Document:

Exhibit 10.1

 

CREDIT AGREEMENT

 

 

dated as of June 23, 2010

 

 

among

 

 

LIQUIDMETAL COATINGS, LLC,

LIQUIDMETAL COATINGS SOLUTIONS, LLC

 

 

and

 

 

ENTERPRISE BANK & TRUST

 

 

 

$3,700,000 Credit Facility

 

 

 

CREDIT AGREEMENT

 

This
Credit Agreement is made as of June 23, 2010, by and among LIQUIDMETAL
COATINGS, LLC, a Delaware limited liability company (“LMC), LIQUIDMETAL
COATINGS SOLUTIONS, LLC, a Delaware limited liability company (“LMCS”),
and ENTERPRISE BANK & TRUST, a Missouri banking corporation (the “Bank”).  LMC and LMCS are each referred to herein as a
“Borrower” and are collectively referred to herein as the “Borrowers.”

 

The
parties agree as follows:

 

Section 1

General Definitions

 

1.1                                 Definitions.  When used in this Agreement, the following
terms have the following meanings:

 

“2010
Bank Refinancing Expenses” means expenses incurred by the Borrowers in
connection with the closing of the loan transactions described in this
Agreement.

 

“Account
Debtor” means any Person who is or may become obligated in respect of an
Account.

 

“Accounts”
means all accounts receivable and all other accounts (as defined in the UCC) in
which a Borrower has or acquires an interest at any time.

 

“Adjusted
EBITDA” means, for any period, EBITDA for such period plus,
to the extent deducted from net income during such period, 2010 Bank
Refinancing Expenses incurred by the Borrowers during such period.

 

“Adjusted
Monthly Libor Rate” means, for any day during a calendar month, an annual
interest rate equal to the greater of:

 

(1)                                  the one-month Libor Rate, as
in effect on the first day of such month, plus three and
three-quarters percent (3.75%); or

 

(2)                                  six percent (6%).

 

The
Adjusted Monthly Libor Rate may vary from month to month, but shall remain
fixed in amount for the duration of any particular month.

 

“Affiliate”
means a Person (1) which owns or otherwise has an interest in five percent
or more of any equity interest of a Borrower, (2) five percent or more of
the equity interests of which a Borrower (or any shareholder or other equity holder,
director, officer, employee or subsidiary of a Borrower or any combination
thereof) owns or otherwise has an interest in, or (3) which, directly or
through one or more intermediaries, is controlled by, controls, or is under
common control with a Borrower.  For
purposes of clause (3) above, “control” means the ability, directly or
indirectly, to affect the management or policies of a Person by virtue of an
ownership interest, by right of contract or any other means.

 

“Agreement”
means this Credit Agreement, as amended, renewed, restated, replaced or
otherwise modified from time to time.

 

1

 

“Applicable
Rate” means, at any time, (1) with respect to Revolving Credit Loans,
the Adjusted Monthly Libor Rate at such time, (2) with respect to the Term
Loan, seven percent (7%) per annum, and (3) with respect to Equipment
Loans, six and three-quarters percent (6.75%) per annum.

 

“Approved
Foreign Account Debtor” means each of (1) Flame Spray SA, (2) Grant
Prideco SA de Cv , (3) VAM Drilling France SAS , and (4) any other
Account Debtor which the Bank, in the exercise of sole and absolute discretion,
consents to being an Approved Foreign Account Debtor by giving a written notice
to a Borrower which specifically identifies such Account Debtor and which
specifically references this definition.

 

“Available
Cash” means, at any time, the aggregate amount of the Borrowers’ collected
deposit account balances maintained with the Bank and with respect to which the
Bank has a perfected first priority Lien, as security for the Obligations,
subject to no other Lien.

 

“Average
Daily Credit Balance” means, for any period, the aggregate principal amount
of all Revolving Credit Loans outstanding at the end of each day during such
period, divided by the number of days in such period; provided,
however, that, for any period occurring during the Equipment Loan
Availability Period, the Average Daily Credit Balance shall be increased by the
aggregate principal amount of all Equipment Loans outstanding at the end of
each day during such period, divided by the number of days in such period.

 

“Business
Day” means a day on which the Bank is open for business to the general
public other than a Saturday or Sunday.

 

“Borrowing
Base” means, at any time, an amount equal to the lesser of:

 

(1)                                  the sum of (a) seventy-five
percent (75%) of the amount of Eligible Accounts (other than Eligible Foreign
Accounts) outstanding at such time, (b) the Eligible Foreign Account
Advance Amount at such time, and (c) fifty percent (50%) of the amount of
Eligible Inventory at such time, calculated on the lower of cost or market, on
a first-in, first-out basis; or

 

(2)                                  $2,000,000.

 

“Borrowing
Base Certificate” means, at any time, a certificate, in the form of Exhibit D
attached hereto or such other form as the Bank may reasonably request from time
to time, signed by the chief financial officer or controller of LMC in favor of
the Bank, and which sets forth in reasonable detail the computations necessary
to determine the Borrowing Base at the end of the most recently ended month.

 

“C3”
means C3 Capital Partners, L.P., a Delaware limited partnership, and/or C3
Capital Partners II, L.P., a Delaware limited partnership.

 

“C3
Proxy” means the Irrevocable Springing Proxy, dated on or about July 24,
2007, from LMT in favor of C3.

 

“C3
Subordinated Notes” means, collectively, (1) the 14% Subordinated
Note, dated July 24, 2007, from LMC and LMCS, as makers, to C3 Capital
Partners, L.P., as payee, in the stated principal amount of $3,770,000, and (2) the
14% Subordinated Note, dated July 24, 2007, from LMC and LMCS, as makers,
to C3 Capital Partners II, L.P., as payee, in the stated principal amount of
$2,730,000.

 

2

 

“C3
Subordination Agreement” means the Subordination Agreement to be executed
by C3, the Borrowers and the Bank on or about the Closing Date and by which
each Borrower’s indebtedness to C3 shall be subordinated to each Borrower’s
indebtedness to the Bank, as the same may be amended, renewed, replaced,
restated, consolidated or otherwise modified from time to time.

 

“Closing
Date” means the date of this Agreement, as set forth in the introductory
paragraph of this Agreement.

 

“Collateral”
means all property, real or personal, with respect to which a Lien has been
granted to or for the benefit of the Bank pursuant to the Security Agreement or
any of the other Credit Documents or which otherwise secures the payment or
performance of any Obligation.

 

“Conditional Consent” means the Conditional
Consent to be executed on or about the Closing Date by the Bank, the Borrowers
and LMT and whereby, subject to the terms and conditions thereof, the parties
thereto agree to take certain actions if certain future events occur, as the
same may be amended, renewed, replaced, restated, consolidated or
otherwise modified from time to time.

 

“Covenant Compliance Certificate” means a
certificate, in the form of Exhibit E attached hereto or such other form
as the Bank may reasonably request from time to time, signed by the chief
financial officer of LMC in favor of the Bank, and which sets forth in
reasonable detail the computations necessary to determine whether the Borrowers
are in compliance with the financial and other covenants set forth in this Agreement
for the relevant time period.

 

“Credit
Documents” means this Agreement, the Notes, the Security Agreement, the LMT
Pledge Agreement, the C3 Subordination Agreement, the Conditional Consent, the
LMT Security Agreement (if entered into), and any other agreements or documents
existing on or after the Closing Date evidencing, securing, guaranteeing or
otherwise relating to any of the transactions described in or contemplated by
this Agreement, and any amendments, renewals, restatements, replacements, consolidations
or other modifications of any of the foregoing from time to time.

 

“Debt”
means any of the following: (1) indebtedness or liability for borrowed
money; (2) obligations evidenced by bonds, debentures, notes or other
similar instruments; (3) obligations for the deferred purchase price of
property or services, or arising out of non-compete, non-solicitation or
similar agreements entered into in connection with asset or equity
acquisitions; (4) obligations as lessee under capital leases; (5) synthetic
lease obligations or similar obligations to pay rent or other payment amounts
under a lease of (or other indebtedness arrangements conveying the right to
use) real or personal property which may be classified and accounted for as an
operating lease or an off-balance sheet liability for accounting purposes but
as a secured or unsecured loan for federal income tax purposes; (6) current
liabilities in respect of unfunded vested benefits under Plans covered by
ERISA; (7) obligations under letters of credit or acceptance facilities; (8) all
guarantees, endorsements (other than for collection or deposit in the ordinary
course of business) and other contingent obligations to purchase, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss; and (9) obligations secured by a Lien,
whether or not the obligations have been assumed.

 

“Default”
means an event or condition the occurrence of which would, with the lapse of
time or the giving of notice or both, become an Event of Default.

 

“Default
Rate” has the meaning provided in Section 3.1 of this Agreement.

 

“Distribution”
has the meaning provided in Section 6.2(j) of this Agreement.

 

3

 

“EBITDA”
means, for any period, consolidated net income of the Borrowers for such period
before provision for income taxes, interest expense, depreciation and
amortization (including, without limitation, implicit interest expense on
capitalized leases), but excluding therefrom (to the extent included):  (1) non-operating gains (including,
without limitation, extraordinary or nonrecurring gains, gains from
discontinuance of operations and gains arising from the sale of assets other
than inventory) during such period; (2) any portion of the net earnings of
any subsidiary which for any reason is unavailable for the payment of dividends
to a Borrower; (3) the earnings of any entity to which any assets of a
Borrower shall have been sold, transferred or disposed of, or into which a Borrower
shall have merged, or been a party to any consolidation or other form of
reorganization, prior to the date of such transaction; (4) any gain
arising from the acquisition of any securities of a Borrower; and (5) non-operating
losses arising from the sale of capital assets during such period.

 

“Eligible
Account” means an Account arising in the ordinary course of a Borrower’s
business from the sale of goods or the rendering of services which the Bank
determines in its reasonable discretion is eligible as the basis for credit
extensions under this Agreement.  Without
limiting the Bank’s discretion provided herein, to be an Eligible Account the
Account must be subject to the Bank’s perfected first priority Lien and no Lien
other than Permitted Liens, and must be evidenced by an invoice or other
documentary evidence reasonably satisfactory to the Bank.  Similarly, without limiting the Bank’s
discretion provided herein, no Account shall be an Eligible Account if: (1) the
Account remains unpaid more than 90 days after the original invoice date; or (2) 25%
or more of the Accounts from the Account Debtor are not Eligible Accounts; or (3) the
Account Debtor is also a Borrower’s creditor or supplier, or has disputed
liability with respect to such Account, or has made any claim with respect to
any other Account due from such Account Debtor to a Borrower, or the Account
otherwise is or may become subject to any right of setoff by the Account
Debtor, in each case to the extent of any such offset, dispute or claim; or (4) any
bankruptcy or other insolvency proceeding has been filed by or against the
Account Debtor; or (5) the Account arises from a sale to an Account Debtor
that is not organized under the laws of one of the states of the United States
of America, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case reasonably acceptable to the Bank; or (6) the Account
arises from a sale to the Account Debtor which is not final, including, without
limitation, on a bill-and-hold, guaranteed sale, sale-or-return,
sale-on-approval, consignment or any other repurchase or return basis; or (7) the
Bank believes, in its reasonable credit judgment, that collection of such
Account is insecure or that payment thereof is doubtful or will be materially
delayed by reason of the Account Debtor’s financial condition; or (8) the
Account Debtor is the United States of America or any state, or any department,
agency, instrumentality or subdivision of the foregoing, unless the applicable
Borrower assigns its right to payment of such Account to the Bank, in form and
substance reasonably satisfactory to the Bank, so as to comply with the
Assignment of Claims Act, as amended (31 U.S.C. Section 3727 et  seq.), or the
comparable state statute, as the case may be; or (9) the goods giving rise
to such Account have not been shipped to the Account Debtor in accordance with
the Account Debtor’s instructions in respect of such goods, or such goods are
otherwise nonconforming goods, or the services giving rise to such Account have
not been properly performed by the applicable Borrower; or (10) the total
unpaid Accounts of the Account Debtor exceed a credit limit determined by the
Bank in its reasonable discretion (which credit limit may be based upon the
extent to which the total unpaid Accounts of such Account Debtor are excessive
relative to all other unpaid Accounts and upon such other customary credit
criteria as the Bank reasonably deems appropriate), to the extent such Account
exceeds such limit; or (11) the Account is evidenced by chattel paper or an
instrument of any kind, or has been reduced to judgment; or (12) a Borrower has
made any agreement with the Account Debtor for any deduction therefrom, except
for discounts or allowances which are made in the ordinary course of a Borrower’s
business for prompt payment and which discounts or allowances are reflected in
the calculation of the face value of each invoice related to such Account and
are not otherwise inconsistent with the provisions of this Agreement; or (13)
the Account arises out of a transaction between a Borrower and an Affiliate of
a Borrower.

 

4

 

“Eligible
Foreign Account” means an Account which would qualify as an Eligible
Account but for the provisions of clause (5) of the definition thereof,
and with respect to which the Account Debtor is an Approved Foreign Account
Debtor.

 

“Eligible
Foreign Account Advance Amount” means, at any time, the lesser of:

 

(1)                                  the amount of Eligible
Foreign Accounts outstanding at such time, times (a) 75%,
from the Closing Date through December 31, 2010, or (b) 55%, from and
after January 1, 2011; or

 

(2)                                  $500,000.

 

“Eligible
Inventory” means inventory of a Borrower which the Bank determines in its
reasonable discretion is eligible as the basis for credit extensions under this
Agreement.  Without limiting the Bank’s
discretion provided herein, no inventory shall be Eligible Inventory unless, in
the Bank’s reasonable determination, it (1) is in good, new and saleable
condition, (2) is not obsolete or unmerchantable, (3) meets all
standards imposed by any governmental agency or authority, (4) conforms in
all respects to the warranties and representations set forth in this Agreement
and the Security Agreement, (5) is at all times subject to the Bank’s duly
perfected, first priority Lien and no other Lien other than Permitted Liens,
and (6) is situated at a location in compliance with the Security
Agreement.

 

“Environmental
Laws” means all federal, state, local and other applicable statutes, ordinances,
rules, regulations, judicial orders or decrees, common law theories of
liability, governmental or quasi-governmental directives or notices or other
laws or matters existing on or after the Closing Date relating in any respect
to occupational safety, health or environmental protection.

 

“Equipment
Loan” has the meaning given to such term in Section 2.4 of this
Agreement.

 

“Equipment
Loan Availability Period” means the period of time beginning on the Closing
Date and ending 363 days thereafter.

 

“Equipment
Note” has the meaning given to such term in Section 2.4 of this
Agreement.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time, and all rules and regulations from time to time promulgated
thereunder.

 

“Eurocurrency
Reserve Requirement” means, for any one-month interest period, the daily
average of the stated maximum rate (expressed as a decimal) at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained during such interest period under Regulation D by member banks of
the Federal Reserve System in New York City with deposits exceeding one billion
dollars against “Eurocurrency liabilities” (as such term is used in Regulation
D) but without benefit or credit of proration, exemptions or offsets that might
otherwise be available from time to time under Regulation D.  Without limiting the effect of the foregoing,
the Eurocurrency Reserve Requirement shall reflect any other reserves required
to be maintained against (1) any category of liabilities that includes
deposits by reference to which the Libor Rate is to be determined, or (2) any
category of extension of credit or other assets that include a Loan.

 

“Existing
C3 Defaults” means any payment defaults by the Borrowers under the C3
Subordinated Notes that exist on the Closing Date.  A payment or other default of the Borrowers
under the C3 Subordinated Notes that occurs after the Closing Date would not
qualify as an Existing C3 Default.

 

5

 

“Event
of Default” has the meaning provided in Section 7.1 of this Agreement.

 

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

 

“Guarantor”
means any Person who, after the Closing Date, may guarantee the payment or
performance of all or any part of the Obligations.  As of the Closing Date, there are no
Guarantors and no Borrower is under any duty to cause any Person to become a
Guarantor.

 

“Guaranty”
means, collectively, each guaranty, if any, executed by any Guarantor after the
Closing Date, and any amendments, renewals, restatements, replacements,
consolidations or other modifications of any of the foregoing from time to
time.

 

“Hazardous
Substance” means any hazardous, toxic, dangerous or otherwise
environmentally unsound substance, waste or other material, in whatever form,
as defined or described in, or contemplated by, any Environmental Law and any
other hazardous, toxic, dangerous or otherwise environmentally unsound
substance, waste or other material in whatever form, or any other substance,
waste or other material regulated by any Environmental Law.

