Exhibit 10.1

 

EXECUTION VERSION

 

 

 

$35,000,000

 

CREDIT AGREEMENT

 

dated as of

 

April 27, 2015

 

between

 

ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD.,

 

as Borrower

 

and

 

CALM WATERS PARTNERSHIP,

 

Lender

 

 

 

 

 

 

Table of Contents

 

    Page       Article I Definitions 1 Section 1.01. Defined Terms 1 Section
1.02. Terms Generally 18       Article II The Term Loan 18 Section 2.01. Term
Loan 18 Section 2.02. Evidence of Debt; Repayment of Loans 18 Section 2.03. Fees
19 Section 2.04. Interest on Loans 19 Section 2.05. Default Interest 19 Section
2.06. Repayment of Term Borrowings 19 Section 2.07. Voluntary Prepayment 20
Section 2.08. Increased Costs 20 Section 2.09. Payments 21 Section 2.10. Taxes
21       Article III Representations and Warranties 24 Section 3.01.
Organization; Powers 24 Section 3.02. Authorization 24 Section 3.03.
Enforceability 24 Section 3.04. Governmental Approvals 25 Section 3.05.
Financial Statements 25 Section 3.06. Capitalization 25 Section 3.07. SEC
Reports 26 Section 3.08. No Material Adverse Effect 26 Section 3.09. Title to
Properties; Possession under Leases 26 Section 3.10. Subsidiaries 27 Section
3.11. Litigation; Compliance with Laws 27 Section 3.12. Agreements 27 Section
3.13. Federal Reserve Regulations 27 Section 3.14. Investment Company Act 27
Section 3.15. Use of Proceeds 28 Section 3.16. Taxes 28 Section 3.17. Employee
Benefit Plans 28 Section 3.18. Environmental Matters 28 Section 3.19. Insurance
29 Section 3.20. Security Documents 29 Section 3.21. Location of Real Property
30 Section 3.22. Intellectual Property 30 Section 3.23. Labor Matters 31 Section
3.24. Solvency 31 Section 3.25. Sanctioned Persons 31 Section 3.26. Foreign
Corrupt Practices Act 31 Section 3.27. Anti-Terrorism Law 32

 

i

 

 

Section 3.28. No Undisclosed Liabilities 32 Section 3.29. Indebtedness 32
Section 3.30. Rank of Indebtedness 32 Section 3.31. No Guarantees of
Indebtedness 32 Section 3.32. No Fees 32 Section 3.33. Transactions with
Affiliates 32       Article IV Conditions of Lending 33 Section 4.01. Conditions
of Borrowing 33       Article V Affirmative Covenants 36 Section 5.01.
Existence; Compliance with Laws; Businesses and Properties 36 Section 5.02.
Insurance 36 Section 5.03. Obligations and Taxes 38 Section 5.04. Financial
Statements, Reports, etc 38 Section 5.05. Litigation and Other Notices 39
Section 5.06. Information Regarding Collateral 40 Section 5.07. Maintaining
Records; Access to Properties and Inspections; Maintenance of Ratings 40 Section
5.08. Use of Proceeds 40 Section 5.09. Employee Benefits 41 Section 5.10.
Compliance with Environmental Laws 41 Section 5.11. Further Assurances 41
Section 5.12. Post-Closing Obligations 42       Article VI Negative Covenants 42
Section 6.01. Indebtedness 42 Section 6.02. Liens 44 Section 6.03. Sale and
Lease-Back Transactions 46 Section 6.04. Investments, Loans and Advances 46
Section 6.05. Mergers and Consolidations 48 Section 6.06. Dispositions 48
Section 6.07. Restricted Payments; Restrictive Agreements 49 Section 6.08.
Transactions with Affiliates 50 Section 6.09. Business of the Borrower and
Subsidiaries 51 Section 6.10. Other Indebtedness and Agreements 51 Section 6.11.
Equity Issuances 51       Article VII Events of Default 51 Section 7.01. Events
of Default 51 Section 7.02. Application of Proceeds 54       Article VIII
Miscellaneous 54 Section 8.01. Notices; Electronic Communications 54 Section
8.02. Survival of Agreement 55 Section 8.03. Binding Effect 55 Section 8.04.
Successors and Assigns 56 Section 8.05. Expenses; Indemnity 57 Section 8.06.
Right of Setoff 58

 

ii

 

 

Section 8.07. Waivers; Amendment 58 Section 8.08. Interest Rate Limitation 59
Section 8.09. Entire Agreement 59 Section 8.10. WAIVER OF JURY TRIAL 59 Section
8.11. Severability 59 Section 8.12. Counterparts 60 Section 8.13. Headings 60
Section 8.14. Applicable Law 60 Section 8.15. Jurisdiction; Consent to Service
of Process 60 Section 8.16. Electronic Execution of Assignments 61 Section 8.17.
No Fiduciary Duty 61 Section 8.18. Release of Collateral and Guarantees 61      
Article IX Representations and Warranties of Lender 62 Section 9.01.
Organization; Authority 62 Section 9.02. Own Account 62 Section 9.03. The Lender
Status 63 Section 9.04. Experience of the Lender 63 Section 9.05. General
Solicitation 63

 

iii

 

 

SCHEDULES

 

Schedule 1.01(a) - Existing Credit Agreements Schedule 1.01(b) - Guarantors
Schedule 1.01(c) - Mortgaged Properties Schedule 3.06 - Capitalization Schedule
3.10 - Subsidiaries Schedule 3.11 - Litigation Schedule 3.12 - Agreements
Schedule 3.15 - Use of Proceeds Schedule 3.19 - Insurance Schedule 3.20(a) - UCC
Filing Offices Schedule 3.20(c) - Mortgage Filing Offices Schedule 3.21 - Owned
Real Property Schedule 3.22 - Intellectual Property Schedule 3.29 - Indebtedness
Schedule 3.30 - Rank of Indebtedness Schedule 3.32 - No Fees Schedule 5.12 -
Post-Closing Obligations Schedule 6.01(a) - Existing Indebtedness Schedule
6.02(a) - Existing Liens Schedule 6.04(a) - Existing Investments Schedule
6.07(b) - Existing Restrictions and Conditions Schedule 6.11 - Equity Issuances
      EXHIBITS           Exhibit A - Form of Affiliate Subordination Agreement
Exhibit B - Form of Compliance Certificate Exhibit C - Form of Guarantee and
Collateral Agreement Exhibit D - Form of Term Note Exhibit E - Form of
Intercreditor Agreement Exhibit F - Form of Warrant

 

i

 

 

CREDIT AGREEMENT dated as of April 27, 2015 (this “Agreement”), among ELECTRONIC
CIGARETTES INTERNATIONAL GROUP, LTD., a Nevada corporation (the “Borrower”) and
CALM WATERS PARTNERSHIP, a Wisconsin general partnership (the “Lender”).

 

The Borrower has requested that the Lender extend credit in the form of a Term
Loan to the Borrower on the Closing Date, in an aggregate principal amount of
$35,000,000. The proceeds of the Term Loan are to be used by the Borrower (a) to
repay in full certain debt obligations, (b) to pay the Transaction Costs (such
term and each other capitalized term used but not defined in these introductory
statements having the meaning given it in Article I) and (c) for other general
corporate purposes.

 

The Lender is willing to extend such credit to the Borrower on the terms and
subject to the conditions set forth herein. Accordingly, the parties hereto
agree as follows:

 

Article I

 

Definitions

 

Section 1.01.   Defined Terms. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the meanings specified below:

 

“Acquired Entity” shall have the meaning assigned to such term in Section
6.04.(e).

 

“Additional Lender Credit Agreement” shall mean the Credit Agreement dated the
date hereof (as amended, restated or otherwise modified from time to time) by
and among the Borrower, Tiburon Opportunity Fund, L.P., as agent and the other
lenders party thereto.

 

“Additional Lender Security Agreement” shall mean the Guarantee and Collateral
Agreement dated the date hereof among the Borrower, the Subsidiaries party
thereto and the Additional Lenders.

 

“Additional Lenders” shall mean the lenders party to the Additional Lender
Credit Agreement.

 

“Affiliate” shall mean, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified;
provided that, for purposes of Section 6.08, the term “Affiliate” shall also
include any Person that directly or indirectly owns 10% or more of any class of
Equity Interests of the Person specified or that is an officer or director of
the Person specified.

 

“Affiliate Subordination Agreement” shall mean an Affiliate Subordination
Agreement in the form of Exhibit A pursuant to which intercompany obligations
and advances owed by any Loan Party are subordinated to the Obligations.

 

“Agreement” shall have the meaning assigned to such term in the introductory
statement hereto.

 

 

 

 

“Anti-Terrorism Laws” shall have the meaning assigned to such term in 7.

 

“Asset Sale” shall mean any Disposition by the Borrower or any Subsidiary
pursuant to Sections Section 6.06.(n) and Section 6.06.(o) (other than a
Disposition generating Net Cash Proceeds of less than $150,000).

 

“Asset Sale Proceeds Pledged Account” shall mean an account subject to a control
agreement in favor of the Lender.

 

“Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. §101, et seq.), as amended and in effect from time to time and the
regulations issued from time to time thereunder.

 

“Board” shall mean the Board of Governors of the Federal Reserve System of the
United States of America.

 

“Borrower” shall have the meaning assigned to such term in the introductory
statement to this Agreement.

 

“Borrower Materials” shall have the meaning assigned to such term in Section
8.01.

 

“Borrower Notice” shall have the meaning assigned to such term in the definition
of Real Estate Collateral Requirements.

 

“Borrowing” shall mean Loans made, converted or continued on the same date.

 

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

 

“Capital Lease Obligations” of any Person shall mean the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

 

“Cash Management Bank” shall mean, with respect to any Cash Management
Obligations, any Person approved in writing by the Lender.

 

“Cash Management Obligation” shall mean obligations owed by any Loan Party or
Subsidiary to any Cash Management Bank in respect of any overdraft and related
liabilities arising from treasury, depositary and cash management services or
any automated clearing house transfer of funds or in respect of any credit card
or similar services.

 

2

 

 

A “Change in Control” shall be deemed to have occurred if (a) any “person” or
“group” (within the meaning of Rule 13d-5 of the Exchange Act as in effect on
the date hereof) shall own, directly or indirectly, beneficially or of record,
shares representing more than 35% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of the Borrower, (b) a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower shall at any time be occupied by persons who were neither (i) nominated
by the board of directors of the Borrower nor (ii) appointed by directors so
nominated or (c) any change in control (or similar event, however denominated)
with respect to the Borrower or any Subsidiary shall occur under and as defined
in any indenture or agreement in respect of Indebtedness of the Borrower.

 

“Change in Law” shall mean the occurrence, after the date of this Agreement, of
any of the following: (a) the adoption or taking effect of any law, rule or
regulation, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Authority or (c) the making or issuance of any request, rule guideline or
directive (whether or not having the force of law) of any Governmental
Authority.

 

“Charges” shall have the meaning assigned to such term in 8.08.

 

“Closing Date” shall mean April 27, 2015.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Collateral” shall mean the “Collateral” as defined in any Security Document and
shall include any Mortgaged Property.

 

“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any other class of securities into which such securities may
hereafter be reclassified or changed.

 

“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, right,
option, warrant or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Communications” shall have the meaning assigned to such term in Section 8.01.

 

“Compliance Certificate” shall mean a compliance certificate in the form of
Exhibit B.

 

“Connection Income Taxes” shall mean Other Connection Taxes that are imposed on
or measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

 

“Control” shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms “Controlling” and “Controlled” shall have meanings correlative thereto.

 

“Debtor Relief Laws” shall mean the Bankruptcy Code and all other liquidation,
conservatorship, bankruptcy, assignment for the benefit of creditors,
moratorium, rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States or other applicable jurisdictions from
time to time in effect.

 

3

 

 

“Default” shall mean any event or condition which upon notice, lapse of time or
both would constitute an Event of Default.

 

“Disposition” shall mean, with respect to any Person, (a) the sale, transfer,
license, lease or other disposition (by way of merger, casualty, condemnation or
otherwise) of any property or asset of such Person (including, without
limitation, any sale and leaseback transaction and the sale of any Equity
Interest owned by such Person) to any other Person and (b) the issuance of
Equity Interests by a subsidiary of such Person to any other Person.

 

“Disqualified Stock” shall mean any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, or
requires the payment of any cash dividend or any other scheduled payment
constituting a return of capital, in each case at any time on or prior to the
first anniversary of the Latest Maturity Date in effect at the time such Equity
Interest is issued or (b) is convertible into or exchangeable (unless at the
sole option of the issuer thereof) for (i) debt securities or (ii) any Equity
Interest referred to in clause (a) above, in each case at any time prior to the
first anniversary of the Latest Maturity Date in effect at the time such Equity
Interest is issued.

 

“Dollars” or “$” shall mean lawful money of the United States of America.

 

“Domestic Subsidiaries” shall mean all Subsidiaries other than Foreign
Subsidiaries.

 

“Environmental Laws” shall mean all former, current and future federal, state,
local, supranational, and foreign laws (including statutory and common law),
treaties, regulations, rules, ordinances, codes, decrees, injunctions,
judgments, governmental restrictions or requirements, directives, orders
(including consent orders), permits, and agreements in each case, relating to
the indoor or outdoor environment, natural resources, human health and safety
(as it relates to exposure to hazardous materials) or the presence, Release of
or exposure to pollutants, contaminants, wastes, chemicals or otherwise
hazardous materials, or the generation, manufacture, processing, distribution,
use, treatment, storage, transport, recycling, disposal or handling of, or the
arrangement for such activities, with respect to any pollutants, contaminants,
wastes, chemicals or otherwise hazardous materials.

 

“Environmental Liability” shall mean all liabilities, obligations, damages,
losses, claims, actions, suits, judgments, orders, fines, penalties, fees,
indemnities, expenses and costs (including administrative oversight costs,
natural resource damages and remediation costs), whether known or unknown,
actual or potential, vested or unvested, or contingent or otherwise, arising out
of or relating to (a) any Environmental Law, (b) the generation, manufacture,
processing, distribution, use, treatment, storage, transport, recycling,
disposal or handling of, or the arrangement for such activities, with respect to
any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
presence or Release of any Hazardous Materials or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

 

4

 

 

“Equity Interests” shall mean shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity interests in any Person and any option, warrant or other
right entitling the holder thereof to purchase or otherwise acquire any such
equity interest.

 

“Equity Issuance” shall mean any issuance or sale by the Borrower or any
Subsidiary of any Equity Interests of the Borrower or any such Subsidiary, as
applicable, except in each case for (a) any issuance or sale to the Borrower or
any Subsidiary, (b) any issuance of directors’ qualifying shares, and (c) sales
or issuances of common stock of the Borrower to management or employees of the
Borrower or any Subsidiary under any employee stock option or stock purchase
plan or employee benefit plan in existence from time to time.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended from time to time.

 

“ERISA Affiliate” shall mean any Person (whether or not incorporated) that,
together with the Borrower, is treated as a single employer under Section 414(b)
or (c) of the Code, or solely for purposes of Section 302 of ERISA and Sections
412, 4980B and 4980H of the Code, is treated as a single employer under Section
414 of the Code. For the avoidance of doubt, when any provision of this
Agreement relates to a past event or period of time, the term “ERISA Affiliate”
includes any person who was, as to the time of such past event or period of
time, an “ERISA Affiliate” within the meaning of the preceding sentence.

 

“ERISA Event” shall mean (a) any “reportable event,” as defined in Section 4043
of ERISA or the regulations issued thereunder, with respect to a Pension Plan
(other than an event for which the 30-day notice period is waived), (b) the
requirements of Section 4043(b) of ERISA apply with respect to a contributing
sponsor, as defined in Section 4001(a)(13) of ERISA, of a Pension Plan, and an
event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
ERISA is reasonably expected to occur with respect to such Pension Plan, (c) a
determination that any Pension Plan is or is reasonably expected to be in “at
risk” status (within the meaning of Section 430 of the Code or Section 303 of
ERISA), (d) the filing pursuant to Section 412(c) of the Code or Section 302(c)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Pension Plan, (e) the incurrence by the Borrower or any of its
ERISA Affiliates of any liability under Title IV of ERISA (other than non
delinquent premiums payable to the PBGC under Sections 4006 and 4007 of ERISA),
(f) the termination, or the filing of a notice of intent to terminate, any
Pension Plan pursuant to Section 4041(c) of ERISA, (g) the receipt by the
Borrower or any of its ERISA Affiliates from the PBGC or a plan administrator of
any notice relating to the intention to terminate any Pension Plan or Pension
Plans or to appoint a trustee to administer any Pension Plan, (h) the cessation
of operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA, (i) conditions contained in
Section 303(k)(1)(A) of ERISA for imposition of a lien shall have been met with
respect to any Pension Plan, (j) the receipt by the Borrower or any of its ERISA
Affiliates of any notice, or the receipt by any Multiemployer Plan from the
Borrower or any of its ERISA Affiliates of any notice, concerning the imposition
of Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, “insolvent” (within the meaning of Section 4245 of ERISA), or in
“endangered,” “critical” or “critical and declining” status (within the meaning
of Section 432 of the Code or Section 304 of ERISA), (k) the occurrence of a
non-exempt “prohibited transaction” with respect to which the Borrower or any of
the Subsidiaries is a “disqualified person” (within the meaning of Section 4975
of the Code) or a “party in interest” (within the meaning of Section 406 of
ERISA) or with respect to which the Borrower, any such Subsidiary or their
respective ERISA Affiliates could otherwise be liable, or (l) any other event or
condition with respect to a Pension Plan or Multiemployer Plan that could result
in liability of the Borrower or any Subsidiary.

 

5

 

 

“Events of Default” shall have the meaning assigned to such term in Section
7.01.

 

“Evidence of Flood Insurance” shall have the meaning assigned to such term in
the definition of Real Estate Collateral Requirements.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Excluded Subsidiary” shall mean Domestic Subsidiaries that are (i) subsidiaries
of Foreign Subsidiaries, (ii) prohibited by applicable law, rule or regulation
from providing a Guarantee of the Credit Facilities or which Guarantee would
require governmental (including regulatory) consent, approval, license or
authorization (provided that this clause (ii) shall not apply if such consent,
approval, license or authorization has been received, and provided further that
the Borrower shall have used commercially reasonable efforts to obtain any such
consent, approval, license or authorization required), (iii) not Wholly Owned by
the Borrower or any of its Subsidiaries or (iv) any Subsidiary that owns no
material assets other than Equity Interests in one or more Foreign Subsidiaries.

