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                   LOAN AGREEMENT            Among      DLH Holdings Corp. (the “Company”), DLH Solutions, Inc. and Danya   International, LLC (the “Subsidiary Borrowers” and together with the Company,   the “Borrower”)      and      Fifth Third Bank as “Bank”         Dated as of May 2, 2016     





 







       i           TABLE OF CONTENTS      Section Page   1. DEFINED TERMS ..............................................................................................................1   2. LOAN AMOUNT AND TERMS ......................................................................................13   2.1 Term Loan. .......................................................................................................................... 13   2.2 Repayment of Term Loan. .................................................................................................. 14   2.3 Revolving Line of Credit. ................................................................................................... 14   2.4 Availability Period. ............................................................................................................. 14   2.5 Letters of Credit. ................................................................................................................. 14   2.6 Borrowing Base................................................................................................................... 15   2.7 Interest Rate. ....................................................................................................................... 15   2.8 Optional Prepayment........................................................................................................... 15   2.9 Excess Cash Flow Recapture Payment ............................................................................... 15   2.10 Interest Calculation. ........................................................................................................ 16   2.11 Interest Limited. .............................................................................................................. 16   2.12 Increased Costs. .............................................................................................................. 16   2.13 Inability to Determine Rates. .......................................................................................... 17   2.14 Mitigation Obligations. ................................................................................................... 18   3. FEES AND EXPENSES ....................................................................................................18   3.1 Fees. .................................................................................................................................... 18   3.2 Expenses. ............................................................................................................................ 18   4. COLLATERAL .................................................................................................................19   4.1 Personal Property. ............................................................................................................... 19   5. DISBURSEMENTS, PAYMENTS AND COSTS ............................................................20   5.1 Disbursements and Payments. ............................................................................................. 20   5.2 Date of Application of Payments. ....................................................................................... 20   6. CONDITIONS ...................................................................................................................20   6.1 Loan Documents. ................................................................................................................ 20   6.2 Lien Searches. ..................................................................................................................... 20   6.3 Authorizations. .................................................................................................................... 20   6.4 Governing Documents. ....................................................................................................... 21   6.5 Collateral Assignments and Related Documents. ............................................................... 21   6.6 Perfection and Evidence of Priority. ................................................................................... 21   6.7 Payment of Fees. ................................................................................................................. 21   6.8 Legal Opinion. .................................................................................................................... 21   6.9 Know Your Customer. ........................................................................................................ 21   6.10 Ownership Interests in Subsidiary Borrowers. ................................................................ 21   6.11 Conditions to All Advances. ........................................................................................... 21   7. REPRESENTATIONS AND WARRANTIES..................................................................22   7.1 Formation. ........................................................................................................................... 22   7.2 Authorization. ..................................................................................................................... 22   7.3 Enforceable Agreement. ...................................................................................................... 23   7.4 No Conflicts. ....................................................................................................................... 23   7.5 Financial Information. ......................................................................................................... 23   7.6 Lawsuits. ............................................................................................................................. 23     





 







       ii           7.7 Collateral. ............................................................................................................................ 23   7.8 Use of Proceeds. .................................................................................................................. 23   7.9 Permits, Franchises. ............................................................................................................ 24   7.10 Other Obligations. ........................................................................................................... 24   7.11 Tax Matters. .................................................................................................................... 24   7.12 No Event of Default. ....................................................................................................... 24   7.13 Margin Regulations, Public Holding Company. ............................................................. 24   7.14 Subsidiaries, Equity Investments. ................................................................................... 24   7.15 Compliance with Laws. ................................................................................................... 25   7.16 OFAC. ............................................................................................................................. 25   7.17 No Material Adverse Change .......................................................................................... 25   7.18 Patriot Act and Corrupt Practices Act. ............................................................................ 25   8. COVENANTS ...................................................................................................................25   8.1 Financial Information. ......................................................................................................... 26   8.2 Fixed Charge Coverage Ratio. ............................................................................................ 27   8.3 Funded Indebtedness to EBITDA. ...................................................................................... 27   8.4 Other Indebtedness .............................................................................................................. 28   8.5 Other Liens. ......................................................................................................................... 28   8.6 Maintenance of Assets. ....................................................................................................... 28   8.7 Investments. ........................................................................................................................ 29   8.8 Loans. .................................................................................................................................. 30   8.9 Additional Negative Covenants. ......................................................................................... 30   8.10 Notices to Bank. .............................................................................................................. 30   8.11 Insurance. ........................................................................................................................ 31   8.12 Compliance with Laws. ................................................................................................... 31   8.13 Books and Records.......................................................................................................... 31   8.14 Field Audits. .................................................................................................................... 31   8.15 Perfection of Liens. ......................................................................................................... 32   8.16 ERISA Plans. .................................................................................................................. 32   8.17 Maintenance of Properties. ............................................................................................. 33   8.18 Assignment of Claims Act. ............................................................................................. 33   8.19 Bank as Principal Depository. ......................................................................................... 33   8.20 Collections Account ........................................................................................................ 33   8.21 Taxes and Assessments. .................................................................................................. 33   8.22 Conduct of Business........................................................................................................ 33   8.23 No Consumer Purpose. ................................................................................................... 34   9. DEFAULT AND REMEDIES ...........................................................................................34   9.1 Failure to Pay. ..................................................................................................................... 34   9.2 Other Bank Agreements. ..................................................................................................... 34   9.3 Cross-default. ...................................................................................................................... 35   9.4 False Information. ............................................................................................................... 35   9.5 Bankruptcy. ......................................................................................................................... 35   9.6 Receivers. ............................................................................................................................ 35   9.7 Judgments. .......................................................................................................................... 35   9.8 Corporate Existence. ........................................................................................................... 35   9.9 Default under Related Documents. ..................................................................................... 35   9.10 Security Interest. ............................................................................................................. 35   9.11 ERISA Plans. .................................................................................................................. 36   9.12 Breach of Borrowing Base. ............................................................................................. 36     





 







       iii           9.13 Invalidity of Loan Documents ........................................................................................ 36   9.14 Change in Control ........................................................................................................... 36   9.15 Suspension or Debarment ............................................................................................... 36   10. ENFORCING THIS AGREEMENT; MISCELLANEOUS ..............................................37   10.1 GAAP. ............................................................................................................................. 37   10.2 Georgia Law. ................................................................................................................... 37   10.3 Successors and Assigns. .................................................................................................. 37   10.4 Right of Setoff. ................................................................................................................ 37   10.5 Severability; Waivers. ..................................................................................................... 37   10.6 Attorneys' Fees. ............................................................................................................... 37   10.7 One Agreement. .............................................................................................................. 38   10.8 Indemnification. .............................................................................................................. 38   10.9 Notices. ........................................................................................................................... 38   10.10 Further Assurances .......................................................................................................... 39   10.11 Headings. ........................................................................................................................ 39   10.12 Patriot Act Notice............................................................................................................ 39   10.13 Counterparts. ................................................................................................................... 39      Exhibit A:  Borrowing Base Agreement   Exhibit B:  Permitted Liens   Exhibit C:  Backlog Report   Exhibit D:  Assignment of Claims Act      Schedule 1 Adjusted EBITDA    Schedule 7.13 Other Equity Investments   Schedule 7.14:  Subsidiaries   Schedule 8.4: Existing Indebtedness   Schedule 8.7:  Existing Investments   Schedule 8.8:  Existing Extensions of Credit        





 







     LOAN AGREEMENT   This Loan Agreement dated as of May 2, 2016 (this “Agreement”), is among Fifth Third   Bank, an Ohio Banking Corporation (the “Bank”), and DLH Holdings Corp., a New Jersey   corporation (the “Company”), DLH Solutions, Inc., a Georgia corporation,  Danya International,   LLC, a Maryland limited liability company (the “Subsidiary Borrowers” and together with the   Company, the “Borrowers”),   1. DEFINED TERMS   As used in this Agreement, the following terms shall have the meanings set forth below:         “Acquisition” means any transaction, or any series of related transactions, consummated   on or after the date of this Agreement, by which the Company or any of its Subsidiaries (i) acquires   any going business or all or substantially all of the assets of any Person or division thereof, whether   through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one   transaction or as the most recent transaction in a series of transactions) at least a majority (in   number of votes) of the voting stock of any Person.    “Adjusted EBITDA” means EBITDA plus (i) cost synergies; (ii) non-cash stock option   expense; (iii) executive compensation; (iv) contract renewal bonuses; (v) excess facility costs; (vi)   severance expense; and (vii) normalized unallowable costs. For avoidance of any doubt, Adjusted   EBITDA shall be computed consistent with Schedule 1 attached hereto which sets forth as an   example a Summary Income Statement and EBITDA and Adjusted EBITDA Schedule for  the last   four fiscal quarters ended March 31, 2016.   “Advance” means a borrowing hereunder (or conversion or continuation thereof)   consisting of the aggregate amount of the several Loans made by the Bank (or converted or   continued by the Bank on the same date of conversion or continuation).    “Affiliate” means, with respect to any Person, another Person that directly, or indirectly   through one or more intermediaries, Controls or is Controlled by or is under common Control with   the Person specified.   “Agreement” means this Loan Agreement as it may be amended, restated or modified from   time to time.   “Applicable Margin” means 3.00%.    “Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of any   Person, the capitalized amount thereof that would appear on a balance sheet of such Person   prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease   Obligation, the capitalized amount of the remaining lease payments under the relevant lease that   would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP   if such lease were accounted for as a capital lease.   “Available Letter of Credit Commitment” means the Letter of Credit Commitment minus   an amount equal to the outstanding Letters of Credit issued hereunder.     





 







      {N0109914  } 2   6035818   “Borrower” is defined in the preamble hereto.   “Borrowing Base Agreement” means that certain Borrowing Base Agreement between   Borrower and Bank dated as of even date herewith.   “Borrowing Base Certificate” means the certificate showing the availability of Advances   required pursuant to the Borrowing Base Agreement.    “Business Day” means any day other than a Saturday, Sunday or other day on which   commercial banks are authorized to close under the Laws of, or are in fact closed in, Cincinnati,   Ohio and, if such day relates to any LIBOR Rate Increment, means any such day on which dealings   in Dollar deposits are conducted by and between banks in the London interbank Eurodollar market.    “Capital Expenditures” means expenditures to purchase real estate, equipment, or   machinery.   “Capital Stock” means (i) in the case of any corporation, all capital stock and any securities   exchangeable for or convertible into capital stock and any warrants, rights or other options to   purchase or otherwise acquire capital stock or such securities or any other form of equity securities,   (ii) in the case of an association or business entity, any and all shares, interests, participations,   rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership   or limited liability company, partnership or membership interests (whether general or limited), and   (iv) any other interest or participation that confers on a Person the right to receive a share of the   profits and losses of, or distributions of assets of, the issuing Person.   “Change of Control” shall mean the occurrence, after the date hereof, of any of the   following:  (i) any person or group of persons (within the meaning of Section 13 or 14 of the   Securities Exchange Act of 1934, as amended), other than any employee benefit plan or plans   (within the meaning of Section 3(3) of ERISA), shall have acquired beneficial ownership (within   the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said   Act) of 35% or more in voting power of the outstanding Voting Stock of the Parent, or (ii) during   any period of twelve (12) consecutive calendar months, individuals who were directors of the   Parent on the first day of such period shall cease to constitute a majority of the board of directors   of the Parent other than because of the replacement as a result of death or disability of one or more   such directors; provided that for purposes of this definition, the aggregate beneficial ownership of   the Voting Stock of the Parent as of the date hereof by Wynnefield Partners Small Cap Value, LP,   Wynnefield Partners Small Cap Value, LP I, Wynnefield Small Cap Value Offshore Fund, Ltd.   and any other affiliated entity controlled by Wynnefield Capital, Inc. shall not constitute a Change   of Control.           “Change in Law” means the occurrence, after the date of this Agreement, of any of the   following: (a) the adoption or taking effect of any rule, regulation, treaty or other law, (b) any   change in any rule, regulation, treaty or other law or in the administration, interpretation,   implementation or application thereof by any Governmental Authority or (c) the making or   issuance of any request, rule, guideline or directive (whether or not having the force of law) by   any Governmental Authority; provided that, notwithstanding anything herein to the contrary, (i)   the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules,     





 







      {N0109914  } 3   6035818   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, and (iii) all requests, rules,   guidelines or directives issued by a Governmental Authority in connection with the Bank’s   submission or re-submission of a capital plan under 12 C.F.R. § 225.8 or a Governmental   Authority’s assessment thereof shall in each case be deemed to be a “Change in Law”, regardless   of the date enacted, adopted, implemented, promulgated or issued.   “Closing Date” means May 2, 2016.   “Code” means the Internal Revenue Code of 1986.   “Collateral” shall mean any and all assets and rights and interests in or to property of   Borrower, whether real or personal, tangible or intangible, in which a Lien is granted or purported   to be granted pursuant to the Collateral Documents.   “Collateral Documents” means all agreements, instruments and documents now or   hereafter executed and delivered  in connection with this Agreement pursuant to which Liens are   granted or purported to be granted to Bank in Collateral securing all or part of the Obligations each   in form and substance reasonably satisfactory to Bank, as each may be amended, restated or   modified from time to time.   “Collections Accounts” means that certain accounts numbered #7460952679 and   #7460952828 maintained at Bank or such other account as Bank may designate as the Collections   Account (which accounts may be subject springing deposit account control agreements at the   Bank’s option).   “Consolidated Entity” means at any date any Subsidiary, and any other entity the accounts   of which would be combined or consolidated with those of the Borrower in its combined or   consolidated financial statements if such statements were prepared as of such date.    “Control” means the possession, directly or indirectly, of the power to direct or cause the   direction of the management or policies of a Person, whether through the ability to exercise voting   power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative   thereto.   “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other   liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,   rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the   United States or other applicable jurisdictions from time to time in effect and affecting the rights   of creditors generally.    ‘Default” means any event or condition that constitutes an Event of Default or that, with   the giving of any notice, the passage of time, or both, would be an Event of Default.   “Default Rate” means a rate of interest which is 200 basis points higher than the rate of   interest otherwise provided under this Agreement.     





 







      {N0109914  } 4   6035818   “Dollar” and “$” mean lawful money of the United States.   “EBITDA” means net income, less income or plus loss from discontinued operations and   extraordinary items, plus income taxes, plus interest expense, plus depreciation, depletion,   amortization, calculated in each case for Borrower and its Subsidiaries on a consolidated basis.   For avoidance of any doubt, EBITDA shall be computed consistent with Schedule 1 attached   hereto which sets forth as an example a Summary Income Statement and EBITDA and Adjusted   EBITDA Schedule for  the last four fiscal quarters ended March 31, 2016.     “Equity Interest” means as to any Person all shares, options, warrants, general or limited   partnership interests, membership interests or other equivalents (regardless of how designated) of   or in a corporation, partnership, limited liability company or equivalent entity whether voting or   nonvoting, including common stock, preferred stock or any other “equity security” (as such term   is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and   Exchange Commission under the Exchange Act).   “Event of Default” has the meaning specified in Article 9.   “Excluded Taxes” means, with respect to Bank and its successors and assigns, (a) taxes   imposed on or measured by its gross or net income (however denominated), or business privilege,   Capital Stock, or franchise taxes imposed on it (whether calculated on gross or net assets, gross or   net income, capitalization or any combination of the foregoing), by any Governmental Authority,   and (b) any branch profits taxes imposed by the United States or any similar tax imposed by any   other jurisdiction in which Borrower is located.   “Excess Cash Flow” with respect to any fiscal year equals EBITDA plus any change in   Working Capital, less the sum of voluntary principal prepayments on the Term Loan and scheduled   principal payments on funded debt (including amortization of the Term Loan but excluding   prepayments of the Revolving Loan except to the extent such prepayment results in a permanent   reduction in the Revolving Loan commitment), cash interest charges, cash tax payments and tax   distributions, unfunded Capital Expenditures.    “Fixed Charge Coverage Ratio” means the ratio of (a) Borrower’s Adjusted EBITDA plus   rent and operating lease payments, less cash taxes paid, distributions, dividends and capital   expenditures (other than Capital Expenditures financed with the proceeds of purchase money   Indebtedness or Capital Leases to the extent permitted hereunder) and other extraordinary items   for the twelve month period then ending to (b) the consolidated sum of (i) Borrower’s interest   expense, and (ii) all principal payments with respect to Indebtedness that were paid or were due   and payable by all Consolidated Entities during the period plus rent and operating lease expense   incurred in the same such period.    “Funded Debt” with respect to any Person, without duplication, (a) all Indebtedness for   borrowed money and (b) all Indebtedness evidenced by notes, bonds, debentures or similar   instruments, or upon which interest payments are customarily made, in each case, that by its terms   matures more than one (1) year from, or is directly or indirectly renewable or extendible at such   Person's option under a revolving credit or similar agreement obligating the lender or lenders to   extend credit over a period of more than one (1) year from, the date of creation thereof, and     





 







      {N0109914  } 5   6035818   specifically including, without limitation, capitalized lease obligations, current maturities of   long-term debt, revolving credit and short-term debt extendible beyond one (1) year at the option   of the debtor, and also including, in the case of the Borrower, the Obligations and, without   duplication, Guaranteed Obligations in respect of Funded Debt of other Persons.    “Funded Indebtedness to Adjusted EBITDA” means the ratio of (a) indebtedness (i) in   respect of money borrowed or (ii) evidenced by a note, debenture (excluding subordinated) or   other like written obligation to pay money, or (iii) in respect of rent or hire of property under leases   or lease arrangements which under generally accepted accounting principle are required to be   capitalized, or (iv) in respect of obligations under conditional sales or other title retention   agreements to (b) EBITDA.    “GAAP” means generally accepted accounting principles in the United States set forth in   the opinions and pronouncements of the Accounting Principles Board and the American Institute   of Certified Public Accountants and statements and pronouncements of the Financial Accounting   Standards Board or such other principles as may be approved by a significant segment of the   accounting profession in the United States, that are applicable to the circumstances as of the date   of determination, consistently applied.   “Governmental Authority” means the government of the United States or any other nation,   or of any political subdivision thereof, whether state or local, and any agency, authority,   instrumentality, regulatory body, court, central bank or other entity exercising executive,   legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to   government (including any supra-national bodies such as the European Union or the European   Central Bank).   “Guarantee” means, as to any Person (a) any obligation, contingent or otherwise, of such   Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other   obligation payable or performable by another Person (the “primary obligor”) in any manner,   whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i)   to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness   or other obligation, (ii) to purchase or lease property, securities or services for the purpose of   assuring the obligee in respect of such Indebtedness or other obligation of the payment or   performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity   capital or any other financial statement condition or liquidity or level of income or cash flow of   the primary obligor so as to enable the primary obligor to pay such Indebtedness or other   obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in   respect of such Indebtedness or other obligation of the payment or performance thereof or to   protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any   assets of such Person securing any Indebtedness or other obligation of any other Person, whether   or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent   or otherwise, of any holder of such Indebtedness to obtain any such Lien).  The amount of any   Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the   related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if   not stated or determinable, the maximum reasonably anticipated liability in respect thereof as   determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a   corresponding meaning.     





 







      {N0109914  } 6   6035818   “Guaranteed Obligations” means as to any Person, without duplication, any obligation of   such Person guaranteeing, providing comfort or otherwise supporting any Indebtedness, lease,   dividend, or other obligation (“primary obligation”) of any other Person (the “primary obligor”)   in any manner, including any obligation or arrangement of such Person to (a) purchase or   repurchase any such primary obligation, (b) advance or supply funds (i) for the purchase or   payment of any such primary obligation or (ii) to maintain working capital or equity capital of the   primary obligor or otherwise to maintain the net worth or solvency or any balance sheet condition   of the primary obligor, (c) purchase property, securities or services primarily for the purpose of   assuring the owner of any such primary obligation of the ability of the primary obligor to make   payment of such primary obligation, (d) protect the beneficiary of such arrangement from loss   (other than product warranties given in the ordinary course of business) or (e) indemnify the owner   of such primary obligation against loss in respect thereof; provided that the term Guaranteed   Obligations shall not include endorsements for collection or deposit in the ordinary course of   business.  The amount of any Guaranteed Obligations at any time shall be deemed to be an amount   equal to the lesser at such time of (x) the stated or determinable amount of the primary obligation   in respect of which such Guaranteed Obligations is incurred and (y) the maximum amount for   which such Person may be liable pursuant to the terms of the instrument embodying such   Guaranteed Obligations, or, if not stated or determinable, the maximum reasonably anticipated   liability (assuming full performance) in respect thereof.   “Guarantor” means any Person that executes a Guarantee of the Obligations.     “Increment” shall mean any principal amount under the Loan bearing interest under the   Libor Rate or any substitute rate.     “Indebtedness” means (i) all items (except items of Capital Stock, of capital surplus, of   general contingency reserves or of retained earnings, deferred income taxes, and amount   attributable to minority interest if any) which in accordance with generally accepted accounting   principles would be included in determining total liabilities on a consolidated basis (if Borrower   should have a subsidiary) as shown on the liability side of a balance sheet as at the date as of which   indebtedness is to be determined, (ii) all indebtedness secured by any mortgage, pledge, lien or   conditional sale or other title retention agreement to which any property or asset owned or held is   subject, whether or not the indebtedness secured thereby shall have been assumed (excluding non-   capitalized leases which may amount to title retention agreements but including capitalized leases),   and (iii) all indebtedness of others which Borrower or any Subsidiary has directly or indirectly   guaranteed, endorse (otherwise than for collection or deposit in the ordinary course of business),   discounted or sold with recourse or agreed (contingently or otherwise) to purchase or repurchase   or otherwise acquire, or in sold with recourse or agreed (contingently or otherwise) to purchase or   repurchase or otherwise acquire, or in respect of which Borrower or any Subsidiary has agreed to   apply or advance funds (whether by way of loan, stock purchase, capital contribution or otherwise)   or otherwise to become directly or indirectly liable.   For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of   any partnership or joint venture (other than a joint venture that is itself a corporation or limited   liability company) in which such Person is a general partner or a joint venturer, unless such   Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation   under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof     





 







      {N0109914  } 7   6035818   as of such date.  The amount of any capital lease or Synthetic Lease Obligation as of any date shall   be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date.   “Indemnified Taxes” means Taxes other than Excluded Taxes.      “Interest Payment Date” means the 1st day of each month, beginning June 1, 2016, and   provided further that, in addition to the foregoing, each of (x) the date upon which each of the   Revolving Loan Commitment and the Term Loan Commitment have been terminated and the   Loans have been paid in full and (y) the Term Loan Maturity Date and the Revolving Line of   Credit Maturity Date, shall be deemed to be an “Interest Payment Date” with respect to any interest   (including interest accruing at the Default Rate) that has then accrued under this Agreement.     “Interest Period” means with respect to any LIBOR Rate Principal, the period commencing   on the date such LIBOR Rate Principal is disbursed or on any subsequent Interest Rate   Determination Date and ending on last day of each calendar month thereafter.       “Interest Rate Determination Date” shall mean the date that the Loan is funded and the first   day of each calendar month thereafter, beginning June 1, 2016.   “Investment” means, as to any Person, any direct or indirect acquisition or investment by   such Person, whether by means of (a) the purchase or other acquisition of Capital Stock or other   securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption   of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or   interest in, another Person, including any partnership or joint venture interest in such other Person   and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person,   or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of   another Person that constitute a business unit.  For purposes of covenant compliance, the amount   of any Investment shall be the amount actually invested, without adjustment for subsequent   increases or decreases in the value of such Investment.    “IRS” means the United States Internal Revenue Service.   “Laws” means, collectively, all international, foreign, Federal, state and local statutes,   treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents   or authorities, including the interpretation or administration thereof by any Governmental   Authority charged with the enforcement, interpretation or administration thereof, and all applicable   administrative orders, directed duties, requests, licenses, authorizations and permits of, and   agreements with, any Governmental Authority, in each case whether or not having the force of   law.   “Lending Office” means, as to Bank, the office of Bank in Atlanta, Georgia.   “Letter of Credit Commitment” shall mean the obligation of the Bank to issue Letters of   Credit in an aggregate face amount not to exceed One Million Dollars ($1,000,000.00) outstanding   at any time as a sublimit under the Revolving Line of Credit Commitment, as such obligations   may be reduced from time to time pursuant to the terms hereof.     





 







      {N0109914  } 8   6035818   “Letter of Credit Obligations” shall mean, at any time, the sum of (a) an amount equal to   the aggregate undrawn and unexpired amount of the then outstanding Letters of Credit (including   the amount to which any such Letter of Credit can be reinstated pursuant to the terms hereof); and   (b) an amount equal to the aggregate, but unreimbursed, drawings on any Letters of Credit.   “Letter of Credit Reserve Account” shall mean any account maintained by the Bank, the   proceeds of which shall be held by Bank as cash collateral for any Letter of Credit repayment   obligations.   “Letters of Credit” shall mean, collectively, standby Letters of Credit and commercial   Letters of Credit issued by the Bank on behalf of the Borrower or its Subsidiaries from time to   time in accordance with the terms hereof.    “LIBOR Business Day” means a Business Day which is also a London Banking Day.      “LIBOR Rate” is, as of any date of determination in accordance with this Agreement, the   rate of interest fixed by ICE Benchmark Administration Limited (or any successor thereto, or   replacement thereof, approved by Bank, each an “Alternate LIBOR Source”) at approximately   11:00 a.m., London, England time (or the relevant time established by ICE Benchmark   Administration Limited, an Alternate LIBOR Source, or Bank, as applicable), two (2) Business   Days prior to such date of determination, relating to quotations for the one month London   InterBank Offered Rates on U.S. Dollar deposits, as displayed by Bloomberg LP (or any successor   thereto, or replacement thereof, as approved by Bank, each an “Approved Bloomberg Successor”),   or, if no longer displayed by Bloomberg LP (or any Approved Bloomberg Successor), such rate as   shall be determined in good faith by Bank from such sources as it shall determine to be comparable   to Bloomberg LP (or any Approved Bloomberg Successor), all as determined by Bank in   accordance with this Note and Bank’s loan systems and procedures periodically in effect.    Notwithstanding anything to the contrary contained herein, in no event shall the LIBOR Rate be   less than 0% as of any date (the “LIBOR Rate Minimum”); provided that, at any time during which   a Swap Contract  with Bank is then in effect with respect to all or a portion of the Obligations, the   LIBOR Rate Minimum, the Rounding Adjustment and the Adjustment Protocol (as defined below)   shall all be disregarded and no longer of any force and effect with respect to such portion of the   Obligations subject to such Swap Contract.   Each determination by Bank of the LIBOR Rate shall   be binding and conclusive in the absence of manifest error. The rate shall be adjusted on the first   Interest Rate Determination Date and each subsequent Interest Rate Determination Date thereafter   (the “Adjustment Protocol”). For purposes herein, the Libor Rate shall never be deemed to be   below 0.00% regardless of the actual rate reported by the Bloomberg reporting service, or such   similar service selected by the Bank.       “LIBOR Rate Increment” means an Increment under the Loan that bears interest at a rate   based on the LIBOR Rate.    “LIBOR Rate Principal” means any portion of the Principal Debt which bears interest at an   applicable LIBOR Rate at the time in question.     





 







      {N0109914  } 9   6035818    “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,   encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or   preferential arrangement in the nature of a security interest of any kind or nature whatsoever   (including any conditional sale or other title retention agreement, any easement, right of way or   other encumbrance on title to real property, and any financing lease having substantially the same   economic effect as any of the foregoing).   “Loan” means the Term Loan or the Revolving Line of Credit Loan, as the case may be,   made by Bank to Borrower pursuant to Section 2 in an amount not to exceed the Term Loan   Commitment and the Revolving Loan Commitment. Collectively the Term Loan and the   Revolving Line of Credit Loan are referred to as the “Loans.”   “Loan Documents” means this Agreement and each Collateral Document.    “London Banking Day” means a day on which banks in London are open for business and   dealing in offshore dollars.   “Material Adverse Effect” means (a) a material adverse change in, or a material adverse   effect upon, the operations, business, properties, liabilities (actual or contingent), condition   (financial or otherwise) of Borrower and any Subsidiaries taken as a whole; (b) a material and   sustained impairment of the ability of Borrower to perform its material obligations under any Loan   Documents; or (c) a material adverse effect upon the legality, validity, binding effect or   enforceability against Borrower of any material provisions of the Loan Documents.    “Note” means collectively, the promissory notes evidencing the Term Loan and the   Revolving Line of Credit Loan.    “Obligations” means all advances to, and debts, liabilities, obligations, reimbursement   obligation or indemnity of the Borrower on account of Letters of Credit, ACH, payment-cards,   covenants and duties of Borrower to Bank, whether arising under any Loan Document or otherwise   with respect to the Loan, any Swap Contract, or any other contract, agreement, instrument or other   document,  whether direct or indirect (including those acquired by assumption), absolute or   contingent, due or to become due, now existing or hereafter arising and including interest and fees   that accrue after the commencement by or against Borrower or any Affiliate thereof of any   proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding,   regardless of whether such interest and fees are allowed claims in such proceeding.     “Obligor” means for purposes of this Agreement any Guarantors.   “Organization Documents” means, (a) with respect to any corporation, the certificate or   articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with   respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the   certificate or articles of formation or organization and operating agreement; and (c) with respect   to any partnership, joint venture, trust or other form of business entity, the partnership, joint   venture or other applicable agreement of formation or organization and any agreement, instrument,   filing or notice with respect thereto filed in connection with its formation or organization with the   applicable Governmental Authority in the jurisdiction of its formation or organization and, if   applicable, any certificate or articles of formation or organization of such entity.     





 







      {N0109914  } 10   6035818   “Other Taxes” means all present or future stamp, intangible or documentary taxes or any   other excise or property taxes, charges or similar levies arising from any payment made hereunder   or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise   with respect to, this Agreement or any other Loan Document.  Other Taxes shall not include   Excluded Taxes.   “Permitted Liens” means (i) liens for taxes not yet due and payable; (ii) landlords’, carriers',   warehousemen's, mechanics', materialmen's, repairmen's or other like liens arising in the ordinary   course of business, payment for which is not more than thirty (30) days past due or which are being   contested in good faith and by appropriate proceedings; (iii) pledges or deposits in connection with   worker's compensation, unemployment insurance and other social security legislation; (iv)   deposits to secure the performance of utilities, lease, statutory obligations and surety and appeal   bonds, bids, tenders, contracts (other than contracts relating to Indebtedness) and other obligations   of a like nature incurred in the ordinary course of business; (v) bankers' liens, rights of setoff and   similar liens arising by statute or under customary terms regarding depository relationships on   deposits held by financial institutions with whom either Borrower has a banker-customer   relationship; (vi) typical restrictions imposed by licenses and leases of software (including location   and transfer restrictions); (vii) judgment liens in respect of judgments that do not constitute an   Event of Default; (viii) liens in favor of Bank, (ix) easements, rights of way, zoning restrictions,   minor defects and irregularities of title and other charges or encumbrances  with respect to real   property, which in each case do not interfere in any material respect with the conduct of the   Borrower’s or any Subsidiary’s business, (x) rights of setoff included in commercial contracts, (xi)   other liens incidental to the conduct of the Borrower’s and its Subsidiaries’ business or the   ownership of its property and assets which were not incurred in connection with the borrowing of   money or obtaining of advances or credit, and which do not in the aggregate materially detract   from the Bank’s rights to the Collateral or the value of the Borrower’s and its Subsidiaries’   property or assets; (xii) liens on assets purchased, leased or otherwise acquired, or reconditioned   or improved, with Indebtedness, including capital lease obligations, and any renewals or   extensions thereof, so long as the amount secured is not increased, and (xiii) those liens, if any, set   forth and described on Exhibit B, and any renewals or extensions thereof, so long as the property   covered by such liens is not expanded, and the amount secured is not increased.      “Person” means any natural person, corporation, limited liability company, trust, joint   venture, association, company, partnership, Governmental Authority or other entity.   “Pledge Agreement” means a Pledge Agreement executed by the Company pledging in   favor of Bank the Capital Stock in either a Subsidiary Borrower or any other Subsidiary.   “Prime Rate” means the floating rate of interest established from time to time by Bank at its   principal office as its “Prime Rate”, whether or not Bank shall at times lend to borrowers at lower rates of   interest.    “Principal Debt” means the aggregate unpaid principal balance on the Loans per the terms   of this Agreement and related Loan Documents at the time in question.       “Revolving Line of Credit Commitment” means $10,000,000.00.     





 







      {N0109914  } 11   6035818   “Revolving Line of Credit Loan” means the Loan provided for in Section 2.3.   “Revolving Line of Credit Maturity Date” means May 1, 2018.   “Subordination Agreement” means that certain Subordination Agreement dated of the date   hereof among Bank, Company, Wynnefield Partners Small Cap Value, LP, Wynnefield Partners   Small Cap Value, LP I and Wynnefield Small Cap Value Offshore Fund, Ltd.   “Subordinated Liabilities” means liabilities subordinated to Borrower's obligations to Bank   in a manner acceptable to Bank in its sole discretion.   “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability   company or other business entity of which a majority of the shares of securities or other interests   having ordinary voting power for the election of directors or other governing body (other than   securities or interests having such power only by reason of the happening of a contingency) are at   the time beneficially owned, or the management of which is otherwise controlled, directly, or   indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise   specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or   Subsidiaries of Borrower.    “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit   derivative transactions, forward rate transactions, commodity swaps, commodity options, forward   commodity contracts, equity or equity index swaps or options, bond or bond price or bond index   swaps or options or forward bond or forward bond price or forward bond index transactions,   interest rate options, forward foreign exchange transactions, cap transactions, floor transactions,   collar transactions, currency swap transactions, cross-currency rate swap transactions, currency   options, spot contracts, or any other similar transactions or any combination of any of the foregoing   (including any options to enter into any of the foregoing), whether or not any such transaction is   governed by or subject to any master agreement, and (b) any and all transactions of any kind, and   the related confirmations, which are subject to the terms and conditions of, or governed by, any   form of master agreement published by the International Swaps and Derivatives Association, Inc.,   any International Foreign Exchange Master Agreement, or any other master agreement (any such   master agreement, together with any related schedules, a “Master Agreement”), including any such   obligations or liabilities under any Master Agreement.   “Swap Termination Value” means, in respect of any one or more Swap Contracts, after   taking into account the effect of any legally enforceable netting agreement relating to such Swap   Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and   termination value(s) determined in accordance therewith, such termination value(s), and (b) for   any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market   value(s) for such Swap Contracts, as determined based upon one or more mid-market or other   readily available quotations provided by any recognized dealer in such Swap Contracts (which   may include a Bank or any Affiliate of the Bank).   “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-   called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or   possession of property creating obligations that do not appear on the balance sheet of such Person     





 







      {N0109914  } 12   6035818   but which, upon the insolvency or bankruptcy of such Person, would be characterized as the   indebtedness of such Person (without regard to accounting treatment).    “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings,   assessments, fees or other charges imposed by any Governmental Authority, including any interest,   additions to tax or penalties applicable thereto.   “Term Loan Commitment” means $25,000,000.   “Term Loan” means the Loan provided for in Section 2.1.   “Term Loan Maturity Date” shall mean May 1, 2021.    “United States” and “U.S.” mean the United States of America.    “Working Capital” means as of the date of the determination, current assets as of such date   minus current liabilities as of such date calculated in accordance with GAAP.   “Wynnefield Subordinated Notes” means Indebtedness in an amount not to exceed   $2,500,000.00 owing by the Company to Wynnefield Partners Small Cap Value, LP, Wynnefield   Partners Small Cap Value, LP I, Wynnefield Small Cap Value Offshore Fund, Ltd or any other   affiliated fund controlled by Wynnefield Capital, Inc.      1.2 Other Interpretive Provisions.   With reference to this Agreement and each other Loan Document, unless otherwise specified   herein or in such other Loan Document   (a) The definitions of terms herein shall apply equally to the singular and plural forms of the   terms defined.  Whenever the context may require, any pronoun shall include the   corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and   “including” shall be deemed to be followed by the phrase “without limitation.”  The word   “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless   the context requires otherwise, (i) any definition of or reference to any agreement,   instrument or other document (including any Organization Document) shall be construed   as referring to such agreement, instrument or other document as from time to time   amended, supplemented or otherwise modified (subject to any restrictions on such   amendments, supplements or modifications set forth herein or in any other Loan   Document), (ii) any reference herein to any Person shall be construed to include such   Person's successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and   words of similar import when used in any Loan Document, shall be construed to refer to   such Loan Document in its entirety and not to any particular provision thereof, (iv) all   references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be   construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan   Document in which such references appear, (v) any reference to any law shall include all   statutory and regulatory provisions consolidating, amending, replacing or interpreting such     





 







      {N0109914  } 13   6035818   law and any reference to any law or regulation shall, unless otherwise specified, refer to   such law or regulation as amended, modified or supplemented from time to time, and (vi)   the words “asset” and “property” shall be construed to have the same meaning and effect   and to refer to any and all tangible and intangible assets and properties, including but not   limited to cash, securities, accounts and contract rights.   (b) In the computation of periods of time from a specified date to a later specified date, the   word “from” means “from and including;” the words “to” and “until” each mean “to but   excluding;” and the word “through” means “to and including.”   (c) Section headings herein and in the other Loan Documents are included for convenience of   reference only and shall not affect the interpretation of this Agreement or any other Loan   Document.   1.3 Accounting Terms.   (a) Generally. All accounting terms not specifically or completely defined herein shall be   construed in conformity with, and all financial data (including financial ratios and other   financial calculations) required to be submitted pursuant to this Agreement shall be   prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to   time, applied in a manner consistent with that used in preparing the Borrower’s and its   Consolidated Subsidiaries' audited financial statements, except as otherwise specifically   prescribed herein.   (b) Changes in GAAP.  If at any time any change in GAAP would affect the computation of   any financial ratio or requirement set forth in any Loan Document, and either Bank or   Borrower shall request, Bank and Borrower shall negotiate in good faith to amend such   ratio or requirement to preserve the original intent thereof in light of such change in GAAP;   provided that, until so amended, (i) such ratio or requirement shall continue to be computed   in accordance with GAAP prior to such change therein and (ii) Borrower shall provide   Bank financial statements and other documents required under this Agreement or as   reasonably requested hereunder setting forth a reconciliation between calculations of such   ratio or requirement made before and after giving effect to such change in GAAP.   1.4 Rounding.  Any financial ratios required to be maintained by Borrower pursuant to this   Agreement shall be calculated by dividing the appropriate component by the other   component, carrying the result to one place more than the number of places by which such   ratio is expressed herein and rounding the result up or down to the nearest number (with a   rounding-up if there is no nearest number).   1.5 Times of Day.  Unless otherwise specified, all references herein to times of day shall be   references to Eastern time (daylight or standard, as applicable).      2. LOAN AMOUNT AND TERMS    2.1 Term Loan.     





 







      {N0109914  } 14   6035818   (a) The Bank agrees to provide a term loan to the Borrower in the amount of the Term Loan   Commitment.     (b) The Term Loan is available in one disbursement from the Bank at closing.   2.2 Repayment of Term Loan.   (a) The Borrower will pay all accrued and unpaid interest on the outstanding principal amount   of the Term Loan on each Interest Payment Date until payment in full of any principal   outstanding under the Term Loan at the then applicable rate per annum set forth in Section   2.7 hereof (plus any interest at the Default Rate if applicable).   (b) The principal amount of the Term Loan shall be payable in fifty-nine (59) consecutive   monthly installments of $312,500.00 payable on the first (1st) day of each month, beginning   on June 1, 2016, and all remaining principal shall be payable on the Term Loan Maturity   Date.   2.3 Revolving Line of Credit.   (a) During the availability period described below, the Bank will provide a line of   credit to the Borrower in the amount of the Revolving Line of Credit Commitment.   (b) This is a revolving line of credit.  The Borrower will pay interest on the  outstanding   principal amount of the Revolving Line of Credit Loan on each Interest Payment   Date until the Revolving Line of Credit Loan has been repaid in its entirety, at the   applicable rate per annum set forth in Section 2.6 hereof (plus any interest at the   Default Rate if applicable). The Borrower agrees not to permit the principal balance   outstanding to exceed the lesser of the Revolving Line of Credit Commitment or   the amount allowed under the Borrowing Base Agreement.  If the Borrower exceeds   this limit, the Borrower will pay the excess to the Bank within one (1) Business   Day following the Bank's demand.   (c) The Borrower will repay in full any principal, interest or other charges outstanding   under this facility no later than the Revolving Line of Credit Maturity Date.   2.4 Availability Period.   The Revolving Line of Credit Loan is available between the date of this Agreement and   the Revolving Line of Credit Maturity Date or such earlier date as the availability may   terminate as provided for in this Agreement.   2.5 Letters of Credit.   As part of the Revolving Line of Credit Loan, Bank agrees to issue Letters of Credit for the account   of the Borrower in an aggregate amount not to exceed the Available Letter of Credit Commitment   determined immediately prior to giving effect to the issuance thereof.  Such aggregate amounts   utilized hereunder shall at all times reduce the amount otherwise available for Advances under the   Revolving Line of Credit Loan.  All Letters of Credit shall be in form and substance reasonably     





 







      {N0109914  } 15   6035818   acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank's   then current standard Application and Letter of Credit Agreement (the “Letter of Credit   Application”).  Borrower agrees to execute any further documentation in connection with any   Letters of Credit as Bank may reasonably request.  In the event a drawing is paid on a Letter of   Credit, the Bank shall promptly notify Borrower thereof.   2.6 Borrowing Base.   The Revolving Line of Credit Loan is subject to a borrowing base in accordance with the terms   and conditions of a Borrowing Base Agreement executed by the Borrower in favor of the Bank as   required under this Agreement and attached hereto as Exhibit A.  The terms of the Borrowing Base    (as defined in the Borrowing Base Agreement) include requirements to maintain collateral with an   adequate loan value and grant to the Bank the right to issue a margin call in the event such   requirements are not met.  Further, any failure to meet the Borrowing Base requirements permits   the Bank to refuse to make advances or other financial accommodations.  The inability of the   Borrower to bring the Line of Credit Loan into compliance with the Borrowing Base Agreement   Failure may constitute an Event of Default under this Agreement.   2.7 Interest Rate.    1.  Term Loan.  The following interest rate shall be applicable for an Advance under the   Term Loan:     (i) LIBOR Rate plus the Applicable Margin.    2.  Revolving Line of Credit Loan.  The following interest rate shall be applicable to an   Advance under the Revolving Line of Credit Loan:     (i)  LIBOR Rate plus the Applicable Margin.        2.8 Optional Prepayment.   Upon three (3) Business Days' prior written notice to the Bank, the Borrower shall have the right   to prepay in whole or in part the Term Loan and/or the then outstanding Revolving Line of Credit   Loans, in each case without premium or penalty. No such prepayment shall eliminate or waive any   fees or costs associated with the termination of any Swap Contract which Borrower may enter into   with Bank or any other party.   2.9 Excess Cash Flow Recapture Payment   Within fifteen (15) days’ receipt of the annual financial statement as required in Section 8.1(a)   commencing with the year ending on September 30, 2017, the Borrower shall pay to Bank an   amount (the “Cash Flow Recapture Payment”) equal to (a) 75% of the Excess Cash Flow of the   Borrower for each year in which the Funded Indebtedness to Adjusted EBITDA Ratio is greater   than or equal to 2.50:1.00, or (b) 50% of the Excess Cash Flow of the Borrower for each fiscal   year in which the Funded Indebtedness to Adjusted EBITDA Ratio is less than 2.50:1.00 but     





 







      {N0109914  } 16   6035818   greater than or equal to 2.00:1.00.  Borrower will provide a worksheet for Bank’s review and   approval showing how the Cash Flow Recapture Payment is calculated prior to the time any such   payment is made. Borrower may apply as an offset to any such Cash Flow Recapture Payment any   voluntary prepayments of principal made by Borrower on the Term Loan for such fiscal year.  The   Cash Flow Recapture Payment shall be applied to the outstanding principal balance of the Term   Loan until the Term Loan shall have been paid in full.  The Cash Flow Recapture Payment is in   addition to the monthly scheduled payments.   2.10 Interest Calculation.   Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the   basis of a 360-day year and the actual number of days elapsed in the case of LIBOR Increments.    Installments of principal which are not paid when due under this Agreement shall continue to bear   interest until paid at the Default Rate.   2.11 Interest Limited.   As used in this Agreement the term “interest” does not include any fees (including, but not limited   to, any loan fee, periodic fee, unused commitment fee or waiver fee) or other charges imposed on   the Borrower in connection with the Indebtedness evidenced by this Agreement, other than the   interest described above.  In no event shall the amount or rate of interest due and payable under   this Agreement exceed the maximum amount or rate of interest allowed by applicable law and, in   the event any such excess payment is made by the Borrower or received by the Bank, such excess   sum shall be credited as a payment of principal (or if no principal shall remain outstanding, shall   be refunded to the Borrower).  It is the express intent hereof that the Borrower not pay and the   Bank not receive, directly or indirectly, interest in excess of that which may be lawfully paid under   applicable law including the usury laws in force in the State of Georgia.   2.12 Increased Costs.   (a) Increased Costs Generally.  If any Change in Law shall:   (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan,   insurance charge or similar requirement against assets of, deposits with or for the   account of, or credit extended or participated in by, Bank (except any reserve   requirement reflected in the LIBOR Rate);    (ii) subject Bank to any tax of any kind whatsoever with respect to this Agreement, or   change the basis of taxation of payments to Bank in respect thereof (except for   Indemnified Taxes or Other Taxes covered by Section 2.12 and the imposition of,   or any change in the rate of, any Excluded Tax payable by Bank); or   (iii) impose on Bank or the London interbank market any other condition, cost or   expense affecting this Agreement or LIBOR Rate Increments;    and the result of any of the foregoing shall be to increase the cost to Bank of making or   maintaining any LIBOR Rate Increment, or to reduce the amount of any sum received or   receivable by Bank hereunder (whether of principal, interest or any other amount) then,     





 







      {N0109914  } 17   6035818   upon request of Bank, Borrower will pay to such Bank, such additional amount or amounts   as will compensate Bank for such additional costs incurred or reduction suffered.   (b) Capital Requirements.  If Bank determines that any Change in Law affecting Bank or the   Lending Office or the Bank's holding company regarding capital requirements has or would   have the effect of reducing the rate of return on Bank's capital or on the capital of Bank's   holding company as a consequence of this Agreement to a level below that which Bank or   Bank's holding company could have achieved but for such Change in Law (taking into   consideration Bank's policies and the policies of Bank's holding company with respect to   capital adequacy), then from time to time Borrower will pay to Bank, such additional   amount or amounts as will compensate Bank or Bank's holding company for any such   reduction suffered.   (c) Certificates for Reimbursement.  A certificate of Bank setting forth the amount or amounts   necessary to compensate Bank or its holding company, as the case may be, as specified in   subsection (a) or (b) of this Section and delivered to Borrower shall be conclusive absent   manifest error.  Borrower shall pay Bank the amount shown as due on any such certificate   within 10 days after receipt thereof.   (d) Delay in Requests.  Failure or delay on the part of Bank to demand compensation pursuant   to the foregoing provisions of this Section shall not constitute a waiver of Bank's right to   demand such compensation, provided that Borrower shall not be required to compensate   Bank pursuant to the foregoing provisions of this Section for any increased costs incurred   or reductions suffered more than six months prior to the date that Bank notifies Borrower   of the Change in Law giving rise to such increased costs or reductions and of Bank's   intention to claim compensation therefor (except that, if the Change in Law giving rise to   such increased costs or reductions is retroactive, then the six-month period referred to   above shall be extended to include the period of retroactive effect thereof).   2.13 Inability to Determine Rates.   If Bank, by written or telephonic notice, notifies Borrower that:   (a) any change in any law, regulation or official directive, or in the interpretation thereof, by   any governmental body charged with the administration thereof, has made it unlawful for   Bank to fund or maintain its funding in Eurodollars of any portion of any advance subject to   the LIBOR Rate or otherwise give effect to Bank’s obligations as contemplated hereby, or   (b) (i) LIBOR deposits for periods of one month are not readily available in the London   Interbank Offered Rate Market, (ii) by reason of circumstances affecting such market or other   economic conditions, adequate and reasonable methods do not exist for ascertaining the rate   of interest applicable to such deposits, or (iii) the LIBOR Rate as determined by Bank will not   adequately and fairly reflect the cost to Bank of making or maintaining advances under this   Note bearing interest with reference to the LIBOR Rate (including inaccurate or inadequate   reflection of actual costs resulting from the calculation of rates by reporting sources), then, in   any of such events: (A) Bank’s obligations in respect of the LIBOR Rate shall terminate   forthwith, (B) the LIBOR Rate with respect to Bank shall forthwith cease to be in effect, (C)     





 







      {N0109914  } 18   6035818   Borrower’s right to utilize LIBOR Rate index pricing as set forth in this Note shall be   terminated forthwith, and (D) amounts outstanding hereunder shall, on and after such date,   bear interest at a rate per annum equal to: (1) the Prime Rate, or, if there is no such Prime   Rate, then such other rate as may be substituted by Bank for such Prime Rate. Each   determination by Bank of the Prime Rate shall be binding and conclusive in the absence of   manifest error. In the event of a change in the Prime Rate, the interest rate accruing hereunder   based upon the Prime Rate shall be changed immediately with such change to be based upon   such new Prime Rate.       2.14 Mitigation Obligations.   If Bank requests compensation under Section 2.11, or Borrower is required to pay any additional   amount to Bank or any Governmental Authority for the account of Bank pursuant to Section 2.11,   or if Bank gives a notice pursuant to Section 2.12(b), then Bank shall use reasonable efforts to   designate a different Lending Office for funding or booking its Loans hereunder or to assign its   rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable   determination of Bank, such designation or assignment (i) would eliminate or reduce amounts   payable under Article 2, in the future, and (ii) in each case, would not subject Bank to any   unreimbursed cost or expense and would not otherwise be materially disadvantageous to Bank.    Borrower hereby agrees to pay all reasonable costs and expenses incurred by Bank in connection   with any such designation or assignment.      3. FEES AND EXPENSES   3.1 Fees.   (a) Facility Fee. A facility fee equal to $350,000.00 shall be paid to the Bank on the Closing   Date.   (b) Unused Commitment Fee. Borrower agrees to pay a fee on any difference between the   Revolving Loan Commitment and the amount of credit it actually uses, determined by the   average of the daily amount of credit outstanding during the specified period. The fee will   be calculated at 0.30% per year. The fee is payable monthly on the Interest Payment Date.   3.2 Expenses.   The Borrower agrees to (a) reimburse and indemnify the Bank for any reasonable expenses it   incurs (i) in the preparation of this Agreement and the Loan Documents and in connection with   the continued administration of the Loan Documents including any amendments, modifications,   consents and waivers, (ii) creating, perfecting and maintaining its Lien on the Collateral pursuant   to the Loan Documents, including filing and recording fees and expenses, the costs of any bonds   required to be posted in respect of future filing and recording fees and expenses, title   investigations, environmental studies, appraisals and intangible taxes, and (iii) any matters   contemplated by or arising out of the Loan Documents, including Bank's customary field audit     





 







      {N0109914  } 19   6035818   charges (but, provided that no Event of Default has occurred and is continuing, only twice per   year) and the reasonable fees, expenses and disbursements of the Bank or any accountants or other   experts retained by the Bank (including any affiliate of Bank as shall be engaged for such purpose)   in connection with accounting and collateral audits or reviews of the Borrower and its affairs; and   (b) to promptly pay all fees, costs and expenses (including attorneys' fees and expenses) incurred   by Bank in connection with any action to enforce any Loan Document or to collect any payments   due from Borrower.  All fees, costs and expenses for which Borrower is responsible under this   Section 3.2 shall be deemed part of the Obligations when incurred, and shall be payable within ten   (10) days following demand by the Bank.        4. COLLATERAL   4.1 Personal Property.   The property listed below now owned or owned in the future by the Borrower will secure the   Borrower's obligations to the Bank under this Agreement.  The Collateral is further defined in   security or pledge agreements executed by the parties who own the Collateral.  The Collateral shall   secure all other present and future obligations of the Borrower to the Bank.  All Collateral securing   any other present or future obligations of the Borrower to the Bank shall also secure this   Agreement.   (a) Inventory.   (b) Accounts, chattel paper, instruments, documents of title and letter of credit rights.   (c) Equipment including vehicles, trailers and any equipment or goods for which certificates   of title are issued.   (d) All investment property and securities entitlements.   (e) Deposit accounts.   (f) Intangibles including all patents, patent rights, trademarks, and servicemarks (and goodwill   appurtenant thereto) trademark rights, trade names, servicemark rights, trade name rights,   copyrights, trade secret rights and all other intellectual property rights.   (g) Commercial tort claims.   (h) The Capital Stock of the Subsidiary Borrowers.   All deposit accounts shall be treated as having been owned by one single entity for purposes of   setoff, paying overdrafts or other charges or expenses incurred in any one deposit account.            





 







      {N0109914  } 20   6035818   5. DISBURSEMENTS, PAYMENTS AND COSTS   5.1 Disbursements and Payments.   (a) Each payment by the Borrower will be made in U.S. Dollars and immediately available   funds by direct debit to a deposit account as specified below or, for payments not required   to be made by direct debit, by mail to the address shown on the Borrower's statement or at   one of the Bank's banking centers in the United States.   (b) Each disbursement by the Bank and each payment by the Borrower will be evidenced by   records kept by the Bank.  In addition, the Bank may, at its discretion, require the Borrower   to sign one or more promissory notes to evidence the Term Loan and the Revolving Line   of Credit Loan.   5.2 Date of Application of Payments.   All payments and disbursements which would be due on a day which is not a Business Day will   be due on the next Business Day.  All payments received on a day which is not a Business Day   will be applied to the credit on the next Business Day.      6. CONDITIONS   Before the Bank is required to extend any credit to the Borrower under this Agreement, it must   receive any documents and other items it may reasonably require, in form and content reasonably   acceptable to the Bank, including any items specifically listed below.   6.1 Loan Documents.   The Bank (or its counsel) shall have received from the Borrower (i) an original of this Agreement   and all Loan Documents signed on behalf of such party or (ii) written evidence satisfactory to the   Bank (which may include telecopy transmission of a signed signature page of this Agreement) that   such party has signed a counterpart of this Agreement.   6.2 Lien Searches.   Bank shall have received Uniform Commercial Code, tax and judgment lien search reports with   respect to Borrower indicating that there are no prior Liens on any assets of Borrower other than   Permitted Liens.    6.3 Authorizations.   The Bank shall have received such documents and certificates as the Bank or its counsel may   reasonably request relating to the organization, existence and good standing of the Borrower, the   authorization of the Borrower to enter into this Agreement and any other legal matters relating to   the Borrower or the Loan Documents, all in form and substance satisfactory to the Bank and its   counsel.     





 







      {N0109914  } 21   6035818   6.4 Governing Documents.   Such documents and certifications as Bank may reasonably require to evidence that the Borrower   is duly organized or formed, and that the Borrower is validly existing, in good standing and   qualified to engage in business in each jurisdiction where its ownership, lease or operation of   properties or the conduct of its business requires such qualification, except to the extent that failure   to do so could not reasonably be expected to have a Material Adverse Effect.   6.5 Collateral Assignments and Related Documents.   Signed original assignments, pledges, financing statements or other documents as may be   necessary for Bank to perfect its security interest in the Collateral.   6.6 Perfection and Evidence of Priority.   Evidence that the security interests and liens in favor of the Bank are valid, enforceable, properly   perfected in a manner acceptable to the Bank and prior to all others' rights and interests, except   those the Bank consents to in writing or permitted under Section 8.7.     6.7 Payment of Fees.   Payment of all fees and other amounts due and owing to the Bank, including without limitation   payment of all accrued and unpaid expenses incurred by the Bank as required by Section 3.2.   6.8 Legal Opinion.   A favorable written opinion from the Borrower's legal counsel, addressed to Bank, with respect to   due execution, authority, enforceability of the Loan Documents, and such other matters as the   Bank may require.  The legal counsel and the terms of the opinion must be reasonably acceptable   to the Bank.   6.9 Know Your Customer.   The Bank shall have received all documentation and other information required by regulatory   authorities under applicable “know your customer” and anti-money laundering rules and   regulations, including the Patriot Act.   6.10 Ownership Interests in Subsidiary Borrowers.    As of the date of this Agreement, Company owns all of the Capital Stock in the Subsidiary   Borrowers issued and outstanding, all of which are owned by the Company free and clear of all   encumbrances.  The pledge, collateral assignment and delivery of the Capital Stock of the   Subsidiary Borrowers pursuant to a Pledge Agreement create a valid first lien and first and senior   security interest in the Capital Stock of the Subsidiary Borrowers, which lien and security interest   are perfected.   6.11 Conditions to All Advances.     





 







      {N0109914  } 22   6035818   The obligation of the Bank to make any Advance hereunder is subject to the following conditions   precedent:   (a) The representations and warranties of Borrower contained in Article 7 or any other Loan   Document, or which are contained in any document furnished at any time under or in   connection herewith or therewith, shall be true and correct in all material respects on and   as of the date of the Loan, except (i) to the extent that such representations and warranties   specifically refer to an earlier date, in which case they shall be true and correct as of such   earlier date and (ii) for changes therein occurring after the date hereof which are not   prohibited by the terms of this Agreement.    (b) No Default shall exist, or would result from such proposed Advance or from the application   of the proceeds thereof.      7. REPRESENTATIONS AND WARRANTIES   When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes   the following representations and warranties.  Each request for an extension of credit constitutes a   renewal of these representations and warranties as of the date of the request:   7.1 Formation.   (a) The Company (i) is duly organized, validly existing and in good standing as a corporation   under the laws of the State of New Jersey, (ii) has all requisite power and authority to carry on its   business as now conducted and (iii) is duly qualified to do business, and is in good standing, in   each jurisdiction where such qualification is required, except where a failure to be so qualified   could not reasonably be expected to result in a Material Adverse Effect.    (b) DLH Solutions, Inc. (i) is duly organized, validly existing and in good standing as a   corporation under the laws of the State of Georgia, (ii) has all requisite power and authority to   carry on its business as now conducted and (iii) is duly qualified to do business, and is in good   standing, in each jurisdiction where such qualification is required, except where a failure to be so   qualified could not reasonably be expected to result in a Material Adverse Effect.    (c) Danya International, LLC (i) is duly organized, validly existing and in good standing as a   limited liability company under the laws of the State of Maryland, (ii) has all requisite power and   authority to carry on its business as now conducted and (iii) is duly qualified to do business, and   is be in good standing, in each jurisdiction where such qualification is required, except where a   failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect.       7.2 Authorization.     





 







      {N0109914  } 23   6035818   The execution, delivery and performance by the Borrower of each of the Loan Documents to which   it is a party are within the Borrower's powers and have been duly authorized by all necessary   corporate action in compliance with the Organization Documents.   7.3 Enforceable Agreement.   This Agreement is a legal, valid and binding agreement of the Borrower, enforceable against the   Borrower in accordance with its terms, and any instrument or agreement required hereunder, when   executed and delivered, will be similarly legal, valid, binding and enforceable subject to applicable   bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights   generally and subject to general principles of equity, regardless of whether considered in a   proceeding in equity or at law.     7.4 No Conflicts.   This Agreement does not conflict with any law, agreement, or obligation by which the Borrower   is bound, except where such conflict could not reasonably be expected to result in a Material   Adverse Effect.   7.5 Financial Information.   All financial and other information that has been or will be supplied to the Bank fairly presents the   Borrower’s financial condition on a consolidated basis except that prior to the Closing date all   such information relating to the Subsidiary Borrowers has been supplied on a consolidating basis.    All pro forma or projected financial statements that have been or will be supplied to the Bank on   behalf of the Borrower will be or has been prepared in good faith based on reasonable assumptions.    Since the date of the most recent financial statements of Borrower provided to the Bank, there has   been no Material Adverse Effect in the consolidated business condition (financial or otherwise),   operations or properties of each of the Company and the Subsidiary Borrowers.     7.6 Lawsuits.     There is no lawsuit, tax claim or other dispute pending or threatened against the Borrower for   which there is a reasonable probability of an adverse result which would be expected to have a   Material Adverse Effect.   7.7 Collateral.   All Collateral required in this Agreement is owned by the grantor of the security interest free of   any title defects or any liens or interests of others, except those which have been approved by the   Bank in writing or permitted under Section 8.7.   7.8 Use of Proceeds.   The proceeds of the Term Loan shall be used by the Company to acquire all of the ownership   interests in Subsidiary Borrower Danya International, LLC.  Up to $5,000,000.00 from the   proceeds of the Revolving Line of Credit Loan may also be used to fund the acquisition of the     





 







      {N0109914  } 24   6035818   Subsidiary Borrower Danya International, LLC, and the remainder shall be used for general   working capital purposes.   7.9 Permits, Franchises.   The Borrower possesses all material permits, memberships, franchises, contracts and licenses   required and all material trademark rights, trade name rights, patent rights, copyrights, and   fictitious name rights necessary to enable it to conduct the business in which it is now engaged.   7.10 Other Obligations.   The Borrower is not in default on any Funded Debt having a principal balance of $100,000.00 or   more.   7.11 Tax Matters.   As of the Closing Date, the Borrower has no knowledge of any pending assessments or adjustments   of its income tax for any year and all material taxes due have been paid, except as have been   disclosed in writing to the Bank.   7.12 No Event of Default.   There is no Event of Default under this Agreement.    7.13 Margin Regulations, Public Holding Company.   (a) Borrower is not engaged and will not engage, principally or as one of its important   activities, in the business of purchasing or carrying margin stock (within the meaning of   Regulation U issued by the FRB), or extending credit for the purpose of purchasing or   carrying margin stock.     (b) None of Borrower, any Person Controlling Borrower, or any Subsidiary is required to be   registered as an “investment company” under the Investment Company Act of 1940.   7.14 Subsidiaries, Equity Investments.   Schedule 7.14 hereto contains an accurate list of all Subsidiaries of the Company as of the date of   this Agreement, setting forth their respective jurisdictions of incorporation or organization and the   percentage of their respective Capital Stock owned by the Company or other Subsidiaries. All of   the issued and outstanding shares of Capital Stock of such Subsidiaries held by the Company have   been duly authorized and issued and are fully paid and non-assessable. As of the Closing Date,   Borrower has no equity investments in any other corporation or entity other than those specifically   disclosed on Schedule 8.7.          





 







      {N0109914  } 25   6035818   7.15 Compliance with Laws.   The Borrower is in compliance with (a) all applicable laws (including without limitation all   environmental laws and all federal and state banking statutes) and all rules, regulations (including   without limitation all federal and state banking regulations) and orders of any governmental   authority, and (b) all indentures, agreements or other instruments binding upon it or its properties,   in each case except where non-compliance, either singly or in the aggregate, could not reasonably   be expected to result in a Material Adverse Effect.   7.16 OFAC.   The Borrower (i) is not a person whose property or interest in property is blocked or subject to   blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property   and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support   Terrorism (66 Fed. Reg. 49079 (2001)), (ii) does not engage in any dealings or transactions   prohibited by Section 2 of such executive order, and is not otherwise associated with any such   person in any manner violative of Section 2, or (iii) is not a person on the list of Specially   Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any   other U.S. Department of Treasury's Office of Foreign Assets Control regulation or executive   order.   7.17 No Material Adverse Change   There has occurred no event, condition or other change since September 30, 2015 which has had,   or which could reasonably be expected to have, a Material Adverse Effect.   7.18 Patriot Act and Corrupt Practices Act.   The Borrower is in compliance, in all material respects, with (i) the Trading with the Enemy Act,   as amended, and each of the foreign assets control regulations of the United States Treasury   Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or   executive order relating thereto and (ii) the Uniting And Strengthening America By Providing   Appropriate Tools Required To Intercept And Obstruct Terrorism (USA Patriot Act of 2001).  No   part of the proceeds of the Obligations will be used, directly or indirectly, for any payments to any   governmental official or employee, political party, official of a political party, candidate for   political office, or anyone else acting in an official capacity, in order to obtain, retain or direct   business or obtain any improper advantage, in violation of the United States Foreign Corrupt   Practices Act of 1977, as amended.      8. COVENANTS   The Borrower agrees so long as credit is available under this Agreement and until the Bank is   repaid in full under the Revolving Line of Credit Loan and the Term Loan and all Letters of Credit   have expired (other than in respect of indemnification obligations that survive termination of this   Agreement):     





 







      {N0109914  } 26   6035818   8.1 Financial Information.   To provide the following financial information and statements in form and content reasonably   acceptable to the Bank, and such additional information as may be reasonably requested by the   Bank from time to time:   (a) Within ninety (90) days of the fiscal year end of Company, true and complete copies of the   annual financial statements of Company, true and complete copies of its balance sheet,   income statement and statement of cash flows for such fiscal year.  Each such financial   statement shall (i) be prepared in accordance with GAAP consistently applied, (ii) be   certified by an authorized financial officer of Company.  The statements shall be audited   (with an opinion satisfactory to Bank) by a certified public accountant.  The statements   shall be prepared on a consolidated basis fairly showing the financial condition of Borrower   and its Subsidiaries.   (b) Within forty-five (45) days of the end of each fiscal quarter of Company (including the last   quarter in each fiscal year), true and complete copies of its unaudited balance sheet, income   statement and statement of cash flows for such quarter and fiscal year to date period.  Each   such quarterly report shall (i) be prepared in accordance with GAAP consistently applied   (except for the omission of footnotes and subject to year-end adjustment) (ii) be certified   by its chief financial officer, and (iii) show the comparison to the same period for the   preceding year. The statements may be internally prepared. The statements shall be   prepared on a consolidated and consolidating basis fairly showing the financial condition   of Company and its Subsidiaries.   (c) Within thirty (30) days of the end of each month, true and complete copies of the   Company’s unaudited balance sheet, income statement.  Each such monthly report shall (i)   be prepared in accordance with GAAP consistently applied (except for the omission of   footnotes and subject to year-end adjustment) (ii) be certified by an authorized financial   officer. The statements may be internally prepared. The statements shall be prepared on a   consolidated and consolidating basis fairly showing the financial condition of Company   and its Subsidiaries.  The monthly financials will not be available for the first 2 months   after the fiscal year ends while the audited financial is being prepared.     (d) Together with the financial statements required under Section 8.1(a) and (b) for the last   day of each fiscal quarter of the Company, a compliance certificate of the Company, signed   by an authorized financial officer and setting forth (i) the information and computations (in   sufficient detail) to establish that the Company is in compliance with the financial   covenants set forth in Section 8 at the end of the period covered by the financial statements   then being furnished and (ii) whether there existed as of the date of such financial   statements and whether there exists as of the date of the certificate, any Event of Default   under this Agreement and, if any such Event of Default exists, specifying the nature thereof   and the action the Company is taking and proposes to take with respect thereto.  The   compliance certificate for the last fiscal quarter may be submitted within one hundred and   twenty (120) days of the end of such quarter.   (e) Within fifteen (15) days of each month end, the Borrowing Base Certificate.     





 







      {N0109914  } 27   6035818   (f) Within fifteen (15) days of each month end, an aging report of the Borrower’s accounts   receivable.   (g) Within fifteen (15) days of each month end, an aging report of the Borrower’s accounts   payable.   (h) Together with the financial statements required under Section 8.1(a) and (b) for the last   day of each fiscal quarter of the Borrower, a contract backlog report shall be provided to   the Bank of the form attached hereto as Exhibit C.  The backlog report shall include the   following information:  contract number, agency, contracting officer, contract type,   remaining funded and unfunded portions and estimated profitability.   (i) Such other information (including non-financial information) as the Bank may from time   to time reasonably request.       8.2 Fixed Charge Coverage Ratio.   The Company shall maintain on a consolidated basis a Fixed Charge Coverage Ratio of at least   1.35:1.0 commencing with the quarter ending June 30, 2016 and for all periods thereafter.  This   ratio will be calculated as of the end of each fiscal quarter using the results of the twelve-month   period ending with that reporting period.  The current portion of long-term debt and the current   portion of capitalized lease obligations will be measured as of the last day of the calculation period.   8.3 Funded Indebtedness to EBITDA.   The Company shall maintain on a consolidated basis a ratio of Funded Indebtedness to Adjusted   EBITDA not exceeding the ratios indicated for each period specified below:       Period  Ratios    At Closing  2.99:1.0       The period ending June 30, 2016      and through September 30, 2016   3.5:1.0        The period ending December 31, 2016      and through September 30, 2017  3.25:1.0       The period ending September 30, 2017    and through June 30, 2018  3.00:1.0        The period ending September 30, 2018 2:50:1.0           





 







      {N0109914  } 28   6035818   8.4 Other Indebtedness   Not to have outstanding or incur any direct or contingent Indebtedness (other than those previously   disclosed in writing to the Bank, or become liable for the liabilities of others, without the Bank's   written consent.  This does not prohibit:   (a) Acquiring goods, supplies, or merchandise on normal trade credit.   (b) Endorsing negotiable instruments received in the usual course of business.   (c) Obtaining surety bonds in the usual course of business.   (d) Liabilities, lines of credit and leases in existence on the date of this Agreement disclosed   on Schedule 8.4.   (e)  Indebtedness (including capital lease obligations) incurred to finance or refinance the cost   of purchasing, reconditioning or improving an assets.   (f) Other Funded Indebtedness not to exceed in the aggregate $100,000.00 at any one time.   (g) Any Swap Contract which is entered into for purposes of hedging interest rate risk related   to the Indebtedness.    (h) Normal accruals in the ordinary course of business for liabilities not yet due and payable,   or which Borrower is contesting in good faith.    (i)  Customer deposits and other unsecured current liabilities not the result of borrowing and   not evidenced by any note or other evidence of Indebtedness.    (j) Indebtedness arising under the Wynnefield Subordinated Notes which Indebtedness must   be subordinated to payments of the Loans, provided, however, that interest and principal   due under the Wynnefield Subordinated Notes may be paid in full (i) prior to maturity in   the event the Company engages in equity financing which results in the Company receiving   funds in an amount sufficient to pay all principal and outstanding interest due and owing   under the Wynnefield Subordinated Notes and (ii) in accordance with the terms of the   Subordination Agreement.       8.5 Other Liens.   Not to create, assume, or allow any security interest or lien (including judicial liens) on property   the Borrowers or any Subsidiary of the Borrowers now or later own, except for Permitted Liens.   8.6 Maintenance of Assets.   (a) Not to sell, assign, lease, transfer or otherwise dispose of any part of the Borrower's   business or the Borrower's assets except in the ordinary course of business.     





 







      {N0109914  } 29   6035818   (b) Not to sell, assign, lease, transfer or otherwise dispose of any assets for less than fair market   value, or enter into any agreement to do so other than in the ordinary course of business.   (c) Not to enter into any sale and leaseback agreement covering any of its fixed assets.   (d) To maintain and preserve all material rights, privileges, and franchises the Borrower now   has, other than those which are not necessary for the conduct of the Borrower's business or   which as to which the failure to so maintain and preserve would not reasonably be expected   to result in a Material Adverse Effect.   Notwithstanding anything to the contrary in this Section 8.4, the Company shall be permitted to   complete the dissolution of those Subsidiaries listed as Inactive Subsidiaries on Schedule 7.14.      8.7 Investments.   Except with respect to the acquisition of Danya International, LLC by the Company, not to have   any existing, or make any new, Investments in any individual or entity, or make any capital   contributions or other transfers of assets to any individual or entity, or to make any Acquisition,   except for:   (a) Existing Investments as shown on Schedule 8.7.   (b) Investments in joint ventures engaged in businesses that are the same as the business of the   Borrower or are reasonably related or complimentary thereto in an amount not to exceed   in the aggregate $100,000.00;   (c) Investments in any of the following:   (i) certificates of deposit;   (ii) U.S. treasury bills and other obligations of the federal government;   (iii) readily marketable securities (including commercial paper, but excluding restricted   stock and stock subject to the provisions of Rule 144 of the Securities and Exchange   Commission).   (d) Obligations under Swap Contracts.   (e) Investments permitted by any other section hereunder.   (f) Investments (including debt obligations) received in connection with the bankruptcy or   reorganization of suppliers and customers and in settlement of delinquent obligations of,   and other disputes with, customer and suppliers arising in the ordinary course of business.   (g) Receivables owing to the Borrower created or acquired in the ordinary course of business.     





 







      {N0109914  } 30   6035818   (h)  Compensation arrangements, including, without limitation, stock option grants, bonus   plans and individual bonuses, to officers, directors, employees and consultants by   Borrower in the ordinary course of business.      8.8 Loans.   Not to make any loans, advances or other extensions of credit to any individual or entity, except   for:   (a) Existing extensions of credit as shown on Schedule 8.8   (b) Extensions of credit in the nature of accounts receivable or notes receivable arising from   the sale or lease of goods or services in the ordinary course of business to non-affiliated   entities.   (c) Advances to employees provided that do not exceed $25,000.00 in the aggregate at any   one time.   (d) Advances for travel and other expenses incurred in the ordinary course of business.   (e) Counterparty risk arising under Swap Contracts to the extent allowed elsewhere under this   Agreement.   8.9 Additional Negative Covenants.   Not to, without the Bank's written consent:   (a) Enter into any consolidation, merger, or other combination, unless Borrower is the   surviving entity.   (b) Engage in any business activities substantially different from the Borrower's present   business and other businesses reasonably related or incidental thereto or which are   reasonably extensions thereof.   (c) Liquidate or dissolve the Borrower's business.   (d) Voluntarily suspend its business for more than seven (7) days.   8.10 Notices to Bank.   To promptly notify the Bank in writing of:   (a) Any threatened in writing, actual or pending litigation against the Borrower (not covered   by insurance) claiming damages in excess of $100,000.00.     (b) Any substantial dispute between any Governmental Authority and the Borrower which   could reasonably be expected to have a Material Adverse Effect.     





 







      {N0109914  } 31   6035818   (c) Any Event of Default or Default under this Agreement.    (d) Occurrence of any Material Adverse Effect.   (e) Any change in the Borrower's name, legal structure, place of business, or chief executive   office if the Borrower has more than one place of business.   (f) Any actual contingent liabilities of the Borrower not otherwise permitted hereunder, and   any such contingent liabilities which are reasonably foreseeable, where such liabilities are   in excess of $100,000.00 in the aggregate.    (g) Any change in the current CEO and CFO of the Company.   (h)  Each dissolution of an Inactive Subsidiary of Borrower within three (3) Business Days   thereof.   8.11 Insurance.   To maintain insurance with carriers reasonably satisfactory to the Bank and covering such risks   and in such amounts as is usual for the Borrower's business.  Each policy shall provide for at least   thirty (30) days prior notice to the Bank of any cancellation thereof ten (10) days in the case of   non-payment).   8.12 Compliance with Laws.   To comply in all material respects with the laws (including any fictitious or trade name statute and   environmental laws), regulations, and orders of any government body with authority over the   Borrower's business except where failure to comply would not reasonably be expected to have a   Material Adverse Effect.     8.13 Books and Records.   To maintain adequate books and records in accordance with GAAP and practices applied on a   basis consistent with preceding years.   8.14 Field Audits.   To allow the Bank and its agents to visit and inspect any of the Borrower's properties, to examine   and make abstracts or copies from any of its books and records, to conduct a collateral audit and   analysis of its inventories and accounts receivable and to discuss its affairs, finances and accounts   with its officers, employees and, in the presence of an officer of Borrower, all at such reasonable   times and as often as may reasonably be desired, all at Borrower’s expense provided that the   Borrower shall not be obligated to reimburse the Bank for more than two such audits and analyses   during any twelve month period.     





 







      {N0109914  } 32   6035818   8.15 Perfection of Liens.   To help the Bank perfect and protect its security interests and liens, and reimburse it for related   costs it incurs to protect its security interests and liens.   8.16 ERISA Plans.   (a) Each Plan (other than a multiemployer plan) is in compliance in all material respects with   the applicable provisions of ERISA, the Code and other federal or state law.  Each Plan has   received a favorable determination letter from the IRS, may rely on a favorable opinion   letter for a prototype or volume submitter plan, or the time for obtaining such a letter has   not expired, and to the best knowledge of the Borrower, nothing has occurred which would   cause the loss of such tax-qualification.  The Borrower has fulfilled its obligations, if any,   under the minimum funding standards of ERISA and the Code with respect to each Plan,   and has not incurred any liability with respect to any Plan.   (b) There are no claims, lawsuits or actions (including by any Governmental Authority), and   there has been no prohibited transaction or violation of the fiduciary responsibility rules,   with respect to any Plan which has resulted or would reasonably be expected to result in a   Material Adverse Effect.   (c) With respect to any Plan subject to Title IV of ERISA:   (i) No reportable event has occurred under Section 4043(c) of ERISA for which the   PBGC requires 30-day notice.   (ii) No action by the Borrower or any ERISA Affiliate to terminate any Plan or to   withdraw from any Plan that is a multiemployer plan has been taken and no notice   of intent to terminate a Plan has been filed under Section 4041 of ERISA.   (iii) No termination proceeding has been commenced with respect to a Plan under   Section 4042 of ERISA, and, to the Borrower’s knowledge, no event has occurred   or condition exists which might constitute grounds for the commencement of such   a proceeding.   (d) The following terms have the meanings indicated for purposes of this Agreement:   (i) “Code” means the Internal Revenue Code of 1986, as amended from time to time.   (ii) “ERISA” means the Employee Retirement Income Security Act of 1974, as   amended from time to time.   (iii) “ERISA Affiliate” means any trade or business (whether or not incorporated) under   common control with the Borrower within the meaning of Section 414(b) or (c) of   the Code.   (iv) “PBGC” means the Pension Benefit Guaranty Corporation.     





 







      {N0109914  } 33   6035818   (v) “Plan” means a pension, profit-sharing, or stock bonus plan intended to qualify   under Section 401(a) of the Code, maintained or contributed to by the Borrower or   any ERISA Affiliate, including any multiemployer plan within the meaning of   Section 4001(a)(3) of ERISA.   8.17 Maintenance of Properties.   The Borrower will, and will cause each of its Subsidiaries to, (i) keep and maintain all property   material to the conduct of its business in good working order and condition, subject to ordinary   wear and tear, except where the failure to do so, either individually or in the aggregate, would not   reasonably be expected to result in a Material Adverse Effect.   8.18 Assignment of Claims Act.   The Borrower hereby covenants and agrees that the Borrower will promptly, upon request by the   Bank, comply with any and all of the requirements of the Assignment of Claims Act (Title 31   Section 3727 and Title 41 Section 15 of the United States Code) attached hereto as Exhibit D,   where such statutes are applicable to any applicable accounts receivable Collateral, and shall take   all such other action as may be necessary to facilitate the direct assignment to the Bank of the   payments due or to become due under such accounts receivable Collateral, and such further action   as may be necessary to facilitate the creation and perfection of the Bank’s security interest in such   payments.    8.19 Bank as Principal Depository.   To maintain the Bank as its principal depository bank, including for the maintenance of business,   cash management, operating and administrative deposit accounts.    8.20 Collections Account   All proceeds of Borrower’s accounts receivables shall be deposited into a Collections Account,   and all automatic sweep arrangements of the Collections Account shall be maintained until this   Agreement is terminated.  Borrower agrees to maintain this account as a deposit-only account   and as one on which checks are not written.  Funds from this account will swept daily into an   Operating Account maintained at the Bank (subject to a springing deposit account control   agreement).   8.21 Taxes and Assessments.   The Borrower shall duly pay and discharge, and shall cause each Subsidiary to duly pay and   discharge, all taxes, rates, assessments, fees, and governmental charges upon or against it or its   assets, in each case before the same become delinquent and before penalties accrue thereon, unless   and to the extent that (a) the same are being contested in good faith and by appropriate proceedings   which prevent enforcement of the matter under contest and adequate reserves are provided   therefore; or (b) such unpaid taxes, rates, assessments, fees and governmental charges  do not   exceed $25,000.00 in the aggregate at any one time.   8.22 Conduct of Business.     





 







      {N0109914  } 34   6035818   Except for the Inactive Subsidiaries shown on Schedule 7.14, the Company will, and will cause   each Subsidiary to, carry on and conduct its business in substantially the same fields of enterprise   as it is presently conducted or fields related thereto or extensions thereof (taking the Company and   its Subsidiaries on a consolidated basis) and do all things necessary to remain duly incorporated   or organized, validly existing and (to the extent such concept applies to such entity) in good   standing as a domestic corporation, partnership or limited liability company in its jurisdiction of   incorporation or organization, as the case may be, and maintain all requisite authority to conduct   its business in each jurisdiction in which its business is conducted, unless the failure to do so could   not reasonably be expected to have a Material Adverse Effect. Borrower shall cause the Inactive   Subsidiaries to be dissolved no later than one hundred and eighty (180) days from the Closing   Date, provided, however, that Borrower may request the Bank to consent to an additional 60-day   extension to complete the dissolution of all remaining Inactive Subsidiaries which consent shall   not be unreasonably withheld.”   8.23 No Consumer Purpose.   Not to use this loan for personal, family, or household purposes.        9. DEFAULT AND REMEDIES   If any of the following events of default occurs and is continuing, each an “Event of Default,” the   Bank may do one or more of the following: declare the Borrower in default, stop making any   additional credit available to the Borrower, stop issuing Letters of Credit and require the Borrower   to repay its entire debt immediately and without prior notice.  If an event which, with notice or the   passage of time, will constitute an Event of Default has occurred and is continuing, the Bank has   no obligation to make advances, issue new Letters of Credit or extend additional credit under this   Agreement.  In addition, if any Event of Default occurs and is continuing, the Bank shall have all   rights, powers and remedies available under any instruments and agreements required by or   executed in connection with this Agreement, as well as all rights and remedies available at law or   in equity and all principal amounts due and owing to Bank by Borrower shall at Bank’s option,   accrue interest at the Default Rate. If an Event of Default occurs under the paragraph entitled   “Bankruptcy,” below, with respect to the Borrower, then the entire debt outstanding under this   Agreement will automatically be due immediately.     9.1 Failure to Pay.   The Borrower fails to make a payment of principal under this Agreement when due, or fails to   make a payment of interest, any fee or other sum under this Agreement within ten (10) days after   the date when due.   9.2 Other Bank Agreements.   The Borrower or any Obligor shall fail to observe or perform any covenant or agreement contained   in this Agreement (other than those referred to in Section 9.1 above), and such failure shall remain     





 







      {N0109914  } 35   6035818   unremedied for thirty (30) days after the earlier of (x) any officer of the Borrower becomes aware   of such failure, or (y) notice thereof shall have been given to the Borrower by the Bank.     9.3 Cross-default.   Any default occurs under any agreement in connection with any Funded Debt of Borrower having   a principal balance of $250,000.00 or more if the default consists of failing to make a payment   when due or gives the other lender the right to accelerate the obligation and it is not cured or   waived within thirty (30) days.   9.4 False Information.   Any representation or warranty made or deemed made by or on behalf of the Borrower in or in   connection with this Agreement or any other Loan Document and any amendments or   modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other   document submitted to the Bank by the Borrower or any representative of the Borrower pursuant   to or in connection with this Agreement shall prove to be incorrect in any material respect when   made or deemed made.    9.5 Bankruptcy.   The Borrower or any Obligor, files a bankruptcy petition, an involuntary bankruptcy petition is   filed against any of the foregoing parties and is not dismissed within sixty (60) days, or the   Borrower or any Obligor makes a general assignment for the benefit of creditors.     9.6 Receivers.   A receiver or similar official is appointed for a substantial portion of the Borrower's or any   Obligor's business, or the business is terminated, or, if any Obligor is anything other than a natural   person, such Obligor is liquidated or dissolved.   9.7 Judgments.   Any final judgments or arbitration awards are entered against the Borrower or any of its   Subsidiaries, in an amount of $250,000.00 or more that is not covered by insurance and that   remains outstanding for more than thirty (30) days without being satisfied, stayed or bonded.   9.8 Corporate Existence.   The Borrower shall dissolve or otherwise cease to exist.   9.9 Default under Related Documents.   Any default occurs under any Loan Document and such failure shall remain unremedied for thirty   (30) days after the earlier of (i) any officer of Borrower becomes aware of such failure, or (ii)   notice thereof shall have been given to the Borrower by Bank.    9.10 Security Interest.     





 







      {N0109914  } 36   6035818   Except as otherwise permitted by the terms of the Loan Agreement, or except to the extent the   Bank agrees or elects not to perfect its security interest, should the Bank cease to have an   enforceable first priority Lien on any property which is subject to a security interest created by any   Loan Document.   9.11 ERISA Plans.   Any one or more of the following events occurs with respect to a Plan of the Borrower subject to   Title IV of ERISA, provided such event or events would reasonably be expected, in the judgment   of the Bank, to subject the Borrower to any tax, penalty or liability (or any combination of the   foregoing) which, in the aggregate, could have a Material Adverse Effect:   (a) A reportable event shall occur under Section 4043(c) of ERISA with respect to a Plan for   which the PBGC has not waived the 30-day notice requirement.   (b) Any Plan termination (or commencement of proceedings to terminate a Plan) or the full or   partial withdrawal from a Plan that is a multiemployer plan within the meaning of Section   4001(a)(3) of ERISA by the Borrower or any ERISA Affiliate.   9.12 Breach of Borrowing Base.   If any of the credit covered by this Agreement is subject to an agreement to maintain a borrowing   base, the terms of such agreement are breached and the Borrower fails to cure such breach by the   expiration of any applicable cure period.   9.13 Invalidity of Loan Documents   In each case, other than as expressly permitted hereunder or thereunder or due to satisfaction in   full of the Loan, any Loan Document  or any provision thereof, at any time after its execution and   delivery and for any reason other than as expressly permitted hereunder or thereunder or   satisfaction in full of the Loan, ceases to be in full force and effect; or Borrower contests in any   manner the validity or enforceability of any Loan Document or any provision thereof; Borrower   denies that it has any or further liability or obligation under any Loan Document, or purports to   revoke, terminate or rescind any Loan Document or any provision thereof.   9.14 Change in Control   The occurrence of a Change of Control.   9.15 Suspension or Debarment   Borrower is suspended or debarred by the Suspension & Debarment Division of the U.S. General   Services Administration, U.S. Government, or otherwise prevented from renewing, soliciting or   otherwise conducting business with the Federal government directly or as an agent or   representative of other contractors or of participants in Federal assistance programs.        





 







      {N0109914  } 37   6035818   10. ENFORCING THIS AGREEMENT; MISCELLANEOUS   10.1 GAAP.   Except as otherwise stated in this Agreement, all financial information provided to the Bank and   all financial covenants will be made under GAAP, consistently applied.   10.2  Georgia Law.   This Agreement is governed by the laws of the State of Georgia, except for conflict of laws   provisions.   10.3 Successors and Assigns.   This Agreement is binding on the Borrower's and the Bank's successors and assignees.  The   Borrower agrees that it may not assign this Agreement without the Bank's prior consent.  The Bank   may, with the Borrower’s consent so long as there exists no Event of Default (such consent not to   be unreasonably withheld), sell participations in or assign this loan, and may exchange information   about the Borrower (including, without limitation, any information regarding any hazardous   substances) with actual or potential participants or assignees.  If a participation is sold or the loan   is assigned, the purchaser will have the right of set-off against the Borrower.      10.4 Right of Setoff.   In addition to any rights now or hereafter granted under applicable law and not by way of limitation   of any such rights, the Bank shall have the right, at any time or from time to time upon the   occurrence and during the continuance of an Event of Default, without prior notice to the   Borrower, any such notice being expressly waived by the Borrower to the extent permitted by   applicable law, to set off and apply against all deposits (general or special, time or demand,   provisional or final) of the Borrower at any time held or other obligations at any time owing by   the Bank to or for the credit or the account of the Borrower against any Indebtedness owed by   Borrower to  Bank, irrespective of whether the Bank shall have made demand hereunder and   although such Indebtedness may be unmatured.  The Bank agrees promptly to notify the Borrower   after any such set-off and any application made by the Bank; provided, that the failure to give such   notice shall not affect the validity of such set-off and application.    10.5 Severability; Waivers.   If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced.  The   Bank retains all rights, even if it makes a loan after default.  If the Bank waives a default, it may   enforce a later default.  Any consent or waiver under this Agreement must be in writing.   10.6 Attorneys' Fees.   The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees actually   incurred by the Bank in connection with the enforcement or preservation of any rights or remedies     





 







      {N0109914  } 38   6035818   under this Agreement and any other documents executed in connection with this Agreement, and   in connection with any amendment, waiver, “workout” or restructuring under this Agreement.  In   the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and   reasonable attorneys' fees incurred in connection with the lawsuit or arbitration proceeding, as   determined by the court or arbitrator.  In the event that any case is commenced by or against the   Borrower under the Bankruptcy Code (Title 11, United States Code) or any similar or successor   statute, the Bank is entitled to recover costs and reasonable attorneys' fees incurred by the Bank   related to the preservation, protection, or enforcement of any rights of the Bank in such a case.     10.7 One Agreement.   This Agreement and any related security or other agreements required by this Agreement,   collectively:   (a) represent the sum of the understandings and agreements between the Bank and the   Borrower concerning this credit;   (b) replace any prior oral or written agreements between the Bank and the Borrower   concerning this credit; and   (c) are intended by the Bank and the Borrower as the final, complete and exclusive statement   of the terms agreed to by them.   In the event of any conflict between this Agreement and any other agreements required by this   Agreement, this Agreement will prevail.  Any reference in any related document to a “promissory   note” or a “note” executed by the Borrower and dated as of the date of this Agreement shall be   deemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.   10.8 Indemnification.   The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages,   judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this   Agreement or any document required hereunder, (b) any credit extended or committed by the Bank   to the Borrower hereunder, and (c) any litigation or proceeding related to or arising out of this   Agreement, any such document, or any such credit but excluding any loss, liability, damages,   judgment and costs arising from the gross negligence or willful misconduct of Bank.  This   indemnity includes but is not limited to attorneys' fees actually incurred.  This indemnity extends   to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents,   successors, attorneys, and assigns.  This indemnity will survive repayment of the Borrower's   obligations to the Bank.  All sums due to the Bank hereunder shall be obligations of the Borrower,   due and payable immediately upon demand.   10.9 Notices.   Unless otherwise provided in this Agreement or in another agreement between the Bank and the   Borrower, all notices required under this Agreement shall be personally delivered or sent by first   class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this   Agreement, or sent by facsimile to the fax numbers listed on the signature page, or to such other     





 







      {N0109914  } 39   6035818   addresses as the Bank and the Borrower may specify from time to time in writing.  Notices and   other communications shall be effective (i) if mailed, upon the earlier of receipt or five (5) days   after deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied, when transmitted, or   (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram),   when delivered.   10.10 Further Assurances   At any time, and from time to time, upon request by Bank, Borrower will, at Borrower’s expense,   (a) correct any defect, error or omission which may be discovered in the form or content of any of   the Loan Documents, and (b) make, execute, deliver and record, or cause to be made, executed,   delivered and recorded, any and all further instruments, certificates and other documents as may,   in the opinion of Bank, be necessary or desirable in order to complete, perfect or continue and   preserve the lien on the Collateral.  Upon any failure by Borrower to do so, Bank may make,   execute and record any and all such instruments, certificates and other documents for and in the   name of Borrower, all at the sole expense of Borrower, and Borrower hereby appoints Bank the   agent and attorney-in-fact of Borrower to do so, this appointment being coupled with an interest   and being irrevocable.  Without limitation of the foregoing, Borrower irrevocably authorizes   Lender at any time and from time to time to file any initial financing statements, amendments   thereto and continuation statements deemed necessary or desirable by Bank to establish or   maintain the validity, perfection and priority of the security interests granted in the Mortgage, and   Borrower ratifies any such filings made by Bank prior to the date hereof.  In addition, at any time,   and from time to time, upon request by Bank, Borrower will, at Borrower's expense, provide any   and all further instruments, certificates and other documents as may, in the opinion of Bank, be   necessary or desirable in order to verify Borrower's identity and background in a manner   satisfactory to Bank.   10.11 Headings.   Article and paragraph headings are for reference only and shall not affect the interpretation or   meaning of any provisions of this Agreement.   10.12 Patriot Act Notice.   Bank hereby notifies the Borrower that, pursuant to the requirements of the USA PATRIOT Act,   Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Act”), Bank is required to   obtain, verify and record information that identifies the Borrower, which information includes the   name and address of the Borrower and other information that will allow Bank, as applicable, to   identify the Borrower in accordance with the Act.   10.13 Counterparts.   This Agreement may be executed in as many counterparts as necessary or convenient, and by the   different parties on separate counterparts each of which, when so executed, shall be deemed an   original but all such counterparts shall constitute but one and the same agreement.   [Signatures appear on the next page]     





 







        This Agreement is executed as of the date stated at the top of the first page.         Fifth Third Bank  DLH Holdings Corp.      By:        By: __/s/ Kathryn JohnBull_____   Name: Name: Kathryn JohnBull      Title: Title: Chief Financial Officer              Fifth Third Bank DLH Holdings Corp.   3344 Peachtree Road, NE Suite 800 3565 Piedmont Road, NE    Atlanta, GA 30126 Bldg. 3, Suite 700    Atlanta, GA 30305          DLH Solutions, Inc.             By: __/s/ Kathryn JohnBull_____    Name: Kathryn JohnBull       Title: Chief Financial Officer           3565 Piedmont Road, NE     Bldg. 3, Suite 700    Atlanta, GA 30305              Danya International, LLC             By: __/s/ Kathryn JohnBull_____    Name: Kathryn JohnBull       Title: Chief Financial Officer        Danya International, LLC    8737 Colesville Road    Suite 1100    Silver Spring, MD 20910                               





 







           Exhibit A   Borrowing Base Agreement        





 







      {N0109914  } 2   5421512   BORROWING BASE AGREEMENT   This Borrowing Base Agreement (this “Agreement”) dated as of May 2, 2016, is among   Fifth Third Bank, an Ohio banking corporation (the “Bank”) and DLH Holdings Corp., a New   Jersey corporation (the “Company”), DLH Solutions, Inc., a Georgia corporation,  Danya   International, LLC, a Maryland limited liability company (the “Subsidiary Borrowers” together   with the Company, the “Borrower”).       1. Borrowing Base.  The aggregate outstanding principal amount of all   amounts from time to time advanced under the Revolving Line of Credit Loan pursuant to the   terms of Section 2.4 of the Loan Agreement dated May 2, 2016 between Bank and Borrower (as   amended, restated or modified, the "Loan Agreement") shall not exceed the Maximum Amount.    Any defined terms used but not otherwise defined herein shall have such meaning ascribed to such   terms in the Loan Agreement.  This Agreement is subject to the terms and conditions set forth in   the Loan Agreement.         "Maximum Amount" shall mean the lesser of $10,000,000.00 or the Borrowing   Base.  The "Borrowing Base" at any time, shall be equal to the sum of (i) 90% of Prime   Government Receivables; (ii) 80% of Commercial Accounts Receivable, and (iii) 50% of Unbilled   Receivables, which are to be billed within thirty (30) days less such availability reserves applicable   to the Borrower as the Lender deems appropriate.       "Commercial Receivables" means Eligible Account Receivables other than Prime   Government Receivables or Unbilled Receivables which have resulted from an amount due owing   from account debtors.       "Prime Government Receivables" means Eligible Accounts Receivables which   have resulted from an amount due and owing directly from the U.S. Government or any   department or agency thereof.    "Unbilled Prime Government Receivables" means Eligible Prime Government   Accounts Receivables, notwithstanding their unbilled status which have resulted from unbilled   costs actually incurred and arising out of work actually performed by the Borrower under written   contracts with the U.S. Government which (i) have been accepted by the U.S. Government and (ii)   are properly billable to the U.S. Government in accordance with the applicable contract    “Eligible Accounts Receivable” shall mean all Accounts Receivable of Borrower   and any of its Subsidiaries which have been created in the ordinary course of Borrower's or such   Subsidiary’s business and upon which Borrower's or such Subsidiary’s right to receive payment is     





 







      {N0109914  } 3   5421512   absolute and not contingent upon the fulfillment of any condition whatsoever, and shall not   include:       any account which remains unpaid more than ninety (90) days past due from the   date of the invoice or sixty (60) days from the stated due date or which has been   written off the books of the Borrower or otherwise designated as uncollectible by   Borrower (it being understood that, in determining the aggregate amount from the   same Customer that is unpaid hereunder, there shall be excluded the amount of any   net credit balances relating to accounts due from such Customer which are unpaid   more than sixty (60) after the stated due date);       any account which represents an obligation of a Customer which is not a resident   of the United States or Canada unless such account is supported by a letter of credit   in form and substance reasonably acceptable to Bank;       any account with respect to which there is another contra account but only to the   extent of the amount owed by Borrower to the Customer;        any account which represents an obligation of any local, state or federal   governmental agency or entity, unless Borrower is not prohibited from assigning   the account and is able to does assign its right to payment of such account to the   Bank, in a manner reasonably satisfactory to Bank, so as to comply with the   Assignment of Claims Act of 1940, as amended;       any account which arises from the sale to an account debtor on a guaranteed sale,   sale-or-return, sale-on-approval, consignment, or any other repurchase or return   basis but such accounts shall only be excluded from Eligible Accounts Receivable   only during the length of time of any such repurchase or return obligations;        any account which arises from the sale to a Customer on a cash-on-delivery basis;       any account for which there exists a right of set off, defense or discount, except   regular discounts allowed in the ordinary course of business to promote prompt   payment and for which no defense or counterclaim has been asserted, but such   accounts shall only be excluded from Eligible Accounts Receivable to the extent of   such asserted right of setoff, defense or discount;        





 







      {N0109914  } 4   5421512    any account which arises from the sale or lease to or performance of services for,   or represents an obligation of, an employee, Affiliate, parent or Subsidiary of   Borrower;       any account which represents an obligation of a Customer of Borrower when 25%   or more of Borrower's accounts from such Customer are not eligible under the first   exclusions paragraph of this definition;       any account on which the Bank is not or does not continue to be, in the Bank's   reasonable discretion exercised in good faith (after providing Borrower with not   less than ten (10) days prior written notice), satisfied with the credit standing of the   Customer of Borrower in relation to the amount of credit extended, to the extent   such Account exceeds any credit limit established by Bank, in its reasonable credit   judgment, as applicable;     any account for which the goods giving rise to such account have not been shipped   to the applicable Customer or for which the services giving rise to such account   have not been performed by the Borrower or if such account was invoiced more   than once for the same goods (other than those accounts which result from bill and   hold sales).        "Customers" shall mean the account debtors obligated on any of the Accounts   Receivables.       "Accounts Receivables" shall mean all of the Borrower's accounts, instruments,   contract rights, chattel paper, document, and general intangibles arising from the sale of goods   and/or the rendition of services by the Borrower in the ordinary course of business, and the   proceeds thereof and all security and guaranties therefor, whether now existing or hereafter   created, and all returned, reclaimed or repossessed goods, and all books and records pertaining to   the foregoing.          2. Advances.  The Bank shall be under no obligation to make any Advance   under the Revolving Line of Credit Loan to Borrower in excess of the limitations stated above.       [Signatures begin on the next page]     





 







      {N0109914  } 5   5421512    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be   executed by their authorized representatives as of the day and year first written above.         BORROWER:   DLH Holdings Corp.         By:/s/ Kathryn M. JohnBull       Name: Kathryn M. JohnBull  [CORPORATE SEAL]      Title: Chief Financial Officer          DLH Solutions, Inc.         By:/s/ Kathryn M. JohnBull       Name: Kathryn M. JohnBull  [CORPORATE SEAL]      Title: Chief Financial Officer               





 







      {N0109914  } 6   5421512   Danya International, LLC         By:/s/ Kathryn M. JohnBull       Name: Kathryn M. JohnBull  [CORPORATE SEAL]      Title: Chief Financial Officer             BANK:   Fifth Third Bank         By:/s/ Anne Cross       Name:  Anne Cross         Title:  Vice President            





 







     Exhibit B   Permitted Liens     





 







{N0109914  }     Exhibit C   Backlog Report   FIFTH THIRD BANK      Company   Name      BACKLOG REPORT     Backlog Report as of                      Government  Agency Type Description Original Final/ Contract Amount Billings Funded Unfunded Total   Contract Number  Name & (CPFF; FFP,  Contract Renewal Value Funded to Date Remaining Remaining Backlog     Address 8(a) etc.)  Date Date    (A) (B) (Sum of A & B)                                                                                                                                                                                                                                                                                                                                             Please attach copies of first two pages of each contract   listed.              After initial submission, attach only copies of new or modified contracts, or options   exercised.                     





 







{N0109914  }       Exhibit D   Assignment of Claims Act         





 







   {N0109914  }    FIFTH THIRD BANK               Instrument of Assignment of Payments                 Under Government Contracts   Know all men by these presents:      That  (“Assignor”)      (Check one)    a corporation organized and existing under the laws of     a partnership existing under the laws of     a limited liability co. organized and existing under the laws of     an individual.    and having its principal place of business at        in consideration of financial accommodations provided or to be provided, and for other good and valuable consideration, receipt   whereof is hereby acknowledged, and pursuant to the provisions of the Assignment of Claims Act of 1940, as amended (31   U.S.C. § 3727, 41 U.S.C. § 6305), does hereby assign, set over, transfer, pledge and convey to FIFTH THIRD BANK, (“Bank”) all of   Assignor's right, title and interest which Assignor now has or may have in and to all moneys due or to become due from the United States   of America or from any agency or department thereof under:      Contract# Date Agency Description                        and does hereby authorize the Bank to receive and collect any amount or amounts due or to become due thereunder, and to   receive and collect the same as fully and to the same extent as if said moneys were its own funds and to apply said money first   to repayment of any loan or loans now or hereafter existing made by the Bank to the Assignor and to the interest thereon, and   to any other indebtedness of the Assignor to the Bank now existing or which may hereafter be incurred.      In Witness Whereof, the undersigned has caused this Instrument of Assignment to be duly executed and delivered on its behalf,   this   day of    ,  .                                Assignor          By:      (Seal)                        Print Name and Title                        Address                  ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------   If Assignor is a corporation:  affix corporate seal here or   attach Certified Board Resolution authorizing assignment.   Also, the Secretary or Assistant Secretary must attest to   this document.                           Signature of Secretary   ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------   If Assignor is a partnership:  this document must be  I hereby certify that I am a General Partner of:   executed by a General Partner and notarized below.        , a partnership             By:          ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------   If Assignor is a limited liability company:  this document  I hereby certify that I am an authorized signer of:   must be executed by an authorized signer of the company       , a limited liability   and notarized below.             company             By:            





 







   {N0109914  }    ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------   If Assignor is a partnership, a limited liability company  State of    , County/City of        or an individual:  this document must be notarized.  SS:          The foregoing instrument was acknowledged before me this            day of    , 20___.             By:       (signature)          My commission expires    (date)            





 







{N0109914  }     FIFTH THIRD BANK Notice of Assignment of   U.S. Government Contracts      To:  Date:                       This has a reference to Contract No.  dated         entered into between  (contractor name and address)                and  (government agency, name of office and address                     for  (describe nature of the contract)           Moneys due or to become due under the contract described above have been assigned to the   undersigned under the provisions of the Assignment of Claims Act of 1940, as amended, 31 U.S.C.   §3727, 41 U.S.C. §6305.    A true copy of the instrument of assignment executed by the contractor on ____________ (date),   is attached to the original notice.    Payments due or to become due under the contract should be made to the undersigned   assignee.    Please return to the undersigned the three enclosed copies of this notice with appropriate   notations showing the date and hour of receipt, and signed by the person acknowledging receipt on   behalf of the addressee.      PAYMENT INSTRUCTIONS:      If by mail, please remit to: If by ACH, please remit to:      (Bank)    (Bank)  (ACH Address)      (ABA#)      (Account #)      Very Truly yours,      FIFTH THIRD BANK (name of assignee)         By:  (signature of signing officer)   Title:  (title of signing officer)  (telephone)   ----------------------------------------------------------------------------------------------------------------------------- --------------------------   --------------   ACKNOWLEDGMENT   Receipt is acknowledged of the above notice and of a copy of the above mentioned instrument of   assignment.  They were received___________ (a.m.)(p.m.) on   _______________________________________, 20_____.     





 







   {N0109914  }          ___________________________________________(signature)      ___________________________________________(title)      ___________________________________________   on behalf of  ___________________________________________(name of addressee of this   notice)              





 







   {N0109914  }    Schedule 1   EBITDA addbacks                                





 







   {N0109914  }    Schedule 7.13   Other Equity Investments   None other than proposed purchase of 100% of membership interests of Danya   International, LLC.     





 







   {N0109914  }    Schedule 7.14   Subsidiaries                   





 







   {N0109914  }       Schedule 8.4   Existing Indebtedness   For DLH Holdings, Corp. and its Subsidiaries (excluding Danya International,   LLC)    See attachments        





 







   {N0109914  }    Schedule 8.7   Existing Investments         





 







{N0109914  }     Schedule 8.8   Existing Extensions of Credit