Alkaline Water Company Inc.: Exhibit 10.1 - Filed by newsfilecorp.com






CREDIT AND SECURITY AGREEMENT 

by and among 

ALKALINE 88, LLC,
ALKALINE WATER CORP,
and
THE ALKALINE WATER COMPANY INC. 
AND ANY ADDITIONAL
ENTITY THAT MAY 
HEREAFTER BE ADDED AS A BORROWER

each a Borrower, and collectively, the Borrowers 

and 

SCM SPECIALTY FINANCE OPPORTUNITIES FUND, L.P. as the
Lender

Dated as of 
February 1, 2017




CREDIT AND SECURITY AGREEMENT 

Table of Contents 

	  	  	  	Page
    
	  	  	  	  
	I. 	DEFINITIONS 	1 
	  	  	  	  
	  	1.1 	General Terms 	1 
	  	1.2 	Specific Terms 	1 
	  	1.3 	Other Definitional
      and Interpretative Provisions 	19 
	  	1.4 	Time is of the
      Essence 	19 
	  	  	  	  
	II. 	ADVANCES,
      PAYMENT AND INTEREST 	20 
	  	  	  	  
	  	2.1 	Loan Advances under
      Revolving Facility 	20 
	  	2.2 	Evidence of
      Obligations; Date Due 	21 
	  	2.3 	Interest on
      Revolving Loan 	21 
	  	2.4 	Revolving Facility
      Disbursements; Requirement to Deliver Borrowing Certificate 	  21
	  	2.5 	Collections;
      Repayment; Borrowing Availability and Lockbox 	22 
	  	2.6 	Promise to Pay;
      Manner of Payment 	23 
	  	2.7 	Repayment of Excess
      Advances 	24 
	  	2.8 	Payments by Lender
    	24 
	  	2.9 	Grant of Security
      Interest; Collateral 	24 
	  	2.10 	Collateral
      Administration 	25 
	  	2.11 	Power of Attorney
	29 
	  	2.12 	Setoff Rights 	29 
	  	  	  	  
	III. 	FEES AND
      OTHER CHARGES 	30 
	  	  	  	  
	  	3.1 	Facility Fee 	30 
	  	3.2 	Unused Line Fee 	30 
	  	3.3 	Collateral
      Management Fee 	30 
	  	3.4 	Early Termination
      Fees 	30 
	  	3.5 	Computation of Fees;
      Lawful Limits 	31 
	  	3.6 	Default Rate of
      Interest 	31 
	  	3.7 	Acknowledgement of
      Joint and Several Liability 	31 
	  	  	  	  
	IV. 	CONDITIONS
      PRECEDENT 	34 
	  	  	  	  
	  	4.1 	Conditions to
      Closing and Advances 	34 
	  	4.2 	Post-Closing
      Requirements 	37 
	  	  	  	  
	V. 	REPRESENTATIONS AND WARRANTIES 	38 
	  	  	  	  
	  	5.1 	Organization and
      Authority 	38 
	  	5.2 	Loan Documents 	38



i 





	  	5.3 	Subsidiaries, Capitalization and
      Ownership Interests 	39 
	  	5.4 	Properties 	39 
	  	5.5 	Other Agreements 	39 
	  	5.6 	Litigation 	40 
	  	5.7 	Labor Matters 	40 
	  	5.8 	Compliance with
      Environmental Requirements; No Hazardous Substances 	41 
	  	5.9 	Tax Returns, Governmental Reports
	41 
	  	5.10 	Financial Statements
      and Reports 	42 
	  	5.11 	Compliance with Law 	42 
	  	5.12 	Intellectual
      Property 	43 
	  	5.13 	Licenses and Permits 	43 
	  	5.14 	Disclosure 	44 
	  	5.15 	Existing Indebtedness; Investments,
      Guarantees and Certain Contracts 	44 
	  	5.16 	Agreements with
      Affiliates 	44 
	  	5.17 	Insurance 	44 
	  	5.18 	Names, Location of
      Offices, Records and Collateral 	44 
	  	5.19 	Material Contracts 	45 
	  	5.20 	Non-Subordination
	45 
	  	5.21 	Interest Rate 	46 
	  	5.22 	Reliance on
      Representations; Survival 	46 
	  	  	  	  
	VI. 	AFFIRMATIVE COVENANTS 	46 
	  	  	  	  
	  	6.1 	Financial
      Statements, Reports and Other Information 	46 
	  	6.2 	Payment of Obligations 	49 
	  	6.3 	Conduct of Business
      and Maintenance of Existence and Assets 	49 
	  	6.4 	Compliance with Legal, Tax and Other
      Obligations 	49 
	  	6.5 	Insurance 	50 
	  	6.6 	True Books 	51 
	  	6.7 	Inspection; Period
      Audits 	51 
	  	6.8 	Further Assurances; Post Closing 	51 
	  	6.9 	Lien Terminations
	52 
	  	6.10 	Use of Proceeds 	52 
	  	6.11 	Collateral
      Documents; Security Interest in Collateral 	52 
	  	6.12 	Right of First Refusal 	53 
	  	6.13 	Taxes and Other
      Charges 	53 
	  	6.14 	Payroll Agent 	54 
	  	6.15 	Hazardous Substances
    	54 
	  	  	  	  
	VII. 	NEGATIVE
      COVENANTS 	55 
	  	  	  	  
	  	7.1 	Financial and Loan
      Covenants 	55 
	  	7.2 	No Debt other than Permitted
      Indebtedness 	55 
	  	7.3 	No Liens other than
      Permitted Liens 	55 
	  	7.4 	Investments, New Facilities or
      Collateral; Subsidiaries 	55 
	  	7.5 	Prohibited Payments
    	56 
	  	7.6 	Transactions with Affiliates 	56 


ii 





	  	7.7 	Charter Documents; Fiscal Year;
      Dissolution; Use of Proceeds 	56 
	  	7.8 	Asset Sales 	57 
	  	7.9 	Restrictive Agreements 	57 
	  	7.10 	Management 	58 
	  	7.11 	Modifications of Certain
      Agreements 	58 
	  	7.12 	Payments and Modifications of Subordinated Debt
    	58 
	  	7.13 	Deposit Accounts 	59 
	  	7.14 	Truth of Statements 	59 
	  	7.15 	IRS Form 8821 	59 
	  	7.16 	Unix Packaging Facility 	59 
	  	7.17 	TAWC Series B Convertible
      Preferred Stock 	59 
	  	  	  	  
	VIII. 	EVENTS OF DEFAULT 	59 
	  	  	  	  
	  	8.1 	Events of Default 	59 
	  	8.2 	Acceleration and Suspension or Termination of
      Commitments 	62 
	  	  	  	  
	IX. 	RIGHTS AND REMEDIES AFTER DEFAULT 	62 
	  	  	  	  
	  	9.1 	Rights and Remedies 	62 
	  	9.2 	Application of Proceeds 	63 
	  	9.3 	Rights of Lender to Appoint Receiver 	64 
	  	9.4 	Application of Payments
      Following Default 	64 
	  	9.5 	Rights and Remedies not Exclusive 	64 
	  	  	  	  
	X. 	WAIVERS AND JUDICIAL PROCEEDINGS 	64 
	  	  	  	  
	  	10.1 	Waivers 	64 
	  	10.2 	Delay; No Waiver or Defaults
	65 
	  	10.3 	Jury Waiver 	65 
	  	10.4 	Cooperation in Discovery and
      Litigation 	65 
	  	  	  	  
	XI. 	EFFECTIVE DATE AND
      TERMINATION 	66 
	  	  	  	  
	  	11.1 	Effectiveness and Termination
    	66 
	  	11.2 	Survival 	66 
	  	  	  	  
	XII. 	ASSIGNMENTS AND PARTICIPATIONS 	67 
	  	  	  	  
	  	12.1 	Assignments 	67 
	  	12.2 	Participations 	67 
	  	12.3 	Defaulting Participants 	67 
	  	12.4 	Definitions 	68 
	  	  	  	  
	XIII. 	MISCELLANEOUS 	68 
	  	  	  	  
	  	13.1 	Governing Law; Jurisdiction;
      Service of Process; Venue 	68 
	  	13.2 	Successors and Assigns; Participants; New
      Lenders 	69 


iii 





	 	13.3 	Revival of
      Obligations 	69 
	 	13.4 	Indemnity 	70 
	 	13.5 	Notice 	70 
	 	13.6 	Severability; Captions;
      Counterparts; Facsimile or other Electronic Signatures 	71 
	 	13.7 	Expenses 	71 
	 	13.8 	Entire Agreement 	72 
	 	13.9 	Lender Approvals 	72 
	 	13.10 	Confidentiality and Publicity 	72 
	 	13.11 	USA Patriot Act
      Notification 	73 
	 	13.12 	Release of Lender 	73 


iv 




ANNEX I 

Financial and Loan Covenants 

EXHIBITS 

	Exhibit A 	- 	Borrowing Certificate 
	Exhibit B 	- 	Compliance Certificate 


SCHEDULES 

	
      Schedule 2.4 
	
      -
	
      Borrower’s Account for Funding Wires 

	
      Schedule 2.9 
	
      -
	
      Collateral 

	
      Schedule 5.1 
	
      -
	
      Organization 

	
      Schedule 5.3 
	
      - 
	
      Capitalization, Organization Chart (including all
      subsidiaries, authorized/issued capitalization, owners, directors,
      officers and managers) and Joint Ventures 

	
      Schedule 5.4 
	
      -
	
      Real Property Owned or Leased 

	
      Schedule 5.6 
	
      -
	
      Litigation 

	
      Schedule 5.8 
	
      -
	
      Environmental Exceptions 

	
      Schedule 5.12 
	
      -
	
      Intellectual Property 

	
      Schedule 5.17 
	
      -
	
      Insurance 

	
      Schedule 5.18 
	
      - 
	
      Names Under Which Business Is Transacted; Business and
      Collateral Locations 

	
      Schedule 5.19 
	
      -
	
      Material Contracts 

	
      Schedule 7.2 
	
      -
	
      Existing Contingent Obligations 

	
      Schedule 7.3 
	
      -
	
      Existing Liens 







CREDIT AND SECURITY AGREEMENT 

THIS CREDIT AND SECURITY
AGREEMENT (the “Agreement”) dated as of February 1, 2017, is entered into
by and among ALKALINE 88, LLC, an Arizona limited liability company
(“Alkaline 88”), ALKALINE WATER CORP, an Arizona corporation
(“TAWC Arizona”), and THE ALKALINE WATER COMPANY INC., a Nevada
corporation (“TAWC”) and any additional borrower that may hereafter be
added to this Agreement (together with Alkaline 88, TAWC Arizona and TAWC,
individually as a “Borrower,” and collectively as “Borrowers”),
and SCM SPECIALTY FINANCE OPPORTUNITIES FUND, L.P., a Delaware limited
partnership (the “Lender”). 

WHEREAS, Borrower has requested
that Lender make available to Borrower a revolving credit facility (the
“Revolving Facility”); and 

WHEREAS, Lender is willing to
make the Revolving Facility available to Borrower upon the terms and subject to
the conditions set forth herein. 

NOW, THEREFORE, in consideration
of the foregoing and for other good and valuable consideration, the receipt and
adequacy of which hereby are acknowledged, Borrower and Lender hereby agree as
follows: 

	I. 	
      DEFINITIONS



1.1    
General Terms 

For purposes of this Agreement,
in addition to the definitions above and elsewhere in this Agreement, the terms
listed below shall have the meanings set forth. All capitalized terms used which
are not specifically defined shall have meanings provided in Article 9 of the
UCC to the extent the same are used or defined therein. Unless otherwise
specified herein, any agreement or contract referred to herein shall mean such
agreement as modified, amended or supplemented from time to time. Unless
otherwise specified, as used in the Loan Documents or in any certificate,
report, instrument or other document made or delivered pursuant to any of the
Loan Documents, all accounting terms not defined elsewhere in this Agreement
shall have the meanings given to such terms in and shall be interpreted in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of each Borrower and its Consolidated
Subsidiaries delivered to Lender on or prior to the Closing Date. 

1.2    
Specific Terms 

“Account Debtor” shall
mean “account debtor”, as defined in Article 9 of the UCC, and any other obligor
in respect of an Account. 

“Accounts” shall mean all
of Borrower’s interest in any (a) right to payment of a monetary obligation, (b)
“accounts” (as that term is defined in the UCC), any account receivable (whether
in the form of payments for services rendered or goods sold, rents, license fees
or otherwise), any “payment intangibles” (as defined in the UCC) and all other
rights to payment and/or reimbursement of every kind and description, whether or
not earned by performance, (c) all accounts, “general intangibles” (as defined
in the UCC), Intellectual Property, rights, remedies, Guarantees, “supporting obligations” (as defined in
the UCC), “letter-of-credit rights” (as defined in the UCC) and security
interests in respect of the foregoing, all rights of enforcement and collection,
all books and records evidencing or related to the foregoing, and all rights
under the Loan Documents in respect of the foregoing, (d) all information and
data compiled or derived by any Borrower or to which any Borrower is entitled in
respect of or related to the foregoing, and (e) all proceeds of any of the
foregoing. 





“Advance” shall mean a
borrowing under the Revolving Facility. Any amounts paid by Lender on behalf of
Borrower or any Guarantor under any Loan Document shall also be an Advance for
purposes of this Agreement. Each Advance shall increase the principal amount
outstanding hereunder. 

“Affiliate” shall mean, as
to any Person, any other Person (a) that, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such Person, (b) who is a director or officer (i) of such Person, (ii) of
any Subsidiary of such Person, or (iii) of any Person described in clause (a)
above with respect to such Person, (c) which, directly or indirectly through one
or more intermediaries, is the beneficial or record owner (as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in
effect on the date hereof) of ten percent (10%) or more of any class of the
outstanding voting stock, securities or other equity or ownership interests of
such Person and (d) any spouses, parents, descendants and siblings of any of the
Persons described in clauses (a), (b) and (c) above. For purposes of this
definition, the term “control” (and the correlative terms, “controlled by” and
“under common control with”) shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the administrative management
or policies, whether through ownership of securities or other interests, by
contract or otherwise. 

“Applicable Margin” means
three and one-quarters percent (3.25%) . 

“Applicable Rate”
shall mean the interest rate applicable from time to time to Revolving
Facility Advances under this Agreement. 

“Availability” shall mean
the Revolving Loan Limit less all Revolving Loans outstanding, minus any
reserves against Availability imposed by the Lender in its Permitted Discretion.


“Bankruptcy Code”
means Title 11 of the United States Code entitled “Bankruptcy”, as the same
may be amended, modified or supplemented from time to time, and any successor
statute thereto. 

“Books and Records” shall
mean Borrower’s books and records specifically relating to Accounts, including,
but not limited to, ledgers, records indicating, summarizing, or evidencing
Borrower’s Accounts and all computer programs, disc or tape files, printouts,
runs, and other computer prepared information with respect to the foregoing and
any software necessary to operate the same. 

“Borrower” and
“Borrowers” mean the entity(ies) described in the first paragraph of this
Agreement and each of their successors and permitted assigns. 

2 




“Borrowing Base” shall
mean, as of any date of determination: 

(a)    
eighty five percent (85%) of Net Eligible Billed Receivables. “Net Eligible
Billed Receivables” for purposes of this definition shall mean the Eligible
Billed Receivables net of reserves as determined by Lender with reference to the
most recent Borrowing Certificate, other factors deemed relevant by Lender and
otherwise in accordance with the Agreement; provided, however,
that if, as of the date of determination, the most recent Borrowing Certificate
is of a date more than four (4) Business Days before or after such date, the
Borrowing Base shall be determined by Lender in its sole discretion;
provided, further, the eighty five percent (85%) factor identified above
may be modified by Lender to the extent that reserves do not fully reflect the
risks associated with the expected collectability of Eligible Billed
Receivables. Any such adjustment to the percentage factor set forth above shall
be made by Lender as warranted by Lender’s underwriting practices and procedures
in its Permitted Discretion and shall be based on Lender’s due diligence and
audits; provided, further, the aggregate outstanding Revolving
Loan Commitment Amount with respect to Eligible Billed Receivables shall at no
time exceed $2,000,000 plus 

(b)     sixty
five percent (65%) of Eligible Unbilled Receivables. “Net Eligible Unbilled
Receivables” for purposes of this definition shall mean the Eligible
Unbilled Receivables net of reserves as determined by Lender with reference to
the most recent Borrowing Certificate, other factors deemed relevant by Lender
and otherwise in accordance with the Agreement; provided, however,
that if, as of the date of determination, the most recent Borrowing Certificate
is of a date more than four (4) Business Days before or after such date, the
Borrowing Base shall be determined by Lender in its sole discretion;
provided, further, the sixty five percent (65%) factor identified
above may be modified by Lender to the extent that reserves do not fully reflect
the risks associated with the expected collectability of Eligible Unbilled
Receivables. Any such adjustment to the percentage factor set forth above shall
be made by Lender as warranted by Lender’s underwriting practices and procedures
in its Permitted Discretion and shall be based on Lender’s due diligence and
audits; provided, further, the aggregate outstanding Revolving
Loan Commitment Amount with respect to Eligible Unbilled Receivables shall at no
time exceed $1,000,000; minus 

(c)     the
Closing Reserve and the amount of any other reserves and/or adjustments
against the Borrowing Base provided for in this Agreement or determined by
Lender from time to time, in its Permitted Discretion, to be appropriate to
reflect risks associated with the Collateral and the financial condition of
Borrower. 

“Borrowing Certificate”
shall mean a Borrowing Certificate substantially in the form of Exhibit
A. 

“Borrowing Date”
shall have the meaning assigned to that term in Section 2.4. 

“Business Day” shall mean
any day other than a Saturday, Sunday, Good Friday or other day on which the
Federal Reserve or Lender is closed. 

3 




“Capital Lease” shall
mean, as to any Person, a lease or any interest in any kind of property or asset
by that Person as lessee that is, should be or should have been recorded as a
“capital lease” in accordance with GAAP. 

“Capitalized Lease
Obligations” shall mean all obligations of any Person under Capital Leases,
in each case, taken at the amount thereof accounted for as a liability in
accordance with GAAP. 

“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C.A. § 9601 et seq., as the same may be amended from time to time.


“Change of Control” shall
mean any of the following: (a) the occurrence of a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or transfer
or any other transaction or series of transactions as a result of which the
owners, directly or indirectly, of a majority of TAWC’s voting stock or voting
power as of the date hereof cease to be entitled to elect or appoint at least a
majority of TAWC’s Board of Directors, or (b) the resignation, termination,
replacement, death, disability or any other event the result of which is the
failure of the existing senior management of Borrower to function in their
current capacities, unless, (i) in the case of a replacement, the replacement is
reasonably acceptable to Lender, or (ii) in all other cases a replacement
reasonably satisfactory to Lender is identified and engaged within thirty (30)
days following such event, (c) TAWC shall cease to beneficially own, directly or
indirectly, one hundred percent (100%), on a fully diluted basis, of the
economic and voting interests in the equity interests of TAWC Arizona, (d) TAWC
Arizona shall cease to beneficially own, directly or indirectly, one hundred
percent (100%), on a fully diluted basis, of the economic and voting interests
in the equity interests of Alkaline 88 or (e) the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the
Borrower’s assets to, or a consolidation or merger with or into, any other
Person, other than any such transaction where immediately thereafter the
surviving Person is a direct or indirect subsidiary of the Borrower. 

“Closing Date” shall mean
the date of this Agreement. 

“Closing Date Subordinated
Creditor” means Turnstone Capital Inc., including its successors and assigns
as permitted hereunder. 

“Closing Date Subordinated
Debt” means any Indebtedness of Borrowers incurred pursuant to the terms of
the Closing Date Subordinated Debt Documents. 

“Closing Date Subordinated
Debt Documents” means that certain Loan Facility Agreement dated September
20, 2016 among TAWC and Closing Date Subordinated Creditor, as amended,
restated, supplemented or otherwise modified from time to time as permitted
hereunder. 

“Closing Date Subordination
Agreement” means that certain Subordination Agreement dated as of even date
herewith by and between Closing Date Subordinated Creditor and Lender and
acknowledged by Borrower. 

4 




“Closing Reserve” means
including a reserve established at Closing in an amount not to exceed $260,000.


“Collateral” shall mean,
collectively and each individually, all collateral and/or security identified in
Section 2.9, together with any additional collateral and/or security now
or hereafter granted to Lender by any Credit Party pursuant to a Loan Document.


“Collateral Management
Fee” shall have the meaning assigned to the term in Section 3.3. 

“Commitment Expiration
Date” means the date that is three (3) years following the Closing Date.


“Compliance
Certificate” shall have the meaning assigned to the term in
Section 6.1(a). 

“Concentration Account”
shall have the meaning assigned to the term in Section 2.5. 

“Contingent Obligation”
means, with respect to any Person, any direct or indirect liability of such
Person: (a) with respect to any Indebtedness of another Person (a “Third
Party Obligation”) if the purpose or intent of such Person incurring such
liability, or the effect thereof, is to provide assurance to the obligee of such
Third Party Obligation that such Third Party Obligation will be paid or
discharged, or that any agreement relating thereto will be complied with, or
that any holder of such Third Party Obligation will be protected, in whole or in
part, against loss with respect thereto; (b) with respect to any undrawn portion
of any letter of credit issued for the account of such Person or as to which
such Person is otherwise liable for the reimbursement of any drawing; (c) under
any Swap Contract, to the extent not yet due and payable; (d) to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement; or (e) for any obligations of another
Person pursuant to any Guaranty (other than a Guaranty of the Obligations or any
part thereof) or pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to preserve the
solvency, financial condition or level of income of another Person. The amount
of any Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determinable amount,
the maximum amount so guaranteed or otherwise supported. 

“Controlled Group” means
all members of any group of corporations and all members of a group of trades or
businesses (whether or not incorporated) under common control which, together
with any Borrower, are treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code or Section 4001(b) of ERISA. 

“Convertible Note Subordinated
Creditor” means, individually and collectively, Jeff Rabe, Craig A. Musick,
John Howell, Tim Knebel and David Lord, including their successors and assigns
as permitted hereunder. 

“Convertible Note Subordinated
Debt” means any Indebtedness of Borrowers incurred pursuant to the terms of
the Convertible Note Subordinated Debt Documents. 

5 




“Convertible Note Subordinated
Debt Documents” means, individually and collectively, (i) that certain Loan
Agreement dated as of June 10, 2016 by and between Jeff Rabe and TAWC and that
certain Non-Negotiable Promissory Note in the principal amount of $50,000 dated
as of June 10, 2016 issued by TAWC in favor of Jeff Rabe, (ii) that certain Loan
Agreement dated as of June 10, 2016 by and between Craig A. Musick and TAWC and
that certain Non-Negotiable Promissory Note in the principal amount of $50,000
dated as of June 10, 2016 issued by TAWC in favor of Craig A. Musick, (iii) that
certain Loan Agreement dated as of June 10, 2016 by and between John Howell and
TAWC and that certain Non-Negotiable Promissory Note in the principal amount of
$10,000 dated as of June 10, 2016 issued by TAWC in favor of John Howell, (iv)
that certain Loan Agreement dated as of June 10, 2016 by and between Tim Knebel
and TAWC and that certain Non-Negotiable Promissory Note in the principal amount
of $100,000 dated as of June 10, 2016 issued by TAWC in favor of Tim Knebel and
(v) that certain Loan Agreement dated as of June 10, 2016 by and between David
Lord and TAWC and that certain Non-Negotiable Promissory Note in the principal
amount of $50,000 dated as of June 10, 2016 issued by TAWC in favor of David
Lord, each as amended, restated, supplemented or otherwise modified from time to
time as permitted hereunder. 

“Convertible Note
Subordination Agreement” means, individually and collectively, those certain
Subordination Agreements dated on or about the date hereof by and between the
respective Convertible Note Subordinated Creditor and Lender and acknowledged by
Borrower. 

“Credit Party” means any
Guarantor under a Guaranty of the Obligations or any part thereof, any Borrower
and any other Person (other than Lender or a participant of a Lender), whether
now existing or hereafter acquired or formed, that becomes obligated as a
borrower, guarantor, surety, indemnitor, pledgor, assignor or other obligor
under any Loan Document, and “Credit Parties” means all such Persons,
collectively. 

“Debtor Relief Law” shall
mean, collectively, the United States Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization or similar debtor relief laws from time
to time in effect affecting the rights of creditors generally, as amended from
time to time. 

“Default” shall mean (a)
any event, fact, circumstance or condition that, with the giving of applicable
notice or passage of time or both, would, unless cured or waived, constitute,
be, become or result in an Event of Default and (b) any Event of Default. 

“Default Rate” shall have
the meaning assigned to the term in Section 3.6. 

“Distribution” means as to
any Person (a) any dividend or other distribution (whether in cash, securities
or other property) on any equity interest in such Person (except those payable
solely in its equity interests of the same class), (b) any payment by such
Person on account of (i) the purchase, redemption, retirement, defeasance,
surrender, cancellation, termination or acquisition of any equity interests in
such Person or any claim respecting the purchase or sale of any equity interest
in such Person, or (ii) any option, warrant or other right to acquire any equity
interests in such Person, (c) any management fees, salaries, bonuses or other
fees or compensation to any Person holding an equity interest in a Borrower or a
Subsidiary of a Borrower (other than reasonable and customary (i) payments of
salaries to individuals, (ii) directors fees, and (iii) advances and reimbursements to
employees or directors, all in the ordinary course of business), an Affiliate of
a Borrower or an Affiliate of any Subsidiary of a Borrower, (d) any lease or
rental payments to an Affiliate or Subsidiary of a Borrower, or (e) repayments
of or debt service on loans or other indebtedness held by any Person holding an
equity interest in a Borrower or a Subsidiary of a Borrower, an Affiliate of a
Borrower or an Affiliate of any Subsidiary of a Borrower unless permitted under
and made pursuant to a Subordination Agreement applicable to such loans or other
indebtedness. 

6 





“Eligible Unbilled
Receivables” shall mean an account receivable of a Borrower meeting all of
the criteria of Eligible Billed Receivable (and otherwise acceptable to Lender
in Lender’s sole discretion), except clause (m) of the definition of “Eligible
Billed Receivables” shall be restated as follows: “it does not remain unbilled
for longer than thirty (30) days from the purchase order date”. 

“Eligible Receivables”
shall mean, collectively, Eligible Billed Receivables and Eligible Unbilled
Receivables. 

“Eligible Billed
Receivables” means, subject to the criteria below, an account receivable of
a Borrower, which was generated in the ordinary course of business, which was
generated originally in the name of a Borrower and not acquired via assignment
or otherwise, and which Lender, in its good faith credit judgment and
discretion, deems to be an Eligible Receivable. Without limiting the generality
of the foregoing, no Account shall be an Eligible Receivable if: 

a.     the Account
  remains unpaid one hundred twenty (120) days past the invoice date; 

b.     the
  Account is subject to any defense, set-off, recoupment, counterclaim, deduction,
  discount, credit, chargeback, freight claim, allowance, or adjustment of any
  kind (but only to the extent of such defense, set-off, recoupment, counterclaim,
  deduction, discount, credit, chargeback, freight claim, allowance, or
  adjustment), or the applicable Borrower is not able to bring suit or otherwise
  enforce its remedies against the Account Debtor through judicial process; 

c.     if
  the Account arises from the sale of goods, any part of any goods the sale of
  which has given rise to the Account has been returned, rejected, lost, or
  damaged (but only to the extent that such goods have been so returned, rejected,
  lost or damaged); 

d.     if the Account arises from the sale of goods, the sale was
  not an absolute, bona fide sale, or the sale was made on consignment or on
  approval or on a sale-or-return or bill-and-hold or progress billing basis, or
  the sale was made subject to any other repurchase or return agreement, or the
  goods have not been shipped to the Account Debtor or its designee or the sale
  was not made in compliance with applicable Laws; 

e.     if the Account arises from
  the performance of services, the services have not actually been performed or
  the services were undertaken in violation of any Law or the Account represents a
  progress billing for which services have not been fully and completely rendered;  

f.     the Account is subject to a Lien other than a Permitted Lien, or Lender does
  not have a first priority, perfected Lien on such Account; 

7 




g.     the
Account is evidenced by Chattel Paper or an Instrument of any kind, or has been
reduced to judgment, unless such Chattel Paper or Instrument has been delivered
to Lender; 

h.     the
Account Debtor is an Affiliate or Subsidiary of a Credit Party, or if the
Account Debtor holds any Indebtedness of a Credit Party; 

i.     more
than fifty percent (50%) of the aggregate balance of all Accounts owing from the
Account Debtor obligated on the Account are ineligible under subclause (a) above
(in which case all Accounts from such Account Debtor shall be ineligible); 

j.    
without limiting the provisions of clause (i) above, fifty percent (50%) or more
of the aggregate unpaid Accounts from the Account Debtor obligated on the
Account are not deemed Eligible Receivables under this Agreement for any reason;


k.     the
total unpaid Accounts of the Account Debtor obligated on the Account exceed
thirty five percent (35%) of the net amount of all Eligible Receivables owing
from all Account Debtors (but only the amount of the Accounts of such Account
Debtor exceeding such thirty five (35%) limitation shall be considered
ineligible); 

l.     any
covenant, representation or warranty contained in the Loan Documents with
respect to such Account has been breached in any respect; 

m.     the
Account is unbilled or has not been invoiced to the Account Debtor in accordance
with the procedures and requirements of the applicable Account Debtor; 

n.     the
Account is an obligation of a Governmental Account Debtor, unless Lender has
agreed to the contrary in writing and Lender has received from the Account
Debtor the acknowledgement of receipt of Lender’s notice of assignment of such
obligation pursuant to this Agreement; 

o.     the
Account is an obligation of an Account Debtor that has suspended business, made
a general assignment for the benefit of creditors, is unable to pay its debts as
they become due or as to which a petition has been filed (voluntary or
involuntary) under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or the Account is an Account as to which any facts, events or
occurrences exist which could reasonably be expected to impair the validity,
enforceability or collectability of such Account or reduce the amount payable or
delay payment thereunder; 

p.     the
Account Debtor has its principal place of business or executive office outside
the United States; 

q.     the
Account is payable in a currency other than United States dollars; 

r.     the
Account Debtor is an individual; 

s.     the
Borrower owning such Account has not signed and delivered to Lender notices to
Account Debtors, in the form requested by Lender, directing the Account Debtors
to make payment to the applicable Lockbox Account; 

8 




t.     the
Account includes late charges or finance charges (but only such portion of the
Account shall be ineligible); 

u.     the
Account arises out of the sale of any Inventory upon which any other Person
holds, claims or asserts a Lien; or 

v.     the
Account or Account Debtor fails to meet such other specifications and
requirements which may from time to time be established by Lender in its good
faith credit judgment and discretion. 