 

“Excluded Taxes” shall mean any of the following Taxes imposed on or with
respect to a Recipient or required to be withheld or deducted from a payment to
a Recipient, (a) Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each case, (i)
imposed as a result of such Recipient being organized under the laws of, or
having its principal office located in, the jurisdiction imposing such Tax (or
any political subdivision thereof) or (ii) that are Other Connection Taxes, (b)
in the case of the Lender, U.S. federal withholding Taxes imposed on amounts
payable to or for the account of the Lender with respect to an applicable
interest in a Loan pursuant to a law in effect on the date on which (i) the
Lender acquires such interest in the Loan, or (ii) the Lender changes its
lending office, except in each case to the extent that, pursuant to Section
2.10, amounts with respect to such Taxes were payable to such Lender immediately
before it changed its lending office, (c) Taxes attributable to such Recipient’s
failure to comply with Section 2.10.(f) and (d) any U.S. federal withholding
Taxes imposed under FATCA.

 

“Executive Order” shall have the meaning assigned to such term in Section 3.27.

 

“Existing Credit Agreements” shall mean those agreements set forth on Schedule
1.01(a).

 

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), any current or
future regulations or official interpretations thereof and any agreements
entered into pursuant to Section 1471(b)(1) of the Code.

 

6

 

 

“Federal Funds Effective Rate” shall mean, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by the Lender from three
Federal funds brokers of recognized standing selected by it.

 

“Financial Officer” of any Person shall mean the chief financial officer,
principal accounting officer, treasurer or controller of such Person.

 

“Flood Laws” shall have the meaning assigned to such term in the definition of
Real Estate Collateral Requirements.

 

“Foreign Subsidiary” shall mean any Subsidiary that is a “controlled foreign
corporation” within the meaning of Section 957 of the Code (and any subsidiary
of such person).

 

“GAAP” shall mean United States generally accepted accounting principles applied
on a basis consistent with the financial statements delivered pursuant to
Section 4.01.(l).

 

“Governmental Authority” shall mean any federal, state, local, supranational or
foreign court or governmental agency, registry, authority, instrumentality or
regulatory body.

 

“Governmental Official” shall have the meaning assigned to such term in Section
3.26.

 

“Guarantee” of or by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation or to purchase (or to advance or supply funds for the purchase
of) any security for the payment of such Indebtedness or other obligation, (b)
to purchase or lease property, securities or services for the purpose of
assuring the owner of such Indebtedness or other obligation of the payment of
such Indebtedness or other obligation or (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation; provided that the term “Guarantee” shall not include endorsements
for collection or deposit in the ordinary course of business.

 

“Guarantee and Collateral Agreement” shall mean the Guarantee and Collateral
Agreement, in the form of Exhibit C, among the Borrower, the Subsidiaries party
thereto and the Lender.

 

“Guarantors” shall mean each Subsidiary listed on Schedule 1.01(b), and each
other Subsidiary that is or becomes a party to the Guarantee and Collateral
Agreement.

 

7

 

 

“Hazardous Materials” shall mean (a) any petroleum products, derivatives or
byproducts and all other hydrocarbons, coal ash, radon gas, lead, asbestos and
asbestos-containing materials, toxic mold, urea formaldehyde foam insulation,
polychlorinated biphenyls, infectious or medical wastes and chlorofluorocarbons
and all other ozone-depleting substances, (b) any pollutant, contaminant, waste
or chemical or any toxic, radioactive, ignitable, corrosive, reactive or
otherwise hazardous substance, waste or material, or any substance, waste or
material having any constituent elements displaying any of the foregoing
characteristics or (c) any substance, waste or material that is prohibited,
limited or regulated by or pursuant to or which can form the basis for liability
under any Environmental Law.

 

“Indebtedness” of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in respect of any
Disqualified Stock Interests of such Person or any other Person or any warrants,
rights or options to acquire such Disqualified Stock, valued, in the case of
redeemable preferred interests, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends, (j) all obligations of
such Person as an account party in respect of letters of credit and (k) all
obligations of such Person in respect of bankers’ acceptances. The Indebtedness
of any Person shall include the Indebtedness of any partnership in which such
Person is a general partner, other than to the extent that the instrument or
agreement evidencing such Indebtedness expressly limits the liability of such
person in respect thereof.

 

“Indemnified Taxes” shall mean (a) Taxes, other than Excluded Taxes, imposed on
or with respect to any payment made by or on account of any obligation of any
Loan Party under any Loan Document and (b) to the extent not otherwise described
in (a), Other Taxes.

 

“Indemnitee” shall have the meaning assigned to such term in Section 8.05.(b).

 

“Intellectual Property Assets” shall have the meaning assigned to such term in
Section 3.22.

 

“Intellectual Property” shall have the meaning assigned to such term in the
Guarantee and Collateral Agreement.

 

“Intellectual Property Rights” shall have the meaning assigned to such term in
Section 3.22.

 

8

 

 

“Intercreditor Agreement” shall mean the intercreditor agreement dated as of the
Closing Date among the Lender and the Additional Lenders, substantially in the
form attached as Exhibit E, as the same may be amended, restated, amended and
restated, supplemented or otherwise modified from time to time in accordance
therewith and herewith.

 

“Interest Payment Date” shall mean the last Business Day of each March, June,
September and December.

 

“Investment” shall mean, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of Equity Interests or Indebtedness or other securities of another
Person, (b) a loan, advance or capital contribution to, Guarantee or assumption
of Indebtedness of, or purchase or other acquisition of any other Indebtedness
or equity participation or interest in, another Person, including any
partnership or joint venture interest in such other Person or (c) the purchase
or other acquisition (in one transaction or a series of transactions) of all or
substantially all of the property and assets or business of another Person or
assets constituting a business unit, line of business or division of such
Person. For purposes of compliance with Section 6.04, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment but giving
effect to any returns or distributions of capital or repayment of principal
actually received in cash by such Person with respect thereto, whether by
disposition, return on capital, dividend or otherwise.

 

“Investment Company Act” shall mean the Investment Company Act of 1940, as
amended from time to time.

 

“IRS” shall mean the United States Internal Revenue Service.

 

“Latest Maturity Date” shall mean, at any time, the latest maturity or
expiration date applicable to any Loan hereunder at such time.

 

“Lender” shall have the meaning assigned to such term in the introductory
statements to this Agreement.

 

“Lien” shall mean (a) with respect to any asset, (i) any mortgage, deed of
trust, lien (statutory or other), pledge, hypothecation, assignment, deposit
arrangement, encumbrance, license, charge preference, priority or other security
interest or preferential arrangement of any kind or nature whatsoever in or on
such asset (including any conditional sale or other title retention agreement,
capital lease, any easement, right of way or other encumbrance on title to real
property) and (ii) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same effect as any of the foregoing) relating to
such asset and (b) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.

 

“Loan Documents” shall mean this Agreement, the Security Documents, the
Intercreditor Agreement, the Notes, the Warrant and any other document executed
in connection with the foregoing.

 

“Loan Parties” shall mean the Borrower and the Guarantors.

 

9

 

 

“Loans” shall mean the Term Loans.

 

“LTIP” shall mean the Electronic Cigarettes International Group, Ltd. Long-Term
Incentive Plan in effect on the date hereof, without further amendment,
supplement or other modification or waiver.

 

“Margin Stock” shall have the meaning assigned to such term in Regulation U.

 

“Material Adverse Effect” shall mean (a) a materially adverse effect on the
business, assets, liabilities, operations, financial condition, operating
results or prospects of the Borrower and the Subsidiaries, taken as a whole, (b)
a material impairment of the ability of the Borrower or any other Loan Party to
perform any of its obligations under any Loan Document to which it is or will be
a party or (c) a material impairment of the rights and remedies of or benefits
available to the Lender under any Loan Document.

 

“Material Indebtedness” shall mean Indebtedness (other than the Loans) of any
one or more of the Borrower or any Subsidiary in an aggregate principal amount
exceeding $250,000.

 

“Maturity Date” shall mean April 27, 2018 (or if such day is not a Business Day,
the next preceding Business Day).

 

“Maximum Rate” shall have the meaning assigned to such term in Section 8.08.

 

“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor thereto.

 

“Mortgaged Properties” shall mean, initially, the owned real properties of the
Loan Parties specified on Schedule 1.01(c), and shall include each other parcel
of real property and improvements thereto with respect to which a Mortgage is
granted pursuant to Section 5.11.

 

“Mortgages” shall mean the mortgages, deeds of trust, deeds to secure debt and
other similar security documents delivered pursuant to Section 4.01 or pursuant
to Section 5.11, each in the form acceptable to the Lender.

 

“Multiemployer Plan” shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.

 

10

 

 

“Net Cash Proceeds” shall mean (a) with respect to any Asset Sale, the cash
proceeds (including cash proceeds subsequently received (but only as and when
received) in respect of noncash consideration initially received), net of (i)
selling expenses (including broker’s and advisors fees or commissions, legal
fees, transfer and similar taxes and the Borrower’s good faith estimate of
income taxes paid or payable in connection with such sale), (ii) amounts
provided as a reserve, in accordance with GAAP, against any liabilities under
any indemnification obligations or purchase price adjustment associated with
such Asset Sale (provided that, to the extent and at the time any such amounts
are released from such reserve, such amounts shall constitute Net Cash Proceeds)
and (iii) the principal amount, premium or penalty, if any, interest and other
amounts on any Indebtedness for borrowed money which is secured by the asset
sold in such Asset Sale to the extent such Indebtedness is required to be repaid
either (x) with such proceeds or (y) because the asset sold is removed from a
borrowing base supporting such Indebtedness (in each case, other than (x)
Indebtedness hereunder and (y) any such Indebtedness assumed by the purchaser of
such asset); provided that, if (x) the Borrower shall deliver a certificate of a
Financial Officer to the Lender at the time of receipt thereof setting forth the
Borrower’s intent to reinvest such proceeds in productive assets of a kind then
used or usable in the business of the Borrower and its Subsidiaries within 12
months of receipt of such proceeds and (y) no Default or Event of Default shall
have occurred and shall be continuing at the time of such certificate or at the
proposed time of the application of such proceeds, such proceeds shall not
constitute Net Cash Proceeds except to the extent (i) not so used or
contractually committed (with a Person other than an Affiliate of the Borrower)
to be so used at the end of such 12-month period and (ii) if so committed within
such 12-month period, not so used on or before day that is 180 days from the
date of such commitment, at which time such proceeds shall be deemed to be Net
Cash Proceeds; provided, further, that upon receipt of any such proceeds, the
Borrower or applicable Subsidiary shall either (x) deposit such proceeds into
the Asset Sale Proceeds Pledged Account or (y) invest such proceeds in a
Permitted Investment that is subject to a first-priority lien in favor of the
Lender, and such proceeds shall remain in such Asset Sale Proceeds Pledged
Account or invested in such Permitted Investments until reinvested pursuant to
this definition; and (b) with respect to any issuance or incurrence of
Indebtedness or any Equity Issuance, the cash proceeds thereof, net of all taxes
and customary fees, commissions, costs, prepayment premiums and other expenses
incurred in connection therewith or in connection with the use of proceeds
thereof.

 

“NFIP” shall have the meaning assigned to such term in the definition of Real
Estate Collateral Requirements.

 

“Notes” shall mean any promissory notes evidencing the Term Loan, as applicable,
executed and delivered pursuant to Section 2.02.(d) and in the form of Exhibit
D, respectively.

 

“Notice of Grant of Security Interest in Copyrights” shall have the meaning
assigned to such term in the Guarantee and Collateral Agreement.

 

“Notice of Grant of Security Interest in Patents” shall have the meaning
assigned to such term in the Guarantee and Collateral Agreement.

 

“Notice of Grant of Security Interest in Trademarks” shall have the meaning
assigned to such term in the Guarantee and Collateral Agreement.

 

“Obligations” shall mean (i) all principal of all Loans, all interest on such
Loans and all other amounts now or hereafter payable by the Borrower pursuant to
the Loan Documents; (ii) all obligations of a Loan Party to any Cash Management
Bank under any Secured Cash Management Agreements; and (iii) all other
obligations of each Loan Party under the Loan Documents.

 

“OFAC” shall have the meaning assigned to such term in Section 3.25.

 

“Other Connection Taxes” shall mean, with respect to any Recipient, Taxes
imposed as a result of a present or former connection between such Recipient and
the jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

11

 

 

“Other Taxes” shall mean all present or future stamp, court or documentary,
intangible, property, excise, mortgage, recording, filing or similar Taxes that
arise from any payment made under, from the execution, delivery, recording,
performance, enforcement or registration of, from the receipt or perfection of a
security interest under, or otherwise with respect to, any Loan Document, except
any such Taxes that are Other Connection Taxes imposed with respect to an
assignment.

 

“Participant” shall have the meaning assigned to such term in Section 8.04.(c).

 

“Participant Register” shall have the meaning assigned to such term in Section
8.04.(c).

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

 

“Pension Plan” shall mean any Plan that is or was an employee pension benefit
plan under Section 3(2) of ERISA and is or was covered by Title IV of ERISA.

 

“Perfection Certificate” shall mean the Information Certificate substantially in
the form of Exhibit B to the Guarantee and Collateral Agreement.

 

“Permitted Acquisition” shall have the meaning assigned to such term in Section
6.04.(e).

 

“Permitted Investments” shall mean:

 

(i)        direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States of America (or by
any agency thereof to the extent such obligations are backed by the full faith
and credit of the United States of America), in each case maturing within one
year from the date of issuance thereof;

 

(ii)       investments in commercial paper maturing within 270 days from the
date of issuance thereof and having, at such date of acquisition, the highest
credit rating obtainable from Moody’s or from S&P;

 

(iii)      investments in certificates of deposit, banker’s acceptances and time
deposits maturing within one year from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof that has a combined capital
and surplus and undivided profits at the date of acquisition thereof of not less
than $500,000,000 and that issues (or the parent of which issues) commercial
paper rated at least “Prime 1” (or the then equivalent grade) by Moody’s or
“A-1” (or the then equivalent grade) by S&P;

 

12

 

 

(iv)      fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (i) above and entered into with
a financial institution satisfying the criteria of clause (iii) above;

 

(v)       investments in “money market funds” within the meaning of Rule 2a-7 of
the Investment Company Act of 1940, as amended, substantially all of whose
assets are invested in investments of the type described in clauses (i) through
(iv) above; and

 

(vi)      other short-term investments utilized by Foreign Subsidiaries in
accordance with normal investment practices for cash management in investments
of a type analogous to the foregoing.

 

“Permitted Surety Bonds” means unsecured guarantees and reimbursement
obligations incurred in the ordinary course of business with respect to surety
and appeal bonds, performance bonds, bid bonds, appeal bonds, completion
guarantee and similar obligations.

 

“Permitted Unsecured Debt” shall mean any Indebtedness incurred by the Borrower
in the form of one or more series of secured or unsecured loans or notes;
provided that (i) the final maturity date of any such Indebtedness shall be no
earlier than 180 days following the Latest Maturity Date, (ii) the terms of such
Indebtedness shall not provide for any scheduled repayment, mandatory
redemption, sinking fund obligations or other payment (other than periodic
interest payments) prior to the date that is 180 days following the Latest
Maturity Date in effect at the time such Permitted Unsecured Debt is issued,
other than customary offers to purchase upon a change of control, asset sale or
casualty or condemnation event and customary acceleration rights upon an event
of default, (iii) such Indebtedness shall be unsecured, (iv) none of the
obligors or guarantors with respect to such Indebtedness shall be a Person that
is not a Loan Party and (v) the terms and conditions (excluding any
subordination, pricing, fees, rate floors, discounts, premiums and optional
prepayment or redemption terms) of such Indebtedness, taken as a whole, shall
not be materially less favorable to the Loan Parties than those applicable to
the Term Loans, except for covenants or other provisions applicable only to
periods after the Latest Maturity Date in effect at the time such Permitted
Unsecured Debt is issued.

 

“Person” shall mean any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership,
Governmental Authority or other entity.

 

“Plan” shall mean any employee benefit plan under Section 3(3) of ERISA (other
than a Multiemployer Plan) in respect of which the Borrower or any ERISA
Affiliate is or was an “employer” as defined in Section 3(5) of ERISA or with
respect to which the Borrower or any ERISA Affiliate or Loan Party could have
any liability.

 

“Post-Petition Interest” shall mean any interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any one or more of the Loan Parties (or would
accrue but for the operation of applicable Debtor Relief Laws), whether or not
such interest is allowed or allowable as a claim in any such proceeding.

 

13

 

 

“Qualified Capital Stock” of any Person shall mean any Equity Interest of such
Person that is not Disqualified Stock.

