Document:

THIS
NOTE HAS BEEN ISSUED WITH “ORIGINAL ISSUE DISCOUNT” FOR U.S. FEDERAL INCOME TAX PURPOSES. THE ISSUER WILL MAKE AVAILABLE
TO ANY HOLDER OF THIS NOTE: (1) THE ISSUE PRICE AND ISSUE DATE OF THE NOTE, (2) THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THE NOTE,
(3) THE YIELD TO MATURITY OF THE NOTE, AND (4) ANY OTHER INFORMATION REQUIRED TO BE MADE AVAILABLE BY U.S. TREASURY REGULATIONS
UPON RECEIVING A WRITTEN REQUEST FOR SUCH INFORMATION AT THE FOLLOWING ADDRESS: 810 ANDREWS AVENUE, DELRAY BEACH, FLORIDA 33843.

 

NEITHER
THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

 

Principal
Amount: $1,650,000.00 Issue Date: December 1, 2017 

Purchase
Price: $1,500,000.00

Original
Issue Discount: $150,000.00

 

 

SENIOR
SECURED CONVERTIBLE PROMISSORY NOTE

 

FOR
VALUE RECEIVED, ETHEMA HEALTH CORPORATION, a Colorado corporation, ETHEMA
Clinic Muskoka Inc., an Ontario corporation, Cranberry
Cove Holdings Ltd., an Ontario corporation, and SeasTONE
Delray HEALTHCARE, LLC, a Florida limited liability company (together,
hereinafter called the “Borrower”), hereby promises to pay to the order of LEONITE CAPITAL, LLC, a Delaware
limited liability company, or registered assigns (the “Holder”) the principal sum of $1,650,000.00 (the “Principal
Amount”), together with interest on the unpaid Principal Amount at the rate of six and one-half percent (6.5%) per annum
(the “Stated Rate”), on the dates set forth below or upon acceleration or otherwise, as set forth herein (the
“Note”). The consideration to the Borrower for this Note is $1,500,000.00 (the “Consideration”).
The Holder shall pay $300,000.00 of the Consideration (the “First Tranche”) within a reasonable amount of time
after the full execution of the Note and all transactional documents related to this Note. At the closing of the First Tranche,
the outstanding principal amount under this Note shall initially consist of the First Tranche plus the OID (as defined below).
The Holder and the Borrower will use their reasonable best efforts to close on the remaining $1,200,000 of the Consideration (the
“Balance Tranche”) by December 15, 2018, or at the latest, by January 1, 2018. The maturity date shall be six
(6) months (the “Term”) from the Issue Date, which date shall be extended to twelve (12) months from the Issue
Date upon, and subject to, the closing of the Balance Tranche (the “Maturity Date”). The principal sum, as
well as any accrued and unpaid interest and other fees shall be due and payable in accordance with the payment terms set forth
in Article I herein. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount
of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of eighteen percent
(18%) per annum from the due date thereof until the same is paid (“Default Interest”). Interest shall commence
accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of
days elapsed. All payments due hereunder (to the extent not converted into the Borrower’s common stock (the “Common
Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments
shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business
day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment
date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account
for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day”
shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized
or required by law or executive order to remain closed.

    	 	
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This
Note carries an original issue discount of $150,000.00 (the “OID”), to cover the Holder’s legal fees,
accounting fees, due diligence fees, monitoring, and/or other transactional costs incurred in connection with the purchase and
sale of the Note, which is included in the principal balance of this Note. Thus, the purchase price of this Note shall be $1,500,000.00,
computed as follows: the Principal Amount minus the OID.

 

It
is further acknowledged and agreed that the Principal Amount owed by Borrower under this Note shall be increased by the amount
of all expenses incurred by the Holder relating to the conversion of this Note into shares of Common Stock. All such expenses
shall be deemed added to the Principal Amount hereunder to the extent such expenses are paid by the Holder.

 

This
Note shall be a senior secured obligation of the Borrower, with priority over all future Indebtedness (as defined below) of the
Borrower as provided for herein, subject to the Borrower’s repayment from the proceeds of the Note of those two certain
convertible promissory notes dated June 16,2017, in the principal amount of $113,500 and November 1, 2017, in the principal amount
of $103,000, issued to Power Up Lending Group Ltd. The obligations of the Borrower under this Note are secured pursuant to the
terms of the following agreement of even date herewith: the security and pledge agreement (the “Security and Pledge Agreement”)
by and among the Borrower, and certain subsidiaries and affiliates of the Borrower, and the Holder, and such security interest
includes but is not limited to all of the assets of the Borrower and such subsidiaries and affiliates.

 

This
Note is issued by the Borrower to the Holder pursuant to the terms of that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated as of the Issue Date but which may be executed following the closing of the First Tranche. Each capitalized
term used herein, and not otherwise defined, shall have the meaning ascribed thereto in the Purchase Agreement. As used in this
Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks
in the city of New York, New York are authorized or required by law or executive order to remain closed. As used herein, the term
“Trading Day” means any day that shares of Common Stock are listed for trading or quotation on the OTCQB (as defined
in the Purchase Agreement).

 

This
Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

 

    	 	
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The
following additional terms shall also apply to this Note:

 

ARTICLE
I. PAYMENTS

 

		1.1	Payments.

 

		(a)	Monthly
                                         Payments.

 

(1)  
Beginning on January 1, 2018 (the “Initial Monthly Payment Date”) and on the same day of each and every calendar
month thereafter throughout the Term of this Note (the “Monthly Payment Dates”), Borrower shall make monthly
payments under this Note to the Holder in the amounts provided in this Article I (each, a “Monthly Payment Amount”).

 

(2)  
The Monthly Payment Amount for the payment due on each Monthly Payment Date through and including the final Monthly Payment
Date during the Term equal the then accrued but unpaid interest on the unpaid principal balance of this Note.

 

(b)  
Payment of Principal Amount. The principal sum of the First Tranche and the Balance Tranche, the OID, as well as any accrued
and unpaid interest and other fees relating to the respective tranches, shall be due and payable on the Maturity Date.

 

(c)  
Payments from Future Funding Sources. The Borrower shall pay to the Holder on an accelerated basis, at the Holder’s
discretion, any outstanding principal amount of the Note, along with accrued, but unpaid interest, from:

 

		(1)	Future
                                         Financing Proceeds – one hundred percent (100%) of the gross cash proceeds
                                         of any future financing of the Borrower, whether debt or equity, and

 

		(2)	Other
                                         Future Receipts - all net proceeds from any sale of assets of the Borrower or any
                                         of its subsidiaries or receipt by Borrower or any of its subsidiaries of any tax credits.

 

(d) 
Remaining payments. Any and all remaining unpaid principal of and interest on this
Note shall be due and payable in full on the Maturity Date.

 

 

    	 	
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ARTICLE
II. CONVERSION RIGHTS

 

2.1  
Conversion Right. The Holder shall have the right at any time at the Holder’s option to convert all or any part of
the outstanding and unpaid principal amount and accrued and unpaid interest of this Note into fully paid and non-assessable shares
of Common Stock or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter
be changed or reclassified (each, a “Conversion Share”) at the conversion price (the “Conversion Price”)
determined as provided herein (a “Conversion”); provided, however, that in no event shall the
Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum
of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock
which may be deemed beneficially owned through the ownership of the unconverted portion of the Note or the unexercised or unconverted
portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained
herein, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with the Holder who
has purchased a portion of the Note from the Holder) and (2) the number of shares of Common Stock issuable upon the conversion
of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso
to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise
provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may
be waived (up to a maximum of 9.99%) by the Holder upon, at the election of the Holder, not less than 61 days’ prior notice
to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date,
as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued
upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion
Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice
of Conversion”), delivered to the Borrower by the Holder in accordance with Section 2.4 below; provided that the Notice
of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice)
to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”).
The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal
amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest,
if any, on such principal amount at the interest rates provided in this Note to the Conversion Date plus (3) at the Holder’s
option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4)
the Holder’s expenses relating to a Conversion, which expenses shall be set at $2,000 for the Holder’s initial conversion
of the Note and $300 for each of any subsequent conversions, plus (5) at the Holder’s option, any amounts owed to
the Holder pursuant to Sections 2.3 and 2.4(g) hereof.

 

		2.2	Conversion
                                         Price.

 

(a) 
Calculation of Conversion Price. The Conversion Price shall be, at the option of the Holder, (i) $0.06 (the “Fixed
Conversion Price”) (subject to adjustment as further described herein) or (ii) 80% (the “Conversion Price Discount”)
multiplied by the price per share paid by the investors in a subsequent Equity Financing (as defined herein) of the Borrower,
provided, however, that upon any Event of Default (as defined herein) under this Note, the Conversion Price shall be equal
to the lowest of: (i) the Fixed Conversion Price, (ii) 60% multiplied by the average of the lowest three trade prices of the Common
Stock during the twenty (20) consecutive Trading Day period immediately preceding the Trading Day that the Company receives a
Notice of Conversion, and (iii) a discount to market based on subsequent financings with other investors. For the avoidance of
doubt, an “Equity Financing” shall mean the Borrower’s sale of its Common Stock or any securities conferring
the right to purchase the Borrower’s Common Stock or securities convertible into, or exchangeable for (with or without additional
consideration), the Borrower’s Common Stock.

 

    	 	
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(b) 
Fixed Conversion Price Adjustments.

 

(1)  
Stock Dividends and Stock Splits. If the Borrower, at any time while this Note is outstanding: (i) pays a stock dividend
or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock; (ii) subdivides
outstanding shares of Common Stock into a larger number of shares; or (iii) issues, in the event of a reclassification of shares
of the Common Stock, any shares of capital stock of the Borrower, then the Fixed Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the Borrower) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event.

 

(2)  
Fundamental Transaction. If, at any time while this Note is outstanding, (i) the Borrower effects any merger or consolidation
of the Borrower with or into another person, (ii) the Borrower effects any sale of all or substantially all of its assets in one
transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Borrower or another
person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities,
cash or property, or (iv) the Borrower effects any reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case,
a “Fundamental Transaction”), then, upon any subsequent conversion of this Note, the Holder shall have the
right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of
such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder
of 1 share of Common Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination
of the Fixed Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of 1 share of Common Stock in such Fundamental Transaction, and the Borrower shall
apportion the Fixed Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.

 

(3)   
Anti-dilution Adjustment. If at any time while this Note is outstanding, the Borrower sells or grants (or has sold or granted,
as the case may be) any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or has
sold or issued, as the case may be, or announces any sale, grant or any option to purchase or other disposition), any Common Stock
or other securities convertible into, exercisable for or otherwise entitled the any person or entity the right to acquire shares
of Common Stock at an effective price per share that is lower than the then Fixed Conversion Price (such lower price, the “Base
Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (it being agreed that
if the holder of the Common Stock or other securities so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share
which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share
that is lower than the Fixed Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price
on such date of the Dilutive Issuance, and the Base Conversion Price shall then be adjusted to equal the lowest of such issuance
price), then the Fixed Conversion Price shall be reduced to a price equal the Base Conversion Price as it may be adjusted as provided
for above. Such adjustment shall be made whenever such Common Stock or other securities are issued. Notwithstanding the foregoing,
no adjustment will be made under this Section 2.2(b)(4) in respect of an Exempt Issuance. For purposes of this Section 2.2(b)(4)
an “Exempt Issuance” means an issuance of shares (i) reserved as employee shares described under the Borrower’s
option pool now or created in the future, (ii) shares issued for consideration other than cash pursuant to a merger, consolidation,
acquisition, or similar business combination approved by the Borrower’s Board of Directors (the “Board”),
provided, however, that any such issuance shall only be to a person (or to the equity holders of a person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a business synergistic with the business of the Borrower
and shall provide to the Borrower additional benefits in addition to the investment of funds, but shall not include a transaction
in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business
is investing in securities; (iii) shares issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement
or debt financing from a bank or similar financial institution approved by the Board; or (iv) shares with respect to which the
Holder waives its anti-dilution rights granted hereby. In the event of an issuance of securities involving multiple tranches or
closings, any adjustment pursuant to this Section 2.2(b)(4) shall be calculated as if all such securities were issued at the initial
closing.

    	 	
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(4)  
Notice to the Holder.  Whenever the Conversion Price is adjusted pursuant to any provision of this Section 2.2(b),
the Borrower shall within two (2) business days deliver to the Holder a notice setting forth the Fixed Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such adjustment.

 

2.3  
Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve
from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance
of Common Stock upon the full conversion of this Note and exercise of the Warrants. The Borrower is required at all times to have
authorized and reserved five (5) times the number of shares that is actually issuable upon full conversion of the Note (based
on the Conversion Price of the Note in effect from time to time, which, if cannot be determined shall be estimated in good faith
by the Borrower) (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance
with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital
structure which would change the number of shares of Common Stock into which the Note shall be convertible at the then current
Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower
(i) acknowledges that it has irrevocably instructed its transfer agent by letter, a copy of which is attached hereto as Exhibit
B to issue certificates for the Common Stock issuable upon conversion of this Note and exercise of the Warrants, and (ii)
agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with
the terms and conditions of this Note.

 

If,
at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of
the Note.

 

		2.4	Method
                                         of Conversion.

 

(a) 
Mechanics of Conversion. Subject to Section 2.1, this Note may be converted by the Holder in whole or in part, at any time
on or after the Maturity Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable
means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section
2.4(b), surrendering this Note at the principal office of the Borrower.

 

(b) 
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note
in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless
the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the
principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the
Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute
or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest
error. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this
paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented
by this Note may be less than the amount stated on the face hereof.

 

(c) 
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other
than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such
shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount
of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

    	 	
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(d) 
Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail
(or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in
this Section 2.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder
certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”)
(and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with
the terms hereof.

 

(e) 
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall
be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the
amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults
on its obligations under this Article II, all rights with respect to the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such
conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue
and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by
the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower
to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by
the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.