 

“Investment”
means, as to any Person, any direct or indirect equity, debt or similar
investment by such Person, including, without limitation, any loan, advance or
other credit extension by such Person to or for the benefit of any other
Person; any capital contribution to, or any acquisition of any equity interests
of, any other Person; and any acquisition of any investment products or
securities of any other Person.

 

“Libor
Rate” means, on any day, the rate per annum determined by the Bank to equal
the quotient of (1) the one-month London interbank offered rate for
dollars, as quoted on such day in the “Money Rates” section of The Wall Street
Journal or by Bloomberg, Reuters, Telerate or any other financial news services
(electronic or otherwise) used by the Bank from time to time in accordance with
commercially reasonable industry standards, divided by (2) one
minus the Eurocurrency Reserve Requirement for a one-month interest
period.  If the Libor Rate cannot be
ascertained on a particular day because such day is not a Business Day or
quotations are not otherwise available in the London interbank market on such
day (except as otherwise provided in Section 3.13 hereof), the Libor Rate
shall be determined on the next Business Day or such next day for which
quotations are available in the London interbank market.

 

“Lien”
means any mortgage, deed of trust, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority, or other security agreement or preferential arrangement,
charge or encumbrance of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.

 

“LMC-India”
means Liquidmetal Coatings Solutions India Pvt Ltd.

 

“LMT”
means Liquidmetal Technologies, Inc., a Delaware corporation.

 

“LMT
Pledge Agreement” means the Pledge Agreement to be executed by LMT on or
about the Closing Date in favor of the Bank and by which LMT shall grant to the
Bank, as security for the Obligations, a security interest in all of LMC’s
equity interests owned at any time by LMT, as the same may be amended, renewed,
replaced, restated, consolidated or otherwise modified from time to time.

 

6

 

“LMT
Security Agreement” means the LMT Security Agreement referred to in the
Conditional Consent, as the same may be amended, renewed, replaced, restated,
consolidated or otherwise modified from time to time.

 

“Loans”
means all Revolving Credit Loans, the Term Loan and all Equipment Loans.  With respect to Revolving Credit Loans, the
term “Loan” may refer to all Revolving Credit Loans then outstanding or, as the
context so requires, any particular Revolving Credit Loan then
outstanding.  Similarly, with respect to
Equipment Loans, the term “Loan” may refer to all Equipment Loans then
outstanding or, as the context so requires, any particular Equipment Loan then
outstanding.

 

“Material
Adverse Effect” means (1) a material adverse effect on the assets,
liabilities, business, prospects, operations, income or condition, financial or
otherwise, of the Borrowers and the Guarantors taken as a whole, (2) a
material impairment of the ability of the Borrowers and the Guarantors, taken
as a whole, to pay, perform or observe their respective obligations under the
Credit Documents, or (3) a material impairment of the enforceability or
availability of the material rights or remedies stated to be available to the
Bank under the Credit Documents.

 

“Net
Worth Plus Subordinated Debt” means, at any time, the sum of (1) the
Borrowers’ consolidated net worth at such time, as determined in accordance
with GAAP, and (2) the outstanding principal balance of Permitted
Subordinated Debt at such time (excluding, however, capitalized interest).

 

“Notes”
means, collectively, the Revolving Credit Note, the Term Note and all Equipment
Notes.

 

“Obligations”
means all Loans and all other advances, debts, liabilities, obligations,
covenants and duties owing, arising, due or payable from the Borrower to the
Bank of any kind or nature, existing or future, whether or not evidenced by any
note, letter of credit, guaranty or other instrument, whether arising under
this Agreement or any of the other Credit Documents or otherwise and whether
direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, primary or secondary, due or to become
due, existing on or after the Closing Date and however acquired, and all
amendments, renewals, restatements, replacements or other modifications of the
foregoing from time to time.  The term
includes, without limitation, all principal, interest, fees, expenses and any
other sums chargeable to any Borrower under any of the Credit Documents.

 

“Permitted C3 Liens” means Liens granted to C3 by LMC on its
existing and future personal property and no other property, as security for
Permitted C3 Subordinated Debt and no other obligations, so long as such Liens
are subordinate in priority, pursuant to the C3 Subordination Agreement, to all
Liens granted by such Borrower to the Bank.

 

“Permitted
C3 Subordinated Debt” means Debt of LMC and LMCS to C3 pursuant to the C3
Subordinated Notes, as in effect on the Closing Date, so long as such Debt is
subordinated to the Obligations pursuant to the C3 Subordination Agreement.

 

“Permitted
Debt” means any of the following: (1) accrued expenses and current
trade account payables incurred in the ordinary course of a Borrower’s
business; (2) Debt to the Bank; (3) Permitted C3 Subordinated Debt; (4) other
Debt which is subordinated to the Obligations pursuant to the terms of a
subordination agreement satisfactory in form and content to the Bank in its
sole discretion; (5) Debt secured by purchase-money security interests
described in clause (8) of the definition of Permitted Liens in this
Section, provided that the aggregate outstanding principal amount of such Debt
does not exceed $300,000 at any time; and (6) other Debt approved in
advance by the Bank in a writing delivered to a Borrower.

 

7

 

“Permitted
Investments” means (1) Investments in cash and cash equivalents, (2) Investments
in investment products offered by the Bank or its affiliates, (3) Investments
by a Borrower in another Borrower, (4) Investments, as of the Closing
Date, in any direct or indirect wholly-owned subsidiary of any Borrower,
provided that such subsidiary exists as of the Closing Date, and (5) so
long as no Default or Event of Default exists at the time such Investment is
made or would result therefrom, Investments in the form of Class A or
Class B shares in LMC-India.

 

“Permitted
Liens” means any of the following: (1) Liens for taxes, assessments or
governmental charges not delinquent or being contested in good faith and by
appropriate proceedings and for which adequate reserves in accordance with GAAP
are maintained on a Borrower’s books; (2) Liens arising out of deposits in
connection with workers’ compensation, unemployment insurance, old age pensions
or other social security or retirement benefits legislation; (3) deposits
or pledges to secure bids, tenders, contracts (other than contracts for the
payment of money), leases, statutory obligations, surety and appeal bonds, and
other obligations of like nature arising in the ordinary course of a Borrower’s
business; (4) Liens imposed by law, such as mechanics’, workers’,
materialmen’s, carriers’ or other like Liens (excluding, however, any Lien in
favor of a landlord) arising in the ordinary course of a Borrower’s business
which secure the payment of obligations which are not past due or which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP are maintained on a Borrower’s
books; (5) rights of way, zoning restrictions, easements and similar
encumbrances affecting a Borrower’s real property which do not materially
interfere with the use of such property; (6) Liens in favor of the Bank; (7) Permitted
C3 Liens; (8) purchase-money security interests incurred solely in
connection with the acquisition (whether purchased outright or acquired through
a capital lease) of equipment to be used in a Borrower’s business, encumbering
only the equipment so acquired, and which secures only the purchase-money Debt
incurred to acquire the equipment so acquired and which Debt otherwise
qualifies as Permitted Debt under clause (5) of the definition of
Permitted Debt in this Section; and (9) other Liens approved in advance by
the Bank in a writing delivered to a Borrower. 
In addition, no Lien in favor of a Person other than the Bank shall be a
Permitted Lien unless such Lien is subordinate in priority to the Bank’s Lien,
except if (a) the Lien does not secure liability for borrowed money,
letter-of-credit obligations or similar funded debt, or (b) the Lien is a
purchase-money Lien described in clause (8) immediately above.

 

“Permitted
Subordinated Debt” means Permitted C3 Debt and any Debt described in clause
(4) of the definition of Permitted Debt.

 

“Person”
means an individual, corporation, limited liability company, partnership,
trust, governmental entity or any other entity, organization or group
whatsoever.

 

“Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of a Borrower on or after the Closing Date.

 

“Projected
Bank Principal” means:

 

(1)                                  $600,000, for each of the
Borrowers’ fiscal quarters ending June 30, 2010, September 30, 2010, December 31,
2010 and March 31, 2011;

 

(2)                                  $500,000, for each of the
Borrowers’ fiscal quarters ending June 30, 2011, September 30, 2011, December 31,
2011 and March 31, 2012; and

 

(3)                                  $400,000, for
each fiscal quarter of the Borrowers ending on or after June 30, 2012;

 

8

 

provided,
however, that, for purposes of the definition of “Section 6.2(j) Total
Debt Service” below, Projected Bank Principal for any month
shall be the Projected Bank Principal for the fiscal quarter in which the month
occurs, divided by three.

 

“Revolving
Credit Loan” has the meaning provided in Section 2.2 of this
Agreement.

 

“Revolving
Credit Note” has the meaning provided in Section 2.2 of this
Agreement.

 

“Revolving
Credit Termination Date” means 364 days after the Closing Date or, if such
day is not a Business Day, the immediately preceding Business Day.

 

“Section 6.2(j) Total
Debt Service” means, for any 12-month period referenced in Section 6.2(j)(1)(A)(iv) of
this Agreement, the sum of:

 

(1)                                  Projected Bank Principal for
such 12-month period (or, if less than 12 months have elapsed since the Closing
Date, Projected Bank Principal during such partial period annualized), plus the amount of principal paid on account of Equipment
Loans during such 12-month period;

 

(2)                                  the total amount of interest
paid to the Bank during such 12-month period (or, if less than 12 months have
elapsed since the Closing Date, the amount of such interest paid during such
partial period annualized);

 

(3)                                  principal and interest paid
on account of Senior Secured Debt, other than Debt due the Bank (or Debt due
Bank Midwest, N.A., if applicable, for any period prior to the Closing Date),
during such 12-month period; and

 

(4)                                  principal and interest paid
on account of Permitted Subordinated Debt during such 12-month period.

 

“Security
Agreement” means the Security Agreement to be executed by the Borrowers on
or about the Closing Date in favor of the Bank and by which each Borrower shall
grant to the Bank, as security for the Obligations, a security interest in all
of its existing and future assets, as the same may be amended, renewed,
replaced, restated, consolidated or otherwise modified from time to time.

 

“Senior
Secured Debt” means the aggregate principal amount or component of (1) Debt
due the Bank, and (2) other Debt secured by a Lien (excluding, however,
Permitted Subordinated Debt).

 

“Senior
Debt Service” means, for any fiscal quarter of the Borrowers, the sum of:

 

(1)                                  Projected Bank Principal, plus the amount of principal paid on account of Equipment
Loans during such quarter;

 

(2)                                  the total amount of interest
paid to the Bank during such quarter and any prior fiscal quarters for that
fiscal year, multiplied by (a) 4, if such quarter is the first fiscal
quarter, (b) 2, if such quarter is the second fiscal quarter, (c) 1.34,
if such quarter is the third fiscal quarter, and (d) 1, if such quarter is
the fourth fiscal quarter; and

 

(3)                                  principal and interest paid
on account of Senior Secured Debt, other than Debt due the Bank (or Debt due
Bank Midwest, N.A., if applicable, for any period prior to the Closing Date).

 

9

 

“Term
Loan” means the Loan described in Section 2.3 of this Agreement.

 

“Term
Loan Termination Date” means three years after the Closing Date or, if such
day is not a Business Day, the immediately preceding Business Day.

 

“Term
Note” has the meaning provided in Section 2.3 of this Agreement.

 

“Total
Debt Service” means, for any fiscal quarter of the Borrowers, the sum of:

 

(1)                                  Projected Bank Principal, plus the amount of principal paid on account of Equipment
Loans during such quarter;

 

(2)                                  the total amount of interest
paid to the Bank during such quarter and any prior fiscal quarters for that
fiscal year, multiplied by (a) 4, if such quarter is the first fiscal
quarter, (b) 2, if such quarter is the second fiscal quarter, (c) 1.34,
if such quarter is the third fiscal quarter, and (d) 1, if such quarter is
the fourth fiscal quarter;

 

(3)                                  principal and interest paid
on account of Senior Secured Debt, other than Debt due the Bank (or Debt due
Bank Midwest, N.A., if applicable, for any period prior to the Closing Date),
during such quarter; and

 

(4)                                  principal and interest paid
on account of Permitted Subordinated Debt during such quarter;

 

“UCC”
means the Uniform Commercial Code as in effect in the State of Missouri from
time to time.

 

“Unused
Line Fee” has the meaning provided in Section 3.11 of this Agreement.

 

“Unused
Revolver Availability” means, at any time, the difference between the
Borrowing Base and the outstanding principal balance of the Revolving Credit
Loans.

 

1.2                                 Accounting and Other Terms.

 

(a)                                  General.  All accounting terms not specifically defined
herein shall be construed in accordance with GAAP.  Unless the context clearly requires
otherwise, all references to “dollars” or “$” are to United States
dollars.  This Agreement and the other
Credit Documents shall be construed without regard to any presumption or rule requiring
construction against the party causing any such document or any portion thereof
to be drafted.  The Section and
other headings in this Agreement and any index at the beginning of this
Agreement are for convenience of reference only and shall not limit or
otherwise affect any of the terms of this Agreement.  Similarly, any page footers or headers
or similar word processing, document or page identification numbers in
this Agreement or any index or exhibit are for convenience of reference only
and shall not limit or otherwise affect any of the terms of this Agreement, nor
shall there be any requirement that any such footers or other numbers be
consistent from page to page. 
Unless the context clearly requires otherwise, any reference to a Section of
this Agreement refers to all Sections and Subsections thereunder.  Any pronoun used herein shall be deemed to
cover all genders.  Defined terms used in
this Agreement may be set forth in Section 1.1 or other Sections of this
Agreement, and all such definitions defined in the singular shall have a
corresponding meaning when used in the plural and vice versa.

 

10

 

(b)                                 Changes in GAAP.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Credit Document, and either the Borrowers or the Bank shall so request, the
Bank and each Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP; provided, however, that,
until so amended, (1) such ratio or requirement shall continue to be
computed in accordance with GAAP prior to such change therein, and (2) the
Borrowers shall provide to the Bank financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting
forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.

 

(c)                                  Bank’s Consent or Approval.  If, in this Agreement or any other Credit
Document, the Bank has the right to give or withhold its consent or similar
approval with respect to any matter, then — unless this Agreement or the other
Credit Document, as applicable, expressly and specifically provides otherwise —
the Bank shall be deemed to have the right to give or exercise, or to not give
or exercise, such consent or approval in its sole and absolute discretion,
and/or to condition its consent or approval in such manner as the Bank may
elect in its sole and absolute discretion; and any such consent or approval
shall be deemed to have not been given by the Bank unless such consent or
approval is evidenced by a contemporaneous writing signed or authenticated by
the Bank and delivered to a Borrower. 
The provisions of this Section 1.2(c) shall prevail over any
conflicting provisions of this Agreement or the other Credit Documents.

 

Section 2

Credit Facility

 

2.1                                 General.  The Bank agrees, subject to the terms and
conditions of this Agreement, to make a credit facility available to the
Borrowers upon request therefor, as provided in this Section 2.

 

2.2                                 Revolving Credit Loans.

 

(a)                                  General.  The Bank agrees, subject to the terms and
conditions of this Agreement, to make revolving credit loans (“Revolving
Credit Loans”) to the Borrowers from time to time from the Closing Date to
the Business Day immediately preceding the Revolving Credit Termination Date up
to a maximum principal amount at any time outstanding equal to the Borrowing
Base at such time.  In no event shall the
Bank be obligated to make any Revolving Credit Loan if any Default or Event of
Default exists or would result from the making of such Revolving Credit
Loan.  Subject to the terms and
conditions of this Agreement, the Borrowers may borrow, repay and re-borrow
under the Revolving Credit Loan facility.

 

(b)                                 Revolving Credit Note.  All Revolving Credit Loans shall be evidenced
by, and shall be payable in accordance with the terms and conditions of, a
promissory note substantially in the form of Exhibit A hereto (as amended,
renewed, restated, replaced, consolidated or otherwise modified from time to
time, the “Revolving Credit Note”).

 

2.3                                 Term Loan.

 

(a)                                  General.  The Bank agrees, subject to the terms and
conditions of this Agreement, to make a term loan (the “Term Loan”) to
the Borrowers on the Closing Date in the principal amount of $1,500,000.  In no event shall the Bank be obligated to
make the Term Loan if any Default or Event of Default exists or would result
from the making of the Term Loan.  The
Borrowers shall not have the right to re-borrow any Term Loan principal which
has been previously borrowed and repaid.