 

“Real Estate Collateral Requirements” shall mean the requirement that within 90
days of the Closing Date, with respect to the Mortgaged Properties listed on
Schedule 1.01(c) and thereafter as required by Section 5.11, the Lender shall
have received a Mortgage for each Mortgaged Property in form and substance
reasonably acceptable to the Lender and suitable for recording or filing,
together, with respect to each Mortgage for any property located in the United
States, the following documents: (a) a fully paid policy of title insurance (or
“pro forma” or marked up commitment having the same effect of a title insurance
policy) (i) in a form approved by the Lender insuring the Lien of the Mortgage
encumbering such property as a valid first priority Lien, subject to Liens
permitted by Section 6.02 herein, (ii) in an amount reasonably satisfactory to
the Lender, but in no event exceeding One Hundred Ten Percent (110%) of the
value of such property as determined by the appraisal report delivered pursuant
to subsection (d) herein or in the event that no such appraisal is ordered, as
reasonably agreed upon by the Borrower and the Lender, (iii) issued by a
nationally recognized title insurance company reasonably satisfactory to the
Lender (the “Title Company”) and (iv) that includes (A) such coinsurance and
direct access reinsurance as the Lender may deem necessary or desirable and (B)
such endorsements or affirmative insurance required by the Lender and which are
available at commercially reasonable rates in the jurisdiction where the
applicable Mortgaged Property is located, (b) with respect to any property
located in any jurisdiction in which a zoning endorsement is not available (or
for which a zoning endorsement is not available at a premium that is not
excessive), if requested by the Lender, a zoning compliance letter from the
applicable municipality or a zoning report from Planning and Zoning Resource
Corporation (or another person acceptable to the Lender), in each case
reasonably satisfactory to the Lender, (c) upon the request of the Lender, a
survey certified to Lender and the Title Company in form and substance
reasonably satisfactory to the Lender, (d) upon the request of the Lender, an
appraisal complying with the requirements of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, by a third-party appraiser selected by the
Lender, (e) an opinion of local counsel reasonably acceptable to the Lender and
in form and substance satisfactory to the Lender, (f) if requested by any
Lender, notwithstanding the first sentence of this definition, solely with
respect to this item (f), no later than three (3) Business Days prior to the
Closing Date, the following documents and instruments, in order to comply with
the National Flood Insurance Reform Act of 1994 and related legislation
(including the regulations of the Board) (“Flood Laws”): (1) a completed
standard flood hazard determination form, (2) if the improvement(s) to the
improved real property is located in a special flood hazard area, a notification
to the Borrower (“Borrower Notice”) and, if applicable, notification to the
Borrower that flood insurance coverage under the National Flood Insurance
Program (“NFIP”) is not available because the community does not participate in
the NFIP, (3) documentation evidencing the Borrower’s receipt of the Borrower
Notice and (4) if the Borrower Notice is required to be given and flood
insurance is available in the community in which the property is located, a copy
of the flood insurance policy, the Borrower’s application for a flood insurance
policy plus proof of premium payment, a declaration page confirming that flood
insurance has been issued, or such other evidence of flood insurance
satisfactory to the Lender (any of the foregoing being “Evidence of Flood
Insurance”), (g) upon the reasonable request of the Lender, Phase I
environmental site assessment reports prepared in accordance with the current
ASTM E1527 standard (“Phase Is”) (to the extent not already provided) and
reliance letters for such Phase Is (which Phase Is and reliance letters shall be
in form and substance reasonably acceptable to the Lender) and any other
environmental information as the Lender shall reasonably request, and (h) such
other instruments and documents (including consulting engineer’s reports and
lien searches) as the Lender shall reasonably request.

 

14

 

 

“Recipient” shall mean the Lender.

 

“Regulation U” shall mean Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

 

“Related Parties” shall mean, with respect to any specified Person, such
Person’s Affiliates and the respective officers, directors, employees, agents,
advisors, representatives, controlling persons, members, successors and
permitted assigns of such Person and such Person’s Affiliates.

 

“Release” shall mean any actual or threatened release, spill, emission, leaking,
dumping, injection, pouring, pumping, deposit, disposal, discharge, dispersal,
leaching or migration into or through the indoor or outdoor environment,
including the air, soil and ground and surface water or into, through, within or
upon any building, structure, facility or fixture.

 

“Repayment Date” shall have the meaning assigned to such term in .

 

“Responsible Officer” of any Person shall mean any executive officer or
Financial Officer of such Person and any other officer or similar official
thereof responsible for the administration of the obligations of such Person in
respect of this Agreement.

 

“Restricted Payment” shall mean any dividend or other distribution (whether in
cash, securities or other property) with respect to any Equity Interests in the
Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any Equity Interests in the Borrower or any Subsidiary.

 

“S&P” shall mean Standard & Poor’s Ratings Service, or any successor thereto.

 

“SEC” shall mean the Securities and Exchange Commission.

 

“SEC Report” shall have the meaning assigned to such term in Section 3.07.

 

“Secured Cash Management Obligations” shall mean any Cash Management Obligations
owed by a Loan Party to any Cash Management Bank.

 

“Secured Parties” shall have the meaning assigned to such term in the Guarantee
and Collateral Agreement.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Security Documents” shall mean the Mortgages, the Guarantee and Collateral
Agreement, the Intercreditor Agreement and each of the security agreements,
mortgages and other agreements, instruments and documents executed and delivered
pursuant to any of the foregoing or pursuant to Section 5.11.

 

15

 

 

“Solvent” shall mean, (a) the sum of the liabilities (including contingent
liabilities) of the Borrower and the Subsidiaries, on a consolidated basis, does
not exceed the fair value of the present assets of the Borrower and the
Subsidiaries, on a consolidated basis (taken as a going concern), (b) the
present fair saleable value of the assets of the Borrower and the Subsidiaries,
on a consolidated basis (taken as a going concern), is greater than the total
amount that will be required to pay the probable liabilities (including
contingent liabilities) of the Borrower and the Subsidiaries as they become
absolute and matured in the normal course of business, (c) the capital of the
Borrower and the Subsidiaries, on a consolidated basis, is not unreasonably
small in relation to their business as contemplated on the date hereof, and (d)
the Borrower and the Subsidiaries, on a consolidated basis, have not incurred
and do not intend to incur, or believe that they will incur, debts or
liabilities, including current obligations, beyond their ability to pay such
debts or other liabilities as they become due (whether at maturity or
otherwise).

 

“subsidiary” shall mean, with respect to any Person, (a) any corporation of
which an aggregate of more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, capital stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of more than fifty percent (50%) of such
capital stock whether by proxy, agreement, operation of law or otherwise, and
(b) any partnership or limited liability company in which such Person and/or one
or more Subsidiaries of such Person shall have an interest (whether in the form
of voting or participation in profits or capital contribution) of more than
fifty percent (50%) or of which any such Person is a general partner or may
exercise the powers of a general partner.

 

“Subsidiary” shall mean any subsidiary of the Borrower.

 

“Taxes” shall mean any and all present or future taxes, levies, imposts, duties,
deductions, assessments, fees, charges or withholdings (including backup
withholding) imposed by any Governmental Authority, including any interest,
additions to tax or penalties applicable thereto.

 

“Term Borrowing” shall mean a Borrowing comprised of Term Loans.

 

“Term Loans” shall mean the term loan made by the Lenders to the Borrower
pursuant to Section 2.01.

 

“Title Company” shall have the meaning assigned to such term in the definition
of Real Estate Collateral Requirements.

 

“Transaction Costs” shall mean the fees, costs and expenses incurred in
connection with the Transactions.

 

16

 

 

“Transactions” shall mean, collectively, (a) the execution, delivery and
performance by the Loan Parties of the Loan Documents to which they are a party
and the funding of the Term Loan on the Closing Date, (b) the repayment of the
obligations under the Existing Credit Agreements and the termination of the
commitments thereunder and the security interests in respect thereof on the
Closing Date and (e) the payment on the Closing Date of the Transaction Costs.

 

“Unfunded Pension Liability” shall mean, with respect to any Pension Plan at any
time, the amount of any of its unfunded benefit liabilities as defined in
Section 4001(a)(18) of ERISA.

 

“U.S. Person” shall mean any Person (a)(i) that is not disregarded as separate
from its owner for U.S. federal income tax purposes and (ii) that is a “United
States Person” as defined in Section 7701(a)(30) of the Code or (b)(i) that is
disregarded as separate from its owner for U.S. federal income tax purposes and
(ii) whose regarded owner for U.S. federal income tax purposes is a “United
States Person” as defined in Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” shall have the meaning assigned to such term
in Section 2.10.(f).

 

“Warrant” shall mean the Common Stock Purchase Warrant executed and delivered
pursuant to Section 4.01(o) and in the form of Exhibit F.

 

“Wholly Owned Subsidiary” of any Person shall mean a subsidiary of such Person
of which securities (except for directors’ qualifying shares) or other ownership
interests representing 100% of the Equity Interests are, at the time any
determination is being made, owned, Controlled or held by such Person or one or
more wholly owned subsidiaries of such Person or by such Person and one or more
wholly owned subsidiaries of such Person.

 

“Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

 

“Withholding Agent” shall mean any Loan Party and the Lender.

 

17

 

 

Section 1.02.         Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.”
The word “will” shall be construed to have the same meaning and effect as the
word “shall,” and the words “asset” and “property” shall be construed as having
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, securities, accounts and contract rights.
The words “herein”, “hereto”, “hereof” and “hereunder” and words of similar
import when used in any Loan Document shall refer to such Loan Document as a
whole and not to any particular provision thereof. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. Except as otherwise expressly provided
herein, (a) any reference in this Agreement to any Loan Document or any other
agreement, instrument or document shall mean such document as amended, restated,
supplemented or otherwise modified from time to time, but only to the extent
that such amendment, restatements, supplements or modifications are not
prohibited by this Agreement, (b) references to any law shall include all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such law, (c) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided that if the Borrower notifies the Lender that the
Borrower wishes to amend any provision of this Agreement or the other Loan
Documents to eliminate the effect of any change in GAAP occurring after the date
of this Agreement on the operation of such provision (or if the Lender notifies
the Borrower that the Required Lenders wish to amend any provision of this
Agreement or the other Loan Documents) regardless of whether any such notice is
given before or after such change in GAAP, then such provision shall be
interpreted on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is withdrawn or such
provision is amended in a manner satisfactory to the Borrower and the Required
Lenders and (d) all terms of an accounting or financial nature used herein shall
be construed, and all computations of amounts and ratios referred to herein
shall be made (i) without giving effect to any election under Accounting
Standards Codification 825-10-25 (or any other Accounting Standards Codification
or Financial Accounting Standard having a similar result or effect) to value any
Indebtedness or other liabilities of the Borrower or any Subsidiary at “fair
value”, as defined therein, (ii) without giving effect to any treatment of
Indebtedness in respect of convertible debt instruments under Accounting
Standards Codification 470-20 (or any other Accounting Standards Codification or
Financial Accounting Standard having a similar result or effect) to value any
such Indebtedness in a reduced or bifurcated manner as described therein, and
such Indebtedness shall at all times be valued at the full stated principal
amount thereof and (iii) in a manner such that the determination of whether a
lease is to be treated as an operating lease or capital lease shall be made
without giving effect to any change in accounting for leases pursuant to GAAP
resulting from the implementation of proposed Accounting Standards Update (ASU)
Leases (Topic 840) issued August 17, 2010.

 

Article II

 

The Term Loan

 

Section 2.01.   Term Loan.  Subject to the terms and conditions and relying upon
the representations and warranties set forth herein and in the other Loan
Documents, the Lender agrees to make a Term Loan to the Borrower on the Closing
Date in a principal amount equal to $35,000,000 to be disbursed in accordance
with Schedule 3.15. Amounts repaid or prepaid in respect of the Term Loan may
not be reborrowed. The Borrower and the Lender agree that for U.S. federal
income tax purposes, the aggregate issue price under Section 1273(b) of the
Internal Revenue Code of 1986, as amended, of the Term Loan is $33,250,000. The
Borrower and the Lender agree to use the foregoing issue price and the values
and the yields which result in such issue price for U.S. federal income tax
purposes.

 

Section 2.02.   Evidence of Debt; Repayment of Loans.  (a) The Borrower hereby
unconditionally promises to pay to the Lender the principal amount of the Term
Loan as provided in Section 2.06.

 

18

 

 

(b)       The Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to the Lender
resulting from each Loan made by the Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.

 

(c)       The entries made in the accounts maintained pursuant to paragraph (a)
above shall be prima facie evidence of the existence and amounts of the
obligations therein recorded; provided that the failure of the Lender to
maintain such accounts or any error therein shall not in any manner affect the
obligations of the Borrower to repay the Loans in accordance with their terms.

 

(d)       The Lender may request that the Term Loan be evidenced by a Note. In
such event, the Borrower shall execute and deliver to the Lender a Note payable
to the Lender and its registered assigns. Notwithstanding any other provision of
this Agreement, in the event the Lender shall request and receive such a Note,
the interests represented by such Note shall at all times (including after any
assignment of all or part of such interests pursuant to Section 8.04) be
represented by one or more Notes payable to the payee named therein or its
registered assigns.

 

Section 2.03.    Fees. In the event all or any portion of the Term Loans are
prepaid (or effectively refinanced through an amendment or repricing) for any
reason after April 27, 2017, the Borrower shall pay to the Lender a prepayment
premium equal to 4.00% of the principal amount of Term Loans repaid, repriced or
refinanced. Such amounts shall be due and payable on the date of effectiveness
of such prepayment, repricing or refinancing.

 

Section 2.04.   Interest on Loans.  (a) Subject to the provisions of Section
2.05, the Loans shall bear interest (computed on the basis of the actual number
of days elapsed over a year of 365 or 366, as applicable, days at all times and
calculated from and including the date of such Borrowing to but excluding the
date of repayment thereof) at a rate per annum equal to 12.0%.

 

(b)       Interest on each Loan shall be payable on the Interest Payment Dates
except as otherwise provided in this Agreement.

 

Section 2.05.    Default Interest. (a) All amounts not paid when due hereunder
shall bear interest (after as well as before judgment), payable on demand, at
the rate otherwise applicable to the Loan pursuant to Section 2.04 plus 2.00%
per annum.

 

Section 2.06.   Repayment of Term Borrowings.  (a) Commencing on the last
Business Day of October 2016, the Borrower shall pay to the Lender, on the last
Business Day of each month occurring prior to the Maturity Date (each, a
“Repayment Date”), a portion of the principal amount of the Term Loan equal to
$600,000, together in each case with accrued and unpaid interest on the
principal amount to be paid to but excluding the date of such payment.

 

(b)       To the extent not previously paid, all Term Loans shall be due and
payable on the Maturity Date together with accrued and unpaid interest on the
principal amount to be paid to but excluding the date of payment.

 

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(c)       All repayments pursuant to this Section 2.06 shall be without premium
or penalty.

 

Section 2.07.    Voluntary Prepayment.  (a) The Borrower shall not have the
right to prepay any Borrowing prior to April 27, 2017. On or after April 27,
2017 the Borrower shall have the right at any time and from time to time to
prepay any Borrowing, in whole or in part, upon not less than thirty (30) days’
nor more than sixty (60) days’ prior written notice (or telephonic notice
promptly confirmed by written notice) to the Lender provided that each partial
prepayment shall be in an amount that is an integral multiple of $500,000 and
not less than $1,000,000 (or such lesser amount as may remain outstanding).

 

(b)       Voluntary prepayments of Term Loans shall be applied as directed by
the Borrower to the remaining scheduled installments of principal due in respect
of the Term Loans under Section 2.06.

 

(c)       Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein; provided that a notice of prepayment
may state that such notice is conditioned upon the effectiveness of other
financing arrangements, in which case such notice may be revoked by the Borrower
(by notice to the Lender prior to 1:00 p.m. on the specified effective date) if
such condition is not satisfied. All prepayments under this Section 2.07 shall
be subject to Section 2.03 but otherwise without premium or penalty. All
prepayments under this Section 2.07 shall be accompanied by accrued and unpaid
interest on the principal amount to be prepaid to but excluding the date of
payment.

 

Section 2.08.    Increased Costs.  (a) If any Change in Law shall:

 

(i)       impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits for the account of or credit extended by the Lender;

 

(ii)      subject any Recipient to any Taxes (other than (A) Indemnified Taxes,
(B) Taxes described in clauses (b) through (d) of the definition of Excluded
Taxes and (C) Connection Income Taxes) on its loans, loan principal,
commitments, or other obligations; or

 

(iii)     impose on the Lender any other condition, cost or expense (other than
Taxes) affecting this Agreement or Loans made by the Lender;

 

and the result of any of the foregoing shall be to increase the cost to such
Lender or such other Recipient of making or maintaining any Loan or to reduce
the amount of any sum received or receivable by such Lender or such other
Recipient hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or such other Recipient, as the case may be,
upon demand such additional amount or amounts as will compensate such Lender or
such other Recipient, as the case may be, for such additional costs incurred or
reduction suffered.

 

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(b)       A certificate of the Lender or such other Recipient setting forth the
amount or amounts necessary to compensate such Lender, or such other Recipient,
as specified in paragraph (a) or (b) above shall be delivered to the Borrower
and shall be conclusive absent manifest error. The Borrower shall pay the Lender
or such other Recipient the amount shown as due on any such certificate
delivered by it within ten (10) days after its receipt of the same.

 

(c)       Failure or delay on the part of the Lender or other such Recipient to
demand compensation pursuant to this Section shall not constitute a waiver of
the Lender’s or such other Recipient’s right to demand such compensation;
provided that the Borrower shall not be required to compensate the Lender or
other such Recipient under paragraph (a) or (b) above pursuant to this Section
for any increased costs incurred or reductions suffered more than 180 days prior
to the date that the Lender or other Recipient, as the case may be, notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions,
and of the Lender’s or other such Recipient’s intention to claim compensation
therefor (except that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof).

 

Section 2.09.   Payments.  (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any Fees or other amounts)
hereunder or under any other Loan Document not later than 4:00 p.m., Milwaukee,
Wisconsin time, on the date when due in immediately available Dollars, without
setoff, defense or counterclaim. Any amounts received after such time on any
date may, in the discretion of the Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
Each such payment shall be made to the Lender by wire transfer of immediately
available funds to an account specified by the Lender.

 

(b)       Except as otherwise expressly provided herein, whenever any payment
(including principal of or interest on any Borrowing or any Fees or other
amounts) hereunder or under any other Loan Document shall become due, or
otherwise would occur, on a day that is not a Business Day, such payment may be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of interest or Fees, if applicable.

 

Section 2.10.    Taxes.  (a) For the avoidance of doubt, for purposes of this
Section 2.10, the term “applicable law” includes FATCA.

 

(b)       Payments Free of Taxes. Any and all payments by or on account of any
obligation of any Loan Party under any Loan Document shall be made without
deduction or withholding for any Taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of an applicable
Withholding Agent) requires the deduction or withholding of any Tax from any
such payment by a Withholding Agent, then the applicable Withholding Agent shall
be entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with applicable law and, if such Tax is an Indemnified Tax, then the sum payable
by the applicable Loan Party shall be increased as necessary so that after such
deduction or withholding has been made (including such deductions and
withholdings applicable to additional sums payable under this Section 2.10) the
applicable Recipient receives an amount equal to the sum it would have received
had no such deduction or withholding been made.

 

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(c)       Payment of Other Taxes by the Loan Parties. The Loan Parties shall
timely pay to the relevant Governmental Authority in accordance with applicable
law, or at the option of the Lender timely reimburse it for the payment of, any
Other Taxes.

