Exhibit 10.1

 

CREDIT AGREEMENT

 

 

dated as of June 23, 2010

 

 

among

 

 

LIQUIDMETAL COATINGS, LLC,

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

and

 

 

ENTERPRISE BANK & TRUST

 

 

 

$3,700,000 Credit Facility

 

 

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CREDIT AGREEMENT

 

This Credit Agreement is made as of June 23, 2010, by and among LIQUIDMETAL
COATINGS, LLC, a Delaware limited liability company (“LMC), LIQUIDMETAL COATINGS
SOLUTIONS, LLC, a Delaware limited liability company (“LMCS”), and ENTERPRISE
BANK & TRUST, a Missouri banking corporation (the “Bank”).  LMC and LMCS are
each referred to herein as a “Borrower” and are collectively referred to herein
as the “Borrowers.”

 

The parties agree as follows:

 

Section 1
General Definitions

 

1.1                                 Definitions.  When used in this Agreement,
the following terms have the following meanings:

 

“2010 Bank Refinancing Expenses” means expenses incurred by the Borrowers in
connection with the closing of the loan transactions described in this
Agreement.

 

“Account Debtor” means any Person who is or may become obligated in respect of
an Account.

 

“Accounts” means all accounts receivable and all other accounts (as defined in
the UCC) in which a Borrower has or acquires an interest at any time.

 

“Adjusted EBITDA” means, for any period, EBITDA for such period plus, to the
extent deducted from net income during such period, 2010 Bank Refinancing
Expenses incurred by the Borrowers during such period.

 

“Adjusted Monthly Libor Rate” means, for any day during a calendar month, an
annual interest rate equal to the greater of:

 

(1)                                  the one-month Libor Rate, as in effect on
the first day of such month, plus three and three-quarters percent (3.75%); or

 

(2)                                  six percent (6%).

 

The Adjusted Monthly Libor Rate may vary from month to month, but shall remain
fixed in amount for the duration of any particular month.

 

“Affiliate” means a Person (1) which owns or otherwise has an interest in five
percent or more of any equity interest of a Borrower, (2) five percent or more
of the equity interests of which a Borrower (or any shareholder or other equity
holder, director, officer, employee or subsidiary of a Borrower or any
combination thereof) owns or otherwise has an interest in, or (3) which,
directly or through one or more intermediaries, is controlled by, controls, or
is under common control with a Borrower.  For purposes of clause (3) above,
“control” means the ability, directly or indirectly, to affect the management or
policies of a Person by virtue of an ownership interest, by right of contract or
any other means.

 

“Agreement” means this Credit Agreement, as amended, renewed, restated, replaced
or otherwise modified from time to time.

 

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“Applicable Rate” means, at any time, (1) with respect to Revolving Credit
Loans, the Adjusted Monthly Libor Rate at such time, (2) with respect to the
Term Loan, seven percent (7%) per annum, and (3) with respect to Equipment
Loans, six and three-quarters percent (6.75%) per annum.

 

“Approved Foreign Account Debtor” means each of (1) Flame Spray SA, (2) Grant
Prideco SA de Cv , (3) VAM Drilling France SAS , and (4) any other Account
Debtor which the Bank, in the exercise of sole and absolute discretion, consents
to being an Approved Foreign Account Debtor by giving a written notice to a
Borrower which specifically identifies such Account Debtor and which
specifically references this definition.

 

“Available Cash” means, at any time, the aggregate amount of the Borrowers’
collected deposit account balances maintained with the Bank and with respect to
which the Bank has a perfected first priority Lien, as security for the
Obligations, subject to no other Lien.

 

“Average Daily Credit Balance” means, for any period, the aggregate principal
amount of all Revolving Credit Loans outstanding at the end of each day during
such period, divided by the number of days in such period; provided, however,
that, for any period occurring during the Equipment Loan Availability Period,
the Average Daily Credit Balance shall be increased by the aggregate principal
amount of all Equipment Loans outstanding at the end of each day during such
period, divided by the number of days in such period.

 

“Business Day” means a day on which the Bank is open for business to the general
public other than a Saturday or Sunday.

 

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

 

(1)                                  the sum of (a) seventy-five percent (75%)
of the amount of Eligible Accounts (other than Eligible Foreign Accounts)
outstanding at such time, (b) the Eligible Foreign Account Advance Amount at
such time, and (c) fifty percent (50%) of the amount of Eligible Inventory at
such time, calculated on the lower of cost or market, on a first-in, first-out
basis; or

 

(2)                                  $2,000,000.

 

“Borrowing Base Certificate” means, at any time, a certificate, in the form of
Exhibit D attached hereto or such other form as the Bank may reasonably request
from time to time, signed by the chief financial officer or controller of LMC in
favor of the Bank, and which sets forth in reasonable detail the computations
necessary to determine the Borrowing Base at the end of the most recently ended
month.

 

“C3” means C3 Capital Partners, L.P., a Delaware limited partnership, and/or C3
Capital Partners II, L.P., a Delaware limited partnership.

 

“C3 Proxy” means the Irrevocable Springing Proxy, dated on or about July 24,
2007, from LMT in favor of C3.

 

“C3 Subordinated Notes” means, collectively, (1) the 14% Subordinated Note,
dated July 24, 2007, from LMC and LMCS, as makers, to C3 Capital Partners, L.P.,
as payee, in the stated principal amount of $3,770,000, and (2) the 14%
Subordinated Note, dated July 24, 2007, from LMC and LMCS, as makers, to C3
Capital Partners II, L.P., as payee, in the stated principal amount of
$2,730,000.

 

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“C3 Subordination Agreement” means the Subordination Agreement to be executed by
C3, the Borrowers and the Bank on or about the Closing Date and by which each
Borrower’s indebtedness to C3 shall be subordinated to each Borrower’s
indebtedness to the Bank, as the same may be amended, renewed, replaced,
restated, consolidated or otherwise modified from time to time.

 

“Closing Date” means the date of this Agreement, as set forth in the
introductory paragraph of this Agreement.

 

“Collateral” means all property, real or personal, with respect to which a Lien
has been granted to or for the benefit of the Bank pursuant to the Security
Agreement or any of the other Credit Documents or which otherwise secures the
payment or performance of any Obligation.

 

“Conditional Consent” means the Conditional Consent to be executed on or about
the Closing Date by the Bank, the Borrowers and LMT and whereby, subject to the
terms and conditions thereof, the parties thereto agree to take certain actions
if certain future events occur, as the same may be amended, renewed, replaced,
restated, consolidated or otherwise modified from time to time.

 

“Covenant Compliance Certificate” means a certificate, in the form of Exhibit E
attached hereto or such other form as the Bank may reasonably request from time
to time, signed by the chief financial officer of LMC in favor of the Bank, and
which sets forth in reasonable detail the computations necessary to determine
whether the Borrowers are in compliance with the financial and other covenants
set forth in this Agreement for the relevant time period.

 

“Credit Documents” means this Agreement, the Notes, the Security Agreement, the
LMT Pledge Agreement, the C3 Subordination Agreement, the Conditional Consent,
the LMT Security Agreement (if entered into), and any other agreements or
documents existing on or after the Closing Date evidencing, securing,
guaranteeing or otherwise relating to any of the transactions described in or
contemplated by this Agreement, and any amendments, renewals, restatements,
replacements, consolidations or other modifications of any of the foregoing from
time to time.

 

“Debt” means any of the following: (1) indebtedness or liability for borrowed
money; (2) obligations evidenced by bonds, debentures, notes or other similar
instruments; (3) obligations for the deferred purchase price of property or
services, or arising out of non-compete, non-solicitation or similar agreements
entered into in connection with asset or equity acquisitions; (4) obligations as
lessee under capital leases; (5) synthetic lease obligations or similar
obligations to pay rent or other payment amounts under a lease of (or other
indebtedness arrangements conveying the right to use) real or personal property
which may be classified and accounted for as an operating lease or an
off-balance sheet liability for accounting purposes but as a secured or
unsecured loan for federal income tax purposes; (6) current liabilities in
respect of unfunded vested benefits under Plans covered by ERISA;
(7) obligations under letters of credit or acceptance facilities; (8) all
guarantees, endorsements (other than for collection or deposit in the ordinary
course of business) and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss; and (9) obligations secured by a Lien, whether
or not the obligations have been assumed.

 

“Default” means an event or condition the occurrence of which would, with the
lapse of time or the giving of notice or both, become an Event of Default.

 

“Default Rate” has the meaning provided in Section 3.1 of this Agreement.

 

“Distribution” has the meaning provided in Section 6.2(j) of this Agreement.

 

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“EBITDA” means, for any period, consolidated net income of the Borrowers for
such period before provision for income taxes, interest expense, depreciation
and amortization (including, without limitation, implicit interest expense on
capitalized leases), but excluding therefrom (to the extent included): 
(1) non-operating gains (including, without limitation, extraordinary or
nonrecurring gains, gains from discontinuance of operations and gains arising
from the sale of assets other than inventory) during such period; (2) any
portion of the net earnings of any subsidiary which for any reason is
unavailable for the payment of dividends to a Borrower; (3) the earnings of any
entity to which any assets of a Borrower shall have been sold, transferred or
disposed of, or into which a Borrower shall have merged, or been a party to any
consolidation or other form of reorganization, prior to the date of such
transaction; (4) any gain arising from the acquisition of any securities of a
Borrower; and (5) non-operating losses arising from the sale of capital assets
during such period.

 

“Eligible Account” means an Account arising in the ordinary course of a
Borrower’s business from the sale of goods or the rendering of services which
the Bank determines in its reasonable discretion is eligible as the basis for
credit extensions under this Agreement.  Without limiting the Bank’s discretion
provided herein, to be an Eligible Account the Account must be subject to the
Bank’s perfected first priority Lien and no Lien other than Permitted Liens, and
must be evidenced by an invoice or other documentary evidence reasonably
satisfactory to the Bank.  Similarly, without limiting the Bank’s discretion
provided herein, no Account shall be an Eligible Account if: (1) the Account
remains unpaid more than 90 days after the original invoice date; or (2) 25% or
more of the Accounts from the Account Debtor are not Eligible Accounts; or
(3) the Account Debtor is also a Borrower’s creditor or supplier, or has
disputed liability with respect to such Account, or has made any claim with
respect to any other Account due from such Account Debtor to a Borrower, or the
Account otherwise is or may become subject to any right of setoff by the Account
Debtor, in each case to the extent of any such offset, dispute or claim; or
(4) any bankruptcy or other insolvency proceeding has been filed by or against
the Account Debtor; or (5) the Account arises from a sale to an Account Debtor
that is not organized under the laws of one of the states of the United States
of America, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case reasonably acceptable to the Bank; or (6) the Account arises
from a sale to the Account Debtor which is not final, including, without
limitation, on a bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or return basis; or
(7) the Bank believes, in its reasonable credit judgment, that collection of
such Account is insecure or that payment thereof is doubtful or will be
materially delayed by reason of the Account Debtor’s financial condition; or
(8) the Account Debtor is the United States of America or any state, or any
department, agency, instrumentality or subdivision of the foregoing, unless the
applicable Borrower assigns its right to payment of such Account to the Bank, in
form and substance reasonably satisfactory to the Bank, so as to comply with the
Assignment of Claims Act, as amended (31 U.S.C. Section 3727 et seq.), or the
comparable state statute, as the case may be; or (9) the goods giving rise to
such Account have not been shipped to the Account Debtor in accordance with the
Account Debtor’s instructions in respect of such goods, or such goods are
otherwise nonconforming goods, or the services giving rise to such Account have
not been properly performed by the applicable Borrower; or (10) the total unpaid
Accounts of the Account Debtor exceed a credit limit determined by the Bank in
its reasonable discretion (which credit limit may be based upon the extent to
which the total unpaid Accounts of such Account Debtor are excessive relative to
all other unpaid Accounts and upon such other customary credit criteria as the
Bank reasonably deems appropriate), to the extent such Account exceeds such
limit; or (11) the Account is evidenced by chattel paper or an instrument of any
kind, or has been reduced to judgment; or (12) a Borrower has made any agreement
with the Account Debtor for any deduction therefrom, except for discounts or
allowances which are made in the ordinary course of a Borrower’s business for
prompt payment and which discounts or allowances are reflected in the
calculation of the face value of each invoice related to such Account and are
not otherwise inconsistent with the provisions of this Agreement; or (13) the
Account arises out of a transaction between a Borrower and an Affiliate of a
Borrower.

 

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“Eligible Foreign Account” means an Account which would qualify as an Eligible
Account but for the provisions of clause (5) of the definition thereof, and with
respect to which the Account Debtor is an Approved Foreign Account Debtor.

 

“Eligible Foreign Account Advance Amount” means, at any time, the lesser of:

 

(1)                                  the amount of Eligible Foreign Accounts
outstanding at such time, times (a) 75%, from the Closing Date through
December 31, 2010, or (b) 55%, from and after January 1, 2011; or

 

(2)                                  $500,000.

 

“Eligible Inventory” means inventory of a Borrower which the Bank determines in
its reasonable discretion is eligible as the basis for credit extensions under
this Agreement.  Without limiting the Bank’s discretion provided herein, no
inventory shall be Eligible Inventory unless, in the Bank’s reasonable
determination, it (1) is in good, new and saleable condition, (2) is not
obsolete or unmerchantable, (3) meets all standards imposed by any governmental
agency or authority, (4) conforms in all respects to the warranties and
representations set forth in this Agreement and the Security Agreement, (5) is
at all times subject to the Bank’s duly perfected, first priority Lien and no
other Lien other than Permitted Liens, and (6) is situated at a location in
compliance with the Security Agreement.

 

“Environmental Laws” means all federal, state, local and other applicable
statutes, ordinances, rules, regulations, judicial orders or decrees, common law
theories of liability, governmental or quasi-governmental directives or notices
or other laws or matters existing on or after the Closing Date relating in any
respect to occupational safety, health or environmental protection.

 

“Equipment Loan” has the meaning given to such term in Section 2.4 of this
Agreement.

 

“Equipment Loan Availability Period” means the period of time beginning on the
Closing Date and ending 363 days thereafter.

 

“Equipment Note” has the meaning given to such term in Section 2.4 of this
Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.

 

“Eurocurrency Reserve Requirement” means, for any one-month interest period, the
daily average of the stated maximum rate (expressed as a decimal) at which
reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such interest period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding one billion dollars against “Eurocurrency liabilities” (as such term
is used in Regulation D) but without benefit or credit of proration, exemptions
or offsets that might otherwise be available from time to time under Regulation
D.  Without limiting the effect of the foregoing, the Eurocurrency Reserve
Requirement shall reflect any other reserves required to be maintained against
(1) any category of liabilities that includes deposits by reference to which the
Libor Rate is to be determined, or (2) any category of extension of credit or
other assets that include a Loan.

 

“Existing C3 Defaults” means any payment defaults by the Borrowers under the C3
Subordinated Notes that exist on the Closing Date.  A payment or other default
of the Borrowers under the C3 Subordinated Notes that occurs after the Closing
Date would not qualify as an Existing C3 Default.

 

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“Event of Default” has the meaning provided in Section 7.1 of this Agreement.

 

“GAAP” means generally accepted accounting principles in effect from time to
time in the United States of America.

 

“Guarantor” means any Person who, after the Closing Date, may guarantee the
payment or performance of all or any part of the Obligations.  As of the Closing
Date, there are no Guarantors and no Borrower is under any duty to cause any
Person to become a Guarantor.

 

“Guaranty” means, collectively, each guaranty, if any, executed by any Guarantor
after the Closing Date, and any amendments, renewals, restatements,
replacements, consolidations or other modifications of any of the foregoing from
time to time.

 

“Hazardous Substance” means any hazardous, toxic, dangerous or otherwise
environmentally unsound substance, waste or other material, in whatever form, as
defined or described in, or contemplated by, any Environmental Law and any other
hazardous, toxic, dangerous or otherwise environmentally unsound substance,
waste or other material in whatever form, or any other substance, waste or other
material regulated by any Environmental Law.

 

“Investment” means, as to any Person, any direct or indirect equity, debt or
similar investment by such Person, including, without limitation, any loan,
advance or other credit extension by such Person to or for the benefit of any
other Person; any capital contribution to, or any acquisition of any equity
interests of, any other Person; and any acquisition of any investment products
or securities of any other Person.

 

“Libor Rate” means, on any day, the rate per annum determined by the Bank to
equal the quotient of (1) the one-month London interbank offered rate for
dollars, as quoted on such day in the “Money Rates” section of The Wall Street
Journal or by Bloomberg, Reuters, Telerate or any other financial news services
(electronic or otherwise) used by the Bank from time to time in accordance with
commercially reasonable industry standards, divided by (2) one minus the
Eurocurrency Reserve Requirement for a one-month interest period.  If the Libor
Rate cannot be ascertained on a particular day because such day is not a
Business Day or quotations are not otherwise available in the London interbank
market on such day (except as otherwise provided in Section 3.13 hereof), the
Libor Rate shall be determined on the next Business Day or such next day for
which quotations are available in the London interbank market.

 

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

 

“LMC-India” means Liquidmetal Coatings Solutions India Pvt Ltd.

 

“LMT” means Liquidmetal Technologies, Inc., a Delaware corporation.

 

“LMT Pledge Agreement” means the Pledge Agreement to be executed by LMT on or
about the Closing Date in favor of the Bank and by which LMT shall grant to the
Bank, as security for the Obligations, a security interest in all of LMC’s
equity interests owned at any time by LMT, as the same may be amended, renewed,
replaced, restated, consolidated or otherwise modified from time to time.

 

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“LMT Security Agreement” means the LMT Security Agreement referred to in the
Conditional Consent, as the same may be amended, renewed, replaced, restated,
consolidated or otherwise modified from time to time.

 

“Loans” means all Revolving Credit Loans, the Term Loan and all Equipment
Loans.  With respect to Revolving Credit Loans, the term “Loan” may refer to all
Revolving Credit Loans then outstanding or, as the context so requires, any
particular Revolving Credit Loan then outstanding.  Similarly, with respect to
Equipment Loans, the term “Loan” may refer to all Equipment Loans then
outstanding or, as the context so requires, any particular Equipment Loan then
outstanding.

 

“Material Adverse Effect” means (1) a material adverse effect on the assets,
liabilities, business, prospects, operations, income or condition, financial or
otherwise, of the Borrowers and the Guarantors taken as a whole, (2) a material
impairment of the ability of the Borrowers and the Guarantors, taken as a whole,
to pay, perform or observe their respective obligations under the Credit
Documents, or (3) a material impairment of the enforceability or availability of
the material rights or remedies stated to be available to the Bank under the
Credit Documents.

 

“Net Worth Plus Subordinated Debt” means, at any time, the sum of (1) the
Borrowers’ consolidated net worth at such time, as determined in accordance with
GAAP, and (2) the outstanding principal balance of Permitted Subordinated Debt
at such time (excluding, however, capitalized interest).

 

“Notes” means, collectively, the Revolving Credit Note, the Term Note and all
Equipment Notes.

 

“Obligations” means all Loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from the
Borrower to the Bank of any kind or nature, existing or future, whether or not
evidenced by any note, letter of credit, guaranty or other instrument, whether
arising under this Agreement or any of the other Credit Documents or otherwise
and whether direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, primary or secondary, due or to become due,
existing on or after the Closing Date and however acquired, and all amendments,
renewals, restatements, replacements or other modifications of the foregoing
from time to time.  The term includes, without limitation, all principal,
interest, fees, expenses and any other sums chargeable to any Borrower under any
of the Credit Documents.

 

“Permitted C3 Liens” means Liens granted to C3 by LMC on its existing and future
personal property and no other property, as security for Permitted C3
Subordinated Debt and no other obligations, so long as such Liens are
subordinate in priority, pursuant to the C3 Subordination Agreement, to all
Liens granted by such Borrower to the Bank.

 

“Permitted C3 Subordinated Debt” means Debt of LMC and LMCS to C3 pursuant to
the C3 Subordinated Notes, as in effect on the Closing Date, so long as such
Debt is subordinated to the Obligations pursuant to the C3 Subordination
Agreement.

 

“Permitted Debt” means any of the following: (1) accrued expenses and current
trade account payables incurred in the ordinary course of a Borrower’s business;
(2) Debt to the Bank; (3) Permitted C3 Subordinated Debt; (4) other Debt which
is subordinated to the Obligations pursuant to the terms of a subordination
agreement satisfactory in form and content to the Bank in its sole discretion;
(5) Debt secured by purchase-money security interests described in clause (8) of
the definition of Permitted Liens in this Section, provided that the aggregate
outstanding principal amount of such Debt does not exceed $300,000 at any time;
and (6) other Debt approved in advance by the Bank in a writing delivered to a
Borrower.

 

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“Permitted Investments” means (1) Investments in cash and cash equivalents,
(2) Investments in investment products offered by the Bank or its affiliates,
(3) Investments by a Borrower in another Borrower, (4) Investments, as of the
Closing Date, in any direct or indirect wholly-owned subsidiary of any Borrower,
provided that such subsidiary exists as of the Closing Date, and (5) so long as
no Default or Event of Default exists at the time such Investment is made or
would result therefrom, Investments in the form of Class A or Class B shares in
LMC-India.

 

“Permitted Liens” means any of the following: (1) Liens for taxes, assessments
or governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with GAAP
are maintained on a Borrower’s books; (2) Liens arising out of deposits in
connection with workers’ compensation, unemployment insurance, old age pensions
or other social security or retirement benefits legislation; (3) deposits or
pledges to secure bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety and appeal bonds, and other
obligations of like nature arising in the ordinary course of a Borrower’s
business; (4) Liens imposed by law, such as mechanics’, workers’, materialmen’s,
carriers’ or other like Liens (excluding, however, any Lien in favor of a
landlord) arising in the ordinary course of a Borrower’s business which secure
the payment of obligations which are not past due or which are being diligently
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP are maintained on a Borrower’s books;
(5) rights of way, zoning restrictions, easements and similar encumbrances
affecting a Borrower’s real property which do not materially interfere with the
use of such property; (6) Liens in favor of the Bank; (7) Permitted C3 Liens;
(8) purchase-money security interests incurred solely in connection with the
acquisition (whether purchased outright or acquired through a capital lease) of
equipment to be used in a Borrower’s business, encumbering only the equipment so
acquired, and which secures only the purchase-money Debt incurred to acquire the
equipment so acquired and which Debt otherwise qualifies as Permitted Debt under
clause (5) of the definition of Permitted Debt in this Section; and (9) other
Liens approved in advance by the Bank in a writing delivered to a Borrower.  In
addition, no Lien in favor of a Person other than the Bank shall be a Permitted
Lien unless such Lien is subordinate in priority to the Bank’s Lien, except if
(a) the Lien does not secure liability for borrowed money, letter-of-credit
obligations or similar funded debt, or (b) the Lien is a purchase-money Lien
described in clause (8) immediately above.

 

“Permitted Subordinated Debt” means Permitted C3 Debt and any Debt described in
clause (4) of the definition of Permitted Debt.

 

“Person” means an individual, corporation, limited liability company,
partnership, trust, governmental entity or any other entity, organization or
group whatsoever.

 

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of a Borrower on or after the Closing Date.

 

“Projected Bank Principal” means:

 

(1)                                  $600,000, for each of the Borrowers’ fiscal
quarters ending June 30, 2010, September 30, 2010, December 31, 2010 and
March 31, 2011;

 

(2)                                  $500,000, for each of the Borrowers’ fiscal
quarters ending June 30, 2011, September 30, 2011, December 31, 2011 and
March 31, 2012; and

 

(3)                                  $400,000, for each fiscal quarter of the
Borrowers ending on or after June 30, 2012;

 

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provided, however, that, for purposes of the definition of “Section 6.2(j) Total
Debt Service” below, Projected Bank Principal for any month shall be the
Projected Bank Principal for the fiscal quarter in which the month occurs,
divided by three.

 

“Revolving Credit Loan” has the meaning provided in Section 2.2 of this
Agreement.

 

“Revolving Credit Note” has the meaning provided in Section 2.2 of this
Agreement.

 

“Revolving Credit Termination Date” means 364 days after the Closing Date or, if
such day is not a Business Day, the immediately preceding Business Day.

 

“Section 6.2(j) Total Debt Service” means, for any 12-month period referenced in
Section 6.2(j)(1)(A)(iv) of this Agreement, the sum of:

 

(1)                                  Projected Bank Principal for such 12-month
period (or, if less than 12 months have elapsed since the Closing Date,
Projected Bank Principal during such partial period annualized), plus the amount
of principal paid on account of Equipment Loans during such 12-month period;

 

(2)                                  the total amount of interest paid to the
Bank during such 12-month period (or, if less than 12 months have elapsed since
the Closing Date, the amount of such interest paid during such partial period
annualized);

 

(3)                                  principal and interest paid on account of
Senior Secured Debt, other than Debt due the Bank (or Debt due Bank Midwest,
N.A., if applicable, for any period prior to the Closing Date), during such
12-month period; and

 

(4)                                  principal and interest paid on account of
Permitted Subordinated Debt during such 12-month period.

 

“Security Agreement” means the Security Agreement to be executed by the
Borrowers on or about the Closing Date in favor of the Bank and by which each
Borrower shall grant to the Bank, as security for the Obligations, a security
interest in all of its existing and future assets, as the same may be amended,
renewed, replaced, restated, consolidated or otherwise modified from time to
time.

 

“Senior Secured Debt” means the aggregate principal amount or component of
(1) Debt due the Bank, and (2) other Debt secured by a Lien (excluding, however,
Permitted Subordinated Debt).

 

“Senior Debt Service” means, for any fiscal quarter of the Borrowers, the sum
of:

 

(1)                                  Projected Bank Principal, plus the amount
of principal paid on account of Equipment Loans during such quarter;

 

(2)                                  the total amount of interest paid to the
Bank during such quarter and any prior fiscal quarters for that fiscal year,
multiplied by (a) 4, if such quarter is the first fiscal quarter, (b) 2, if such
quarter is the second fiscal quarter, (c) 1.34, if such quarter is the third
fiscal quarter, and (d) 1, if such quarter is the fourth fiscal quarter; and

 

(3)                                  principal and interest paid on account of
Senior Secured Debt, other than Debt due the Bank (or Debt due Bank Midwest,
N.A., if applicable, for any period prior to the Closing Date).

 

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“Term Loan” means the Loan described in Section 2.3 of this Agreement.

 

“Term Loan Termination Date” means three years after the Closing Date or, if
such day is not a Business Day, the immediately preceding Business Day.

 

“Term Note” has the meaning provided in Section 2.3 of this Agreement.

 

“Total Debt Service” means, for any fiscal quarter of the Borrowers, the sum of:

 

(1)                                  Projected Bank Principal, plus the amount
of principal paid on account of Equipment Loans during such quarter;

 

(2)                                  the total amount of interest paid to the
Bank during such quarter and any prior fiscal quarters for that fiscal year,
multiplied by (a) 4, if such quarter is the first fiscal quarter, (b) 2, if such
quarter is the second fiscal quarter, (c) 1.34, if such quarter is the third
fiscal quarter, and (d) 1, if such quarter is the fourth fiscal quarter;

 

(3)                                  principal and interest paid on account of
Senior Secured Debt, other than Debt due the Bank (or Debt due Bank Midwest,
N.A., if applicable, for any period prior to the Closing Date), during such
quarter; and

 

(4)                                  principal and interest paid on account of
Permitted Subordinated Debt during such quarter;

 

“UCC” means the Uniform Commercial Code as in effect in the State of Missouri
from time to time.

 

“Unused Line Fee” has the meaning provided in Section 3.11 of this Agreement.

 

“Unused Revolver Availability” means, at any time, the difference between the
Borrowing Base and the outstanding principal balance of the Revolving Credit
Loans.

 

1.2                                 Accounting and Other Terms.

 

(a)                                  General.  All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.  Unless
the context clearly requires otherwise, all references to “dollars” or “$” are
to United States dollars.  This Agreement and the other Credit Documents shall
be construed without regard to any presumption or rule requiring construction
against the party causing any such document or any portion thereof to be
drafted.  The Section and other headings in this Agreement and any index at the
beginning of this Agreement are for convenience of reference only and shall not
limit or otherwise affect any of the terms of this Agreement.  Similarly, any
page footers or headers or similar word processing, document or
page identification numbers in this Agreement or any index or exhibit are for
convenience of reference only and shall not limit or otherwise affect any of the
terms of this Agreement, nor shall there be any requirement that any such
footers or other numbers be consistent from page to page.  Unless the context
clearly requires otherwise, any reference to a Section of this Agreement refers
to all Sections and Subsections thereunder.  Any pronoun used herein shall be
deemed to cover all genders.  Defined terms used in this Agreement may be set
forth in Section 1.1 or other Sections of this Agreement, and all such
definitions defined in the singular shall have a corresponding meaning when used
in the plural and vice versa.

 

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(b)                                 Changes in GAAP.  If at any time any change
in GAAP would affect the computation of any financial ratio or requirement set
forth in any Credit Document, and either the Borrowers or the Bank shall so
request, the Bank and each Borrower shall negotiate in good faith to amend such
ratio or requirement to preserve the original intent thereof in light of such
change in GAAP; provided, however, that, until so amended, (1) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein, and (2) the Borrowers shall provide to the Bank financial
statements and other documents required under this Agreement or as reasonably
requested hereunder setting forth a reconciliation between calculations of such
ratio or requirement made before and after giving effect to such change in GAAP.

 

(c)                                  Bank’s Consent or Approval.  If, in this
Agreement or any other Credit Document, the Bank has the right to give or
withhold its consent or similar approval with respect to any matter, then —
unless this Agreement or the other Credit Document, as applicable, expressly and
specifically provides otherwise — the Bank shall be deemed to have the right to
give or exercise, or to not give or exercise, such consent or approval in its
sole and absolute discretion, and/or to condition its consent or approval in
such manner as the Bank may elect in its sole and absolute discretion; and any
such consent or approval shall be deemed to have not been given by the Bank
unless such consent or approval is evidenced by a contemporaneous writing signed
or authenticated by the Bank and delivered to a Borrower.  The provisions of
this Section 1.2(c) shall prevail over any conflicting provisions of this
Agreement or the other Credit Documents.

 

Section 2
Credit Facility

 

2.1                                 General.  The Bank agrees, subject to the
terms and conditions of this Agreement, to make a credit facility available to
the Borrowers upon request therefor, as provided in this Section 2.

 

2.2                                 Revolving Credit Loans.

 

(a)                                  General.  The Bank agrees, subject to the
terms and conditions of this Agreement, to make revolving credit loans
(“Revolving Credit Loans”) to the Borrowers from time to time from the Closing
Date to the Business Day immediately preceding the Revolving Credit Termination
Date up to a maximum principal amount at any time outstanding equal to the
Borrowing Base at such time.  In no event shall the Bank be obligated to make
any Revolving Credit Loan if any Default or Event of Default exists or would
result from the making of such Revolving Credit Loan.  Subject to the terms and
conditions of this Agreement, the Borrowers may borrow, repay and re-borrow
under the Revolving Credit Loan facility.

 

(b)                                 Revolving Credit Note.  All Revolving Credit
Loans shall be evidenced by, and shall be payable in accordance with the terms
and conditions of, a promissory note substantially in the form of Exhibit A
hereto (as amended, renewed, restated, replaced, consolidated or otherwise
modified from time to time, the “Revolving Credit Note”).

 

2.3                                 Term Loan.

 

(a)                                  General.  The Bank agrees, subject to the
terms and conditions of this Agreement, to make a term loan (the “Term Loan”) to
the Borrowers on the Closing Date in the principal amount of $1,500,000.  In no
event shall the Bank be obligated to make the Term Loan if any Default or Event
of Default exists or would result from the making of the Term Loan.  The
Borrowers shall not have the right to re-borrow any Term Loan principal which
has been previously borrowed and repaid.

 

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(b)                                 Term Note.  The Term Loan shall be evidenced
by, and shall be payable in accordance with the terms and conditions of, a
promissory note substantially in the form of Exhibit B hereto (as amended,
renewed, restated, replaced, consolidated or otherwise modified from time to
time, the “Term Note”).

 

2.4                                 Equipment Loans.

 

(a)                                  General.  The Bank agrees, subject to the
terms and conditions of this Agreement, to make equipment loans (each, an
“Equipment Loan”) to the Borrowers, during the Equipment Loan Availability
Period, subject to the following terms and conditions:  (1) the proceeds of each
Equipment Loan shall be used solely for purposes of a Borrower purchasing new or
used equipment to be used in a Borrower’s business and which is otherwise
reasonably acceptable to the Bank; (2) the original principal amount of each
Equipment Loan shall not exceed 90% of the invoiced cost of any new equipment to
be purchased thereby or 75% of the invoiced cost of any used equipment to be
purchased thereby (in each case exclusive of shipping and other soft costs
relating to such equipment); (3) the aggregate original principal amount of all
Equipment Loans shall not exceed $200,000; (4) in no event shall the Bank be
obligated to make any Equipment Loan if a Default or Event of Default exists or
would result from the making of the requested Equipment Loan, or if, upon the
Borrower’s acquisition of the equipment to be purchased thereby, the Bank would
not have a perfected first priority security interest in such equipment, as
security for the Obligations, subject to no other Lien; (5) if a Borrower
requests an Equipment Loan, a Borrower shall provide to the Bank, not less than
two Business Days’ prior to the proposed funding date for such Equipment Loan
(or such lesser period of time as shall be acceptable to the Bank in its sole
discretion), written notice of the proposed principal amount of such Equipment
Loan, the equipment to be purchased thereby, copies of the equipment seller’s
invoice and related documentation with respect to the equipment to be purchased,
and such other information as the Bank may reasonably request.  The Borrowers
shall not have the right to re-borrow any Equipment Loan principal which has
been previously borrowed and repaid.

 

(b)                                 Equipment Note.  Each Equipment Loan shall
be evidenced by, and shall be payable in accordance with the terms and
conditions of, a promissory note substantially in the form of Exhibit C hereto
(as amended, renewed, restated, replaced, consolidated or otherwise modified
from time to time, an “Equipment Note”).

 

Section 3
Finance Charges, Repayment And Other Terms

 

3.1                                 Interest Rate.

 

(a)                                  Applicable Rate.  Interest shall accrue on
the outstanding principal balance of each Loan at the end of each day at the
Applicable Rate in effect on such day, except as otherwise provided in
Section 3.1(b) below.

 

(b)                                 Default Rate.  Upon or after the occurrence
and during the continuation of any Event of Default, the principal amount of
each Loan shall bear interest at a rate per annum equal to three percent (3.0%)
above the interest rate that would otherwise apply under Section 3.1(a) above
(the “Default Rate”).

 

(c)                                  Late Fee.  In addition to interest payable
at the Default Rate or any other amounts payable under this Agreement or the
other Credit Documents, the Borrowers shall pay to the Bank a late fee in an
amount equal to five percent (5%) of the amount of each payment due under this
Agreement which is not received by the Bank within ten (10) days after its due
date.

 

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(d)                                 Computation of Interest.  In all cases,
interest on the outstanding principal balance of all Loans and all other
Obligations with respect to which interest accrues pursuant to the terms of this
Agreement shall be calculated on a daily basis, computed on the basis of a
360-day year for the actual number of days elapsed.

 

(e)                                  Usury.  In no contingency or event
whatsoever shall the aggregate of all amounts deemed interest hereunder or under
any Note and charged or collected pursuant to the terms of this Agreement or any
other Credit Documents exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
thereto.  If such a court determines that the Bank has charged or received
interest hereunder or under the other Credit Documents in excess of the highest
applicable rate, the Bank shall apply such excess to any other Obligations then
due and payable, whether principal, interest, fees or otherwise, and shall
refund the remainder of such excess interest, if any, to a Borrower, and such
rate shall automatically be reduced to the maximum rate permitted by such law.

 

3.2                                 Payments of Principal, Interest and Costs. 
Except as otherwise provided in this Agreement, the Borrowers jointly and
severally agree to pay the Obligations as follows:

 

(a)                                  Revolving Credit Loan.

 

(1)                                  Interest.  Accrued interest on the
outstanding principal balance of the Revolving Credit Loans is payable on the
earlier to occur of (A) the first day of each month (beginning July 1, 2010), or
(B) the Revolving Credit Termination Date.

 

(2)                                  Principal.  The outstanding principal
balance of the Revolving Credit Loans is payable on the Revolving Credit
Termination Date.

 

(b)                                 Term Loan.

 

(1)                                  Interest. Accrued interest on the
outstanding principal balance of the Term Loan is payable on the first day of
each month, beginning July 1, 2010;

 

(2)                                  Principal.  Principal installments in
respect of the Term Loan are payable as follows:

 

(A)                              Year 1.  $50,000 on the first day of each
month, beginning August 1, 2010 and ending July 1, 2011,

 

(B)                                Year 2.  $41,667 on the first day of each
month, beginning August 1, 2011 and ending July 1, 2012,

 

(C)                                Year 3.   $33,333 on the first day of each
month, beginning August 1, 2012 and ending on the first day of the month in
which the Term Loan Termination Date occurs; and

 

(3)                                  Termination Date.  On the Term Loan
Termination Date, any remaining principal outstanding under the Term Loan and
all accrued but unpaid interest outstanding and any other amounts owing under
this Credit Agreement shall be due and payable in their entirety.

 

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(c)                                  Equipment Loans.

 

(1)                                  Amortized Monthly Principal and Interest
Payments.  Principal and interest on each Equipment Loan shall be payable
monthly, beginning on the first day of the month immediately following the date
such Loan was made, in an amount (as determined by the Bank acting in a
commercially reasonable manner) based upon a monthly amortization of the
original principal amount of such Loan; the Applicable Rate for Equipment Loans;
and an assumed amortization period equal to (i) five years, if all proceeds of
such Loan are used to acquire new equipment, or (ii) three years, if any
proceeds of such Loan are used to acquire used equipment;

 

(2)                                  Maturity.  The outstanding principal of the
Equipment Loans, all accrued but unpaid interest thereon and any other amounts
owing on the Equipment Loans are due and payable in their entirety on (i) with
respect to each Equipment Loan all of the proceeds of which were used to acquire
new equipment, five years after the date of disbursement of such Loan, and
(ii) with respect to each Equipment Loan any proceeds of which were used to
acquire used equipment, three years after the date of disbursement of such Loan.

 

(d)                                 Other Obligations.  Costs, fees and expenses
and any other Obligations payable pursuant to this Agreement or the other Credit
Documents shall be payable as and when provided in this Agreement or the other
Credit Documents, as the case may be, or, if no specific provision for payment
is made, on demand.

 

3.3                                 Voluntary Prepayments.  The Borrowers have
the right, without penalty or premium, to prepay the Loans, in whole or in part,
at any time and from time to time after the Closing Date.

 

3.4                                 Mandatory Prepayments.

 

(a)                                  General.  Except as otherwise provided
below, if a Borrower sells any Collateral other than the sale of inventory in
the ordinary course of such Borrower’s business, or if any Collateral is taken
by condemnation or other governmental taking, the Borrower shall pay to the
Bank, unless otherwise agreed by the Bank, as a mandatory prepayment of the Term
Loan, a sum equal to the proceeds received by such Borrower from such sale or
condemnation, and if the Term Loan has been paid in full, such proceeds shall be
applied to reduce the outstanding principal balance of the Revolving Credit
Loans; provided, however, that, if no Default or Event of Default is in effect,
the foregoing prepayment requirement shall not apply to any equipment sales the
aggregate proceeds of which are less than $50,000 during any year. 
Notwithstanding anything in Section 3.4(a) to the contrary, if a Borrower sells
any equipment acquired pursuant to an Equipment Loan, the proceeds of such sale
shall first be applied as a mandatory prepayment of such Equipment Loan, and if
such Equipment Loan has been paid in full, shall be applied as otherwise
provided in this Section 3.4, in each case without regard to the $50,000
exclusion referenced in the prior sentence.

 

(b)                                 Borrowing Base.  If the outstanding
principal balance of Revolving Credit Loans at any time exceeds the Borrowing
Base at such time, the Borrowers shall repay the Revolving Credit Loans in an
amount sufficient to reduce the aggregate unpaid principal amount of such
Revolving Credit Loans by an amount equal to such excess.

 

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3.5                                 Method of Payment.  Payments due the Bank
under this Agreement and the other Credit Documents shall be made in immediately
available funds to the Bank at its office described in Section 8.1 below unless
the Bank gives notice to the contrary.  Payments so received at or before
1:00 p.m. Kansas City time on any Business Day shall be deemed to have been
received by the Bank on that Business Day.  Payments received after 1:00 p.m.
Kansas City time on any Business Day shall be deemed to have been received on
the next Business Day, and interest, if payable in respect of such payment,
shall accrue thereon until such next Business Day.

 

3.6                                 Use of Proceeds.

 

(a)                                  Revolving Credit Loans.  The Revolving
Credit Loans shall be used solely for purposes of (i) repaying any indebtedness
owing by Borrowers to Bank Midwest, N.A. on the Closing Date, and (ii) each
Borrower’s working capital needs and for general limited liability company
purposes.

 

(b)                                 Term Loan.  The Term Loan shall be used
solely for purposes of repaying any indebtedness owing by Borrowers to Bank
Midwest, N.A. on the Closing Date.

 

(c)                                  No Margin Loans.  Notwithstanding anything
herein to the contrary, no Borrower shall, directly or indirectly, use any part
of the Loan proceeds for the purpose of purchasing or carrying any margin stock
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System, or to extend credit to any Person for the purpose of purchasing
or carrying any such margin stock, or for any purpose which violates, or is
inconsistent with, Regulation X of such Board of Governors.

 

3.7                                 Notice and Manner of Borrowing.  The
Borrowers shall give the Bank notice of their intention to borrow under any
Revolving Credit Loan, in each case specifying: (1) the proposed funding date of
such Loan; (2) the amount of such Loan; and (3) whether the principal amount of
such Loan, together with the principal amount of all Revolving Credit Loans then
outstanding, is within the Borrowing Base at such time.  All notices given under
this Section by a Borrower shall be irrevocable and shall be given not later
than 11:00 a.m. Kansas City time on the day on which such Loan is to be made. 
For purposes of this Section, the Borrowers agree that the Bank may rely and act
upon any request for a Loan from any individual who the Bank, absent gross
negligence or willful misconduct, believes to be a representative of a Borrower.

 

3.8                                 Capital Adequacy.  If the Bank determines
that the adoption of any law, rule or regulation regarding capital adequacy, or
any change therein or in the interpretation or application thereof or compliance
by the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or governmental authority,
does or shall have the effect of reducing the rate of return on the Bank’s
capital as a consequence of its obligations hereunder to a level below that
which the Bank could have achieved but for such adoption, change or compliance
(taking into consideration the Bank’s policies with respect to capital adequacy)
by an amount deemed by the Bank, in its reasonable discretion, to be material,
then from time to time, after submission by the Bank to a Borrower of a written
demand therefor, the Borrowers shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such reduction.  A certificate of the
Bank claiming entitlement to payment as set forth in this Section shall be
delivered to a Borrower.  Such certificate shall set forth the nature of the
occurrence giving rise to such payment, the additional amount or amounts to be
paid to the Bank, and the method by which such amounts were determined.  In
determining such amount, the Bank may use any reasonable averaging and
attribution method.

 

3.9                                 Application of Payments and Collections. 
Each Borrower irrevocably waives the right to direct the application of any and
all payments and collections at any time or times after the Closing Date

 

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received by the Bank from or on behalf of a Borrower, and each Borrower agrees
that the Bank has the continuing exclusive right to apply and reapply any and
all such payments and collections received at any time or times after the
Closing Date by the Bank or its agent against the Obligations, in such manner as
the Bank may deem advisable, notwithstanding any entry by the Bank upon any of
its books and records.

 

3.10                           Periodic Statement.  Insofar as the Bank makes
available to one or more of the Borrowers a periodic statement of loan balances,
accrued interest and principal and interest payments received pursuant to this
Agreement, any such statement rendered by the Bank shall be deemed final,
binding and conclusive upon the Borrowers unless the Bank is notified by a
Borrower in writing to the contrary within 60 days after the date each such
statement is made available to a Borrower.  Any such notice by a Borrower shall
only be deemed an objection to those items specifically objected to in such
notice.

 

3.11                           Unused Line Fee.  The Borrowers jointly and
severally agree to pay to the Bank, on the first day of each month for the
preceding month, a fee (the “Unused Line Fee”) at a rate per annum equal to
three-eighths of one percent (0.375%) of the difference between (1) the Maximum
Amount, and (2) the Average Daily Credit Balance for such preceding month.  The
“Maximum Amount” means (i) $2,200,000 during the Equipment Loan Availability
Period, and (ii) $2,000,000 at all other times.  If this Agreement is terminated
on a day other than the first day of a month, the Bank, acting in a commercially
reasonable manner, shall pro-rate or otherwise adjust the amount of the Unused
Line Fee accordingly and such fee shall be payable on such termination date. 
Similarly, if the period of time giving rise to the initial Unused Line Fee
payable under this Agreement does not equal a full calendar month, the Bank,
acting in a commercially reasonable manner, shall pro-rate or otherwise adjust
the Unused Line Fee to reflect such different time period.

 

3.12                           Closing Fee.  The Borrowers shall pay to the Bank
a closing fee of $35,000 which shall be deemed fully earned and nonrefundable at
the closing of the transactions contemplated hereby and which shall be paid on
the Closing Date.  Such fee shall compensate the Bank for the costs associated
with the origination, structuring, processing, approving and closing of the
transactions contemplated by this Agreement, including, but not limited to,
administrative, general overhead and lost opportunity costs, but not including
any out-of-pocket or other costs, fees or expenses for which the Borrowers have
agreed to reimburse the Bank pursuant to any other provision of this Agreement
or the other Credit Documents or any commitment letter, letter of intent or
similar agreement.

 

3.13                           Libor Provisions.

 

(a)                                  Market Disruption.  Notwithstanding
anything in this Agreement to the contrary, if, prior to the determination of
any Libor Rate, the Bank determines (which determination shall be conclusive)
that any condition exists which impairs the Bank’s ability to readily or
reliably ascertain the Libor Rate (whether due to disruption in the relevant
markets, suspension of quotations, or otherwise), the Bank shall give the
Borrower prompt notice thereof, and so long as such condition remains in effect,
interest shall accrue on the outstanding principal balance of the Revolving
Credit Loans at a fluctuating interest rate based on such alternative reference
rate, together with such margin thereto, as the Bank, acting in a commercially
reasonable manner, may select that approximates the interest rate that would
have been in effect under this Agreement but for such condition (the
“Alternative Fluctuating Rate”).

 

(b)                                 Illegality; Regulatory Change. Similarly,
notwithstanding anything in this Agreement to the contrary, if it becomes
unlawful for the Bank to charge or collect interest based on the London
interbank offered rate, or if due to any legal or regulatory change the Bank
becomes subject to restrictions on the amount of or category of assets or
liabilities it may hold with respect to which interest accrues at the London
interbank offered rate, the Bank may give the Borrower prompt written notice of
such legal or regulatory impairment and, so long as such illegality or
regulatory impairment remains in

 

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effect, interest shall accrue on the outstanding principal balance of the
Revolving Credit Loans at the Alternative Fluctuating Rate.

 

3.14                           Joint and Several Liability; Subordination of
Reimbursement Rights. All Loans and all other Obligations of any Borrower shall
constitute one general obligation of all of the Borrowers.  Notwithstanding
anything to the contrary in this Agreement, the Notes or any other Credit
Document, the Borrowers shall be primarily and jointly and severally liable for
all Obligations of any Borrower to the Bank.  Notwithstanding the foregoing, if,
and to the extent, a Borrower is deemed to be a guarantor of another Borrower
hereunder, such Borrower’s joint liability for any Loans made or other credit
extended to or for the benefit of such other Borrower shall be deemed to be a
guaranty of payment and performance, and not of collection.  To the fullest
extent permitted by law, each Borrower hereby waives promptness, diligence,
notice of acceptance, and any other notices of any nature whatsoever with
respect to any of the Obligations, and any requirement that the Bank protect,
secure, perfect or insure any Lien or any property subject thereto or exhaust
any right or take any action against any other Borrower, any Guarantor, any
other Person or any Collateral.  Each Borrower agrees that any rights of
subrogation, indemnification, reimbursement or any similar rights it may have
against any other Borrower with respect to its joint and several liability,
whether such rights arise under an express or implied contract or by operation
of law, shall be subject, junior and subordinate in all respect to all
Obligations of such Borrower to the Bank and that the enforcement of such rights
shall be stayed until such time as the Borrowers shall have indefeasibly paid in
full all Obligations of the Borrowers to the Bank and the Bank shall be under no
duty to extend credit to or for the benefit of any Borrower.  The liability of
each Borrower under this Section shall be absolute and unconditional
irrespective of (a) any change in the time, manner or place of payment of, or in
any other term of, any of the Obligations, or any other amendment or waiver of
or any consent to departure from this Agreement, the Notes or any of the other
Credit Documents, (b) any exchange, release or non-perfection of any Collateral
or any release or amendment or waiver of or consent to departure from any other
guaranty, or any release of any Person liable in whole or in part, for all or
any of the Obligations, or (c) any other circumstance which might otherwise
constitute a defense available to or discharge of a surety.

 

3.15                           Appointment of Borrowing Agent.  Each Borrower
hereby appoints the other Borrower (the “Borrowing Agent”) as such Borrower’s
agent and attorney-in-fact to take any action, execute any document or
instrument, consent or agree to any amendment or other modification of the
Credit Documents or waiver of or departure from any of the terms thereof, to
perform any Obligation of the Borrowers hereunder, and to give or receive any
notice by or to any Borrower hereunder.  Without limiting the generality of the
foregoing, the Borrowing Agent may request Loans or incur any other Obligation
for the account of the other Borrower, and the Borrowers shall be fully, and
jointly and severally, bound by the actions of the Borrowing Agent.  The Bank
shall be entitled to rely absolutely and without duty of inquiry or
investigation upon any agreement, request, communication or other notice given
by the Borrowing Agent under the Credit Documents (including, without
limitation, any request by the Borrowing Agent to make Loans to another
Borrower) until two Business Days after the Bank shall have received written
notice from the Borrowers of the revocation of this agency and power of
attorney, which revocation, in accordance with Section 7.1, shall constitute an
Event of Default.

 

Section 4
Lending Conditions

 

4.1                                 Credit Documents.  Notwithstanding anything
herein or in the other Credit Documents to the contrary, the Bank shall not be
obligated to make the initial Loan under this Agreement to the Borrowers until
the Bank has received the following documents, duly executed and delivered by
all parties thereto, and otherwise satisfactory in form and content to the Bank:

 

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(a)                                  Credit Agreement.  This Agreement;

 

(b)                                 Notes.  The Revolving Credit Note, the Term
Note and, if an Equipment Loan is to be made on the Closing Date, an Equipment
Note;

 

(c)                                  Security Agreement.  The Security
Agreement;

 

(d)                                 UCC Financing Statements.  Acknowledgment
copies of filed Uniform Commercial Code financing statements from each Borrower,
as debtor, to the Bank, as secured party, covering the Collateral, from such
jurisdictions as the Bank deems necessary or desirable to perfect its security
interest in the Collateral;

 

(e)                                  Subordination Agreement.  The C3
Subordination Agreement, together with attachments thereto containing copies of
the applicable subordinated notes bearing the required subordination legends;

 

(f)                                    LMT Pledge Agreement Documents.  The LMT
Pledge Agreement; the original of each membership unit certificate encumbered
thereby and a stock power or similar transfer instrument for each such
certificate duly executed in blank by LMT; and one or more Uniform Commercial
Code financing statements, from LMT, as debtor, to the Bank, as secured party,
covering the property encumbered by the LMT Pledge Agreement, from such
jurisdictions as the Bank deems necessary or desirable to perfect its security
interest in such property

 

(g)                                 Insurance.  Copies of each Borrower’s
property damage insurance certificates (and, if requested by the Bank, copies of
the related insurance policies), together with loss payable endorsements on the
Bank’s standard form of loss payee endorsement (or which are otherwise
acceptable to the Bank) and which name the Bank as sole loss payee thereunder,
and copies of each Borrower’s liability insurance certificates (and, if
requested by the Bank, copies of the related liability insurance policies),
together with endorsements naming the Bank as an additional named insured
thereunder;

 

(h)                                 Loan Disbursement Instructions; Borrowing
Base Certificate.  If requested by the Bank, written instructions from the
Borrowers to the Bank directing the application of proceeds of the initial Loan
made pursuant to this Agreement and a Borrowing Base Certificate;

 

(i)                                     Certificate of Borrower’s Secretary.  A
certificate executed by each Borrower’s members or a secretary or similar
representative of each Borrower whereby such Person(s) affirm that, among other
things, attached to such certificate is (1) a copy of such Borrower’s members’
resolutions authorizing the borrowing of monies, the granting of Liens and all
other matters set forth in or contemplated by the Credit Documents to which such
Borrower is a party, (2) a copy of such Borrower’s operating agreement as in
effect on the Closing Date, (3) a copy of such Borrower’s certificate of
formation and all amendments thereto, and (4) a certificate of good standing for
such Borrower, dated on or immediately prior to the Closing Date, from the
Secretary of State of the state of its organization and all other states in
which the nature of its activities in such states require it to be qualified as
a foreign limited liability company in such states;

 

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(j)                                     LMC-India Documents.  A certificate,
signed by a duly authorized representative of LMC, whereby such representative
attests that attached to such certificate are true and correct copies of the
material organizational documents of LMC-India, as in effect on the Closing
Date, and any material agreements in effect on the Closing Date between or among
either or both of the Borrowers, on the one hand, and LMC-India, on the other
hand;

 

(k)                                  Certificate of LMT’s Secretary.  A
certificate executed by the secretary or similar representative of LMT whereby
such Person affirms that, among other things, attached to such certificate is
(1) a copy of LMT’s directors’ resolutions authorizing the granting of Liens and
all other matters set forth in or contemplated by the LMT Pledge Agreement and
any other Credit Documents to which LMT is a party, (2) a copy of LMT’s
certificate of incorporation as in effect on the Closing Date, (3) a copy of
LMT’s by-laws and all amendments thereto, and (4) a certificate of good standing
for LMT, dated on or immediately prior to the Closing Date, from the Secretary
of State of the state of its incorporation;

 

(l)                                     Opinion of Counsel. The favorable
written opinion to the Bank of Foley and Lardner LLP, counsel to the Borrowers,
regarding the Borrowers, LMT, the Credit Documents and the transactions
contemplated by this Agreement and the other Credit Documents;

 

(m)                               Bank Midwest Payoff Letter.  A payoff and lien
release letter from Bank Midwest, N.A. regarding Debt due such creditor that is
to be paid in full and terminated on the Closing Date and the release of any
Liens held by such creditor on any assets of any Borrower;

 

(n)                                 LMT Acknowledgment of C3’s Proxy Rights.  An
acknowledgment from LMT that, as of the Closing Date, a “Triggering Event of
Default” has occurred under the C3 Proxy which has not been cured or waived and
that, as such, C3 has the present legal right, as of the Closing Date, should it
so elect, to exercise the voting, consent and other rights granted to it under
the C3 Proxy; and

 

(o)                                 Other Items.  Such other agreements,
documents and assurances as the Bank may reasonably request in connection with
the transactions described in or contemplated by the Credit Documents.

 

If the Bank, in its sole and absolute discretion, elects to make a Loan
notwithstanding a Borrower’s failure to comply with all of the terms of this
Section, the Bank shall not be deemed to have waived the Borrowers’ compliance
therewith, nor to have waived any of the Bank’s other rights under this
Agreement; and in any event the Bank, if it so elects, may declare an immediate
Event of Default if the Borrowers fail to furnish to the Bank on demand any of
the Credit Documents described in this Section or otherwise fail to comply with
any condition precedent set forth in any Credit Document, in each case
irrespective of whether such failure occurs on or after the Closing Date or the
making of such Loan.

 

4.2                                 Additional Conditions Precedent to Initial
Loan.  The Bank’s obligation to make the initial Loan under this Agreement shall
also be subject to the satisfaction, in the Bank’s reasonable judgment, of each
of the following conditions precedent:

 

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(a)                                  Since the date of the financial statements
submitted by the Borrowers to the Bank immediately prior to the Closing Date,
there shall not have occurred any act or event which could reasonably be
expected to have a Material Adverse Effect;

 

(b)                                 No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit, or to obtain damages in respect of, or which is related to or arises
out of this Agreement or the other Credit Documents or the consummation of the
transactions contemplated hereby or thereby or which, in the Bank’s reasonable
determination, would make it inadvisable to consummate the transactions
contemplated by this Agreement or the other Credit Documents; and

 

(c)                                  The Borrowers shall have paid all legal
fees and other closing or like costs and expenses of the Bank which the
Borrowers are obligated to pay hereunder.

 

4.3                                 Conditions Precedent to All Loans.  The
obligation of the Bank to make each Loan under this Agreement (including,
without limitation, the initial Loan) shall be subject to the further conditions
precedent that, on the date of each such Loan:

 

(a)                                  The following statements shall be true:
(1) the representations and warranties of each Borrower contained in this
Agreement and the other Credit Documents are correct in all material respects on
and as of the date of such Loan as though made on and as of such date (except to
the extent any such representation or warranty is expressly made as of a
specific earlier date, in which case it shall only have to have been correct as
of such earlier date), and (2) there exists no Default or Event of Default as of
such date, nor would any Default or Event of Default result from the making of
the Loan requested by a Borrower;

 

(b)                                 The Borrowers shall have signed and sent to
the Bank, if the Bank so requests, a request for advance, setting forth in
writing the amount of the Loan requested and the other information required
pursuant to this Agreement; provided, however, that the foregoing condition
precedent shall not prevent the Bank, if it so elects in its sole discretion,
from making a Loan pursuant to a Borrower’s non-written request therefor; and

 

(c)                                  The Bank shall have received such other
approvals, opinions or documents as it may reasonably request.

 

Each Borrower agrees that the making of a request by such Borrower for a
Revolving Credit Loan or an Equipment Loan, whether in writing, by telephone or
otherwise, shall constitute a certification by the Borrowers that all
representations and warranties of the Borrowers in the Credit Documents are true
in all material respects as of the date thereof (except to the extent any such
representation or warranty is expressly made as of a specific earlier date, in
which case it shall only have to have been correct as of such earlier date) and
that all required conditions to the making of such Loan have been met.

 

Section 5
Representations And Warranties

 

5.1                                 Representations and Warranties of the
Borrowers.  The Borrowers jointly and severally represent and warrant to the
Bank as follows:

 

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(a)                                  Organization and Existence.  Each Borrower
(1) is a limited liability company duly organized, validly existing and in good
standing under the laws of the state of its organization as reflected in the
introductory paragraph of this Agreement, (2) is in good standing in all other
jurisdictions in which it is required to be qualified to do business as a
foreign limited liability company, and (3) has obtained all licenses and permits
and has filed all registrations necessary to the operation of its business;
except where the failure to so qualify or to obtain such licenses or permits
could not reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Authorization by the Borrowers.  The
execution, delivery and performance by each Borrower of the Credit Documents to
which it is a party (1) are within such Borrower’s limited liability company
powers, (2) have been duly authorized by all necessary limited liability company
or similar action, (3) do not contravene such Borrower’s certificate of
formation, operating agreement or other constituent documents, or any law or
contractual restriction binding on or affecting such Borrower or its properties,
and (4) do not result in or require the creation of any Lien upon any of the
Collateral other than a Lien in favor of the Bank.

 

(c)                                  Approval of Governmental Bodies.  Except
for the filing of a UCC financing statement against each Borrower in the Uniform
Commercial Code records of the Office of the Secretary of State of Delaware, no
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for the due execution,
delivery and performance by each Borrower of the Credit Documents to which it is
a party or the exercise by the Bank of its rights thereunder, including, without
limitation, the collection of any Collateral or the sale or other disposition of
any Collateral to any Person.

 

(d)                                 Enforceability of Obligations.  The Credit
Documents are the legal, valid and binding joint and several obligations of the
Borrowers enforceable against the Borrowers in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforceability of creditors’ rights generally and subject to the discretion of
courts in applying equitable remedies.

 

(e)                                  Financial Statements.  All financial
statements of the Borrowers which have been furnished to the Bank fairly present
in all material respects the financial position of the Borrowers as of the dates
reflected on the financial statements, and fairly present in all material
respects the results of their respective operations for the period covered
thereby, all in accordance with GAAP, except for the omission of footnotes in
interim financial statements and subject to normal year-end adjustments.  All
financial statements of any Guarantor which a Borrower has furnished or caused
to be furnished to the Bank fairly present, in all material respects, the
financial position of the Guarantor named therein as of the dates reflected
therein.  As of the Closing Date, there has been no material adverse change in
the financial condition or results from operations of the Borrowers, taken as a
whole, since the dates of the most recent financial statements of the Borrowers
submitted to the Bank.

 

(f)                                    Litigation.  There is no pending or, to
any Borrower’s knowledge, threatened action or proceeding affecting any Borrower
or any Guarantor or any of their respective properties before any court,
governmental agency or arbitrator which, if determined adversely to such
Borrower or any such Guarantor, could reasonably be expected to have a Material
Adverse Effect.

 

(g)                                 Investments.  No Borrower has any
Investments in any Person except for Permitted Investments.

 

(h)                                 Existing Debt.  No Borrower has any Debt
other than Permitted Debt.

 

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(i)                                     Taxes.  Each Borrower and each
Guarantor, if any, has filed all required federal, state, local and other tax
returns and has paid, or made adequate provision for the payment of, any taxes
due pursuant thereto or pursuant to any assessment received by such Person
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided.

 

(j)                                     Equity Interests and Records.  All
outstanding equity interests of each Borrower were and are properly issued, and
all books and records of each Borrower, including but not limited to its minute
books and books of account, are accurate and complete in all material respects. 
The ownership of the Borrowers is set forth in Schedule 5.1(j) of this
Agreement.  Except as may be otherwise set forth in Schedule 5.1(j), no Borrower
is obligated on or after the Closing Date to redeem or otherwise acquire, or pay
any dividends or make any other distributions in respect of, any of its equity
interests other than distributions in respect of tax obligations.

 

(k)                                  Hazardous Materials.  Each Borrower has
complied with all Environmental Laws and all of its facilities, leaseholds,
assets and other property comply with all Environmental Laws, except where such
failure to comply could not reasonably be expected to have a Material Adverse
Effect.  There are no outstanding or, to any Borrower’s knowledge, threatened
citations, notices or orders of non-compliance with Environmental Laws issued to
a Borrower or relating to its facilities, leaseholds, assets or other property.
Each Borrower has been issued all licenses, certificates, permits or other
authorizations required under any Environmental Law or by any federal, state or
local governmental or quasi-governmental entity, except where the failure to
obtain such license, certificate, permit or other authorization could not
reasonably be expected to have a Material Adverse Effect.

 

(l)                                     Negative Pledges.  No Borrower is a
party to or bound by any indenture, contract or other instrument or agreement
which prohibits the creation, incurrence or sufferance to exist of any Lien upon
any of the Collateral in favor of the Bank.

 

(m)                               Title to Property; Liens.  Each Borrower has
good and valid (or, in the case of real property, marketable) title to all
assets and other property purported to be owned by it, and the Bank has a
perfected first priority Lien thereon subject to no Lien other than Permitted
Liens.

 

(n)                                 Insolvency.  After the execution and
delivery of the Credit Documents and the disbursement of the initial Loan
hereunder, no Borrower will be insolvent within the meaning of the United States
Bankruptcy Code or unable to pay its debts as they mature.

 

(o)                                 Fiscal Year.  Each Borrower’s fiscal year is
a calendar year and each Borrower’s fiscal quarter is a calendar quarter.

 

(p)                                 Pledge of LMC’s Equity Interests; C3
Springing Proxy.  C3 has a perfected security interest in all equity interests
of LMC owned by LMT as security for the Borrowers’ obligations under the C3
Subordinated Notes and the related Securities Purchase Agreement, dated July 24,
2007, between C3 and the Borrowers.   As of the Closing Date, a “Triggering
Event of Default” has occurred under the C3 Proxy which has not been cured or
waived and C3 has the present legal right, as of the Closing Date, should it so
elect, to exercise the voting, consent and other rights granted to it under the
C3 Proxy.

 

(q)                                 LMT Pledge.  Bank has a perfected security
interest in all equity interests of LMC owned by LMT as security for the
Obligations.  By virtue of the C3 Subordination Agreement, the Bank’s security
interest in such equity interests is a first priority security interest and C3’s
security interest in such equity interests is a second priority security
interest; and, as of the Closing Date, no other Person has a perfected security
interest in such equity interests.

 

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(r)                                    Survival of Representations.  All
representations and warranties made in this Section 5 shall survive the
execution and delivery of the Credit Documents and the making of the Loans.

 

Section 6
Covenants

 

6.1                                 Affirmative Covenants.  So long as any
Obligations remain unpaid or the Bank has any commitment to extend credit to or
for the benefit of a Borrower, the Borrowers jointly and severally covenant to
the Bank as follows:

 

(a)                                  Compliance with Laws.  Each Borrower shall
comply with all applicable laws, rules, regulations and orders affecting such
Borrower or its properties, including, without limitation, all Environmental
Laws, except where such failure to comply could not reasonably be expected to
have a Material Adverse Effect.  Without limiting the foregoing, each Borrower
shall, and shall cause each of its Subsidiaries to, (1) ensure that no Person
who owns a controlling interest in or otherwise controls such Borrower or any
such Subsidiary is or shall be listed on the Specially Designated Nationals and
Blocked Person List or other similar lists maintained by the Office of Foreign
Assets Control (“OFAC”), the Department of the Treasury or included in any
Executive Orders, (2) not use or permit the use of the proceeds of any Loans to
violate any of the foreign asset control regulations of OFAC or any enabling
statute or Executive Order relating thereto, and (3) comply with all applicable
Bank Secrecy Act (“BSA”) laws and regulations, as amended.  As required by
federal law and the Bank’s policies and practices, the Bank may need to obtain,
verify and record certain customer identification information and documentation
in connection with opening or maintaining accounts, or establishing or
continuing to provide services.

 

(b)                                 Reporting and Notice Requirements.  The
Borrowers shall furnish to the Bank:

 

(1)                                  Monthly Financial Statements.  As soon as
available and in any event within 30 days after the end of each month, an
internally prepared balance sheet of the Borrowers (on a consolidated and
consolidating basis) as of the end of such month and internally prepared income
statements of the Borrowers (on a consolidated and consolidating basis) as of
the end of such month for such month and for the fiscal year-to-date, each
certified by LMC’s chief financial officer;

 

(2)                                  Audited Year-End Financial Statements.  As
soon as available and in any event within 90 days after the end of each fiscal
year of the Borrowers, final audited financial statements (as described in
subparagraph (1) above but including statements of retained earnings and
members’ equity) as of the end of such fiscal year of the Borrowers (on a
consolidated and consolidating basis) reported on by and accompanied by the
unqualified opinion of independent certified accountants selected by the
Borrowers and reasonably acceptable to the Bank, and a copy of any management,
operation or other letter or correspondence from such accountant to a Borrower
or any of its Affiliates in connection therewith;

 

(3)                                  Monthly A/R Aging Report.  As soon as
available and in any event within 15 days after the end of each month, an aging
report for each Borrower’s accounts receivable, certified by LMC’s chief
financial officer;

 

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(4)                                  Monthly Inventory Report.  As soon as
available and in any event within 15 days after the end of each month, a summary
of each Borrower’s inventory, certified by LMC’s chief financial officer;

 

(5)                                  Monthly Borrowing Base Certificate.  As
soon as available and in any event within 15 days after the end of each month, a
Borrowing Base Certificate;

 

(6)                                  Monthly EBITDA Report.  As soon as
available and in any event within 15 days after the end of each month, a report,
certified by LMC’s chief financing officer, of the Borrowers’ consolidated and
consolidating EBITDA, by month, for each of the 12 preceding months;

 

(7)                                  Quarterly Covenant Compliance Certificate. 
As soon as available and in any event within 30 days after the end of each
fiscal quarter of the Borrowers (beginning with the fiscal quarter ending
June 30, 2010), a Covenant Compliance Certificate;

 

(8)                                  Quarterly Distributions Compliance
Certificate.  As soon as available and in any event within 30 days after the end
of each calendar quarter, the amount of Distributions made during such quarter
and a report, certified by LMC’s chief financial officer, setting forth the
computations necessary to determine whether such Distributions complied with the
various tests and other restrictions contained in Section 6.2(j) of this
Agreement (it being understood that no such certificate shall be required for
any quarter during which no Distributions are made);

 

(9)                                  Borrower Tax Returns Promptly after being
filed with the relevant taxing authority, copies of all federal and state income
tax returns filed by each Borrower and all amendments thereto;

 

(10)                            Projections.  As soon as available and in any
event before the beginning of each fiscal year of the Borrowers, reasonably
detailed monthly projections of the Borrowers’ consolidated and consolidating
earnings and expenses for the next fiscal year of the Borrowers;

 

(11)                            Change in Key Personnel.  Written notice of any
voluntary or involuntary termination of employment of either the chief executive
officer or the chief financial officer of any Borrower or of any material
reduction in the material responsibilities of any such officers; in each case
within 30 days after the occurrence thereof;

 

(12)                            Litigation.  Written notice of any lawsuit filed
against or any arbitration request served upon either Borrower if the amount of
damages claimed exceeds $50,000 (or, if no specific dollar amount is claimed, if
the amount of damages would likely exceed $50,000 if the claimant were to
prevail in the lawsuit or arbitration); in each case within 30 days after the
Borrower obtains notice of such lawsuit or arbitration request;

 

(13)                            LMT.  Written notice of (i) any voluntary or
involuntary removal or departure of any director of LMT, (ii) any voluntary or
involuntary

 

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cessation of employment of the president, chief executive officer or chief
financial officer (or equivalent office holders) of LMT, (iii) any sale of all
or substantially all of the assets or equity interests of LMT, (iv) the filing
of any bankruptcy or other insolvency proceeding by or against LMT, or any
substantially equivalent action such as the appointment of a receiver or the
like, or (v) the cessation of all material operations of LMT; in each case
within five Business Days after the occurrence thereof; and

 

(14)                            Other.  Such other information respecting the
condition or operations, financial or otherwise, of the Borrowers, or the
financial condition of any Guarantor, as the Bank may reasonably request from
time to time.

 

All financial statements described in clauses (1) and (2) above shall be
prepared in accordance with GAAP in all material respects and on a basis
consistent with the financial statements of the Borrowers delivered to the Bank
for the period ending most immediately prior to the Closing Date, except that
unaudited financial statements may be subject to normal year-end audit
adjustments and need not contain footnotes.

 

(c)                                  Preservation of Business and Corporate
Existence.  Each Borrower shall: (1) carry on and conduct its principal business
substantially as it is now being conducted; (2) maintain in good standing its
existence and its right to transact business in those states in which it is now
or may after the Closing Date be doing business; and (3) maintain all licenses,
permits and registrations necessary to the conduct of its business; except where
the failure to so maintain its right to transact business or to maintain such
licenses, permits or registrations could not reasonably be expected to have a
Material Adverse Effect.

 

(d)                                 Insurance.  Each Borrower shall keep insured
at all times with financially sound and reputable insurers (1) all of its
property of an insurable nature, including, without limitation, all equipment,
fixtures and inventories, against fire and other casualties in such a manner and
to the extent that like properties are usually insured by others owning
properties of a similar character in a similar locality or as otherwise
reasonably required by the Bank, with the proceeds of such casualty insurance
payable solely to the Bank, and (2) against liability on account of damage to
persons or property (including product liability insurance and all insurance
required under all applicable worker’s compensation laws) caused by such
Borrower or its officers, directors, employees, agents or contractors in such a
manner and to the extent that like risks are usually insured by others
conducting similar businesses in the places where such Borrower conducts its
business or as otherwise reasonably required by the Bank, with the Bank being
named as an additional insured under such liability policies.  Each Borrower
shall cause the insurers under all of its insurance policies to provide the Bank
at least 30 days prior written notice of the termination of any such policy
before such termination shall be effective and to agree to such other reasonable
matters in respect of any such casualty insurance as provided in the Bank’s loss
payee endorsement provided to the Borrowers.  In addition, each Borrower will,
upon request of the Bank at any time, furnish a written summary of the amount
and type of insurance carried, the names of the insurers and the policy numbers,
and deliver to the Bank certificates with respect thereto.

 

(e)                                  Payment of Taxes.  Each Borrower shall pay
and discharge, before they become delinquent, all taxes, assessments and other
governmental charges imposed upon it, its properties, or any part thereof, or
upon the income or profits therefrom and all claims for labor, materials or
supplies which if unpaid might be or become a Lien or charge upon any of its
property, except such items as it is in good faith appropriately contesting and
as to which adequate reserves have been provided in accordance with

 

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GAAP.  Each Borrower shall provide such evidence of its compliance with this
Section as the Bank may reasonably request from time to time.

 

(f)                                    Maintenance of Properties and Leases. 
Each Borrower shall: (1) maintain, preserve and keep its properties and every
part thereof in good repair, working order and condition in all material
respects (except for such properties as such Borrower in good faith determines
are not useful in the conduct of its business); (2) from time to time make all
necessary and customary property repairs, renewals, replacements, additions and
improvements thereto so that at all times the efficiency thereof shall be fully
preserved and maintained in all material respects; and (3) maintain all leases
of real or personal property in good standing, free of any material defaults by
such Borrower thereunder.

 

(g)                                 Employee Plans.  Each Borrower shall:
(1) notify the Bank promptly of the establishment of any Plan, except that prior
to the establishment of any “welfare plan” (as defined in Section 3(1) of ERISA)
covering any employee of a Borrower for any period after such employee’s
termination of employment other than such period required by the Consolidated
Omnibus Budget Reconciliation Act of 1986 or “defined benefit plan” (as defined
in Section 3(35) of ERISA), it will obtain the Bank’s prior written approval of
such establishment, such approval not to be unreasonably withheld, conditioned
or delayed; (2) at all times make prompt payments or contributions to meet the
minimum funding standards of Section 412 of the Internal Revenue Code of 1986,
as amended, with respect to each Plan; (3) promptly after the filing thereof,
furnish to the Bank a copy of any report required to be filed pursuant to
Section 103 of ERISA in connection with each Plan for each Plan year, including
but not limited to the Schedule B attached thereto, if applicable; (4) notify
the Bank promptly of any “reportable event” (as defined in ERISA) or any
circumstances arising in connection with any Plan which might constitute grounds
for the termination thereof by the Pension Benefit Guaranty Corporation or for
the appointment by the appropriate United States District Court of a trustee to
administer the Plan, the initiation of any audit or inquiry by the Internal
Revenue Service or the Department of Labor of any Plan or
transaction(s) involving or related to any Plan, or any “prohibited transaction”
as defined in Section 406 of ERISA or Section 4975(c) of the Internal Revenue
Code of 1986, as amended; (5) notify the Bank prior to any action that could
result in the assertion of liability under Subtitle E of Title IV of ERISA
caused by the complete or partial withdrawal from any multiemployer plan or to
terminate any defined benefit plan sponsored by a Borrower; and (6) promptly
furnish such additional information concerning any Plan as the Bank may from
time to time request.

 

(h)                                 Notice of Default.  The Borrowers shall give
prompt written notice to the Bank of the occurrence of any Default or Event of
Default under any of the Credit Documents.  Similarly, the Borrowers shall give
prompt written notice to the Bank of any failure to pay, perform or observe or
any other default by a Borrower or any Guarantor under or in connection with any
of the C3 Subordinated Notes or under any other existing or future agreement by
which such Borrower or any such Guarantor is bound if, in the case of any such
other existing or future agreement, such default could reasonably be expected to
have a Material Adverse Effect.

 

(i)                                     Books and Records; Inspection; Audits. 
Each Borrower shall: (1)  maintain complete and accurate books and financial
records in accordance with GAAP in all material respects (except that interim
financial statements need not contain footnotes and may be subject to normal
year-end audit adjustments); (2) during normal working hours (and upon not less
than 5 days prior written notice, unless a Default or Event of Default exists)
permit the Bank and Persons designated by the Bank to visit and inspect its
properties, to inspect its books and financial records (including its journals,
orders, receipts and correspondence which relates to its accounts receivable),
and (without regard to the foregoing 5-day prior notice requirement) to discuss
its affairs, finances and accounts receivable and operations with its directors,
officers, employees and agents and its independent public accountants; and

 

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(3) permit the Bank and Persons designated by the Bank to perform audits of such
books and financial records when and as requested by the Bank.

 

(j)                                     Bank May Perform Obligations; Further
Assurances.  So long as a Default or Event of Default exists, each Borrower
shall permit the Bank, if the Bank so elects in its sole discretion, to pay or
perform any of the Obligations hereunder or under the other Credit Documents and
to reimburse the Bank, on demand, or, if the Bank so elects, by the Bank making
a Revolving Credit Loan on the Borrowers’ behalf and disbursing the same to the
appropriate Persons, for all amounts expended by or on behalf of the Bank in
connection therewith and all reasonable costs and expenses incurred by or on
behalf of the Bank in connection therewith.  Each Borrower further agrees to
execute, deliver or perform, or cause to be executed, delivered or performed,
all such documents, agreements or acts, as the case may be, as the Bank may
reasonably request from time to time to create, perfect, continue or otherwise
assure the Bank with respect to any Lien created or purported to be created by
any of the Credit Documents or to otherwise create, evidence or assure the
Bank’s rights and remedies under, or as contemplated by, the Credit Documents or
at law or in equity.

 

(k)                                  Bank Accounts.  Each Borrower shall
maintain all of its operating accounts, including, without limitation, checking,
savings and collateral trust accounts, with the Bank.

 

6.2                                 Negative Covenants.  So long as any
Obligations remain unpaid or the Bank has any commitment to extend credit to or
for the benefit of a Borrower, the Borrowers jointly and severally covenant to
the Bank as follows:

 

(a)                                  Liens.  No Borrower shall create or suffer
to exist any Lien, except for Permitted Liens, upon or with respect to any of
its properties, whether such Borrower owns or has an interest in such properties
on the Closing Date or at any time thereafter.

 

(b)                                 Debt.  No Borrower shall create or suffer to
exist any Debt except for Permitted Debt.

 

(c)                                  Restricted Investments.  No Borrower shall
make or permit to exist any Investments, except for Permitted Investments.

 

(d)                                 Structure; Fundamental Changes; Disposition
of Assets.  No Borrower shall merge or consolidate with or be acquired by any
other Person; and no Borrower shall acquire any equity interests of, or any
material portion of the assets of any business line or other unit of, any other
Person; and no Borrower shall change its limited liability company or other
organizational structure in any material respect or in any respect which would
be adverse to the Bank’s interests, or liquidate, wind-up or dissolve itself;
provided, however, that (1) nothing in this Section 6.2(d) shall prohibit any
Investment permitted pursuant to Section 6.2(c), and (2) if no Default or Event
of Default exists or would result therefrom, any wholly-owned subsidiary of a
Borrower may merge or consolidate with a Borrower if after giving effect to such
merger or consolidation such Borrower is the surviving entity.  No Borrower
shall sell, lease or otherwise transfer all or any part of its properties, real
or personal, other than, for so long as no Event of Default exists, (1) the sale
of inventory in the ordinary course of such Borrower’s business, and (2) the
disposition of obsolete equipment to the extent permitted under the terms of
this Agreement.

 

(e)                                  Sale-Leasebacks; Subsidiaries; New
Business.  No Borrower shall enter into any sale and leaseback transaction with
respect to any of its properties or create any subsidiary, or manufacture any
goods, render any services or otherwise enter into any business which is not
substantially similar to that existing on the Closing Date.

 

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(f)                                    Other Agreements.  No Borrower shall
enter into any agreement any term or condition of which violates any provision
of this Agreement or any other Credit Document.

 

(g)                                 Changes in Accounting Principles; Fiscal
Year.  No Borrower shall make any change in its principles or methods of
accounting as currently in effect, except such changes as are permitted or
required by GAAP, nor shall a Borrower, without first obtaining the Bank’s
written consent, change its fiscal year.

 

(h)                                 Transactions With Affiliates.  No Borrower
shall enter into or be a party to any transaction or arrangement, including
without limitation, the purchase, sale or exchange of property of any kind or
the rendering of any service, with any Affiliate, except in the ordinary course
of such Borrower’s business and upon fair and reasonable terms substantially as
favorable to such Borrower as those which would be obtained in a comparable
arms-length transaction with a non-Affiliate.

 

(i)                                     Compensation.  No Borrower shall pay,
directly or indirectly, in any fiscal year, compensation in any form (including,
without limitation, by way of salaries, bonuses, pension or profit sharing
contributions or other deferred compensation) to any of its equity holders,
directors, officers, managers or employees in amounts which are in excess of
fair and reasonable compensation paid for similar services rendered by such
persons by businesses substantially similar to such Borrower’s.

 

(j)                                     Distributions and C3 Payments.  No
Borrower shall pay any dividends or make any other distributions in respect of
any equity interests of such Borrower or redeem or otherwise acquire any such
equity interests or make any payment or prepayment with respect to any Permitted
C3 Subordinated Debt (all of the foregoing being collectively referred to herein
as a “Distribution”); provided, however, that:

 

(1)                                  Permitted C3 Debt Interest Payments. 
During each fiscal quarter of the Borrowers (beginning with the fiscal quarter
ending June 30, 2010), the Borrowers may pay interest then owing with respect to
Permitted C3 Debt provided that each of the following clauses (A), (B) and
(C) are satisfied:

 

(A)                              at the time of such Distribution and after
giving effect to such Distribution:

 

(i)                                     the aggregate amount of Available Cash
and Unused Revolver Availability equals at least $500,000,

 

(ii)                                  the ratio of (1) Senior Secured Debt at
the end of the most recently ended calendar month, to (2) Adjusted EBITDA for
the 12 calendar months most recently ended, does not exceed 1.50 to 1,

 

(iii)                               Adjusted EBITDA for the 12 calendar months
most recently ended equals at least $800,000, and

 

(iv)                              the ratio of (1) Adjusted EBITDA for the 12
calendar months most recently ended (less the amount of maintenance capital
expenditures incurred during such 12 calendar months, but only for those months
consisting of June 2011 or any month thereafter), to (2) 

 

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Section 6.2(j) Total Debt Service for such 12-month period, equals or exceeds
1.10 to 1;

 

(B)                                the aggregate amount of Distributions paid
pursuant to this clause (1) does not exceed $250,000 during any fiscal quarter
of the Borrowers; and

 

(C)                                no Default or Event of Default exists at the
time of or would result from such Distribution;

 

(2)                                  LMCS Distributions.  LMCS may make any
Distributions to LMC; and

 

(3)                                  LMC Stock Dividends.  LMC may make
Distributions payable solely in equity interests of LMC, subject, however, to
the terms of the LMT Pledge Agreement.

 

6.3                                 Specific Financial Covenants.  So long as
any Obligations remain unpaid or the Bank has any commitment to extend credit to
or for the benefit of a Borrower, the Borrowers jointly and severally covenant
to the Bank as follows:

 

(a)                                  Senior Debt Leverage Ratio.  The Borrowers
shall maintain, at the end of each fiscal quarter of the Borrowers, a ratio of
(1) Senior Secured Debt at such time, to (2) Adjusted EBITDA for the four fiscal
quarters then ending, of not more than:

 

(i)                                     2.50 to 1, for the Borrowers’ fiscal
quarters ending June 30, 2010, September 30, 2010, December 31, 2010 and
March 31, 2011;

 

(ii)                                  2.00 to 1, for the Borrowers’ fiscal
quarters ending June 30, 2011, September 30, 2011, December 31, 2011 and
March 31, 2012; and

 

(iii)                               1.75 to 1, for the Borrowers’ fiscal
quarters ending June 30, 2012, September 30, 2012, December 31, 2012 and
March 31, 2013.

 

(b)                                 Adjusted EBITDA.  The Borrowers shall
achieve, at the end of each fiscal quarter of the Borrowers (beginning with the
fiscal quarter ending June 30, 2010), Adjusted EBITDA for the four fiscal
quarters then ending of not less than $800,000.

 

(c)                                  Net Worth Plus Subordinated Debt.  The
Borrowers shall maintain, at the end of each fiscal quarter of the Borrowers
(beginning with the fiscal quarter ending June 30, 2010), Net Worth Plus
Subordinated Debt of not less than $7,500,000.

 

(d)                                 Senior Fixed Charge Coverage Ratio.  The
Borrowers shall maintain, at the end of each fiscal quarter of the Borrowers
(beginning with the fiscal quarter ending June 30, 2010), a ratio of
(1) Adjusted EBITDA for the four fiscal quarters then ending, to (2) Senior Debt
Service for such four fiscal quarters, of not less than 1.25 to 1.

 

(e)                                  Total Fixed Charge Coverage Ratio.  The
Borrowers shall maintain, at the end of each fiscal quarter of the Borrowers
(beginning with the fiscal quarter ending June 30, 2010), a ratio of
(1) Adjusted EBITDA for the four fiscal quarters then ending (less the amount of
maintenance capital expenditures incurred during such four fiscal quarters, but
only for those quarters ending on or after September 30, 2011), to (2) Total
Debt Service for such four fiscal quarters, of not less than 1.10 to 1.

 

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Section 7
Default

 

7.1                                 Events of Default.  Each of the following
events shall constitute an Event of Default hereunder:

 

(a)                                  Monetary Default.  The Borrowers (i) fail
to pay any principal or interest under the Credit Documents when due, or any fee
payable pursuant to Section 3.11 or Section 3.12 of this Agreement when due, or
(ii) fail to pay any other monetary Obligation under the Credit Documents within
five days after a Borrower’s receipt of written demand therefor from the Bank
(which written demand shall describe with reasonable specificity the nature of
the Obligation and the amount due thereunder); or

 

(b)                                 Material Non-Monetary Default.  The
Borrowers fail to perform or observe any term, covenant or other provision
contained in Sections 6.1(b), 6.1(c), 6.1(d), 6.1(h), 6.1(i), 6.1(j), 6.1(k),
6.2 or 6.3 of this Agreement in accordance with the terms thereof; or

 

(c)                                  Other Non-Monetary Default.  (1) The
Borrowers fail to perform or observe any other term, covenant or other provision
in any Credit Document (other than any term, covenant or provision addressed in
Subsections (a) or (b) above) in accordance with the terms thereof and, if such
default is curable, the Borrowers fail to cure such default within 30 days after
written notice from the Bank specifying in reasonable detail the nature of such
default is received by a Borrower; or (2) any “Event of Default” (as such term
is defined in any other Credit Document to which a Borrower, a Guarantor or LMT
is a party) occurs, or a Borrower, a Guarantor or LMT fails to perform or
observe any obligation, term or other provision of any Credit Document to which
such Person is a party beyond any applicable grace, cure or notice period; or

 

(d)                                 Misrepresentation.  Any representation or
warranty made or furnished by a Borrower, a Guarantor or LMT in connection with
this Agreement or the other Credit Documents proves to be incorrect, incomplete
or misleading in any material respect when made or when deemed made, or any such
representation or warranty becomes incorrect, incomplete or misleading in any
material respect and such Borrower or Guarantor or LMT, as the case may be,
fails to give the Bank prompt written notice thereof; or

 

(e)                                  Cross-Default.  (1) A Borrower fails to pay
any Debt (other than a monetary Obligation due the Bank under the Credit
Documents, as contemplated by Subsection (a) above) or to perform or observe any
other obligation or term in respect of such Debt (including, without limitation,
any Debt evidenced by any C3 Subordinated Note) and, as a result of any such
failure, the holder of such Debt accelerates or is entitled to accelerate the
maturity thereof or requires or is entitled to require a Person to purchase or
otherwise acquire such Debt (provided, however, that the existence of the
Existing C3 Defaults shall not constitute a Default or Event of Default under
this Subsection (e) unless C3 in fact accelerates the maturity of any Debt
evidenced by the C3 Subordinated Notes or unless C3 in fact requires a Person to
purchase or other acquire such Debt)); or (2) the Bank receives a notice from C3
pursuant to the C3 Subordination

 

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Agreement that C3 intends to take an Enforcement Action (as defined in the C3
Subordination Agreement) or, whether or not such notice is given or received, C3
takes any such Enforcement Action; or

 

(f)                                    Insolvency.  A Borrower or any Guarantor
ceases to be solvent or suffers the appointment of a receiver, trustee,
custodian or similar fiduciary or makes an assignment for the benefit of
creditors; or any petition for an order for relief is filed by or against a
Borrower or any Guarantor under the federal Bankruptcy Code or any similar state
insolvency statute (except, in the case of a petition filed against such Person,
if such proceeding is dismissed within 60 days after the petition is filed,
unless prior thereto an order for relief is entered under the federal Bankruptcy
Code); or a Borrower or any Guarantor makes any offer of settlement, extension
or composition to their respective unsecured creditors generally; or

 

(g)                                 Change of Control.  (1) LMC ceases to own
and control, beneficially and of record, all of the issued and outstanding
equity interests of LMCS; or (2) the holders of the equity interests of LMC, as
of the Closing Date, in the aggregate cease to own and control, beneficially and
of record, at least 85% of the issued and outstanding equity interests of LMC;
or (3) C3 ceases to own and control, beneficially and of record, all of the
equity interests of LMC owned or purported to be owned by C3 on the Closing
Date; or (4) C3 ceases to have the right to appoint at least half of the Board
of Managers (or similar governing body) of LMC; or

 

(h)                                 Contest Credit Documents.  A Borrower, a
Guarantor or LMT challenges or contests in any action, suit or proceeding the
validity or enforceability of any of the Credit Documents, the legality or
enforceability of any of the Obligations (or of C3’s voting or other rights
under the C3 Proxy) or the creation, attachment, perfection or priority of any
Lien granted to the Bank; or

 

(i)                                     Guaranty.  Any Guarantor revokes or
attempts to revoke (in whole or in part) the Guaranty signed by such Guarantor,
or repudiates (in whole or in part) such Guarantor’s liability thereunder or is
in default under the terms thereof or dies or is judicially declared
incompetent; or

 

(j)                                     Judgments.  One or more uninsured
judgments, decrees or orders for the payment of money in excess of $250,000 in
the aggregate during any 12-month period is rendered against one or more
Borrowers or any Guarantor; or

 

(k)                                  Lien.  The Bank shall cease to have a duly
perfected first priority security interest in the Collateral subject to no Lien
other than Permitted Liens; or

 

(l)                                     Revocation of Agency.  Any Borrower
revokes or limits, or takes any action purporting to revoke or limit, the
appointment or authority of the Borrowing Agent as such Borrower’s agent for
purposes of borrowing money or taking any other action described in or
contemplated by Section 3.15 hereof; or

 

(m)                               License Impairment; LMT Default.  (1) Any
actual or attempted revocation, rejection or other impairment at any time of all
or any part of any existing or future license agreement or other agreement
relating to any intellectual property

 

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rights between LMT, on the one hand, and LMC and/or LMCS, on the other hand; or
(2) the occurrence of any other event described in Section 5 of the Conditional
Consent, which pursuant to the terms of such Section 5, is to give rise to an
Event of Default hereunder; or (3) LMT shall enter into the Potential Assignment
Transaction referred to in the Conditional Consent without contemporaneously
therewith entering into the LMT Security Agreement; or (4) if such Potential
Assignment Transaction is entered into, the SPE referred to therein grants or
suffers to exist any Lien on any of the LMC IP Assets referred to therein,
including, without limitation, any contractual rights relating to any LMC IP
Assets referred to therein that form any part of the LMT License Agreement
referred to therein or the LMC License Agreement referred to therein; or (5) LMT
shall default in the payment, performance or observance of any existing or
future written obligation of LMT to the Bank, in each case beyond any applicable
grace, cure or notice period, including, without limitation, any such default
under the Conditional Consent, the LMT Pledge Agreement or any other Credit
Document to which LMT is a party; or

 

(n)                                 Material Adverse Change.  Any act or event
occurs which reasonably could be expected to have a Material Adverse Effect.

 

7.2                                 Obligation to Lend; Acceleration.  After the
occurrence and during the continuation of any Default, the Bank may declare the
obligation of the Bank to make Loans or to otherwise extend credit hereunder to
be terminated, whereupon the same shall forthwith terminate, or, if the Bank so
elects, to reduce Collateral advance rates or otherwise reduce the maximum
Borrowing Base by such amounts as the Bank elects in its sole and absolute
discretion from time to time.  After the occurrence and during the continuation
of any Event of Default, the Bank may declare the Notes, all interest thereon,
and all other Obligations to be forthwith due and payable, whereupon the Notes,
all such interest thereon and all such other Obligations shall become and be
forthwith due and payable, without presentment, protest or further notice or
demand of any kind, all of which are waived by each Borrower.  If,
notwithstanding the foregoing, after the occurrence and during the continuation
of any Default or Event of Default, as the case may be, the Bank elects (any
such election to be in the Bank’s sole and absolute discretion) to make one or
more advances under this Agreement or to not accelerate all or any of the
Obligations, any such election shall not preclude the Bank from electing
thereafter (in its sole and absolute discretion) to not make advances or to
accelerate all or any of the Obligations, as the case may be.

 

7.3                                 Remedies.  Upon or after the occurrence and
during the continuation of any Event of Default, the Bank has and may exercise
from time to time the following rights and remedies:

 

(a)                                  All of the rights and remedies of a secured
party under the UCC or under other applicable law, and all other legal and
equitable rights to which the Bank may be entitled, all of which rights and
remedies shall be cumulative, and none of which shall be exclusive, and all of
which shall be in addition to any other rights or remedies contained in this
Agreement or any of the other Credit Documents.

 

(b)                                 The right to take immediate possession of
the Collateral, and (1) to require the Borrowers to assemble the Collateral, at
the Borrower’s expense, and make it available to the Bank at a place designated
by the Bank which is reasonably convenient to the Borrowers and the Bank, and
(2) to enter upon and use any premises in which a Borrower has an ownership,
leasehold or other interest, or wherever any of the Collateral shall be located,
and to store, remove, abandon, manufacture, sell, dispose of or otherwise use
all or any part of the Collateral on such premises without the payment of rent
or any other fees by the Bank to a Borrower or any other Person for the use of
such premises or such Collateral.

 

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(c)                                  The right to sell or otherwise dispose of
all or any Collateral in its then condition, or after any further manufacturing
or processing thereof, at public or private sale or sales, with such notice as
may be required by law, in lots or in bulk, for cash or on credit, all as the
Bank, in its sole discretion, may deem advisable.  The Borrowers agree that, if
prior notice of such sale is required, not less than 10 days prior written
notice to a Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof; and that such sale may be at such
locations as the Bank may designate in such notice.  The Bank has the right to
conduct such sales on each Borrower’s premises, without charge therefor, and
such sales may be adjourned from time to time in accordance with applicable
law.  The Bank has the right to sell, lease or otherwise dispose of Collateral,
or any part thereof, for cash, credit or any combination thereof, and the Bank
may purchase all or any part of Collateral at public or, if permitted by law,
private sale and, in lieu of actual payment of such purchase price, may set-off
or credit the amount of such price against the Obligations.

 

(d)                                 The Bank is granted a license or other right
to use, solely in connection with the enforcement of its rights under this
Agreement, without charge, all of each Borrower’s labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks and
advertising matter, or any property of a similar nature as it pertains to the
Collateral or any other property of each Borrower, in storing, removing,
transporting, manufacturing, advertising, selling or otherwise using the
Collateral, and each Borrower’s rights in and under such property shall inure to
the Bank’s benefit.

 

(e)                                  The proceeds realized from the sale of any
Collateral may be applied, after the Bank is in receipt of good funds, as
follows: first, to the reasonable costs, expenses and attorneys’ fees and
expenses incurred by the Bank for collection and for acquisition, completion,
manufacture, protection, removal, storage, sale and delivery of the Collateral;
second, to any fees or expenses due the Bank under the Credit Documents; third,
to interest due upon any of the Obligations; and fourth, to the principal of the
Obligations; or in such other manner as the Bank may elect in its sole
discretion.  If any deficiency shall arise, the Borrowers and each Guarantor, if
any, shall remain jointly and severally liable to the Bank therefor.  Any
surplus remaining after payment in full of the Obligations may be returned to a
Borrower or to whomever may be legally entitled thereto.

 

7.4                                 Right of Set-off.  Upon or after the
occurrence and during the continuation of any Event of Default, the Bank is
authorized at any time and from time to time, without notice to the Borrowers
(any such notice being waived by the Borrowers), to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by the Bank to or for the
credit or the account of a Borrower against any and all of the Obligations
irrespective of whether or not the Bank has made any demand under this Agreement
or the other Credit Documents and although such Obligations may be unmatured. 
The rights of the Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of setoff or recoupment)
which the Bank may have.

 

Section 8
Miscellaneous

 

8.1                                 Notices.  Except as otherwise provided
herein, all notices, requests and demands to or upon a party to this Agreement
to be effective shall be in writing and shall be deemed validly given upon
receipt thereof, whether by personal delivery, U.S. mail, fax, other electronic
transmission or otherwise, in each case addressed as follows:

 

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If to the Bank:

 

Enterprise Bank & Trust

12695 Metcalf Avenue

Overland Park, KS  66213

Attn.:  Judson Stanion

Fax No.:  314-812-4031

 

with a copy (which shall not constitute notice) to:

 

Stinson Morrison Hecker LLP

1201 Walnut Street., Suite 2900

Kansas City, MO  64106

Attn.:  Mark Ovington, Esq.

Fax No.: 816-691-3495

 

If to a Borrower:

 

Liquidmetal Coatings, LLC

900 Rockmead

Suite 240

Kingwood, TX  77339

Attn.:  Larry Buffington

Fax No.:  281-359-1185

 

or to such other address or telecopy number as each party may designate for
itself by like notice given in accordance with this Section.

 

8.2                                 Power of Attorney.  Each Borrower
irrevocably designates, makes, constitutes and appoints the Bank, and all
Persons designated by the Bank, as such Borrower’s true and lawful attorney and
agent-in-fact (such power of attorney and agency being coupled with an interest
and therefore irrevocable until the Obligations have been indefeasibly paid in
full and the Bank has no duty to extend credit to or for the benefit of a
Borrower), and the Bank, and any Persons designated by the Bank, may, at any
time except as otherwise provided below, and without notice to or the consent of
the Borrowers and in either a Borrower’s or the Bank’s name, but at the cost and
expense of the Borrowers, (1) pay and perform any Obligation to be paid or
performed under any of the Credit Documents, (2) endorse a Borrower’s name on
any checks, notes, acceptances, drafts, money orders or any other evidence of
payment or proceeds of the Collateral which come into the possession of the Bank
or under the Bank’s control, and (3) at any time an Event of Default exists,
(a) to the extent the Collateral consists of accounts receivable, instruments,
payment intangibles or other payment rights, demand payment of and collect all
amounts due thereunder from all Persons obligated thereon and enforce payment
thereof by legal proceedings or otherwise, and generally exercise all of each
Borrower’s rights and remedies with respect to the collection of such
Collateral, (b) settle, adjust, compromise, discharge or release any Collateral
or any legal proceedings brought to collect any Collateral, (c) sell or
otherwise transfer any Collateral upon such terms, for such amounts and at such
time or times as the Bank deems advisable, (d) take control, in any manner, of
any item of payment or proceeds relating to any Collateral, (e) prepare, file
and sign a Borrower’s name to a proof of claim in bankruptcy or similar document
against any account debtor or to any notice of Lien, assignment or satisfaction
of Lien or similar document in connection with any of the Collateral,
(f) endorse the name of a Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of the Bank on
account of the Obligations, (g) endorse the name of a Borrower upon any
instrument, chattel paper or similar document or agreement relating to

 

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any Collateral, (h) make and adjust claims under policies of insurance,
(i) access and use any computer or other electronic hardware and software and
other electronic records and access devices to which any Borrower has access for
any purpose relating to any Collateral, (j) make and retain paper or electronic
copies of all paper and electronic records and other documents of each Borrower
described in this Section 8.2; and (k) do all other acts and things necessary,
in the Bank’s determination, to fulfill each Borrower’s obligations under this
Agreement.

 

8.3                                 Indemnity.  Each Borrower agrees to
indemnify, defend and hold harmless the Bank and each shareholder, director,
officer, employee, agent, attorney and other representative of or contractor for
the Bank from and against any and all damages, settlement amounts, expenses
(including, without limitation, attorney’s fees and court costs), other losses,
claims or other assertions of liability of any nature whatsoever incurred by or
on behalf of or asserted against, as the case may be, any one or more of such
indemnified parties at any time arising in whole or in part out of a Borrower’s
failure to observe, perform or discharge any of its duties under any of the
Credit Documents or any misrepresentation made by or on behalf of such Borrower
under any of the Credit Documents.  Without limiting the generality of the
foregoing, this indemnity shall extend to any claims asserted against the Bank
or such other indemnitees by any Person under any Environmental Laws or similar
laws by reason of a Borrower’s or any other Person’s failure to comply with laws
applicable to Hazardous Substances.  Each Borrower further agrees to indemnify,
defend and hold harmless the Bank and each shareholder, director, officer,
employee, agent, attorney and other representative of or contractor for the Bank
from and against any and all damages, settlement amounts, expenses (including,
without limitation, attorneys’ fees and court costs), other losses, claims or
other assertions of liability of any nature whatsoever incurred by or on behalf
of or asserted against, as the case may be, any one or more of such indemnified
parties at any time in connection with any one or more indemnified parties’
actions or inactions relating in any respect to the Credit Agreement, any of the
other Credit Documents or any of the transactions described in or contemplated
by any of the foregoing (including, without limitation, any such losses incurred
by any one or more indemnified parties arising out of any claim by any
Guarantor), except to the extent such losses arise out of such indemnified
party’s gross negligence, bad faith or willful misconduct.  All indemnities
given by a Borrower to the Bank under the Credit Documents, including, without
limitation, the indemnities set forth in this Section, shall survive the
repayment of the Loans and the termination of this Agreement.

 

8.4                                 Entire Agreement; Modification of Agreement;
Sale of Interest.  This Agreement and the other Credit Documents, together with
all other instruments, agreements and certificates executed by the parties in
connection therewith or with reference thereto, embodies the entire agreement
between the parties hereto and thereto with respect to the subject matter hereof
and thereof and supersedes all prior agreements, understandings and inducements,
whether express or implied, oral or written.  This Agreement may not be
modified, altered or amended, except by an agreement in writing signed by the
Borrowers and the Bank.  No Borrower may directly or indirectly sell, assign or
transfer any interest in or rights under this Agreement or any of the other
Credit Documents.  Each Borrower consents to the Bank’s participation, sale,
assignment, transfer or other disposition, at any time or times on or after the
Closing Date, of this Agreement and any of the other Credit Documents, or of any
portion hereof or thereof, including, without limitation, the Bank’s rights,
title, interests, remedies, powers and duties hereunder or thereunder.

 

8.5                                 Reimbursement of Expenses.  If, at any time
or times prior or subsequent to the Closing Date, regardless of whether an Event
of Default then exists or any of the transactions contemplated hereunder are
concluded, the Bank employs counsel for advice or other representation, or
incurs reasonable legal and/or appraisers’, liquidators’, engineers’ expenses
and/or other costs or out-of-pocket expenses in connection with: (a) the
negotiation and preparation of this Agreement and any of the other Credit
Documents, any amendment or other modification of this Agreement or any of the
other Credit Documents, or any sale or attempted sale of any interest herein or
therein to a participating lender or other

 

35

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Person; (b) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by the Bank, a Borrower or any other Person) in any way
relating to the Collateral, this Agreement, any of the other Credit Documents or
a Borrower’s affairs; (c) any attempt to enforce any rights of the Bank against
a Borrower or any other Person which may be obligated to the Bank by virtue of
this Agreement or any of the other Credit Documents, including, without
limitation, any account debtors, irrespective of whether litigation is commenced
in pursuance of such rights; and/or (d) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, manufacture, liquidate or otherwise dispose of
or realize upon the Collateral (all of which are hereinafter collectively
referred to as the “Expenses”); then, in any and each such event, such Expenses
shall be jointly and severally payable on demand by the Borrowers to the Bank,
and shall be additional Obligations and be secured by the Collateral and may be
funded, if the Bank so elects, by the Bank making a Revolving Credit Loan or
other loan under this Agreement on the Borrowers’ behalf and paying the same to
the Persons to whom such Expenses are payable.  Additionally, if any taxes
(excluding taxes imposed upon or measured by the income of the Bank) shall be
payable on account of the execution or delivery of this Agreement or the other
Credit Documents, or the execution, delivery, issuance or recording of any of
the Credit Documents, or the creation of any of the Obligations hereunder, by
reason of any federal, state or local statute or other law existing on or after
the Closing Date, the Borrowers will pay all such taxes, including, but not
limited to, any interest and penalties thereon, and will indemnify and hold the
Bank harmless from and against all liabilities in connection therewith.

 

8.6                                 Indulgences Not Waivers.  The Bank’s
failure, at any time or times on or after the Closing Date, to require strict
performance by a Borrower of any provision of this Agreement or the other Credit
Documents shall not waive, affect or diminish any right of the Bank thereafter
to demand strict compliance and performance therewith.  Any suspension or waiver
by the Bank of a Default or an Event of Default by the Borrowers under this
Agreement or any of the other Credit Documents shall not suspend, waive or
affect any other Default or Event of Default by the Borrowers under this
Agreement or any of the other Credit Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type.  None of the
undertakings, agreements, warranties, covenants and representations of the
Borrowers contained in this Agreement or any of the other Credit Documents and
no Default or Event of Default by the Borrower under this Agreement or any of
the other Credit Documents shall be deemed to have been suspended or waived by
the Bank, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of the Bank and directed and delivered to the Borrowers.

 

8.7                                 Severability.  Wherever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

 

8.8                                 Successors and Assigns.  This Agreement and
the other Credit Documents shall be binding upon and inure to the benefit of the
successors and assigns of each Borrower and the Bank.  This provision, however,
shall not be deemed to modify Section 8.4 hereof.

 

8.9                                 General Waivers by Borrower.  Except as
otherwise expressly provided for in this Agreement, each Borrower waives:
(a) presentment, protest, demand for payment, notice of dishonor demand and
protest and notice of presentment, default, notice of nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts receivable, contract rights, documents, instruments, chattel
paper and guaranties at any time held by the Bank on which such Borrower may in
any way be liable and ratifies and confirms whatever the Bank may do in this
regard; (b) notice prior to taking possession or control of the Collateral or
any bond or security which

 

36

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

 

might be required by any court prior to allowing the Bank to exercise any of the
Bank’s remedies, including the issuance of an immediate writ of possession;
(c) the benefit of all valuation, appraisement and exemption laws; and (d) any
and all other notices, demands and consents in connection with the delivery,
acceptance, performance, default or enforcement of this Agreement or any of the
other Credit Documents and/or any of the Bank’s rights in respect of the
Collateral.  Subject to the following sentence, each Borrower also waives any
right of setoff or similar right such Borrower may at any time have against the
Bank as a defense to the payment or performance of such Borrower’s Obligations. 
If a Borrower now or hereafter has any claim against the Bank giving rise to any
such right of setoff or similar right, such Borrower agrees not to assert such
claim as a defense or right of setoff with respect to such Borrower’s
Obligations under the Credit Documents or otherwise, and to instead assert any
such claim, if such Borrower so elects to assert such claim, in a separate
proceeding against the Bank and not as a part of any proceeding or as a defense
to any claim initiated by the Bank to enforce any of the Bank’s rights under any
of the Credit Documents.

 

8.10                           Collateral Protection Act Notice.  The following
notice is given pursuant to Mo. Rev. Stat. § 427.120:  “UNLESS YOU PROVIDE
EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE
MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR
COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS.  THE
COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT
IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL.  YOU MAY LATER CANCEL ANY
INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE
OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT.  IF WE PURCHASE INSURANCE FOR
THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT
INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE
MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE
EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF
THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION.  THE
COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO
OBTAIN ON YOUR OWN.”

 

8.11                           Mo. Rev. Stat. § 432.047 Statement.  The
following statement is given pursuant to Mo. Rev. Stat. § 432.047:  “Oral
agreements or commitments to loan money, extend credit or to forbear from
enforcing repayment of a debt including promises to extend or renew such debt
are not enforceable, regardless of the legal theory upon which it is based that
is in any way related to the credit agreement.  To protect you (borrower(s)) and
us (creditor) from misunderstanding or disappointment, any agreements we reach
covering such matters are contained in this writing, which is the complete and
exclusive statement of the agreement between us, except as we may later agree in
writing to modify it.”  For purposes of this Section 8.11 and the foregoing
Missouri statute, all terms of the other Credit Documents are incorporated in
and made part of this Agreement by reference; provided, however, that to the
extent of any direct conflict between this Agreement and such other Credit
Documents, this Agreement shall prevail and govern.

 

8.12                           Execution in Counterparts; Facsimile Signatures. 
This Agreement and the other Credit Documents may be executed in any number of
counterparts and by different parties thereto, each of which when so executed
and delivered shall be deemed to be an original and all of which counterparts
taken together shall constitute but one and the same instrument.  A signature of
a party to any of the Credit Documents sent by facsimile or other electronic
means shall be deemed to constitute an original and fully effective signature of
such party.

 

37

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8.13                           USA Patriot Act Notice.  The Bank notifies each
Borrower that, pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”), it is required to
obtain, verify and record information that identifies such Borrower, which
information includes the name and address of such Borrower and other information
that will allow the Bank to identify such Borrower and any Guarantors in
accordance with the Act.  Each Borrower agrees to provide such information and
take such other action as the Bank may request from time to time to enable the
Bank to comply with the provisions of the Act with respect to the transactions
described in the Credit Documents.

 

8.14                           Governing Law; Consent to Forum.  This Agreement
shall be governed by the laws of the State of Missouri without giving effect to
any choice of law rules thereof.  As part of the consideration for new value
this day received, each Borrower consents to the jurisdiction of any state or
federal court located within Jackson County, Missouri (collectively, the “Chosen
Forum”), and waives personal service of any and all process upon it and consents
that all such service of process be made by certified or registered mail
directed to such Borrower at the address stated in Section 8.1 hereof and
service so made shall be deemed to be completed upon delivery thereto.  Each
Borrower waives any objection to jurisdiction and venue of any action instituted
against it as provided herein and agrees not to assert any defense based on lack
of jurisdiction or venue.  Each Borrower further agrees not to assert against
the Bank (except by way of a defense or counterclaim in a proceeding initiated
by the Bank) any claim or other assertion of liability relating to any of the
Credit Documents, the Obligations, the Collateral or the Bank’s actions or
inactions in respect of any of the foregoing in any jurisdiction other than the
Chosen Forum.  Nothing in this Agreement shall affect the Bank’s right to bring
any action or proceeding relating to this Agreement or the other Credit
Documents against a Borrower or its properties in courts of other jurisdictions.

 

8.15                           Waiver of Jury Trial; Limitation on Damages.  To
the fullest extent permitted by law, and as separately bargained-for
consideration to the Bank, each Borrower waives any right to trial by jury
(which the Bank also waives) in any action, suit, proceeding or counterclaim of
any kind arising out of or otherwise relating to any of the Credit Documents,
the Obligations, the Collateral or the Bank’s actions or inactions in respect of
any of the foregoing.  To effectuate the foregoing, each Borrower grants the
Bank an irrevocable power of attorney to file, as attorney-in-fact for such
Borrower, a copy of this Agreement in any Missouri court pursuant to Mo. Rev.
Stat. § 510.190 and Rule 69.01, V.A.M.R. and/or any other applicable law, and
the copy of this Agreement so filed shall conclusively be deemed to constitute
such Borrower’s waiver of trial by jury in any proceeding arising out of or
otherwise relating to any of the Credit Documents, the Obligations, the
Collateral or the Bank’s actions or inactions in respect of any of the
foregoing.  To the fullest extent permitted by law, and as separately
bargained-for consideration to the Bank, each Borrower also waives any right it
may have at any time to claim or recover in any litigation or other dispute
involving the Bank, whether the underlying claim or dispute sounds in contract,
tort or otherwise, any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages.  Each Borrower
acknowledges that the Bank is relying upon and would not enter into the
transactions described in the Credit Documents on the terms and conditions set
forth therein but for such Borrower’s waivers and agreements under this Section.

 

[signature page(s) to follow]

 

38

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered by their duly authorized representatives as of the date first above
written.

 

 

 

LIQUIDMETAL COATINGS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

ENTERPRISE BANK & TRUST

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

Credit Agreement – Signature Page

 

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

 

Exhibit A

 

REVOLVING CREDIT NOTE

 

$2,000,000

 

June 23, 2010

 

For value received, LIQUIDMETAL COATINGS, LLC, a Delaware limited liability
company, and LIQUIDMETAL COATINGS, LLC, a Delaware limited liability company
(each a “Borrower” and, collectively, the “Borrowers”), jointly and severally
promise to pay to the order of ENTERPRISE BANK & TRUST, a Missouri banking
corporation (the “Bank”; which term shall include any subsequent holder hereof),
in lawful money of the United States of America, without setoff, recoupment,
deduction or counterclaim, the principal sum of Two Million and 00/100 Dollars
($2,000,000.00) or, if different, the principal amount outstanding under
Section 2.2 of the Credit Agreement referred to below.

 

This Revolving Credit Note (the “Note”) is the Revolving Credit Note referred to
in, is issued pursuant to, and is subject to the terms and conditions of, the
Credit Agreement, dated on or about the date hereof, among the Borrowers and the
Bank, as the same may be amended, renewed, restated, replaced, consolidated or
otherwise modified from time to time (the “Credit Agreement”).  To the extent of
any direct conflict between the terms and conditions of this Note and the terms
and conditions of the Credit Agreement, the terms and conditions of the Credit
Agreement shall prevail and govern.  Capitalized terms used and not defined in
this Note have the meanings given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal balance of this Note as
provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any, to prepay this Note is subject to the
terms and conditions of the Credit Agreement.

 

The termination of the Credit Agreement or the occurrence of an Event of Default
shall entitle the Bank, at its option, to declare the then outstanding principal
balance hereof, all accrued interest thereon, and all other amounts, if any,
payable in respect of this Note to be, and the same shall thereupon become,
immediately due and payable without notice to or demand on the Borrowers, all of
which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by
applicable law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other notices,
demands and consents in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and consents to any extensions of time,
renewals, releases of any parties to or guarantors of this Note, waivers and any
other modifications that may be granted or consented to by the Bank from time to
time in respect of the time of payment or any other provision of this Note.

 

This Note shall be governed by the laws of the State of Missouri, without regard
to any choice of law rule thereof which gives effect to the laws of any other
jurisdiction.

 

[signature page to follow]

 

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

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Note as of
the date first above written.

 

 

LIQUIDMETAL COATINGS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

2

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Exhibit B

 

TERM NOTE

 

$1,500,000

 

June 23, 2010

 

For value received, LIQUIDMETAL COATINGS, LLC, a Delaware limited liability
company, and LIQUIDMETAL COATINGS SOLUTIONS, LLC (each a “Borrower” and,
collectively, the “Borrowers”), jointly and severally promise to pay to the
order of ENTERPRISE BANK & TRUST, a Missouri banking corporation (the “Bank”;
which term shall include any subsequent holder hereof), in lawful money of the
United States of America, without setoff, recoupment, deduction or counterclaim,
the principal sum of One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00).

 

This Term Note (the “Note”) is the Term Note referred to in, is issued pursuant
to, and is subject to the terms and conditions of, the Credit Agreement, dated
on or about the date hereof, among the Borrowers and the Bank, as the same may
be amended, renewed, restated, replaced, consolidated or otherwise modified from
time to time (the “Credit Agreement”).  To the extent of any direct conflict
between the terms and conditions of this Note and the terms and conditions of
the Credit Agreement, the terms and conditions of the Credit Agreement shall
prevail and govern.  Capitalized terms used and not defined in this Note have
the meanings given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal balance of this Note as
provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any, to prepay this Note is subject to the
terms and conditions of the Credit Agreement.

 

The termination of the Credit Agreement or the occurrence of an Event of Default
shall entitle the Bank, at its option, to declare the then outstanding principal
balance hereof, all accrued interest thereon, and all other amounts, if any,
payable in respect of this Note to be, and the same shall thereupon become,
immediately due and payable without notice to or demand upon the Borrowers, all
of which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by
applicable law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other notices,
demands and consents in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and consents to any extensions of time,
renewals, releases of any parties to or guarantors of this Note, waivers and any
other modifications that may be granted or consented to by the Bank from time to
time in respect of the time of payment or any other provision of this Note.

 

This Note shall be governed by the laws of the State of Missouri, without regard
to any choice of law rule thereof which gives effect to the laws of any other
jurisdiction.

 

[signature page to follow]

 

1

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

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Note as of
the date first above written.

 

 

LIQUIDMETAL COATINGS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

2

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

 

Exhibit C

 

EQUIPMENT NOTE

 

$

 

[date]

 

For value received, LIQUIDMETAL COATINGS, LLC, a Delaware limited liability
company, and LIQUIDMETAL COATINGS, LLC, a Delaware limited liability company
(each a “Borrower” and, collectively, the “Borrowers”), jointly and severally
promise to pay to the order of ENTERPRISE BANK & TRUST, a Missouri banking
corporation (the “Bank”; which term shall include any subsequent holder hereof),
in lawful money of the United States of America, without setoff, recoupment,
deduction or counterclaim, the principal sum of
                                                                 and       /100
Dollars ($                              ).

 

This Equipment Note (the “Note”) is an Equipment Note referred to in, is issued
pursuant to, and is subject to the terms and conditions of, the Credit
Agreement, dated on or about June 23, 2010, among the Borrowers and the Bank, as
the same may be amended, renewed, restated, replaced, consolidated or otherwise
modified from time to time (the “Credit Agreement”).  To the extent of any
direct conflict between the terms and conditions of this Note and the terms and
conditions of the Credit Agreement, the terms and conditions of the Credit
Agreement shall prevail and govern.  Capitalized terms used and not defined in
this Note have the meanings given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal balance of this Note as
provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any, to prepay this Note is subject to the
terms and conditions of the Credit Agreement.

 

The termination of the Credit Agreement or the occurrence of an Event of Default
shall entitle the Bank, at its option, to declare the then outstanding principal
balance hereof, all accrued interest thereon, and all other amounts, if any,
payable in respect of this Note to be, and the same shall thereupon become,
immediately due and payable without notice to or demand on the Borrowers, all of
which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by
applicable law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other notices,
demands and consents in connection with the delivery, acceptance, performance,
default or enforcement of this Note, and consents to any extensions of time,
renewals, releases of any parties to or guarantors of this Note, waivers and any
other modifications that may be granted or consented to by the Bank from time to
time in respect of the time of payment or any other provision of this Note.

 

This Note shall be governed by the laws of the State of Missouri, without regard
to any choice of law rule thereof which gives effect to the laws of any other
jurisdiction.

 

[signature page to follow]

 

1

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

 

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Note as of
the date first above written.

 

 

LIQUIDMETAL COATINGS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

2

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

 

Exhibit D

 

(form of Borrowing Base Certificate)

 

BORROWING BASE CERTIFICATE

 

(for the month ended               )

 

This Borrowing Base Certificate (the “Certificate”) is delivered pursuant to
Section 6.1(b)(5) of the Credit Agreement, dated as of June 23, 2010, among
Liquidmetal Coatings, LLC and Liquidmetal Coatings Solutions, LLC (each a
“Borrower”), and Enterprise Bank & Trust (the “Bank”), as the same may be
amended from time to time (the “Credit Agreement”).  Capitalized terms used but
not defined in this Certificate have the meanings given to them in the Credit
Agreement.

 

The undersigned hereby certifies that he or she is the chief financial officer
of the Borrowers and, as such, is authorized to execute and deliver this
Certificate on behalf of the Borrowers, and that:

 

1.                                       Borrowing Base Calculation.  Attached
hereto is a spreadsheet showing the Borrowing Base, including its component
parts, as of the date indicated above, which Borrowing Base equals
$                            .

 

2.                                       Reliance.  This Certificate is
delivered to and may be conclusively relied upon by the Bank.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate on behalf of
the Borrowers on                                      , 20      .

 

 

 

LIQUIDMETAL COATINGS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

1

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

 

Exhibit E

 

(form of Covenant Compliance Certificate)

 

COVENANT COMPLIANCE CERTIFICATE

 

(for the fiscal quarter ended               )

 

This Covenant Compliance Certificate (the “Certificate”) is delivered pursuant
to Section 6.1(b)(7) of the Credit Agreement, dated as of June 23, 2010, among
Liquidmetal Coatings, LLC and Liquidmetal Coatings Solutions, LLC (each a
“Borrower”), and Enterprise Bank & Trust (the “Bank”), as the same may be
amended from time to time (the “Credit Agreement”).  Capitalized terms used but
not defined in this Certificate have the meanings given to them in the Credit
Agreement.

 

The undersigned hereby certifies that he or she is the chief financial officer
of the Borrowers and, as such, is authorized to execute and deliver this
Certificate on behalf of the Borrowers, and that:

 

1.                                       Financial Covenants.  Attached hereto
is a spreadsheet showing the Borrowers’ compliance or noncompliance with the
various financial covenants set forth in Section 6.3 of the Credit Agreement as
of, or for the applicable time periods ending on, the date indicated above.

 

2.                                       Financial Statements  The financial
statements described in Section 6.1(b) of the Credit Agreement for the Borrowers
for the fiscal quarter and, if applicable, fiscal year referred to above, which
are attached hereto and are incorporated herein by this reference, fairly
present the financial condition and results of operations of the Borrowers in
accordance with GAAP consistently applied, as at the end of, and for, such
period (subject, in the case of interim statements, to normal year-end audit
adjustments and to the absence of footnote disclosures).

 

3.                                       Other Compliance.  A review of the
activities of the Borrowers during the period since the date of the last
Covenant Compliance Certificate (or, in the case of the initial delivery of this
Covenant Compliance Certificate, since the Closing Date) has been made at my
direction and under my supervision with a view to determining whether the
Borrowers have kept, observed and performed all of their respective obligations
under the Credit Agreement and all other Credit Documents to which they are a
party, and to the best of my knowledge after due inquiry and investigation,
(a) the Borrowers have kept, observed and performed all of their respective
obligations under the Credit Agreement and the other Credit Documents to which
any Borrower is a party, (b) no Default or Event of Default has occurred and is
continuing, and (c) all representations and warranties made by each Borrower in
the Credit Agreement and the other Credit Documents to which it is a party are
true and correct as of the date of this Certificate (unless the representations
or warranties relate to a specific earlier date, in which case the
representations and warranties were true and correct as of the earlier date).

 

4.                                       Reliance.  This Certificate is
delivered to and may be conclusively relied upon by the Bank.

 

[signature page(s) to follow]

 

1

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

 

IN WITNESS WHEREOF, the undersigned has executed this certificate on behalf of
the Borrowers on                                      , 20      .

 

 

LIQUIDMETAL COATINGS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

2

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

 

Schedule 5.1(j)

 

(Ownership of Borrowers)

 

1.                                       LMC owns all outstanding equity
interests of LMCS.

 

2.                                       The outstanding equity interests of
LMC, as of the Closing Date, are owned as follows:

 

Common Units:

 

(a)                                  LMT owns 47,436.25 Class A Common Units of
LMC, which Class A Common Units constitute 69.25% of all Common Units of LMC.

 

(b)                                 C3, collectively, owns 13,015 Class B Common
Units of LMC, which Class B Common Units constitute 19% of all Common Units of
LMC.

 

(c)                                  Larry Buffington owns (i) 5,850 Class B
Common Units of LMC, and (ii) 1,000 Class C Common Units of LMC; which Class B
Common Units and Class C Common Units together constitute 10% of all Common
Units of LMC.

 

(d)                                 Global Strategy & Capital Group, Inc., d/b/a
CRESO Capital Partners, owns (i) 1,023.75 Class B Common Units of LMC, and
(ii) 175 Class C Common Units of LMC; which Class B Common Units and Class C
Common Units together constitute 1.75% of all Common Units of LMC.

 

Preferred Units:

 

(e)                                  C3, collectively, owns 2,500 Preferred
Units of LMC, which Preferred Units constitute all outstanding Preferred Units
of LMC.

 

LMC has no equity interests outstanding on the Closing Date, or holders of such
equity interests as of the Closing Date, other than as described in this
paragraph number 2.

 

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