NANOPHASE TECHNOLOGIES CORPORATION 10-K


Exhibit
10.32


 


BUSINESS
LOAN AGREEMENT (ASSET BASED)


 





	 	 	 	 
	Borrower:	Nanophase Technologies
    Corporation	Lender:	Libertyville Bank and
    Trust Company
	 	1319 Marquette Drive	 	507 N. Milwaukee Ave
	 	Romeoville, IL 60446	 	Libertyville, IL 60048
	 	 	 	(847)
    367-6800
	 	 	 	 




 


THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) dated March 4, 2019, is made and executed between Nanophase Technologies Corporation (“Borrower”)
and Libertyville Bank and Trust Company (“Lender”) on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including
those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A)
in granting, renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements
as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to
Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of
this Agreement. This Agreement shall apply to any and all present and future loans, loan advances, extension of credit, financial
accommodations and other agreements and undertakings of every nature and kind that may be entered into by and between Borrower
and Lender now and in the future.


 


TERM.
This Agreement shall be effective as of March 4, 2019, and shall continue in full force and effect until such time as all
of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’
fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.


 


ADVANCE
AUTHORITY. The following person or persons are authorized to request advances and authorize payments under the line of credit
until Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of such authority: Jess
Jankowski, President of Nanophase Technologies Corporation.


 


LINE
OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration
Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows:


 


Conditions
Precedent to Each Advance. Lender’s obligation to make any Advance to or for the account of Borrower under this Agreement
is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required
under this Agreement to be in form and substance satisfactory to Lender:


 


(1)
Lender shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered
by Borrower to Lender.


 


(2)
Lender shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request.


 


(3)
The security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and
shall be in full force and effect.


 


(4)
All guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender,
and be in full force and effect.


 


(5)
Lender, at its option and for its sole benefit, shall have conducted an audit of Borrower’s Accounts, books, records, and
operations, and Lender shall be satisfied as to their condition.


 


(6)
Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are
then due and payable.


 


(7)
There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement,
and Borrower shall have delivered to Lender the compliance certificate called for in the paragraph below titled “Compliance
Certificate.”


 


(8)
Borrower shall have deposit account(s) with Lender with an aggregate balance of no less than $500,000.00, including funds advanced
under the Primary Credit Facility.


 


(9)
Any Advance under the Primary Credit Facility is limited to the beginning or end of each fiscal quarter.


 


(10)
Cash equivalents of Borrower at the end of the twelve-month period ending on the date of Borrower’s most recent published quarterly
financial statements (calculated in accordance with GAAP and applied on a consistent basis) shall be less the $500,000. Cash and
cash equivalents shall include any accounts receivable outstanding and due from BASF SE over 30 days from ship date, finished
goods Z-COTE in Borrower’s inventory (at no time be greater than $500,000.00), and zinc metal Borrower’s inventory (at no time be
greater than $250,000.00) shall be less than $1,000,000.00.


 


Making
Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower’s accounts, may
be requested orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed
in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1)
when credited to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions
of an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.


 


Mandatory
Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing
Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between
the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender
in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with
all other applicable fees, costs and charges, if any, not yet paid.


 


Loan
Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance and such
other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic
statements of Borrower’s account, which statements shall be considered to be correct and conclusively binding on Borrower
unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower’s receipt of any such statement which
Borrower deems to be incorrect.


 


COLLATERAL.
To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower
to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender may
require. Lender’s Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products
of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees
and represents and warrants to Lender:


 




 




     


     


    

 





	BUSINESS
    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         2





 

Perfection
of Security Interests. Borrower agrees to execute all documents perfecting Lender’s Security Interest and to take whatever
actions are requested by Lender to perfect and continue Lender’s Security Interests in the Collateral. Upon request of Lender,
Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note
Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. Contemporaneous
with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as
may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate
location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower,
file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower
will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender’s
security interest in the Collateral. Borrower promptly will notify Lender before any change in Borrower’s name including
any change to the assumed business names of Borrower. Borrower also promptly will notify Lender before any change in Borrower’s
Social Security Number or Employer Identification Number. Borrower further agrees to notify Lender in writing prior to any change
in address or location of Borrower’s principal governance office or should Borrower merge or consolidate with any other
entity.


 


Collateral
Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lender’s representative upon demand for inspection and copying at any reasonable
time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without
limitation information concerning Eligible Accounts and Account balances and agings. Records related to Accounts (Receivables)
are or will be located at 1319 Marquette drive; Romeoville, IL 60446. The above is an accurate and complete list of all locations
at which Borrower keeps or maintains business records concerning Borrower’s collateral.


 


Collateral
Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules
of Accounts and schedules of Eligible Accounts in form and substance satisfactory to the Lender. Thereafter supplemental schedules
shall be delivered according to the following schedule: With respect to Eligible Accounts, schedules shall be delivered as soon
as available, but in no event later than fifteen (15) days after each fiscal quarter end. Schedules to include an Accounts Receivable
Aging Report.


 


Representations
and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender: (1) Each Account
represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition
of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject
to immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense
to inspect, examine, and audit Borrower’s records and to confirm with Account Debtors the accuracy of such Accounts.


 


REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement
of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:


 


Organization.
Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Delaware. Borrower is duly authorized to transact business in all other states
in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state
in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation
in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition.
Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged
or presently proposes to engage. Borrower maintains an office at 1319 Marquette Drive, Romeoville, IL 60446. Unless Borrower has
designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its
records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower’s state of
organization or any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force
and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower’s business activities.


 


Assumed
Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names
used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower
does business: None.


 


Authorization.
Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized
by all necessary action by Borrower, do not require the consent or approval of any other person, regulatory authority, or governmental
body, and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s
articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any
law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties. Borrower has the
power and authority to enter into the Note and the Related Documents and to grant collateral as security for the Loan. Borrower
has the further power and authority to own and to hold all of Borrower’s assets and properties, and to carry on Borrower’s
business as presently conducted.


 


Financial
Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s
financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial
condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.


 


Legal
Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their
respective terms.


 


Properties.
Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing
to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns
and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security
documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s
legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.


 


Hazardous
Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During
the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral.
(2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws;
(b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on,
under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous
Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes
Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine
compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s
expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part
of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s
due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives
any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of
a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to
indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement
and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.


 




     


     


    

 





	BUSINESS
    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         3



 


Litigation
and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s
financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged
by Lender in writing.


 


Taxes.
To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be
filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently
being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been
provided.


 


Lien
Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s
Security Interests and rights in and to such Collateral.


 


Binding
Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective
terms.


 


Commercial
Purposes. Borrower intends to use the Loan proceeds solely for business or commercially related purposes.


 


Employee
Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (1) no Reportable Event nor Prohibited Transaction (as defined in ERISA)
has occurred with respect to any such plan, (2) Borrower has not withdrawn from any such plan or initiated steps to do so, (3)
no steps have been taken to terminate any such plan or to appoint a trustee to administer such a plan, and (4) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.


 


Investment
Company Act. Borrower is not an “investment company” or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.


 


Public
Utility Holding Company Act. Borrower is not a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a
“holding company”, within the meaning of the Public Utility Holding Company Act of 1935, as amended.


 


Regulations
T and U. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the
Federal Reserve System).


 


Information.
All information previously furnished or which is now being furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated by this Agreement is, and all information furnished by or on behalf of Borrower
to Lender in the future will be, true and accurate in every material respect on the date as of which such information is dated
or certified; and no such information is or will be incomplete by omitting to state any material fact the omission of which would
cause the information to be misleading.


 


Claims
and Defenses. There are no defenses or counterclaims, offsets or other adverse claims, demands or actions of any kind, personal
or otherwise, that Borrower, any Grantor, or any Guarantor could assert with respect to the Note, Loan, this Agreement, or the
Related Documents.


 


Replacement
and Restatement. Borrower acknowledges that this Business Loan Agreement (Asset Based) restates and replaces that certain
Business Loan Agreement (Asset Based) dated March 4, 2018 between Borrower and Lender.


 


AFFIRMATIVE
COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:


 


Repayment.
Repay the Loan in accordance with its terms and the terms of this Agreement.


 


Notices
of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial
condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition
of any Guarantor. In addition, Borrower shall provide Lender with written notice of the occurrence of any Event of Default, the
occurrence of any Reportable Event under, or the institution of steps by Borrower to withdraw from, or the institution of any
steps to terminate, any employee benefit plan as to which Borrower may have any liability.


 


Financial
Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine
and audit Borrower’s books and records at all reasonable times.


 


Financial
Statements. Furnish Lender with the following:


 


Tax
Returns. As soon as available, but in no event later than forty-five (45) days after the applicable filing date for the tax
reporting period ended, Borrower’s Federal and other governmental tax returns, prepared by a tax professional satisfactory
to Lender.


 


Additional
Requirements.


 


Interim
Statements. As soon as available, but in no event later than thirty (30) days after Lender’s request, Borrower’s
balance sheet and profit and loss statement for the period ended, prepared by Borrower.


 


Annual
Statements. As soon as available, but in no event later than thirty (30) days after Lender’s request, Borrower’s
balance sheet and income statement for the year ended, prepared by Borrower.


 




     


     


    

 





	BUSINESS
    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         4



 


All
financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent
basis, and certified by Borrower as being true and correct.


 


Additional
Information. Furnish such additional information and statements, as Lender may request from time to time.


 


Insurance.
Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect
to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender.
Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written
notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s
loss payable or other endorsements as Lender may require.


 


Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as
Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured;
(3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine,
as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.


 


Other
Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower
and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.


 


Loan
Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary
by Lender in writing.


 


Taxes,
Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate
proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with GAAP.


 


Performance.
Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower and Lender, and in all other loan agreements now or in
the future existing between Borrower and any other party. Borrower shall notify Lender immediately in writing of any default in
connection with any agreement.


 


Operations.
Maintain executive and management personnel with substantially the same qualifications and experience as the present executive
and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.


 


Environmental
Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings
as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance
defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.


 


Compliance
with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of
the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower
has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion, Lender’s interests in the
Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory
to Lender, to protect Lender’s interest.


 


Inspection.
Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s
other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s
books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower’s expense.


 


Change
of Location. Immediately notify Lender in writing of any additions to or changes in the location of Borrower’s businesses.


 


Title
to Assets and Property. Maintain good and marketable title to all of Borrower’s assets and properties.


 


Notice
of Default, Litigation and ERISA Matters. Forthwith upon learning of the occurrence of any of the following, Borrower shall
provide Lender with written notice thereof, describing the same and the steps being taken by Borrower with respect thereto: (1)
the occurrence of any Event of Default, or (2) the institution of, or any adverse determination in, any litigation, arbitration
proceeding or governmental proceeding, or (3) the occurrence of a Reportable Event under, or the institution of steps by Borrower
to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which Borrower may have any liability.


 


Other
Information. From time to time Borrower will provide Lender with such other information as Lender may reasonably request.


 


Employee
Benefit Plans. So long as this Agreement remains in effect, Borrower will maintain each employee benefit plan as to which
Borrower may have any liability, in compliance with all applicable requirements of law and regulations.


 


Environmental
Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third
party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal,
state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt
thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any
environmental activity whether or not there is damage to the environment and/or other natural resources.


 






     


     


    

 





	BUSINESS
    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         5



 


Additional
Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence
and secure the Loans and to perfect all Security Interests.


 


Repayment
of an Advance. Borrower agrees to repay the entirety of any Advance under the Primary Credit Facility within five (5) Business
Days.


 


RECOVERY
OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation, guideline, or generally accepted accounting
principle, or the interpretation or application of any thereof by any court, administrative or governmental authority, or standard-setting
organization (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except
federal, state or local income or franchise taxes imposed on Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement
relates, (B) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (C) reduce the rate of return
on Lender’s capital as a consequence of Lender’s obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after
Lender’s written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge
and a calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall
be conclusive in the absence of manifest error.


 


LENDER’S
EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral
or if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s
failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate,
including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any
time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the
date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among
and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2)
the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.


 


NEGATIVE
COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the
prior written consent of Lender:


 


Indebtedness
and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage,
assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted
Liens), or (3) sell with recourse any of Borrower’s accounts, except to Lender.


 


Continuity
of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge or restructure as a legal entity (whether by division or otherwise), consolidate with or
acquire any other entity, change its name, convert to another type of entity or redomesticate, dissolve or transfer or sell Collateral
out of the ordinary course of business, or (3) pay any dividends on Borrower’s stock (other than dividends payable in its
stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing
or would result from the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined in the Internal
Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership
of shares of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’s
capital structure.


 


Loans,
Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2)
purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor
other than in the ordinary course of business.


 


Agreements.
Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s
obligations under this Agreement or in connection herewith.


 


CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other
agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy
or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition,
in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender;
or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.


 


RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with
Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively
freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.


 


DEFAULT.
Each of the following shall constitute an Event of Default under this Agreement:


 


Payment
Default. Borrower fails to make any payment when due under the Loan.


 


Other
Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.


 


Default
in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase
or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s
or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.


 


False
Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf,
or made by Guarantor, under this Agreement or the Related Documents in connection with the obtaining of the Loan evidenced by
the Note or any security document directly or indirectly securing repayment of the Note is false or misleading in any material
respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.


 




     


     


    

 





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    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         6



 


Insolvency.
The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment
of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout,
or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.


 


Defective
Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure
of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.


 


Creditor
or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the
Loan. This includes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.


 


Execution;
Attachment. Any execution or attachment is levied against the Collateral, and such execution or attachment is not set aside,
discharged or stayed within thirty (30) days after the same is levied.


 


Change
in Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public restriction is enacted,
adopted or implemented, that limits or defines the uses which may be made of the Collateral such that the present or intended
use of the Collateral, as specified in the Related Documents, would be in violation of such zoning ordinance or regulation or
public restriction, as changed.


 


Default
Under Other Lien Documents. A default occurs under any other mortgage, deed of trust or security agreement covering all or
any portion of the Collateral.


 


Judgment.
Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving
more than ten thousand dollars ($10,000.00) against Borrower and the failure by Borrower to discharge the same, or cause it to
be discharged, or bonded off to Lender’s satisfaction, within thirty (30) days from the date of the order, decree or process
under which or pursuant to which such judgment was entered.


 


Events
Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any
Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the
Indebtedness.


 


Change
in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.


 


Adverse
Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment
or performance of the Loan is impaired.


 


Insecurity.
Lender in good faith believes itself insecure.


 


Right
to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be,
has not been given a notice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor,
as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default:
(1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiate steps
which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete
all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.


 


EFFECT
OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related
Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately
will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness
immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional.
In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may
be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect
Lender’s right to declare a default and to exercise its rights and remedies.


 


ADDITIONAL
DOCUMENTS. Borrower shall provide Lender with the following additional documents:


 


Corporate
Resolution. Borrower has provided or will provide Lender with a certified copy of resolutions properly adopted by Borrower’s
Board of Directors, and certified by Borrower’s corporate secretary, assistant secretary, or other authorized officer, under
which Borrower’s Board of Directors authorized one or more designated officers or employees to execute this Agreement, the
Note and any and all Security Agreements directly or indirectly securing repayment of the same, and to consummate the borrowings
and other transactions as contemplated under this Agreement, and to consent to the remedies following any default by Borrower
as provided in this Agreement and in any Security Agreements.


 


Opinion
of Counsel. When required by Lender, Borrower has provided or will provide Lender with an opinion of Borrower’s counsel
certifying to and that: (1) Borrower’s Note, any Security Agreements and this Agreement constitute valid and binding obligations
on Borrower’s part that are enforceable in accordance with their respective terms; (2) Borrower is validly existing and
in good standing; (3) Borrower has authority to enter into this Agreement and to consummate the transactions contemplated under
this Agreement; and (4) such other matters as may have been requested by Lender or by Lender’s counsel.


 


MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are a part of this Agreement:


 


Amendments.
This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.


 


Attorneys’
Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’
fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay
someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’
fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals,
and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may
be directed by the court.


 


Borrower
Information. Borrower consents to the release of information on or about Borrower by Lender in accordance with any court order,
law or regulation and in response to credit inquiries concerning Borrower.


 




     


     


    

 





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    LOAN AGREEMENT (ASSET BASED)
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    No: 880066269-3	(Continued)	Page
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Caption
Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.


 


Consent
to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more
participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have
about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have
with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest
and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective
of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against
Lender.


 


Governing
Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the
laws of the State of Illinois without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in
the State of Illinois.


 


Non-Liability
of Lender. The relationship between Borrower and Lender created by this Agreement is strictly a debtor and creditor relationship
and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender
and Borrower. Borrower is exercising Borrower’s own judgment with respect to Borrower’s business. All information
supplied to Lender is for Lender’s protection only and no other party is entitled to rely on such information. There is
no duty for Lender to review, inspect, supervise or inform Borrower of any matter with respect to Borrower’s business. Lender
and Borrower intend that Lender may reasonably rely on all information supplied by Borrower to Lender, together with all representations
and warranties given by Borrower to Lender, without investigation or confirmation by Lender and that any investigation or failure
to investigate will not diminish Lender’s right to so rely.


 


Notice
of Lender’s Breach. Borrower must notify Lender in writing of any breach of this Agreement or the Related Documents
by Lender and any other claim, cause of action or offset against Lender within thirty (30) days after the occurrence of such breach
or after the accrual of such claim, cause of action or offset. Borrower waives any claim, cause of action or offset for which
notice is not given in accordance with this paragraph. Lender is entitled to rely on any failure to give such notice.


 


Indemnification
of Lender. Borrower agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations,
damages, losses, costs and expenses (including, without limitation, Lender’s attorneys’ fees), demands, liabilities,
penalties, fines and forfeitures of any nature whatsoever that may be asserted against or incurred by Lender, its officers, directors,
employees, and agents arising out of, relating to, or in any manner occasioned by this Agreement and the exercise of the rights
and remedies granted Lender under this, as well as by: (1) the ownership, use, operation, construction, renovation, demolition,
preservation, management, repair, condition, or maintenance of any part of the Collateral; (2) the exercise of any of Borrower’s
rights collaterally assigned and pledged to Lender hereunder; (3) any failure of Borrower to perform any of its obligations hereunder;
and/or (4) any failure of Borrower to comply with the environmental and ERISA obligations, representations and warranties set
forth herein. The foregoing indemnity provisions shall survive the cancellation of this Agreement as to all matters arising or
accruing prior to such cancellation and the foregoing indemnity shall survive in the event that Lender elects to exercise any
of the remedies as provided under this Agreement following default hereunder. Borrower’s indemnity obligations under this
section shall not in any way be affected by the presence or absence of covering insurance, or by the amount of such insurance
or by the failure or refusal of any insurance carrier to perform any obligation on its part under any insurance policy or policies
affecting the Collateral and/or Borrower’s business activities. Should any claim, action or proceeding be made or brought
against Lender by reason of any event as to which Borrower’s indemnification obligations apply, then, upon Lender’s
demand, Borrower, at its sole cost and expense, shall defend such claim, action or proceeding in Borrower’s name, if necessary,
by the attorneys for Borrower’s insurance carrier (if such claim, action or proceeding is covered by insurance), or otherwise
by such attorneys as Lender shall approve. Lender may also engage its own attorneys at its reasonable discretion to defend Borrower
and to assist in its defense and Borrower agrees to pay the fees and disbursements of such attorneys.


 


Counterparts.
This Agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts, taken together, shall constitute one and the same Agreement.


 


No
Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of
such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver
of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No
prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute
a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.


 


Notices.
Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered,
when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight
courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid,
directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s
address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless
otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed
to be notice given to all Borrowers.


 


Severability.
If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance.
If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending
provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.


 


Sole
Discretion of Lender. Whenever Lender’s consent or approval is required under this Agreement, the decision as to whether
or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender’s decision shall be final
and conclusive.


 






     


     


    

 





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    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
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Subsidiaries
and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include
all of Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries
or affiliates.


 


Successors
and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents
shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the
prior written consent of Lender.


 


Survival
of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation
made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to
Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each
Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid
in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.


 


Time
is of the Essence. Time is of the essence in the performance of this Agreement.


 


Waive
Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought
by any party against any other party.


 


DEFINITIONS.
The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically
stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words
and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial
Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance
with generally accepted accounting principles as in effect on the date of this Agreement:


 


Account.
The word “Account” means a trade account, account receivable, other receivable, or other right to payment for
goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender).


 


Account
Debtor. The words “Account Debtor” mean the person or entity obligated upon an Account.


 


Advance.
The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s
behalf under the terms and conditions of this Agreement.


 


Agreement.
The word “Agreement” means this Business Loan Agreement (Asset Based), as this Business Loan Agreement (Asset
Based) may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement
(Asset Based) from time to time.


 


Borrower.
The word “Borrower” means Nanophase Technologies Corporation and includes all co-signers and co-makers signing
the Note and all their successors and assigns.


 


Borrowing
Base. The words “Borrowing Base” mean the lesser of (1) $500,000.00 or (2) 2 times the sum of (a)
75.000% of Eligible Accounts and Borrower’s cash deposited with Lender.


 


Business
Day. The words “Business Day” mean a day on which commercial banks are open in the State of Illinois.


 


Collateral.
The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form
of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise. The word Collateral also includes without limitation all collateral described
in the Collateral section of this Agreement.


 


Eligible
Accounts. The words “Eligible Accounts” mean at any time, all of Borrower’s Accounts which contain selling
terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude
all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts
do not include:


 


(1)
Accounts with respect to which the Account Debtor is employee or agent of Borrower.


 


(2)
Accounts with respect to which the Account Debtor is a subsidiary of, or affiliated with Borrower or its shareholders, officers,
or directors.


 


(3)
Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment
by the Account Debtor may be conditional.


 


(4)
Accounts with respect to which Borrower is or may become liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower.


 


(5)
Accounts which are subject to dispute, counterclaim, or setoff.


 


(6)
Accounts with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account
Debtor.


 


(7)
Accounts with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.


 


(8)
Accounts of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief
under any provision of any state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed a trustee,
custodian, or receiver for the assets of such Account Debtor; or who has made an assignment for the benefit of creditors or has
become insolvent or fails generally to pay its debts (including its payrolls) as such debts become due.


 


(9)
Accounts which have not been paid in full within ninety (90) days from the invoice date. The entire balance of any Account
of any single Account Debtor will be ineligible whenever the portion of the Account which has not been paid within ninety (90)
days from the invoice date is in excess of 25.000% of the total amount outstanding on the Account.


 






     


     


    

 





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    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         9



 


Environmental
Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances
relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state
or federal laws, rules, or regulations adopted pursuant thereto.


 


ERISA.
The word “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and
including all regulations and published interpretations of the act.


 


Event
of Default. The words “Event of Default” mean individually, collectively, and interchangeably any of the events
of default set forth in this Agreement in the default section of this Agreement.


 


Expiration
Date. The words “Expiration Date” mean the date of termination of Lender’s commitment to lend under this
Agreement.


 


GAAP.
The word “GAAP” means generally accepted accounting principles.


 


Grantor.
The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral
for the Loan, including without limitation all Borrowers granting such a Security Interest.


 


Guarantor.
The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan, and, in each
case, Borrower’s successors, assigns, heirs, personal representatives, executors and administrators of any guarantor, surety,
or accommodation party.


 


Guaranty.
The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all
or part of the Note.


 


Hazardous
Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or
physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment
when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances,
materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes,
without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.


 


Indebtedness.
The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal
and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement
or under any of the Related Documents.


 


Lender.
The word “Lender” means Libertyville Bank and Trust Company, its successors and assigns.


 


Loan.
The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described
on any exhibit or schedule attached to this Agreement from time to time, and further including any and all subsequent amendments,
additions, substitutions, renewals and refinancings of any of Borrower’s Loans.


 


Note.
The word “Note” means a Promissory Note dated March 4, 2018, as amended from time to time, in the original principal
amount of $500,000.00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or credit agreement.


 


Permitted
Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower
to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens
of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property
acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security
interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those
liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower’s assets.


 


Primary
Credit Facility. The words “Primary Credit Facility” mean the credit facility described in the Line of Credit
section of this Agreement.


 


Related
Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental
agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in connection with the Loan.


 


Security
Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing,
or creating a Security Interest.


 


Security
Interest. The words “Security Interest” mean, individually, collectively, and interchangeably, without limitation,
any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed
of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s
lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.


 




     


     


    

 





	BUSINESS
    LOAN AGREEMENT (ASSET BASED)
	Loan
    No: 880066269-3	(Continued)	Page
                                         10



 


BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED MARCH 4, 2019.


 


BORROWER:


 


NANOPHASE
TECHNOLOGIES CORPORATION





 


	By:	 /s/
                                                                                                                                                                Jess Jankowski	 
	 	Jess
                                         Jankowski, President of Nanophase Technologies Corporation	 



 


LENDER:


 


 


LIBERTYVILLE
BANK AND TRUST COMPANY


 





	By:	 /s/ Benjamin Johnson 	 
	 	Authorized
                                         Signer	 





	 



LaserPro,
Ver. 18.4.20.085 Copr. Finastra USA Corporation 1997, 2019. All Rights Reserved. - IL C:\LASERPRO\CCO\CFI\LPL\C40.FC TR-13598
PR-162