 

(d)       Indemnification by the Loan Parties. The Borrower shall, and shall
cause the other Loan Parties to, jointly and severally indemnify each Recipient,
within 10 days after demand therefor, for the full amount of any Indemnified
Taxes (including Indemnified Taxes imposed or asserted on or attributable to
amounts payable under this Section 2.10) payable or paid by such Recipient
(including amounts withheld or deducted from a payment to such Recipient) and
any reasonable out-of-pocket expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by the Lender shall be
conclusive absent manifest error.

 

(e)       Evidence of Payments. As soon as practicable after any payment of
Taxes by any Loan Party to a Governmental Authority pursuant to this Section
2.10, such Loan Party shall deliver to the Lender the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such payment,
a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Lender.

 

(f)       Status of Lenders. (i) If the Lender is entitled to an exemption from
or reduction of withholding Tax with respect to payments made under any Loan
Document, the Lender shall deliver to the Borrower, at the time or times
reasonably requested by the Borrower, such properly completed and executed
documentation reasonably requested by the Borrower as will permit such payments
to be made without withholding or at a reduced rate of withholding. In addition,
the Lender, if reasonably requested by the Borrower, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower as will enable the Borrower to determine whether or not the Lender is
subject to backup withholding or information reporting requirements and to
satisfy any such information reporting requirements. Notwithstanding anything to
the contrary in the preceding two sentences, the completion, execution and
submission of such documentation (other than such documentation set forth in
Section 2.10.(f)(ii)(A) and (ii)(B) below) shall not be required if in the
Lender’s reasonable judgment such completion, execution or submission would
subject the Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of the Lender.

 

(ii)      Without limiting the generality of the foregoing, in the event that
the Borrower is a U.S. Person,

 

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(A)      the Lender shall deliver to the Borrower on or prior to the date of
this Agreement, from time to time thereafter upon the reasonable request of the
Borrower, and pursuant to Section 2.10(f)(iii), executed originals of IRS Form
W-9 certifying that the Lender is exempt from U.S. federal backup withholding
tax;

 

(B)       if a payment made to a Recipient under any Loan Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Recipient were
to fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Recipient shall deliver to the Borrower at the time or times prescribed by law
and at such time or times reasonably requested by the Borrower or pursuant to
Section 2.10.(f)(iii) such documentation prescribed by applicable law (including
as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional
documentation reasonably requested by the Borrower as may be necessary for the
Borrower to comply with their obligations under FATCA and to determine that such
Recipient has complied with such Recipient’s obligations under FATCA or to
determine the amount to deduct and withhold from such payment. Solely for
purposes of this clause (D), “FATCA” shall include any amendments made to FATCA
after the date of this Agreement.

 

(iii)     Each Recipient agrees that if any form or certification it previously
delivered expires or becomes obsolete or inaccurate in any respect, it shall
update such form or certification or promptly notify the Borrower in writing of
its legal inability to do so.

 

(g)       Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 2.10(including by
the payment of additional amounts pursuant to this Section 2.10), it shall pay
to the indemnifying party an amount equal to such refund (but only to the extent
of indemnity payments made under this Section 2.10 with respect to the Taxes
giving rise to such refund), net of all reasonable out-of-pocket expenses
(including Taxes imposed on the receipt of such refund) of such indemnified
party and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund). Such indemnifying party,
upon the request of such indemnified party, shall repay to such indemnified
party the amount paid over pursuant to this paragraph (g) (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) in the
event that such indemnified party is required to repay such refund to such
Governmental Authority. Notwithstanding anything to the contrary in this
paragraph (g), in no event will the indemnified party be required to pay any
amount to an indemnifying party pursuant to this paragraph (g) to the extent the
payment of which would place the indemnified party in a less favorable net
after-Tax position than the indemnified party would have been in if the Tax
subject to indemnification had not been deducted, withheld or otherwise imposed
and the indemnification payments or additional amounts giving rise to such
refund had never been paid. This paragraph shall not be construed to require any
indemnified party to make available its Tax returns (or any other information
relating to its Taxes that it deems confidential) to the indemnifying party or
any other Person.

 

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(h)       Survival. Each party’s obligations under this Section 2.10 shall
survive any assignment of rights by the Lender and the repayment, satisfaction
or discharge of all obligations under any Loan Document.

 

Article III

 

Representations and Warranties

 

The Borrower represents and warrants to the Lender on the Closing Date and on
each other date contemplated by Article IV that:

 

Section 3.01.   Organization; Powers.  The Borrower and each of the Subsidiaries
(a) is duly organized and/or established, as the case may be, validly existing
and in good standing under the laws of the jurisdiction of its organization or
establishment, as applicable, (b) has all requisite power and authority to own
its property and assets and to carry on its business as now conducted and as
proposed to be conducted except where the failure to have the same could not
reasonably be expected to have a Material Adverse Effect, (c) is qualified to do
business in, and is in good standing in, every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
power and authority to execute, deliver and perform its obligations under each
of the Loan Documents and each other agreement or instrument contemplated
thereby to which it is or will be a party and, in the case of the Borrower, to
borrow hereunder.

 

Section 3.02.   Authorization.  The Transactions (a) have been duly authorized
by all requisite corporate or limited liability company, as applicable, and, if
required, stockholder or member, as applicable, action and (b) will not (i)
violate (A) any provision of (1) law, statute, rule or regulation, or (2) the
certificate or articles of incorporation, partnership agreement or other
constitutive documents or by-laws of the Borrower or any Subsidiary, (B) any
order of any Governmental Authority or (C) any provision of any indenture,
agreement or other instrument to which the Borrower or any Subsidiary is a party
or by which any of them or any of their property is or may be bound, (ii) be in
conflict with, result in a breach of or constitute (alone or with the giving of
notice or lapse of time or both) a default under, or give rise to any right to
accelerate or to require the prepayment, repurchase or redemption of any
obligation under any such indenture, agreement or other instrument except, in
the case of clause (i)(A)(1) or (iii) result in the creation or imposition of
any Lien upon or with respect to any property or assets now owned or hereafter
acquired by the Borrower or any Subsidiary (other than any Lien created
hereunder or under the Security Documents).

 

Section 3.03.   Enforceability.  This Agreement has been duly executed and
delivered by the Borrower and constitutes, and each other Loan Document when
executed and delivered by each Loan Party thereto will constitute, a legal,
valid and binding obligation of such Loan Party enforceable against such Loan
Party in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).

 

24

 

 

Section 3.04.    Governmental Approvals.  No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority or
third party is or will be required in connection with the Transactions, except
for (a) the filing of Uniform Commercial Code financing statements and filings
of the Notice of Grant of Security Interest in Patents, the Notice of Grant of
Security Interest in Trademarks and the Notice of Grant of Security Interest in
Copyrights with the United States Patent and Trademark Office and the United
States Copyright Office, as applicable, (b) recordation of the Mortgages and (c)
such as have been made or obtained and are in full force and effect or where the
failure to obtain which could not reasonably be expected to have a Material
Adverse Effect.

 

Section 3.05.   Financial Statements.  (a) The Borrower has, heretofore,
delivered to the Lenders the consolidated balance sheets and related statements
of income, stockholder’s equity and cash flows of the Borrower and its
consolidated Subsidiaries as of and for the fiscal year ended December 31, 2014.
Such financial statements present fairly the financial condition and results of
operations and cash flows of the Borrower and its consolidated Subsidiaries as
of such dates and for such periods. Such balance sheets and the notes thereto
disclose all liabilities, direct or contingent, of the Borrower and its
consolidated Subsidiaries as of the dates thereof. Such financial statements
were prepared in accordance with GAAP applied on a consistent basis, subject, in
the case of unaudited financial statements, to year-end audit adjustments and
the absence of footnotes.

 

Section 3.06.    Capitalization.  The capitalization of the Company is as set
forth on Schedule 3.06, which Schedule 3.06 shall also include the number of
shares of Common Stock owned beneficially, and of record, by Affiliates of the
Company as of the date hereof. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other than
pursuant to the exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees pursuant to
the Company’s employee stock purchase plans and pursuant to the conversion
and/or exercise of Common Stock Equivalents outstanding as of the date of the
most recently filed periodic report under the Exchange Act. Except as set forth
on Schedule 3.06, no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the Transactions
contemplated by the Loan Documents. Except as set forth on Schedule 3.06 and as
a result of the purchase and sale of the Securities, there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or equity plans,
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common Stock
or Common Stock Equivalents. The issuance and sale of the Securities will not
obligate the Company to issue shares of Common Stock or other securities to any
Person (other than the Lender and the Additional Lenders) and will not result in
a right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements or other
similar agreements with respect to the Company’s capital stock to which the
Company is a party or, to the knowledge of the Company, between or among any of
the Company’s stockholders. Except as set forth on Schedule 3.06, the Company is
not a party to or bound by any agreement or understanding granting registration
rights to any person or entity with respect to any of its Equity Interests or
debt securities.

 

25

 

 

Section 3.07.    SEC Reports.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
“SEC Reports”) on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, or as of such date when an amendment to
such filing was subsequently made, as applicable, the SEC Reports complied in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Company has ceased to be an issuer described in Rule
144(i)(1)(i) under the Securities Act and otherwise satisfies the conditions set
forth in Rule 144(i)(2) under the Securities Act.

 

Section 3.08.    No Material Adverse Effect.  Since September 30, 2014, no event
or circumstance has occurred that has had, or could reasonably be expected to
have, a Material Adverse Effect or a material adverse effect on the
Transactions.

 

Section 3.09 .   Title to Properties; Possession under Leases.  (a) Each of the
Borrower and the Subsidiaries has, in all material respects, good and marketable
title to, valid leasehold interests in, or easements, licenses or other limited
property interests in, all its properties that are necessary for the operation
of their respective businesses as currently conducted and as proposed to be
conducted, free and clear of all Liens (other than Liens permitted by Section
6.02).

 

(b)       Each of the Borrower and the Subsidiaries has complied with all
material obligations under all material leases to which it is a party and all
such leases are in full force and effect. Each of the Borrower and the
Subsidiaries enjoys peaceful and undisturbed possession under all such material
leases.

 

(c)       As of the Closing Date, (i) no real property or other assets material
to the Borrower and its Subsidiaries is affected by any fire or other casualty
(whether or not covered by insurance) and (ii) the Borrower has not received any
notice of, nor has any knowledge of, any pending or contemplated condemnation
proceeding (or any sale or disposition thereof in lieu of condemnation)
affecting any real property or other assets material to the Borrower or its
Subsidiaries.

 

26

 

 

(d)       As of the Closing Date, none of the Borrower or any of the
Subsidiaries is obligated under any right of first refusal, option or other
contractual right to sell, assign or otherwise dispose of any Mortgaged Property
or any interest therein.

 

Section 3.10.   Subsidiaries.  Schedule 3.10 sets forth as of the Closing Date a
list of all Subsidiaries and the percentage ownership interest of the Borrower
therein. The shares of capital stock or other ownership interests so indicated
on Schedule 3.10 are fully paid and nonassessable and are owned by the Borrower,
directly or indirectly, free and clear of all Liens (other than Liens created
under the Security Documents.

 

Section 3.11.    Litigation; Compliance with Laws.  Except as set forth on
Schedule 3.11, (a) there are no actions, suits or proceedings at law or in
equity or by or before any Governmental Authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
Subsidiary or any business, property or rights of any such Person (i) that
involve any Loan Document or the Transactions or (ii) that could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect.

 

(b)       None of the Borrower or any of the Subsidiaries or any of their
respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits) or any
restrictions of record or agreements affecting the Mortgaged Property, or is in
default with respect to any judgment, writ, injunction, decree or order of any
Governmental Authority, where such violation or default has resulted or could
reasonably be expected to result in a Material Adverse Effect.

 

(c)       Certificates of occupancy and permits are in effect for each Mortgaged
Property as currently constructed, and true and complete copies of such
certificates of occupancy have been delivered to the Lender as mortgagee with
respect to each Mortgaged Property.

 

Section 3.12.    Agreements.  Except as set forth on Schedule 3.12, none of the
Borrower or any of the Subsidiaries is in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound.

 

Section 3.13.   Federal Reserve Regulations.  (a) None of the Borrower or any of
the Subsidiaries is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of buying or carrying Margin
Stock.

 

(b)       No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, for any purpose
that entails a violation of, or that is inconsistent with, the provisions of the
Regulations of the Board, including Regulation T, U or X.

 

Section 3.14.   Investment Company Act.  None of the Borrower or any Subsidiary
is required to register as an “investment company,” as defined in the Investment
Company Act.

 

27

 

 

Section 3.15.    Use of Proceeds.  The Borrower will use the proceeds of the
Loans only for the purposes specified in Schedule 3.15.

 

Section 3.16.    Taxes.  Each of the Borrower and the Subsidiaries has filed or
caused to be filed all U.S. federal, state, local and foreign tax returns or
materials required to have been filed by it and has paid or caused to be paid
all Taxes due and payable by it and all assessments received by it, except Taxes
that are being contested in good faith by appropriate proceedings and for which
the Borrower or the applicable Subsidiary, as applicable, shall have set aside
on its books adequate reserves.

 

Section 3.17.    Employee Benefit Plans.  Except as would not reasonably be
expected to result in a Material Adverse Effect, with respect to each Plan, the
Borrower, its ERISA Affiliates and the Loan Parties are in, and have at all
times been in, compliance with the applicable provisions of ERISA, the Code, the
regulations and published interpretations thereunder and all other applicable
laws. No ERISA Event has occurred or is reasonably expected to occur that, when
taken together with all other such ERISA Events, has resulted or could
reasonably be expected to result in a Material Adverse Effect. There exists no
Unfunded Pension Liability, excise tax payable under the Code, or, except as
could not reasonably be expected to result in a Material Adverse Effect, penalty
payable under ERISA with respect to any Plan.

 

Section 3.18.    Environmental Matters.   (a) Except with respect to any matters
that, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, none of the Borrower or any of the
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability, (iii)
has received notice of any claim with respect to any Environmental Liability or
(iv) knows of any basis for any Environmental Liability.

 

(b)       Except with respect to any matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect: (i) each Mortgaged Property is and has been in compliance with all
Environmental Law and has obtained, maintained and complied with any permit,
license or other approval required under any Environmental Law, (ii) there are
no Environmental Liabilities that have arisen or exist in connection with or in
any way relating to any of the Mortgaged Property and (iii) none of the Borrower
or any of the Subsidiaries knows of any basis for any Environmental Liability in
connection with or in any way relating to any of the Mortgaged Property.

 

(c)       There has been no material environmental investigation, study, audit,
test, review or other analysis conducted that is within the possession, custody
or control of the Borrower or any of the Subsidiaries in relation to the current
or prior business the Borrower or any Subsidiary or any property or facility now
or previously owned, leased or operated by the Borrower or any Subsidiary,
including the Mortgaged Properties, which has not been delivered to the Lenders
at least five days prior to the date hereof.

 

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(d)       For purposes of this Section, the terms “Borrower” and “Subsidiary”
shall include any business or business entity which is, in whole or in part, a
predecessor of the Borrower or any Subsidiary.

 

Section 3.19.    Insurance.  Schedule 3.19 sets forth a true, complete and
correct description of all material insurance maintained by the Borrower or by
the Borrower for its Subsidiaries as of the date hereof and the Closing Date. As
of each such date, such insurance is in full force and effect and all premiums
have been duly paid. The Borrower and its Subsidiaries have insurance in such
amounts and covering such risks and liabilities as are in accordance with normal
industry practice.

 

Section 3.20.   Security Documents.   (a) The Guarantee and Collateral
Agreement, upon execution and delivery thereof by the parties thereto, will
create in favor of the Lender, a legal, valid and enforceable security interest
in the Collateral (other than the Mortgaged Property) and the proceeds thereof
and (i) when the Pledged Collateral (as defined in the Guarantee and Collateral
Agreement) is delivered to the Lender, the Lien created under Guarantee and
Collateral Agreement shall constitute a fully perfected first priority Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Pledged Collateral, in each case prior and superior in right to any other
Person, and (ii) when the financing statements in appropriate form are filed in
the offices specified on Schedule , the Lien created under the Guarantee and
Collateral Agreement will constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in the Collateral
described in such statements (other than Intellectual Property), in each case
prior and superior in right to any other Person, other than with respect to
Liens expressly permitted by Section 6.02.

 

(b)       Upon the recordation of the Notice of Grant of Security Interest in
Patents, the Notice of Grant of Security Interest in Trademarks and the Notice
of Grant of Security Interest in Copyrights substantially in the form of Exhibit
B, Exhibit C and Exhibit D, respectively, to the Guarantee and Collateral
Agreement with the United States Patent and Trademark Office and the United
States Copyright Office, as applicable, together with the financing statements
in appropriate form filed in the offices specified on Schedule , the Lien
created under the Guarantee and Collateral Agreement shall constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in the Intellectual Property consisting of material issued or
pending United States patents, material registered or pending United States
trademarks and material registered United States copyrights in which a security
interest may be perfected by filing in the United States and its territories and
possessions, in each case prior and superior in right to any other Person, other
than with respect to Liens expressly permitted by Section 6.02 (it being
understood that subsequent recordings in the United States Patent and Trademark
Office and the United States Copyright Office may be necessary to perfect a Lien
on United States registered trademarks, issued patents, trademark and patent
applications and registered copyrights acquired by the Loan Parties after the
date hereof).

 

(c)       Upon due execution and delivery thereof, each Mortgage will be
effective to create in favor of the Lender, a legal, valid and enforceable first
priority Lien on all of the applicable Loan Party’s right, title and interest in
and to the Mortgaged Property thereunder and the proceeds thereof, and when such
Mortgage is filed in the offices specified on Schedule Section 3.20.(c), such
Mortgage shall constitute a fully perfected first priority Lien on, and security
interest in, all right, title and interest of such Loan Party in such Mortgaged
Property and the proceeds thereof, in each case prior and superior in right to
any other Person, other than with respect to Liens expressly permitted by
Section 6.02.

 

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Section 3.21.    Location of Real Property.  Schedule 3.21 lists completely and
correctly as of the Closing Date all real property owned by the Borrower and the
Subsidiaries and the addresses thereof.