 

11

 

(b)                                 Term Note.  The Term Loan shall be evidenced by, and
shall be payable in accordance with the terms and conditions of, a promissory
note substantially in the form of Exhibit B hereto (as amended, renewed,
restated, replaced, consolidated or otherwise modified from time to time, the “Term
Note”).

 

2.4                                 Equipment Loans.

 

(a)                                  General.  The Bank agrees, subject to the terms and
conditions of this Agreement, to make equipment loans (each, an “Equipment
Loan”) to the Borrowers, during the Equipment Loan Availability Period,
subject to the following terms and conditions: 
(1) the proceeds of each Equipment Loan shall be used solely for
purposes of a Borrower purchasing new or used equipment to be used in a
Borrower’s business and which is otherwise reasonably acceptable to the Bank; (2) the
original principal amount of each Equipment Loan shall not exceed 90% of the
invoiced cost of any new equipment to be purchased thereby or 75% of the
invoiced cost of any used equipment to be purchased thereby (in each case exclusive
of shipping and other soft costs relating to such equipment); (3) the
aggregate original principal amount of all Equipment Loans shall not exceed
$200,000; (4) in no event shall the Bank be obligated to make any
Equipment Loan if a Default or Event of Default exists or would result from the
making of the requested Equipment Loan, or if, upon the Borrower’s acquisition
of the equipment to be purchased thereby, the Bank would not have a perfected
first priority security interest in such equipment, as security for the
Obligations, subject to no other Lien; (5) if a Borrower requests an
Equipment Loan, a Borrower shall provide to the Bank, not less than two
Business Days’ prior to the proposed funding date for such Equipment Loan (or
such lesser period of time as shall be acceptable to the Bank in its sole
discretion), written notice of the proposed principal amount of such Equipment
Loan, the equipment to be purchased thereby, copies of the equipment seller’s
invoice and related documentation with respect to the equipment to be
purchased, and such other information as the Bank may reasonably request.  The Borrowers shall not have the right to
re-borrow any Equipment Loan principal which has been previously borrowed and
repaid.

 

(b)                                 Equipment Note.  Each Equipment Loan shall be evidenced by,
and shall be payable in accordance with the terms and conditions of, a
promissory note substantially in the form of Exhibit C hereto (as amended,
renewed, restated, replaced, consolidated or otherwise modified from time to
time, an “Equipment Note”).

 

Section 3

Finance Charges, Repayment And Other Terms

 

3.1                                 Interest Rate.

 

(a)                                  Applicable Rate.  Interest shall accrue on the outstanding
principal balance of each Loan at the end of each day at the Applicable Rate in
effect on such day, except as otherwise provided in Section 3.1(b) below.

 

(b)                                 Default Rate.  Upon or after the occurrence and during the
continuation of any Event of Default, the principal amount of each Loan shall
bear interest at a rate per annum equal to three percent (3.0%) above the
interest rate that would otherwise apply under Section 3.1(a) above
(the “Default Rate”).

 

(c)                                  Late Fee.  In addition to interest payable at the
Default Rate or any other amounts payable under this Agreement or the other
Credit Documents, the Borrowers shall pay to the Bank a late fee in an amount
equal to five percent (5%) of the amount of each payment due under this
Agreement which is not received by the Bank within ten (10) days after its
due date.

 

12

 

(d)                                 Computation of Interest.  In all cases, interest on the outstanding
principal balance of all Loans and all other Obligations with respect to which
interest accrues pursuant to the terms of this Agreement shall be calculated on
a daily basis, computed on the basis of a 360-day year for the actual number of
days elapsed.

 

(e)                                  Usury.  In no contingency or event whatsoever shall
the aggregate of all amounts deemed interest hereunder or under any Note and
charged or collected pursuant to the terms of this Agreement or any other
Credit Documents exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem
applicable thereto.  If such a court
determines that the Bank has charged or received interest hereunder or under
the other Credit Documents in excess of the highest applicable rate, the Bank
shall apply such excess to any other Obligations then due and payable, whether
principal, interest, fees or otherwise, and shall refund the remainder of such
excess interest, if any, to a Borrower, and such rate shall automatically be
reduced to the maximum rate permitted by such law.

 

3.2                                 Payments of Principal, Interest
and Costs.  Except as
otherwise provided in this Agreement, the Borrowers jointly and severally agree
to pay the Obligations as follows:

 

(a)                                  Revolving Credit Loan.

 

(1)                                  Interest.  Accrued interest on the outstanding principal
balance of the Revolving Credit Loans is payable on the earlier to occur of (A) the
first day of each month (beginning July 1, 2010), or (B) the
Revolving Credit Termination Date.

 

(2)                                  Principal.  The outstanding principal balance of the
Revolving Credit Loans is payable on the Revolving Credit Termination Date.

 

(b)                                 Term Loan.

 

(1)                                  Interest. Accrued
interest on the outstanding principal balance of the Term Loan is payable on
the first day of each month, beginning July 1, 2010;

 

(2)                                  Principal.  Principal installments in respect of the Term
Loan are payable as follows:

 

(A)                              Year 1.  $50,000 on the first
day of each month, beginning August 1, 2010 and ending July 1, 2011,

 

(B)                                Year 2.  $41,667 on the first
day of each month, beginning August 1, 2011 and ending July 1, 2012,

 

(C)                                Year 3.    $33,333 on the first day of each
month, beginning August 1, 2012 and ending on the first day of the month
in which the Term Loan Termination Date occurs; and

 

(3)                                  Termination
Date.  On the Term Loan Termination
Date, any remaining principal outstanding under the Term Loan and all accrued
but unpaid interest outstanding and any other amounts owing under this Credit
Agreement shall be due and payable in their entirety.

 

13

 

(c)                                  Equipment Loans.

 

(1)                                  Amortized
Monthly Principal and Interest Payments.  Principal and interest on each Equipment Loan
shall be payable monthly, beginning on the first day of the month immediately
following the date such Loan was made, in an amount (as determined by the Bank
acting in a commercially reasonable manner) based upon a monthly amortization
of the original principal amount of such Loan; the Applicable Rate for
Equipment Loans; and an assumed amortization period equal to (i) five
years, if all proceeds of such Loan are used to acquire new equipment, or (ii) three
years, if any proceeds of such Loan are used to acquire used equipment;

 

(2)                                  Maturity.  The outstanding principal of the Equipment
Loans, all accrued but unpaid interest thereon and any other amounts owing on
the Equipment Loans are due and payable in their entirety on (i) with respect
to each Equipment Loan all of the proceeds of which were used to acquire new
equipment, five years after the date of disbursement of such Loan, and (ii) with
respect to each Equipment Loan any proceeds of which were used to acquire used
equipment, three years after the date of disbursement of such Loan.

 

(d)                                 Other Obligations.  Costs, fees and expenses and any other
Obligations payable pursuant to this Agreement or the other Credit Documents
shall be payable as and when provided in this Agreement or the other Credit
Documents, as the case may be, or, if no specific provision for payment is
made, on demand.

 

3.3                                 Voluntary Prepayments.  The Borrowers have the right, without penalty
or premium, to prepay the Loans, in whole or in part, at any time and from time
to time after the Closing Date.

 

3.4                                 Mandatory Prepayments.

 

(a)                                  General.  Except as otherwise provided below, if a
Borrower sells any Collateral other than the sale of inventory in the ordinary
course of such Borrower’s business, or if any Collateral is taken by
condemnation or other governmental taking, the Borrower shall pay to the Bank,
unless otherwise agreed by the Bank, as a mandatory prepayment of the Term
Loan, a sum equal to the proceeds received by such Borrower from such sale or
condemnation, and if the Term Loan has been paid in full, such proceeds shall
be applied to reduce the outstanding principal balance of the Revolving Credit
Loans; provided, however, that,
if no Default or Event of Default is in effect, the foregoing prepayment requirement
shall not apply to any equipment sales the aggregate proceeds of which are less
than $50,000 during any year. 
Notwithstanding anything in Section 3.4(a) to the contrary, if
a Borrower sells any equipment acquired pursuant to an Equipment Loan, the
proceeds of such sale shall first be applied as a mandatory prepayment of such
Equipment Loan, and if such Equipment Loan has been paid in full, shall be
applied as otherwise provided in this Section 3.4, in each case without
regard to the $50,000 exclusion referenced in the prior sentence.

 

(b)                                 Borrowing Base.  If the outstanding principal balance of
Revolving Credit Loans at any time exceeds the Borrowing Base at such time, the
Borrowers shall repay the Revolving Credit Loans in an amount sufficient to reduce
the aggregate unpaid principal amount of such Revolving Credit Loans by an
amount equal to such excess.

 

14

 

3.5                                 Method of Payment.  Payments due the Bank under this Agreement
and the other Credit Documents shall be made in immediately available funds to
the Bank at its office described in Section 8.1 below unless the Bank
gives notice to the contrary.  Payments
so received at or before 1:00 p.m. Kansas City time on any Business Day
shall be deemed to have been received by the Bank on that Business Day.  Payments received after 1:00 p.m. Kansas
City time on any Business Day shall be deemed to have been received on the next
Business Day, and interest, if payable in respect of such payment, shall accrue
thereon until such next Business Day.

 

3.6                                 Use of Proceeds.

 

(a)                                  Revolving Credit Loans.  The Revolving Credit Loans shall be used
solely for purposes of (i) repaying any indebtedness owing by Borrowers to
Bank Midwest, N.A. on the Closing Date, and (ii) each Borrower’s working
capital needs and for general limited liability company purposes.

 

(b)                                 Term Loan.  The Term Loan shall be used solely for
purposes of repaying any indebtedness owing by Borrowers to Bank Midwest, N.A.
on the Closing Date.

 

(c)                                  No Margin Loans.  Notwithstanding anything herein to the
contrary, no Borrower shall, directly or indirectly, use any part of the Loan
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System, or to extend credit to any Person for the purpose of purchasing or
carrying any such margin stock, or for any purpose which violates, or is
inconsistent with, Regulation X of such Board of Governors.

 

3.7                                 Notice and Manner of
Borrowing.  The
Borrowers shall give the Bank notice of their intention to borrow under any
Revolving Credit Loan, in each case specifying: (1) the proposed funding
date of such Loan; (2) the amount of such Loan; and (3) whether the
principal amount of such Loan, together with the principal amount of all
Revolving Credit Loans then outstanding, is within the Borrowing Base at such
time.  All notices given under this Section by
a Borrower shall be irrevocable and shall be given not later than 11:00 a.m.
Kansas City time on the day on which such Loan is to be made.  For purposes of this Section, the Borrowers
agree that the Bank may rely and act upon any request for a Loan from any
individual who the Bank, absent gross negligence or willful misconduct, believes
to be a representative of a Borrower.

 

3.8                                 Capital Adequacy.  If the Bank determines that the adoption of
any law, rule or regulation regarding capital adequacy, or any change
therein or in the interpretation or application thereof or compliance by the Bank
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any central bank or governmental authority, does or
shall have the effect of reducing the rate of return on the Bank’s capital as a
consequence of its obligations hereunder to a level below that which the Bank
could have achieved but for such adoption, change or compliance (taking into
consideration the Bank’s policies with respect to capital adequacy) by an
amount deemed by the Bank, in its reasonable discretion, to be material, then
from time to time, after submission by the Bank to a Borrower of a written
demand therefor, the Borrowers shall pay to the Bank such additional amount or
amounts as will compensate the Bank for such reduction.  A certificate of the Bank claiming
entitlement to payment as set forth in this Section shall be delivered to
a Borrower.  Such certificate shall set
forth the nature of the occurrence giving rise to such payment, the additional
amount or amounts to be paid to the Bank, and the method by which such amounts
were determined.  In determining such
amount, the Bank may use any reasonable averaging and attribution method.

 

3.9                                 Application of Payments and
Collections.  Each
Borrower irrevocably waives the right to direct the application of any and all
payments and collections at any time or times after the Closing Date 

 

15

 

received
by the Bank from or on behalf of a Borrower, and each Borrower agrees that the
Bank has the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times after the Closing Date
by the Bank or its agent against the Obligations, in such manner as the Bank
may deem advisable, notwithstanding any entry by the Bank upon any of its books
and records.

 

3.10                           Periodic Statement.  Insofar as the Bank makes available to one or
more of the Borrowers a periodic statement of loan balances, accrued interest
and principal and interest payments received pursuant to this Agreement, any
such statement rendered by the Bank shall be deemed final, binding and
conclusive upon the Borrowers unless the Bank is notified by a Borrower in
writing to the contrary within 60 days after the date each such statement is
made available to a Borrower.  Any such
notice by a Borrower shall only be deemed an objection to those items
specifically objected to in such notice.

 

3.11                           Unused Line Fee.  The Borrowers jointly and severally agree to
pay to the Bank, on the first day of each month for the preceding month, a fee
(the “Unused Line Fee”) at a rate per annum equal to three-eighths of
one percent (0.375%) of the difference between (1) the Maximum Amount, and
(2) the Average Daily Credit Balance for such preceding month.  The “Maximum Amount” means (i) $2,200,000
during the Equipment Loan Availability Period, and (ii) $2,000,000 at all
other times.  If this Agreement is
terminated on a day other than the first day of a month, the Bank, acting in a
commercially reasonable manner, shall pro-rate or otherwise adjust the amount
of the Unused Line Fee accordingly and such fee shall be payable on such
termination date.  Similarly, if the
period of time giving rise to the initial Unused Line Fee payable under this
Agreement does not equal a full calendar month, the Bank, acting in a
commercially reasonable manner, shall pro-rate or otherwise adjust the Unused
Line Fee to reflect such different time period.

 

3.12                           Closing Fee.  The Borrowers shall pay to the Bank a closing
fee of $35,000 which shall be deemed fully earned and nonrefundable at the
closing of the transactions contemplated hereby and which shall be paid on the
Closing Date.  Such fee shall compensate
the Bank for the costs associated with the origination, structuring,
processing, approving and closing of the transactions contemplated by this
Agreement, including, but not limited to, administrative, general overhead and
lost opportunity costs, but not including any out-of-pocket or other costs,
fees or expenses for which the Borrowers have agreed to reimburse the Bank
pursuant to any other provision of this Agreement or the other Credit Documents
or any commitment letter, letter of intent or similar agreement.

 

3.13                           Libor Provisions.

 

(a)                                  Market Disruption.  Notwithstanding anything in this Agreement to
the contrary, if, prior to the determination of any Libor Rate, the Bank
determines (which determination shall be conclusive) that any condition exists
which impairs the Bank’s ability to readily or reliably ascertain the Libor
Rate (whether due to disruption in the relevant markets, suspension of
quotations, or otherwise), the Bank shall give the Borrower prompt notice
thereof, and so long as such condition remains in effect, interest shall accrue
on the outstanding principal balance of the Revolving Credit Loans at a
fluctuating interest rate based on such alternative reference rate, together
with such margin thereto, as the Bank, acting in a commercially reasonable
manner, may select that approximates the interest rate that would have been in
effect under this Agreement but for such condition (the “Alternative
Fluctuating Rate”).

 

(b)                                 Illegality; Regulatory
Change. Similarly, notwithstanding anything in this Agreement to the
contrary, if it becomes unlawful for the Bank to charge or collect interest
based on the London interbank offered rate, or if due to any legal or
regulatory change the Bank becomes subject to restrictions on the amount of or
category of assets or liabilities it may hold with respect to which interest
accrues at the London interbank offered rate, the Bank may give the Borrower
prompt written notice of such legal or regulatory impairment and, so long as
such illegality or regulatory impairment remains in 

 

16

 

effect,
interest shall accrue on the outstanding principal balance of the Revolving
Credit Loans at the Alternative Fluctuating Rate.

 

3.14                           Joint and Several Liability;
Subordination of Reimbursement Rights. All Loans and all other
Obligations of any Borrower shall constitute one general obligation of all of
the Borrowers.  Notwithstanding anything
to the contrary in this Agreement, the Notes or any other Credit Document, the
Borrowers shall be primarily and jointly and severally liable for all
Obligations of any Borrower to the Bank. 
Notwithstanding the foregoing, if, and to the extent, a Borrower is
deemed to be a guarantor of another Borrower hereunder, such Borrower’s joint
liability for any Loans made or other credit extended to or for the benefit of
such other Borrower shall be deemed to be a guaranty of payment and
performance, and not of collection.  To
the fullest extent permitted by law, each Borrower hereby waives promptness,
diligence, notice of acceptance, and any other notices of any nature whatsoever
with respect to any of the Obligations, and any requirement that the Bank
protect, secure, perfect or insure any Lien or any property subject thereto or
exhaust any right or take any action against any other Borrower, any Guarantor,
any other Person or any Collateral.  Each
Borrower agrees that any rights of subrogation, indemnification, reimbursement
or any similar rights it may have against any other Borrower with respect to
its joint and several liability, whether such rights arise under an express or
implied contract or by operation of law, shall be subject, junior and
subordinate in all respect to all Obligations of such Borrower to the Bank and
that the enforcement of such rights shall be stayed until such time as the
Borrowers shall have indefeasibly paid in full all Obligations of the Borrowers
to the Bank and the Bank shall be under no duty to extend credit to or for the
benefit of any Borrower.  The liability
of each Borrower under this Section shall be absolute and unconditional
irrespective of (a) any change in the time, manner or place of payment of,
or in any other term of, any of the Obligations, or any other amendment or
waiver of or any consent to departure from this Agreement, the Notes or any of
the other Credit Documents, (b) any exchange, release or non-perfection of
any Collateral or any release or amendment or waiver of or consent to departure
from any other guaranty, or any release of any Person liable in whole or in
part, for all or any of the Obligations, or (c) any other circumstance
which might otherwise constitute a defense available to or discharge of a
surety.

 

3.15                           Appointment of Borrowing
Agent.  Each Borrower hereby appoints
the other Borrower (the “Borrowing Agent”) as such Borrower’s agent and
attorney-in-fact to take any action, execute any document or instrument,
consent or agree to any amendment or other modification of the Credit Documents
or waiver of or departure from any of the terms thereof, to perform any
Obligation of the Borrowers hereunder, and to give or receive any notice by or
to any Borrower hereunder.  Without
limiting the generality of the foregoing, the Borrowing Agent may request Loans
or incur any other Obligation for the account of the other Borrower, and the
Borrowers shall be fully, and jointly and severally, bound by the actions of
the Borrowing Agent.  The Bank shall be
entitled to rely absolutely and without duty of inquiry or investigation upon
any agreement, request, communication or other notice given by the Borrowing
Agent under the Credit Documents (including, without limitation, any request by
the Borrowing Agent to make Loans to another Borrower) until two Business Days
after the Bank shall have received written notice from the Borrowers of the
revocation of this agency and power of attorney, which revocation, in
accordance with Section 7.1, shall constitute an Event of Default.

 

Section 4

Lending Conditions

 

4.1                                 Credit Documents.  Notwithstanding anything herein or in the
other Credit Documents to the contrary, the Bank shall not be obligated to make
the initial Loan under this Agreement to the Borrowers until the Bank has
received the following documents, duly executed and delivered by all parties
thereto, and otherwise satisfactory in form and content to the Bank:

 

17

 

(a)                                  Credit
Agreement.  This
Agreement;

 

(b)                                 Notes.  The Revolving Credit Note, the Term Note and,
if an Equipment Loan is to be made on the Closing Date, an Equipment Note;

 

(c)                                  Security
Agreement.  The
Security Agreement;

 

(d)                                 UCC Financing
Statements. 
Acknowledgment copies of filed Uniform Commercial Code financing
statements from each Borrower, as debtor, to the Bank, as secured party,
covering the Collateral, from such jurisdictions as the Bank deems necessary or
desirable to perfect its security interest in the Collateral;

 

(e)                                  Subordination
Agreement.  The C3
Subordination Agreement, together with attachments thereto containing copies of
the applicable subordinated notes bearing the required subordination legends;

 

(f)                                    LMT Pledge
Agreement Documents.  The LMT
Pledge Agreement; the original of each membership unit certificate encumbered
thereby and a stock power or similar transfer instrument for each such
certificate duly executed in blank by LMT; and one or more Uniform Commercial
Code financing statements, from LMT, as debtor, to the Bank, as secured party,
covering the property encumbered by the LMT Pledge Agreement, from such
jurisdictions as the Bank deems necessary or desirable to perfect its security
interest in such property

 

(g)                                 Insurance.  Copies of each Borrower’s property damage
insurance certificates (and, if requested by the Bank, copies of the related
insurance policies), together with loss payable endorsements on the Bank’s
standard form of loss payee endorsement (or which are otherwise acceptable to
the Bank) and which name the Bank as sole loss payee thereunder, and copies of
each Borrower’s liability insurance certificates (and, if requested by the
Bank, copies of the related liability insurance policies), together with endorsements
naming the Bank as an additional named insured thereunder;

 

(h)                                 Loan
Disbursement Instructions; Borrowing Base Certificate.  If requested by the Bank, written
instructions from the Borrowers to the Bank directing the application of
proceeds of the initial Loan made pursuant to this Agreement and a Borrowing
Base Certificate;

 

(i)                                     Certificate of
Borrower’s Secretary.  A
certificate executed by each Borrower’s members or a secretary or similar
representative of each Borrower whereby such Person(s) affirm that, among
other things, attached to such certificate is (1) a copy of such Borrower’s
members’ resolutions authorizing the borrowing of monies, the granting of Liens
and all other matters set forth in or contemplated by the Credit Documents to
which such Borrower is a party, (2) a copy of such Borrower’s operating
agreement as in effect on the Closing Date, (3) a copy of such Borrower’s
certificate of formation and all amendments thereto, and (4) a certificate
of good standing for such Borrower, dated on or immediately prior to the
Closing Date, from the Secretary of State of the state of its organization and
all other states in which the nature of its activities in such states require
it to be qualified as a foreign limited liability company in such states;

 

18

 

(j)                                     LMC-India
Documents.  A
certificate, signed by a duly authorized representative of LMC, whereby such
representative attests that attached to such certificate are true and correct
copies of the material organizational documents of LMC-India, as in effect on
the Closing Date, and any material agreements in effect on the Closing Date
between or among either or both of the Borrowers, on the one hand, and
LMC-India, on the other hand;

 

(k)                                  Certificate of
LMT’s Secretary.  A
certificate executed by the secretary or similar representative of LMT whereby
such Person affirms that, among other things, attached to such certificate is (1) a
copy of LMT’s directors’ resolutions authorizing the granting of Liens and all
other matters set forth in or contemplated by the LMT Pledge Agreement and any
other Credit Documents to which LMT is a party, (2) a copy of LMT’s
certificate of incorporation as in effect on the Closing Date, (3) a copy
of LMT’s by-laws and all amendments thereto, and (4) a certificate of good
standing for LMT, dated on or immediately prior to the Closing Date, from the
Secretary of State of the state of its incorporation;

 

(l)                                     Opinion of
Counsel. The favorable written opinion to the Bank of Foley and Lardner LLP,
counsel to the Borrowers, regarding the Borrowers, LMT, the Credit Documents
and the transactions contemplated by this Agreement and the other Credit
Documents;

 

(m)                               Bank Midwest
Payoff Letter.  A payoff
and lien release letter from Bank Midwest, N.A. regarding Debt due such
creditor that is to be paid in full and terminated on the Closing Date and the
release of any Liens held by such creditor on any assets of any Borrower;

 

(n)                                 LMT
Acknowledgment of C3’s Proxy Rights.  An acknowledgment from LMT that, as of the
Closing Date, a “Triggering Event of Default” has occurred under the C3 Proxy
which has not been cured or waived and that, as such, C3 has the present legal
right, as of the Closing Date, should it so elect, to exercise the voting,
consent and other rights granted to it under the C3 Proxy; and

 

(o)                                 Other Items.  Such other agreements, documents and
assurances as the Bank may reasonably request in connection with the
transactions described in or contemplated by the Credit Documents.

 

If
the Bank, in its sole and absolute discretion, elects to make a Loan
notwithstanding a Borrower’s failure to comply with all of the terms of this
Section, the Bank shall not be deemed to have waived the Borrowers’ compliance
therewith, nor to have waived any of the Bank’s other rights under this
Agreement; and in any event the Bank, if it so elects, may declare an immediate
Event of Default if the Borrowers fail to furnish to the Bank on demand any of
the Credit Documents described in this Section or otherwise fail to comply
with any condition precedent set forth in any Credit Document, in each case
irrespective of whether such failure occurs on or after the Closing Date or the
making of such Loan.

 

4.2                                 Additional Conditions
Precedent to Initial Loan.  The
Bank’s obligation to make the initial Loan under this Agreement shall also be
subject to the satisfaction, in the Bank’s reasonable judgment, of each of the
following conditions precedent:

 

19

 

(a)                                  Since the date
of the financial statements submitted by the Borrowers to the Bank immediately
prior to the Closing Date, there shall not have occurred any act or event which
could reasonably be expected to have a Material Adverse Effect;

 

(b)                                 No action,
proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, or which is related to or arises out of this Agreement or the other
Credit Documents or the consummation of the transactions contemplated hereby or
thereby or which, in the Bank’s reasonable determination, would make it
inadvisable to consummate the transactions contemplated by this Agreement or
the other Credit Documents; and

 

(c)                                  The Borrowers
shall have paid all legal fees and other closing or like costs and expenses of
the Bank which the Borrowers are obligated to pay hereunder.

 

4.3                                 Conditions Precedent to All
Loans.  The obligation of the Bank to
make each Loan under this Agreement (including, without limitation, the initial
Loan) shall be subject to the further conditions precedent that, on the date of
each such Loan:

 

(a)                                  The following
statements shall be true: (1) the representations and warranties of each
Borrower contained in this Agreement and the other Credit Documents are correct
in all material respects on and as of the date of such Loan as though made on
and as of such date (except to the extent any such representation or warranty
is expressly made as of a specific earlier date, in which case it shall only
have to have been correct as of such earlier date), and (2) there exists
no Default or Event of Default as of such date, nor would any Default or Event
of Default result from the making of the Loan requested by a Borrower;

 

(b)                                 The Borrowers
shall have signed and sent to the Bank, if the Bank so requests, a request for
advance, setting forth in writing the amount of the Loan requested and the
other information required pursuant to this Agreement; provided,
however, that the foregoing condition precedent shall not prevent
the Bank, if it so elects in its sole discretion, from making a Loan pursuant
to a Borrower’s non-written request therefor; and

 

(c)                                  The Bank shall
have received such other approvals, opinions or documents as it may reasonably
request.

 

Each
Borrower agrees that the making of a request by such Borrower for a Revolving
Credit Loan or an Equipment Loan, whether in writing, by telephone or
otherwise, shall constitute a certification by the Borrowers that all
representations and warranties of the Borrowers in the Credit Documents are
true in all material respects as of the date thereof (except to the extent any
such representation or warranty is expressly made as of a specific earlier
date, in which case it shall only have to have been correct as of such earlier
date) and that all required conditions to the making of such Loan have been
met.

 

Section 5

Representations And Warranties

 

5.1                                 Representations and
Warranties of the Borrowers.  The Borrowers jointly and severally represent
and warrant to the Bank as follows:

 

20

 

(a)                                  Organization and Existence.  Each Borrower (1) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its organization as reflected in the introductory paragraph of
this Agreement, (2) is in good standing in all other jurisdictions in
which it is required to be qualified to do business as a foreign limited
liability company, and (3) has obtained all licenses and permits and has
filed all registrations necessary to the operation of its business; except
where the failure to so qualify or to obtain such licenses or permits could not
reasonably be expected to have a Material Adverse Effect.

 

(b)                                 Authorization by the
Borrowers.  The
execution, delivery and performance by each Borrower of the Credit Documents to
which it is a party (1) are within such Borrower’s limited liability company
powers, (2) have been duly authorized by all necessary limited liability
company or similar action, (3) do not contravene such Borrower’s
certificate of formation, operating agreement or other constituent documents,
or any law or contractual restriction binding on or affecting such
Borrower or its properties, and (4) do not result in or require the
creation of any Lien upon any of the Collateral other than a Lien in favor of
the Bank.

 

(c)                                  Approval of Governmental
Bodies.  Except for the filing of a UCC
financing statement against each Borrower in the Uniform Commercial Code
records of the Office of the Secretary of State of Delaware, no authorization
or approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due execution,
delivery and performance by each Borrower of the Credit Documents to which it
is a party or the exercise by the Bank of its rights thereunder, including,
without limitation, the collection of any Collateral or the sale or other
disposition of any Collateral to any Person.

 

(d)                                 Enforceability of
Obligations.  The Credit
Documents are the legal, valid and binding joint and several obligations of the
Borrowers enforceable against the Borrowers in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforceability of creditors’ rights generally and subject to the discretion of
courts in applying equitable remedies.

 

(e)                                  Financial Statements.  All financial statements of the Borrowers
which have been furnished to the Bank fairly present in all material respects
the financial position of the Borrowers as of the dates reflected on the
financial statements, and fairly present in all material respects the results
of their respective operations for the period covered thereby, all in
accordance with GAAP, except for the omission of footnotes in interim financial
statements and subject to normal year-end adjustments.  All financial statements of any Guarantor
which a Borrower has furnished or caused to be furnished to the Bank fairly
present, in all material respects, the financial position of the Guarantor
named therein as of the dates reflected therein.  As of the Closing Date, there has been no
material adverse change in the financial condition or results from operations
of the Borrowers, taken as a whole, since the dates of the most recent
financial statements of the Borrowers submitted to the Bank.

 

(f)                                    Litigation.  There is no pending or, to any Borrower’s
knowledge, threatened action or proceeding affecting any Borrower or any
Guarantor or any of their respective properties before any court, governmental
agency or arbitrator which, if determined adversely to such Borrower or any
such Guarantor, could reasonably be expected to have a Material Adverse Effect.

 

(g)                                 Investments.  No Borrower has any Investments in any Person
except for Permitted Investments.

 

(h)                                 Existing Debt.  No Borrower has any Debt other than Permitted
Debt.

 

21

 

(i)                                     Taxes.  Each Borrower and each Guarantor, if any, has
filed all required federal, state, local and other tax returns and has paid, or
made adequate provision for the payment of, any taxes due pursuant thereto or
pursuant to any assessment received by such Person except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have
been provided.

 

(j)                                     Equity Interests and Records.  All outstanding equity interests of each
Borrower were and are properly issued, and all books and records of each
Borrower, including but not limited to its minute books and books of account,
are accurate and complete in all material respects.  The ownership of the Borrowers is set forth
in Schedule 5.1(j) of this Agreement. 
Except as may be otherwise set forth in Schedule 5.1(j), no Borrower is
obligated on or after the Closing Date to redeem or otherwise acquire, or pay
any dividends or make any other distributions in respect of, any of its equity
interests other than distributions in respect of tax obligations.

 

(k)                                  Hazardous Materials.  Each Borrower has complied with all
Environmental Laws and all of its facilities, leaseholds, assets and other
property comply with all Environmental Laws, except where such failure to
comply could not reasonably be expected to have a Material Adverse Effect.  There are no outstanding or, to any Borrower’s
knowledge, threatened citations, notices or orders of non-compliance with
Environmental Laws issued to a Borrower or relating to its facilities,
leaseholds, assets or other property. Each Borrower has been issued all
licenses, certificates, permits or other authorizations required under any
Environmental Law or by any federal, state or local governmental or
quasi-governmental entity, except where the failure to obtain such license,
certificate, permit or other authorization could not reasonably be expected to
have a Material Adverse Effect.

 

(l)                                     Negative Pledges.  No Borrower is a party to or bound by any
indenture, contract or other instrument or agreement which prohibits the
creation, incurrence or sufferance to exist of any Lien upon any of the
Collateral in favor of the Bank.

 

(m)                               Title to Property; Liens.  Each Borrower has good and valid (or, in the
case of real property, marketable) title to all assets and other property
purported to be owned by it, and the Bank has a perfected first priority Lien
thereon subject to no Lien other than Permitted Liens.

 

(n)                                 Insolvency.  After the execution and delivery of the
Credit Documents and the disbursement of the initial Loan hereunder, no
Borrower will be insolvent within the meaning of the United States Bankruptcy
Code or unable to pay its debts as they mature.

 

(o)                                 Fiscal Year.  Each Borrower’s fiscal year is a calendar
year and each Borrower’s fiscal quarter is a calendar quarter.

 

(p)                                 Pledge of LMC’s Equity
Interests; C3 Springing Proxy.  C3 has a perfected security interest in all
equity interests of LMC owned by LMT as security for the Borrowers’ obligations
under the C3 Subordinated Notes and the related Securities Purchase Agreement,
dated July 24, 2007, between C3 and the Borrowers.   As of the Closing Date, a “Triggering Event
of Default” has occurred under the C3 Proxy which has not been cured or waived
and C3 has the present legal right, as of the Closing Date, should it so elect,
to exercise the voting, consent and other rights granted to it under the C3
Proxy.

 

(q)                                 LMT Pledge.  Bank has a perfected security interest in all
equity interests of LMC owned by LMT as security for the Obligations.  By virtue of the C3 Subordination Agreement,
the Bank’s security interest in such equity interests is a first priority
security interest and C3’s security interest in such equity interests is a second
priority security interest; and, as of the Closing Date, no other Person has a
perfected security interest in such equity interests.

 

22

 

(r)                                    Survival of Representations.  All representations and warranties made in
this Section 5 shall survive the execution and delivery of the Credit
Documents and the making of the Loans.

 

Section 6

Covenants

 

6.1                                 Affirmative Covenants.  So long as any Obligations remain unpaid or
the Bank has any commitment to extend credit to or for the benefit of a
Borrower, the Borrowers jointly and severally covenant to the Bank as follows:

 

(a)                                  Compliance with Laws.  Each Borrower shall comply with all
applicable laws, rules, regulations and orders affecting such Borrower or its
properties, including, without limitation, all Environmental Laws, except where
such failure to comply could not reasonably be expected to have a Material
Adverse Effect.  Without limiting the
foregoing, each Borrower shall, and shall cause each of its Subsidiaries to, (1) ensure
that no Person who owns a controlling interest in or otherwise controls such
Borrower or any such Subsidiary is or shall be listed on the Specially
Designated Nationals and Blocked Person List or other similar lists maintained
by the Office of Foreign Assets Control (“OFAC”), the Department of the
Treasury or included in any Executive Orders, (2) not use or permit the
use of the proceeds of any Loans to violate any of the foreign asset control
regulations of OFAC or any enabling statute or Executive Order relating
thereto, and (3) comply with all applicable Bank Secrecy Act (“BSA”) laws
and regulations, as amended.  As required
by federal law and the Bank’s policies and practices, the Bank may need to
obtain, verify and record certain customer identification information and
documentation in connection with opening or maintaining accounts, or
establishing or continuing to provide services.

 

(b)                                 Reporting and Notice
Requirements.  The
Borrowers shall furnish to the Bank:

 

(1)                                  Monthly Financial
Statements.  As soon as
available and in any event within 30 days after the end of each month, an
internally prepared balance sheet of the Borrowers (on a consolidated and
consolidating basis) as of the end of such month and internally prepared income
statements of the Borrowers (on a consolidated and consolidating basis) as of
the end of such month for such month and for the fiscal year-to-date, each
certified by LMC’s chief financial officer;

 

(2)                                  Audited
Year-End Financial Statements.  As soon as available and in any event within
90 days after the end of each fiscal year of the Borrowers, final audited
financial statements (as described in subparagraph (1) above but including
statements of retained earnings and members’ equity) as of the end of such
fiscal year of the Borrowers (on a consolidated and consolidating basis)
reported on by and accompanied by the unqualified opinion of independent
certified accountants selected by the Borrowers and reasonably acceptable to
the Bank, and a copy of any management, operation or other letter or
correspondence from such accountant to a Borrower or any of its Affiliates in
connection therewith;

 

(3)                                  Monthly A/R
Aging Report.  As soon as
available and in any event within 15 days after the end of each month, an aging
report for each Borrower’s accounts receivable, certified by LMC’s chief
financial officer;

 

23

 

(4)                                  Monthly
Inventory Report.  As soon as
available and in any event within 15 days after the end of each month, a
summary of each Borrower’s inventory, certified by LMC’s chief financial
officer;

 

(5)                                  Monthly
Borrowing Base Certificate.  As soon as available and in any event within
15 days after the end of each month, a Borrowing Base Certificate;

 

(6)                                  Monthly EBITDA
Report.  As soon as available and in
any event within 15 days after the end of each month, a report, certified by
LMC’s chief financing officer, of the Borrowers’ consolidated and consolidating
EBITDA, by month, for each of the 12 preceding months;

 

(7)                                  Quarterly
Covenant Compliance Certificate.  As soon as available and in any event within
30 days after the end of each fiscal quarter of the Borrowers (beginning with
the fiscal quarter ending June 30, 2010), a Covenant Compliance
Certificate;

 

(8)                                  Quarterly
Distributions Compliance Certificate.  As soon as available and in any event within
30 days after the end of each calendar quarter, the amount of Distributions
made during such quarter and a report, certified by LMC’s chief financial
officer, setting forth the computations necessary to determine whether such
Distributions complied with the various tests and other restrictions contained
in Section 6.2(j) of this Agreement (it being understood that no such
certificate shall be required for any quarter during which no Distributions are
made);

 

(9)                                  Borrower Tax
Returns Promptly after being filed with the relevant taxing authority, copies
of all federal and state income tax returns filed by each Borrower and all
amendments thereto;

 

(10)                            Projections.  As soon as available and in any event before
the beginning of each fiscal year of the Borrowers, reasonably detailed monthly
projections of the Borrowers’ consolidated and consolidating earnings and
expenses for the next fiscal year of the Borrowers;

 

(11)                            Change in Key
Personnel.  Written
notice of any voluntary or involuntary termination of employment of either the
chief executive officer or the chief financial officer of any Borrower or of
any material reduction in the material responsibilities of any such officers;
in each case within 30 days after the occurrence thereof;

 

(12)                            Litigation.  Written notice of any lawsuit filed against
or any arbitration request served upon either Borrower if the amount of damages
claimed exceeds $50,000 (or, if no specific dollar amount is claimed, if the
amount of damages would likely exceed $50,000 if the claimant were to prevail
in the lawsuit or arbitration); in each case within 30 days after the Borrower
obtains notice of such lawsuit or arbitration request;

 

(13)                            LMT.  Written notice of (i) any voluntary or
involuntary removal or departure of any director of LMT, (ii) any
voluntary or involuntary 

 

24

 

cessation of employment of the president, chief
executive officer or chief financial officer (or equivalent office holders) of
LMT, (iii) any sale of all or substantially all of the assets or equity
interests of LMT, (iv) the filing of any bankruptcy or other insolvency
proceeding by or against LMT, or any substantially equivalent action such as
the appointment of a receiver or the like, or (v) the cessation of all
material operations of LMT; in each case within five Business Days after the
occurrence thereof; and

 

(14)                            Other.  Such other information respecting the
condition or operations, financial or otherwise, of the Borrowers, or the
financial condition of any Guarantor, as the Bank may reasonably request from
time to time.

 

All
financial statements described in clauses (1) and (2) above shall be
prepared in accordance with GAAP in all material respects and on a basis
consistent with the financial statements of the Borrowers delivered to the Bank
for the period ending most immediately prior to the Closing Date, except that
unaudited financial statements may be subject to normal year-end audit
adjustments and need not contain footnotes.

 

(c)                                  Preservation of Business and
Corporate Existence.  Each
Borrower shall: (1) carry on and conduct its principal business
substantially as it is now being conducted; (2) maintain in good standing
its existence and its right to transact business in those states in which it is
now or may after the Closing Date be doing business; and (3) maintain all
licenses, permits and registrations necessary to the conduct of its business;
except where the failure to so maintain its right to transact business or to
maintain such licenses, permits or registrations could not reasonably be
expected to have a Material Adverse Effect.

 

(d)                                 Insurance.  Each Borrower shall keep insured at all times
with financially sound and reputable insurers (1) all of its property of
an insurable nature, including, without limitation, all equipment, fixtures and
inventories, against fire and other casualties in such a manner and to the
extent that like properties are usually insured by others owning properties of
a similar character in a similar locality or as otherwise reasonably required
by the Bank, with the proceeds of such casualty insurance payable solely to the
Bank, and (2) against liability on account of damage to persons or
property (including product liability insurance and all insurance required
under all applicable worker’s compensation laws) caused by such Borrower or its
officers, directors, employees, agents or contractors in such a manner and to
the extent that like risks are usually insured by others conducting similar
businesses in the places where such Borrower conducts its business or as
otherwise reasonably required by the Bank, with the Bank being named as an
additional insured under such liability policies.  Each Borrower shall cause the insurers under
all of its insurance policies to provide the Bank at least 30 days prior
written notice of the termination of any such policy before such termination
shall be effective and to agree to such other reasonable matters in respect of
any such casualty insurance as provided in the Bank’s loss payee endorsement
provided to the Borrowers.  In addition,
each Borrower will, upon request of the Bank at any time, furnish a written
summary of the amount and type of insurance carried, the names of the insurers
and the policy numbers, and deliver to the Bank certificates with respect
thereto.

 

(e)                                  Payment of Taxes.  Each Borrower shall pay and discharge, before
they become delinquent, all taxes, assessments and other governmental charges
imposed upon it, its properties, or any part thereof, or upon the income or
profits therefrom and all claims for labor, materials or supplies which if
unpaid might be or become a Lien or charge upon any of its property, except
such items as it is in good faith appropriately contesting and as to which
adequate reserves have been provided in accordance with 

 

25

 

GAAP.  Each Borrower shall provide such evidence of
its compliance with this Section as the Bank may reasonably request from
time to time.

 

(f)                                    Maintenance of Properties
and Leases.  Each
Borrower shall: (1) maintain, preserve and keep its properties and every
part thereof in good repair, working order and condition in all material
respects (except for such properties as such Borrower in good faith determines
are not useful in the conduct of its business); (2) from time to time make
all necessary and customary property repairs, renewals, replacements, additions
and improvements thereto so that at all times the efficiency thereof shall be
fully preserved and maintained in all material respects; and (3) maintain
all leases of real or personal property in good standing, free of any material
defaults by such Borrower thereunder.

 

(g)                                 Employee Plans.  Each Borrower shall: (1) notify the Bank
promptly of the establishment of any Plan, except that prior to the
establishment of any “welfare plan” (as defined in Section 3(1) of
ERISA) covering any employee of a Borrower for any period after such employee’s
termination of employment other than such period required by the Consolidated
Omnibus Budget Reconciliation Act of 1986 or “defined benefit plan” (as defined
in Section 3(35) of ERISA), it will obtain the Bank’s prior written
approval of such establishment, such approval not to be unreasonably withheld,
conditioned or delayed; (2) at all times make prompt payments or
contributions to meet the minimum funding standards of Section 412 of the
Internal Revenue Code of 1986, as amended, with respect to each Plan; (3) promptly
after the filing thereof, furnish to the Bank a copy of any report required to
be filed pursuant to Section 103 of ERISA in connection with each Plan for
each Plan year, including but not limited to the Schedule B attached thereto,
if applicable; (4) notify the Bank promptly of any “reportable event” (as
defined in ERISA) or any circumstances arising in connection with any Plan
which might constitute grounds for the termination thereof by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United
States District Court of a trustee to administer the Plan, the initiation of
any audit or inquiry by the Internal Revenue Service or the Department of Labor
of any Plan or transaction(s) involving or related to any Plan, or any “prohibited
transaction” as defined in Section 406 of ERISA or Section 4975(c) of
the Internal Revenue Code of 1986, as amended; (5) notify the Bank prior
to any action that could result in the assertion of liability under Subtitle E
of Title IV of ERISA caused by the complete or partial withdrawal from any
multiemployer plan or to terminate any defined benefit plan sponsored by a
Borrower; and (6) promptly furnish such additional information concerning
any Plan as the Bank may from time to time request.

 

(h)                                 Notice of Default.  The Borrowers shall give prompt written
notice to the Bank of the occurrence of any Default or Event of Default under
any of the Credit Documents.  Similarly,
the Borrowers shall give prompt written notice to the Bank of any failure to
pay, perform or observe or any other default by a Borrower or any Guarantor
under or in connection with any of the C3 Subordinated Notes or under any other
existing or future agreement by which such Borrower or any such Guarantor is
bound if, in the case of any such other existing or future agreement, such
default could reasonably be expected to have a Material Adverse Effect.

 

(i)                                     Books and Records;
Inspection; Audits.  Each
Borrower shall: (1)  maintain complete and accurate books and
financial records in accordance with GAAP in all material respects (except that
interim financial statements need not contain footnotes and may be subject to
normal year-end audit adjustments); (2) during normal working hours (and
upon not less than 5 days prior written notice, unless a Default or Event of
Default exists) permit the Bank and Persons designated by the Bank to visit and
inspect its properties, to inspect its books and financial records (including
its journals, orders, receipts and correspondence which relates to its accounts
receivable), and (without regard to the foregoing 5-day prior notice
requirement) to discuss its affairs, finances and accounts receivable and
operations with its directors, officers, employees and agents and its
independent public accountants; and 

 

26

 

(3) permit
the Bank and Persons designated by the Bank to perform audits of such books and
financial records when and as requested by the Bank.

 

(j)                                     Bank May Perform
Obligations; Further Assurances.  So long as a Default or Event of Default
exists, each Borrower shall permit the Bank, if the Bank so elects in its sole
discretion, to pay or perform any of the Obligations hereunder or under the
other Credit Documents and to reimburse the Bank, on demand, or, if the Bank so
elects, by the Bank making a Revolving Credit Loan on the Borrowers’ behalf and
disbursing the same to the appropriate Persons, for all amounts expended by or
on behalf of the Bank in connection therewith and all reasonable costs and
expenses incurred by or on behalf of the Bank in connection therewith.  Each Borrower further agrees to execute,
deliver or perform, or cause to be executed, delivered or performed, all such
documents, agreements or acts, as the case may be, as the Bank may reasonably
request from time to time to create, perfect, continue or otherwise assure the
Bank with respect to any Lien created or purported to be created by any of the
Credit Documents or to otherwise create, evidence or assure the Bank’s rights
and remedies under, or as contemplated by, the Credit Documents or at law or in
equity.

 

(k)                                  Bank Accounts.  Each Borrower shall maintain all of its
operating accounts, including, without limitation, checking, savings and
collateral trust accounts, with the Bank.

 

6.2                                 Negative Covenants.  So long as any Obligations remain unpaid or
the Bank has any commitment to extend credit to or for the benefit of a
Borrower, the Borrowers jointly and severally covenant to the Bank as follows:

 

(a)                                  Liens.  No Borrower shall create or suffer to exist
any Lien, except for Permitted Liens, upon or with respect to any of its
properties, whether such Borrower owns or has an interest in such properties on
the Closing Date or at any time thereafter.

 

(b)                                 Debt.  No Borrower shall create or suffer to exist
any Debt except for Permitted Debt.

 

(c)                                  Restricted Investments.  No Borrower shall make or permit to exist any
Investments, except for Permitted Investments.

 

(d)                                 Structure; Fundamental
Changes; Disposition of Assets.  No Borrower shall merge or consolidate with
or be acquired by any other Person; and no Borrower shall acquire any equity
interests of, or any material portion of the assets of any business line or
other unit of, any other Person; and no Borrower shall change its limited
liability company or other organizational structure in any material respect or
in any respect which would be adverse to the Bank’s interests, or liquidate,
wind-up or dissolve itself; provided, however,
that (1) nothing in this Section 6.2(d) shall prohibit any
Investment permitted pursuant to Section 6.2(c), and (2) if no
Default or Event of Default exists or would result therefrom, any wholly-owned
subsidiary of a Borrower may merge or consolidate with a Borrower if after
giving effect to such merger or consolidation such Borrower is the surviving
entity.  No Borrower shall sell, lease or
otherwise transfer all or any part of its properties, real or personal, other
than, for so long as no Event of Default exists, (1) the sale of inventory
in the ordinary course of such Borrower’s business, and (2) the
disposition of obsolete equipment to the extent permitted under the terms of
this Agreement.

 

(e)                                  Sale-Leasebacks;
Subsidiaries; New Business.  No Borrower shall enter into any sale and
leaseback transaction with respect to any of its properties or create any
subsidiary, or manufacture any goods, render any services or otherwise enter
into any business which is not substantially similar to that existing on the
Closing Date.

 

27

 

(f)                                    Other Agreements.  No Borrower shall enter into any agreement
any term or condition of which violates any provision of this Agreement or any
other Credit Document.

 

(g)                                 Changes in Accounting
Principles; Fiscal Year.  No
Borrower shall make any change in its principles or methods of accounting as
currently in effect, except such changes as are permitted or required by GAAP,
nor shall a Borrower, without first obtaining the Bank’s written consent,
change its fiscal year.

 

(h)                                 Transactions With Affiliates.  No Borrower shall enter into or be a party to
any transaction or arrangement, including without limitation, the purchase,
sale or exchange of property of any kind or the rendering of any service, with
any Affiliate, except in the ordinary course of such Borrower’s business and
upon fair and reasonable terms substantially as favorable to such Borrower as
those which would be obtained in a comparable arms-length transaction with a
non-Affiliate.

 

(i)                                     Compensation.  No Borrower shall pay, directly or
indirectly, in any fiscal year, compensation in any form (including, without
limitation, by way of salaries, bonuses, pension or profit sharing
contributions or other deferred compensation) to any of its equity holders,
directors, officers, managers or employees in amounts which are in excess of
fair and reasonable compensation paid for similar services rendered by such
persons by businesses substantially similar to such Borrower’s.

 

(j)                                     Distributions and C3
Payments.  No Borrower
shall pay any dividends or make any other distributions in respect of any
equity interests of such Borrower or redeem or otherwise acquire any such
equity interests or make any payment or prepayment with respect to any
Permitted C3 Subordinated Debt (all of the foregoing being collectively
referred to herein as a “Distribution”); provided,
however, that:

 

(1)                                  Permitted C3 Debt Interest
Payments.  During each
fiscal quarter of the Borrowers (beginning with the fiscal quarter ending June 30,
2010), the Borrowers may pay interest then owing with respect to Permitted C3
Debt provided that each of the following clauses (A), (B) and (C) are
satisfied:

 

(A)                              at the time of such
Distribution and after giving effect to such Distribution:

 

(i)                                     the aggregate amount of
Available Cash and Unused Revolver Availability equals at least $500,000,

 

(ii)                                  the ratio of (1) Senior
Secured Debt at the end of the most recently ended calendar month, to (2) Adjusted
EBITDA for the 12 calendar months most recently ended, does not exceed 1.50 to
1,

 

(iii)                               Adjusted EBITDA for the 12
calendar months most recently ended equals at least $800,000, and

 

(iv)                              the ratio of (1) Adjusted
EBITDA for the 12 calendar months most recently ended (less
the amount of maintenance capital expenditures incurred during such 12 calendar
months, but only for those months consisting of June 2011 or any month
thereafter), to (2) 

 

28

 

Section 6.2(j) Total
Debt Service for such 12-month period, equals or exceeds 1.10 to 1;

 

(B)                                the aggregate amount of
Distributions paid pursuant to this clause (1) does not exceed $250,000
during any fiscal quarter of the Borrowers; and

 

(C)                                no Default or Event of
Default exists at the time of or would result from such Distribution;

 

(2)                                  LMCS Distributions.  LMCS may make any Distributions to LMC; and

 

(3)                                  LMC Stock Dividends.  LMC may make Distributions payable solely in
equity interests of LMC, subject, however, to the terms of the LMT Pledge
Agreement.

 

6.3                                 Specific Financial Covenants.  So long as any Obligations remain unpaid or
the Bank has any commitment to extend credit to or for the benefit of a
Borrower, the Borrowers jointly and severally covenant to the Bank as follows:

 

(a)                                  Senior Debt Leverage Ratio.  The Borrowers shall maintain, at the end of
each fiscal quarter of the Borrowers, a ratio of (1) Senior Secured Debt
at such time, to (2) Adjusted EBITDA for the four fiscal quarters then
ending, of not more than:

 

(i)                                     2.50 to 1, for
the Borrowers’ fiscal quarters ending June 30, 2010, September 30,
2010, December 31, 2010 and March 31, 2011;

 

(ii)                                  2.00 to 1, for
the Borrowers’ fiscal quarters ending June 30, 2011, September 30,
2011, December 31, 2011 and March 31, 2012; and

 

(iii)                               1.75 to 1, for
the Borrowers’ fiscal quarters ending June 30, 2012, September 30,
2012, December 31, 2012 and March 31, 2013.

 

(b)                                 Adjusted EBITDA.  The Borrowers shall achieve, at the end of
each fiscal quarter of the Borrowers (beginning with the fiscal quarter ending June 30,
2010), Adjusted EBITDA for the four fiscal quarters then ending of not less
than $800,000.

 

(c)                                  Net Worth Plus Subordinated
Debt.  The Borrowers shall maintain,
at the end of each fiscal quarter of the Borrowers (beginning with the fiscal
quarter ending June 30, 2010), Net Worth Plus Subordinated Debt of not
less than $7,500,000.

 

(d)                                 Senior Fixed Charge Coverage
Ratio.  The Borrowers shall maintain,
at the end of each fiscal quarter of the Borrowers (beginning with the fiscal
quarter ending June 30, 2010), a ratio of (1) Adjusted EBITDA for the
four fiscal quarters then ending, to (2) Senior Debt Service for such four
fiscal quarters, of not less than 1.25 to 1.

 

(e)                                  Total Fixed Charge Coverage
Ratio.  The Borrowers shall maintain,
at the end of each fiscal quarter of the Borrowers (beginning with the fiscal
quarter ending June 30, 2010), a ratio of (1) Adjusted EBITDA for the
four fiscal quarters then ending (less the amount
of maintenance capital expenditures incurred during such four fiscal quarters,
but only for those quarters ending on or after September 30, 2011), to (2) Total
Debt Service for such four fiscal quarters, of not less than 1.10 to 1.

 

29

 

Section 7

Default

 

7.1                                 Events of
Default.  Each of the following events
shall constitute an Event of Default hereunder:

 

(a)                                  Monetary
Default.  The Borrowers (i) fail to
pay any principal or interest under the Credit Documents when due, or any fee
payable pursuant to Section 3.11 or Section 3.12 of this Agreement
when due, or (ii) fail to pay any other monetary Obligation under the
Credit Documents within five days after a Borrower’s receipt of written demand
therefor from the Bank (which written demand shall describe with reasonable
specificity the nature of the Obligation and the amount due thereunder); or

 

(b)                                 Material
Non-Monetary Default.  The
Borrowers fail to perform or observe any term, covenant or other provision
contained in Sections 6.1(b), 6.1(c), 6.1(d), 6.1(h), 6.1(i), 6.1(j), 6.1(k),
6.2 or 6.3 of this Agreement in accordance with the terms thereof; or

 

(c)                                  Other
Non-Monetary Default.  (1) The
Borrowers fail to perform or observe any other term, covenant or other
provision in any Credit Document (other than any term, covenant or provision
addressed in Subsections (a) or (b) above) in accordance with the
terms thereof and, if such default is curable, the Borrowers fail to cure such
default within 30 days after written notice from the Bank specifying in
reasonable detail the nature of such default is received by a Borrower; or (2) any
“Event of Default” (as such term is defined in any other Credit Document to
which a Borrower, a Guarantor or LMT is a party) occurs, or a Borrower, a
Guarantor or LMT fails to perform or observe any obligation, term or other
provision of any Credit Document to which such Person is a party beyond any
applicable grace, cure or notice period; or

 

(d)                                 Misrepresentation.  Any representation or warranty made or
furnished by a Borrower, a Guarantor or LMT in connection with this Agreement
or the other Credit Documents proves to be incorrect, incomplete or misleading
in any material respect when made or when deemed made, or any such
representation or warranty becomes incorrect, incomplete or misleading in any
material respect and such Borrower or Guarantor or LMT, as the case may be,
fails to give the Bank prompt written notice thereof; or

 

(e)                                  Cross-Default.  (1) A Borrower fails to pay any Debt
(other than a monetary Obligation due the Bank under the Credit Documents, as
contemplated by Subsection (a) above) or to perform or observe any other
obligation or term in respect of such Debt (including, without limitation, any
Debt evidenced by any C3 Subordinated Note) and, as a result of any such
failure, the holder of such Debt accelerates or is entitled to accelerate the
maturity thereof or requires or is entitled to require a Person to purchase or
otherwise acquire such Debt (provided, however,
that the existence of the Existing C3 Defaults shall not constitute a Default
or Event of Default under this Subsection (e) unless C3 in fact
accelerates the maturity of any Debt evidenced by the C3 Subordinated Notes or
unless C3 in fact requires a Person to purchase or other acquire such Debt));
or (2) the Bank receives a notice from C3 pursuant to the C3 Subordination

 

30

 

Agreement that C3 intends to
take an Enforcement Action (as defined in the C3 Subordination Agreement) or,
whether or not such notice is given or received, C3 takes any such Enforcement
Action; or

 

(f)                                    Insolvency.  A Borrower or any Guarantor ceases to be
solvent or suffers the appointment of a receiver, trustee, custodian or similar
fiduciary or makes an assignment for the benefit of creditors; or any petition
for an order for relief is filed by or against a Borrower or any Guarantor
under the federal Bankruptcy Code or any similar state insolvency statute
(except, in the case of a petition filed against such Person, if such
proceeding is dismissed within 60 days after the petition is filed, unless
prior thereto an order for relief is entered under the federal Bankruptcy
Code); or a Borrower or any Guarantor makes any offer of settlement, extension
or composition to their respective unsecured creditors generally; or

 

(g)                                 Change of
Control.  (1) LMC ceases to own and
control, beneficially and of record, all of the issued and outstanding equity
interests of LMCS; or (2) the holders of the equity interests of LMC, as
of the Closing Date, in the aggregate cease to own and control, beneficially
and of record, at least 85% of the issued and outstanding equity interests of
LMC; or (3) C3 ceases to own and control, beneficially and of record, all
of the equity interests of LMC owned or purported to be owned by C3 on the
Closing Date; or (4) C3 ceases to have the right to appoint at least half
of the Board of Managers (or similar governing body) of LMC; or

 

(h)                                 Contest Credit
Documents.  A Borrower,
a Guarantor or LMT challenges or contests in any action, suit or proceeding the
validity or enforceability of any of the Credit Documents, the legality or
enforceability of any of the Obligations (or of C3’s voting or other rights
under the C3 Proxy) or the creation, attachment, perfection or priority of any
Lien granted to the Bank; or

 

(i)                                     Guaranty.  Any Guarantor revokes or attempts to revoke
(in whole or in part) the Guaranty signed by such Guarantor, or repudiates (in
whole or in part) such Guarantor’s liability thereunder or is in default under
the terms thereof or dies or is judicially declared incompetent; or

 

(j)                                     Judgments.  One or more uninsured judgments, decrees or
orders for the payment of money in excess of $250,000 in the aggregate during
any 12-month period is rendered against one or more Borrowers or any Guarantor;
or

 

(k)                                  Lien.  The Bank shall cease to have a duly perfected
first priority security interest in the Collateral subject to no Lien other
than Permitted Liens; or

 

(l)                                     Revocation of
Agency.  Any Borrower revokes or
limits, or takes any action purporting to revoke or limit, the appointment or
authority of the Borrowing Agent as such Borrower’s agent for purposes of
borrowing money or taking any other action described in or contemplated by Section 3.15
hereof; or

 

(m)                               License
Impairment; LMT Default.  (1) Any
actual or attempted revocation, rejection or other impairment at any time of
all or any part of any existing or future license agreement or other agreement
relating to any intellectual property 

 

31

 

rights between LMT, on the
one hand, and LMC and/or LMCS, on the other hand; or (2) the occurrence of
any other event described in Section 5 of the Conditional Consent, which
pursuant to the terms of such Section 5, is to give rise to an Event of
Default hereunder; or (3) LMT shall enter into the Potential Assignment
Transaction referred to in the Conditional Consent without contemporaneously
therewith entering into the LMT Security Agreement; or (4) if such
Potential Assignment Transaction is entered into, the SPE referred to therein
grants or suffers to exist any Lien on any of the LMC IP Assets referred to
therein, including, without limitation, any contractual rights relating to any
LMC IP Assets referred to therein that form any part of the LMT License
Agreement referred to therein or the LMC License Agreement referred to therein;
or (5) LMT shall default in the payment, performance or observance of any
existing or future written obligation of LMT to the Bank, in each case beyond
any applicable grace, cure or notice period, including, without limitation, any
such default under the Conditional Consent, the LMT Pledge Agreement or any
other Credit Document to which LMT is a party; or

 

(n)                                 Material
Adverse Change.  Any act or
event occurs which reasonably could be expected to have a Material Adverse
Effect.

 

7.2                                 Obligation to
Lend; Acceleration.  After the
occurrence and during the continuation of any Default, the Bank may declare the
obligation of the Bank to make Loans or to otherwise extend credit hereunder to
be terminated, whereupon the same shall forthwith terminate, or, if the Bank so
elects, to reduce Collateral advance rates or otherwise reduce the maximum
Borrowing Base by such amounts as the Bank elects in its sole and absolute
discretion from time to time.  After the
occurrence and during the continuation of any Event of Default, the Bank may
declare the Notes, all interest thereon, and all other Obligations to be
forthwith due and payable, whereupon the Notes, all such interest thereon and
all such other Obligations shall become and be forthwith due and payable,
without presentment, protest or further notice or demand of any kind, all of
which are waived by each Borrower.  If,
notwithstanding the foregoing, after the occurrence and during the continuation
of any Default or Event of Default, as the case may be, the Bank elects (any
such election to be in the Bank’s sole and absolute discretion) to make one or
more advances under this Agreement or to not accelerate all or any of the
Obligations, any such election shall not preclude the Bank from electing
thereafter (in its sole and absolute discretion) to not make advances or to
accelerate all or any of the Obligations, as the case may be.

 

7.3                                 Remedies.  Upon or after the occurrence and during the
continuation of any Event of Default, the Bank has and may exercise from time
to time the following rights and remedies:

 

(a)                                  All of the
rights and remedies of a secured party under the UCC or under other applicable
law, and all other legal and equitable rights to which the Bank may be
entitled, all of which rights and remedies shall be cumulative, and none of
which shall be exclusive, and all of which shall be in addition to any other
rights or remedies contained in this Agreement or any of the other Credit
Documents.

 

(b)                                 The right to
take immediate possession of the Collateral, and (1) to require the
Borrowers to assemble the Collateral, at the Borrower’s expense, and make it
available to the Bank at a place designated by the Bank which is reasonably
convenient to the Borrowers and the Bank, and (2) to enter upon and use
any premises in which a Borrower has an ownership, leasehold or other interest,
or wherever any of the Collateral shall be located, and to store, remove, abandon,
manufacture, sell, dispose of or otherwise use all or any part of the
Collateral on such premises without the payment of rent or any other fees by
the Bank to a Borrower or any other Person for the use of such premises or such
Collateral.

 

32

 

(c)                                  The right to
sell or otherwise dispose of all or any Collateral in its then condition, or
after any further manufacturing or processing thereof, at public or private
sale or sales, with such notice as may be required by law, in lots or in bulk,
for cash or on credit, all as the Bank, in its sole discretion, may deem
advisable.  The Borrowers agree that, if
prior notice of such sale is required, not less than 10 days prior written
notice to a Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof; and that such sale may be at
such locations as the Bank may designate in such notice.  The Bank has the right to conduct such sales
on each Borrower’s premises, without charge therefor, and such sales may be
adjourned from time to time in accordance with applicable law.  The Bank has the right to sell, lease or
otherwise dispose of Collateral, or any part thereof, for cash, credit or any
combination thereof, and the Bank may purchase all or any part of Collateral at
public or, if permitted by law, private sale and, in lieu of actual payment of
such purchase price, may set-off or credit the amount of such price against the
Obligations.

 

(d)                                 The Bank is
granted a license or other right to use, solely in connection with the
enforcement of its rights under this Agreement, without charge, all of each
Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any property of a
similar nature as it pertains to the Collateral or any other property of each
Borrower, in storing, removing, transporting, manufacturing, advertising,
selling or otherwise using the Collateral, and each Borrower’s rights in and under
such property shall inure to the Bank’s benefit.

 

(e)                                  The proceeds
realized from the sale of any Collateral may be applied, after the Bank is in
receipt of good funds, as follows: first, to the reasonable costs,
expenses and attorneys’ fees and expenses incurred by the Bank for collection
and for acquisition, completion, manufacture, protection, removal, storage,
sale and delivery of the Collateral; second, to any fees or expenses due
the Bank under the Credit Documents; third, to interest due upon any of
the Obligations; and fourth, to the principal of the Obligations; or in
such other manner as the Bank may elect in its sole discretion.  If any deficiency shall arise, the Borrowers
and each Guarantor, if any, shall remain jointly and severally liable to the
Bank therefor.  Any surplus remaining
after payment in full of the Obligations may be returned to a Borrower or to
whomever may be legally entitled thereto.

 

7.4                                 Right of
Set-off.  Upon or after the occurrence
and during the continuation of any Event of Default, the Bank is authorized at
any time and from time to time, without notice to the Borrowers (any such
notice being waived by the Borrowers), to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Bank to or for the credit
or the account of a Borrower against any and all of the Obligations
irrespective of whether or not the Bank has made any demand under this
Agreement or the other Credit Documents and although such Obligations may be
unmatured.  The rights of the Bank under
this Section are in addition to other rights and remedies (including,
without limitation, other rights of setoff or recoupment) which the Bank may
have.

 

Section 8

Miscellaneous

 

8.1                                 Notices.  Except as otherwise provided herein, all
notices, requests and demands to or upon a party to this Agreement to be
effective shall be in writing and shall be deemed validly given upon receipt
thereof, whether by personal delivery, U.S. mail, fax, other electronic
transmission or otherwise, in each case addressed as follows:

 

33

 

If to the Bank:

 

Enterprise Bank & Trust

12695 Metcalf Avenue

Overland Park, KS 
66213

Attn.:  Judson
Stanion

Fax No.: 
314-812-4031

 

with a copy (which shall not constitute notice) to:

 

Stinson Morrison Hecker LLP

1201 Walnut Street., Suite 2900

Kansas City, MO 
64106

Attn.:  Mark
Ovington, Esq.

Fax No.: 816-691-3495

 

If to a Borrower:

 

Liquidmetal Coatings, LLC

900 Rockmead

Suite 240

Kingwood, TX 
77339

Attn.:  Larry
Buffington

Fax No.: 
281-359-1185

 

or
to such other address or telecopy number as each party may designate for itself
by like notice given in accordance with this Section.

 

8.2                                 Power of
Attorney.  Each
Borrower irrevocably designates, makes, constitutes and appoints the Bank, and
all Persons designated by the Bank, as such Borrower’s true and lawful attorney
and agent-in-fact (such power of attorney and agency being coupled with an
interest and therefore irrevocable until the Obligations have been indefeasibly
paid in full and the Bank has no duty to extend credit to or for the benefit of
a Borrower), and the Bank, and any Persons designated by the Bank, may, at any
time except as otherwise provided below, and without notice to or the consent
of the Borrowers and in either a Borrower’s or the Bank’s name, but at the cost
and expense of the Borrowers, (1) pay and perform any Obligation to be
paid or performed under any of the Credit Documents, (2) endorse a
Borrower’s name on any checks, notes, acceptances, drafts, money orders or any
other evidence of payment or proceeds of the Collateral which come into the
possession of the Bank or under the Bank’s control, and (3) at any time an
Event of Default exists, (a) to the extent the Collateral consists of
accounts receivable, instruments, payment intangibles or other payment rights,
demand payment of and collect all amounts due thereunder from all Persons
obligated thereon and enforce payment thereof by legal proceedings or
otherwise, and generally exercise all of each Borrower’s rights and remedies
with respect to the collection of such Collateral, (b) settle, adjust,
compromise, discharge or release any Collateral or any legal proceedings
brought to collect any Collateral, (c) sell or otherwise transfer any
Collateral upon such terms, for such amounts and at such time or times as the
Bank deems advisable, (d) take control, in any manner, of any item of
payment or proceeds relating to any Collateral, (e) prepare, file and sign
a Borrower’s name to a proof of claim in bankruptcy or similar document against
any account debtor or to any notice of Lien, assignment or satisfaction of Lien
or similar document in connection with any of the Collateral, (f) endorse
the name of a Borrower upon any of the items of payment or proceeds relating to
any Collateral and deposit the same to the account of the Bank on account of
the Obligations, (g) endorse the name of a Borrower upon any instrument,
chattel paper or similar document or agreement relating to 

 

34

 

any Collateral, (h) make and adjust claims
under policies of insurance, (i) access and use any computer or other
electronic hardware and software and other electronic records and access
devices to which any Borrower has access for any purpose relating to any
Collateral, (j) make and retain paper or electronic copies of all paper
and electronic records and other documents of each Borrower described in this Section 8.2;
and (k) do all other acts and things necessary, in the Bank’s
determination, to fulfill each Borrower’s obligations under this Agreement.

 

8.3                                 Indemnity.  Each Borrower agrees to indemnify, defend and
hold harmless the Bank and each shareholder, director, officer, employee,
agent, attorney and other representative of or contractor for the Bank from and
against any and all damages, settlement amounts, expenses (including, without
limitation, attorney’s fees and court costs), other losses, claims or other
assertions of liability of any nature whatsoever incurred by or on behalf of or
asserted against, as the case may be, any one or more of such indemnified
parties at any time arising in whole or in part out of a Borrower’s failure to
observe, perform or discharge any of its duties under any of the Credit
Documents or any misrepresentation made by or on behalf of such Borrower under
any of the Credit Documents.  Without
limiting the generality of the foregoing, this indemnity shall extend to any
claims asserted against the Bank or such other indemnitees by any Person under
any Environmental Laws or similar laws by reason of a Borrower’s or any other
Person’s failure to comply with laws applicable to Hazardous Substances.  Each Borrower further agrees to indemnify,
defend and hold harmless the Bank and each shareholder, director, officer,
employee, agent, attorney and other representative of or contractor for the
Bank from and against any and all damages, settlement amounts, expenses
(including, without limitation, attorneys’ fees and court costs), other losses,
claims or other assertions of liability of any nature whatsoever incurred by or
on behalf of or asserted against, as the case may be, any one or more of such
indemnified parties at any time in connection with any one or more indemnified
parties’ actions or inactions relating in any respect to the Credit Agreement,
any of the other Credit Documents or any of the transactions described in or
contemplated by any of the foregoing (including, without limitation, any such
losses incurred by any one or more indemnified parties arising out of any claim
by any Guarantor), except to the extent such losses arise out of such
indemnified party’s gross negligence, bad faith or willful misconduct.  All indemnities given by a Borrower to the
Bank under the Credit Documents, including, without limitation, the indemnities
set forth in this Section, shall survive the repayment of the Loans and the
termination of this Agreement.

 

8.4                                 Entire
Agreement; Modification of Agreement; Sale of Interest.  This Agreement and the other Credit
Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto,
embodies the entire agreement between the parties hereto and thereto with
respect to the subject matter hereof and thereof and supersedes all prior
agreements, understandings and inducements, whether express or implied, oral or
written.  This Agreement may not be
modified, altered or amended, except by an agreement in writing signed by the
Borrowers and the Bank.  No Borrower may
directly or indirectly sell, assign or transfer any interest in or rights under
this Agreement or any of the other Credit Documents.  Each Borrower consents to the Bank’s
participation, sale, assignment, transfer or other disposition, at any time or
times on or after the Closing Date, of this Agreement and any of the other
Credit Documents, or of any portion hereof or thereof, including, without
limitation, the Bank’s rights, title, interests, remedies, powers and duties
hereunder or thereunder.

 

8.5                                 Reimbursement
of Expenses.  If, at any
time or times prior or subsequent to the Closing Date, regardless of whether an
Event of Default then exists or any of the transactions contemplated hereunder
are concluded, the Bank employs counsel for advice or other representation, or
incurs reasonable legal and/or appraisers’, liquidators’, engineers’ expenses
and/or other costs or out-of-pocket expenses in connection with: (a) the
negotiation and preparation of this Agreement and any of the other Credit
Documents, any amendment or other modification of this Agreement or any of the
other Credit Documents, or any sale or attempted sale of any interest herein or
therein to a participating lender or other 

 

35

 

Person; (b) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by the Bank, a Borrower or any
other Person) in any way relating to the Collateral, this Agreement, any of the
other Credit Documents or a Borrower’s affairs; (c) any attempt to enforce
any rights of the Bank against a Borrower or any other Person which may be
obligated to the Bank by virtue of this Agreement or any of the other Credit
Documents, including, without limitation, any account debtors, irrespective of
whether litigation is commenced in pursuance of such rights; and/or (d) any
attempt to inspect, verify, protect, preserve, restore, collect, sell,
manufacture, liquidate or otherwise dispose of or realize upon the Collateral
(all of which are hereinafter collectively referred to as the “Expenses”);
then, in any and each such event, such Expenses shall be jointly and severally
payable on demand by the Borrowers to the Bank, and shall be additional
Obligations and be secured by the Collateral and may be funded, if the Bank so
elects, by the Bank making a Revolving Credit Loan or other loan under this
Agreement on the Borrowers’ behalf and paying the same to the Persons to whom
such Expenses are payable.  Additionally,
if any taxes (excluding taxes imposed upon or measured by the income of the
Bank) shall be payable on account of the execution or delivery of this
Agreement or the other Credit Documents, or the execution, delivery, issuance
or recording of any of the Credit Documents, or the creation of any of the
Obligations hereunder, by reason of any federal, state or local statute or
other law existing on or after the Closing Date, the Borrowers will pay all
such taxes, including, but not limited to, any interest and penalties thereon,
and will indemnify and hold the Bank harmless from and against all liabilities
in connection therewith.

 

8.6                                 Indulgences Not
Waivers.  The Bank’s failure, at any
time or times on or after the Closing Date, to require strict performance by a
Borrower of any provision of this Agreement or the other Credit Documents shall
not waive, affect or diminish any right of the Bank thereafter to demand strict
compliance and performance therewith. 
Any suspension or waiver by the Bank of a Default or an Event of Default
by the Borrowers under this Agreement or any of the other Credit Documents
shall not suspend, waive or affect any other Default or Event of Default by the
Borrowers under this Agreement or any of the other Credit Documents, whether
the same is prior or subsequent thereto and whether of the same or of a
different type.  None of the
undertakings, agreements, warranties, covenants and representations of the
Borrowers contained in this Agreement or any of the other Credit Documents and
no Default or Event of Default by the Borrower under this Agreement or any of
the other Credit Documents shall be deemed to have been suspended or waived by
the Bank, unless such suspension or waiver is by an instrument in writing
specifying such suspension or waiver and is signed by a duly authorized
representative of the Bank and directed and delivered to the Borrowers.

 

8.7                                 Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

8.8                                 Successors and
Assigns.  This Agreement and the other
Credit Documents shall be binding upon and inure to the benefit of the
successors and assigns of each Borrower and the Bank.  This provision, however, shall not be deemed
to modify Section 8.4 hereof.

 

8.9                                 General Waivers
by Borrower.  Except as
otherwise expressly provided for in this Agreement, each Borrower waives: (a) presentment,
protest, demand for payment, notice of dishonor demand and protest and notice
of presentment, default, notice of nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts
receivable, contract rights, documents, instruments, chattel paper and
guaranties at any time held by the Bank on which such Borrower may in any way
be liable and ratifies and confirms whatever the Bank may do in this regard; (b) notice
prior to taking possession or control of the Collateral or any bond or security
which 

 

36

 

might be required by any court prior to allowing the
Bank to exercise any of the Bank’s remedies, including the issuance of an
immediate writ of possession; (c) the benefit of all valuation,
appraisement and exemption laws; and (d) any and all other notices,
demands and consents in connection with the delivery, acceptance, performance,
default or enforcement of this Agreement or any of the other Credit Documents
and/or any of the Bank’s rights in respect of the Collateral.  Subject to the following sentence, each
Borrower also waives any right of setoff or similar right such Borrower may at
any time have against the Bank as a defense to the payment or performance of
such Borrower’s Obligations.  If a
Borrower now or hereafter has any claim against the Bank giving rise to any
such right of setoff or similar right, such Borrower agrees not to assert such
claim as a defense or right of setoff with respect to such Borrower’s
Obligations under the Credit Documents or otherwise, and to instead assert any
such claim, if such Borrower so elects to assert such claim, in a separate
proceeding against the Bank and not as a part of any proceeding or as a defense
to any claim initiated by the Bank to enforce any of the Bank’s rights under any
of the Credit Documents.

 

8.10                           Collateral
Protection Act Notice.  The
following notice is given pursuant to Mo. Rev. Stat. § 427.120:  “UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE
COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT
YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT
YOUR INTERESTS.  THE COVERAGE THAT WE
PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE
AGAINST YOU IN CONNECTION WITH THE COLLATERAL. 
YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER
PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR
AGREEMENT.  IF WE PURCHASE INSURANCE FOR
THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING
THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE
IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF
THE CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED
TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION.  THE COSTS OF THE INSURANCE MAY BE MORE
THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.”

 

8.11                           Mo. Rev. Stat.
§ 432.047 Statement.  The
following statement is given pursuant to Mo. Rev. Stat. § 432.047:  “Oral
agreements or commitments to loan money, extend credit or to forbear from
enforcing repayment of a debt including promises to extend or renew such debt
are not enforceable, regardless of the legal theory upon which it is based that
is in any way related to the credit agreement. 
To protect you (borrower(s)) and us (creditor) from misunderstanding or
disappointment, any agreements we reach covering such matters are contained in
this writing, which is the complete and exclusive statement of the agreement
between us, except as we may later agree in writing to modify it.”  For purposes of this Section 8.11 and
the foregoing Missouri statute, all terms of the other Credit Documents are
incorporated in and made part of this Agreement by reference; provided, however, that to the extent of any direct conflict
between this Agreement and such other Credit Documents, this Agreement shall
prevail and govern.

 

8.12                           Execution in
Counterparts; Facsimile Signatures.  This Agreement and the other Credit Documents
may be executed in any number of counterparts and by different parties thereto,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.  A signature of a party
to any of the Credit Documents sent by facsimile or other electronic means
shall be deemed to constitute an original and fully effective signature of such
party.

 

37

 

8.13                           USA Patriot Act
Notice.  The Bank notifies each
Borrower that, pursuant to the requirements of the USA Patriot Act (Title III
of Pub. L. 107-56 (signed into law October 26, 2001) (the “Act”),
it is required to obtain, verify and record information that identifies such Borrower,
which information includes the name and address of such Borrower and other
information that will allow the Bank to identify such Borrower and any
Guarantors in accordance with the Act. 
Each Borrower agrees to provide such information and take such other
action as the Bank may request from time to time to enable the Bank to comply
with the provisions of the Act with respect to the transactions described in
the Credit Documents.

 

8.14                           Governing Law;
Consent to Forum.  This
Agreement shall be governed by the laws of the State of Missouri without giving
effect to any choice of law rules thereof. 
As part of the consideration for new value this day received, each
Borrower consents to the jurisdiction of any state or federal court located
within Jackson County, Missouri (collectively, the “Chosen Forum”), and
waives personal service of any and all process upon it and consents that all
such service of process be made by certified or registered mail directed to
such Borrower at the address stated in Section 8.1 hereof and service so
made shall be deemed to be completed upon delivery thereto.  Each Borrower waives any objection to
jurisdiction and venue of any action instituted against it as provided herein
and agrees not to assert any defense based on lack of jurisdiction or
venue.  Each Borrower further agrees not
to assert against the Bank (except by way of a defense or counterclaim in a
proceeding initiated by the Bank) any claim or other assertion of liability
relating to any of the Credit Documents, the Obligations, the Collateral or the
Bank’s actions or inactions in respect of any of the foregoing in any
jurisdiction other than the Chosen Forum. 
Nothing in this Agreement shall affect the Bank’s right to bring any
action or proceeding relating to this Agreement or the other Credit Documents
against a Borrower or its properties in courts of other jurisdictions.

 

8.15                           Waiver of Jury
Trial; Limitation on Damages.  To the fullest extent permitted by law, and
as separately bargained-for consideration to the Bank, each Borrower waives any
right to trial by jury (which the Bank also waives) in any action, suit,
proceeding or counterclaim of any kind arising out of or otherwise relating to
any of the Credit Documents, the Obligations, the Collateral or the Bank’s
actions or inactions in respect of any of the foregoing.  To effectuate the foregoing, each Borrower
grants the Bank an irrevocable power of attorney to file, as attorney-in-fact
for such Borrower, a copy of this Agreement in any Missouri court pursuant to
Mo. Rev. Stat. § 510.190 and Rule 69.01, V.A.M.R. and/or any other
applicable law, and the copy of this Agreement so filed shall conclusively be
deemed to constitute such Borrower’s waiver of trial by jury in any proceeding
arising out of or otherwise relating to any of the Credit Documents, the
Obligations, the Collateral or the Bank’s actions or inactions in respect of
any of the foregoing.  To the fullest extent permitted by law, and
as separately bargained-for consideration to the Bank, each Borrower also waives any right it may have at any time to claim or
recover in any litigation or other dispute involving the Bank, whether the
underlying claim or dispute sounds in contract, tort or otherwise, any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages.  Each
Borrower acknowledges that the Bank is relying upon and would not enter into
the transactions described in the Credit Documents on the terms and conditions
set forth therein but for such Borrower’s waivers and agreements under this
Section.

 

[signature page(s) to follow]

 

38

 

IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly authorized representatives
as of the date first above written.

 

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ENTERPRISE BANK & TRUST

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

Credit Agreement – Signature Page

 

 

Exhibit A

 

REVOLVING CREDIT NOTE

 

	
  $2,000,000

  	
   

  	
  June 23, 2010

  

 

For value received, LIQUIDMETAL COATINGS, LLC, a
Delaware limited liability company, and LIQUIDMETAL COATINGS, LLC, a Delaware
limited liability company (each a “Borrower” and, collectively, the “Borrowers”),
jointly and severally promise to pay to the order of ENTERPRISE BANK &
TRUST, a Missouri banking corporation (the “Bank”; which term shall
include any subsequent holder hereof), in lawful money of the United States of
America, without setoff, recoupment, deduction or counterclaim, the principal
sum of Two Million and 00/100 Dollars ($2,000,000.00) or, if different, the
principal amount outstanding under Section 2.2 of the Credit Agreement
referred to below.

 

This Revolving Credit Note (the “Note”) is
the Revolving Credit Note referred to in, is issued pursuant to, and is subject
to the terms and conditions of, the Credit Agreement, dated on or about the
date hereof, among the Borrowers and the Bank, as the same may be amended,
renewed, restated, replaced, consolidated or otherwise modified from time to
time (the “Credit Agreement”).  To
the extent of any direct conflict between the terms and conditions of this Note
and the terms and conditions of the Credit Agreement, the terms and conditions of
the Credit Agreement shall prevail and govern. 
Capitalized terms used and not defined in this Note have the meanings
given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal
balance of this Note as provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any,
to prepay this Note is subject to the terms and conditions of the Credit Agreement.

 

The termination of the Credit Agreement or the
occurrence of an Event of Default shall entitle the Bank, at its option, to
declare the then outstanding principal balance hereof, all accrued interest
thereon, and all other amounts, if any, payable in respect of this Note to be,
and the same shall thereupon become, immediately due and payable without notice
to or demand on the Borrowers, all of which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by applicable
law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other
notices, demands and consents in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and consents to any
extensions of time, renewals, releases of any parties to or guarantors of this
Note, waivers and any other modifications that may be granted or consented to
by the Bank from time to time in respect of the time of payment or any other
provision of this Note.

 

This Note shall be governed by the laws of the State
of Missouri, without regard to any choice of law rule thereof which gives
effect to the laws of any other jurisdiction.

 

[signature page to follow]

 

 

IN WITNESS WHEREOF, the Borrowers have executed and
delivered this Note as of the date first above written.

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

2

 

Exhibit B

 

TERM NOTE

 

	
  $1,500,000

  	
   

  	
  June 23, 2010

  

 

For value received, LIQUIDMETAL COATINGS, LLC, a
Delaware limited liability company, and LIQUIDMETAL COATINGS SOLUTIONS, LLC
(each a “Borrower” and, collectively, the “Borrowers”), jointly
and severally promise to pay to the order of ENTERPRISE BANK & TRUST,
a Missouri banking corporation (the “Bank”; which term shall include any
subsequent holder hereof), in lawful money of the United States of America,
without setoff, recoupment, deduction or counterclaim, the principal sum of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00).

 

This Term Note (the “Note”) is the Term Note
referred to in, is issued pursuant to, and is subject to the terms and conditions
of, the Credit Agreement, dated on or about the date hereof, among the
Borrowers and the Bank, as the same may be amended, renewed, restated,
replaced, consolidated or otherwise modified from time to time (the “Credit
Agreement”).  To the extent of any
direct conflict between the terms and conditions of this Note and the terms and
conditions of the Credit Agreement, the terms and conditions of the Credit
Agreement shall prevail and govern. 
Capitalized terms used and not defined in this Note have the meanings
given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal
balance of this Note as provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any,
to prepay this Note is subject to the terms and conditions of the Credit
Agreement.

 

The termination of the Credit Agreement or the
occurrence of an Event of Default shall entitle the Bank, at its option, to
declare the then outstanding principal balance hereof, all accrued interest
thereon, and all other amounts, if any, payable in respect of this Note to be,
and the same shall thereupon become, immediately due and payable without notice
to or demand upon the Borrowers, all of which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by applicable
law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other
notices, demands and consents in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and consents to any
extensions of time, renewals, releases of any parties to or guarantors of this
Note, waivers and any other modifications that may be granted or consented to
by the Bank from time to time in respect of the time of payment or any other
provision of this Note.

 

This Note shall be governed by the laws of the State
of Missouri, without regard to any choice of law rule thereof which gives
effect to the laws of any other jurisdiction.

 

[signature page to follow]

 

1

 

IN WITNESS WHEREOF, the Borrowers have executed and
delivered this Note as of the date first above written.

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

2

 

Exhibit C

 

EQUIPMENT NOTE

 

	
  $

  	
   

  	
  [date]

  

 

For value received, LIQUIDMETAL COATINGS, LLC, a
Delaware limited liability company, and LIQUIDMETAL COATINGS, LLC, a Delaware
limited liability company (each a “Borrower” and, collectively, the “Borrowers”),
jointly and severally promise to pay to the order of ENTERPRISE BANK &
TRUST, a Missouri banking corporation (the “Bank”; which term shall
include any subsequent holder hereof), in lawful money of the United States of
America, without setoff, recoupment, deduction or counterclaim, the principal
sum of
                                                                
and       /100 Dollars
($                              ).

 

This Equipment Note (the “Note”) is an
Equipment Note referred to in, is issued pursuant to, and is subject to the terms
and conditions of, the Credit Agreement, dated on or about June 23, 2010,
among the Borrowers and the Bank, as the same may be amended, renewed,
restated, replaced, consolidated or otherwise modified from time to time (the “Credit
Agreement”).  To the extent of any
direct conflict between the terms and conditions of this Note and the terms and
conditions of the Credit Agreement, the terms and conditions of the Credit
Agreement shall prevail and govern. 
Capitalized terms used and not defined in this Note have the meanings
given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal
balance of this Note as provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any,
to prepay this Note is subject to the terms and conditions of the Credit
Agreement.

 

The termination of the Credit Agreement or the
occurrence of an Event of Default shall entitle the Bank, at its option, to
declare the then outstanding principal balance hereof, all accrued interest
thereon, and all other amounts, if any, payable in respect of this Note to be,
and the same shall thereupon become, immediately due and payable without notice
to or demand on the Borrowers, all of which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by applicable
law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other
notices, demands and consents in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and consents to any
extensions of time, renewals, releases of any parties to or guarantors of this
Note, waivers and any other modifications that may be granted or consented to
by the Bank from time to time in respect of the time of payment or any other
provision of this Note.

 

This Note shall be governed by the laws of the State
of Missouri, without regard to any choice of law rule thereof which gives
effect to the laws of any other jurisdiction.

 

[signature page to follow]

 

1

 

IN WITNESS WHEREOF, the Borrowers have executed and
delivered this Note as of the date first above written.

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

2

 

Exhibit D

 

(form of Borrowing Base Certificate)

 

BORROWING BASE CERTIFICATE

 

(for the
month ended
              )

 

This Borrowing Base Certificate (the “Certificate”)
is delivered pursuant to Section 6.1(b)(5) of the Credit Agreement,
dated as of June 23, 2010, among Liquidmetal Coatings, LLC and Liquidmetal
Coatings Solutions, LLC (each a “Borrower”), and Enterprise Bank &
Trust (the “Bank”), as the same may be amended from time to time (the “Credit
Agreement”).  Capitalized terms used
but not defined in this Certificate have the meanings given to them in the
Credit Agreement.

 

The undersigned hereby certifies that he or she is
the chief financial officer of the Borrowers and, as such, is authorized to
execute and deliver this Certificate on behalf of the Borrowers, and that:

 

1.                                       Borrowing Base
Calculation.  Attached
hereto is a spreadsheet showing the Borrowing Base, including its component
parts, as of the date indicated above, which Borrowing Base equals
$                            .

 

2.                                       Reliance.  This Certificate is delivered to and may be
conclusively relied upon by the Bank.

 

IN WITNESS WHEREOF, the undersigned has executed
this Certificate on behalf of the Borrowers on
                 
                   ,
20      .

 

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

1

 

Exhibit E

 

(form of Covenant Compliance Certificate)

 

COVENANT COMPLIANCE
CERTIFICATE

 

(for the
fiscal quarter ended
              )

 

This Covenant Compliance Certificate (the “Certificate”)
is delivered pursuant to Section 6.1(b)(7) of the Credit Agreement,
dated as of June 23, 2010, among Liquidmetal Coatings, LLC and Liquidmetal
Coatings Solutions, LLC (each a “Borrower”), and Enterprise Bank &
Trust (the “Bank”), as the same may be amended from time to time (the “Credit
Agreement”).  Capitalized terms used
but not defined in this Certificate have the meanings given to them in the
Credit Agreement.

 

The undersigned hereby certifies that he or she is
the chief financial officer of the Borrowers and, as such, is authorized to
execute and deliver this Certificate on behalf of the Borrowers, and that:

 

1.                                       Financial
Covenants.  Attached
hereto is a spreadsheet showing the Borrowers’ compliance or noncompliance with
the various financial covenants set forth in Section 6.3 of the Credit
Agreement as of, or for the applicable time periods ending on, the date
indicated above.

 

2.                                       Financial
Statements  The financial
statements described in Section 6.1(b) of the Credit Agreement for
the Borrowers for the fiscal quarter and, if applicable, fiscal year referred
to above, which are attached hereto and are incorporated herein by this
reference, fairly present the financial condition and results of operations of
the Borrowers in accordance with GAAP consistently applied, as at the end of,
and for, such period (subject, in the case of interim statements, to normal
year-end audit adjustments and to the absence of footnote disclosures).

 

3.                                       Other
Compliance.  A review of
the activities of the Borrowers during the period since the date of the last
Covenant Compliance Certificate (or, in the case of the initial delivery of
this Covenant Compliance Certificate, since the Closing Date) has been made at
my direction and under my supervision with a view to determining whether the
Borrowers have kept, observed and performed all of their respective obligations
under the Credit Agreement and all other Credit Documents to which they are a
party, and to the best of my knowledge after due inquiry and investigation, (a) the
Borrowers have kept, observed and performed all of their respective obligations
under the Credit Agreement and the other Credit Documents to which any Borrower
is a party, (b) no Default or Event of Default has occurred and is
continuing, and (c) all representations and warranties made by each
Borrower in the Credit Agreement and the other Credit Documents to which it is
a party are true and correct as of the date of this Certificate (unless the
representations or warranties relate to a specific earlier date, in which case
the representations and warranties were true and correct as of the earlier
date).

 

4.                                       Reliance.  This Certificate is delivered to and may be
conclusively relied upon by the Bank.

 

[signature page(s) to follow]

 

1

 

IN WITNESS WHEREOF, the undersigned has executed
this certificate on behalf of the Borrowers on
                  
                  ,
20      .

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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2

 

Schedule 5.1(j)

 

(Ownership of Borrowers)

 

1.                                       LMC owns all outstanding
equity interests of LMCS.

 

2.                                       The outstanding
equity interests of LMC, as of the Closing Date, are owned as follows:

 

Common Units:

 

(a)                                  LMT owns
47,436.25 Class A Common Units of LMC, which Class A Common Units
constitute 69.25% of all Common Units of LMC.

 

(b)                                 C3,
collectively, owns 13,015 Class B Common Units of LMC, which Class B
Common Units constitute 19% of all Common Units of LMC.

 

(c)                                  Larry
Buffington owns (i) 5,850 Class B Common Units of LMC, and (ii) 1,000
Class C Common Units of LMC; which Class B Common Units and Class C
Common Units together constitute 10% of all Common Units of LMC.

 

(d)                                 Global Strategy &
Capital Group, Inc., d/b/a CRESO Capital Partners, owns (i) 1,023.75 Class B
Common Units of LMC, and (ii) 175 Class C Common Units of LMC; which Class B
Common Units and Class C Common Units together constitute 1.75% of all
Common Units of LMC.

 

Preferred Units:

 

(e)                                  C3,
collectively, owns 2,500 Preferred Units of LMC, which Preferred Units
constitute all outstanding Preferred Units of LMC.

 

LMC has no equity interests outstanding on the
Closing Date, or holders of such equity interests as of the Closing Date, other
than as described in this paragraph number 2.Exhibit 10.2

 

REVOLVING CREDIT NOTE

 

	
  $2,000,000

  	
   

  	
  June 23, 2010

  

 

For value received, LIQUIDMETAL COATINGS, LLC, a
Delaware limited liability company, and LIQUIDMETAL COATINGS, LLC, a Delaware
limited liability company (each a “Borrower” and, collectively, the “Borrowers”),
jointly and severally promise to pay to the order of ENTERPRISE BANK &
TRUST, a Missouri banking corporation (the “Bank”; which term shall
include any subsequent holder hereof), in lawful money of the United States of
America, without setoff, recoupment, deduction or counterclaim, the principal
sum of Two Million and 00/100 Dollars ($2,000,000.00) or, if different, the
principal amount outstanding under Section 2.2 of the Credit Agreement
referred to below.

 

This Revolving Credit Note (the “Note”) is
the Revolving Credit Note referred to in, is issued pursuant to, and is subject
to the terms and conditions of, the Credit Agreement, dated on or about the
date hereof, among the Borrowers and the Bank, as the same may be amended,
renewed, restated, replaced, consolidated or otherwise modified from time to
time (the “Credit Agreement”).  To
the extent of any direct conflict between the terms and conditions of this Note
and the terms and conditions of the Credit Agreement, the terms and conditions
of the Credit Agreement shall prevail and govern.  Capitalized terms used and not defined in
this Note have the meanings given to them in the Credit Agreement.

 

Interest shall accrue on the outstanding principal
balance of this Note as provided in the Credit Agreement.  Principal, interest and all other amounts, if
any, payable in respect of this Note shall be payable as provided in the Credit
Agreement.  The Borrowers’ right, if any,
to prepay this Note is subject to the terms and conditions of the Credit
Agreement.

 

The termination of the Credit Agreement or the
occurrence of an Event of Default shall entitle the Bank, at its option, to
declare the then outstanding principal balance hereof, all accrued interest
thereon, and all other amounts, if any, payable in respect of this Note to be,
and the same shall thereupon become, immediately due and payable without notice
to or demand on the Borrowers, all of which the Borrowers waive.

 

Time is of the essence of this Note.  To the fullest extent permitted by applicable
law, each Borrower, for itself and its successors and assigns, waives
presentment, demand, protest, notice of dishonor, and any and all other
notices, demands and consents in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and consents to any
extensions of time, renewals, releases of any parties to or guarantors of this
Note, waivers and any other modifications that may be granted or consented to
by the Bank from time to time in respect of the time of payment or any other
provision of this Note.

 

This Note shall be governed by the laws of the State
of Missouri, without regard to any choice of law rule thereof which gives
effect to the laws of any other jurisdiction.

 

[signature page to follow]

 

 

IN WITNESS WHEREOF, the Borrowers have executed and
delivered this Note as of the date first above written.

 

	
   

  	
  LIQUIDMETAL COATINGS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  LIQUIDMETAL COATINGS SOLUTIONS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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  Name:

  
	
   

  	
   

  	
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Revolving Credit Note – Signature
Page

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