Exhibit 10.2

 

FORM OF
AMENDED & RESTATED CREDIT AGREEMENT

 

THIS AMENDED & RESTATED CREDIT AGREEMENT dated as of [●], 2019 (this
“Agreement”) by and among PURPLE INNOVATION, LLC, a Delaware limited liability
company (“Borrower”), COLISEUM CAPITAL PARTNERS, L.P. (“CCP”), BLACKWELL
PARTNERS LLC-SERIES A (“Blackwell”), COLISEUM CO-INVEST DEBT FUND, L.P.
(together with CCP and Blackwell, “Lenders”) and DELAWARE TRUST COMPANY, a
Delaware corporation, as collateral agent on behalf of the Lenders (the
“Collateral Agent”).

 

RECITALS

 

Borrower is party to that certain Credit Agreement, dated as of February 2, 2018
(as amended, restated, amended and restated, supplemented or otherwise modified
from time to time prior to the Incremental Funding Date (as defined below), the
“Original Credit Agreement”; the date of the Original Credit Agreement and the
initial funding of the Loan thereunder, the “Original Closing Date”), by and
among Borrower and Lenders party thereto.

 

Borrower has requested that Lenders extend commitments to provide additional
credit to Borrower as described below, and Lenders have agreed to provide the
Incremental Loan (as defined below) on the terms and conditions contained
herein.

 

Borrower and Lenders have further agreed to modify, amend and/or supplement the
Original Credit Agreement to, among other things, secure the Obligations and
make the other modifications contemplated hereby.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Lenders and Borrower hereby agree as follows:

 

Article I
CREDIT TERMS

 

Section 1.1. LOAN.

 

(a) Loan. Subject to the terms and conditions of this Agreement, (i) Lenders
have made ratably according to their respective loan percentages for the
Original Loan set forth on Schedule 1.1-A hereto (on a several and not joint
basis), a loan to Borrower on the Original Closing Date (as defined below), in
an aggregate principal amount of Twenty-Five Million Dollars ($25,000,000.00)
(the “Original Loan”), the proceeds of which were used to finance Borrower’s
working capital requirements and general corporate purposes, (ii) Lenders hereby
agree to make ratably, according to their respective loan percentages for the
Incremental Loan set forth on Schedule 1.1-B hereto, an incremental loan on the
Incremental Funding Date (as defined below) in an aggregate principal amount of
Ten Million Dollars ($10,000,000.00) (the “Incremental Loan”) and (iii) at any
time after the funding of the Incremental Loan and prior to the Maturity Date,
the Lenders may, at the request of Borrower so long as the Borrower has
satisfied the Approval Conditions (as defined below), agree to provide
additional loans (the “Additional Loans” and, together with the Original Loan
and the Incremental Loan, collectively, the “Loan” or “Loans”) in an aggregate
principal amount to not to exceed Ten Million Dollars ($10,000,000) (the
“Additional Loan Amount”), which Additional Loans may be funded hereunder in a
single drawing or multiple drawings (provided that amounts borrowed under the
Additional Loan Amount that are prepaid or repaid may not be reborrowed) subject
only to the conditions set forth in Section 3.2 hereof and shall otherwise be on
identical terms and conditions as the Loans previously provided hereunder;
provided, that (a) each Lender party hereto at the time of such Additional Loan
incurrence shall be permitted to participate in such Additional Loans on a pro
rata basis based on such Lender’s aggregate outstanding principal amount of
Loans hereunder (giving effect to any applicable increase hereunder resulting
from Borrower’s election to pay in kind interest in accordance herewith),
provided, however, that no Lender shall be required to participate in any such
Additional Loans and, to the extent any Lender declines to participate in all or
a portion of such Lender’s pro rata share of the Additional Loan (a “Declined
Amount”), each other Lender hereunder shall be permitted (but not obligated) to
increase its Additional Loans by its pro rata share of such Declined Amount or a
greater amount if any Lender declines to participate in the Declined Amount and
(b) the indebtedness permitted to be incurred by Borrower pursuant to Section
5.3(e) hereof shall be reduced on a dollar-for-dollar basis by the amount of any
Additional Loan provided hereunder (for the avoidance of doubt, there shall not
be a corresponding reduction of the Additional Loan Amount permitted to be
incurred hereunder in connection with any Asset Based Credit Facility incurred
by Borrower pursuant to such Section 5.3(e)). As used herein, the “Approval
Condition” means that Borrower has elected to request Additional Loans pursuant
to Section 1.1(a)(iii) hereof and has received the approval for such request
from (x) a majority of the independent directors of the Board of Directors of
Parent Guarantor, (y) to the extent such individuals are on the Board of
Directors of Parent Guarantor at the time of such request, and such loan is
funded by a fund or account managed by Coliseum Capital Management, LLC (a
“Coliseum Managed Account”), Tony Pearce and Terry Pearce and (z) if at the time
of such request, such loan is provided by a Coliseum Managed Account and
Innohold, LLC owns at least one-third of the common stock, members’ equity or
other ownership interest of Parent Guarantor not held by a Coliseum Managed
Account or its affiliates, Innohold, LLC. Upon any such funding of Additional
Loans, the Borrower shall deliver an updated Schedule 1.1 to the Lenders and
Collateral Agent reflecting such Additional Loans.

 

 

 

 

(b) Repayment; Mandatory Prepayments.

 

  (i) Following the first anniversary of the Incremental Funding Date, Borrower
may partially or wholly repay its outstanding Loans hereunder subject to
concurrent payment of any applicable Prepayment Premium, calculated on the
amount prepaid. For purposes of the foregoing, “Prepayment Premium” shall mean
(a) 6.00% on any date during the second year following the Incremental Funding
Date, (b) 4.00% on any date during the third year following the Incremental
Funding Date, (c) 2.00% on any date during the fourth year following the
Incremental Funding Date and (d) thereafter, 0%. The remaining outstanding
principal amount of the Loan shall be repaid in full on the fifth anniversary of
the Incremental Funding Date (the “Maturity Date”). Notwithstanding anything to
the contrary, in the event that Borrower desires to prepay the Loan on or prior
to the first anniversary of the Incremental Funding Date, such prepayment shall
be permitted subject to the concurrent payment of the applicable Make-Whole
Amount (as defined below).

 

“Make-Whole Amount” means, with respect to any prepayment of the Loan pursuant
to the terms of this Agreement at any time during the first year following the
Incremental Funding Date, an amount equal to the sum of (a) the present value
(discounted at a rate per annum equal to the rate on five-year U.S. treasury
bills at the time of prepayment as reasonably selected by Lenders plus 50 basis
points) of the unpaid interest that would have accrued through the first
anniversary of the Incremental Funding Date as though the full amount of the
Loans had been funded on the Incremental Funding Date and had remained
outstanding during such one-year period plus (b) a prepayment premium equal to
6% of the amount prepaid.

 

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  (ii) In addition, within five (5) business days following receipt of Net
Proceeds (as defined below), Borrower shall make an offer to Lenders to prepay
the outstanding principal amount of the Loan by such amount. Lenders shall
thereafter accept or reject such offer within three (3) business days, and such
payment shall, if accepted, be made within one (1) business day following such
acceptance.

 

For purposes of the foregoing, “Net Proceeds” means, without duplication: (v)
(A) in the case of any sale, lease, transfer or otherwise disposition or
conveyance of any asset of Borrower not permitted by Section 5.4, 100% of the
net cash proceeds received by or on behalf of Borrower from such sale, lease,
transfer or other disposition or conveyance and (B) 100% of any net cash
payments received by or on behalf of, or paid to or for the account of, Borrower
(other than in the ordinary course of business), in connection with insurance
payments, in the case of each of the foregoing clauses (A) and (B), that have
not been reinvested by Borrower within twelve (12) months to purchase assets
used or useful in the business of Borrower; provided that the amounts set forth
in this clause (v) shall not constitute “Net Proceeds” until the aggregate
amount of such net cash proceeds, for all sales, leases, transfers or other
dispositions or conveyances and all insurance payments (taken as a whole) have
exceed $200,000.00 in any fiscal year or $750,000.00 in the aggregate, (w) 100%
of the net cash proceeds received by or on behalf of Borrower in connection with
any incurrence of indebtedness that is not permitted to be incurred pursuant to
the terms of this Agreement, (x) 100% of any net cash payments received by or on
behalf of, or paid to or for the account of, Borrower (other than in the
ordinary course of business), in connection with condemnation events and
indemnity payments, (y) 100% of the net cash proceeds received by or on behalf
of Borrower as a result of Borrower’s issuance or sale of its stock and (z) 100%
of any indemnification payments made to Borrower pursuant to the terms of the
Merger Agreement. For purposes of this definition, as to any event giving rise
to net cash proceeds, the calculation of such net cash proceeds shall include
netting for (i) the direct costs relating to the event giving rise to such
proceeds (including, as applicable (x) sales commissions and (y) legal,
accounting and investment banking fees, commissions and expenses) in each case
to the extent paid to unaffiliated third parties, (ii) taxes paid or reasonably
estimated by the Borrower to be payable as a result of such event (after taking
into account any available tax credits or deductions and any tax sharing
arrangements), and (iii) amounts required to be applied to the repayment of any
Indebtedness secured by a Permitted Lien on the asset being disposed of in
connection with such event.

 

(c) Change of Control Premium. In the event that all, or any portion, of the
Loans is repaid (whether voluntarily, mandatorily, as a result of acceleration,
or otherwise) (i) upon the occurrence of a Change of Control during the first
year after the Incremental Funding Date, Borrower shall pay a fee to Lenders,
ratably in accordance with their respective commitment percentages set forth on
Schedule 1.1 hereto, equal to the present value (discounted at a rate equal to
the rate on five-year U.S. treasury billed at the time of such Change of Control
as reasonably selected by Lenders plus 50 basis points) of the unpaid interest
that would have accrued through the first anniversary of the Incremental Funding
Date as though the full amount of the Loans had been funded on the Incremental
Funding Date and had remained outstanding during such one-year period or (ii)
upon the occurrence of a Change of Control at any time after the first
anniversary of the Incremental Funding Date, such repayment (whether voluntary,
mandatory, as a result of acceleration, or otherwise) shall be subject to the
applicable Prepayment Premium set forth in 1.1(b)(i) above.

 

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Section 1.2. INTEREST.

 

(a) Interest. The outstanding principal balance of the Loans shall bear interest
at the rate of interest of (i) initially, 12.0% per annum (computed on the basis
of a 360-day year, actual days elapsed) for the principal amount of the Loans
and any overdue interest thereon and (ii) commencing with the first full fiscal
quarter ending after the Incremental Funding Date, a rate of interest of 12.0%
per annum (computed on the basis of a 360-day year, actual days elapsed) plus
such additional amounts (which additional amounts may be payable in cash or in
kind) in any applicable fiscal quarter based on the EBITDA set forth in the most
recent certificate delivered to the Lenders pursuant to Section 4.3 of this
Agreement (any such additional interest determined based on the following
pricing grid, “Additional Interest” and such pricing grid, the “Additional
Interest Pricing Grid”):

 

Pricing Level EBITDA Additional Interest (per annum) I Greater than or equal to
$0.0 million 0.00% II Greater than or equal to $(2.0) million but less than
$0.00 million 1.00% III Greater than or equal to $(5.0) million but less than
$(2.0) million 2.00% IV Less than $(5.0) million 4.00%

 

and (iii) such interest rate shall be further increased in an amount equal to
2.00% per annum (which may be payable in cash or in kind) with respect to any
applicable fiscal period during which Parent Guarantor (as defined in Section
5.6) is not S-X Compliant (such Additional Interest, the “S-X Additional
Interest”; provided, for the avoidance of doubt, such S-X Additional Interest
shall be applicable only to such quarter during which Parent Guarantor is not
S-X Compliant or has failed to deliver a Compliance Certificate in accordance
with Section 4.3 hereof certifying as such). Notwithstanding anything to the
contrary, if in connection with the preparation of the annual audited financial
statements of the Borrower for any fiscal year, the Borrower determines that the
Parent Guarantor was not S-X Compliant as to any fiscal quarter during such
fiscal year as to which the Borrower previously certified that Parent Guarantor
was S-X Compliant, then (a) the Borrower shall promptly notify the Lenders in
writing of such determination, (b) S-X Additional Interest shall be deemed to
have accrued and to apply retroactively to such relevant fiscal quarter and, if
not paid in cash upon the giving of such notification by Borrower, to have been
paid in kind and (c) the giving by the Borrower of such previous certification
that Parent Guarantor was S-X Compliant shall not otherwise constitute an Event
of Default under this Agreement or the Loan Documents. As used herein, “S-X
Compliant” means the Parent Guarantor is in compliance in all material respects
with the requirements of the Sarbanes-Oxley Act of 2002 for the applicable
fiscal quarter.