“Environmental Laws” means
any present and future federal, state, provincial, territorial, municipal and
local laws, statutes, ordinances, rules, regulations, standards, policies and
other governmental directives or requirements, as well as common law, pertaining
to the environment, natural resources, pollution, health (including any
environmental clean up statutes and all regulations adopted by any local, state,
federal, provincial, territorial, municipal or other Governmental Authority, and
any statute, ordinance, code, order, decree, law rule or regulation all of which
pertain to or impose liability or standards of conduct concerning medical waste
or medical products, equipment or supplies), safety or clean-up that apply to
any Borrower and relate to Hazardous Substances, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act of
1976 (42 U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act
(33 U.S.C. § 1251 et seq.), the Hazardous Materials Transportation Act
(49 U.S.C. § 5101 et seq.), the Clean Air Act (42 U.S.C. § 7401 et
seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §
136 et seq.), the Emergency Planning and Community Right-to-Know Act (42
U.S.C. § 11001 et seq.), the Occupational Safety and Health Act (29
U.S.C. § 651 et seq.), the Residential Lead-Based Paint Hazard Reduction
Act (42 U.S.C. § 4851 et seq.), any analogous state, federal,
territorial, provincial, municipal or local laws, any amendments thereto, and
the regulations promulgated pursuant to said laws, together with all amendments
from time to time to any of the foregoing and judicial interpretations thereof.


“Equipment” means
“equipment” as defined in Article 9 of the UCC. 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as the same may be amended,
modified or supplemented from time to time, and any successor statute thereto,
and any and all rules or regulations promulgated from time to time thereunder.


“ERISA Plan” means any
“employee benefit plan,” as such term is defined in Section 3(3) of ERISA (other
than a Multiemployer Plan), which any Borrower maintains, sponsors or
contributes to, or, in the case of an employee benefit plan which is subject to
Section 412 of the Code or Title IV of ERISA, to which any Borrower or any
member of the Controlled Group may have any liability, including any liability
by reason of having been a substantial employer within the meaning of Section
4063 of ERISA at any time during the preceding five (5) years, or by reason of
being deemed to be a contributing sponsor under Section 4069 of ERISA. 

“Event of Default” shall
mean the occurrence of any event set forth in Article VIII. 

9 




“Excess Availability”
means, as of any date of determination, the amount equal to Availability minus
the aggregate amount, if any, of all trade payables of Borrowers and their
Subsidiaries aged in excess of historical levels with respect thereto and all
book overdrafts of Borrowers and their Subsidiaries in excess of historical
practices with respect thereto, in each case as determined by Lender in its
Permitted Discretion. 

“Facility Fee”
shall have the meaning set forth in Section 3.1. 

“GAAP” shall mean
generally accepted accounting principles in the United States of America in
effect from time to time as applied by nationally recognized accounting firms.


“Government Contract”
shall be defined to mean all contracts (including all amendments thereto)
relating to the payment of Government Receivables (a) with the United States
government or with any agency or instrumentality thereof, or (b) with any State
or Territory of the United States or the District of Columbia or with any agency
or instrumentality thereof. 

“Governmental Account
Debtor” means the United States government or a political subdivision
thereof, or any state, county or municipality or department, agency or
instrumentality thereof, that is responsible for payment of an Account, or any
agent, administrator, intermediary or carrier for the foregoing. 

“Governmental Authority”
shall mean any federal, state, municipal, national, local or other governmental
department, court, commission, board, bureau, agency or instrumentality or
political subdivision thereof, or any entity or officer exercising executive,
legislative or judicial, regulatory or administrative functions of or pertaining
to any government or any court, in each case, whether of the United States or a
state, territory or possession thereof, a foreign sovereign entity or country or
jurisdiction or the District of Columbia. 

“Guarantor” shall mean any
guarantor of the Obligations or any part thereof, including any guarantor of the
accuracy of any one or more representations and/or warranties of Borrower
contained in this Agreement. 

“Guaranty” shall mean any
obligation, contingent or otherwise, of such Person directly or indirectly
guaranteeing any Indebtedness or other obligation of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise), or (b)
entered into for the purpose of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided,
however, that the term Guaranty shall not include endorsements for
collection or deposit in the ordinary course of business. The term
“Guaranty” used as a verb has a corresponding meaning. The term
“Guaranties” shall mean the plural of Guaranty. 

“Hazardous Substances”
means petroleum and petroleum products and compounds containing them, including
gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and compounds
containing them; lead and lead-based paint; asbestos or asbestos-containing
materials; underground or above-ground storage tanks, whether empty or
containing any substance; any substance the presence of which is prohibited by
any Environmental Laws; any contaminant, pollutant, waste or substance that is
likely to cause immediately or at some future time harm or degradation to the
surrounding environment or risk to human health; toxic mold, any substance that
requires special handling; and any other material or substance now or in the
future defined, classified or listed as a “hazardous substance,” “hazardous
material,” “hazardous waste,” “toxic substance,” “toxic pollutant,”
“contaminant,” “pollutant”, “radioactive”, “dangerous” or other words of similar
import within the meaning of any Environmental Law, including: (a) any
“hazardous substance” defined as such in (or for purposes of) CERCLA, or any
so-called “superfund” or “superlien” Law, including the judicial interpretation
thereof; (b) any “pollutant or contaminant” as defined in 42 U.S.C.A. §
9601(33); (c) any material now defined as “hazardous waste” pursuant to 40
C.F.R. Part 260; (d) any petroleum or petroleum by-products, including crude oil
or any fraction thereof; (e) natural gas, natural gas liquids, liquefied natural
gas, or synthetic gas usable for fuel; (f) any “hazardous chemical” as defined
pursuant to 29 C.F.R. Part 1910; (g) any toxic or harmful substances, wastes,
materials, pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls (“PCB’s”), flammable explosives, radioactive
materials, infectious substances, materials containing lead-based paint or raw
materials which include hazardous constituents); and (h) any other toxic
substance or contaminant that is subject to any Environmental Laws or other past
or present requirement of any Governmental Authority. 

10 





“Hazardous Substances
Contamination” means contamination (whether now existing or hereafter
occurring) of the improvements, buildings, facilities, personalty, soil,
groundwater, air or other elements on or of the relevant property by Hazardous
Substances, or any derivatives thereof, or on or of any other property as a
result of Hazardous Substances, or any derivatives thereof, generated on,
emanating from or disposed of in connection with the relevant property. 

“Indebtedness” of a Person
means at any date, without duplication, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable arising and paid on a timely basis and in the ordinary course
of business, (d) all capital leases of such Person, (e) all non-Contingent
Obligations of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit, banker’s acceptance or similar
instrument, (f) all equity securities of such Person subject to repurchase or
redemption other than at the sole option of such Person, (g) all obligations
secured by a Lien on any asset of such Person, whether or not such obligation is
otherwise an obligation of such Person, (h) “earnouts,” purchase price
adjustments, profit sharing arrangements, deferred purchase money amounts and
similar payment obligations or continuing obligations of any nature of such
Person arising out of purchase and sale contracts, (i) all Indebtedness of
others guaranteed by such Person, (j) off-balance sheet liabilities and/or
Pension Plan or Multiemployer Plan liabilities of such Person, and (k)
obligations arising under non-compete agreements. 

“Indemnified Persons”
shall have the meaning assigned to the term in Section 13.4. 

11 




“Intellectual Property”
means, with respect to any Person, all patents, patent applications and like
protections, including improvements divisions, continuation, renewals, reissues,
extensions and continuations in part of the same, trademarks, trade names, trade
styles, trade dress, service marks, logos and other business identifiers and, to
the extent permitted under applicable law, any applications therefor, whether
registered or not, and the goodwill of the business of such Person connected
with and symbolized thereby, copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
works, whether published or unpublished, technology, know-how and processes,
operating manuals, trade secrets, computer hardware and software (including
source code and related documentation), rights to unpatented inventions and all
applications and licenses therefor, used in or necessary for the conduct of
business by such Person and all claims for damages by way of any past, present
or future infringement of any of the foregoing. 

“Intellectual Property
Security Agreement” shall mean that certain Intellectual Property Security
Agreement of even date herewith made by Borrower in favor of Lender. 

“JPMorgan Accounts” shall
mean those certain accounts of Borrower maintained at JPMorgan Chase Bank
numbered 475 260 613, 3559 353 106 and 521 796 123. 

“Landlord Waiver and
Consent” shall mean a waiver/consent in form and substance reasonably
satisfactory to Lender from the owner/lessor of 7730 East Greenway Road,
Scottsdale, Arizona, 85260 and any other premises not owned by Borrower at which
billing operations are conducted or Books and Records are maintained, or any of
the Collateral is now or hereafter located for the purpose of providing Lender
access to such Collateral, in each case as such may be modified, amended or
supplemented from time to time and subordinating in favor of Lender any claims
that the owner/lessor may have against Borrower or against any of Lender’s
Collateral. 

“Laws” means any and all
federal, state, provincial, territorial, municipal, local and foreign statutes,
laws, judicial decisions, regulations, ordinances, rules, judgments, orders,
decrees, codes, injunctions, permits, governmental agreements and governmental
restrictions, whether now or hereafter in effect, which are applicable to any
Credit Party in any particular circumstance. 

“Laws” includes, without
limitation, Environmental Laws. 

“Lien” shall mean any
mortgage, pledge, security interest, encumbrance, restriction, lien or charge of
any kind (including any agreement to give any of the foregoing, any conditional
sale or other title retention agreement or any lease in the nature thereof), or
any other arrangement pursuant to which title to the property is retained by or
vested in some other Person for security purposes. For the purposes of this
Agreement and the other Loan Documents, any Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset. 

“Loan” or “Loans”
means the Revolving Loans. 

“Loan Documents” shall
mean, collectively and each individually, this Agreement, any documents that
provide, as security for all or any portion of the Obligations, a Lien on any
assets in favor of Lender, the Guaranties and any documents evidencing
a security interest in assets as collateral for the Guaranties, the Pledge
Agreement, the Lockbox Agreements, the Intellectual Property Security Agreement,
the Uniform Commercial Code Financing Statements and all other documents or
instruments necessary to create or perfect the Liens in the Collateral, the
Subordination Agreements, the Landlord Waiver and Consents, the Borrowing
Certificates, and all other agreements, documents, instruments and certificates
heretofore or hereafter executed or delivered to Lender in connection with any
of the foregoing or the Loans, as the same may be amended, modified or
supplemented from time to time; all of which shall be in form and substance
acceptable to Lender in its sole discretion. 

12 





“Lockbox Accounts” shall
mean the accounts maintained by Borrower at the Lockbox Banks into which all
collections or payments on their Accounts and Collateral are paid. 

“Lockbox Agreement” shall
have the meaning assigned to the term in Section 2.5. 

“Lockbox Bank” shall have
the meaning assigned to the term in Section 2.5. 

“Material Adverse
Effect” or “Material Adverse Change” means with
respect to any event, act, condition or occurrence of whatever nature (including
any adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, which results directly or indirectly in (a)
a material adverse change in, or a material adverse effect upon, any of (i) the
condition (financial or otherwise), operations, business, properties or
prospects of any of the Credit Parties, (ii) the rights and remedies of Lender
under any Loan Document, or the ability of any Credit Party to perform any of
its obligations under any Loan Document to which it is a party, (iii) the
legality, validity or enforceability of any Loan Document, (iv) the existence,
perfection or priority of any security interest granted in any Loan Document, or
(v) the value of any material Collateral; (b) an impairment to the likelihood
that Eligible Receivables in general will be collected and paid in the ordinary
course of business of any Borrower and upon the same schedule and with the same
frequency as such Borrowers’ recent collections history; or (c) the imposition
of a fine against or the creation of any liability of any Credit Party to any
Governmental Authority in excess of $50,000.00. 

“Material Contracts”
has the meaning set forth in Section 5.19. 

“Obligations” shall mean
all present and future obligations, Indebtedness and liabilities of any Credit
Party to Lender at any time and from time to time of every kind, nature and
description, direct or indirect, secured or unsecured, joint and several,
absolute and contingent, due or to become due, matured or unmatured, now
existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, under any of the Loan Documents or under applicable law,
including, without limitation, all applicable fees, charges and expenses and/or
all amounts paid or advanced by Lender on behalf of or for the benefit of any
Credit Party for any reason at any time, including in each case obligations of
performance as well as obligations of payment and interest that accrue after the
commencement of any proceeding under any Debtor Relief Law by or against any
such Person. 

13 




“Orderly Liquidation
Value” means the net amount (after all costs of sale), expressed in terms of
money, which Lender, in its good faith discretion, estimates can be realized
from a sale, as of a specific date, given a reasonable period to find a
purchaser(s), with the seller being compelled to sell on an as-is/where-is
basis. 

“Organizational Documents”
means, with respect to any Person other than a natural person, the documents by
which such Person was organized (such as a certificate of incorporation,
certificate of limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred stock or other
forms of preferred equity) and which relate to the internal governance of such
Person (such as by-laws, a partnership agreement or an operating, limited
liability company or members agreement), including any and all shareholder
agreements or voting agreements relating to the capital stock or other equity
interests of such Person. 

“Permit” means all
governmental licenses, authorizations, provider numbers, supplier numbers,
registrations, permits, drug or device authorizations and approvals,
certificates, franchises, qualifications, accreditations, consents and approvals
of a Credit Party required under all applicable Laws and required for such
Credit Party in order to carry on its business as now conducted. 

“Permitted Contest” means,
with respect to any tax obligation or other obligation allegedly or potentially
owing from any Borrower or its Subsidiary to any governmental tax authority or
other third party, a contest maintained in good faith by appropriate proceedings
promptly instituted and diligently conducted and with respect to which such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made on the books and records and financial
statements of the applicable Credit Party(ies); provided, however,
that (a) compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge; (b) Borrowers’ and its Subsidiaries’
title to, and its right to use, the Collateral is not adversely affected thereby
and Lender’s Lien and priority on the Collateral are not adversely affected,
altered or impaired thereby; (c) Borrowers have given prior written notice to
Lender of a Borrower’s or its Subsidiary’s intent to so contest the obligation;
(d) the Collateral or any part thereof or any interest therein shall not be in
any danger of being sold, forfeited or lost by reason of such contest by
Borrowers or its Subsidiaries; (e) Borrowers have given Lender notice of the
commencement of such contest and upon request by Lender, from time to time,
notice of the status of such contest by Borrowers and/or confirmation of the
continuing satisfaction of this definition; (f) a final determination of such
contest could not result in Lender’s Lien and its priority on the Collateral
being adversely affected, altered or impaired; (g) any reserves as may be
required by GAAP with respect thereto shall have been made on Borrower’s books;
and (h) upon a final determination of such contest, Borrowers and its
Subsidiaries shall promptly comply with the requirements thereof. 

“Permitted Contingent
Obligations” means (a) Contingent Obligations arising in respect of the
Indebtedness under the Loan Documents; (b) Contingent Obligations resulting from
endorsements for collection or deposit in the ordinary course of business; (c)
Contingent Obligations outstanding on the date of this Agreement and set forth
on Schedule 7.2 (but not including any refinancings, extensions,
increases or amendments to the indebtedness underlying such Contingent
Obligations other than extensions of the maturity thereof without any other change in terms); (d) Contingent Obligations incurred in the
ordinary course of business with respect to surety and appeal bonds, performance
bonds and other similar obligations not to exceed $25,000 in the aggregate at
any time outstanding; (e) Contingent Obligations arising under indemnity
agreements with title insurers to cause such title insurers to issue to Lender
mortgagee title insurance policies; (f) Contingent Obligations arising with
respect to customary indemnification obligations in favor of purchasers in
connection with dispositions of personal property assets permitted under
Section 7.8; (g) so long as there exists no Event of Default both
immediately before and immediately after giving effect to any such transaction,
Contingent Obligations existing or arising under any Swap Contract, provided, however, that such obligations are (or were)
entered into by Borrower or an Affiliate in the ordinary course of business for
the purpose of directly mitigating risks associated with liabilities,
commitments, investments, assets, or property held or reasonably anticipated by
such Person and not for purposes of speculation; and (h) other Contingent
Obligations not permitted by clauses (a) through (g) above, not to exceed
$25,000 in the aggregate at any time outstanding. 

14 





“Permitted Discretion”
shall mean a determination or judgment made by Lender in good faith in the
exercise of its reasonable business judgment. 

“Permitted Indebtedness”
shall mean: (i) Indebtedness under the Loan Documents, (ii) Capitalized Lease
Obligations incurred after the Closing Date and secured only by the equipment
being leased pursuant to such Capitalized Lease Obligations; (iii) Indebtedness
incurred pursuant to purchase money Liens, provided that the aggregate
amount thereof outstanding at any time shall not exceed $100,000, (iv)
Indebtedness in connection with advances made by a stockholder in order to cure
any default of the financial and loan covenants set forth on Annex I;
provided, however, that such Indebtedness shall be on an unsecured
basis, subordinated in right of repayment and remedies to all of the Obligations
and to all of Lender’s rights and in form and substance satisfactory to Lender;
(v) accounts payable to trade creditors and current operating expenses incurred
in the ordinary course of business and paid on a timely basis; (vi) borrowings
incurred in the ordinary course of business and not exceeding $25,000
individually or in the aggregate outstanding at any one time; provided,
however, that such Indebtedness shall be on an unsecured basis,
subordinated in right of repayment and remedies to all of the Obligations and to
all of the Lender’s rights and in form and substance satisfactory to Lender;
(vii) so long as there exists no Event of Default both immediately before and
immediately after giving effect to any such transaction, Indebtedness existing
or arising under any Swap Contract, provided, however, that
such obligations are (or were) entered into by Borrower or an Affiliate in the
ordinary course of business for the purpose of directly mitigating risks
associated with liabilities, commitments, investments, assets, or property held
or reasonably anticipated by such Person and not for purposes of speculation;
(viii) Indebtedness in the form of insurance premiums financed through the
applicable insurance company; (ix) the Closing Date Subordinated Debt and the
Convertible Note Subordinated Debt; (x) Indebtedness outstanding on the date of
this Agreement and set forth on Schedule 7.2 (but not including any
refinancings, extensions, increases or amendments to such Indebtedness other
than extensions to the maturity thereof without any other change in terms); and
(xi) any other Indebtedness that Lender may expressly consent to in writing
prior to its incurrence, which consent shall be in the sole discretion of
Lender. Notwithstanding the foregoing, Borrower shall incur no Indebtedness if
the incurrence of such Indebtedness will, directly or indirectly, cause a
Default or an Event of Default under this Agreement. Borrower shall not make
prepayments on an existing or future Indebtedness to any Person other than to
Lender or to the extent specifically permitted by this
Agreement or any subsequent agreement between Borrower and Lender. 

15 





“Permitted Liens” means:
(a) deposits or pledges of cash to secure obligations under worker’s
compensation, social security or similar laws, or under unemployment insurance
(but excluding Liens arising under ERISA, or, with respect to any Pension Plan
or Multiemployer Plan, the Code) pertaining to a Borrower’s or its Subsidiary’s
employees, if any; (b) deposits or pledges of cash to secure bids, tenders,
contracts (other than contracts for the payment of money or the deferred
purchase price of property or services), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of business; (c) carrier’s, warehousemen’s, mechanic’s, workmen’s,
materialmen’s or other like Liens on Collateral, other than any Collateral which
is part of the Borrowing Base, arising in the ordinary course of business with
respect to obligations which are not due, or which are being contested pursuant
to a Permitted Contest; (d) Liens on Collateral, other than Accounts, for taxes
or other governmental charges not at the time delinquent or thereafter payable
without penalty or the subject of a Permitted Contest; (e) attachments, appeal
bonds, judgments and other similar Liens on Collateral other than Accounts, for
sums not exceeding $100,000 in the aggregate arising in connection with court
proceedings; provided, however, that the execution or other
enforcement of such Liens is effectively stayed and the claims secured thereby
are the subject of a Permitted Contest; (f) Liens and encumbrances in favor of
Lender under the Loan Documents; (g) Liens on Collateral, other than Collateral
which is part of the Borrowing Base, existing on the date hereof and set forth
on Schedule 7.3; (h) any Lien on any Equipment securing Indebtedness
permitted under subpart (iii) of the definition of Permitted Indebtedness,
provided, however, that such Lien attaches concurrently with or
within twenty (20) days after the acquisition thereof; (i) easements, rights of
way, restrictions (including zoning restrictions), covenants, encroachments, and
other similar real estate charges or encumbrances, minor defects or
irregularities in title and other similar real estate Liens, in each case solely
affecting real property, none of which, individually or collectively, (i)
interfere in any material respect with the ordinary conduct of the business of
any Borrower or any Subsidiary thereof or (ii) materially or adversely affect
the value of the real property; (j) leases, subleases, licenses or sublicenses
of the assets or properties of any Borrower or Subsidiary, in each case entered
into in the ordinary course of such Borrower or Subsidiary and not interfering
in any material respect with the business of any Borrower or any Subsidiary
thereof; (k) normal and customary set off rights against deposits of cash in
depository accounts permitted hereunder in favor of banks at which a Borrower or
any Subsidiary thereof maintains such depository accounts, which set off rights
only secure the obligations of such Borrower or Subsidiary thereof to pay
ordinary course fees and bank charges; (l) Liens consisting of precautionary
filings of UCC financing statements filed with respect to operating leases
permitted hereunder and any interest of title of a lessor under any operating
lease permitted hereunder; and (m) non-exclusive licenses of Intellectual
Property granted in the ordinary course of business. 

“Person” shall mean any
natural person, corporation, limited liability company, professional
association, limited partnership, general partnership, joint stock company,
joint venture, association, company, trust, bank, trust company, land trust,
business trust or other organization, whether or not a legal entity, and any
Governmental Authority or any other entity of whatever nature. 

16 




“Pledge Agreement” shall
mean that certain Pledge Agreement dated as of the date hereof executed by TAWC
and TAWC Arizona in favor of Lender, as may be amended, restated, supplemented
or otherwise modified from time to time. 

“Prime Rate” shall mean a
fluctuating interest rate per annum equal at all times to the rate of interest
announced, from time to time, within Wells Fargo Bank at its principal office in
San Francisco as its “prime rate,” with the understanding that the “prime rate”
is one of Wells Fargo Bank’s base rates (not necessarily the lowest of such
rates) and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto and is evidenced by the
recording thereof after its announcement in such internal publications as Wells
Fargo Bank may designate; provided that Lender may, upon prior written
notice to Borrower, choose a reasonably comparable index or source to use as the
basis for the Prime Rate, and further provided, that in no event
shall the Prime Rate be lower than such rate as in effect as of the Closing
Date, and further provided, that each change in the fluctuating
interest rate shall take effect simultaneously with the corresponding change in
the Prime Rate. 

“Receipt” shall have the
meaning assigned in Section 13.5. 

“Related Property” shall
mean, with respect to each Account, the following: (i) all records of any nature
evidencing or related to the Account, including contracts, invoices, charges
slips, credit memoranda, notes and other instruments and other documents, books,
records and other information (including, without limitation, computer data);
(ii) all security interests or liens and property subject thereto from time to
time purporting to secure payment of such Account, whether pursuant to the
contract related to such Account or otherwise, including all rights of stoppage
in transit, replevin, reclamation, supporting obligations and letter of credit
rights (as such terms are defined in the Uniform Commercial Code), and all
claims of lien filed or held by the Borrower on personal property; (iii) all
rights to any goods whose sale gave rise to such Account, including returned or
repossessed goods; (iv) all instruments, documents, chattel paper and general
intangibles (each as defined in the Uniform Commercial Code) arising from,
related to or evidencing such Account; (v) all UCC financing statements covering
any collateral securing payment of such Account; (vi) all guaranties and other
agreements or arrangements of whatever character from time to time supporting or
securing payment of such Account whether pursuant to the contract related to
such Account or otherwise; and (vii) all proceeds and amounts received or
receivable arising from any of the foregoing. 

“Revolving Facility
Termination” shall mean any of the following: 

(i)     A
termination of the Revolving Facility by the Borrower under Section 11.1
hereof, 

(ii)    any other
voluntary or involuntary prepayment of the Revolving Facility and/or Obligations
relating to the Revolving Facility by Borrower or any other Person occurs (other
than reductions to zero of the outstanding balance of the Revolving Facility
resulting from the ordinary course operation of the provisions of Section
2.5), whether by virtue of Lender’s exercising its right of set-off or
otherwise, 

17 




(iii)   Lender demands
or Borrower is otherwise required to make payment in full of the Revolving
Facility and/or Obligations relating to the Revolving Facility upon the
occurrence of an Event of Default, 

(iv)    Lender
terminates its obligations to make Advances hereunder upon the occurrence of an
Event of Default, or 

(v)     any
payment reduction or reduction of the outstanding balance of the Revolving Loan
and/or the Revolving Facility is made during a bankruptcy, reorganization or
other proceeding or is made pursuant to any plan of reorganization or
liquidation or any Debtor Relief Law. 

“Revolving Loan”
means the aggregate of the loans made pursuant to Section 2.1. 

“Revolving Loan Commitment
Amount” shall be $3,000,000. 

“Revolving Loan Limit”
means, at any time, the lesser of (a) the Revolving Loan Commitment Amount
and (b) the Borrowing Base. 

“Subordination Agreement”
means each agreement, including the Closing Date Subordination Agreements and
Convertible Note Subordination Agreements, between Lender and another creditor
of Borrowers, as the same may be amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms thereof, pursuant to
which the Indebtedness owing from any Borrower(s) and/or the Liens securing such
Indebtedness granted by any Borrower(s) to such creditor are subordinated in any
way to the Obligations and the Liens created under the Loan Documents, the terms
and provisions of such Subordination Agreements to have been agreed to by and be
acceptable to Lender in the exercise of its sole discretion. 

“Subordinated Debt”
means any Indebtedness, including the Closing Date Subordinated Debt and the
Convertible Note Subordinated Debt, of Borrowers incurred pursuant to the terms
of the Subordinated Debt Documents and with the prior written consent of Lender,
all of which documents must be in form and substance acceptable to Lender in its
sole discretion. 

“Subordinated Debt
Documents” means any documents evidencing and/or securing Debt,
including the Closing Date Subordinated Debt Documents and the Convertible Note
Subordinated Debt Documents, governed by a Subordination Agreement, all of which
documents must be in form and substance acceptable to Lender in its sole
discretion. 

“Subsidiary” shall mean
(i) as to Borrower, any Person in which more than 50% of all equity, membership,
partnership or other ownership interests is owned directly or indirectly by
Borrower or one or more of its Subsidiaries, and (ii) as to any other Person,
any Person in which more than 50% of all equity, membership, partnership or
other ownership interests is owned directly or indirectly by such Person or by
one or more of such Person’s Subsidiaries. Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary of
a Borrower. 

“Termination Date” means
the earlier to occur of (a) the Commitment Expiration Date, (b) any date on
which Lender accelerates the maturity of the Loans pursuant to Article
VIII, or (c) the termination date stated in any notice of termination of
this Agreement provided by Borrowers in accordance with Section 11.1. 

18 





“Termination Fee” shall
mean the amount equal to two percent (2%) of the Revolving Loan Commitment
Amount if a Revolving Facility Termination occurs before the Commitment
Expiration Date. The Termination Fee is an “Obligation,” as that term is defined
herein. 

“UCC” and
“Uniform Commercial Code” means the Uniform Commercial Code of the
State of New York or of any other state the laws of which are required to be
applied in connection with the perfection of security interests in any
Collateral. 

“Unused Line Fee” shall
have the meaning assigned to the term in Section 3.2. 

1.3    
Other Definitional and Interpretative Provisions 

References in this Agreement to
“Articles”, “Sections”, “Annexes”, “Exhibits”, or “Schedules” shall be to
Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement
unless otherwise specifically provided. Any term defined herein may be used in
the singular or plural. “Include”, “includes” and “including” shall be deemed to
be followed by “without limitation”. Except as otherwise specified or limited
herein, references to any Person include the successors and assigns of such
Person. References “from” or “through” any date mean, unless otherwise
specified, “from and including” or “through and including”, respectively. Unless
otherwise specified herein, the settlement of all payments and fundings
hereunder between or among the parties hereto shall be made in lawful money of
the United States and in immediately available funds. Unless otherwise specified
herein, all amounts (including, for the avoidance of doubt, for purposes of
calculating the Borrowing Base) shall be calculated in United States Dollars.
References to any statute or act shall include all related current regulations
and all amendments and any successor statutes, acts and regulations. All amounts
used for purposes of financial calculations required to be made herein shall be
without duplication. References to any statute or act, without additional
reference, shall be deemed to refer to federal statutes and acts of the United
States. References to any agreement, instrument or document shall include all
schedules, exhibits, annexes and other attachments thereto. As used in this
Agreement, the meaning of the term “material” or the phrase “in all material
respects” is intended to refer to an act, omission, violation or condition which
reflects or could reasonably be expected to result in a Material Adverse Effect.
References to capitalized terms that are not defined herein, but are defined in
the UCC, shall have the meanings given them in the UCC. All references herein to
times of day shall be references to daylight or standard time, as applicable.


1.4    
Time is of the Essence 

Time is of the essence in
Borrower’s and each other Credit Party’s performance under this Agreement and
all other Loan Documents. 

19 





	II. 	
      ADVANCES, PAYMENT AND
INTEREST



2.1    
Loan Advances under Revolving Facility 

(a)    
Subject to the provisions of this Agreement, Lender shall make Advances to
Borrower under the Revolving Facility from time to time during the Term, and not
more than once per each week unless agreed to by Lender and subject to the
processing fees set forth in Section 2.4; provided that, notwithstanding any
other provision of this Agreement (but subject to the provisions of this Section
2.1), the aggregate amount of all Advances at any one time outstanding shall not
exceed the Revolving Loan Limit. The Revolving Facility is a revolving credit
facility, which may be drawn, repaid and redrawn, from time to time as permitted
under this Agreement. Any determination as to whether there is availability
within the Borrowing Base for Advances shall be made by Lender in its Permitted
Discretion and is final and binding upon Borrower. Unless otherwise permitted by
Lender, each Advance requested by Borrower shall be in an amount of at least
$25,000. Subject to Availability and the provisions of this Agreement, Borrower
may request Advances under the Revolving Facility from time to time as set forth
in Section 2.4. Advances under the Revolving Facility automatically may, in the
discretion of the Lender, be made for the payment of interest on the Revolving
Facility and other Obligations on the date when due to the extent of
Availability and as provided for herein.

(b)    
Notwithstanding anything to the contrary contained herein, Lender shall have the
right (but not the obligation), in the exercise of its Permitted Discretion, to
establish and increase or decrease reserves against the Borrowing Base,
including without limitation, the Closing Reserve. Lender agrees to promptly
release a portion of the Closing Reserve at such time as Lender receives a
portion of the Convertible Note Subordination Agreements that were not delivered
to Lender or its representatives at or prior to Closing which released portion
shall be equal to the amount of the Convertible Note Subordinated Debt subject
to such Convertible Note Subordination Agreement(s) received by Lender at such
time, each Convertible Note Subordination Agreement to be in form and substance
satisfactory to Lender.

(c)    
Upon the request by Borrower, Lender may in its sole and absolute discretion
make one or more Advances in excess of Availability. The making of any Advance
in excess of Availability shall not be deemed an acknowledgement that any
additional such Advances will be made or may be required to be made; nor shall
any such Advance be deemed to establish any course of conduct, waiver, or
estoppel that would obligate Lender to make any further such Advances or prevent
the Lender from treating the Borrower’s failure to repay such Advance(s) as a
Default or an Event of Default. In the event outstanding Advances under the
Revolving Facility exceed the Availability (whether because of an intentional
Advance in excess of Availability or a reduction in the Borrowing Base or
otherwise), Lender may charge an over-advance fee of ten percent (10%) of the
amount by which such outstanding Advances exceed the Availability. Such
over-advance fee shall be in addition to any other fees, charges or other
provisions that may increase the Applicable Rate of interest hereunder and the
assessment or collection of such over-advance fee shall not, unless Lender
specifically agrees in writing to the contrary, prevent Lender from considering
any such over-advance from being a Default or an Event of Default. The
over-advance fee shall be paid on the first Business Day of each week if the
amount outstanding hereunder is in excess of the Availability at any time during
the immediately preceding week. 

20 




2.2    
Evidence of Obligations; Date Due 

(a)    
Lender shall maintain a loan account (the “Loan Account”) on its books to
record Loans and other extensions of credit made by the Lender hereunder or
under any other Loan Document, and all payments thereon made by or on behalf of
each Borrower. All entries in the Loan Account shall be made in accordance with
Lender’s customary accounting practices as in effect from time to time. The
balance in the Loan Account, as recorded in Lender’s books and records at any
time shall be conclusive and binding evidence of the amounts due and owing to
Lender by each Borrower absent manifest error; provided, however, that any
failure to so record or any error in so recording shall not limit or otherwise
affect any Borrower’s duty to pay all amounts owing hereunder or under any other
Loan Document. Lender shall endeavor to provide Borrowers with a monthly
statement regarding the Loan Account (but Lender shall have no liability if
Lender shall fail to provide any such statement). Unless any Borrower notifies
Lender of any objection to any such statement (specifically describing the basis
for such objection) within sixty (60) days after the date of receipt thereof, it
shall be deemed final, binding and conclusive upon Borrowers in all respects as
to all matters reflected therein. 

(b)    
All amounts outstanding hereunder and other Obligations shall be due and payable
in full, if not earlier in accordance with this Agreement, on the Termination
Date. 

2.3    
Interest on Revolving Loan 

Interest shall accrue on the
principal amount of the Revolving Facility outstanding from time to time
hereunder at a rate per annum equal to the Prime Rate plus the Applicable Margin
calculated on the basis of a 360-day year and adjusted for the actual number of
calendar days elapsed in each interest calculation period. Interest shall be
payable by Borrower monthly in arrears but in no event later than the first
Business Day of each calendar month, commencing March 1, 2017. 

Interest payments may, at the
discretion of the Lender, be made (i) by application of funds in the
Concentration Account as set forth in Section 2.5, (ii) by an Advance on
the Revolving Facility, as set forth in Section 2.1, without any further
action by Borrower, or (iii) directly by Borrower. Interest shall continue until
the irrevocable payment in full in cash of the Obligations. Any accrued but
unpaid interest shall be added to the Obligations and increase the principal
amount outstanding hereunder on the first Business Day of each month.


2.4    
Revolving Facility Disbursements; Requirement to Deliver Borrowing
Certificate So long as no Default or Event of Default shall have occurred
and be continuing, Borrower may give Lender written notice requesting an Advance
under the Revolving Facility by delivering to Lender not later than 11:00 a.m.
(New York City time) at least two but not more than four Business Days before
the proposed borrowing date of such requested Advance (the “Borrowing
Date”), a completed Borrowing Certificate and relevant supporting
documentation satisfactory to Lender in its Permitted Discretion, which shall
(i) specify the proposed Borrowing Date of such Advance which shall be a
Business Day, and (ii) specify the principal amount of such requested Advance,
(iii) certify the matters specified therein. In the event that Borrower does not
request an Advance during any two consecutive calendar weeks, Borrower shall, on
the last Business Day of the second such week (and more frequently
if Lender shall so request) until the Obligations are indefeasibly paid in cash
in full and this Agreement is terminated, deliver to Lender a Borrowing
Certificate which shall (i) certify the matters specified therein, and (ii) be
accompanied by a separate detailed aging and categorizing of Borrower’s accounts
receivable and such other supporting documentation with respect to the figures
and information in the Borrowing Certificate as Lender shall reasonably request
from a credit or security perspective or otherwise. On each Borrowing Date,
Borrower authorizes Lender to disburse the proceeds of the requested Advance to
the Borrower’s account(s) as set forth on Schedule 2.4 (or to such other account
as to which the Borrower shall expressly instruct Lender in writing), for credit
by the recipient of such proceeds to the Borrower, via federal funds wire
transfer no later than 4:00 p.m. (New York City time); provided, however, if any
amounts are then due to Lender on account of any interest, fees or expense
reimbursements due under the Loan Documents at the time such Advance is
requested, Lender is authorized (but not required) to reduce the proceeds to
Borrower with respect to such Advance by the amount of such interest, fees or
expense reimbursements and to retain such amounts as payment of such interest,
fees or expense reimbursements. Lender shall charge a processing fee of $150.00
for the first Advance each calendar week and $450.00 for each additional Advance
during such calendar week. 

21 





2.5    
Collections; Repayment; Borrowing Availability and Lockbox 

Prior to the consummation of the
transactions contemplated by this Agreement, the Borrower shall establish and
maintain at the Borrower’s expense an account (the “Lockbox Account”)
with a depository institution satisfactory to the Lender into which all
collections in respect of all Eligible Receivables shall be deposited, pursuant
to one or more agreements acceptable to Lender in its sole discretion
(collectively, the “Lockbox Agreement”). (The depository institution(s)
in which the Lockbox Account is maintained are referred to as the “Lockbox
Bank”.) The Borrower hereby agrees to direct each payor of an Account to
remit all payments with respect to such Account for deposit in the Lockbox
Account by (A) delivering to each such payor a notice containing such
instructions and (B) identifying the Lockbox Account as the “pay to” address on
all bills sent to payors of all Accounts. The Borrower further agrees not to
change such directive to payors without the prior written consent of the Lender.
The Borrower agrees not to terminate the Lockbox Account. The Lockbox Agreement
shall instruct the Lockbox Bank to immediately transfer all funds paid into the
Lockbox Accounts into a depository account or accounts owned and maintained by
Lender or an Affiliate of Lender at such bank as Lender may communicate to the
Lockbox Bank from time to time (the “Concentration Account”). The
Borrower agrees not to revoke such instructions and the Borrower hereby agrees
not to change or direct the custodian thereof to modify such sweep order or to
provide any other or additional instructions to the custodian thereof. In the
event the payors with respect to any Eligible Receivables receive any
instruction whatsoever from or on behalf of the Borrower indicating that
collections with respect to the Eligible Receivables should be sent to any
location other than the Lockbox Account, the Borrower hereby acknowledges and
agrees that such actions would be an express violation of this Agreement, would
cause irreparable harm to the Lender for which there would be no adequate remedy
at law, and agrees and consents to entry of an order by a court of competent
jurisdiction granting the Lender specific performance of the terms and
provisions of this Agreement as to the Borrower. 

22 




To the extent that any Account
collections of Borrower or any other cash payments received by Borrower are not
sent directly to the Lockbox Account but are received by Borrower or any of its
Affiliates, such collections and proceeds shall be held in trust for the benefit
of the Lender and immediately remitted (and in any event within one (1) Business
Day), in the form received (or, with respect to cash, by check or wire
transfer), to the Lockbox Account for immediate transfer to the Concentration
Account. Borrower acknowledges and agrees that compliance with the terms of this
Section 2.5 is an essential term of this Agreement, and that, in addition
to and notwithstanding any other rights Lender may have hereunder under any
other Loan Document, under applicable law or equity, upon each and every failure
by Borrower or any of its Affiliates to cause collections with respect to
Eligible Receivables or any other payments to Borrower with respect to the
Collateral to be deposited into the Lockbox Account as set forth in this
Section 2.5, Lender shall be entitled to assess Borrower with a
non-compliance fee in an amount equal to ten percent (10%) of the amount of such
collections or other payments; provided that such non-compliance fee
shall be in addition to any other fees, charges or other provisions that may
increase the Applicable Rate of interest hereunder and the assessment or
collection of such non-compliance fee shall not, unless Lender specifically
agrees in writing to the contrary, prevent Lender from considering any such
non-compliance to be a Default or an Event of Default. For purposes of
determining Availability, all funds transferred to the Concentration Account in
accordance with this Section shall be applied in accordance with the foregoing
sentence as of the date of the transfer. For purposes of calculating interest,
all funds transferred to the Concentration Account in accordance with this
Section shall be subject to a three (3) Business Day clearance period and all
interest accruing on such funds during such clearance period shall accrue for
the benefit of the Lender. All funds transferred to the Concentration Account
for application to the Obligations shall be applied to reduce the Obligations
hereunder in the following order of priority: (i) payment of any fees and
expense reimbursements due to Lender under the Loan Documents, (ii) any other
Obligations of Borrower not included in items (iii) and (iv) below, (iii) to any
interest then due and owing hereunder, and (iv) to the principal amount
outstanding hereunder. If as the result of collections of Accounts and/or any
other cash payments received by Borrower pursuant to this Section 2.5
there is a positive balance in favor of Borrower in the Concentration Account,
such positive balance shall not accrue interest in favor of Borrower, but shall
be available to Borrower in accordance with the terms of this Agreement. If
applicable, at any time prior to the execution of all or any of the Lockbox
Agreements and operation of all or any of the Lockbox Accounts, Borrower and its
Affiliates shall direct all collections or proceeds it receives on Accounts or
from other Collateral to the account(s) and in the manner specified by Lender in
its Permitted Discretion so long as any amounts are outstanding under the
Revolving Facility. 

2.6    
Promise to Pay; Manner of Payment 

Borrower promises to pay
principal, interest and all other amounts payable hereunder, or under any other
Loan Document, without any right of rescission and without any deduction
whatsoever, including any deduction for any setoff, counterclaim or recoupments,
and notwithstanding any damage to, defects in or destruction of the Collateral
or any other event, including obsolescence of any property or improvements.
Unless paid in accordance with Section 2.5, all payments made by Borrower
(other than payments automatically paid through Advances under the Revolving
Facility as provided herein), shall be made only by wire transfer on the date
when due, without offset or deduction for counterclaim, in U.S. Dollars, in immediately available funds to such account as may be indicated
in writing by Lender to Borrower from time to time. Any such payment received
after 4:00 p.m. (New York City time) on the date when due shall be deemed
received on the following Business Day. Whenever any payment hereunder shall be
stated to be due or shall become due and payable on a day other than a Business
Day, the due date thereof shall be extended to, and such payment shall be made
on, the next succeeding Business Day, and such extension of time in such case
shall be included in the computation of payment of any interest (at the interest
rate then in effect during such extension) and/or fees, as the case may be. 

23 





2.7    
Repayment of Excess Advances 

Subject to the following
sentence, any balance of Advances under the Revolving Facility outstanding at
any time in excess of the Revolving Loan Limit shall be immediately due and
payable by Borrower upon demand (or, if such overadvance was created as a result
of Lender’s adjustment of the advance rates for Availability or eligibility
criteria, then within five (5) Business Days, unless such adjustment by Lender
was the result of any misrepresentation or fraud of the Borrower, in which as
there shall be no grace period and any such overadvance shall be immediately due
and payable), whether or not a Default or Event of Default has occurred or is
continuing and shall be paid in the manner specified in Section 2.6.
Notwithstanding the foregoing, if Lender intentionally makes an Advance which is
in excess of Availability, such Advance shall be repaid within five (5) Business
Days of a demand for repayment or when it is otherwise required to be repaid
pursuant to other Sections of this Agreement. 

2.8    
Payments by Lender 

Should any amount required to be
paid under any Loan Document remain unpaid after it is due and payable and after
the expiration of any cure period, if applicable, such amount may be paid by
Lender, which payment shall be deemed a request for an Advance under the
Revolving Facility as of the date such payment is due, and Borrower irrevocably
authorizes disbursements of any such funds to Lender by way of direct payment of
the relevant amount, interest or Obligations. No payment or prepayment of any
amount by Lender or any other Person shall entitle any Person to be subrogated
to the rights of Lender under any Loan Document unless and until the Obligations
have been fully performed and paid irrevocably in cash and this Agreement has
been terminated. Any sums expended by Lender as a result of any Borrower’s or
any Guarantor’s failure to pay, perform or comply with any Loan Document or any
of the Obligations may be charged to Borrower’s account as an Advance under the
Revolving Facility and added to the Obligations and increase the principal
amount of the Revolving Loans outstanding hereunder. 

2.9    
Grant of Security Interest; Collateral 

(a)    
To secure the payment and performance of the Obligations, and without limiting
any grant of a Lien and security interest in any other Loan Document, the
Borrower hereby grants to Lender a continuing security interest in and Lien
upon, and pledges to Lender, all of its right, title and interest in and to the
personal property set forth on Schedule 2.9 attached hereto and made a
part hereof. 

24 




(b)    
Upon the execution and delivery of this Agreement, and upon the proper filing of
the necessary financing statements without any further action, Lender will have
a good, valid and perfected first priority Lien and security interest in all
Collateral which may be perfected by the filing of financing statements, subject
to no transfer or other restrictions or Liens of any kind in favor of any other
Person except for Permitted Liens. No financing statement relating to any of the
Collateral is on file in any public office except those (i) on behalf of Lender,
and/or (ii) in connection with Permitted Liens. 

2.10   
Collateral Administration 

(a)
All Collateral (except funds required to be deposited in the Lockbox Accounts)
will at all times be kept by Borrower at the locations (including warehouses)
set forth on Schedule 5.18 hereto and shall not, without concurrent
written notice to Lender, be moved therefrom and in any case shall not be moved
outside the continental United States. 

(b)
Borrower shall keep accurate and complete records of its Accounts and all
payments and collections thereon and shall submit such records to Lender on such
periodic basis as Lender may request. After the occurrence and during the
continuance of an Event of Default, and upon Lender’s request, Borrower shall
execute and deliver to Lender formal written assignments of all of its Accounts
weekly or daily as Lender may request, including all Accounts created since the
date of the last assignment, together with copies of invoices and/or other
information related thereto. To the extent that collections from such assigned
Accounts exceed the amount of the Obligations, such excess amount shall not
accrue interest in favor of Borrower, but shall be available to Borrower upon
Borrower’s written request. 

(c)
Any of Lender’s officers, employees, representatives or agents shall have the
right, at any time during normal business hours upon reasonable prior notice to
Borrower, to verify the validity, amount or any other matter relating to any
Accounts of Borrower. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude such verification. 

(d)
Lender shall have the right at all times after the occurrence and during the
continuance of an Event of Default to notify Account Debtors owing Accounts to
Borrower that their Accounts have been assigned to Lender and to collect such
Accounts directly in its own name and to charge collection costs and expenses,
including reasonable attorneys’ fees, to Borrower. 

(e)
As and when determined by Lender in its Permitted Discretion, Lender shall have
the right to perform the searches described in clauses (i) and (ii) below
against Borrower and Guarantors (the results of which are to be consistent with
Borrower’s representations and warranties under this Agreement), at Borrower’s
reasonable expense: (i) UCC searches with the Secretary of State and local
filing offices of each jurisdiction where Borrower maintains its executive
offices, a place of business or assets or in which they are organized; and (ii)
judgment and federal, state and local tax lien searches, in each jurisdiction
searched under clause (i) above. 

25 




(f)    
Borrower (i) shall provide prompt written notice to its current bank to transfer
all items, collections and remittances to the Concentration Account, (ii) shall
direct each Account Debtor to make payments to the Lockbox Account as set forth
in Section 2.5, and Borrower hereby authorizes Lender, upon any failure
to send such notices and directions within ten (10) calendar days after the date
of this Agreement (or ten (10) calendar days after the Person becomes an Account
Debtor), to send any and all similar notices and directions to such Account
Debtors, and (iii) shall do anything further that may be lawfully required by
Lender to secure Lender and effectuate the intentions of the Loan Documents.


(g)    
As of the Closing Date, no Borrower has any ownership interest in any Chattel
Paper (as defined in Article 9 of the UCC), letter of credit rights, commercial
tort claims, Instruments, documents or investment property (other than equity
interests in any Subsidiaries of such Borrower disclosed on Schedule 5.3)
and Borrowers shall give notice to Lender promptly (but in any event not later
than the delivery by Borrowers of the next Borrowing Certificate required
pursuant to Section 2.4 above) upon the acquisition by any Borrower of
any such Chattel Paper, letter of credit rights, commercial tort claims,
Instruments, documents, investment property. No Person other than any Lender has
“control” (as defined in Article 9 of the UCC) over any Deposit Account,
investment property (including securities accounts and commodities account),
letter of credit rights or electronic chattel paper in which any Borrower has
any interest (except for such control arising by operation of law in favor of
any bank or securities intermediary or commodities intermediary with whom any
Deposit Account, securities account or commodities account of Borrowers is
maintained). 

(h)   
 Borrowers will conduct a physical count of the Inventory at least twice
per year and at such other times as Lender requests, and Borrowers shall provide
to Lender a written accounting of such physical count in form and substance
satisfactory to Lender. Each Borrower will use commercially reasonable efforts
to at all times keep its Inventory in good and marketable condition. In addition
to the foregoing, from time to time, Lender may require Borrowers to obtain and
deliver to Lender appraisal reports in form and substance and from appraisers
reasonably satisfactory to Lender stating the then current fair market values of
all or any portion of Inventory owned by each Borrower or any Subsidiaries. 

(i)    
In addition to the foregoing, from time to time, Lender may require Borrowers to
obtain and deliver to Lender appraisal reports, at the Borrower’s expense, in
form and substance and from appraisers reasonably satisfactory to Lender stating
the then current Orderly Liquidation Values, as required by the Lender, and fair
market values of all or any portion of Inventory, Intellectual Property and
furniture, fixtures and equipment owned by each Borrower or any Subsidiaries.


(j)   
 Borrowers shall not adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any Account Debtor, or allow any credit
or discount thereon (other than adjustments, settlements, compromises, credits
and discounts in the ordinary course of business, made while no Default exists
and in amounts which are not material with respect to the Account and which,
after giving effect thereto, do not cause the Borrowing Base to be less than the
Revolving Loans outstanding) without the prior written consent of Lender.
Without limiting the generality of this Agreement or any other provisions of any
of the Loan Documents relating to the rights of Lender after the occurrence and
during the continuance of an Event of Default, Lender shall have the right at any time after
the occurrence and during the continuance of an Event of Default to: (i)
exercise the rights of Borrowers with respect to the obligation of any Account
Debtor to make payment or otherwise render performance to Borrowers and with
respect to any property that secures the obligations of any Account Debtor or
any other Person obligated on the Collateral, and (ii) adjust, settle or
compromise the amount or payment of such Accounts. 

26 





(k)    
Without limiting the generality of Sections 2.10(g) and (j): 

(A)    
Borrowers shall deliver to Lender all tangible Chattel Paper and all Instruments
and documents owned by any Borrower and constituting part of the Collateral duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to Lender. Borrowers shall provide Lender
with “control” (as defined in Article 9 of the UCC) of all electronic Chattel
Paper owned by any Borrower and constituting part of the Collateral by having
Lender identified as the assignee on the records pertaining to the single
authoritative copy thereof and otherwise complying with the applicable elements
of control set forth in the UCC. Borrowers also shall deliver to Lender all
security agreements securing any such Chattel Paper and securing any such
Instruments. Borrowers will mark conspicuously all such Chattel Paper and all
such Instruments and documents with a legend, in form and substance satisfactory
to Lender, indicating that such Chattel Paper and such instruments and documents
are subject to the security interests and Liens in favor of Lender created
pursuant to this Agreement and the Security Documents. 

(B)    
Borrowers shall deliver to Lender all letters of credit on which any Borrower is
the beneficiary and which give rise to letter of credit rights owned by such
Borrower which constitute part of the Collateral in each case duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Lender. Borrowers shall take any and all actions
as may be necessary or desirable, or that Lender may request, from time to time,
to cause Lender to obtain exclusive “control” (as defined in Article 9 of the
UCC) of any such letter of credit rights in a manner acceptable to Lender. 

(C)    
Borrowers shall promptly advise Lender upon any Borrower becoming aware that it
has any interests in any commercial tort claim that constitutes part of the
Collateral, which such notice shall include descriptions of the events and
circumstances giving rise to such commercial tort claim and the dates such
events and circumstances occurred, the potential defendants with respect such
commercial tort claim and any court proceedings that have been instituted with
respect to such commercial tort claims, and Borrowers shall, with respect to any
such commercial tort claim, execute and deliver to Lender such documents as
Lender shall request to perfect, preserve or protect the Liens, rights and
remedies of Lender with respect to any such commercial tort claim. 

(D)    
Except for Accounts and Inventory in an aggregate amount of $25,000, no Accounts
or Inventory or other Collateral shall at any time be in the possession or
control of any warehouse, consignee, bailee or any of Borrowers’ agents or
processors without prior written notice to Lender and the receipt by Lender, if
Lender has so requested, of warehouse receipts, consignment agreements or bailee
lien waivers (as applicable) satisfactory to Lender prior to the commencement of such possession or control;
provided, however, that for Collateral located at the Creekside
Springs, LLC facilities no such consent shall be required unless the value of
the Collateral exceeds $30,000 at any time; provided, further,
that for Collateral located at the Unix Packaging, Inc. facility the value of
the Collateral shall not exceed $250,000 at any time. Borrower has notified
Lender that Inventory is currently located at the locations set forth on Schedule 5.18. Borrowers shall, upon the request of Lender, notify any
such warehouse, consignee, bailee, agent or processor of the security interests
and Liens in favor of Lender created pursuant to this Agreement and the Loan
Documents, instruct such Person to hold all such Collateral for Lender’s account
subject to Lender’s instructions and shall obtain an acknowledgement from such
Person that such Person holds the Collateral for Lender’s benefit. 

27 





(E)    
Borrowers shall cause all equipment and other tangible Personal Property other
than Inventory to be maintained and preserved in the same condition, repair and
in working order as when new, ordinary wear and tear excepted, and shall
promptly make or cause to be made all repairs, replacements and other
improvements in connection therewith that are necessary or desirable to such
end. Upon request of Lender, Borrowers shall promptly deliver to Lender any and
all certificates of title, applications for title or similar evidence of
ownership of all such tangible Personal Property and shall cause Lender to be
named as lienholder on any such certificate of title or other evidence of
ownership. Borrowers shall not permit any such tangible Personal Property to
become fixtures to real estate unless such real estate is subject to a Lien in
favor of Lender. 

(F)    
Each Borrower acknowledges that Lender is authorized to file without the
signature of such Borrower one or more UCC financing statements relating to
liens on personal property relating to all or any part of the Collateral, which
financing statements may list Lender as the “secured party” and such Borrower as
the “debtor” and which describe and indicate the collateral covered thereby as
all or any part of the Collateral under the Loan Documents (including an
indication of the collateral covered by any such financing statement as “all
assets” of such Borrower now owned or hereafter acquired), in such jurisdictions
as Lender from time to time determines are appropriate, and to file without the
signature of such Borrower any continuations of or corrective amendments to any
such financing statements, in any such case in order for Lender to perfect,
preserve or protect the Liens, rights and remedies of Lender with respect to the
Collateral. Each Borrower also ratifies its authorization for Lender to have
filed in any jurisdiction any initial UCC financing statements or amendments
thereto if filed prior to the date hereof. 

(G)    
As of the Closing Date, no Borrower holds, and after the Closing Date Borrowers
shall promptly notify Lender in writing upon creation or acquisition by any
Borrower of, any Collateral which constitutes a claim against any Governmental
Authority, including, without limitation, the federal government of the United
States or any instrumentality or agency thereof, the assignment of which claim
is restricted by any applicable Law, including, without limitation, the federal
Assignment of Claims Act and any other comparable Law. If any Collateral at any
time constitutes a claim against a Governmental Authority, upon the request of
Lender, Borrowers shall take such steps as may be necessary or desirable, or
that Lender may request, to comply with any such applicable Law. 

28 




(H)    
Borrowers shall furnish to Lender from time to time any statements and schedules
further identifying or describing the Collateral and any other information,
reports or evidence concerning the Collateral as Lender may reasonably request
from time to time. 

