Exhibit 10.16 

 

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

LOAN AND SECURITY AGREEMENT

 

Dated as of July 6, 2015

 

--------------------------------------------------------------------------------

 

MARQUIS AFFILIATED HOLDINGS LLC,

MARQUIS INDUSTRIES, INC.,

A-O INDUSTRIES, LLC,

ASTRO CARPET MILLS, LLC,

CONSTELLATION INDUSTRIES, LLC,

and

S F COMMERCIAL PROPERTIES, LLC,

 

as Borrowers

 

--------------------------------------------------------------------------------

 

BANK OF AMERICA, N.A.,

 

as Lender

 

--------------------------------------------------------------------------------

 

 

 

 

 

 

 

 

 

   

 

 

 

TABLE OF CONTENTS

 

    Page Section 1. DEFINITIONS; RULES OF CONSTRUCTION 1 1.1.   Definitions 1
1.2.   Accounting Terms 23 1.3.   Uniform Commercial Code 23 1.4.   Certain
Matters of Construction 23 Section 2. CREDIT FACILITIES 23 2.1.   Revolver
Commitment 23 2.2.   Term Loan Commitment 24 2.3.   Letter of Credit Facility 24
Section 3. INTEREST, FEES AND CHARGES 25 3.1.   Interest 25 3.2.   Fees 27 3.3.
  Computation of Interest, Fees, Yield Protection 27 3.4.   Reimbursement
Obligations 27 3.5.   Illegality 28 3.6.   Inability to Determine Rates 28 3.7.
  Increased Costs; Capital Adequacy 28 3.8.   Mitigation 29 3.9.   Funding
Losses 29 3.10.   Maximum Interest 30 Section 4. LOAN ADMINISTRATION 30 4.1.  
Manner of Borrowing and Funding Revolver Loans 30 4.2.   Number and Amount of
LIBOR Loans; Determination of Rate 30 4.3.   Borrower Agent 31 4.4.   One
Obligation 31 4.5.   Effect of Termination 31 Section 5. PAYMENTS 31 5.1.  
General Payment Provisions 31 5.2.   Repayment of Revolver Loans 31 5.3.  
Repayment of Term Loan 32 5.4.   Payment of Other Obligations 32 5.5.  
Marshaling; Payments Set Aside 32 5.6.   Applications of Payments; Dominion
Account 32 5.7.   Account Stated 32 5.8.   Taxes 33 5.9.   Nature and Extent of
Each Borrower’s Liability 34 Section 6. CONDITIONS PRECEDENT 36 6.1.  
Conditions Precedent to Initial Loans 36 6.2.   Conditions Precedent to All
Credit Extensions 38 Section 7. COLLATERAL 39 7.1.   Grant of Security Interest
39 7.2.   Lien on Deposit Accounts; Cash Collateral 40 7.3.   Real Estate
Collateral 40 7.4.   Other Collateral 40 7.5.   Limitations 41 7.6.   Further
Assurances; Extent of Liens 41 7.7.   Foreign Subsidiary Stock 41 Section 8.
COLLATERAL ADMINISTRATION 41 8.1.   Borrowing Base Certificates 41

 

 

 

 i 

 

 

8.2.   Accounts 41 8.3.   Inventory 42 8.4.   Equipment 42 8.5.   Deposit
Accounts 43 8.6.   General Provisions 43 8.7.   Power of Attorney 44 Section 9.
REPRESENTATIONS AND WARRANTIES 45 9.1.   General Representations and Warranties
45 9.2.   Complete Disclosure 49 Section 10. COVENANTS AND CONTINUING AGREEMENTS
49 10.1.   Affirmative Covenants 49 10.2.   Negative Covenants 53 10.3.  
Financial Covenants 56 Section 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT 57
11.1.   Events of Default 57 11.2.   Remedies upon Default 58 11.3.   License 58
11.4.   Setoff 59 11.5.   Remedies Cumulative; No Waiver 59 Section 12.
MISCELLANEOUS 59 12.1.   Amendments and Waivers 59 12.2.   Indemnity 59 12.3.  
Notices and Communications 60 12.4.   Performance of Borrowers' Obligations 61
12.5.   Credit Inquiries 61 12.6.   Severability 61 12.7.   Cumulative Effect;
Conflict of Terms 61 12.8.   Counterparts 61 12.9.   Entire Agreement 61 12.10.
  No Control; No Advisory or Fiduciary Responsibility 61 12.11.  
Confidentiality 62 12.12.   GOVERNING LAW 62 12.13.   Consent to Forum 62 12.14.
  Waivers by Borrowers 63 12.15.   Patriot Act Notice 63 12.16.   NO ORAL
AGREEMENT 63

  

LIST OF SCHEDULES

 

 

Schedule 8.5 Deposit Accounts Schedule 8.6.1 Business Locations Schedule 9.1.4
Names and Capital Structure Schedule 9.1.10 Brokers Schedule 9.1.11 Patents,
Trademarks, Copyrights and Licenses Schedule 9.1.14 Environmental Matters
Schedule 9.1.15 Restrictive Agreements Schedule 9.1.16 Litigation Schedule
9.1.18 Pension Plans Schedule 9.1.120 Labor Relations Schedule 10.2.2 Existing
Liens Schedule 10.2.17 Existing Affiliate Transactions

 

 

 

 ii 

 

 

 

LIST OF EXHIBITS

 

Exhibit AHistorical EBITDA / Fixed Charge Coverage Ratio Calculations

 

 

 

 

 

 

 

 

 

 

 iii 

 

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is dated as of July 6, 2015, among MARQUIS
AFFILIATED HOLDINGS LLC, a Delaware limited liability company ("Holdings"),
MARQUIS INDUSTRIES, INC., a Georgia corporation ("Marquis"), A-O INDUSTRIES,
LLC, a Georgia limited liability company ("A-O"), ASTRO CARPET MILLS, LLC, a
Georgia limited liability company ("Astro"), CONSTELLATION INDUSTRIES, LLC, a
Georgia limited liability company ("Constellation"), and S F COMMERCIAL
PROPERTIES, LLC, a Georgia limited liability company ("SF Commercial"; and
together with Holdings, Marquis, A-O, Astro and Constellation, collectively,
"Borrowers" and each individually, a "Borrower"), and BANK OF AMERICA, N.A., a
national banking association ("Lender").

 

R E C I T A L S:

 

On the date of this Agreement, Holdings acquired all of the capital stock of
Marquis (the "Marquis Acquisition") pursuant to that certain Purchase Agreement,
dated July 6, 2015, by and among Live Ventures Inc., a Nevada corporation ("Live
Ventures"), Marquis, all of its stockholders, Timothy A. Bailey, a Georgia
resident, ("Bailey"), Larry Heckman, a Georgia resident ("Heckman"), David
Stokes, a Georgia resident ("Stokes"), and Mark Rowland, a Georgia resident
("Rowland", with Bailey, Heckman, Stokes, and Rowland, individually and
interchangeably, a "Seller", and, in the aggregate, the "Sellers"), and Holdings
(such agreement, as amended, restated, supplemented or otherwise modified from
time to time, the "Marquis SPA" and, together with each other material
agreement, instrument, certificates, schedule, exhibit, annex and rider executed
in connection therewith or contemplated thereby, collectively, the "Marquis SPA
Documents").

 

The Marquis Acquisition was funded solely with proceeds from (a) the Loans (as
defined below), (b) term loan indebtedness from Isaac Capital Fund I, LLC, a
Georgia limited liability company ("Mezzanine Lender"), in an amount equal to
$7,000,000 (the "Mezzanine Debt") pursuant to that certain Loan Agreement dated
as of the date hereof by and among Mezzanine Lender and Borrowers (the
"Mezzanine Loan Agreement" and, together with all of the documents, agreements,
instruments, certificates, schedules, exhibits, annexes and riders executed in
connection therewith or contemplated thereby, in each case as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms of the Debt and Lien Subordination Agreement (as defined below),
collectively, the "Mezzanine Debt Documents") and (c) an equity contribution
from, among others, Live Ventures, Bailey, Heckman, Stokes, and Rowland, in an
aggregate amount not less than $6,000,000.00 (the "Equity Contribution" and, all
of the documents, agreements, instruments, certificates, schedules, exhibits,
annexes and riders executed in connection therewith or contemplated thereby,
collectively, the "Equity Contribution Documents").

 

Borrowers have requested that Lender provide a credit facility to Borrowers to
finance their mutual and collective business enterprise. Lender is willing to
provide the credit facility on the terms and conditions set forth in this
Agreement.

 

NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties
agree as follows:

 

SECTION 1. DEFINITIONS; RULES OF CONSTRUCTION

 

1.1.           Definitions. As used herein, the following terms have the
meanings set forth below:

 

Account: as defined in the UCC, including all rights to payment for goods sold
or leased, or for services rendered.

 

 

 

 

 

 1 

 

 

Account Debtor: a Person obligated under an Account, Chattel Paper or General
Intangible.

 

Accounts Formula Amount: 85% of the Value of Eligible Accounts.

 

Acquisition: a transaction or series of transactions resulting in (a)
acquisition of a business, division or substantially all assets of a Person; (b)
record or beneficial ownership of 50% or more of the Equity Interests of a
Person; or (c) merger, consolidation or combination of a Borrower or Subsidiary
with another Person.

 

Affiliate: with respect to a specified Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or
is under common Control with the Person specified. "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise. "Controlling" and
"Controlled" have correlative meanings.

 

Allocable Amount: as defined in Section 5.9.3.

 

Anti-Terrorism Law: any law relating to terrorism or money laundering, including
the Patriot Act.

 

Applicable Law: all laws, rules, regulations and governmental guidelines
applicable to the Person, conduct, transaction, agreement or matter in question,
including all applicable statutory law, common law and equitable principles, and
all provisions of constitutions, treaties, statutes, rules, regulations, orders
and decrees of Governmental Authorities.

 

Applicable Margin: the margin set forth below, as determined by the Fixed Charge
Coverage

Ratio:

 

Level

Fixed Charge

Coverage Ratio

Base Rate

Revolver

Loans

LIBOR

Revolver

Loans

Base Rate Term

Loans

LIBOR Term

Loans

I >2.00 to 1.00 0.50% 1.50% 0.75% 1.75% II

<2.00 to 1.00

but

>1.50 to 1.00

0.75% 1.75% 1.00% 2.00% III

<1.50 to 1.00

but

>1.20 to 1.00

1.00% 2.00% 1.25% 2.25% IV <1.2x 1.25% 2.25% 1.50% 2.50%

 

Until November 3, 2015, margins shall be determined as if Level II were
applicable. Thereafter, the margins shall be subject to increase or decrease by
Lender on the third Business Day of the second calendar month following each
Fiscal Quarter end. If Lender is unable to calculate the Fixed Charge Coverage
Ratio due to Borrowers' failure to deliver any financial statements when
required hereunder, then, at the option of Lender, margins shall be determined
as if Level IV were applicable until the third Business Day of the second
calendar month following its receipt.

 

Asset Disposition: a sale, lease, license, consignment, transfer or other
disposition of Property of an Obligor, including a disposition of Property in
connection with a sale-leaseback transaction or synthetic lease.

 

 

 

 

 

 2 

 

 

Availability: the Borrowing Base minus Revolver Usage.

 

Availability Reserve: the sum (without duplication) of (a) the Inventory
Reserve; (b) the Rent and Charges Reserve; (c) the Bank Product Reserve; (d) the
aggregate amount of liabilities secured by Liens upon Collateral that are senior
to Lender's Liens (but imposition of any such reserve shall not waive an Event
of Default arising therefrom); (e) the Dilution Reserve; and (f) such additional
reserves, in such amounts and with respect to such matters, as Lender in its
Permitted Discretion may elect to impose from time to time.

 

Bank Product: any of the following products, services or facilities extended to
an Obligor or any Subsidiary of an Obligor by Lender or any of its Affiliates:
(a) Cash Management Services; (b) products under Hedging Agreements; (c)
commercial credit card and merchant card services; and (d) leases and other
banking products or services provided to any Obligor or any Subsidiary, other
than Letters of Credit.

 

Bank Product Debt: Debt, obligations and other liabilities of an Obligor or any
Subsidiary of an Obligor with respect to Bank Products.

 

Bank Product Reserve: the aggregate amount of reserves established by Lender
from time to time in its Permitted Discretion in respect of Bank Product Debt.

 

Bankruptcy Code: Title 11 of the United States Code.

 

Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime
Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c)
LIBOR for a 30 day interest period as of such day, plus 1.00%.

 

Base Rate Loan: any Loan that bears interest based on the Base Rate.

 

Base Rate Revolver Loan: a Revolver Loan that bears interest based on the Base
Rate.

 

Board of Governors: the Board of Governors of the Federal Reserve System.

 

Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt
that (i) arises from the lending of money by any Person to such Obligor, (ii) is
evidenced by notes, drafts, bonds, debentures, credit documents or similar
instruments, (iii) accrues interest or is a type upon which interest charges are
customarily paid (excluding trade payables owing in the Ordinary Course of
Business), or (iv) was issued or assumed as full or partial payment for
Property; (b) Capital Leases; (c) reimbursement obligations with respect to
letters of credit; and (d) guaranties of any Debt of the foregoing types owing
by another Person.

 

Borrower Agent: as defined in Section 4.3.

 

Borrowing: a group of Loans that are made or converted together on the same day
and have the same interest option and, if applicable, Interest Period.

 

Borrowing Base: on any date of determination, an amount equal to the lesser of
(a) the Revolver Commitment; or (b) the sum of the Accounts Formula Amount, plus
the Factored Accounts Formula Amount, plus the Inventory Formula Amount, minus
the Availability Reserve.

 

Borrowing Base Certificate: a certificate, in form reasonably satisfactory to
Lender and substance satisfactory to Lender, by which Borrowers certify the
Borrowing Base and certain other matters set forth therein.

 

 

 

 

 

 3 

 

 

Business Day: any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the laws of, or are in fact
closed in, North Carolina and Georgia, and if such day relates to a LIBOR Loan,
any such day on which dealings in Dollar deposits are conducted between banks in
the London interbank Eurodollar market.

 

Capital Expenditures: all liabilities incurred or expenditures made by a
Borrower or Subsidiary for the acquisition of fixed assets, or any improvements,
replacements, substitutions or additions thereto with a useful life of more than
one year.

 

Capital Lease: any lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.

 

Cash Collateral: cash, and any interest or other income earned thereon, that is
delivered to Lender to Cash Collateralize any Obligations.

 

Cash Collateral Account: a demand deposit, money market or other account
maintained with Lender and subject to Lender's Liens.

 

Cash Collateralize: the delivery of cash to Lender, as security for the payment
of Obligations, in an amount equal to (a) with respect to LC Obligations, 105%
of the aggregate LC Obligations, and (b) with respect to any inchoate,
contingent or other Obligations (including Obligations arising under Bank
Products but excluding unasserted inchoate or contingent indemnification
obligations), Lender's good faith estimate of the amount due or to become due,
including fees, expenses and indemnification hereunder. "Cash Collateralization"
has a correlative meaning.

 

Cash Equivalents: (a) marketable obligations issued or unconditionally
guaranteed by, and backed by the full faith and credit of, the United States
government, maturing within 12 months of the date of acquisition; (b)
certificates of deposit, time deposits and bankers' acceptances maturing within
12 months of the date of acquisition, and overnight bank deposits, in each case
which are issued by a commercial bank (including Lender) organized under the
laws of the United States or any state or district thereof, rated A-1 (or
better) by S&P or P-1 (or better) by Moody's at the time of acquisition, and
(unless issued by Lender) not subject to offset rights; (c) repurchase
obligations with a term of not more than 30 days for underlying investments of
the types described in clauses (a) and (b) entered into with any bank meeting
the qualifications specified in clause (b); (d) commercial paper issued by
Lender or rated A-1 (or better) by S&P or P-1 (or better) by Moody's, and
maturing within nine months of the date of acquisition; and (e) shares of any
money market fund that has substantially all of its assets invested continuously
in the types of investments referred to above, has net assets of at least
$500,000,000 and has the highest rating obtainable from either Moody's or S&P.

 

Cash Management Services: services provided from time to time by Lender or any
of its Affiliates to Obligors or any Subsidiary relating to operating,
collections, payroll, trust, or other depository or disbursement accounts,
including automated clearinghouse, e-payable, electronic funds transfer, wire
transfer, controlled disbursement, overdraft, depository, information reporting,
lockbox and stop payment services.

 

CERCLA: the Comprehensive Environmental Response Compensation and Liability Act
(42 U.S.C. § 9601 et seq.).

 

Change in Law: the occurrence, after the date hereof, of (a) the adoption,
taking effect or phasing in of any law, rule, regulation or treaty; (b) any
change in any law, rule, regulation or treaty or in the administration,
interpretation or application thereof; or (c) the making, issuance or
application of any request, guideline, requirement or directive (whether or not
having the force of law) by any Governmental Authority; provided, however, that
"Change in Law" shall include, regardless of the date enacted, adopted or
issued, all requests, rules, guidelines, requirements or directives (i) under or
relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or
(ii) promulgated pursuant to Basel III by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any similar
authority) or any other Governmental Authority.

 

 

 

 

 

 4 

 

 

Change of Control: (a) Jon Isaac ceases to (i) own and control, beneficially and
of record, directly or indirectly, at least 25% of the Equity Interests of Live
(or Live Ventures after the Live Restructuring Transaction), and (ii) be the
Chief Executive Officer of Live (or Live Ventures after the Live Restructuring
Transaction) or the Chairman of the Board of Directors of Live (or Live Ventures
after the Live Restructuring Transaction); (b) Live (or Live Ventures after the
Live Restructuring Transaction) ceases to own and control, beneficially and of
record, directly or indirectly, at least 80% of Holdings; (c) Holdings ceases to
own and control, beneficially and of record, at least 100% of the Equity
Interests of Marquis; (d) Marquis ceases to own and control, beneficially and of
record, directly or indirectly, all Equity Interests in all other Borrowers
(other than Holdings) except as a result of a transaction specifically permitted
by this Agreement; (e) a change in the majority of directors of Holdings during
any 24 month period, unless approved by the majority of directors serving at the
beginning of such period; or (f) the sale or transfer of all or substantially
all assets of a Borrower, except to another Borrower.

 

Claims: all claims, liabilities, obligations, losses, damages, penalties,
judgments, proceedings, interest, costs and expenses of any kind (including
remedial response costs, reasonable attorneys' fees and Extraordinary Expenses)
at any time (including after Full Payment of the Obligations) incurred by any
Indemnitee or asserted against any Indemnitee by any Obligor or other Person, in
any way relating to (a) any Loans, Letters of Credit, Loan Documents, or the use
thereof or transactions relating thereto, (b) any action taken or omitted to be
taken by any Indemnitee in connection with any Loan Documents, (c) the existence
or perfection of any Liens, or realization upon any Collateral, (d) exercise of
any rights or remedies under any Loan Documents or Applicable Law, or (e)
failure by any Obligor to perform or observe any terms of any Loan Document, in
each case including all costs and expenses relating to any investigation,
litigation, arbitration or other proceeding (including an Insolvency Proceeding
or appellate proceedings), whether or not the applicable Indemnitee is a party
thereto.

 

Closing Date: as defined in Section 6.1.

 

Code: the Internal Revenue Code of 1986.

 

Collateral: all Property described in Section 7.1, all Property described in any
Security Documents as security for any Obligations, and all other Property that
now or hereafter secures (or is intended to secure) any Obligations.

 

Commitment Termination Date: the earliest to occur of (a) the Revolver
Termination Date; (b) the date on which Borrowers terminate the Revolver
Commitment pursuant to Section 2.1.3; or (c) the date on which the Revolver
Commitment is terminated pursuant to Section 11.2.

 

Commitments: the Revolver Commitment and Term Loan Commitment.

 

Commodity Exchange Act: the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

Compliance Certificate: a certificate, in form reasonably satisfactory to Lender
and substance satisfactory to Lender, by which Borrowers certify compliance with
Section 10.3 and certain other matters set forth therein.

 

Connection Income Taxes: Other Connection Taxes that are imposed on or measured
by net income (however denominated), or are franchise or branch profits Taxes.

 

Contingent Obligation: any obligation of a Person arising from a guaranty,
indemnity or other assurance of payment or performance of any Debt, lease,
dividend or other obligation ("primary obligations") of another obligor
("primary obligor") in any manner, whether directly or indirectly, including any
obligation of such Person under any (a) guaranty, endorsement, co-making or sale
with recourse of an obligation of a primary obligor; (b) obligation to make
take-or-pay or similar payments regardless of nonperformance by any other party
to an agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity capital,
net worth or solvency of the primary obligor, (iv) to purchase Property or
services for the purpose of assuring the ability of the primary obligor to
perform a primary obligation, or (v) otherwise to assure or hold harmless the
holder of any primary obligation against loss in respect thereof. The amount of
any Contingent Obligation shall be deemed to be the stated or determinable
amount of the primary obligation (or, if less, the maximum amount for which such
Person may be liable under the instrument evidencing the Contingent Obligation)
or, if not stated or determinable, the maximum reasonably anticipated liability
with respect thereto.

 

 

 

 

 

 5 

 

 

Copyright Security Agreement: that certain Copyright Security Agreement dated as
of the Closing Date by and among Borrowers and Lender.

 

Credit Insurance Loss Payable Endorsement: a loss payable endorsement in favor
of Lender from the issuer of any credit insurance with respect to Accounts of
any Borrower that is reasonably acceptable to Lender.

 

CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

 

Debt: as applied to any Person, without duplication, (a) all items that would be
included as liabilities on a balance sheet in accordance with GAAP, including
Capital Leases, but excluding trade payables incurred and being paid in the
Ordinary Course of Business; (b) all Contingent Obligations; (c) all
reimbursement obligations in connection with letters of credit issued for the
account of such Person; and (d) in the case of a Borrower, the Obligations. The
Debt of a Person shall include any recourse Debt of any partnership in which
such Person is a general partner or joint venturer.

 

Debt and Lien Subordination Agreement: the Debt and Lien Subordination Agreement
of even date herewith, between Mezzanine Lender and Lender, relating to the
Mezzanine Debt.

 

Default: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.

 

Default Rate: for any Obligation (including, to the extent permitted by law,
interest not paid when due), 2.00% plus the interest rate otherwise applicable
thereto.

 

Deposit Account Control Agreement: a control agreement reasonably satisfactory
to Lender executed by an institution maintaining a Deposit Account for an
Obligor, to perfect Lender's Lien on such account.

 

Dilution Percent: the percent, determined for Borrowers' most recent Fiscal
Quarter, equal to (a) bad debt write-downs or write-offs, discounts, returns,
promotions, credits, credit memos and other dilutive items with respect to
Accounts, divided by (b) gross sales.

 

Dilution Reserve: a reserve against Availability equal to the sum by which the
Dilution Percent exceeds 5.0% multiplied by the Dollar amount of Eligible
Accounts or Eligible Factoring Credit Balances, as applicable.

 

Distribution: any declaration or payment of a distribution, interest or dividend
on any Equity Interest (other than payment-in-kind); any distribution, advance
or repayment of Debt to a holder of Equity Interests; or any purchase,
redemption, or other acquisition or retirement for value of any Equity Interest.

 

 

 

 

 

 6 

 

 

Dollars: lawful money of the United States.

 

Dominion Account: a special account established by Borrowers at Lender or a bank
acceptable to Lender, over which Lender has exclusive control for withdrawal
purposes.

 

EBITDA: determined on a consolidated basis for Borrowers and Subsidiaries, net
income, calculated before interest expense, transaction costs associated with
the Transactions not to exceed $1,000,000, provision for income taxes,
depreciation and amortization expense, gains or losses arising from the sale of
capital assets, gains arising from the write-up of assets, and any extraordinary
gains, losses on impairment of long-lived assets and goodwill, unrealized gains
and losses resulting in changes from fair values of derivatives and financial
instruments (including changes in fair value of contingent consideration related
to business combinations), directly related charges related to the consummation
of business combinations, non-cash severance and restructuring charges, gains
arising from the write-up of assets, extraordinary gains and losses (including
losses and gains from extinguishment of debt) and non- recurring expenses and
income which do not represent cash items in such period (in each case, to the
extent included in determining net income). For purposes of this Agreement,
EBITDA and its components for the 12 months prior to the Closing Date is as
shown on Exhibit A.

 

Eligible Account: an Account owing to a Borrower that arises in the Ordinary
Course of Business from the sale of goods, is payable in Dollars and is deemed
by Lender, in its Permitted Discretion, to be an Eligible Account. Without
limiting the foregoing, no Account shall be an Eligible Account if (a) it is
unpaid for more than 60 days after the original due date, or more than 90 days
after the original invoice date; (b) 50% or more of the Accounts owing by the
Account Debtor are not Eligible Accounts under the foregoing clause; (c) it is
owing by (i) any Account Debtor (other than Menard, Inc. ("Menards") whose
otherwise Eligible Accounts, in face amount, exceed 10% of the aggregate
Eligible Accounts plus Eligible Factoring Credit Balances of Borrowers (or such
higher percentage as Lender may establish for the Account Debtor from time to
time), but only to the extent of such excess, (ii) Menards, if the otherwise
Eligible Accounts of Menards, in face amount, exceed 20% of the aggregate
Eligible Accounts plus Eligible Factoring Credit Balances of Borrowers (or such
higher percentage as Lender may establish for Menards from time to time), but
only to the extent of such excess; (d) it does not conform with a covenant or
representation herein; (e) it is owing by a creditor or supplier, or is
otherwise subject to a potential offset, counterclaim, dispute, deduction,
discount, recoupment, reserve, defense, chargeback, credit or allowance (but
ineligibility shall be limited to the amount thereof); (f) an Insolvency
Proceeding has been commenced by or against the Account Debtor; or the Account
Debtor has failed, has suspended or ceased doing business, is liquidating,
dissolving or winding up its affairs, is not Solvent, unless (i) such Account
Debtor (A) is a debtor-in-possession in a case then pending under chapter 11 of
the Bankruptcy Code, (B) has established debtor-in-possession financing
satisfactory to Lender in its sole discretion and (C) otherwise satisfied each
of the requirements set forth in this definition of Eligible Account, or is
subject to Sanctions or any specially designated nationals list maintained by
OFAC; or the Borrower is not able to bring suit or enforce remedies against the
Account Debtor through judicial process; (g) the Account Debtor is organized or
has its principal offices or assets outside the United States or Canada, unless
the Account is supported by a letter of credit (delivered to and directly
drawable by Lender) or credit insurance satisfactory in all respects to Lender
in its Permitted Discretion; (h) it is owing by a Governmental Authority, unless
the Account Debtor is the United States or any department, agency or
instrumentality thereof and the Account has been assigned to Lender in
compliance with the federal Assignment of Claims Act; (i) it is not subject to a
duly perfected, first priority Lien in favor of Lender, or is subject to any
other Lien (other than, subject to the Debt and Lien Subordination Agreement or
any subordination agreement for any other Subordinated Debt, Mezzanine Lender’s
Lien and any Lien of a lender of other Subordinated Debt); (j) the goods giving
rise to it have not been delivered to the Account Debtor or it otherwise does
not represent a final sale; (k) it is evidenced by Chattel Paper or an
Instrument of any kind, or has been reduced to judgment; (l) its payment has
been extended or the Account Debtor has made a partial payment; (m) it arises
from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold,
sale-or-return, sale-on-approval, consignment, or other repurchase or return
basis, or from a sale for personal, family or household purposes; (n) it
represents a progress billing or retainage, or relates to services for which a
performance, surety or completion bond or similar assurance has been issued on
behalf of a Borrower; (o) it includes a billing for interest, fees or late
charges, but ineligibility shall be limited to the extent thereof; or (p) it is
a Factored Account, it has been charged back to a Borrower by a Factor under a
Factoring Agreement, it is subject to reserves by a Factor or the Factor has
advanced on it. In calculating delinquent portions of Accounts under clauses (a)
and (b), credit balances more than 90 days old will be excluded.

 

 

 

 

 

 7 

 

 

Eligible Factoring Credit Balances: such Factoring Credit Balances that Lender,
in its Permitted Discretion, determines to meet all of the following
requirements: (i) such Factoring Credit Balances have been assigned to Lender
pursuant to a Factor Intercreditor Agreement and are subject to Lender's duly
perfected, first priority security interest and no other Lien except a Permitted
Lien, (ii) such Factoring Credit Balances are not subject to any present or
contingent offset, deduction or counterclaim including any such offset,
deduction or counterclaim arising out of any Borrower's breach of any
representation, warranty, agreement or covenant under the applicable Factoring
Agreement, and (iii) such Factoring Credit Balances are not determined by
Lender, in its Permitted Discretion, to be ineligible for any other reason.

 

Eligible Inventory: Inventory owned by a Borrower that Lender, in its Permitted
Discretion, deems to be Eligible Inventory. Without limiting the foregoing, no
Inventory shall be Eligible Inventory unless it (a) is finished goods or raw
materials, and not work-in-process, packaging or shipping materials, labels,
samples, display items, bags, replacement parts or manufacturing supplies; (b)
is not held on consignment, nor subject to any deposit or down payment; (c) is
in new and saleable condition and is not damaged, defective, shopworn or
otherwise unfit for sale; (d) is not perishable, obsolete or unmerchantable, and
does not constitute returned or repossessed goods; (e) meets all standards
imposed by any Governmental Authority, has not been acquired from an entity
subject to Sanctions or any specially designated nationals list maintained by
OFAC, and does not constitute hazardous materials under any Environmental Law;
(f) conforms with the covenants and representations herein; (g) is subject to
Lender's duly perfected, first priority Lien, and no other Lien (other than,
subject to the Debt and Lien Subordination Agreement or any subordination
agreement for any other Subordinated Debt, Mezzanine Lender’s Lien and any Lien
of a lender of other Subordinated Debt); (h) is within the continental United
States, is not in transit except between locations of Borrowers or between
locations of a Borrower and any outside processor if such processor has
delivered an appropriate Lien Waiver to Lender, and is not consigned to any
Person; (i) is not subject to any warehouse receipt or negotiable Document; (j)
is not subject to any License or other arrangement that restricts such
Borrower's or Lender's right to dispose of such Inventory, unless Lender has
received an appropriate Lien Waiver; (k) is not located on leased premises or in
the possession of a warehouseman, processor, repairman, mechanic, shipper,
freight forwarder or other Person, unless the lessor or such Person has
delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been
established; and (l) is reflected in the details of a current perpetual
inventory report (except for Inventory located at any outside processor).

 

Enforcement Action: any action to enforce any Obligations or Loan Documents or
to realize upon any Collateral (whether by judicial action, self-help,
notification of Account Debtors, exercise of setoff or recoupment, credit bid,
action in an Obligor's Insolvency Proceeding or otherwise).

 

Environmental Agreement: an agreement of an Obligor to indemnify Lender from
liability under Environmental Laws with respect to Real Estate subject to a
Mortgage.

 

Environmental Laws: Applicable Laws (including programs, permits and guidance
promulgated by regulators) relating to public health (other than occupational
safety and health regulated by OSHA) or the protection or pollution of the
environment, including CERCLA, RCRA and CWA.

 

 

 

 

 

 8 

 

 

Environmental Notice: a notice (whether written or oral) from any Governmental
Authority or other Person of any possible noncompliance with, investigation of a
possible violation of, litigation relating to, or potential fine or liability
under any Environmental Law, or with respect to any Environmental Release,
environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation
or otherwise.

 

Environmental Release: a release as defined in CERCLA or under any other
Environmental Law.

 

Equity Contribution: shall have the meaning ascribed to it in the recitals
hereto.

 

Equity Interest: the interest of any (a) shareholder in a corporation; (b)
partner in a partnership (whether general, limited, limited liability or joint
venture); (c) member in a limited liability company; or (d) other Person having
any other form of equity security or ownership interest.

 

Equity Interest Pledge Agreement: that certain Pledge Agreement dated as of the
Closing Date by and among Holdings, Marquis and Lender.

 

ERISA: the Employee Retirement Income Security Act of 1974.

 

ERISA Affiliate: any trade or business (whether or not incorporated) under
common control with an Obligor within the meaning of Section 414(b) or (c) of
the Code (and Sections 414(m) and (o) of the Code for purposes of provisions
relating to Section 412 of the Code).

 

ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a substantial employer
(as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan
or notification that a Multiemployer Plan is in reorganization; (d) the filing
of a notice of intent to terminate, the treatment of a Plan amendment as a
termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e)
the determination that any Pension Plan or Multiemployer Plan is considered an
at risk plan or a plan in critical or endangered status under the Code, ERISA or
the Pension Protection Act of 2006; (f) an event or condition which constitutes
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or (g) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or
ERISA Affiliate.

 

Event of Default: as defined in Section 11.

 

Excluded Assets:

(a)  any rights of an Obligor in any contract, license, right or other agreement
if under the terms thereof, or any Applicable Law with respect thereto, the
valid grant of a security interest therein to Lender is prohibited and such
prohibition has not been waived or the consent of the other party to such
contract or license has not been obtained or, under Applicable Law, such
prohibition cannot be waived; provided however that (i) the "Excluded Assets"
shall not be interpreted (A) to apply to any contract, license, right or other
agreement to the extent the applicable prohibition is ineffective or
unenforceable under the UCC (including Sections 9-406 through 9-409 or any other
Applicable Law), or (B) so as to limit, impair or otherwise affect Lender's
unconditional continuing security interest in and Lien upon any rights or
interests of such Obligor in or to moneys due or to become due under any such
contract, license, right or other agreement (including any Accounts), and (ii)
notwithstanding the foregoing, Lender's security interest in any such contract,
license, right or other agreement shall attach immediately (and thus become
Collateral hereunder) at such time as the condition causing such prohibition or
default is remedied or removed, and

 

 

 

 

 

 9 

 

 

(b)   any intent-to-use trademark application to the extent that, and solely
during the period in which, the grant of a security interest therein to Lender
would impair the validity or enforceability of such intent-to-use trademark
application or the trademark that is the subject of such application under
federal law;

 

provided that "Excluded Assets" shall not include any right to receive proceeds
from the sale or other disposition of any Excluded Asset or any proceeds,
products, substitutions or replacements of Excluded Assets.

 

Excluded Swap Obligation: with respect to an Obligor, each Swap Obligation as to
which, and only to the extent that, such Obligor's guaranty of or grant of a
Lien as security for such Swap Obligation is or becomes illegal under the
Commodity Exchange Act because the Obligor does not constitute an "eligible
contract participant" as defined in the act (determined after giving effect to
any keepwell, support or other agreement for the benefit of such Obligor and all
guarantees of Swap Obligations by other Obligors) when such guaranty or grant of
Lien becomes effective with respect to the Swap Obligation. If a Hedging
Agreement governs more than one Swap Obligation, only the Swap Obligation(s) or
portions thereof described in the foregoing sentence shall be Excluded Swap
Obligation(s) for the applicable Obligor.

 

Excluded Taxes: (a) Taxes imposed on or measured by a Recipient's net income
(however denominated), franchise Taxes and branch profits Taxes (i) as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of Lender, its lending office located in, the
jurisdiction imposing such Tax, or (ii) constituting Other Connection Taxes; and
(b) U.S. federal withholding Taxes imposed pursuant to FATCA.

 

Extraordinary Expenses: all costs, expenses or advances that Lender may incur
during a Default or Event of Default, or during the pendency of an Insolvency
Proceeding of an Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or
advertising for sale, sale, collection, or other preservation of or realization
upon any Collateral; (b) any action, arbitration or other proceeding (whether
instituted by or against Lender, any Obligor, any representative of creditors of
an Obligor or any other Person) in any way relating to any Collateral (including
the validity, perfection, priority or avoidability of Lender's Liens with
respect to any Collateral), Loan Documents, Letters of Credit or Obligations,
including any lender liability or other Claims; (c) the exercise of any rights
or remedies of Lender in, or the monitoring of, any Insolvency Proceeding; (d)
settlement or satisfaction of taxes, charges or Liens with respect to any
Collateral; (e) any Enforcement Action; and (f) negotiation and documentation of
any modification, waiver, workout, restructuring or forbearance with respect to
any Loan Documents or Obligations. Such costs, expenses and advances include
transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility
reservation and standby fees, legal fees, appraisal fees, brokers' and
auctioneers' fees and commissions, accountants' fees, environmental study fees,
wages and salaries paid to employees of any Obligor or independent contractors
in liquidating any Collateral, and travel expenses.

 

Factor: The CIT Group/Commercial Services, Inc., Branch Banking and Trust
Company or any other factor reasonably acceptable to, and agreed to in writing
by, Lender, and "Factors" means all of such entities collectively.

 

Factor Intercreditor Agreement: an assignment of factoring credit balances and
intercreditor agreement (or document of similar name) among a Borrower, Lender
and a Factor, in form and substance acceptable to Lender, pursuant to which such
Borrower assigns to Lender the right to receive monies due under the applicable
Factoring Agreement and the Factor agrees not to (a) advance or loan funds to
such Borrower or guarantee obligations of such Borrower (except to the extent
the Factor agrees not to offset amounts payable to it with respect thereto
against amounts due under the Factoring Agreement), or (b) offset ledger debt
against amounts due under the applicable Factoring Agreement, and "Factor
Intercreditor Agreements" means all such agreements collectively.

 

 

 

 

 

 10 

 

 

Factored Account: shall mean an account of a Borrower which is factored by a
Factor under a Factoring Agreement.

 

Factored Accounts Formula Amount: on any date of determination thereof, an
amount equal to 85% (or such lesser percentage as Lender may in its Permitted
Discretion determine from time to time) of the net amount of Eligible Factoring
Credit Balances on such date.

 

Factoring Agreement: a factoring agreement by and between a Factor and a
Borrower, in form and substance reasonably acceptable to Lender, with respect to
the factoring of Accounts arising from sales by such Borrower to Account Debtors
located in the United States of America, and "Factoring Agreements" means all
such agreements collectively.

 

Factoring Credit Balances: the aggregate of the outstanding net amount payable
by the Factors to Borrowers at any time for Accounts factored under the
Factoring Agreements by Borrowers with the Factors so long as such Accounts
would satisfy all of the criteria for Eligible Accounts, as determined by
Lender, in its Permitted Discretion, except that such Account is a Factored
Account.

 

FATCA: Sections 1471 through 1474 of the Code (including any amended or
successor version if substantively comparable and not materially more onerous to
comply with), and any agreements entered into pursuant to Section 1471(b)(1) of
the Code.

 

Federal Funds Rate: (a) the weighted average of interest rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers on the applicable Business Day (or on the preceding
Business Day, if the applicable day is not a Business Day), as published by the
Federal Reserve Bank of New York on the next Business Day; or (b) if no such
rate is published on the next Business Day, the average rate (rounded up, if
necessary, to the nearest 1/8 of 1%) charged to Lender on the applicable day on
such transactions, as determined by Lender.

 

Fiscal Quarter: each period of three months, commencing on the first day of a
Fiscal Year.

 

Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and
tax purposes, ending on September 30 of each year.

 

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for
Borrowers and Subsidiaries for the most recent 12 months, of (a) EBITDA minus
Capital Expenditures (except those financed with Borrowed Money other than
Revolver Loans), to (b) Fixed Charges. For purposes of this Agreement, Fixed
Charge Coverage Ratio and its components for the 12 months prior to the Closing
Date is as shown on Exhibit A.

 

Fixed Charges: the sum of interest expense (other than payment-in-kind) and
principal payments made on Borrowed Money, income taxes paid in cash and
Distributions made (excluding (a) Upstream Payments and (b) Distributions made
on or about the Closing Date that relate to transactions contemplated by the
Marquis SPA Documents, as in effect on the Closing Date).

 

FLSA: the Fair Labor Standards Act of 1938.

 

Foreign Plan: any employee benefit plan or arrangement (a) maintained or
contributed to by any Obligor or Subsidiary that is not subject to the laws of
the United States; or (b) mandated by a government other than the United States
for employees of any Obligor or Subsidiary.

 

 

 

 

 

 11 

 

 

Foreign Subsidiary: a Subsidiary that is a "controlled foreign corporation"
under Section 957 of the Code, such that a guaranty by such Subsidiary of the
Obligations or a Lien on the assets of such Subsidiary to secure the Obligations
would result in material tax liability to Borrowers.

 

Full Payment: with respect to any Obligations, (a) the full and indefeasible
cash payment thereof, including any interest, fees and other charges accruing
during an Insolvency Proceeding (whether or not allowed in the proceeding); (b)
if such Obligations are LC Obligations or inchoate or contingent in nature, Cash
Collateralization thereof (or delivery of a standby letter of credit acceptable
to Lender in its discretion, in the amount of required Cash Collateral); and (c)
a release of any Claims of Obligors against Lender arising on or before the
payment date. The Revolver Loans shall not be deemed to have been paid in full
unless the Revolver Commitment has terminated.

 

GAAP: generally accepted accounting principles in effect in the United States
from time to time.

 

Governmental Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all
Governmental Authorities.

 

Governmental Authority: any federal, state, county, municipal, foreign or other
governmental agency, authority, body, commission, court, instrumentality,
political subdivision, central bank, or other entity or officer exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions for any governmental, judicial, investigative, regulatory or
self-regulatory authority (including any supra-national bodies such as the
European Union or European Central Bank).

 

Guarantor Payment: as defined in Section 5.9.3.

 

Guarantors: each Person that guarantees payment or performance of Obligations.

 

Guaranty: each guaranty agreement executed by a Guarantor in favor of Lender.

 

Hedging Agreement: any "swap agreement" as defined in Section 101(53B)(A) of the
Bankruptcy Code.

 

Indemnified Taxes: (a) Taxes, other than Excluded Taxes, imposed on or relating
to any payment of an Obligation; and (b) to the extent not otherwise described
in clause (a), Other Taxes.

 

Indemnitees: Lender, other Secured Parties, and their officers, directors,
employees, Affiliates, agents and attorneys.

 

Insolvency Proceeding: any case or proceeding commenced by or against a Person
under any state, federal or foreign law for, or any agreement of such Person to,
(a) the entry of an order for relief under the Bankruptcy Code, or any other
applicable insolvency, debtor relief or debt adjustment law; (b) the appointment
of a receiver, trustee, liquidator, administrator, conservator or other
custodian for such Person or any part of its Property; or (c) an assignment or
trust mortgage for the benefit of creditors.

 

Intellectual Property: all intellectual and similar Property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases; all embodiments or fixations thereof
and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records
relating to the foregoing.

 

Intellectual Property Claim: any claim or assertion (whether in writing, by suit
or otherwise) that a Borrower's or Subsidiary's ownership, use, marketing, sale
or distribution of any Inventory, Equipment, Intellectual Property or other
Property violates another Person's Intellectual Property.

 

 

 

 

 

 12 

 

 

Interest Period: as defined in Section 3.1.3.

 

Inventory: as defined in the UCC, including all goods intended for sale, lease,
display or demonstration; all work in process; and all raw materials, and other
materials and supplies of any kind that are or could be used in connection with
the manufacture, printing, packing, shipping, advertising, sale, lease or
furnishing of such goods, or otherwise used or consumed in a Borrower's business
(but excluding Equipment).

 

Inventory Formula Amount: the lesser of (i) $7,500,000; (ii) 65% of the Value of
Eligible Inventory; or (iii) 85% of the NOLV Percentage of the Value of Eligible
Inventory. As used in this definition of Inventory Formula Amount, advance rates
shall be determined by an appraisal firm satisfactory to Lender, in its
Permitted Discretion, with the advance rate for purposes of clause (ii) of this
definition of Inventory Formula Amount for each individual category of raw
materials, work-in-process and finished goods not to exceed 70% and with the
overall advance rate for all three of such categories (i.e., raw materials,
work-in-process and finished goods) not to exceed 65%. For the avoidance of
doubt, on the Closing Date, the individual advance rate for purposes of clause
(ii) of this definition of Inventory Formula Amount shall be 55.3% for raw
materials, 0% for work-in-process and 70.0% for finished goods.

 

Inventory Reserve: reserves established by Lender in its Permitted Discretion to
reflect factors that may negatively impact the Value of Inventory, including
change in salability, obsolescence, seasonality, theft, shrinkage, imbalance,
change in composition or mix, markdowns and vendor chargebacks.

 

Investment: an Acquisition, an acquisition of record or beneficial ownership of
any Equity Interests of a Person, or an advance or capital contribution to or
other investment in a Person; provided, that, Capital Expenditures shall not in
and of themselves constitute "Investments".

 

IRS: the United States Internal Revenue Service.

 

LC Application: an application by Borrower Agent to Lender for issuance of a
Letter of Credit, in form and substance satisfactory to Lender.

 

LC Conditions: the following conditions necessary for issuance of a Letter of
Credit: (a) each of the conditions set forth in Section 6; (b) after giving
effect to such issuance, total LC Obligations do not exceed the Letter of Credit
Subline, no Overadvance exists and Revolver Usage does not exceed the Borrowing
Base; (c) the Letter of Credit and payments thereunder are denominated in
Dollars or other currency satisfactory to Lender; and (d) the purpose and form
of the proposed Letter of Credit are satisfactory to Lender in its discretion.

 

LC Documents: all documents, instruments and agreements (including LC Requests
and LC Applications) delivered by Borrowers or any other Person to Lender in
connection with issuance, amendment, renewal of, or payment under, any Letter of
Credit.

 

LC Obligations: the sum of (a) all amounts owing by Borrowers for drawings under
Letters of Credit; and (b) the Stated Amount of all outstanding Letters of
Credit.

 

LC Request: a request for issuance of a Letter of Credit, to be provided by
Borrower Agent, in form satisfactory to Lender.

 

Lender Professionals: attorneys, accountants, appraisers, auditors, business
valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Lender.

 

Letter of Credit: any standby or documentary letter of credit, foreign guaranty,
documentary bankers acceptance or similar instrument issued by Lender for the
account or benefit of an Obligor or a Subsidiary of an Obligor.

 

 

 

 

 

 13 

 

 

Letter of Credit Subline: $1,500,000.

 

LIBOR: for any Interest Period, the per annum rate of interest (rounded up, if
necessary, to the nearest 1/8th of 1%) determined by Lender at approximately
11:00 a.m. (London time) two Business Days prior to commencement of such
Interest Period, for a term comparable to such Interest Period, equal to (a) the
British Bankers Association LIBOR Rate or successor thereto if such association
is no longer making such rate available, as published by Reuters (or other
commercially available source designated by Lender); or (b) if the rate
described in clause (a) is unavailable for any reason, the interest rate at
which Dollar deposits in the approximate amount of the Loan would be offered by
Lender's London branch to major banks in the London interbank Eurodollar market.

 

LIBOR Loan: each set of LIBOR Revolver Loans or LIBOR Term Loans having a common
length and commencement of Interest Period.

 

LIBOR Revolver Loan: a Revolver Loan that bears interest based on LIBOR.

 

LIBOR Term Loan: a Term Loan that bears interest based on LIBOR.

 

License: any license or agreement under which an Obligor is authorized to use
Intellectual Property (other than off-the-shelf software) in connection with any
manufacture, marketing, distribution or disposition of Collateral, any use of
Property or any other conduct of its business.

 

Licensor: any Person from whom an Obligor obtains the right to use any
Intellectual Property.

 

Lien: a Person's interest in Property securing an obligation owed to, or a claim
by, such Person, including any lien, security interest, pledge, hypothecation,
assignment, trust, reservation, encroachment, easement, right-of-way, covenant,
condition, restriction, lease, or other title exception or encumbrance.

 

Lien Waiver: an agreement, in form and substance reasonably satisfactory to
Lender, by which

(a) for any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral, and agrees to permit Lender
to enter upon the premises and remove the Collateral or to use the premises to
store or dispose of the Collateral; (b) for any Collateral held by a
warehouseman, processor, shipper, customs broker or freight forwarder, such
Person waives or subordinates any Lien it may have on the Collateral, agrees to
hold any Documents in its possession relating to the Collateral as agent for
Lender, and agrees to deliver the Collateral to Lender upon request; (c) for any
Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Lender's Lien, waives or subordinates any Lien it may have on the Collateral,
and agrees to deliver the Collateral to Lender upon request; and (d) for any
Collateral subject to a Licensor's Intellectual Property rights, the Licensor
grants to Lender the right, vis-à-vis such Licensor, to enforce Lender's Liens
with respect to the Collateral, including the right to dispose of it with the
benefit of the Intellectual Property, whether or not a default exists under any
applicable License.

 

Live: LiveDeal, Inc., a Nevada corporation.

 

Live Restructuring Transaction: a transaction anticipated to be consummated
after the Closing Date pursuant to which Live becomes a wholly-owned subsidiary
of Live Ventures, Live ceases to be publicly traded and Live Ventures becomes
publicly traded.

 

Loan: a Revolver Loan or Term Loan.

 

Loan Documents: this Agreement, Other Agreements and Security Documents.

 

 

 

 

 

 14 

 

 

Loan Year: each 12 month period commencing on the Closing Date and on each
anniversary of the Closing Date.

 

Margin Stock: as defined in Regulation U of the Board of Governors.

 

Marquis Acquisition: shall have the meaning ascribed to it in the recitals
hereto.

 

Marquis SPA: shall have the meaning ascribed to it in the recitals hereto.

 

Marquis SPA Documents: shall have the meaning ascribed to it in the recitals
hereto.

 

Material Adverse Effect: the effect of any event or circumstance that, taken
alone or in conjunction with other events or circumstances, (a) has or could be
reasonably expected to have a material adverse effect on the business,
operations, Properties or condition (financial or otherwise) of Obligors, taken
as a whole, on the value of any material Collateral, on the enforceability of
any Loan Documents, or on the validity or priority of Lender's Liens on any
Collateral; (b) impairs the ability of an Obligor to perform its obligations
under the Loan Documents, including repayment of any Obligations; or (c)
otherwise impairs the ability of Lender to enforce or collect any Obligations or
to realize upon any material Collateral.

 

Material Contract: any agreement or arrangement to which a Borrower or
Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a
material contract under any securities law applicable to such Person, including
the Securities Act of 1933; (b) for which breach, termination, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or (c) that relates to Subordinated Debt, or to Debt in an aggregate amount of
$1,000,000 or more.

 

Mezzanine Debt: shall have the meaning ascribed to it in the recitals hereto.

 

Mezzanine Debt Documents: shall have the meaning ascribed to it in the recitals
hereto.

 

Mezzanine Lender: shall have the meaning ascribed to it in the recitals hereto.

 

Mezzanine Loan Agreement: shall have the meaning ascribed to it in the recitals
hereto.

 

Moody's: Moody's Investors Service, Inc., and its successors.

 

Mortgage: a mortgage or deed of trust in which an Obligor grants a Lien on its
Real Estate to Lender, as security for its Obligations.

 

Multiemployer Plan: any employee benefit plan of the type described in Section
4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is
obligated to make contributions, or during the preceding five plan years, has
made or been obligated to make contributions.

 

Net Proceeds: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by a Borrower or
Subsidiary in cash from such disposition, net of bona fide direct costs incurred
in connection therewith, including (a) reasonable and customary costs and
expenses actually incurred in connection therewith, including legal fees and
sales commissions and fees of accountants, investment bankers and consultants;
(b) amounts applied to repayment of Debt secured by a Permitted Lien senior to
Lender's Liens on Collateral sold; (c) transfer or similar taxes; and (d)
reserves for indemnities, until such reserves are no longer needed.

 

NOLV Percentage: the net orderly liquidation value of Inventory, expressed as a
percentage, expected to be realized at an orderly, negotiated sale held within a
reasonable period of time, net of all liquidation expenses, as determined from
the most recent appraisal of Borrowers' Inventory performed by an appraiser and
on terms satisfactory to Lender.

 

 

 

 

 

 15 

 

 

Notice of Borrowing: a Notice of Borrowing to be provided by Borrower Agent to
request a Borrowing of Revolver Loans, in form reasonably satisfactory to
Lender.

 

Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be
provided by Borrower Agent to request a conversion or continuation of any Loans
as LIBOR Loans, in form reasonably satisfactory to Lender.

 

Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC
Obligations and other obligations of Obligors with respect to Letters of Credit,
(c) interest, expenses, fees, indemnification obligations, Extraordinary
Expenses and other amounts payable by Obligors under Loan Documents, (d) Bank
Product Debt, and (e) other Debts, obligations and liabilities of any kind owing
by any Obligor to Lender, whether now existing or hereafter arising, whether
evidenced by a note or other writing, whether allowed in any Insolvency
Proceeding, whether arising from an extension of credit, issuance of a letter of
credit, acceptance, loan, guaranty, indemnification or otherwise, and whether
direct or indirect, absolute or contingent, due or to become due, primary or
secondary, or joint or several; provided, that Obligations of an Obligor shall
not include its Excluded Swap Obligations.

 

Obligor: each Borrower, Guarantor, or other Person that is liable for payment of
any Obligations or that has granted a Lien in favor of Lender on its assets to
secure any Obligations.

 

OFAC: Office of Foreign Assets Control of the U.S. Treasury Department.

 

Ordinary Course of Business: the ordinary course of business of any Borrower or
Subsidiary, undertaken in good faith and consistent with Applicable Law and past
practices.

 

Organic Documents: with respect to any Person, its charter, certificate or
articles of incorporation, bylaws, articles of organization, limited liability
agreement, operating agreement, members agreement, shareholders agreement,
partnership agreement, certificate of partnership, certificate of formation,
voting trust agreement, or similar agreement or instrument governing the
formation or operation of such Person.

 

OSHA: the Occupational Safety and Hazard Act of 1970.

 

Other Agreement: the Debt and Lien Subordination Agreement and each LC Document,
Lien Waiver, Release Agreement, Real Estate Related Document, Borrowing Base
Certificate, Credit Insurance Loss Payable Endorsement, Compliance Certificate,
financial statement or report delivered hereunder, each Factor Intercreditor
Agreement, or any other document, instrument or agreement (other than this
Agreement or a Security Document) now or hereafter delivered by an Obligor or
other Person to Lender in connection with any transactions relating hereto.

 

Other Connection Taxes: Taxes imposed on a Recipient due to a present or former
connection between it and the taxing jurisdiction (other than connections
arising from the Recipient having executed, delivered, become party to,
performed obligations or received payments under, received or perfected a Lien
or engaged in any other transaction pursuant to, enforced, or sold or assigned
an interest in, any Loan or Loan Document).

 

Other Taxes: all present or future stamp, court, documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from
the execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a Lien under, or otherwise with respect to, any Loan
Document, except Other Connection Taxes imposed with respect to an assignment.

 

Overadvance: as defined in Section 2.1.4.

 

 

 

 

 

 16 

 

 

Patriot Act: the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No.
107-56, 115 Stat. 272 (2001).

 

Payment Item: each check, draft or other item of payment payable to a Borrower,
including those constituting proceeds of any Collateral.

 

PBGC: the Pension Benefit Guaranty Corporation.

 

Pension Plan: any employee pension benefit plan (as defined in Section 3(2) of
ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA
and is sponsored or maintained by any Obligor or ERISA Affiliate or to which the
Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in
the case of a multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the preceding five plan years.

 

Permitted Acquisition: any Acquisition as long as (a) no Default or Event of
Default exists or is caused thereby; (b) the Acquisition is consensual; (c) the
assets, business or Person being acquired is useful or engaged in the business
of Borrowers and Subsidiaries, is located or organized within the United States,
and had positive unadjusted EBITDA for the 12 month period most recently ended;
(d) no Debt or Liens are incurred, assumed or result from the Acquisition,
except Debt permitted under Section 10.2.1(g) or (i); (e) Lender has received
the financial statements required under Section 10.1.2(a)(ii); (f) the total
consideration (including deferred payment obligations and Debt assumed or
incurred), when aggregated with the total consideration for all other
Acquisitions made during the preceding 12 months, is less than $5,000,000; (g)
Availability on each day during the 90 day period immediately preceding such
Acquisition calculated on a pro forma basis assuming such Acquisition occurred
on the first day of such period (including any Loans made hereunder to finance
such Acquisition) shall be greater than or equal to $4,000,000; (h)
Availability, on the date of such Acquisition, immediately after giving pro
forma effect to the consummation of such Acquisition (including any Loans made
hereunder to finance such Acquisition) shall be greater than or equal to
$4,000,000; (i) Lender has received evidence that after giving effect to the
consummation of such Acquisition, Borrowers shall maintain a Fixed Charge
Coverage Ratio of at least 1.25 to 1.0 on a pro forma basis, measured as of the
most recently ended month for which Obligors have delivered the financial
statements required under Section 10.1.2(a) or (b), as the case may be, for the
twelve month period then ended; (j) at the time of any such proposed
Acquisition, the outstanding balance of the Term Loan is less than or equal to
$4,500,000; and (k) Borrowers deliver to Lender, at least 10 Business Days prior
to the Acquisition, copies of all material agreements relating thereto and a
certificate, in form and substance satisfactory to Lender, stating that the
Acquisition is a "Permitted Acquisition" and demonstrating compliance with the
foregoing requirements.

 

Permitted Asset Disposition: as long as no Default or Event of Default exists
and all Net Proceeds are remitted to Lender, an Asset Disposition that is (a) a
sale of Inventory in the Ordinary Course of Business; (b) a disposition of
Equipment that, in the aggregate during any 12 month period, has a fair market
or book value (whichever is more) of $500,000 or less; (c) a disposition of
Inventory that is obsolete, unmerchantable or otherwise unsalable or replaced in
the Ordinary Course of Business; (d) termination of a lease of real or personal
Property that is not necessary for the Ordinary Course of Business, where such
termination could not reasonably be expected to have a Material Adverse Effect
and does not result from an Obligor's default; (e) sales of Factored Accounts to
a Factor pursuant to a Factoring Agreement; (f) a discount or other compromise
for less than face value of notes or Accounts in the Ordinary Course of
Business; (g) a sale or disposition to a Borrower to the extent permitted
herein; (h) transfers of Property subject to condemnation or casualty events;
(i) as long as no Default or Event of Default is continuing or would result
therefrom, any other disposition of Property other than Accounts or Inventory
for fair market value so long as (i) at least 75% of the consideration received
for such sale shall be cash and (ii) the Value of the Property so disposed shall
not exceed $1,000,000 per Fiscal Year; or (j) approved in writing by Lender.

 

 

 

 

 

 17 

 

 

Permitted Contingent Obligations: Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the Ordinary Course
of Business; (b) arising from Hedging Agreements permitted hereunder; (c)
existing on the Closing Date, and any extension or renewal thereof that does not
increase the amount of such Contingent Obligation when extended or renewed; (d)
incurred in the Ordinary Course of Business with respect to workers'
compensation claims, self-insurance obligations, surety, appeal or performance
bonds, or other similar obligations; (e) arising from customary indemnification
obligations in favor of purchasers in connection with dispositions of Equipment
permitted hereunder; (f) arising under the Loan Documents; or (g) in an
aggregate amount of $500,000 or less at any time.

 

Permitted Discretion: a determination made in the exercise, in good faith, of
reasonable business judgment (from the perspective of a secured, asset-based
lender).

 

Permitted Lien: as defined in Section 10.2.2.

 

Permitted Non-Tax Distributions: Distributions by Holdings to holders of its
Equity Interests so long as the following conditions are satisfied: (a) no
Default or Event of Default has occurred or would result from such Distribution,
(b) Lender has received the financial statements required under Section
10.1.2(a)(ii), (c) Lender has received evidence that after giving effect to the
consummation of such Distribution, Borrowers shall maintain a Fixed Charge
Coverage Ratio of at least 1.25 to 1.0 on a pro forma basis, measured as of the
most recently ended month for which Obligors have delivered the financial
statements required under Section 10.1.2(a) or (b), as the case may be, for the
twelve month period then ended, (d) Availability on each day during the 90 day
period immediately preceding such Distribution calculated on a pro forma basis
assuming such Distribution occurred on the first day of such period (including
any Loans made hereunder to finance such Distribution) shall be greater than or
equal to $4,000,000, (e) Availability, on the date of such Distribution,
immediately after giving pro forma effect to the consummation of such
Distribution (including any Loans made hereunder to finance such Distribution)
shall be greater than or equal to $4,000,000 and (f) at the time of any such
proposed Distribution, the outstanding balance of the Term Loan is less than or
equal to $4,500,000.

 

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries
that is unsecured or secured only by a Purchase Money Lien, as long as the
aggregate amount does not exceed

$5,000,000 at any time.

 

Permitted Tax Distributions: for so long as Holdings is taxed as a partnership
for federal income tax purposes in accordance with the Code, a cash Distribution
by Holdings to holders of its Equity Interests no more frequently than once each
Fiscal Quarter (each a "Tax Distribution") based upon the consolidated taxable
income of Borrowers under Section 703 of the Code in an amount that is not in
excess of the amount necessary to pay federal, state and local income taxes
(including quarterly estimated tax payments) solely attributable to the holders’
distributive shares of the consolidated taxable income of Borrowers determined
assuming each holder is subject to taxation at a rate that is equal to the
highest federal, state and local income tax rate payable by any holder of Equity
Interests in Borrowers for the applicable tax year. If any Tax Distribution is
made as set forth in Section 10.2.4, Borrowers shall deliver to Lender, as soon
as practicable following the last day of the taxable year of Borrowers for which
any such Tax Distribution is made, a true and correct copy of each Schedule K-1
delivered by Borrowers to the holders of its Equity Interests for such taxable
year.

 

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

 

Plan: any employee benefit plan (as such term is defined in Section 3(3) of
ERISA) established by an Obligor or, with respect to any such plan that is
subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

 

 

 

 

 

 18 

 

 

Platform: as defined in Section 12.3.3.

 

Prime Rate: the rate of interest announced by Lender from time to time as its
prime rate. Such rate is set by Lender on the basis of various factors,
including its costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above or below such rate. Any change in such rate publicly announced
by Lender shall take effect at the opening of business on the day specified in
the announcement.

 

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

 

Property: any interest in any kind of property or asset, whether real, personal
or mixed, or tangible or intangible.

 

Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of
the purchase price of fixed assets (including equipment and vehicles); (b) Debt
(other than the Obligations) incurred within 10 days before or after acquisition
of any fixed assets (including equipment and vehicles), for the purpose of
financing any of the purchase price thereof; and (c) any renewals, extensions or
refinancings (but not increases) thereof.

 

Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only
the fixed assets acquired with such Debt and constituting a Capital Lease or a
purchase money security interest under the UCC.

 

Qualified ECP: an Obligor with total assets exceeding $10,000,000, or that
constitutes an "eligible contract participant" under the Commodity Exchange Act
and can cause another Person to qualify as an "eligible contract participant"
under Section 1a(18)(A)(v)(II) of such act.

 

RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

 

Real Estate: all right, title and interest (whether as owner, lessor or lessee)
in any real Property or any buildings, structures, parking areas or other
improvements thereon.

 

Recipient: Lender or any other recipient of a payment to be made by an Obligor
under a Loan Document or on account of an Obligation.

 

Refinancing Conditions: the following conditions for Refinancing Debt: (a) it is
in an aggregate principal amount that does not exceed the principal amount of
the Debt being extended, renewed or refinanced; (b) it has a final maturity no
sooner than, and a weighted average life no less than the Debt being extended,
renewed or refinanced and an interest rate at a rate that does not exceed a rate
that is 4.00% higher than the interest rate of the Debt being extended, renewed
or refinanced; (c) if such Refinancing Debt is in relation to Subordinated Debt,
(i) such Refinancing Debt satisfies all of the requirements under this Agreement
to constitute Subordinated Debt, (ii) the subordination agreement with respect
thereto is not materially less favorable to Lender than the subordination
agreement with respect to the Subordinated Debt being extended, renewed or
refinanced, and (iii) it is subordinated to the Obligations at least to the same
extent as the Debt being extended, renewed or refinanced; (d) the
representations, covenants and defaults applicable to it taken as a whole are
not materially less favorable to Borrowers than those applicable to the Debt
being extended, renewed or refinanced; (e) no additional Lien is granted to
secure it; (f) no additional Person is obligated on such Debt; and (g) upon
giving effect to it, no Default or Event of Default exists.

 

 

 

 

 

 19 

 

 

Refinancing Debt: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under Section 10.2.1(b), (c) or (e).

 

Reimbursement Date: as defined in Section 2.3.2.

 

Related Real Estate Documents: with respect to any Real Estate subject to a
Mortgage, the following, in form and substance reasonably satisfactory to Lender
and received by Lender for review at least 5 days prior to the effective date of
the Mortgage: (a) a mortgagee title policy (or binder therefor) covering
Lender's interest under the Mortgage and all endorsements thereto and
affirmative coverages thereunder required by Lender, by an insurer reasonably
acceptable to Lender, which must be fully paid on such effective date; (b) such
assignments of leases, estoppel letters, attornment agreements, consents,
waivers and releases as Lender may require with respect to other Persons having
an interest in the Real Estate; (c) a current, as-built survey of the Real
Estate, containing a metes-and-bounds property description and certified by a
licensed surveyor acceptable to Lender or, if acceptable to title insurer to
remove the general survey exception from and to provide the endorsements to and
affirmative coverages under the mortgagee title policy described in clause (a)
above, a non-current, as-built survey of the Real Estate and a "no change
affidavit" from the applicable Borrower; (d) a life-of-loan flood hazard
determination and, if the Real Estate is located in a special flood hazard area,
an acknowledged notice to borrower and flood insurance by an insurer reasonably
acceptable to Lender; (e) a current appraisal of the Real Estate, prepared by an
appraiser, and in form and substance reasonably satisfactory to Lender; (f) an
environmental assessment, prepared by environmental engineers acceptable to
Lender, and such other reports, certificates, studies or data as Lender may
reasonably require; and (g) an Environmental Agreement and such other documents,
instruments or agreements as Lender may reasonably require with respect to any
environmental risks regarding the Real Estate.

 

Release Agreement: the Release Agreement dated on or about the Closing Date from
FHL Capital Corporation in favor of Lender.

 

Rent and Charges Reserve: the aggregate of (a) all past due rent and other
amounts owing by an Obligor to any landlord, warehouseman, processor, repairman,
mechanic, shipper, freight forwarder, broker or other Person who possesses any
Collateral or could assert a Lien on any Collateral (and in the case of a
processor in possession of Inventory that constitutes Eligible Inventory, all
amounts owing to such processor, whether or not such amounts are past due); and
(b) a reserve equal to three months' rent and other charges that could be
payable to any such Person, unless it has executed a Lien Waiver.

 

Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other
than events for which the 30 day notice period has been waived.

 

Restricted Investment: any Investment by a Borrower or Subsidiary, other than
(a) Investments in Subsidiaries to the extent existing on the Closing Date; (b)
Cash Equivalents that are subject to Lender's Lien and control, pursuant to
documentation in form and substance reasonably satisfactory to Lender; (c) loans
and advances permitted under Section 10.2.7; (d) Permitted Acquisitions; and (e)
any Investment (other than a loan or advance, which is addressed in clause (c)
of this definition) so long as (i) no Default or Event of Default has occurred
or would result from such Investment, (b) Lender has received the financial
statements required under Section 10.1.2(a)(ii), (c) Lender has received
evidence that after giving effect to the consummation of such Investment,
Borrowers shall maintain a Fixed Charge Coverage Ratio of at least 1.25 to 1.0
on a pro forma basis, measured as of the most recently ended month for which
Obligors have delivered the financial statements required under Section
10.1.2(a) or (b), as the case may be, for the twelve month period then ended,
(d) Availability on each day during the 90 day period immediately preceding such
Investment calculated on a pro forma basis assuming such Investment occurred on
the first day of such period (including any Loans made hereunder to finance such
Investment) shall be greater than or equal to $4,000,000, (e) Availability, on
the date of such Investment, immediately after giving pro forma effect to the
consummation of such Investment (including any Loans made hereunder to finance
such Investment) shall be greater than or equal to $4,000,000 and (f) at the
time of any such proposed Investment, the outstanding balance of the Term Loan
is less than or equal to $4,500,000.

 

 

 

 

 

 20 

 

 

Restrictive Agreement: an agreement (other than a Loan Document, a Mezzanine
Debt Document or a document relating to Subordinated Debt) that conditions or
restricts the right of any Borrower, Subsidiary or other Obligor to incur or
repay Borrowed Money, to grant Liens on any assets, to declare or make
Distributions, to modify, extend or renew any agreement evidencing Borrowed
Money, or to repay any intercompany Debt.

 

Revolver Commitment: Lender's obligation to make Revolver Loans and to issue
Letters of Credit in an amount up to $15,000,000 in the aggregate.

 

Revolver Loan: a loan made pursuant to Section 2.1.

 

Revolver Termination Date: July 6, 2020.

 

Revolver Usage: the aggregate amount of outstanding Revolver Loans, plus the
aggregate Stated Amount of outstanding Letters of Credit.

 

Royalties: all royalties, fees, expense reimbursement and other amounts payable
by a Borrower under a License.

 

S&P: Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill
Companies, Inc., and any successor thereto.

 

Sanction: any international economic sanction administered or enforced by the
United States Government (including OFAC), the United Nations Security Council,
the European Union, Her Majesty’s Treasury or other relevant sanctions
authority.

 

Secured Parties: Lender and providers of Bank Products.

 

Security Documents: the Equity Interest Pledge Agreement, Guaranties, Mortgages,
Trademark Security Agreement, Copyright Security Agreement, Deposit Account
Control Agreements, and all other documents, instruments and agreements now or
hereafter securing (or given with the intent to secure) any Obligations.

 

Senior Officer: the chairman of the board, president, chief executive officer or
chief financial officer of a Borrower or, if the context requires, an Obligor.

 

Solvent: as to any Person, such Person (a) owns Property whose fair salable
value (as defined below) is greater than the amount required to pay all of its
debts (including contingent, subordinated, unmatured and unliquidated
liabilities); (b) owns Property whose present fair salable value is greater than
the probable total liabilities (including contingent, subordinated, unmatured
and unliquidated liabilities) of such Person as they become absolute and
matured; (c) is able to pay all of its debts as they mature; (d) has capital
that is not unreasonably small for its business and is sufficient to carry on
its business and transactions and all business and transactions in which it is
about to engage; (e) is not "insolvent" within the meaning of Section 101(32) of
the Bankruptcy Code; and (f) has not incurred (by way of assumption or
otherwise) any obligations or liabilities (contingent or otherwise) under any
Loan Documents, or made any conveyance in connection therewith, with actual
intent to hinder, delay or defraud either present or future creditors of such
Person or any of its Affiliates. "Fair salable value" means the amount that
could be obtained for assets within a reasonable time, either through collection
or through sale under ordinary selling conditions by a capable and diligent
seller to an interested buyer who is willing (but under no compulsion) to
purchase.

 

 

 

 

 

 21 

 

 

Specified Obligor: an Obligor that is not then an "eligible contract
participant" under the Commodity Exchange Act (determined prior to giving effect
to Section 5.9.3).

 

Stated Amount: the stated amount of a Letter of Credit, including any automatic
increase provided by the terms of the Letter of Credit or related LC Documents,
whether or not then effective.

 

Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations, and is on terms
(including maturity, interest, fees, repayment, covenants and subordination)
reasonably satisfactory to Lender, including the Mezzanine Debt.

 

Subsidiary: any entity at least 50% of whose voting securities or Equity
Interests is owned by a Borrower or combination of Borrowers (including indirect
ownership through other entities in which a Borrower directly or indirectly owns
50% of the voting securities or Equity Interests).

 

Swap Obligations: with respect to an Obligor, its obligations under a Hedging
Agreement that constitutes a "swap" within the meaning of Section 1a(47) of the
Commodity Exchange Act.

 

Taxes: all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

 

Term Loan: a loan made pursuant to Section 2.2.

 

Term Loan Commitment: Lender's obligation to make a Term Loan in an amount up to
$7,787,662.

 

Term Loan Maturity Date: July 6, 2020.

 

Trademark Security Agreement: that certain Trademark Security Agreement dated as
of the Closing Date by and among Marquis and Lender.

 

Transactions: collectively, the transactions contemplated in connection with the
consummation of the initial Loans made under this Agreement on the Closing Date,
the consummation of the transactions contemplated by the Mezzanine Debt
Documents and the Equity Contribution and the consummation of the Marquis
Acquisition.

 

UCC: the Uniform Commercial Code as in effect in the State of Georgia or, when
the laws of any other jurisdiction govern the perfection or enforcement of any
Lien, the Uniform Commercial Code of such jurisdiction.

 

Unfunded Pension Liability: the excess of a Pension Plan's benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of
2006 for the applicable plan year.

 

Unused Line Fee Rate: a per annum rate equal to 0.25 %.

 

Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.

 

 

 

 

 

 22 

 

 

Value: (a) for Inventory, its value determined on the basis of the lower of cost
or market, calculated on a first-in, first-out basis, and excluding any portion
of cost attributable to intercompany profit among Borrowers and their
Affiliates; and (b) for an Account, its face amount, net of any returns,
rebates, discounts (calculated on the shortest terms), credits, allowances or
Taxes (including sales, excise or other taxes) that have been or could be
claimed by the Account Debtor or any other Person.

 

1.2.           Accounting Terms. Under the Loan Documents (except as otherwise
specified therein), all accounting terms shall be interpreted, all accounting
determinations shall be made, and all financial statements shall be prepared, in
accordance with GAAP applied on a basis consistent with the most recent audited
financial statements of Borrowers delivered to Lender before the Closing Date
and using the same inventory valuation method as used in such financial
statements, except for any change required or permitted by GAAP if Borrowers'
certified public accountants concur in such change, the change is disclosed to
Lender, and all relevant provisions of the Loan Documents are amended in a
manner satisfactory to Lender to take into account the effects of the change.

 

1.3.           Uniform Commercial Code. As used herein, the following terms are
defined in accordance with the UCC in effect in the State of Georgia from time
to time: "Chattel Paper," "Commercial Tort Claim," "Deposit Account,"
"Document," "Equipment," "General Intangibles," "Goods," "Instrument,"
"Investment Property," "Letter-of-Credit Right" and "Supporting Obligation."

 

1.4.           Certain Matters of Construction. The terms "herein," "hereof,"
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified date to a later specified date, "from" means "from and including,"
and "to" and "until" each mean "to but excluding." The terms "including" and
"include" shall mean "including, without limitation" and, for purposes of each
Loan Document, the parties agree that the rule of ejusdem generis shall not be
applicable to limit any provision. Section titles appear as a matter of
convenience only and shall not affect the interpretation of any Loan Document.
All references to (a) laws include all related regulations, interpretations,
supplements, amendments and successor provisions; (b) any document, instrument
or agreement include any amendments, waivers and other modifications, extensions
or renewals (to the extent permitted by the Loan Documents); (c) any section
mean, unless the context otherwise requires, a section of this Agreement; (d)
any exhibits or schedules mean, unless the context otherwise requires, exhibits
and schedules attached hereto, which are hereby incorporated by reference; (e)
any Person include successors and assigns; (f) time of day mean time of day at
Lender's notice address under Section 12.3.1; or (g) except where otherwise
qualified herein, discretion of Lender mean its sole and absolute discretion.
All references to Value, Borrowing Base components, Loans, Letters of Credit,
Obligations and other amounts herein shall be denominated in Dollars, unless
expressly provided otherwise, and all determinations (including calculations of
Borrowing Base and financial covenants) made from time to time under the Loan
Documents shall be made in light of the circumstances existing at such time.
Borrowing Base calculations shall be consistent with historical methods of
valuation and calculation, and otherwise satisfactory to Lender (and not
necessarily calculated in accordance with GAAP). Borrowers shall have the burden
of establishing any alleged negligence, misconduct or lack of good faith by
Lender under any Loan Documents. No provision of any Loan Documents shall be
construed against any party by reason of such party having, or being deemed to
have, drafted the provision. Reference to a Borrower's "knowledge" or similar
concept means actual knowledge of a Senior Officer, or knowledge that a Senior
Officer would have obtained if he or she had engaged in good faith and diligent
performance of his or her duties, including reasonably specific inquiries of
employees or agents and a good faith attempt to ascertain the matter.

 

SECTION 2. CREDIT FACILITIES

 

2.1.           Revolver Commitment.

 

 

 

 

 

 23 

 

 

2.1.1.       Revolver Loans. Lender agrees, on the terms set forth herein, to
make Revolver Loans to Borrowers in an aggregate amount up to the Revolver
Commitment, from time to time through the Commitment Termination Date. The
Revolver Loans may be repaid and reborrowed as provided herein. In no event
shall Lender have any obligation to honor a request for a Revolver Loan if
Revolver Usage at such time plus the requested Revolver Loan would exceed the
Borrowing Base.

 

2.1.2.       Use of Proceeds. The proceeds of Revolver Loans shall be used by
Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction
expenses associated with the closing of the Transactions; (c) to pay a portion
of the purchase price for the Marquis Acquisition; (d) to pay Obligations in
accordance with this Agreement; and (e) for other lawful corporate purposes of
Borrowers, including working capital.

 

2.1.3. Voluntary Reduction or Termination of Revolver Commitment.

 

(a)              The Revolver Commitment shall terminate on the Revolver
Termination Date, unless sooner terminated in accordance with this Agreement.
Upon at least 15 days prior written notice to Lender at any time, Borrowers may,
at their option, terminate the Revolver Commitment and this credit facility. Any
notice of termination given by Borrowers shall be irrevocable but, subject to
Lender's discretion, may be conditioned upon the closing of a refinancing
transaction. On the Revolver Termination Date, Borrowers shall make Full Payment
of all Obligations.

 

(b)             Borrowers may permanently reduce the Revolver Commitment upon at
least 15 days prior written notice to Lender, which notice shall specify the
amount of the reduction and shall be irrevocable once given; provided, however,
that the Revolver Commitment may not be reduced below $10,000,000 except in
connection with a termination of the Revolver Commitment under Section 2.1.3(a).
Each reduction shall be in a minimum amount of $1,000,000, or an increment of
$1,000,000 in excess thereof.

 

2.1.4.       Overadvances. If Revolver Usage exceeds the Borrowing Base
("Overadvance") at any time, the excess amount shall be payable by Borrowers on
demand by Lender, but all such Revolver Loans shall nevertheless constitute
Obligations secured by the Collateral and entitled to all benefits of the Loan
Documents. Any funding or sufferance of an Overadvance by Lender shall not
constitute a waiver of the Event of Default caused thereby.

 

2.2.           Term Loan Commitment. Lender agrees, on the terms set forth
herein, to make a Term Loan to Borrowers in an amount up to the Term Loan
Commitment. The Term Loan shall be funded by Lender on the Closing Date and the
Term Loan Commitment shall expire upon funding.

 

2.3. Letter of Credit Facility.

 

2.3.1.       Issuance of Letters of Credit. Lender agrees to issue Letters of
Credit from time to time until 30 days prior to the Revolver Termination Date
(or until the Commitment Termination Date, if earlier), on the terms set forth
herein, including the following:

 

(a)              Each Borrower acknowledges that Lender's willingness to issue
any Letter of Credit is conditioned upon its receipt of a LC Application with
respect to the requested Letter of Credit, as well as such other instruments and
agreements as Lender may customarily require for issuance of a letter of credit
of similar type and amount. Lender shall have no obligation to issue any Letter
of Credit unless (i) it receives a LC Request and LC Application at least three
Business Days prior to the requested date of issuance; and (ii) each LC
Condition is satisfied.

 

(b)             Letters of Credit may be requested by a Borrower to support
obligations incurred in the Ordinary Course of Business, or as otherwise
approved by Lender. Increase, renewal or extension of a Letter of Credit shall
be treated as issuance of a new Letter of Credit, except that Lender may require
a new LC Application in its discretion.

 

 

 

 

 

 24 

 

 

(c)              Borrowers assume all risks of the acts, omissions or misuses of
any Letter of Credit by the beneficiary. In connection with issuance of any
Letter of Credit, Lender shall not be responsible for the existence, character,
quality, quantity, condition, packing, value or delivery of any goods purported
to be represented by any Documents; any differences or variation in the
character, quality, quantity, condition, packing, value or delivery of any goods
from that expressed in any Documents; the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Documents or of any endorsements thereon; the
time, place, manner or order in which shipment of goods is made; partial or
incomplete shipment of, or failure to ship, any goods referred to in a Letter of
Credit or Documents; any deviation from instructions, delay, default or fraud by
any shipper or other Person in connection with any goods, shipment or delivery;
any breach of contract between a shipper or vendor and a Borrower; errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex, telecopy, e-mail, telephone or otherwise;
errors in interpretation of technical terms; the misapplication by a beneficiary
of any Letter of Credit or the proceeds thereof; or any consequences arising
from causes beyond the control of Lender, including any act or omission of a
Governmental Authority. No Indemnitee shall be liable to any Obligor or other
Person for any action taken or omitted to be taken in connection with any Letter
of Credit or LC Documents except as a result of its gross negligence or willful
misconduct. Lender shall be fully subrogated to the rights and remedies of each
beneficiary whose claims against Borrowers are discharged with proceeds of any
Letter of Credit.

 

(d)             In connection with its administration of and enforcement of
rights or remedies under any Letters of Credit or LC Documents, Lender shall be
entitled to act, and shall be fully protected in acting, upon any certification,
documentation or communication in whatever form believed by Lender, in good
faith, to be genuine and correct and to have been signed, sent or made by a
proper Person. Lender may consult with and employ legal counsel, accountants and
other experts to advise it concerning its obligations, rights and remedies, and
shall be entitled to act upon, and shall be fully protected in any action taken
in good faith reliance upon, any advice given by such experts. Lender may employ
agents and attorneys-in-fact in connection with any matter relating to Letters
of Credit or LC Documents, and shall not be liable for the negligence or
misconduct of agents and attorneys-in-fact selected with reasonable care.

 

2.3.2.       Reimbursement. If Lender honors any request for payment under a
Letter of Credit, Borrowers shall pay to Lender, on the same day ("Reimbursement
Date"), the amount paid under such Letter of Credit, together with interest at
the interest rate for Base Rate Revolver Loans from the Reimbursement Date until
payment by Borrowers. The obligation of Borrowers to reimburse Lender for any
payment made under a Letter of Credit shall be absolute, unconditional,
irrevocable, and joint and several, and shall be paid without regard to any lack
of validity or enforceability of any Letter of Credit or the existence of any
claim, setoff, defense or other right that Borrowers may have at any time
against the beneficiary. Whether or not Borrower Agent submits a Notice of
Borrowing, Borrowers shall be deemed to have requested a Borrowing of Base Rate
Revolver Loans in an amount necessary to pay all amounts due on any
Reimbursement Date.

 

2.3.3.       Cash Collateral. If at any time (a) an Event of Default exists, (b)
the Commitment Termination Date has occurred, or (c) the Revolver Termination
Date is scheduled to occur within 20 Business Days, then Borrowers shall, at
Lender's request, Cash Collateralize all outstanding Letters of Credit. If
Borrowers fail to provide any Cash Collateral as required hereunder, Lender may
advance, as Revolver Loans, the amount of Cash Collateral required.

 

SECTION 3. INTEREST, FEES AND CHARGES

 

3.1.           Interest.

 

 

 

 

 

 25 

 

 

3.1.1.       Rates and Payment of Interest.

 

(a)              The Obligations shall bear interest (i) if a Base Rate Loan, at
the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if a
LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable
Margin; and (iii) if any other Obligation (including, to the extent permitted by
law, interest not paid when due), at the Base Rate in effect from time to time,
plus the Applicable Margin for Base Rate Revolver Loans. The Base Rate on the
date hereof is % per annum and, therefore, the rate of interest in effect on the
date hereof, expressed in simple interest terms, is % per annum for Base Rate
Revolver Loans and % per annum for Term Loans constituting Base Rate Loans.

 

(b)             During an Insolvency Proceeding with respect to any Borrower, or
during the existence of any other Event of Default if Lender in its discretion
so elects, Obligations shall bear interest at the Default Rate (whether before
or after any judgment). Each Borrower acknowledges that the cost and expense to
Lender due to an Event of Default are difficult to ascertain and that the
Default Rate is fair and reasonable compensation for this.

 

(c)              Interest shall accrue from the date a Loan is advanced or
Obligation is incurred or payable, until paid in full by Borrowers. If a Loan is
repaid on the same day made, one day's interest shall accrue. Interest accrued
on the Loans shall be due and payable in arrears, (i) (A) on the first day of
each month, if a Base Rate Loan, and (B) at the end of the applicable Interest
Period, if a LIBOR Loan; (ii) on any date of prepayment, with respect to the
principal amount of Loans being prepaid; and (iii) on the Commitment Termination
Date. Interest accrued on any other Obligations shall be due and payable as
provided in the Loan Documents and, if no payment date is specified, shall be
due and payable on demand. Notwithstanding the foregoing, interest accrued at
the Default Rate shall be due and payable on demand.

 

3.1.2. Application of LIBOR to Outstanding Loans.

 

(a)              Borrowers may on any Business Day, subject to delivery of a
Notice of Conversion/Continuation, elect to convert any portion of the Base Rate
Loans to, or to continue any LIBOR Loan at the end of its Interest Period as, a
LIBOR Loan. During any Default or Event of Default, Lender may declare that no
Loan may be made, converted or continued as a LIBOR Loan.

 

(b)             Whenever Borrowers desire to convert or continue Loans as LIBOR
Loans, Borrower Agent shall give Lender a Notice of Conversion/Continuation, no
later than 11:00 a.m. at least two Business Days before the requested conversion
or continuation date. Each Notice of Conversion/Continuation shall be
irrevocable, and shall specify the amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be 30 days if not
specified). If, upon the expiration of any Interest Period in respect of any
LIBOR Loans, Borrowers shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such
Loans into Base Rate Loans.

 

3.1.3.       Interest Periods. In connection with the making, conversion or
continuation of any LIBOR Loans, Borrowers shall select an interest period
("Interest Period") to apply, which interest period shall be 30, 60, or 90 days
(if available from Lender); provided, however, that:

 

(a)              the Interest Period shall begin on the date the Loan is made or
continued as, or converted into, a LIBOR Loan, and shall expire on the
numerically corresponding day in the calendar month at its end;

 

(b)               if any Interest Period begins on a day for which there is no
corresponding day in the calendar month at its end or if such corresponding day
falls after the last Business Day of such month, then the Interest Period shall
expire on the last Business Day of such month; and if any Interest Period would
otherwise expire on a day that is not a Business Day, the period shall expire on
the next Business Day; and

 

 

 

 

 

 26 

 

 

(c)              no Interest Period shall extend beyond the Revolver Termination
Date; and no Interest Period for a LIBOR Term Loan may be established that would
require repayment before the end of an Interest Period in order to make any
scheduled principal payment on the Term Loan.

 

3.1.4.       Interest Rate Not Ascertainable. If, due to any circumstance
affecting the London interbank market, Lender determines that adequate and fair
means do not exist for ascertaining LIBOR on any applicable date or that any
Interest Period is not available on the basis provided herein, then Lender shall
immediately notify Borrowers of such determination. Until Lender notifies
Borrowers that such circumstance no longer exists, the obligation of Lender to
make affected LIBOR Loans shall be suspended and no further Loans may be
converted into or continued as such LIBOR Loans.

 

3.2.Fees.

 

3.2.1.       Unused Line Fee. Borrowers shall pay to Lender a fee equal to the
Unused Line Fee Rate times the amount by which the Revolver Commitment exceeds
the average daily Revolver Usage during the immediately preceding month (or, in
the case of such payment made on the Commitment Termination Date, during the
period commencing on the date the immediately preceding unused line fee was due
and ending on the Commitment Termination Date). Such fee shall be payable in
arrears, commencing on August 1, 2015, on the first day of each month thereafter
and on the Commitment Termination Date.

 

3.2.2.       LC Facility Fees. Borrowers shall pay to Lender (a) a fee equal to
the Applicable Margin in effect for LIBOR Revolver Loans times the average daily
Stated Amount of Letters of Credit, which fee shall be payable monthly in
arrears, on the first day of each month; (b) a fronting fee equal to 0.125% per
annum on the Stated Amount of each Letter of Credit, which fee shall be payable
monthly in arrears, on the first day of each month; and (c) all customary
charges associated with the issuance, amending, negotiating, payment,
processing, transfer and administration of Letters of Credit, which charges
shall be paid as and when incurred. During an Event of Default, the fee payable
under clause (a) shall be increased by 2% per annum.

 

3.2.3.Closing Fee. On the Closing Date, Borrowers shall pay to Lender a closing
fee of $45,575.00.

 

3.3.           Computation of Interest, Fees, Yield Protection. All interest, as
well as fees and other charges calculated on a per annum basis, shall be
computed for the actual days elapsed, based on a year of 360 days. Each
determination by Lender of any interest, fees or interest rate hereunder shall
be final, conclusive and binding for all purposes, absent manifest error. All
fees shall be fully earned when due and shall not be subject to rebate, refund
or proration. All fees payable under Section 3.2 are compensation for services
and are not, and shall not be deemed to be, interest or any other charge for the
use, forbearance or detention of money. A certificate as to amounts payable by
Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.8, submitted to Borrower Agent
by Lender shall be final, conclusive and binding for all purposes, absent
manifest error, and Borrowers shall pay such amounts to the appropriate party
within 10 days following receipt of the certificate.

 

3.4.           Reimbursement Obligations. Borrowers shall pay all Extraordinary
Expenses promptly upon request. Borrowers shall also reimburse Lender for all
reasonable and documented legal, accounting, appraisal, consulting, and other
fees, costs and expenses incurred by it in connection with (a) negotiation and
preparation of any Loan Documents, including any amendment or other modification
thereof; (b) administration of and actions relating to any Collateral, Loan
Documents and transactions contemplated thereby, including any actions taken to
perfect or maintain priority of Lender's Liens on any Collateral, to maintain
any insurance required hereunder or to verify Collateral; and (c) subject to the
limits of Section 10.1.1(b), each inspection, audit or appraisal with respect to
any Obligor or Collateral, whether prepared by Lender's personnel or a third
party. All legal, accounting and consulting fees shall be charged to Borrowers
by Lender's professionals at their full hourly rates, regardless of any
alternative fee arrangements that Lender or any of its Affiliates may have with
such professionals that otherwise might apply to this or any other transaction.
Borrowers acknowledge that counsel may provide Lender with a benefit (such as a
discount, credit or accommodation for other matters) based on counsel's overall
relationship with Lender, including fees paid hereunder. If, for any reason
(including inaccurate reporting by any Borrower), it is reasonably determined
that a higher Applicable Margin should have applied to a period than was
actually applied, then, following Lender's consultation with Borrower Agent, the
proper margin shall be applied retroactively and Borrowers shall immediately pay
to Lender an amount equal to the difference between the amount of interest and
fees that would have accrued using the proper margin and the amount actually
paid. All amounts payable by Borrowers under this Section shall be due on
demand.

 

 

 

 

 

 27 

 

 

3.5.           Illegality. If Lender determines that any Applicable Law has made
it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for Lender to make, maintain or fund LIBOR Loans, or to determine or
charge interest rates based upon LIBOR, or any Governmental Authority has
imposed material restrictions on the authority of Lender to purchase or sell, or
to take deposits of, Dollars in the London interbank market, then, on notice
thereof by Lender to Borrower Agent, any obligation of Lender to make or
continue LIBOR Loans or to convert Base Rate Loans to LIBOR Loans shall be
suspended until Lender notifies Borrower Agent that the circumstances giving
rise to such determination no longer exist. Upon delivery of such notice,
Borrowers shall prepay or, if applicable, convert all LIBOR Loans to Base Rate
Loans, either on the last day of the Interest Period therefor, if Lender may
lawfully continue to maintain LIBOR Loans to such day, or immediately, if Lender
may not lawfully continue to maintain LIBOR Loans. Upon any such prepayment or
conversion, Borrowers shall also pay accrued interest on the amount so prepaid
or converted.

 

3.6.           Inability to Determine Rates. If Lender notifies Borrower Agent
in connection with a Borrowing, conversion or continuation of a LIBOR Loan that
for any reason (a) Dollar deposits are not being offered to banks in the London
interbank Eurodollar market for the applicable Loan amount or Interest Period,
(b) adequate and reasonable means do not exist for determining LIBOR for the
applicable Interest Period, or (c) LIBOR for the applicable Interest Period does
not adequately and fairly reflect the cost to Lender of funding the Loan, then
Lender's obligation to make or maintain LIBOR Loans shall be suspended to the
extent of the affected LIBOR Loan or Interest Period until Lender revokes the
notice. Upon receipt of the notice, Borrower Agent may revoke any pending
request for a Borrowing, conversion or continuation of a LIBOR Loan or, failing
that, will be deemed to have submitted a request for a Base Rate Loan.

 

3.7.Increased Costs; Capital Adequacy.

 

3.7.1.       Increased Costs Generally. If any Change in Law shall:

 

(a)              impose, modify or deem applicable any reserve, liquidity,
special deposit, compulsory loan, insurance charge or similar requirement
against assets of, deposits with or for the account of, or credit extended or
participated in by, Lender (except any reserve requirement reflected in LIBOR);

 

(b)             subject any Recipient to Taxes (other than (i) Indemnified
Taxes, (ii) Taxes described in clause (b) of the definition of Excluded Taxes,
or (iii) Connection Income Taxes) with respect to any Loan, Letter of Credit,
Commitment or other obligations, or its deposits, reserves, other liabilities or
capital attributable thereto; or

 

 

 

 

 

 28 

 

 

(c)              impose on Lender or any interbank market any other condition,
cost or expense affecting any Loan, Letter of Credit, Commitment or Loan
Document;

 

and the result thereof shall be to increase the cost to Lender of making or
maintaining any Loan or Commitment, or converting to or continuing any interest
option for a Loan, or to increase the cost to Lender of issuing or maintaining
any Letter of Credit (or of maintaining its obligation to issue a Letter of
Credit), or to reduce the amount of any sum received or receivable by Lender
hereunder (whether of principal, interest or any other amount) then, upon
request by Lender, Borrowers will pay to Lender such additional amount or
amounts as will compensate Lender for such additional costs incurred or
reduction suffered.

 

3.7.2.       Capital Requirements. If Lender determines that a Change in Law
affecting Lender or its holding company regarding capital or liquidity
requirements has or would have the effect of reducing the rate of return on
Lender's or such holding company's capital as a consequence of this Agreement,
Commitments, Loans or Letters of Credit to a level below that which Lender or
such holding company could have achieved but for such Change in Law (taking into
consideration its policies with respect to capital adequacy), then from time to
time Borrowers will pay to Lender such additional amounts as will compensate it
or its holding company for the reduction suffered.

 

3.7.3.       LIBOR Loan Reserves. If Lender is required to maintain reserves
with respect to liabilities or assets consisting of or including Eurocurrency
funds or deposits, Borrowers shall pay additional interest to Lender on each
LIBOR Loan equal to the costs of such reserves allocated to the Loan by Lender
(as determined by it in good faith, which determination shall be conclusive).
The additional interest shall be due and payable on each interest payment date
for the Loan; provided, however, that if Lender notifies Borrowers of the
additional interest less than 10 days prior to the interest payment date, then
the additional interest shall be payable 10 days after Borrowers' receipt of the
notice.

 

3.7.4.       Compensation. Failure or delay on the part of Lender to demand
compensation pursuant to this Section shall not constitute a waiver of its right
to demand such compensation, but Borrowers shall not be required to compensate
Lender for any increased costs or reductions suffered more than nine months
(plus any period of retroactivity of the Change in Law giving rise to the
demand) prior to the date that Lender notifies Borrower Agent of the applicable
Change in Law and of Lender's intention to claim compensation therefor.

 

3.8.           Mitigation. If Lender gives a notice under Section 3.5 or
requests compensation under Section 3.7, or if Borrowers are required to pay any
Indemnified Taxes or additional amounts under Section 5.8, then at the request
of Borrower Agent, Lender shall use reasonable efforts to designate a different
lending office or to assign its rights and obligations hereunder to another of
its offices, branches or Affiliates, if, in the judgment of Lender, such
designation or assignment (a) would eliminate the need for such notice or reduce
amounts payable or to be withheld in the future, as applicable; and (b) would
not subject Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to it or unlawful. Borrowers shall pay all reasonable costs
and expenses incurred by Lender in connection with any such designation or
assignment.

 

3.9.           Funding Losses. If for any reason (a) any Borrowing, conversion
or continuation of a LIBOR Loan does not occur on the date specified therefor in
a Notice of Borrowing or Notice of Conversion/Continuation (whether or not
withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a day
other than the end of its Interest Period, or (c) Borrowers fail to repay a
LIBOR Loan when required hereunder, then Borrowers shall pay to Lender all
resulting losses and expenses, including loss of anticipated profits and any
loss, expense or fee arising from redeployment of funds or termination of match
fundings. For purposes of calculating amounts payable under this Section, Lender
shall be

deemed to have funded a LIBOR Loan by a matching deposit or other borrowing in
the London interbank market for a comparable amount and period, whether or not
the Loan was in fact so funded.

 

 

 

 

 

 29 

 

 

3.10.        Maximum Interest. Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by Applicable Law ("maximum rate"). If Lender shall receive interest
in an amount that exceeds the maximum rate, the excess interest shall be applied
to the principal of the Obligations or, if it exceeds such unpaid principal,
refunded to Borrowers. In determining whether the interest contracted for,
charged or received by Lender exceeds the maximum rate, Lender may, to the
extent permitted by Applicable Law, (a) characterize any payment that is not
principal as an expense, fee or premium rather than interest; (b) exclude
voluntary prepayments and the effects thereof; and (c) amortize, prorate,
allocate and spread in equal or unequal parts the total amount of interest
throughout the contemplated term of the Obligations hereunder.

 

SECTION 4. LOAN ADMINISTRATION

 

4.1.           Manner of Borrowing and Funding Revolver Loans.

 

4.1.1.       Notice of Borrowing.

 

(a)              Whenever Borrowers desire funding of a Revolver Loan, Borrower
Agent shall give Lender a Notice of Borrowing. Such notice must be received by
Lender by 11:00 a.m. (i) on the requested funding date for a Base Rate Loan, and
(ii) at least two Business Days prior to the requested funding date for a LIBOR
Loan. Notices received after such time shall be deemed received on the next
Business Day. Each Notice of Borrowing shall be irrevocable and shall specify
(A) the amount of the Borrowing, (B) the requested funding date (which must be a
Business Day), (C) whether the Borrowing is to be made as a Base Rate Loan or
LIBOR Loan, and (D) in the case of a LIBOR Loan, the applicable Interest Period
(which shall be deemed to be 30 days if not specified).

 

(b)             Unless payment is otherwise made by Borrowers, the becoming due
of any Obligation (whether principal, interest, fees or other charges, including
Extraordinary Expenses, LC Obligations, Cash Collateral and Bank Product Debt)
shall be deemed to be a request for a Base Rate Revolver Loan on the due date in
the amount due and the Loan proceeds shall be disbursed as direct payment of
such Obligation. In addition, Lender may, at its option, charge such amount
against any operating, investment or other account of a Borrower maintained with
Lender or any of its Affiliates.

 

(c)              If a Borrower maintains a disbursement account with Lender or
any of its Affiliates, then presentation for payment in the account of a Payment
Item when there are insufficient funds to cover it shall be deemed to be a
request for a Base Rate Revolver Loan on the presentation date, in the amount of
the Payment Item. Proceeds of the Loan may be disbursed directly to the account.

 

4.1.2.       Notices. Borrowers may request, convert or continue Loans, select
interest rates, and transfer funds based on telephonic or e-mailed instructions
to Lender. Borrowers shall confirm each such request by prompt delivery to
Lender of a Notice of Borrowing or Notice of Conversion/Continuation, if
applicable, but if it differs materially from the action taken by Lender, the
records of Lender shall govern. Lender shall not have any liability for any loss
suffered by a Borrower as a result of Lender acting upon its understanding of
telephonic or e-mailed instructions from a person believed in good faith to be a
person authorized to give such instructions on a Borrower's behalf.

 

4.2.           Number and Amount of LIBOR Loans; Determination of Rate. Each
Borrowing of LIBOR Loans when made shall be in a minimum amount of $500,000,
plus any increment of $100,000 in excess thereof. No more than 5 Borrowings of
LIBOR Loans may be outstanding at any time, and all LIBOR Loans having the same
length and beginning date of their Interest Periods shall be aggregated together
and considered one Borrowing for this purpose. Upon determining LIBOR for any
Interest Period requested by Borrowers, Lender shall promptly notify Borrowers
thereof by telephone or electronically and, if requested by Borrowers, shall
confirm any telephonic notice in writing.

 

 

 

 

 

 30 

 

 

4.3.           Borrower Agent. Each Borrower hereby designates Marquis
("Borrower Agent") as its representative and agent for all purposes under the
Loan Documents, including requests for and receipt of Loans and Letters of
Credit, designation of interest rates, delivery or receipt of communications,
delivery of Borrowing Base and financial information and reports, payment of
Obligations, requests for waivers, amendments or other accommodations, actions
under the Loan Documents (including in respect of compliance with covenants),
and all other dealings with Lender. Borrower Agent hereby accepts such
appointment. Lender shall be entitled to rely upon, and shall be fully protected
in relying upon, any notice or communication (including any Notice of Borrowing)
delivered by Borrower Agent on behalf of any Borrower. Lender may give any
notice or communication with a Borrower hereunder to Borrower Agent on behalf of
such Borrower. Lender shall have the right, in its discretion, to deal
exclusively with Borrower Agent for all purposes under the Loan Documents. Each
Borrower agrees that any notice, election, communication, delivery,
representation, agreement, action or undertaking on its behalf by Borrower Agent
shall be binding upon and enforceable against it.

 

4.4.           One Obligation. The Loans, LC Obligations and other Obligations
shall constitute one general obligation of Borrowers and are secured by Lender's
Lien on all Collateral; provided, however, that Lender shall be deemed to be a
creditor of, and the holder of a separate claim against, each Borrower to the
extent of any Obligations jointly or severally owed by such Borrower.

 

4.5.           Effect of Termination. On the effective date of the termination
of the Revolver Commitment, the Obligations shall be immediately due and
payable, and each Secured Party may terminate its Bank Products. Until Full
Payment of the Obligations, all undertakings of Borrowers contained in the Loan
Documents shall continue, and Lender shall retain its Liens in the Collateral
and all of its rights and remedies under the Loan Documents. Lender shall not be
required to terminate its Liens unless it receives Cash Collateral or a written
agreement, in each case reasonably satisfactory to it, protecting it from
dishonor or return of any Payment Item previously applied to the Obligations.
Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.8, 12.2, this Section, and each
indemnity or waiver given by an Obligor in any Loan Document, shall survive Full
Payment of the Obligations.

 

SECTION 5. PAYMENTS

 

5.1.           General Payment Provisions. All payments of Obligations shall be
made in Dollars, without offset, counterclaim or defense of any kind, free and
clear of (and without deduction for) any Taxes, and in immediately available
funds, not later than 12:00 noon on the due date. Any payment after such time
shall be deemed made on the next Business Day. Any payment of a LIBOR Loan prior
to the end of its Interest Period shall be accompanied by all amounts due under
Section 3.9. Borrowers agree that Lender shall have the continuing, exclusive
right to apply and reapply payments and proceeds of Collateral against
Obligations, in such manner as Lender deems advisable, but whenever possible,
any prepayment of Loans shall be applied first to Base Rate Loans and then to
LIBOR Loans.

 

5.2.           Repayment of Revolver Loans. Revolver Loans shall be due and
payable in full on the Revolver Termination Date, unless payment is sooner
required hereunder. Revolver Loans may be prepaid from time to time, without
penalty or premium. If an Overadvance exists at any time, Borrowers shall, on
the sooner of Lender's demand or the first Business Day after any Borrower has
knowledge thereof, repay Revolver Loans in an amount sufficient to reduce
Revolver Usage to the Borrowing Base. If any Asset Disposition includes the
disposition of Accounts or Inventory, Borrowers shall apply Net Proceeds to
repay Revolver Loans equal to the greater of (a) the net book value of such
Accounts and Inventory, or (b) the reduction in Borrowing Base resulting from
the disposition.

 

 

 

 

 

 31 

 

 

5.3.Repayment of Term Loan.

 

5.3.1.       Payment of Principal. The Term Loan shall be repaid on the first
day of each month in consecutive monthly installments of $79,612, commencing on
August 1, 2015 and continuing through the Term Loan Maturity Date, on which date
all principal, interest and other amounts owing with respect to the Term Loan
shall be due and payable in full. Once repaid, whether such repayment is
voluntary or required, no portion of the Term Loan may be reborrowed.

 

5.3.2.Mandatory Prepayments.

 

(a)            Concurrently with any Permitted Asset Disposition of Equipment or
Real Estate, Borrowers shall prepay the Term Loan in an amount equal to the Net
Proceeds of such disposition;

 

(b)             Concurrently with the receipt of any proceeds of insurance or
condemnation awards paid in respect of any Equipment or Real Estate, Borrowers
shall prepay the Term Loan in an amount equal to such proceeds, subject to
Section 8.6.2;

 

(c)            Concurrently with any issuance of Equity Interests by a Borrower,
Borrowers shall prepay the Term Loan in an amount equal to the net proceeds of
such issuance; and

 

(d)             On the Commitment Termination Date, Borrowers shall prepay the
entire Term Loan (unless sooner repaid hereunder).

 

5.3.3.       Optional Prepayments. Borrowers may, at their option from time to
time, prepay the Term Loan, which prepayment must be at least $100,000, plus any
increment of $100,000 in excess thereof. Borrowers shall give written notice to
Lender of an intended prepayment of the Term Loan, which notice shall specify
the amount of the prepayment, shall be irrevocable once given, shall be given at
least 5 Business Days prior to the end of a month and shall be effective as of
the first day of the next month.

 

5.3.4.       Interest; Application of Prepayments. Each prepayment of the Term
Loan shall be accompanied by all interest accrued thereon and any amounts
payable under Section 3.9, and shall be applied to principal in inverse order of
maturity.

 

5.4.           Payment of Other Obligations. Obligations other than Loans,
including LC Obligations and Extraordinary Expenses, shall be paid by Borrowers
as provided in the Loan Documents or, if no payment date is specified, on
demand.

 

5.5.           Marshaling; Payments Set Aside. Lender shall have no obligation
to marshal any assets in favor of any Obligor or against any Obligations. If any
payment by or on behalf of Borrowers is made to Lender or if Lender exercises a
right of setoff, and any of such payment or setoff is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by Lender in its discretion) to be
repaid to a trustee, receiver or any other Person, then the Obligation
originally intended to be satisfied, and all Liens, rights and remedies relating
thereto, shall be revived and continued in full force and effect as if such
payment or setoff had not occurred.

 

5.6.           Application of Payments; Dominion Account. The ledger balance in
the main Dominion Account as of the end of a Business Day shall be applied to
the Obligations at the beginning of the next Business Day. If a credit balance
results from such application, it shall not accrue interest in favor of
Borrowers and shall be made available to Borrowers as long as no Default or
Event of Default exists. Notwithstanding anything herein to the contrary, monies
and collateral proceeds obtained from an Obligor shall not be applied to
repayment of its Excluded Swap Obligations.

 

5.7. Account Stated. Lender shall maintain, in accordance with its customary
practices, loanaccount(s) evidencing the Debt of Borrowers hereunder. Any
failure of Lender to record anything in a loan account, or any error in doing
so, shall not limit or otherwise affect the obligation of Borrowers to pay any
amount owing hereunder. Entries made in a loan account shall constitute
presumptive evidence of the information contained therein. If any information
contained in a loan account is provided to or inspected by any Person, the
information shall be conclusive and binding on such Person for all purposes
absent manifest error, except to the extent such Person notifies Lender in
writing within 30 days after receipt or inspection that specific information is
subject to dispute.

 

 

 

 

 

 32 

 

 

5.8.Taxes.

 

5.8.1.       Payments Free of Taxes; Obligation to Withhold; Tax Payment.

 

(a)              All payments of Obligations by Obligors shall be made without
deduction or withholding for any Taxes, except as required by Applicable Law. If
Applicable Law (as determined by Lender in its discretion) requires the
deduction or withholding of any Tax from any such payment by a Recipient or
Obligor, then the Recipient or Obligor shall be entitled to make such deduction
or withholding based on information and documentation provided pursuant to this
Section.

 

(b)             If a Recipient or Obligor is required by the Code to withhold or
deduct Taxes, including backup withholding and withholding taxes, from any
payment, then the Recipient shall pay the full amount that it determines is to
be withheld or deducted to the relevant Governmental Authority pursuant to the
Code. If a Recipient or Obligor is required by any Applicable Law other than the
Code to withhold or deduct Taxes from any payment, then the Recipient or
Obligor, to the extent required by Applicable Law, shall timely pay the full
amount to be withheld or deducted to the relevant Governmental Authority. In
each case, to the extent the withholding or deduction is made on account of
Indemnified Taxes, the sum payable by the applicable Obligor shall be increased
as necessary so that the Recipient receives an amount equal to the sum it would
have received had no such withholding or deduction been made.

 

(c)              Without limiting the foregoing, Borrowers shall timely pay all
Other Taxes to the relevant Governmental Authority in accordance with Applicable
Law or, at Lender's option, timely reimburse Lender for payment thereof.

 

5.8.2.       Tax Indemnification. Borrowers shall indemnify and hold harmless,
on a joint and several basis, each Recipient against any Indemnified Taxes
(including those imposed or asserted on or attributable to amounts payable under
this Section) payable or paid by a Recipient or required to be withheld or
deducted from a payment to a Recipient, and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. Borrowers shall make payment within 10 days
after demand for any amount or liability payable under this Section. A
certificate delivered to Borrowers by Lender (for itself or on behalf of a
Recipient) as to the amount of such payment or liability, shall be conclusive
absent manifest error.

 

5.8.3.       Evidence of Payments. If Lender or an Obligor pays any Taxes
pursuant to this Section, then upon request, Lender or Borrower Agent, as
applicable, shall deliver to the other a copy of a receipt issued by the
appropriate Governmental Authority evidencing the payment, a copy of any return
required by Applicable Law to report the payment, or other evidence of payment
reasonably satisfactory to the requesting party.

 

5.8.4.       Treatment of Certain Refunds. If Lender determines in its
discretion that it or another Recipient has received a refund of any Taxes that
were indemnified by Borrowers or with respect to which a Borrower paid
additional amounts pursuant to this Section, Lender shall pay or shall cause the
other Recipient to pay to Borrowers the amount of such refund (but only to the
extent of indemnity payments made, or additional amounts paid, by Borrowers with
respect to the Taxes giving rise to the refund), net of all out-of-pocket
expenses (including Taxes) incurred by the Recipient and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund). Borrowers shall, upon request by Lender, repay to the Recipient
any refund amount so paid over to Borrowers (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) if the Recipient
is required to repay such refund to the Governmental Authority. Notwithstanding
anything herein to the contrary, no Recipient shall be required to pay any
amount to Borrowers if such payment would place the Recipient in a less
favorable net after-Tax position than it would have been in if the Tax subject
to indemnification and giving rise to such refund had not been deducted,
withheld or otherwise imposed and the indemnification payments or additional
amounts with respect to such Tax had never been paid. In no event shall any
Recipient be required to make its tax returns (or any other information relating
to its taxes that it deems confidential) available to any Obligor or other
Person.

 

 

 

 

 

 33 

 

 

5.8.5.       Status of Lender. If Lender is entitled to an exemption from or
reduction of withholding Tax with respect to payments of Obligations, it shall
deliver to Borrowers properly completed and executed documentation reasonably
requested by Borrowers as will permit such payments to be made without or at a
reduced rate of withholding. In addition, Lender, if reasonably requested by
Borrowers, shall deliver such other documentation prescribed by Applicable Law
as is necessary to enable Borrowers to determine whether Lender is subject to
backup withholding or information reporting requirements. Notwithstanding the
foregoing, such documentation shall not be required if Lender believes delivery
of the documentation would subject it to any material unreimbursed cost or
expense or would materially prejudice its legal or commercial position.

 

5.8.6.       Documentation. Without limiting the foregoing, Lender shall deliver
to Borrowers, from time to time upon reasonable request, executed originals of
IRS Form W-9 or W-8BEN, certifying that Lender is exempt from U.S. federal
backup withholding Tax. If payment of any Obligation to Lender would be subject
to U.S. federal withholding Tax imposed by FATCA if Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code), Lender shall deliver to
Borrowers at the time(s) prescribed by law and otherwise as reasonably requested
by Borrowers such documentation prescribed by Applicable Law (including Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by Borrowers as may be necessary for them to comply with their
obligations under FATCA and to determine that Lender has complied with its
obligations under FATCA or to determine the amount to deduct and withhold from
such payment. Solely for purposes of the preceding sentence, "FATCA" shall
include any amendments made to FATCA after the date hereof. If any form or
certification delivered by Lender pursuant to this Section expires or becomes
obsolete or inaccurate in any respect, Lender shall update the form or
certification or notify Borrowers in writing of its inability to do so.

 

5.8.7.       Survival. Each party's obligations under this Section 5.8 shall
survive any assignment by Lender of rights or obligations hereunder, termination
of the Commitments, and any repayment, satisfaction, discharge or Full Payment
of any Obligations.

 

5.9.Nature and Extent of Each Borrower's Liability.

 

5.9.1.       Joint and Several Liability. Each Borrower agrees that it is
jointly and severally liable for, and absolutely and unconditionally guarantees
to Lender the prompt payment and performance of, all Obligations, except its
Excluded Swap Obligations. Each Borrower agrees that its guaranty obligations
hereunder constitute a continuing guaranty of payment and performance and not of
collection, that such obligations shall not be discharged until Full Payment of
the Obligations, and that such obligations are absolute and unconditional,
irrespective of (a) the genuineness, validity, regularity, enforceability,
subordination or any future modification of, or change in, any Obligations or
Loan Document, or any other document, instrument or agreement to which any
Obligor is or may become a party or be bound; (b) the absence of any action to
enforce this Agreement (including this Section) or any other Loan Document, or
any waiver, consent or indulgence of any kind by Lender with respect thereto;
(c) the existence, value or condition of, or failure to perfect a Lien or to
preserve rights against, any security or guaranty for any Obligations or any
action, or the absence of any action, by Lender in respect thereof (including
the release of any security or guaranty); (d) the insolvency of any Obligor; (e)
any election by Lender in an Insolvency Proceeding for the application of
Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien
by any other Borrower, as debtor-in-possession under Section 364 of the
Bankruptcy Code or otherwise; (g) the disallowance of any claims of Lender
against any Obligor for the repayment of any Obligations under Section 502 of
the Bankruptcy Code or otherwise; or (h) any other action or circumstances that
might otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor, except Full Payment of the Obligations.

 

 

 

 

 

 34 

 

 

5.9.2.Waivers.

 

(a)              Each Borrower expressly waives all rights that it may have now
or in the future under any statute, at common law, in equity or otherwise, to
compel Lender to marshal assets or to proceed against any Obligor, other Person
or security for the payment or performance of any Obligations before, or as a
condition to, proceeding against such Borrower. Each Borrower waives all
defenses available to a surety, guarantor or accommodation co-obligor other than
Full Payment of Obligations and waives, to the maximum extent permitted by law,
any right to revoke any guaranty of Obligations as long as it is a Borrower. It
is agreed among each Borrower and Lender that the provisions of this Section 5.9
are of the essence of the transaction contemplated by the Loan Documents and
that, but for such provisions, Lender would decline to make Loans and issue
Letters of Credit. Each Borrower acknowledges that its guaranty pursuant to this
Section is necessary to the conduct and promotion of its business, and can be
expected to benefit such business.

 

(b)             Lender may, in its discretion, pursue such rights and remedies
as it deems appropriate, including realization upon Collateral or any Real
Estate by judicial foreclosure or nonjudicial sale or enforcement, without
affecting any rights and remedies under this Section 5.9. If, in taking any
action in connection with the exercise of any rights or remedies, Lender shall
forfeit any other rights or remedies, including the right to enter a deficiency
judgment against any Borrower or other Person, whether because of any Applicable
Laws pertaining to "election of remedies" or otherwise, each Borrower consents
to such action and waives any claim based upon it, even if the action may result
in loss of any rights of subrogation that any Borrower might otherwise have had.
Any election of remedies that results in denial or impairment of the right of
Lender to seek a deficiency judgment against any Borrower shall not impair any
other Borrower's obligation to pay the full amount of the Obligations. Each
Borrower waives all rights and defenses arising out of an election of remedies,
such as nonjudicial foreclosure with respect to any security for Obligations,
even though that election of remedies destroys such Borrower's rights of
subrogation against any other Person. Lender may bid Obligations, in whole or
part, at any foreclosure, trustee or other sale, including any private sale, and
the amount of such bid need not be paid by Lender but shall be credited against
the Obligations. The amount of the successful bid at any such sale, whether
Lender or any other Person is the successful bidder, shall be conclusively
deemed to be the fair market value of the Collateral, and the difference between
such bid amount and the remaining balance of the Obligations shall be
conclusively deemed to be the amount of the Obligations guaranteed under this
Section 5.9, notwithstanding that any present or future law or court decision
may have the effect of reducing the amount of any deficiency claim to which
Lender might otherwise be entitled but for such bidding at any such sale.

 

5.9.3.Extent of Liability; Contribution.

 

(a)              Notwithstanding anything herein to the contrary, each
Borrower's liability under this Section 5.9 shall not exceed the greater of (i)
all amounts for which such Borrower is primarily liable, as described in clause
(c) below, and (ii) such Borrower's Allocable Amount.

 

 

 

 

 

 35 

 

 

(b)             If any Borrower makes a payment under this Section 5.9 of any
Obligations (other than amounts for which such Borrower is primarily liable) (a
"Guarantor Payment") that, taking into account all other Guarantor Payments
previously or concurrently made by any other Borrower, exceeds the amount that
such Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Guarantor Payments in the same proportion that
such Borrower's Allocable Amount bore to the total Allocable Amounts of all
Borrowers, then such Borrower shall be entitled to receive contribution and
indemnification payments from, and to be reimbursed by, each other Borrower for
the amount of such excess, ratably based on their respective Allocable Amounts
in effect immediately prior to such Guarantor Payment. The "Allocable Amount"
for any Borrower shall be the maximum amount that could then be recovered from
such Borrower under this Section 5.9 without rendering such payment voidable
under Section 548 of the Bankruptcy Code or under any applicable state
fraudulent transfer or conveyance act, or similar statute or common law.

 

(c)              Section 5.9.3(a) shall not limit the liability of any Borrower
to pay or guarantee Loans made directly or indirectly to it (including Loans
advanced hereunder to any other Person and then re-loaned or otherwise
transferred to, or for the benefit of, such Borrower), LC Obligations relating
to Letters of Credit issued to support its business, Bank Products incurred to
support its business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder. Lender shall have the right, at any time in
its discretion, to condition Loans and Letters of Credit upon a separate
calculation of borrowing availability for each Borrower and to restrict the
disbursement and use of Loans and Letters of Credit to a Borrower based on that
calculation.

 

(d)             Each Obligor that is a Qualified ECP when its guaranty of or
grant of Lien as security for a Swap Obligation becomes effective hereby jointly
and severally, absolutely, unconditionally and irrevocably undertakes to provide
such funds or other support to each Specified Obligor with respect to such Swap
Obligation as may be needed by such Specified Obligor from time to time to honor
all of its obligations under the Loan Documents in respect of such Swap
Obligation (but, in each case, only up to the maximum amount of such liability
that can be hereby incurred without rendering such Qualified ECP's obligations
and undertakings under this Section 5.9 voidable under any applicable fraudulent
transfer or conveyance act). The obligations and undertakings of each Qualified
ECP under this Section shall remain in full force and effect until Full Payment
of all Obligations. Each Obligor intends this Section to constitute, and this
Section shall be deemed to constitute, a guarantee of the obligations of, and a
"keepwell, support or other agreement" for the benefit of, each Obligor for all
purposes of the Commodity Exchange Act.

 

5.9.4.       Joint Enterprise. Each Borrower has requested that Lender make this
credit facility available to Borrowers on a combined basis, in order to finance
Borrowers' business most efficiently and economically. Borrowers' business is a
mutual and collective enterprise, and the successful operation of each Borrower
is dependent upon the successful performance of the integrated group. Borrowers
believe that consolidation of their credit facility will enhance the borrowing
power of each Borrower and ease administration of the facility, all to their
mutual advantage. Borrowers acknowledge that Lender's willingness to extend
credit and to administer the Collateral on a combined basis hereunder is done
solely as an accommodation to Borrowers and at Borrowers' request.

 

5.9.5.       Subordination. Each Borrower hereby subordinates any claims,
including any rights at law or in equity to payment, subrogation, reimbursement,
exoneration, contribution, indemnification or set off, that it may have at any
time against any other Obligor, howsoever arising, to the Full Payment of its
Obligations.

 

SECTION 6. CONDITIONS PRECEDENT

 

6.1.           Conditions Precedent to Initial Loans. In addition to the
conditions set forth in Section 6.2, Lender shall not be required to fund any
requested Loan, issue any Letter of Credit or otherwise extend credit to
Borrowers hereunder, until the date ("Closing Date") that each of the following
conditions has been satisfied:

 

 

 

 

 

 36 

 

 

(a)              Each Loan Document shall have been duly executed and delivered
to Lender by each of the signatories thereto, and each Obligor shall be in
compliance with all terms thereof.

 

(b)             Lender shall have received acknowledgments of all filings or
recordations necessary to perfect its Liens in the Collateral, as well as UCC
and Lien searches and other evidence satisfactory to Lender that such Liens are
the only Liens upon the Collateral, except Permitted Liens.

 

(c)              Lender shall have received the Related Real Estate Documents
for all Real Estate subject to a Mortgage.

 

(d)             Lender shall have received duly executed agreements establishing
each Dominion Account and related lockbox, in form and substance, and with
financial institutions, satisfactory to Lender.

 

(e)              Lender shall have received certificates, in form and substance
satisfactory to it, from a knowledgeable Senior Officer of Borrower Agent
certifying that, after giving effect to the initial Loans and transactions
hereunder as well as all of the transactions contemplated under the Marquis SPA
Documents and the Mezzanine Debt Documents, (i) such Borrower is Solvent; (ii)
no Default or Event of Default exists; (iii) the representations and warranties
set forth in Section 9 are true and correct; and (iv) such Borrower has complied
with all agreements and conditions to be satisfied by it under the Loan
Documents.

 

(f)              Lender shall have received a certificate of a duly authorized
officer of each Obligor, certifying (i) that attached copies of such Obligor's
Organic Documents are true and complete, and in full force and effect, without
amendment except as shown; (ii) that an attached copy of resolutions authorizing
execution and delivery of the Loan Documents is true and complete, and that such
resolutions are in full force and effect, were duly adopted, have not been
amended, modified or revoked, and constitute all resolutions adopted with
respect to this credit facility; and (iii) to the title, name and signature of
each Person authorized to sign the Loan Documents. Lender may conclusively rely
on this certificate until it is otherwise notified by the applicable Obligor in
writing.

 

(g)             Lender shall have received a written opinion of Baker Hostetler,
as well as any local counsel to Borrowers or Lender, in form and substance
satisfactory to Lender.

 

(h)             Lender shall have received copies of the charter documents of
each Obligor, certified by the Secretary of State or other appropriate official
of such Obligor's jurisdiction of organization. Lender shall have received good
standing certificates for each Obligor, issued by the Secretary of State or
other appropriate official of such Obligor's jurisdiction of organization and
each jurisdiction where such Obligor's conduct of business or ownership of
Property necessitates qualification.

 

(i)               Lender shall have received copies of policies or certificates
of insurance for the insurance policies carried by Borrowers, all in compliance
with the Loan Documents.

 

(j)               Lender shall have completed its business, financial and legal
due diligence of Obligors, including (i) a field examination, (ii) Inventory,
Equipment and Real Estate appraisals, and (iii) a review of all material pending
or threatened litigation or administrative proceedings and all environmental
aspects of Borrowers' business, in each case with results satisfactory to
Lender. No material adverse change in the financial condition of any Obligor or
in the quality, quantity or value of any Collateral shall have occurred since
January 3, 2015.

 

 

 

 

 

 37 

 

 

(k)               Borrowers shall have paid all fees and expenses to be paid to
Lender on the Closing Date.

 

(l)               Lender shall have received a Borrowing Base Certificate
prepared as of June 29, 2015. Upon giving effect to the initial funding of Loans
and issuance of Letters of Credit, and the payment by Borrowers of all fees and
expenses incurred in connection herewith as well as any payables stretched
beyond their customary payment practices, Availability shall be at least
$3,000,000.

 

(m)            Borrowers shall have obtained consents and approvals from all
Governmental Authorities and other third parties that are required by the
Marquis SPA.

 

(n)             All conditions precedent to the effectiveness of the Marquis SPA
shall have been satisfied (and not waived unless Lender shall have approved such
waiver in its discretion) and the Marquis Acquisition shall have been
consummated on terms and subject to legal documentation acceptable to Lender in
its discretion.

 

(o)             Lender shall have received copies of the fully-executed Marquis
SPA and the Marquis SPA Documents, certified by an officer of Borrower Agent to
be true, correct and complete.

 

(p)             All conditions precedent to the effectiveness of the Equity
Contribution Documents shall have been satisfied (and not waived unless Lender
shall have approved such waiver in its discretion) and the Equity Contribution
shall have been consummated on terms and subject to legal documentation
acceptable to Lender in its discretion.

 

(q)             The transactions contemplated by the Mezzanine Debt Documents
shall have been consummated on terms and subject to legal documentation
acceptable to Lender in its discretion.

 

(r)              Agent shall have received copies of the fully-executed Equity
Contribution Documents and the Mezzanine Debt Documents, certified by an officer
of Borrower Agent to be true, correct and complete, each of which shall be in
form and substance acceptable to Lender.

 

(s)              Lender shall have received (i) interim financial statements for
Borrowers as of May 30, 2015, (ii) projections of Borrower's consolidated
balance sheets, results of operations, cash flow and Availability for Fiscal
Year 2015, month by month and (iii) all other financial and business information
reasonably requested by Lender.

 

(t)               Lender shall be satisfied with all aspects of Obligors'
corporate, capital and ownership structure and indebtedness.

 

(u)             Lender shall have completed all due diligence required for
compliance with the PATRIOT Act and other Applicable Law and all background
checks.

 

6.2.           Conditions Precedent to All Credit Extensions. Lender shall not
be required to fund any Loans, issue any Letters of Credit, or grant any other
accommodation to or for the benefit of Borrowers, unless the following
conditions are satisfied:

 

(a)              No Default or Event of Default shall exist at the time of, or
result from, such funding, issuance or grant;

 

(b)             The representations and warranties of each Obligor in the Loan
Documents shall be true and correct on the date of, and upon giving effect to,
such funding, issuance or grant (except for representations and warranties that
expressly relate to an earlier date);

 

(c)All conditions precedent in any other Loan Document shall be satisfied;

 

 

 

 

 

 38 

 

 

(d)             No event shall have occurred or circumstance exist that has or
could reasonably be expected to have a Material Adverse Effect; and

 

(e)             With respect to issuance of a Letter of Credit, the LC
Conditions shall be satisfied.

 

Each request (or deemed request) by Borrowers for funding of a Loan, issuance of
a Letter of Credit or grant of an accommodation shall constitute a
representation by Borrowers that the foregoing conditions are satisfied on the
date of such request and on the date of such funding, issuance or grant. As an
additional condition to any funding, issuance or grant, Lender shall have
received such other information, documents, instruments and agreements as it
deems appropriate in connection therewith.

 

SECTION 7. COLLATERAL

 

7.1.           Grant of Security Interest. To secure the prompt payment and
performance of its Obligations, each Borrower hereby grants to Lender a
continuing security interest in and Lien upon all Property of such Borrower,
including all of the following Property, whether now owned or hereafter
acquired, and wherever located:

 

 

  (a) all Accounts;

 

(b)all Chattel Paper, including electronic chattel paper;

 

(c)all Commercial Tort Claims, including those shown on Schedule 9.1.16;

 

(d)all Deposit Accounts;

 

(e)all Documents;

 

(f)all General Intangibles, including Intellectual Property;

 

(g)all Goods, including Inventory, Equipment and fixtures;

 

(h)all Instruments;

 

(i)all Investment Property;

 

(j)all Letter-of-Credit Rights;

 

(k)all Supporting Obligations;

 

(l)               all monies, whether or not in the possession or under the
control of Lender, or a bailee or Affiliate of Lender, including any Cash
Collateral;

 

(m)            all accessions to, substitutions for, and all replacements,
products, and cash and non-cash proceeds of the foregoing, including proceeds of
and unearned premiums with respect to insurance policies, and claims against any
Person for loss, damage or destruction of any Collateral; and

 

(n)             all books and records (including customer lists, files,
correspondence, tapes, computer programs, print-outs and computer records)
pertaining to the foregoing.

 

Notwithstanding anything to the contrary contained herein, in no event shall
Excluded Assets constitute Collateral under this Agreement or any other Loan
Document.

 

 

 

 

 

 39 

 

 

7.2.Lien on Deposit Accounts; Cash Collateral.

 

7.2.1.       Deposit Accounts. To further secure the prompt payment and
performance of its Obligations, each Borrower hereby grants to Lender a
continuing security interest in and Lien upon all amounts credited to any
Deposit Account of such Borrower, including sums in any blocked, lockbox, sweep
or collection account. Each Borrower hereby authorizes and directs each bank or
other depository to deliver to Lender, upon request, all balances in any Deposit
Account maintained for such Borrower, without inquiry into the authority or
right of Lender to make such request.

 

7.2.2.       Cash Collateral. Cash Collateral may be invested, at Lender's
discretion (and with the consent of Borrowers, as long as no Event of Default
exists), but Lender shall have no duty to do so, regardless of any agreement or
course of dealing with any Borrower, and shall have no responsibility for any
investment or loss. As security for its Obligations, each Borrower hereby grants
to Lender a security interest in and Lien upon all Cash Collateral held from
time to time and all proceeds thereof, whether held in a Cash Collateral Account
or otherwise. Lender may apply Cash Collateral to the payment of Obligations as
they become due, in such order as Lender may elect. Each Cash Collateral Account
and all Cash Collateral shall be under the sole dominion and control of Lender,
and no Borrower or other Person shall have any right to any Cash Collateral,
until Full Payment of the Obligations.

 

7.3.Real Estate Collateral.

 

7.3.1.       Lien on Real Estate. The Obligations shall also be secured by
Mortgages upon all Real Estate owned by Borrowers, including the Real Estate
located at (a) 2743 Highway 76, Chatsworth, Georgia 30705, (b) 325 Smyrna Church
Road, Chatsworth, Georgia 30705, (c) 242 Treadwell Road, Chatsworth, Georgia
30705, (d) 1978 Highway 52 Alt., Chatsworth, Georgia 30705, (e) 1642 Duval Road,
Chatsworth, Georgia 30705, (f) 1805 South Hamilton, Dalton, Georgia 30720, and
(g) 2669 Lakeland Road, Dalton, Georgia 30720. The Mortgages shall be duly
recorded, at Borrowers' expense, in each office where such recording is required
to constitute a fully perfected Lien on the Real Estate covered thereby. If any
Borrower acquires Real Estate hereafter, Borrowers shall, within 30 days,
execute, deliver and record a Mortgage sufficient to create a first priority
Lien in favor of Lender on such Real Estate, and shall deliver all Related Real
Estate Documents.

 

7.3.2.       Collateral Assignment of Leases. To further secure the prompt
payment and performance of its Obligations, each Borrower hereby transfers and
assigns to Lender all of such Borrower's right, title and interest in, to and
under all now or hereafter existing leases of real Property to which such
Borrower is a party, whether as lessor or lessee, and all extensions, renewals,
modifications and proceeds thereof.

 

7.4.Other Collateral.

 

7.4.1.       Commercial Tort Claims. Borrowers shall promptly notify Lender in
writing if any Borrower has a Commercial Tort Claim (other than, as long as no
Default or Event of Default exists, a Commercial Tort Claim for less than
$100,000), shall promptly amend Schedule 9.1.16 to include such claim, and shall
take such actions as Lender deems appropriate to subject such claim to a duly
perfected, first priority Lien in favor of Lender.

 

7.4.2.       Certain After-Acquired Collateral. Borrowers shall promptly notify
Lender in writing if, after the Closing Date, any Borrower obtains any interest
in any Collateral consisting of Deposit Accounts, Chattel Paper, Documents,
Instruments, Intellectual Property, Investment Property or Letter-of-Credit
Rights with a face amount or representing Property having a value in excess of
$100,000 and, upon Lender's request, shall promptly take such actions as Lender
deems appropriate to effect Lender's duly perfected, first priority Lien upon
such Collateral, including obtaining any appropriate possession, control
agreement or Lien Waiver. If any Collateral is in the possession of a third
party, at Lender's request, Borrowers shall use commercially reasonable efforts
to obtain an acknowledgment that such third party holds the Collateral for the
benefit of Lender.

 

 

 

 

 

 40 

 

 

7.5.           Limitations. The Lien on Collateral granted hereunder is given as
security only and shall not subject Lender to, or in any way modify, any
obligation or liability of Borrowers relating to any Collateral. In no event
shall the grant of any Lien under any Loan Document secure an Excluded Swap
Obligation of the granting Obligor.

 

7.6.           Further Assurances; Extent of Liens. All Liens granted to Lender
under the Loan Documents are for the benefit of Secured Parties. Promptly upon
request, Borrowers shall deliver such instruments and agreements, and shall take
such actions, as Lender deems appropriate under Applicable Law to evidence or
perfect its Lien on any Collateral, or otherwise to give effect to the intent of
this Agreement. Each Borrower authorizes Lender to file any financing statement
that describes the Collateral as "all assets" or "all personal property" of such
Borrower, or words to similar effect, and ratifies any action taken by Lender
before the Closing Date to effect or perfect its Lien on any Collateral.

 

7.7.           Foreign Subsidiary Stock. Notwithstanding Section 7.1, the
Collateral shall include only 65% of the voting stock of any Foreign Subsidiary.

 

SECTION 8. COLLATERAL ADMINISTRATION

 

8.1.           Borrowing Base Certificates. By Wednesday of each week, Borrowers
shall deliver to Lender a Borrowing Base Certificate prepared as of the close of
business of the previous Friday, by the 15th day of each month, Borrowers shall
deliver to Lender a Borrowing Base Certificate prepared as of the close of
business of the previous month and at such other times as Lender may request,
Borrowers shall deliver to Lender a Borrowing Base Certificate. All calculations
of Availability in any Borrowing Base Certificate shall originally be made by
Borrowers and certified by a Senior Officer or the Treasurer, provided that
Lender may from time to time review and adjust any such calculation (a) to
reflect its reasonable estimate of declines in value of any Collateral, due to
collections received in the Dominion Account or otherwise; (b) to adjust advance
rates to reflect changes in dilution, quality, mix and other factors affecting
Collateral; and (c) to the extent the calculation is not made in accordance with
this Agreement or does not accurately reflect the Availability Reserve.

 

8.2.Accounts.

 

8.2.1.       Records and Schedules of Accounts. Each Borrower shall keep
accurate and complete records of its Accounts, including all payments and
collections thereon, and shall submit to Lender sales, collection,
reconciliation and other reports in form satisfactory to Lender, on such
periodic basis as Lender may request. Each Borrower shall also provide to
Lender, on or before the 15th day of each month, a detailed aged trial balance
of all Accounts as of the end of the preceding month, specifying each Account's
Account Debtor name and address, amount, invoice date and due date, showing any
discount, allowance, credit, authorized return or dispute, and including such
proof of delivery, copies of invoices and invoice registers, copies of related
documents, repayment histories, status reports and other information as Lender
may reasonably request. If Accounts in an aggregate face amount of $250,000 or
more cease to be Eligible Accounts or Eligible Factoring Credit Balances, as
applicable, Borrowers shall notify Lender of such occurrence promptly (and in
any event within two Business Days) after any Borrower has knowledge thereof.

 

8.2.2.       Taxes. If an Account of any Borrower includes a charge for any
Taxes, Lender is authorized, in its discretion, to pay the amount thereof to the
proper taxing authority for the account of such Borrower and to charge Borrowers
therefor; provided, however, that Lender shall not be liable for any Taxes that
may be due from Borrowers or with respect to any Collateral.

 

8.2.3.       Account Verification. Whether or not a Default or Event of Default
exists, Lender shall have the right at any time, in the name of Lender, any
designee of Lender or any Borrower, to verify the validity, amount or any other
matter relating to any Accounts of Borrowers by mail, telephone or otherwise.
Borrowers shall cooperate fully with Lender in an effort to facilitate and
promptly conclude any such verification process.

 

 

 

 

 

 41 

 

 

8.2.4.       Maintenance of Dominion Account. Borrowers shall maintain Dominion
Accounts pursuant to lockbox or other arrangements reasonably acceptable to
Lender. Borrowers shall obtain an agreement (in form and substance reasonably
satisfactory to Lender) from each lockbox servicer and Dominion Account bank,
establishing Lender's control over and Lien in the lockbox or Dominion Account,
requiring immediate deposit of all remittances received in the lockbox to a
Dominion Account, and waiving offset rights of such servicer or bank against any
funds in the lockbox or Dominion Account, except offset rights for customary
administrative charges. If a Dominion Account is not maintained with Lender,
Lender may require immediate transfer of all funds in such account to a Dominion
Account maintained with Lender. Lender assumes no responsibility to Borrowers
for any lockbox arrangement or Dominion Account, including any claim of accord
and satisfaction or release with respect to any Payment Items accepted by any
bank.

 

8.2.5.       Proceeds of Collateral. Borrowers shall request in writing and
otherwise take all necessary steps to ensure that all payments on Accounts or
otherwise relating to Collateral are made directly to a Dominion Account (or a
lockbox relating to a Dominion Account). If any Borrower or Subsidiary receives
cash or Payment Items with respect to any Collateral, it shall hold same in
trust for Lender and promptly (not later than the next Business Day) deposit
same into a Dominion Account.

 

8.3.Inventory.

 

8.3.1.       Records and Reports of Inventory. Each Borrower shall keep accurate
and complete records of its Inventory, including costs and daily withdrawals and
additions. Each Borrower shall also provide to Lender, on or before the 15th day
of each month, inventory and reconciliation reports in form satisfactory to
Lender, on such periodic basis as Lender may request. Each Borrower shall
conduct a physical inventory at least once per calendar year (and on a more
frequent basis if requested by Lender when an Event of Default exists) and
periodic cycle counts consistent with historical practices, and shall provide to
Lender a report based on each such inventory and count promptly upon completion
thereof, together with such supporting information as Lender may request. Lender
may participate in and observe each physical count.

 

8.3.2.       Returns of Inventory. No Borrower shall return any Inventory to a
supplier, vendor or other Person, whether for cash, credit or otherwise, unless
(a) such return is in the Ordinary Course of Business; (b) no Default, Event of
Default or Overadvance exists or would result therefrom; (c) Lender is promptly
notified if the aggregate Value of all Inventory returned in any month exceeds
$250,000; and (d) any payment received by a Borrower for a return is promptly
remitted to Lender for application to the Obligations.

 

8.3.3.       Acquisition, Sale and Maintenance. No Borrower shall acquire or
accept any Inventory on consignment or approval, and shall take all steps to
assure that all Inventory is produced in accordance with Applicable Law,
including the FLSA. No Borrower shall sell any Inventory on consignment or
approval or any other basis under which the customer may return or require a
Borrower to repurchase such Inventory. Borrowers shall use, store and maintain
all Inventory with reasonable care and caution, in accordance with applicable
standards of any insurance and in conformity in all material respects with
Applicable Law, and shall make current rent payments (within applicable grace
periods provided for in leases and except in the case of a bona fide dispute or
exercise of set-off rights) at all locations where any Collateral is located.

 

8.4.Equipment.

 

 

 

 

 

 42 

 

 

8.4.1.       Records and Schedules of Equipment. Each Borrower shall keep
accurate and complete records of its Equipment, including kind, quality,
quantity, cost, acquisitions and dispositions thereof, and shall submit to
Lender, on such periodic basis as Lender may request, a current schedule
thereof, in form satisfactory to Lender. Promptly upon request, Borrowers shall
deliver to Lender evidence of their ownership or interests in any Equipment.

 

8.4.2.       Dispositions of Equipment. No Borrower shall sell, lease or
otherwise dispose of any Equipment, without the prior written consent of Lender,
other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment
that is worn, damaged or obsolete with Equipment of like function and value, if
the replacement Equipment is acquired substantially contemporaneously with such
disposition and is free of Liens.

 

8.4.3.       Condition of Equipment. The Equipment is in good operating
condition and repair, and all necessary replacements and repairs have been made
so that the value and operating efficiency of the Equipment is preserved at all
times, normal wear and tear and obsolescence excepted. Except for normal wear
and tear and obsolescence, each Borrower shall ensure that the Equipment is
mechanically and structurally sound, and capable of performing the functions for
which it was designed, in accordance with manufacturer specifications. No
Borrower shall permit any Equipment to become affixed to real Property unless
any landlord or mortgagee delivers a Lien Waiver.

 

8.5.           Deposit Accounts. Schedule 8.5 sets forth all Deposit Accounts
maintained by Borrowers, including all Dominion Accounts as of the Closing Date.
Each Borrower shall take all actions necessary to establish Lender's control of
each such Deposit Account (other than an account exclusively used for payroll,
payroll taxes or employee benefits, or an account containing not more than
$10,000 at any time). Each Borrower shall be the sole account holder of each
Deposit Account and shall not allow any other Person (other than Lender and,
subject to the Debt and Lien Subordination Agreement, Mezzanine Lender) to have
control over a Deposit Account or any Property deposited therein. Each Borrower
shall promptly notify Lender of any opening or closing of a Deposit Account and,
with the consent of Lender, will amend Schedule 8.5 to reflect same.

 

8.6.General Provisions.

 

8.6.1.       Location of Collateral. All tangible items of Collateral, other
than Inventory in transit, shall at all times be kept by Borrowers at the
business locations set forth in Schedule 8.6.1, except that Borrowers may (a)
make sales or other dispositions of Collateral in accordance with Section
10.2.6; and (b) move Collateral to another location in the United States, upon
30 Business Days prior written notice to Lender.

 

8.6.2.Insurance of Collateral; Condemnation Proceeds.

 

(a)              Each Borrower shall maintain insurance with respect to the
Collateral, covering casualty, hazard, theft, malicious mischief, flood and
other risks, in amounts, with endorsements and with insurers (with a Best Rating
of at least A, unless otherwise approved by Lender in its discretion)
satisfactory to Lender. All proceeds under each policy shall be payable to
Lender. From time to time upon request, Borrowers shall deliver to Lender the
originals or certified copies of its insurance policies and updated flood plain
searches. Unless Lender shall agree otherwise, each policy shall include
satisfactory endorsements (i) showing Lender as lender's loss payee; (ii)
requiring 30 days prior written notice to Lender in the event of cancellation of
the policy for any reason whatsoever; and (iii) specifying that the interest of
Lender shall not be impaired or invalidated by any act or neglect of any
Borrower or the owner of the Property, nor by the occupation of the premises for
purposes more hazardous than are permitted by the policy. If any Borrower fails
to provide and pay for any insurance, Lender may, at its option, but shall not
be required to, procure the insurance and charge Borrowers therefor. Each
Borrower agrees to deliver to Lender, promptly as rendered, copies of all
reports made to insurance companies. While no Event of Default exists, Borrowers
may settle, adjust or compromise any insurance claim, as long as the proceeds
are delivered to Lender. If an Event of Default exists, only Lender shall be
authorized to settle, adjust and compromise such claims.

 

 

 

 

 

 43 

 

 

(b)             Any proceeds of insurance (other than proceeds from workers'
compensation or D&O insurance) and any awards arising from condemnation of any
Collateral shall be paid to Lender. Any such proceeds or awards that relate to
Inventory shall be applied to payment of the Revolver Loans, and then to other
Obligations, other than the Term Loan. Subject to clause (c) below, any proceeds
or awards that relate to Equipment or Real Estate shall be applied first to the
Term Loan, then to Revolver Loans and then to other Obligations.

 

(c)              If requested by Borrowers in writing within 30 days after
Lender's receipt of any insurance proceeds or condemnation awards relating to
any loss or destruction of Equipment or Real Estate, Borrowers may use such
proceeds or awards to repair or replace such Equipment or Real Estate (and until
so used, the proceeds shall be held by Lender as Cash Collateral) as long as (i)
no Default or Event of Default exists; (ii) such repair or replacement is
promptly undertaken and concluded, in accordance with plans reasonably
satisfactory to Lender; (iii) replacement buildings are constructed on the sites
of the original casualties and are materially comparable in size, quality and
utility to the destroyed buildings; (iv) the repaired or replaced Property is
free of Liens, other than Permitted Liens that are not Purchase Money Liens; (v)
Borrowers comply with disbursement procedures for such repair or replacement as
Lender may reasonably require; and (vi) the aggregate amount of such proceeds or
awards requested to be used by Borrowers from any single casualty or
condemnation does not exceed $750,000.

 

8.6.3.       Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping any Collateral, all
Taxes payable with respect to any Collateral (including any sale thereof), and
all other payments required to be made by Lender to any Person to realize upon
any Collateral, shall be borne and paid by Borrowers. Lender shall not be liable
or responsible in any way for the safekeeping of any Collateral, for any loss or
damage thereto (except for reasonable care in its custody while Collateral is in
Lender's actual possession), for any diminution in the value thereof, or for any
act or default of any warehouseman, carrier, forwarding agency or other Person
whatsoever, but the same shall be at Borrowers' sole risk.

 

8.6.4.       Defense of Title. Each Borrower shall take all reasonable actions
to defend its title to Collateral and Lender's Liens therein against all
Persons, claims and demands, except Permitted Liens.

 

8.7.           Power of Attorney. Each Borrower hereby irrevocably constitutes
and appoints Lender (and all Persons designated by Lender) as such Borrower's
true and lawful attorney (and agent-in-fact) for the purposes provided in this
Section. Lender, or Lender's designee, may, without notice and in either its or
a Borrower's name, but at the cost and expense of Borrowers:

 

(a)              Endorse a Borrower's name on any Payment Item or other proceeds
of Collateral (including proceeds of insurance) that come into Lender's
possession or control; and

 

(b)             During an Event of Default, (i) notify any Account Debtors of
the assignment of their Accounts, demand and enforce payment of Accounts, by
legal proceedings or otherwise, and generally exercise any rights and remedies
with respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or
release any Accounts or other Collateral, or any legal proceedings brought to
collect Accounts or Collateral; (iii) sell or assign any Accounts and other
Collateral upon such terms, for such amounts and at such times as Lender deems
advisable; (iv) collect, liquidate and receive balances in Deposit Accounts or
investment accounts, and take control, in any manner, of proceeds of Collateral;
(v) prepare, file and sign a Borrower's name to a proof of claim or other
document in a bankruptcy of an Account Debtor, or to any notice, assignment or
satisfaction of Lien or similar document; (vi) receive, open and dispose of mail
addressed to a Borrower, and notify postal authorities to deliver any such mail
to an address designated by Lender; (vii) endorse any Chattel Paper, Document,
Instrument, bill of lading, or other document or agreement relating to any
Accounts, Inventory or other Collateral; (viii) use a Borrower's stationery and
sign its name to verifications of Accounts and notices to Account Debtors; (ix)
use information contained in any data processing, electronic or information
systems relating to Collateral; (x)   make and adjust claims under insurance
policies; (xi) take any action as may be necessary or appropriate to obtain
payment under any letter of credit, banker's acceptance or other instrument for
which a Borrower is a beneficiary; and (xii) take all other actions as Lender
deems appropriate to fulfill any Borrower's obligations under the Loan
Documents.

 

 

 

 

 

 44 

 

 

SECTION 9. REPRESENTATIONS AND WARRANTIES

 

9.1.           General Representations and Warranties. To induce Lender to enter
into this Agreement and to make available the Commitments, Loans and Letters of
Credit, each Borrower represents and warrants that:

 

9.1.1.       Organization and Qualification. Each Borrower and Subsidiary is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each Borrower and Subsidiary is duly
qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could
reasonably be expected to have a Material Adverse Effect.

 

9.1.2.       Power and Authority. Each Obligor is duly authorized to execute,
deliver and perform the Loan Documents to which it is a party. The execution,
delivery and performance of the Loan Documents have been duly authorized by all
necessary action, and do not (a) require any consent or approval of any holders
of Equity Interests of any Obligor, except those already obtained; (b)
contravene the Organic Documents of any Obligor; (c) violate or cause a default
under any Applicable Law or Material Contract; or (d) result in or require the
imposition of a Lien (other than Permitted Liens) on any Obligor's Property.

 

9.1.3.       Enforceability. Each Loan Document is a legal, valid and binding
obligation of each Obligor party thereto, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.

 

9.1.4.       Capital Structure. Schedule 9.1.4 shows, for each Borrower and
Subsidiary, its name, jurisdiction of organization, authorized and issued Equity
Interests, holders of its Equity Interests, and agreements binding on such
holders with respect to such Equity Interests. Except as disclosed on Schedule
9.1.4, in the five years preceding the Closing Date, no Borrower or Subsidiary
has acquired any substantial assets from any other Person nor been the surviving
entity in a merger or combination. Each Borrower has good title to its Equity
Interests in its Subsidiaries, subject only to (a) Lender's Lien and (b) to the
extent subject to the Debt and Lien Subordination Agreement, the Permitted Lien
in favor of the Mezzanine Lender, and all such Equity Interests are duly issued,
fully paid and non-assessable. Except as set forth on Schedule 9.1.4, there are
no outstanding purchase options, warrants, subscription rights, agreements to
issue or sell, convertible interests, phantom rights or powers of attorney
relating to Equity Interests of any Borrower or Subsidiary.

 

9.1.5.       Title to Properties; Priority of Liens. Each Borrower and
Subsidiary has good and marketable title to (or valid leasehold interests in)
all of its Real Estate, and good title to all of its personal Property,
including all Property reflected in any financial statements delivered to
Lender, in each case free of Liens except Permitted Liens. Each Borrower and
Subsidiary has paid and discharged all lawful claims that, if unpaid, could
become a Lien on its Properties, other than Permitted Liens. All Liens of Lender
in the Collateral are duly perfected, first priority Liens, subject only to
Permitted Liens that are expressly allowed to have priority over Lender's Liens.

 

 

 

 

 

 45 

 

 

9.1.6.       Accounts. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrowers with
respect thereto. Borrowers warrant, with respect to each Account at the time it
is shown as an Eligible Account in a Borrowing Base Certificate, that:

 

(a)              it is genuine and enforceable in accordance with its terms and
is not evidenced by a judgment;

 

(b)             it arises out of a completed, bona fide sale and delivery of
goods in the Ordinary Course of Business, and substantially in accordance with
any purchase order, contract or other document relating thereto;

 

(c)              it is for a sum certain, maturing as stated in the invoice
covering such sale, a copy of which has been furnished or is available to Lender
on request;

 

(d)             it is not subject to any offset, Lien (other than Lender's Lien,
subject to the Debt and Lien Subordination Agreement or any subordination
agreement for any other Subordinated Debt, Mezzanine Lender’s Lien and any Lien
of a lender of other Subordinated Debt), deduction, defense, dispute,
counterclaim or other adverse condition except as arising in the Ordinary Course
of Business and disclosed to Lender; and it is absolutely owing by the Account
Debtor, without contingency in any respect;

 

(e)              no purchase order, agreement, document or Applicable Law
restricts assignment of the Account to Lender (regardless of whether, under the
UCC, the restriction is ineffective), and the applicable Borrower is the sole
payee or remittance party shown on the invoice;

 

(f)              no extension, compromise, settlement, modification, credit,
deduction or return has been authorized with respect to the Account, except
discounts or allowances granted in the Ordinary Course of Business for prompt
payment that are reflected on the face of the invoice related thereto and in the
reports submitted to Lender hereunder; and

 

(g)             to the best of Borrowers' knowledge, (i) there are no facts or
circumstances that are reasonably likely to impair the enforceability or
collectability of such Account; (ii) the Account Debtor had the capacity to
contract when the Account arose, continues to meet the applicable Borrower's
customary credit standards, is Solvent (except to the extent clauses (f)(i) and
(ii) of the definition of "Eligible Account" apply), is not contemplating or
subject to an Insolvency Proceeding (except to the extent clauses (f)(i) and
(ii) of the definition of "Eligible Account" apply), and has not failed, or
suspended or ceased doing business; and (iii) there are no proceedings or
actions threatened or pending against any Account Debtor that could reasonably
be expected to have a material adverse effect on the Account Debtor's financial
condition.

 

9.1.7.       Financial Statements. The consolidated and consolidating balance
sheets, and related statements of income, cash flow and shareholders equity, of
Borrowers and Subsidiaries that have been and are hereafter delivered to Lender,
are prepared in accordance with GAAP, and fairly present in all material
respects the financial positions and results of operations of Borrowers and
Subsidiaries at the dates and for the periods indicated. All projections
delivered from time to time to Lender have been prepared in good faith, based on
reasonable assumptions in light of the circumstances at such time. Since January
3, 2015, there has been no change in the condition, financial or otherwise, of
any Borrower or Subsidiary that could reasonably be expected to have a Material
Adverse Effect. No financial statement delivered to Lender at any time contains
any untrue statement of a material fact, nor fails to disclose any material fact
necessary to make such statement not materially misleading. Each Borrower and
Subsidiary is Solvent.

 

 

 

 

 

 46 

 

 

9.1.8.       Surety Obligations. No Borrower or Subsidiary is obligated as
surety or indemnitor under any bond or other contract that assures payment or
performance of any obligation of any Person, except as permitted hereunder.

 

9.1.9.       Taxes. Each Borrower and Subsidiary has filed all federal, state
and local tax returns and other reports that it is required by law to file
(except where on extension authorized by Applicable Law), and has paid, or made
provision for the payment of, all Taxes upon it, its income and its Properties
that are due and payable, except to the extent being Properly Contested. The
provision for Taxes on the books of each Borrower and Subsidiary is adequate for
all years not closed by applicable statutes, and for its current Fiscal Year.

 

9.1.10.    Brokers. Except as set forth on Schedule 9.1.10, there are no
brokerage commissions, finder's fees or investment banking fees payable in
connection with any transactions contemplated by the Loan Documents.

 

9.1.11.    Intellectual Property. Each Borrower and Subsidiary owns or has the
lawful right to use all material Intellectual Property necessary for the conduct
of its business, without conflict with any rights of others. There is no pending
or, to any Borrower's knowledge, threatened Intellectual Property Claim with
respect to any Borrower, any Subsidiary or any of their Property (including any
Intellectual Property). Except as disclosed on Schedule 9.1.11, no Borrower or
Subsidiary pays or owes any Royalty or other compensation to any Person with
respect to any Intellectual Property. All Intellectual Property (other than
off-the-shelf software) owned, used or licensed by, or otherwise subject to any
interests of, any Borrower or Subsidiary, as of the Closing Date, is shown on
Schedule 9.1.11.

 

9.1.12.    Governmental Approvals. Each Borrower and Subsidiary has, is in
compliance in all material respects with, and is in good standing with respect
to, all Governmental Approvals necessary to conduct its business and to own,
lease and operate its Properties. All necessary import, export or other
licenses, permits or certificates for the import or handling of any goods or
other Collateral have been procured and are in effect, and Borrowers and
Subsidiaries have complied with all foreign and domestic laws with respect to
the shipment and importation of any goods or Collateral, except where
noncompliance could not reasonably be expected to have a Material Adverse
Effect.

 

9.1.13.    Compliance with Laws. Each Borrower and Subsidiary has duly complied,
and its Properties and business operations are in compliance, in all material
respects with all Applicable Law, except where noncompliance could not
reasonably be expected to have a Material Adverse Effect. There have been no
citations, notices or orders of material noncompliance issued to any Borrower or
Subsidiary under any Applicable Law. No Inventory has been produced in violation
of the FLSA.

 

9.1.14.    Compliance with Environmental Laws. Except as disclosed on Schedule
9.1.14, no Borrower's or Subsidiary's past or present operations, Real Estate or
other Properties are subject to any federal, state or local investigation to
determine whether any remedial action is needed to address any environmental
pollution, hazardous material or environmental clean-up. No Borrower or
Subsidiary has received any Environmental Notice. No Borrower or Subsidiary has
any contingent liability with respect to any Environmental Release,
environmental pollution or hazardous material on any Real Estate now or
previously owned, leased or operated by it. The representations and warranties
contained in the Environmental Agreement are true and correct on the Closing
Date.

 

9.1.15.    Burdensome Contracts. No Borrower or Subsidiary is a party or subject
to any contract, agreement or charter restriction that could reasonably be
expected to have a Material Adverse Effect. No Borrower or Subsidiary is party
or subject to any Restrictive Agreement, except as shown on Schedule 9.1.15. No
such Restrictive Agreement prohibits the execution, delivery or performance of
any Loan Document by an Obligor.

 

 

 

 

 

 47 

 

 

9.1.16.    Litigation. Except as shown on Schedule 9.1.16, there are no
proceedings or investigations pending or, to any Borrower's knowledge,
threatened against any Borrower or Subsidiary, or any of their businesses,
operations, Properties, prospects or conditions, that (a) relate to any Loan
Documents or transactions contemplated thereby; or (b) could reasonably be
expected to have a Material Adverse Effect if determined adversely to any
Borrower or Subsidiary. Except as shown on such Schedule, no Obligor has a
Commercial Tort Claim (other than, as long as no Default or Event of Default
exists, a Commercial Tort Claim for less than $100,000). No Borrower or
Subsidiary is in default with respect to any order, injunction or judgment of
any Governmental Authority.

 

9.1.17.    No Defaults. No event or circumstance has occurred or exists that
constitutes a Default or Event of Default. No Borrower or Subsidiary is in
default, and no event or circumstance has occurred or exists that with the
passage of time or giving of notice would constitute a default, under any
Material Contract or in the payment of any Borrowed Money or allow termination
of any Material Contract.

 

9.1.18. ERISA. Except as disclosed on Schedule 9.1.18:

 

(a)              Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and other federal and state laws. Each
Plan that is intended to qualify under Section 401(a) of the Code has received a
favorable determination letter from the IRS or an application for such a letter
is currently being processed by the IRS with respect thereto and, to the
knowledge of Borrowers, nothing has occurred which would prevent, or cause the
loss of, such qualification. Each Obligor and ERISA Affiliate has met all
applicable requirements under the Code, ERISA and the Pension Protection Act of
2006, and no application for a waiver of the minimum funding standards or an
extension of any amortization period has been made with respect to any Plan.

 

(b)             There are no pending or, to the knowledge of Borrowers,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan that could reasonably be expected to have a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted in or
could reasonably be expected to have a Material Adverse Effect.

 

(c)              (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Obligor
or ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) no Obligor or ERISA
Affiliate has incurred, or reasonably expects to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan; (v) no Obligor or ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA; and (vi)
as of the most recent valuation date for any Pension Plan or Multiemployer Plan,
the funding target attainment percentage (as defined in Section 430(d)(2) of the
Code) is at least 60%, and no Obligor or ERISA Affiliate knows of any fact or
circumstance that could reasonably be expected to cause the funding target
attainment percentage for any such plan to drop below 60% as of such date.

 

(d)             With respect to any Foreign Plan, (i) all employer and employee
contributions required by law or by the terms of the Foreign Plan have been
made, or, if applicable, accrued, in accordance with normal accounting
practices; (ii) the fair market value of the assets of each funded Foreign Plan,
the liability of each insurer for any Foreign Plan funded through insurance, or
the book reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all current and former participants in such Foreign
Plan according to the actuarial assumptions and valuations most recently used to
account for such obligations in accordance with applicable generally accepted
accounting principles; and (iii) it has been registered as required and has been
maintained in good standing with applicable regulatory authorities.

 

 

 

 

 

 48 

 

 

9.1.19.    Trade Relations. There exists no actual or threatened termination,
limitation or modification of any business relationship between any Borrower or
Subsidiary and any customer or supplier, or any group of customers or suppliers,
who individually or in the aggregate are material to the business of such
Borrower or Subsidiary. There exists no condition or circumstance that could
reasonably be expected to impair the ability of any Borrower or Subsidiary to
conduct its business at any time hereafter in substantially the same manner as
conducted on the Closing Date.

 

9.1.20.    Labor Relations. No Borrower or Subsidiary is party to or bound by
any collective bargaining agreement. Except as set forth on Schedule 9.1.20, no
Borrower or Subsidiary is party to any management agreement or consulting
agreement. There are no material grievances, disputes or controversies with any
union or other organization of any Borrower's or Subsidiary's employees, or, to
any Borrower's knowledge, any asserted or threatened strikes, work stoppages or
demands for collective bargaining.

 

9.1.21.    Payable Practices. No Borrower or Subsidiary has made any material
change in its historical accounts payable practices from those in effect on the
Closing Date.

 

9.1.22.    Not a Regulated Entity. No Obligor is (a) an "investment company" or
a "person directly or indirectly controlled by or acting on behalf of an
investment company" within the meaning of the Investment Company Act of 1940; or
(b) subject to regulation under the Federal Power Act, the Interstate Commerce
Act, any public utilities code or any other Applicable Law regarding its
authority to incur Debt.

 

9.1.23.    Margin Stock. No Borrower or Subsidiary is engaged, principally or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock. No Loan proceeds or Letters
of Credit will be used by Borrowers to purchase or carry, or to reduce or
refinance any Debt incurred to purchase or carry, any Margin Stock or for any
related purpose governed by Regulations T, U or X of the Board of Governors.

 

9.1.24.    OFAC. No Borrower, Subsidiary or, to the knowledge of any Borrower or
Subsidiary, any director, officer, employee, agent, affiliate or representative
thereof, is an individual or entity currently the subject of any Sanctions. No
Borrower or Subsidiary is located, organized or resident in a Designated
Jurisdiction.

 

9.2.           Complete Disclosure. No Loan Document contains any untrue
statement of a material fact, nor fails to disclose any material fact necessary
to make the statements contained therein not materially misleading in light of
the circumstances in which such statements were made. There is no fact or
circumstance that any Obligor has failed to disclose to Lender in writing that
could reasonably be expected to have a Material Adverse Effect.

 

SECTION 10. COVENANTS AND CONTINUING AGREEMENTS

 

10.1.        Affirmative Covenants. Until Full Payment of the Obligations, each
Borrower shall, and shall cause each Subsidiary to:

 

10.1.1.    Inspections; Appraisals.

 

(a)              Permit Lender from time to time, subject (except when a Default
or Event of Default exists) to reasonable notice and normal business hours, to
visit and inspect the Properties of any Borrower or Subsidiary, inspect, audit
and make extracts from any Borrower's or Subsidiary's books and records, and
discuss with its officers, employees, agents, advisors and independent
accountants such Borrower's or Subsidiary's business, financial condition,
assets, prospects and results of operations. Lender shall not have any duty to
any Borrower to make any inspection, nor to share any results of any inspection,
appraisal or report with any Borrower. Borrowers acknowledge that all
inspections, appraisals and reports are prepared by Lender for its purposes, and
Borrowers shall not be entitled to rely upon them.

 

 

 

 

 

 49 

 

 

(b)             Reimburse Lender for all its reasonable and documented charges,
costs and expenses in connection with (i) examinations of any Obligor's books
and records or any other financial or Collateral matters as Lender deems
appropriate, up to two times per Loan Year; and (ii) appraisals of Inventory up
to one time per Loan Year; provided, however, that if an examination or
appraisal is initiated during a Default or Event of Default, all charges, costs
and expenses therefor shall be reimbursed by Borrowers without regard to such
limits. Subject to and without limiting the foregoing, Borrowers agree to pay
Lender's then standard charges for examination activities, including the
standard charges of Lender's internal examination and appraisal groups, as well
as the charges of any third party used for such purposes.

 

10.1.2.    Financial and Other Information. Keep adequate records and books of
account with respect to its business activities, in which proper entries are
made in accordance with GAAP reflecting all financial transactions; and furnish
to Lender:

 

(a)              (i) as soon as available, and in any event within 120 days
after the Closing Date,

(A)   an opening balance sheet as of a date not later than July 17, 2015, on a
consolidated basis for Holdings, which balance sheet shall be audited and
certified (without qualification) by a firm of independent certified public
accountants of recognized standing selected by Borrowers and reasonably
acceptable to Lender, and (B) an opening balance sheet as of a date not later
than July 17, 2015, unaudited and on a consolidating basis for each of the other
Borrowers and Subsidiaries, (ii) as soon as available, and in any event within
120 days after the close of Fiscal Year 2015, (A) a balance sheet as of the end
of such Fiscal Year and the related statements of income, cash flow and
shareholders' equity for the period from the Closing Date through the end of
such Fiscal Year, on a consolidated basis for Holdings, which consolidated
statements shall be audited and certified (without qualification) by a firm of
independent certified public accountants of recognized standing selected by
Borrowers and reasonably acceptable to Lender, and shall set forth in
comparative form corresponding figures for the preceding Fiscal Year and other
information reasonably acceptable to Lender, and (B) a balance sheet as of the
end of such Fiscal Year and the related statements of income, cash flow and
shareholders' equity for the period from the Closing Date through the end of
such Fiscal Year, unaudited and on a consolidating basis for the other Borrowers
and Subsidiaries, and (iii) as soon as available, and in any event within 120
days after the close of each Fiscal Year thereafter, (A) a balance sheet as of
the end of such Fiscal Year and the related statements of income, cash flow and
shareholders' equity for such Fiscal Year, on a consolidated basis for Holdings,
which consolidated statements shall be audited and certified (without
qualification) by a firm of independent certified public accountants of
recognized standing selected by Borrowers and reasonably acceptable to Lender,
and shall set forth in comparative form corresponding figures for the preceding
Fiscal Year and other information reasonably acceptable to Lender, and (B) a
balance sheet as of the end of such Fiscal Year and the related statements of
income, cash flow and shareholders' equity for such Fiscal Year, unaudited and
on a consolidating basis for the other Borrowers and Subsidiaries;

 

(b)             as soon as available, and in any event within 30 days after the
end of each month, unaudited balance sheets as of the end of such month and the
related statements of income and cash flow for such month and for the portion of
the Fiscal Year then elapsed, on consolidated and consolidating bases for
Borrowers and Subsidiaries, setting forth in comparative form corresponding
figures for the preceding Fiscal Year and certified by the chief financial
officer or Treasurer of Borrower Agent as prepared in accordance with GAAP and
fairly presenting in all material respects the financial position and results of
operations for such month and period, subject to normal year-end adjustments and
the absence of footnotes;

 

(c) concurrently with delivery of financial statements under clauses (a) and (b)
above, or more frequently if requested by Lender while a Default or Event of
Default exists, a Compliance Certificate executed by the chief financial officer
or Treasurer of Borrower Agent;

 

 

 

 

 

 50 

 

 

(d)             concurrently with delivery of financial statements under clause
(a) above, copies of all management letters and other material reports submitted
to Borrowers by their accountants in connection with such financial statements;

 

(e)              no later than 60 days after the end of each Fiscal Year,
projections of Borrowers' consolidated balance sheets, results of operations,
cash flow and Availability for the next Fiscal Year, month by month;

 

(f)              at Lender's request, a listing of each Borrower's trade
payables, specifying the trade creditor and balance due, and a detailed trade
payable aging, all in form reasonably satisfactory to Lender;

 

(g)             promptly after the sending or filing thereof, copies of any
proxy statements, financial statements or reports that any Borrower has made
generally available to its shareholders; copies of any regular, periodic and
special reports or registration statements or prospectuses that any Borrower
files with the Securities and Exchange Commission or any other Governmental
Authority, or any securities exchange; and copies of any press releases or other
statements made available by a Borrower to the public concerning material
changes to or developments in the business of such Borrower;

 

(h)             promptly after the sending or filing thereof, copies of any
annual report to be filed in connection with each Plan or Foreign Plan;

 

(i)               such other reports and information (financial or otherwise) as
Lender may reasonably request from time to time in connection with any
Collateral or any Borrower's, Subsidiary's or other Obligor's financial
condition or business;

 

(j)               as soon as available, and in any event within 120 days after
the close of each Fiscal Year, financial statements for each Guarantor, in form
and substance satisfactory to Lender;

 

(k)             upon receipt or delivery thereof by or to any Obligor or
Subsidiary, any notice of "Default" or "Event of Default" (under and as defined
in the Mezzanine Debt Documents) and, without duplication of any report required
to be provided hereunder, each material report required to be provided pursuant
to the Mezzanine Loan Agreement and, upon execution thereof, any waiver,
amendment or other modification to the Mezzanine Debt Documents;

 

(l)               upon receipt or delivery thereof by or to any Borrower, any
notice of "Default" or "Event of Default" (under and as defined in the Factoring
Agreements) and, without duplication of any report required to be provided
hereunder, each material report required to be provided pursuant to the
Factoring Agreements and, upon execution thereof, any waiver, amendment or other
modification to the Factoring Agreements; and

 

(m)            at Lender's request at any time after any Borrower files or
consents to the filing of a consolidated income tax return with any Person other
than Borrowers and Subsidiaries under the limited circumstances set forth in
Section 10.2.12, provide Lender with true, correct and complete copies of all
filed consolidated income tax returns for the Person with which such Borrower
files or consents to the filing of such consolidated income tax returns and
evidence that such Person has timely and fully paid all Taxes owing to
Governmental Authorities under such returns.

 

10.1.3.    Notices. Notify Lender in writing, promptly after a Borrower's
obtaining knowledge thereof, of any of the following that affects an Obligor:
(a) the threat or commencement of any proceeding or investigation, whether or
not covered by insurance, if an adverse determination could reasonably be
expected to have a Material Adverse Effect; (b) any pending or threatened labor
dispute, strike or walkout, or the expiration of any material labor contract;
(c) any default under or termination of a Material Contract; (d) the existence
of any Default or Event of Default; (e) any judgment in an amount exceeding
$250,000 not covered by insurance; (f) the assertion of any Intellectual
Property Claim, if an adverse resolution could reasonably be expected to have a
Material Adverse Effect; (g) any violation or asserted violation of any
Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws), if an
adverse resolution could reasonably be expected to have a Material Adverse
Effect; (h) any Environmental Release by an Obligor or on any Property owned,
leased or occupied by an Obligor; or receipt of any Environmental Notice; (i)
the occurrence of any ERISA Event; (j) the discharge of or any withdrawal or
resignation by Borrowers' independent accountants; (k) any opening of a new
office or place of business, at least 30 days prior to such opening; (l) without
duplication of any notice required to be provided hereunder, each material
notice required to be provided pursuant to the Mezzanine Loan Agreement; or (m)
without duplication of any notice required to be provided hereunder, each
material notice required to be provided pursuant to any Factoring Agreement.

 

 

 

 51 

 

 

10.1.4.    Landlord and Storage Agreements. Upon reasonable request, provide
Lender with copies of all existing agreements, and promptly after execution
thereof provide Lender with copies of all future agreements, between an Obligor
and any landlord, warehouseman, processor, shipper, bailee or other Person that
owns any premises at which any Collateral may be kept or that otherwise may
possess or handle any Collateral.

 

10.1.5.    Compliance with Laws. Comply with all Applicable Laws, including
ERISA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding
collection and payment of Taxes, and maintain all Governmental Approvals
necessary to the ownership of its Properties or conduct of its business, unless
failure to comply (other than failure to comply with Anti-Terrorism Laws) or
maintain could not reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing, if any material Environmental
Release occurs at or on any Properties of any Borrower or Subsidiary, it shall
act promptly and diligently to investigate and report to Lender and all
appropriate Governmental Authorities the extent of, and to make appropriate
remedial action to eliminate, such Environmental Release, whether or not
directed to do so by any Governmental Authority.

 

10.1.6.    Taxes. Pay and discharge all Taxes prior to the date on which they
become delinquent or penalties attach, unless such Taxes are being Properly
Contested.

 

10.1.7.    Insurance. In addition to the insurance required hereunder with
respect to Collateral, maintain insurance with insurers (with a Best Rating of
at least A, unless otherwise approved by Lender in its discretion) satisfactory
to Lender, (a) with respect to the Properties and business of Borrowers and
Subsidiaries of such type (including product liability, workers' compensation,
larceny, embezzlement, or other criminal misappropriation insurance), in such
amounts, and with such coverages and deductibles as are customary for companies
similarly situated; and (b) business interruption insurance in an amount not
less than $10,000,000, with deductibles and subject to an Insurance Assignment
satisfactory to Lender.

 

10.1.8.    Licenses. Keep each material License affecting any Collateral
(including the manufacture, distribution or disposition of Inventory) or any
other material Property of Borrowers and Subsidiaries in full force and effect;
promptly notify Lender of any proposed modification to any such License, or
entry into any new material License, in each case at least 10 days prior to its
effective date; pay all Royalties when due; and notify Lender of any default or
breach asserted by any Person to have occurred under any such License.

 

10.1.9.    Future Subsidiaries. Promptly notify Lender upon any Person becoming
a Subsidiary and, if such Person is not a Foreign Subsidiary, cause it to
guaranty the Obligations (or, if requested by Borrowers and agreed to by Lender
in its discretion, become a Borrower hereunder) in a manner reasonably
satisfactory to Lender, and to execute and deliver such documents, instruments
and agreements and to take such other actions as Lender shall reasonably require
to evidence and perfect a Lien in favor of Lender on all assets of such Person
(other than Excluded Assets), including delivery of such legal opinions, in form
and substance reasonably satisfactory to Lender, as it shall deem appropriate.

 

 

 

 

 

 52 

 

 

10.1.10.    Depository Bank. Maintain Lender as its principal depository bank,
including for the maintenance of all operating, collection, disbursement and
other deposit accounts and for all Cash Management Services.

 

10.1.11.    Post-Closing Obligations. Use commercially reasonable efforts to
address and ameliorate, to Lender's reasonable satisfaction, matters of concern
for Lender with respect to that portion of the Collateral consisting of Real
Estate.

 

10.2.        Negative Covenants. Until Full Payment of the Obligations, each
Borrower shall not, and shall cause each Subsidiary not to:

 

10.2.1.    Permitted Debt. Create, incur, guarantee or suffer to exist any Debt,
except:

 

(a)              the Obligations;

 

(b)             the Mezzanine Debt subject to the terms of the Debt and Lien
Subordination Agreement as in effect on the date hereof;

 

(c) Subordinated Debt;

 

(d) Permitted Purchase Money Debt;

 

(e)              Borrowed Money (other than the Obligations, Subordinated Debt
and Permitted Purchase Money Debt), but only to the extent outstanding on the
Closing Date and not satisfied with proceeds of the initial Loans;

 

(f) Bank Product Debt incurred in the Ordinary Course of Business;

 

(g)             Debt that is in existence when a Person becomes a Subsidiary or
that is secured by an asset when acquired by a Borrower or Subsidiary, as long
as such Debt was not incurred in contemplation of such Person becoming a
Subsidiary or such acquisition, and does not exceed $2,000,000 in the aggregate
at any time

 

(h) Permitted Contingent Obligations;

 

(i) Refinancing Debt as long as each Refinancing Condition is satisfied;

 

(j) Debt incurred pursuant to any intercompany loan permitted under Section
10.2.7;

 

(k)             guaranties by any Borrower of Debt or other obligations or
another Borrower or Subsidiary with respect, in each case, to Debt otherwise
permitted to be incurred under this Section 10.2.1; and

 

(l)               Debt that is not included in any of the preceding clauses of
this Section, is not secured by a Lien and does not exceed $2,500,000 in the
aggregate at any time.

 

10.2.2.    Permitted Liens. Create or suffer to exist any Lien upon any of its
Property, except the following (collectively, "Permitted Liens"):

 

 

 

 

 

 53 

 

 

(a)              Liens in favor of Lender;

 

(b)             Liens in favor of the Mezzanine Lender securing the Mezzanine
Debt permitted hereunder so long as the Debt and Lien Subordination Agreement
remains in full force and effect with respect thereto;

 

(c) Purchase Money Liens securing Permitted Purchase Money Debt;

 

(d) Liens for Taxes not yet due or being Properly Contested;

 

(e)              statutory Liens (other than Liens for Taxes or imposed under
ERISA) arising in the Ordinary Course of Business, but only if (i) payment of
the obligations secured thereby is not yet due or is being Properly Contested,
and (ii) such Liens do not materially impair the value or use of the Property or
materially impair operation of the business of any Borrower or Subsidiary;

 

(f)              Liens incurred or deposits made in the Ordinary Course of
Business to secure the performance of government tenders, bids, contracts,
statutory obligations and other similar obligations, as long as such Liens are
at all times junior to Lender's Liens and are required or provided by law;

 

(g)              Liens arising in the Ordinary Course of Business that are
subject to Lien Waivers;

 

(h)             Liens arising by virtue of a judgment or judicial order against
any Borrower or Subsidiary, or any Property of a Borrower or Subsidiary, as long
as such Liens are (i) in existence for less than 20 consecutive days or being
Properly Contested, and (ii) at all times junior to Lender's Liens;

 

(i)               easements, rights-of-way, restrictions, covenants or other
agreements of record, and other similar charges or encumbrances on Real Estate,
that do not secure any monetary obligation and do not interfere with the
Ordinary Course of Business;

 

(j)               normal and customary rights of setoff upon deposits in favor
of depository institutions, and Liens of a collecting bank on Payment Items in
the course of collection;

 

(k) existing Liens shown on Schedule 10.2.2;

 

(l)               Liens on the factored Accounts created for the purpose of
evidencing the transfer and sale of Accounts sold to the Factors pursuant to the
terms of the Factoring Agreements, provided that a Factor Intercreditor
Agreement has been received by Lender and remains in effect with respect to each
such Factoring Agreement;

 

(m) any interest or title of a lessor or sublessor under any lease permitted
hereunder;

 

(n)             any zoning or similar law or right reserved to or vested in any
Governmental Authority to control or regulate the use of any real Property not
materially detracting from the value of such real Property; and

 

(o)             Liens incurred in the Ordinary Course of Business on deposits
made in connection with workers' compensation, unemployment insurance and other
types of social security that are junior to Lender's Liens.

 

10.2.3. Reserved.

 

10.2.4.    Distributions; Upstream Payments. (a) Declare or make any
Distributions, except: (i) Upstream Payments, (ii) Permitted Tax Distributions,
and (iii) Permitted Non-Tax Distributions.

 

 

 

 

 

 54 

 

 

(b) Create or suffer to exist any encumbrance or restriction on the ability of a
Subsidiary to make any Upstream Payment, except for restrictions under the Loan
Documents, under Applicable Law or in effect on the Closing Date as shown on
Schedule 9.1.15.

 

10.2.5. Restricted Investments. Make any Restricted Investment.

 

10.2.6.    Disposition of Assets. Make any Asset Disposition, except a Permitted
Asset Disposition, a disposition of Equipment under Section 8.4.2, or a transfer
of Property by a Subsidiary or Obligor to a Borrower.

 

10.2.7.    Loans. Make any loans or other advances of money to any Person,
except (a) advances to an officer or employee for salary, travel expenses,
commissions and similar items in the Ordinary Course of Business; (b) prepaid
expenses and extensions of trade credit made in the Ordinary Course of Business;
(c) deposits with financial institutions permitted hereunder; and (d) as long as
no Default or Event of Default exists, intercompany loans by a Borrower to
another Borrower.

 

10.2.8.       Restrictions on Payment of Certain Debt. Make any payments
(whether voluntary or mandatory, or a prepayment, redemption, retirement,
defeasance or acquisition) with respect to any:

 

(a)    Subordinated Debt (other than Subordinated Debt of the type described in
the following clause (b)), except regularly scheduled payments of principal,
interest and fees, but only to the extent permitted under any subordination
agreement relating to such Debt (and a Senior Officer of Borrower Agent shall
certify to Lender, not less than five Business Days prior to the date of
payment, that all conditions under such agreement have been satisfied); or

 

(b)  The Mezzanine Debt, except to the extent expressly permitted under the
terms of the Debt and Lien Subordination Agreement; or

 

(c)  Borrowed Money (other than the Obligations, the Mezzanine Debt and
Subordinated Debt) prior to its due date under the agreements evidencing such
Debt as in effect on the Closing Date (or as amended thereafter with the consent
of Lender).

 

10.2.9.       Fundamental Changes. (a) Without giving 30 days prior written
notice to Lender, change its name or conduct business under any fictitious name;
change its tax, charter or other organizational identification number; change
its form or state of organization; (b) liquidate, wind up its affairs or
dissolve itself; or merge, combine or consolidate with any Person, whether in a
single transaction or in a series of related transactions, except for (i)
mergers or consolidations of a wholly- owned Subsidiary with another
wholly-owned Subsidiary or into a Borrower; or (ii) Permitted Acquisitions.

 

10.2.10.    Subsidiaries. Form or acquire any Subsidiary after the Closing Date,
except in accordance with Sections 10.1.9, 10.2.5 or 10.2.9; or permit any
existing Subsidiary to issue any additional Equity Interests except directors'
qualifying shares.

 

10.2.11.    Organic Documents. Amend, modify or otherwise change any of its
Organic Documents, except in connection with a transaction permitted under
Section 10.2.9.

 

10.2.12.    Tax Consolidation. File or consent to the filing of any consolidated
income tax return with any Person other than Borrowers and Subsidiaries or any
corporation that owns all of the Equity Interests of any Obligor.

 

 

 

 

 

 55 

 

 

10.2.13.    Accounting Changes. Make any material change in accounting treatment
or reporting practices, except as required by GAAP and in accordance with
Section 1.2; or change its Fiscal Year.

 

10.2.14.    Restrictive Agreements. Become a party to any Restrictive Agreement,
except a Restrictive Agreement (a) in effect on the Closing Date; (b) relating
to secured Debt permitted hereunder, as long as the restrictions apply only to
collateral for such Debt; or (c) constituting customary restrictions on
assignment in leases and other contracts.

 

10.2.15.    Hedging Agreements. Enter into any Hedging Agreement, except to
hedge risks arising in the Ordinary Course of Business and not for speculative
purposes.

 

10.2.16.    Conduct of Business. Engage in any business, other than its business
as conducted on the Closing Date (or similar related business) and any
activities incidental thereto.

 

10.2.17.    Affiliate Transactions. Enter into or be party to any transaction
with an Affiliate, except (a) transactions contemplated by the Loan Documents or
the Marquis SPA Documents; (b) payment of reasonable compensation to officers
and employees for services actually rendered, and loans and advances permitted
by Section 10.2.7; (c) payment of customary directors' fees and indemnities; (d)
transactions solely among Borrowers; (e) transactions with Affiliates
consummated prior to the Closing Date, as shown on Schedule 10.2.17; and (f)
transactions with Affiliates in the Ordinary Course of Business, upon fair and
reasonable terms fully disclosed to Lender and no less favorable than would be
obtained in a comparable arm's-length transaction with a non-Affiliate.

 

10.2.18.    Plans. Become party to any Multiemployer Plan or Foreign Plan, other
than any in existence on the Closing Date.

 

10.2.19.    Amendments to Mezzanine Debt, Factoring Agreements and Other
Subordinated Debt.

 

(a)              Amend, supplement or otherwise modify any document, instrument
or agreement relating to the Mezzanine Debt, except to the extent expressly
permitted under the terms of the Debt and Lien Subordination Agreement.

 

(b)             Amend, supplement or otherwise modify any Factoring Agreement,
except to the extent expressly permitted under the terms of the applicable
Factor Intercreditor Agreement.

 

(c)              Amend, supplement or otherwise modify any document, instrument
or agreement relating to any Subordinated Debt (other than Subordinated Debt of
the type described in the foregoing clause (a)), if such modification (i)
increases the principal balance of such Debt, or increases any required payment
of principal or interest; (ii) accelerates the date on which any installment of
principal or any interest is due, or adds any additional redemption, put or
prepayment provisions; (iii) shortens the final maturity date or otherwise
accelerates amortization; (iv) increases the interest rate; (v) increases or
adds any fees or charges; (vi) modifies any covenant in a manner or adds any
representation, covenant or default that is more onerous or restrictive in any
material respect for any Borrower or Subsidiary, or that is otherwise materially
adverse to any Borrower, any Subsidiary or Lender; or (vii) results in the
Obligations not being fully benefited by the subordination provisions thereof.

 

10.3.        Financial Covenants. As long as any Commitment or Obligations are
outstanding, Borrowers shall:

 

10.3.1.    Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio
of at least 1.05 to 1.0, tested as of the last day of each month for the twelve
consecutive months ending on such day.

 

 

 

 

 

 56 

 

 

SECTION 11. EVENTS OF DEFAULT; REMEDIES ON DEFAULT

 

11.1.        Events of Default. Each of the following shall be an "Event of
Default" if it occurs for any reason whatsoever, whether voluntary or
involuntary, by operation of law or otherwise:

 

(a)              Any Borrower fails to pay its Obligations when due (whether at
stated maturity, on demand, upon acceleration or otherwise);

 

(b)             Any representation, warranty or other written statement of an
Obligor made in connection with any Loan Documents or transactions contemplated
thereby is incorrect or misleading in any material respect when given;

 

(c)              A Borrower breaches or fail to perform any covenant contained
in Section 7.2, 7.3, 7.4, 7.6, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1, 10.1.2, 10.2 or
10.3;

 

(d)             An Obligor breaches or fails to perform any other covenant
contained in any Loan Documents, and such breach or failure is not cured within
15 days after a Senior Officer of such Obligor has knowledge thereof or receives
notice thereof from Lender, whichever is sooner; provided, however, that such
notice and opportunity to cure shall not apply if the breach or failure to
perform is not capable of being cured within such period or is a willful breach
by an Obligor;

 

(e)              A Guarantor repudiates, revokes or attempts to revoke its
Guaranty; an Obligor or third party denies or contests the validity or
enforceability of any Loan Documents or Obligations, or the perfection or
priority of any Lien granted to Lender; or any Loan Document ceases to be in
full force or effect for any reason (other than a waiver or release by Lender);

 

(f)              Any breach or default of an Obligor occurs (after giving effect
to any applicable grace period thereunder) under (i) any Hedging Agreement; (ii)
any Mezzanine Debt Document; (iii) any Factoring Agreement; or (iv) any
instrument or agreement to which it is a party or by which it or any of its
Properties is bound, relating to any Debt (other than the Obligations) in excess
of $1,000,000, if the maturity of or any payment with respect to such Debt may
be accelerated or demanded due to such breach;

 

(g)             Any judgment or order for the payment of money is entered
against an Obligor in an amount that exceeds, individually or cumulatively with
all unsatisfied judgments or orders against all Obligors, $750,000 (net of
insurance coverage therefor that has not been denied by the insurer), unless a
stay of enforcement of such judgment or order is in effect, by reason of a
pending appeal or otherwise;

 

(h)             A loss, theft, damage or destruction occurs with respect to any
Collateral if the amount not covered by insurance exceeds $500,000;

 

(i)               An Obligor is enjoined, restrained or in any way prevented by
any Governmental Authority from conducting any material part of its business; an
Obligor suffers the loss, revocation or termination of any material license,
permit, lease or agreement necessary to its business; there is a cessation of
any material part of an Obligor's business for a material period of time; any
material Collateral or Property of an Obligor is taken or impaired through
condemnation; an Obligor agrees to or commences any liquidation, dissolution or
winding up of its affairs except in connection with a merger or consolidation
with another Obligor that is permitted under this Agreement; or an Obligor is
not Solvent;

 

(j)               An Insolvency Proceeding is commenced by an Obligor; an
Obligor makes an offer of settlement, extension or composition to its unsecured
creditors generally; a trustee is appointed to take possession of any
substantial Property of or to operate any of the business of an Obligor; or an
Insolvency Proceeding is commenced against an Obligor and: the Obligor consents
to institution of the proceeding, the petition commencing the proceeding is not
timely contested by the Obligor, the petition is not dismissed within 30 days
after filing, or an order for relief is entered in the proceeding;

 

 

 

 

 

 57 

 

 

(k)             An ERISA Event occurs with respect to a Pension Plan or
Multiemployer Plan that has resulted or could reasonably be expected to result
in liability of an Obligor to a Pension Plan, Multiemployer Plan or PBGC, or
that constitutes grounds for appointment of a trustee for or termination by the
PBGC of any Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate
fails to pay when due any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan; or any event
similar to the foregoing occurs or exists with respect to a Foreign Plan;

 

(l)               An Obligor or any of its Senior Officers is criminally
indicted or convicted for (i) a felony committed in the conduct of the Obligor's
business, or (ii) violating any state or federal law (including the Controlled
Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of
War Materials Act) that could lead to forfeiture of any material Property or any
Collateral; or

 

(m)            A Change of Control occurs; or any event occurs or condition
exists that has a Material Adverse Effect.

 

11.2.        Remedies upon Default. If an Event of Default described in Section
11.1(j) occurs with respect to any Borrower, then to the extent permitted by
Applicable Law, all Obligations shall become automatically due and payable and
all Commitments shall terminate, without any action by Lender or notice of any
kind. In addition, or if any other Event of Default exists, Lender may in its
discretion do any one or more of the following from time to time:

 

(a)              declare any Obligations immediately due and payable, whereupon
they shall be due and payable without diligence, presentment, demand, protest or
notice of any kind, all of which are hereby waived by Borrowers to the fullest
extent permitted by law;

 

(b)             terminate, reduce or condition any Commitment, or make any
adjustment to the Borrowing Base;

 

(c)              require Obligors to Cash Collateralize their LC Obligations,
Bank Product Debt and other Obligations that are contingent or not yet due and
payable, and if Obligors fail to deposit such Cash Collateral, Lender may
advance the required Cash Collateral as Revolver Loans; and

 

(d)             exercise any other rights or remedies afforded under any
agreement, by law, at equity or otherwise, including the rights and remedies of
a secured party under the UCC. Such rights and remedies include the rights to
(i) take possession of any Collateral; (ii) require Borrowers to assemble
Collateral, at Borrowers' expense, and make it available to Lender at a place
designated by Lender; (iii) enter any premises where Collateral is located and
store Collateral on such premises until sold (and if the premises are owned or
leased by a Borrower, Borrowers agree not to charge for such storage); and (iv)
sell or otherwise dispose of any Collateral in its then condition, or after any
further manufacturing or processing thereof, at public or private sale, with
such notice as may be required by Applicable Law, in lots or in bulk, at such
locations, all as Lender, in its discretion, deems advisable. Each Borrower
agrees that 10 days notice of any proposed sale or other disposition of
Collateral by Lender shall be reasonable, and that any sale conducted on the
internet or to a licensor of Intellectual Property shall be commercially
reasonable. Lender may conduct sales on any Obligor's premises, without charge,
and any sales may be adjourned from time to time in accordance with Applicable
Law. Lender shall have the right to sell, lease or otherwise dispose of any
Collateral for cash, credit or any combination thereof, and Lender may purchase
any Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of the purchase price, may set off the amount of such price
against the Obligations.

 

11.3.        License. To the extent permitted under the terms of any underlying
license or sublicense agreements (if applicable), Lender is hereby granted an
irrevocable, non-exclusive license or other right to use, license or sub-license
during the existence of an Event of Default (without payment of royalty or other
compensation to any Person) any or all Intellectual Property of Borrowers,
computer hardware and software, trade secrets, brochures, customer lists,
promotional and advertising materials, labels, packaging materials and other
Property, in advertising for sale, marketing, selling, collecting, completing
manufacture of, or otherwise exercising any rights or remedies with respect to,
any Collateral. Each Borrower's rights and interests under Intellectual Property
shall inure to Lender's benefit.

 

 

 

 

 

 58 

 

 

11.4.        Setoff. At any time during an Event of Default, Lender and its
Affiliates are authorized, to the fullest extent permitted by Applicable Law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final, in whatever currency) at any time held and other
obligations (in whatever currency) at any time owing by Lender or such Affiliate
to or for the credit or the account of an Obligor against its Obligations,
whether or not Lender or such Affiliate shall have made any demand under this
Agreement or any other Loan Document and although such Obligations may be
contingent or unmatured or are owed to a branch or office of Lender or such
Affiliate different from the branch or office holding such deposit or obligated
on such indebtedness. The rights of Lender and each such Affiliate under this
Section are in addition to other rights and remedies (including other rights of
setoff) that such Person may have.

 

11.5.Remedies Cumulative; No Waiver.

 

11.5.1.    Cumulative Rights. All agreements, warranties, guaranties,
indemnities and other undertakings of Obligors under the Loan Documents are
cumulative and not in derogation of each other. The rights and remedies of
Lender under the Loan Documents are cumulative, may be exercised at any time and
from time to time, concurrently or in any order, and are not exclusive of any
other rights or remedies available by agreement, by law, at equity or otherwise.
All such rights and remedies shall continue in full force and effect until Full
Payment of all Obligations.

 

11.5.2.    Waivers. No waiver or course of dealing shall be established by (a)
the failure or delay of Lender to require strict performance by any Obligor
under any Loan Document, or to exercise any rights or remedies with respect to
Collateral or otherwise; (b) the making of any Loan or issuance of any Letter of
Credit during a Default, Event of Default or other failure to satisfy any
conditions precedent; or (c) acceptance by Lender of any payment or performance
by an Obligor under any Loan Documents in a manner other than that specified
therein. Any failure to satisfy a financial covenant on a measurement date shall
not be cured or remedied by satisfaction of such covenant on a subsequent date.

 

SECTION 12. MISCELLANEOUS

 

12.1.        Amendments and Waivers.

 

12.1.1.    Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrowers, Lender, and their respective successors and
assigns, except that no Borrower shall have the right to assign its rights or
delegate its obligations under any Loan Documents.

 

12.1.2.    Amendments and Other Modifications. No modification of any Loan
Document, including any extension or amendment of a Loan Document or any waiver
of a Default or Event of Default, shall be effective without the prior written
agreement of Lender and each Obligor party to such Loan Document; provided,
however, that only the consent of the parties to a Bank Product agreement shall
be required for any modification of such agreement. Any waiver or consent
granted by Lender shall be effective only if in writing, and only for the matter
specified.

 

12.2.        Indemnity. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE
INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY
INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING
FROM THE NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan
Document have any obligation thereunder to indemnify or hold harmless an
Indemnitee with respect to a Claim that is determined in a final, non-
appealable judgment by a court of competent jurisdiction to result from the
gross negligence or willful misconduct of such Indemnitee.

 

 

 

 

 

 59 

 

 

12.3.Notices and Communications.

 

12.3.1.    Notice Address. Subject to Section 4.1.2, all notices and other
communications by or to a party hereto shall be in writing and shall be given to
any Borrower, at Borrower Agent's address shown on the signature pages hereof,
and to any other Person at its address shown on the signature pages hereof, or
at such other address as a party may hereafter specify by notice in accordance
with this Section 12.3. Each such notice or other communication shall be
effective only (a) if given by facsimile transmission, when transmitted to the
applicable facsimile number, if confirmation of receipt is received; (b) if
given by mail, three Business Days after deposit in the U.S. mail, with
first-class postage pre-paid, addressed to the applicable address; or (c) if
given by personal delivery, when duly delivered to the notice address with
receipt acknowledged. Notwithstanding the foregoing, no notice to Lender
pursuant to Section 2.1.3, 2.3, 3.1.2, 4.1.1 or 5.3.3 shall be effective until
actually received by the individual to whose attention at Lender such notice is
required to be sent. Any written notice or other communication that is not sent
in conformity with the foregoing provisions shall nevertheless be effective on
the date actually received by the noticed party. Any notice received by Borrower
Agent shall be deemed received by all Borrowers.

 

12.3.2.    Electronic Communications; Voice Mail. Electronic mail and internet
websites may be used only for routine communications, such as delivery of
financial statements, Borrowing Base Certificates and other information required
by Section 10.1.2, administrative matters, distribution of Loan Documents, and
matters permitted under Section 4.1.2. Lender make no assurances as to the
privacy and security of electronic communications. Electronic and voice mail may
not be used as effective notice under the Loan Documents.

 

12.3.3.    Platform. Borrowing Base information, reports, financial statements
and other materials shall be delivered by Borrowers pursuant to procedures
approved by Lender, including electronic delivery (if possible) upon request by
Lender to an electronic system maintained by it ("Platform"). Borrowers shall
notify Lender of each posting of reports or other information on the Platform.
All information shall be deemed received by Lender only upon its receipt of such
notice. The Platform is provided "as is" and "as available." NO WARRANTY OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY LENDER WITH RESPECT TO
THE PLATFORM. Lender does not warrant the adequacy or functioning of the
Platform, and expressly disclaims liability for any issues involving the
Platform. No Indemnitee shall have any liability to Borrowers or any other
Person for losses, claims, damages, liabilities or expenses of any kind (whether
in tort, contract or otherwise) relating to use by any Person of the Platform or
delivery of any information over the internet.

 

12.3.4.    Non-Conforming Communications. Lender may rely upon any
communications purportedly given by or on behalf of any Borrower even if they
were not made in a manner specified herein, were incomplete or were not
confirmed, or if the terms thereof, as understood by the recipient, varied from
a later confirmation. Each Borrower shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any
electronic or telephonic communication purportedly given by or on behalf of a
Borrower.

 

 

 

 

 

 60 

 

 

12.4.        Performance of Borrowers' Obligations. Lender may, in its
discretion at any time and from time to time, at Borrowers' expense, pay any
amount or do any act required of a Borrower under any Loan Documents or
otherwise lawfully requested by Lender to (a) enforce any Loan Documents or
collect any Obligations; (b) protect, insure, maintain or realize upon any
Collateral; or (c) defend or maintain the validity or priority of Lender's Liens
in any Collateral, including any payment of a judgment, insurance premium,
warehouse charge, finishing or processing charge, or landlord claim, or any
discharge of a Lien. All payments, costs and expenses (including Extraordinary
Expenses) of Lender under this Section shall be reimbursed by Borrowers, on
demand, with interest from the date incurred until paid in full, at the Default
Rate applicable to Base Rate Revolver Loans. Any payment made or action taken by
Lender under this Section shall be without prejudice to any right to assert an
Event of Default or to exercise any other rights or remedies under the Loan
Documents.

 

12.5.        Credit Inquiries. Lender may (but shall have no obligation) to
respond to usual and customary credit inquiries from third parties concerning
any Obligor or Subsidiary.

 

12.6.        Severability. Wherever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be valid under Applicable
Law. If any provision is found to be invalid under Applicable Law, it shall be
ineffective only to the extent of such invalidity and the remaining provisions
of the Loan Documents shall remain in full force and effect.

 

12.7.        Cumulative Effect; Conflict of Terms. The provisions of the Loan
Documents are cumulative. The parties acknowledge that the Loan Documents may
use several limitations or measurements to regulate similar matters, and they
agree that these are cumulative and that each must be performed as provided.
Except as otherwise provided in another Loan Document (by specific reference to
the applicable provision of this Agreement), if any provision contained herein
is in direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

 

12.8.        Counterparts; Execution. Any Loan Document may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement shall become
effective when Lender has received counterparts bearing the signatures of all
parties hereto. Delivery of a signature page of any Loan Document by telecopy or
other electronic means shall be effective as delivery of a manually executed
counterpart of such agreement. Any electronic signature, contract formation on
an electronic platform and electronic record-keeping shall have the same legal
validity and enforceability as a manually executed signature or use of a
paper-based recordkeeping system to the fullest extent permitted by Applicable
Law, including the Federal Electronic Signatures in Global and National Commerce
Act, the New York State Electronic Signatures and Records Act, or any similar
state law based on the Uniform Electronic Transactions Act.

 

12.9.        Entire Agreement. Time is of the essence with respect to all Loan
Documents and Obligations. The Loan Documents constitute the entire agreement,
and supersede all prior understandings and agreements, among the parties
relating to the subject matter thereof.

 

12.10.     No Control; No Advisory or Fiduciary Responsibility. Nothing in any
Loan Document and no action of Lender pursuant to any Loan Document shall be
deemed to constitute control of any Obligor by Lender. In connection with all
aspects of each transaction contemplated by any Loan Document, Borrowers
acknowledge and agree that (a)(i) this credit facility and all related services
by Lender or its Affiliates are arm's-length commercial transactions between
Borrowers and such Person; (ii) Borrowers have consulted their own legal,
accounting, regulatory and tax advisors to the extent they have deemed
appropriate; and (iii) Borrowers are capable of evaluating, and understand and
accept, the terms, risks and conditions of the transactions contemplated by the
Loan Documents; (b) each of Lender and its Affiliates is and has been acting
solely as a principal and, except as expressly agreed in writing by the relevant
parties, has not been, is not, and will not be acting as an advisor, agent or
fiduciary for Borrowers, their Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents
except as expressly set forth therein; and (c) Lender and its Affiliates may be
engaged in a broad range of transactions that involve interests that differ from
those of Borrowers and their Affiliates, and have no obligation to disclose any
of such interests to Borrowers or their Affiliates. To the fullest extent
permitted by Applicable Law, each Borrower hereby waives and releases any claims
that it may have against Lender and its Affiliates with respect to any breach of
agency or fiduciary duty in connection with any transaction contemplated by a
Loan Document.

 

 

 

 

 

 61 

 

 

12.11.     Confidentiality. Lender agrees to maintain the confidentiality of all
Information (as defined below), except that Information may be disclosed (a) to
its Affiliates, and its and their partners, directors, officers, employees,
agents, advisors and representatives (provided they are informed of the
confidential nature of the Information and instructed to keep it confidential);
(b) to the extent requested by any governmental, regulatory or self-regulatory
authority purporting to have jurisdiction over it or its Affiliates (in which
case Lender shall notify Borrower Agent to the extent Lender is lawfully
permitted to do so); (c) to the extent required by Applicable Law or by any
subpoena or other legal process (in which case Lender shall notify Borrower
Agent to the extent Lender is lawfully permitted to do so); (d) to any other
party hereto; (e) in connection with any action or proceeding relating to any
Loan Documents or Obligations; (f) subject to an agreement containing provisions
substantially the same as this Section, to any potential or actual transferee of
any interest in a Loan Document or any actual or prospective party (or its
advisors) to any Bank Product or to any swap, derivative or other transaction
under which payments are to be made by reference to an Obligor or Obligor's
obligations; (g) with the consent of Borrower Agent; or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) is available to Lender or its Affiliates on a
nonconfidential basis from a source other than Borrowers. Notwithstanding the
foregoing, subject to Borrower Agent's prior written consent, Lender may publish
or disseminate general information concerning this credit facility, and may use
Borrowers' logos, trademarks or product photographs in advertising materials. As
used herein, "Information" means information received from an Obligor or
Subsidiary relating to it or its business, other than any information that is
available to Lender on a nonconfidential basis prior to disclosure by an Obligor
or Subsidiary, provided, that in the case of information received from an
Obligor or Subsidiary after the Closing Date, such information is identified as
confidential when delivered. A Person required to maintain the confidentiality
of Information pursuant to this Section shall be deemed to have complied if it
exercises a degree of care similar to that accorded its own confidential
information. Lender acknowledges that (i) Information may include material
non-public information; (ii) it has developed compliance procedures regarding
the use of such information; and (iii) it will handle the material non- public
information in accordance with Applicable Law.

 

12.12.     GOVERNING LAW. UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES
EXCEPT FEDERAL LAWS RELATING TO NATIONAL BANKS.

 

12.13.Consent to Forum.

 

12.13.1.    Forum. EACH BORROWER HEREBY CONSENTS TO THE NON- EXCLUSIVE
JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER
THE NORTHERN DISTRICT OF GEORGIA OR COBB COUNTY, GEORGIA, IN ANY DISPUTE,
ACTION, LITIGATION OR OTHER PROCEEDING RELATING IN ANY WAY TO ANY LOAN
DOCUMENTS, AND AGREES THAT ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING
SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE
REGARDING ANY SUCH COURT'S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR
INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO
THE JURISDICTION OF SUCH COURTS AND CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 12.3.1. A final judgment in any proceeding of
any such court shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or any other manner provided by Applicable Law.

 

 

 

 

 

 62 

 

 

12.13.2.    Other Jurisdictions. Nothing herein shall limit the right of Lender
to bring proceedings against any Obligor in any other court, nor limit the right
of any party to serve process in any other manner permitted by Applicable Law.
Nothing in this Agreement shall be deemed to preclude enforcement by Lender of
any judgment or order obtained in any forum or jurisdiction.

 

12.14.     Waivers by Borrowers. To the fullest extent permitted by Applicable
Law, each Borrower waives (a) the right to trial by jury (which Lender hereby
also waives) in any proceeding or dispute of any kind relating in any way to any
Loan Documents, Obligations or Collateral; (b) presentment, demand, protest,
notice of presentment, default, non-payment, maturity, release, compromise,
settlement, extension or renewal of any commercial paper, accounts, documents,
instruments, chattel paper and guaranties at any time held by Lender on which a
Borrower may in any way be liable, and hereby ratifies anything Lender may do in
this regard; (c) notice prior to taking possession or control of any Collateral;
(d) any bond or security that might be required by a court prior to allowing
Lender to exercise any rights or remedies; (e) the benefit of all valuation,
appraisement and exemption laws; (f) any claim against Lender, on any theory of
liability, for special, indirect, consequential, exemplary or punitive damages
(as opposed to direct or actual damages) in any way relating to any Enforcement
Action, Obligations, Loan Documents or transactions relating thereto; and (g)
notice of acceptance hereof. Each Borrower acknowledges that the foregoing
waivers are a material inducement to Lender entering into this Agreement and
that Lender is relying upon the foregoing in its dealings with Borrowers. Each
Borrower has reviewed the foregoing waivers with its legal counsel and has
knowingly and voluntarily waived its jury trial and other rights following
consultation with legal counsel. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.

 

12.15.     Patriot Act Notice. Lender hereby notifies Borrowers that pursuant to
the Patriot Act, Lender is required to obtain, verify and record information
that identifies each Borrower, including its legal name, address, tax ID number
and other information that will allow Lender to identify it in accordance with
the Patriot Act. Lender will also require information regarding each personal
guarantor, if any, and may require information regarding Borrowers' management
and owners, such as legal name, address, social security number and date of
birth. Borrowers shall, promptly upon request, provide all documentation and
other information as Lender may request from time to time in order to comply
with any obligations under "know your customer," anti-money laundering or other
requirements of Applicable Law.

 

12.16.     NO ORAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

 

[Remainder of page intentionally left blank; signatures begin on following page]

 

 

 

 

 

 

 

 

 

 

 63