 

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Notwithstanding anything herein to the contrary, for any applicable fiscal
period with respect to which Borrower has failed to deliver a Compliance
Certificate in accordance with Section 4.3, the Additional Interest with respect
to such period shall be deemed to be the highest level (“Level IV”) in the
Additional Interest Pricing Grid plus, in the case of any such fiscal period
during which Parent Guarantor is required to be S-X Compliant, the S-X
Additional Interest. Additional Interest shall be subject to increase or
decrease effective as of the first Business Day immediately following the date
the certificate delivered pursuant to Section 4.3 is delivered to the Lenders.
In the event that any financial statement or certificate delivered pursuant to
Section 4.3 is shown to be inaccurate at a time when this Agreement is in effect
and unpaid Loans under this Agreement are outstanding (other than indemnities
and other contingent obligations not yet due and payable), and such inaccuracy,
if corrected, would have led to the application of a higher or lower rate of
interest for any period (an “Applicable Period”) then the Additional Interest
actually applied for such Applicable Period, then (i) Borrower shall promptly
deliver to the Lenders a correct certificate required by Section 4.3 for such
Applicable Period, (ii) (A) if such inaccuracy if corrected, would have resulted
in a higher rate of Additional Interest, the Additional Interest shall be deemed
to be such higher Additional Interest, and (B) Borrower shall pay upon five (5)
Business Days after any Lender makes a written demand thereof, the accrued
additional interest owing as a result of such increased Additional Interest for
such Applicable Period and (iii) (A) if such inaccuracy if corrected, would have
resulted in a lower rate of Additional Interest, the Additional Interest shall
be deemed to be such lower Additional Interest, and (B) Borrower may credit to
the future payments of interest (or, if the Loans have matured or been
accelerated, the principal upon the Loans) an amount equal to the lower interest
owing as a result of such lower Additional Interest for such Applicable Period;
provided, that, any such inaccuracy resulting in lower Additional Interest for
any such Applicable Period shall have been reported by Borrower within 90 days
of such Applicable Period.

 

At the election of Borrower prior to the Maturity Date (it being understood
that, if Borrower does not pay such interest in cash on the applicable Interest
Payment Date (as defined below), Borrower shall be deemed to have made such
election for such Interest Payment Date), interest (including without limitation
Additional Interest and S-X Additional Interest (but not, for the avoidance of
doubt default interest pursuant to Section 1.2(b) below)) in excess of 5.0% per
annum may, in lieu of being paid in cash, be capitalized and added to the
principal amount of the Loan (ratably owing to Lenders based on their respective
loan percentages as set forth on Schedule 1.1 hereto).

 

Interest shall accrue and be payable on the last business day of each March,
June, September and December, commencing on June 29, 2018, (each, an “Interest
Payment Date”) and on the Maturity Date.

 

(b) Default Interest. From and after the Maturity Date, or such earlier date as
all principal owing hereunder becomes due and payable by acceleration or
otherwise, or upon the occurrence and during the continuance of an Event of
Default, then, the outstanding principal amount of the Loan shall bear interest
at an increased rate per annum (computed on the basis of a 360-day year, actual
days elapsed) equal to four percent (4.0%) above the rate of interest from time
to time otherwise applicable to the Loan (including Additional Interest and
Additional S-X Interest, as applicable), which increase shall be in the form of
cash interest and shall take effect automatically and without further action (of
the Lenders or otherwise).

 

Section 1.3. CREATION OF SECURITY INTEREST.

 

(a) Grant of Security Interest. Borrower hereby grants Lenders, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to the Lenders, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof.

 

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Borrower (on behalf of itself and its subsidiaries) hereby grants to Lenders an
irrevocable, non-exclusive, world-wide license, exercisable upon the occurrence
and during the continuance of an Event of Default, without payment of royalty or
other compensation to Borrower or any of its subsidiaries, to use, transfer,
license or sublicense any intellectual property (including, without limitation,
patents, trademarks, copyrights, service marks, trade secrets and other
intellectual property) now owned, licensed to, or hereafter acquired by Borrower
or such subsidiaries, and wherever the same may be located, including in such
license access to all media in which any of the licensed items may be recorded
or stored and to all computer software and programs used for the compilation or
printout thereof; provided that such license (a) will be used in connection with
Lenders’ exercise of their rights and remedies under the Loan Documents and (b)
will terminate on the date on which all indebtedness and other obligations
(other than unasserted, contingent indemnification obligations) arising under
the Loan Documents are paid in full.

 

If this Agreement is terminated, Lenders’ Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations) are repaid in
full in cash. Upon payment in full in cash of the Obligations (other than
inchoate indemnity obligations), Lenders shall, at the sole cost and expense of
Borrower, release its Liens in the Collateral and all rights therein shall
revert to Borrower. In the event (x) all Obligations (other than inchoate
indemnity obligations), are satisfied in full, and (y) any commitment of the
Lenders to extend financial accommodations to the Borrowers shall have expired
or been terminated, Lenders shall terminate the security interests granted
herein and in the other Loan Documents and shall (at the cost and expense of the
Borrower) execute and deliver (and cause the Collateral Agent to execute and
deliver) such terminations and releases of such security interests as the
Borrower may reasonably request.

 

(b) Priority of Security Interest. Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times continue to
be a first priority perfected (to the extent perfection can be achieved by the
filing of financing statements or the taking of other actions that have been
taken or requested to be taken by the Lenders) security interest in the
Collateral (subject only to Permitted Liens that are permitted pursuant to the
terms of this Agreement or applicable law to have superior priority to the
Lenders’ Lien under this Agreement). If Borrower shall acquire a commercial tort
claim in an amount in excess of $100,000 (which dollar threshold shall not apply
if an Event of Default is continuing), Borrower shall promptly notify Lenders in
a writing signed by Borrower of the general details thereof and grant to Lenders
in such writing a security interest therein and in the proceeds thereof, all
upon the terms of this Agreement, with such writing to be in form and substance
reasonably satisfactory to Lenders.

 

(c) Authorization to File Financing Statements. Borrower hereby authorizes
Lenders to file financing statements, without notice to Borrower, with all
appropriate jurisdictions to perfect or protect Lenders’ interest or rights
hereunder. Such financing statements may indicate the Collateral as “all assets
of the Debtor” or words of similar effect, or as being of an equal or lesser
scope, or with greater detail, in the Lenders’ discretion.

 

Article II
REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Lenders, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until all indebtedness and other
obligations (other than unasserted, contingent indemnification obligations)
arising under this Agreement and the other Loan Documents are paid in full.

 

Section 2.1. LEGAL STATUS. Borrower is: (a) a limited liability company, duly
organized and existing and in good standing under the laws of Delaware, (b) is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which the failure to so
qualify or to be so licensed could have a Material Adverse Effect on Borrower;
and (c) not the target of any trade or economic sanctions promulgated by the
United Nations or the governments of the United States, the United Kingdom, the
European Union, or any other jurisdiction in which Borrower is located or
operates (collectively, “Sanctions”). As used herein, “Material Adverse Effect”
means (a) a material adverse effect on the operations, business, assets,
properties, financial prospects, liabilities (actual or contingent) or financial
condition of Borrower, (b) a material impairment of the ability of Borrower to
perform its obligations under the Loan Documents to which it is a party, (c) a
material impairment of the rights and remedies of Lenders under any Loan
Document or (d) an impairment of the legality, validity, binding effect or
enforceability against Borrower of any Loan Document to which it is a party.

 

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Section 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each guaranty,
contract, instrument and other document required hereby or at any time hereafter
delivered to Lenders in connection herewith (collectively, the “Loan Documents”)
have been duly authorized, and upon their execution and delivery in accordance
with the provisions hereof will constitute legal, valid and binding agreements
and obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms, except as enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency, fraudulent
conveyance, moratorium or similar laws affecting the enforcement of creditor’s
rights, generally and by general principles of equity. In connection with this
Agreement as amended and restated on the Incremental Funding Date, Borrower has
delivered to Lenders a completed certificate signed by Borrower entitled
“Perfection Certificate” (the “Perfection Certificate”). Borrower represents and
warrants to Lenders (a) Borrower’s exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof; (b) Borrower is an
organization of the type and is organized in the jurisdiction set forth in the
Perfection Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that
Borrower has none; (d) the Perfection Certificate (as updated from time to time
pursuant to the terms hereof) accurately sets forth, as of the date thereof,
Borrower’s place of business, or, if more than one, its chief executive office
as well as Borrower’s mailing address (if different than its chief executive
office); (e) except as set forth in the Perfection Certificate, Borrower (and
each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate (as updated from time to
time pursuant to the terms hereof) pertaining to Borrower and each of its
Subsidiaries is accurate and complete as of the date thereof (it being
understood and agreed that Borrower may from time to time update certain
information in the Perfection Certificate after the Incremental Funding Date by
delivering a new Perfection Certificate or by disclosing such updates on a
monthly Compliance Certificate to the extent such updates result from actions,
transactions or circumstances that are permitted by this Agreement and all
references to “Perfection Certificate” shall hereinafter be deemed to be a
reference to the updated Perfection Certificate). If Borrower is not now a
registered organization but later becomes one, Borrower shall promptly notify
Lenders of such occurrence and provide Lenders with Borrower’s organizational
identification number.

 

Section 2.3. NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the organizational and governing
documents of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound, except as could not have a Material Adverse Effect
on the financial condition or operation of Borrower.

 

Section 2.4. LITIGATION. There are no pending, or to the best of Borrower’s
knowledge threatened in writing, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a Material Adverse Effect on the
financial condition or operation of Borrower, except as described on Schedule
2.4 hereto.

 

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Section 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement
of Borrower dated December 31, 2016, and all interim financial statements of
Borrower delivered to Lenders (or set forth in public filings) since said date,
true copies of which have been delivered by Borrower to Lenders (or set forth in
public filings) prior to the date hereof, (a) are complete and correct in all
material respects and present fairly the financial condition of Borrower,
(b) disclose all liabilities of Borrower that, as of the date thereof, are
required to be reflected or reserved against under generally accepted accounting
principles, whether liquidated or unliquidated, fixed or contingent, and
(c) have been prepared in accordance with generally accepted accounting
principles consistently applied. Since the dates of such financial statements
there has been no material adverse change in the financial condition of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or
otherwise encumbered any of its assets or properties except Permitted Liens (as
defined below).

 

Section 2.6. INCOME AND SALES TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments (in an amount in excess of $10,000) of its
income or sales tax payable with respect to any year, except for (i) income or
sales tax being contested or disputed in accordance with Section 4.7 or as
disclosed in the Perfection Certificate or (ii) such pending assessments or
adjustments described on Schedule 2.6 hereto with respect to which the potential
exposure does not exceed $3,000,000 in the aggregate.

 

Section 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s obligations
subject to this Agreement to any other obligation of Borrower.

 

Section 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law, except as could not have a Material Adverse
Effect on the financial condition or operation of Borrower.

 

Section 2.9. ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time (“ERISA”); Borrower has not violated any
provision of any defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event
as defined in ERISA has occurred and is continuing with respect to any Plan
initiated by Borrower; Borrower has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under generally accepted accounting principles.

 

Section 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation
for borrowed money in an amount in excess of $250,000, any purchase money
obligation in an amount in excess of $250,000 or any other material lease,
commitment, contract, instrument or obligation, except as set forth on Schedule
2.10. As of the Incremental Funding Date, the aggregate amount of accounts
payable greater than 60 days past due and owed by Borrower does not exceed
$1,000,000.

 

Section 2.11. ENVIRONMENTAL MATTERS. Except as specifically disclosed on
Schedule 2.11 hereto, Borrower is in compliance in all material respects with
all applicable federal or state environmental, hazardous waste, health and
safety statutes, and any rules or regulations adopted pursuant thereto, which
govern or affect any of Borrower’s operations and/or properties, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986,
the Federal Resource Conservation and Recovery Act of 1976, and the Federal
Toxic Substances Control Act, as any of the same may be amended, modified or
supplemented from time to time (collectively, “Environmental Laws”). None of the
operations of Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment. Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or substance into the
environment.

 

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Section 2.12. COLLATERAL. Subject to the next paragraph, Borrower has good title
to, rights in, and the power to transfer each item of the Collateral upon which
it purports to grant a Lien hereunder, free and clear of any and all Liens
except Permitted Liens. All Inventory is in all material respects of good and
marketable quality, free from material defects.