 

Section 3.22.   Intellectual Property.  Except as set forth on Schedule 3.22,
the Borrower and its Subsidiaries own or possess the valid right to use all (i)
valid and enforceable patents, patent applications, trademarks, trademark
registrations, service marks, service mark registrations, Internet domain name
registrations, copyrights, copyright registrations, licenses,  trade secret
rights (“Intellectual Property Rights”) and (ii) inventions, software, works of
authorships, trade marks, service marks, trade names, databases, formulae, know
how, Internet domain names and other intellectual property (including trade
secrets and other unpatented and/or unpatentable proprietary confidential
information, systems, or procedures) (collectively, “Intellectual Property
Assets”) necessary to conduct their respective businesses as currently
conducted, and as proposed to be conducted and described in the
Reports.  Neither the Borrower nor any of its Subsidiaries is infringing,
misappropriating, or otherwise violating, valid and enforceable Intellectual
Property Rights of any other person, and, except as set forth in the financial
statements provided pursuant to Section 3.05, have not received written notice
of any challenge, by any other person to the rights of the Borrower and its
Subsidiaries with respect to any Intellectual Property Rights or Intellectual
Property Assets owned or used by the Borrower or any of its
Subsidiaries.  Except as described in the financial statements provided pursuant
to Section 3.05, the Borrower and its Subsidiaries’ respective businesses as now
conducted do not give rise to any infringement of, any misappropriation of, or
other violation of, any valid and enforceable Intellectual Property Rights of
any other person.  All licenses for the use of the Intellectual Property Rights
described in the financial statements provided pursuant to Section 3.05 are
valid, binding upon, and enforceable by or against the parties thereto in
accordance to its terms.  The Borrower and its Subsidiaries have complied in all
material respects with, and are not in breach nor have they received any
asserted or threatened claim of breach of any Intellectual Property license that
has not been resolved, and to the knowledge of the Borrower there has been no
unresolved breach or anticipated breach by any other person to any Intellectual
Property license, except where such breach, singularly or in the aggregate,
would not have a Material Adverse Effect.  There are no unresolved claims
against the Borrower or any of its Subsidiaries alleging the infringement by the
Borrower or any of its Subsidiaries of any patent, trademark, service mark,
trade name, copyright, trade secret, license in or other intellectual property
right or franchise right of any person, except to the extent that any such claim
does not have a Material Adverse Effect.  The Borrower and its Subsidiaries have
taken reasonable steps to protect, maintain and safeguard their Intellectual
Property Rights, including the execution of appropriate nondisclosure and
confidentiality agreements.  The consummation of the transactions contemplated
by this Agreement and the other Transaction Documents will not result in the
loss or impairment of or payment of any additional amounts with respect to, nor
require the consent of any other person in respect of, the Borrower’s or any of
its Subsidiaries’ right to own, use, or hold for use any of the Intellectual
Property Rights as owned, used or held for use in the conduct of the business as
currently conducted.  The Borrower and its Subsidiaries have taken the necessary
actions to obtain ownership of all works of authorship and inventions made by
its employees, consultants and contractors during the time they were employed by
or under contract with the Borrower or any of its Subsidiaries and which relate
to the business of the Borrower and its Subsidiaries. All key employees have
signed confidentiality and invention assignment agreements with the Borrower and
its Subsidiaries, except where to sign such agreements would not have a Material
Adverse Effect.

 

30

 

 

Section 3.23.    Labor Matters.  As of the date hereof and the Closing Date,
there are no strikes, lockouts or slowdowns against the Borrower or any
Subsidiary pending or, to the knowledge of the Borrower, threatened. Except as
would not reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect, the hours worked by and payments made to employees of
the Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters. The consummation of the Transactions will not give
rise to any right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Borrower or any
Subsidiary is bound.

 

Section 3.24.    Solvency.  Immediately after the consummation of the
Transactions to occur on the Closing Date, the Borrower and its Subsidiaries,
taken as a whole, are Solvent.

 

Section 3.25.    Sanctioned Persons.  None of the Borrower or any Subsidiary
nor, to the knowledge of the Borrower, any director, officer, agent, employee or
Affiliate of the Borrower or any Subsidiary is currently subject to any U.S.
sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Borrower will not directly or indirectly
use the proceeds of the Loans or otherwise make available such proceeds to any
Person, for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC.

 

Section 3.26.    Foreign Corrupt Practices Act.  Each of the Borrower, the
Subsidiaries and their respective directors, officers, agents, employees, and
any person acting for or on behalf of the Borrower or such Subsidiaries has
complied with, and will comply with, the U.S. Foreign Corrupt Practices Act, as
amended from time to time, or any other applicable anti-bribery or
anti-corruption law, and it and they have not made, offered, promised, or
authorized, and will not make, offer, promise, or authorize, whether directly or
indirectly, any payment, of anything of value to: (a) an executive, official,
employee or agent of a governmental department, agency or instrumentality, (b) a
director, officer, employee or agent of a wholly or partially government-owned
or government-controlled company or business, (c) a political party or official
thereof, or candidate for political office or (d) an executive, official,
employee or agent of a public international organization (e.g., the
International Monetary Fund or the World Bank) (“Government Official”); while
knowing or having a reasonable belief that all or some portion will be used for
the purpose of: (i) influencing any act, decision or failure to act by a
Government Official in his or her official capacity, (ii) inducing a Government
Official to use his or her influence with a government or instrumentality to
affect any act or decision of such government or entity or (iii) securing an
improper advantage; in order to obtain, retain, or direct business.

 

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Section 3.27.   Anti-Terrorism Law.  Neither the Borrower nor any of the
Subsidiaries is in violation of any legal requirement relating to any laws with
respect to terrorism or money laundering (“Anti-Terrorism Laws”), including
Executive Order No. 13224 on Terrorist Financing effective September 24, 2001
(the “Executive Order”) and the USA PATRIOT Act.

 

Section 3.28.   No Undisclosed Liabilities.  Neither the Borrower nor any of its
Subsidiaries has any liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) which are not properly reflected or reserved
against in financial statements provided pursuant to Section 3.05 to the extent
required to be so reflected or reserved against in accordance with GAAP, except
for (i) liabilities that have arisen in the ordinary course of business
consistent with past practice and that have not had a Material Adverse Effect,
and (ii) liabilities that, individually or in the aggregate, have not had and
would not reasonably be expected to have or result in a Material Adverse Effect.

 

Section 3.29.   Indebtedness.  Schedule 3.29 hereto sets forth as of the Closing
Date all outstanding secured and unsecured Indebtedness of the Borrower and its
Subsidiaries, or for which the Company or any Subsidiary has commitments.

 

Section 3.30.   Rank of Indebtedness.  Except as set forth on Schedule 3.30, no
Indebtedness of the Company or any of its Subsidiaries existing as of the
Closing is senior to, or pari passu with, the Term Loan in right of payment or
redemption, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise.

 

Section 3.31.   No Guarantees of Indebtedness.  Neither the Borrower nor any of
its Subsidiaries has guaranteed (directly or indirectly) any Indebtedness of any
Person.

 

Section 3.32.   No Fees.  Except as set forth on Schedule 3.32, the Borrower has
not employed any broker or finder or incurred any liability for any brokerage or
investment banking fees, commissions, finders’ structuring fees, financial
advisory fees or other similar fees in connection with the Transaction
Documents.

 

Section 3.33.   Transactions with Affiliates.  There are no loans, leases,
agreements, contracts, royalty agreements, management contracts or arrangements
or other continuing transactions between (a) the Borrower, any of its
Subsidiaries or any of their respective customers or suppliers on the one hand,
and (b) on the other hand, any officer, employee, consultant or director of the
Borrower, or any of its Subsidiaries, or any Affiliate of the Borrower or any of
its Subsidiaries or any member of the immediate family of such officer,
employee, consultant, director or stockholder or any corporation or other entity
controlled by such officer, employee, consultant, director or stockholder, or a
member of the immediate family of such officer, employee, consultant, director
or stockholder which, in each case, is required to be disclosed in the SEC
Reports or in the Borrower’s most recently filed definitive proxy statement on
Schedule 14A for an annual meeting of stockholders, that is not so disclosed in
the SEC Reports or in such proxy statement.

 

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Article IV

 

Conditions of Lending

 

The obligations of the Lender to make Loan hereunder are subject to the
satisfaction of the following conditions:

 

Section 4.01.    Conditions of Borrowing.   On the Closing Date:

 

(a)       The representations and warranties set forth in Article III and in
each other Loan Document shall be true and correct on and as of the Closing
Date, with the same effect as though made on and as of such date, except to the
extent such representations and warranties expressly relate to an earlier date.

 

(b)       On the Closing Date, no Default or Event of Default shall have
occurred and be continuing.

 

(c)       Lender shall have received favorable written opinions of Pryor Cashman
LLP, Fennemore Craig, P.C., and Robinson Brog Leinwand Greene Genovese & Gluck
P.C., counsel for the Borrower, in form and substance reasonably satisfactory to
the Lender.

 

(d)       The Lender shall have received (i) a copy of the certificate or
articles of incorporation (or comparable organizational document), including all
amendments thereto, of each Loan Party, certified as of a recent date by the
Secretary of State (or comparable entity) of the jurisdiction of its
organization, and a certificate as to the good standing (where such concept is
applicable) of each Loan Party as of a recent date, from such Secretary of State
(or comparable entity), (ii) a certificate of the Secretary or Assistant
Secretary of each Loan Party dated the Closing Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of such Loan Party
as in effect on the Closing Date and at all times since a date prior to the date
of the resolutions described in clause (B) below, (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of Directors (or
comparable governing body) of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such Loan Party is a
party and, in the case of the Borrower, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect, (C) that the certificate or articles of incorporation (or comparable
organizational document) of such Loan Party have not been amended since the date
of the last amendment thereto shown on the certificate of good standing
furnished pursuant to clause (i) above and (D) as to the incumbency and specimen
signature of each officer executing any Loan Document or any other document
delivered in connection herewith on behalf of such Loan Party; and (iii) a
certificate of another officer as to the incumbency and specimen signature of
the Secretary or Assistant Secretary executing the certificate pursuant to
clause (ii) above.

 

33

 

 

(e)       The Lender shall have received a certificate, dated the Closing Date
and signed by a Financial Officer of the Borrower, confirming compliance with
the conditions precedent set forth in paragraphs (a), and (b) of this Section
4.01.

 

(f)       Contemporaneously with the closing, the Lender shall have received all
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder or under any other Loan
Document.

 

(g)       The Lender shall have received duly executed counterparts of this
Agreement from each party hereto.

 

(h)       The Lender shall have received duly executed counterparts of each
Security Document required to be executed at Closing from each party thereto and
the Security Documents shall be in full force and effect on the Closing Date and
the Lender shall have a perfected security interest in the Collateral of the
type and priority described in each Security Document.

 

(i)        The Lender shall have received a Perfection Certificate with respect
to the Loan Parties dated the Closing Date and duly executed by a Responsible
Officer of the Borrower, and shall have received the results of a search of the
Uniform Commercial Code filings (or equivalent filings) made with respect to the
Loan Parties in the states (or other jurisdictions) of formation of such
Persons, in which the chief executive office of each such Person is located and
in the other jurisdictions in which such Persons maintain property, in each case
as indicated on such Perfection Certificate, together with copies of the
financing statements (or similar documents) disclosed by such search, and
accompanied by evidence reasonably satisfactory to the Lender that the Liens
indicated in any such financing statement (or similar document) would be
permitted under Section 6.02 or have been or will be contemporaneously released
or terminated (or are otherwise required to be released pursuant to the terms of
a payoff letter reasonably acceptable to Lender).

 

(j)        The Lender shall have received a copy of, or a certificate as to
coverage under, the insurance policies required by Section 5.02 and the
applicable provisions of the Security Documents, each of which shall be endorsed
or otherwise amended to include a customary lender’s loss payable endorsement
and to name the Lender as additional insured, in form and substance reasonably
satisfactory to the Lender.

 

(k)       All principal, premium, if any, interest, fees and other amounts due
or outstanding under the Existing Credit Agreements shall have been or will be,
substantially simultaneously with the initial funding of the Loans on the
Closing Date, repaid, the commitments thereunder terminated and all guarantees
and security in support thereof discharged and released, and the Lender shall
have received reasonably satisfactory evidence thereof (it being understood and
agreed that such evidence shall be payoff letters from the administrative agents
under Existing Credit Agreements satisfactory to the Lender. Immediately after
giving effect to the Transactions and the other transactions contemplated
hereby, the Borrower and the Subsidiaries shall have outstanding no Indebtedness
or preferred stock other than (a) Indebtedness outstanding under this Agreement
and (b) other Indebtedness permitted under this Agreement.

 

34

 

 

(l)        The Lender shall have received the financial statements referred to
in Section 3.05.

 

(m)       The Lender shall have received a certificate from the chief financial
officer of the Borrower certifying that each of the Loan Parties after giving
effect to the Transactions to occur on the Closing Date, is Solvent.

 

(n)       All requisite Governmental Authorities and third parties shall have
approved or consented to the Transactions and the other transactions
contemplated hereby to the extent required or reasonably requested by the
Lender, all applicable appeal periods shall have expired and there shall not be
any pending or threatened litigation, governmental, administrative or judicial
action that has resulted or could reasonably be expected to restrain, prevent or
impose burdensome conditions on the Transactions or the other transactions
contemplated hereby.

 

(o)       The Lender shall have received from the Company a duly executed
Warrant to purchase 152,410,185 shares of Common Stock.

 

(p)       The Lender shall have received from the Company a duly executed
counterpart amendment to that certain Registration Rights Agreement, dated as of
the date hereof, covering the shares of Common Stock subject to the Warrant.

 

Notwithstanding anything to the contrary herein or in any other Loan Document,
it is understood and agreed that to the extent any security interest in any
Collateral is not or cannot be perfected (or, in the case of Mortgages, granted)
or any Real Estate Collateral Requirements satisfied on or before the Closing
Date (other than the perfection of the security interests in Equity Interests of
the Subsidiaries (to the extent required under the terms of the Guarantee and
Collateral Agreement) and assets with respect to which a Lien may be perfected
by the filing of a financing statement under the UCC or an intellectual property
notice filing with the United States Patent and Trademark Office or the United
States Copyright Office) after the Loan Parties’ use of commercially reasonable
efforts to do so, then the perfection (or, in the case of Mortgages, grant) of a
security interest in such Collateral or, if applicable, failure to satisfy any
Real Estate Collateral Requirement, shall not constitute a condition precedent
to availability of the Credit Facilities on the Closing Date, but instead shall
be required to be perfected (or, in the case of Mortgages, granted) within 30
days after the Closing Date (which period may be extended with the consent of
the Lender in is sole discretion) pursuant to arrangements to be mutually agreed
by the Lender and the Borrower acting reasonably.

 

35

 

 

Article V

 

Affirmative Covenants

 

The Borrower covenants and agrees with the Lender that so long as this Agreement
shall remain in effect and the principal of and interest on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full, unless the Lender shall otherwise consent in writing, the
Borrower will, and will cause each of the Subsidiaries to:

 

Section 5.01.    Existence;  Compliance with Laws; Businesses and Properties.

 

(a)       Do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its legal existence, except as otherwise expressly
permitted under Section 6.05.

 

(b)       Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations and intellectual property material to the conduct of
its business; maintain and operate such business in substantially the manner in
which it is presently conducted and operated and comply in all material respects
with all applicable laws, rules, regulations and decrees and orders of any
Governmental Authority, whether now in effect or hereafter enacted.

 

(c)       The Loan Parties shall, and shall cause each Subsidiary to (i)
maintain, preserve, and protect all of its material properties and equipment
necessary in the operation of its business in good working order, repair and
condition, casualty or condemnation excepted, (ii) make all necessary renewals,
repairs, replacements, modifications, improvements, upgrades, extensions and
additions thereof or thereto in accordance with prudent industry practice in
order that the business carried on in connection therewith may be properly
conducted at all times and (iii) keep all material leases to which any Loan
Party is a party in full force and effect.

 

Section 5.02.    Insurance.

 

(a)       Keep its insurable properties adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance, to such
extent and against such risks, including fire and other risks insured against by
extended coverage, as is customary with companies in the same or similar
businesses operating in the same or similar locations, including public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it and maintain such other insurance as may be
required by law.

 

(b)       (i)       Cause all such policies covering any Collateral to be
endorsed or otherwise amended to include a customary lender’s loss payable
endorsement, in form and substance reasonably satisfactory to the Lender and the
Lender, which endorsement shall provide that, from and after the Closing Date,
if the insurance carrier shall have received written notice from the Lender of
the occurrence of an Event of Default, the insurance carrier shall pay all
proceeds otherwise payable to the Borrower or the Loan Parties under such
policies directly to the Lender; cause all such policies to provide that neither
the Borrower, nor the Lender, nor any other party shall be a coinsurer
thereunder and to contain a “Replacement Cost Endorsement,” without any
deduction for depreciation, and such other provisions as the Lender may
reasonably require from time to time to protect their interests; deliver
original or certified copies of all such policies to the Lender; cause each such
policy to provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium upon not less than 10 days’ prior written notice
thereof by the insurer to the Lender (giving the Lender the right to cure
defaults in the payment of premiums) or (ii) for any other reason upon not less
than 30 days’ prior written notice thereof by the insurer to the Lender and
deliver to the Lender, prior to the cancellation, modification or nonrenewal of
any such policy of insurance, a copy of a renewal or replacement policy (or
other evidence of renewal of a policy previously delivered to the Lender)
together with evidence satisfactory to the Lender of payment of the premium
therefor.

 

36

 

 

(ii)       Cause all such policies issued in the United Kingdom to contain a
Replacement Cost Endorsement (or such similar endorsement as is customary in the
United Kingdom), without any deduction for depreciation, and such other
provisions as the Lender may reasonably require from time to time to protect
their interests; if the Borrower receives insurance proceeds during the
existence of an Event of Default, the Borrower shall deliver to the Lender a
certificate stating that Loan Parties intend to use any proceeds from such
policies to acquire assets useful to the business of the Loan Parties within 60
days of the receipt of such proceeds, it being expressly agreed that any
proceeds not so reinvested shall be immediately paid to the Lender; deliver
original or certified copies of all such policies to the Lender; cause each such
policy to provide that it shall not be canceled, modified or not renewed (i) by
reason of nonpayment of premium upon not less than 10 days’ prior written notice
thereof by the insurer to the Lender (giving the Lender the right to cure
defaults in the payment of premiums) or (ii) for any other reason upon not less
than 30 days’ prior written notice thereof by the insurer to the Lender and
deliver to the Lender, prior to the cancellation, modification or nonrenewal of
any such policy of insurance, a copy of a renewal or replacement policy (or
other evidence of renewal of a policy previously delivered to the Lender)
together with evidence satisfactory to the Lender of payment of the premium
therefor.

 

(c)       If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated (i) a “flood hazard area” in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), obtain flood insurance, if so requested by the Lender, in
such total amount as the Lender may from time to time require and otherwise
comply with the NFIP as set forth in the Flood Laws or (ii) a “Zone 1” area,
obtain earthquake insurance in such total amount as the Lender may from time to
time require. Following the Closing Date, the Borrower shall deliver to the
Lender annual renewals of the flood insurance policy or annual renewals of a
force-placed flood insurance policy for each Mortgaged Property if flood
insurance for such Mortgaged Property was requested by any Lender. In connection
with any amendment to this Agreement pursuant to which any increase, extension,
or renewal of Loans is contemplated, the Borrower shall, if requested by any
Lender, cause to be delivered to the Lender for any Mortgaged Property, a Flood
Determination Form, Borrower Notice and Evidence of Flood Insurance, as
applicable.

 

37

 

 

(d)       With respect to any Mortgaged Property, carry and maintain
comprehensive general liability insurance including the “broad form CGL
endorsement” and coverage on an occurrence basis against claims made for
personal injury (including bodily injury, death and property damage) and
umbrella liability insurance against any and all claims, in no event for a
combined single limit of less than that which is customary for companies in the
same or similar businesses operating in the same or similar locations, naming
the Lender as an additional insured, on forms satisfactory to the Lender.

 

(e)       Notify the Lender promptly whenever any separate insurance concurrent
in form or contributing in the event of loss with that required to be maintained
under this Section 5.02 is taken out by any Loan Party and promptly deliver to
the Lender a duplicate original copy of such policy or policies.

 

(f)        Within 30 days following the Closing Date, obtain a key man life and
disability insurance policy covering Daniel O’Neill in an amount no less than
$15,000,000 , which names the Lender as the sole beneficiary from an insurance
company or companies, and otherwise on terms, acceptable to the Lender in its
sole discretion (the “Key Man Policy”), and maintain the Key Man Policy in full
force and effect at all times thereafter.

 

Section 5.03.    Obligations and Taxes. .  Pay its Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all Taxes, before the same shall become delinquent or in
default, as well as all lawful claims for labor, materials and supplies or
otherwise that, if unpaid, might give rise to a Lien upon such properties or any
part thereof; provided that such payment and discharge shall not be required
with respect to any such Tax so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings, the Borrower shall have set
aside on its books adequate reserves with respect thereto in accordance with
GAAP, such contest operates to suspend collection of the contested obligation,
tax, assessment or charge and enforcement of a Lien and, in the case of a
Mortgaged Property, there is no risk of forfeiture of such property.

 

Section 5.04.    Financial Statements, Reports, etc.  In the case of the
Borrower, furnish to Lender:

 

(a)       within 75 days after the end of each fiscal year (except for the year
ended December 31, 2015, which shall be within 90 days after the end of such
fiscal year), its consolidated balance sheet and related statements of income,
stockholders’ equity and cash flows showing the financial condition of the
Borrower and its consolidated Subsidiaries as of the close of such fiscal year
and the results of its operations and the operations of such Subsidiaries during
such year, together with comparative figures for the immediately preceding
fiscal year, all audited by Rehmann Robson LLC or other independent public
accountants of recognized national standing and accompanied by an opinion of
such accountants (which opinion shall be without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
fairly present the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, together with a customary “management discussion and
analysis”;

 

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(b)       within 40 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated balance sheet and related
statements of income, stockholders’ equity and cash flows showing the financial
condition of the Borrower and its consolidated Subsidiaries as of the close of
such fiscal quarter and the results of its operations and the operations of such
Subsidiaries during such fiscal quarter and the then elapsed portion of the
fiscal year, and, other than with respect to quarterly reports during the
remainder of the first fiscal year after the Closing Date, comparative figures
for the same periods in the immediately preceding fiscal year, all certified by
one of its Financial Officers as fairly presenting the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments, together with a customary “management
discussion and analysis”;

 

(c)       concurrently with any delivery of financial statements under paragraph
(a) or (b) above, a certificate of a Financial Officer in the form of Exhibit B
certifying that no Event of Default or Default has occurred or, if such an Event
of Default or Default has occurred, specifying the nature and extent thereof and
any corrective action taken or proposed to be taken with respect thereto;

 

(d)       within 60 days after the beginning of each fiscal year of the
Borrower, a detailed consolidated budget for such fiscal year (including a
projected consolidated balance sheet and related statements of projected
operations and cash flows as of the end of and for such fiscal year and setting
forth the assumptions used for purposes of preparing such budget) and, promptly
when available, any significant revisions of such budget;

 

(e)       promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed to its
shareholders, as the case may be;

 

(f)        promptly after the receipt thereof by the Borrower or any of the
Subsidiaries, a copy of any “management letter” received by any such Person from
its certified public accountants and the management’s response thereto; and

 

(g)       promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Borrower or any
Subsidiary, or compliance with the terms of any Loan Document, as the Lender may
reasonably request.

 

Section 5.05.    Litigation and Other Notices.  Furnish to the Lender prompt
written notice of the following:

 

(a)       any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) taken or proposed to be taken with
respect thereto;

 

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(b)       the filing or commencement of, or any threat or notice of intention of
any Person to file or commence, any action, suit or proceeding, whether at law
or in equity or by or before any Governmental Authority, against the Borrower or
any Affiliate thereof that has resulted or could reasonably be expected to
result in a Material Adverse Effect; and

 

(c)       any development that has resulted or could reasonably be expected to
result in a Material Adverse Effect.

 

Section 5.06.    Information Regarding Collateral.

 

(a)       Furnish to the Lender prompt written notice of any change (i) in the
corporate name of any Loan Party, (ii) in the jurisdiction of organization or
formation of any Loan Party, (iii) in any Loan Party’s identity or corporate
structure or (iv) in any Loan Party’s Federal Taxpayer Identification Number.
The Borrower agrees not to effect or permit any change referred to in the
preceding sentence unless all filings have been made under the Uniform
Commercial Code or otherwise that are required in order for the Lender to
continue at all times following such change to have a valid, legal and perfected
security interest in all the Collateral. The Borrower also agrees promptly to
notify the Lender if any material portion of the Collateral is damaged or
destroyed.

 

(b)       In the case of the Borrower, each year, at the time of delivery of the
annual financial statements with respect to the preceding fiscal year pursuant
to Section 5.04.(a), deliver to the Lender a certificate of a Financial Officer
setting forth the information required pursuant to Section 2 of the Perfection
Certificate or confirming that there has been no change in such information
since the date of the Perfection Certificate delivered on the Closing Date or
the date of the most recent certificate delivered pursuant to this Section 5.06.

 

Section 5.07.    Maintaining Records; Access to Properties and Inspections;
Maintenance of Ratings. Keep proper books of record and account in which full,
true and correct entries in all material respects in conformity with GAAP or,
with respect to Subsidiaries organized outside of the United States, the local
accounting standards applicable to the relevant jurisdiction, and all
requirements of law are made of all dealings and transactions in relation to its
business and activities. Each Loan Party will, and will cause each of its
subsidiaries to, permit any representatives designated by the Lender to visit
and inspect the financial records and the properties of such Person at
reasonable times and as often as reasonably requested and to make extracts from
and copies of such financial records, and permit any representatives designated
by the Lender to discuss the affairs, finances and condition of such Person with
the officers thereof and independent accountants therefor.

 

Section 5.08.    Use of Proceeds.  Use the proceeds of the Loans only for the
purposes specified in Schedule 3.15.

 

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Section 5.09.    Employee Benefits.  (a) Comply in all material respects with
the provisions of ERISA, the Code and all other laws and regulations applicable
to Plans, (b) furnish to the Lender as soon as possible after, and in any event
within ten days after any responsible officer of the Borrower, any ERISA
Affiliate or any Loan Party knows or has reason to know that, any ERISA Event
has occurred or is reasonably expected to occur that, alone or together with any
other ERISA Event that has occurred or is reasonably expected to occur that has
resulted or could reasonably be expected to result in a Material Adverse Effect
on the Borrower, any ERISA Affiliate or any Loan Party, a statement of a
Financial Officer of the Borrower setting forth details as to such ERISA Event
and the action, if any, that the Borrower proposes to take with respect thereto
and (c) promptly and in any event within 30 days after the filing thereof with
the United States Department of Labor, furnish to the Lender copies of each
Schedule SB (Actuarial Information) to the Annual Report (Form 5500 Series) with
respect to each Plan.

 

Section 5.10.    Compliance with Environmental Laws.  Comply, and cause all
lessees and any other Person leasing or occupying its properties to comply, in
all material respects with all applicable Environmental Laws; obtain and renew
all material environmental permits necessary for its operations and properties;
and conduct any remedial action in accordance with Environmental Laws; provided
that none of the Borrower or any Subsidiary shall be required to undertake any
remedial action to the extent that its obligation to do so is being contested by
the Borrower or any Subsidiary in good faith and by proper proceedings,
appropriate reserves are being maintained with respect to such circumstances in
accordance with GAAP and any such delay or inaction with respect to such
remedial action does not violate any Environmental Law.

 

Section 5.11.   Further Assurances.   (a) Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing Uniform Commercial Code and other financing statements,
mortgages and deeds of trust) that may be required under applicable law, or that
the Lender may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and priority of the security interests created or intended
to be created by the Security Documents.

 

(b)       If, following the Closing Date, any Domestic Subsidiary or Foreign
Subsidiary is acquired or organized, the Borrower shall promptly (and in any
event within 30 days (or such longer period as the Lender shall agree) of such
event) (i) notify the Lender thereof, (ii) cause such Subsidiary to become a
Loan Party by executing the Guarantee and Collateral Agreement (or a supplement
thereto in the form specified therein), (iii) cause (A) the Equity Interests of
such Subsidiary and (B) the Equity Interests of any Subsidiary owned by such
Subsidiary to be pledged to the Lender on a first-priority basis and deliver to
the Lender all certificates or other instruments representing such Equity
Interests, together with stock powers or other instruments of transfer with
respect thereto endorsed in blank to the extent required by the Security
Documents, (iv) promptly (and, in the case of any security interests in real
property, as soon as reasonably practicable) cause all documents and
instruments, including Uniform Commercial Code financing statements and
Mortgages, required by law or reasonably requested by the Lender to be filed,
registered or recorded to create the Liens intended to be created by the
Security Documents and perfect or record such Liens to the extent, and with the
priority, required by the Security Documents, to be filed, registered or
recorded or delivered to the Lender for filing, registration or recording, in
each case except with respect to any Excluded Assets (as defined in the
Guarantee and Collateral Agreement), (v) cause each Loan Party to take all other
action required by law, under the Security Documents or reasonably requested by
the Lender to perfect, register and/or record the Liens granted by it thereunder
and (vi) cause to be delivered to the Lenders all such instruments and documents
(including legal opinions, title insurance policies and lien searches) as the
Lender shall reasonably request to evidence compliance with this Section
5.11.(b). If any fee owned real property, is acquired by any Loan Party after
the Closing Date, having a value in excess of $100,000 the Borrower will notify
the Lender thereof, and, if requested by the Lender, the Borrower will, no later
than 90 days after such acquisition, cause such assets to be subjected to a Lien
securing the Obligations and will take such actions as shall be requested by the
Lender to grant and perfect such Liens, including the satisfaction of the Real
Estate Collateral Requirements, all at the expense of the Borrower.

 

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Section 5.12.    Post-Closing Obligations.

 

(a)       Real Property Collateral. On or before a date which is 60 days
following the Closing Date (unless a later date is otherwise agreed to by the
Lender), the Real Estate Collateral Requirements shall have been satisfied.

 

(b)       Other. Take all such actions as shall be set forth on Schedule 5.12
within the time periods specified on Schedule 5.12 (unless a later date is
otherwise agreed to by the Lender).

 

Article VI

 

Negative Covenants

 

The Borrower covenants and agrees with the Lender that until the principal of
and interest on each Loan, all Fees and all other expenses or amounts payable
under any Loan Document have been paid in full (other than contingent
indemnification and expense reimbursement obligations for which no claim has
been made), unless the Lender shall otherwise consent in writing, the Borrower
will not, nor will it cause or permit any of the Subsidiaries to:

 

Section 6.01.    Indebtedness.  Incur, create, assume or permit to exist any
Indebtedness, except

 

(a)       Indebtedness existing on the date hereof and set forth on Schedule
Section 6.01.(a);

 

(b)       Indebtedness created hereunder and under the other Loan Documents;

 

(c)       Intercompany Indebtedness of the Borrower and the Subsidiaries;
provided that any such Indebtedness that is owed by a Loan Party to a Subsidiary
that is not a Loan Party is subordinated to the Obligations pursuant to an
Affiliate Subordination Agreement;

 

(d)       Indebtedness of the Borrower or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets;
provided that (A) such Indebtedness is incurred prior to or within 180 days
after such acquisition or the completion of such construction or improvement and
(B) the aggregate principal amount of Indebtedness permitted by this Section
6.01.(d), when combined with the aggregate principal amount of all Capital Lease
Obligations incurred pursuant to Section 6.01.(e) shall not exceed $500,000 at
any time outstanding;

 

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(e)       Capital Lease Obligations and purchase money obligations in an
aggregate principal amount, when combined with the aggregate principal amount of
all Indebtedness incurred pursuant to Section 6.01.(d), shall not exceed
$500,000 at any time outstanding;

 

(f)        Indebtedness under performance bonds or with respect to workers’
compensation claims, in each case incurred in the ordinary course of business;

 

(g)       Indebtedness acquired or assumed in connection with any Permitted
Acquisition or other acquisition permitted under Section 6.04; provided that (A)
such Indebtedness exists at the time of such Permitted Acquisition or other
acquisition and is not created in contemplation of or in connection with such
Permitted Acquisition or other acquisition, (B) immediately before and after
such Person becomes a Subsidiary, no Default or Event of Default shall have
occurred and be continuing and (C) the aggregate principal amount of
Indebtedness permitted by this Section 6.01.(g) shall not exceed $500,000 at any
time outstanding;

 

(h)       Permitted Unsecured Debt of the Borrower or any Subsidiary incurred to
finance any acquisition permitted by Section 6.04.(e); provided that
Indebtedness shall be permitted under this paragraph only if, at the time of the
incurrence thereof no Default or Event of Default has occurred and is continuing
at such time;

 

(i)        Indebtedness consisting of unsecured guarantees arising with respects
to customary indemnification obligations to purchasers in connection with
Dispositions permitted by Section 6.06;

 

(j)        Financing of insurance premiums in the ordinary course of business;

 

(k)       Indebtedness incurred in respect of credit cards, credit card
processing services, debit cards, stored value cards, purchase cards (including
so-called “procurement cards” or “P-cards”), or cash management services,
netting services, overdraft protection, and other like services, in each case
incurred in the ordinary course of business;

 

(l)        unsecured Indebtedness owing to former employees, officers or
directors (or any spouses, ex-spouses, or estates of any of the foregoing)
incurred in connection with the repurchase by Borrower of the Equity Interests
of Borrower that have been issued to such Persons, so long as (i) no Default or
Event of Default has occurred and is continuing or would result from the
incurrence of such Indebtedness, and (ii) the aggregate amount of all such
Indebtedness outstanding at any one time does not exceed $250,000;

 

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(m)       Accrual of interest, accretion or amortization of original issue
discount, or the payment of interest in kind, in each case on Indebtedness that
otherwise constitutes Indebtedness permitted under this Section 6.01;

 

(n)       to the extent constituting Indebtedness, customary purchase price
adjustments, earn outs, indemnification obligations, unsecured guarantees
thereof and similar items of the Borrower or any of its Subsidiaries in
connection with Permitted Acquisitions, other acquisitions permitted under
Section 6.04, Asset Sales or other Dispositions permitted under Section 6.06;
and

 

(o)       other Indebtedness of the Borrower or the Subsidiaries in an aggregate
principal amount not exceeding $250,000 at any time outstanding.

 

Section 6.02.    Liens.  Create, incur, assume or permit to exist any Lien on
any property or assets (including Equity Interests or other securities of any
Person, including the Borrower or any Subsidiary) now owned or hereafter
acquired by it or on any income or revenues or rights in respect of any thereof,
except:

 

(a)       Liens on property or assets of the Borrower and its Subsidiaries
existing on the date hereof and set forth on Schedule Section 6.02.(a); provided
that such Liens shall secure only those obligations which they secure on the
date hereof;

 

(b)       any Lien created under the Loan Documents;

 

(c)       any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary or existing on any property or assets
of any Person that becomes a Subsidiary after the date hereof prior to the time
such Person becomes a Subsidiary, as the case may be; provided that (i) such
Lien is not created in contemplation of or in connection with such acquisition
or such Person becoming a Subsidiary, (ii) such Lien does not apply to any other
property or assets of the Borrower or any Subsidiary and (iii) such Lien secures
only those obligations which it secures on the date of such acquisition or the
date such Person becomes a Subsidiary, as the case may be;

 

(d)       Liens for Taxes not yet due or which are being contested in compliance
with Section 5.03;

 

(e)       carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or
other like Liens arising in the ordinary course of business and securing amounts
not overdue for a period of more than 30 days, or, if more than 30 days overdue,
(i) which are being contested in compliance with Section 5.03 or (ii) with
respect to which the failure to make payment could not reasonably be expected to
have a Material Adverse Effect;

 

(f)        pledges and deposits made in the ordinary course of business in
compliance with workmen’s compensation, unemployment insurance and other social
security laws or regulations;

 

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(g)       deposits to secure the performance of leases (other than Capital Lease
Obligations), statutory obligations, surety and appeal bonds, and other
obligations of a like nature incurred in the ordinary course of business;

 

(h)       zoning restrictions, easements, rights-of-way, restrictions on use of
real property, minor defects or irregularities of title and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not interfere with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries;

 

(i)        security interests to secure Indebtedness permitted by Section
6.01.(d) and Section 6.01.(e) provided that (i) such security interests are
incurred, and the Indebtedness secured thereby is created, within 180 days after
such acquisition, construction or improvement, (ii) the Indebtedness secured
thereby does not exceed the lesser of the cost or the fair market value of such
assets at the time of such acquisition, construction or improvement and (iii)
such security interests do not apply to any other property or assets of the
Borrower or any Subsidiary, other than any proceeds, products, accessions or
improvements with respect to such assets; provided that individual financings of
such assets provided by one lender may be cross-collateralized to other
financings of fixed or capital assets provided by such lender;

 

(j)        judgment Liens securing judgments not constituting an Event of
Default under Section 7.01.(i);

 

(k)       any license or sub-license entered into in the ordinary course of
business and the interest of any non-exclusive licensors under license
agreements (including, for the avoidance of doubt, relating to intellectual
property);

 

(l)        any interest or title or right of a lessor or sub-lessor under any
lease or sub-lease entered into in the ordinary course of business and covering
only the assets so leased;

 

(m)       Liens arising from precautionary UCC financing statements filed in
connection with operating leases;

 

(n)       bankers’ Liens, rights of setoff and other similar Liens existing
solely with respect to cash and Permitted Investments on deposit in one or more
accounts maintained by the Borrower or any of its Subsidiaries (including any
restriction on the use of such cash and Permitted Investment), in each case
granted in the ordinary course of business in favor of the bank or banks with
which such accounts are maintained, securing amounts owing to such bank or banks
with respect to cash management and operating account arrangements, including
those involving pooled accounts and netting arrangements; provided that in no
case shall any such Liens secure (either directly or indirectly) the repayment
of any Indebtedness;

 

(o)       Liens on cash earnest money deposits made in connection with Permitted
Acquisitions or other acquisitions permitted under Section 6.04;

 

45

 

 

(p)       Liens in favor of the Borrower or any Subsidiary securing Indebtedness
permitted under Section 6.01.(c);

 

(q)       Liens granted in the ordinary course of business on the unearned
portion of insurance premiums securing the financing of insurance premiums to
the extent the financing is permitted under Section 6.01.(j) hereof;

 

(r)        Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties not yet delinquent in connection with
the importation of goods in the ordinary course of business;

 

(s)       other Liens securing liabilities in an aggregate amount not to exceed
$250,000 at any time outstanding;

 

(t)        Liens incurred pursuant to the Additional Lender Credit Agreement and
the Additional Lender Security Agreement.

 

Section 6.03.    Sale and Lease-Back Transactions.  Enter into any arrangement,
directly or indirectly, with any Person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred unless (a) the sale or transfer of such
property is permitted by Section 6.06 and (b) any Capital Lease Obligations or
Liens arising in connection therewith are permitted by Section 6.01 and Section
6.02, as the case may be.

 

Section 6.04.    Investments, Loans and Advances.  Purchase, hold or acquire any
Investment in a Person except:

 

(a)       Investments existing on the date hereof and set forth on Schedule
Section 6.04;

 

(b)       Permitted Investments;

 

(c)       Investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;

 

(d)       the Borrower and the Subsidiaries may make loans and advances in the
ordinary course of business in accordance with their usual practice to their
respective employees so long as the aggregate principal amount thereof at any
time outstanding (determined without regard to any write-downs or write-offs of
such loans and advances) shall not exceed $250,000;

 

46

 

 

(e)       the Borrower or any Subsidiary may acquire all or substantially all
the assets of a Person or line of business of such Person or not less than 75%
of the Equity Interests of a Person (referred to herein as the “Acquired
Entity”); provided that (i) the Acquired Entity shall be in a similar line of
business as that of the Borrower and the Subsidiaries as conducted during the
current and most recent calendar year and (ii) at the time of such transaction
(A) both before and after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing, (B) the Acquired Entity shall become a
Loan Party or the acquired assets shall be owned by a Loan Party, (C) the total
consideration paid in connection with such acquisition and any other
acquisitions pursuant to this Section 6.04.(e) (including any Indebtedness of
the Acquired Entity that is assumed by the Borrower or any Subsidiary following
such acquisition and any payments following such acquisition pursuant to
earn-out provisions or similar obligations) shall not in the aggregate exceed
$1,000,000, (D) the Borrower shall have delivered a certificate of a Financial
Officer, certifying as to the foregoing and containing reasonably detailed
calculations in support thereof, in form and substance satisfactory to the
Lender and (E) the Borrower shall comply, and shall cause the Acquired Entity to
comply, with the applicable provisions of Section 5.11 and the Security
Documents (any acquisition of an Acquired Entity meeting all the criteria of
this Section 6.04.(e) being referred to herein as a “Permitted Acquisition”);

 

(f)        Investments consisting of the non-cash portion of the sales price
received for Dispositions permitted by Section 6.06;

 

(g)       lease, utility and other deposits or advances in the ordinary course
of business;

 

(h)       cash earnest money deposits made in connection with Permitted
Acquisitions or other acquisitions permitted by Section 6.04;

 

(i)        investments in the ordinary course of business consisting of
endorsements for collection or deposit;

 

(j)        acquisitions of, investments in, and loans and advances to, joint
ventures, so long as the aggregate amount invested, loaned or advanced pursuant
to this paragraph (j) on or after the Closing Date (determined without regard to
any write-downs or write-offs of such investments, loans or advances) does not
at any time outstanding exceed $500,000;

 

(k)       Investments of any Person existing at the time such person becomes a
Subsidiary, or consolidates, amalgamates or merges with the Borrower or any of
the Subsidiaries (including in connection with a Permitted Acquisition) (but
excluding investments in subsidiaries which must be otherwise permitted by this
Section 6.04) so long as such investments were not made in contemplation of such
person becoming a Subsidiary or of such consolidation, amalgamation or merger;
and

 

(l)        in addition to Investments permitted by paragraphs (a) through (k)
above, additional Investments by the Borrower and the Subsidiaries so long as
the aggregate amount invested, loaned or advanced pursuant to this paragraph (l)
(determined without regard to any write-downs or write-offs of such Investments)
does not exceed $250,000.

 

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Section 6.05.    Mergers and Consolidations.  Merge into or consolidate with any
other Person, or permit any other Person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one transaction or in a
series of related transactions) all or substantially all the assets of the
Borrower or any Subsidiary, except that (i) if at the time thereof and
immediately after giving effect thereto no Event of Default or Default shall
have occurred and be continuing (x) any Wholly Owned Subsidiary may merge into
the Borrower in a transaction in which the Borrower is the surviving
corporation, and (y) any Subsidiary may merge into or consolidate with any other
Subsidiary in a transaction in which the surviving entity is a Subsidiary
(provided that if any party to any such transaction is a Loan Party, the
surviving entity of such transaction shall be a Loan Party) and (ii) the
Borrower and the Subsidiaries may make Permitted Acquisitions and other
Investments permitted by Section 6.04.

 

Section 6.06.    Dispositions.  Dispose of any property or assets, other than:

 

(a)       Dispositions of damaged, worn-out, obsolete or surplus equipment and
property (including intellectual property no longer material to the business of
the Borrower or any of the Subsidiaries) no longer used or useful in the
business of the Borrower and its Subsidiaries, in each case in the ordinary
course of business;

 

(b)       Dispositions of inventory in the ordinary course of business;

 

(c)       Dispositions of Permitted Investments;

 

(d)       Dispositions between and among the Borrower and the Subsidiaries;
provided that the transferor in such a transaction is a Loan Party and the
transferee in such a transaction is a Loan Party;

 

(e)       Dispositions among Subsidiaries that are not Loan Parties;

 

(f)        the sale of services, or the termination of any contracts, in each
case in the ordinary course of business;

 

(g)       the granting of Liens permitted by Section 6.02;

 

(h)       the sale or discount, in each case without recourse, of accounts
receivable arising in the ordinary course of business, but only in connection
with the compromise or collection thereof;

 

(i)        any involuntary loss, damage or destruction of property, or any
involuntary condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, or confiscation or requisition of use of property, provided
such event does not have a Material Adverse Effect;

 

(j)        the leasing or subleasing of assets of Borrower or its Subsidiaries
in the ordinary course of business;

 

(k)       (i) the lapse of registered patents, trademarks, copyrights and other
intellectual property of Borrower and its Subsidiaries to the extent not
economically desirable in the conduct of their business or (ii) the abandonment
of patents, trademarks, copyrights or other intellectual property rights in the
ordinary course of business.

 

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(l)        the making of Restricted Payments that are expressly permitted to be
made pursuant to this Agreement;

 

(m)      Dispositions constituting the licensing or cross-licensing of
intellectual property on a non-exclusive basis in the ordinary course of
business;

 

(n)       sale leaseback transactions with respect to (i) the Company’s facility
located at 14200 Ironwood Drive, Grand Rapids, Michigan 49544 or (ii) any other
property having an aggregate fair market value not to exceed $250,000; and

 

(o)       Dispositions not otherwise permitted hereunder; provided that (i) at
the time of such Disposition, no Default or Event of Default shall have occurred
and be continuing or would result from such Disposition, (ii) not less than
seventy-five percent (75%) of the aggregate sale price from such disposition
shall be paid in cash, (iii) the aggregate Net Cash Proceeds of all Dispositions
pursuant to this paragraph (o) shall not exceed $1,000,000 in any fiscal year
and (iv) all such Dispositions shall be for at least the fair market value of
the assets or property subject to such Disposition.

 

Section 6.07.    Restricted Payments; Restrictive Agreements.   (a) Declare or
make, or agree to declare or make, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so; except

 

(i)       any Subsidiary may declare and pay dividends or make other
distributions ratably to its equity holders;

 

(ii)      so long as no Event of Default or Default shall have occurred and be
continuing or would result therefrom, the Borrower may repurchase its Common
Stock owned by employees of the Borrower or the Subsidiaries or make payments to
employees of the Borrower or the Subsidiaries upon termination of employment in
connection with the exercise of stock options, stock appreciation rights or
similar equity incentives or equity based incentives outstanding on the date
hereof or issued pursuant to the LTIP or in connection with the death or
disability of such employees in an aggregate amount not to exceed $500,000 in
any fiscal year;

 

49

 

 

(b)       Enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (i) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets, or (ii) the ability of any
Subsidiary to pay dividends or other distributions with respect to any of its
Equity Interests or to make or repay loans or advances to the Borrower or any
other Subsidiary or to Guarantee Indebtedness of the Borrower or any other
Subsidiary; provided that (A) the foregoing shall not apply to restrictions and
conditions imposed by law or by any Loan Document, (B) the foregoing shall not
apply to restrictions and conditions existing on the date hereof as set forth on
Schedule Section 6.07.(b) (including any extensions or renewals thereof), (C)
the foregoing shall not apply to customary restrictions and conditions contained
in agreements relating to the sale of a Subsidiary pending such sale; provided
such restrictions and conditions apply only to the Subsidiary that is to be sold
and such sale is permitted hereunder, (D) the foregoing shall not apply to
customary provisions in licenses and sub-licenses restricting the assignment
thereof, (E) the foregoing shall not apply to restrictions and conditions
imposed on any Foreign Subsidiary by the terms of any Indebtedness of such
Foreign Subsidiary permitted to be incurred hereunder, (F) clause (i) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness, (G) clause (i) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof, (H)
the foregoing shall not apply to any agreement or other instrument of a Person
acquired by the Borrower or any Subsidiary which was in existence at the time of
such acquisition (but not created in contemplation thereof or in connection
therewith), which restriction or condition is not applicable to any Person or
the properties or assets of any Person, other than the Person and its
Subsidiaries, or the property or assets of the person and its Subsidiaries, so
acquired; and (I) the foregoing shall not apply to any restrictions or
conditions imposed by any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings of the
contracts, instruments or other obligations referred to in clauses (A) through
(J) above, provided that the restrictions and conditions contained in such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive than those
restrictions and conditions in effect immediately prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding, replacement
or refinancing under the applicable contract, instrument or other obligation.

 

Section 6.08.    Transactions with Affiliates.  Sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except:

 

(a)       transactions between or among Loan Parties;

 

(b)       any Restricted Payment permitted by Section 6.07;

 

(c)       any Investment permitted by Section 6.04;

 

(d)       any transaction pursuant to Section 6.11;

 

(e)       mergers, consolidations, amalgamations, liquidations, dissolutions and
transfers of assets permitted by Section 6.05;

 

(f)       the Borrower or any Wholly Owned Subsidiary may engage in transactions
with any Wholly Owned Subsidiary that are consistent with past practice and that
the Borrower determines to be in the best interests of the Borrower and the
Subsidiaries to the extent otherwise permitted hereunder;

 

(g)       the Borrower or any Subsidiary may engage in any of the foregoing
transactions at prices and on terms and conditions not less favorable to the
Borrower or such Subsidiary than could be obtained on an arm’s-length basis from
unrelated third parties.

 

50

 

 

Section 6.09.    Business of the Borrower and Subsidiaries.  Engage at any time
in any business or business activity other than the business currently conducted
by them and business activities reasonably incidental thereto.

 

Section 6.10.    Other Indebtedness and Agreements.

 

(a)       Permit (i) any waiver, supplement, modification, amendment,
termination or release of any indenture, instrument or agreement pursuant to
which any Indebtedness of the Borrower or any of the Subsidiaries is outstanding
if the effect of such waiver, supplement, modification, amendment, termination
or release would increase the obligations of the obligor or confer additional
rights on the holder of such Indebtedness or would permit payment thereunder
otherwise prohibited by Section 6.10.(b), or (ii) any waiver, supplement,
modification or amendment of its certificate of incorporation, by-laws,
operating, management or partnership agreement or other organizational
documents, to the extent any such waiver, supplement, modification or amendment
would be adverse to the Lender in any respect.

 

(b)       Optionally prepay, redeem, repurchase, retire or otherwise acquire for
consideration, or set apart any sum for the aforesaid purposes, any Indebtedness
that is subordinated or secured on a junior-lien basis, or constitutes Permitted
Unsecured Debt.

 

Section 6.11.    Equity Issuances.  Except as set forth on Schedule 6.11, sell
or issue any Equity Interests.

 

Article VII

 

Events of Default

 

Section 7.01.    Events of Default.  In case of the happening of any of the
following events (“Events of Default”):

 

(a)       any representation or warranty made or deemed made in or in connection
with any Loan Document or the borrowings hereunder, or any representation,
warranty, statement or information contained in any report, certificate,
financial statement or other instrument furnished in connection with or pursuant
to any Loan Document, shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished;

 

(b)       default shall be made in the payment of any principal of any Loan when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or by acceleration thereof or otherwise;

 

(c)       default shall be made in the payment of any interest on any Loan or
any Fee or any other amount (other than an amount referred to in (b) above) due
under any Loan Document, when and as the same shall become due and payable, and
such default shall continue unremedied for a period of five (5) Business Days;

 

51

 

 

(d)       default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement contained in
the last paragraph of Section 4.01, Section 5.01(a), Section Section 5.05,
Section Section 5.08 or in Article VI.

 

(e)       default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement contained in
any Loan Document (other than those specified in (b), (c) or (d) above) and such
default shall continue unremedied for a period of 30 days after the notice
thereof from the Lender to the Borrower;

 

(f)        (i) the Borrower or any Subsidiary shall fail to pay any principal or
interest, regardless of amount, due in respect of any Material Indebtedness,
when and as the same shall become due and payable beyond the period of grace, if
any, provided in the instrument or agreement pursuant to which such Indebtedness
was created, or (ii) any other event or condition occurs that results in any
Material Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or agent
on its or their behalf to cause any Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity; provided that this clause (ii) shall not apply to
secured Indebtedness that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Indebtedness;

 

(g)       an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Borrower or any Subsidiary, or of a substantial part of the
property or assets of the Borrower or a Subsidiary, under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
the property or assets of the Borrower or a Subsidiary or (iii) the winding-up
or liquidation of the Borrower or any Subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

 

(h)       the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law, (ii)
consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in paragraph (g)
above, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of the property or assets of the Borrower
or any Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;

 

52

 

 

(i)        one or more judgments shall be rendered against the Borrower, any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to levy upon
assets or properties of the Borrower or any Subsidiary to enforce any such
judgment and such judgment either (i) is for the payment of money in an
aggregate uninsured amount (to the extent not covered by independent third-party
insurance as to which the insurer has been notified of such judgment and does
not deny coverage) in excess of $1,000,000 or (ii) is for injunctive relief and
has resulted or could reasonably be expected to result in a Material Adverse
Effect;

 

(j)        an ERISA Event shall have occurred or is reasonably expected to occur
that, when taken either alone or together with all other such ERISA Events, has
resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(k)       any Guarantee under the Guarantee and Collateral Agreement for any
reason shall cease to be in full force and effect (other than in accordance with
its terms), or any Guarantor shall deny in writing that it has any further
liability under the Guarantee and Collateral Agreement (other than as a result
of the discharge of such Guarantor in accordance with the terms of the Loan
Documents);

 

(l)        any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by the Borrower or any other
Loan Party not to be, a valid, perfected (except as otherwise expressly provided
in this Agreement or such Security Document) security interest in the
securities, assets or properties covered thereby; or

 

(m)       there shall have occurred a Change in Control;

 

then, and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above), and at any time thereafter during the
continuance of such event, the Lender may, by notice to the Borrower, declare
the Loans then outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans so declared to be due and payable, together
with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in paragraph (g) or (h) above, the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower accrued hereunder and under any other
Loan Document, shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding. In addition, the Lender may exercise
all other rights and remedies available to the Lender to effect the repayment of
the Obligations.

 

53

 

 

Section 7.02.    Application of Proceeds.  Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral shall be applied in the
order specified in the Guarantee and Collateral Agreement.

 

Article VIII

 

Miscellaneous

 

Section 8.01.   Notices; Electronic Communications.  Except for notices and
other communications expressly permitted to be given by telephone hereunder (and
except as provided in this Section 8.01), notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
fax, as follows:

 

(a)       if to the Borrower, to it at Electronic Cigarettes International
Group, Ltd., 14200 Ironwood Drive, Grand Rapids, MI 49544, Attention of Philip
Anderson (Facsimile No. (888) 479-0691, Email: phil.anderson@ecigcorporate.com);
and

 

(b)       if to the Lender, to it at Calm Waters Partnership, 115 S. 84th St.,
Milwaukee, WI 53214, Attention of Richard S. Strong (Facsimile No. (414)
453-9174, Email: jbrown@baraboogrowth.com and kdavis@baraboogrowth.com), with a
copy to Calm Waters Partnership, 115 S. 84th St., Milwaukee, WI 53214, Attention
of Susan Hollister (Facsimile No. (414) 453-9174, Email:
shollister@baraboogrowth.com).

 

All notices and other communications given to any party hereto, in accordance
with the provisions of this Agreement, shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service, or sent by
fax or on the date five (5) Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 8.01, or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 8.01. As agreed to among the Borrower and the Lender from time to time,
notices and other communications may also be delivered by e-mail to the e-mail
address of a representative of the applicable Person provided from time to time
by such Person.

 

The Borrower hereby agrees, unless directed otherwise by the Lender or unless
the electronic mail address referred to below has not been provided by the
Lender to the Borrower, that it will, and will cause its Subsidiaries to,
provide to the Lender all information, documents and other materials that it is
obligated to furnish to the Lender pursuant to the Loan Documents, including all
notices, requests, financial statements, financial and other reports,
certificates and other information materials, but excluding any such
communication that (i) relates to the payment of any principal or other amount
due under this Agreement prior to the scheduled date therefor, (ii) provides
notice of any Default or Event of Default under this Agreement or any other Loan
Document or (iii) is required to be delivered to satisfy any condition precedent
to the effectiveness of this Agreement and/or any Borrowing or other extension
of credit hereunder (all such nonexcluded communications being referred to
herein collectively as “Communications”), by transmitting the Communications in
an electronic/soft medium that is properly identified in a format acceptable to
the Lender to an electronic mail address as directed by the Lender. In addition,
the Borrower agrees, and agrees to cause its Subsidiaries, to continue to
provide the Communications to the Lender in the manner specified in the Loan
Documents but only to the extent requested by the Lender.

 

54

 

 

The Borrower hereby acknowledges that the Lender may not wish to receive
material nonpublic information with respect to the Borrower or its respective
securities. The Borrower hereby agrees that (i) all materials and/or information
provided by, or on behalf of, the Borrower hereunder (collectively, the
“Borrower Materials”) that are to be made available to the Lender shall be
clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that
the word “PUBLIC” shall appear prominently on the first page thereof, and (ii)
by marking all Borrower Materials “PUBLIC,” the Borrower shall be deemed to have
authorized the Lender to treat such Borrower Materials as not containing any
material nonpublic information with respect to the Borrower or its securities
for purposes of United States Federal and state securities laws. Notwithstanding
the foregoing, the following Borrower Materials shall be deemed to be marked
“PUBLIC,” unless the Borrower notifies the Lender in writing (including by
email) promptly prior to their intended distribution after the Borrower has had
a reasonable opportunity to review the Borrower Materials that any such document
contains material nonpublic information: (1) the Loan Documents, (2) any
notification of changes in the terms of the Term Loan and (3) all information
delivered pursuant to Section 5.04.(a), Section 5.04.(b) and Section 5.04.(c).
Notwithstanding the foregoing, with the Lender’s prior written consent, the
Borrower may provide Borrower Materials that are not marked “PUBLIC”.

 

Section 8.02.    Survival of Agreement.  All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and shall survive the making by the Lenders
of the Loans, regardless of any investigation made by the Lenders or on their
behalf, and shall continue in full force and effect as long as the principal of
or any accrued interest on any Loan or any Fee or any other amount payable under
this Agreement or any other Loan Document is outstanding and unpaid. The
provisions of Sections Section 2.08, Section 2.10 and Section 8.05 shall remain
operative and in full force and effect regardless of the expiration of the term
of this Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document or any investigation made
by or on behalf of the Lender.

 

Section 8.03.    Binding Effect.  Subject to Section 4.01, this Agreement shall
become effective when it shall have been executed by the Borrower and the Lender
and when the Lender shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto.

 

55

 

 

Section 8.04.    Successors and Assigns.

 

(a)       Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that neither the
Borrower nor any other Loan Party may assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of the Lender,
and the Lender may assign or otherwise transfer any of its rights or obligations
hereunder. Nothing in this Agreement, expressed or implied, shall be construed
to confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby, Participants to the extent provided in
Section 8.04.(c) and, to the extent expressly contemplated hereby, the Related
Parties of the Lender) any legal or equitable right, remedy or claim under or by
reason of this Agreement.

 

(b)       Assignments by Lenders. The Lender may at any time assign to one or
more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of the Loans at the time owing to it).

 

(c)       Participations. The Lender may at any time, without the consent of, or
notice to, the Borrower, sell participations to any Person (other than a natural
Person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries)
(each, a “Participant”) in all or a portion of such Lender’s rights and/or
obligations under this Agreement (including all or a portion of Loans owing to
it); provided that (i) the Lender’s obligations under this Agreement shall
remain unchanged, (ii) the Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the Borrower
and the Lender shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.

 

Any agreement or instrument pursuant to which the Lender sells such a
participation shall provide that the Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that the Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver with respect to the following:
decreasing any fees payable to such Participant hereunder or the amount of
principal of or the rate at which interest is payable on the Loans in which such
Participant has an interest, or extending any scheduled principal payment date
or date fixed for the payment of interest on the Loans in which such Participant
has an interest, or releasing Guarantors (other than in connection with the sale
of any Guarantor in a transaction permitted by Section 6.05) or all or
substantially all of the Collateral). The Borrower agrees that each Participant
shall be entitled to the benefits of Sections Section 2.08 and Section 2.10
(subject to the requirements and limitations therein, including the requirements
under Section 2.10 (it being understood that the documentation required under
Section 2.10.(f) shall be delivered to the participating Lender))) to the same
extent as if it were the Lender and had acquired its interest by assignment
pursuant to Section 8.04.(b); provided that such Participant shall not be
entitled to receive any greater payment under Sections Section 2.08 and Section
2.10, with respect to any participation, than its participating Lender would
have been entitled to receive, except to the extent such entitlement to receive
a greater payment results from a Change in Law that occurs after the Participant
acquired the applicable participation. To the extent permitted by law, each
Participant also shall be entitled to the benefits of Section 8.06 as though it
were the Lender. The Lender shall, acting solely for this purpose as an agent of
the Borrower, maintain a register on which it enters the name and address of
each Participant and the principal amounts (and stated interest) of each
Participant’s interest in the Loans or other obligations under the Loan
Documents (the “Participant Register”); provided that the Lender shall not have
any obligation to disclose all or any portion of the Participant Register
(including the identity of any Participant or any information relating to a
Participant’s interest in any commitments, loans or its other obligations under
any Loan Document) to any Person. The entries in the Participant Register shall
be conclusive absent manifest error, and such Lender shall treat each Person
whose name is recorded in the Participant Register as the owner of such
participation for all purposes of this Agreement notwithstanding any notice to
the contrary.

 

56

 

 

(d)       Certain Pledges. The Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of the Lender; provided that no such pledge or assignment
shall release the Lender from any of its obligations hereunder or substitute any
such pledgee or assignee for the Lender as a party hereto.

 

Section 8.05.    Expenses; Indemnity.  (a) The Borrower agrees to pay all
reasonable and documented out-of-pocket expenses incurred by the Lender (and
each of its Affiliates) in connection with the preparation and administration of
this Agreement and the other Loan Documents and in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby or thereby contemplated shall be
consummated) and incurred by the Lender (and each of its Affiliates) in
connection with the enforcement or protection of its rights in connection with
this Agreement and the other Loan Documents or in connection with the Loans made
hereunder, including (i) the fees, charges and disbursements of Godfrey & Kahn,
S.C., counsel for the Lender, and, (ii) in connection with any such enforcement
or protection, the fees, charges and disbursements of any other counsel for the
Lender (and each of its Affiliates).

 

(b)       The Borrower agrees to indemnify the Lender and each Related Party of
the Lender (each such Person being called an “Indemnitee”) against, and to hold
each Indemnitee harmless from, any and all losses, claims, damages, liabilities
and related expenses, including counsel and consultant or other expert fees,
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the Transactions and
the other transactions contemplated thereby, (ii) the use of the proceeds of the
Loans, (iii) any Environmental Liability related in any way to the Loan Parties,
any of their respective subsidiaries or predecessors or any property currently
or formerly owned, leased or operated by the Loan Parties or any of their
respective subsidiaries or predecessors, including the Mortgaged Properties, or
(iv) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto (and regardless of
whether such matter is initiated by the Borrower, any other Loan Party or any of
their respective Affiliates or any other Person); provided that such indemnity
shall not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
primarily from the gross negligence, bad faith or willful misconduct of such
Indemnitee. This Section 8.05.(b) shall not apply with respect to Taxes other
than any Taxes that represent losses, claims, damages, liabilities and related
expenses arising from any non-Tax claim.

 

57

 

 

(c)       To the extent permitted by applicable law, the Borrower shall not
assert, and the Borrower hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement or any agreement or instrument contemplated
hereby, the Transactions, any Loan or the use of the proceeds thereof.

 

(d)       The provisions of this Section 8.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document or any investigation made by or on behalf
of the Lender. All amounts due under this Section 8.05 shall be payable on
written demand therefor.

 

Section 8.06.    Right of Setoff.  If an Event of Default shall have occurred
and be continuing, the Lender is hereby authorized at any time and from time to
time, except to the extent prohibited by law, to set off and apply any and all
assets at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
other Loan Documents held by the Lender, irrespective of whether or not the
Lender shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of the
Lender under this Section 8.06 are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.

 

Section 8.07.    Waivers; Amendment.   (a) No failure or delay of the Lender in
exercising any power or right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Lender
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower or any other Loan Party therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.

 

(b)       No Loan Document or provision thereof may be waived, amended or
modified except, in the case of this Agreement, by an agreement or agreements in
writing entered into by the Borrower and the Lender or, in the case of any other
Loan Document, by an agreement or agreements in writing entered into by the
parties thereto with the consent of the Lender; provided that any waiver,
amendment and/or modification must also be in accordance with the Intercreditor
Agreement.

 

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Section 8.08.    Interest Rate Limitation.  Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which are treated as interest on such
Loan under applicable law (collectively, the “Charges”), shall exceed the
maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section 8.08 shall be cumulated and the interest
and Charges payable to such Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by such Lender.

 

Section 8.09.    Entire Agreement.  This Agreement and the other Loan Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Unless otherwise specified therein, any other previous agreement
among the parties with respect to the subject matter hereof is superseded by
this Agreement and the other Loan Documents. Nothing in this Agreement or in the
other Loan Documents, expressed or implied, is intended to confer upon any
Person (other than the parties hereto and thereto, their respective successors
and assigns permitted hereunder and, to the extent expressly contemplated
hereby, the Related Parties of the Lender) any rights, remedies, obligations or
liabilities under or by reason of this Agreement or the other Loan Documents.

 

Section 8.10.    WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 8.10.

 

Section 8.11.    Severability.  In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

 

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Section 8.12.    Counterparts.  This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 8.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission or other customary means of electronic transmission (e.g. “pdf”)
shall be as effective as delivery of a manually signed counterpart of this
Agreement.

 

Section 8.13.    Headings.  Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.

 

Section 8.14.    Applicable Law.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) AND ANY CLAIM,
CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT OR ANY SUCH
OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ANY CLAIMS SOUNDING IN
CONTRACT LAW OR TORT LAW ARISING OUT OF THE SUBJECT MATTER HEREOF) SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

Section 8.15.    Jurisdiction; Consent to Service of Process.  (a) The Borrower
hereby irrevocably and unconditionally agrees that it will not commence any
action, litigation or proceeding of any kind or description, whether in law or
equity, whether in contract or tort or otherwise, against the Lender or any
Related Party of the foregoing in any way relating to this Agreement or any
other Loan Document (except as otherwise expressly stated therein) or the
transactions relating hereto or thereto, in any forum other than any New York
State court or Federal court of the United States of America sitting in the
borough of Manhattan in New York City, and any appellate court from any thereof,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Borrower or its properties in the courts of any
jurisdiction.

 

(b)       The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of, or relating to, this Agreement or the other Loan Documents in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

 

(c)       Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 8.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

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Section 8.16.    Electronic Execution of Assignments.  (a) The words
“execution,” “signed,” “signature,” and words of like import in any Assignment
and Assumption shall be deemed to include electronic signatures or the keeping
of records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform Electronic
Transactions Act.

 

Section 8.17.    No Fiduciary Duty.  The Lender and its Affiliates
(collectively, solely for purposes of this paragraph, the “Lender”), may have
economic interests that conflict with those of the Loan Parties, their
stockholders and/or their Affiliates. Each Loan Party agrees that nothing in the
Loan Documents or otherwise will be deemed to create an advisory, fiduciary or
agency relationship or fiduciary or other implied duty between the Lender, on
the one hand, and such Loan Party, its stockholders or its Affiliates, on the
other. The Loan Parties acknowledge and agree that (i) the transactions
contemplated by the Loan Documents (including the exercise of rights and
remedies hereunder and thereunder) are arm’s-length commercial transactions
between the Lender, on the one hand, and the Loan Parties, on the other, and
(ii) in connection therewith and with the process leading thereto, (x) the
Lender has not assumed an advisory or fiduciary responsibility in favor of any
Loan Party, its stockholders or its Affiliates with respect to the transactions
contemplated hereby (or the exercise of rights or remedies with respect thereto)
or the process leading thereto (irrespective of whether the Lender has advised,
is currently advising or will advise any Loan Party, its stockholders or its
Affiliates on other matters) or any other obligation to any Loan Party except
the obligations expressly set forth in the Loan Documents and (y) the Lender is
acting solely as principal and not as the agent or fiduciary of any Loan Party,
its management, stockholders, creditors or any other Person. Each Loan Party
acknowledges and agrees that it has consulted its own legal and financial
advisors to the extent it deemed appropriate and that it is responsible for
making its own independent judgment with respect to such transactions and the
process leading thereto. Each Loan Party agrees that it will not claim that the
Lender has rendered advisory services of any nature or respect, or owes a
fiduciary or similar duty to such Loan Party, in connection with such
transaction or the process leading thereto.

 

Section 8.18.    Release of Collateral and Guarantees.  (a) All security
interests and Liens granted or created under the Security Documents shall
automatically terminate when all the Obligations (other than contingent
indemnification and expense reimbursement obligations for which no claim has
been made) have been indefeasibly paid in full in cash.

 

(b)       A Guarantor shall automatically be released from its obligations under
the Security Documents and all security interests and Liens granted in the
Collateral of such Guarantor shall be automatically released upon the
consummation of any transaction permitted by this Agreement as a result of which
such Guarantor ceases to be a Guarantor or a Subsidiary;

 

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(c)       Security interests and Liens granted or created under the Security
Documents shall be terminated with respect to Collateral (i) upon any sale or
other transfer by any Loan Party of any Collateral that is permitted under this
Agreement to any person that is not the Borrower or a Guarantor, except to the
extent necessary for the Lender to retain security interests and Liens on the
proceeds thereof and (ii) upon the effectiveness of any written consent to the
release of the security interest or Lien granted under the Security Documents in
any Collateral pursuant thereto.

 

(d)       In connection with any termination or release pursuant to paragraph
(a), (b) or (c) above, the Lender shall promptly execute and deliver to any Loan
Party, at such Loan Party’s expense, all Uniform Commercial Code termination
statements and other documents that such Loan Party shall reasonably request to
evidence such termination, release or subordination. Any execution and delivery
of documents pursuant to this Section 8.18 shall be without recourse to or
representation or warranty by the Lender. Without limiting the provisions of ,
the Borrower shall reimburse the Lender upon demand for all reasonable and
documented costs and out of pocket expenses, including the reasonable and
documented fees, charges and expenses of counsel, incurred by it in connection
with any action contemplated by this Section 8.18.

 

Article IX

 

Representations and Warranties of Lender

 

The Lender represents and warrants to the Borrower on the Closing Date that:

 

Section 9.01.    Organization; Authority.  The Lender is an entity duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
formation with full right, partnership power and authority to enter into and to
consummate the transactions contemplated by the Loan Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of the Loan Documents and performance by the Lender of the transactions
contemplated by the Loan Documents have been duly authorized by all necessary
partnership action on the part of the Lender . Each Loan Document to which it is
a party has been duly executed by the Lender, and when delivered by the Lender
in accordance with the terms hereof, will constitute the valid and legally
binding obligation of the Lender, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.

 

Section 9.02.    Own Account. The Lender understands that the Notes have not
been registered under the Securities Act or any applicable state securities law
and is acquiring the Notes as principal for its own account and not with a view
to or for distributing or reselling such Notes or any part thereof in violation
of the Securities Act or any applicable state securities law, has no present
intention of distributing any of such Notes in violation of the Securities Act
or any applicable state securities law and has no direct or indirect arrangement
or understandings with any other persons to distribute or regarding the
distribution of such Notes in violation of the Securities Act or any applicable
state securities law (this representation and warranty not limiting the Lender’s
right to sell the Notes in compliance with applicable federal and state
securities laws). The Lender is acquiring the Notes hereunder in the ordinary
course of its business.

 

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Section 9.03.    The Lender Status.  At the time the Lender was offered the
Notes, it was, and as of the date hereof it is an “accredited investor” as
defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act.

 

Section 9.04.   Experience of the Lender.  The Lender, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Notes, and has so evaluated the
merits and risks of such investment. The Lender is able to bear the economic
risk of an investment in the Notes and, at the present time, is able to afford a
complete loss of such investment.

 

Section 9.05.    General Solicitation.  The Lender is not purchasing the Notes
as a result of any advertisement, article, notice or other communication
regarding the Notes published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

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

 

  ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD., as Borrower           by    
  Name:       Title:             CALM WATERS PARTNERSHIP, as Lender           by
      Name:       Title: