutions or surrenders of Collateral
Lender deems necessary or proper in its sole discretion, including without
limitation, extending the time of payment, permitting payment in installments,
or otherwise modifying the terms or rights relating to any of the Collateral,
all of which may be effected without notice to, consent of, or any other action
of Borrower and without otherwise discharging or affecting the Obligations, the
Collateral or the security interests granted to Lender under this Agreement or
any other Loan Document.

 

28

 

 

(c) Insurance. Lender may file proofs of loss and claim with respect to any of
the Collateral with the appropriate insurer, and may endorse in its own and
Borrower’s name any checks or drafts constituting Proceeds of insurance. Any
Proceeds of insurance received by Lender may be applied by Lender against
payment of all or any portion of the Obligations as Lender may elect in its sole
discretion.

 

(d) Possession and Assembly of Collateral. Lender may take possession of the
Collateral and/or without removal render Borrower’s Equipment unusable. Upon
Lender’s request, Borrower shall assemble the Collateral and make it available
to Lender at a place or places to be designated by Lender that is reasonably
convenient to Lender and Borrower.

 

(e) Set-off. Lender may, and without any notice to, consent of or any other
action by Borrower (such notice, consent or other action being expressly
waived), set-off or apply (i) any and all deposits (general or special, time or
demand, provisional or final) at any time held by or for the account of Lender,
and/or (ii) any Indebtedness at any time owing by Lender or any Affiliate of
Lender or any participant in the Loans to or for the credit or the account of
Borrower, to the repayment of the Obligations irrespective of whether any demand
for payment of the Obligations has been made.

 

(f) Disposition of Collateral.

 

(i) Sale, Lease, etc. of Collateral. Lender may, without demand, advertising or
notice, all of which Borrower hereby waives (except as the same may be required
by the UCC or other applicable law), at any time or times in one or more public
or private sales or other dispositions, for cash, on credit or otherwise, at
such prices and upon such terms as are commercially reasonable (within the
meaning of the UCC) (A) sell, lease, license or otherwise dispose of any and all
Collateral, and/or (B) deliver and grant options to a third party to purchase,
lease, license or otherwise dispose of any and all Collateral. Lender may sell,
lease, license or otherwise dispose of any Collateral in its then-present
condition or following any preparation or processing deemed necessary by Lender
in its sole discretion. Lender may be the purchaser at any such public or
private sale or other disposition of Collateral, and in such case Lender may
make payment of all or any portion of the purchase price therefor by the
application of all or any portion of the Obligations due to Lender to the
purchase price payable in connection with such sale or disposition. Lender may,
if it deems it reasonable, postpone or adjourn any sale or other disposition of
any Collateral from time to time by an announcement at the time and place of the
sale or disposition to be so postponed or adjourned without being required to
give a new notice of sale or disposition; provided, however, that Lender shall
provide Borrower with written notice of the time and place of such postponed or
adjourned sale or disposition. Borrower hereby acknowledges and agrees that
Lender’s compliance with any requirements of applicable law in connection with a
sale, lease, license or other disposition of Collateral will not be considered
to adversely affect the commercial reasonableness of any sale, lease, license or
other disposition of such Collateral.

 

(ii) Application of Disposition Proceeds. Borrower shall be obligated for, and
the Proceeds of any sale, lease, license or other disposition of Collateral
pursuant to this paragraph (f) shall be applied (A) first to the costs of
retaking, holding, preparing for disposition, processing, and disposing of
Collateral, including the fees and disbursements of attorneys, auctioneers,
appraisers, consultants and accountants employed by Lender in connection with
the foregoing, and then (B) to the payment of the Obligations in whatever order
Lender may elect. Borrower shall remain liable for all amounts of the
Obligations remaining unpaid as a result of any deficiency of the Proceeds of
the sale, lease, license or other disposition of Collateral after such Proceeds
are applied as provided in the foregoing sentence. Lender shall pay any Proceeds
of the sale, lease, license or other disposition of Collateral remaining after
application as provided in clause (A) and (B), above, in accordance with the
applicable provisions of the UCC.

 

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(iii) Warranties; Sales on Credit. Lender may sell, lease, license or otherwise
dispose of the Collateral without giving any warranties and may specifically
disclaim any and all warranties, including but not limited to warranties of
title, possession, merchantability and fitness. Borrower hereby acknowledges and
agrees that Lender’s disclaimer of any and all warranties in connection with a
sale, lease, license or other disposition of Collateral will not be considered
to adversely affect the commercial reasonableness of any such disposition of the
Collateral. If Lender sells, leases, licenses or otherwise disposes of any of
the Collateral on credit, Borrower will be credited only with payments actually
made by the recipient of such Collateral and received by Lender and applied to
the Obligations. If any Person fails to pay for Collateral acquired pursuant to
this paragraph (f) on credit, Lender may re-offer the Collateral for sale,
lease, license or other disposition.

 

(g) Election of Remedies for Non-Collateral Property. Notwithstanding Lender’s
Lien in and to the Collateral, to the extent that the Obligations are now or are
hereafter secured by any Property other than the Collateral, or by the guaranty,
endorsement, assets or Property of any other Person, Lender shall have the right
in Lender’s sole discretion to determine which rights, remedies, powers,
privileges, security, or Liens Lender may at any time pursue, foreclose upon,
relinquish, subordinate, modify or take any other action with respect to,
without in any way impairing, modifying or affecting any of Lender’s other
rights, remedies, powers, privileges, security, or Liens with respect to such
Property, or any of Lender’s rights, remedies, powers or privileges under this
Agreement or any other Loan Document.

 

(h) Lender’s Obligations. Borrower agrees that Lender shall not have any
obligation to preserve rights to any Collateral against prior parties or to
marshal any Collateral of any kind for the benefit of any other creditor of
Borrower or any other Person. Lender shall not be responsible to Borrower for
loss or damage resulting from Lender’s failure to enforce its security interests
or collect any Collateral or Proceeds or any monies due or to become due under
the Obligations or any other liability or obligation of Borrower to Lender.

 

(i) Waiver of Rights by Borrower. Except as may be otherwise specifically
provided in this Agreement, Borrower waives, to the extent permitted by law, all
bonds, security or sureties required by any Governmental Rule or otherwise as an
incident to Lender’s taking of possession of, or sale, lease, license or other
disposition of, any Collateral. Borrower authorizes Lender, upon the occurrence
of an Event of Default to enter upon any premises owned by or leased to Borrower
where the Collateral is kept, without obligation to pay rent or for use and
occupancy, through self help, without judicial process and without having first
given notice to Borrower or obtained an order of any court, and peacefully
retake possession thereof by securing at or removing same from such premises.

 

ARTICLE 10. GENERAL PROVISIONS.

 

10.1. Rights and Remedies Cumulative. Lender’s rights, powers, remedies and
privileges under this Agreement (specifically including all rights, powers,
remedies and privileges of Lender under ARTICLE 9) shall be cumulative and not
alternative or exclusive, irrespective of any other rights, powers, remedies or
privileges that may be available to Lender under any other Loan Document, by
operation of law or otherwise, and may be exercised by Lender at such time or
times and in such order as Lender in Lender’s sole discretion may determine, and
are for the sole benefit of Lender. No course of dealing and no delay or failure
of Lender in exercising any right, power, remedy or privilege under this
Agreement or any other Loan Document shall (a) affect any other or future
exercise thereof, or (b) operate as a waiver thereof, (c) preclude Lender from
exercising, or operate as a waiver of, any other right, power, remedy or
privilege of Lender under this Agreement or any other Loan Document, or (d)
result in liability to Lender or Lender’s Affiliates or their respective
members, managers, shareholders, directors, officers, partners, employees,
consultants or agents. No single or partial exercise by Lender of any right,
power, remedy or privilege under this Agreement or any other Loan Document, or
any abandonment or discontinuance of steps to enforce such a right, power,
remedy or privilege, shall preclude any further exercise thereof or of any such
other right, power, remedy or privilege.

 

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10.2. Reinstatement. Lender’s rights, powers, remedies and privileges under this
Agreement and the agreements, covenants, liabilities and obligations of Borrower
set forth in this Agreement (including, but not limited to, Full Payment of the
Obligations, and all Liens granted to Lender under this Agreement) shall
continue to be effective, or be reinstated, as the case may be, if at any time
(a) any payment in respect of the Obligations is rescinded or must otherwise be
restored or returned by Lender by reason of any bankruptcy, reorganization,
arrangement, composition or similar proceeding or as a result of the appointment
of a receiver, intervenor or conservator of, or trustee or similar officer for,
Borrower or any other Person, or any Property of Borrower or any other Person,
or otherwise, all as though such payment had not been made. Furthermore, to the
extent that Borrower, any Guarantor or any other Person makes a payment or
payments to Lender, or Lender enforces any right, power, remedy, privilege, or
Lien or exercises any right of setoff, granted to Lender under this Agreement or
any other Loan Document, and such payment or payments or the proceeds of such
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, any other state
or federal law, common law or any equitable cause, then, to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all rights, powers, remedies, privileges, or Lien, granted to Lender under
this Agreement, under any other Loan Document, and under applicable law, shall
be revived and continued in full force and effect as if such payment or payments
had not been made or such enforcement or setoff had not occurred, or (b) Lender
or any “Indemnitee” suffers or incurs any “Indemnified Liability” (as such terms
are defined in Section 10.12 and Lender and/or such Indemnitee is not promptly
reimbursed for the full amount of such Indemnified Liability, or (c) any
expense, tax, assessment, charge or levy to be reimbursed by Borrower pursuant
to Section 10.8 is not promptly paid to Lender in full.

 

10.3. Successors and Assigns. This Agreement is entered into for the benefit of
the parties hereto and their successors and assigns and shall be binding upon
the parties, their successors and assigns. Lender shall have the right, without
the necessity of any consent, authorization or other action by Borrower, to
sell, hypothecate, assign, securitize or grant participations in all or a
portion of Lender’s interest in the Loans and the Loan Documents to other
financial institutions or other Persons of Lender’s choice and on such terms as
are acceptable to Lender in Lender’s sole discretion. Borrower shall not assign,
exchange or otherwise hypothecate this Agreement, or any rights, liabilities or
obligations under this Agreement, in whole or in part, without the prior written
consent of Lender, which consent may be granted or withheld in Lender’s sole
discretion, and any attempted assignment, exchange or hypothecation without
Lender’s written consent shall be void and be of no effect.

 

10.4. Notice. Wherever this Agreement provides for notice to any party (except
as expressly provided to the contrary), it shall be given by messenger,
facsimile, certified U.S. mail with return receipt requested, or nationally
recognized overnight courier with receipt requested, effective when either
received or receipt rejected by the party to whom addressed, and shall be
addressed as provided in the Disclosure Schedule, or to such other address as
the party affected may hereafter designate.

 

10.5. Strict Performance. The failure by Lender at any time to require
Borrower’s strict compliance with or performance of any provision of this
Agreement shall not waive, affect, impair or diminish any right of Lender
thereafter to demand Borrower’s strict compliance with and performance of such
provision. Any suspension or waiver by Lender of any Default or Event of Default
shall not suspend, waive or affect any other Default or Event of Default,
whether the same is prior or subsequent to such suspension or waiver and whether
of the same or a different type.

 

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10.6. Waiver. Borrower waives presentment, protest, notice of dishonor and
notice of protest with respect to any Document or Instrument on or for which it
may be liable to Lender as maker, endorser, guarantor or otherwise (including
but not limited to this Agreement and each Note).

 

10.7. Construction of Agreement. The parties hereto agree that the terms,
provisions and language of this Agreement were the result of negotiations
between the parties, and, as a result, there shall be no presumption that any
ambiguities in this Agreement shall be resolved against either party. Any
controversy over the construction of this Agreement shall be decided without
regard to events of authorship or negotiation.

 

10.8. Expenses; Taxes.

 

(a) Borrower shall reimburse Lender for all reasonable expenses incurred by
Lender in connection with the transactions contemplated by this Agreement or the
other Loan Documents, including, without limitation, fees in connection with any
bank account, the Lockbox, the Blocked Account, wire charges, automatic clearing
house fees and other similar costs and expenses incurred by Lender in carrying
out the transactions contemplated by this Agreement.

 

(b) If, at any time or times prior or subsequent to the Effective Date,
regardless of any of the transactions contemplated by this Agreement are
concluded, or whether or not a Default or an Event of Default then exists,
Lender employs counsel for advice or other representation, incurs legal fees or
expenses, consulting fees or expenses, fees, costs or expenses of external
professionals engaged by Lender, or other out-of-pocket costs or expenses in
connection with: (i) the exercise of any right, power, remedy or privilege of
Lender described in this Agreement or any other Loan Document; (ii) the
negotiation and preparation of this Agreement or any other Loan Document, or any
amendment, modification or restatement of this Agreement or any other Loan
Document; (iii) the administration of this Agreement or any other Loan Document
and the transactions contemplated hereby and thereby; (iv) periodic field exams
or audits and appraisals performed by Lender as limited by the terms hereof; (v)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by Lender, Borrower or any other Person) in any way relating to the Collateral,
this Agreement or any other Loan Document or Borrower’s business or affairs;
(vi) the establishment, attachment, perfection or protection of any Lien on the
Collateral; (vii) any attempt to enforce any right, power, remedy or privilege
of Lender against Borrower or any other Person who may be obligated to Lender by
virtue of this Agreement or any other Loan Document including, without
limitation, Account Debtors, including but not limited to, collection of all or
any portion of the Obligations; or (viii) any attempt to inspect, verify,
protect, preserve, restore, collect, sell, lease, license, liquidate or
otherwise dispose of or realize upon the Collateral; then, in any such event,
all reasonable attorneys’ fees arising from such services and all expenses,
costs and charges of such counsel, all fees, costs, expenses and charges of
consultants and professionals engaged by Lender, and all other costs and
out-of-pocket expenses of Lender relating to any of the events or actions
described above shall be payable by Borrower to Lender, and shall be additional
Obligations under this Agreement secured by the Collateral.

 

(c) Additionally, if any tax, levy or charge (including any intangibles tax,
stamp tax or recording tax but excluding any tax based on the income or revenues
of Lender) shall be imposed upon or payable by Lender in connection with the
execution or delivery of this Agreement, or the execution, delivery, issuance or
recording of any other Loan Document, or the creation of any of the Obligations
under this Agreement (i) Borrower will pay (or will promptly reimburse Lender
for the payment of) all such taxes, levies and charges including, but not
limited to, any interest and penalties thereon, (ii) following receipt of notice
from Lender regarding the claim for payment of, or imposition of, any such tax,
levy or charge, with the consent of Lender, which consent may not be
unreasonably withheld, conditioned or delayed, Borrower shall have the right, at
its own cost and expense, to contest the imposition of such tax, levy or charge,
and with the consent of the Lender, which consent may not be unreasonably
withheld, conditioned or delayed, to compromise or settle such claim for such
tax, levy or charge and pay the same following such compromise or settlement,
and (iii) in any circumstance described in clause (i) or (ii) above, Borrower
will indemnify, defend and hold Lender harmless from and against any liability
in connection therewith.

 

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(d) Borrower’s obligations under this Section 10.8 shall survive termination of
Lender’s commitment to make Loans and Advances hereunder and the termination of
this Agreement.

 

10.9. Interest, Fees and Reimbursements Charged to Revolving Credit. Borrower
agrees that Lender may (a) charge all interest, fees, costs and expenses payable
by Borrower to Lender pursuant to the terms of this Agreement and the other Loan
Documents (including any amount paid by Lender and required to be reimbursed by
Borrower pursuant to the provisions of Section 10.8) to the Revolving Credit,
(b) pay such amounts to Lender from the proceeds of the Revolving Credit, and
(c) treat each such payment as an Advance of the Revolving Credit on the date
the proceeds of an Advance described immediately above are paid to Lender.

 

10.10. Marketing and Advertising. Borrower hereby authorizes and gives
permission for Lender and Lender’s Affiliates to use the legal or fictional
company name, logo, trademark and/or personal quotes in connection with
promotional materials that Lender may disseminate to the public relating to
Lender’s relationship with Borrower. Promotional materials may include, but are
not limited to, brochures, video tapes, emails, internet websites, advertising
in newspapers and/or other periodicals, lucites, pictures and photographs.
Lender shall provide Borrower with a copy of promotional materials prepared by
Lender or Lender’s Affiliates prior to making such promotional materials
available to the public.

 

10.11. Waiver of Right to Jury Trial. Borrower and Lender recognize that in
matters related to the Loans, this Agreement and/or the other Loan Documents,
and as each may be subsequently modified and/or amended, either party may be
entitled to a trial in which matters of fact are determined by a jury (as
opposed to a trial in which such matters are determined by a judge, magistrate,
referee or other elected or appointed decider of facts). By executing this
Agreement, Lender and Borrower will give up their respective right to a trial by
jury. Borrower and Lender each hereby expressly acknowledges that this waiver is
entered into to avoid delays, minimize trial expenses, and streamline the legal
proceedings in order to accomplish a quick resolution of claims arising under or
in connection with this Agreement, the other Loan Documents, the Loan(s), the
Note(s) and the transactions contemplated by this Agreement.

 

(a) WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, BORROWER
AND LENDER EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
THAT BORROWER OR LENDER MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION, ACTION, SUIT OR PROCEEDING, DIRECTLY OR INDIRECTLY, AT ANY TIME
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, ANY LOAN, ANY NOTE,
ANY LOAN DOCUMENT OR ANY TRANSACTION CONTEMPLATED BY THIS AGREEMENT, BEFORE OR
AFTER MATURITY.

 

(b) CERTIFICATIONS. BORROWER HEREBY CERTIFIES THAT NEITHER ANY REPRESENTATIVE
NOR AGENT OF LENDER NOR LENDER’S COUNSEL HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, OR IMPLIED THAT LENDER WOULD NOT, IN THE EVENT OF ANY LITIGATION,
ACTION SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER. BORROWER
ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATION HEREIN.

 

33

 

 

10.12. Indemnification by Borrower. Borrower hereby covenants and agrees to
indemnify, defend (with counsel selected by Lender) and hold harmless Lender,
Lender’s Affiliates and their respective servicers, members, managers,
directors, shareholders, officers, partners, employees, attorneys, consultants
and agents (collectively, the “Indemnitees”) from and against any and all
claims, damages, liabilities, reasonable costs and expenses (including, without
limitation, actual attorney’s fees and expenses and other costs of investigation
or defense, including those incurred upon any appeal), which may be incurred by
or asserted against any Indemnitee (whether for breach of contract, in tort or
under any other theory of liability) in connection with or as a result of credit
having been extended, suspended or terminated under this Agreement or the other
Loan Documents or with respect to the execution, delivery, enforcement,
performance or administration of, or in any other way arising out of relating
to, this Agreement or the other Loan Documents or any other documents or
transactions contemplated by or referred to in this Agreement, or any action or
failure to act with respect to any of the foregoing, including any and all
product liabilities, environmental liabilities, taxes and legal costs and
expenses arising out of or incurred in connection with disputes between or among
any parties to any of the Loan Documents, the correctness, validity or
genuineness of any Instrument or Document that may be released or endorsed to
Borrower by Lender (which shall automatically be deemed to be without recourse
to Lender in any event), the existence, character, quantity, quality, condition,
value or delivery of any Goods purporting to be represented by any such
Instruments or Documents, or any broker’s commission, finder’s fee or similar
charge or fee payable by Borrower in connection with the Loans and the
transactions contemplated by this Agreement (collectively, the “Indemnified
Liabilities”), except to the extent that any such Indemnified Liability is
determined by a court of competent jurisdiction in a final non-appealable
judgment to have resulted from such Indemnitee’s gross negligence or willful
misconduct. BORROWER, FOR ITSELF AND FOR ALL SUCCESSORS, ASSIGNS, THIRD PARTY
BENEFICIARIES AND ALL OTHER PERSONS THAT MAY ASSERT CLAIMS DERIVATIVELY THROUGH
SUCH PARTY, HEREBY WAIVES ANY AND ALL CLAIMS FOR INDEMNIFIED LIABILITIES AGAINST
ALL INDEMNITEES EXCEPT TO THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITY IS
DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL, NON-APPEALABLE
JUDGMENT TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. NO INDEMNITEE SHALL BE RESPONSIBLE OR LIABLE TO BORROWER, ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT UNDER ANY
POWER OF ATTORNEY OR FOR INDIRECT PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
THAT MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR
TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER. THE PROVISIONS OF THIS
SECTION 10.12 SHALL SURVIVE TERMINATION OF LENDER’S COMMITMENT TO MAKE LOANS AND
ADVANCES HEREUNDER AND THE TERMINATION OF THIS AGREEMENT.