 

Borrower is the sole owner of the Intellectual Property which it owns or
purports to own except for (a) non-exclusive licenses granted to its customers
in the ordinary course of business, (b) over-the-counter software that is
commercially available to the public, (c) material Intellectual Property
licensed to Borrower and noted on the Perfection Certificate (as updated from
time to time), (d) non-material Intellectual Property of de minimis value to
Borrower and which has been abandoned or terminated in the exercise of
Borrower’s reasonable business judgment and in accordance with the terms of this
Agreement and (e) exclusive licenses of intellectual property by or to EdiZONE,
LLC existing on the Incremental Funding Date and described in the Perfection
Certificate. Each Patent which it owns or purports to own and which is material
to Borrower’s business is valid and enforceable, and no part of the Intellectual
Property which Borrower owns or purports to own and which is material to
Borrower’s business has been judged by the United States Patent and Trademark
Office, the United States Copyright Office, or any court of competent
jurisdiction to be invalid or unenforceable, in whole or in part. To the best of
Borrower’s knowledge, no claim has been made that any part of the Intellectual
Property violates the rights of any third party except to the extent such claim
would not reasonably be expected to have a material adverse effect on Borrower’s
business.

 

Article III
CONDITIONS

 

Section 3.1. CONDITIONS TO INCREMENTAL FUNDING DATE. This Agreement shall not
become effective and the Incremental Loan shall not be funded until the date on
which each of the following conditions precedent shall have been satisfied or
waived in a manner satisfactory to Lenders (the “Incremental Funding Date”):

 

(a) Documentation. Lenders shall have received, in form and substance
satisfactory to Lenders, each of the following, duly executed:

 

  (i) This Agreement;

 

  (ii) Amended and Restated Parent Guaranty substantially in the form attached
hereto as Exhibit A-1;

 

  (iii) Guarantor Security Agreement substantially in the form attached hereto
as Exhibit A-2;

 

  (iv) Intellectual Property Security Agreement substantially in the form
attached hereto as Exhibit A-3;

 

  (v) Perfection Certificate substantially in the form attached hereto as
Exhibit A-4;

 

  (vi) certified copies, dated as of a recent date, of financing statement
searches, as Lenders may request, accompanied by written evidence (including any
UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, on the Incremental
Funding Date, will be terminated or released;

 

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  (vii) a customary legal opinion of Borrower’s counsel dated as of the
Incremental Funding Date in form and substance reasonably acceptable to the
Lenders; and

 

  (viii) Incremental Funding Date Warrants substantially in the form attached
hereto as Exhibit A-5 and all related documentation approved by the independent
directors of the board of directors of Parent Guarantor and Borrower;

 

  (ix) the Registration Rights Agreement substantially in the form attached
hereto as Exhibit A-6;

 

  (x) such customary certificates of resolutions or other action, incumbency
certificates and/or other certificates of responsible officers of each Loan
Party as the Lenders may reasonably require evidencing the identity, authority
and capacity of each responsible officer thereof authorized to act as a
responsible officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party and such
documents, registers and certifications (including organization documents and,
if applicable, good standing certificates in the jurisdiction of organization of
the applicable Loan Party) as the Lenders may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each of them is
validly existing and in good standing;

 

  (xi) Lenders shall have received a certificate from a responsible officer of
Borrower, in form and substance reasonably satisfactory to the Lenders,
certifying as to compliance with the conditions set forth in clauses (c), (d),
(f) and (g) of this Section 3.1; and

 

  (xii) Deposit account control agreements providing for springing control of a
deposit account upon the occurrence and during the continuation of an event of
default, landlord waivers (to the extent that, as to leased locations owned by a
person or entity that is not an affiliate of the Borrower, the same are
obtainable after exercising commercially reasonable efforts to obtain same) and
credit card notifications, in each case in a form reasonably satisfactory to the
Lenders, and such other documents as Lenders may require under any other Section
of this Agreement.

 

(b) Secured Collateral. In order to create in favor of Collateral Agent, for the
benefit of Secured Parties, a valid, perfected security interest in the
Collateral, the Lenders and the Collateral Agent shall have received evidence
reasonably satisfactory to the Lenders of the compliance by Borrower and Parent
Guarantor of their obligations under this Agreement and any other security
documents delivered in connection herewith (collectively, the “Security
Documents”) as may be taken or requested to be taken by the Lenders (including,
without limitation, their obligations to authorize or execute, as the case may
be, and deliver UCC financing statements, originals of securities, instruments
and chattel paper and any agreements governing deposit and/or securities
accounts as provided therein, all in a form reasonably prescribed by the Lenders
).

 

- 10 -

 

 

(c) Receipt of Shareholder Approval. Borrower shall have obtained the requisite
shareholder approval, including without limitation, shareholder consent by the
holders of Equity Interest in the Parent Guarantor and any related board or
regulatory approval, to enter into this Agreement and perform its obligations
hereunder (“Shareholder Approval”).

 

(d) Financial Condition. There shall have been no material adverse change in the
financial condition or business of Borrower hereunder, if any, nor any material
decline in the book value of a substantial or material portion of the assets of
Borrower, if any.

 

(e) Payment of Fees and Expenses. Borrower shall pay to Lenders (i) an amendment
fee equal to 0.35% of the Original Loan (based on such Lender’s pro rata share
thereof including capitalized interest accrued through the date hereof), (ii) an
upfront fee equal to 4.00% of the original principal amount of the Incremental
Loan (based on such Lender’s pro rata share thereof) and (iii) all other costs,
fees and reasonable and documented expenses (including, without limitation,
legal fees and expenses) to be paid by the Borrower to the Lenders shall have
been paid (or shall be paid substantially concurrently with the effectiveness of
this Agreement on the Incremental Funding Date) to the extent due and not
previously paid.

 

(f) No Default. No Default or Event of Default shall have occurred and be
continuing

 

(g) Representations and Warranties. The representations and warranties of
Borrower and Parent Guarantor set forth in this Agreement and the other Loan
Documents shall be true and correct in all material respects.

 

Section 3.2. CONDITIONS TO ADDITIONAL LOANS. To the extent Borrower has
requested Additional Loans and any Lender has agreed to fund such Additional
Loans, such Additional Loans shall not be funded until the date on which each of
the following conditions precedent shall have been satisfied or waived in a
manner satisfactory to Lenders funding such Additional Loans (the “Additional
Loan Funding Date”):

 

(a) Documentation. Lenders shall have received, in form and substance
satisfactory to Lenders, each of the following, duly executed:

 

  (i) An Additional Loan Request substantially in the form of Exhibit C hereto,
together with a certificate from a responsible officer of Borrower certifying as
to the satisfaction of the Approval Condition in connection with such Additional
Loan Request; provided that the Approval Conditions cannot be waived by any
Lender

 

  (ii) a customary legal opinion of Borrower’s counsel dated as of the
Additional Loan Funding Date in form and substance reasonably acceptable to the
Lenders;

 

  (iii) Additional Loan Funding Date Warrants substantially in the form attached
hereto as Exhibit A-7;

 

  (iv) the Registration Rights Agreement substantially in the form attached
hereto as Exhibit A-6;

 

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  (v) such customary certificates of resolutions or other action, incumbency
certificates and/or other certificates of responsible officers of each Loan
Party as the Lenders may reasonably require evidencing the identity, authority
and capacity of each responsible officer thereof authorized to act as a
responsible officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party and such
documents, registers and certifications (including organization documents and,
if applicable, good standing certificates in the jurisdiction of organization of
the applicable Loan Party) as the Lenders may reasonably require to evidence
that each Loan Party is duly organized or formed, and that each of them is
validly existing and in good standing; and

 

  (vi) Lenders shall have received a certificate from a responsible officer of
Borrower, in form and substance reasonably satisfactory to the Lenders,
certifying as to compliance with the conditions set forth in clauses (b), (d),
and (e) of this Section 3.2.

 

(b) Financial Condition. There shall have been no material adverse change in the
financial condition or business of Borrower hereunder, if any, nor any material
decline in the book value of a substantial or material portion of the assets of
Borrower, if any.

 

(c) Payment of Fees and Expenses. Borrower shall pay to Lenders (i) an upfront
fee equal to 4.00% of the original principal amount of the Additional Loan
(based on such Lender’s pro rata share thereof) and (ii) all other costs, fees
and reasonable and documented expenses (including, without limitation, legal
fees and expenses) to be paid by the Borrower to the Lenders shall have been
paid (or shall be paid substantially concurrently with the effectiveness of this
Agreement on the Additional Loan Funding Date) to the extent due and not
previously paid.

 

(d) No Default. No Default or Event of Default shall have occurred and be
continuing

 

(e) Representations and Warranties. The representations and warranties of
Borrower and Parent Guarantor set forth in this Agreement and the other Loan
Documents shall be true and correct in all material respects.

 

Article IV
AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as the Loan (or the commitments in respect
thereof) remain outstanding, and until all indebtedness and other obligations
(other than unasserted, contingent indemnification obligations) arising under
this Agreement and the other Loan Documents are paid in full, Borrower shall,
unless Lenders otherwise consent in writing:

 

Section 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Lenders, the
amount by which the outstanding principal balance of any credit subject hereto
at any time exceeds any limitation on Loans applicable thereto.

 

Section 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of the Majority Lenders, at any reasonable time
during regular business hours, to inspect, audit and examine such books and
records, to make copies of the same, and to inspect the properties of Borrower.
Notwithstanding anything to the contrary, such Lender shall bear the cost and
expense of such inspections, audits and examinations; provided that any such
examinations, audits and examinations conducted during an Event of Default shall
be at the cost and expense of Borrower.

 

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Section 4.3. FINANCIAL STATEMENTS. Provide to Lenders all of the following, in
form and detail reasonably satisfactory to Lenders:

 

(a) not later than 90 days (or, if Borrower is required to include such
financial statements in an Annual Report on Form 10-K, such later date as may be
permitted by the Securities Exchange Act or the rules thereunder) after and as
of the end of each fiscal year of Borrower, an audited financial statement of
Borrower, prepared by a certified public accountant acceptable to Lenders, to
include balance sheet, income statement and statement of cash flows and sources,
and within 30 days after filing, but in no event later than each August 30,
copies of Borrower’s filed federal income tax returns for such year. The audited
annual financial statements shall be accompanied by the unqualified opinion (as
to scope of opinion and going concern) of such accountant addressed to Lenders;

 

(b) not later than 45 days (or, if Borrower is required to include such
financial statements in a Quarterly Report on Form 10-Q, such later date as may
be permitted by the Securities Exchange Act or the rules thereunder) after and
as of the end of each fiscal quarter, a financial statement of Borrower,
prepared by Borrower, to include balance sheet, income statement and statement
of cash flows and sources;

 

(c) contemporaneously with each annual and quarterly financial statement of
Borrower required hereby, a certificate of the president or chief financial
officer, a general partner or a member of Borrower, as applicable, substantially
to the form of Exhibit B attached hereto (a “Compliance Certificate”) and
incorporated herein by this reference that (i) said financial statements are
complete and correct in all material respects and fairly present the financial
condition of Borrower as of the date thereof, (ii) there exists no Default or
Event of Default, except as set forth in such certificate, (iii) sets forth the
calculations of trailing last twelve-month EBITDA evidencing compliance with
Section 5.11 hereof, (iv) sets forth the calculations of quarterly EBITDA for
the applicable period for the purpose of determining the level set forth in the
Additional Interest Pricing Grid and (v) with respect to the Compliance
Certificate delivered in connection with any annual or quarterly financial
statements for any fiscal period commencing with the fiscal quarter ending on
March 31, 2020, certifying whether or not Parent Guarantor is S-X Compliant for
the applicable fiscal quarter; and

 

(d) from time to time such other information regarding Borrower and its
properties and operations as Lenders may reasonably request.

 

To the extent any financial statements required by Section 4.3(a) or
Section 4.3(b) are included in an Annual Report on Form 10-K or Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission, such financial
statements shall be deemed to have been provided to Lenders hereunder in form
satisfactory to Lenders and shall be deemed delivered to Lenders when such
financial statements are filed for public availability on the Securities and
Exchange Commission’s Electronic Data Gathering and Retrieval System.

 

Section 4.4. COMPLIANCE. (a) Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business, except as could not have a Material Adverse Effect on
the financial condition or operation of Borrower; (b) comply with the provisions
of all documents pursuant to which Borrower is organized and/or which govern
Borrower’s continued existence; (c) comply with the requirements of all laws,
rules, regulations and orders of any jurisdiction in which Borrower is located
or doing business, or otherwise is applicable to Borrower, except as could not
have a Material Adverse Effect on the financial condition or operation of
Borrower; (d) comply in all material respects with all Environmental Laws and
(e) comply with (i) all Sanctions, (ii) all laws and regulations that relate to
money laundering, any predicate crime to money laundering, or any financial
record keeping and reporting requirements related thereto, (iii) the
U.S. Foreign Corrupt Practices Act of 1977, as amended, (iv) the U.K. Bribery
Act of 2010, as amended, and (v) any other applicable anti-bribery or
anti-corruption laws and regulations.

 

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Section 4.5. INSURANCE. Maintain and keep in force, for each business in which
Borrower is engaged, insurance of the types and in amounts customarily carried
in similar lines of business, including but not limited to fire, extended
coverage, commercial general liability, directors’ and officers’ liability,
flood, and, if required, hurricane, windstorm, seismic property damage and
workers’ compensation.

 

Section 4.6. FACILITIES. Keep all properties useful or necessary to Borrower’s
business in good repair and condition (ordinary wear and tear excepted), and
from time to time make necessary repairs, renewals and replacements thereto so
that such properties shall be fully and efficiently preserved and maintained
(ordinary wear and tear excepted).

 

Section 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, in an amount exceeding $10,000 except (a) such
as Borrower may in good faith contest or as to which a bona fide dispute may
arise, and (b) for which Borrower maintains adequate reserves with respect
thereto, in accordance with generally accepted accounting principles, for
eventual payment thereof in the event Borrower is obligated to make such
payment.

 

Section 4.8. LITIGATION. Promptly give notice in writing to Lenders of any
litigation pending or threatened against Borrower with a claim reasonably
expected to be in excess of $500,000.00.

 

Section 4.9. NOTICE TO LENDERS. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Lenders in reasonable detail of: (a) the occurrence of any Default or Event
of Default; (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction relating to Borrower, each as defined in ERISA, or any funding
deficiency with respect to any Plan; or (d) any termination or cancellation of
any insurance policy which Borrower is required to maintain, or any uninsured or
partially uninsured loss through liability or property damage, or through fire,
theft or any other cause affecting Borrower’s property in an amount in excess of
$100,000.

 

Section 4.10. PROTECTION AND REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.

 

(a) (i) Except as set forth in Section 2.12, protect, defend and maintain the
validity and enforceability of its Intellectual Property; (ii) promptly advise
Lenders in writing of material infringements or any other event that could
reasonably be expected to materially and adversely affect the value of its
Intellectual Property; and (iii) except as provided in Section 2.12, not allow
any Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Lenders’ written consent.

 

- 14 -

 

 

(b) If Borrower (i) obtains any Patent, registered Trademark, registered
Copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (ii) applies for any
Patent or the registration of any Trademark, then Borrower shall, on or prior to
the due date for the delivery of the Compliance Certificate for the month
following same, provide written notice thereof to Lenders and shall execute such
intellectual property security agreements and other documents and take such
other actions as Lenders may reasonably request to perfect and maintain a first
priority perfected security interest in favor of Lenders in such property
(subject to Permitted Liens which are permitted pursuant to the terms of this
Agreement or applicable law to have superior priority to Lenders’ Liens). If
Borrower decides to register any Copyrights or mask works in the United States
Copyright Office, Borrower shall: (x) on or prior to the due date for the
Delivery of the Compliance Certificate for the month following same, provide
Lenders with at least fifteen (15) days prior written notice of Borrower’s
intent to register such Copyrights or mask works together with a copy of the
application it intends to file with the United States Copyright Office
(including exhibits thereto); (y) execute an intellectual property security
agreement and such other documents and take such other actions as Lenders may
reasonably request to perfect and maintain a first priority security in favor of
Lenders (subject to Permitted Liens which are permitted pursuant to the terms of
this Agreement or applicable law to have superior priority to Lenders’ Liens) in
the Copyrights or mask works intended to be registered with the United States
Copyright Office; and (z) record such intellectual property security agreement
with the United States Copyright Office contemporaneously with filing the
Copyright with the United States Copyright Office. Borrower shall on or prior to
the due date for the delivery of the Compliance Certificate for the month
following such filing, promptly provide to Lenders copies of all applications
that it files for Patents or for the registration of Trademarks, Copyrights or
mask works, together with evidence of the recording of the intellectual property
security agreement required for Lenders to perfect and maintain a first priority
perfected security interest in such property (subject to Permitted Liens which
are permitted pursuant to the terms of this Agreement or applicable law to have
superior priority to Lenders’ Liens).

 

Section 4.11. FORMATION OR ACQUISITION OF SUBSIDIARIES. Notwithstanding and
without limiting the negative covenants contained in Sections 5.4 and 5.7
hereof, at the time that Borrower or any Guarantor forms any direct or indirect
Subsidiary or acquires any direct or indirect Subsidiary after the Original
Closing Date, Borrower and such Guarantor shall (a) notify Lenders in writing of
the formation or acquisition of such Subsidiary; (b) promptly upon Lenders’
request, cause such new Subsidiary that is a Domestic Subsidiary to provide to
Lenders a joinder to this Agreement to cause such Domestic Subsidiary to become
a co-borrower hereunder, together with such appropriate financing statements
and/or control agreements, all in form and substance satisfactory to Lenders in
its reasonable discretion (including being sufficient to grant Lenders a first
priority Lien (subject to Permitted Liens) in and to the assets of such newly
formed or acquired Domestic Subsidiary), (c) provide to Lenders appropriate
certificates and powers and financing statements, pledging all of the direct or
beneficial ownership interest in any such new Domestic Subsidiary or Foreign
Subsidiary, as applicable, in form and substance satisfactory to Lenders in its
reasonable discretion (provided that in no event shall more than 65% of the
presently existing and hereafter arising issued and outstanding shares of
capital stock owned by Borrower of any Foreign Subsidiary which shares entitle
the holder thereof to vote for directors or any other matter be pledged if the
pledge of a greater amount would cause Borrower adverse tax consequences under
Internal Revenue Code Section 956 or any successor statute during the subject
fiscal year), and (d) provide to Lenders all other documentation in form and
substance satisfactory to Lenders in their reasonable discretion, which in its
opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above. Any document, agreement, or
instrument executed or issued pursuant to this Section 4.11 shall be a Loan
Document.

 

Section 4.12. FURTHER ASSURANCES. Execute any further instruments and take
further action as Lenders reasonably requests to perfect or continue Lenders’
Lien in the Collateral or to effect the purposes of this Agreement. Deliver to
Lenders, within five (5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any governmental
authority regarding compliance with or maintenance of governmental approvals or
requirements of law that could reasonably be expected to have a material effect
on any of the governmental approvals or otherwise on the operations of Borrower
or any of its Subsidiaries.

 

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Article V
NEGATIVE COVENANTS

 

Borrower further covenants that so long as the Loan (or the commitments in
respect thereof) remain outstanding, and until all indebtedness and other
obligations (other than unasserted, contingent indemnification obligations)
arising under this Agreement and the other Loan Documents are paid in full,
Borrower will not without Lenders’ prior written consent:

 

Section 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof, or directly or
indirectly use any such proceeds for the purpose of (a) providing financing to,
or otherwise funding, any targets of Sanctions; or (b) providing financing for,
or otherwise funding, any transaction which would be prohibited by Sanctions or
would otherwise cause Lenders or any affiliate of a Lender to be in breach of
any Sanctions.

 

Section 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $20,000,000.00.

 

Section 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities (each to the extent resulting from borrowings, loans
or advances of money), whether secured or unsecured, matured or unmatured,
liquidated or unliquidated, joint or several, except (a) the liabilities of
Borrower to Lenders, (b) any other liabilities of Borrower existing as of, and
specifically disclosed on Schedule 5.3 hereto (and together with refinancings or
replacements thereof that do not increase the principal amount thereof),
(c) Capital Lease Obligations and purchase money indebtedness in an aggregate
amount not to exceed $10,000,000.00 at any time outstanding, (d) (i) unsecured
obligations under commercial credit cards in the ordinary course of business in
a principal amount not exceeding $5,000,000 outstanding at any time and (ii)
other unsecured indebtedness in an amount not exceeding $250,000 outstanding at
any time, (e) any indebtedness and obligations (each, an “Asset Based Credit
Facility”) to an asset based lender (each, an “Asset Based Lender”) in an amount
not to exceed $10,000,000 at any time outstanding; provided, that Lenders agree
to negotiate in good faith and enter into customary pari passu intercreditor
arrangements with respect to any such Asset Based Credit Facility entered into
pursuant to this Section 5.3(e) (provided, however, that in no event shall any
such Asset Based Credit Facility be secured by (x) any lien on the assets of
Parent Guarantor, the Borrower or any Subsidiary constituting intellectual
property or (y) in the case of any lien on Collateral that does not constitute
intellectual property (the “Shared Collateral”), by a lien on such Shared
Collateral that secures such Asset Based Credit Facility on a greater than pari
passu basis with the liens securing the Loans); provided, further that up to
$5,000,000 of the indebtedness permitted to be incurred under this Section
5.3(e) may be in the form of other secured or unsecured indebtedness (the
principal amount of any such indebtedness incurred pursuant to this proviso
shall, for the avoidance of doubt, reduce dollar-for-dollar the aggregate amount
of indebtedness permitted to be incurred under this Section 5.3(e)); and
(f) additional indebtedness (each, an “Additional Debt Facility”) so long as
after giving effect to the incurrence thereof Borrower is in compliance with the
Debt Incurrence Conditions. As used herein, (i) “Capital Lease Obligations” of
any person or entity means the obligations of such person or entity to pay rent
or other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance sheet
of such person or entity under generally accepted accounting principles, and the
amount of such obligations shall be the capitalized amount thereof determined in
accordance with generally accepted accounting principles, consistently applied
(“GAAP”); provided, that in the event that Borrower notifies Lenders that
Borrower requests an amendment to any provision hereof to eliminate the effect
of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision, regardless of whether any such
notice is given before or after such change in GAAP or in the application
thereof, then Borrower and Majority Lenders shall negotiate in good faith to
enter into an amendment of the relevant affected provisions (without the payment
of any amendment or similar fee to any Lenders) to preserve the original intent
thereof in light of such change in GAAP or the application thereof, (ii) “Debt
Incurrence Conditions” means that (x) no Default or Event of Default is
continuing or would result from the incurrence of such indebtedness and (y)
after giving effect to the incurrence of such indebtedness, Borrower would be in
compliance (determined on a pro forma basis after giving effect to such
incurrence) with a Total Debt Ratio not to exceed 2.00:1.00 (iii) “Total Debt
Ratio” means the ratio of (A) (x) all indebtedness incurred by Borrower (for the
avoidance of doubt, including (without limitation) Capital Lease Obligations),
plus (x) solely for the purpose of determining compliance with Section 5.7(c)
hereof, all cash dividends and distributions to be made pursuant to Section
5.7(c) of this agreement, together with all such cash dividends and
distributions made prior to the date of the proposed use of such amount in
reliance on Section 5.7(c), to (B) net profit of Borrower before tax plus, to
the extent deducted in determining net profit before tax, interest expense (net
of capitalized interest expense), depreciation expense, amortization expense,
non-cash compensation expense and, to the extent approved by Lenders (such
approval not to be unreasonably withheld, conditioned or delayed), transaction
expenses incurred in connection with the GPAC Merger (as defined herein), each
as determined for the most recently ended period of four consecutive fiscal
quarters of the Borrower (this clause (B), “Adjusted Cash Flow”), and (iv) “GPAC
Merger” means the merger of PRPL Acquisition, LLC with and into borrower,
pursuant to which Global Partner Acquisition Corp. acquired a minority interest
in Borrower and the shareholders in Borrower existing on the Original Closing
Date maintained a majority interest in Borrower through rolled equity.

 

- 16 -

 

 

Section 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS, DIVISIONS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower’s business as conducted as of the date hereof; other than as permitted
by Section 5.6 hereof, acquire all or substantially all of the assets of any
other entity; nor sell, lease, transfer or otherwise dispose of all or a
substantial or material portion of Borrower’s assets except in the ordinary
course of its business and, so long as no Default or Event of Default is
continuing or would result therefrom, other sales and dispositions in an amount
not exceeding $250,000 in any fiscal year of Borrower. Notwithstanding anything
herein to the contrary, for all purposes under this Agreement and the other Loan
Documents, in connection with any division or plan of division under Delaware
law (or any comparable event under a different jurisdiction’s laws): (a) if any
asset, right, obligation or liability of any person becomes the asset, right,
obligation or liability of a different person, then it shall be deemed to have
been transferred from the original person to the subsequent person, and (b) if
any new person comes into existence, such new person shall be deemed to have
been organized on the first date of its existence by the holders of its Equity
Interests at such time.

 

Section 5.5. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except, if
applicable, any of the foregoing in favor of an Asset Based Lender pursuant an
Asset Based Credit Facility or any holder of any Additional Debt Facility
otherwise permitted hereunder.

 

Section 5.6. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except (a) any of the foregoing existing as
of, and specifically disclosed on Schedule 5.6 hereto (including investments
existing on the date hereof in EquaPressure LLC, which is an inactive subsidiary
of Borrower), (b) travel and other advances to management personnel and
employees in the ordinary course of business; (c) other readily marketable
Investments in debt securities which are reasonably acceptable to Lenders, (d)
loans, advances and investment in Subsidiary Guarantors as to which the Borrower
has complied with Section 4.11; (e) Permitted Acquisitions and (f) so long as no
Default or Event of Default is continuing or would result therefrom, investments
not otherwise permitted hereunder which are made after the date hereof so long
as the aggregate amount of all such Investments does not exceed $250,000 at any
one time outstanding. As used herein, “Permitted Acquisition” means any
transaction or series of related transactions by Borrower for (i) the direct or
indirect acquisition of all or substantially all of the property or assets of
any U.S. person, or of any assets constituting a line of business, business unit
or division of any person located in the U.S., or, with respect to intellectual
property assets related to the business, located in the U.S. or any other
jurisdiction, (ii) the acquisition (including by merger or consolidation) of the
equity interests (other than director qualifying shares) of any person that
becomes a subsidiary of Borrower after giving effect to such transaction, or
(iii) a merger or consolidation or any other combination with any person (so
long as a Loan Party, to the extent such Loan Party is a party to such merger or
consolidation, is the surviving entity); provided that each of the following
conditions shall be met: (A) no Default or Event of Default shall exist either
at the time of the consummation of such acquisition or execution of applicable
acquisition documentation, or in each case would result therefrom, (B) such
acquisition is consensual, (C) such acquisition shall not result in a decrease
to the Adjusted Cash Flow of Borrower prior to giving effect thereto, (D)
Borrower shall have delivered to Lenders at least five (5) business days prior
to the consummation thereof (1) a due diligence package comprising such material
and information that Borrower has obtained during the course of its own
diligence process, and (2) notice of such acquisition setting forth in
reasonable detail the terms and conditions of such acquisition, (e) Borrower
shall be in pro forma compliance with the Debt Incurrence Conditions after
giving effect thereto and (F) the target shall be in a similar line of business
as Borrower; provided, further, that any acquired subsidiary shall execute a
guaranty in substantially the form of the Parent Guaranty attached hereto as
Exhibit A-1 (a “Subsidiary Guarantor”; any Subsidiary Guarantors together with
Purple Innovation, Inc., a Delaware corporation (the “Parent Guarantor”) and
Borrower are each referred to herein as “Loan Party” and collectively “Loan
Parties”).

 

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Section 5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower’s stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower’s stock now or hereafter outstanding;
provided however, that Borrower may (a) pay any Tax Distributions (as defined in
the Limited Liability Company Agreement of Borrower), (b) pay other cash
dividends or distributions to its shareholders, members or partners, as
applicable, in any year to cover such shareholders’, members’ or partners’
federal and state income tax liability for the immediately preceding year, to
the extent not paid pursuant to Section 5.7(a) hereof, arising as a direct
result of Borrower’s reported income for said year, but not to exceed the
minimum amount so required, and Borrower shall provide to Lenders, upon request,
any documentation required by Lenders to substantiate the appropriateness of
amounts paid or to be paid, (c) make distributions to Parent Guarantor for the
purpose of repurchasing the stock of former employees or consultants pursuant to
stock repurchase agreements, provided that the aggregate amount of all such
repurchases does not exceed Two Hundred Fifty Thousand Dollars ($250,000) per
fiscal year, (d) pay the costs and expenses incurred by Parent Guarantor in its
capacity as the corporate parent of the Borrower in an amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000) per fiscal year and (e) pay other cash
dividends and distributions, so long as (x) no Default or Event of Default is
continuing or would result from the payment of such dividends or distributions
and (y) after giving effect to the payment of such dividends or distributions,
Borrower would be in compliance (determined as of the last day of the most
recently ended fiscal quarter on a pro forma basis after giving effect to such
payment) with a Total Debt Ratio not to exceed 2.00:1.00.

 

Section 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower’s assets now
owned or hereafter acquired, except the following (collectively, “Permitted
Liens”): (a) any of the foregoing, in or upon assets (other than assets
constituting intellectual property), in favor of the holder of any Asset Based
Credit Facility permitted under Section 5.3(e), (b) security interests in assets
not constituting intellectual property securing indebtedness permitted under
Section 5.3(c) herein (provided that (i) such security shall be created
substantially simultaneously with the acquisition of the related property,
(ii) such security interests do not at any time encumber any property other than
the property financed and the proceeds thereof, (iii) the amount of indebtedness
secured thereby is not increased, except in connection with a refinancing or
replacement thereof that does not exceed the amount specified in Section 5.3(c)
and (iv) the principal amount of indebtedness secured by any such security
interest shall at no time exceed one hundred percent (100%) of the original
price for the purchase of such property(including customary fees, costs and
expenses) at the time of purchase), (c) deposits or pledges to secure payment of
workers’ compensation, unemployment insurance, old age pensions or other social
security obligations, in the ordinary course of business of Borrower, (d) liens
for taxes, fees, assessments and governmental charges not delinquent or to the
extent that payment therefor shall not at the time be required to be made in
accordance with, the provisions of Section 4.7, (e) liens of carriers,
warehousemen, mechanics and materialmen, and other like liens arising in the
ordinary course of business, for sums not due or to the extent that payment
therefor shall not at the time be required to be made in accordance with the
provisions of Section 4.7, (f) liens upon assets not constituting intellectual
property incurred, or deposits or pledges made or given in connection with, or
to secure payment of, indemnity, performance or other similar bonds, (g) liens
arising solely by virtue of any statutory or common law provision relating to
banker’s liens, rights of set-off or similar rights and remedies as to deposit
accounts or other funds maintained with a creditor depository institution;
provided that (i) such deposit account is not a dedicated cash collateral
account and is not subject to restriction against access by Borrower in excess
of those set forth by regulations promulgated by the Federal Reserve Board, and
(ii) such deposit account is not intended by Borrower to provide collateral to
the depository institution, (h) encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of real
property and landlord’s liens under leases on the premises rented, which do not
materially detract from the value of such property or impair the use thereof in
the business of Borrower, (i) leases or subleases of real property granted in
the ordinary course of Borrower’s business (or, if referring to another person
or entity, in the ordinary course of such person or entity’s business), and
leases, subleases, non-exclusive licenses or sublicenses of personal property
(other than intellectual property) granted in the ordinary course of Borrower’s
business (or, if referring to another person or entity, in the ordinary course
of such person or entity’s business), (j) non-exclusive licenses of intellectual
property rights granted to third parties in the ordinary course of business not
interfering, individually or in the aggregate, in any material respect with the
conduct of the business of Borrower, (k) liens with respect to security deposits
given by Borrower to secure real estate leases not exceeding $1,000,000.00 in
the aggregate outstanding at any time, (l) deposits with Rocky Mountain Power in
an amount up to $150,000 in connection with the change of the name of Borrower’s
account with Rocky Mountain Power from EdiZONE to Borrower and (m) exclusive
licenses of intellectual property by or to EdiZONE, LLC existing on the date of
this Agreement and described on Schedule 5.8(m) hereto.

 

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Section 5.9. RESTRICTIONS ON ENCUMBRANCE OF INTELLECTUAL PROPERTY. Without in
any way limiting the generality of Section 5.8 hereof, mortgage, pledge, grant
or permit to exist a security interest in, or lien upon (other than, for the
avoidance of doubt, the liens in favor of the Collateral Agent on behalf of the
Lenders under this Agreement and the other Loan Documents), all or any portion
of Borrower’s intellectual property, including, without limitation, patents,
trademarks, copyrights, service marks and trade secrets, whether now owned or
hereafter acquired, except (a) non-exclusive licenses of intellectual property
rights granted to third parties in the ordinary course of business not
interfering, individually or in the aggregate, in any material respect with the
conduct of the business of Borrower and (b) exclusive licenses permitted by
Section 5.8(m) hereof.

 

Section 5.10. TRANSACTIONS WITH AFFILIATES. Directly or indirectly: (i) pay any
funds to or for the account of any Affiliate, (ii) make any Investment in any
Affiliate (whether by acquisition of equity interests or Indebtedness, by loan,
advance, transfer of property, guarantee or other agreement to pay, purchase or
service, directly or indirectly, any debt or otherwise), (iii) dispose of any
property, tangible or intangible, to or from any Affiliate or (iv) participate
in, or effect, any transaction with any Affiliate (transactions of the nature
described in clauses (i) through (iv), “Affiliate Transactions”), except for (a)
Affiliate Transactions entered into on an arm’s-length (or better) basis and
provided that all of the material terms thereof could have been obtained from a
third party that was not an Affiliate, (b) transactions described in the proviso
clause of Section 6.1(h), (c) transactions described in Section 5.8(m), (d) the
commercial real estate lease existing on the date hereof (without any
modification thereto) between the Borrower and TNT Holdings LLC, (e)
transactions with Affiliates that are borrowers or secured guarantors hereunder;
(f) transactions permitted pursuant to Section 5.7; (g) reasonable and customary
director and officer compensation (including bonuses and stock option programs),
benefits and indemnification arrangements, in the ordinary course of business
and approved by the Board of Directors of Borrower (or a committee thereof) and
(h) the InnoHold Tender Offer. As used herein, “Affiliate” means, with respect
to a specified person at any time, another person that directly or indirectly
through one or more intermediaries, Controls or is Controlled by, or is under
common Control with, the person specified, and “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a person, whether through the ability to exercise
voting power, by contract or otherwise.

 

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Section 5.11. MINIMUM LTM EBITDA. Permit EBITDA for the twelve consecutive month
period ending as of the last day of any fiscal quarter listed in the table below
to be less than:

 

Fiscal Quarter Ending: EBITDA December 31, 2019 $0.0 March 31, 2020 $1,500,000
June 30, 2020 $3,000,000 September 30, 2020 $6,500,000 December 31, 2020
$10,000,000 March 31, 2021 $11,250,000 June 30, 2021 $12,500,000 September 30,
2021 $13,750,000 December 31, 2021 $15,000,000 March 31, 2022 $16,250,000 June
30, 2022 $17,500,000 September 30, 2022 $18,750,000 December 31, 2022 and
thereafter $20,000,000

 

Article VI
EVENTS OF DEFAULT

 

Section 6.1. The occurrence of any of the following shall constitute an “Event
of Default” under this Agreement and any condition, act or event which with the
giving of notice or the passage of time or both would constitute an Event of
Default shall constitute a “Default” under this Agreement:

 

(a) Borrower shall fail to pay when due any principal, interest, fees or other
amounts payable under any of the Loan Documents, and, except as to principal,
such failure shall continue unremedied for three (3) business days.

 

(b) Any financial statement or certificate furnished to Lenders in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.

 

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those specifically described as an “Event of Default” in this
section 6.1), and with respect to any such default that by its nature can be
cured, such default shall continue for a period of twenty (20) days from its
occurrence.

 

(d) Any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any contract, instrument or document (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Lenders, and such default
shall continue beyond any grace period applicable thereto, that in any case,
give rise to any payment in an amount exceeding $100,000.

 

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(e) Borrower shall become insolvent, or shall suffer or consent to or apply for
the appointment of a receiver, trustee, custodian or liquidator of itself or any
of its property, or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower shall
file a voluntary petition in bankruptcy, or seeking reorganization, in order to
effect a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time (“Bankruptcy Code”), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or Borrower
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary petition; or Borrower shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower by any court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief for
debtors.

 

(f)   The filing of a notice of judgment lien in excess of $100,000 against
Borrower and same shall not be vacated or stayed within 30 days after the
attachment thereof; or the recording of any abstract or transcript of judgment
in excess of $100,000 against Borrower in any county or recording district in
which Borrower has an interest in real property and such judgment and same shall
not be vacated or stayed within 30 days after the attachment thereof; or the
service of a notice of levy and/or of a writ of attachment or execution, or
other like process, against the assets of Borrower having a value exceeding
$100,000 and same shall not be vacated or stayed within 30 days after the
attachment thereof; or the entry of a judgment against Borrower in excess of
$100,000 and same shall remain unsatisfied or undismissed for 30 days; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower and same shall not be
stayed or dismissed within 60 days.

 

(g) The dissolution or liquidation of Borrower; or Borrower, or any of its
directors, stockholders or members shall take action seeking to effect the
dissolution or liquidation of Borrower (it being understood that the GPAC Merger
does not effect a dissolution or liquidation of Borrower).

 

(h) The occurrence of a Change of Control. “Change of Control” shall mean the
withdrawal, resignation or expulsion of any one or more of the general partners
in Borrower or any change in control of Borrower or any entity or combination of
entities that directly or indirectly control Borrower, with “control” defined as
ownership of an aggregate of twenty-five percent (25%) or more of the common
stock, members’ equity or other ownership interest (other than a limited
partnership interest); provided, however, that in no event shall a “Change of
Control” of Borrower occur in connection with either (i) the exchange by
InnoHold, LLC (or any successor thereto) of Class B Common Stock of Parent
Guarantor and Class B Units of Borrower for Class A Common Stock of Parent
Guarantor, (ii) a transfer by InnoHold, LLC of its interests in Borrower to an
estate planning entity controlled by a member of InnoHold, LLC or (iii) a
permitted transfer by InnoHold, LLC of its interests in Borrower to its members,
including but not limited to those members who are current and former employees
of Parent Guarantor and/or the Borrower in return for the cancellation of
profits interests of InnoHold, LLC.

 

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Section 6.2. REMEDIES.

 

(a) Upon the occurrence and during the continuation of any Event of Default:
(i) all principal, unpaid interest outstanding and other indebtedness of
Borrower under each of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at the Majority Lenders’ option and without notice become
immediately due and payable without presentment, demand, protest or any notices
of any kind, including without limitation, notice of nonperformance, notice of
protest, notice of dishonor, notice of intention to accelerate or notice of
acceleration, all of which are hereby expressly waived by Borrower; (ii) the
obligation, if any, of Lenders to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; (iii) Lenders may verify
the amount of, demand payment of and performance under, and collect any Accounts
and General Intangibles, settle or adjust disputes and claims directly with
Account Debtors for amounts on terms and in any order that Lenders consider
advisable, and notify any person or entity owing Borrower money of Lenders’
security interest in such funds; Borrower shall collect all payments in trust
for Lenders and, if requested by Lenders, immediately deliver the payments to
any Lender in the form received from the Account Debtor, with proper
endorsements for deposit make any payments and do any acts it considers
necessary or reasonable to protect the Collateral and/or its security interest
in the Collateral; Borrower shall assemble the Collateral if Lenders request and
make it available as the Lenders designate; Lenders may enter premises where the
Collateral is located, take and maintain possession of any part of the
Collateral, and pay, purchase, contest, or compromise any Lien which appears to
be prior or superior to its security interest and pay all expenses incurred;
Borrower grants Lenders a license to enter and occupy any of its premises,
without charge, to exercise any of Lenders’ rights or remedies, (iv) Lenders may
ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral; Lenders are hereby granted a
non-exclusive, royalty-free license or other right to, upon and during the
continuation of an Event of Default, use, without charge, Borrower’s labels,
Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade
names, Trademarks, and advertising matter, or any similar property as it
pertains to the Collateral, in completing production of, advertising for sale,
and selling any Collateral and, in connection with any Lender’s exercise of its
rights under this Section 6.2, Borrower’s rights under all licenses and all
franchise agreements inure to such Lender’s benefit and (v)  Lenders shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law or equity, including without limitation all remedies provided
under the Code (including disposal of the Collateral pursuant to the terms
thereof) and the right to exercise any or all of the rights of a beneficiary
pursuant to applicable law; provided, any such exercise shall be by Majority
Lenders on behalf of all other applicable Lenders. All rights, powers and
remedies of Lenders may be exercised at any time by the Majority Lenders and
from time to time during the continuance of an Event of Default, are cumulative
and not exclusive, and shall be in addition to any other rights, powers or
remedies provided by law or equity. Notwithstanding anything to the contrary,
unless an Event of Default is continuing, neither the Collateral Agent (acting
at the direction of the Lenders) nor the Lenders shall give any (i) entitlement
orders under deposit account or securities account control agreements that
constitute Loan Documents or (ii) directions to credit card or other payment
processors to pay any credit card payments or other payment intangibles contrary
to those contained in any direction or notification letter delivered by the
Borrower to such processor in connection with the consummation of the
transactions contemplated hereby.

 

(b) All proceeds of Collateral received by Collateral Agent after an Event of
Default has occurred and is continuing and all or any portion of the Loans shall
have been accelerated hereunder pursuant to Section 6.2, shall upon election by
the Collateral Agent be applied first, to pay any fees, indemnities, or expense
reimbursements then due to the Collateral Agent, and thereafter, shall at the
direction of the Majority Lenders be applied second, ratably, to pay any fees or
expense reimbursements then due to the Lenders from the Borrower; third,
ratably, to pay interest due and payable in respect of the Loans; and fourth,
ratably, to pay that portion of the Obligations constituting unpaid principal of
the Loans.

 

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Article VII
COLLATERAL AGENT

 

Section 7.1. Appointment of Collateral Agent; Financing Statements.

 

(a) Upon the terms and subject to the conditions set forth in this Article VII,
Lenders appoint Collateral Agent, and Collateral Agent accepts such appointment,
to (i) serve as Lenders’ representative and agent for purposes of filing
financing statements against any Loan Party with respect to the Collateral,
including by listing Collateral Agent as secured party of record thereon (as
such term is used in the Uniform Commercial Code (the “UCC”)), and Collateral
Agent agrees that, in such capacity, Collateral Agent shall be the
representative of Lenders for purposes of satisfying the requirements of Section
9-502(a)(2) of the UCC, whether or not Collateral Agent is indicated in any such
financing statement as acting in its capacity as a representative and agent of
Lenders (as contemplated under Section 9-503(d) of the UCC), and (ii) take such
other action or actions as Collateral Agent may be directed in writing from time
to time by Majority Lenders to create, perfect, preserve or maintain Lenders’
security interest in the Collateral or enforce any and all rights and remedies,
in whole or in part, available to Lenders under the Loan Documents with respect
to the Collateral. In furtherance of the foregoing, Collateral Agent hereby
agrees to promptly take any other action (x) required or directed by Majority
Lenders from time to time in order to maintain the perfection of, and preserve
or protect, Lenders’ security interests in the Collateral, (y) necessary in any
bankruptcy or insolvency proceeding with respect to any Loan Party to evidence
Lenders’ appointment of Collateral Agent hereunder and the perfection,
preservation and maintenance of the Collateral in favor of Lenders or (z)
permitted or required to be taken by a secured party of record under the UCC and
directed by Majority Lenders from time to time in order to carry out more
effectively the purposes of this Agreement. Collateral Agent undertakes to
perform only such duties as are expressly set forth herein, and no duties shall
be implied. Collateral Agent agrees that it shall not take any action other than
those actions expressly directed by Majority Lenders hereunder. Except as
expressly set forth herein, Majority Lenders shall have and retain the sole
power and authority to exercise any and all powers and rights with respect to
the Collateral.

 

(b) Collateral Agent further agrees that (i) Lenders shall, and are hereby
authorized to, file all initial financing statements against any Loan Party with
respect to the Collateral, which financing statements shall list Collateral
Agent as secured party of record thereon, (ii) it will not amend, nor will it
consent the amendment of, any financing statements filed against any Loan Party
with respect to the Collateral without the prior written consent of Majority
Lenders; and (iii) it shall immediately notify Majority Lenders in writing of
any change to its information listed on any financing statement filed against
any Loan Party with respect to the Collateral including, without limitation, the
name or address of Collateral Agent, and shall take any action directed by
Majority Lenders to make any necessary amendments to any such financing
statement.

 

(c) Collateral Agent shall have no duty, liability or obligation to the Borrower
under this Agreement. The Majority Lenders shall direct the Collateral Agent to
take any action that the Borrower is permitted to direct the Lenders to take
pursuant to the terms of this Agreement or the other Loan Documents.

 

(d) Collateral Agent shall have no liability under, and no duty to inquire as to
the provisions of, any agreement other than this Agreement. Collateral Agent may
rely upon, and shall not be liable for acting or refraining from acting upon,
any written notice, instruction or request furnished to it hereunder and
reasonably believed by it to be genuine and to have been signed or presented by
the proper party or parties except to the extent directly or indirectly caused
by the gross negligence or willful misconduct of Collateral Agent or Collateral
Agent’s taking of any action in violation of this Agreement. Collateral Agent
shall be under no duty to inquire into or investigate the validity, accuracy or
content of any such document. Collateral Agent shall not be liable for any
action taken or omitted by it in good faith except to the extent directly or
indirectly caused by the gross negligence or willful misconduct of Collateral
Agent as adjudicated by a court of competent jurisdiction. Collateral Agent
shall have no liability for assets lost or damaged while being delivered to
Collateral Agent except to the extent directly or indirectly caused by the gross
negligence or willful misconduct of Collateral Agent as adjudicated by a court
of competent jurisdiction. Collateral Agent may execute any of its powers and
perform any of its duties hereunder directly or through agents or attorneys and
may consult with counsel, accountants and other skilled persons to be selected
and retained by it. Anything in this Agreement to the contrary notwithstanding,
in no event shall Collateral Agent be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if Collateral Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.

 

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Section 7.2. NOTICE BY COLLATERAL AGENT OF CERTAIN EVENTS; CONTINUATION
STATEMENTS. Collateral Agent shall promptly notify Majority Lenders in writing
whenever Collateral Agent receives notice, including any notices received under
or in connection with the UCC, that (a) any security interest (other than the
security interests of Lenders under the Loan Documents) has been placed, or
attempted to be placed, on any Collateral, including any inquiries in respect of
any financing statements listing Collateral Agent as secured party of record
thereunder, or (b) the attachment or perfection of Lenders’ security interest in
the Collateral shall have been challenged. Collateral Agent shall also promptly
notify Lenders in writing that any financing statement filed against any Loan
Party with respect to the Collateral which lists Collateral Agent as secured
party of record thereon (each, an “Expiring Financing Statement”) shall be
expiring, and such notice shall be provided by Collateral Agent no earlier than
six months and no later than three months prior to each such expiration (each,
an “Expiration Notice”). If Collateral Agent shall not have received further
instruction from Majority Lenders within 10 business days following the date on
which Collateral Agent sent an Expiration Notice with respect to an Expiring
Financing Statement, Collateral Agent shall promptly file, in the appropriate
filing office, a continuation statement with respect to such Expiring Financing
Statement and shall provide evidence of the same to Majority Lenders.

 

Section 7.3. REPRESENTATIONS AND WARRANTIES. Each party hereby represents and
warrants as of the date hereof that:

 

(a) It is duly incorporated, validly existing and in good standing under the
laws of its state of incorporation;

 

(b) It has the full power and authority to execute, deliver and perform this
Agreement and has taken all necessary action to authorize the execution,
delivery and performance by it of this Agreement;

 

(c) The execution, delivery and performance by it of this Agreement does not
violate any provision of its corporate governance documents; and

 

(d) This Agreement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding agreement, enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.

 

Section 7.4. TERM OF APPOINTMENT; TERMINATION OF APPOINTMENT. The collateral
agency appointment shall remain in full force and effect until its termination
in accordance with this Section 7.4. Lenders may, in their sole discretion,
terminate the appointment at any time they deems appropriate. Collateral Agent
may terminate the appointment, and resign from its appointment hereunder (and as
the collateral agent under all other applicable Loan Documents), by giving
Majority Lenders at least sixty (60) days’ advance written notice of such
resignation. Upon the termination of the appointment, Collateral Agent shall (a)
take any and all actions directed by Majority Lenders to amend all financing
statements filed against any Loan Party with respect to the Collateral which
list Collateral Agent as secured party of record thereon, and (b) take any other
action permitted or required to be taken by a secured party of record (as such
term is used in the UCC) as directed by Majority Lenders from time to time in
connection with the termination of the appointment.

 

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Section 7.5. COLLATERAL AGENT FEES. Borrower agrees to pay to Collateral Agent,
upon execution of this Agreement and from time to time thereafter, reasonable
compensation for the services to be rendered hereunder, which, unless otherwise
agreed in writing, include (a) a one-time $2,500 acceptance fee payable upon the
date hereof, (b) a $10,000 annual administration fee payable upon the date
hereof as collateral agent and upon each subsequent annual anniversary date and
(c) a one-time $250 amendment fee payable upon execution of each amendment or
supplement to this Agreement. In addition, all reasonable out-of-pocket
expenses, fees and disbursements (including attorneys’ reasonable fees and
out-of-pocket expenses, court costs and other expenses) in connection with (a)
the negotiation and administration of this Agreement and all other applicable
Loan Documents and (b) the enforcement or protection of Collateral Agent’s
rights in connection with this Agreement and all other applicable Loan Documents
(including any expenses incurred as a result any workout, restructuring or
negotiations), shall be billed at cost to Borrower and payable promptly on
demand. In the case of an Event of Default, Collateral Agent may charge Borrower
reasonable extraordinary administration fees (calculated in accordance with
Collateral Agent’s normal fee schedules) for time rendered in connection with
its duties. All reasonable out-of-pocket expenses are payable at cost including
but not limited to outside counsel fees. The parties hereto acknowledge that the
foregoing payment obligations shall survive the termination of the collateral
agency appointment and of this Agreement, and if not paid by or on behalf of
Borrower (without limiting the obligation of the Borrower to do so) shall be
payable by Lenders on a ratable basis in accordance with each Lender’s
respective share of the Loans hereunder.

 

Section 7.6. INDEMNITY. Lenders shall severally, on the basis of each Lender’s
respective share of the Loans hereunder, and not jointly, indemnify, defend and
hold harmless Collateral Agent and its directors, officers, agents and employees
(collectively, the “Indemnified Parties”) from all loss, liability or expense
arising out of or in connection with Collateral Agent’s execution and
performance of this Agreement and all other applicable Loan Documents, or any
Indemnified Party’s following of any instructions or other directions from
Majority Lenders with respect to the appointment of Collateral Agent under this
Agreement, except, in each case, to the extent that such loss, liability or
expense is due to the gross negligence or willful misconduct as adjudicated by a
court of competent jurisdiction. The parties hereto acknowledge that the
foregoing indemnities shall survive the termination of the collateral agency
appointment and of this Agreement and shall not limit the obligations of the
Borrower to indemnify the Collateral Agent under this Agreement and all other
applicable Loan Documents.

 

Section 7.7. CONCERNING THE COLLATERAL AGENT.

 

(a) Lenders acknowledge and agree that (i) the duties, responsibilities and
obligations of the Collateral Agent shall be limited to those expressly set
forth in this Agreement and no duties, responsibilities or obligations shall be
inferred or implied, (ii) the Collateral Agent shall not be responsible for any
of the agreements referred to or described herein, or for determining or
compelling compliance therewith, (iii) this Article VII shall constitute the
entire agreement of the parties with respect to the subject matter and
supersedes all prior oral or written agreements in regard thereto, (iv) the
Collateral Agent shall not be required to expend or risk any of its own funds or
otherwise incur any financial or other liability in the performance of any of
its duties hereunder, and (v) the Collateral Agent shall not be obligated to
take any legal or other action hereunder which might in its judgment involve or
cause it to incur any expense or additional liability unless it shall have been
furnished with acceptable indemnification. Except as expressly set forth herein,
Lenders shall have and retain the sole power and authority to exercise any and
all powers and rights with respect to the Collateral. The Collateral Agent may
earn compensation in the form of short-term interest (“float”) on items like
uncashed distribution checks (from the date issued until the date cashed), funds
that the Collateral Agent is directed not to invest, deposits awaiting
investment direction or received too late to be invested overnight in previously
directed investments.

 

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(b) The Collateral Agent shall be under no duty to afford the assets in the
Collateral any greater degree of care than it gives its own similar property.
The Collateral Agent shall not be liable for any damage, loss or injury
resulting from any action taken or omitted in the absence of gross negligence or
willful misconduct, as adjudicated by a court of competent jurisdiction or the
Collateral Agent’s taking of any action in violation of this Agreement.

 

(c) Notwithstanding any other provision of this Article VII, the Collateral
Agent shall not be liable (i) for any indirect, incidental, consequential,
punitive or special losses or damages, regardless of the form of action and
whether or not any such losses or damages were foreseeable or contemplated, (ii)
for the acts or omissions of any nominees, correspondents, designees, agents,
subagents or sub-custodians, or (iii) for the investment or reinvestment of any
assets in the Account, or any liquidation of such investment or reinvestment,
executed in accordance with the terms of the Agreement, including, without
limitation, any liability for any delays (not resulting from its gross
negligence or willful misconduct as adjudicated by a court of competent
jurisdiction or the Collateral Agent’s taking of any action in violation of this
Agreement) in the investment or reinvestment of the Collateral, any loss of
interest incident to any such delays, or any loss or penalty as a result of the
liquidation of any investment before its stated maturity date.

 

(d) All instructions and notices required under this appointment shall be
delivered to the Collateral Agent in writing.

 

(e) Notwithstanding anything else to the contrary herein or in any other
agreement, any reference to any discretionary action by, consent, designation,
specification, requirement or approval of, notice, request or other
communication from, or other direction given or action to be undertaken or to be
(or not to be) suffered or omitted by the Collateral Agent or to any election,
decision, opinion, acceptance, use of judgment, expression of satisfaction or
other exercise of discretion, rights or remedies to be made (or not to be made)
by the Collateral Agent, it is understood that in all cases the Collateral Agent
shall be fully justified in failing or refusing to take any such action if it
shall not have received such written instruction, advice or concurrence of
Majority Lenders as it deems appropriate. This provision is intended solely for
the benefit of the Collateral Agent and its successors and permitted assigns and
is not intended to and will not entitle the other parties hereto to any defense,
claim or counterclaim, or confer any rights or benefits on any party hereto.

 

(f) The Collateral Agent acknowledges that it has, independently and without
reliance upon any other secured party and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into to this Agreement. The Collateral Agent also acknowledges
that it will, independently and without reliance upon any other secured party
and based on such documents and information as it shall from time to time deem
appropriate, make its own credit analysis and decision as to whether it will
continue to be party to this Agreement.

 

Section 7.8. CONFIDENTIALITY. The Collateral Agent and the Lenders agree that
the existence and contents of this Agreement, all other information and
documents provided by Lenders to Collateral Agent in connection herewith, and
the existence of the relationship between Lenders and Collateral Agent, and any
services provided by Collateral Agent in connection therewith, are and shall
remain confidential and shall not be disclosed to any third party, except for
such information (i) as may become generally available to the public, (ii) as
may be required or appropriate in response to any summons, subpoena, or
otherwise in connection with any litigation, arbitration, administrative or
similar proceeding, or to comply with any applicable law, order, regulation,
ruling, request from governmental regulators, and provided that, if possible,
notice of such disclosure is provided to the other party prior thereto, (iii) as
may be obtained from a non-confidential source that disclosed such information
in a manner that did not violate its obligations to the other party in making
such disclosure, or (iv) as may be furnished to that party’s affiliates, or its
affiliates’ auditors, attorneys, advisors, lenders and credit rating agencies
which are required to keep the information that is disclosed in confidence.
Without limiting the foregoing, upon Collateral Agent’s receipt of an inquiry
from a third party regarding any financing statements of record against any Loan
Party with respect to the Collateral listing Collateral Agent as secured party
of record thereon, Collateral Agent shall promptly provide notice of the same to
Majority Lenders, and shall only respond to such inquiry in accordance with
instructions provided by Majority Lenders.

 

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Article VIII
MISCELLANEOUS

 

Section 8.1. NO WAIVER. No delay, failure or discontinuance of any Secured Party
(as defined in Section 8.14 hereof) in exercising any right, power or remedy
under any of the Loan Documents shall affect or operate as a waiver of such
right, power or remedy; nor shall any single or partial exercise of any such
right, power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, permit, consent or approval of any kind by such Secured Party of any
breach of or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.

 

Section 8.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

  BORROWER: PURPLE INNOVATION, LLC     Purple Innovation, LLC     123 E 200 N  
  Alpine, Utah 84004     Attn: Chief Legal Officer     Email: casey@purple.com  
        LENDERS: COLISEUM CAPITAL PARTNERS, L.P.     105 Rowayton Avenue    
Rowayton, CT 06853       Attn: Adam Gray     Email: agray@coliseumpartners.com  
        BLACKWELL PARTNERS LLC – SERIES A     c/o Coliseum Capital Management,
LLC     105 Rowayton Avenue     Rowayton, CT 06853     Attn: Adam Gray    
Email: agray@coliseumpartners.com           COLISEUM CO-INVEST DEBT FUND, L.P.  
  c/o Coliseum Capital Management, LLC     105 Rowayton Avenue     Rowayton, CT
06853     Attn: Adam Gray     Email: agray@coliseumpartners.com        
COLLATERAL AGENT: DELAWARE TRUST COMPANY     251 Little Falls Drive    
Wilmington, DE 19808     Attn: Corporate Trust Administration     Email:
trust@delawaretrust.com

 

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy or
e-mail, upon receipt.

 

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Section 8.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Lenders
immediately upon demand (a) the full amount of all reasonable out-of-pocket
payments, advances, charges, costs and expenses, including, to the extent
permitted by applicable law, reasonable attorneys’ fees, expended or incurred by
Lenders in connection with the negotiation and preparation of (i) this Agreement
and the other Loan Documents, (ii) Lenders’ continued administration hereof and
thereof, and (iii) the preparation of any amendments and waivers hereto and
thereto, (b) the full amount of all out-of-pocket payments, advances, charges,
costs and expenses, including, to the extent permitted by applicable law,
attorneys’ fees, expended or incurred by Lenders in connection with the
enforcement of Lenders’ rights and/or the collection of any amounts which become
due to Lenders (or any of them) under any of the Loan Documents, whether or not
suit is brought, and (c) the full amount of all out-of-pocket payments,
advances, charges, costs and expenses, including, to the extent permitted by
applicable law, attorneys’ fees), expended or incurred by Lenders (or any of
them) in connection with the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by any Lender or any
other person) relating to Borrower or any other person or entity and related to
any of the Loan Documents. Notwithstanding anything in this Agreement to the
contrary, reasonable attorneys’ fees shall not exceed the amount permitted by
law.

 

Section 8.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interests or rights hereunder without
Lenders’ prior written consent. Each Lender reserves the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, such Lender’s rights and benefits under each of the Loan Documents
with the prior written consent of the Borrower (which consent shall not be
unreasonably withheld, conditioned or delayed and shall not be required if (a)
an Event of Default is continuing or (b) such assignment or participation is to
an affiliate of a Lender). In connection therewith, the applicable Lender may
disclose all documents and information which such Lender now has or may
hereafter acquire relating to any credit subject hereto, Borrower or its
business, any guarantor hereunder or the business of such guarantor, provided
that prior to disclosing such documents and information, the Lender shall first
obtain the agreement of such prospective assignee, participant or other
transferee to comply with the provisions of Section 8.12. Upon any such
assignment, the applicable Lender shall deliver an updated Schedule 1.1 to
Borrower and Collateral Agent reflecting such assignment.

 

Section 8.5. ENTIRE AGREEMENT; AMENDMENT. To the full extent permitted by law,
this Agreement and the other Loan Documents constitute the entire agreement
between Borrower and Lenders with respect to each credit subject hereto and
supersede all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified
only in writing signed by the Borrower and the Lenders, except that Borrower and
Lenders holding not less than a majority in interest of the Loan (the “Majority
Lenders”) may agree to amendments or waivers that do not (a) extend the date of
any payment or prepayment required hereunder or (b) decrease the principal
amount of the Loan, the interest rate hereunder or the amount of any prepayment
or repayment premium. Further, Article VII of this Agreement, and any other
provision for the benefit of the Collateral Agent, may be amended or modified
only in writing signed by the Collateral Agent and, to the extent affecting the
Borrower, the Borrower.

 

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Section 8.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

 

Section 8.7. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

 

Section 8.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

 

Section 8.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

 

Section 8.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER AGREES TO THE EXCLUSIVE
JURISDICTION OF COURTS LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF
AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS AGREEMENT.

 

Section 8.11. BUSINESS PURPOSE. Borrower represents and warrants that each
credit subject hereto is made for (a) a business, commercial, investment,
agricultural or other similar purpose, (b) the purpose of acquiring or carrying
on a business, professional or commercial activity, or (c) the purpose of
acquiring any real or personal property as an investment and not primarily for a
personal, family or household use.

 

Section 8.12. CONFIDENTIALITY OF INFORMATION. Each Lender shall use reasonable
efforts to assure that information about Borrower or Parent Guarantor and their
respective operations, affairs and financial condition, not generally disclosed
to the public or to trade and other creditors, that is furnished to such Lender
pursuant to the provisions hereof is used only for the purposes of this
Agreement and the other Loan Documents and any other relationship between such
Lender and Borrower or Parent Guarantor and shall not be divulged to any person
or entity other than such Lender, its affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys and accountants;
(b) in connection with the enforcement of the rights of such Lender hereunder
and under the Loan Documents or otherwise in connection with applicable
litigation; (c) in connection with assignments and participations and the
solicitation of prospective assignees and participants referred to in
Section 8.4 hereof; (d) if such information is generally available to the public
other than as a result of disclosure by such Lender; (e) to any direct or
indirect contractual counterparty in any hedging arrangement or such contractual
counterparty’s professional advisor; and (f) as may otherwise be required or
requested by any regulatory authority having jurisdiction over such Lender or by
any applicable law, rule, regulation or judicial process, the opinion of such
Lender’s counsel concerning the making of such disclosure to be binding on the
parties hereto. No Lender shall incur any liability to Borrower by reason of any
disclosure permitted by this Section.

 

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Section 8.13. TERMINATION PRIOR TO MATURITY; SURVIVAL. All covenants,
representations and warranties made in this Agreement shall continue in full
force until this Agreement has terminated pursuant to its terms and all
Obligations have been satisfied. Notwithstanding anything to the contrary, so
long as Borrower has satisfied the Obligations (including, for the avoidance of
doubt, all Obligations arising pursuant to Article I hereof and otherwise, other
than inchoate indemnity obligations, and any other obligations which, by their
terms, are to survive the termination of this Agreement), this Agreement may be
terminated prior to the Maturity Date by Borrower, effective three (3) Business
Days after written notice of termination is given to Lenders. Those obligations
that are expressly specified in this Agreement as surviving this Agreement’s
termination shall continue to survive notwithstanding this Agreement’s
termination.

 

Section 8.14. Indemnification. Borrower agrees to indemnify, defend and hold the
each Lender and the Collateral Agent (each a “Secured Party” and collectively,
the “Secured Parties”) and each Secured Party’s directors, officers, employees,
agents, attorneys, or any other person or entity affiliated with or representing
Secured Parties (each, an “Indemnified Person”) harmless against: (i) all
obligations, demands, claims, and liabilities (collectively, “Claims”) claimed
or asserted by any other party in connection with the transactions contemplated
by the Loan Documents; and (ii) all losses or expenses (including Secured
Party’s expenses) in any way suffered, incurred, or paid by such Indemnified
Person as a result of, following from, consequential to, or arising from
transactions between Secured Parties and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by such Indemnified Person’s gross negligence or willful misconduct. This
Section 8.14 shall survive until all statutes of limitation with respect to the
Claims, losses, and expenses for which indemnity is given shall have run.

 

Section 8.15. NO NOVATION. Notwithstanding anything to the contrary contained
herein, this Agreement shall not extinguish the obligations for the payment of
money outstanding under the Original Credit Agreement or discharge or release
the Lien or priority of any Security Document or any other security therefor.
Nothing herein contained shall be construed as a substitution or novation of the
obligations outstanding under the Original Credit Agreement or instruments
securing the same, which shall remain in full force and effect, except to any
extent modified hereby or by instruments executed concurrently herewith and
except to the extent repaid as provided herein. Nothing implied in this
Agreement or in any other document contemplated hereby shall be construed as a
release or other discharge of any of the Loan Parties under any Loan Document
from any of its obligations and liabilities as a Borrower, Guarantor or pledgor
under any of the Loan Documents.

 

Article IX
DEFINITIONs

 

Section 9.1. DEFINITIONS. As used in this Agreement, the following capitalized
terms have the following meanings:

 

“Account” is, as to any person or entity, any “account” of such person or entity
as “account” is defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable and
other sums owing to such person or entity.

 

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“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

 

“Business Day” is any day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close.

 

“Capital Stock” is, with respect to any person or entity, the common stock, the
preferred stock, any other capital stock or other equivalents (however
designated) of capital stock of a corporation, and any and all similar ownership
interests or membership interests in a person or entity (other than a
corporation) of such person or entity authorized from time to time, and any
other shares, options, warrants, rights, interests, participations or
equivalents (however designated) of or in such person or entity, whether voting
or nonvoting, including, without limitation, common stock, options, warrants,
preferred stock, phantom stock, stock appreciation rights, preferred stock,
convertible notes or debentures, stock purchase rights, and all securities
convertible, exercisable, or exchangeable, in whole or in part, into any one or
more of the foregoing.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that (a) any term that
is defined in the Code and used but not defined herein shall have the meaning
under the Code and (b) to the extent that the Code is used to define any term
herein or in any Loan Document and such term is defined differently in different
Articles or Divisions of the Code, the definition of such term contained in
Article or Division 9 shall govern; provided further, that in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection,
or priority of, or remedies with respect to, Lenders’ Lien on any Collateral is
governed by the Uniform Commercial Code in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority, or
remedies and for purposes of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described
on Annex A.

 

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

 

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United
States or any state or territory thereof or the District of Columbia.

 

“EBITDA” means (a) Net Income, plus (b) to the extent deducted in the
calculation of Net Income, without duplication, (i) Interest Expense, plus (ii)
depreciation expense and amortization expense, plus (iii) income tax expense,
plus (iv) non-cash stock compensation expense, plus (v) such other items
reducing Net Income acceptable to Majority Lenders in their reasonable
discretion, plus or minus (vi) non-cash gains, losses and charges, plus (vii)
one-time fees, costs and expenses incurred in connection with the consummation
of the transactions contemplated by the Loan Documents.

 

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“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

 

“Equity Interests” means all shares, interests, participation or other
equivalents, however designated, of or in a corporation or limited liability
company, whether or not voting, including but not limited to common stock,
member interests, warrants, preferred stock, convertible debentures, and all
agreements, instruments and documents convertible, in whole or in part, into any
one or more or all of the foregoing.

 

“Exchange Agreement” means that certain Exchange Agreement dated February 2,
2018 by and among Borrower, Parent Guarantor, InnoHold, LLC and the other
parties thereto.

 

“Excluded Deposit Account” means any deposit account exclusively used for
payroll, payroll taxes, and other employee wage and benefit payments to or for
the benefit of Borrower’s employees and identified to Lenders by Borrower as
such.

 

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

 

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

 

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

 

“Indebtedness” is all of the Borrower’s obligations for borrowed money, all
obligations evidenced by notes, bonds, debentures, loan agreements, amounts
drawn under lines of credit, outstanding L/Cs, bank guaranties, performance
bonds, bankers’ acceptances, obligations under hedging agreements, debt secured
by a lien on the Borrower’s property, debt-like equity that would constitute
indebtedness or a liability under GAAP and any guarantees of any of the
foregoing.

 

“InnoHold Tender Offer” means the tender offer to be conducted by InnoHold, LLC
pursuant to which InnoHold, LLC will distribute shares of Class B Common Stock
of Parent Guarantor and Class B Units of the Company to members of InnoHold, LLC
who are also current and former employees of Parent Guarantor and the Borrower
in return for the cancellation of profits interests of InnoHold, LLC held by
such current and former employees of Parent Guarantor and/or the Borrower.

 

“Intellectual Property” means, with respect to any person or entity, all of such
person’s or entity’s right, title, and interest in and to the following: (a) its
Copyrights, Trademarks and Patents; (b) any and all trade secrets and trade
secret rights, including, without limitation, any rights to unpatented
inventions, know-how and operating manuals; (c) any and all source code; (d) any
and all design rights which may be available to such person or entity; (e) any
and all claims for damages by way of past, present and future infringement of
any of the foregoing, with the right, but not the obligation, to sue for and
collect such damages for said use or infringement of the Intellectual Property
rights identified above; and (f) all amendments, renewals and extensions of any
of the Copyrights, Trademarks or Patents.

 

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“Interest Expense” means for any fiscal period, interest expense (whether cash
or non-cash) of Borrower determined in accordance with GAAP for the relevant
period ending on such date, including, in any event, interest expense with
respect to any Indebtedness of Borrower, including, without limitation or
duplication, all commissions, discounts, or related amortization and other fees
and charges with respect to letters of credit and bankers’ acceptance financing
and the net costs associated with interest rate swap, cap, and similar
arrangements, and the interest portion of any deferred payment obligation
(including leases of all types).

 

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

“Investment” is, with respect to any person or entity, (a) any acquisition of
Capital Stock, bonds, notes, debentures, partnership, joint venture or other
ownership interests or other securities of another person or entity, (b) any
deposit with, or advance, loan or other extension of credit to, such other
person or entity (other than deposits made in connection with the purchase of
equipment inventory and supplies in the ordinary course of business), (c) any
other capital contribution to or investment in such other person or entity,
including, without limitation, any guaranty obligation incurred for the benefit
of such other person or entity and (d) any acquisition of any division or
business unit of, or substantially all of the assets of, such other person or
entity.

 

“IP Agreement” is that certain Intellectual Property Security Agreement between
Borrower, Parent Guarantor and the Lenders dated as of the Incremental Funding
Date, as may be amended, restated, supplemented or otherwise modified from time
to time.

 

“Lien” is any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge or other security interest or any
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing), and the filing
of any financing statement under the Code or comparable law of any jurisdiction
in respect of any of the foregoing.

 

“Net Income” means, as calculated on a consolidated basis for Borrower for any
period as at any date of determination, the net profit (or loss), after
provision for taxes, of Borrower for such period taken as a single accounting
period.

 

“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, fees, expenses, Prepayment Premium, the Loan, and other amounts
Borrower owes Lenders now or later, under this Agreement or the other Loan
Documents, including, without limitation, all obligations and interest accruing
after insolvency proceedings begin and debts, liabilities, or obligations of
Borrower assigned to Lenders, and to perform Borrower’s duties under the Loan
Documents. Notwithstanding anything to the contrary, the Obligations do not
include any Equity Interests held by any Lender in Borrower or Parent Guarantor.

 

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

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“Restricted License” is any material license or other material agreement with
respect to which Borrower is the licensee (a) that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property, or (b) for which a default
under or termination of could interfere with any Lender’s right to sell any
Collateral. For the avoidance of doubt, “Restricted License” shall not include
any license of over-the-counter software that is commercially available to the
public.

 

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

 

“Tax Receivable Agreement” means that certain Tax Receivable Agreement dated
February 2, 2018 by and among Borrower, Parent Guarantor, InnoHold, LLC and the
other parties thereto.

 

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

 

[Continues With Signatures On Following Page]

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Agreement to be executed as of the day and year first written
above.

 

PURPLE INNOVATION, LLC         By:     Name:     Title:  

 

  COLISEUM CAPITAL PARTNERS, L.P.   By: Coliseum Capital, LLC, its General
Partner         By:       Name:     Title:         BLACKWELL PARTNERS LLC –
Series A   By: Coliseum Capital Management, LLC, its   Attorney-in-Fact        
By:       Name:     Title:         COLISEUM CO-INVEST DEBT FUND, L.P.   By:
Coliseum Capital, LLC, its General Partner         By:       Name:     Title:  
      DELAWARE TRUST COMPANY         By:       Name:     Title:

 

 

 

 

Annex A – COLLATERAL DESCRIPTION

 

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, Intellectual Property, commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts, certificates of
deposit, fixtures, letters of credit rights (whether or not the letter of credit
is evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and

 

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding anything to the contrary herein, the Collateral does not include
any of the following, whether now owned or hereafter acquired: (a) more than
sixty-five percent (65%) of the presently existing and hereafter arising issued
and outstanding shares of capital stock owned by Borrower of any Foreign
Subsidiary which shares entitle the holder thereof to vote for directors or any
other matter; (b) U.S. intent-to-use trademark application or “intent-to-use”
service mark application before the filing of a ”Statement of Use” or an
“Amendment to Allege Use” with respect thereto with the United States Patent and
Trademark Office, to the extent that and during the period in which the grant of
a security interest therein would impair the validity or enforceability of, or
render void or voidable or result in the cancellation of any of the Borrower’s
right, title, or interest therein of any such trademark or service mark
application under applicable federal law; (c) rights held under a permit,
license or contract that are not assignable by their terms without the consent
of the licensor, issuer or contract counterparty thereof (but only to the extent
such restriction on assignment is enforceable under applicable law, and upon the
termination of such restriction, such rights shall immediately become Collateral
without any action by Borrower or any Lender); (d) any interest of Borrower in
any Equipment subject to an Equipment lease or purchase money loan secured by
such Equipment if Borrower is prohibited by the terms of such lease or loan from
granting a security interest in such Equipment or under which such an assignment
or Lien in such Equipment would cause a default to occur under such lease or
loan; provided, however, that upon termination of such prohibition, such
interest shall immediately become Collateral without any action by Borrower or
Lender; or (e) Excluded Deposit Accounts.