2.11    Power
of Attorney 

Lender is hereby irrevocably
made, constituted and appointed the true and lawful attorney-in-fact for
Borrower (without requiring Lender to act as such) with full power of
substitution to do the following: (i) upon the occurrence and during the
continuance of an Event of Default, endorse the name of the Borrower upon any
and all checks, drafts, money orders, and other instruments for the payment of
money that are payable to Borrower and constitute collections on its Accounts;
(ii) upon the occurrence and during the continuance of Event of Default, execute
in the name of Borrower any financing statements, schedules, assignments,
instruments, documents, and statements that it is obligated to give Lender under
any of the Loan Documents; (iii) upon the occurrence and during the continuance
of an Event of Default, do such other and further acts and deeds in the name of
Borrower that Lender may reasonably deem necessary or desirable to enforce any
Account or other Collateral including, without limitation, (a) demand, collect,
receive for and give renewals, extensions, discharges and releases of any
Account, (b) take possession of and liquidate any Account, (c) institute and
prosecute legal and equitable proceedings to realize upon any Account, and (d)
settle, compromise, compound or adjust claims in respect of any Account or any
legal proceedings brought in respect thereof; (iv) upon the occurrence and
during the continuance of an Event of Default, in the name of Borrower, notify
the Post Office authorities to change the address for the delivery of mail
addressed to Borrower to such address as Lender may designate (notwithstanding
the foregoing, for the purposes of notice and service of process to or upon
Borrower as set forth in this Agreement, Lender’s rights to change the address
for the delivery of mail shall not give Lender the right to change the address
for notice and service of process to or upon Borrower in this Agreement); (v)
perfect Lender’s security interest or lien in any Collateral, (vi) engage, on
behalf of Borrower, a third party to service and collect Borrower’s receivables,
including billing and rebilling third party payors, and (vii) sign IRS Forms W-9
on behalf of Borrower reflecting Borrower’s address as the address of the
Lockboxes established pursuant to Section 2.5 and deliver such Forms to
third party payors on the Borrower’s Accounts. In addition, if Borrower breaches
its obligation hereunder to direct payments of Accounts or the proceeds of any
other Collateral to the Lockbox Account, Lender, as the irrevocably made,
constituted and appointed true and lawful attorney for Borrower pursuant to this
paragraph, may by the signature or other act of any of Lender’s officers or
authorized signatories (without requiring any of them to do so), direct any
federal, state or private payor or fiscal intermediary to pay proceeds of
Accounts or any other Collateral to the Lockbox Account. The appointment of
Lender as attorney-in-fact for Borrower is coupled with an interest and is
irrevocable. 

2.12    Setoff
Rights 

During the continuance of any
Event of Default, Lender is hereby authorized by Borrower at any time or from
time to time, with reasonably prompt subsequent notice to Borrower (any prior or
contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (a) balances held by Lender or any of
Lender’s Affiliates for the account of Borrower or any of its Subsidiaries (regardless
of whether such balances are then due to Borrower or its Subsidiaries), and (b)
other property at any time held or owing by Lender to or for the credit or for
the account of Borrower or any of its Subsidiaries, against and on account of
any of the Obligations. 

29 






	III. 	
      FEES AND OTHER CHARGES



3.1    
Facility Fee 

On or before the Closing Date,
Borrower shall pay to Lender one percent (1.0%) of the Revolving Loan Commitment
Amount as a nonrefundable and fully earned closing fee (the “Facility
Fee”). 

3.2    
Unused Line Fee 

Borrower shall pay to Lender
monthly an unused line fee (the “Unused Line Fee”) in an amount equal to
one-twelfth of one percent (0.083%) per month of the difference derived by
subtracting (i) the average daily outstanding balance under the Revolving
Facility during the preceding month, from (ii) the Revolving Loan Commitment
Amount. The Unused Line Fee shall be payable monthly in arrears but in no event
later than the first Business Day of each successive calendar month (starting
with March 1, 2017). Payment of the Unused Line Fee may be made, at the
discretion of Lender: (i) by application of available funds in the Concentration
Account pursuant to Section 2.5, (ii) by application of Advances under
the Revolving Facility pursuant to Section 2.1, or (iii) directly by
Borrower. 

3.3    
Collateral Management Fee 

Borrower shall pay Lender as
additional interest a monthly collateral management fee (the “Collateral
Management Fee”) for monitoring and servicing the Revolving Facility, equal
to thirty-five hundredths of one percent (0.35%) per month calculated on the
basis of the average daily balance under the Revolving Facility outstanding
during the preceding month. The Collateral Management Fee shall be payable
monthly in arrears but in no event later than the first Business Day of each
successive calendar month (starting with March 1, 2017). Payment of the
Collateral Management Fee may be made, at the discretion of Lender: (i) by
application of available funds in the Concentration Account pursuant to
Section 2.5, (ii) by application of Advances under the Revolving Facility
pursuant to Section 2.1, or (iii) directly by Borrower. The final payment
shall be prorated to the date of payment in full and shall be paid on that date
as part of the Obligations. 

3.4    
Early Termination Fees 

Upon a Revolving Facility
Termination, Borrower shall pay Lender (in addition to the then outstanding
principal, accrued interest and other Obligations (other than indemnity
obligations with respect to which no claim has been made) relating to the
Revolving Facility pursuant to the terms of this Agreement and any other Loan
Documents), as yield maintenance for the loss of bargain and not as a penalty,
an amount equal to the applicable Termination Fee. Notwithstanding any other
provision of any Loan Document, no Termination Fee as described above shall be
due and payable if (i) Borrower refinances the Obligations with Lender (which,
for purposes hereof, shall include Lender, and any of
its parents, subsidiaries or Affiliates), (ii) this Agreement terminates in
accordance with its terms at the end of its Term, or (iii) Borrower terminates
this Agreement within 10 days after Borrower provides written notice to Lender
of a default by Lender hereunder, and such default by Lender remains uncured as
of the date of such termination. 

30 





3.5    
Computation of Fees; Lawful Limits 

All fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed in each calculation period, as applicable. In no contingency or event
whatsoever, whether by reason of acceleration or otherwise, shall the interest
and other charges paid or agreed to be paid to Lender for the use, forbearance
or detention of money hereunder exceed the maximum rate permissible under
applicable law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If, due to any circumstance whatsoever,
fulfillment of any provision hereof, at the time performance of such provision
shall be due, shall exceed any such limit, then, the obligation to be so
fulfilled shall be reduced to such lawful limit, and, if Lender shall have
received interest or any other charges of any kind which might be deemed to be
interest under applicable law in excess of the maximum lawful rate, then such
excess shall be applied first to any unpaid fees and charges hereunder, then to
unpaid principal balance owed by Borrowers hereunder, and if the then remaining
excess interest is greater than the previously unpaid principal balance, Lender
shall promptly refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate. The terms and
provisions of this Section shall control to the extent any other provision of
any Loan Document is inconsistent herewith. 

3.6    
Default Rate of Interest 

Upon the occurrence and during
the continuation of an Event of Default, the Applicable Rate of interest in
effect at such time with respect to the Obligations shall be increased by 5% per
annum (the “Default Rate”). Such increase shall be in addition to any
other specific charges provided for herein for noncompliance with specific
provisions of this Agreement. 

3.7    
Acknowledgement of Joint and Several Liability 

(a)    
Each Borrower is accepting joint and several liability hereunder and under the
other Loan Documents in consideration of the financial accommodations to be
provided by the Lender under this Agreement, for the mutual benefit, directly
and indirectly, of such Borrower and in consideration of the undertakings of
each other Borrower to accept joint and several liability for the Obligations.


(b)    
Each Borrower, jointly and severally, hereby irrevocably and unconditionally
accepts, not merely as surety but also as a co-debtor, joint and several
liability with the other Borrowers, with respect to the performance of all of
the Obligations (including, without limitation, any Obligations arising under
this Section 3.7), it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of the Borrowers
without preference or distinction among them and that all of the
representations, warranties, covenants, obligations, conditions, agreements and other terms
contained in the Loan Documents shall be applicable to and be binding upon each
Borrower. 

31 





(c)   
 If and to the extent that any Borrower shall fail to make any payment with
respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event each
other Borrower will make such payment with respect to, or perform, such
Obligation. 

(d)   
 The Obligations of any Borrower under the provisions of this Section
3.7 constitute the full recourse Obligations of such Borrower enforceable
against such Borrower to the full extent of its properties and assets,
irrespective of the validity, regularity or enforceability of this Agreement or
the other Loan Documents or any other circumstance whatsoever as to any other
Borrower. 

(e)    
Except as otherwise expressly provided herein, each Borrower hereby waives
promptness, diligence, presentment, demand, protest, notice of acceptance of its
joint and several liability, notice of any and all Advances under the Revolving
Facility, notice of occurrence of any Default or Event of Default (except to the
extent notice is expressly required to be given pursuant to the terms of this
Agreement or any of the Loan Documents), or of any demand for any payment under
this Agreement, notice of any action at any time taken or omitted by Lender or
under or in respect of any of the Obligations hereunder, any requirement of
diligence and, generally, all demands, notices and other formalities of every
kind in connection with this Agreement and other Loan Documents. Each Borrower
hereby waives all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any right
to require the marshaling of assets of such Borrower and any other entity or
Person primarily or secondarily liable with respect to any of the Obligations,
and all suretyship defenses generally. Each Borrower hereby assents to, and
waives notice of, any extension or postponement of the time for the payment, or
place or manner for payment, compromise, refinancing, consolidation or renewals
of any of the Obligations hereunder, the acceptance of any partial payment
thereon, any waiver, consent or other action or acquiescence by Lender at any
time or times in respect of any default by such Borrower in the performance or
satisfaction of any term, covenant, condition or provision of this Agreement and
the other Loan Documents, any and all other indulgences whatsoever by Lender in
respect of any of the Obligations hereunder, and the taking, addition,
substitution or release, in whole or in part, of such Borrower or any other
entity or Person primarily or secondarily liable for any Obligation. Each
Borrower further agrees that its Obligations shall not be released or
discharged, in whole or in part, or otherwise affected by the adequacy of any
rights which the Lender may have against any collateral security or other means
of obtaining repayment of any of the Obligations, the impairment of any
collateral security securing the Obligations, including, without limitation, the
failure to protect or preserve any rights which Lender may have in such
collateral security or the substitution, exchange, surrender, release, loss or
destruction of any such collateral security, any other act or omission which
might in any manner or to any extent vary the risk of such Borrower, or
otherwise operate as a release or discharge of such Borrower, all of which may
be done without notice to such Borrower; provided, however, that the foregoing
shall in no way be deemed to create commercially unreasonable standards as to
Lender’s duties as secured party under the Loan Documents (as such rights and
duties are set forth therein). If for any reason any Borrower has no legal
existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from any Borrower by reason of any insolvency, bankruptcy or
reorganization or by other operation of law or for any reason, this Agreement
and the other Loan Documents to which it is a party shall nevertheless be
binding on each other Borrower to the same extent as if such Borrower at all
times had been the sole obligor on such Obligations. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of Lender, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder
which might, but for the provisions of this Section 3.7, afford grounds
for terminating, discharging or relieving such Borrower, in whole or in part,
from any of its obligations under this Section 3.7, it being the
intention of such Borrower that, so long as any of the Obligations hereunder
remain unsatisfied, the obligations of such Borrower under Section 3.7 shall not be discharged except by performance and then only to the extent of
such performance. The Obligations of each Borrower under this Section 3.7 shall not be diminished or rendered unenforceable by any winding up,
reorganization, amalgamation, arrangement, liquidation, reconstruction or
similar proceeding with respect to any other Borrower or the Lender. The joint
and several liability of each Borrower hereunder shall continue in full force
and effect notwithstanding any absorption, merger, amalgamation or any other
change whatsoever in the name, ownership, membership, constitution or place of
formation of such Borrower or the Lender. Each Borrower acknowledges and
confirms that it has established its own adequate means of obtaining from each
other Borrower on a continuing basis all information desired by such Borrower
concerning the financial condition of each other Borrower and that such Borrower
will look to each other Borrower and not to Lender for Borrower to keep
adequately informed of changes in each of the other Borrowers’ respective
financial conditions. 

32 





(f)   
 Each Borrower acknowledges that all or any portion of the Obligations may
now or hereafter be secured by a Lien or Liens upon property of such Borrower.
Lender may foreclose under all or any portion of one or more said Liens by means
of judicial or nonjudicial sale or sales. Each Borrower agrees that Lender may
exercise whatever rights and remedies it may have in respect to said security,
all without affecting the liability of such Borrower hereunder, except to the
extent Lender realizes payment by such action or proceeding. No election to
proceed in one form of action or against any party, or on any obligation shall
constitute a waiver of Lender’s right to proceed in any other form of action or
against any Borrower or other Person, or diminish the liability of any Borrower,
or affect the right of Lender to proceed against Borrower for any deficiency,
except to the extent Lender realizes payment by such action, notwithstanding the
effect of such action upon any Borrower’s rights of subrogation, reimbursement
or indemnity, if any, against any other Borrower or any other person. 

(g)   
 The provisions of this Section 3.7 are made for the benefit of the
Lender and its permitted successors and assigns, and may be enforced by it from
time to time against any or all of the Borrowers as often as occasion may arise
without requirement on the part of Lender or such successor or assign first to
marshal any of its claims or to exercise any of its rights against any other
Borrower or to exhaust any remedies available to it against any other Borrower
or to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. The provisions of this
Section 3.7 shall remain in effect until all of the Obligations shall
have been paid in full or otherwise fully satisfied. If at any time, any
payment, or any part thereof, made in respect of any of the Obligations, is
rescinded or must otherwise be restored or returned by Lender upon the
insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the
provisions of this Section 3.7 will forthwith be reinstated in effect, as
though such payment had not been made. 

33 





(h)   
 Each Borrower hereby agrees that it will not enforce any of its rights of
reimbursement, contribution, subrogation or the like against any other Borrower
with respect to any liability incurred by it hereunder or under any of the other
Loan Documents, any payments made by it to Lender with respect to any of the
Obligations or any collateral security therefor until such time as all of the
Obligations have been indefeasibly satisfied. Any claim which any Borrower may
have against any other Borrower with respect to any payments to Lender hereunder
or under other Loan Documents are hereby expressly made subordinate and junior
in right of payment, without limitation as to any increases in the Obligations
arising hereunder or thereunder, to the prior payment in full of the Obligations
and, in the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceeding under the laws of any jurisdiction
relating to such Borrower, its debts, or its assets, whether voluntary or
involuntary, all such Obligations shall be paid in full before any payment or
distribution of any character, whether in cash, securities or other property,
shall be made to any other Borrower therefor. 

(i)    
Each Borrower hereby agrees that the payment of any amounts due with respect to
the indebtedness owing by any Borrower to any other Borrower is hereby
subordinated to the prior payment in full in cash of the Obligations. Borrower
hereby agrees that after the occurrence and during the continuance of any
Default or Event of Default, each Borrower will not demand, sue for or otherwise
attempt to collect any indebtedness of any other Borrower owing to any Borrower
until the Obligations shall have been paid in full in cash. If, notwithstanding
the foregoing sentence, any Borrower shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by such Borrower as trustee for Lender and be paid over to
Lender to be applied to repay the Obligations. 

	IV. 	
      CONDITIONS PRECEDENT



4.1    
Conditions to Closing and Advances 

The obligations of Lender to
consummate the transactions contemplated herein and to make any Advance under
the Revolving Facility are subject to the satisfaction (or waiver), in the sole
judgment of Lender, of the following: 

(a)    
Each Borrower shall have delivered to Lender: 

(i)    
the Loan Documents to which it is a party, each duly executed by an authorized
officer of Borrower and any other parties thereto; 

(ii)   
a Closing Certificate certifying to the organizational documents of Borrower,
the good standing or existence of Borrower in its jurisdiction of organization,
the adoption of resolutions approving the Loans and the incumbency of its
authorized officers; 

34 




(iii)  
a Borrowing Certificate in the form of Exhibit A executed by an
authorized officer of Borrower, 

(b)    
Each Guarantor shall have duly executed and delivered to Lender a Guaranty
Agreement, and each Guarantor who is an equity owner of any Borrower shall have
delivered to Lender a pledge of such Guarantor’s equity interest in such
Borrower as security for the payment of the Obligations; 

(c)    
Legal counsel to each Borrower and each Guarantor shall have delivered to Lender
a written legal opinion, in form and substance satisfactory to Lender and its
counsel; 

(d)    
Each Borrower shall have delivered to Lender all applicable Landlord Waivers and
Consents; 

(e)    
Each Borrower shall have executed and delivered to Lender an IRS Form 8821 in
form acceptable to Lender naming Tax Guard as appointee; 

(f)   
 Lender shall have received (i) copies of all insurance policies required
by Section 6.5, (ii) a copy of the declarations page for such insurance
policies, and (iii) certificates of insurance and applicable endorsements
confirming that the Lender has been named as sole beneficiary, lender’s loss
payable or additional insured, as appropriate; 

(g)    
Each Borrower shall have provided Lender with all information (including,
including without limitation, user identifications and passwords) necessary for
Lender to have on-line access to view all information regarding all of the
Borrowers’ bank accounts; 

(h)    
Each Borrower shall have provided evidence satisfactory to Lender of such
Borrower’s compliance with the requirements of Section 6.14 (relating to
tracking of payroll tax payments); 

(i)    
Lender shall have received each document (including, without limitation, any
Uniform Commercial Code financing statement) required by any Loan Documents or
under law or requested by Lender to be filed, registered or recorded to create
in favor of Lender, a perfected first priority security interest upon the
Collateral, including, without limitation, deposit account control agreements
with respect to all of Borrower’s deposit accounts; 

(j)    
Lender shall have received, in form and substance satisfactory to Lender, (i)
payoff letters for all existing indebtedness secured by the Collateral, (ii)
evidence of the repayment in full of all existing indebtedness secured by the
Collateral and termination of any and all Liens, security interests and Uniform
Commercial Code financing statements relating thereto, or (iii) in the sole
discretion of Lender, such existing indebtedness is (A) expressly subordinated
to the Obligations of Borrower hereunder pursuant to a Subordination Agreement
acceptable in form and substance to Lender, (B) matures subsequent to the
Commitment Expiration Date, (C) does not require any payment other than interest
during the Term, and (D) will receive no payments following an Event of Default
under this Agreement; 

35 




(k)    
Borrower shall have established Lockbox Accounts and Lender shall have received
Lockbox Agreements, all in accordance with Section 2.5; 

(l)     Lender shall
  have received a list of outstanding checks drawn on the JPMorgan Accounts as of
  the Closing Date;

 (m)     Lender shall have: 

(i)    
completed its examinations, the results of which shall be satisfactory in form
and substance to Lender, of the Collateral, the financial statements and the
books, records, business, obligations, financial condition and operational state
of each Borrower and Guarantor, and each such Person shall have demonstrated to
Lender’s satisfaction that (i) its operations comply, in all material respects,
with all applicable federal, state, foreign and local laws, statutes and
regulations, except where the failure to comply would not reasonably be expected
to have a Material Adverse Effect, 


(ii)    its operations are not the subject of any governmental
investigation, evaluation or any remedial action which could reasonably be
expected to result in any Material Adverse Effect, and (iii) it has no liability
(whether contingent or otherwise) that would reasonably be expected to have a
Material Adverse Effect; (ii) completed its legal due diligence examinations of
each Borrower, the results of which shall be satisfactory in form and substance
to Lender, as evidenced by Lender’s execution of the Loan Documents; 

(iii)  
completed a background check of the principals of each Borrower and all
Guarantors and the results of such background checks are satisfactory to Lender
in its sole discretion; 

(iv)     received a report of Uniform Commercial Code
  financing statement, tax and judgment lien searches performed with respect to
  each Borrower and each Guarantor in each jurisdiction determined by Lender in
  its Permitted Discretion, and such report shall show no Liens on the Collateral
  (other than Permitted Liens and Liens that will be terminated within five (5)
  Business Days after the Closing Date); 

(v)    
received all fees, charges and expenses payable to Lender on or prior to the
date of the Advance pursuant to the Loan Documents; 

(n)    
All corporate and other proceedings, documents, instruments and other legal
matters in connection with the transactions contemplated by the Loan Documents
shall be satisfactory to Lender; 

(o)    
Each of the representations and warranties made by each Borrower in or pursuant
to this Agreement shall be accurate in all material respects on and as of the
date the Advance is requested as if made on and as of such date, before and
after giving effect to such Advance; and no Default or Event of Default shall
have occurred and be continuing or would exist after giving effect to the
Advance under the Revolving Facility on such date; 

(p)    
(i) No default shall exist pursuant to any Borrower’s obligations under any
material contract and each Borrower shall be in compliance with all applicable
laws in all material respects, in each case except to the extent such
failure would not reasonably be expected to have a Material Adverse Effect, and
(ii) each Borrower has no accounts payable or taxes payable that have been
outstanding for more than 90 days, or to the extent that such accounts payable
or taxes payable exist, each Borrower shall provide to Lender written evidence
(satisfactory to Lender in its sole discretion) from such account creditors
and/or taxing authorities of payment plans with respect thereto; 

36 





(q)   
 Immediately after giving effect to the requested Advance, the aggregate
outstanding principal amount of Advances under the Revolving Facility shall not
exceed the Revolving Loan Limit; 

(r)    
No event has occurred which has had or would reasonably be expected to have a
Material Adverse Effect; 

(s)    
Lender shall have received such other documents, certificates, information or
legal opinions as Lender may reasonably request, all in form and substance
reasonably satisfactory to Lender. 

4.2    
Post-Closing Requirements 

The obligation of Lender to make
any Advance under the Revolving Facility is subject to the Borrower taking, in
the sole judgment of Lender, the actions identified below by the dates
indicated. 

(a)    
No later than sixty (60) calendar days following the Closing Date, Lender shall
have received a file stamped copy of an amendment to TAWC’s Articles of
Incorporation from the Nevada Secretary of State reflecting that the terms of
the Series B Convertible Preferred Stock have been amended in form and substance
satisfactory to Lender; 

(b)   
 No later than forty-five (45) calendar days following the Closing Date,
Lender shall have received a completed background check on David Guarino in form
and substance satisfactory to Lender; 

(c)    
No later than thirty (30) calendar days following the Closing Date, Lender shall
have received evidence in form and substance satisfactory to Lender that any
Collateral maintained at any of the Creekside Springs, LLC facilities has been
moved to the Central Carolina Bottling Company, Inc. d/b/a Grand Springs
facilities; 

(d)    
No later than thirty (30) calendar days following the Closing Date, Lender shall
have received evidence in form and substance satisfactory to Lender that the
JPMorgan Accounts have been closed; and 

(e)    
No later than March 3, 2017, Lender shall have received evidence in form and
substance satisfactory to Lender that (i) an order of dismissal has been entered
in the Richard Miller v. Alkaline Water Company Inc., et al, Los Angeles
Superior Court Case No. BC623490 and (ii) the final settlement payment due on
February 28, 2017 in the amount of $23,000 has been made to Richard Miller. 

37 





	V. 	
      REPRESENTATIONS AND
WARRANTIES



In order to induce Lender to
enter into this Agreement and to advance funds to the Borrowers, each Borrower
represents and warrants as of the date hereof, the Closing Date, and each
Borrowing Date as follows: 

5.1    
Organization and Authority 

Each Credit Party is an entity of
the type specified on Schedule 5.1, is duly organized, validly existing
and in good standing or existence under the laws of the jurisdiction specified
on Schedule 5.1 and no other jurisdiction. Each Credit Party (i) has all
requisite corporate power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in the Loan
Documents, (ii) is duly qualified to do business in every jurisdiction in which
failure so to qualify would reasonably be expected to have a Material Adverse
Effect, and (iii) has requisite power and authority (A) to execute, deliver and
perform the Loan Documents to which it is a party and all amendments thereto,
(B) to borrow hereunder, (C) to consummate the transactions contemplated under
the Loan Documents, and (D) to grant the Liens with regard to the Collateral
pursuant to the Loan Documents to which it is a party. No Credit Party is an
“investment company” registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is any Credit Party controlled
by or a subsidiary of such an “investment company.” 

5.2    
Loan Documents 

The execution, delivery and
performance by each Credit Party of the Loan Documents to which it is a party,
and the consummation of the transactions contemplated thereby, including the
grants of Liens and security interests in the Collateral, (i) have been duly
authorized by all requisite action of the appropriate Credit Party and have been
duly executed and delivered by or on behalf of such Credit Party; (ii) do not
violate any provisions of (A) applicable law, statute, rule, regulation,
ordinance or tariff, (B) any order of any Governmental Authority binding on any
Credit Party or any of the Credit Parties’ respective properties the effect of
which would reasonably be expected to have a Material Adverse Effect, or (C) the
certificate of incorporation or bylaws (or any other equivalent governing
agreement or document) of each Credit Party, or any agreement between any Credit
Party and its shareholders, members, partners or equity owners or among any such
shareholders, members, partners or equity owners; (iii) are not in conflict
with, and do not result in a breach or default of or constitute an Event of
Default, or an event, fact, condition, breach, Default or Event of Default
under, any indenture, agreement or other instrument to which any Credit Party is
a party, or by which the properties or assets of any Credit Party are bound, the
effect of which would reasonably be expected to have a Material Adverse Effect;
(iv) except as set forth therein, will not result in the creation or imposition
of any Lien of any nature upon any of the properties or assets of any Credit
Party, and (v) do not require the consent, approval or authorization of, or
filing, registration or qualification with, any Governmental Authority or Credit
Party unless otherwise obtained. When executed and delivered, each of the Loan
Documents to which each Credit Party is a party will constitute the legal, valid
and binding obligation of the respective Credit Party, enforceable against such
Credit Party in accordance with its terms. 

38 




5.3    
Subsidiaries, Capitalization and Ownership Interests 

As of the date of this Agreement,
each Credit Party has no Subsidiaries other than those Persons listed as
Subsidiaries on Schedule 5.3, each of which is a Credit Party.
Schedule 5.3 also states the authorized and issued capitalization of each
Credit Party and each subsidiary, the number and class of equity securities
and/or ownership, voting or partnership interests issued and outstanding of
Borrower and the record and beneficial owners thereof (including options,
warrants and other rights to acquire any of the foregoing). No options, warrants
or other rights to acquire equity securities and/or ownership, voting or
partnership interests of Borrower have any call, put or other features that
would obligate Borrower to declare or pay cash dividends, make cash
distributions or otherwise make any cash payment to any Person. The ownership
interests of each Credit Party that is a limited partnership or a limited
liability company are certificated, the documents relating to such interests
expressly state that the interests are governed by Article 8 of the Uniform
Commercial Code, and the interests are not held in a securities account. The
outstanding equity securities and/or ownership, voting or partnership interests
of each Credit Party have been duly authorized and validly issued and are fully
paid and nonassessable, and each Person listed on Schedule 5.3 owns
beneficially and of record all of the equity securities and/or ownership, voting
or membership interests it is listed as owning free and clear of any Liens other
than Liens created by the Loan Documents. Except as listed on Schedule
5.3, no Credit Party owns an interest in or participates or engages in any
joint venture, partnership or similar arrangements with any Persons. 

5.4    
Properties 

Each Borrower (i) is the sole
owner and has good, valid and marketable title to, or a valid leasehold interest
in, all of its material properties and assets, including the Collateral, whether
personal or real, subject to no transfer restrictions or Liens of any kind
except for Permitted Liens, and (ii) is in compliance in all material respects
with each lease to which it is a party or otherwise bound except for such
noncompliance as would not reasonably be expected to have a Material Adverse
Effect. Schedule 5.4 lists all real properties (and their locations)
owned or leased by or to each Borrower. Each Borrower enjoys peaceful and
undisturbed possession under all such leases and such leases are all the leases
necessary for the operation of such properties and assets, are valid and
subsisting and are in full force and effect. 

5.5    
Other Agreements 

No Credit Party is (i) a party to
any judgment, order or decree or any agreement, document or instrument, or
subject to any restriction, which would materially adversely affect its ability
to execute and deliver, or perform under, any Loan Document or to pay the
Obligations, (ii) in default in the performance, observance or fulfillment of
any obligation, covenant or condition contained in any agreement, document or
instrument to which it is a party or to which any of its properties or assets
are subject, which default, if not remedied within any applicable grace or cure
period would reasonably be expected to have a Material Adverse Effect, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both; would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period would reasonably be expected to have a Material
Adverse Effect; or (iii) a party or subject to any agreement, document or instrument with respect to, or obligation to pay
any, service or management fee to a third party (other than Affiliates) with
respect to, the ownership, operation, leasing or performance of any of its
business or any facility, nor is there any manager with respect to any such
facility. 

39 





5.6   
 Litigation 

Except as set forth on
Schedule 5.6, there is no action, suit, proceeding or investigation
pending or, to any Credit Party’s knowledge, threatened against a Credit Party
that (i) could reasonably be expected to affect the validity of any of the Loan
Documents or the right of a Borrower to enter into any Loan Document or to
consummate the transactions contemplated thereby or (ii) could reasonably be
expected to be or have, either individually or in the aggregate, any Material
Adverse Change or Material Adverse Effect. No Credit Party is a party or subject
to any order, writ, injunction, judgment or decree of any Governmental Authority
that could reasonably be expected to have a Material Adverse Effect. There is no
action, suit, proceeding or investigation initiated with respect to any Credit
Party currently pending. 

5.7    
Labor Matters 

As of the Closing Date, there are
no strikes, slowdowns, work stoppages, lockouts, grievances, other collective
bargaining or labor related disputes pending or, to any Borrower’s knowledge,
threatened against any Credit Party. Hours worked and payments made to the
employees of the Credit Parties have not been in violation of the Fair Labor
Standards Act or any other applicable Law dealing with such matters. No Credit
Party is engaged in unfair labor practice, and there is no unfair labor
practice, complaint or complaint of employment discrimination pending against
any Credit Party or threatened against any Credit Party. All payments due from
the Credit Parties, or for which any claim may be made against any of them, on
account of wages and employee and retiree health and welfare insurance and other
benefits have been paid or accrued as a liability on their books, as the case
may be. Each Credit Party and each of its predecessors and Affiliates has
complied and is in compliance with all Laws pertaining to any terms or
conditions of employment, including Laws governing or regarding employment
standards, labor relations, application and employee background checking,
immigration, the payment of wages or other compensation, including overtime
compensation, employee leave, employee benefits, the classification of workers
as employees and independent contractors, employment discrimination and
harassment and retaliation, pay equity, occupational safety and health, workers’
compensation, and any and all other Laws governing or pertaining to the terms
and conditions of employment. The provisions of any collective agreement are
consistent with applicable industry standards respecting wage rates, benefits
and working rules. The Borrower is not in breach of any provision of any
collective agreement that it is a party to. The consummation of the transactions
contemplated by the Loan Documents will not give rise to a right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which it is a party or by which it is bound. 

40 




5.8    
Compliance with Environmental Requirements; No Hazardous Substances 

Except in each case as set forth
on Schedule 5.8: 

(a)    
no investigation, proceeding, directive, notice, notification, demand, request
for information, citation, summons, complaint or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending, or to such Borrower’s knowledge, threatened by any
Governmental Authority or other Person with respect to any (i) alleged violation
by any Credit Party of any Environmental Law, (ii) alleged failure by any Credit
Party to have any Permits required in connection with the conduct of its
business or to comply with the terms and conditions thereof, (iii) any
generation, treatment, storage, recycling, transportation or disposal of any
Hazardous Substances, or (iv) release of Hazardous Substances; 

(b)    
no property now owned or leased by any Credit Party and, to the knowledge of
each Borrower, no such property previously owned or leased by any Credit Party,
to which any Credit Party has, directly or indirectly, transported or arranged
for the transportation of any Hazardous Substances, is listed or, to such
Borrower’s knowledge, proposed for listing, on the National Priorities List
promulgated pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar
state list or is the subject of federal, state or local enforcement actions or,
to the knowledge of such Borrower, other investigations which may lead to claims
against any Credit Party for clean-up costs, remedial work, damage to natural
resources or personal injury claims, including, without limitation, claims under
CERCLA; 

(c)    
each Credit Party and its business, operations, assets, equipment, property,
leaseholds and other facilities is in compliance in all material respects with
all Environmental Laws, specifically including all Environmental Laws concerning
the storage and handling of Hazardous Substances; and 

(d)   
 there has been no material emission, spill, release, or discharge into or
upon (i) the air; (ii) soils, or any improvements located thereon; (iii) surface
water or groundwater; or (iv) the sewer, septic system or waste treatment,
storage or disposal system servicing the premises, of any Hazardous Substances
at or from any of the real property listed on Schedule 5.4. 

For purposes of this Section
5.8, each Credit Party shall be deemed to include any business or business
entity (including a corporation) that is, in whole or in part, a predecessor of
such Credit Party. 

5.9    
Tax Returns, Governmental Reports 

Each Credit Party (i) has filed
all material federal, state, foreign (if applicable) and local tax returns and
other reports which are required by law to be filed by such Credit Party, and
(ii) has paid all taxes, assessments, fees and other governmental charges,
including, without limitation, payroll and other employment related taxes, in
each case that are due and payable. 

41 




5.10   
Financial Statements and Reports 

All financial information and
statements relating to any Credit Party that have been or may hereafter be
delivered to Lender by any Credit Party are accurate and complete in all
material respects as of such date of delivery and have been prepared in
accordance with GAAP, except as may be disclosed in such financial statements,
consistently applied with prior periods. No Credit Party has any material
obligations or liabilities of any kind not disclosed in such financial
information or statements, and since the date of the most recent financial
statements submitted to Lender, there has not occurred any Material Adverse
Change, Material Adverse Effect or, to Borrower’s knowledge, any other event or
condition that would reasonably be expected to have a Material Adverse
Effect. 

5.11   
Compliance with Law 

Each Borrower (i) is in
substantial compliance with all laws, statutes, rules, regulations, ordinances
and tariffs of any Governmental Authority applicable to such Borrower and/or
such Borrower’s business, assets or operations, including, without limitation,
ERISA, and (ii) is not in violation of any order of any Governmental Authority
or other board or tribunal, in each case except where noncompliance or violation
would not reasonably be expected to have a Material Adverse Effect. There is no
event, fact, condition or circumstance which, with notice or passage of time, or
both, would constitute or result in any noncompliance with, or any violation of,
any of the foregoing, in each case except where noncompliance or violation would
not reasonably be expected to have a Material Adverse Effect. No Borrower has
received any notice that it is not in compliance in any respect with any of the
requirements of any of the foregoing. No Credit Party has (a) engaged in any
Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder, (b) failed to meet any applicable minimum funding
requirements under Section 302 of ERISA in respect of its plans and no such
funding requirements have been postponed or delayed, (c) any knowledge of any
event or occurrence which would cause the Pension Benefit Guaranty Corporation
to institute proceedings under Title IV of ERISA to terminate any of the
employee benefit plans, (d) any fiduciary responsibility under ERISA for
investments with respect to any plan existing for the benefit of Persons other
than its employees or former employees, or (e) withdrawn, completely or
partially, from any multi-employer pension plans so as to incur liability under
the MultiEmployer Pension Plan Amendments of 1980. With respect to each Credit
Party, there exists no event described in Section 4043 of ERISA, excluding
Subsections 4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) day
notice period contained in 12 C.F.R. § 26153 has not been waived. Each ERISA
Plan (and the related trusts and funding agreements) complies in form and in
operation with, has been administered in compliance with, and the terms of each
ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all
material respects. Each ERISA Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified, and the United States Internal
Revenue Service has issued a favorable determination letter with respect to each
such ERISA Plan which may be relied on currently. No Credit Party has incurred
liability for any material excise tax under any of Sections 4971 through 5000 of
the Code. 

42 




5.12   
Intellectual Property 

Each Credit Party owns, is
licensed to use or otherwise has the right to use, all Intellectual Property
that is material to the condition (financial or other), business or operations
of such Credit Party. All Intellectual Property existing as of the Closing Date
which is issued, registered or pending with any United States or foreign
Governmental Authority (including, without limitation, any and all applications
for the registration of any Intellectual Property with any such United States or
foreign Governmental Authority) and all licenses under which any Borrower is the
licensee of any such registered Intellectual Property (or any such application
for the registration of Intellectual Property) owned by another Person are set
forth on Schedule 5.12. Such Schedule 5.12 indicates in each case
whether such registered Intellectual Property (or application therefor) is owned
or licensed by such Credit Party, and in the case of any such licensed
registered Intellectual Property (or application therefor), lists the name and
address of the licensor and the name and date of the agreement pursuant to which
such item of Intellectual Property is licensed and whether or not such license
is an exclusive license and indicates whether there are any purported
restrictions in such license on the ability to such Credit Party to grant a
security interest in and/or to transfer any of its rights as a licensee under
such license. Except as indicated on Schedule 5.12, the applicable Credit
Party is the sole and exclusive owner of the entire and unencumbered right,
title and interest in and to each such registered Intellectual Property (or
application therefor) purported to be owned by such Credit Party, free and clear
of any Liens and/or licenses in favor of third parties or agreements or
covenants not to sue such third parties for infringement. All registered
Intellectual Property of each Credit Party is duly and properly registered,
filed or issued in the appropriate office and jurisdictions for such
registrations, filings or issuances, except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect. No Credit Party is
party to, nor bound by, any material license or other agreement with respect to
which any Credit Party is the licensee that prohibits or otherwise restricts
such Credit Party from granting a security interest in such Borrower’s interest
in such license or agreement or other property. To such Borrower’s knowledge,
each Credit Party conducts its business without infringement or claim of
infringement of any Intellectual Property rights of others and there is no
infringement or claim of infringement by others of any Intellectual Property
rights of any Credit Party, which infringement or claim of infringement could
reasonably be expected to have a Material Adverse Effect. 

5.13  
 Licenses and Permits 

Each Credit Party is in
substantial compliance with and has all Permits necessary or required by
applicable law or Governmental Authority for the operation of its businesses
except where the failure to be in compliance would not reasonably be expected to
have a Material Adverse Effect. All of the foregoing are in full force and
effect and not in known conflict with the rights of others except where the
failure to be in compliance would not reasonably be expected to have a Material
Adverse Effect. Borrower is not (i) in breach of or default under the provisions
of any of the foregoing, nor is there any event, fact, condition or circumstance
which, with notice or passage of time or both, would constitute or result in a
conflict, breach, Default or Event of Default under, any of the foregoing which,
if not remedied within any applicable grace or cure period would reasonably be
expected to have a Material Adverse Effect, (ii) a party to or subject to any agreement, instrument or restriction that is so
unusual or burdensome that it might have a Material Adverse Effect. 

43 





5.14   
Disclosure 

No Loan Document nor any other
agreement, document, certificate, or statement furnished to Lender by or on
behalf of any Credit Party in connection with the transactions contemplated by
the Loan Documents, when taken as a whole contains any untrue statement of
material fact or omits to state any fact necessary to make the statements
therein not materially misleading in light of current circumstances. All
financial projections delivered to Lender by any Credit Party (or their agents)
have been prepared on the basis of the assumptions stated therein. Such
projections represent each Credit Party’s best estimate of such Credit Party’s
future financial performance and such assumptions are believed by such Credit
Party to be fair and reasonable in light of current business conditions;
provided, however, that no Credit Party can give any assurance that such
projections will be attained. 

5.15   
Existing Indebtedness; Investments, Guarantees and Certain Contracts 

Except as permitted by the Loan
Documents, each Borrower (i) has no outstanding Indebtedness other than
Permitted Indebtedness, (ii) is not subject or party to any mortgage, note,
indenture, indemnity or guarantee of, with respect to or evidencing any
Indebtedness of any other Person other than in connection with a Permitted Lien,
or (iii) does not own or hold any equity or long-term debt investments in, and
does not have any outstanding advances to or any outstanding guarantees for the
obligations of, or any outstanding borrowings from, any Person. Borrower has
performed all material obligations required to be performed by such Borrower
pursuant to or connection with its outstanding Indebtedness and the items
permitted by the Loan Documents and there has occurred no breach, default or
event of default under any document evidencing any such items or any fact,
circumstance, condition or event which, with the giving of notice or passage of
time or both, would constitute or result in a breach, default or event of
default thereunder. 

5.16   
Agreements with Affiliates 

There are no existing or proposed
material agreements, arrangements, understandings or transactions between any
Credit Party and any of its officers, members, managers, directors,
stockholders, partners, other interest holders, employees or Affiliates or any
members of their respective immediate families. 

5.17   
Insurance 

Each Borrower has in full force
and effect such insurance policies as are customary in its industry and as may
be required pursuant to Section 6.5 hereof. All such insurance policies
as in force on the date of this Agreement are listed and described on
Schedule 5.17. 

5.18    Names,
Location of Offices, Records and Collateral 

During the preceding five years,
Borrower has not conducted business under or used any name (whether corporate,
partnership or assumed) other than as shown on Schedule 5.18. Borrower is the sole owner of all of its names listed on
Schedule 5.18, and any and all business done and invoices issued in such
names are such Borrower’s sales, business and invoices. Each Borrower maintains
its places of business and chief executive offices only at the locations set
forth on Schedule 5.18. Schedule 5.18 also identifies all of the
addresses (including warehouses) at which any of the Collateral is located or
books and records of Borrowers regarding any Collateral are kept and identifying
which Collateral and which books and records are kept at each location, the
nature of such location (e.g., leased business location operated by Borrower(s),
third party warehouse, consignment location, processor location, etc.) and the
name and address of the third party owning and/or operating such location. No
Collateral and no books and records in connection therewith or in any way
relating thereto or that evidence the Collateral are located at any other
location. All of the Collateral is and shall remain located only in the
continental United States. 

44 





5.19   
Material Contracts 

Except for the Organizational
Documents and the other agreements set forth on Schedule 5.19
(collectively with the Organizational Documents, the “Material
Contracts”), as of the Closing Date there are no (a) employment agreements
covering the management of any Credit Party, (b) collective bargaining
agreements or other similar labor agreements covering any employees of any
Credit Party, (c) agreements for managerial, consulting or similar services to
which any Credit Party is a party or by which it is bound, (d) agreements
regarding any Credit Party, its assets or operations or any investment therein
to which any of its equity holders is a party or by which it is bound, (e) real
estate leases, Intellectual Property licenses or other lease or license
agreements to which any Credit Party is a party, either as lessor or lessee, or
as licensor or licensee (other than licenses arising from the purchase of “off
the shelf” products), (f) customer, distribution, marketing or supply agreements
to which any Credit Party is a party, in each case with respect to the preceding
clauses (a) through (f) requiring payment of more than $25,000 in any year, (g)
partnership agreements to which any Credit Party is a general partner or joint
venture agreements to which any Credit Party is a party, (h) third party billing
arrangements to which any Credit Party is a party, or (i) any other agreements
or instruments to which any Credit Party is a party, and the breach,
nonperformance or cancellation of which, or the failure of which to renew, could
reasonably be expected to have a Material Adverse Effect. Schedule 5.19
sets forth, with respect to each real estate lease agreement to which any
Borrower is a party (as a lessee) as of the Closing Date, the address of the
subject property and the annual rental (or, where applicable, a general
description of the method of computing the annual rental). The consummation of
the transactions contemplated by the Loan Documents will not give rise to a
right of termination in favor of any party to any Material Contract (other than
any Credit Party), except for such Material Contracts the noncompliance with
which would not reasonably be expected to have a Material Adverse Effect.


5.20   
Non-Subordination 

The Obligations are not
subordinated in any way to any other obligations of any Borrower or to the
rights of any other Person. 

45 




5.21   
Interest Rate 

The rate of interest paid under
this Agreement and the method and manner of the calculation thereof do not
violate any usury or other law or applicable Laws, any of the Organizational
Documents, or any of the Loan Documents. 

5.22    Reliance on
Representations; Survival 

Each Borrower makes the
representations and warranties contained herein with the knowledge and intention
that Lender is relying and will rely thereon. All such representations and
warranties will survive the execution and delivery of this Agreement and the
making of the Advances under the Revolving Facility. No investigation or inquiry
made by or on behalf of Lender nor knowledge by Lender which is in any fashion
inconsistent with the representations and warranties contained herein, shall in
any way (i) affect or lessen the representations and warranties made and entered
into by any Borrower hereunder, or (ii) reduce or in any way affect Lender’s
rights with respect to a breach of such representations and warranties.


	VI. 	
      AFFIRMATIVE COVENANTS



Each of the Borrowers covenants
and agrees that, until full performance and satisfaction, and payment in full in
cash, of all the Obligations (other than indemnity obligations with respect to
which no claim has been made) and termination of this Agreement: 

6.1   
Financial Statements, Reports and Other Information 

(a)    
Financial Reports. Each Borrower shall furnish to Lender (i) as soon as
available and in any event within one hundred twenty (120) calendar days after
the end of each fiscal year of each Borrower, annual consolidated and
consolidating financial statements of each Borrower, including the notes
thereto, consisting of a consolidated and consolidating balance sheet at the end
of such completed fiscal year and the related consolidated and consolidating
statements of income, retained earnings, cash flows and owners’ equity for such
completed fiscal year, compiled by an accounting firm reasonably acceptable to
Lender, and, if any Borrower’s annual revenues exceed $50,000,000, such
financial statements shall be audited and certified without qualification by an
independent certified public accounting firm reasonably acceptable to Lender and
accompanied by related management letters, if available, and (ii) within thirty
(30) calendar days after the end of each calendar month, unaudited consolidated
and consolidating financial statements of each Borrower consisting of a balance
sheet and statements of income, retained earnings, cash flows and owners’ equity
as of the end of such calendar month. All such financial statements shall be
prepared in accordance with GAAP consistently applied with prior periods. With
each such financial statement, each Borrower shall also deliver a compliance
certificate of its chief executive officer or chief financial officer in the
form set forth in Exhibit B showing compliance with all financial and
loan covenants set forth in Annex I (a “Compliance Certificate”).
In addition to the above financial reports, each Borrower shall furnish to
Lender as soon as available and in any event within ten (10) calendar days after
the end of each calendar month, statements from each Borrower’s bank showing all
account activity for the preceding calendar month. Notwithstanding any other
provision of this Agreement, in the event any of the financial statements or
other financial reports due by any Borrower under this Section 6.1(a) are
not timely delivered to Lender, such Borrower shall pay Lender
a late fee equal to $250 per day until such statements or reports are delivered
to Lender. Such late fee shall be in addition to any other fees, charges or
other provisions that may increase the Applicable Rate of interest hereunder and
the assessment or collection of such late fee shall not, unless Lender
specifically agrees in writing to the contrary, prevent Lender from considering
any such non-timely delivery to be a Default or an Event of Default. 

46 





(b)    
Accounts Payable and Accounts Receivable Aging Schedules. Each Borrower
shall furnish to Lender as soon as available, and in any event within ten (10)
calendar days after the end of each calendar month, detailed accounts payable
and accounts receivable aging schedules as of the end of such month, in a form
satisfactory to Lender. 

(c)    
Forms 941. Within thirty (30) calendar days following the end of each
calendar quarter, Borrower shall furnish Lender with a copy of the IRS Form 941
required to be filed by Borrower with respect to the quarter then ended. 

(d)    
Other Materials. Each Borrower shall furnish to Lender as soon as
available, and in any event within fifteen (15) calendar days after the
preparation or issuance thereof or at such other time as set forth below: 

(i)    
Shareholder Communications. Any reports, returns, information, notices
and other materials that any Borrower shall send to its stockholders, members,
partners or other equity owners at any time; 

(ii)   
Insurance Renewals. Prior to the expiration date of each of the insurance
policies required to be maintained pursuant to Section 6.5, proof of the
renewal of each such insurance policy together with copies of the declarations
page for each such renewed policy. 

(iii)  
Accountants Communications. Promptly upon receipt thereof, copies of any
reports submitted to any Borrower by its independent accountants in connection
with any interim audit of the books of such Person or any of its Affiliates and
copies of each management control letter provided by such independent
accountants; 

(iv)   
Bank Statements. Copies of monthly bank statements for each bank account
maintained by Borrower as soon as available, and in any event within ten (10)
calendar days after the end of each calendar month; and 

(v)    
Documents Requested by Lender. Such additional information, documents,
statements, reports and other materials as Lender may reasonably request from a
credit or security perspective or otherwise from time to time, including, but
not limited to, periodic receivable and payable aging reports, payroll tax
information, dilution analyses, origination reports and default/charge off
reports. 

(e)   
Notices. Each Borrower shall promptly, and in any event within five (5)
Business Days after any Credit Party or any officer of any Credit Party obtains
knowledge thereof, notify Lender in writing of (i) any pending litigation, suit,
investigation, arbitration, formal dispute resolution proceeding or
administrative proceeding brought against or initiated by any Credit Party or otherwise affecting or involving or
relating to any Credit Party or any of its property or assets to the extent (A)
the amount in controversy exceeds Ten Thousand Dollars ($10,000), or (B) to the
extent any of the foregoing seeks injunctive relief, (ii) any Default or Event
of Default, which notice shall specify the nature and status thereof, the period
of existence thereof and what action is proposed to be taken with respect
thereto, (iii) any other development, event, fact, circumstance or condition
that would reasonably be expected to have a Material Adverse Effect, in each
case describing the nature and status thereof and the action proposed to be
taken with respect thereto, (iv) any notice received by Borrower from any payor
of an Account to the effect that such payor has one or more claim against any
Credit Party involving aggregate amounts in excess of Ten Thousand Dollars
($10,000), (v) any matter(s) affecting the value, enforceability or
collectability of any of the Collateral, including without limitation, claims or
disputes in the amount of Ten Thousand Dollars ($10,000) or more, singly or in
the aggregate, in existence at any one time, (vi) any notice given by Borrower
to any other lender of Borrower and shall furnish to Lender a copy of such
notice, (vii) receipt of any notice or request from any Governmental Authority
or governmental payor regarding any liability or claim of liability outside the
ordinary course of business, (viii) termination of any executive manager of any
facility owned, operated or leased by any Credit Party, and/or (ix) if any
Account becomes evidenced or secured by an Instrument or Chattel Paper. 

47 





(f)    
Consents. Each Borrower shall obtain and deliver from time to time all
required consents, approvals and agreements from such third parties as Lender
shall determine are necessary or desirable in its Permitted Discretion (as
communicated to such Borrower by written notice) for the protection of its
Collateral and that are reasonably satisfactory to Lender with respect to the
Loan Documents and the transactions contemplated thereby or any of the
Collateral, including, without limitation, (a) Landlord Waivers and Consents
with respect to leases entered into after the Closing Date, and (b) warehouse
receipts, consignment agreements or bailee lien waivers (as applicable) with
respect to Collateral in the possession or control of any warehouse, consignee,
bailee or any of Borrowers’ agents or processors except for Accounts and
Inventory in an aggregate amount of $25,000; provided, however,
that for Collateral located at the Creekside Springs, LLC facilities no such
consent shall be required unless the value of the Collateral exceeds $30,000 at
any time; provided, further, that for Collateral located at the
Unix Packaging, Inc. facility the value of the Collateral shall not exceed
$250,000 at any time. 

(g)    
Operating Budget. If requested by Lender, Borrower shall furnish to
Lender on or prior to the Closing Date and for each fiscal year of Borrower
thereafter not more than sixty (60) calendar days preceding the commencement of
such fiscal year, consolidated and consolidating month by month projected
operating budgets, annual projections, balance sheets and cash flow reports of
and for Borrower for such upcoming fiscal year (including an income statement
for each month), in each case prepared in accordance with GAAP consistently
applied with prior periods.Unix Inventory Report. Each Borrower shall
furnish to Lender no less frequently than once per week (x) in conjunction with
the delivery of each Borrowing Certificate required pursuant to Section
2.4 herein, to the extent a Borrowing Certificate is required for such week
or (y) if no Borrowing Certificate is required for such week, on the first
Business Day of such week, a report evidencing actual inventory levels located
at the Unix Packaging, Inc. facility (i) as of such date and (ii) since the date
of the last such inventory report. 

48 




6.2    
Payment of Obligations 

Each Borrower (a) will pay and
discharge, and cause each Subsidiary to pay and discharge, on a timely basis as
and when due, all of their respective obligations and liabilities, except for
such obligations and/or liabilities (i) that may be the subject of a Permitted
Contest, and (ii) the nonpayment or nondischarge of which could not reasonably
be expected to have a Material Adverse Effect or result in a Lien against any
Collateral, except for Permitted Liens, (b) without limiting anything contained
in the foregoing clause (a), pay all amounts due and owing in respect of Taxes
(including without limitation, payroll and withholdings tax liabilities) on a
timely basis as and when due, and in any case prior to the date on which any
fine, penalty, interest, late charge or loss may be added thereto for nonpayment
thereof, (c) will maintain, and cause each Subsidiary to maintain, in accordance
with GAAP, appropriate reserves for the accrual of all of their respective
obligations and liabilities, and (d) will not breach or permit any Subsidiary to
breach, or permit to exist any default under, the terms of any lease,
commitment, contract, instrument or obligation to which it is a party, or by
which its properties or assets are bound, except for such breaches or defaults
which could not reasonably be expected to have a Material Adverse Effect.
Notwithstanding the foregoing, each Borrower shall make full and timely payment
in cash of the principal of and interest on the Loans, Advances and all other
Obligations when due and payable. 

6.3    
Conduct of Business and Maintenance of Existence and Assets 

Each Borrower shall (i) engage
principally in the same or similar lines of business substantially as heretofore
conducted, (ii) collect its Accounts in the ordinary course of business, (iii)
maintain all of its material properties, assets and equipment used or useful in
its business in good repair, working order and condition (normal wear and tear
excepted and except as may be disposed of in the ordinary course of business and
in accordance with the terms of the Loan Documents and otherwise as determined
by each Borrower using commercially reasonable business judgment), (iv) from
time to time make all necessary or desirable repairs, renewals and replacements
thereof, as determined by each Borrower using commercially reasonable business
judgment, (v) maintain and keep in full force and effect its existence and all
material Permits and qualifications to do business and good standing or
existence in each jurisdiction in which the ownership or lease of property or
the nature of its business makes such Permits or qualification necessary and in
which failure to maintain such Permits or qualification could reasonably be
likely to have a Material Adverse Effect; and (vi) remain in good standing or
existence and maintain operations in all jurisdictions necessary due to the
ownership or lease of property or the nature of its business. If all or any part
of the Collateral useful or necessary in its business, or upon which any
Borrowing Base is calculated, becomes damaged or destroyed, each Borrower will,
and will cause each Subsidiary to, promptly and completely repair and/or restore
the affected Collateral in a good and workmanlike manner, regardless of whether
Lender agrees to disburse insurance proceeds or other sums to pay costs of the
work of repair or reconstruction. 

6.4   
 Compliance with Legal, Tax and Other Obligations 

Each Borrower shall (i)
substantially comply with all laws, statutes, rules, regulations, ordinances and
tariffs of all Governmental Authorities applicable to it or its business, assets
or operations, (ii) pay all taxes, assessments, fees, governmental charges,
claims for labor, supplies, rent and all other obligations or liabilities of any kind, as
and when due and payable, except liabilities being contested in good faith and
against which adequate reserves have been established; provided, however, all
payroll taxes payable in connection with each payroll shall be paid or funds
shall set aside in a reserve in an amount adequate to pay all such payroll taxes
contemporaneously with the payment of such payroll, and (iii) perform in
accordance with its terms each contract, agreement or other arrangement to which
it is a party or by which it or any of the Collateral is bound, except where the
failure to comply, pay or perform would not reasonably be expected to have a
Material Adverse Effect, except where the failure to comply with any of the
foregoing provisions of this Section 6.4 would reasonably be expected not
to have a Material Adverse Effect. 

49 





6.5    
Insurance 

(a)    
Each Borrower shall (i) keep all of its insurable properties and assets
adequately insured in all material respects against losses, damages and hazards
as are customarily insured against by businesses engaging in similar activities
or owning similar assets or properties and at least the minimum amount required
by applicable law, including, without limitation, medical malpractice and
professional liability insurance, as applicable; (ii) maintain business
interruption insurance, (iii) maintain general public liability insurance at all
times against liability on account of damage to persons and property having such
limits, deductibles, exclusions and co-insurance and other provisions as are
customary for a business engaged in activities similar to those of each
Borrower; and (iv) maintain insurance under all applicable workers’ compensation
laws. All of the insurance policies referenced above shall be (x) satisfactory
in form and substance to Lender in its Permitted Discretion and (y) placed with
insurers having an A.M. Best policyholder rating acceptable to Lender in its
Permitted Discretion. Each Borrower agrees that it shall not alter, amend,
modify or cancel its insurance policies without thirty (30) Business Days prior
written notice to Lender unless such alteration, amendment, modification or
cancellation, shall be in compliance with the requirements set forth above. The
insurance policies referenced in clauses (i) and (ii) shall name Lender as
lender’s loss payable thereunder. The insurance policies referenced in clause
(iii) shall name Lender as an additional insured thereunder. 

(b)    
In the event any Borrower fails to provide Lender with evidence of the insurance
coverage required by this Agreement, Lender may purchase insurance at Borrower’s
expense to protect Lender’s interests in the Collateral. This insurance may, but
need not, protect such Borrower’s interests. The coverage purchased by Lender
may not pay any claim made by such Borrower or any claim that is made against
such Borrower in connection with the Collateral. Such Borrower may later cancel
any insurance purchased by Lender, but only after providing Lender with evidence
that such Borrower has obtained insurance as required by this Agreement. If
Lender purchases insurance for the Collateral, Borrowers will be responsible for
the costs of that insurance to the fullest extent provided by law, including
interest and other charges imposed by Lender in connection with the placement of
the insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs
of the insurance may be more than the cost of insurance such Borrower is able to
obtain on its own. 

50 




6.6    
True Books 

Each Borrower shall (i) keep
true, complete and accurate books of record and accounts in accordance with
commercially reasonable business practices in which true and correct entries are
made of all of its dealings and transactions in all material respects; and (ii)
set up and maintain on its books such reserves as may be required by GAAP with
respect to doubtful accounts and all taxes, assessments, charges, levies and
claims and with respect to its business, and include such reserves in its
quarterly as well as year end financial statements. 

6.7   
 Inspection; Period Audits 

Each Borrower shall permit the
representatives of Lender, at the expense of such Borrower, from time to time
during normal business hours, upon reasonable notice but not more than two times
in any calendar year (provided that upon the occurrence and during the
continuance of an Event of Default, there shall be no restrictions on the number
of times that Lender may perform the activities described in this Section
6.7 nor shall Lender be required to give prior notice to Borrower), to (i)
visit and inspect any of its offices or properties or any other place where
Collateral is located to inspect the Collateral and/or to examine or audit all
of such Borrower’s books of account, records, reports and other papers, (ii)
make copies and extracts therefrom, and (iii) discuss such Borrower’s business,
operations, prospects, properties, assets, liabilities, condition and/or
Accounts with such Borrower’s officers and independent public accountants (and
by this provision such officers and accountants are authorized to discuss the
foregoing). 

6.8    
Further Assurances; Post Closing 

At such Borrower’s cost and
expense, each Borrower shall (i) within five (5) Business Days after Lender’s
reasonable request, take such further actions, and duly execute and deliver such
further agreements, assignments, instructions or documents and do such further
acts and things as may be necessary or proper in the reasonable opinion of
Lender to carry out more effectively the provisions and purposes of this
Agreement and the Loan Documents, and (ii) upon the exercise by Lender or any of
its Affiliates of any power, right, privilege or remedy pursuant to any Loan
Documents or under applicable law or at equity which requires any consent,
approval, registration, qualification or authorization of any Person, including
without limitation a Governmental Authority, execute and deliver, or cause the
execution and delivery of, all applications, certificates, instruments and other
documents that Lender or its Affiliate may be required to obtain for such
consent, approval, registration, qualification or authorization. Without
limiting the generality of the foregoing, (x) each Borrower shall, at the time
of the delivery of any Compliance Certificate disclosing the acquisition by an
Credit Party of any registered Intellectual Property or application for the
registration of Intellectual Property, deliver to Lender a duly completed and
executed supplement to the applicable Credit Party’s Intellectual Property
Security Agreement in the form of the respective Exhibit thereto, and (y) at the
request of Lender, following the disclosure by any Borrowers on any Compliance
Certificate of the acquisition by any Credit Party of any rights under a license
as a licensee with respect to any registered Intellectual Property or
application for the registration of any Intellectual Property owned by another
Person, the applicable Borrower shall execute any documents requested by Lender
to establish, create, preserve, protect and perfect a first priority lien in
favor of Lender, to 

51 




the extent legally possible, in such Borrower’s rights under
such license and shall use their commercially reasonable best efforts to obtain
the written consent of the licensor which such license to the granting in favor
of Lender of a Lien on such Borrower’s rights as licensee under such license.


6.9    
Lien Terminations 

If Liens other than Permitted
Liens exist, the applicable Borrower immediately shall take, execute and deliver
all actions, documents and instruments necessary to release and terminate such
Liens. 

6.10    Use of
Proceeds 

The Borrowers shall use the
proceeds of Revolving Loans solely for (a) to repay existing indebtedness of
Borrowers, (b) transaction fees incurred in connection with the Loan Documents,
and (c) for working capital needs of Borrowers and their Subsidiaries. No
portion of the proceeds of the Loans will be used for family, personal,
agricultural or household use. 

6.11   
Collateral Documents; Security Interest in Collateral 

Each Borrower hereby authorizes
Lender to file UCC-1 Financing Statements with respect to the Collateral, and
any amendments or continuations relating thereto, without the signature of any
Borrower and hereby ratifies, confirms and consents to any such filings made by
Lender prior to the date hereof. In addition to the UCC financing statements
references in Section 2.10(k)(F), each Borrower hereby agrees to execute
any additional documents or financing statements which Lender deems necessary in
its reasonable discretion in order to evidence Lender’s security interest in the
Collateral. No Borrower shall allow any financing statement (other than that
filed by or on behalf of Lender and other than Permitted Liens) to be on file in
any public office covering any Collateral or the proceeds thereof. Pursuant to
Section 2.11, Lender has full power of attorney to execute,
deliver, file, register and/or record in the name of each Borrower and financing
statements, schedules, assignments, instruments, and documents necessary to
perfect Lender’s security interest in or lien on any Collateral. If necessary or
advisable beyond that power of attorney, and at the reasonable request of Lender
upon reasonable notice, a Borrower shall (i) execute, obtain, deliver, file,
register and/or record any and all financing statements, continuation
statements, stock powers, instruments and other documents, or cause the
execution, filing, registration, recording or deliver of any and all of the
foregoing, that are necessary or required under law or otherwise or reasonably
requested by Lender to be executed, filed, registered, obtained, delivered or
recorded to create, maintain, perfect, preserve, validate or otherwise protect
the pledge of the Collateral to Lender and Lender’s perfected first priority
Lien on the Collateral (and such Borrower irrevocably grants Lender the right,
at Lender’s option, to file any or all of the foregoing) and (ii) defend the
Collateral and Lender’s perfected first priority Lien thereon against all claims
and demands of all Persons at any time claiming the same or any interest therein
adverse to Lender, and pay all reasonable costs and expenses (including, without
limitation, reasonable in-house documentation and diligence fees and reasonable
legal expenses and reasonable attorneys’ fees and expenses) in connection with
such defense, which may at Lender’s discretion be added to the Obligations and
increase the principal amount outstanding hereunder. 

52 




6.12    Right
of First Refusal 

If at any time any Borrower
receives from a third party an offer, term sheet or commitment or makes a
proposal accepted by any Person (each, an “Offer”) which provides for any
type of financing for any Borrower or any of its then current subsidiaries, such
Borrower shall notify Lender of the Offer in writing (including all material
terms of the Offer) and Lender shall have thirty (30) calendar days after
Receipt of such notice (the “Option Period”) to agree to provide
financing in the place of such Person upon terms and conditions no less
favorable to such Borrower as set forth in the Offer, together with such
additional terms as may generally be standard or reasonable in similar
financings. Lender shall notify such Borrower in writing of Lender’s acceptance
of the Offer pursuant hereto (the “Acceptance Notice”), in which case
such Borrower shall obtain such financing from Lender and shall not accept the
Offer from such other Person. If no Acceptance Notice has been Received from
Lender within the Option Period, Borrower may consummate the Offer with the
other Person on the terms and conditions set forth in the Offer (the
“Transaction”); provided, however, that none of the
foregoing or any failure by Lender to issue an Acceptance Notice shall be
construed as a waiver of any of the terms, covenants or conditions of any of the
Loan Documents. If the Transaction is not consummated on the terms set forth in
the Offer or with the Person providing the Offer during the ninety (90) calendar
day period following the expiration of the Option Period, such Borrower shall
not be permitted to consummate the Transaction without again complying with this
Section 6.12. For purposes of this Section 6.12, “Lender”
shall include SCM Specialty Finance Opportunities Fund, L.P., a Delaware limited
partnership, and any of its parents, subsidiaries or Affiliates. 

6.13    Taxes
and Other Charges 

All payments and reimbursements
to Lender made under any Loan Document shall be free and clear of and without
deduction for all taxes, levies, imposts, deductions, assessments, charges or
withholdings, and all liabilities with respect thereto of any nature whatsoever,
excluding taxes to the extent imposed on Lender’s net income. If any Borrower
shall be required by law to deduct any such amounts from or in respect of any
sum payable under any Loan Document to Lender, then the sum payable to Lender
shall be increased as may be necessary so that, after making all required
deductions, Lender receives an amount equal to the sum it would have received
had no such deductions been made. Notwithstanding any other provision of any
Loan Document, if at any time after the Closing (i) any change in any applicable
law, regulation, treaty or directive or in the interpretation or application
thereof, (ii) any new law, regulation, treaty or directive (whether or not
having the force of law) from any Governmental Authority (A) subjects Lender to
any tax, levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation
of payments to Lender of any amount payable thereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest or
facility fees or other fees payable hereunder or changes in the rate of tax on
the overall net income of Lender), or (B) imposes on Lender any other condition
or increased cost in connection with the transactions contemplated thereby or
participations therein; and the result of any of the foregoing is to increase
the cost to Lender of making or continuing any Loan hereunder or to reduce any
amount receivable hereunder, then, in any such case, the Borrowers shall
promptly pay to Lender any additional amounts necessary to compensate Lender, on
an after-tax basis, for such additional cost or reduced amount as determined by Lender. If Lender becomes entitled to claim any
additional amounts pursuant to this Section 6.13 it shall promptly notify
the Borrowers of the event by reason of which Lender has become so entitled, and
each such notice of additional amounts payable pursuant to this Section
6.13 submitted by Lender to the Borrowers shall, absent manifest error, be
final, conclusive and binding for all purposes. For purposes of this Section,
(i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States or
foreign regulatory authorities, in each case pursuant to Basel III, shall in
each case be deemed to be a “change in any applicable Law”, regardless of the
date enacted, adopted or issued. 

53 





6.14    Payroll
Agent 

Each Borrower shall at all times
either (a) retain and use a payroll agent for purposes of processing, managing
and paying such Borrower’s payroll, including all payroll tax payments required
to be made under applicable tax laws and regulations, or (b) be enrolled in the
Electronic Federal Payment Tax Service on line at www.efpts.com and
provide such information and authorizations to Lender as may be required for
Lender to monitor payment of periodic payroll taxes or (c) utilize a
professional employer service organization to lease employees provided
that such organization provides to such Borrower adequate insurance against the
failure of such organization to make required tax payments with respect to the
leased employees. If such Borrower uses a payroll agent, the payroll agent shall
be a third party, independent of such Borrower, reasonably acceptable to Lender.
Such Borrower shall instruct the payroll agent to provide such reports directly
to Lender as Lender may request from time to time reflecting payment of
applicable payroll taxes and, in any event, such payroll agent shall deliver to
Lender within ten (10) calendar days after the end of each calendar month a
report of such Borrower’s payroll taxes for the immediately preceding calendar
month and evidence of payment thereof. 

6.15   
Hazardous Substances 

(a)   
 If any release or disposal of Hazardous Substances shall occur or shall
have occurred on any real property or any other assets of any Borrower or any
other Credit Party, such Borrower will cause, or direct the applicable Credit
Party to cause, the prompt containment and removal of such Hazardous Substances
and the remediation of such real property or other assets as is necessary to
comply with all Environmental Laws and to preserve the value of such real
property or other assets. Without limiting the generality of the foregoing, each
Borrower shall, and shall cause each other Credit Party to, comply with each
Environmental Law requiring the performance at any real property by any Borrower
or any other Credit Party of activities in response to the release or threatened
release of a Hazardous Substances. 

(b)    
Borrowers will provide Lender within thirty (30) days after written demand
therefor with a bond, letter of credit or similar financial assurance evidencing
to the reasonable satisfaction of Lender that sufficient funds are available to
pay the cost of removing, treating and disposing of any Hazardous Substances or
Hazardous Substances Contamination and discharging any assessment which may be
established on any property as a result thereof, such demand to be made, if at
all, upon Lender’s reasonable business determination that the failure to remove, treat or dispose of any Hazardous Substances
or Hazardous Substances Contamination, or the failure to discharge any such
assessment could reasonably be expected to have a Material Adverse Effect. 

54 






	VII. 	
      NEGATIVE COVENANTS



Each of the Borrowers covenants
and agrees that, until full performance and satisfaction, and payment in full in
cash, of all the Obligations (other than indemnity obligations with respect to
which no claim has been made) and termination of this Agreement: 

7.1   
 Financial and Loan Covenants 

No Borrower shall violate the
financial and loan covenants set forth on Annex I to this Agreement,
which is incorporated herein and made a part hereof. 

7.2     No
Debt other than Permitted Indebtedness 

No Borrower will, or will permit
any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or
otherwise become or remain directly or indirectly liable with respect to, any
Debt, except for Permitted Indebtedness. No Borrower will, or will permit any
Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist
any Contingent Obligations, except for Permitted Contingent Obligations.


7.3     No
Liens other than Permitted Liens 

No Borrower shall create, incur,
assume or suffer to exist any Lien upon, in or against, or pledge of, any of the
Collateral or any of its properties or assets or any of its shares, securities
or other equity or ownership or partnership interests, whether now owned or
hereafter acquired, except the Permitted Liens. 

7.4   
 Investments, New Facilities or Collateral; Subsidiaries 

No Borrower, directly or
indirectly, shall (i) purchase, own, hold, invest in or otherwise acquire
obligations or stock or securities of, or any other interest in, or all or
substantially all of the assets of, any Person or any joint venture whether by
merger, consolidation, outright purchase or otherwise, or (ii) make or permit to
exist any loans, advances or guarantees to or for the benefit of any Person or
assume, guarantee, endorse, contingently agree to purchase or otherwise become
liable for or upon or incur any obligation of any Person (other than those
created by the Loan Documents and Permitted Indebtedness and other than (A)
trade credit extended in the ordinary course of business, (B) advances for
business travel and similar temporary advances made in the ordinary course of
business to officers, directors and employees, (C) deposits to landlords and (D)
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business). No Borrower, directly or
indirectly, shall purchase, own, operate, hold, invest in or otherwise acquire
any facility, property or assets or any Collateral that is not located at the
locations set forth on Schedule 5.18 unless such Borrower shall provide
to Lender at least thirty (30) Business Days prior written notice. No Borrower
shall have any Subsidiaries other than such Subsidiaries existing at Closing.


55 




7.5    
Prohibited Payments 

No Borrower shall (i) declare,
pay or make any dividend or distribution on any shares of capital stock or other
securities or interests (other than dividends or distributions payable in its
stock, or split-ups or reclassifications of its stock); (ii) apply any of its
funds, property or assets to the acquisition, redemption or other retirement or
any capital stock or other securities or interests or of any options to purchase
or acquire any of the foregoing (provided, however, that a Borrower may redeem
its equity securities from terminated employees pursuant to, but only to the
extent required under, the terms of the related employment agreements as long as
no Default or Event of Default has occurred and is continuing or would be caused
by or result therefrom), (iii) otherwise make any payments or Distributions to
any stockholder, member, partner or other equity owner in such Person’s capacity
as such, (iv) make any payment with respect to any loan or other indebtedness
from any Affiliate; or (v) make any payment of any management, or related or
similar fee to any Person or with respect to any facility owned, operated or
leased by such Borrower if such payment directly or indirectly causes such
Borrower to be in default of any of the financial or loan covenants set forth in
Annex I. 

7.6    
Transactions with Affiliates 

No Borrower shall enter into or
consummate any transactions of any kind with any of its Affiliates other than:
(i) salary, bonus, employee stock option and other compensation to and
employment arrangements with directors, officers or employees in the ordinary
course of business, provided, that no payment of any bonus shall be
permitted if an Event of Default has occurred and remains in effect or would be
caused by or result from such payment, (ii) payments permitted pursuant to
Section 7.5, (iii) transactions with Lender or any Affiliate of Lender,
and (iv) payments (other than those referenced in cause (i) above) permitted
under and pursuant to written agreements entered into by and between Borrower
and one or more of its Affiliates (A) both reflect and constitute transactions
on overall terms at least as favorable to Borrower as would be the case in an
arm’s-length transaction between unrelated parties of equal bargaining power,
(B) do not grant a security interest in the Collateral to any Affiliate of
Borrower, and (C) contain payment obligations, if any, that are subordinate to
the Obligations, provided, that notwithstanding the foregoing Borrower
shall not enter into, consummate, or perform with respect to any transactions or
agreement pursuant to which it becomes a party to any mortgage, note, indenture
or guarantee evidencing any Indebtedness of any of its Affiliates or otherwise
to become responsible or liable, as a guarantor, surety or otherwise, pursuant
to agreement for any Indebtedness of any such Affiliate other than Permitted
Indebtedness and Permitted Contingent Obligations. 

7.7   
 Charter Documents; Fiscal Year; Dissolution; Use of Proceeds 

No Borrower shall (i) change its
state of formation, or amend, modify, restate or change its certificate of
incorporation or formation or bylaws or similar charter documents in a manner
that would be materially adverse to Lender and, in any event, without five (5)
days’ notice to Lender, (ii) change its fiscal year, unless Borrower
demonstrates to Lender’s satisfaction compliance with the covenants contained
herein for both the fiscal year in effect prior to any change and the new fiscal
year period by delivery to Lender of appropriate interim and annual pro forma,
historical and current compliance certificates for such periods and such other
information as Lender may reasonably request, (iii) amend,
alter or suspend or terminate or make provisional in any material way, any
Permit without the prior written consent of Lender, which consent shall not be
unreasonably withheld, (iv) wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking to wind up,
liquidate or dissolve or that would result in any of the foregoing, or (v) use
any proceeds of any Advance for “purchasing” or “carrying” “margin stock” as
defined in Regulations U, T or X of the Board of Governors of the Federal
Reserve System. 

56 





7.8    
Asset Sales 

No Borrower shall, without the
prior written approval of Lender, directly or indirectly sell, convey, transfer,
assign, license, lease (that has the effect of a disposition) or otherwise
dispose of (including, without limitation, any merger or consolidation or upon
any condemnation, eminent domain or similar proceedings) to any Person, in one
transaction or a series of related transactions, any assets of a Borrower which
constitute substantially all of an operating unit of a Borrower or any other
assets (including without limitation Intellectual Property) of the Borrower
outside of the ordinary course of business other than (i) the grant of licenses,
sublicenses (including licenses and sublicenses of Intellectual Property),
leases or subleases in the ordinary course of business, (ii) the abandonment of
Intellectual Property rights or allowing of Intellectual Property rights to
lapse, in each case, in the ordinary course of business and which are not
collectively material to the conduct of the business of the Borrower, (iii) the
disposition or transfer of obsolete, worn-out or surplus inventory or equipment
that is not material to the conduct of a Borrower’s business in the ordinary
course of business, (iv) the disposition or transfer of cash or cash equivalent
investments in the ordinary course of business and consistent with past
practices, and (v) the disposition or transfer of any leasehold interest at the
natural expiration of such lease or upon the earlier termination of the lease as
provided therein. 

7.9   
 Restrictive Agreements 

No Borrower will, or will permit
any Subsidiary to, directly or indirectly (a) enter into or assume any agreement
(other than the Loan Documents, the Closing Date Subordinated Debt Documents the
Convertible Note Subordinated Debt Documents, and any agreements for purchase
money debt permitted under clause (iii) of the definition of Permitted
Indebtedness) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired (other than a
Permitted Lien), or (b) create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind (except as
provided by the Loan Documents, the Closing Date Subordinated Debt Documents and
the Convertible Note Subordinated Debt Documents) on the ability of any
Subsidiary to: (i) pay or make Distributions to any Borrower or any Subsidiary;
(ii) pay any Indebtedness owed to any Borrower or any Subsidiary; (iii) make
loans or advances to any Borrower or any Subsidiary; or (iv) transfer any of its
property or assets to any Borrower or any Subsidiary; provided,
that, the Closing Date Subordinated Debt Documents, the Convertible Note
Subordinated Debt Documents and any agreements for purchase money debt shall not
prohibit (i) the creation or assumption of any Lien upon any assets or
properties to secure the Obligations or (ii) the repayment of the Obligations.


57 




7.10   
Management 

No Borrower shall pay any
compensation or other amounts to senior management of Borrower in excess of such
amounts as are usual and customary for companies in similar businesses and of a
similar size. 

7.11   
Modifications of Certain Agreements 

No Borrower will, or will permit
any Subsidiary to, directly or indirectly, amend or otherwise modify any
Material Contract, which amendment or modification in any case: (a) is contrary
to the terms of this Agreement or any other Loan Document; (b) could reasonably
be expected to be adverse to the rights, interests or privileges of the Lender
or their ability to enforce the same; (c) results in the imposition or expansion
in any material respect of any obligation of or restriction or burden on any
Borrower or any Subsidiary; or (d) reduces in any material respect any rights or
benefits of any Borrower or any Subsidiaries (it being understood and agreed
that any such determination shall be in the discretion of the Lender). Each
Borrower shall, prior to entering into any amendment or other modification of
any of the foregoing documents, deliver to Lender reasonably in advance of the
execution thereof, any final or execution form copy of amendments or other
modifications to such documents, and such Borrower agrees not to take, nor
permit any of its Subsidiaries to take, any such action with respect to any such
documents without obtaining such approval from Lender. 

7.12   
Payments and Modifications of Subordinated Debt 

No Borrower will, or will permit
any Subsidiary to, directly or indirectly (a) declare, pay, make or set aside
any amount for payment in respect of Subordinated Debt, except for payments made
in full compliance with and expressly permitted under the Subordination
Agreement, (b) amend or otherwise modify the terms of any Subordinated Debt,
except for amendments or modifications made in full compliance with the
Subordination Agreement, (c) declare, pay, make or set aside any amount for
payment in respect of any Indebtedness hereinafter incurred that, by its terms,
or by separate agreement, is subordinated to the Obligations, except for
payments made in full compliance with and expressly permitted under the
subordination provisions applicable thereto, or (d) amend or otherwise modify
the terms of any such Indebtedness if the effect of such amendment or
modification is to (i) increase the interest rate or fees on, or change the
manner or timing of payment of, such Indebtedness, (ii) accelerate or shorten
the dates upon which payments of principal or interest are due on, or the
principal amount of, such Indebtedness, (iii) change in a manner adverse to any
Credit Party or Lender any event of default or add or make more restrictive any
covenant with respect to such Indebtedness, (iv) change the prepayment
provisions of such Indebtedness or any of the defined terms related thereto, (v)
change the subordination provisions thereof (or the subordination terms of any
guaranty thereof), or (vi) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Indebtedness in a manner
adverse to Borrowers, any Subsidiaries, or Lender. Borrowers shall, prior to
entering into any such amendment or modification, deliver to Lender reasonably
in advance of the execution thereof, any final or execution form copy thereof.


58 




7.13    Deposit
Accounts 

Each Borrower has provided Lender
with all information (including, without limitation, user identifications and
passwords) necessary for Lender to have on-line access to all information
regarding all of Borrowers’ deposit accounts, as required by Section
4.1(g). Borrowers shall not make any changes to their deposit accounts,
Lockbox Accounts or establish new deposit accounts or change the passwords or
user identification information with respect thereto in such a fashion as would
result in Lender not having on-line access to view all information regarding all
of Borrowers’ deposit accounts and Lockbox Accounts or having control of all of
Borrowers’ deposit accounts through deposit account control agreements. The
provisions of this Section requiring deposit account control agreements shall
not apply to (i) the deposit accounts exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of
Borrowers’ employees and identified to Lender by Borrowers as such;
provided, however, that at all times that any Obligations
remain outstanding, Borrowers shall maintain one or more separate deposit
accounts to hold any and all amounts to be used for payroll, payroll taxes and
other employee wage and benefit payments, and shall not commingle any monies
allocated for such purposes with funds in any other deposit account; or (ii) the
JPMorgan Accounts; provided, however, that the amounts in the
JPMorgan Accounts shall not exceed $100,000 in the aggregate at any one time.


7.14    Truth
of Statements 

Borrowers shall not furnish to
Lender any certificate or other document that contains any untrue statement of a
material fact or that omits to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished. 

7.15    IRS
Form 8821 

Borrowers shall not materially
alter, amend, restate, or otherwise modify, or withdraw, terminate or re-file
the IRS Form 8821 required to be delivered pursuant to the Conditions Precedent
in Section 4.1, hereof. 

7.16    Unix
Packaging Facility 

The value of the Collateral
located at the Unix Packaging, Inc. facility shall not exceed $250,000 at any
time. 

7.17    TAWC
Series B Convertible Preferred Stock 

TAWC shall not at any time issue
any Series B Convertible Preferred Stock. 

	VIII. 	
      EVENTS OF DEFAULT



8.1   
 Events of Default 

The occurrence of any one or more
of the following shall constitute an “Event of Default”: 

59 




(a)    
Borrowers shall fail to pay any amount on the Obligations or provided for in any
Loan Document when due (whether on any payment date, at maturity, by reason or
acceleration, by notice of intention to prepay, by required prepayment or
otherwise); 

(b)    
Any representation, statement or warranty made or deemed made by any Credit
Party in any Loan Document or in any other certificate, document, report or
opinion delivered in conjunction with any Loan Document to which it is a party,
(i) shall not be true and correct in all material respects, or (ii) shall have
been false or misleading in any material respect on the date when made or deemed
to have been made (except to the extent already qualified by materiality, in
which case it shall be true and correct in all respects and shall not be false
or misleading in any respect); 

(c)   
 Any Credit Party or other party thereto other than Lender shall be in
violation, breach or default of, or shall fail to perform, observe or comply
with any covenant, obligation or agreement set forth in any Loan Document and
such violation, breach, default or failure shall not be cured within the
applicable period set forth in the applicable Loan Documents; provided
that, with respect to the affirmative covenants set forth in Article VI
(other than Sections 6.2, 6.3 (i), 6.9 and 6.11 for
which there shall be no cure period), there shall be a fifteen (15) calendar day
cure period commencing from the earlier of (i) receipt by such Person of written
notice of such breach, default, violation or failure, and (ii) the time at which
such Person or any officer thereof knew or became aware, or should have known or
been aware, of such failure, violation, breach or default; 

(d)    
(i) Any of the Loan Documents ceases to be in full force and effect, or (ii) any
Lien created thereunder ceases to constitute a valid perfected first priority
Lien on the Collateral in accordance with the terms thereof, or Lender ceases to
have a valid perfected first priority security interest in any material portion
of the Collateral; 

(e)    
One or more judgments or decrees is rendered against any Borrower or Guarantor
in an amount in excess of $25,000 individually or $50,000 in the aggregate at
one time outstanding, which is/are not satisfied, stayed, bonded, vacated or
discharged of record within thirty (30) calendar days of being rendered; 

(f)   
 (i) Any default occurs, which is not cured within any applicable grace
period or cure period or waived, (x) in the payment of any amount with respect
to any Indebtedness (other than the Obligations), including without
limitation the Closing Date Subordinated Debt and the Convertible Note
Subordinated Debt, of any Borrower or Guarantor in excess of $10,000, (y)
in the performance, observance or fulfillment of any provision contained in any
agreement, contract, document or instrument to which any Credit Party is a party
or to which any of their properties or assets are subject or bound under or
pursuant to which any Indebtedness, including without limitation the Closing
Date Subordinated Debt and the Convertible Note Subordinated Debt, was issued,
created, assumed, guaranteed or secured and such Default continues for more than
any applicable grace period or permits the holder of any Indebtedness, including
without limitation the Closing Date Subordinated Debt and the Convertible Note
Subordinated Debt, to accelerate the maturity thereof, or (z) in the
performance, observance or fulfillment of any provision contained in any
agreement, contract, document or instrument between any Credit Party and Lender
or Affiliate of Lender (other than the Loan Documents), including without limitation the Closing
Date Subordinated Debt Documents and the Convertible Note Subordinated Debt
Documents, or (ii) any Indebtedness, including without limitation the Closing
Date Subordinated Debt and the Convertible Note Subordinated Debt, of any Credit
Party is declared to be due and payable or is required to be prepaid (other than
by a regularly scheduled payment) prior to the stated maturity thereof, or any
obligation of such Person for the payment of Indebtedness (other than the
Obligations), including without limitation the Closing Date Subordinated Debt
and the Convertible Note Subordinated Debt, is not paid when due or
within any applicable grace period, or any such obligation becomes or is
declared to be due and payable before the expressed maturity thereof, or there
occurs an event which, with the giving of notice or lapse of time, or both,
would cause any such obligation to become, or allow any such obligation to be
declared to be, due and payable; 

60 





(g)    
Any Credit Party shall (i) be unable to pay its debts generally as they become
due, (ii) file a petition under any insolvency statute, (iii) make a general
assignment for the benefits of its creditors, (iv) commence a proceeding for the
appointment of a receiver, trustee, liquidator or conservator of itself or of
the whole or any substantial part of its property, or (v) file a petition
seeking reorganization or liquidation or similar relief under any Debtor Relief
Law or any other applicable law or statute; 

(h)   
 (i) A court of competent jurisdiction shall (A) enter an order, judgment
or decree appointing a custodian, receiver, trustee, liquidator or conservator
of any Credit Party or the whole or any substantial part of any such Person’s
properties and, if such order, judgment or decree is issued without notice to
the Credit Party and a hearing, such order, judgment or decree remains unstayed
and in effect for a period of sixty (60) calendar days, (B) shall approve a
petition filed against any Credit Party seeking reorganization, liquidation or
similar relief under any Debtor Relief Law or any other applicable law or
statute, which is not dismissed within sixty (60) calendar days or, (C) under
the provisions of any Debtor Relief Law or other applicable law or statute,
assume custody or control of any Credit Party or of the whole or any substantial
part of any such Person’s properties, which is not irrevocably relinquished
within sixty (60) calendar days, or (ii) there is commenced against any Credit
Party any proceeding or petition seeking reorganization, liquidation or similar
relief under any Debtor Relief Law or any other applicable law or statute, (A)
which is not unconditionally dismissed within sixty (60) calendar days after the
date of commencement, or (B) with respect to which such Credit Party takes any
action to indicate its approval or consent; 

(i)    
(i) Any Change of Control occurs or any agreement or commitment to cause or that
may result in any such Change of Control is entered into, (ii) any Material
Adverse Effect or any Material Adverse Change occurs, or (iii) any Credit Party
ceases any material portion of its business operations as currently conducted;


(j)    
Lender receives any indication or evidence that any Credit Party may have
directly or indirectly been engaged in any type of activity which, in Lender’s
judgment, might result in forfeiture of any property to a Governmental Authority
which shall have continued unremedied for a period of ten (10) calendar days
after written notice from Lender; 

61 




(k)    
Any Credit Party or any of their respective directors/members/managers or senior
officers is criminally indicted or convicted under any law that could lead to a
forfeiture of any material portion of their respective assets; or 

(l)    
The issuance of any process for levy, attachment or garnishment or execution
upon or prior to any judgment for in any one instance or in the aggregate an
amount of $10,000 or more against any Credit Party or any of their respective
property or assets. 

8.2    
Acceleration and Suspension or Termination of Commitments 

Upon the occurrence and during
the continuance of an Event of Default, notwithstanding any other provision of
any Loan Documents, Lender may by notice to Borrowers (i) suspend or terminate
the Revolving Loan Commitment and the obligation of the Lender with respect
thereto and/or (ii) by notice to Borrowers declare all or any portion of the
Obligations to be due and payable immediately (except in the case of an Event of
Default under Section 8.1(g) or (h), in which event all of the foregoing
shall automatically and without further act by Lender be due and payable),
provided that, with respect to non-material breaches or violations that
constitute Events of Default under clause (ii) of Section 8.1(d), there
shall be a three (3) Business Day cure period commencing from the earlier of (A)
Receipt by the Borrowers of written notice of such breach or violation or any
event, fact or circumstance constituting or resulting in any of the foregoing,
and (B) the time at which the Borrowers or any officer thereof knew or became
aware, or should have known or been aware, of such breach or violation and
resulting Event of Default or of any event, fact or circumstance constituting or
resulting in any of the foregoing), in each case without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by Borrowers. 

	IX. 	
      RIGHTS AND REMEDIES AFTER
DEFAULT



9.1    
Rights and Remedies 

(a)   
 In addition to the acceleration provisions set forth in Article
VIII above, upon the occurrence and continuation of an Event of Default,
Lender shall have the right to exercise any and all rights, options and remedies
provided for in any Loan Document, under the UCC or at law or in equity,
including, without limitation, the right to (i) apply any property of any
Borrower received or held by Lender to reduce the Obligations in such manner as
Lender may deem advisable, (ii) foreclose the Liens created under the Loan
Documents, (iii) realize upon, take possession of and/or sell any Collateral or
securities pledged with or without judicial process, (iv) exercise all rights
and powers with respect to the Collateral as any Borrower might exercise, (v)
collect and send notices regarding the Collateral with or without judicial
process, (vi) at Borrowers’ expense, require that all or any part of the
Collateral be assembled and made available to Lender at any reasonable place
designated by Lender, (vii) reduce or otherwise change the Revolving Loan
Commitment Amount, (viii) engage, on behalf of Borrowers, a third party to
service and collect Borrowers’ receivables, including billing and rebilling
third party payors to the extent of their obligations thereunder, and/or (ix)
relinquish or abandon any Collateral or securities pledged or any Lien thereon.
Notwithstanding any provision of any Loan Document, Lender, in its Permitted
Discretion, shall have the right, at any time that any Borrower fails to do so,
and from time to time, without prior notice, to: (i) obtain insurance covering any of the Collateral to the extent required
hereunder; (ii) pay for the performance of any Obligations; (iii) discharge
taxes or liens on any of the Collateral that are in violation of any Loan
Document unless such Borrower is in good faith with due diligence by appropriate
proceedings contesting those items; and (iv) pay for the maintenance and
preservation of the Collateral. Such expenses and advances shall be added to the
Obligations and increase the principal amount outstanding hereunder, until
reimbursed to Lender and shall be secured by the Collateral, and such payments
by Lender shall not be construed as a waiver by Lender of any Event of Default
or any other rights or remedies of Lender. 

62 





(b)    
Each Borrower agrees that notice received by it at least ten (10) calendar days
before the time of any intended public sale, or the time after which any private
sale or other disposition of Collateral is to be made, shall be deemed to be
reasonable notice of such sale or other disposition. If permitted by applicable
law, any perishable Collateral which threatens to speedily decline in value or
which is sold on a recognized market may be sold immediately by Lender without
prior notice to Borrower. At any sale or disposition of Collateral or securities
pledged, Lender may (to the extent permitted by applicable law) purchase all or
any part thereof free from any right of redemption by any Borrower which right
is hereby waived and released. Each Borrower covenants and agrees not to, and
not to permit or cause any of its Subsidiaries to, interfere with or impose any
obstacle to Lender’s exercise of its rights and remedies with respect to the
Collateral. Lender, in dealing with or disposing of the Collateral or any part
thereof, shall not be required to give priority or preference to any item of
Collateral or otherwise to marshal assets or to take possession or sell any
Collateral with judicial process. 

9.2    
Application of Proceeds 

In addition to any other rights,
options and remedies Lender has under the Loan Documents, the UCC, at law or in
equity, all dividends, interest, rents, issues, profits, fees, revenues, income
and other proceeds collected or received from collecting, holding, managing,
renting, selling, or otherwise disposing of all or any part of the Collateral or
any proceeds thereof upon exercise of its remedies hereunder shall be applied in
the following order of priority: (i) first, to the payment of all
reasonable out-of-pocket costs and expenses of such collection, storage, lease,
holding, operation, management, sale, disposition or delivery and of conducting
any Borrower’s business and of maintenance, repairs, replacements, alterations,
additions and improvements of or to the Collateral, and to the payment of all
sums which Lender may be required or may elect to pay, if any, for taxes,
assessments, insurance and other charges upon the Collateral or part thereof,
and all other payments that Lender may be required or authorized to make under
any provision of this Agreement (including, without limitation, in each such
case, in-house documentation and diligence fees and legal expenses, search,
audit, recording, professional and filing fees and expenses and reasonable
attorneys’ fees and all expenses, expert witness fees, liabilities and advances
made or incurred in connection therewith, whether litigation is commenced or
not); (ii) second, to the payment of all Obligations as provided herein,
(iii) third, to the satisfaction of Indebtedness secured by any
subordinate security interest of record in the Collateral if written
notification of demand therefore is received before distribution of the proceeds
is completed, provided, that, if requested by Lender, the holder of a
subordinate security interest shall furnish reasonable proof of its interest,
and unless it does so, Lender need not address its claims; and (iv)
fourth, to the payment of any surplus then remaining to Borrowers, unless
otherwise provided by law or directed by a court of competent jurisdiction, provided that Borrowers shall be liable for any
deficiency if such proceeds are insufficient to satisfy the Obligations or any
of the other items referred to in this Section. 

63 





9.3    
Rights of Lender to Appoint Receiver 

Without limiting and in addition
to any other rights, options and remedies Lender has under the Loan Documents,
the UCC, at law or in equity, upon the occurrence and continuation of an Event
of Default, Lender shall have the right to apply for and have a receiver
appointed by a court of competent jurisdiction in any action taken by Lender to
enforce its rights and remedies in order to manage, protect and preserve the
Collateral and continue the operation of the business of any Borrower to the
extent necessary to collect all revenues and profits thereof and apply the same
to the payment of all expenses and other charges of such receivership including
the compensation of the receiver and to the payments as aforesaid until a sale
or other disposition of such Collateral shall be finally made and consummated.
Borrowers waive any right to require a bond to be posted by or on behalf of any
such receiver. 

9.4    
Application of Payments Following Default 

Following the occurrence and
during the continuance of an Event of Default, Lender shall apply any and all
payments received by Lender in respect of the Obligations, and any and all
proceeds of Collateral received by Lender, in such order as Lender may from time
to time elect. 

9.5    
Rights and Remedies not Exclusive 

Lender shall have the right in
accordance with the terms hereof, in its Permitted Discretion to determine which
rights, Liens and/or remedies Lender may at any time pursue, relinquish,
subordinate or modify, and such determination will not in any way modify or
affect any of Lender’s rights, Liens or remedies under any Loan Document,
applicable law or equity. The enumeration of any rights and remedies in any Loan
Document is not intended to be exhaustive, and all rights and remedies of Lender
described in any Loan Document are cumulative and are not alternative to or
exclusive of any other rights or remedies which Lender otherwise may have. The
partial or complete exercise of any right or remedy shall not preclude any other
further exercise of such or any other right or remedy. 

	X. 	
      WAIVERS AND JUDICIAL
PROCEEDINGS



10.1   
Waivers 

Except as expressly provided for
herein, Borrowers hereby waive setoff, counterclaim, demand, presentment,
protest, all defenses with respect to any and all instruments and all notices
and demands of any description, and the pleading of any statute of limitations
as a defense to any demand under any Loan Document. Borrowers hereby waive any
and all defenses and counterclaims it may have or could interpose in any action
or procedure brought by Lender to obtain an order of court recognizing the
assignment of, or Lien of Lender in and to, any Collateral. With respect to any
action hereunder, Lender conclusively may rely upon, and shall incur no
liability to any Borrower in acting upon, any request or other communication
that Lender reasonably believes to have been given or made by a person
authorized on any Borrower’s behalf, whether or not such person is listed on the
incumbency certificate delivered pursuant to Section 4.1 hereof. In each such case,
Borrowers hereby waive the right to dispute Lender’s action based upon such
request or other communication, absent manifest error. 

64 





10.2    Delay;
No Waiver or Defaults 

Other than any waiver granted by
Lender in writing, and except as otherwise provided in the Loan Documents, no
course of action or dealing, renewal, release or extension of any provisions of
any Loan Document, or single or partial exercise of any such provision, or
delay, failure or omission on Lender’s part in enforcing any such provision
shall affect the liability of any Borrower or Guarantor or operate as a waiver
of such provision or affect the liability of any Borrower or Guarantor or
preclude any other or further exercise of such provision. No waiver by any party
to any Loan Document of any one or more defaults by any other party in the
performance of any of the provisions of any Loan Document shall operate or be
construed as a waiver of any future default, whether of a like or different
nature, and each such waiver shall be limited solely to the express terms and
provisions of such waiver. Notwithstanding any other provision of any Loan
Document, by completing the Closing under this Agreement and/or by making
Advances, Lender does not waive any breach of any representation or warranty of
under any Loan Document, and all of Lender’s claims and rights resulting from
any such breach or misrepresentation are specifically reserved. 

10.3    Jury
Waiver 

EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY WAY CONNECTED WITH OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY
COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS
TO TRIAL BY JURY. 

10.4   
Cooperation in Discovery and Litigation 

In any litigation, arbitration or
other dispute resolution proceeding relating to any Loan Document, Borrowers
waive any and all defenses, objections and counterclaims it may have or could
interpose with respect to (i) any of its directors, officers, employees or
agents being deemed to be employee or managing agents of any Borrower for
purposes of all applicable law or court rules regarding the production of
witnesses by notice for testimony (whether in a deposition, at trial or
otherwise), (ii) Lender’s counsel examining any such individuals as if under
cross-examination and using any discovery deposition of any of them as if it
were an evidence deposition, and/or (iii) using all commercially reasonable
efforts to produce in any such dispute resolution proceeding, at the time and in
the manner requested by Lender, all Persons, documents (whether in tangible, electronic or other form)
and/or other things under its control and relating to the dispute. 

65 





	XI. 	
      EFFECTIVE DATE AND
TERMINATION



11.1   
Effectiveness and Termination 

(a)    
Termination by Lender. Subject to Lender’s right to terminate and cease
making Advances upon the occurrence and during the continuance of an Event of
Default, this Agreement shall continue in full force and effect until the full
performance and indefeasible payment in cash of all Obligations (other than
indemnity obligations with respect to which no claim has been made), unless
terminated sooner as provided in this Section 11.1. 

(b)    
Termination by Borrower. Borrowers may terminate this Agreement at any
time on or before upon not less than thirty (30) calendar days’ prior written
notice to Lender and upon full performance and indefeasible payment in full in
cash of all Obligations (other than indemnity obligations with respect to which
no claim has been made) on or prior to such 30th calendar day after
Receipt by Lender of such written notice. Borrowers may elect to terminate this
Agreement in its entirety only. No section of this Agreement or type of Loan
available hereunder may be terminated singly. 

(c)    
Effectiveness of Termination. All of the Obligations (other than
indemnity obligations with respect to which no claim has been made) shall be
immediately due and payable upon the Termination Date. All undertakings,
agreements, covenants, warranties and representations of Borrowers contained in
the Loan Documents shall survive any such termination and Lender shall retain
its Liens in the Collateral and Lender shall retain all of its rights and
remedies under the Loan Documents notwithstanding such termination until all
Obligations have been irrevocably discharged or paid, in full, in immediately
available funds, including, without limitation, all Obligations under Section
3.4 and the terms of any fee letter or other agreements, if any, resulting from
such termination. Notwithstanding the foregoing or the payment in full of the
Obligations, Lender shall not be required to terminate its Liens in the
Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrowers or any Account Debtor and applied to the Obligations, Lender shall, at
its option, (i) have received a written agreement satisfactory to Lender,
executed by Borrowers and by any Person whose loans or other advances to
Borrowers are used in whole or in part to satisfy the Obligations, indemnifying
Lender from any such loss or damage or (ii) have retained cash Collateral or
other Collateral for such period of time as Lender, in its discretion, may deem
necessary to protect Lender from any such loss or damage. 

11.2   
Survival 

All obligations, covenants,
agreements, representations, warranties, waivers and indemnities made by
Borrowers in any Loan Document shall survive the execution and delivery of the
Loan Documents, the Closing, the making of the Advances and any termination of
this Agreement until all Obligations (other than indemnity obligations with
respect to which no claim has been made) are fully performed and indefeasibly
paid in full in cash. Notwithstanding the foregoing sentence of this Section 11.2, the obligations
and provisions of Article III and Sections 10.1, 13.1, 13.3, 13.4, 13.7 and 13.12 shall survive termination
of the Loan Documents and any payment, in full or in part, of the
then-outstanding Obligations. 

66 





	XII. 	
      ASSIGNMENTS AND
PARTICIPATIONS



12.1   
Assignments 

Lender may at any time assign the
Lender’s rights and obligations hereunder and under all other Loan Documents to
one or more Eligible Assignees. Upon Receipt of notice of such assignment,
Borrowers shall treat the assignee as the Lender for all purposes hereunder and
under the other Loan Documents. Each Eligible Assignee shall have all of the
rights and benefits with respect to the Obligations, Collateral and/or Loan
Documents held by it as fully as if the original holder thereof; provided
that, Borrowers shall not be obligated to pay under this Agreement to any
Eligible Assignee any sum in excess of the sum which Borrowers would have been
obligated to pay to Lender had such assignment not been effected.
Notwithstanding any other provision of a Loan Document, Lender may disclose to
any Eligible Assignee all information, reports, financial statements,
certificates and documents obtained under any provision of any Loan Document.
Borrowers may not offset any amounts owing to Borrowers by an Eligible Assignee
from any amounts owed by Borrowers to such Eligible Assignee pursuant to this
Agreement. 

12.2   
Participations 

Lender may at any time, without
the consent of, or notice to, Borrowers, sell to one or more Persons
participating interests in its Loan, commitments or other interests hereunder
(any such Person, a “Participant”). Notwithstanding any other provision
of a Loan Document, Lender may disclose to any Participant all information,
reports, financial statements, certificates and documents obtained under any
provision of any Loan Document. Subject to Section 12.3, in the event of
a sale by Lender of a participating interest to a Participant, (i) Borrowers
shall continue to deal solely and directly with Lender in connection with
Lender’s rights and obligations hereunder, and (ii) all amounts payable by
Borrowers shall be determined as if Lender had not sold such participation and
shall be paid directly to Lender. Borrowers agree that if amounts outstanding
under this Agreement are due and payable (as a result of acceleration or
otherwise), each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement. 

12.3   
Defaulting Participants 

Lender may from time to time
notify Borrowers of the participations sold by Lender hereunder and the share of
each Participant’s interest in the Loan (such notification, as it may be amended
from time to time, is referred to herein as a “Participation Notice”).
Following Receipt by Borrowers of a Participation Notice, (i) it shall be the
responsibility of the Participant identified in the Participation Notice to fund
each Advance in an amount equal to such Participant’s share of each Advance as
set forth in the Participation Notice, (ii) Borrowers will look solely to
Participant identified in the Participation Notice for the funding of such
portion of each Advance as is equal to the Participant’s share of such
Advance as set forth in the Participation Notice, and (iii) notwithstanding any
other provision of this Agreement or any other Loan Document, Lender shall not
be obligated to fund any portion of an Advance which is the responsibility of a
Participant as set forth in a Participation Notice. Following Receipt by
Borrowers of a Participation Notice, any Participant which shall fail to make
any Advance or other credit accommodation, disbursement, settlement or
reimbursement required pursuant to the terms of any Loan Document, for so long
as such failure shall remain in existence and uncured, shall be deemed to be a
“Defaulting Participant.” After a Participant becomes a Defaulting
Participant, and the circumstances causing such status shall not have been cured
or waived, each of the Borrowers and Lender may, at their respective option,
notify such Defaulting Participant of such Person’s intention to obtain a
replacement Participant (“Replacement Participant”) for the Defaulting
Participant, which Replacement Participant shall be an Eligible Assignee. In the
event Borrowers or Lender, as applicable, obtain a Replacement Participant, the
Borrowers shall look to the Replacement Participant rather than the Defaulting
Participant for the funding of future Advances in an amount equal to the
Defaulting Participant’s share of each Advance set forth in the Participation
Notice. Any Replacement Participant shall not be responsible for, and such
Replacement Participant’s interest in the Loan shall not be subject to, any
liabilities of the Defaulting Participant to Borrowers accruing prior to the
date of the transfer of the participation interest. Borrowers may not offset any
amounts owing to Borrowers by the Defaulting Participant from any amounts owed
by Borrowers to Lender pursuant to this Agreement. 

67 





12.4  
 Definitions 

For purposes of this Article
XII, the following terms shall have the following meanings: 

“Eligible Assignee” shall
mean (a) Lender, (b) an Affiliate of Lender, (c) an Approved Fund, and (d) any
other Person (other than a natural person) approved by Lender;
provided, however, that notwithstanding the foregoing,
“Eligible Assignee” shall not include Borrower or any of Borrower’s
Affiliates. 

“Approved Fund” means any
(a) investment company, finance company, fund, trust, securitization vehicle or
conduit that is (or will be) engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course of business or (b) any Person (other than a natural person) which
temporarily warehouses loans for any Lender or any entity described in the
preceding clause (a) and that, with respect to each of the preceding clauses (a)
and (b), is administered or managed by (i) Lender, (ii) an Affiliate of Lender,
or (iii) a Person (other than a natural person) or an Affiliate of a Person
(other than a natural person) that administers or manages Lender. 


	XIII. 	
      MISCELLANEOUS 




13.1   
Governing Law; Jurisdiction; Service of Process; Venue 

The Loan Documents shall be
governed by and construed in accordance with the internal substantive laws of
the State of New York without giving effect to its choice of law provisions. Any
judicial proceeding against Borrower with respect to the Obligations, any Loan
Documents or any related agreement may be brought in any federal or state court
of competent jurisdiction located in the State of New York. By execution and delivery of
each Loan Document to which it is a party, each of Borrower and Lender (i)
accepts the non-exclusive jurisdiction of the aforesaid courts and irrevocably
agrees to be bound by any judgment rendered thereby, (ii) waives personal
service of process, (iii) agrees that service of process upon it may be made by
certified or registered mail, return receipt requested, pursuant to Section
13.5, hereof, (iv) waives any objection to jurisdiction and venue of any action
instituted hereunder and agrees not to assert any defense based on lack of
jurisdiction, venue or convenience, and (v) agrees that this loan was made in
New York, that Lender has accepted in New York the Loan Documents executed by
Borrower and has disbursed Advances under the Loan Documents in New York.
Nothing shall affect the right of Lender to serve process in any manner
permitted by law or shall limit the right of Lender to bring proceedings against
Borrower in the courts of any other jurisdiction having jurisdiction. Any
judicial proceedings against Lender involving, directly or indirectly, the
Obligations, any Loan Document or any related agreement shall be brought only in
a federal or state court located in the State of New York. All parties
acknowledge that they participated in the negotiation and drafting of this
Agreement and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than
against any other. 

68 





13.2   
Successors and Assigns; Participants; New Lenders 

The Loan Documents shall inure to
the benefit of Lender, Transferees and all future holders of any Revolving Loan,
the Obligations and/or any of the Collateral, and each of their respective
successors and assigns. Each Loan Document shall be binding upon the Persons
other than Lender that are parties thereto and their respective successors and
assigns, and no such Person may assign, delegate or transfer any Loan Document
or any of its rights or obligations thereunder without the prior written consent
of Lender. No rights are intended to be created under any Loan Document for the
benefit of any Person who is not a party to such Loan Document. Nothing
contained in any Loan Document shall be construed as a delegation to Lender of
any other Person’s duty of performance. BORROWERS ACKNOWLEDGE AND AGREE THAT
LENDER AT ANY TIME AND FROM TIME TO TIME MAY SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
LOAN DOCUMENT, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS (EACH SUCH
TRANSFEREE, ASSIGNEE OR PURCHASER, A “TRANSFEREE”). 

13.3    Revival
of Obligations 

To the extent that any payment
made or received with respect to the Obligations is subsequently invalidated,
determined to be fraudulent or preferential, set aside or required to be repaid
to a trustee, debtor in possession, receiver, custodian or any other Person
under any Debtor Relief Law, common law or equitable cause or any other law,
then the Obligations intended to be satisfied by such payment (whether or not
previously terminated) shall be revived and shall continue as if such payment
had not been received by Lender. Any payments received with respect to such
revived Obligations shall be credited and applied in such manner and order, as
Lender shall decide in its Permitted Discretion. 

69 




13.4   
Indemnity 

Borrower shall indemnify Lender,
its Affiliates and its and their respective managers, members, officers,
employee, Affiliates, agents, representatives, successors, assigns, accountants
and attorneys (collectively, the “Indemnified Persons”) from and against
any and all liability, obligations, losses, damages, penalties, actions,
judgments, suits, reasonable out-of-pocket costs, expenses and disbursements of
any kind of nature whatsoever (including, without limitation, reasonable fees
and disbursements of counsel, expert witness fees, and reasonable in-house
documentation and diligence fees and reasonable legal expenses) which may be
imposed on, incurred by or asserted against any Indemnified Person with respect
to or arising out of, or in any way relating to any litigation, proceeding or
investigation instituted or conducted by any Person with respect to any aspect
of, or any transaction contemplated by or referred to in, or any matter related
to, any Loan Document or any agreement, document or transaction contemplated
thereby, whether or not such Indemnified Person is a party thereto, except to
the extent that any of the foregoing (i) arises out of the gross negligence or
willful misconduct of any Indemnified Person or (ii) arises out of a dispute
between or among any Indemnified Persons. If any Indemnified Person uses
in-house counsel for any purpose for which any Borrower is responsible to pay or
indemnify, each Borrower expressly agrees that its indemnification obligations
include reasonable charges for such work commensurate with the fees that would
otherwise be charged by outside legal counsel selected by Indemnified Person in
its Permitted Discretion for the work performed. Lender agrees to give Borrowers
reasonable notice of any event of which Lender becomes aware for which
indemnification may be required under this Section 13.4, and Lender may
elect (but is not obligated) to direct the defense thereof, provided that
the selection of counsel shall be subject to Borrowers’ consent which consent
shall not be unreasonably withheld or delayed. Any Indemnified Person may in its
reasonable discretion, take such actions, as it deems necessary and appropriate
to investigate, defend or settle any event or take other remedial or corrective
actions with respect thereto as may be necessary for the protection of such
Indemnified Person or the Collateral. Notwithstanding the foregoing, if any
insurer agrees to undertake the defense of an event (an “Insured Event”),
Lender agrees not to exercise its right to select counsel to defend the event if
that would cause any Borrowers’ insurer to deny coverage; provided,
however, that Lender reserves the right to retain counsel to represent
any Indemnified Person with respect to an Insured Event at its sole cost and
expense. To the extent that Lender obtains recovery from a third party other
than an Indemnified Person of any of the amounts that any Borrower has paid to
Lender pursuant to the indemnity set forth in this Section 13.4, then
Lender shall promptly pay to such Borrower the amount of such recovery.


13.5   
Notice 

Any notice or request under any
Loan Document shall be given to any party to this Agreement at such party’s
address set forth beneath its signature on the signature page to this Agreement,
or at such other address as such party may hereafter specify in a notice given
in the manner required under this Section 13.5. Any notice or request
hereunder shall be given only by, and shall be deemed to have been received upon
(each, a “Receipt”): (i) registered or certified mail, return receipt
requested, on the date on which such received as indicated in such return
receipt, (ii) delivery by a nationally recognized overnight courier, one (1)
Business Day after deposit with such courier, or (iii) facsimile or electronic
transmission, in each case upon telephone or further electronic communication
from the recipient acknowledging receipt (whether automatic or manual from recipient), as applicable.
Any notice or request under any Loan Document or otherwise pursuant to any
applicable law which is given to one Borrower will be deemed to be notice (or,
if applicable, a request) to each Borrower. 

70 





13.6   
Severability; Captions; Counterparts; Facsimile or other Electronic
Signatures 

If any provision of any Loan
Document is adjudicated to be invalid under applicable laws or regulations, such
provision shall be inapplicable to the extent of such invalidity without
affecting the validity or enforceability of the remainder of the Loan Documents
which shall be given effect so far as possible. The captions in the Loan
Documents are intended for convenience and reference only and shall not affect
the meaning or interpretation of the Loan Documents. The Loan Documents may be
executed in one or more counterparts (which taken together, as applicable, shall
constitute one and the same instrument) and by facsimile or other electronic
transmission, which facsimile or other electronic signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will
be bound by its own facsimile or other electronic signature and that it accepts
the facsimile or other electronic signature of each other party. 

13.7   
Expenses 

Borrowers shall pay, whether or
not the Closing occurs, all usual and customary costs and expenses incurred by
Lender and/or its Affiliates, including, without limitation, documentation and
diligence fees and expenses, all search, audit, appraisal, recording reasonable
professional and filing fees and expenses and all other actual out-of-pocket
charges and expenses (including, without limitation, UCC and judgment and tax
lien searches and UCC filings and fees for post-Closing UCC and judgment and tax
lien searches and audit expenses), and reasonable attorneys’ fees and expenses,
incurred (i) in any effort to enforce, protect or collect payment of any
Obligation or to enforce any Loan Document or any related agreement, document or
instruments (ii) in connection with entering into, negotiating, preparing,
reviewing and executing the Loan Documents and/or any related agreements,
documents or instruments, (iii) arising in any way out of administration of the
Obligations, (iv) in connection with instituting, maintaining, preserving,
enforcing and/or foreclosing on Lender’s Liens in any of the Collateral or
securities pledged under the Loan Documents, whether through judicial
proceedings or otherwise, (v) in defending or prosecuting any actions, claims or
proceedings arising out of or relating to Lender’s transactions with Borrower,
(vi) in seeking, obtaining or receiving any advice with respect to its rights
and obligations under any Loan Document and any related agreement, document or
instrument, (vii) in connection with any modification, restatement, supplement,
amendment, waiver or extension of any Loan Document and/or any related
agreement, document or instrument and/or (viii) in connection with all actions,
visits, audits and inspections undertaken by Lender or its Affiliates pursuant
to the Loan Documents, subject to the provisions of Section 6.7 hereof.
In addition, Borrowers shall pay Lender a wire fee of $25.00 with respect to
each domestic wire transfer of funds by Lender to or for the benefit of
Borrower. All of the foregoing shall be charged to Borrowers’ account and shall
be part of the Obligations. If Lender or any of its Affiliates uses in-house
counsel for any purpose under any Loan Document for which Borrowers are
responsible to pay or indemnify, Borrowers expressly agree that their
Obligations include reasonable charges for such work commensurate with the fees
that would otherwise be charged by outside legal counsel selected by Lender or
such Affiliate in its Permitted Discretion for the work performed. Without limiting
the foregoing, Borrowers shall pay all taxes (other than taxes based upon or
measured by Lender’s income or revenues or any personal property tax), if any,
in connection with the transactions contemplated by this Agreement and the Loan
Documents and the filing and/or recording of any documents and/or financing
statements. 

71 





13.8    Entire
Agreement 

This Agreement and the other Loan
Documents to which Borrowers are parties constitute the entire agreement between
Borrower and Lender with respect to the subject matter hereof and thereof, and
supersede all prior agreements and understandings, if any, relating to the
subject matter hereof or thereof. Any promises, representations, warranties or
guarantees not herein contained and hereafter made shall have no force and
effect unless in writing signed by Borrowers and Lender, provided, however,
additional covenants, representations, warranties and guarantees will be
enforceable if executed by the party against whom enforcement is sought. No
provision of this Agreement may be changed, modified, amended, restated, waived,
supplemented, discharged, canceled or terminated orally or by any course of
dealing or in any other manner other than by an agreement in writing signed by
Lender and Borrowers. Each party hereto acknowledges that it has been advised by
counsel in connection with the negotiation and execution of this Agreement and
is not relying upon oral representations or statements inconsistent with the
terms and provisions hereof. 

13.9    Lender
Approvals 

Unless expressly provided herein
to the contrary, any approval, consent, waiver or satisfaction of Lender with
respect to any matter that is subject of any Loan Document may be granted or
withheld by Lender in its sole and absolute discretion. 

13.10  
Confidentiality and Publicity 

Borrower agrees, and agrees to
cause each of its Affiliates, (i) not to transmit or disclose provisions of any
Loan Documents to any Person (other than to Borrower’s advisors and officers on
a need-to-know basis) without Lender’s prior written consent, which may be
withheld in its sole discretion, and (ii) to inform all such Persons of the
confidential nature of the Loan Documents and to direct them not to disclose the
same to any other Person and to require each of them to be bound by these
provisions. Lender reserves the right to review and approve all materials that
Borrower or any of its Affiliates prepares that contain Lender’s name or
describe or refer to any Loan Document, any of the terms thereof or any of the
transactions contemplated thereby. Borrower shall not, and shall not permit any
of its Affiliates to, use Lender’s name (or the name of any of Lender’s
Affiliates) in connection with any of its business operations. Nothing contained
in any Loan Documents is intended to permit or authorize Borrower or any of its
Affiliates to contract on behalf of Lender. Further, Borrower hereby agrees that
Lender or any Affiliate of Lender may (i) disclose a general description of
transactions arising under the Loan Documents for advertising, marketing or
other similar purposes to the extent such information is publicly available and,
if not publicly available, with Borrowers’ prior approval and (ii) use any
Borrowers’ or any Guarantor’s name, logo or other indicia germane to such party
in connection with such advertising, marketing or other similar purposes.
Notwithstanding any of the foregoing, Lender acknowledges that Borrower and its
Affiliates, may disclose such information concerning the transaction(s) as
contemplated by this Agreement, including terms or provisions of any Loan
Documents, as may be necessary to fully comply with all public reporting
requirements as promulgated by the Securities and Exchange Commission including
but not limited to any 8-K reports. 

72 





13.11   USA
Patriot Act Notification 

Lender hereby notifies each
Borrower that pursuant to the requirements of the USA PATRIOT Act, it is
required to obtain, verify and record certain information and documentation that
identifies any Borrower, which information includes the name and address of any
Borrower and such other information that will allow Lender to identify any
Borrower in accordance with the USA PATRIOT Act. 

13.12   Release of
Lender 

Notwithstanding any other
provision of any Loan Document, each Borrower voluntarily, knowingly,
unconditionally and irrevocably, with specific and express intent, for and on
behalf of itself, its managers, members, directors, officers, employees,
stockholders, Affiliates, agents, representatives, accountants, attorneys,
successors and assigns and their respective Affiliates (collectively, the
“Releasing Parties”), (i) hereby fully and completely releases and
forever discharges the Indemnified Persons and any other Person or insurer which
may be responsible or liable for the acts or omissions of any of the Indemnified
Persons, or who may be liable for the injury or damage resulting therefrom
(collectively, with the Indemnified Persons, the “Released Parties”), of
and from any and all actions, causes of action, damages, claims, obligations,
liabilities, costs, expenses and demands of any kind whatsoever, at law or in
equity, matured or unmatured, vested or contingent, that any of the Releasing
Parties has against any of the Released Parties as of the date of the Closing
and (ii) by acceptance of each Advance hereunder fully and completely releases
and forever discharges the Released Parties, of and from any and all actions,
causes of action, damages, claims, obligations, liabilities, costs, expenses and
demands of any kind whatsoever, at law or in equity, matured or unmatured,
vested or contingent, that any of the Releasing Parties has against any of the
Released Parties as of the date of each such Advance. Each Borrower acknowledges
that the foregoing release is a material inducement to Lender’s decision to
extend to Borrowers the financial accommodations hereunder and will be relied
upon by Lender in making the Advances. 

[SIGNATURES APPEAR ON THE FOLLOWING PAGE] 

73 




IN WITNESS WHEREOF, each of the
parties has duly executed this Credit and Security Agreement as of the date
first written above. 

THE ALKALINE WATER COMPANY INC.,
a Nevada
corporation


	By: 	 /s/ Richard A. Wright 
	Name: 	 Richard A. Wright 
	Title: 	Vice President and Secretary




ALKALINE WATER CORP,
an Arizona corporation


	By: 	 /s/ Richard A. Wright 
	Name: 	 Richard A. Wright 
	Title: 	President 



ALKALINE 88, LLC,
an Arizona limited liability
company

	By: The Alkaline Water Company Inc. 
	Its: Manager 




	By: 	 /s/ Richard A. Wright 
	Name: 	 Richard A. Wright 
	Title: 	Vice President and Secretary




Address for Notice: 

The Alkaline Water Company Inc. 
7730 East Greenway Road

Scottsdale, Arizona, 85260 
Attention: Richard A. Wright

Telephone: 440-479-0408
Fax: 480-393-2907 
Email: rwright@alkaline88.com

Signature Page to Credit and Security Agreement 




SCM SPECIALTY FINANCE OPPORTUNITIES FUND, L.P., 
a
Delaware limited partnership


	By: 	
      /s/ Bradley D. Asness 

	Name: 	Bradley D. Asness 
	Title: 	Authorized Signatory 



Address for Notice: 
SCM Specialty Finance
Opportunities Fund, L.P.
c/o CNH Partners 
2 Greenwich Plaza, 1st Floor

Greenwich, CT 06830 
Attention: Tim Peters 
Telephone: (203) 742-3051

Fax: (203) 742-3072 
Email: tpeters@cnhfinance.com

With copy to (delivery of copy will not constitute notice):


Duane Morris LLP 
190 S. LaSalle Street, Suite 3700

Chicago, IL 60603 
Attention: Michael A. Witt, Esq. 
Telephone: (312)
499-6716 
Fax: (312) 277-9519 
Email: MAWitt@duanemorris.com

Signature Page to Credit and Security Agreement 





ANNEX I 

Financial and Loan Covenants 

EXHIBITS 

	Exhibit A 	- 	Borrowing Certificate 
	 	 	 
	Exhibit B 	- 	Compliance Certificate 


SCHEDULES 

	Schedule 2.4 	-	Borrower’s Account for Funding Wires 
	 	 	 
	Schedule 2.9 	-	Collateral 
	 	 	 
	Schedule 5.1 	-	Organization 
	 	 	 
	Schedule 5.3 	-	
      Capitalization, Organization Chart (including all
      subsidiaries, authorized/issued capitalization, owners, directors,
      officers and managers) and Joint Ventures 

	 	 	 
	Schedule 5.4 	-	Real Property Owned or Leased 
	 	 	 
	Schedule 5.6 	-	Litigation 
	 	 	 
	Schedule 5.8 	-	Environmental Exceptions 
	 	 	 
	Schedule 5.12 	-	Intellectual Property 
	 	 	 
	Schedule 5.17 	-	Insurance 
	 	 	 
	Schedule 5.18 	-	
      Names Under Which Business Is Transacted; Business and
      Collateral Locations 

	 	 	 
	Schedule 5.19 	-	Material Contracts 
	 	 	 
	Schedule 7.2 	-	Existing Contingent Obligations 
	 	 	 
	Schedule 7.3 	-	Existing Liens 






ANNEX I 

FINANCIAL AND LOAN COVENANTS 

	 	1) 	
      Loan Turnover Rate



The amount calculated by dividing
(A) 365 by (B) the result achieved by dividing (i) the product of the aggregate
of all collections received in the Lockbox Accounts during each Test Period with
respect to all of Borrower’s Accounts, multiplied by 4, by (ii) the outstanding
principal balance of the Revolving Facility as of the last Business Day of such
Test Period, shall not be greater than 45. 

	 	2) 	
      Minimum EBITDA



Commencing with February 28, 2017
and on the last Business Day at the end of each calendar month thereafter,
Borrower (on a consolidated basis) will not permit its EBITDA for the Test
Periods ending on dates set forth below to be less than the minimum amount set
forth in the table below opposite such date: 


	Feb 28, 2017 	($83,930)

	March 31, 2017 	($60,353) 
	April 30, 2017 	($33,113)

	May 31, 2017 	($14,489) 
	June 30, 2017 	$7,942 
	July 31, 2017 	$23,602 
	August 31, 2017 	$40,358 
	September 30, 2017 	$58,288





	 	3) 	
      Fixed Charge Coverage Ratio (EBITDA/Fixed
      Charges)



Commencing with October 31, 2017
and on the last Business Day at the end of each calendar month thereafter,
Borrower (on a consolidated basis) will not permit its Fixed Charge Coverage
Ratio for the Test Period ending on such date to be less than 1.10 to 1.00. 

	 	4) 	
      Minimum Liquidity



Borrower shall have Minimum
Liquidity at all times measured as of the last Business Day of each calendar
month commencing with the calendar month ending February 28, 2017 and continuing
each calendar month thereafter of at least $200,000. 

For purposes of the covenants set
forth in this Annex I, the terms listed below shall have the following meanings:


“Capital Expenditures” shall
mean, for any period, all direct or indirect (by way of acquisition of
securities of a Person or the expenditure of cash or the transfer of property or
the incurrence of Indebtedness) expenditures in respect of the
purchase or other acquisition of fixed or capital assets determined in
conformity with GAAP.


A-A-1 




“EBITDA” shall mean, for
  any Test Period, the sum, without duplication, of the following, on a
  consolidated basis: Net Income, plus, (a) Interest Expense, (b) taxes on income,
  whether paid, payable or accrued, (c) depreciation expense, (d) amortization
  expense, (e) all other non-cash, non-recurring charges and expenses (including,
  without limitation, non-cash, non-recurring charges and expenses with respect to
  the issuance of stock and/or warrants), excluding accruals for cash expenses
  made in the ordinary course of business, and (f) loss from any sale of assets,
  other than sales in the ordinary course of business, all of the foregoing
  determined in accordance with GAAP, minus (a) gains from any sale of assets,
  other than sales in the ordinary course of business and (b) other extraordinary
or non-recurring gains. 

“Fixed Charge Coverage
Ratio” shall mean the ratio of (a) EBITDA for the Test Period, to (b) Fixed
Charges for the Test Period. 

“Fixed Charges” shall mean
the sum of the following: (a) all Interest Expenses, all principal payments made
on Indebtedness, all payments with respect to Capitalized Lease Obligations (to
the extent not otherwise included), and all sinking fund payments made by
Borrower, plus (b) all Capital Expenditures by Borrower, plus (c) all
distributions to equity holders, plus (d) all payments described in Section
7.5(ii). 

“Interest Expense” shall
mean, for any Test Period, total interest expense (including interest expense
attributable to Capital Leases in accordance with GAAP) and fees with respect to
all outstanding Indebtedness including capitalized interest but excluding
commissions, discounts and other fees owed with respect to letters of credit and
bankers’ acceptance financing and net costs under Interest Rate Agreements. 

“Minimum Liquidity” shall
mean the sum of (i) total unrestricted cash on hand plus (ii) the lesser of (x)
Availability, (y) the Revolving Loan Commitment Amount or (z) the Borrowing
Base, as reflected on a recent Borrowing Base Certificate which calculates the
Availability and Borrowing Base as of the last Business Day of such calendar
month plus (iii) (x) the Loan Amount (as defined in the Closing Date
Subordinated Debt Documents) minus the amount of all outstanding Advances (as
defined in the Closing Date Subordinated Debt Documents). 

“Net Income” shall mean,
the net income (or loss) determined in conformity with GAAP, provided
that there shall be excluded (i) the income (or loss) of any Person in which any
other Person (other than any Borrower) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to a
Borrower by such Person, (ii) the income (or loss) of any Person accrued prior
to the date it becomes a Borrower or is merged into or consolidated with a
Borrower or that Person’s assets are acquired by a Borrower, (iii) the income of
any Subsidiary of Borrower to the extent that the declaration or payment of
dividends or similar distributions of that income by that Subsidiary is not at
the time permitted by operation of the terms of the Person’s organizational
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) compensation expense
resulting from the issuance of capital stock, stock options or stock
appreciation rights issued to former or current employees, including officers,
of a Borrower, or the exercise of such options or rights, in each case to the extent the obligation
(if any) associated therewith is not expected to be settled by the payment of
cash by a Borrower or any Affiliate thereof, and (v) compensation expense
resulting from the repurchase of capital stock, options and rights described in
clause (iv) of this definition of Net Income. 

A-A-2 




“Test Period” shall mean,
  (i) with respect to the Loan Turnover Rate, the three (3) most recent calendar
  months then ended (taken as one accounting period), (ii) with respect to Minimum
  Adjusted EBITDA, the one (1) most recent calendar month then ended (taken as one
  accounting period), and (iii) with respect to the Fixed Charge Coverage Ratio,
  (a) the seven (7) calendar months ending October 31, 2017 (taken as one
  accounting period), (b) the eight (8) calendar months ending November 30, 2017
  (taken as one accounting period), (c) the nine (9) calendar months ending
  December 31, 2017 (taken as one accounting period), (d) the ten (10) calendar
  months ending January 31, 2018 (taken as one accounting period), (e) the eleven
  (11) calendar months ending February 28, 2018 (taken as one accounting period),
  (f) the twelve (12) calendar months ending March 31, 2018 (taken as one
  accounting period) and (g) the twelve (12) most recent calendar months then
  ended for each calendar month thereafter (taken as one accounting period), or,
  in each case, such other period as specified in the Agreement or any Annex
thereto. 

A-A-3 




EXHIBIT A 

BORROWING CERTIFICATE 
Dated as of [__________, 20___] 

[BORROWER], a
[____________________] corporation (the “Borrower”), by the undersigned
duly authorized officer, hereby certifies to Lender in accordance with the
Credit and Security Agreement dated as of February 1, 2017, between Borrower and
SCM SPECIALTY FINANCE OPPORTUNITIES FUND, L.P., a Delaware limited partnership
(“Lender”) (as amended, supplemented or modified from time to time, the
“Credit Agreement;” all capitalized terms not defined herein have the
meanings given them in the Credit Agreement) and other Loan Documents that: 

A.     
Borrowing Base and Compliance 

Attached as Schedule 1 is a
Borrowing Base Certificate complying in all respects with the Credit Agreement
and confirming that, after giving effect to the requested Advance, the principal
amount outstanding under the Revolving Facility will not exceed the lesser of
(i) Availability or (ii) the Revolving Loan Commitment Amount. The amounts,
calculations and representations set forth below and on Schedule 1 are
true and correct in all respects and were determined in accordance with the
Credit Agreement and GAAP. All of the Accounts referred to (other than those
entered as ineligible on Schedule 1) are Eligible Receivables. Attached
are reports with detailed aging and categorizing of Borrower’s accounts
receivable and payables and Inventory and supporting documentation with respect
to the amounts, calculation and representations set forth on Schedule 1,
all as reasonably requested by Lender pursuant to the Credit Agreement. 

B.     
Borrowing Notice (to be completed and effective only if Borrower is
requesting an Advance) 

The undersigned hereby irrevocably
requests from Lender an Advance under the Revolving Facility pursuant to the
Credit Agreement in the aggregate principal amount of
$_____________(“Requested Advance”) to be made on
_____________________(the “Borrowing Date”), which day is a Business Day.


[For initial Advance Only] The
undersigned requests that the Advance be disbursed as follows: 

	 	1. 	
      To Lender: $______________

	 	 	 
	 	2. 	
      To Lender’s Legal Counsel: $___________________

	 	 	 
	 	3. 	
      To [name of creditor/IRS]: $
___________________

	 	 	 
	 	4. 	
      To Borrower: $
_________________________



E-A-1 




C.     
General Certifications 

The undersigned officer hereby
certifies that, both before and after giving effect to the request above (a)
each of the conditions precedent set forth in Section 4.1 of the Credit
Agreement have been satisfied as of the date hereof and will be satisfied as of
the Borrowing Date (if applicable), (b) all of the representations and
warranties contained in the Credit Agreement and the other Loan Documents are
true, correct and complete as of the date hereof and on the Borrowing Date (if
applicable), (c) no Default or Event of Default has occurred and is continuing
on the date hereof or will exist after giving effect to the advance requested
hereby, and (d) Borrower has paid all payroll taxes through the payroll period
ended ______________. 

This Borrowing Certificate may be
executed in one or more counterparts, each of which shall be deemed to be an
original but all of which taken together shall constitute but one and the same
document. A signature hereto sent or delivered by facsimile or other electronic
transmission shall be as legally binding and enforceable as a signed original
for all purposes. 

IN WITNESS WHEREOF, the
undersigned has caused this certificate to be executed as of the date first
written above. 

	  	 	 	[BORROWER] 
	 	 	 	 
	 	 	 	 
	Prepared by: 	 	Approved by: 
	 	 	 
	 	 	 
	Name: 	 	 	Name: 	 
	Title: 	 	 	Title: 	 


E-A-2 




SCHEDULE 1 TO BORROWING CERTIFICATE 
UNDER
CREDIT AND
SECURITY AGREEMENT FOR 
[BORROWER] 

As of [date] 


	Accounts Receivable Aging (by invoice date) 	 	 	 	 	 
	 
	     
                         
                         
                       0-30 Days
	 	 	 	$	 - 	 
	     
                         
                         
                       31-60 Days
    	 	 	 	$	 - 	 
	     
                         
                         
                       61-90 Days
    	 	 	 	$	 - 	 
	     
                         
                         
                       91-120 Days
    	 	 	 	$	 - 	 
	                 
                         
                         
           121+ Days 	 	 	 	$	 - 	 
	Total Accounts
      Receivable 	 	 	 	$	 - 	 
	     
                         
                         
                       Aged invoice
    	$	 - 	 	 		 
	     
                         
                         
                       Credit
      balance 	$	 - 	 	 		 
	     
                         
                         
                       Contras 	$	 - 	 	 		 
	     
                         
                         
                       Crossage 	$	 - 	 	 		 
	     
                         
                         
                       Intercompany
    	$	 - 	 	 		 
	     
                         
                         
                       Foreign 	$	 - 	 	 		 
	     
                         
                         
                       Dilution 	$	 - 	 	 		 
	     
                         
                         
                       Other
      Reserve 	$	 - 	 	 		 
	     
                         
                         
                       Other
      Reserve 	$	 - 	 	 		 
	Total Ineligible 	 	 	 	$	 - 	 
	Total Eligible
      Billed Receivables 	 	 	 	$	 - 	 
	Advance Rate 	 	 	 	 	85%
    	 
	Total Accounts
      Billed Receivable Availability 	 	 	 	$	 - 	 
	  	 	 	 	 	  	 
	Eligible Unbilled
      Receivables 	 	 	 	$	 - 	 
	Advance Rate 	 	 	 	 	65%
    	 
	Total Unbilled
      Receivable Availability 	 	 	 	$	 - 	 
	  	 	 	 	 	  	 
	Total Receivables 	 	 	 	$	 - 	 



S-1-1 




EXHIBIT B 

COMPLIANCE CERTIFICATE 
Dated as of [___________, 20__] 

This Compliance Certificate is
delivered by [BORROWER] (the “Borrower”), in accordance with the Credit
and Security Agreement dated as of February 1, 2017, between Borrower and SCM
SPECIALTY FINANCE OPPORTUNITIES FUND, L.P., a Delaware limited partnership
(“Lender”) (as amended, supplemented or modified from time to time, the
“Credit Agreement”). All capitalized terms not defined herein have the
meanings given them in the Credit Agreement and other Loan Documents. 

The undersigned hereby certifies
that: 

(a)      The
financial statements delivered with this certificate in accordance with
Section 6.1 of the Credit Agreement fairly present in all material
respects the results of operations and financial condition of Borrower as of the
dates and the accounting periods covered by such financial statements; 

(b)      I
have reviewed the terms of the Credit Agreement and have made, or caused to be
made under my supervision, a review in reasonable detail of the transactions and
financial condition of Borrower during the accounting period covered by such
financial statements; 

(c)      Such
review has not disclosed the existence during or at the end of such accounting
period, and I have no knowledge of the existence as of the date hereof, of any
condition or event that constitutes a Default or an Event of Default, except as
set forth in Schedule 1 attached hereto, which includes a description of
the nature and period of existence of such Default or an Event of Default and
what action Borrower has taken, is undertaking and proposes to take with respect
thereto; 

(d)      Except
as noted on Schedule 2 attached hereto, the undersigned has no knowledge
of any federal or state tax liens having been filed against the Borrower or any
Collateral; 

(e)      Except
as noted on Schedule 3 attached hereto, the undersigned has no knowledge
of any failure of the Borrower to make required payments of withholding or other
tax obligations of the Borrower during the accounting period to which the
attached statements pertain or any subsequent period. 

(f)      Except
as described in the Credit Agreement or on Schedule 4 attached hereto,
the undersigned has no knowledge of any current, pending or threatened: 

(i)        litigation against the
Borrower; 

(ii)       inquiries,
investigations or proceedings concerning the business affairs, practices,
licensing or reimbursement entitlements of Borrower; 

(iii)      default by Borrower under
any material contract to which either of them is a party, including, without
limitation, any leases. 

S-1-2 




(g)      Borrower is in compliance
with the financial and loan covenants contained in Annex I of the Credit
Agreement, as demonstrated by the calculation of such covenants below, except as
set forth below; in determining such compliance, the following calculations have
been made: [See attached worksheets]. Such calculations and the certifications
contained therein are true, correct and complete. 

Certified to as of [date] by:

Chief Financial Officer of [Borrower] 

S-1-3 




Schedules to Compliance Certificate 

Schedule 1 – Non-Compliance with Covenants 

Schedule 2 – Federal or State Tax Liens 

Schedule 3 – Unpaid Tax or Withholding Obligations 

Schedule 4 – Pending Litigation, Inquiries or Investigations;
Defaults under Material Contracts 

Worksheet(s) for Financial or Other Covenant Calculations


S-1-4 




Loan Turnover Rate Worksheet (Attachment to Compliance
Certificate) 

	1. Total collections received in the Lockbox Account during
      each Test Period with respect to all of the Borrowers’ Accounts: 	$___________ 
	 	 
	2. Line 1 multiplied by 4: 	$___________ 
	 	 
	3. Outstanding principal balance of Revolving Facility as
      of the end of the most recent month: 	$___________ 
	 	 
	4. Line 2 divided by Line 3: 	$___________ 
	 	 
	5. 365 divided by Line 4: 	________days 
	 	 
	6. Maximum Loan Turnover Rate: 	45 days 
	 	 
	7. In compliance: 	-YES - NO 


S-1-5 




Fixed Charge Coverage Ratio Worksheet (Attachment to
Compliance Certificate) 

	1. EBITDA for the Test Period most recently ended: 	$___________ 
	 	 
	2. Fixed Charges for the Test Period most recently ended:
    	$___________ 
	 	 
	3. Ratio of Line 1 to Line 2: 	____________
	 	 
	4. Minimum Fixed Charge Coverage Ratio: 	1.10 to 1.00 
	 	 
	5. In compliance: 	YES - NO 


S-1-6 




[Minimum] EBITDA Worksheet (Attachment to Compliance
Certificate) 

	1. Net Income as of the end of the most recent month: 	$___________ 



	2. 	(a) Interest Expense $______________ 	 
	  	  	 
		(b) taxes on income, whether paid, payable or
      accrued $____________ 	 
	  	  	 
	  	(c) depreciation expense $__________________
	 
	  	  	 
	  	(d) amortization expense $________________ 	 
	  	  	 
		
      (e) all other non-cash, non-recurring charges and
      expenses (including, without limitation, non-cash, non-recurring charges
      and expenses with respect to the issuance of stock and/or warrants),
      excluding accruals for cash expenses made in the ordinary course of
      business $_________________ 
	 
	  	  	 
		(f) loss from any sale of assets, other than
      sales in the ordinary course of business, all of the foregoing determined
      in accordance with GAAP as of the end of the most recent month
      $________________ 	 



	 	Total of (a) through (f): 	$___________ 



	3. 	(a) gains from any sale of assets, other than
      sales in the ordinary course of business $_____________ 	
	 	 	 
	  	(b) other extraordinary or non-recurring gains
      $______________ 	  
	 	 	 
	  	Total of (a) and (b): 	$____________ 



	4. EBITDA (line 1, plus lines 2(a) through (f), minus lines
      3(a) and (b): 	$____________ 
	 	 
	5. In compliance: 	YES - NO 


S-1-7 




Fixed Charges Worksheet (Attachment to Compliance
Certificate) 

	1. 	
      (a) Interest Expense $______________
	 
	 	 	 
		(b) all principal payments made on Indebtedness
      $____________	 
	 	 	 
		
      (c) all payments with respect to Capitalized Lease
      Obligations (to the extent not otherwise included)
    $__________________
	 
	 	 	 
		(d) all sinking fund payments made by Borrower
      $________________	



	 	Total of (a) through (d): 	$___________ 



	2. 	all Capital Expenditures by Borrower 	$____________ 
	 	 	 
	3. 	all distributions to equity holders 	$____________ 
	 	 	 
	4. 	all payments described in Section 7.5(ii)
      of the Credit Agreement 	$____________ 
	 	 	 
	5. Fixed Charges (lines 1(a) through (d), plus
      line 2, plus line 3, plus line 4): 	$____________ 


S-1-8 




Minimum Liquidity Worksheet (Attachment to Compliance
Certificate) 

	1. Total unrestricted cash on hand as of such date 	$___________ 
	 	 
	2. Availability, as reflected on a recent Borrowing Base
      Certificate which calculates the Availability as of the last Business Day
      of the calendar month of such Test Period 	$ ___________ 
	 	 
	3. Revolving Loan Commitment Amount as of such date 	$___________ 
	 	 
	4. The Borrowing Base, as reflected on a recent Borrowing
      Base Certificate which calculates the Borrowing Base as of the last
      Business Day of the calendar month of such Test Period 	$ ___________ 
	 	 
	5. The lesser of Line 2, 3 and 4: 	$___________ 
	 	 
	6. The Loan Amount (as defined in the Closing Date
      Subordinated Debt Documents) as of such date 	$ ___________ 
	 	 
	7. The amount of all outstanding Advances (as defined in
      the Closing Date Subordinated Debt Documents) as of such date 	$ ___________ 
	 	 
	8. Line 6 minus Line 7: 	$___________ 
	 	 
	9. Line 1 plus Line 5 plus Line 8: 	$___________ 
	 	 
	10. Minimum Liquidity: 	$200,000 
	 	 
	11. In compliance: 	YES - NO 


S-1-9 




SCHEDULE 2.4 

Borrower’s Account for Funding Wires 

 

 

S-1-10 




SCHEDULE 2.9 

Collateral 

The Collateral consists of all of
Borrower’s assets, including without limitation, all of Borrower’s right, title
and interest in and to the following, whether now owned or hereafter created,
acquired or arising: 

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

(b)      all
of Borrowers’ books and records relating to any of the foregoing; and 

(c)      any
and all claims, rights and interests in any of the above and all substitutions
for, additions, attachments, accessories, accessions and improvements to and
replacements, products, proceeds and insurance proceeds of any or all of the
foregoing. 

S-1-11 




SCHEDULE 5.1 

ORGANIZATION 

 

 

S-1-12 




SCHEDULE 5.3 

Subsidiaries, Capitalization and Ownership Interests 

The Borrower [similar information
for each Credit Party] is a [type of entity] organized under the laws of [State]


The Borrower [similar information
for each Credit Party] has [no] [the following] subsidiaries. 

The number and class of equity
securities issued and outstanding of Borrower [and each Credit Party] and the
record and beneficial owners thereof (including options, warrants and other
rights to acquire any of the foregoing) are as follows: 


	[Borrower or other Credit Party]
	Beneficial 
Owner 	Class of Equity 
Securities 	Number of 
Shares 
Authorized 	Number of 
Shares Issued 	Number of 
Shares 
Outstanding 
	  	 	  	 	  
		 		 	








S-1-13 




SCHEDULE 5.4 

Real Property Owned or Leased 

 

 

S-1-14 




SCHEDULE 5.6 

Litigation 

 

 

S-1-15 




SCHEDULE 5.8 

Environmental Exceptions 

 

 

S-1-16 




SCHEDULE 5.12 

Intellectual Property 

 

 

S-1-17 




SCHEDULE 5.17 

Insurance 

 

 

S-1-18 




SCHEDULE 5.18 

Names Under Which Business is Transacted, Business and
Collateral Locations 

 

 

S-1-19 




SCHEDULE 5.19 

Material Contracts 

 

 

S-1-20 




SCHEDULE 7.2 

Existing Contingent Obligations 

 

 

S-1-21 




SCHEDULE 7.3 

Existing Liens 

 

 

S-1-22