 

10.13. Savings Clause for Indemnification. To the extent that Borrower’s
undertaking to indemnify, pay and hold harmless set forth in Section 10.12 above
may be unenforceable because it violates any law or public policy, Borrower
shall contribute the maximum portion which it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all matters referred to
under Section 10.12.

 

10.14. Lender’s Performance. Lender shall not be responsible for any failure of
any Advance to be credited to any account of Borrower (i) if such failure is
caused by conditions beyond Lender’s control including, but not limited to Acts
of God, restrictions of Governmental Units (including the denial or cancellation
of any necessary license, registration or permit), wars, insurrections, or
interruptions of telephone service or internet access caused by a service
provider or resulting from the failure of a service provider’s equipment,
software or personnel, and (ii) if such failure is not caused by or due to an
event, occurrence or condition described in clause (i) immediately above, unless
such failure is caused by or due to Lender’s gross negligence or willful
misconduct as determined by a court of competent jurisdiction in a final,
non-appealable judgment.

 

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10.15. Entire Agreement; Amendments; Lender’s Consent. This Agreement (including
the Schedules and Exhibits) constitutes the entire agreement between Lender and
Borrower with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions between
Lender and Borrower, whether express or implied, oral, written, inscribed on a
tangible medium or stored in an electronic or other medium, with respect to the
subject matter hereof. No amendment or waiver of any provision of this
Agreement, nor consent by Lender to any departure by Borrower therefrom, shall
in any event be effective unless the same shall be in writing and Authenticated
by Lender in such writing, and then such amendment, waiver or consent shall be
effective only to the extent specifically set forth in such writing. No
discussions, negotiations or statements, whether oral, or in electronic or other
format, by Lender or between Borrower and Lender with respect to the subject
matter of this Agreement or any of the other Loan Document shall be valid and
binding against Lender, nor shall the same create a binding obligation on Lender
to lend money or to take any other action with respect to the Loans or Borrower,
unless the same is reduced to writing and Authenticated by Lender in such
writing.

 

10.16. Cross Default; Cross Collateralization. Borrower hereby acknowledges and
agrees that (a) each other Loan Document and agreement between Borrower and
Lender is hereby amended, to the extent necessary, to provide that a Default or
an Event of Default under this Agreement is a default or event of default,
respectively, under each such Loan Document or agreement, and a default or event
of default under any Loan Document or agreement between Borrower and Lender is a
Default or an Event of Default, respectively, under this Agreement, and (b) the
Collateral secures the Full Payment to Lender in cash and performance of the
Obligations, whether now or hereafter outstanding under all other Loan Documents
and agreements between Borrower and Lender, and that the Collateral and any
other Property of any other Person pledged to Lender in connection with the
transactions contemplated by this Agreement under any other Loan Document or
agreement with Lender secures the Full Payment to Lender in cash and performance
of the Obligations.

 

10.17. Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.

 

10.18. Severability of Provisions. Any provision of this Agreement or any of the
other Loan Documents that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement or the other Loan Documents or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

10.19. Governing Law; Consent to Jurisdiction.

 

(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND MADE BY BORROWER
AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF EACH NOTE
DELIVERED PURSUANT HERETO WERE AND ARE DISBURSED FROM THE STATE OF NEW YORK. THE
PARTIES AGREE THAT THE STATE OF NEW YORK HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND
IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED ENTIRELY IN SUCH STATE WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD RESULT IN A GOVERNING LAW OTHER THAN
THE LAW OF THE STATE OF NEW YORK. TO THE FULLEST EXTENT PERMITTED BY LAW, LENDER
AND BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT OR ANY NOTE ISSUED
BY BORROWER TO LENDER IN CONNECTION HEREWITH.

 

35

 

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT
OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN THE SOLE OPTION OF
LENDER IN ANY FEDERAL OR STATE COURT LOCATED IN WESTCHESTER COUNTY, NEW YORK,
PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW; HOWEVER,
LENDER MAY, AT ITS OPTION, COMMENCE ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION TO OBTAIN POSSESSION OF OR FORECLOSE UPON ANY
COLLATERAL, TO OBTAIN EQUITABLE RELIEF OR TO ENFORCE ANY JUDGMENT OR ORDER
OBTAINED BY LENDER AGAINST BORROWER OR WITH RESPECT TO ANY COLLATERAL, TO
ENFORCE ANY RIGHT, POWER, REMEDY OR PRIVILEGE UNDER THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR UNDER APPLICABLE LAW OR TO OBTAIN ANY OTHER RELIEF DEEMED
APPROPRIATE BY LENDER, AND LENDER AND BORROWER EACH WAIVES ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND LENDER AND BORROWER EACH HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER
REPRESENTS AND ACKNOWLEDGES THAT IT HAS REVIEWED THIS CONSENT TO JURISDICTION
PROVISION WITH ITS LEGAL COUNSEL, AND HAS MADE THIS WAIVER KNOWINGLY AND
VOLUNTARILY, WITHOUT COERCION OR DURESS.

 

10.20. Rules of Construction. The terms “herein”, “hereof,” and “hereunder” and
other words of similar import refer to this Agreement as a whole and not to any
particular section, paragraph, or subdivision. Any pronoun used shall be deemed
to cover all genders. In the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including” and
the words “to” and “until” each means “to but excluding.” The section titles,
table of contents, and list of exhibits and schedules appear as a matter of
convenience only and shall not affect the interpretation of this Agreement. All
references to (a) statutes and related regulations shall include all related
rules and implementing regulations and any amendments of same and any successor
statutes, rules, and regulations; (b) any agreement, instrument, or other
documents (including any of the Loan Documents) shall include any and all
modifications and supplements thereto and any and all restatements, extensions,
or renewals thereof to the extent such modifications, supplements, restatements,
extensions, or renewals of any such documents are permitted by the terms
thereof; (c) any Person (including Borrower or Lender) shall mean and include
the successors and permitted assigns of such Person; or (d) “including” and
“include” shall be understood to mean “including, without limitation,”
regardless of whether the “without limitation” is included in some instances and
not in others (and, for purposes of each Loan Document, the parties agree that
the rule of ejusdem generis shall not be applicable to limit a general
statement, which is followed by or referable to an enumeration of specific
matters to matters similar to the matters specifically mentioned).

 

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

 

36

 

 

LENDER:         ACF FINCO I LP         By: /s/ John Nooney   Name: John Nooney  
Its: Managing Director   Effective Date: August 31, 2016  

 

BORROWER:         JOHN KEELER & CO. INC.         By: /s/ John Keeler   Name:
John Keeler   Its: CEO   Date: August 31, 2016  

 

DEFINITIONS SCHEDULE

 

“Additional Specified Subordinated Indebtedness” means subordinated Indebtedness
in an amount not less than $500,000 incurred by Borrower pursuant to loans made
to it by Specified Subordinated Creditor, evidenced by a promissory note or
other instrument in form and substance acceptable to Lender.

 

“Advance” means each principal amount of the Revolving Credit delivered to
Borrower in connection with a Notice of Borrowing, and each other amount charged
to the principal of the Revolving Credit pursuant to this Agreement.

 

“Affiliate” of a Person means a “Person related to” such Person as defined in
Sections 9-102(62) and 9-102(63) of the UCC, and for purposes of this Agreement
also includes any employee of such Person, and any entity controlled by or under
common control with any such employee. For purposes of this definition the term
“control” as used in Section 9-102(63) of the UCC means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and/or policies of a Person, whether through the ownership of voting stock or
other equity interests, by agreement or otherwise.

 

“Anti-Terrorism Laws” shall mean any and all laws, regulations, rules, orders,
etc. in effect from time to time relating to anti-money laundering and
terrorism, including, without limitation, Executive Order No. 13224 (effective
September 24, 2001) and the USA Patriot Act (Pub. L. No. 107-56 (Oct. 12,
2001)).

 

“Bacolod” means Bacolod Blue Star Export Corp., a Philippine corporation.

 

 

“Banking Day” means a day on which commercial banks are not authorized or
required to close in New York State.

 

[Loan and Security Agreement]

 

 

 

 

“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101, et
seq.), as amended.

 

“Blocked Person” shall mean (a) any person (i) listed in the annex to, or is
otherwise subject to the provisions of, Executive Order No. 13224 or any other
applicable regulations of the U.S. Department of Treasury Office of Foreign
Asset Control or any successor agency (“OFAC”), (ii) owned or controlled by, or
acting for or on behalf of, any person listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224 or other applicable OFAC
regulations, (iii) with which Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law, (iv) that commits,
threatens or conspires to commit or supports “terrorism” as defined in Executive
Order No. 13224 or other applicable OFAC regulations, (v) that is named a
“specially designated national” or “blocked person” on the most current list
published by OFAC or other similar list, or (vi) that is named a “denied person”
on the most current list published by the U.S. Commerce Department, (b) an
agency of the government of a Sanctioned Country, (c) an organization controlled
by a Sanctioned Country, or (d) a person resident in a Sanctioned Country to the
extent subject to a sanctions program administered by OFAC.

 

“Borrowing Base” means, at any time, an amount equal to:

 

(a) an amount not to exceed eighty-five percent (85%) of the aggregate amount of
Eligible Receivables at such time; plus

 

(b) the least of (i) $10,000,000, (ii) seventy-five percent (75%) of the Value
of Eligible Inventory at such time, and (iii) eighty-five percent (85%) of the
NOLV of Eligible Inventory, and

 

(c) the aggregate amount of all Reserves in effect at such time;

 

provided, however, that the portion of the Borrowing Base calculated on any date
with reference to (I) Eligible Inventory shall not exceed seventy-five percent
(75%) of the total Borrowing Base, and (II) Eligible In-Transit Inventory shall
not exceed $3,500,000.

 

For purposes of determining the amount to be advanced against Inventory in
calculating the Borrowing Base as described above, the “Value” of Inventory
shall mean the lesser of cost or the fair market value of such Inventory, and
all amounts of an item of Inventory maintained by Borrower at any time exceeding
the average amount of such item sold by Borrower during the preceding twelve
(12) consecutive calendar months shall be disregarded.

 

“Borrowing Base Certificate” means a certificate in the form of Exhibit B
prepared by Borrower.

 

“Borrowing Capacity” means, with respect to the Revolving Credit, at any time,
an amount equal to (a) the lesser of (i) the Revolving Credit Limit, or (ii) the
Borrowing Base at such time, minus (b) the Borrowing Capacity Block at such
time.

 

“Borrowing Capacity Block” means an amount equal to $500,000 which, after
Borrower’s receipt of the Additional Specified Subordinated Indebtedness, is
subject to the following reductions:

 

(a) if Borrower achieves year-to-date EBITDA for Fiscal Year 2016 (as reported
in the financial statements required by Section 6.5) of at least $250,000, a
reduction to $375,000 on the first day of the calendar month following Lender’s
receipt of such financial statements and at all times thereafter (unless further
reduced as set forth in paragraph (b) below), and

 

(b) if Borrower achieves year-to-date EBITDA for Fiscal Year 2016 (as reported
in the financial statements required by Section 6.5) of at least $500,000, a
reduction (or further reduction, if applicable) to $250,000 on the first day of
the calendar month following Lender’s receipt of such financial statements and
at all times thereafter, and

 

2

 

 

(c) Beginning with the calendar month ending December 31, 2016 and as of the
last day of any month thereafter, if Borrower achieves EBITDA (as reported in
the financial statements required by Section 6.5) for any trailing six (6) month
period of at least $600,000, a reduction (or further reduction, if applicable)
to $250,000 on the first day of the calendar month following Lender’s receipt of
such financial statements and at all times thereafter.

 

“Capital Expenditures” means for any period, as determined in accordance with
GAAP, the dollar amount of gross expenditures (including obligations under
capital leases) made or incurred for fixed assets, real property, plant and
equipment, and all renewals, improvements and replacements thereto (but not
repairs thereof) during such period.

 

“Charter Documents” means (a) with respect to a corporation, such corporation’s
certificate or articles of incorporation (as applicable) and bylaws in effect on
the Effective Date, and as the same may be amended, restated or otherwise
modified after the date hereof, (b) with respect to a partnership, such
partnership’s articles or certificate of formation or certificate of partnership
(as applicable) or other certificate required to be filed with any Governmental
Unit in order to form such partnership, and partnership agreement in effect on
the Effective Date, and as the same may be amended, restated or otherwise
modified after the date hereof, and (c) with respect to a limited liability
company or limited liability partnership, such limited liability company’s or
limited liability partnership’s articles or certificate of formation (as
applicable) and limited liability company agreement, limited liability
partnership agreement or operating agreement (as applicable) in effect on the
Effective Date, and as the same may be amended, restated or otherwise modified
after the date hereof.

 

“Code” means the United States Internal Revenue Code (26 U.S.C. §1, et seq.), as
the same may be amended.

 

“Collateral” means all of Borrower’s right, title and interest in and to the
following, wherever located and whether owned on the Effective Date or
thereafter acquired, whether owned or held by Borrower or by any other Person in
any manner for Borrower’s account (and specifically includes all accessions to,
substitutions for and all replacements, products and cash and non-cash proceeds
of all of the following): all cash, Money (as defined in Section 1-201(24) of
the UCC), Accessions, Accounts (including without limitation all Receivables and
unearned premiums with respect to insurance policies insuring any of the
Collateral and claims against any Person for loss of, damage to, or destruction
of any or all of the Collateral), Certificates of title, Chattel Paper,
Commercial Tort Claims (specifically including all Commercial Tort Claims
arising from or in connection with the matters described in the attached
Disclosure Schedule), Deposit Accounts, Documents (including but not limited all
to books and records, and all recorded data of any kind or nature, regardless of
the medium of recording, including, without limitation, writings, plans,
specifications, schematics customer lists, credit files, computer programs,
printouts and other computer materials and records of Borrower pertaining to any
of the items or subject matter described in this paragraph), Equipment, General
Intangibles, Goods, Health-Care-Insurance Receivables, Instruments, Inventory,
Investment Property, Letter-Of-Credit Rights, Proceeds, Records, Software and
Supporting Obligations, all rights to payment for money or funds advanced or
sold, and all monies or other Property of any kind now or at any time or times
hereafter in the possession or under the control of Lender or any Affiliate of
Lender or any representative, agent or correspondent of Lender pertaining to any
of the items or subject matter described in this paragraph, and to the extent
not otherwise included in the foregoing, all other property in which a security
interest may be granted under the UCC or which may be delivered to and held by
Lender pursuant to the terms hereof. Notwithstanding the foregoing, if on or
prior to the Effective Date Borrower has not obtained the written consent of a
Governmental Unit necessary to permit the assignment of any Document,
Instrument, Chattel Paper, contract or agreement by and between Borrower and any
Governmental Unit (a “Government Contract”) in connection with the granting by
Borrower to Lender of the security interests described herein, the Collateral
and Lender’s security interests described herein shall specifically exclude each
such Government Contract, and all of Borrower’s rights, title and interests
therein, however, in such case the Collateral and Lender’s security interests
granted herein shall specifically include and shall be limited to all Accounts
and Receivables in connection with such Government Contract and all of
Borrower’s rights, title and interests in and to such Accounts and Receivables,
and all such Accounts and Receivables shall be considered as Collateral for
purposes hereof. Notwithstanding anything contained in this Agreement or the
other Loan Documents to the contrary, the term “Collateral” shall not include
the following:

 

3

 

 

(a) Borrower’s rights or interests in or under any license, contract or
agreement to the extent, but only to the extent that such a grant would, under
the terms of such license, contract or agreement, constitute or result in a
breach or default under such license, contract or agreement (other than to the
extent that any such term has been waived or would be rendered ineffective
pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor
provision or provisions)), provided that (A) immediately upon either (i) an
Event of Default pursuant to Section 9.1(f) or Section 9.1(g) or (ii) the
ineffectiveness, lapse, termination or waiver of any such term, the Collateral
shall include, and Borrower shall be deemed to have granted a security interest
as of the Effective Date in all such rights and interests as if such term had
never been in effect, and (B) to the extent that any such lease, license,
contract or agreement would otherwise constitute Collateral (but for the
provisions of this paragraph), all Receivables or other amounts due and payable
or to become due and payable from Borrower’s performance under such license,
contract or agreement and all proceeds resulting from the sale or disposition by
Borrower of any rights of Borrower under such license, contract or agreement
shall constitute Collateral, or

 

(b) any real property, or

 

(c) any Equity Interests in Borrower which Guarantor is prohibited from pledging
under the terms of any settlement agreement entered into in connection with, or
court order issued in, case number 07-29085 FC (28) pending in the Circuit Court
of the 11th Judicial Circuit in and for Miami-Dade County Florida, styled as In
re: The Marriage of Maria Fernanda Keeler and John R. Keeler.

 

“Compliance Certificate” means a certificate in the form of Exhibit C prepared
by Borrower.

 

“Contract Year” means initially the period of twelve (12) consecutive calendar
months commencing on the Effective Date, and thereafter each period of twelve
(12) consecutive calendar months commencing on the annual anniversary of the
Effective Date.

 

“Default” means each event, occurrence or condition, or series of events,
occurrences or conditions (individually and collectively, an “Occurrence”), that
would constitute an Event of Default as defined in Section 9.1, disregarding (a)
all requirements of notice to be delivered to Borrower under this Agreement in
connection with such Occurrence as a condition to the existence of such
prospective Event of Default, and (b) all periods of time, grace or cure under
this Agreement that must pass prior to the existent of such prospective Event of
Default.

 

“Default Rate” means an annualized rate of interest that is equal to three
percent (3.00%) more than the Revolving Credit Rate.

 

“Eastern Time” means North American Eastern Standard Time, including Eastern
standard time when observing standard time, and Eastern daylight time when
observing daylight saving time.

 

4

 

 

“EBITDA” means, for any period, (a) Borrower’s total income before interest
expense, taxes, depreciation, amortization and fees, costs and expenses paid or
payable by Borrower with respect to the Obligations for such period, plus (b)
any restructuring, consulting or attorneys’ fees actually paid by Borrower to
Conway MacKenzie or Frost Brown and Todd LLC during such period which directly
relate to Borrower’s restructuring, plus (c) any early termination, exit or
accommodation fee charged by AloStar Bank of Commerce and actually paid by
Borrower during such period, plus (d) any legal fees charged by AloStar Bank of
Commerce and actually paid by Borrower during such period, in each case
calculated in accordance with GAAP, consistently applied and determined as of
and at the end of such period; provided, that for each of the months listed
below, EBITDA for such month, and year-to-date EBITDA for the period beginning
January 1, 2016 through the last day of such month, shall be deemed to be the
amount corresponding thereto:

 

Month  EBITDA for such Month   Year to Date EBITDA  January 31, 2016  $(87,183) 
$(87,183) February 29, 2016  $27,248   $(59,935) March 31, 2016  $(37,480) 
$(97,415) April 30, 2016  $(36,600)  $(134,015) May 31, 2016  $66,639  
$(67,376) June 30, 2016  $138,873   $71,497  July 31, 2016  $120,844   $192,340 

 

For purposes of this Agreement, adjustments to EBITDA for any period with
respect to extraordinary items of income and expense during such period shall be
made by Lender in its sole discretion.

 

“Eligible In-Transit Inventory” means Inventory that meets all of the criteria
for Eligible Inventory except that it constitutes In-Transit Inventory, but only
if:

 

(a) title and risk of loss with respect to such Inventory has passed to Borrower
on or before such date;

 

(b) Borrower is in default of any of its obligations to the Vendor thereof
(whether related to such Inventory or otherwise), and such Vendor does not have
any right on such date, under applicable law or pursuant to any document
relating to the sale of such Inventory, to reclaim, divert the shipment of,
reroute, repossess, stop delivery of or otherwise assert any Lien rights or
title retention with respect to such Inventory;

 

(c) all inspection or other requirements of law in the country of origin that
are applicable to such Inventory and are a prerequisite to the shipment thereof
have been satisfied;

 

(d) such Inventory is fully insured by Borrower in such amounts, with such
insurance companies and subject to such deductibles as are satisfactory to
Lender (including, without limitation, marine cargo insurance) and in respect of
which Lender has been named as first lender loss payee pursuant to a loss
payable endorsement satisfactory to Lender;

 

(e) such Inventory complies in all material respects with all United States laws
concerning food safety and other similar laws applicable to such Inventory;

 

(f) such Inventory is in the possession of a common carrier, which is not an
Affiliate of such Vendor or Borrower;

 

5

 

 

(g) such Inventory is evidenced by a tangible negotiable bill of lading that (i)
is issued by such carrier to the order of Borrower (or, if otherwise required by
Lender in its discretion, to the order of Lender), (ii) covers only such
Inventory, (ii) for all bills of lading issued on or after October 1, 2016,
bears a conspicuous notation on its face of Lender’s security interest therein
and lists Lender as a notify party (unless such bill of lading is issued to the
order of Lender), and (iv) is otherwise in form and substance satisfactory to
Lender;

 

(h) all original counterparts of the bill of lading covering such Inventory are
in the United States and are in the possession of Lender or an Eligible
Logistics Provider no later than three (3) Banking Days after Borrower’s receipt
from the Vendor of such Inventory or the carrier engaged by such Vendor with
respect to such Inventory;

 

(i) such Inventory is not subject to a hold by the U.S. Food and Drug
Administration or any other Governmental Unit for more than 30 calendar days,
whether for inspection purposes or otherwise; and

 

(j) such Inventory has not been in transit for more than 75 calendar days.

 

“Eligible Inventory” means Inventory that Borrower has identified and described
to Lender and that is in all other respects acceptable to Lender in Lender’s
permitted discretion, and that meets all of the following criteria on the date
of any Advance or Loan based thereon and on each day thereafter while any
Obligation is outstanding:

 

(a) the Inventory consists of saleable and non-obsolete refrigerated or frozen
seafood finished goods acquired by Borrower in the Ordinary Course of Business
of Borrower; and

 

(b) the Inventory does not consist of packaging supplies, labels or maintenance
items; and

 

(c) the Inventory shall not have been in Borrower’s possession or control for a
period of more than twelve (12) calendar months in the case of refrigerated
Inventory or eighteen (18) calendar months in the case of frozen Inventory; and

 

(d) Borrower is the sole owner of the Inventory; none of the Inventory is being
held or shipped by Borrower on a consignment or approval basis; Borrower has not
sold, assigned or otherwise transferred all or any portion thereof; and none of
the Inventory is subject to any claim or Lien (other than a Permitted Lien); and

 

(e) if any of the Inventory is represented or covered by any Certificate Of
Title, Instrument, Document or Chattel Paper, Borrower is the sole owner of each
such Certificate Of Title, Instrument, Document or Chattel Paper, each of which
is in the possession of Borrower (or, for all Documents consisting of bills of
lading, in the possession of an Eligible Logistics Provider no later than three
(3) Banking Days after Borrower’s receipt thereof), none of which has been sold,
assigned or otherwise transferred, and none of which is subject to any claim or
Lien; and

 

(f) the Inventory is not In Transit Inventory unless it is Eligible In-Transit
Inventory;

 

(g) unless it is Eligible In-Transit Inventory, the Inventory is subject to
Borrower’s contract or sole possession, is located at a facility described on
the Disclosure Schedule that is (i) owned, operated or used by Borrower, or (ii)
if located at a facility that is not owned by Borrower, (A) the landlord,
warehouseman or bailee of such facility has delivered a waiver in form and
substance acceptable to Lender in Lender’s permitted discretion and (B) if a
warehouseman or bailee, such Person is otherwise acceptable to Lender in
permitted discretion (it being understood that Los Angeles Cold Storage is
acceptable to Lender);

 

6

 

 

(h) any representation contained in this Agreement with respect to such
Inventory or with respect to whether such Inventory is Eligible Inventory was
inaccurate when made; and

 

(i) Lender has a valid and perfected first priority security interest in the
Inventory.

 

“Eligible Logistics Provider” means any customs broker or non-vessel operating
common carrier which has its principal assets, place of organization and place
of business in the United States, which is acceptable to Lender, with whom
Lender has entered into an Imported Goods Agreement, and which has not asserted
any adverse claim or Lien against any In-Transit Inventory.

 

“Eligible Receivable” means each Receivable: for which the Records and accounts
are located at Borrower’s facilities where such Records are maintained as
described in the Disclosure Schedule; arising out of a sale in the Ordinary
Course of Business of Borrower; relating to a sale made by Borrower to a Person
that is not an Affiliate of Borrower; that is not in dispute; with respect to
which each representation with respect to Eligible Receivables set forth in this
Agreement is accurate, and; that is acceptable to Lender in Lender’s permitted
discretion. Lender may treat any Receivable as ineligible if:

 

(a) more than ninety (90) consecutive calendar days has passed from the original
invoice date for such Receivable or sixty (60) consecutive calendar days have
passed from the original due date for such Receivable; or

 

(b) any representation contained in this Agreement with respect to such
Receivable or with respect to whether such Receivable is an Eligible Receivable
was inaccurate when made; or

 

(c) the Account Debtor has disputed liability or made any claim with respect to
such Receivable; or

 

(d) the Account Debtor (i) has filed a case for bankruptcy or reorganization
under the Bankruptcy Code, or (ii) has had filed against it any case under the
Bankruptcy Code, or (iii) has made an assignment for the benefit of creditors,
or (iv) has failed, suspended business operations, become insolvent, (v) has had
a receiver or a trustee appointed for all or a significant portion of its assets
or affairs, or (vi) has provided notice, or Lender has received notice, of an
imminent insolvency proceeding of such Account Debtor; or

 

(e) the Account Debtor is a supplier to or creditor of Borrower; or

 

(f) the Account Debtor has or asserts any right of offset with respect to such
Receivable or asserts any claim or counterclaim against Borrower with respect to
such Receivable; or

 

(g) Borrower is not the sole owner of the Receivable; Borrower has sold,
assigned or otherwise transferred all or any portion thereof; or any portion of
the Receivable is subject to any claim or Lien (other than a Permitted Lien); or

 

(h) the sale giving rise to such receivable is to an Account Debtor domiciled
outside of the United States or Canada excluding the Province of Quebec (each, a
“Canadian Receivables”); provided, however, that, any such Canadian Receivables
shall be billed in U.S. Dollars and the aggregate amount of Canadian Receivables
that constitute Eligible Receivables shall not exceed $250,000 on any date; or

 

(i) fifty percent (50%) or more of the Receivables of any Account Debtor and/or
its Affiliates is ineligible, then all the Receivables of such Account Debtor
and its Affiliates shall be treated as ineligible; or

 

7

 

 

(j) any portion of the Eligible Receivables of the Account Debtor and/or its
Affiliates exceeds twenty percent (20%) of the total amount of all Eligible
Receivables, then the amount of such excess shall be treated as ineligible;
provided, however, such percentage shall be (i) forty percent (40%) with respect
to US Foods Holding Company and its Affiliates and (ii) thirty percent (30%)
with respect to Performance Food Group Company and its Affiliates;

 

(k) such Receivable relates to a sale of goods or services to the United States
of America, or to a Governmental unit of the United States of America, unless
Borrower assigns its right to payment of such Receivable to Lender in compliance
with the Assignment of Claims Act of 1940, as amended; or

 

(l) such Receivable relates to a sale of goods or services to any State of the
United States of America, or to any Governmental Unit of any State of the United
States of America, unless Borrower assigns its right to payment of such
Receivable to Lender in compliance with all applicable laws, rules, regulations
or administrative or judicial determinations relating to the assignment (in
whole or in part) of any agreement or contract pursuant to which such sale was
made; or

 

(m) the goods or services covered by such Receivable were shipped to the
customer or performed for the customer, as applicable, prior to or after the
date of the invoice giving rise to such Receivable, or such Receivable consists
of a sale to an Account Debtor: on consignment; on any bill and hold basis; on
any guaranteed sale, sale or return, sale on approval or other repurchase or
return basis; on any billing in advance of shipment or other “pre-billing”
basis; or under any payment plan, scheduled installment plan, or other extended
payment terms basis, or such Receivable consists of progress billing; or

 

(n) the Account Debtor is located in a state in which Borrower is deemed to be
doing business under the laws of such state and such state denies creditors
access to its courts in the absence of Borrower’s qualification to transact
business in such state or of Borrower’s filing of any reports with such state,
unless Borrower has qualified as a foreign corporation authorized to do business
in such state or has filed all required reports; or

 

(o) such Receivable is evidenced by chattel paper or an instrument of any kind
which has not been assigned or endorsed and delivered to Lender, or such
Receivable has been reduced to judgment; or

 

(p) such Receivable arises from a sale of goods or services to an individual who
is purchasing such goods primarily for personal, family or household purposes;
or

 

(q) Lender reasonably believes that collection of such Receivable is insecure or
that such Receivable may not be paid by reason of the Account Debtor’s financial
inability to pay; or

 

(r) Lender does not have a valid and perfected first priority security interest
in such Receivable.

 

“Environmental Law” means each federal, state and local environmental, land use,
zoning, health, chemical use, safety and sanitation law, statute, ordinance or
code relating to the protection of any water or water vapor, any land surface or
subsurface, air, fish, wildlife, biota or any other natural resources and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of “hazardous substances” and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of any Governmental Unit with respect thereto.

 

“Equity Interests” of a Person means such Person’s issued and outstanding equity
securities, or membership, partnership or profits interests, as applicable, or
debt or securities (or combinations thereof) convertible into such Person’s
equity securities, or membership, partnership or profits interests, as
applicable.

 

8

 

 

“ERISA” means the Employee Retirement Income Security Act of 1974 (29 U.S.C. Ch.
18) and related sections of the Code, as amended.

 

“Fiscal Quarter” means the three (3) consecutive calendar month period
commencing on the first day of the Fiscal Year, and each three (3) consecutive
calendar month period in such Fiscal Year commencing on the day immediately
following end of the preceding Fiscal Quarter.

 

“Fiscal Year” means a year of 365 or 366 days, as the case may be, ending on the
last day of December in any calendar year.

 

“Fixed Charge Coverage Ratio” means, for any period, the ratio of (a) EBITDA for
such period, divided by (b) the sum of the following for such period (calculated
on a pre-tax basis): (i) all regularly scheduled cash repayments of principal of
the Obligations and other Indebtedness of Borrower (including the principal
component of any payments in respect of capital lease obligations), whether or
not actually paid or whether accrued or capitalized during such period; plus
(ii) all regularly scheduled cash payments of interest payable by Borrower in
respect of the Obligations and other Indebtedness (including the interest
component of any payments in respect of capital lease obligations), whether or
not actually paid or whether accrued or capitalized during such period; plus
(iii) all fees, costs and expenses paid or payable by Borrower with respect to
the Obligations (including all collateral management fees, unused line fees and
other amounts other than the Facility Fee) and other Indebtedness whether or not
actually paid or whether accrued or capitalized during such period; plus (iv)
with respect to the Facility Fee, an amount equal to $5,833 per month to be
multiplied by the number of months (of portion thereof) during such period, plus
(v) Unfunded Capital Expenditures during such period, plus (vi) all cash
dividends or distributions on Borrower’s equity, membership or partnership
interests (as applicable) during such period, plus (vii) all taxes and Tax
Distributions actually paid during such period.

 

“Full Payment” means the full, final and indefeasible payment in full of all of
the Obligations (or, in the case of any contingent Obligations, such as letters
of credit, the cash collateralization of such contingent Obligations in a manner
satisfactory to Lender and to the extent of 105% of the liquidated or estimated
amount of such contingent Obligations); termination of Lender’s commitments to
make Loans and Advances hereunder; and release by each Borrower, Guarantor or
other person obligated to pay the Obligations (and by any representative of
creditors of each such Person in any bankruptcy or other insolvency proceeding
of such Person) of any claims that such Person has or asserts to have against
Lender or any of its Affiliates.

 

“GAAP” means generally accepted accounting principles consistently applied and
maintained throughout the period indicated and consistent with the prior
financial practice of Borrower, except for changes mandated by the Financial
Accounting Standards Board or any similar accounting authority of comparable
standing.

 

“Governmental Rules” means all federal, state and local governmental rules,
ordinances and regulations applicable to Borrower or Borrower’s ownership or use
of properties or the operation or conduct of its business.

 

“Governmental Unit” means, with respect to the government of the United States,
a State of the United States or a foreign country (a “government”) (a) a
subdivision, agency, department, county, parish, municipality or other unit of
such government, or (b) an entity exercising executive, legislative, judicial,
taxing, law enforcement, regulatory or administrative powers or functions of or
pertaining to such government.

 

9

 

 

“Guarantor” means John R. Keeler and any other Person now or hereafter
guaranteeing, endorsing, acting as surety of, or otherwise becoming liable for
any Obligations, but excluding a Support Party that has not otherwise also
executed a guaranty agreement in favor of Lender.

 

“Imported Goods Agreement” means an agreement among Lender, Borrower and an
Eligible Logistics Provider, that is in form and substance satisfactory to
Lender and pursuant to which, among other things, the parties shall agree upon
their relative rights with respect to In-Transit Inventory of Borrower.

 

“Indebtedness” of a Person means all obligations for borrowed money of any kind
or nature, including funded debt and unfunded liabilities, contingent
obligations under guaranties or letters of credit or similar financial
instruments or accommodations, and all obligations for the acquisition or use of
any fixed asset or improvements, including capitalized leases, which are payable
over a period longer than one (1) year, regardless of the term thereof or the
Person or Persons to whom the same is payable.

 

“In Transit Inventory” means Inventory that has been purchased by Borrower and
that is being shipped or otherwise transported to Borrower from a point of
origin within the continental United States or is being shipped or otherwise
transported to Borrower from a point of origin outside of the continental United
States.

 

“Lender’s permitted discretion” means, that in connection with a determination
to be made by Lender under this Agreement, or in connection with an election by
Lender to take or refrain from taking an action under this Agreement, Lender may
make such determination, or elect to take or not take such action, as
applicable, in good faith and in the exercise of reasonable business judgment
from the perspective of a secured asset based lender.

 

“LIBOR Rate” means the annual rate of interest for deposits in U.S. Dollars for
a term of three (3) months as quoted on LIBOR01 Page as of 11:00 a.m. London
Time on the second (2nd) Banking Day prior to the date of an Advance until the
first day of the first full month following the date of such Advance, and for
each calendar month thereafter on the second (2nd) Banking Day prior to the
first day of each calendar month, adjusted for reserve requirements and such
other requirements as may be imposed by federal, state or local government and
regulatory agencies.

 

“LIBOR01 Page” means the Reuters Screen LIBOR01 Page (or such other page as may
replace or substitute the LIBOR01 Page on that service), or such other service
as may be selected by Lender as the information vendor for the purpose of
displaying the London interbank offered rate for U.S. Dollar deposits
administered by the ICE Benchmark Administration (or any other Person that takes
over the administration of such rate).

 

“Lien” means a Person’s interest in Property (whether arising by agreement or
under any statute or law or otherwise) securing an obligation owed to, or a
claim by, such Person, including any lien, security interest, pledge,
hypothecation, assignment, trust, reservation, encroachment, easement,
right-of-way, covenant, condition, restriction, lease, or other title exception
or encumbrance.

 

“Loan Document” means this Agreement and each other agreement, document and
instrument delivered by Borrower or any other Person to Lender or by Lender to
any other Person in connection with the Obligations, the Loans, the Notes, or
any other Indebtedness payable to Lender in connection with the transactions
contemplated by this Agreement, as the same may be amended, modified,
supplemented, extended or restated from time to time.

 

“Loans” means the Revolving Credit (including all Advances thereof) and all
other Indebtedness of Borrower to Lender under the terms of this Agreement.

 

10

 

 

“Material” and “Materially” mean a level of significance that (a) if capable of
reduction to a monetary amount, would be reasonably expected to exceed $100,000
when aggregated with all other similar matters, and (b) if not capable of
reduction to a monetary amount, would have affected any decision of a reasonable
business person in Lender’s position as an asset-based lender regarding whether
(i) to enter into this Agreement, or (ii) to consummate the transactions
contemplated by this Agreement, or (iii) to continue to make Advances to, or to
continue to extend the Loans, in whole or in part, to Borrower.

 

“Material Adverse Change” means any: (a) Material adverse change in the
business, assets, operations, profits or condition (financial or otherwise), of
Borrower; or (b) Material adverse change in the ability of Borrower to pay or
perform the Obligations in accordance with their terms; or (c) Material adverse
change in the value, collectability or salability of the Collateral taken as a
whole; or (d) the occurrence of any event, development, circumstance or
condition, or series of events, developments, circumstances or conditions, that
has or could reasonably be expected to have a material adverse effect on the
validity or enforceability of this Agreement or any of the other Loan Documents,
or on the perfection or priority of Lender’s security interests in any
Collateral; or (e) the occurrence of any event, development, circumstance or
condition, or series of events, developments, circumstances or conditions, that
has or could reasonably be expected to have a material adverse effect on
Lender’s practical realization of any right, power, remedy or privilege inuring
to Lender under this Agreement, under any other Loan Document, or under
applicable law; or (f) the occurrence of any event, development, circumstance or
condition, or series of events, developments, circumstances or conditions, that
has or could reasonably be expected to materially impair Lender’s security,
materially increase Lender’s risks, or materially impair (i) Borrower’s ability
to perform under this Agreement, or (ii) Borrower’s or any other party’s ability
to perform under any other Loan Document. The determination of whether a
Material Adverse Change has occurred shall be made by Lender in Lender’s sole
discretion.

 

“NOLV” means, as to any Property, the expected dollar amount to be realized at
an orderly negotiated sale of such Property, net of operating expenses,
liquidation expenses, and commissions, as determined by Lender from time to time
based on the most recent Qualified Appraisal of such Property.

 

“Note” means a promissory note Authenticated by Borrower and delivered to Lender
pursuant to the terms of this Agreement.

 

“Notice of Borrowing” means a certificate in the form of Exhibit A prepared by
Borrower.

 

“Obligation” means any Indebtedness, liability, obligation, covenant or duty
owed or owing by Borrower to Lender, of any kind or nature, present or future,
whether or not evidenced by any note, guaranty, Supporting Obligation or other
agreement, document or instrument, whether arising under this Agreement, any
other Loan Document or under any other agreement, document, instrument delivered
to Lender by Borrower, or by operation of law, whether or not for the payment of
money, whether arising in connection with an extension of credit to Borrower or
Borrower’s opening, guaranteeing or confirming of a letter of credit, loan,
guaranty, indemnification or other financial accommodation, whether direct or
indirect (including those acquired by purchase or assignment), absolute or
contingent, due or to become due, now or hereafter arising and howsoever
acquired including, without limitation, each Loan, Advance, and other
Indebtedness payable by Borrower to Lender, all interest payable to Lender with
respect to each Loan, Advance and other Indebtedness of Borrower to Lender, and
each charge, cost, expense, fee, and other sum chargeable to Borrower under this
Agreement, any other Loan Document or any other agreement, document or
instrument delivered by Borrower to Lender. The Obligations shall specifically
include, but not be limited to (i) Borrower’s obligations to finally and
indefeasibly pay to Lender in cash the full principal amounts of all Loans,
Notes and other Indebtedness of Borrower to Lender when due, whether upon
termination, maturity, demand or acceleration under the terms of the Loan
Documents, all interest due and payable thereon, and all fees, costs and
expenses payable in connection therewith, and (ii) Borrower’s obligations to
perform in full all agreements, covenants and duties of Borrower under the Loan
Documents in the manner and at such times as provided by the terms of each such
Loan Document.

 

11

 

 

“Ordinary Course of Business” means, with respect to any transaction involving
any Person, the ordinary course of such Person’s business, as conducted by such
Person in accordance with past practices and undertaken by such Person in good
faith and not for the purpose of evading any covenant or restriction in any Loan
Document.

 

“Permitted Liens” means:

 

(a) Liens in favor of Lender;

 

(b) Liens existing on the Effective Date that are described in the Disclosure
Schedule;

 

(c) Liens for taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to the provisions of ERISA or Environmental
Laws) (i) not yet due and payable or (ii) which are being Properly Contested;

 

(d) claims of materialmen, mechanics, carriers, warehousemen, processors or
landlords arising out of operation of law so long as the obligations secured
thereby (i) are not past due or (ii) are being Properly Contested;

 

(e) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with workers’ compensation, unemployment insurance,
social security and similar laws;

 

(f) Liens on equipment (including capital leases) to secure purchase money
Indebtedness permitted under Section 8.1, so long as such security interests do
not apply to any property of Borrower other than the equipment so acquired, and
the Indebtedness secured thereby does not exceed the cost of such equipment; and

 

(g) Liens in, to or on any Collateral in favor of any creditor of Borrower other
than Lender so long and to the extent that such Lien is junior and subordinate
to the Lien in, to or on Collateral in favor of Lender pursuant to a
subordination agreement executed by Lender.

 

“Post-Closing Letter” means that certain Post-Closing Letter dated on or about
the date hereof, between Borrower and Lender.

 

“Person” means an individual, partnership, limited liability company, limited
liability partnership, corporation, joint venture, joint stock company, land
trust, business trust, unincorporated organization, or Governmental Unit.

 

“Prime Rate” means, at any time, the prime rate published in the “Money Rates”
column of The Wall Street Journal at such time, and in the event that The Wall
Street Journal is not available at such time, the prime rate published in
another publication as determined by Lender in its sole discretion.

 

“Properly Contested” means, with respect to any Indebtedness of Borrower or any
Guarantor (each, an “Obligor”), (a) the obligation is subject to a bona fide
dispute regarding amount or the Obligor’s liability to pay; (b) the obligation
is being properly contested in good faith by appropriate proceedings promptly
instituted and diligently pursued; (c) appropriate reserves have been
established in accordance with GAAP; (d) non-payment could not reasonably be
expected to have a Material Adverse Change nor result in forfeiture or sale of
any assets of the Obligor; (e) no Lien is imposed on assets of the Obligor,
unless bonded and stayed to the satisfaction of Lender; and (f) if the
obligation results from entry of a judgment or other order, such judgment or
order is stayed pending appeal or other judicial review.

 

12

 

 

“Property” means, with respect to a Person, all of such Person’s tangible and
intangible property, assets and interests in property and assets, whether
personal, real or mixed, owned on the Effective Date or thereafter acquired.

 

“Qualified Appraisal” means an appraisal conducted in a manner and with such
scope and using such methods as are acceptable to Lender by an appraiser
selected by, or acceptable to, Lender, the results of which are reasonably
acceptable to Lender in all respects.

 

“Receivable” means, with respect to Borrower, each (a) Account, (b)
Health-Care-Insurance Receivable, (c) credit card receivable, (d) right to
payment under any contract, Document Instrument promissory note, Chattel Paper,
or electronic chattel paper, (e) tax refund or right to receive any tax refund,
(f) bond or certificate owned or held by Borrower or held for the benefit of
Borrower, (g) right to payment for the sale, lease or license of any Inventory,
Equipment or General Intangible, (h) policy of insurance issued to or for the
benefit of Borrower and each right to payment and Proceeds of such insurance,
(i) right to payment in connection with each Investment Property, Deposit
Account, book account, credit or reserve, and (j) form of obligation whatsoever
owing to Borrower, together with all Instruments, Documents and Certificates of
title representing any of the foregoing, and all rights in any merchandise or
Goods which any of the same may represent, all files and Records with respect to
any collateral or security given by Borrower to Lender in the foregoing,
together with all rights, title, security, Supporting Obligations and guarantees
with respect to the foregoing, including any right of stoppage in transit,
whether now owned or hereafter created or acquired by Borrower or in which
Borrower now has or hereafter acquires any interest.

 

“Reportable Event” has the same definition as provided in Title IV of ERISA.

 

“Revolving Credit Limit” means an amount equal to $14,000,000.

 

“Revolving Credit Rate” means a per annum rate of interest determined as
follows:

 

(a) for the period commencing on the Effective Date and ending on the first
Determination Date (as defined below), equal to the greatest of (a) the sum of
the LIBOR Rate plus six and one-quarter percent (6.25%), (b) the sum of the
Prime Rate plus three percent (3.00%), and (c) a fixed rate of six and one-half
percent (6.50%); and

 

(b) Thereafter, determined from time to time on each Determination Date for the
period through (but not including) the immediately succeeding Determination
Date, by reference to the following table (the “Pricing Grid”) and corresponding
to Borrower’s EBITDA calculated as of the last day of the most recently ended
calendar month for the consecutive six (6) calendar month period ending on such
last day, equal to the greatest of the (a) the sum of the LIBOR Rate plus the
applicable percentage in the Pricing Grid, (b) the sum of the Prime Rate plus
the applicable percentage in the Pricing Grid, and (c) a fixed rate in the
amount of the applicable percentage in the Pricing Grid:

 

Level  Trailing six month EBITDA   LIBOR Rate   Prime Rate   Fixed Rate  I   $0
to < $600,000    6.25%   3.00%   6.50% II   >$600,000 and < $1,200,000    5.75% 
 2.50%   6.00% III   >$1,200,000    5.25%   2.00%   5.50%

 

13

 

 

The Revolving Credit Rate shall be subject to reduction or increase, as
applicable and as set forth in the Pricing Grid, on a monthly basis as of each
Determination Date, according to Borrower’s EBITDA as set forth above and as
reported in accordance with Section 6.5. Except as otherwise provided in this
paragraph, any increase or reduction in the Revolving Credit Rate provided for
herein shall be effective on each Determination Date. Without limiting Lender’s
rights to invoke the Default Rate, if (i) the financial statements and the
Compliance Certificate of Borrower setting forth EBITDA are not received by
Lender by the date required pursuant to Section 6.5, as applicable, or (ii) an
Event of Default occurs and Lender so elects, then, in each case, the Revolving
Credit Rate shall be at Level I until such time as such financial statements and
Compliance Certificate are received and any Event of Default (whether resulting
from a failure to timely deliver such financial statements or Compliance
Certificate or otherwise) is waived in writing by Lender. As used herein,
“Determination Date” means the first day of the first calendar month after the
date on which Borrower provides the Compliance Certificate and financial
statements under Section 6.5 for each calendar month, beginning with the
calendar month ending December 31, 2016.

 

In the event that any financial statement or Compliance Certificate required by
Section 6.5 is shown to be inaccurate (regardless of whether this Agreement or
Lender’s commitment to extend Loans and Advances hereunder is in effect when
such inaccuracy is discovered), and such inaccuracy, if corrected, would have
led to the application of a higher Revolving Credit Rate for any period (an
“Applicable Period”) than the Revolving Credit Rate applied for such Applicable
Period, then (i) Borrower shall immediately deliver to Lender a correct
Compliance Certificate for such Applicable Period, (ii) the Revolving Credit
Rate for such Applicable Period shall be determined by reference to such
Compliance Certificate, and (iii) Borrower shall promptly pay Lender, on demand,
the accrued additional interest owing as a result of such increased Revolving
Credit Rate for such Applicable Period, which payment shall be promptly applied
by Lender in accordance with the terms hereof.

 

“Revolving Credit Termination Date” means the earliest to occur of (a) the third
(3rd) anniversary of the Effective Date, (b) the date Lender terminates the
Revolving Credit pursuant to Section 9.3(a), and (c) the date on which repayment
of the Revolving Credit, or any portion thereof, becomes immediately due and
payable pursuant to Section 9.3(b).

 

“Sanctioned Country” means a country subject to the sanctions programs
identified on the list maintained by OFAC and available at the following website
or as otherwise published from time to time:
http://www.treas.gov/offices/enforcement/ofac/programs/.

 

“Settlement Account” means Lender’s account at BMO Harris Bank N.A., Chicago, IL
60603, Account Name: ACF FINCO I LP Concentration Account; Account No. 3098704,
ABA No. 071000288, or such other account as Lender may advise Borrower.

 

“Significant Holder” means a Person that directly or indirectly holds ten
percent (10%) or more of Borrower’s Equity Interests.

 

“Solvent” means, at any time, with respect to any Person as of any date of
determination, that (a) at fair valuations, the sum of such Person’s debts
(including contingent liabilities) is less than all of such Person’s assets, (b)
such Person is not engaged or about to engage in a business or transaction for
which the remaining assets of such Person are unreasonably small in relation to
the business or transaction or for which the property remaining with such Person
is an unreasonably small capital, (c) such Person has not incurred and does not
intend to incur, or reasonably believes that it will not incur, debts beyond its
ability to pay such debts as they become due (whether at maturity or otherwise),
and (d) such Person is “solvent” or not “insolvent”, as applicable within the
meaning given those terms and similar terms under applicable laws relating to
fraudulent transfers and conveyances.

 

“Specified Subordinated Creditor” means John R. Keeler, an individual resident
of the State of Florida.

 

14

 

 

“Specified Subordinated Indebtedness” means Indebtedness of Borrower owing to
Specified Subordinated Creditor, whether under the Specified Subordinated Notes
or otherwise, in each case so long as (a) such Indebtedness is subordinated in
right of payment to the Obligations pursuant to a subordination agreement in
favor of Lender in form and content acceptable to Lender in Lender’s permitted
discretion, (b) such Indebtedness is not secured by any Lien on any Collateral,
unless specifically consented to by Lender in a subordination agreement, and (c)
upon the incurrence of such Indebtedness and after giving effect thereto, no
Default or Event of Default shall occur.

 

“Specified Subordinated Notes” means, collectively, the following promissory
notes issued by Borrower to the order of Specified Subordinated Creditor: (a)
that certain Promissory Note dated January 4, 2006, in the original principal
amount of $500,000.00, (b) that certain Promissory Note dated March 6, 2006, in
the original principal amount of $500,000.00, (c) that certain Promissory Note
dated March 22, 2006, in the original principal amount of $293,300.00, (d) that
certain Promissory Note dated March 22, 2006, in the original principal amount
of $300,000.00, (e) that certain Promissory Note dated March 31, 2006, in the
original principal amount of $200,000.00, (f) that certain Promissory Note dated
November 21, 2007, in the original principal amount of $100,000.00, (g) that
certain Promissory Note dated July 13, 2013, in the original principal amount of
$516,834.00 and (h) any promissory note or other instrument made by Borrower in
connection with the Additional Specified Subordinated Indebtedness.

 

“Specified Subordination Agreement” means that certain Subordination Agreement
among Lender and the Specified Subordinated Creditor dated on or about the
Effective Date.

 

“Support Party” means any Person that has executed and delivered in favor of
Lender a validity and support agreement.

 

“to Borrower’s knowledge”, “to the knowledge of Borrower” and all variations and
derivations of such terms mean (i) the actual individual and/or collective
knowledge of any of Borrower’s (as applicable) directors, officers and senior
management (individually and collectively, the “Knowledge Parties”), after due
inquiry by each of the Knowledge Parties, and (ii) the individual and/or
collective knowledge of any fact, condition, event, occurrence or circumstance
that would have come to the attention of any of the Knowledge Parties in the
course of discharging his or her duties as a director, officer, managing
partner, manager, partner, member or senior manager of Borrower (as applicable)
in a reasonable and prudent manner consistent with sound business practices.

 

“UCC” means the New York Uniform Commercial Code as in effect on the date of
this Agreement, and as may be amended or modified after the date of this
Agreement; provided, however, in the event that, by reason of mandatory
provisions of law, the perfection, the effect of perfection or nonperfection or
priority of Lender’s security interest in any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, then the term “UCC” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for the purposes
of the provisions hereof relating to perfection, the effect of perfection or
nonperfection or priority of Lender’s security interest in such Collateral.

 

“Unfunded Capital Expenditures” means, for any period, the aggregate amount of
Capital Expenditures made by Borrower during such period, less the aggregate
principal amount of all Indebtedness assumed or incurred by Borrower during such
period for the purpose of financing such Capital Expenditures (other than the
principal amount of Loans made for the purpose of financing such Capital
Expenditures).

 

“Vendor” means a Person that sells In-Transit Inventory to Borrower.

 

“Vendor Agreement” means an agreement between Lender and a Vendor that is in
form and substance satisfactory to Lender and pursuant to which, among other
things, the parties shall agree upon their relative rights with respect to
In-Transit Inventory of Borrower purchased from such Vendor.

 

UCC Definitions. When used in this Agreement, the following terms have the same
definitions as provided in Article 9 of the UCC, but for convenience in this
Agreement the first letter of all such terms shall be capitalized : “Accession”,
“Account”, “Account Debtor”, “Authenticate” (and all derivations thereof),
“Certificate Of Title”, “Chattel Paper”, “Commercial Tort Claim”, “Deposit
Account”, “Document”, “Equipment”, “General Intangible”, “Goods”,
“Health-Care-Insurance Receivable”, “Instrument”, “Inventory”, “Investment
Property”, “Letter-Of-Credit Right”, “Proceeds” (as specifically defined in
Section 9-102(64) of the UCC), “Record”, “Secured Party”, “Software” and
“Supporting Obligation”.

 

15

 

 

DISCLOSURE SCHEDULE

 

5.1 Organization, Qualification and Structure. 5.1(a) Borrower Jurisdiction.  
5.1(b) Affiliates.       5.3 Name and Address.       5.4 Location of Collateral.
5.4(a) Location of Collateral Records.   5.4(b) Location of Inventory.   5.4(c)
Location of Equipment.     5.5 Title; Liens; Permitted Liens.       5.6 Existing
Indebtedness.       5.7 Financial Statements.       5.9 General Intangibles,
Patents, Trademarks, Copyrights and Licenses.       5.10 Existing Business
Relationships.       5.14 Litigation.       5.15 ERISA Matters.       5.17
Environmental Matters.       5.19 Location of Bank and Securities Accounts.    
  5.21 Capital Structure.       10.4 Notice.

 

  If to Lender:

ACF FinCo I LP
Attn: Ryan Cascade, President
560 White Plains Road, 4th Floor, Suite 400
Tarrytown, NY 10591

Fax: (914) 921-1154

         

ACF FinCo I LP
Attn: Oleh Szczupak, Executive Vice President
560 White Plains Road, 4th Floor, Suite 400
Tarrytown, NY 10591

 

Fax: (914) 921-1154

        With a copy to:

McGuireWoods LLP

Attn: Anthony Cianciotti, Esq.

1230 Peachtree Street, Suite 2100

Atlanta, GA 30309

Fax: (404) 443-5774

        If to Borrower:

John Keeler & Co. Inc.

Attn: Chief Financial Officer

3000 NW 109 Avenue

Miami, FL 33172

Fax: (305) 836-6858

        With a copy to:

Frost Brown Todd LLC
Attn: Ronald E. Gold, Esq.

3300 Great American Tower
301 East Fourth Street
Cincinnati, Ohio 45202
Fax: (513) 651-6981

 

 

 

 

EXHIBIT A

NOTICE OF BORROWING

 

ACF FinCo I LP

560 White Plains Road

4th Floor, Suite 400

Tarrytown, NY 10591

 

Re: Request for Advance

 

The undersigned requests the following Advance(s) of the Revolving Credit
pursuant to Section 2.1 of the Loan and Security Agreement dated as of August
31, 2016, between ACF FinCo I LP and the undersigned, as the same may be
amended, supplemented or otherwise modified (“Loan Agreement”). Capitalized
terms used herein and not otherwise defined herein shall have the meanings given
to them in the Loan Agreement.

 

Revolving Credit: $________________________

 

Please wire the requested Advance(s) to our operating account number
____________________________ at ______________________________________________
in accordance with the following wire instructions:

 

_______________________________________________

 

_______________________________________________

 

_______________________________________________

 

_______________________________________________

 

_______________________________________________

 

_______________________________________________.

 

Please call the undersigned to confirm receipt of this fax at (____) _______.

 

JOHN KEELER & CO. INC.         By:     Name:     Title:    

 

 

 

 

EXHIBIT B

 

FORM OF BORROWING BASE CERTIFICATE

 

[ex10-10_001.jpg]

 

 

 

 

EXHIBIT C

 

FORM OF COMPLIANCE CERTIFICATE

 

 

JOHN KEELER & CO. INC. (“Borrower”) hereby certifies to ACF FINCO I LP in
accordance with the provisions of the Loan and Security Agreement dated as of
August 31, 2016, between ACF FinCo I LP and the undersigned, as the same may be
amended, supplemented or otherwise modified (the “Loan Agreement”) that:

 

A. General. As of date of this Certificate:

 

  ● Borrower has complied in all respects with all the terms, covenants and
conditions of the Loan Agreement;         ● the representations contained in the
Agreement are true, accurate and complete in all respects with the same effect
as though such representations and warranties had been made on the date hereof;
and         ● there exists no Default or Event of Default as defined in the Loan
Agreement.

 

B. Financial Covenants. As of and for such periods as designated below, the
computations, ratios and calculations as set forth below are true, accurate and
correct:

 

Unfunded Capital Expenditures as of __________________:__________________

 

Fixed Charge Coverage Ratio as of and for the period ending _____________:
________________________

 

EBITDA for the trailing twelve (12) month period ending
________________:_________________________

 

JOHN KEELER & CO. INC.         By:     Name:     Title: