Exhibit 10.01

  

EXECUTION COPY

 

Loan Agreement

 

between

 

NIL FUNDING CORPORATION

 

and

 

GAS NATURAL INC.

 

dated as of

 

April 15, 2016

 

 

 

 

TABLE OF CONTENTS

 

Article I Definitions and Interpretation 1       Section 1.01 Definitions. 1    
Section 1.02 Interpretation 11       Article II The Loan 12       Section 2.01
Loan Commitment. 12     Section 2.02 Repayment of the Loan. 12     Section 2.03
Repayment of Loans; Evidence of Debt. 13     Section 2.04 Optional Prepayments.
13     Section 2.05 Mandatory Prepayments. 13     Section 2.06 Application of
Prepayments. 13     Section 2.07 Interest. 14     Section 2.08 Origination Fee.
14     Section 2.09 Computation of Interest and Fees. 14       Article III Taxes
14       Section 3.01 Taxes. 14       Article IV Conditions Precedent 16      
Section 4.01 Conditions Precedent to Initial Loans. 16       Article V
Representations and Warranties 17       Section 5.01 Existence; Compliance With
Laws. 18     Section 5.02 Power; Authorization; Enforceability. 18     Section
5.03 No Contravention. 18     Section 5.04 Financial Statements. 19     Section
5.05 No Material Adverse Effect. 19     Section 5.06 No Litigation. 19    
Section 5.07 No Default. 19     Section 5.08 Ownership of Property; Liens. 20  
  Section 5.09 Environmental Matters. 20

 

i 

 

 

Section 5.10 Insurance. 21     Section 5.11 Material Contracts. 21     Section
5.12 Intellectual Property. 21     Section 5.13 Taxes. 21     Section 5.14
ERISA. 22     Section 5.15 Margin Regulations. 22     Section 5.16 Investment
Company Act. 23     Section 5.17 Subsidiaries; Equity Interests. 23     Section
5.18 Labor Matters. 23     Section 5.19 Accuracy of Information, Etc. 23    
Section 5.20 Solvency. 24     Section 5.21 PATRIOT Act; OFAC and Other
Regulations. 24       Article VI Affirmative Covenants 25       Section 6.01
Financial Statements. 25     Section 6.02 Certificates; Other Information. 26  
  Section 6.03 Notices. 27     Section 6.04 Maintenance of Existence;
Compliance. 27     Section 6.05 Performance of Material Contracts. 28    
Section 6.06 Maintenance of Property; Insurance. 28     Section 6.07 Inspection
of Property; Books and Records; Discussions. 28     Section 6.08 Environmental
Laws. 29     Section 6.09 Use of Proceeds. 29     Section 6.10 Further
Assurances. 29       Article VII Negative Covenants 29       Section 7.01
Limitation on Debt. 30     Section 7.02 Limitation on Liens. 30     Section 7.03
Mergers; Nature of Business. 32     Section 7.04 Limitation on Investments. 32  
  Section 7.05 Limitation on Dispositions. 33     Section 7.06 Limitation on
Sales and Leasebacks. 33

 

ii 

 

 

Section 7.07 Limitation on Restricted Payments. 33     Section 7.08 Limitation
on Prepayments of Debt and Amendments of Debt Instruments. 34     Section 7.09
Limitation on Transactions With Affiliates. 35     Section 7.10 Limitation on
Restrictive Agreements. 35     Section 7.11 Limitation on Amendments of Material
Contracts. 35       Article VIII Events of Default and Remedies 36       Section
8.01 Events of Default. 36     Section 8.02 Remedies Upon Event of Default. 38  
    Article IX Miscellaneous 39       Section 9.01 Notices. 39     Section 9.02
Amendments and Waivers. 40     Section 9.03 Expenses; Indemnity; Damage Waiver.
40     Section 9.04 Successors and Assigns. 42     Section 9.05 Survival. 43    
Section 9.06 Counterparts; Integration; Effectiveness. 43     Section 9.07
Severability. 44     Section 9.08 Governing Law; Jurisdiction; Consent to
Service of Process. 44     Section 9.09 Waiver of Jury Trial. 45     Section
9.10 Headings. 45     Section 9.11 USA PATRIOT Act. 45     Section 9.12 Pulic
Announcements. 45

 

iii 

 

 

Loan Agreement

 

This Loan Agreement (this "Agreement"), dated as of April 15, 2016, is entered
into between Gas Natural Inc., an Ohio corporation (the "Borrower"), and NIL
Funding Corporation, a Delaware limited liability company (the "Lender").

 

For and in consideration of the mutual covenants and agreements hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

 

Article I

Definitions and Interpretation

 

Section 1.01         Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:

 

"Affiliate" as to the borrower, means any other Person that, directly or
indirectly through one or more intermediaries, is in control of, is controlled
by, or is under common control with, the Borrower. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting power
for the election of directors (or persons performing similar functions) of such
Person, or (b) direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise.

 

"Anti-terrorism Law" means any Requirement of Law related to money laundering or
financing terrorism including the PATRIOT Act, The Currency and Foreign
Transactions Reporting Act (31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s),
1820(b) and 1951-1959) (also known as the "Bank Secrecy Act"), the Trading With
the Enemy Act (50 U.S.C. § 1 et seq.) and Executive Order 13224 (effective
September 24, 2001).

 

"Asset Sale" means any Disposition of Property or series of related Dispositions
of Property (excluding any such Disposition permitted by Section 7.05) that
yields gross proceeds to the Borrower (valued at the principal amount thereof in
the case of non-cash proceeds consisting of notes or other debt securities and
valued at fair market value in the case of other non-cash proceeds) in excess of
$2 million.

 

"Bankruptcy Code" means Title 11 of the United States Code, as amended from time
to time, or any similar federal or state law for the relief of debtors.

 

 

 

 

"Base Rate" for any day, means seven and one-half percent (7.5%) per annum.

 

"Blocked Person" means any Person that (a) is publicly identified on the most
current list of "Specially Designated Nationals and Blocked Persons" published
by the Office of Foreign Assets Control of the US Department of the Treasury
("OFAC") or resides, is organized or chartered, or has a place of business in a
country or territory subject to OFAC sanctions or embargo programs, or (b) is
publicly identified as prohibited from doing business with the United States
under the International Emergency Economic Powers Act, the Trading With the
Enemy Act, or any other Requirement of Law.

 

"Board" means the Board of Governors of the Federal Reserve System of the United
States (or any successor thereto).

 

"Borrower" means Gas Natural Inc., an Ohio corporation.

 

"Business Day" means a 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 Lease Obligations" with respect to any Person, means the obligations of
such Person 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 under GAAP on the balance sheet of such Person
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

"Cash Equivalents" as to any Person, means (a) securities issued or directly and
fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition by such Person, (b) time deposits and
certificates of deposit of any commercial bank having, or which is the principal
banking subsidiary of a bank holding company organized under the laws of the
United States, any State thereof or, the District of Columbia having capital,
surplus and undivided profits aggregating in excess of $500,000,000, having
maturities of not more than six months from the date of acquisition by such
Person, (c) repurchase obligations with a term of not more than 90 days for
underlying securities of the types described in clause (a) above entered into
with any bank meeting the qualifications specified in clause (b) above, (d)
commercial paper issued by any issuer rated at least A-1 by S&P or at least P-1
by Moody's (or carrying an equivalent rating by a nationally recognized rating
agency if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally), and in each case maturing not more than one
year after the date of acquisition by such Person or (e) investments in money
market funds substantially all of whose assets are comprised of securities of
the types described in clauses (a) through (d) above.

 

  2

 

 

"Change in Law" means the occurrence after the date of this Agreement of (a) the
adoption or effectiveness of any law, rule, regulation, judicial ruling,
judgment or treaty, (b) any change in any law, rule, regulation or treaty or in
the administration, interpretation, implementation or application by any
Governmental Authority of any law, rule, regulation or treaty, or (c) the making
or issuance by any Governmental Authority of any request, rule, guideline or
directive, whether or not having the force of law.

 

"Closing Date" means the date on which the conditions precedent set forth in
Section 4.01 are satisfied or waived.

 

"Code" means the Internal Revenue Code of 1986, as amended.

 

"Commitment Fee" has the meaning set forth in Section 2.12.

 

"Contractual Obligation" of any Person, means any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound,
other than the Obligations.

 

"Debt" of any Person at any date, without duplication, means (a) all
indebtedness of such Person for borrowed money; (b) all obligations of such
Person for the deferred purchase price of property or services (other than (i)
trade payables and accrued expenses incurred in the ordinary course of business
and not past due for more than 90 days after the date on which each such trade
payable or account payable was created and (ii) any earn-out, purchase price
adjustment or similar obligation until such obligation appears in the
liabilities section of the balance sheet of such Person); (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar instruments;
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property); (e)
all obligations of such Person to purchase, redeem, retire, defease or otherwise
make any required payment in respect of any Equity Interests pursuant to its
express terms in such Person or any other Person or any warrants, rights or
options to acquire such Equity Interests, valued, in the case of redeemable
preferred interests, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends; (f) all obligations of such
Person, contingent or otherwise, as an account party or applicant under
acceptance, letter of credit or similar facilities in respect of obligations of
the kind referred to in subsections (a) through (e) of this definition; (g) all
Guaranty Obligations of such Person in respect of obligations of the kind
referred to in subsections (a) through (f) above; (h) for the purposes of
Section 8.01(e) only, all net obligations of such Person in respect of Swap
Agreements valued on any date at the Swap Termination Value thereof as of such
date; and (i) all debt of any general partnership, unlimited liability company
or unincorporated joint venture in which such Person is a general partner,
member or a joint venturer, respectively (unless such Debt is expressly made
non-recourse to such Person).

 

  3

 

 

"Debtor Relief Law" means the Bankruptcy Code and all other liquidation,
bankruptcy, assignment for the benefit of creditors, conservatorship,
moratorium, receivership, insolvency, rearrangement, reorganization or similar
debtor relief laws of the US or other applicable jurisdictions in effect from
time to time.

 

"Default" means any of the events specified in Section 8.01 which constitutes an
Event of Default or which, upon the giving of notice, the lapse of time, or both
pursuant to Section 8.01 would, unless cured or waived, become an Event of
Default.

 

"Default Rate" has the meaning set forth in Section 2.07(a).

 

"Disclosed Litigation" has the meaning set forth in Section 5.06.

 

"Disposition" or "Dispose" means the sale, transfer, license, lease or other
disposition (whether in one transaction or in a series of transactions, and
including any sale and leaseback transaction) of any property (including,
without limitation, any Equity Interests) by any Person (or the granting of any
option or other right to do any of the foregoing), including any sale,
assignment, transfer or other disposal, with or without recourse, of any notes
or accounts receivable or any rights and claims associated therewith.

 

"Dollars" means the lawful currency of the United States of America.

 

"Eligible Assignee" has the meaning set forth in Section 9.04 .

 

"Environmental Action" means any action, suit, demand, demand letter, claim,
notice of violation or non-compliance, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any permit issued under any
Environmental Law, or any Hazardous Material, or arising from alleged injury or
threat to health, safety or the environment including (a) by any Governmental
Authority for enforcement, clean-up, removal, response, remedial or other
actions or damages and (b) any Governmental Authority or third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.

 

"Environmental Law" means any and all Federal, state, foreign, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) as now or may at any time hereafter be in effect, and any
binding judicial or administrative interpretation thereof, including any binding
judicial or administrative order, consent decree or judgment, regulating,
relating to or imposing liability or standards of conduct concerning protection
of the environment or, to the extent relating to exposure to substances that are
harmful or detrimental to the environment, or human health or safety.

