Exhibit 10.5


 


FOURTH AMENDMENT TO

LOAN AND SECURITY AGREEMENT


 


This FOURTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT (the “Amendment”) is entered into as of May 6, 2016 between ACME UNITED CORPORATION,
a Connecticut corporation (the “Borrower”) and HSBC BANK USA, NATIONAL ASSOCIATION (the “Lender”).


 


RECITALS


 


The Borrower and
the Lender are parties to a Loan and Security Agreement dated as of April 5, 2012, as amended (collectively, the “Loan
Agreement”). Capitalized terms used herein shall have the meanings given to them in the Loan Agreement unless otherwise
specified.


 


The Borrower has
requested that the Lender amend certain terms and conditions of the Loan Agreement, pursuant to the terms of this Amendment.


 


NOW, THEREFORE,
in consideration of the promises, covenants and understandings set forth in this Amendment and the benefits to be received from
the performance of such promises, covenants and understandings, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:


 


1.                 
Amendment to Loan Agreement. Subject to satisfaction of the conditions precedent set
forth in Section 3 below, the Loan Agreement is effective as of the Amendment No. 2 Closing Date (as defined in Section 3 below),
hereby amended to delete the stricken text (indicated as set forth in the following example: stricken text) and
to add the double-underlined text (indicated as set forth in the following example: double-underlined
text) as set forth in the copy of the Loan Agreement attached as Exhibit A hereto.


 


2.                 
No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Loan Agreement shall remain in full force and effect.


 


3.                 
Conditions Precedent. This Amendment shall be effective (the “Fourth Amendment
Closing Date”) when the Lender shall have received (a) a copy hereof executed by the Borrower and (b) all documents, instruments
and information identified on Schedule I hereto.


 


4.                 
Representations and Warranties. The Borrower hereby represents and warrants to the
Lender as follows:


 


(a)               
The Borrower has all requisite power and authority to execute this Amendment and to perform
all of the obligations hereunder and thereunder, and this Amendment has been duly executed and delivered by the Borrower and constitutes
the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms.


 


(b)              
The execution, delivery and performance by the Borrower of this Amendment has been duly authorized
by all necessary corporate action and does not (i) require any authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree presently in effect, having applicability to the Borrower, or the articles
of incorporation or by-laws of the Borrower, or (iii) result in a breach of or constitute a default under any indenture or
loan or loan agreement or any other agreement, lease or instrument to which the Borrower is a party or by which it or its properties
may be bound or affected.


 






    	 	1	 



     

    

 


(c)               
All of the representations and warranties contained in Section 5 of the Loan Agreement are
correct on and as of the date hereof as though made on and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.


 


(d)              
No Default or Event of Default has occurred and is continuing or will result from Borrower
entering into this Amendment.


 


5.                 
References. All references in the Loan Agreement to “this Agreement” shall
be deemed to refer to the Loan Agreement as amended hereby; and any and all references in the Loan Documents to the Loan Agreement
shall be deemed to refer to the Loan Agreement as amended hereby.


 


6.                 
No Other Waiver. The execution of this Amendment and acceptance of any documents related
hereto shall not be deemed to be a waiver of any Default or Event of Default under the Loan Agreement, or breach, default or event
of default under any Loan Documents or other document held by the Lender, whether or not known to the Lender and whether or not
existing on the date of this Amendment.


 


7.                 
Costs and Expenses. The Borrower hereby reaffirms its agreement under the Loan Agreement
to pay or reimburse the Lender on demand for all reasonable costs and expenses incurred by the Lender in connection with the Loan
Documents, including without limitation all reasonable fees and disbursements of legal counsel. Without limiting the generality
of the foregoing, the Borrower specifically agrees to pay all reasonable fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental
hereto.


 





8.                 
Miscellaneous. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of which counterparts, taken together, shall constitute
one and the same instrument.


 


9.                 
Reaffirmation. The Borrower as debtor, grantor, pledgor, assignor, or in any other
similar capacity in which the Borrower grants liens or security interests in its property hereby (i) ratifies and reaffirms all
of its payment and performance obligations, contingent or otherwise, under the Loan Agreement and each of the other Loan Documents
to which it is a party (after giving effect hereto) and (ii) ratifies and reaffirms the liens on or security interests in any of
its property granted pursuant to the Loan Agreement and any such other Loan Document as security for the Obligations under or with
respect to the Loan Agreement or the other Loan Documents, and confirms and agrees that such security interests and liens hereafter
secure all of the Obligations as amended hereby. The Borrower acknowledges that the Loan Agreement and each of the other Loan Documents
remains in full force and effect and are hereby ratified and reaffirmed. The execution of this Amendment shall not operate as a
waiver of any right, power or remedy of the Lender (except as expressly provided for herein), constitute a waiver of any provision
of any of the Loan Agreement or any of the other Loan Documents (except as expressly provided for herein) or serve to effect a
novation of the Obligations.


 






    	 	2	 



     

    

 


10.             
Release.


 





(a)               
Borrower hereby releases and forever discharges Lender and its parents, subsidiaries and affiliates,
past or present, and each of them, as well as their respective directors, officers, agents, servants, employees, shareholders,
representatives, attorneys, administrators, executors, heirs, assigns, predecessors and successors in interest, and all other persons,
firms or corporations with whom any of the former have been, are now, or may hereafter be affiliated, and each of them (collectively,
the “Releasees”), from and against any and all claims, demands, liens, agreements, contracts, covenants, actions,
suits, causes of action in law or equity, obligations, controversies, debts, costs, expenses, damages, judgments, orders and liabilities
of whatever kind or nature in law, equity or otherwise, whether known or unknown, fixed or contingent, suspected or unsuspected
by Borrower, and whether concealed or hidden (collectively, “Claims”), which Borrower now owns or holds or has
at any time heretofore owned or held, which are based upon or arise out of or in connection with any matter, cause or thing existing
at any time prior to the date hereof or anything done, omitted or suffered to be done or omitted at any time prior to the date
hereof in connection with the Loan Agreement or the other Loan Documents (collectively the “Released Matters”).


 


(b)              
Borrower represents, warrants and agrees, that in executing and entering into this release,
it is not relying and have not relied upon any representation, promise or statement made by anyone which is not recited, contained
or embodied in this Amendment, the Loan Agreement or the other Loan Documents. Borrower has reviewed this release with Borrower’s
legal counsel, and understands and acknowledges the significance and consequence of this release and of the specific waiver thereof
contained herein. Borrower understands and expressly assumes the risk that any fact not recited, contained or embodied therein
may turn out hereafter to be other than, different from, or contrary to the facts now known to Borrower or believed by Borrower
to be true. Nevertheless, Borrower intends by this release to release fully, finally and forever all Released Matters and agrees
that this release shall be effective in all respects notwithstanding any such difference in facts, and shall not be subject to
termination, modification or rescission by reason of any such difference in facts.


 


(c)               
Borrower, on behalf of itself and its successors, assigns, and other legal representatives,
hereby absolutely, unconditionally and irrevocably, covenants and agrees with each Releasee that it will not sue (at law, in equity,
in any regulatory proceeding or otherwise) any Releasee on the basis of any Claims released, remised and discharged by Borrower
pursuant to this Section 9. If Borrower violates the foregoing covenant, Borrower agrees to pay, in addition to such other damages
as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by any Releasee as a result
of such violation.


 


REMAINDER OF THIS PAGE INTENTIONALLY
LEFT BLANK


 









    	 	3	 



     

    

IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed as of the date first written above.


 


	 	 
	HSBC BANK USA, NATIONAL ASSOCIATION	ACME UNITED CORPORATION
	 	 
	 	 
	By:_________________________________	By:_________________________________
	Name:	Name:
	Title	Title


 


 


 


 


 


 


 


 


 


 


[SIGNATURE PAGE TO FOURTH AMENDMENT TO

LOAN AND SECURITY AGREEMENT]


 









    	 	4	 



     

    

Schedule I


 


	1.      Second Amended and Restated Secured Revolving Note
	2.      UCC, tax lien and judgment bring down searches against Borrower 
	3.      Updated Perfection Certificate
	4.      Insurance Certificates
	5.      Secretary’s Certificate of Borrower with Incumbency Certificate attaching:
	(a)               Certified Articles of Incorporation
	(b)               By-Laws 
	(c)                Authorizing Resolutions 
	6.      Good Standing Certificate


 






 



    	 	5	 



     

    



Execution Version


[Exhibit
A to

Amendment No. 4]




LOAN AND
SECURITY AGREEMENT


LOAN AND SECURITY
AGREEMENT (this “Agreement”) dated as of April 5, 2012 (the “Effective Date”) by and
between HSBC BANK, USA, NATIONAL ASSOCIATION, a national banking association (“HSBC”), and ACME UNITED
CORPORATION, a Connecticut corporation (“Borrower”). The parties agree as follows:


1                    
ACCOUNTING AND OTHER TERMS; DEFINITIONS


1.1               
Accounting and Other Terms. As used in this Agreement, the Revolving Note, any other Loan Document, or any certificate,
report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere
in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings
given to them under GAAP; provided, however, whenever such accounting terms are used for the purposes of determining compliance
with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation
of the audited financial statements of Borrower for the fiscal year ended December 31, 2010. If at any time any change in GAAP
would affect the computation of any financial ratio set forth in any Loan Document, and Borrower or HSBC shall so request, HSBC
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 (subject to approval by HSBC and Borrower); provided that, until so amended, such ratio shall continue
to be computed in accordance with GAAP prior to such change therein, and Borrowers shall provide to HSBC within five days after
delivery of each certificate or financial report required hereunder that is affected thereby a written statement of a Responsible
Officer of Borrowers setting forth in reasonable detail the differences (including any differences that would affect any calculations
relating to the financial covenants) that would have resulted if such financial statements had been prepared without giving effect
to such change. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 1.2.
All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent
such terms are defined therein.


The terms “herein”,
“hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to
any particular section, paragraph or subdivision. Each reference to a Section, an Exhibit or a Schedule shall be deemed to refer
to a Section, an Exhibit or a Schedule, as applicable, of this Agreement, as modified or supplemented pursuant to the terms hereof.
Any pronoun used shall be deemed to cover all genders. Wherever appropriate in the context, terms used herein in the singular also
include the plural and vice versa. All references to statutes (including the Code) and related regulations shall
include any amendments of same and any successor statutes and regulations. Unless otherwise provided, all references to any instruments
or agreements to which HSBC is a party, including, without limitation, references to any of the other Loan Documents, shall include
any and all modifications or amendments thereto and any and all extensions or renewals thereof. All references herein to the time
of day shall mean the time in New York. A Default or Event of Default shall be deemed to exist at all times during the period commencing
on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing
pursuant to this Agreement or, in the case of a Default that is capable of being cured, is cured within any period of cure expressly
provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such
Event of Default has been waived in writing by HSBC. Wherever the phrase “to the best of Borrower’s knowledge”
or words of similar import relating to the knowledge or the awareness of Borrower are used in this Agreement or other Loan Documents,
such phrase shall mean and refer to (i) the actual knowledge of a senior officer of Borrower or (ii) the knowledge that a senior
officer would have obtained if he had engaged in good faith and diligent performance of his duties, including the making of such
reasonably specific inquiries as may be necessary of the employees or agents of Borrower and a good faith attempt to ascertain
the existence or accuracy of the matter to which such phrase relates.


1.2               
Definitions. As used in the Loan Documents, the word “shall” is mandatory, the word “may” is
permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting,
the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement,
the following capitalized terms have the following meanings:


“Account”
is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without
limitation, all accounts receivable and other sums owing to any Borrower.









    	 	6	 



     

    


“Account
Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter
be made.


“Adjusted
LIBO Rate” shall mean, with respect to any LIBOR Rate Loan for any Interest Period, a rate of interest equal to the greater of (x) zero and (y):


(a)the
offered rate for deposits in U.S. dollars in the London interbank market for an Interest Period of one month which is shown on
the Reuters “LIBOR01” screen (or any successor thereto) that displays the average
British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the first day of such Interest PeriodBloomberg
Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which U.S. dollar deposits are offered by leading
banks in the London interbank market) as of 11:00 a.m. (London time) on the day which is two (2) Business Days prior
to the first day of such Interest Period for a term of one month; provided, however, that if, for any reason, such a rate is not
published by the British Bankers’ Association or available on the Reuters Screen LIBO PageICE
Benchmark Administration (or any successor thereto) or available on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg
page that displays rates at which U.S. dollar deposits are offered by leading banks in the London interbank market),
Adjusted LIBO Rate shall be equal to a rate per annum equal to the average rate (rounded upwards, if necessary, to the next nearest
1/100 of 1%) at which HSBC determines that U.S. dollars in an amount comparable to the amount of the applicable Advances
are being offered to prime banks at approximately 11:00 a.m. (London time) on the day which is two (2) Business Days prior to
the first day of such Interest Period for a term of one
month for settlement in immediately available funds by leading banks in the London interbank market selected by HSBC; divided
by


(b)a
number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2) Business Days prior to the beginning of such Interest Period (including, without
limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect)
for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) which
are required to be maintained by a member bank of the Federal Reserve System (the “LIBOR-Rate Reserve Percentage”);
such rate (if greater than zero) to be rounded upward to the next whole multiple of one-sixteenth of one percent (0.0625%).


“Advance”
or “Advances” means an advance (or advances) under the Revolving Line.


“Affiliate”
is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls
or is controlled by or is under common control with the Person.


“Agreement”
is defined in the preamble hereof.


“Annual
Financial Statements” is defined in Section 5.2(b).


“Anti-Terrorism
Laws” means any applicable laws relating to terrorism or money laundering, including Executive Order No. 13224, the PATRIOT
Act, the applicable laws comprising or implementing the Bank Secrecy Act, and the applicable laws administered by the United States
Treasury Department’s Office of Foreign Asset Control (as any of the foregoing applicable laws may from time to time be amended,
renewed, extended, or replaced).


“Availability
Amount” is (a) the Revolving Line, minus (b) the outstanding principal balance of any Advances.


“Bank Products”
means the following services or facilities extended to Borrower by Administrative HSBC or its Affiliates: (a) credit cards, (b)
credit card processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions, or (f) cash management, including controlled
disbursement accounts or services.


“Bank
Secrecy Act” means 31 U.S.C. Sections 5311-5330, as the same has been, or shall hereafter be, extended, amended or replaced.


“Base Rate”
shall mean a variable rate of interest per annum equal to the highest of the “prime rate,” “reference rate,”
“base rate” or other similar rate as announced from time to time by HSBC (with the understanding that any such rate
may merely be a reference rate and may not necessarily represent the lowest or best rate actually charged to any customer by HSBC),
such rate to be adjusted automatically, without notice, on the effective date of any change in such rate.









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“Base Rate
Advance” means an Advance that bears interest based at the Base Rate.


“Base Rate
Margin” means one and one quarter of one percent (1.25%).


“Borrower”
and “Borrowers” are defined in the preamble hereof.


“Borrower’s
Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding
Borrower’s assets, liabilities, the Collateral, business operations or financial condition, and all computer programs or
storage or any equipment containing such information.


“Borrowing
Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s Board of Directors and
delivered by such Person to HSBC approving the Loan Documents to which such Person is a party and the transactions contemplated
thereby, together with a certificate executed by its Secretary on behalf of such Person certifying that (a) such Person has
the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that
attached as Exhibit A to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect
authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party,
(c) the name(s) of the Person(s) authorized to execute the Loan Documents on behalf of such Person, together with a sample of the
true signature(s) of such Person(s), and (d) that HSBC may conclusively rely on such certificate unless and until such Person
shall have delivered to HSBC a further certificate canceling or amending such prior certificate.


“Business
Day” is any day that is not a Saturday, Sunday or other day on which banking institutions in the State of New York are
authorized or required by law or other governmental action to close, except that if any determination of a “Business Day”
shall relate to a LIBOR Rate Loan, the term “Business Day” shall also mean a day on which dealings are carried on in
the London interbank market.


“Cash”
means unrestricted cash and Cash Equivalents.


“Cash Equivalents”
means (a) marketable securities issued, or directly, unconditionally and fully guaranteed or insured, by the United States or any
agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof)
having maturities of not more than one (1) year from the date of acquisition by such person, (b) time deposits and certificates
of deposit of HSBC or any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized
under the laws of the United States, any state thereof or the District of Columbia having, capital and surplus aggregating in excess
of $500,000,000 and a rating of "A" (or such other similar equivalent rating) or higher by at least one nationally recognized
statistical rating organization (as defined in Rule 436 under the Securities Act) with maturities of not more than one year from
the date of acquisition by such person, (c) repurchase obligations with a term of not more than 30 days for underlying securities
of the types described in clause (a) above entered into with any person meeting the qualifications specified in clause (b) above,
(d) commercial paper issued by any person incorporated in the United States having one of the two highest ratings obtainable from
S&P or Moody's, in each case maturing not more than one year after the date of acquisition by such person, (e) investments
in money market funds at least 95% of whose assets are comprised of securities of the types described in clauses (a) through (d)
above, and (f) demand deposit accounts maintained in the ordinary course of business with any bank meeting the qualifications specified
in clause (b) above.


“Change in Control”
means any event, transaction, or occurrence as a result of which (a) any “person” (as such term is defined in Sections
3(a)(9) and 13(d)(3) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit
plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of Borrower, representing more than 50% of the combined voting power of Borrower’s then outstanding
securities; or (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted
the Board of Directors of Borrower (together with any new directors whose election by the Board of Directors of Borrower was approved
by a vote of not less than two-thirds of the directors then still in office who either were directions at the beginning of such
period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability
to constitute a majority of the directors then in office.


 









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“Change
in Law” means (a) the adoption of any treaty, law, rule or regulation after the date of this Agreement, (b) any change
in any treaty, law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by HSBC with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this Agreement; provided, however, that notwithstanding
anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines
or directives thereunder or issued in connection therewith as well as Basel III and 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 regulatory authorities shall each be deemed to be a “Change in Law,” regardless of
the date enacted, adopted or issued. For purposes of this definition references to HSBC also shall include any corporation or
bank controlling HSBC. 


“Code”
is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of New York; provided,
that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently
in different Articles or Divisions of the Code, the definition of such term contained in Article 9 shall govern; provided further,
that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, HSBC’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction
other than the State of New York, the term “Code” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority,
or remedies and for purposes of definitions relating to such provisions. 


“Collateral
is any and all properties, rights and assets of Borrower described on Exhibit B.


“Collateral
Account” is any Deposit Account, Securities Account, or Commodity Account.


“Committed
Availability” means, as the date of determination, an amount equal to the Availability Amount.


“Commodity
Account” is any “commodity account” as defined in the Code with such additions to such terms as may hereafter
be made.


“Compliance
Certificate” is that certain certificate in the form attached hereto as Exhibit C.


“Contingent
Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness,
lease, declared dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly
guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest
rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated
to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined
amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any
guarantee or other support arrangement.


“Control
Agreements”. is any control agreement entered into among the depository institution at which Borrower maintains a Deposit
Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and HSBC pursuant to which HSBC obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.


“Copyrights”
are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship
and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.


“Credit
Extension” is any Advance or any other extension of credit by HSBC for Borrower’s benefit.


“Credit
Party” means Borrower and each Guarantor.









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“Default”
shall mean an event which, with the giving of notice or passage of time or both, would constitute an Event of Default.


“Default
Rate” is defined in Section 2.3(c).


“Deposit
Account” has the meaning given to such term in the Security Agreement.


“Designated
Deposit Account” are Borrower’s deposit accounts, account numbers 812011996 and 797047727, maintained with HSBC.


“Dollars,”
“dollars” or use of the sign “$” means only lawful money of the United States and not
any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily
converted into lawful money of the United States.


“Domestic
Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the
District of Columbia.


“Effective
Date” is defined in the preamble hereof.


“Environmental
Laws” means any present or future federal, state or local law, rule, regulation or order relating to pollution, waste,
disposal or the protection of human health or safety, plant life or animal life, natural resources or the environment.


“Equipment”
is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without
limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.


“ERISA”
is the Employee Retirement Income Security Act of 1974, and its regulations.


“Event
of Default” is defined in Section 8.


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


“Executive
Order No. 13224” means the Executive Order No. 13224 on Terrorist Financing effective September 24, 2001, as the same
has been, or shall hereafter be renewed, extended, amended or replaced from time to time.


“Foreign
Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.


“Funding
Date” is any date on which a Loan is made to or for the account of the Borrower, which shall be a Business Day.


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


“Governmental
Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration,
filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority. 


“Governmental
Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative
functions of or pertaining to government, any securities exchange and any self-regulatory organization.


“Guarantor”
is any present or future guarantor of the Obligations. As of the Effective Date there are no Guarantors.


“Guaranty”
means a Guaranty in a form reasonably acceptable to HSBC.









    	 	10	 



     

    


“Hazardous
Material” means all or any of the following: (a) substances that are defined or listed in, or otherwise classified pursuant
to, any Environmental Laws or regulations as “hazardous substances”, “hazardous materials”, “hazardous
wastes”, “toxic substances” or any other formulation intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, or toxicity; (b) oil, petroleum or petroleum
derived substances, natural gas, natural gas liquids or synthetic gas and drilling fluids, produced waters and other wastes associated
with the exploration, development or production of crude oil, natural gas or geothermal resources; (c) any flammable substances
or explosives or any radioactive materials; and (d) asbestos in any form or electrical equipment which contains any oil or dielectric
fluid containing polychlorinated biphenyls.


“HSBC”
is defined in the preamble hereof.


“HSBC Expenses”
are all costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering,
defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency
Proceedings) or otherwise incurred with respect to any Borrower.


“Imprest
Balance” is $0.


“Indebtedness”
is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations
for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital
lease obligations, and (d) Contingent Obligations.


“Insolvency
Proceeding” is any proceeding by or against any Person under the United States bankruptcy Code, or any other bankruptcy
or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or
proceedings seeking dissolution, liquidation, reorganization, arrangement, or other relief.


“Intellectual
Property” means all of Borrower’s right, title, and interest in and to the following: 


(a)                
its Copyrights, Trademarks and Patents; 


(b)                
any and all trade secrets and trade secret rights, including, without limitation, any rights
to unpatented inventions, know-how, operating manuals;


(c)                
any and all source code;


(d)                
any and all design rights;


(e)                
any and all claims for damages by way of past, present and future infringement of any of the
foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual
Property rights identified above;


(f)                 
All licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all
license fees and royalties arising from such use to the extent permitted by such license or rights; 


(g)                
All amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents; and


(h)                
All proceeds and products of the foregoing, including without limitation all payments under
insurance or any indemnity or warranty payable in respect of any of the foregoing.


“Interest
Payment Date” means, (i) with respect to any LIBOR Rate Advance, the last day of each Interest Period applicable to
such LIBOR Rate Loan and, (ii) with respect to Base Rate Advances, the first day of each calendar month (or, if that day of the
calendar month does not fall on a Business Day, then on the first Business Day following such date) and each date a Base Rate
Advance is converted into a LIBOR Rate Loan to the extent of the amount converted to a LIBOR Rate Advance.






    	 	11	 



     

    


“Interest
Period” shall mean, with respect to any LIBOR Rate Advance, the period commencing on the date such Advance is made as,
renewed as or converted into a LIBOR Rate Advance and ending on the date one month thereafter as selected by Borrower pursuant
to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest
Period and ending one month thereafter, as selected by Borrower pursuant to the provisions below. The duration of each Interest
Period for any LIBOR Rate Advance shall be for one month; provided that:


(i)                
whenever
the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period
shall occur on the next succeeding Business Day; provided, that if such extension of time would cause the last day of such
Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the last Business
Day immediately preceding the last day of such Interest Period;


(ii)                
if Borrower
renews any LIBOR Rate Advance for an additional Interest Period, the first day of the new Interest Period shall be the last day
of the preceding Interest Period; however, interest shall only be charged once for such day at the rate applicable to the LIBOR
Rate Advance for the new Interest Period.


“Inventory”
is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter
be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work
in process and finished products, including without limitation such inventory as is temporarily out of any Borrower’s custody
or possession or in transit and including any returned goods and any documents of title representing any of the above.


“LIBOR
Rate Advance” means an Advance that bears interest based at the LIBOR Rate.


“LIBOR
Rate” means for any LIBOR Rate Loan for the then current Interest Period relating thereto the rate per annum (such LIBOR
Rate to be adjusted to the next higher 1/100 of 1%) equal to the Adjusted LIBO Rate.


“LIBOR
Rate Margin” means one and three quarters of one two
percent (1.752.00%).


“LIBOR-Rate
Reserve Percentage” shall have the meaning set forth in the definition of Adjusted LIBO Rate.


“Lien”
is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily
incurred or arising by operation of law or otherwise against any property.


“Lien Waiver
Agreement” shall mean an agreement which is executed in favor of HSBC by a Person who owns or occupies premises at which
any Collateral may be located from time to time and by which such Person shall waive any Lien that such Person may ever have with
respect to any of the Collateral and shall authorize HSBC from time to time to enter upon the premises to inspect or remove the
Collateral from such premises or to use such premises to store or dispose of such Inventory.


“Loan Documents”
are, collectively, this Agreement, the Control Agreements, the Perfection Certificate, the Revolving Note, any other note or notes
or guaranties executed by Borrower or any Guarantor, and any other present or future agreement between Borrower any Guarantor and/or
for the benefit of HSBC in connection with this Agreement, all as amended, restated, or otherwise modified.


“Material
Adverse Change” is (a) a material impairment in the perfection or priority of HSBC’s Lien in the Collateral or
in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise)
of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations or (d) HSBC determines,
based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall
fail to comply with one or more of the financial covenants in Section 6.7 during the next succeeding financial reporting period.


“Notice
of Borrowing” means a notice given by Borrower to HSBC in accordance with Section 3.5(b), substantially in the form
of Exhibit D, with appropriate insertions.


“Notice
of Conversion” means a notice given by Borrower to HSBC in accordance with Section 3.5(g), substantially in the
form of Exhibit E, with appropriate insertions.






    	 	12	 



     

    



“Obligations”
are Borrower’s obligations to pay when due any debts, principal, interest, HSBC Expenses and other amounts Borrower owes
HSBC now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations
relating to Bank Products and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings
begin and debts, liabilities, or obligations of Borrower assigned to HSBC, and to perform Borrower’s duties under the Loan
Documents.


“Operating
Documents” are, for any Person, such Person’s formation documents, as certified with the Secretary of State of
such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such
Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.


“Patents”
means all patents, patent applications and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.


“PATRIOT
Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001, Pub. L. 107-56, signed into law October 26, 2001.


“Payment
Office” shall mean initially 452 Fifth Avenue, New York, New York 10018; thereafter, such other office of HSBC, if any,
which it may designate by notice to Borrower to be the Payment Office.


“Perfection
Certificate” is defined in Section 5.1.


“Permitted
Indebtedness” is:


(a)                
Borrower’s
Indebtedness to HSBC under this Agreement and the other Loan Documents;


(b)                
Indebtedness
existing on the Effective Date and shown on Schedule 7.4;


(c)                
Subordinated
Debt;


(d)                
unsecured
Indebtedness to trade creditors incurred in the ordinary course of business;


(e)                
Indebtedness
incurred as a result of endorsing negotiable instruments received in the ordinary course of business;


(f)                
Indebtedness
secured by Liens permitted under clauses (a)(i) and (c) of the definition of “Permitted Liens” hereunder;


(g)                
Indebtedness
of Borrower to any Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of Borrower (provided that
the primary obligations are not prohibited hereby), and Indebtedness of any Subsidiary to Borrower or any other Subsidiary and
Contingent Obligations of any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary obligations
are not prohibited hereby);


(h)                
other Indebtedness
not otherwise permitted by Section 7.4 not exceeding One Million Dollars ($1,000,000) in the aggregate outstanding at any time;
and


(i)                
extensions,
refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) above, provided
that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower
or its Subsidiary, as the case may be.


“Permitted
Liens” are:


(a)                
(i) Liens
existing on the Effective Date and shown on Schedule 7.5 or (ii) Liens arising under this Agreement and the other Loan Documents;






    	 	13	 



     

    


(b)                
Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being
contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any
such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted
thereunder; 



(c)                
purchase
money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more
than One Million Dollars ($1,000,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if
the Lien is confined to the property and improvements and the proceeds of the Equipment;


(d)                
Liens of
carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so
long as such Liens attach only to Inventory, securing liabilities which are not delinquent or remain payable without penalty or
which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture
or sale of the property subject thereto;


(e)                
Liens to
secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations
incurred in the ordinary course of business (other than Liens imposed by ERISA);


(f)                
Liens incurred
in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness
may not increase;


(g)                
leases or
subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in
the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal
property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another
Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit
granting HSBC a security interest therein;


(h)                
licenses
of Intellectual Property granted to third parties in the ordinary course of business; and


(i)                
Liens arising
from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and
8.7.


“Person”
is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.


“Registered
Organization” is any “registered organization” as defined in the Code with such additions to such term as
may hereafter be made.


“Regulatory
Change” means, with respect to HSBC, any change on or after the date of this Agreement in United States federal, state,
or foreign laws or regulations, including Regulation D, or the adoption or making on or after such date of any interpretations,
directives, or requests applying to a class of lenders including HSBC, of or under any United States federal or state, or any foreign
laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.


“Requirement
of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common),
treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or any of its property is subject.


“Reserve
Requirement” means, for any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental,
or emergency reserves) are required to be maintained during such Interest Period under Regulation D against “Eurocurrency
liabilities” (as such term is used in Regulation D) by member banks of the Federal Reserve System. Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by HSBC by reason of any Regulatory
Change against (a) any category of liabilities which includes deposits by reference to which the LIBOR Rate is to be determined
as provided in the definition of LIBOR or (b) any category of extensions of credit or other assets which include Advances.






    	 	14	 



     

    



“Responsible
Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of Borrower.


“Restricted
License” is any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits
or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or
any other property, or (b) for which a default under or termination of could interfere with the HSBC’s right to sell
any Collateral.


“Revolving
Line” is an Advance or Advances in an aggregate principal amount up to Forty Fifty
Million Dollars ($40,000,000.0050,000,000.00).


“Revolving
Line Maturity Date” is April 5May
6, 2017
2019.


“Revolving
Note” means a Promissory Note in substantially the form of Exhibit A.


“SEC”
shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.


“Securities
Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter
be made.


“Subordinated
Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to HSBC
(pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to HSBC entered into
between HSBC and the other creditor), on terms acceptable to HSBC.


“Subsidiary”
is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of
the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership
or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall
be a reference to a Subsidiary of Borrower.


“Trademarks”
means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.


“Trading
with the Enemy Act” means the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) and any enabling legislation or executive order relating thereto.


“Transfer”
is defined in Section 7.1.


“USA PATRIOT
Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required To Intercept and Obstruct
Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be renewed, extended, amended or replaced from
time to time.


2                    
LOAN AND TERMS OF PAYMENT


2.1               
Promise to Pay. Borrower hereby unconditionally promises to pay HSBC the outstanding principal amount of all Credit
Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.


2.1.1          
Revolving Advances.


(a)                
Availability. Subject to the terms and conditions of this Agreement, HSBC shall make Advances not exceeding the Availability
Amount. Amounts borrowed hereunder may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable
terms and conditions precedent herein.






    	 	15	 



     

    


(b)                
Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount
of all Advances, the accrued and unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately
due and payable.


2.1.2          
[Intentionally Omitted].


2.1.3          
General Provisions Relating to the Advances. Each Advance shall, at Borrower’s option in accordance with the terms
of this Agreement, be either in the form of a Base Rate Advance or a LIBOR Rate Advance; provided, that in no event
shall there be outstanding more than three LIBOR Rate Advances at any time. Borrower shall pay interest accrued on the Advances
at the rates and in the manner set forth in Section 2.3.


2.2               
Overadvances. If, at any time, the outstanding principal amount of all Advances exceeds the Revolving Line, Borrower
shall immediately pay to HSBC in cash such excess.


2.3               
Payment of Interest on the Credit Extensions. 


(a)                
Computation of Interest. Interest on the Credit Extensions and all fees payable hereunder shall be computed on the
basis of a 360-day year and the actual number of days elapsed in the period during which such interest accrues. In computing interest
on any Credit Extension, the date of the making of such Credit Extension shall be included and the date of payment shall be excluded;
provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included
in computing interest on such Credit Extension.


(b)                
Interest; Payment.  Each Advance shall bear interest on the outstanding principal amount thereof from the
date when made, continued or converted until paid in full at a rate per annum equal to (i) for Base Rate Advances, the Base
Rate minus the applicable Base Rate Margin and (ii) for LIBOR Rate Advances, the LIBOR Rate plus the applicable LIBOR Rate
Margin. Pursuant to the terms hereof, interest on each Advance shall be paid in arrears on each Interest Payment Date. Interest
shall also be paid on the date of any prepayment of any Advance pursuant to this Agreement for the portion of any Advance so prepaid
and upon payment (including prepayment) in full thereof. All accrued and unpaid interest on the Advances shall be due and payable
on the Revolving Line Maturity Date.


(c)                
Default Rate. Upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest
at a rate 2% above the rate that would otherwise be applicable thereto (the “Default Rate”). Payment or acceptance
of the increased interest provided in this Section 2.3(c) is not a permitted alternative to timely payment and shall not constitute
a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of HSBC.


(d)                
Debit of Accounts. HSBC may debit any of Borrower’s deposit accounts, including the Designated Deposit Account,
for principal and interest payments or any other amounts Borrower owes HSBC when due. These debits shall not constitute a set-off.


2.4               
Fees. Borrower shall pay to HSBC:


(a)Commitment
Fee. A fully earned, non-refundable commitment fee equal to 0.175% of the Revolving Line, on the Effective Date; and


(a)                
[Intentionally Omitted]. 


(b)                
HSBC Expenses. All HSBC Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, when due.


(c)                
Sweep Fees. Borrower agrees to pay HSBC's fees for the sweep service described in Sections 2.5(b) and 3.5(b) in an
amount equal to $150 per month and authorizes the Bank to deduct the fees from the Designated Deposit Account or any other account
of Borrower maintained at HSBC.






    	 	16	 



     

    



(d)                
Unused Revolving Line Facility Fee. A fee, payable quarterly, in arrears,
on the last day of each calendar quarter (commencing June 30, 2016), in an amount equal to two tenths of one percent (0.20%) per
annum of the average daily unused portion of the Revolving Line, as determined by HSBC. Borrower shall not be entitled to any credit,
rebate or repayment of any Unused Revolving Line Facility Fee previously earned by HSBC pursuant to this Section notwithstanding
any termination of the Agreement or the suspension or termination of HSBC’s obligation to make loans and advances hereunder


2.5               
Payments; Application of Payments.


(a)                
All payments (including prepayments) to be made by Borrower under any Loan Document shall be made in immediately available
funds in Dollars, without setoff or counterclaim, before 1:00 PM (New York time) on the date when due to HSBC at the Payment Office.
Payments of principal and/or interest received after 1:00 PM (New York time) are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business
Day, and additional fees or interest, as applicable, shall continue to accrue until paid; provided, that with respect to
LIBOR Rate Advances, if extending such payment would cause the last day of the applicable Interest Period to be extended into the
next calendar month, then the due date for such payment shall be the immediately preceding Business Day.


(b)If
on any Business Day, there are excess funds in the Designated Deposit Account after covering the presentment amounts made against
the Disbursement Account and maintaining the Imprest Balance, HSBC is authorized, at its discretion, to repay any outstanding
balance of the Advances. Amounts to be applied pursuant to this Section 2.5(b) to the prepayment of Advances shall be applied,
as applicable, first to reduce outstanding Base Rate Advances. If the amount of any prepayment of Advances under this Section 2.5(b)
shall be in excess of the amount of the Base Rate Advances at the time outstanding (an “Excess Amount”), only
the portion of the amount of such prepayment as is equal to the amount of such outstanding Base Rate Advances shall be immediately
prepaid and, at the election of the Borrower, the Excess Amount shall be either (A) deposited in the Designated Deposit Account
and applied to the prepayment of LIBOR Rate Advances on the last day of the then next-expiring Interest Period for the applicable
LIBOR Rate Advances, as the case may be or (B) applied to the immediate repayment of LIBOR Rate Advances (first to the LIBOR
Rate Advances with the next expiring Interest Periods), together with any amounts owing to HSBC under Section 3.5(j).


(c)HSBC
shall apply the whole or any part of collected funds against the Revolving Line and other Obligations or credit such collected
funds to a depository account of Borrower with HSBC (or an account maintained by an Affiliate of HSBC), the order and method of
such application to be in the sole discretion of HSBC. Borrower shall have no right to specify the order or the accounts to which
HSBC shall allocate or apply any payments required to be made by Borrower to HSBC or otherwise received by HSBC under this Agreement
when any such allocation or application is not specified elsewhere in this Agreement.


3                    
CONDITIONS OF LOANS


3.1               
Conditions Precedent to Initial Credit Extension. HSBC’s obligation to make the initial Credit Extension is subject
to the condition precedent that HSBC shall have received, in form and substance satisfactory to HSBC in its sole discretion, such
documents, and completion of such other matters, as HSBC may reasonably deem necessary or appropriate, including, without limitation:


(a)                
duly executed original signatures to the Loan Documents;


(b)                
Borrower’s Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of
the State of Connecticut as of a date no earlier than thirty (30) days prior to the Effective Date;


(c)                
duly executed original signatures to the completed Borrowing Resolutions for Borrower;


(d)                
duly executed original signature to a payoff letter from Wells Fargo Bank, N.A.;


(e)                
evidence that (i) the Liens securing Indebtedness owed by Borrower to Wells Fargo Bank, N.A. will be terminated prior to
or concurrent with the initial Credit Extension and (ii) the documents and/or filings evidencing the perfection of such Liens,
including without limitation any financing statements and/or control agreements, have or will, concurrently with the initial Credit
Extension, be terminated;






    	 	17	 



     

    


(f)                 
certified copies, dated as of a recent date, of bankruptcy, judgment and lien searches, as HSBC shall request, accompanied
by written evidence (including any UCC termination statements) that the Liens and judgments indicated in any such search results
either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;


(g)                
the Perfection Certificate(s) of Borrower, together with the duly executed original signature thereto;


(h)                
a legal opinion of Borrower’s counsel dated as of the Effective Date together with the duly executed original signature
thereto;


(i)                  
the duly executed original signatures to the Pledge Agreement, together with stock certificates and related stock powers;


(j)                 
evidence satisfactory to HSBC that the insurance policies required by Section 6.5 hereof are in full force and effect, together
with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of HSBC;


(k)                
payment of the fees and HSBC Expenses then due as specified in Section 2.4 hereof; and


(l)                  
receipt all documentation and other information required by bank regulatory authorities under applicable “know-your-customer”
and anti-money laundering rules and regulations, including the PATRIOT Act.


3.2               
Conditions Precedent to all Credit Extensions. HSBC’s obligations to make each Credit Extension, including the
initial Credit Extension, is subject to the following conditions precedent:


(a)                
except as otherwise provided in Section 3.5(b), timely receipt of an executed Notice of Borrowing;


(b)                
the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the
date of the Notice of Borrowing and on the Funding Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in
the text thereof; and provided, further that those representations and warranties expressly referring to a specific
date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred
and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on
that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects;
provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly
referring to a specific date shall be true, accurate and complete in all material respects as of such date; and


(c)                
in HSBC’s sole discretion, there has not been a Material Adverse Change.


2.3Post-Closing
Conditions. Within 90 days after the Effective Date, HSBC shall have received, in form and substance satisfactory to HSBC:


3.3               
Reserved.


(a)Stock
certificates and related stock powers evidencing 65% of the shares owned by the Borrower in Acme United Limited and Acme United
(Asia Pacific) Limited.


(b)(x)
A loss payable endorsement to the Borrower’s property insurance policy (or policies), naming Agent as a lender loss payee
under such policy or policies and (y) an additional insured endorsement to the Borrower’s liability insurance policy or policies
(or evidence of inapplicability of same).






    	 	18	 



     

    


3.4               
Covenant to Deliver. Except as otherwise provided in Section 3.3, Borrower
agrees to deliver to HSBC each item required to be delivered to HSBC under this Agreement as a condition precedent to any Credit
Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by HSBC of any such item shall not constitute
a waiver by HSBC of Borrower’s obligation to deliver such item, and the making of any Credit Extension in the absence of
a required item shall be in HSBC’s sole discretion. 



3.5               
Procedures for Borrowing.


(a)                
Subject to Section 3.5(b) and to the prior satisfaction of all other applicable conditions to the making of an Advance set
forth in this Agreement, each Advance shall be made upon Borrower’s irrevocable written notice delivered to HSBC in the form
of a Notice of Borrowing, each executed by a Responsible Officer of Borrower or his or her designee or without instructions if
the Advances are necessary to meet Obligations which have become due. HSBC may rely on any telephone notice given by a person whom
HSBC believes is a Responsible Officer or designee. Borrower will indemnify HSBC for any loss HSBC suffers due to such reliance.


(b)                
Notwithstanding the foregoing, HSBC shall monitor daily balances in the Designated Deposit Account and presentment amounts
for disbursement account number 797046844 maintained at HSBC (the “Disbursement Account”). If HSBC determines
that funds in the Designated Deposit Account are insufficient to pay the amount of the items presented for that day in the Disbursement
Account and to maintain the Imprest Balance in the Designated Deposit Account, Borrower shall be deemed to have made a request
for an Advance to be maintained as a Base Rate Advance as of such date in the amount of such shortfall, such Advance to be deposited
in the Designated Deposit Account or the Disbursement Account, as appropriate. In addition, any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other agreement with HSBC, or with respect to any other Obligation,
which shall become due, shall be deemed a request for an Advance to be maintained as a Base Rate Advance as of the date such payment
is due, in the amount required to pay in full such interest, fee, charge or Obligation under this Agreement, or any other agreement
with HSBC and such request shall be irrevocable.


(c)                
Excluding Advances that have been deemed to have been requested under Section 3.5(b) (which shall not require the delivery
of a Notice of Borrowing), each Notice of Borrowing must be received by HSBC prior to 11:00 AM (New York time), on the requested
Funding Date, specifying: (1) the amount of the Advance which, for LIBOR Rate Advances, shall be in a minimum amount of $500,000
and in integral multiples of $100,000 in excess thereof; (2) the requested Funding Date; (3) if the Advance shall be transferred
to the Designated Deposit Account or to another account set forth in the Notice of Borrowing, and (4) whether the Advance is to
be comprised of LIBOR Rate Advances or Base Rate Advances. Interest Periods for LIBOR Rate Advances shall be for one month. No
LIBOR Rate Advance shall be made available to Borrower during the continuance of a Default or an Event of Default. After giving
effect to each such borrowing, there shall not be outstanding more than three (3) LIBOR Rate Advances, in the aggregate at any
time. HSBC shall provide Borrower with a quote of the actual interest rate available for the LIBOR Rate Advance requested by Borrower,
which quote shall be given on the day such LIBOR Rate Advance is requested and such quote shall be effective from the day provided
by HSBC until one (1) Business Day thereafter.


(d)                
Except as provided in sub-clause (b) of this Section 3.5, the proceeds of all such Advances will then be made available
to Borrower on the Funding Date by HSBC by transfer to the Designated Deposit Account and, subsequently, by wire transfer to such
other account as Borrower may instruct in the Notice of Borrowing.


(e)                
Notwithstanding anything to the contrary contained herein, HSBC shall not be required to purchase United States Dollar deposits
in the London interbank market or other applicable LIBOR Rate market to fund any LIBOR Rate Advances, but the provisions hereof
shall be deemed to apply as if HSBC had purchased such deposits to fund the LIBOR Rate Advances.


(f)                 
Each Interest Period of a LIBOR Rate Advance shall commence on the date such LIBOR Rate Advance is made and shall be for
a period of one-month, provided that the exact length of each Interest Period shall be determined in accordance with the practice
of the interbank market for offshore Dollar deposits and no Interest Period shall end after the Revolving Line Maturity Date.






    	 	19	 



     

    


(g)                
Provided that no Event of Default shall have occurred and be continuing, Borrower, may, on the last Business Day of the
then current Interest Period applicable to any outstanding LIBOR Rate Advance, or on any Business Day with respect to Base Rate
Advances, convert any such advance into an advance of another type in the same aggregate principal amount provided that any conversion
of a LIBOR Rate Advance shall be made only on the last Business Day of the then current Interest Period applicable to such LIBOR
Rate Advance. If Borrower desires to convert an advance, Borrower shall give HSBC a Notice of Conversion by no later than 11:00
AM (New York time) (i) on the day which such conversion is to occur with respect to a conversion from a Base Rate Advance to a
LIBOR Rate Advance, or (ii) on the day which such conversion is to occur with respect to a conversion from a LIBOR Rate Advance
to a Base Rate Advance, specifying, in each case, the date of such conversion and the loans to be converted.



(h)                
At its option and upon written notice given prior to 11:00 AM (New York time) on the date of such prepayment, Borrower may
prepay the LIBOR Rate Advances in whole at any time or in part from time to time, together with amounts which may be owed to HSBC
pursuant to Section 3.5(i)), and with accrued interest on the principal being prepaid to the date of such repayment. Borrower shall
specify the date of prepayment of LIBOR Rate Advances and the amount of such prepayment. In the event that any prepayment of a
LIBOR Rate Advance is required or permitted on a date other than the last Business Day of the then current Interest Period with
respect thereto, Borrower shall indemnify HSBC therefor in accordance with Section 3.5(i).


(i)                  
Borrower shall indemnify HSBC and hold HSBC harmless from and against any and all losses or expenses that HSBC may sustain
or incur as a consequence of any prepayment, conversion of or any default by Borrower in the payment of the principal of or interest
on any LIBOR Rate Advance or failure by Borrower to complete a borrowing of, a prepayment of or conversion of or to a LIBOR Rate
Advance after notice thereof has been given, including, but not limited to, any interest payable by HSBC to lenders of funds obtained
by it in order to make or maintain its LIBOR Rate Advance hereunder. A certificate as to any additional amounts payable pursuant
to the foregoing sentence submitted by HSBC to Borrower shall be conclusive absent manifest error.


(j)                 
Notwithstanding any other provision hereof, if any Requirement of Law, treaty, regulation or directive, or any change therein
or in the interpretation or application thereof, shall make it unlawful for HSBC (for purposes of this Section 3.5(j), “HSBC”
shall include the office or branch where HSBC or any corporation or bank controlling HSBC makes or maintains any LIBOR Rate Advances)
to make or maintain its LIBOR Rate Advances, the obligation of HSBC to make LIBOR Rate Advances hereunder shall forthwith be cancelled
and Borrower shall, if any affected LIBOR Rate Advances are then outstanding, promptly upon request from HSBC, either pay all such
affected LIBOR Rate Advances or convert such affected LIBOR Rate Advances into Base Rate Advances. If any such payment or conversion
of any LIBOR Rate Advances is made on a day that is not the last day of the Interest Period applicable to such LIBOR Rate Advances,
Borrower shall pay HSBC, upon HSBC’s request, such amount or amounts as may be necessary to compensate HSBC for any loss
or expense sustained or incurred by HSBC in respect of such LIBOR Rate Advance as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by HSBC to lenders of funds obtained by HSBC in order to make or maintain
such LIBOR Rate Advance. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by HSBC
to Borrower shall be conclusive absent manifest error.


3.6               
Additional Provisions Governing LIBOR Rate Advances. Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to LIBOR Rate Advances as to the matters covered:


(a)                
Increased Costs. In the event that any applicable law, treaty or governmental regulation, or any change therein Change
in Law or in the interpretation or application thereof, or compliance by HSBC (for purposes of this Section 3.6(a),
references to HSBC shall also include any corporation or bank controlling HSBC) and the office or branch where HSBC makes or maintains
any LIBOR Rate Advances with any request or directive (whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:


(i)                
subject
HSBC to any tax of any kind whatsoever with respect to this Agreement or any other Loan Document or change the basis of taxation
of payments to HSBC of principal, fees, interest or any other amount payable hereunder or under any other Loan Documents (except
for changes in the rate of tax on the overall net income of HSBC by the jurisdiction in which it maintains its principal office);






    	 	20	 



     

    



(ii)                
impose,
modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or deposits in
or for the account of, advances or loans by, or other credit extended by, any office of HSBC, including (without limitation) pursuant
to Regulation D of the Board of Governors of the Federal Reserve System; or


(iii)                
impose on HSBC or the London interbank LIBOR Rate market any other condition with respect to this Agreement or any other
Loan Document; 



and the result of any of the foregoing
is to increase the cost to HSBC of making, renewing or maintaining its Advances hereunder by an amount that HSBC reasonably deems
to be material or to reduce the amount of any payment (whether of principal, interest or otherwise) in respect of any of the Advances
by an amount that HSBC reasonably deems to be material, then, in any case Borrower shall promptly pay HSBC, upon its demand, such
additional amount as will compensate HSBC for such additional cost or such reduction, as the case may be, provided that the foregoing
shall not apply to increased costs which are reflected in the Adjusted LIBO Rate. HSBC shall certify the amount of such additional
cost or reduced amount to Borrower, and such certification shall be conclusive absent manifest error.


(b)                
Basis For Determining Interest Rate Inadequate or Unfair. In the event that HSBC shall have determined that:


(i)                
reasonable
means do not exist for ascertaining the Adjusted LIBO Rate applicable pursuant to Section 3.5 for any Interest Period; or


(ii)                
Dollar
deposits in the relevant amount and for the relevant maturity are not available in the London interbank LIBOR Rate market, with
respect to an outstanding LIBOR Rate Advance, a proposed LIBOR Rate Advance, or a proposed conversion of a Base Rate Advance into
a LIBOR Rate Advance,


then HSBC shall give Borrower prompt
written, telephonic or telegraphic notice of such determination. If such notice is given, (i) any such requested LIBOR Rate Advance
shall be made as a Base Rate Advance, unless Borrower shall notify HSBC no later than 10:00 AM (New York time) two (2) Business
Days prior to the date of such proposed borrowing, that its request for such borrowing shall be cancelled or made as an unaffected
type of LIBOR Rate Advance, (ii) any Base Rate Advance or LIBOR Rate Advance which was to have been converted to an affected type
of LIBOR Rate Advance shall be continued as or converted into a Base Rate Advance, or, if Borrower shall notify HSBC, no later
than 10:00 AM (New York time) two (2) Business Days prior to the proposed conversion, shall be maintained as an unaffected type
of LIBOR Rate Advance, and (iii) any outstanding affected LIBOR Rate Advances shall be converted into a Base Rate Advance, or,
if Borrower shall notify HSBC, no later than 10:00 AM (New York time) two (2) Business Days prior to the last Business Day of the
then current Interest Period applicable to such affected LIBOR Rate Advance, shall be converted into an unaffected type of LIBOR
Rate Advance, on the last Business Day of the then current Interest Period for such affected LIBOR Rate Advance. Until such notice
has been withdrawn, HSBC shall have no obligation to make an affected type of LIBOR Rate Advance or maintain outstanding affected
LIBOR Rate Advances and Borrower shall have no right to convert a Base Rate Advance or an unaffected type of LIBOR Rate Advance
into an affected type of LIBOR Rate Advance.


(c)                
Capital Adequacy.






    	 	21	 



     

    



(i)                 In
the event that HSBC shall have determined that any applicable law, rule, regulation or guideline regarding capital
adequacy or liquidity, or any change
thereinChange in Law, or any change in
the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by HSBC (for purposes of this Section 3.6(c), references to HSBC
shall also include any corporation or bank controlling HSBC) and the office or branch where HSBC makes or maintains any LIBOR
Rate Advances with any request or directive regarding capital adequacy or liquidity (whether or not having
the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate
of return on HSBC’s capital as a consequence of its obligations hereunder to a level below that which HSBC could have
achieved but for such adoption, change or compliance (taking into consideration HSBC’s policies with respect to capital
adequacy) by an amount reasonably deemed by HSBC to be material, then, from time to time, Borrower shall pay upon demand to
HSBC such additional amount or amounts as will compensate HSBC for such reduction. In determining such amount or amounts,
HSBC may use any reasonable averaging or attribution methods. The protection of this Section 3.6(c) shall be available to
HSBC regardless of any possible contention of invalidity or inapplicability with respect to the applicable law, regulation or
condition.


(ii)                
A certificate of HSBC setting forth such amount or amounts as shall be necessary to compensate it with respect to Section
3.6(c)(i) when delivered to Borrower shall be conclusive absent manifest error. 



4                    
CREATION OF SECURITY INTEREST


4.1               
Grant of Security Interest. Borrower hereby grants to HSBC, to secure the payment and performance in full of all
of the Obligations, a continuing security interest in and to, and pledges to HSBC, all of the Collateral, wherever located, whether
now owned or existing or hereafter acquired or arising, and all proceeds and products thereof.


4.2               
Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein
is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted
Liens that may have superior priority to HSBC’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify HSBC in a writing signed by Borrower of the general details thereof and grant to HSBC in such writing
a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to HSBC.


If this Agreement
is terminated, HSBC’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations)
are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as HSBC’s obligation to make
Credit Extensions has terminated, HSBC shall, at Borrower’s sole cost and expense, release its Liens in the Collateral and
all rights therein shall revert to Borrower.


4.3               
Authorization to File Financing Statements. Borrower hereby authorizes HSBC to file financing statements, without notice
to Borrower, with all appropriate jurisdictions to perfect or protect HSBC’s interest or rights hereunder, including a notice
that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of HSBC under
the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect,
or as being of an equal or lesser scope, or with greater detail, all in HSBC’s discretion.


5                    
REPRESENTATIONS AND WARRANTIES


Borrower represents
and warrants as follows:






    	 	22	 



     

    


5.1               
Due Organization, Authorization; Power and Authority. Borrower is duly existing and in good standing as a Registered
Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction
in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do
so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement,
Borrower has delivered to HSBC a completed certificate signed by Borrower, entitled “Perfection Certificate”.
Borrower represents and warrants to HSBC that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate
and on the signature page hereof; (b) Borrower is an organization of the type and is organized in the jurisdiction set forth
in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place
of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its
chief executive office); (e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction
of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information
set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being
understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective
Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization
but later becomes one, Borrower shall promptly notify HSBC of such occurrence and provide HSBC with Borrower’s organizational
identification number. 



The execution,
delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict
with any of Borrower’s Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any
material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or
assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental
Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full
force and effect, or (v) constitute an event of default under any material agreement by which Borrower is bound. Borrower
is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrower’s business. 



5.2               
Collateral. Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which
it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts
other than the deposit accounts with HSBC, the deposit accounts, if any, described in the Perfection Certificate delivered to HSBC
in connection herewith, or of which Borrower has given HSBC notice and taken such actions as are necessary to give HSBC a perfected
security interest therein.


The Collateral is
not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate.
None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate
or as permitted pursuant to Section 7.2.


Borrower is not
a party to, nor is it bound by, any Restricted License.


5.3               
Environmental Compliance. Borrower and its Subsidiaries conduct in the ordinary course of business a review of the effect
of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law
on their respective businesses, operations and properties, and as a result thereof the Borrower has reasonably concluded that such
Environmental Laws and claims are not reasonably likely to result in a Material Adverse Change.


5.4               
Litigation. There are no actions, or proceedings to the knowledge of the Borrower, threatened in writing, at law, in
equity, in arbitration or before any Governmental Authority, by or against the Borrower or any of its Subsidiaries or against any
of their properties or revenues, and not otherwise disclosed in the Borrower’s public filings with the SEC, that (a) purport
to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either
individually or in the aggregate, if determined adversely, are reasonably likely to result in a Material Adverse Change.






    	 	23	 



     

    



5.5               
Financial Statements; Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries
delivered to HSBC fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations. There has not been any material adverse change in Borrower’s consolidated financial condition
since the date of the most recent financial statements submitted to HSBC.


5.6               
Solvency. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the
fair value of its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they mature.


5.7               
Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by
an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its
important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).
Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company”
of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower
has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a material adverse
effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower
or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating,
or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all notices to, all Government Authorities that are necessary
to continue their respective businesses as currently conducted.


5.8               
Subsidiaries; Investments. Borrower does not have any Subsidiaries or own any stock, partnership interest or other equity
securities except as set forth in item 18 of the Perfection Certificate.


5.9               
Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and
Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower.
Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the
taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies HSBC in writing of the commencement
of, and any material development in, the proceedings, (c) takes proper reserves, and (d) posts bonds or takes any other steps required
to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by Borrower. Borrower has paid all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn
from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event
with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability
to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.






    	 	24	 



     

    


5.10           
Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely for commercial purposes as follows:
for general corporate purposes, including working capital needs of the Borrower and its Subsidiaries (including repayment of such
Subsidiaries’ debts), capital expenditures, acquisitions, and for stock repurchases and dividend payments by the Borrower,
in each case, to the extent permitted by this Agreement.


4.11Anti-Terrorism;
Trading with the Enemy. Neither Borrower nor any Subsidiary of Borrower is in violation of any Anti-Terrorism Law or engages
in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in any Anti-Terrorism Law. Neither Borrower nor any Subsidiary of Borrower, or, to Borrowers’
knowledge, their respective agents acting or benefiting in any capacity in connection with the Advances or other transactions hereunder,
is any of the following (each a “Blocked Person”): (i)a Person that is listed in the annex
to, or is otherwise subject to the provisions of, the Executive Order No. 13224; a Person owned or controlled by, or acting for
or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No.
13224; a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism
Law; a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive
Order No. 13224; a Person or entity that is named as a “specially designated national” on the most current list published
by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement
official publication of such list; or a Person or entity who is affiliated or associated with a Person or entity listed above.
Neither any Borrower or, to the knowledge of any Borrower, any of its agents acting in any capacity in connection with the Advances
or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or
services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order No. 13224. Neither Borrower has engaged, nor does it
intend to engage, in any business or activity prohibited by the Trading with the Enemy Act.


5.11           
Sanctions; Anti-Bribery.


5.11.1      
None of the Borrower, any of its Subsidiaries, any director or officer,
or any employee, agent, or Affiliate, of the Borrower or any of its respective Subsidiaries is an individual or entity (“Person”)
that is, or is owned or controlled by Persons that are, (i) the subject of any sanctions administered or enforced by the US Department
of the Treasury’s Office of Foreign Assets Control, the US Department of State, the United Nations Security Council, the
European Union, Her Majesty’s Treasury, the Hong Kong Monetary Authority or other relevant sanctions authority (collectively,
“Sanctions”), or (ii) located, organized or resident in a country or territory that is, or whose government is, the
subject of Sanctions, including, without limitation, currently, Cuba, the Crimea region of Ukraine, Iran, North Korea, Sudan and
Syria. 


5.11.2      
None of the Borrower or any of its Subsidiaries, nor to the knowledge
of the Borrower, any director, officer, agent, employee, Affiliate or other person acting on behalf of the Borrower or any of its
respective Subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons
of any applicable anti-bribery law, including but not limited to, the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”).
Furthermore, the Borrower and, to the knowledge of the Borrower, its Affiliates have conducted their businesses in compliance with
the FCPA and similar laws, rules or regulations and have instituted and maintain policies and procedures designed to ensure, and
which are reasonably expected to continue to ensure, continued compliance therewith.


5.12           
Full Disclosure. No written representation, warranty or other statement of Borrower in any certificate or written statement
given to HSBC, as of the date such representation, warranty, or other statement was made, taken together with all such written
certificates and written statements given to HSBC, contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by HSBC that
the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts
and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or
forecasted results).






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6                    
AFFIRMATIVE COVENANTS


Borrower shall do
all of the following:


6.1               
Government Compliance. Maintain its and all its Subsidiaries’ legal existence and good standing in their respective
jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably
be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material
adverse effect on Borrower’s business.


6.2               
Financial Statements, Reports, Certificates. Deliver to HSBC:


(a)                
Intentionally Omitted;


(b)                
Quarterly Financial Statements. As soon as available, but no later than forty-five (45) days after the last day of
each fiscal, a company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations
for such fiscal quarter certified by a Responsible Officer and in a form acceptable to HSBC (the “Quarterly Financial
Statements”);


(c)                
Quarterly Compliance Certificate. Within forty-five (45) days after the last day of each fiscal quarter and together
with the Quarterly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that
as of the end of such fiscal quarter, Borrower was in full compliance with all of the terms and conditions of this Agreement, and
setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information
as HSBC shall reasonably request;


(d)                
Annual Audited Financial Statements. As soon as available, but no later than ninety (90) days after the last day
of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together
with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to HSBC
in its reasonable discretion;


(e)                
Other Statements. Within five (5) days of delivery, copies of all statements, reports and notices made available
to Borrower’s security holders or to any holders of Subordinated Debt;


(f)                 
SEC Filings. Within five (5) days of filing, copies of all periodic and other reports, proxy statements and other
materials filed by Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with
any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant
to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered
electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents,
or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address. As to any information
contained in the materials furnished pursuant to this clause (f), Borrower shall not be required separately to furnish such information
under clauses (b), (c) and (e), but the foregoing shall not be in derogation of the obligation of Borrower to furnish the information
and materials described in such clauses (b), (c) and (e) at the times specified therein.


(g)                
Legal Action Notice. A prompt report of any legal actions pending or threatened in writing against Borrower or any
of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries that could reasonably be expected
to cause a Material Adverse Change with respect to Borrower or any of its Subsidiaries;


(h)                
[Intentionally Omitted]; and


(i)                  
Other Financial Information. Budgets, sales projections, operating plans and other financial information reasonably
requested by HSBC.






    	 	26	 



     

    


6.3               
Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances
between Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date.


6.4               
Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports
and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to
the terms of Section 5.9 hereof, and shall deliver to HSBC, on demand, appropriate certificates attesting to such payments, and
pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their
terms.


In
the event any payments are received by HSBC from Borrower pursuant to this Agreement, such payments will be made subject to applicable
withholding for any taxes, levies, fees, deductions, withholding, restrictions or conditions of any nature whatsoever. Notwithstanding
the foregoing, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower
to make any such deduction or withholding from any such payment or other sum payment hereunder to HSBC, the amount due from Borrower
with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the
making of such required deduction or withholding, HSBC receives a net sum equal to the sum which it would have received had no
deductions or withholding been required, and Borrower shall pay the full amount deducted or withheld to the relevant Governmental
Authority. Borrower will, upon request, furnish HSBC with proof satisfactory to HSBC indicating that Borrower has made such withholding
payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment
is contested in good faith by appropriate proceedings and as to which payment in full is bonded or reserved against by Borrower.
The agreements and obligations of Borrower contained in this provision shall survive the termination of this Agreement.


6.5               
Insurance. Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s
industry and location and as HSBC may reasonably request. Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to HSBC. All property policies shall have a lender’s loss payable endorsement showing HSBC as the sole
lender loss payee and waive subrogation against HSBC. All liability policies shall show, or have endorsements showing, HSBC as
an additional insured. All policies (or the loss payable and additional insured endorsements) shall provide that the insurer shall
give HSBC at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At HSBC’s request,
Borrower shall deliver certified copies of policies and evidence of all premium payments. Except as otherwise provided in this
Section 6.5, proceeds payable under any policy shall, at HSBC’s option, be payable to HSBC on account of the Obligations.
Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option
of (i) applying the proceeds of any casualty policy up to Five Hundred Thousand Dollars ($500,000) for all losses under all casualty
policies in any one year, as it determines in its discretion and (ii) applying the proceeds of any casualty policy in excess of
Five Hundred Thousand Dollars ($500,000) for all losses under all casualty policies in any one year, toward the replacement or
repair of destroyed or damaged property; provided that any such replaced or repaired property shall be deemed Collateral
in which HSBC has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an
Event of Default, all proceeds payable under such casualty policy shall, at the option of HSBC, be payable to HSBC on account of
the Obligations. If Borrower fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish
any required proof of payment to third persons and HSBC, HSBC may make all or part of such payment or obtain such insurance policies
required in this Section 6.5, and take any action under the policies HSBC deems prudent.


6.6               
Operating Accounts. Maintain its primary depository account and cash management account with HSBC.  


6.7               
Financial Covenants. Maintain as of the last day of each quarter, unless otherwise noted, on a consolidated basis with
respect to Borrower and its Subsidiaries


(a)                
Debt/Net Worth Ratio. A ratio of Total Liabilities less Subordinated Debt to Tangible Net Worth of not more
than the ratio set forth below for each quarter set forth below:






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        Quarterly Period

        Ending on

         
	Debt/Net Worth Ratio
	March 31st of each year	2.0 to 1.0
	June 30th of each year	2.5 to 1.0
	September 30th of each year	2.5 to 1.0
	December 31st of each year	2.0 to 1.0


 


(b)                
Tangible Net Worth. A Tangible Net Worth of at least $20,000,000.


(c)                
Fixed Charge Coverage Ratio. Measured as of the end of each fiscal quarter for the four (4) fiscal quarter period
then-ended, a Fixed Charge Coverage Ratio of at least 1.1 to 1.0.


(d)                
No Net Loss. Measured as of the end of each fiscal year for the four (4) fiscal
quarter period then-ended, Net Income of greater than $0.


(e)                
(d)Definitions. As used in this Section 6.7 or elsewhere
in this Agreement, the following capitalized terms have the following meanings:


“EBITDA”
shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation
expense and amortization expense, plus (d) income tax expense.


“Fixed
Charge Coverage Ratio” means, for any period, the ratio of (x) EBITDA minus capital expenditures (net of amounts
financed by third parties, and excluding up to $4,100,000 of capital expenditures related to the acquisition and refurbishment
of the real property located in Rocky Mount, North Carolina so long as such capital expenditures are incurred on or prior to September
30, 2014Unfinanced Capital Expenditures)
to (y) the sum of (i) Interest Expense, plus (ii) income tax expense plus (iii) all dividends and distributions
actually paid in such period, plus (iv) all scheduled payments of principal with respect to Indebtedness.
(excluding, for the avoidance of doubt, repayments of principal of the Advances).


“Interest
Expense” means for any period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the
relevant period ending on such date, including, in any event, interest expense with respect to any Loan and other Indebtedness
of Borrower and its Subsidiaries, including, without limitation or duplication, all commissions, discounts, or related amortization
and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated
with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including
leases of all types).


“Net Income”
means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination,
the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting
period.


“Tangible
Net Worth” is, on any date, the consolidated total assets of Borrower and its Subsidiaries, including any tax receivables,
minus (a) any amounts attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense,
Patents, Trademarks, Copyrights, and research and development expenses except prepaid expenses, (iii) notes, accounts receivable
and other obligations owing to Borrower from its officers or other Affiliates, and (iv) reserves not already deducted from assets,
minus (b) Total Liabilities plus Subordinated Debt.


“Total
Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated
balance sheet.


“Unfinanced
Capital Expenditures” means all capital expenditures of the Borrower other than those made utilizing financing provided
by the applicable seller or third party lenders. For the avoidance of doubt, capital expenditures made by the Borrower utilizing
Advances shall be deemed Unfinanced Capital Expenditures. 






    	 	28	 



     

    

6.8               
[Intentionally Omitted].






6.9               
Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available
to HSBC, without expense to HSBC, Borrower and its officers, employees and agents and Borrower's books and records, to the extent
that HSBC may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against
HSBC with respect to any Collateral or relating to Borrower.


6.10           
Access to Collateral; Books and Records. Allow HSBC, or its agents, at reasonable times, on one (1) Business Day’s
notice (provided no notice is required if an Event of Default has occurred and is continuing), to inspect the Collateral and audit
and copy Borrower’s Books. The foregoing inspections and audits shall be at Borrower’s expense.


6.11           
Formation or Acquisition of Subsidiaries. At the time that Borrower forms any direct or indirect Subsidiary or acquires
any direct or indirect Subsidiary after the Effective Date, Borrower shall (a) in the case of a Domestic Subsidiary cause such
new Domestic Subsidiary to provide to HSBC either a joinder to the Loan Agreement to cause such Domestic Subsidiary to become a
co-borrower hereunder or an executed Guaranty to cause such Domestic Subsidiary to become a Guarantor hereunder, together with
such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to HSBC (including being
sufficient to grant HSBC a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired
Domestic Subsidiary), (b) in case of a direct Subsidiary, provide to HSBC appropriate certificates and powers and financing statements,
pledging all of the direct or beneficial ownership interest in such new Subsidiary (to the extent permitted), in form and substance
satisfactory to HSBC, and (c) provide to HSBC all other documentation in form and substance satisfactory to HSBC, including
one or more opinions of counsel satisfactory to HSBC, which in its opinion is appropriate with respect to the execution and delivery
of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section
6.11 shall be a Loan Document.


6.12           
Environmental Compliance. Comply in all respects with all Environmental Laws, except if such failure to comply could
not reasonably be expected to result in an Material Adverse Change. Not suffer, cause or permit any disposal of Hazardous Materials
at any property owned, leased or operated by Borrower or any Subsidiary except in accordance with applicable Environmental Laws.
Promptly notify Lender in the event of the disposal of any Hazardous Materials in violation of any Environmental Law at any property
owned, leased or operated by Borrower or any of its Subsidiaries, or in the event of any release, or threatened release, of a Hazardous
Materials in violation of any Environmental Law from any such property, in each case, if such violation could reasonably be expected
to result in an Material Adverse Change. Deliver promptly to Lender copies of any documents received from the United States Environmental
Protection Agency or any state, provincial, county or municipal environmental or health agency concerning a violation or alleged
violation by Borrower or any Subsidiary of any Environmental Law that could reasonably be expected to result in an Material Adverse
Change.


6.13           
Further Assurances. Execute any further instruments and take further action as HSBC reasonably requests to perfect or
continue HSBC’s Lien in the Collateral or to effect the purposes of this Agreement. Deliver to HSBC, within five (5)
days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be
expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its
Subsidiaries.


7                    
NEGATIVE COVENANTS


Borrower shall not
do any of the following without HSBC’s prior written consent:


7.1               
Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory
in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens and investments
permitted by Section 7.7(b); and (d) other sales in an aggregate not to exceed One Million Dollars ($1,000,000) in any fiscal year.


7.2               
Changes in Business, Control, or Business Locations.


(a)           Engage in or
permit any of its Subsidiaries to engage in any business that is materially different from the businesses currently engaged in
by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) permit
or suffer any Change in Control.






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Borrower shall not,
without at least thirty (30) days prior written notice to HSBC: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than One Million Dollars ($1,000,000) in Borrower’s assets or
property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of One Million Dollars ($1,000,000)
to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change
its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of organization.


7.3               
Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other
Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of
another Person except where (I) if the total consideration including cash and the value of any non-cash consideration, for all
such transactions does not in the aggregate exceed Two Million Dollars ($2,000,000) in any fiscal year of Borrower (a) no Event
of Default has occurred and is continuing or would exist after giving effect to the transactions; (b) Borrower is the surviving
legal entity; and (c) immediately after giving effect to such acquisition Borrower’s unrestricted cash and Cash Equivalents
plus the Committed Availability is at least Two Million Five Hundred Thousand Dollars ($2,500,000); or (II) if the total consideration
including cash and the value of any non-cash consideration, for all such transactions in the aggregate exceeds Two Million Dollars
($2,000,000) in any fiscal year of Borrower (a) HSBC shall have consented to such transaction in its sole and absolute discretion;
(b) no Event of Default has occurred and is continuing or would exist after giving effect to the transactions; (c) Borrower is
the surviving legal entity; (d) immediately after giving effect to such acquisition Borrower’s unrestricted cash and Cash
Equivalents plus the Committed Availability is at least Two Million Five Hundred Thousand Dollars ($2,500,000); and (e) no later
than thirty (30) days prior to the closing of such acquisition, Borrower has delivered to HSBC a Compliance Certificate demonstrating
that after giving effect to such acquisition Borrower will be in compliance with all covenants on a pro forma basis after giving
effect to such acquisition. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.


7.4               
Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than
Permitted Indebtedness; provided that prior to incurring any Subordinated Debt after the Effective Date, Borrower shall
deliver to HSBC a Compliance Certificate demonstrating that after giving effect to such incurrence of Subordinated Debt, Borrower
will be in compliance with all covenants in this Agreement on a pro forma basis after giving effect to such incurrence.


7.5               
Encumbrance. Create, incur, allow, or suffer any Lien on any of the Collateral other than Permitted Liens.


7.6               
Maintenance of Collateral Accounts. Maintain any Collateral Account unless HSBC has a first priority perfected security
interest in such Collateral Account pursuant to a Control Agreement.


7.7               
Distributions; Investments.


(a)               Pay
any dividends or make any distribution or payment or redeem, retire or purchase any capital stock; provided that Borrower
may pay dividends or make any distribution or payment or redeem, retire or purchase any capital stock, so long as after giving
effect to such repurchase no Default or Event of Default has occurred and is continuing and Borrower will be in compliance with
all covenants on a pro forma basis after giving effect to such repurchase; provided further that Borrower may only
repurchase up to $2,000,000 of its common stock in any fiscal year, and only so long as after giving effect to such repurchase
no Default or Event of Default has occurred and is continuing and Borrower will be in compliance with all covenants on a pro forma
basis after giving effect to such repurchase; or


(b)               directly
or indirectly make any investments, loans or advances, excepting investments, loans and advances to any Subsidiary, suppliers or
vendors in the ordinary course of business, and ordinary course of business travel and expense advances, to any Person, or permit
any of its Subsidiaries to do so, so long as after giving effect thereto no Default or Event of Default has occurred and is continuing.






    	 	30	 



     

    

7.8               
Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any
Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable
terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated
Person.





7.9               
Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination,
intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations
owed to HSBC.


6.10Anti-Terrorism;
Trading with the Enemy. Borrower shall not nor shall it permit any Subsidiary or agent to: (a) conduct any business or engage
in any transaction or dealing with any Blocked Person, including the making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person; (b) deal in, or otherwise engage in any transaction relating to, any property or interests
in property blocked pursuant to the Executive Order No. 13224; (c) engage in or conspire to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in the Executive
Order No. 13224, the PATRIOT Act or any other Anti-Terrorism Law or (d) engage in any business or activity in violation of the
Trading with the Enemy Act. Borrower shall deliver to HSBC any certification or other evidence requested from time to time by HSBC
in its sole discretion, confirming its compliance with this Section.


7.10           
Sanctions; Anti-Bribery. 


7.10.1      
Borrower will not, directly or indirectly, use the proceeds of the Advances,
or lend, contribute or otherwise make available such proceeds to any Subsidiary, joint venture partner or other Person, (i) to
fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or
whose government is, the subject of Sanctions or (ii) in any other manner that would result in a violation of Sanctions by any
Person (including any Person participating in the Advances, whether as underwriter, advisor, investor or otherwise). 


7.10.2      
No part of the proceeds of the Advances will be used, directly or indirectly,
for any payments that could constitute a violation of any applicable anti-bribery law. 


7.11           
Compliance. Become an “investment company” or a company controlled by an “investment company”,
under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase
or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds
of any Credit Extension for
that purposeto purchase or carry margin stock or to
extend credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System)
(as defined in Regulation U of the Board of Governors of the Federal Reserve System); fail to meet the minimum funding
requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with
the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have
a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary
to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in
any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental
agency.


8                    
EVENTS OF DEFAULT


Any one of the following
shall constitute an event of default (an “Event of Default”) under this Agreement:


8.1               
Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension on its
due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which
three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period,
the failure to make or pay any payment specified under clause (a) or (b) hereunder is not an Event of Default (but no Credit Extension
will be made during the cure period);


8.2               
Covenant Default.


(a) Borrower fails
or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.10, or violates any covenant in Section 7; or






    	 	31	 



     

    


(b) Borrower fails
or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement
or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof. Cure
periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth
in clause (a) above;


8.3               
Material Adverse Change. A Material Adverse Change occurs;


8.4               
Attachment; Levy; Restraint on Business.


(a) (i) The service
of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower
(including a Subsidiary) on deposit or otherwise maintained with HSBC or any HSBC Affiliate, or (ii) a notice of lien or levy is
filed against any of Borrower’s assets by any government agency, and the same under subclauses (i) and (ii) hereof are not,
within sixty (60) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any sixty (60) day cure period; or


(b) (i) any material
portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any
court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;


8.5               
Insolvency (a) Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent;
(b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within thirty (30) days (but no Credit Extensions shall be made while of any of the conditions described in clause (a) exist and/or
until any Insolvency Proceeding is dismissed);


8.6               
Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or
parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity
of any Indebtedness in an amount individually or in the aggregate in excess of One Million Dollars ($1,000,000); or (b) any default
by Borrower or Guarantor, the result of which could have a material adverse effect on Borrower’s or any Guarantor’s
business: provided, however, that the Event of Default under this Section 8.6 caused by the occurrence of a default under such
other agreement shall be cured or waived for purposes of this Agreement upon HSBC receiving written notice from the party asserting
such default of such cure or waiver of the default under such other agreement, if at the time of such cure or waiver under such
other agreement (x) HSBC has not declared an Event of Default under this Agreement and/or exercised any rights with respect thereto;
(y) any such cure or waiver does not result in an Event of Default under any other provision of this Agreement or any Loan Document;
and (z) in connection with any such cure or waiver under such other agreement, the terms of any agreement with such third
party are not modified or amended in any manner which could in the good faith judgment of HSBC be materially less advantageous
to Borrower or any Guarantor;


8.7               
Judgments. One or more final judgments, orders, or decrees for the payment of money in an amount, individually or in
the aggregate, of at least One Million Dollars ($1,000,000) (not covered by independent third-party insurance as to which liability
has been accepted by such insurance carrier) shall be rendered against Borrower and the same are not, within sixty (60) days after
the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior
to the expiration of any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of
such judgment, order, or decree);


8.8               
Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement
now or later in this Agreement, any Loan Document or in any writing delivered to HSBC or to induce HSBC to enter this Agreement
or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;


8.9               
Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked
or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner
the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall
for any reason be subordinated or shall not have the priority contemplated by this Agreement;






    	 	32	 



     

    



8.10           
Guaranty. (a) Any guaranty of any Obligations to HSBC terminates or ceases for any reason to be in full force and effect;
(b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations to HSBC; (c) any circumstance
described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, (d) the liquidation, winding up, or
termination of existence of any Guarantor; or (e)  (i) a material impairment in the perfection or priority of HSBC’s
Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) a material adverse change in the general
affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs
with respect to any Guarantor; or


8.11           
HSBC Group. Borrower or any of its Subsidiaries defaults under any agreement (other than any Loan Document) with HSBC
or any of its Affiliates.


8.12           
Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in
an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority
that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result
in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission,
suspension, modification or non-renewal (i) has, or could reasonably be expected to have, a Material Adverse Change, or (ii) adversely
affects the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction
and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or
legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.


9                    
HSBC’S RIGHTS AND REMEDIES


9.1               
Rights and Remedies. While an Event of Default occurs and continues HSBC may, without notice or demand, do any or all
of the following:


(a)                
declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations
are immediately due and payable without any action by HSBC);


(b)                
stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement
between Borrower and HSBC;


(c)                
[Intentionally Omitted];


(d)                
settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that HSBC considers
advisable, notify any Person owing Borrower money of HSBC’s security interest in such funds, and verify the amount of such
account;


(e)                
make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest
in the Collateral. Borrower shall assemble the Collateral if HSBC requests and make it available as HSBC designates. HSBC may enter
premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants
HSBC a license to enter and occupy any of its premises, without charge, to exercise any of HSBC’s rights or remedies;


(f)                 
apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by HSBC owing to or
for the credit or the account of Borrower;


(g)                
ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral.
HSBC is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents,
Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in
connection with HSBC’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise
agreements inure to HSBC’s benefit;






    	 	33	 



     

    


(h)                
place a “hold” on any account maintained with HSBC and/or deliver a notice of exclusive control, any entitlement
order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral; 



(i)                  
demand and receive possession of Borrower’s Books; and


(j)                 
exercise all rights and remedies available to HSBC under the Loan Documents or at law or equity, including all remedies
provided under the Code (including disposal of the Collateral pursuant to the terms thereof).


9.2               
Power of Attorney. Borrower hereby irrevocably appoints HSBC as its lawful attorney-in-fact, exercisable upon the occurrence
and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment
or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors;
(c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms HSBC determines
reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise
take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of HSBC or a third party as the
Code permits. Borrower hereby appoints HSBC as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary
to perfect or continue the perfection of HSBC’s security interest in the Collateral regardless of whether an Event of Default
has occurred until all Obligations have been satisfied in full and HSBC is under no further obligation to make Credit Extensions
hereunder. HSBC’s foregoing appointment as Borrower’s attorney in fact, and all of HSBC’s rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and HSBC’s obligation
to provide Credit Extensions terminates.


9.3               
Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium
thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, HSBC
may obtain such insurance or make such payment, and all amounts so paid by HSBC are HSBC Expenses and immediately due and payable,
bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. HSBC will make reasonable
efforts to provide Borrower with notice of HSBC obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by HSBC are deemed an agreement to make similar payments in the future or HSBC’s waiver of any Event
of Default.


9.4               
Application of Payments and Proceeds Upon Default. If an Event of Default has occurred and is continuing, HSBC may apply
any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection
of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as HSBC shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable
to HSBC for any deficiency. If HSBC, in its good faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, HSBC shall have the option, exercisable at any time,
of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations
until the actual receipt by HSBC of cash therefor.


9.5               
HSBC’s Liability for Collateral. So long as HSBC complies with reasonable banking practices regarding the safekeeping
of the Collateral in the possession or under the control of HSBC, HSBC shall not be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act
or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.


9.6               
No Waiver; Remedies Cumulative. HSBC’s failure, at any time or times, to require strict performance by Borrower
of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of HSBC thereafter
to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the
party granting the waiver and then is only effective for the specific instance and purpose for which it is given. HSBC’s
rights and remedies under this Agreement and the other Loan Documents are cumulative. HSBC has all rights and remedies provided
under the Code, by law, or in equity. HSBC’s exercise of one right or remedy is not an election and shall not preclude HSBC
from exercising any other remedy under this Agreement or other remedy available at law or in equity, and HSBC’s waiver of
any Event of Default is not a continuing waiver. HSBC’s delay in exercising any remedy is not a waiver, election, or acquiescence.






    	 	34	 



     

    



9.7               
Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by HSBC on which Borrower is liable. 



10                
NOTICES


All notices, consents,
requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing
and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business
Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid;
(b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed
to the party to be notified and sent to the address, facsimile number, or email address indicated below. HSBC or Borrower may
change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.


	If to Borrower:	Acme United Corporation
	 	60
Round Hill Road, Fax: 55 Walls Drive
	 	Fairfield, Connecticut 06824
	 	Attn: Chief Financial Officer
	 	Fax: (203) 254-6521
	 	Email:  PDriscoll@AcmeUnited.com
	 	 
	With a copy to:	Brody Wilkinson PC
	 	2507 Post Road
	 	Southport, Connecticut 06890
	 	Attn: James Rice
	 	Fax: (203) 319-7112
	 	Email: jrice@brodywilk.com
	 	 
	If to HSBC:	HSBC Bank USA, National Association
	 	452 Fifth Avenue
	 	New York, New York
	 	Attn: Relationship Manager - Acme United
	 	Fax: (212) 525-2555
	 	Email:  john.i.athanasoulias@us.hsbc.comPeter.I.Sanchez@us.hsbc.com



 


11                
CHOICE OF LAW, VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE


This Agreement and
the other Loan Documents shall be governed by and construed in accordance with the laws of the State of New York applied to contracts
to be performed wholly within the State of New York. Any judicial proceeding brought by HSBC against Borrower with respect to any
of the Obligations, this Agreement or any other Loan Document or related agreement may be brought in any court of competent jurisdiction
in the County of New York, State of New York, United States of America, and, by execution and delivery of this Agreement, Borrower
accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts in connection with any such judicial proceeding brought by HSBC against Borrower, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed
to Borrower at its address set forth in Section 10 and service so made shall be deemed completed five (5) days after the same shall
have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in
any manner permitted by law or shall limit the right of HSBC to bring proceedings against Borrower in the courts of any other jurisdiction.
Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Borrower against
HSBC involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Agreement
or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York.






    	 	35	 



     

    


TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND HSBC EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY
AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED
THIS WAIVER WITH ITS COUNSEL.


12                
GENERAL PROVISIONS


12.1           
Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each
party. Borrower may not assign this Agreement or any rights or obligations under it without HSBC’s prior written consent
(which may be granted or withheld in HSBC’s discretion). HSBC has the right, without the consent of or notice to Borrower,
to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, HSBC’s obligations,
rights, and benefits under this Agreement and the other Loan Documents.


12.2           
Indemnification.


(a)                
Borrower shall indemnify HSBC and its officers, directors, Affiliates, employees and agents from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against HSBC in any litigation, proceeding or investigation instituted or conducted by any governmental agency
or instrumentality or any other Person with respect to any aspect of, or any transaction contemplated by, or referred to in, or
any matter related to, this Agreement or the other Loan Documents, whether or not HSBC is a party thereto, except to the extent
that any of the foregoing is caused by the gross negligence or willful misconduct of the party being indemnified (as determined
by a court of competent jurisdiction in a final and non-appealable judgment).


(b)                
Borrower shall indemnify HSBC and its officers, directors, Affiliates, employees and agents from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, reasonable fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against HSBC (i) under or on account of Borrower’s violation of any applicable Environmental Laws, including,
without limitation, the assertion of any Lien thereunder and/or (ii) with respect to any discharge of Hazardous Materials, the
presence of any Hazardous Materials affecting real property owned or leased by Borrower, whether or not the same originates or
emerges from such real property or any contiguous real estate. Borrower’s obligations under this sub-section shall arise
upon the discovery of the presence of any Hazardous Material at any real property owned or leased by Borrower, whether or not any
federal, state, or local environmental agency has taken or threatened any action in connection with the presence of any Hazardous
Materials.


(c)                
Borrower shall indemnify HSBC and hold HSBC harmless from and against any and all losses or expenses that HSBC may sustain
or incur as a consequence of any prepayment, conversion of or any default by Borrower in the payment of the principal of or interest
on any LIBOR Rate Advance or failure by Borrower to complete a borrowing of, a prepayment of or conversion of or to a LIBOR Rate
Advance after notice thereof has been given, including, but not limited to, any interest payable by HSBC to lenders of funds obtained
by it in order to make or maintain its LIBOR Rate Advances hereunder. A certificate as to any additional amounts payable pursuant
to the foregoing sentence submitted by HSBC to Borrower shall be conclusive absent manifest error.


12.3           
Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.


12.4           
Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining
the enforceability of any provision.


12.5           
Correction of Loan Documents. HSBC may correct patent errors and fill in any blanks in the Loan Documents consistent
with the agreement of the parties so long as HSBC provides Borrower with written notice of such correction and allows Borrower
at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by
an amendment signed by both HSBC and Borrower.






    	 	36	 



     

    



12.6           
Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver,
discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the
extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting
the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance
or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document.
Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent
or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further
waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.
All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter
of the Loan Documents merge into the Loan Documents.


12.7           
Maximum Charges. In no event whatsoever shall interest and other charges charged hereunder exceed the highest rate permissible
under law. In the event interest and other charges as computed hereunder would otherwise exceed the highest rate permitted under
law, such excess amount shall be first applied to any unpaid principal balance owed by Borrower, and if the then remaining excess
amount is greater than the previously unpaid principal balance, HSBC shall promptly refund such excess amount to Borrower and the
provisions hereof shall be deemed amended to provide for such permissible rate.


12.8           
Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.


12.9           
Survival. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement
has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which,
by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. The obligation of Borrower
in Section 12.2 to indemnify HSBC shall survive until the statute of limitations with respect to such claim or cause of action
shall have run.


12.10        
Confidentiality/Sharing of Information.


(a)                
HSBC shall hold all non-public information obtained by Borrower pursuant to the requirements of this Agreement in accordance
with HSBC’s customary procedures for handling confidential information of this nature; provided, however, HSBC
may disclose such confidential information (i) to its examiners, affiliates, outside auditors, counsel and other professional advisors,
(ii) to any prospective transferees, and (iii) as required or requested by any Governmental Authority or pursuant to legal process
or applicable law; provided, further that (x) unless specifically prohibited by applicable law or court order, HSBC
shall use reasonable efforts prior to disclosure thereof, to notify Borrower of the applicable request for disclosure of such non-public
information (A) by a Governmental Authority (other than any such request in connection with an examination of the financial condition
of HSBC by such Governmental Authority) or (B) pursuant to legal process and (y) in no event shall HSBC be obligated to return
any materials furnished by Borrower other than those documents and instruments in possession of HSBC in order to perfect its Lien
on the Collateral once the Obligations have been paid in full and this Agreement has been terminated.


(b)                
Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or
provided to Borrower or one or more of its Affiliates (in connection with this Agreement or otherwise) by HSBC or by one or more
Subsidiaries or Affiliates of HSBC and Borrower hereby authorizes HSBC, following HSBC’s receipt of Borrower’s prior
written consent, to share any information delivered to HSBC by Borrower and its Subsidiaries pursuant to this Agreement, or in
connection with the decision of HSBC to enter into this Agreement, to any such Subsidiary or Affiliate of HSBC, it being understood
that any such Subsidiary or Affiliate of any Lender receiving such information shall be bound by the provision of this Section
12.10. Such authorization shall survive the repayment of the Obligations and the termination of this Agreement


12.11        
Attorneys’ Fees, Costs and Expenses. All costs and expenses may be charged to the Designated Deposit Account and
shall be part of the Obligations, including, without limitation:






    	 	37	 



     

    



(a)                
reasonable attorneys’ fees and disbursements incurred by HSBC, (i) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (ii) in connection with the entering into, modification, amendment and administration
of this Agreement or any consents or waivers hereunder and all related agreements, documents and instruments, or (iii) in instituting,
maintaining, preserving, enforcing and foreclosing on HSBC’s security interest in or Lien on any of the Collateral, whether
through judicial proceedings or otherwise, or (iv) in defending or prosecuting any actions or proceedings arising out of or relating
to HSBC’s transactions with Borrower, or (v) in connection with any advice given to HSBC with respect to its rights and
obligations under this Agreement and all related agreements, or (vi) in connection with the enforcement of this Agreement or any
consent or waivers hereunder and all related agreements, documents and instruments; and 



(b)                
reasonable fees and disbursements incurred by HSBC in connection with any appraisals of Inventory or other Collateral, field
examinations, collateral analysis or monitoring or other business analysis conducted by outside Persons in connection with this
Agreement and all related agreements.


12.12        
Electronic Execution of Documents. The words “execution,” “signed,” “signature”
and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use
of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including,
without limitation, any state law based on the Uniform Electronic Transactions Act.


12.13        
Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this
Agreement.


12.14        
Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation
and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties
caused the uncertainty to exist.


12.15        
Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement.
The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties
or incidents different from those of parties to an arm’s-length contract.


12.16        
Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights
or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted
successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement;
or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.


12.17        
[Intentionally Omitted].


12.18        
PATRIOT Act Notice. HSBC hereby notifies Borrower that pursuant to the requirements of the PATRIOT Act, it is required
to obtain, verify and record information that identifies Borrower, which information includes the names and addresses of Borrower
and other information that will allow HSBC to identify Borrower in accordance with the PATRIOT Act.


12.19        
Injunctive Relief. Borrower recognizes that, in the event Borrower fails to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law may prove to be inadequate relief to Lenders; therefore, HSBC,
if HSBC so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving
that actual damages are not an adequate remedy.


12.20        
Consequential Damages. None of HSBC nor any agent or attorney for any of them, shall be liable to Borrower for indirect,
punitive, exemplary, incidental, special or consequential damages arising from any breach of contract, tort or other wrong relating
to the establishment, administration or collection of the Obligations.


[Signature page
follows.]






    	 	38	 



     

    







IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the Effective Date.


BORROWER:


ACME UNITED CORPORATION


By_________________________________________

Name: Walter C. Johnsen

Title: Chairman of the Board and Chief Executive Officer


HSBC:


HSBC Bank USA, National Association


By_________________________________________

Name:______________________________________

Title:_______________________________________






    	 	39	 



     

    








EXHIBIT
A


SECOND
AMENDED AND RESTATED 

SECURED REVOLVING NOTE


	$30,000,000$50,000,000	 
	 	Maturity Date:  April 5May 6, 2017 2019


 


FOR
VALUE RECEIVED, ACME UNITED CORPORATION, a Connecticut corporation (“Borrower”) hereby promises to pay to the order
of HSBC Bank, National Association or the holder (the “Lender”) of this Secured Revolving Note (this “Revolving
Note”) at 452 Fifth Avenue, New York, New York or such other place of payment as the holder of this Revolving Note may specify
from time to time in writing, in lawful money of the United States of America, the principal amount of Thirty Fifty
Million Dollars ($30,000,00050,000,000)
or such other principal amount as Lender has advanced to Borrower, together with interest at a rate as specified in the Loan Agreement
(defined hereafter). 


 


This Revolving
Note is the Revolving Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement
dated April 5, 2012, by and between Borrower and Lender (as the same may from time to time be amended, modified or supplemented
in accordance with its terms, the “Loan Agreement”), and is entitled to the benefit and security of the Loan Agreement
and the other Loan Documents (as defined in the Loan Agreement), to which reference is made for a statement of all of the terms
and conditions thereof. All payments shall be made in accordance with the Loan Agreement. All terms defined in the Loan Agreement
shall have the same definitions when used herein, unless otherwise defined herein. An Event of Default under the Loan Agreement
shall constitute a default under this Revolving Note. 


 


Borrower
waives presentment and demand for payment, notice of dishonor, protest and notice of protest under the UCC or any applicable law.
Borrower agrees to make all payments under this Revolving Note without setoff, recoupment or deduction and regardless of any counterclaim
or defense. This Revolving Note has been negotiated and delivered to Lender and is payable in the State of New York. This Revolving
Note shall be governed by and construed and enforced in accordance with, the laws of the State of New York, excluding any conflicts
of law rules or principles that would cause the application of the laws of any other jurisdiction.


 


 


BORROWER FOR ITSELFACME
UNITED CORPORATION


 


By:

Title:


 



    	 	40	 



     

    








EXHIBIT
B


COLLATERAL
DESCRIPTION ATTACHMENT TO LOAN AND SECURITY AGREEMENT


All personal property
of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently existing or hereafter created
or acquired, and wherever located, including, but not limited to:


		·	all accounts (including health-care-insurance receivables), chattel paper (including tangible and
electronic chattel paper), deposit accounts, documents (including negotiable documents), equipment (including all accessions and
additions thereto), financial assets, general intangibles (excluding patents, trademarks, copyrights, but including goodwill, payment
intangibles and software), goods (including fixtures), instruments (including promissory notes), inventory (including all goods
held for sale or lease or to be furnished under a contract of service, and including returns and repossessions), investment property
(including securities and securities entitlements), letter of credit rights, money, and all of Debtor’s books and records
with respect to any of the foregoing, and the computers and equipment containing said books and records;



		·	any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation,
insurance proceeds, and all supporting obligations and the security therefor or for any right to payment. All terms above have
the meanings given to them in the New York Uniform Commercial Code, as amended or supplemented from time to time, including revised
Division 9 of the Uniform Commercial Code-Secured Transactions.



 






    	 	41	 



     

    








EXHIBIT
C


Compliance
Certificate


The undersigned, the [Chief Financial Officer]
[Chief Executive Officer] of ACME UNITED CORPORATION, a Connecticut corporation (the “Borrower”), gives
this certificate to HSBC BANK USA, NATIONAL ASSOCIATION (the “HSBC”), in accordance with the requirements of
Sections 6.2(d) of that certain Loan and Security Agreement, dated as of April __, 2012 (including all annexes, exhibits or schedules
thereto, and as from time to time amended, restated, supplemented or otherwise modified, the “Loan Agreement”),
by and between Acme United Corporation, a Connecticut corporation (“Borrower”) and HSBC Bank USA, National Association
(“HSBC”). Capitalized terms used herein without definition are so used as defined in the Loan Agreement.


 


1.                No Default
or Event of Default has occurred or is continuing, except for such conditions or events listed on Schedule 1 attached
hereto, specifying the nature and status and period of existence thereof and what action the Borrower has taken, is taking, or
proposes to take with respect thereto.


2.                Borrower is
in compliance in all material respects with all representations, warranties, and covenants set forth in the Loan Agreement and
the other Loan Documents, except as set forth on Schedule 2 attached hereto. Without limiting the generality of the
foregoing, the Borrower is in compliance with the financial covenants contained in Section 6.7 of the Loan Agreement as
demonstrated by the calculations set forth on Schedule 3 hereof.


 


ACME UNITED CORPORATION


 


 


By:__________________________


Name:


Title:


 


 






    	 	42	 



     

    








EXHIBIT
D


Notice
of borrowing


Reference is made to that certain
Loan and Security Agreement, dated as of April 5, 2012 (including all annexes, exhibits or schedules thereto, and as from time
to time amended, restated, supplemented or otherwise modified, the “Loan Agreement”), by and between Acme United
Corporation, a Connecticut corporation (“Borrower”) and HSBC Bank USA, National Association (“HSBC”).
Capitalized terms used herein without definition are so used as defined in the Loan Agreement.


Pursuant to Section 3.2 of the Loan
Agreement, please take notice that Borrower requests a Revolving Loan as follows:


Funding Date of Proposed Advance: ______________,
200__


Amount of Advance: $________________


The proposed Advance will be [Base Rate
Advance][an LIBOR Rate Advance with an Interest Period of ___].


To induce HSBC to make the requested
Advance, Borrower hereby represents and warrants that all of the conditions contained in Section 3.2 of the Loan Agreement have
been satisfied on and as of the date hereof, and will continue to be satisfied on and as of the Funding Date of the requested Advance,
before and after giving effect thereto.


 


ACME UNITED CORPORATION


 


By:_____________________________


Name:


Title:


 






    	 	43	 



     

    








EXHIBIT
E


Notice
of Conversion


Reference is made
to that certain Loan and Security Agreement, dated as of April 5, 2012 (including all annexes, exhibits or schedules thereto, and
as from time to time amended, restated, supplemented or otherwise modified, the “Loan Agreement”), by and between
Acme United Corporation, a Connecticut corporation (“Borrower”) and HSBC Bank USA, National Association (“HSBC”).
Capitalized terms used herein without definition are so used as defined in the Loan Agreement.


Borrower hereby gives irrevocable
notice, pursuant to Section 3.5 of the Loan Agreement, of its request to:


(a)                on [date] convert
$[________] of the aggregate outstanding principal amount of the Advances, bearing interest at the [Base][LIBOR] Rate, into a(n)
[Base Rate][LIBOR Rate] Advance [and, in the case of a LIBOR Rate Advance, having an Interest Period of [one][three][six] month(s)];


[(b)                on [ date ] continue $[______]
of the aggregate outstanding principal amount of the LIBOR Rate Advance, bearing interest at the LIBOR Rate Rate, as a LIBOR Rate
Rate having an Interest Period of [one][three][six] month(s)].


Borrower hereby represents and warrants
that all of the conditions contained in Section 3.2 of the Loan Agreement have been satisfied on and as of the date hereof, and
will continue to be satisfied on and as of the date of the conversion/continuation requested hereby, before and after giving effect
thereto.


 


ACME UNITED CORPORATION


 


By:________________________________


Name:


Title:


 






    	 	44	 



     

    








Schedule 7.4


Existing Indebtedness


None


 






    	 	45	 



     

    

 






Schedule 7.5


Existing Liens


None


 





	46