 

  4

 

 

"Equity Interests" means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership (or profit) interests in a Person (other than a
corporation), securities convertible into or exchangeable for shares of capital
stock of (or other ownership or profit interests in) such Person, and any and
all warrants, rights or options to purchase any of the foregoing, whether voting
or nonvoting, and whether or not such shares, warrants, options, rights or other
interests are authorized or otherwise existing on any date of determination.

 

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

"ERISA Affiliate" means an entity, whether or not incorporated, that is under
common control with the Borrower within the meaning of §4001 of ERISA or is part
of a group that includes the Borrower and that is treated as a single employer
under §414 of the Code.

 

"Event of Default" has the meaning set forth in Section 8.01.

 

"Excluded Taxes" means any of the following Taxes, imposed on or with respect to
the Lender (a) Taxes imposed on or measured by net income (however denominated),
and franchise Taxes.

 

"Extraordinary Receipts" means any cash received by or paid to or for the
account of any Person not in the ordinary course of business, including, without
limitation, tax refunds, pension plan reversions, proceeds of insurance (other
than proceeds of business interruption insurance to the extent such proceeds
constitute compensation for lost earnings), condemnation awards and similar
payments, indemnity payments and any purchase price adjustment received in
connection with any purchase agreement; provided, however, that Extraordinary
Receipts shall not include cash receipts from proceeds of insurance,
condemnation awards or similar payments, or indemnity payments to the extent
that such funds are received by any Person in respect of any third party claim
against such Person and applied to pay (or reimburse such Person for its prior
payment of) such claim plus related costs and expenses.

 

"GAAP" means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.

 

  5

 

 

"Governmental Authority" means the government of any nation or any political
subdivision thereof, whether at the national, state, territorial, provincial,
municipal or any other level, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of, or pertaining to, government.

 

"Guaranty Obligation" as to any Person, means any (a) obligation, contingent or
otherwise, of such Person guaranteeing or having the effect of guaranteeing any
Debt or other obligation payable or performable by another Person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt or other
obligation, (ii) to purchase or lease property, securities or services for the
purpose of assuring the obligee in respect of such Debt or other obligation of
the payment or performance of such Debt or other obligation, (iii) to maintain
working capital, equity capital, net worth or solvency or liquidity or any level
of income or cash flow of the primary obligor so as to enable the primary
obligor to pay such Debt or other obligation, or (iv) entered into for the
purpose of assuring in any other manner the obligee in respect of such Debt or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (b) Lien on
any assets of such Person securing any Debt or other obligation of any other
Person, whether or not such Debt or other obligation is assumed by such Person
(or any right, contingent or otherwise, of any holder of such Debt to obtain any
such Lien). The amount of any Guaranty Obligation shall be deemed to be an
amount equal to the stated or determinable amount of the related primary
obligation, or portion thereof, in respect of which such Guaranty Obligation is
made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by the guaranteeing Person in good
faith.

 

"Hazardous Materials" means (a) any gasoline, petroleum or petroleum products or
by-products, radioactive materials, friable asbestos or asbestos-containing
materials, urea-formaldehyde insulation, polychlorinated biphenyls and radon
gas, and (b) any other chemicals, materials or substances designated, classified
or regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.

 

"Indemnified Taxes" means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by the Borrower under any Loan Document, and
(b) to the extent not otherwise described in (a), Other Taxes.

 

"Insolvency" with respect to any Multiemployer Plan, means such Plan is
insolvent within the meaning of §4245 of ERISA.

 

"Intellectual Property" means any and all intellectual property, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, all rights therein, and all rights
to sue at law or in equity for any past, present, or future infringement,
violation, misuse, misappropriation or other impairment thereof, whether arising
under United States, multinational or foreign laws or otherwise, including the
right to receive injunctive relief and all proceeds and damages therefrom.

 

  6

 

 

"Interest Payment Date" means the first day of each calendar month to occur
while the Loan is outstanding and the Maturity Date of the Loan.

 

"Lien" means any mortgage, pledge, hypothecation, assignment (as security),
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 having substantially
the same economic effect as any of the foregoing (including any conditional sale
or other title retention agreement and any capital lease).

 

"Loan" means the loan made by the Lender under Section 2.01(a).

 

"Loan Documents" means, collectively, this Agreement, the Note and all other
agreements, documents, certificates and instruments executed and delivered to
the Lender by the Borrower in connection therewith.

 

"Margin Stock" has the meaning specified in Regulation U of the Board as in
effect from time to time.

 

"Material Adverse Effect" means a material adverse effect on (a) the business,
assets, properties, liabilities (actual or contingent), operations or condition
(financial or otherwise) of the Borrower, individually, or the Borrower and its
Subsidiaries taken as a whole, in excess of an aggregate of $1,000,000 in any
fiscal year (b) the validity or enforceability of any Loan Document, (c) the
rights or remedies of the Lender under any Loan Document or (d) the ability of
the Borrower to perform any of its material obligations under any Loan Document
to which it is a party.

 

"Material Contracts" with respect to any Person, means each contract to which
such Person is a party involving aggregate consideration payable by or to such
Person equal to at least $500,000.00 or otherwise material to the business,
condition (financial or otherwise), operations, performance, properties or
prospects of such Person.

 

"Maturity Date" means the date that is seven months following the Closing Date.

 

"Moody's" means Moody's Investors Service, Inc. and any successor thereto.

 

"Multiemployer Plan" means a Plan which is a multiemployer plan as defined in §
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate makes or is
obligated to make contributions.

 

  7

 

 

"Net Cash Proceeds" means (a) in connection with any Asset Sale or any Recovery
Event, the proceeds thereof in the form of cash and Cash Equivalents in an
amount for any Asset Sale or Recovery Event in excess of $2 million and in the
aggregate for all Asset Sales and Recovery Events in any fiscal year in excess
of $2 million (including any such proceeds actually received from deferred
payments of principal pursuant to a note, a receivable or otherwise), net of
attorneys' fees, accountants' fees, investment banking fees, amounts required to
be reserved for indemnification, adjustment of purchase price or similar
obligations pursuant to the agreements governing such Asset Sale, amounts
required to be applied to the repayment of Debt expressly permitted hereunder
that is the subject of such Asset Sale or Recovery Event and other customary
fees and expenses actually incurred in connection therewith and net of taxes
paid or reasonably estimated to be payable as a result thereof (after taking
into account any available tax credits or deductions and any tax sharing
arrangements) and (b) in connection with any issuance or sale of Equity
Interests or any incurrence of Debt, the cash proceeds received from such
issuance or incurrence, net of attorneys' fees, investment banking fees,
accountants' fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith. Notwithstanding the
foregoing, Net Cash Proceeds shall not include any proceeds (or portion thereof)
from an Asset Sale or Recovery Event that is required to be retained by a
Subsidiary pursuant to the order or direction of a Governmental Authority having
regulatory oversight of such Subsidiary.

 

"Note" means a promissory note of the Borrower payable to the Lender, in
substantially the form of Exhibit 1 hereto, evidencing the aggregate
indebtedness of the Borrower to the Lender resulting from the Loan.

 

"Obligations" means all advances to, and debts (including principal, interest,
fees, costs, and expenses), liabilities, covenants, and indemnities of, the
Borrower arising under any Loan Document or otherwise with respect to the Loan,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.

 

"Open Year" has the meaning set forth in Section 5.13(b).

 

"Other Taxes" means any and all present or future stamp, court, recording,
filing, intangible, documentary or similar Taxes or any other excise or property
Taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement or
registration of, or performance under, or from the receipt or perfection of a
security interest under or otherwise with respect to this Agreement or any other
Loan Document (other than Excluded Taxes imposed with respect to an assignment).

 

"Origination Fee" has the meaning set forth in Section 2.08.

 

"PATRIOT Act" has the meaning set forth in Section 9.13.

 

  8

 

 

"PBGC" means the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA (or any successor thereto).

 

"Person" means any individual, corporation, limited liability company, trust,
joint venture, association, company, limited or general partnership,
unincorporated organization, Governmental Authority or other entity.

 

"Plan" at any one time, means any "employee benefit plan" that is covered by
ERISA and in respect of which the Borrower or an ERISA Affiliate is (or, if such
plan were terminated at such time, would under §4062 or §4069 of ERISA be deemed
to be) an "employer" as defined in §3(5) of ERISA.

 

"Properties" has the meaning set forth in Section 5.09(a).

 

"Recovery Event" means any settlement of or payment to the Borrower in respect
of any property or casualty insurance claim or any condemnation proceeding
relating to any asset of the Borrower.

 

"Reinvestment Notice" means a written notice executed by a Responsible Officer
of the Borrower stating that no Event of Default has occurred and is continuing
and that the Borrower (directly or indirectly through a Subsidiary) intends and
expects to use all or a specified portion of the Net Cash Proceeds of an Asset
Sale or Recovery Event to acquire or repair assets necessary, used or useful in
the Borrower's business.

 

"Related Parties" with respect to any Person, means such Person's Affiliates and
the directors, officers, employees, partners, agents, trustees, administrators,
managers, advisors and representatives of it and its Affiliates.

 

"Reorganization" with respect to any Multiemployer Plan, means that such plan is
in reorganization within the meaning of §4241 of ERISA.

 

"Reportable Event" means any of the events set forth in §4043(c) of ERISA, other
than those events as to which the thirty day notice period is waived.

 

"Requirement of Law" as to any Person, means the certificate or articles of
incorporation and code of regulations or by-laws or other organizational or
governing documents of such Person, and any law (including common law), statute,
ordinance, treaty, rule, regulation, order, decree, judgment, writ, injunction,
settlement agreement, requirement or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

  9

 

 

"Responsible Officer" with respect to any Person, means the chief executive
officer, president or chief financial officer of such Person, except that with
respect to financial matters, the Responsible Officer shall be the chief
financial officer or treasurer of such Person.

 

"Restricted Payments" has the meaning set forth in Section 7.07.

 

"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto.

 

"SEC" means the Securities and Exchange Commission (or successors thereto or an
analogous Governmental Authority).

 

"Single Employer Plan" means any Plan that is covered by Title IV of ERISA,
other than a Multiemployer Plan.

 

"Solvent" with respect to any Person as of any date of determination, means that
on such date (a) the present fair salable value of the property and assets of
such Person exceeds the debts and liabilities, including contingent liabilities,
of such Person, (b) the present fair salable value of the property and assets of
such Person is greater than the amount that will be required to pay the probable
liability of such Person on its debts and other liabilities, including
contingent liabilities, as such debts and other liabilities become absolute and
matured, (c) such Person does not intend to incur, or believe (nor should it
reasonably believe) that it will incur, debts and liabilities, including
contingent liabilities, beyond its ability to pay such debts and liabilities as
they become absolute and matured, and (d) such Person does not have unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted. The amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.

 

"Subsidiary" as to the Borrower, means any corporation, partnership, limited
liability company, joint venture, trust or estate of or in which more than 50%
of (a) the issued and outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class of such corporation may
have voting power upon the happening of a contingency), (b) the interest in the
capital or profits of such partnership, limited liability company, or joint
venture or (c) the beneficial interest in such trust or estate is at the time
directly or indirectly owned or controlled through one or more intermediaries,
or both, by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Borrower.

 

  10

 

 

"Swap Agreement" means any credit, equity, commodity or commodity-related,
currency, foreign exchange or rate swap or derivatives contract or any contract
or option related to, or any transaction similar to or with similar
characteristics to, any of the foregoing, including any swap or derivative
related to any index.

 

"Swap Termination Value" in respect of any one or more Swap Agreements, means
after taking into account the effect of any legally enforceable netting
agreement relating to such Swap Agreements (a) for any date on or after the date
such Swap Agreements have been closed out and termination values determined in
accordance therewith, such termination values, and (b) for any date prior to the
date referenced in subsection (a), the amounts determined as the mark-to-market
values for such Swap Agreements, as determined based upon one or more mid-market
or other readily available quotations provided by any recognized dealer in such
Swap Agreements.

 

"Taxes" means any and all present or future income, stamp or other taxes,
levies, imposts, duties, deductions, charges, fees or withholdings imposed,
levied, withheld or assessed by any Governmental Authority, together with any
interest, additions to tax or penalties imposed thereon and with respect
thereto.

 

Section 1.02         Interpretation With reference to this Agreement and each
other Loan Document, unless otherwise specified herein or in such other Loan
Document:

 

(a)          The definitions of terms herein shall apply equally to the singular
and plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include," "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The word "will" shall be construed to have
the same meaning and effect as the word "shall." Unless the context requires
otherwise (i) any definition of or reference to any agreement, instrument or
other document shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein or in any other Loan Document), (ii) any reference herein to
any Person shall be construed to include such Person's successors and assigns,
(iii) the words "herein," "hereof" and "hereunder," and words of similar import
when used in any Loan Document, shall be construed to refer to such Loan
Document in its entirety and not to any particular provision thereof, (iv) all
references in a Loan Document to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, the Loan Document in which such references appear, (v) any
reference to any law shall include all statutory and regulatory provisions
consolidating, amending replacing or interpreting such law and any reference to
any law or regulation shall, unless otherwise specified, refer to such law or
regulation as amended, modified or supplemented from time to time, and (vi) the
words "asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights.

 

  11

 

 

(b)          In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including;" the words "to"
and "until" each mean "to but excluding;" and the word "through" means "to and
including."

 

(c)          Any reference herein or in any other Loan Document to the
satisfaction, repayment, or payment in full of the Obligations shall mean the
repayment in Dollars in full in cash or immediately available funds (and in the
case of any other contingent Obligations, providing cash collateral or other
collateral as may be requested by the Lender) of all of the Obligations other
than (i) unasserted contingent indemnification Obligations, and (ii) any
Obligations relating to Swap Agreements that, at such time, are allowed by the
applicable provider of such Swap Agreements to remain outstanding without being
required to be repaid.

 

(d)          All accounting terms not specifically or completely defined herein
shall be construed in conformity with, and all financial data required to be
submitted pursuant to this Agreement shall be prepared in conformity with, GAAP
as in effect from time to time, and applied on a consistent basis in a manner
consistent with that used in preparing the Borrower's audited financial
statements, except as otherwise specifically prescribed herein.

 

Article II

The Loan

 

Section 2.01         Loan Commitment.

 

(a)          Subject to the terms and conditions of this Agreement, the Lender
agrees to make, in a single advance, a loan to the Borrower on the Closing Date
in the amount Four Million Dollars ($4,000,000.00).

 

(b)          Amounts borrowed under this Section 2.01 and repaid or prepaid may
not be reborrowed.

 

Section 2.02         Repayment of the Loan. The Loan shall be payable in full on
the Maturity Date (which amounts shall be reduced as a result of the application
of any prepayments in accordance with Sections 2.04 and 2.05).

 

  12

 

 

Section 2.03         Repayment of Loan; Evidence of Debt.

 

(a)          The Borrower hereby unconditionally promises to pay to the Lender
in full in cash, to the extent not previously paid, the then-unpaid principal
amount of the Loan on the Maturity Date.

 

(b)          The Borrower will execute and deliver to the Lender an executed
promissory note evidencing the Loan on the Closing Date.

 

Section 2.04         Optional Prepayments. The Borrower may at any time and from
time to time prepay the Loan, in whole or in part, without premium or penalty.

 

Section 2.05         Mandatory Prepayments.

 

(a)          If (i) any Debt shall be incurred by the Borrower (excluding any
Debt permitted to be incurred pursuant to Section 7.01(a) through Section
7.01(d) ), or (ii) any Equity Interests shall be issued by the Borrower, then,
in each case, no later than five Business Days after the Borrower receives the
Net Cash Proceeds therefrom, the Loan shall be prepaid by an amount equal to
100% of the amount of the Net Cash Proceeds from such incurrence or issuance as
set forth in Section 2.06).

 

(b)          If on any date the Borrower shall receive Net Cash Proceeds from
any Asset Sale or Recovery Event in an amount for any such sale or event in
excess of $2 million, then, unless, only in the case of a Recovery Event, a
Reinvestment Notice shall be delivered in respect thereof, within five Business
Days of the date of receipt by the Borrower of such Net Cash Proceeds, the Loan
shall be prepaid as set forth in Section 2.06.

 

(c)          Upon any Extraordinary Receipt received by or paid to or for the
account of the Borrower, and not otherwise included in Section 2.05(a) or
Section 2.05(b), the Borrower shall prepay the Loan as set forth in Section
2.06(a) in an amount equal to 100% of all Net Cash Proceeds received therefrom
within five Business Days of the date of receipt thereof by the Borrower.

 

(d)          No prepayment shall be required pursuant to this Section 2.05
unless the required amount thereof shall be $100,000.00 or more.

 

Section 2.06         Application of Prepayments.

 

Amounts to be applied in connection with prepayments made pursuant to Section
2.05(a), Section 2.05(b) and Section 2.05(c) shall be applied, first, to the
prepayment of the principal of the Loan. Each prepayment of the Loan under
Section 2.05 shall be accompanied by accrued interest to the date of such
prepayment on the amount prepaid.

 

  13

 

 

Section 2.07         Interest. The Loan shall bear interest on the outstanding
principal amount thereof from the Closing Date at a rate per annum equal to the
Base Rate.

 

(a)          If all or any amount of principal of the Loan is not paid when due,
whether at stated maturity, by acceleration or otherwise, such outstanding Loan
(whether or not overdue) shall bear interest at a rate of interest per annum
equal to the Base Rate plus 3% (the “Default Rate”) and shall be payable on
demand. In addition to payment of the foregoing interest, the Borrower shall pay
the Lender a monthly fee of $10,000.00 for any month or portion thereof in which
the Default Rate is in effect.

 

(b)          Interest on the Loan shall be due and payable in arrears on each
Interest Payment Date applicable thereto and at such other times as may be
specified herein.

 

Section 2.08         Origination Fee. The Borrower agrees to pay the Lender an
origination fee (the " Origination Fee") of $80,000.00 at the Closing Date.

 

Section 2.09         Computation of Interest and Fees. All computations of
interest for the Loan shall be made on the basis of a year of 365 days and the
actual number of days elapsed. Interest shall accrue on the Loan for the day on
which the Loan is made, and shall not accrue on the Loan, or any portion
thereof, for the day on which the Loan or such portion is paid.

 

Article III

Taxes

 

Section 3.01         Taxes.

 

(a)          Any and all payments by or on account of any obligation of the
Borrower hereunder or under any other Loan Document shall be made free and clear
of and without deduction or withholding for any Taxes except as required by
applicable law. If the Borrower is required by applicable law to deduct or
withhold any Taxes from such payments, then:

 

(i)          if such Tax is an Indemnified Tax, the amount payable by the
Borrower shall be increased so that after all such required deductions or
withholdings are made (including deductions or withholdings applicable to
additional amounts payable under this Section), the Lender receives an amount
equal to the amount it would have received had no such deduction or withholding
been made, and

 

  14

 

 

(ii)         the Borrower shall make such deductions or withholdings and timely
pay the full amount deducted or withheld to the relevant Governmental Authority
in accordance with applicable law.

 

(b)          Without limiting the provisions of Section 3.01(a) above, the
Borrower shall timely pay any Other Taxes to the relevant Governmental Authority
in accordance with applicable law.

 

(c)          The Borrower shall indemnify the Lender, within ten days after
demand therefor, for the full amount of any Indemnified Taxes (including
Indemnified Taxes imposed on or attributable to amounts payable under this
Section) paid or payable by the Lender, on or with respect to an amount payable
by the Borrower under or in respect of this Agreement or under any other Loan
Document, together with any reasonable expenses arising in connection therewith
and with respect thereto, whether or not such Indemnified Taxes were correctly
or legally imposed or asserted by the relevant Governmental Authority. A
certificate from the Lender as to the amount of such payment or liability
delivered to the Borrower shall be conclusive absent manifest error.

 

(d)          As soon as practicable after any payment of Taxes by the Borrower
to a Governmental Authority pursuant to this Section 3.01, the Borrower shall
deliver to the Lender the original or certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of the relevant return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Lender.

 

(e)          If the Lender determines, in its sole discretion exercised in good
faith, that it has received a refund of any Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay over such refund (or
the amount of any credit in lieu of refund) to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section with respect to the Taxes giving rise to such refund or
credit in lieu of refund), net of all out-of-pocket expenses of the Lender and
without interest (other than any interest paid by the relevant Governmental
Authority with respect to such refund or credit in lieu of refund); provided
that, the Borrower, upon the request of the Lender, agrees to repay the amount
paid over to the Borrower (plus any interest, penalties or other charges imposed
by the relevant Governmental Authority) to the Lender in the event the Lender is
required to repay such refund or credit in lieu of refund to such Governmental
Authority. Notwithstanding anything to the contrary in this paragraph (e), in no
event will the Lender be required to pay any amount to the Borrower pursuant to
this paragraph if the payment of such amount would place the Lender in a less
favorable net after-Tax position than it would have been in if the Tax subject
to indemnification had not been deducted, withheld or otherwise imposed and the
indemnification payments or additional amounts with respect to such Tax had
never been paid. Nothing in this paragraph (e) shall be construed to require the
Lender to make available its tax returns or any other information relating to
its taxes that it deems confidential to the Borrower or any other Person.

 

  15

 

 

Article IV

Conditions Precedent

 

Section 4.01         Conditions Precedent to the Loan. The obligation of the
Lender to make the Loan to be made by it hereunder is subject to the
satisfaction or the waiver by the Lender of the following conditions precedent:

 

(a)          The Lender shall have received:

 

(i)          this Agreement, duly executed and delivered by an authorized
officer of the Borrower; and

 

(ii)         the Note, duly executed and delivered by an authorized officer of
the Borrower.

 

(b)          The Lender shall have received:

 

(i)          audited consolidated financial statements of the Borrower for the
two most recent fiscal years ended prior to the Closing Date as filed with the
SEC;

 

(ii)         unaudited interim consolidated financial statements of the Borrower
as filed with the SEC for each fiscal quarter ended after the date of the latest
applicable financial statements delivered pursuant to clause (i) of this Section
4.1(b) as to which such financial statements are available, and such financial
statements shall not, in the reasonable judgment of the Lender, reflect any
material adverse change in the consolidated financial condition of the Borrower,
as reflected in the audited consolidated financial statements described in
clause (i) of this Section 4.1(b); and

 

(iii)        copies of all correspondence with the SEC since October 1, 2015
relating to any investigation or possible or proposed enforcement action against
the Borrower or any of its Affiliates.

 

(c)          All governmental and third party approvals necessary in connection
with the Borrower’s consummation of the transaction contemplated hereby shall
have been obtained and be in full force and effect, and all applicable waiting
periods shall have expired without any action being taken or threatened by any
competent authority that would restrain, prevent or otherwise impose adverse
conditions on the financing contemplated hereby.

 

  16

 

 

(d)          The Lender shall have received the Origination Fee, and all
expenses for which invoices have been presented (including the reasonable fees
and expenses of legal counsel), on or before the Closing Date. All such amounts
will be paid with proceeds of the Loan made on the Closing Date and will be
reflected in the funding instructions given by the Borrower to the Lender on or
before the Closing Date.

 

(e)          Except as disclosed to Lender on Schedule 4.01(e), there shall have
occurred no Material Adverse Effect since December 31, 2015.

 

(f)          The Lender shall have received, in form and substance satisfactory
to it, a certificate of the Borrower, certified by a secretary of the Borrower,
dated the Closing Date, including:

 

(i)          the articles of incorporation of the Borrower certified by the
relevant authority of the jurisdiction of organization of the Borrower;

 

(ii)         the code of regulations of the Borrower as in effect on the date on
which the resolutions referred to below were adopted;

 

(iii)        resolutions of the board of directors of the Borrower approving the
transaction and the Loan Documents;

 

(iv)        a certification that the names and signatures of the officers of the
Borrower authorized to sign the Loan Documents and other documents to be
delivered hereunder and thereunder are true and correct; and

 

(v)         a good standing certificate for the Borrower from its jurisdiction
of organization.

 

(g)          The Lender shall have received the legal opinion of Kohrman Jackson
& Krantz LLP, counsel to the Borrower and its Subsidiaries covering such matters
incident to the transactions contemplated by this Agreement as the Lender may
reasonably require.

 

Article V

Representations and Warranties

 

To induce the Lender to enter into this Agreement and to make the Loans
hereunder, the Borrower hereby represents and warrants to the Lender that,
except as otherwise disclosed in the Schedules to this Agreement:

 

  17

 

 

Section 5.01         Existence; Compliance With Laws. The Borrower (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, (b) is duly qualified as a foreign corporation or
other organization and in good standing under the laws of each jurisdiction
where its ownership, lease or operation of property or the conduct of its
business requires such qualification except to the extent that the failure to
qualify in such jurisdiction would not reasonably be expected to have a Material
Adverse Effect, and (c) is in compliance with all Requirements of Law except to
the extent that the failure to comply therewith would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

Section 5.02         Power; Authorization; Enforceability.

 

(a)          The Borrower has the power and authority, and the legal right, to
own or lease and operate its property, and to carry on its business as now
conducted and as proposed to be conducted, and to execute, deliver and perform
the Loan Documents and to obtain the Loan hereunder. The Borrower has taken all
necessary organizational action to authorize the execution, delivery and
performance of the Loan Documents and to authorize the borrowing of the Loan on
the terms and conditions contained herein. No consent or authorization of,
filing with, notice to or other act by, or in respect of, any Governmental
Authority or any other Person is required in connection with the extensions of
credit hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or any of the Loan Documents. Each Loan
Document has been duly executed and delivered by the Borrower.

 

(b)          This Agreement constitutes, and each other Loan Document when
delivered hereunder will constitute, a legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

 

Section 5.03         No Contravention. The execution, delivery and performance
of this Agreement and the other Loan Documents, the borrowing of the Loan
hereunder and the use of the proceeds thereof will not violate any Requirement
of Law or any Contractual Obligation of the Borrower or its Subsidiaries and
will not result in, or require, the creation or imposition of any Lien on any of
their respective properties or assets pursuant to any Requirement of Law or any
such Contractual Obligation (other than the Liens created by the Loan
Documents). No Requirement of Law or Contractual Obligation applicable to the
Borrower or its Subsidiaries would reasonably be expected to have a Material
Adverse Effect.

 

  18

 

 

Section 5.04         Financial Statements.

 

(a)          The audited consolidated balance sheets of the Borrower and its
Subsidiaries as at December 31, 2015, and the related consolidated statements of
income and of cash flows for the fiscal year ended on such date, accompanied by
an unqualified opinion from MaloneBailey LLP, independent public accountants,
present fairly the consolidated financial condition of the Borrower and its
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the fiscal year then ended, in accordance
with GAAP.

 

(b)          The unaudited consolidated balance sheets of the Borrower and its
Subsidiaries as at March 31, 2016, and the related unaudited consolidated
statements of income and of cash flows for the three-month period ended on such
date, duly certified by the chief financial officer of the Borrower, do or will
present fairly the consolidated financial condition of the Borrower and its
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the three-month period then ended, in
accordance with GAAP (subject to normal year-end audit adjustments and the
absence of footnotes).

 

Section 5.05         No Material Adverse Effect. Since December 31, 2015, except
as set forth on Schedule 4.01(e), no development or event has occurred that has
had or would reasonably be expected to have a Material Adverse Effect.

 

Section 5.06         No Litigation. No action, suit, litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Borrower, threatened by or against the Borrower or
its Subsidiaries or against any of their property or assets (a) with respect to
any of the Loan Documents or any of the transactions contemplated hereby or
thereby, or (b) that would reasonably be expected to have a Material Adverse
Effect, other than that set forth on Schedule 5.06 (the "Disclosed Litigation"),
and there has been no adverse change in the status, or financial effect on the
Borrower or its Subsidiaries, of the Disclosed Litigation from that described on
Schedule 5.06.

 

Section 5.07         No Default. No Default or Event of Default has occurred and
is continuing and no default has occurred and is continuing under or with
respect to any Contractual Obligation of the Borrower or any of its Subsidiaries
that would reasonably be expected to have a Material Adverse Effect.

 

  19

 

 

Section 5.08         Ownership of Property; Liens. The Borrower and its
Subsidiaries have fee simple title to, or a valid leasehold interest in, all its
real property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 7.02 and such defects in title as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 5.09         Environmental Matters. Except as, in the aggregate, could
not reasonably be expected to have a Material Adverse Effect:

 

(a)          none of the facilities or properties currently or formerly owned,
leased or operated by the Borrower or its Subsidiaries (the "Properties")
contain or previously contained, any Hazardous Materials in amounts or
concentrations or under circumstances that constitute or constituted a violation
of, or could result in liability under, any Environmental Law;

 

(b)          the Borrower has not received any notice of actual or alleged
violation, non-compliance or liability regarding compliance with Environmental
Laws or other environmental matters or with respect to any of the Properties or
the business operated by the Borrower or its Subsidiaries, nor is there any
reason to believe that any such notice will be received or is being threatened;

 

(c)          the Properties and all operations at the Properties are and
formerly have been in compliance with all applicable Environmental Laws, and
there is no contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated by the
Borrower;

 

(d)          Hazardous Materials have not been transported or disposed of from
the Properties in violation of, or in a manner or to a location that could
result in liability under, any Environmental Law; no Hazardous Materials have
been generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could result in liability under,
any applicable Environmental Law; and there has been no release or threat of
release of Hazardous Materials at or from the Properties, or arising from or
related to the operations of the Borrower in connection with the Properties or
the business operated by the Borrower, in violation of or in amounts or in a
manner that could result in liability under Environmental Laws;

 

  20

 

 

(e)          no administrative or governmental action or judicial proceeding is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower is or will be a party with respect to
the Properties or the business operated by the Borrower, nor are there any
decrees or orders or other administrative or judicial requirements outstanding
under any Environmental Law with respect to the Properties or the business
operated by the Borrower; and

 

(f)          the Borrower has not assumed any liability of any other Person
under Environmental Laws.

 

Section 5.10         Insurance. The properties of the Borrower and its
Subsidiaries are insured with financially sound and reputable insurance
companies which are not Affiliates of the Borrower and its Subsidiaries, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Borrower and its Subsidiaries operate. Schedule 5.10
sets forth a description of all insurance maintained by or on behalf of the
Borrower and its Subsidiaries as of the Closing Date. Each insurance policy
listed on Schedule 5.10 is in full force and effect and all premiums in respect
thereof that are due and payable have been paid.

 

Section 5.11         Material Contracts. Schedule 5.11 sets forth all Material
Contracts to which the Borrower and its Subsidiaries are a party or are bound as
of the Closing Date. The Borrower and its Subsidiaries are not in breach or in
default in any material respect of or under any Material Contract and have not
received any notice of the intention of any other party thereto to terminate any
Material Contract.

 

Section 5.12         Intellectual Property. The Borrower and its Subsidiaries
own, or are licensed to use, all Intellectual Property necessary for the conduct
of its business as currently conducted or proposed to be conducted. No material
claim has been asserted and is pending by any Person challenging the use,
validity or effectiveness of any Intellectual Property, nor is the Borrower
aware of any valid basis for any such claim. The use of Intellectual Property by
the Borrower and its Subsidiaries does not materially infringe on the rights of
any Person.

 

Section 5.13         Taxes.

 

(a)          The Borrower and its Subsidiaries have filed all Federal, state and
other tax returns that are required to be filed and has paid all taxes shown
thereon to be due, together with applicable interest and penalties, and all
other taxes, fees or other charges imposed on it or any of its property by any
Governmental Authority (except those that are currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Borrower and its
Subsidiaries). No tax Lien has been filed, and, to the knowledge of the Borrower
and its Subsidiaries, no claim is being asserted, with respect to any such tax,
fee or other charge. The Borrower and its Subsidiaries are not parties to any
tax sharing agreements except among themselves.

 

  21

 

 

(b)          Set forth on Schedule 5.13 is, as of the date hereof, each taxable
year of each group member for which Federal income tax returns have been filed
but for which the statute of limitations for assessment or collection has not
expired (an "Open Year"), together with a description of the unpaid adjustments
to the Federal income tax liability requested by the Internal Revenue Service
with respect to such Open Years in excess of $100,000. The total amount of all
unpaid adjustments to the Federal income tax liability with respect to such Open
Years, together with applicable interest and penalties, does not exceed
$100,000.

 

(c)          The total amount, as of the date hereof, of all unpaid adjustments
to the state, local and foreign tax liability of all group members proposed by
all state, local and foreign taxing authorities, together with applicable
interest and penalties, does not exceed $50,000.

 

(d)          No issues have been raised by the Internal Revenue Service in
respect of Open Years or by any state, local or foreign taxing authorities that,
in the aggregate would reasonably be expected to have a Material Adverse Effect.

 

Section 5.14         ERISA. Each Plan is in compliance with ERISA, the Code and
any Requirement of Law in all material respects; neither a Reportable Event nor
an "accumulated funding deficiency" (within the meaning of §412 or §430 of the
Code or §302 of ERISA) has occurred (or is likely to occur) with respect to any
Plan. No Single Employer Plan has terminated, and no Lien has been incurred in
favor of the PBGC or a Plan. Based on the assumptions used to fund each Single
Employer Plan, the present value of all accrued benefits under each such Plan
did not materially exceed the value of the assets of such Plan allocable to such
accrued benefit as of the last annual valuation date prior to the date on which
this representation is made. Neither the Borrower nor any ERISA Affiliate has
incurred or is reasonably expected to incur any Withdrawal Liability in
connection with any Multiemployer Plan. No such Multiemployer Plan is (or is
reasonably expected to be) terminated, in Reorganization, or insolvent (within
the meaning of §4245 of ERISA).

 

Section 5.15         Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock, and no proceeds of any Loan will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock.

 

  22

 

 

Section 5.16         Investment Company Act. The Borrower is not, and is not
required to be registered as, an "investment company" under the Investment
Company Act of 1940, as amended.

 

Section 5.17         Subsidiaries; Equity Interests.

 

(a)          Except as disclosed to the Lender by the Borrower in writing from
time to time after the Closing Date:

 

(i)          Part A of Schedule 5.17 sets forth the name, address of principal
place of business, jurisdiction of formation and US taxpayer identification
number (or in the case of a non-US Subsidiary that does not have a US taxpayer
identification number, its unique identification number issued to it by its
jurisdiction of formation) of each Subsidiary and, as to each such Subsidiary,
the percentage of each class of Equity Interest owned by the Borrower;

 

(ii)         there are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees or directors, Equity Interests of the Borrower issued to directors on
a quarterly basis as compensation and directors' qualifying shares) relating to
any Equity Interest of the Borrower or any Subsidiary, except as created by the
Loan Documents.

 

(b)          All of the outstanding Equity Interests in each Subsidiary have
been validly issued, are fully paid and non-assessable and are owned by the
Borrower free and clear of all Liens except those created under the Loan
Documents. All of the outstanding Equity Interests in the Borrower have been
validly issued, are fully paid and non-assessable.

 

(c)          The Borrower has no equity investments in any other corporation or
entity other than those disclosed on Part C of Schedule 5.17.

 

Section 5.18         Labor Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect (a) there are no
strikes, lockouts or other labor disputes pending or, to the knowledge of the
Borrower, threatened against the Borrower or its Subsidiaries, (b) hours worked
by and wages paid to employees of the Borrower and its Subsidiaries have not
violated the Fair Labor Standards Act or any other applicable Requirement of
Law, and (c) all payments due in respect of employee health and welfare
insurance from the Borrower and its Subsidiaries have been paid or properly
accrued on the books of the Borrower and its Subsidiaries.

 

  23

 

 

Section 5.19         Accuracy of Information, Etc. The Borrower has disclosed to
the Lender all agreements, instruments and corporate or other restrictions to
which it or any of its Subsidiaries is subject as of the Closing Date, and all
other matters known to it as of the Closing Date, that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. No
statement or information contained in this Agreement, any other Loan Document,
or any other document, certificate or statement furnished by or on behalf of the
Borrower to the Lender, for use in connection with the transactions contemplated
by this Agreement or the other Loan Documents, when taken as a whole, contained
as of the date such statement, information, document or certificate was so
furnished, any untrue statement of a material fact or omitted to state a
material fact necessary to make the statement contained herein or therein not
misleading.

 

Section 5.20         Solvency. The Borrower is, and after giving effect to the
incurrence of all Debt and obligations incurred in connection herewith will be,
Solvent.

 

Section 5.21         PATRIOT Act; OFAC and Other Regulations.

 

(a)          Neither the Borrower, nor any of its Subsidiaries nor any of the
Affiliates or respective officers, directors, brokers or agents of the Borrower,
such Subsidiary or Affiliate:

 

(i)          has violated any Anti-terrorism Laws; or

 

(ii)         has engaged in any transaction, investment, undertaking or activity
that conceals the identity, source or destination of the proceeds from any
category of prohibited offenses designated by the Organization for Economic
Co-operation and Development's Financial Action Task Force on Money Laundering.

 

(b)           Neither the Borrower, nor any of its Subsidiaries nor any of the
Affiliates or respective officers, directors, brokers or agents of the Borrower,
such Subsidiary or Affiliate that is acting or benefiting in any capacity in
connection with the Loans is a Blocked Person.

 

(c)          Neither the Borrower, nor any of its Subsidiaries nor any of the
Affiliates or respective officers, directors, brokers or agents of the Borrower,
such Subsidiary or Affiliate acting or benefiting in any capacity in connection
with the Loans:

 

(i)          conducts any business or engages in making or receiving any
contribution of goods, services or money to or for the benefit of any Blocked
Person;

 

(ii)         deals in, or otherwise engages in any transaction related to, any
property or interests in property blocked pursuant to any Anti-terrorism Law; or

 

(iii)        engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in any Anti-terrorism Law.

 

  24

 

 

Article VI

Affirmative Covenants

 

So long as the Loan or any other amounts payable to the Lender hereunder or
under any other Loan Document have not been paid in full, the Borrower shall,
and shall cause its Subsidiaries to (except that, in the case of the covenants
set forth in Section 6.01, Section 6.02, and Section 6.03, the Borrower shall
furnish all applicable materials to the Lender):

 

Section 6.01         Financial Statements. Furnish to the Lender:

 

(a)          As soon as available, but in any event within 90 days after the end
of each fiscal year of the Borrower, a copy of the annual audit report of the
Borrower and its Subsidiaries for such year including a copy of the audited
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such year and the related audited consolidated statements of income and of cash
flows for such year, setting forth in each case in comparative form the figures
for the previous year, together with an opinion as to such audit report of
MaloneBailey LLP or other independent certified public accountants of nationally
recognized standing which does not contain a "going concern" or similar
qualification or exception, or qualification arising out of the scope of the
audit; provided that, in the event of any change in generally accepted
accounting principles used in the preparation of such financial statements, the
Borrower shall also provide a reconciliation of such financial statements to
GAAP; and

 

(b)          As soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly periods of each fiscal year of the
Borrower, the unaudited consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and of cash flows for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth in
each case in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments).

 

All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied (except as approved by such accountants or Responsible Officer, as the
case may be, and disclosed in reasonable detail therein) consistently throughout
the periods reflected therein and with prior periods.

 

  25

 

 

Section 6.02         Certificates; Other Information. The Borrower shall furnish
the following to the Lender:

 

(a)          On the same dates as delivery of the quarterly or annual financial
statements in Section 6.01(a) and Section 6.01(b) , a compliance certificate
from a Responsible Officer of the Borrower (i) containing all information and
calculations necessary for determining compliance by the Borrower with the
provisions of this Agreement as of the last day of the fiscal quarter or fiscal
year of the Borrower, as the case may be and (ii) stating that the Borrower
during such period has observed and performed in all material respects all of
the covenants and other agreements, and satisfied every condition contained in
this Agreement and the other Loan Documents to which it is a party to be
observed, performed or satisfied by it, and that such officer has not obtained
any knowledge of any Default or Event of Default except as specified in such
certificate;

 

(b)          Promptly, and in any event within ten days thereafter, to the
extent not previously disclosed to the Lender, a description of any change in
the jurisdiction of organization of the Borrower;

 

(c)          Promptly after the same are sent or received, copies of all proxy
statements, financial statements and reports that the Borrower sends to any of
its securities holders, and copies of all reports and registration statements
and all correspondence that the Borrower files with or receives from the SEC or
any national securities exchange;

 

(d)          Promptly after the same are sent, copies of any statement or report
sent to any holder of debt securities of the Borrower pursuant to the terms of
any indenture, loan agreement or similar agreement and not otherwise required to
be furnished to the Lender pursuant to any other clause of this Section;

 

(e)          Promptly upon receipt of the same, copies of all notices, requests
and other documents received by the Borrower under or pursuant to any Material
Contract or instrument, indenture, loan agreement regarding or related to any
breach or default by any party thereto or any other event that could materially
impair the value of the interests or the rights of the Borrower or otherwise
have a Material Adverse Effect and copies of the foregoing and such information
and reports regarding Material Contracts and such instruments, indentures, loan
agreements as the Lender may request from time to time;

 

(f)          Such other information respecting the business, condition
(financial or otherwise), operations, performance, or properties of the Borrower
as the Lender may from time to time reasonably request.

 

  26

 

 

Section 6.03         Notices. Promptly and in any event within ten days give
notice to the Lender of:

 

(a)          The occurrence of any Default or Event of Default;

 

(b)          Any (i) default or event of default under any Material Contract or
(ii) litigation, investigation or proceeding that may exist at any time between
the Borrower and any Governmental Authority, that in either case, if not cured
or if adversely determined, as the case may be, would reasonably be expected to
have a Material Adverse Effect;

 

(c)          Any litigation or proceeding affecting the Borrower (i) in which
the amount involved is at least $100,000.00 and not covered in full by
insurance, (ii) in which injunctive or similar relief is sought, or (iii) which
relates to any Loan Document;

 

(d)          The following events, as soon as possible and in any event within
15 days after the Borrower or any of its ERISA Affiliates knows or has reason to
know thereof:

 

(i)          the occurrence of any Reportable Event with respect to any Plan, a
failure to make any required contribution to a Plan, the creation of any Lien in
favor of the PBGC or any Multiemployer Plan; or

 

(ii)         the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any ERISA Affiliate or any Multiemployer Plan with
respect to the withdrawal from, or the termination, Reorganization or Insolvency
of, any Plan;

 

(e)          The occurrence of any Environmental Action against or of any
noncompliance by the Borrower with any Environmental Law or relevant permit that
would reasonably be expected to have a Material Adverse Effect; and

 

(f)          Any development or event that has had or would reasonably be
expected to have a Material Adverse Effect.

 

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of
a Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower proposes to take with
respect thereto.

 

Section 6.04         Maintenance of Existence; Compliance.

 

(a)          (i) Preserve, renew and maintain in full force and effect its
corporate or organizational existence and (ii) take all reasonable action to
maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business, except, in each case, as otherwise permitted
under this Agreement and except, as in the case of clause (ii) above, to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect.

 

  27

 

 

(b)          Comply with all Contractual Obligations and Requirements of Law
except to the extent that failure to comply therewith would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 6.05         Performance of Material Contracts. Perform and observe all
the terms and provisions of each Material Contract to be performed or observed
by it and maintain each Material Contract in full force and effect, except where
the failure to do so, either individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.

 

Section 6.06         Maintenance of Property; Insurance.

 

(a)          Maintain and preserve all of its property useful and necessary in
its business in good working order and condition, ordinary wear and tear
excepted.

 

(b)          Maintain insurance with respect to its property and business
(including without limitation, property and casualty and business interruption
insurance) with financially sound and reputable insurance companies that are not
Affiliates of the Borrower, in such amounts and covering such risks as are
usually insured against by similar companies engaged in the same or a similar
business; provided, however, that the Borrower may self-insure to the same
extent as other companies engaged in similar businesses and owning similar
properties to the Borrower.

 

Section 6.07         Inspection of Property; Books and Records; Discussions.

 

(a)          Keep proper books of records and accounts, in which full, true and
correct entries in all material respects and in any event in conformity with
GAAP and all Requirements of Law shall be made of all dealings and transactions
and assets in relation to its business and activities.

 

(b)          Permit the Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time during regular business hours and as often as may reasonably be desired and
to discuss its business operations, properties and financial and other condition
with its officers and employees and its independent certified public
accountants.

 

  28

 

 

Section 6.08         Environmental Laws.

 

(a)          Obtain, comply and maintain in all material respects, and ensure
the same in all material respects by all tenants and subtenants, if any, with
all applicable Environmental Laws, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws.

 

(b)          Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions necessary to remove and
clean up all Hazardous Materials from any of its properties required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.

 

Section 6.09         Use of Proceeds. Use the proceeds of the Loan for general
corporate purposes of the Borrower, to the extent not prohibited under any
Requirement of Law or the Loan Documents.

 

Section 6.10         Further Assurances. Promptly upon the request of the
Lender:

 

(a)          Correct any material defect or error that may be discovered in any
Loan Document or in the execution, acknowledgement, filing or recordation
thereof; and

 

(b)          Do, execute, acknowledge, and deliver any and all such further
acts, notices of assignments, transfers, certificates, assurances and other
instruments as the Lender, may require from time to time in order to:

 

(i)          carry out more effectively the purposes of the Loan Documents; and

 

(ii)          assure, convey, grant, assign, transfer, preserve, protect and
confirm more effectively to the Lender, the rights granted or now or hereafter
intended to be granted to the Lender under any Loan Document or under any other
instruments executed in connection with any Loan Document to which the Borrower
is or is to be a party.

 

Article VII
Negative Covenants

 

So long as the Loan or any other amounts payable to the Lender hereunder or
under any other Loan Document have not been paid in full, the Borrower shall
not, and shall not permit its Subsidiaries to:

 

  29

 

 

Section 7.01         Limitation on Debt. Create, incur, assume, permit to exist
or otherwise become liable with respect to any Debt, except:

 

(a)          Debt of the Borrower existing or arising under this Agreement and
any other Loan Document;

 

(b)          Debt of:

 

(i)          the Borrower owed to any Subsidiary; and

 

(ii)         any Subsidiary owed to the Borrower or any other Subsidiary;

 

(c)          Debt existing on the date hereof and listed on Schedule 7.01(c) and
any refinancings, modifications, renewals and extensions of any such Debt;
provided that (i) the principal amount of such Debt shall not be increased from
the principal amount outstanding at the time of such refinancing, modification,
renewal or extension and (ii) the maturity of such Debt shall not be shortened
and (iii) the terms relating to collateral (if any) and subordination (if any)
of any such refinancing, modification, renewing or extending Debt, and of any
agreement entered into and of any instrument issued in connection therewith, are
not less favorable in any material respect to the Borrower or the Lender than
the terms of any agreement or instrument governing the Debt being so refinanced,
modified, renewed or extended; and

 

(d)          Guaranty Obligations incurred in the ordinary course of business by
the Borrower of obligations of any of its Subsidiaries.

 

Section 7.02         Limitation on Liens. Create, incur, assume or permit to
exist any Lien on any property or assets (including Equity Interests of any of
its Subsidiaries) now owned or hereafter acquired by it or on any income or
rights in respect of any thereof, except:

 

(a)          Liens created pursuant to or arising under any Loan Document;

 

(b)          Liens imposed by law for taxes, assessments or governmental charges
not yet due or which are being contested in good faith and by appropriate
proceedings diligently conducted if, unless the amount is not material with
respect to it or its financial condition, adequate reserves with respect thereto
are maintained in accordance with GAAP on the books of the applicable Person;

 

(c)          Carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other similar Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days or
that are being contested in good faith and by appropriate proceedings diligently
conducted;

 

  30

 

 

(d)          Pledges and deposits and other Liens (i) made in the ordinary
course of business in compliance with workers' compensation, unemployment
insurance and other social security laws or regulations, and (ii) securing
liability for reimbursement or indemnification obligations of (including
obligations in respect of letters of credit or bank guarantees for the benefit
of) insurance carriers providing property, casualty or liability insurance to
the Borrower;

 

(e)          Liens (including deposits) to secure the performance of bids,
tenders, trade contracts, leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of like nature, in each case in
the ordinary course of business;

 

(f)          Easements, zoning restrictions, rights-of-way, minor defects or
irregularities in title and similar encumbrances on real property imposed by law
or arising in the ordinary course of business which, in the aggregate, are not
material in amount and which do not materially detract from the value of the
affected property or interfere materially with the ordinary conduct of business
of the Borrower or any of its Subsidiaries;

 

(g)          Liens in existence as of the date hereof which are listed on
Schedule 7.02, securing Debt permitted by Section 7.01(c) , and any renewals,
modifications, replacements and extensions of such Liens (including the
extension of Liens on newly acquired assets of Borrower or its Subsidiaries as
required by such Debt documents); provided that the aggregate principal amount
of the Debt secured by such Liens does not increase from that amount outstanding
at the time of any such renewal, modification, replacement or extension;

 

(h)          Judgment or other similar Liens in connection with legal
proceedings in an aggregate principal amount net of amounts for which insurance
providers have delivered written acknowledgements of coverage up to $100,000.00
which, whether immediately or with the passage of time (i) do not give rise to
an Event of Default under Section 8.01(h) and (ii) are being contested in good
faith by appropriate proceedings diligently conducted; and

 

(i)          Any other Liens on property not otherwise permitted by this Section
7.02 so long as neither (i) the aggregate principal amount of the Debt and other
obligations secured thereby nor (ii) the aggregate fair market value (determined
as of the date such Lien is incurred) of the assets subject thereto exceeds
$100,000.00 at any time outstanding.

 

  31

 

 

Section 7.03         Mergers; Nature of Business.

 

(a)          Merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or liquidate or dissolve,
except that, if at the time thereof and immediately after giving effect thereto
no Event of Default shall have occurred and be continuing (i) any Subsidiary of
the Borrower may merge into the Borrower in a transaction in which the Borrower
is the surviving corporation, (ii) any Subsidiary of the Borrower may merge into
any other Subsidiary of the Borrower in a transaction in which the surviving
entity is a subsidiary of the Borrower, and (iii) any Subsidiary of the Borrower
may liquidate or dissolve if the Borrower determines in good faith that such
liquidation or dissolution is in the best interests of the Borrower and is not
materially disadvantageous to the Lender.

 

(b)          Engage in any business other than businesses of the type conducted
by the Borrower and its Subsidiaries on the date hereof and businesses
reasonably related thereto.

 

Section 7.04         Limitation on Investments. Make any advance, loan,
extension of credit (by way of guaranty or otherwise) or capital contribution
to, or purchase, hold or acquire any Equity Interests, bonds, notes, debentures
or other debt securities of, or any assets constituting a business unit of, or
make any other investment in, any Person (all of the foregoing, "Investments"),
except:

 

(a)          Investments in Cash Equivalents;

 

(b)          Loans and advances permitted by Section 13(k) of the Securities
Exchange Act of 1934, as amended, to officers, directors, or employees of the
Borrower in the ordinary course of business (including for travel, entertainment
and relocation expenses) in an aggregate amount not to exceed $100,000.00 at any
time outstanding;

 

(c)          Intercompany Investments by any Subsidiary in the Borrower;

 

(d)          Extensions of trade credit in the ordinary course of business
(including any instrument evidencing the same and any instrument, security or
other asset acquired through bona fide collection efforts with respect to the
same); and

 

(e)          In addition to Investments otherwise expressly permitted by this
Section 7.04 , Investments by the Borrower in an aggregate amount (valued at
cost) not to exceed $100,000.00 during the term of this Agreement.

 

  32

 

 

Section 7.05         Limitation on Dispositions. Dispose of any of its property,
whether now owned or hereafter acquired, or issue or sell any Equity Interests
to any Person, except:

 

(a)          The sale or Disposition of machinery and equipment no longer used
or useful in the business of the Borrower;

 

(b)          The Disposition of obsolete or worn-out property in the ordinary
course of business;

 

(c)          The sale of inventory in the ordinary course of business;

 

(d)          Dispositions of property to the Borrower;

 

(e)          The sale or issuance of a Subsidiary’s Equity Interests to any
other Subsidiary;

 

(f)          Dispositions of other property in any fiscal year of the Borrower,
so long as (i) such property, together with all other property Disposed of
during such fiscal year, shall have a fair market value not exceeding $2 million
and (ii) the purchase price paid to the Borrower for such property shall be paid
solely in cash;

 

(g)          Dispositions of property of the Borrower or its Subsidiaries that
are currently the subject of a letter of intent or binding agreement and are
disclosed on Schedule 7.05(g); and

 

(h)          The compensatory issuance of Equity Interests of the Borrower to
its directors on a quarterly basis consistent with past practice.

 

Section 7.06         Limitation on Sales and Leasebacks. Except for Debt
permitted by Section 7.01(c), enter into any arrangement with any Person whereby
the Borrower shall sell or otherwise transfer any property owned by the Borrower
to (a) such Person and thereafter rent or lease such Property from such Person
or (b) any other Person to whom funds have been or are to be advanced by such
Person on the security of such Property or rental obligations of the Borrower.

 

Section 7.07         Limitation on Restricted Payments. Declare or pay any
dividend on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any Equity Interests of the Borrower or any
of its Subsidiaries, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Borrower or any of its Subsidiaries
(collectively, "Restricted Payments"), except that:

 

  33

 

 

(a)          A Subsidiary of the Borrower may make a Restricted Payment to the
Borrower and/or any other Persons owning Equity Interests in such Subsidiary, so
long as such Restricted Payment is made to the Borrower or such other Persons
ratably in accordance with their Equity Interests of the same class or series
therein;

 

(b)          The Borrower may purchase or otherwise acquire Equity Interests in
any Subsidiary of the Borrower using additional shares of its Equity Interests;

 

(c)          The Borrower may (i) make repurchases or redemptions of its Equity
Interests (x) in connection with the exercise of stock options or restricted
stock awards if such Equity Interests represent all or a portion of the exercise
price thereof or (y) deemed to occur upon the withholding of a portion of such
Equity Interests issued to directors, officers or employees of the Borrower or
any Subsidiary under any stock option plan or other benefit plan or agreement
for directors, officers and employees of the Borrower and the Subsidiaries to
cover withholding tax obligations of such Persons in respect of such issuance
and (ii) make other Restricted Payments, not exceeding $50,000.00 in the
aggregate for any fiscal year, pursuant to and in accordance with stock option
plans or other benefit plans or agreements for directors, officers and employees
of the Borrower and the Subsidiaries; and

 

(d)          Unless an Event of Default has occurred, the Borrower may make
quarterly dividends to its shareholders consistent with past practice.

 

Section 7.08         Limitation on Prepayments of Debt and Amendments of Debt
Instruments.

 

(a)          Make or offer to make any optional or voluntary payment or
prepayment on or redemption, defeasance or purchase of any amounts (whether
principal or interest) payable under any Debt which is contractually
subordinated in right of payment to the obligations of the Borrower pursuant to
the Loan Documents; and

 

(b)          Amend, modify, waive or otherwise change, or consent or agree to
any amendment, modification, waiver or other change to any of the terms of any
Debt that is contractually subordinated to the obligations of the Borrower
pursuant to the Loan Documents, other than any amendment, modification, waiver
or other change which would extend the maturity or reduce the amount of any
payment of principal thereof or reduce the rate or extend any date for payment
of interest thereon.

 

  34

 

 

Section 7.09         Limitation on Transactions With Affiliates. Except for
transactions that are already the subject of an agreement between the Borrower
or a Subsidiary with any Affiliate as identified on Schedule 5.11, enter into
any transaction including any purchase, sale, lease or exchange of property, the
rendering of any service or the payment of any management, advisory or similar
fees, with any Affiliate unless such transaction is:

 

(a)          Otherwise permitted by the terms of this Agreement;

 

(b)          In the ordinary course of business of the Borrower or the relevant
Subsidiary, as the case may be; and

 

(c)          On fair and reasonable terms no less favorable to the Borrower or
the relevant Subsidiary, as the case may be, than those that would have been
obtained in a comparable transaction on an arm's length basis from an unrelated
Person.

 

Section 7.10         Limitation on Restrictive Agreements. Except as otherwise
required pursuant to any order or direction of a Governmental Authority having
regulatory oversight of the Borrower or any of its Subsidiaries, enter into or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary of the Borrower to:

 

(a)          Make Restricted Payments in respect of any Equity Interests of such
Subsidiary held by, or pay any Debt owed to, the Borrower or any other
Subsidiary of the Borrower;

 

(b)          Make loans or advances to, or Investments in, the Borrower or any
other Subsidiary of the Borrower; and

 

(c)          Transfer any of its assets to the Borrower or any other Subsidiary
of the Borrower, except for such encumbrances or restrictions (i) existing under
the Loan Documents, and (ii) with respect to a Subsidiary imposed pursuant to an
agreement that has been entered into in connection with the Disposition of all
or substantially all of the Equity Interests or assets of such Subsidiary.

 

Section 7.11         Limitation on Amendments of Material Contracts. Amend,
supplement or otherwise modify (pursuant to a waiver or otherwise):

 

(a)          Its articles of incorporation, certificate of designation,
operating agreement, code of regulations, bylaws or other organizational
document; or

 

(b)          The terms and conditions of any Material Contract;

 

in each case, in any respect materially adverse to the interests of the Lender,
without the Lender's prior written consent.

 

  35

 

 

ARTICLE VIII
Events of Default and Remedies

 

Section 8.01         Events of Default. Each of the following events or
conditions shall constitute an "Event of Default" (whether it shall be voluntary
or involuntary or come about or be effected by any Requirement of Law or
otherwise):

 

(a)          the Borrower fails to pay (x) any principal of the Loan when due,
whether at stated maturity, by acceleration, by notice of voluntary prepayment,
by mandatory prepayment or otherwise; (y) any interest on the Loan, or any fee
or other amount payable hereunder or under any other Loan Document when due;

 

(b)          any representation, warranty, certification or other statement of
fact made by the Borrower herein or in any other Loan Document or any amendment
or modification hereof or thereof or waiver hereunder or thereunder or in any
certificate, document, report, financial statement or other document furnished
by or on behalf of the Borrower under or in connection with this Agreement or
any other Loan Document, proves to have been false or misleading in any material
respect on or as of the date made;

 

(c)          the Borrower fails to perform or observe any covenant, term,
condition or agreement contained in Section 6.03, Section 6.04(a), Section 6.09,
Section 6.10, or Article 7;

 

(d)          the Borrower fails to perform or observe any other covenant, term,
condition or agreement contained in this Agreement or any other Loan Document
(other than as provided in subsections (a) through (c) of this Section 8.01),
and such failure continues unremedied for a period of thirty days after written
notice to the Borrower from the Lender;

 

(e)          The Borrower:

 

(i)          fails to pay any principal or interest in respect of any Debt
(including any Guaranty Obligation, but excluding any Debt outstanding under
this Agreement) when due and such failure continues after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt;

 

(ii)         fails to perform or observe any other covenant, term, condition or
agreement relating to any such Debt or contained in any instrument or agreement
evidencing or relating thereto, or any other event occurs or condition exists,
the effect of which failure or other event or condition is to cause, or to
permit the holder or beneficiary of such Debt (or a trustee or agent on behalf
of such holder or beneficiary) to cause, with the giving of notice, if required,
such Debt to become due prior to its stated maturity (or, in the case of any
such Debt constituting a Guaranty Obligation, to become payable); or any such
Debt is declared to be due and payable, or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or redemption or as a
mandatory prepayment), purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Debt shall be required to be made, in each case prior
to the stated maturity thereof;

 

  36

 

 

(f)           

 

(i)          The Borrower: (x) commences any case, proceeding or other action
under any existing or future Debtor Relief Law, seeking (A) to have an order for
relief entered with respect to it, or (B) to adjudicate it as bankrupt or
insolvent, or (C) reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (D) appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part of its assets,
or (y) makes a general assignment for the benefit of its creditors;

 

(ii)         there is commenced against the Borrower in a court of competent
jurisdiction any case, proceeding or other action of a nature referred to in
clause (i) above which (x) results in the entry of an order for relief or any
such adjudication or appointment or (y) remains undismissed, undischarged,
unstayed or unbonded for thirty days;

 

(iii)        there is commenced against the Borrower any case, proceeding or
other action seeking issuance of a warrant of attachment, execution or similar
process against all or any substantial part of its assets which results in the
entry of an order for any such relief which has not been vacated, discharged,
stayed or bonded pending appeal within thirty days from the entry thereof;

 

(iv)        the Borrower is generally not, or is unable to, or admits in writing
its inability to, pay its debts as they become due; or

 

(v)         the Borrower takes any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii) or (iii) above.

 

(g)           

 

(i)          any Person shall engage in any "prohibited transaction" (as defined
in §406 of ERISA or §4975 of the Code) involving any Plan;

 

(ii)         any failure to satisfy the minimum funding standard (within the
meaning of Sections §412 or §430 of the Code or §302 of ERISA) shall exist with
respect to any Plan, or any Lien in favor of the PBGC or a Plan shall arise on
the assets of the Borrower or any ERISA Affiliate;

 

  37

 

 

(iii)        a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of trustee is likely to result in the
termination of such Plan for purposes of Title IV of ERISA;

 

(iv)        any Single Employer Plan shall terminate for purposes of Title IV of
ERISA; or

 

(v)         the Borrower or any ERISA Affiliate shall be likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan.

 

and in each case in clauses (i) through (v) above, such event or condition,
together with all other such events or conditions, if any, would, in the
Lender's reasonable judgment, reasonably be expected to have a Material Adverse
Effect;

 

(h)          one or more final and non-appealable judgments or decrees is
entered against the Borrower by a court of competent jurisdiction involving, in
the aggregate, a liability (not paid or fully covered by insurance as to which
the relevant insurance company has been notified and has not denied coverage, or
for which the Borrower has not set aside adequate reserves on its balance sheet)
in an amount in excess of $1,000,000 and all such judgments or decrees have not
been vacated, discharged, stayed or bonded pending appeal within thirty days
from the entry thereof;

 

(i)          there occurs in the reasonable judgment of the Lender a Material
Adverse Effect.

 

Section 8.02         Remedies Upon Event of Default. If any Event of Default
occurs and is continuing, then:

 

(a)          if such event is an Event of Default specified in Section 8.01(f)
above with respect to the Borrower, the Loan (with accrued interest thereon) and
all other amounts owing under this Agreement and the other Loan Documents shall
immediately become due and payable;

 

(b)          if such event is an Event of Default (other than an Event of
Default under Section 8.01(f) ), any or all of the following actions may be
taken:

 

(i)          the Lender may, by notice to the Borrower, declare the Loan (with
accrued interest thereon) and all other amounts owing under this Agreement and
the other Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable;

 

  38

 

 

(ii)         the Lender may exercise all rights and remedies available to it
under any Loan Document; and

 

(iii)        the Lender, in its sole discretion and in one or more transactions
following the procedures set forth in Exhibit 2 hereto, may convert any part of
the amounts due and unpaid to Lender pursuant to the Loan and this Agreement to
shares of common stock, $0.15 par value per share, of the Borrower for a
conversion price of 95% of the previous day’s closing price on the NYSE MKT.

 

(c) all remedies hereunder are cumulative and the exercise of any remedy shall
not constitute an election of remedies or foreclose the use of any other remedy
so long as any amount remains payable to the Lender.

 

article ix
Miscellaneous

 

Section 9.01         Notices.

 

(a)          Except in the case of notices and other communications expressly
permitted to be given by telephone (or by e-mail as provided in paragraph (b)
below), all notices and other communications provided for herein shall be made
in writing and mailed by certified or registered mail, delivered by hand or
overnight courier service, or sent by facsimile as follows:

 

(i)          If to the Borrower, to it at 1375 East 9th Street, Suite 3100,
Cleveland, Ohio 44114, Attention of James E. Sprague, CFO (Facsimile No.
216.938.7944; Telephone No. 216.202.1564), with a copy to Kohrman Jackson &
Krantz LLP, 1375 East 9th Street, 29th Floor, Cleveland, Ohio 44114, Attention
of Christopher J. Hubbert, Esq. (Facsimile No. 216.621.6536; Telephone No.
216.736.7215).

 

(ii)         If to the Lender, to it at 4838 Jenkins Avenue, North Charleston,
SC 29405, Attention of Jay Tiedemann (Facsimile No. (843) 746-0095, Telephone
No. (843) 744-5174); with a copy to Jeffrey Winkler (Facsimile No. (843)
746-0098; Telephone No. (843) 744-5174).

 

Notices mailed by certified or registered mail or sent by hand or overnight
courier service shall be deemed to have been given when received. Notices sent
by facsimile during the recipient's normal business hours shall be deemed to
have been given when sent (and if sent after normal business hours shall be
deemed to have been given at the opening of the recipient's business on the next
Business Day).

 

(b)          Either party hereto may change its address or facsimile number for
notices and other communications hereunder by notice to the other party.

 

  39

 

 

Section 9.02         Amendments and Waivers.

 

(a)          No failure to exercise and no delay in exercising, on the part of
the Lender, any right, remedy, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. No waiver of any provision of any Loan Document shall in any
event be effective unless the same shall comply with paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the generality of
the foregoing, the making of the Loan shall not be construed as a waiver of any
Default, regardless of whether the Lender may have had notice or knowledge of
such Default at the time.

 

(b)          Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except (i) in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by the Borrower and the Lender, or (ii) in the case of any other
Loan Document, pursuant to an agreement or agreements in writing entered into by
the Lender and the Person or Persons that are parties thereto.

 

Section 9.03         Expenses; Indemnity; Damage Waiver.

 

(a)          The Borrower agrees to pay:

 

(i)          all reasonable out-of-pocket expenses incurred by the Lender and
its agents, including the reasonable fees, charges and disbursements of counsel
for the Lender, in connection with the preparation, negotiation, execution,
delivery and administration of the Loan Documents and any amendments, waivers or
other modifications of the provisions of any Loan Document and;

 

(ii)         all out-of-pocket expenses incurred by the Lender, including the
reasonable fees, charges and disbursements of any counsel for the Lender, in
connection with the enforcement or protection of its rights (i) in connection
with the Loan Documents, including its rights under this Section 9.03, or (ii)
in connection with the Loan issued under this Agreement, including all such
out-of-pocket expenses incurred in connection with any restructuring, workout or
negotiations in respect of the Loan Documents or such Loan.

 

  40

 

 

(b)          The Borrower agrees to indemnify and hold harmless the Lender and
each of its Related Parties (each, an "Indemnified Party") from and against, any
and all claims, damages, losses, liabilities and related expenses (including the
reasonable fees, charges and expenses of any counsel for any Indemnified Party,
and shall indemnify and hold harmless each Indemnified Party from all allocated
costs of internal counsel for such Indemnified Party), incurred by any
Indemnified Party or asserted against any Indemnified Party by any Person
(including the Borrower) other than such Indemnified Party and its Related
Parties arising out of, in connection with, or by reason of:

 

(i)          the execution or delivery of any Loan Document or any agreement or
instrument contemplated in any Loan Document, the performance by the parties
thereto of their respective obligations under any Loan Document or the
consummation of the transactions contemplated by the Loan Documents;

 

(ii)         the Loan or the actual or proposed use of the proceeds therefrom;

 

(iii)        any actual or alleged presence or release of Hazardous Materials on
or from any property currently or formerly owned or operated by the Borrower or
any of its Subsidiaries, or any Environmental Liability related to the Borrower
or any of its Subsidiaries in any way; or

 

(iv)        any actual or prospective claim, investigation, litigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory, whether brought by a third party or by the Borrower, and
regardless of whether any Indemnified Party is a party thereto. This Section
9.03 shall only apply to Taxes that represent losses, claims, damages or similar
charges arising from a non-Tax claim.

 

(c)          The Borrower agrees, to the fullest extent permitted by applicable
law, not to assert, and hereby waives, any claim against any Indemnified Party,
on any theory of liability, for special, indirect, consequential or punitive
damages (including, without limitation, any loss of profits or anticipated
savings), as opposed to actual or direct damages, resulting from this Agreement
or any other Loan Document or arising out of such Indemnified Party's activities
in connection herewith or therewith (whether before or after the Closing Date).

 

(d)          All amounts due under Section 9.03 shall be payable not later than
ten Business Days after demand is made for payment by the Lender.

 

(e)          The Borrower agrees that neither it nor any of its Subsidiaries
will settle, compromise or consent to the entry of any judgment in any pending
or threatened claim, action or proceeding in respect of which indemnification or
contribution could be sought under Section 9.03 (whether or not any Indemnified
Party is an actual or potential party to such claim, action or proceeding)
without the prior written consent of the applicable Indemnified Party, unless
such settlement, compromise or consent includes an unconditional release of such
Indemnified Party from all liability arising out of such claim, action or
proceeding.

 

  41

 

 

Section 9.04         Successors and Assigns.

 

(a)          The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
the Lender (and any attempted assignment or transfer by the Borrower without
such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, the Related Parties of the Lender) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)          The Lender may, at any time, without the consent of the Borrower,
assign to one or more Eligible Assignees (as defined below) all or a portion of
its rights and obligations under this Agreement. For purposes of this Agreement,
"Eligible Assignee" means any Person other than a natural Person that is (i) an
Affiliate of the Lender, (ii) a commercial bank, insurance company, investment
or mutual fund or other Person that is an "accredited investor" (as defined in
Regulation D under the Securities Act) or (iii) a corporate entity that
possesses financial sophistication and standing similar to that of the Lender.
Subject to notification of an assignment, the assignee shall be a party hereto
and, to the extent of the interest assigned, have the rights and obligations of
the Lender under this Agreement, and the Lender shall, to the extent of the
interest assigned, be released from its obligations under this Agreement (and,
in the case of an assignment covering all of the Lender's rights and obligations
under this Agreement, the Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Section 3.01 and Section 9.03). The
Borrower hereby agrees to execute any amendment and/or any other document that
may be necessary to effectuate such an assignment, including an amendment to
this Agreement to provide for multiple lenders and an administrative agent to
act on behalf of such lenders. Any assignment or transfer by the Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by the
Lender of a participation in such rights and obligations.

 

  42

 

 

Section 9.05         Survival. All covenants, agreements, representations and
warranties made by the Borrower in the Loan Documents and in the certificates or
other instruments delivered in connection with or pursuant to this Agreement or
any other Loan Document shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the Lender may
have notice or knowledge of any Event of Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of, or any accrued interest on,
any Loan or any fee or any other amount payable under this Agreement is
outstanding and unpaid. The provisions of Section 3.01 and Article IX shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loan or the
termination of this Agreement or any provision hereof.

 

Section 9.06         Counterparts; Integration; Effectiveness.

 

(a)          This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to fees
payable to the Lender constitute the entire contract among the parties with
respect to the subject matter hereof and supersede all previous agreements and
understandings, oral or written, with respect to the subject matter hereof.
Except as provided in Section 4.1, this Agreement shall become effective when it
shall have been executed by the Lender and when the Lender shall have received a
counterpart hereof executed by the Borrower. Delivery of an executed counterpart
of a signature page to this Agreement by facsimile or in electronic ("pdf" or
"tif") format shall be effective as delivery of a manually executed counterpart
of this Agreement.

 

(b)          The words "execution," "signed," "signature," and words of similar
import in any Loan Document shall be deemed to include electronic or digital
signatures or the keeping of records in electronic form, each of which shall be
of the same effect, validity and enforceability as manually executed signatures
or a paper-based recordkeeping system, as the case may be, to the extent and as
provided for under applicable law, including the Electronic Signatures in Global
and National Commerce Act of 2000 (15 USC § 7001 et seq.), the Electronic
Signatures and Records Act of 1999 (NY State Technology Law §§ 301-309), or any
other similar state laws based on the Uniform Electronic Transactions Act.

 

  43

 

 

Section 9.07         Severability. If any term or provision of any Loan Document
is invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision
thereof or invalidate or render unenforceable such term or provision in any
other jurisdiction. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify the applicable Loan Document so as to effect the original intent
of the parties as closely as possible in a mutually acceptable manner in order
that the transactions contemplated hereby be consummated as originally
contemplated to the greatest extent possible.

 

Section 9.08         Governing Law; Jurisdiction; Consent to Service of Process.

 

(a)          This Agreement and the other Loan Documents and any claim,
controversy, dispute or cause of action (whether in contract or tort or
otherwise) based upon, arising out of or relating to this Agreement or any other
Loan Document (except, as to any other Loan Document, as expressly set forth
therein) and the transactions contemplated hereby and thereby shall be governed
by, and construed in accordance with, the laws of the State of South Carolina,
without regard to conflicts of laws principles.

 

(b)          The Borrower irrevocably and unconditionally agrees that it will
not commence any action, litigation or proceeding of any kind whatsoever,
whether in law or equity, or whether in contract or tort or otherwise, against
the Lender or any of its Related Parties in any way relating to this Agreement
or any other Loan Document or the transactions contemplated hereby or thereby,
in any forum other than the courts of the State of South Carolina sitting in
Charleston County, and of the United States District Court of the District of
South Carolina, and any appellate court from any thereof, and each of the
parties hereto irrevocably and unconditionally submits to the exclusive
jurisdiction of such courts and agrees that any such action, litigation or
proceeding may be brought in any such South Carolina State court or, to the
fullest extent permitted by applicable law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action, litigation or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing herein or
in any other Loan Document shall affect any right that the Lender may otherwise
have to bring any action or proceeding relating to this Agreement or any other
Loan Document against the Borrower or its properties in the courts of any
jurisdiction.

 

  44

 

 

(c)          The Borrower irrevocably and unconditionally waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of venue of any action or proceeding arising out of or
relating to this Agreement or any other Loan Document in any such court referred
to in subsection (b) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.

 

(d)          The Borrower irrevocably consents to the service of process in the
manner provided for notices in Section 9.01 and agrees that nothing herein will
affect the right of any party hereto to serve process in any other manner
permitted by applicable law.

 

Section 9.09         Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY RELATING TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY. EACH
PARTY HERETO (A) CERTIFIES THAT NO AGENT, ATTORNEY, REPRESENTATIVE OR ANY OTHER
PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT
SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF LITIGATION, AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section 9.10         Headings. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.

 

Section 9.11         USA PATRIOT Act. The Lender hereby notifies the Borrower
that pursuant to the requirements of the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (Title III of Pub. L. 107-56, signed into law October 26, 2001) (the
"PATRIOT Act"), it may be required to obtain, verify, and record information
that identifies the Borrower, which information includes the name and address of
the Borrower and other information that will allow the Lender to identify the
Borrower in accordance with the PATRIOT Act, and the Borrower agrees to provide,
or cause its Subsidiaries to provide, such information from time to time to the
Lender.

 

Section 9.12         Public Announcements. Unless otherwise required by
applicable law or stock exchange requirements, neither party shall make any
public announcements or filings regarding this Agreement or the transactions
contemplated hereby without the prior written consent of the other party (which
consent shall not be unreasonably withheld or delayed). The party proposing to
make any announcement, including a filing with a Governmental Authority that
will be accessible to the public, shall allow the other party to review the
proposed announcement and comment thereon within a reasonable time prior to the
release or filing of the announcement.

  

[SIGNATURE PAGE FOLLOWS]

 

  45

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

  GAS NATURAL INC.       By /s/ James E. Sprague       Name: James E. Sprague  
Title: Chief Financial Officer

 

  NIL FUNDING CORPORATION       By /s/ Jeffrey Winkler       Name: Jeffrey
Winkler   Title: Authorized Officer

 

  46

 

 

EXHIBIT 1

 

Form of Promissory Note

 

April 15, 2016

 

FOR VALUE RECEIVED, the undersigned, Gas Natural Inc., an Ohio corporation (the
"Borrower"), hereby promises to pay to the order of NIL Funding Corporation LLC
(the "Lender") the Four Million Dollar ($4,000,000.00) principal amount of the
Loan of the Lender outstanding from time to time in accordance with the
provisions of the Loan Agreement, of even date hereof, between the Borrower and
the Lender (as amended, restated, extended, supplemented or otherwise modified
in writing from time to time, the "Loan Agreement"). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in the
Loan Agreement.

 

(a) The Borrower promises to pay interest on the unpaid principal amount of the
Loan from the date of the Loan until such principal amount is paid in full, at
the interest rates and at the times provided in the Loan Agreement.

 

(b) This Note is the Note referred to in the Loan Agreement, is entitled to the
benefits thereof and may be prepaid in whole or in part subject to the terms and
conditions provided therein. Upon the occurrence and continuation of any Event
of Default under the Loan Agreement, all principal and all accrued interest then
remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable, all as provided in the Loan Agreement.

 

(c) The Loan made by the Lender may be evidenced by one or more records or
accounts maintained by the Lender in the ordinary course of business as well as
by this Note. The Lender may also attach schedules to this Note and endorse
thereon the date, amount and maturity of the Loan and all payments made on the
Loan; provided that any failure of the Lender to make any such recordation or
endorsement shall not affect the Obligations of the Borrower under this Note.

 

(d) The Borrower hereby waives diligence, presentment, demand, protest, notice
of intent to accelerate, notice of acceleration, and any other notice of any
kind. No failure on the part of the holder hereof to exercise, and no delay in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof or a consent thereto; nor shall a single or partial exercise of any such
right, power or privilege preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.

 

THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF SOUTH
CAROLINA

 

  47

 

 

  Gas Natural, Inc.       By         Name: James E. Sprague   Title: Chief
Financial Officer

 

  48

 

 

EXHIBIT 2

 

Procedures for Conversion of Debt to Common Stock

 

Pursuant to the Loan Agreement dated April 15, 2016, between NIL Funding
Corporation (the “Lender”) and Gas Natural Inc., (the “Borrower”) if there is an
Event of Default, the Lender will have, as a nonexclusive remedy, the right to
convert some or all of the amounts due and payable by the Borrower to the Lender
to shares of common stock, $0.15 par value per share, of the Borrower. The
procedures for the exercise of such right of conversion are set forth below.
Except as may be specifically set forth in these procedures, capitalized terms
used herein shall have the meanings set forth in the Loan Agreement.

 

1.          Before or promptly after the Closing Date, Borrower shall take all
steps necessary to reserve 250,000 shares of its authorized but unissued common
stock for issuance to the Lender upon one or more exercises of its conversion
rights under Section 8.02 of the Loan Agreement (or such greater number as shall
be requested by the Lender to enable it to fully exercise its conversion
rights). The Borrower shall notify the Lender of the completion of such
obligation.

 

2.          If the Lender chooses to exercise its right to acquire shares of the
Borrower’s common stock by conversion of amounts due under the Loan Agreement,
the Lender shall notify the Borrower by e-mail to jsprague@egas.net, with a copy
to cjh@kjk.com, or other form of communication permitted by the Loan Agreement
(each such notice an “Exercise Notice”). Each Exercise Notice shall contain: (a)
the number of whole shares to be acquired; and (b) the date of the acquisition
(the “Exercise Date”). No fractional shares may be acquired by conversion.
Promptly upon receipt of an Exercise Notice, the Borrower shall list such shares
for trading on the NYSE MKT.

 

3.          Further, upon receipt of an Exercise Notice the Borrower shall
calculate the purchase price of the shares to be purchased by multiplying the
number of shares by the dollar amount which is 95% of the closing price of
Borrower common stock on the NYSE MKT for the business day preceding the
Exercise Date (the “Purchase Price”). The Borrower shall reduce the amount it
owes to Lender on account of the Loan by the amount of the Purchase Price,
notify the Lender of the amount of the purchase price and cause the Borrower’s
transfer agent to issue a certificate for the purchased shares to the Lender.
For the avoidance of doubt, the Lender may exercise its right of conversion
multiple times, with a separate Purchase Price for each conversion transaction.

 

4.          Certificates for shares purchased by conversion shall bear an
appropriate legend restricting transfer of the shares represented thereby to
transactions complying with applicable securities laws.         

 

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