 

(f) 
Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions
contained in Section 2.1 and in this Section 2.4, the Borrower shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with
DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

 

(g) 
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other
remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon
conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 2.3
above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $1,000 per day in cash, for each
day beyond the Deadline that the Borrower fails to deliver such Common Stock. Such cash amount shall be paid to Holder by the
fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a
valuable right to the Holder, and as such, the Borrower will not take any actions to hamper, delay or prevent any Holder conversion
of the Note. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section
2.4(g) are justified.

    	 	
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2.5  
Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred
unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer
agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act
(or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate”
(as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section
2.5 and who is an Accredited Investor. Except as otherwise provided (and subject to the removal provisions set forth below), until
such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise
may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then
be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included
in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption
that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

The
legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made
without registration under the Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected or
(ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does
not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from
registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section
4.2 of the Note.

 

2.6  
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved
Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a
Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because
of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect
to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect
to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the
Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted.
In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive
Conversion Default Payments pursuant to Section 2.3 to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance
with Section 2.3) for the Borrower’s failure to convert this Note.

    	 	
8
	 

    	 

    

 

2.7  
No Shorting. Neither the Holder nor any affiliate of the Holder shall execute any short sale (as defined in Rule 200 of
Regulation SHO under the Exchange Act) of Common Stock at any time while this note is outstanding.

 

ARTICLE
III. RANKING, CERTAIN COVENANTS AND POST CLOSING OBLIGATIONS

 

3.1        
Commitment Shares. Promptly following the closing of the First Tranche, the Borrower shall issue to the Holder a number
of restricted shares of the Common Stock (the “Commitment Shares”) equal to the Principal Amount of the Note.

 

3.2       Warrants.
Promptly following the closing of the First Tranche, the Borrower shall issue to the Holder warrants (the “Warrants”)
exercisable for that number of shares of Common Stock equal to 100% of the number of shares of Common Stock it would receive upon
conversion of the Principal Amount of the Note at the Conversion Price. The Warrants shall have a term of five (5) years, be exercisable
at a price of $0.10 per share and shall contain full-ratchet anti-dilution protection provisions, expect that with respect to
dilutive issuances of $250,000 or less in the aggregate, the ratchet adjustment shall be limited to 80%. Notwithstanding the foregoing,
no exercise adjustment shall be made with respect to any issuance of (a) shares of Common Stock and options to officers, employees,
or directors of the Borrower prior to and after the Closing Date, (b) securities upon the exercise or exchange of or conversion
of any securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common
Stock issued and outstanding on the date of this Note, provided that such securities and any term thereof have not been amended
since the date of this Note to increase the number of such securities or to decrease the issue price, exercise price, exchange
price or conversion price of such securities, (c) securities issued pursuant to acquisitions or strategic transactions approved
by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a person (or to
the equity holders of a person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in
a business synergistic with the business of the Borrower and shall be intended to provide to the Borrower substantial additional
benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, and (d) securities
issued or issuable pursuant to this Note or the Warrants, or any agreement entered into in connection therewith, or upon exercise
or conversion of any such securities.

 

3.3       Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property
or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional
shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect
of its capital stock except for distributions that comply with Section 3.7 below.

 

3.4       Restrictions
on Variable Rate Transactions. So long as the Borrower shall have any obligation under this Note and unless approved by the
Holder, the Borrower and each subsidiary shall not enter into an agreement to effect any
sale of securities involving, or convert any securities previously issued under, a Variable Rate Transaction. The term “Variable
Rate Transaction” means a transaction in which the Borrower or any subsidiary (i) issues or sells any convertible securities
either (A) at a conversion, exercise or exchange rate or other price that is based upon and/or varies with the trading prices
of, or quotations for, the shares of Common Stock at any time after the initial issuance of such convertible securities, or (B)
with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of
such convertible securities or upon the occurrence of specified or contingent events directly or indirectly related to the business
of the Borrower or the subsidiary, as the case may be, or the market for the Common Stock, other than pursuant to a customary
“weighted average” anti-dilution provisions, or (ii) enters into any agreement (including, without limitation, an
“equity line of credit” or an “at-the-market offering”) whereby the Borrower or any subsidiary may sell
securities at a future determined price (other than standard and customary “preemptive” or “participation”
rights).  The Holder shall be entitled to obtain injunctive relief against the Borrower and its Subsidiaries to preclude
any such issuance, which remedy shall be in addition to any right to collect damages. With respect to any outstanding Variable
Rate Transactions that the Borrower intends pay off and settle with the proceeds of the Note, no such payments will be made out
of the proceeds of the First Tranche.

 

    	 	
9
	 

    	 

    

3.5       
Restrictions on Certain Transactions. So long as the Borrower shall have any obligation under this Note and unless approved
by the Holder, the Borrower shall not (a) change the nature of its business; or (b) sell, divest, change the structure of any
material assets of the Borrower or any subsidiary other than in the ordinary course of business.

 

3.6       
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall
not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property
or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the
Borrower or any warrants, rights or options to purchase or acquire any such shares; except for the repurchase of shares at a nominal
price in connection with rights under an agreement with an employee or consultant of the Borrower whose shares have been forefeited
as a result of such employee or consultant’s ceasing to provide services to the Borrower.

 

3.7       
Use of Proceeds. The Borrower agrees to use the proceeds of the Balance Tranche of the Note for the following: first, to
pay off all variable rate convertible debt, second, to pay off all existing convertible debt, and third, as a down payment for
an acquisition of an addiction center facility.

 

3.8       
Ranking and Security. The obligations of the Borrower under this Note shall rank senior with respect to any and all Indebtedness
incurred as of or following the Issue Date. The obligations of the Borrower under this Note are secured pursuant to the Security
and Pledge Agreement. So long as the Borrower shall have any obligation under this Note, the Borrower shall not (directly or indirectly
through any subsidiary or affiliate) incur or suffer to exist or guarantee any Indebtedness that is senior to or pari passu with
(in priority of payment and performance) the Borrower’s obligations hereunder. As used herein, the term “Indebtedness”
means (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services, including
any type of letters of credit, but not including deferred purchase price obligations in place as of the Issue Date or obligations
to trade creditors incurred in the ordinary course of business, (b) all obligations of the Borrower evidenced by notes, bonds,
debentures or other similar instruments, (c) purchase money indebtedness hereafter incurred by the Borrower to finance the purchase
of fixed or capital assets, including all capital lease obligations of the Borrower which do not exceed the purchase price of
the assets funded, (d) all guarantee obligations of the Borrower in respect of obligations of the kind referred to in clauses
(a) through (c) above that the Borrower would not be permitted to incur or enter into, and (e) all obligations of the kind referred
to in clauses (a) through (d) above that the Borrower is not permitted to incur or enter into that are secured and/or unsecured
by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured and/or unsecured
by) any lien or encumbrance on property (including accounts and contract rights) owned by the Borrower, whether or not the Borrower
has assumed or become liable for the payment of such obligation.

 

ARTICLE
IV. EVENTS OF DEFAULT

 

It
shall be considered an event of default if any of the following events listed in this Article IV (each, an “Event of
Default”) shall occur; provided, however, that, except in the case of the Events of Default listed in Sections
4.1, 4.2, 4.7, 4.10, 4.14 or 4.20 below, the Borrower shall be have five (5) business days to cure such Event of Default unless
a lesser number of days is required pursuant to the provisions of this Article IV:

 

4.1       Failure
to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.

 

    	 	
10
	 

    	 

    

4.2          
Conversion and the Shares. The Borrower fails to reserve a sufficient amount of shares of common stock as required under
the terms of this Note (including Section 1.3 of this Note)(and such breach continues for a period of five (5) days), fails to
issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so)
upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer
or cause its transfer agent to transfer (issue) (electronically or in certificated form) shares of Common Stock issued to the
Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer
agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in
certificated form) shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as
and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders
its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on
any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by
this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in
this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion.
It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default
of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer
agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process
a conversion, such advanced funds shall be paid by the Borrower to the Holder within five (5) business days of a demand from the
Holder, either in cash or as an addition to the balance of the Note, and such choice of payment method is at the discretion of
the Borrower.

 

4.3          
Breach of Covenants. The Borrower, or the relevant related party, as the case may be, breaches any material covenant, post-closing
obligation or other material term or condition contained in this Note, or in the related Purchase Agreement, Security and Pledge
Agreement, Affidavit of Confession of Judgment, Term Sheet or any other collateral documents (together, the “Transaction
Documents”) and such breach continues for a period of ten (10) days.

 

4.4          
Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement,
statement or certificate given pursuant hereto or in connection herewith, shall be false or misleading in any material respect
when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder
with respect to this Note and the other Transaction Documents.

 

4.5          
Receiver or Trustee. Except with respect to Blue Dog Holdings LLC and its wholly owned subsidiaries, Delray Recovery Center,
LLC  Behavioral Health Innovations, LLC  and Alternatives in Treatment, LLC, companies one or more of which the Borrower
may acquire with the proceeds of this Note, the Borrower or any subsidiary of the Borrower shall make an assignment for the benefit
of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property
or business, or such a receiver or trustee shall otherwise be appointed.

 

4.6          
Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary
of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

    	 	
11
	 

    	 

    

 

4.7          
Bankruptcy. Except with respect to Blue Dog Holdings LLC and its wholly owned subsidiaries, Delray Recovery Center, LLC 
Behavioral Health Innovations, LLC  and Alternatives in Treatment, LLC, companies one or more of which the Borrower may acquire
with the proceeds of this Note, bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary
or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the
Borrower or any subsidiary of the Borrower. With respect to any such proceedings that are involuntary, Borrower shall have a 45
day cure period.

 

4.8          
Delisting of Common Stock. If at any time on or after the date in which the Borrower’s Common Stock is listed or
quoted on the OTCQB or an equivalent U.S. replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York
Stock Exchange, or the NYSE MKT, the Borrower shall fail to maintain the listing or quotation of the Common Stock on the OTCQB
or an U.S. equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange,
or the NYSE MKT.

 

4.9          
Failure to Comply with the Exchange Act. The Borrower shall fail to comply with the reporting requirements of the Exchange
Act (including but not limited to becoming delinquent in its filings), and/or the Borrower shall cease to be subject to the reporting
requirements of the Exchange Act.

 

4.10      
Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

4.11      
Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to
pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as
a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

4.12      
Maintenance of Assets. The failure by Borrower to maintain any intellectual property rights, personal, real property or
other assets which are necessary to conduct its business (whether now or in the future), to the extent that such failure would
result in a material adverse condition or material adverse change in or affecting the business operations, properties or financial
condition of the Borrower or any of its subsidiaries (a “Material Adverse Effect”).

 

4.13      
Financial Statement Restatement. The Borrower restates any financial statements filed by the Borrower with the Securities
and Exchange Commission (the “SEC”) for any date or period from two years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement,
have constituted a material adverse effect on the rights of the Holder with respect to this Note.

 

4.14      
Failure to Execute Transaction Documents or Complete the Transaction. The failure of the Borrower to execute any of the
Transaction Documents or to complete the transaction for the full Principal Amount of the Note, as contemplated by the Purchase
Agreement.

 

4.15      
Replacement of Transfer Agent. In the event that the Borrower appoints a transfer agent and thereafter replaces its transfer
agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer
Agent Instructions (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount)
signed by the successor transfer agent to Borrower and the Borrower.

 

    	 	
12
	 

    	 

    

4.16      
DTC “Chill.” The DTC places a “chill” (i.e. a restriction placed by DTC on one or more of DTC’s
services, such as limiting a DTC participant’s ability to make a deposit or withdrawal of the security at DTC) on any of
the Borrower’s securities.

 

4.17      
Illegality. Any court of competent jurisdiction issues an order declaring this Note, any of the other Transaction Documents
or any provision hereunder or thereunder to be illegal.

 

4.18      
DWAC Eligibility. In addition to the Event of Default in Section 3.16, the Common Stock is otherwise not eligible for trading
through the DTC’s Fast Automated Securities Transfer or Deposit/Withdrawal at Custodian
programs.

 

4.19      
Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents,
a breach or default by the Borrower of any covenant or other term or condition contained in any of the other financial instrument,
including but not limited to all promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder or any
other 3rd party (the “Other Agreements”), after the passage of all applicable notice and cure or
grace periods, that results in a Material Adverse Effect shall, at the option of the Holder, be considered a default under this
Note, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note
by reason of a default under said Other Agreement or hereunder.

 

4.20      
Variable Rate Transactions. Without the prior approval of the Holder, the Borrower (i) enters into a Variable Rate Transaction
(as defined below) (ii) issues shares of Common Stock (or convertible securities or purchase rights) pursuant to an equity line
of credit of the Borrower or otherwise in connection with a Variable Rate Transaction (whether now existing or entered into in
the future) or (iii) adjusts downward the “floor price” at which shares of Common Stock (or convertible securities
or purchase rights) may be issued under an equity line of credit or otherwise in connection with a Variable Rate Transaction (whether
now existing or entered into in the future).

 

Subject
to applicable cure periods specifically provided for herein, upon the occurrence and during the continuation of any Event of Default
specified in this Article IV, exercisable through the delivery of written notice to the Borrower by the Holder (the “Default
Notice”) (provided, however, that no Default Notice need be provided by the Holder and no notice and no cure period shall
apply in the case of the Events of Default specified in Sections 4.1, 4.2, 4.7, 4.10, 4.14 or 4.20 above), this Note shall become
immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount
(the “Default Amount”) equal to the Principal Amount then outstanding plus accrued interest (including any Default
Interest) through the date of full repayment. Holder may, in its sole discretion, determine to accept payment part in Common Stock
and part in cash. For purposes of payments in Common Stock, the conversion formula set forth in Section 2.2 shall apply. Upon
an uncured Event of Default, (i) all amounts payable hereunder shall immediately become due and payable, all without demand, presentment
or notice, all of which hereby are expressly waived by the Borrower, together with all costs, including, without limitation, legal
fees and expenses, of collection, (ii) the Holder shall be entitled to the Commitment Shares, the Warrants and liquidated damages
in an amount equal to the outstanding principal amount of the Note, (iii) the Borrower shall promptly assign all Borrower receivables
to the Holder and (iv) the Holder shall be entitled to exercise all other rights and remedies available at law or in equity, including,
without limitation, those set forth in Section 4.21 below. Upon an Event of Default specified in Section 4.14 above, a liquidated
damages charge equal to the 25% of the outstanding principal amount of the Note and the OID will be assessed and will become immediately
due and payable to the Holder, either in the form of a cash payment or as an addition to the balance of this Note.

 

4.21
       Upon the occurrence and during the continuation of an Event of Default specified in
Section 4.1 of this Note, and in addition to any other right or remedy of the Holder hereunder, under the Purchase Agreement or
otherwise at law or in equity, the Borrower hereby irrevocably authorizes and empowers Holder or its legal counsel, each as the
Borrower’s attorney-in-fact, to appear ex parte and without notice to the Borrower to confess judgment against the Borrower
for the unpaid amount of this Note as evidenced by the Affidavit of Confession of Judgment signed by the Borrower as of the Issue
Date and to be completed by the Holder or its counsel pursuant to the foregoing power of attorney (which power is coupled with
an interest), a copy of which is attached as Exhibit C hereto (the “Affidavit”). The Affidavit shall
set forth the amount then due hereunder, plus attorney’s fees and cost of suit, and to release all errors, and waive all
rights of appeal. The Borrower waives the right to contest Holder’s rights under this Article IV, including without limitation
the right to any stay of execution and the benefit of all exemption laws now or hereafter in effect. No single exercise of the
foregoing right and power to confess judgment will be deemed to exhaust such power, whether or not any such exercise shall be
held by any court to be invalid, voidable, or void, and such power shall continue undiminished and may be exercised from time
to time as the Holder may elect until all amounts owing on this Note have been paid in full.

 

    	 	
13
	 

    	 

    

ARTICLE
V. MISCELLANEOUS

 

5.1          
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

5.2          
Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered
or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid,
or (iv) transmitted by hand delivery, telegram, facsimile, or electronic mail addressed as set forth below or to such other address
as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to
be given hereunder shall be deemed effective (a) upon hand delivery, upon electronic mail delivery, or delivery by facsimile,
with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered
on a business day during normal business hours where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on
the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or
upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If
to the Borrower, to:

ETHEMA
HEALTH CORPORATION

810
Andrews Avenue

Delray,
Florida 33843

Attn:
Shawn E. Leon, CEO

e-mail:

 

If
to the Holder:

 

LEONITE
CAPITAL, LLC

1
Hillcrest Center Dr., Suite 232

Spring
Valley, NY 10977

ATTN:
Avi Geller

e-mail:
avi@leonitecap.com

 

5.3          
Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and
the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

5.4          
Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit
of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined
in Rule 501(a) of the 1933 Act).

 

5.5          
Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.

 

    	 	
14
	 

    	 

    

5.6       Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state and/or federal courts located in Rockland County, New York. The parties to this Note hereby
irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS NOTE OR ANY TRANSACTIONS CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover from
the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement
delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute
or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability
of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process
being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Documents by mailing
a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other
manner permitted by law.

 

5.6          
Certain Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding
principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest
on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty
and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the
sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant
to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate
to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares
of Common Stock.

 

5.7          
Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that
the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond or other security being required.

 

5.8          
Optional Redemption. Notwithstanding anything to the contrary contained in this Note, the Borrower may redeem any amount
outstanding under this Note, prior to the Maturity Date, by making a payment to the Holder of an amount in cash equal to (i) 115%
of the outstanding principal amount being redeemed under the Note, plus all unpaid interest thereon, if the redemption is effected
prior to the 181st day following the Issue Date, and (ii) 130% of the outstanding principal amount being redeemed under
the Note, plus all unpaid interest thereon, if the redemption is effected prior to Maturity Date but following the 180th day following
the Issue Date. 

    	 	
15
	 

    	 

    

5.9          
Usury. To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever
claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now
or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Holder in order to enforce
any right or remedy under this Note.  Notwithstanding any provision to the contrary contained in this Note, it is expressly
agreed and provided that the total liability of the Borrower under this Note for payments which under New York law are in the
nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated
with any other sums which under New York law in the nature of interest that the Borrower may be obligated to pay under this Note
exceed such Maximum Rate.  It is agreed that if the maximum contract rate of interest allowed by New York law and applicable
to this Note is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to this Note from the effective date thereof forward,
unless such application is precluded by applicable law.  If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Borrower to the Holder with respect to indebtedness evidenced by this Note, such excess shall be applied
by the Holder to the unpaid principal balance of any such indebtedness or be refunded to the Borrower, the manner of handling
such excess to be at the Holder’s election.

 

5.10      
Section 3(a)(10) Transactions. If at any time while this Note is outstanding, the Borrower enters into a transaction structured
in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act, then a
liquidated damages charge of 25% of the outstanding principal balance of this Note at that time, will be assessed and will become
immediately due and payable to the Holder, either in the form of cash payment or as an addition to the balance of the Note, as
determined by mutual agreement of the Borrower and Holder.

 

5.11      
Terms of Future Financings.  Except with respect to a future issuance of securities the proceeds of which are used
to repay this Note in full, so long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries
of any security with any term reasonably believed by Holder to be more favorable to the holder of such security or with a term
in favor of the holder of such security that was not similarly provided to the Holder in this Note, the Borrower shall notify
the Holder of such additional or more favorable term. At the Holder’s option, such more favorable term or condition shall
become a part of the Transaction Documents with the Holder.  The types of terms contained in another security that may be
more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment
rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share,
and warrant coverage.

 

5.12      
Registration Rights. Within 90 days following the closing of the Holder’s purchase of this Note, the Borrower shall
file a resale registration statement with the SEC registering all shares issuable upon conversion of this Note. Additionally,
the Borrower shall include on the next registration statement the Borrower files with SEC (or on the subsequent registration statement
if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to comply with either of
these provisions shall result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than
Fifteen Thousand and No/100 United States Dollars ($15,000), being immediately due and payable to the Holder at its election in
the form of cash payment or addition to the balance of this Note. In the event there is a conflict between these provisions and
the registration rights provisions set forth in the Purchase Agreement, the provisions in the Purchase Agreement shall control.

 

5.13      
Participation Rights. In the event the Borrower proposes to offer and sell its securities in an Equity Financing, the Lender
shall have the right, but not the obligation, to participate in the purchase of the securities being offered in such Equity Financing
up to an amount equal to one hundred percent (100%) of aggregate principal amount of the Notes to be purchased by the Holder pursuant
to the terms of the SPA, until the earliest of (i) the Maturity Date, (ii) the date that the Note and all accrued but unpaid interest
shall have been repaid in full, and (iii) the closing date of an Equity Financing in which all, or any remaining portion, of the
outstanding principal amount of the Note along with accrued but unpaid interest shall have been converted, in full, into, and
on the same terms as, the securities being offered in such Equity Financing.

 

5.14      
Right of First Refusal. If at any time while this Note is outstanding, the Borrower has a bona fide offer of capital or
financing from any 3rd party that the Borrower intends to act upon, then the Borrower must first offer such opportunity
to the Holder to provide such capital or financing to the Borrower on the same terms as each respective 3rd party’s
terms. Should the Holder be unwilling or unable to provide such capital or financing to the Borrower within 10 Trading Days from
Holder’s receipt of written notice of the offer (the “Offer Notice”) from the Borrower, then the Borrower
may obtain such capital or financing from that respective 3rd party upon the exact same terms and conditions offered
by the Borrower to the Holder, which transaction must be completed within 60 days after the date of the Offer Notice. If the Borrower
does not receive the capital or financing from the respective 3rd party within 60 days after the date of the respective
Offer Notice, then the Borrower must again offer the capital or financing opportunity to the Holder as described above, and the
process detailed above shall be repeated. The Offer Notice must be sent via electronic mail to avi@leonitecap.com.

 

[signature
page to follow]

    	 	
16
	 

    	 

    

 

 

IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this December 1, 2017.

 

ETHEMA
HEALTH CORPORATION

 

By:
________________

Name: Shawn E. Leon

Title:
Chief Executive Office

 

 

ETHEMA Clinic Muskoka Inc.     

 

By: ______________________________ 

 

Name: Shawn E. Leon 

Title: President         

 

CRANBERRY COVE HOLDINGS LTD.     

 

By: ____________________ 

Name: Shawn E. Leon 

Title: President    

 

SEASTONE
DELRAY HEALTHCARE LLC

 

 

By:
__________________

Name: Shawn E. Leon

Title:
President

 

    	 	
17
	 

    	 

    

 

EXHIBIT
A -- NOTICE OF CONVERSION

 

The
undersigned hereby elects to convert $ principal amount of the Note (defined below) into that number of shares of Common
Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of ETHEMA HEALTH CORPORATION,
a Colorado corporation (the “Borrower”) according to the conditions of the senior secured convertible note of the
Borrower dated as of [*], 2017 (the “Note”), as of the date written
below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

 

Box
Checked as to applicable instructions:

 

[
] The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of
the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

Name
of DTC Prime Broker: Account Number:

 

[
] The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock
set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately
below or, if additional space is necessary, on an attachment hereto:

 

LEONITE
CAPITAL, LLC

__________________________________________

e-mail:
___________________

 

Date
of Conversion: ___________________

 

Applicable
Conversion Price:$_____________

Number of Shares of Common Stock to be Issued

Pursuant
to Conversion of the Note: ___________________

Amount of Principal Balance Due remaining

Under
the Note after this conversion: _________________

 

LEONITE
CAPITAL, LLC

 

By:____________________ 

Name:__________________

Title:___________________

Date: ___________________

    	 	
18
	 

    	 

    

EXHIBIT
B – TRANSFER AGENT IRREVOCABLE RESERVE LETTER 

    	 	
19
	 

    	 

    

EXHIBIT
C -- AFFIDAVIT OF CONFESSION OF JUDGMENT

    	 	
20ex_101359.htm

Exhibit 10.1

 

 

 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

Between 

 

NEWBEVCO, INC.

 

And 

 

BRANCH BANKING AND TRUST COMPANY 

 

DATED AS OF October 4, 2017

 

$50,000,000 Revolving Credit

 

 

 

 

 

 

TABLE OF CONTENTS

 

	 	 	
			Page No.

			
	
			SECTION 1. DEFINITIONS

				
			1

			
	
			1.1

				
			Defined Terms

				
			1

			
	
			1.2

				
			Other Definitional Provisions

				
			11

			
	
			SECTION 2. AMOUNT AND TERMS OF CREDIT

				
			12

			
	
			2.1

				
			The Revolving Credit

				
			12

			
	
			2.2

				
			[Intentionally deleted.]

				
			14

			
	
			2.3

				
			Use of Proceeds of Revolving Credit

				
			14

			
	
			2.4

				
			Interest Rate

				
			14

			
	
			2.5

				
			Prepayment.

				
			14

			
	
			2.6

				
			Facility Fee

				
			15

			
	
			SECTION 3. SECURITY AND GUARANTY

				
			15

			
	
			3.1

				
			Security Interest

				
			15

			
	
			3.2

				
			Guaranty

				
			15

			
	
			SECTION 4. REPRESENTATIONS AND WARRANTIES

				
			16

			
	
			4.1

				
			Corporate Existence; Power; Compliance with Law; Restricted Subsidiaries; Name History

				16
	
			4.2

				
			Capital Stock; Parent; Subsidiaries

				
			16

			
	
			4.3

				
			Corporate Power and Authorization to Execute Loan Documents; No Conflict; No Consent.

				17
	
			4.4

				
			Enforceable Obligations

				
			17

			
	
			4.5

				
			Financial Condition

				
			18

			
	
			4.6

				
			No Litigation

				
			18

			
	
			4.7

				
			Investment Company Act; Regulation

				
			18

			
	
			4.8

				
			Disclosure and No Untrue Statements

				
			19

			
	
			4.9

				
			Title to Assets; Leases in Good Standing

				
			19

			
	
			4.10

				
			Investments

				
			19

			
	
			4.11

				
			Payment of Taxes

				
			20

			
	
			4.12

				
			Agreement or Contract Restrictions; No Default

				
			20

			
	
			4.13

				
			Patents, Trademarks, Licenses, Etc

				
			20

			
	
			4.14

				
			[RESERVED]

				
			20

			
	
			4.15

				
			Compliance with ERISA; Multiemployer Plans

				
			20

			
	
			4.16

				
			Compliance with Environmental Laws

				
			21

			
	
			4.17

				
			Labor Relations

				
			22

			
	
			SECTION 5. CONDITIONS OF LENDING

				
			23

			
	
			5.1

				
			Continuing Accuracy of Representations and Warranties

				
			23

			
	
			5.2

				
			No Default

				
			23

			
	
			5.3

				
			Opinion of the Borrower's Counsel

				
			23

			
	
			5.4

				
			Insurance

				
			23

			
	
			5.5

				
			Loan Documents

				
			23

			
	
			5.6

				
			Supporting Documents

				
			23

			
	
			SECTION 6. AFFIRMATIVE COVENANTS

				
			23

			

 

 

 

 

	
			6.1

				
			Financial Reports and Other Information

				
			24

			
	
			6.2

				
			Payment of Indebtedness to the Bank; Performance of other Covenants; Payment of Other Obligations

				
			25

			
	
			6.3

				
			Conduct of Business; Maintenance of Existence and Rights

				
			26

			
	
			6.4

				
			Maintenance of Property

				
			26

			
	
			6.5

				
			Right of Inspection; Discussions

				
			26

			
	
			6.6

				
			Notices

				
			26

			
	
			6.7

				
			Payment of Taxes; Liens

				
			28

			
	
			6.8

				
			Insurance of Properties

				
			28

			
	
			6.9

				
			True Books

				
			28

			
	
			6.10

				
			Observance of Laws

				
			28

			
	
			6.11

				
			Further Assurances

				
			29

			
	
			6.12

				
			ERISA

				
			29

			
	
			6.13

				
			Change of Name, Principal Place of Business, Office, or Agent

				
			29

			
	
			6.14

				
			Financial Covenants

				
			29

			
	
			SECTION 7. NEGATIVE COVENANTS

				
			29

			
	
			7.1

				
			Limitations on Mortgages, Liens, Etc

				
			29

			
	
			7.2

				
			Consolidation and Merger, Sale of Assets, Etc

				
			29

			
	
			7.3

				
			Transfer and Sale of Assets; Sale and Leaseback

				
			30

			
	
			7.4

				
			Payment Restrictions

				
			31

			
	
			7.5

				
			Limitations on Distributions

				
			32

			
	
			7.6

				
			[RESERVED]

				
			32

			
	
			7.7

				
			Regulation U

				
			32

			
	
			7.8

				
			Transactions with Affiliates

				
			32

			
	
			7.9

				
			Limitation on Nature of Business

				
			32

			
	
			7.10

				
			Restricted Subsidiaries

				
			32

			
	
			7.11

				
			Changes in Governing Documents, Accounting Methods, Fiscal Year

				
			33

			
	
			7.12

				
			Limitation on Incurrence of Funded Debt

				
			33

			
	
			7.13

				
			Amendment of Comerica Loan Agreement

				
			34

			
	
			SECTION 8. EVENTS OF DEFAULT

				
			34

			
	
			8.1

				
			Payment of Obligations Under Loan Documents

				
			34

			
	
			8.2

				
			Representation or Warranty

				
			34

			
	
			8.3

				
			Covenants under this Agreement

				
			34

			
	
			8.4

				
			Other Covenants Under the Loan Documents

				
			34

			
	
			8.5

				
			Payment, Performance, or Default of other Monetary Obligations

				
			34

			
	
			8.6

				
			Covenants or Defaults to the Bank or Others; Revocation of Guaranty

				
			35

			
	
			8.7

				
			Liquidation; Dissolution; Bankruptcy; Etc

				
			35

			
	
			8.8

				
			Involuntary Bankruptcy, Etc

				
			35

			
	
			8.9

				
			Judgments

				
			35

			
	
			8.10

				
			Attachment, Garnishment, Liens Imposed by Law

				
			35

			
	
			8.11

				
			ERISA

				
			36

			
	
			8.12

				
			Corporate Existence

				
			36

			
	
			SECTION 9. REMEDIES OF THE BANK

				
			36

			
	
			SECTION 10.CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS; PRICING GRID

				
			37

			
	
			10.1

				
			Reimbursement of Prepayment Costs

				
			37

			

 

 

 

 

	
			10.2

				
			Bank's LIBOR Lending Office

				
			37

			
	
			10.3

				
			Inability to Determine Rate

				
			37

			
	
			10.4

				
			Illegality: Impracticability

				
			38

			
	
			10.5

				
			Increased Cost of LIBOR-based Advances

				
			38

			
	
			10.6

				
			Other Increased Costs

				
			39

			
	
			10.7

				
			Margin Adjustment

				
			39

			
	
			SECTION 11.MISCELLANEOUS

				
			40

			
	
			11.1

				
			Course of Dealing: Amendment; Supplemental Agreements

				
			40

			
	
			11.2

				
			Waiver By the Bank of Requirements

				
			40

			
	
			11.3

				
			Waiver of Default

				
			40

			
	
			11.4

				
			Notices

				
			40

			
	
			11.5

				
			No Waiver; Cumulative Remedies

				
			41

			
	
			11.6

				
			Reliance Upon, Survival of, and Materiality of Representations and Warranties, Agreements, and Covenants

				
			41

			
	
			11.7

				
			Set-Off

				
			41

			
	
			11.8

				
			Severability and Enforceability of Provisions

				
			41

			
	
			11.9

				
			Payment of Expenses, Including Attorneys' Fees and Taxes

				
			41

			
	
			11.10

				
			Obligations Absolute

				
			42

			
	
			11.11

				
			Successors and Assigns

				
			42

			
	
			11.12

				
			Counterparts; Effective Date

				
			42

			
	
			11.13

				
			Participations

				
			42

			
	
			11.14

				
			Law of Florida

				
			43

			
	
			11.15

				
			Consent to Jurisdiction

				
			43

			
	
			11.16

				
			Title and Headings; Table of Contents

				
			43

			
	
			11.17

				
			Complete Agreement; No Other Consideration

				
			43

			
	
			11.18

				
			Legal or Governmental Limitations

				
			43

			
	
			11.19

				
			Interest

				
			43

			
	
			11.20

				
			Independence of Covenants

				
			44

			
	
			11.21

				
			WAIVER OF TRIAL BY JURY

				
			44

			
	
			11.22

				
			AMENDMENT AND RESTATEMENT

				
			44

			

 

Exhibits

Exhibit A - Form of Amended and Restated Revolving Credit Note

Exhibit B - Form of Request for Advance

Exhibit C - Form of Joinder Agreement

Exhibit D - Form of Certificate of Compliance

 

Schedules

Schedule 1.1.A - Liens

Schedule 1.1.B - Subsidiaries

Schedule 1.1.C - Investments

Schedule 4.6 - Litigation

Schedule 10.7 - Margins and Fees

 

 

 

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This Credit Agreement is made and entered into as of this 4th day of October, 2017, by and between NewBevCo, Inc., a Delaware corporation (the “Borrower”) and Branch Banking and Trust Company (the “Bank”).

 

RECITALS

 

A.     Borrower and Bank are parties to that certain Credit Agreement dated as of July 8, 2011, as amended by that certain First Amendment to Credit Agreement dated November 23, 2012, that certain Second Amendment to Credit Agreement dated October 10, 2014 and that certain Third Amendment to Credit Agreement dated June 30, 2015 (as further amended, restated, supplemented, and otherwise modified from time to time, the (“Existing Credit Agreement”).

 

B.     Borrower and Bank have agreed to amend and restate the Existing Credit Agreement upon the terms and subject to the conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements, covenants, and conditions herein, the Borrower and the Bank agree as follows:

 

SECTION 1. DEFINITIONS.

 

1.1     Defined Terms. Except as otherwise expressly provided in this Agreement, the capitalized terms used in the foregoing preamble and background sections and the following capitalized terms shall have the respective meanings ascribed to them for all purposes of this Agreement:

 

“Advance” means a borrowing requested by Borrower and made by Bank under Section 2.l(a) of this Agreement, including without limitation any readvance, refunding or conversion of such borrowing pursuant to Section 2.l(c) hereof, and shall include, as applicable, a LIBOR- based Advance and/or Prime-based Advance.

 

“Affiliate” means with respect to any Person, any other Person (i) which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with, such Person or another Affiliate of such Person, (ii) which beneficially owns or holds 10% or more of the shares of any class of the voting stock of such Person, or (iii) 10% or more of the shares of any class of voting stock of which is beneficially owned or held of record by such Person or any of its Subsidiaries. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting stock, by contract, or otherwise. The term “Affiliate,” when used herein without reference to any Person, shall mean an Affiliate of the Borrower.

 

“Agreement” means this Credit Agreement, as the same may be amended, restated, supplemented, or replaced from time to time in accordance with the provisions hereof.

 

“Applicable Facility Fee Percentage” shall mean, as of any date of determination thereof, the applicable per annum percentage used to calculate the facility fee due and payable under section 2.6 of this Agreement determined by reference to the appropriate columns in the pricing grid attached to this Agreement as Schedule 10.7, such Applicable Facility Fee Percentage to be adjusted solely as specified in Section 10.7 hereof.

 

 

 

 

“Applicable Interest Rate” shall mean the Prime-based Rate or the LIBOR-based Rate as selected by Borrower from time to time pursuant to the terms of this Agreement.

 

“Applicable Letter of Credit Percentage” shall mean, as of any date of determination thereof, the applicable percentage used to calculate fees due and payable hereunder with respect to Letters of Credit determined by reference to the appropriate columns in the pricing grid attached to this Agreement as Schedule 10.7, such Applicable Letter of Credit Percentage to be adjusted as provided in Section 10.7 hereof.

 

“Applicable Margin” shall mean, as of any date of determination thereof, the applicable interest rate margin for the LIBOR-based Rate and the Prime-based Rate determined by reference to the appropriate columns in the pricing grid attached to this Agreement as Schedule 10.7, such Applicable Margin to be adjusted as provided in Section 10.7 hereof.

 

“Attributable Indebtedness” shall mean, as of the date of any determination thereof, with respect to any Capital Lease under which any Person is a lessee, the sum of the present value of the amount of each remaining payment of rent under the terms of such Capital Lease (including any period for which the term of any such Capital Lease has been or may be, at the option of the lessor, extended), as such amount would be reflected on the liability side of a balance sheet in accordance with GAAP.

 

“Bank” has the meaning specified in the first sentence hereof. “Borrower” has the meaning specified in the first sentence hereof.

 

“Business Day” means any day on which commercial banks are open for domestic and international business in Fort Lauderdale and New York.

 

“Capital Lease” means any Lease or other agreement for the use of property which is required to be capitalized on a balance sheet of the lessee or other user of property in accordance with GAAP.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute, together with the rules and regulations thereunder.

 

“Comerica Loan Agreement'' means that certain Second Amended and Restated Credit Agreement dated as of June 30, 2008 between Borrower and Comerica Bank, as amended, and as may be further amended, restated, supplemented or replaced from time to time.

 

“Committed Amount” has the meaning specified in Section 2.1(a) hereof.

 

“Consolidated Depreciation Expense” means, for any fiscal period, without duplication, the consolidated expense of the Borrower and its Restricted Subsidiaries during such fiscal period for depreciation and amortization, determined in accordance with GAAP.

 

“Consolidated EBITDA” means for any period, Consolidated Net income for such period, plus, without duplication and only to the extent reflected as a charge or reduction in the statement of such Consolidated Net Income for such period, the sum of (a) Consolidated Income Tax Expense, (b) Consolidated Interest Expense, and (c) Consolidated Depreciation Expense, in each case determined in accordance with GAAP.

 

2

 

 

“Consolidated Funded Debt” means at any date, the aggregate amount of all Funded Debt of the Borrower and the Restricted Subsidiaries at such date, all as determined in accordance with GAAP.

 

“Consolidated Income Tax Expense” means for any period the aggregate amount of taxes based on the income or profits of Borrower and its Restricted Subsidiaries determined in accordance with GAAP.

 

“Consolidated Interest Expense” shall mean for any period the total interest expense (including that attributable to Capital Leases) of Borrower and its Restricted Subsidiaries, determined in accordance with GAAP.

 

“Consolidated Net Income” means for any period, the consolidated net income (or loss) of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Restricted Subsidiary) in which the Borrower or any of its Restricted Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Restricted Subsidiary in the form of dividends or similar distributions, and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any agreement (other than under any Loan Document) or legal requirement applicable to such Subsidiary.

 

“Consolidated Net Worth” means at any date, the total common shareholders' equity of Borrower and its Restricted Subsidiaries, as reflected on the most recent regularly prepared quarterly or annual balance sheet of Borrower and such Restricted Subsidiaries, which balance sheet shall be prepared in accordance with GAAP, minus all Investments of Borrower and its Restricted Subsidiaries that are not Permitted Investments.

 

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

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute, together with the rules and regulations thereunder.

 

“ERISA Affiliate” means any Person which is under “common control” with the Borrower or any Subsidiary (within the meaning of Section 414 (b) or (c) of the Code or Section 4001 (a) (14) of ERISA).

 

“ERISA Termination Event” means (a) a “reportable events (within the meaning of Section 4043(b) of ERISA) with respect to a Pension Plan (other than a “reportable event” as to which the PBGC has by regulation waived the 30 day notice requirement under Section 4043 (a) of ERISA); provided, however, that a failure to meet the minimum funding standards of Section 412 of the Code shall be an ERISA Termination Event regardless of the issuance of any waiver under Section 412(d) of the Code; (b) the withdrawal of the Borrower, any Subsidiary, or any ERISA Affiliate from a Pension Plan during a plan year in which it was a “substantial employer” (within the meaning of Section 4001 (a) (2) of ERISA) (c) the complete or partial withdrawal of the Borrower, any Subsidiary, or any ERISA Affiliate from a Multiemployer Plan under Section 4201 or 4204 or ERISA; (d) the receipt by the Borrower, any Subsidiary, or any ERISA Affiliate of notice from a Multiemployer Plan that is in reorganization or insolvent under Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (e) the providing of a notice of intent to terminate a Pension Plan pursuant to Section 4041(a) (2) of ERISA or the treatment of a Pension Plan amendment as a termination under Section 4041(e) of ERISA; (f) the institution of proceedings by the PBGC to terminate a Pension Plan or the appointment of a trustee to administer any Pension Plan under Section 4042 of ERISA; (g) the receipt by the Borrower, any Subsidiary, or any ERISA Affiliate of a notice from any Multiemployer Plan that any action described in clause (f) has been taken with respect to that Multiemployer Plan; or (h) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan.

 

3

 

 

“Event of Default” means any of the events specified in Section 8 hereof.

 

“Exchange Act” means the Securities and Exchange Act of 1934, as amended from time to time.

 

“Federal Funds Effective Rate” means, for any day, a fluctuating interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Bank from three Federal funds brokers of recognized standing selected by it, all as conclusively determined by the Bank, such sum to be rounded upward, if necessary, to the nearest whole multiple of 1116th of 1%.

 

“Fifth Third Loan Agreement” means that certain Credit Agreement dated as of June 18, 2015 between Borrower and Fifth Third Bank, as amended, and as may be further amended, restated, supplemented or replaced from time to time.

 

“Funded Debt” of any Person means (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services as of such date (other than operating leases and trade liabilities incurred in the ordinary course of business) or which is evidenced by a note, bond, debenture or similar instrument, (b) the principal component of all obligations of such person under Capital Leases, (c) all reimbursement obligations (actual, contingent or otherwise) of such Person in respect of letters of credit, acceptances or similar obligations issued or created for the account of such Person, (d) all liabilities secured by any liens on any property owned by such Person as of such date even though such Person has not assumed or otherwise become liable for the payment thereof, in each case determined in accordance with GAAP; provided, however, that so long as such Person is not personally liable for such liabilities, the amount of such liability shall be deemed to be the lesser of the fair market value at such date of the property subject to the lien securing such liability and the amount of the liability secured, and (e) all Guarantee Obligations in respect of any liability which constitutes Funded Debt.

 

“GAAP” shall mean generally accepted accounting principles in the United States of America, as in effect on the date hereof, consistently applied.

 

“Guaranty” and “Guaranties” have the meaning specified in Section 3.2 hereof.

 

“Guarantee Obligation” shall mean as to any Person (the “guaranteeing person”) any obligation of the guaranteeing person in respect of any obligation of another Person (including, without limitation, any bank under any letter of credit), the creation of which was induced by a reimbursement agreement, counter indemnity or similar obligation issued by the guaranteeing person, in either case guaranteeing or in effect guaranteeing any Debt, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Credit Parties in good faith.

 

4

 

 

“Interest Period” means:

 

(i)         with respect to each Prime-based Advance, a calendar month (commencing on the first day of each calendar month and ending on the last day of each calendar month regardless of whether a Prime-based Advance is outstanding on either date); provided that:

 

(a)     the initial Interest Period applicable to Prime-based Advances shall mean the period commencing on the effective date hereof and ending October 31, 2017; and

 

(b)     the last Interest Period applicable to Prime-based Advances under this Agreement shall end on the Maturity Date; or

 

(ii)        with respect to each LIBOR-based Advance, a calendar month (commencing on the first day of each calendar month and ending on the last day of each calendar month regardless of whether a LIBOR-based Advance is outstanding on either date); provided that:

 

(a)     the initial Interest Period applicable to LIBOR-based Advances shall mean the period commencing on the effective date hereof and ending October 31, 2017; and

 

(b)     the last Interest Period applicable to LIBOR-based Advances under this Agreement shall end on the Maturity Date.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement dated June 18, 2015 among the Bank, Comerica Bank, Fifth Third Bank and the Borrower.

 

“Investment” means any loan, advance, or extension of credit, without duplication (except for accounts and notes receivable for merchandise sold or services furnished in the ordinary course of business, and amounts paid in advance on account of the purchase price of merchandise to be delivered to the payor within one year of the date of the advance), or purchase of stock, notes, bonds, or other securities, evidences of indebtedness, or property not used in the business activities of the Borrower or a Restricted Subsidiary, or capital contribution to any Person, whether in cash or other property.

 

5

 

 

“IRS” means the Internal Revenue Service or any successor thereof.

 

“Lease” means any lease of property, whether real, personal, or mixed, with a remaining term of at least one year (including any period for which such lease is renewable at the option of the lessor) other than leases between the Borrower and its Restricted Subsidiaries and leases between Restricted Subsidiaries.

 

“Letter of Credit” shall have the meaning set forth in Section 2.1(t) of this Agreement. 

 

“Letter of Credit Documents” shall have the meaning set forth in Section 2.1(t) of this Agreement.

 

“Letter of Credit Reserve” shall mean as of any date of determination thereof, an amount equal to the undrawn amount of all Letters of Credit plus the unreimbursed amount of any draws under Letters of Credit honored by Bank.

 

“LIBOR-based Advance” means an Advance which bears interest at the LIBOR-based

Rate.

 

“LIBOR-based Rate” means, with respect to any Interest Period, the per annum interest rate which is equal to the sum of the Applicable Margin plus the quotient of:

 

(A)     the average rate quoted on Reuters Screen LIBOR0l Page (or such replacement page) on the determination date for deposits in U. S. Dollars offered in the London interbank market for one month determined as of 11:00 am London time two (2) Business Days prior to the commencement of the applicable Interest Period; provided that if the above method for determining one-month LIBOR shall not be available, the rate quoted in The Wall Street Journal, or a rate determined by a substitute method of determination agreed on by Borrower and Bank; provided further that if such agreement is not reached within a reasonable period of time (in Bank's sole judgment), a rate reasonably determined by Bank in its sole discretion as a rate being paid, as of the determination date, by first class banking organizations (as determined by Bank) in the London interbank market for U.S. Dollar deposits, divided by

 

(B)     an amount equal to one minus the maximum aggregate rate at which reserves (including, without limitation, any marginal supplemental or emergency reserves) are required to be maintained under Regulation D by member banks of the Federal Reserve System with respect to dollar funding in the London interbank market. Without limiting the effect of the foregoing, such maximum aggregate rate shall reflect any other reserves required to be maintained by such member banks by reason of any applicable regulatory change against (i) any category of liability which includes deposits by reference to which the LIBOR-based Rate is to be determined or (ii) any category of extensions of credit or other assets related to LIBOR, 

 

all as conclusively determined (absent manifest error) by the Bank; provided, however, if the LIBOR-based Rate is less than zero, such rate shall be deemed zero for purposes of this Agreement.

 

“LIBOR Lending Office” means the Bank's main office or such other branch or branches of Bank, domestic or foreign, as it may hereafter designate as a LIBOR Lending Office by notice to Borrower.

 

6

 

 

“Lien” means any interest in property securing an obligation owed to, or a claim by, any Person other than the owner of the property, whether such interest shall be based on the common law, civil law, statute, civil code, or contract, whether or not such interest shall be recorded or perfected, and whether or not such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, and including the lien, privilege, security interest, or other encumbrance arising from a mortgage, deed of trust, hypothecation, transfer, assignment, pledge, adverse claim or charge, conditional sale, or trust receipt, or from a lease, consignment, or bailment for security purposes. The term “Lien” also includes reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting property. For the purposes of this Agreement, a Person shall be deemed to be the owner of any property that such Person shall have acquired or shall hold subject to a conditional sale agreement or other arrangement (including a leasing arrangement) pursuant to which title to the property shall have been retained by or vested in some other Person for security purposes.

 

“Loan Documents” means this Agreement, the Revolving Credit Note, the Guaranties, and each of the Security Documents delivered to Bank at any time after the date hereof.

 

“Moody's” means Moody's Investors Service, Inc.

 

“Multiemployer Plan” means any Plan that is a “multiemployer plan” (within the meaning of Section 4001(a)(3) of ERISA).

 

“Parent” means National Beverage Corp., a Delaware corporation.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor thereof. 

 

“Pension Plan” means any Plan that is an “employee pension benefit plan” (within the meaning of Section 3 (2) of ERISA).

 

“Permitted Acquisition” shall mean any acquisition (including by way of merger or consolidation) by Borrower or any Restricted Subsidiary of all or substantially all of the assets of another Person, a division or line of business of another Person, or the capital stock or other equity interests of another Person, which is conducted in accordance with the following requirements:

 

(a)     Both immediately before and after such acquisition, no Default or Event of Default shall have occurred and be continuing; and

 

(b)     The board of directors (or other Person(s) exercising similar functions) of the seller of the assets or issuer of the capital stock or other equity interests being acquired shall not have disapproved such transaction or recommended that such transaction be disapproved.

 

“Permitted Investment” means any of the following Investments:

 

(a)     Marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency thereof and maturing within one year from the date of acquisition thereof;

 

7

 

 

(b)     Commercial paper of any corporation incorporated in the United States of America having (i) a rating of “A-1” or better by S&P or “P-1” or better by Moody's and (ii) combined capital, surplus, and undivided profits of not less than $100,000,000.00;

 

(c)     Certificates of deposit, repurchase agreements, bankers acceptances, eurocurrency deposits, and yankee certificates of deposit (i) in an amount not in excess of the maximum amount of insurance provided by the Federal Deposit Insurance Corporation, or (ii) issued by commercial banks or trust companies incorporated under the laws of the United States of America, each being a member of the Federal Deposit Insurance Corporation and having unsecured long-term debt that is rated “A-” or better by S&P or “A3” or better by Moody's;

 

(d)     Readily marketable debt securities issued by any state or municipality within the United States or any political subdivision, agency, or instrumentality thereof maturing within twelve months or less of the date of acquisition and rated “MIG-I” or better by Moody's;

 

(e)     Investments in so-called “money market funds” registered under the Investment Company Act of 1940, as amended, and organized under the laws of the United States of America or any jurisdiction thereof, having total net assets of at least $100,000,000.00 and investing primarily in Investments of the types specified in clauses (a), (b), (c), and/or (d), but in each case without limitation as to maturity (so that it may reasonably be expected that at any time at least 80% of its invested funds will be invested in such Investments);

 

(f)     Trust certificates or other instruments evidencing an ownership interest in debt securities held by a trustee or custodian and meeting the requirements of clause (d) hereof (except as to maturity), so long as the holder thereof has the right, at least as often as every thirty (30) days, to cause the purchase of such trust certificate or other instrument by a bank which meets the requirements of clause (c) hereof;

 

(g)     Investments in (i) any Restricted Subsidiary or (ii) any corporation which, simultaneously therewith, becomes a Restricted Subsidiary and which, in either case, is a Guarantor;

 

(h)     Investments in joint ventures as to which:

 

	 	
			(i)

				
			no party to such joint venture (other than the entity created by such joint venture) shall be an Affiliate of the Borrower;

			

 

	 	
			(ii)

				
			the entity created by such joint venture shall not engage in any line of business other than the lines of business in which the Borrower may engage pursuant to Section 7.9 hereof; and

			

 

	 	
			(iii)

				
			the aggregate amount of the Borrower's Investment in such joint venture shall not exceed the greater of$5,000,000 and 20% of Consolidated Net Worth.

			

 

(i)     Other Investments held by the Borrower or any Restricted Subsidiary on the date of this Agreement and described on Schedule 1.1.C hereto.

 

“Permitted Liens” means:

 

(a)     Liens existing on the date of this Agreement which are: (i) described in Schedule 1.1.A hereto; or (ii) individually in each case, on property with a book value of less than $30,000 and in the aggregate on property with a book value not exceeding $1,000,000 and which do not secure Funded Debt;

 

8

 

 

(b)     Liens securing taxes, assessments, governmental charges or levies or the claims or carriers, warehousemen, materialmen, mechanics and other like Persons not yet due or the payment of which is not then required by this Agreement; provided, however, that this clause (b) shall not be deemed to permit any Liens which may be imposed pursuant to Section 4068 of ERISA or Section 412(n) of the Code;

 

(c)     Liens incidental to the ordinary course of business or the ownership of properties and assets, including, without limitation, (i) Liens, deposits, or pledges securing the performance of bids, tenders, teases, or trade contracts, (ii) Liens securing statutory obligations (including those arising under workers compensation, unemployment insurance, and other social security legislation), (iii) Liens to secure the performance of surety and appeal bonds, performance bonds, and other similar obligations; provided, however, that (A) any such Lien shall not be created in connection with and shall not secure Funded Debt; (B) any obligation secured by any such Lien shall not be overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings during which there is no right on the part of the secured party to seize, take possession of or sell or cause the sale of the property subject to such Lien, and adequate book reserves have been established in accordance with GAAP; and (C) all such Liens, pledges, and deposits shall not in the aggregate materially impair the use or diminish the value of the properties of the Borrower or any Restricted Subsidiary in the operation of the respective businesses of the Borrower and the Restricted Subsidiaries provided, further, that this clause (C) shall not be deemed to permit any Liens which may be imposed pursuant to Section 4068 of ERISA or Section 412(n) of the Code; or (iv) other Liens not in excess of 10% of Consolidated Net Worth;

 

(d)     [RESERVED];

 

(e)     Minor survey exceptions and minor encumbrances, easements, or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Borrower and the Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair the use or diminish the value of any of such properties in the operation of the businesses of the Borrower and the Restricted Subsidiaries;

 

(f)     Liens originally created to secure payment of a portion of the purchase price relating to fixed assets or equipment which the Borrower or any Restricted Subsidiary acquires after the date hereof from a non-affiliate, provided, however, that (i) no such Lien shall extend to any other property of the Borrower or any Restricted Subsidiary; (ii) the outstanding principal amount of indebtedness secured by any such Lien shall not exceed 100% of the cost of the property subject to such Lien;

 

(g)     Liens securing indebtedness of a corporation outstanding on the date such corporation (i) is designated as a Restricted Subsidiary pursuant to the provisions of this Agreement, (ii) merges into or consolidates with the Borrower or any Restricted Subsidiary pursuant to the provisions of Section 7.3 hereof, or (iii) is acquired by the purchase of all or substantially all of such corporation's assets and the assumption of such indebtedness of such corporation by the Borrower or any Restricted Subsidiary; provided, however, that such Liens are not applicable to the Borrower or any previously designated Restricted Subsidiary or the assets (other than the acquired assets) of the Borrower or any previously designated Restricted Subsidiary; provided, further, that none of such Liens is created prior to and in anticipation of such designation, merger, consolidation, or acquisition;

 

9

 

 

(h)     Liens which may arise to secure Indebtedness incurred under the Comerica Loan Agreement as a result of security interests granted Bank in accordance with clause (ii) of Section 3.l(b), so long as property of the Borrower and/or Restricted Subsidiaries is subjected to such Liens in compliance with the provisions of this Agreement; and

 

(i)     The extension, renewal, or replacement of any Lien specified in the foregoing clauses (a) through (h); provided, however that (i) no property shall become subject to such extended, renewal, or replacement Lien that was not subject to the Lien extended, renewed, or replaced; (ii) the aggregate principal amount of Indebtedness secured by any such extended, renewed, or replacement Lien shall not be increased by such extension, renewal, or replacement; (iii) the Indebtedness secured by such Lien could be incurred in compliance with the applicable limitations of this Agreement at the time of such extension, renewal, or replacement; and (iv) after giving effect thereto, no Event of Default shall exist.

 

“Person” means any corporation, business entity, natural person, firm, joint venture, partnership, trust, unincorporated organization, association, government, or any department or agency of any government.

 

“Plan” means any “employee benefit plan” (within the meaning of Section 3 (3) of ERISA) that the Borrower, any Subsidiary, or any ERISA Affiliate maintains, contributes to, or is obligated to contribute to for the benefit of employees or former employees of the Borrower, any Subsidiary, or any ERISA Affiliate.

 

“Prime-based Advance” means an Advance which bears interest at the Prime-based Rate. “Prime-based Rate” means for any day, that rate of interest which is equal to the Applicable Margin plus the Prime Rate.

 

“Prime Rate” means the per annum rate of interest publicly announced by Bank, at its main office from time to time as its “prime rate” (it being acknowledged that such announced rate may not necessarily be the lowest rate charged by Bank to any of its customers), which Prime Rate shall change simultaneously with any change in such announced rate.

 

“Responsible Officer” means the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer or Chief Accounting Officer of the Borrower.

 

“Restricted Subsidiary” means the Subsidiaries designated as “Restricted Subsidiaries” in Schedule 1.1.B hereto, and any other Subsidiary that may be designated as a Restricted Subsidiary by resolution of the board of directors of the Borrower so long as (i) such Subsidiary conducts substantially all of its business and owns substantially all of its property within the United States or such other location as is consented to by the Bank, and (ii) at least eighty percent (80%) of each class of the voting stock and one hundred percent (100%) of the preferred stock of such Subsidiary is legally and beneficially owned by the Borrower; provided, however, that any such designation of a Subsidiary as a Restricted Subsidiary shall not be effective unless the provisions of Section 7.10 hereof shall have been complied with. Once a Subsidiary becomes a Restricted Subsidiary, it may not thereafter become an Unrestricted Subsidiary.

 

10

 

 

“Revolving Credit” means the revolving credit loan to be advanced to the Borrower by Bank pursuant to Section 2.1 of this Agreement, in an aggregate amount, not to exceed, at any one time outstanding, the Committed Amount.

 

“Revolving Credit Note” means the revolving credit note described in Section 2.1 hereof, made by Borrower payable to Bank, in the form annexed to this Agreement as Exhibit “A”, as such note may be amended or supplemented from time to time, and other note issued in substitution, replacement or renewal thereof from time to time.

 

“S&P” means Standard & Poor's Corporation.

 

“Sale Leaseback Transaction” has the meaning specified in Section 7.3(b) hereof. 

 

“SEC” means the Securities and Exchange Commission, or any successor organization. 

 

“Security Documents” has the meaning set forth in Section 3.1(b) hereof.

 

“Subsidiary” means, for any Person, any corporation, partnership, or other entity of which more than fifty percent (50%) of the securities or other ownership interests having ordinary voting power to elect the board of directors or having direct power to perform functions similar to that of a board of directors is at the time directly or indirectly owned or controlled by such Person. Unless the context clearly indicates otherwise, the term, “Subsidiary” refers to a subsidiary of the Borrower.

 

“Substantial Sale of Assets” means the sale of any assets of the Borrower or any Restricted Subsidiary out of the ordinary course of business which, when aggregated with the proceeds of all such asset sales by the Borrower and any Restricted Subsidiary after the date hereof, exceeds 50% of the total consolidated tangible assets of the Borrower and its Restricted Subsidiaries on January 28, 2017, as determined in accordance with GAAP.

 

“Tax Sharing Agreement” means the Tax Sharing Agreement dated as of June 1, 1992, between the Borrower and the Parent as presently in effect and any similar agreement approved in writing by the Bank. The Borrower will not, nor will it permit any Restricted Subsidiary to, amend or supplement any provision of a Tax Sharing Agreement without the prior written consent of the Bank, which consent will not be unreasonably withheld.

 

“Termination Date” means October 3, 2020, subject to the provisions of Section 9 hereof. 

 

“Unrestricted Subsidiary” means a Subsidiary which is not a Restricted Subsidiary. 

 

“Voting Stock” means with respect to a corporation, the stock of such corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect members of the board of directors (or other governing body) of such corporation, and with respect to any partnership, the partnership interests in such partnership the owners of which are entitled to manage the management of the affairs of the partnership or the designation of another Person as the Person entitled to manage the affairs the partnership (it being understood that, in the case of any partnership, “shares of Voting Stock” shall refer to such partnership interests).

 

1.2     Other Definitional Provisions.

 

(a)      The terms “material” and “materially” shall have the meanings ascribed to such terms under GAAP as such would be applied to the business of the Borrower or others, except as the context shall clearly otherwise require; (b) all of the terms defined in this Agreement shall have such defined meanings when used in other documents issued under, or delivered pursuant to, this Agreement unless the context shall otherwise require; (c) all terms defined in this Agreement in the singular shall have comparable meanings when used in the plural, and vice versa; (d) accounting terms to the extent not otherwise defined shall have the respective meanings given them under, and shall be construed in accordance with GAAP; (e) “hereof,” “herein,” “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; (f) the masculine and neuter genders are used herein and whenever used shall include the masculine, feminine, and neuter as well; and (g) whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such parties unless the context shall expressly provide otherwise.

 

11

 

 

SECTION 2. AMOUNT AND TERMS OF CREDIT.

 

2.1     The Revolving Credit.

 

(a)     Revolving Credit Commitment. Subject to the terms and conditions of this Agreement, Bank agrees to make Advances of the Revolving Credit to Borrower from time to time on any Business Day during the period from the effective date hereof until (but excluding) the Termination Date in an aggregate amount not to exceed at any one time outstanding Fifty Million Dollars ($50,000,000) (the “Committed Amount”). All of such Advances hereunder shall be evidenced by the Revolving Credit Note, under which advances, repayments and readvances may be made, subject to the terms and conditions of this Agreement.

 

(b)     Accrual of Interest and Maturity. The Revolving Credit Note, and all principal and interest outstanding thereunder, shall mature and become due and payable in full on the Termination Date, and each Advance evidenced by the Revolving Credit Note from time to time outstanding hereunder shall, from and after the date of such Advance, bear interest at its Applicable Interest Rate. The amount and date of each Revolving Credit Advance, its Applicable Interest Rate, its Interest Period (if any), and the amount and date of any repayment shall be noted on Bank's records, which records will be conclusive evidence thereof, absent manifest error; provided, however, that any failure by the Bank to record any such information shall not relieve Borrower of its obligation to repay the outstanding principal amount of such Advance, all interest accrued thereon and any amount payable with respect thereto in accordance with the terms of this Agreement and the other Loan Documents.

 

(c)     Requests for Advances and Requests for Refundings and Conversions of Advances. Borrower may request an Advance, and may request to refund any Advance in the same type of Advance or convert any Advance to any other type of Advance only after delivery to Bank of a Request for Advance executed by an authorized officer of Borrower, subject to the following and to the remaining provisions hereof:

 

(i)     each such Request for Advance shall set forth the information required on the Request for Advance form annexed hereto as Exhibit “B”, including without limitation:

 

	 	(A)	
			the proposed date of the Advance, which must be a Business Day;

			
	 	 	 
	 	
			(B)

				
			whether the Advance is a refunding or conversion of an outstanding Advance; and

			

 

	 	
			(C)

				
			whether such Advance is to be a Prime-based Advance or a LIBOR-based Advance, and, except in the case of a Prime-based Advance, the first Interest Period applicable thereto;

			

 

12

 

 

(ii)     each such Request for Advance shall be delivered to Bank by 11:00 a.m. (Fort Lauderdale time) two (2) Business Days prior to the proposed date of Advance, except in the case of a Prime-based Advance, for which the Request for Advance must be delivered by 10 a.m. (Fort Lauderdale time) on such proposed date;

 

(iii)     the principal amount of such requested Advance plus the principal amount of all other Advances then outstanding hereunder, plus the Letter of Credit Reserve, shall not exceed the Committed Amount;

 

(iv)     the principal amount of such Advance, plus the amount of any other outstanding indebtedness under this Agreement to be then combined therewith having the same Applicable Interest Rate and Interest Period, if any, shall be at least Two Hundred Fifty Thousand Dollars ($250,000) or a larger integral multiple of Fifty Thousand Dollars ($50,000) and at any one time there shall not be in effect more than ten (10) Interest Periods;

 

(v)     each Request for Advance, once delivered to Bank, shall not be revocable by Borrower, and shall constitute and include a certification by the Borrower as of the date thereof that:

 

	 	
			(A)

				
			both before and after the Revolving Credit Advance, the obligations of Borrower and Restricted Subsidiaries set forth in this Agreement are valid, binding and enforceable obligations of such parties;

			

 

	 	
			(B)

				
			to the best knowledge of Borrower all conditions to Advances of the Revolving Credit have been satisfied; and

			

 

	 	
			(C)

				
			both before and after the Advance, there is no Default or Event of Default in existence.

			

 

(d)     Prime-based Advance in Absence of Election or Upon Default. If, as to any outstanding LIBOR-based Advance, Bank has not received payment on the last day of the interest Period applicable thereto, or does not receive a timely Request for Advance meeting the requirements of this Section 2.1 with respect to the refunding or conversion of such Advance, or, subject to Section 2.4(d) hereof, if on such day a Default or Event of Default shall have occurred and be continuing, the principal amount thereof which is not then prepaid shall be converted automatically to a Prime-based Advance and Bank shall thereafter promptly notify Borrower of said action.

 

(e)     [Intentionally deleted.]

 

(f)     Subject to the terms and conditions of this Agreement, Bank agrees to issue, or commit to issue, from time to time, standby letters of credit for the account of Borrower (herein individually called a “Letter of Credit” and collectively “Letters of Credit”) in aggregate undrawn amounts not to exceed three Million Dollars ($3,000,000) at any one time outstanding; provided, however, that the sum of the aggregate amount of Advances outstanding under the Revolving Credit Note plus the Letter of Credit Reserve shall not exceed the Committed Amount at any time; and provided further that no Letter of Credit shall, by its terms, have an expiration date which is more than twelve (12) months after issuance or which extends beyond the Termination Date. In addition to the terms and conditions of this Agreement, the issuance of any Letters of Credit also shall be subject to the terms and conditions of any letter of credit applications and agreements (“Letter of Credit Documents”) executed and delivered by Borrower to Bank with respect thereto. Borrower shall pay to Bank in advance upon issuance of any Letter of Credit a fee equal to the Applicable Letter of Credit Percentage per annum of the amount of such Letter of Credit.

 

13

 

 

2.2     [Intentionally deleted.]

 

2.3     Use of Proceeds of Revolving Credit. The proceeds of all Advances shall be used for working capital needs, capital expenditures, Permitted Acquisitions, and other lawful corporate purpose of Borrower, subject to the terms and conditions of this Agreement.

 

2.4     Interest Rate.

 

(a)     Prime-based Interest Payments. Interest on the unpaid balance of all Prime-based Advances from time to time outstanding shall accrue from the date of such Advances to the Termination Date (and until paid), at a per annum interest rate equal to the Prime-based Rate, and shall be payable in immediately available funds on the first day of each calendar quarter, commencing with the first such date after the initial Advance hereunder. Interest accruing at the Prime-based Rate shall be computed on the basis of a 360 day year and assessed for the actual number of days elapsed, and in such computation effect shall be given to any change in the interest rate resulting from a change in the Prime-based Rate on the date of such change in the Prime-based Rate.

 

(b)     LIBOR-based Interest Payments. Interest on each LIBOR-based Advance shall accrue at its LIBOR-based Rate and shall be payable in immediately available funds on the last day of the Interest Period applicable thereto. Interest accruing at the LIBOR-based Rate shall be computed on the basis of a 360 day year and assessed for the actual number of days elapsed from the first day of the Interest Period applicable thereto to, but not including, the last day thereof.

 

(c)     Interest Payments on Conversions. Notwithstanding anything to the contrary in Section 2.4(a) or (b), all accrued and unpaid interest on any Advance refunded or converted pursuant to Section 2.1(c) hereof shall be due and payable in full on the date such Advance is refunded or converted.

 

(d)     Interest on Default. Notwithstanding anything to the contrary set forth in Section 2.4(a), (b) or (c), in the event and so long as any Event of Default shall exist under this Agreement, interest shall be payable daily on the principal amount of all Advances from time to time outstanding (and on all other monetary obligations of Borrower hereunder and under the other Loan Documents) at a per annum rate equal to the Applicable Interest Rate in respect of each such Advance, plus, in the case of LIBOR-based Advances, three percent (3%) per annum for the remainder of the then existing Interest Period (but only so long as any Event of Default shall continue to exist), if any, and at all other such times and for all Prime-based Advances, at a per annum rate equal to the Prime-based Rate, plus three percent (3%).

 

2.5     Prepayment. Borrower may prepay all or part of the outstanding balance of any Prime-based Advance(s) (subject to not less than one (1) Business Days’ notice to Bank) at any time, provided that the amount of any partial prepayment shall be at least Two Hundred Fifty Thousand Dollars ($250,000) and the aggregate balance of Prime-based Advance(s) remaining outstanding under the Revolving Credit Note shall be at least Two Hundred Fifty Thousand Dollars ($250,000). Borrower may prepay all or part of any LIBOR-based Advance (subject to not less than three (3) Business Days' notice to Bank) only on the last day of the Interest Period applicable thereto, provided that the amount of any such partial prepayment shall be at least Two Hundred Fifty Thousand Dollars ($250,000), and the unpaid portion of such Advance which is refunded or converted under Section 2.1(c) shall be at least Two Hundred Fifty Thousand Dollars ($250,000). Any prepayment made in accordance with this Section 2.5 shall be without premium, penalty or prejudice to the right to reborrow under the terms of this Agreement. Any other prepayment of all or any portion of the Revolving Credit, whether by acceleration, mandatory or required prepayment or otherwise, shall be subject to Section 10 hereof, but otherwise without premium, penalty or prejudice.

 

14

 

 

2.6     Facility Fee. As consideration for making the Revolving Credit available, the Borrower shall pay to the Bank a non-refundable quarterly facility fee in an amount equal to the Applicable Facility Fee Percentage per annum of the Committed Amount (whether or not utilized or drawn). Such fee shall be payable quarterly in arrears beginning on December 31, 2017 and continuing on the last day of each calendar quarter thereafter, and on the Termination Date.

 

SECTION 3. SECURITY AND GUARANTY.

 

The obligations and liabilities of the Borrower hereunder and under the Loan Documents shall be secured and guaranteed as provided in this Section 3, subject to the provisions set forth below.

 

	 	
			3.1

				
			Security Interest.

			

 

(a)     The Revolving Credit Note shall be unsecured except as provided for in Section 3.1(b) below.

 

(b)     (i) Subject to the terms of the Intercreditor Agreement, in the event that any real or personal property of the Borrower becomes subject to a Lien (in violation of this Agreement) which is not a Permitted Lien and which Lien is not removed within thirty days of Borrower's receipt of notice of any Lien (and without regard to any additional cure period) or (ii) upon the occurrence of any Event of Default which has not otherwise been cured or waived at any time, the Bank shall have the right after written notice to Comerica Bank (with a copy to Borrower) to become secured by a first perfected (as set forth below) security interest in and mortgage of all the real and personal property of the Borrower now owned or hereafter acquired or arising, and all proceeds thereof. The Borrower shall execute and deliver to the Bank such mortgages and security agreements as the Bank shall require and as are customary for a transaction of that type, covering said real and personal property in form and substance satisfactory to the Bank (the “Security Documents”), securing the foregoing obligations to the full extent permitted under applicable law. The Security Documents shall be sufficient, when notice thereof is properly filed or recorded in the appropriate jurisdictions, to grant to the Bank a first perfected security interest in and lien on the Borrower's property, subject to no prior Liens or encumbrances except as expressly permitted herein, except the equal and ratable lien, if any, to be granted pursuant to the Comerica Loan Agreement, or except as the Bank permits in writing. The Borrower agrees to execute or otherwise provide to the Bank any and all financing statements, modifications, and other agreements or consents required by the Bank now or in the future to perfect Bank's interest in the collateral and otherwise in connection therewith. The grant of a lien and security interest pursuant to this Section shall not cure any violation of this Agreement; any such violation shall constitute an Event of Default hereunder taking into account the expiration of any applicable cure period.

 

3.2     Guaranty. Payment of the Revolving Credit Note, any other obligations under this Agreement or the other Loan Documents, presently existing or hereafter arising, shall be guaranteed by each of the Restricted Subsidiaries as set forth in the Continuing and Unconditional Guaranty dated as of the date hereof executed by each Restricted Subsidiary (the “Guaranty”). In the event of the designation of any additional Restricted Subsidiaries, a joinder agreement in the form attached hereto as Exhibit “C” shall be executed and delivered to the Bank by each such additional Restricted Subsidiary (also, a “Guaranty”), together with such supporting attorney's opinion, if requested by Lender, evidence of corporate authorization, and other instruments and documents as the Bank may reasonably request.

 

15

 

 

SECTION 4. REPRESENTATIONS AND WARRANTIES.

 

To induce the Bank to enter into this Agreement and to establish the Revolving Credit and make the Advances and issue the Letters of Credit, the Borrower represents and warrants to the Bank as follows:

 

4.1     Corporate Existence; Power; Compliance with Law; Restricted Subsidiaries; Name History. Each of the Borrower and the Restricted Subsidiaries is an entity duly incorporated or organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or organization. Each of the Borrower and the Restricted Subsidiaries has all requisite power and authority (corporate and otherwise) to own and operate its properties and to carry on its business as now being conducted, is duly qualified as a foreign entity to do business and is good standing in every jurisdiction in which the failure to so qualify is reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken as a whole. Each of the Borrower and the Restricted Subsidiaries has all licenses and permits necessary to carry on and conduct its business in all states and localities wherein it now operates and is in compliance with all other requirements of law, rule, or regulation applicable to it and to its business, if the failure to possess such licenses and permits or to so comply, either individually or in the aggregate, is reasonably likely to materially adversely affect the business, earnings, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

The Borrower is a Subsidiary of the Parent. All of the Subsidiaries of the Borrower are listed on Schedule 1.1.B hereto. None of the Borrower or the Restricted Subsidiaries have merged, changed its name, or done business under a fictitious name during the past five years, except as set forth in Schedule 1.1.B hereto.

 

	 	
			4.2

				
			Capital Stock; Parent; Subsidiaries.

			

 

(a)     The authorized capital stock of the Borrower consists of 1,000 shares of common stock, par value $0.01 per share, which is voting stock and is vested with all the voting rights in the Borrower, of which 100 shares are issued and outstanding, and 1,000 shares of preferred stock, par value $0.01 per share, of which no shares are issued or outstanding. All such outstanding shares have been duly authorized, validly issued and are fully paid, nonassessable and free of preemptive rights. No shares of common stock are held in the treasury of the Borrower. There are no subscriptions, options, warrants, or calls relating to the issuance by the Borrower of any shares of common stock, including any right of conversion or exchange under any outstanding security or other instrument. There are no voting trusts or other agreements or understandings with respect to the voting of the common stock of the Borrower. The Borrower is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its common stock or any security convertible into or exchangeable for any of its common stock. All of the outstanding shares of common stock of the Borrower are owned beneficially and of record by the Parent.

 

16

 

 

(b)     The authorized capital stock of the Parent consists of 75,000,000 shares of common stock, par value $0.01 per share, which is voting stock and, is vested with all the voting rights in the Parent, of which 50,616,134 shares are issued and 46,585,150 shares are outstanding, and 1,000,000 shares of preferred stock, par value $1.00 per share, none of which are outstanding.

 

(c)     The only Subsidiaries of the Borrower are as listed in Schedule 1.1.B hereto. Schedule 1.1.B correctly sets forth as to each Subsidiary its name, the jurisdiction of its incorporation if a corporation, or the jurisdiction of its formation if a partnership, whether such Subsidiary is a Restricted Subsidiary, the jurisdiction of its principal place of business, the address of its principal place of business, chief executive office, and the office where all books and records are kept, if different, the name of its parent company, the number of authorized shares, and the number of outstanding shares of each class of capital stock of such Subsidiary, and the number of such outstanding shares owned by the Borrower or other parent company. All of the outstanding shares of capital stock of each class of each Subsidiary have been validly issued and are fully paid and nonassessable. The Borrower owns beneficially and of record all of the outstanding shares of capital stock of each Subsidiary indicated as being owned by it on Schedule 1.1.B hereto, free and clear of any Liens.

 

4.3     Corporate Power and Authorization to Execute Loan Documents; No Conflict; No Consent. Each of the Parent, Borrower and the Restricted Subsidiaries has the corporate or limited liability company power and authority and the legal right to execute and deliver the Loan Documents to be executed by it and to perform its obligations thereunder, and has taken all corporate action necessary to authorize the execution, delivery, and performance of such Loan Documents and to authorize the transactions contemplated thereby. The execution, delivery, and performance by the Parent, the Borrower or the Restricted Subsidiaries of the Loan Documents to be executed by it will not contravene, conflict with, result in the breach of, or constitute a violation of or default under, or result in the creation of any lien, charge, or encumbrance upon any property or assets of such Person, pursuant to the constituent documents or other governing instruments of such Person, or any applicable law, rule, regulation, judgment, order, writ, injunction, or decree or any indenture or other agreement or instrument to which the Borrower, the Parent or a Restricted Subsidiary is a party, or by which such Person or its property may be bound or affected which has a material adverse effect on the business earnings, prospects, properties, or conditions (financial or otherwise) of the Borrower and the Restricted Subsidiaries taken as a whole. No consent, license, or authorization of, or filing with, or notice to, any Person or entity (including, without limitation, any governmental authority), is necessary or required in connection with the execution, delivery, performance, validity, or enforceability of the Loan Documents and the transactions as contemplated thereunder, except for consents, licenses, authorizations, filings, and notices obtained or performed by the Borrower or any Restricted Subsidiary and of which the Bank has been provided written notice, or referred to or disclosed in the Loan Documents. Any such consents, licenses, authorizations, filings, or notices remain in full force and effect.

 

4.4     Enforceable Obligations. The Loan Documents constitute legal, valid, and binding agreements enforceable against the respective parties thereto and any property described therein in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, arrangement, moratorium, or other laws relating to or affecting the rights of creditors generally and (ii) general principles of equity, regardless of whether enforcement is considered in proceedings at law or in equity.

 

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			4.5

				
			Financial Condition.

			

 

(a)     The consolidated financial statements of the Borrower as of April 29, 2017 and the consolidated financial statements of the Parent as of April 29, 2017, copies of which have been furnished to the Bank, fairly present the financial condition of the Borrower and its Subsidiaries and the Parent, respectively, as at the date of the financial statements, and fairly present the results of the operations of the Borrower and its Subsidiaries and the Parent for the period covered thereby.

 

(b)     Neither the Borrower, nor any of the Restricted Subsidiaries, has any direct or contingent liabilities, liabilities for taxes, long-term leases, or unusual forward or long-term commitments as of the date of this Agreement which, either individually or in the aggregate, are or are reasonably likely to be material to the Borrower and the Restricted Subsidiaries, which are not disclosed by provided for, or reserved against in the foregoing financial statements or referred to in notes thereto, other than liabilities incurred since April 29, 2017 in the ordinary course of business which in the aggregate have no material adverse effect on the Borrower and the Restricted Subsidiaries, taken as a whole, or on the conduct of the business of the Borrower and the Restricted Subsidiaries, taken as a whole. The Borrower does not know of any basis for any material unrealized or anticipated losses of the Borrower. The financial statements furnished to the Bank have been prepared in accordance with GAAP maintained throughout the period involved. There has been no material adverse change in the business, earnings, prospects, properties, or condition, financial or otherwise, of the Borrower and the Restricted Subsidiaries, taken as a whole, since the date of such financial statements.

 

4.6     No Litigation. Except as set forth in Schedule 4.6 hereto, there is no suit or proceeding at law or in equity or other proceeding or investigation (including proceedings by or before any court, arbitrator, governmental or administrative commission, board or bureau, or other administrative agency) pending, or to the best knowledge of the Borrower threatened, by or, against or involving the Parent, the Borrower, or any Subsidiary, or against any of their respective properties, existence, or revenues which, individually or in the aggregate, (a) if adversely determined, is reasonably likely to have a material adverse effect on the properties, assets, or business, or on the condition, financial or otherwise, of the Borrower and the Restricted Subsidiaries, taken as a whole, (b) materially impair the right or ability of the Borrower and the Restricted Subsidiaries, taken as a whole, to carry on their operations substantially as now conducted or as anticipated to be conducted in the future, (c) which would substantially impair the ability of the Borrower to perform its obligations under the Loan Documents, or, regardless of outcome, which questions the validity of the transactions contemplated by the Loan Documents, or (d) regardless of outcome, which would be required to be disclosed in notes to any balance sheet as of the date hereof of the Borrower prepared in reasonable detail in accordance with GAAP.

 

	 	
			4.7

				
			Investment Company Act; Regulation.

			

 

(a)     Neither the Borrower nor any of its Subsidiaries is an “investment company” or an “affiliated person” of an “investment company,” or a company “controlled” by an “investment company,” and neither the Borrower nor any of its Subsidiaries is an “investment advisor” or an affiliated person” of an “investment advisor,” and as each of the quoted terms is defined or used in the Investment Company Act of 1940, as amended.

 

(b)     Neither the Borrower nor any of its Subsidiaries is subject to regulation under any state or local public utilities code or any federal, state, or local statute or regulation limiting its ability to incur Indebtedness for Money Borrowed or to pledge assets of the type contemplated hereunder.

 

18

 

 

4.8     Disclosure and No Untrue Statements. No representation or warranty made by the Borrower in the Loan Documents or which will be made by the Borrower from time to time in connection with the Loan Documents (a) contains or will contain any misrepresentation or untrue statement of any material fact, or (b) omits or will omit to state any material fact necessary to make the statements therein not misleading. There is no fact (excluding information relating to world or national economic, social, or political conditions generally) known to any Responsible Officer of Borrower which materially adversely affects, or which would in the future materially adversely affect, the business, assets, properties, or condition, financial or otherwise, of the Borrower and the Restricted Subsidiaries, taken as a whole, or materially affects, or which might in the future materially adversely affect, the ability of the Borrower and the Restricted Subsidiaries to perform their obligations under the Loan Documents, or except as set forth or referred to in the Loan Documents or otherwise disclosed in writing to the Bank.

 

	 	
			4.9

				
			Title to Assets; Leases in Good Standing.

			

 

(a)     Each of the Borrower and the Restricted Subsidiaries has good and valid title (or, with respect to interests as lessee or otherwise, its equivalent under applicable law) to properties and assets purported to be owned (or leased) by it that are material to the conduct of the business of the Borrower and the Restricted Subsidiaries, taken as a whole, and including properties and assets reflected in the financial statements and notes thereto described in Section 4.5 hereof, except for such assets as have been disposed of in the ordinary course of business. All such properties and assets are subject to no Liens, other than Permitted Liens. Schedule 1.1.A accurately lists (i) each financing statement, deed, agreement, or other instrument in effect on the date hereof which has been filed, recorded, or registered pursuant to any United States federal, state, or local law or regulation that names the Borrower or any of the Restricted Subsidiaries as debtor or lessee or as the grantor or the transferor of the interest created thereby, and (ii) as to each such financing statement, deed, agreement, or other instrument, the names of the debtor, lessee, grantor, or transferor and the secured party, lessor, grantee, or transferee and the name of the jurisdiction in which such financing statement, deed, agreement or other instrument has been filed, recorded, or registered. Except as contemplated hereby, and pursuant to the Comerica Loan Agreement, neither the Borrower nor any of the Restricted Subsidiaries has signed any agreement or instrument in effect on the date hereof authorizing any secured party thereunder to file any such financing statement, deed, agreement, or other instrument (other than any such agreement or instrument relating to the Liens permitted under paragraph (d) or (f) of the definition of Permitted Liens).

 

(b)     Each of the Borrower and its Restricted Subsidiaries has the right to, and does, enjoy peaceful and undisturbed possession under all leases under which it is leasing property that are material to the conduct of the business of the Borrower and its Restricted Subsidiaries, taken as a whole. All such leases are valid, subsisting and in full force and effect, subject only to Permitted Liens, and neither the Borrower nor any of its Restricted subsidiaries in default in the performance, observance, or fulfillment of any obligation under any provision of any such lease, which default is reasonably likely to result in a termination of such lease or have a material adverse effect on the Borrower and its Restricted Subsidiaries, taken as a whole. No Responsible Officer has received any written notice that any other party to any such lease is in default under any such lease.

 

4.10   Investments. As of the date hereof, the Borrower and the Restricted Subsidiaries do not own any investments other than Permitted Investments of the types described in clauses (a)-(e) of the definition of such term in Section 1.1 hereof and other than the Investments listed in Schedule 1.1.C hereto, which Item correctly sets forth the amounts (determined as provided in the definition of “Investments” in Section 1.1) of the Investments listed thereon.

 

19

 

 

4.11     Payment of Taxes. Each of the Borrower, and the Subsidiaries has filed or caused to be filed all, federal, state, and local tax returns which are required to be filed by it and has paid or caused to be paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due, other than taxes being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been established in accordance with GAAP. No controversy in respect of additional taxes of the Parent, the Borrower or any Subsidiary is pending, or, to the knowledge of the Borrower, threatened, except as shown on the Borrower's financial statements described in Section 4.5 hereof or in notes thereto, and other than amounts in respect of business carried on by the Borrower, and the Subsidiaries in the ordinary course since the date of such financial statements, and other than amounts which, either individually or in the aggregate, do not materially and adversely affect, and are not likely to materially and adversely affect, the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

4.12     Agreement or Contract Restrictions; No Default. Neither the Borrower nor any of the Subsidiaries is a party to, or is bound by, any agreement, contract, or instrument or subject to any charter or other corporate restriction which materially and adversely affects the business, properties, assets, operations, or condition, financial or otherwise, of the Borrower and the Restricted Subsidiaries, taken as a whole. The ability of the Borrower or any of its Restricted Subsidiaries to declare, make, or pay dividends in respect of any shares of its common stock is not expressly limited by the provisions of any agreement or instrument other than the Comerica Loan Agreement. Each of the Borrower and the Restricted Subsidiaries is in full compliance with and is not in default in the performance, observance, or fulfillment of any obligations, covenants, or conditions contained in any agreement or instrument to which it is a party, other than any defaults which individually or in the aggregate are not reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

4.13     Patents, Trademarks, Licenses, Etc. Each of the Borrower and the Restricted Subsidiaries owns, possesses, or has the right to use, and holds free from burdensome restrictions or known conflicts with the rights of others, all patents, patent rights, licenses, trademarks, trademark rights, trade names, trade name rights, and copyrights, and all rights with respect to the foregoing, necessary to conduct their respective businesses as now being conducted, and is in full compliance with the terms and conditions, if any, of all such patents, patent rights, licenses, trademarks, trademark rights, trade names, trade name rights, or copyrights and the terms and conditions of any agreements relating thereto, except for such conflicts or noncompliance which, either individually or in the aggregate, do not materially and adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole. Further, each of the Restricted Subsidiaries and the Borrower agree that they shall not transfer any and all patents, patent rights, licenses, trademarks, trademark rights, trade name, trade name rights and copyrights and all rights to the foregoing presently held by Borrower or any Restricted Subsidiary to any Person or entity including the Parent, however, transfers between (a) Borrower and the Restricted Subsidiaries; (b) Restricted Subsidiaries; and (c) Restricted Subsidiaries and Borrower shall be permitted.

 

4.14     [RESERVED]

 

	 	
			4.15

				
			Compliance with ERISA; Multiemployer Plans.

			

 

(a)     Neither the execution and delivery of this Agreement or the other Loan Documents, the incurrence of the indebtedness hereunder by the Borrower, the application by the Borrower of the proceeds thereof, nor the consummation of any of the other transactions contemplated by this Agreement, constitutes or will constitute a “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA).

 

20

 

 

(b)     Each Plan (other than a Multiemployer Plan) is in compliance in all material respects with applicable provisions of ERISA and the Code. Each of the Borrower and the Subsidiaries has made all contributions to the Plans required to be made by them.

 

(c)     Except for liabilities to make contributions and to pay PGGC premiums and administrative costs, neither the Borrower, the Subsidiaries, nor any ERISA Affiliate has incurred any material liability to or on, account of any Pension Plan under applicable provisions of ERISA or the Code, and no condition exists which presents a material risk to the Borrower, any of its Subsidiaries, or any ERISA Affiliate of incurring any such liability. No domestic Pension Plan (other than a Multiemployer Plan) has failed to satisfy the minimum funding standard (within the meaning of Section 412 of the Code), whether or not waived. Neither the Parent, the Borrower, any of its Subsidiaries, any ERISA Affiliate, the PBGC, nor any other Person has instituted any proceedings or taken any other action to terminate any Pension Plan (other than a Multiemployer Plan), nor (in the case of the Parent, the Borrower, or any Subsidiary) has any present intention of terminating any Pension Plan.

 

(d)     Except with respect to any Multiemployer Plan, the present value of the all accumulated benefit obligations under each Pension Plan (based on the assumptions used in the funding of such Pension Plan, which assumptions are reasonable, and determined as of the last day of the most recent plan year of such Pension Plan for which an annual report has been filed with the IRS, did not exceed the current fair market value of the assets of such Pension Plan as of such last day.

 

(e)     None of the Plans is a Multiemployer Plan, except as set forth in the Parent's financial statements, Note 9, Pension Plans, as reported in the Parent's Annual Report on Form 10-K for the fiscal year ended May 3, 2014 (and similar Notes for subsequent fiscal years).

 

	 	
			4.16

				
			Compliance with Environmental Laws.

			

 

(a)     Each of the Borrower and the Restricted Subsidiaries is, and will continue to be, in full compliance with all applicable federal, state, and local environmental laws, regulations, and ordinances governing its business, products, properties, or assets with respect to all discharges into the ground and surface water, emissions into the ambient air and generation, accumulation, storage, treatment, transportation, labeling, or disposal of waste materials or process by-products, the violation of which is reasonably likely to materially and adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole, and neither the Borrower nor any of its Restricted Subsidiaries is liable for any penalties, fines, or forfeitures for failure to comply with any such laws, regulations, and ordinances other than penalties, fines or forfeitures which are not reasonably likely to materially and adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and Restricted Subsidiaries, taken as a whole. All licenses, permits or registrations required for the business of the Borrower and its Restricted Subsidiaries, as presently conducted and proposed to be conducted, under any federal, state, or local environmental laws, regulations or ordinances have been obtained or made, other than any such licenses, permits, or registrations the failure to obtain or make which, either individually or in the aggregate, do not materially and adversely affect, and are not reasonably likely to materially and adversely affect, the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken as a whole, and the Borrower and its Restricted Subsidiaries each is in compliance with all such licenses, permits, and registrations other than any such licenses, permits, or registrations the failure to obtain, make or comply with which, either individually or in the aggregate, do not materially and adversely affect, and are not reasonably likely to materially and adversely affect, the business, earnings, prospects, properties or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken as a whole.

 

21

 

 

(b)     No release, emission, or discharge into the environment of hazardous substances, as defined under the Comprehensive Environmental Responses, compensation, and Liability Act, as amended, or hazardous waste, as defined under the Resource Conservation and Recovery Act, or air pollutants as defined under the Clean Air Act, or pollutants, as defined under the Clean Water Act, has occurred or is presently occurring on or from any property owned or leased by the Borrower or its Subsidiaries in excess of federal, state or local permitted release or reportable quantities, or other concentrations,, standards, or limitations under the foregoing laws, or any state or local law governing the protection of health and the environment, or under any other federal state, or local laws or regulations (then or now applicable, as the case may be) other than any such releases, emissions, or discharges which, either individually or in the aggregate, do not materially and adversely affect, and are not reasonably likely to materially and adversely affect, the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

(c)     Neither the Borrower nor any of its Restricted Subsidiaries has ever (i) owned, occupied, or operated a site or structure on or in which any hazardous substance was or is stored, transported, or disposed of, or (ii) transported or arranged for the transportation of any hazardous substance except, in each case, in full compliance with all applicable federal, state, and local environmental laws, regulations, and ordinances governing its business, products, properties, or assets or the storage, transportation, or disposal of hazardous substances, which ownership, occupation, operation, transportation or arranging is reasonably likely to (i) subject the Parent, the Borrower and the Restricted Subsidiaries to any liabilities, expenses, fines or penalties which, individually or in the aggregate, are material to the Parent, the Borrower and its Restricted Subsidiaries, taken as a whole, or (ii) inhibit or result in the prohibition by the use by the Borrower or any Restricted Subsidiary of any property necessary in the conduct of the business of the Parent, the Borrower or such Subsidiary, the effect of which, individually or in the aggregate, is reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Parent, the Borrower and the Restricted Subsidiaries, taken as a whole. Neither the Parent, the Borrower nor any of its Restricted Subsidiaries has ever caused or been held legally responsible for any release or threatened release of any hazardous substance, or received notification from any federal, state, or other governmental authority of any such release or threatened release, of any hazardous substance from any site or structure owned, occupied, or operated by the Borrower or any of its Restricted Subsidiaries, individually or in the aggregate, reasonably likely to lead to liabilities, expenses, fines, and penalties in an amount material to the Borrower and the Restricted Subsidiaries, taken as a whole.

 

4.17     Labor Relations. Neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor practice which is reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole. There is (a) no unfair labor practice complaint pending or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Restricted Subsidiaries before the National Labor Relations Board or any court or labor board, and no grievance or arbitration proceedings arising out of or under collective bargaining agreements is so pending or, to the best knowledge of the Borrower, threatened; (b) no strike, lock-out, labor dispute, slowdown, or work stoppage pending or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Restricted Subsidiaries; and (c) no union representation or certification question existing or pending with respect to the employees of the Borrower or any of its Subsidiaries and, to the best knowledge of the Borrower, no union organization activity taking place, which unfair labor practice complaint, grievance, or arbitration proceedings, strike, lock-out, labor dispute, slowdown, or work stoppage or union representation or certification question, individually or in the aggregate, is reasonably likely to have a material adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

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SECTION 5. CONDITIONS OF LENDING.

 

The obligations of Bank to make any Advance or to issue or renew any Letters of Credit hereunder are subject to the condition that:

 

5.1     Continuing Accuracy of Representations and Warranties. At the time of each Advance or Letter of Credit, the representations and warranties set forth in Section 4 hereof, as supplemented by written disclosures by the Borrower to the Bank of changes affecting such representations and warranties (but which changes do not breach any term of this Agreement except as may have been waived or for which consent has been given by the Bank) or as supplemented by subsequent financial statements provided to the Bank, shall be true and correct on and as of the date of the borrowing with the same effect as though the representations and warranties had been made on and as of the date of the borrowing or issuance, except to the extent that such representations and warranties may expressly relate to an earlier date, in which case the shall continue to be true as of such date.

 

5.2     No Default. At the time of each borrowing or issuance or renewal of a Letter of Credit hereunder, the Borrower shall be in compliance with all terms and conditions set forth herein, and no Default or Event of Default shall have occurred and be continuing at the time of such borrowing, unless such Default or Event of Default shall have been waived by the Bank in writing.

 

5.3     Opinion of the Borrower's Counsel. On or prior to the date of this Agreement, the Bank shall have received the favorable opinion of counsel for the Borrower, in form and substance satisfactory to the Bank.

 

5.4     Insurance. On or prior to the date of this Agreement, the Bank shall have received, certificates of insurance, in form and detail acceptable to the Bank, describing the types and amounts of insurance (property and liability) maintained by the Borrower and its Restricted Subsidiaries.

 

5.5     Loan Documents. On or prior to the date of this Agreement, the Bank shall have received, duly executed, this Agreement and the other Loan Documents (with the exception of any Security Documents), all in form and substance satisfactory to the Bank and counsel for the Bank.

 

5.6     Supporting Documents. On or prior to the date of this Agreement, the Bank shall have received all other documents and instruments required hereunder or otherwise reasonably required by the Bank to be executed and delivered or otherwise provided to the Bank in form and substance satisfactory to the Bank and counsel for the Bank.

 

SECTION 6. AFFIRMATIVE COVENANTS.

 

The Borrower covenants and agrees that until the Termination Date and thereafter until final payment in full of all obligations and liabilities hereunder, and under the Revolving Credit Note and the performance by the Borrower of all other obligations under this Agreement and the other Loan Documents, unless Bank shall otherwise consent in writing, the Borrower will fully comply and will cause each Restricted Subsidiary to comply with the following provisions:

 

23

 

 

6.1     Financial Reports and Other Information. The Borrower will deliver or cause to be delivered to the Bank the following:

 

(a)     As soon as practicable and in any event within forty-five (45) days after the end of each fiscal quarter of the Borrower other than the last quarter of each fiscal year, a consolidated balance sheet of the Borrower and the Restricted Subsidiaries as at the last day of such quarter and the related consolidated statement of income for such quarter and cumulative fiscal year-to-date for the Borrower and the Restricted Subsidiaries, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in scope to the Bank and certified by the chief financial officer of the Borrower as to the fairness of such financial statements and that the same have been prepared in accordance with GAAP, subject to changes resulting from normal, recurring year- end adjustments; provided, however, that if, so long as the Borrower is a Subsidiary of the Parent, the Parent duly files with the SEC any Form 12b-25 under the Exchange Act (or any successor form thereunder) with respect to its inability to timely file its quarterly report on Form 10-Q for a fiscal quarter and obtains a valid extension of such time to file, the financial information required to be delivered by this paragraph may be delivered later than forty-five (45) days after the end of such fiscal quarter but in no event later than the extended deadline for filing such quarterly report imposed by said Rule 12b-25.

 

(b)     As soon as practicable and in any event within one hundred (100) days after the end of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and the Restricted Subsidiaries as at the end of such fiscal year, and related consolidated statements of income, retained earnings, and changes in financial position for such fiscal year, setting forth in each case in comparative form figures for the corresponding period in the preceding calendar year, all in reasonable detail and satisfactory in scope to the Bank and certified by and containing an unqualified opinion of RSM US, LLP or other independent certified public accountants of recognized national standing selected by the Borrower and reasonably satisfactory to the Bank, provided, however, that if, so long as the Borrower is a Subsidiary of the Parent, the Parent shall duly file with the SEC any Form 12b-25 under the Exchange Act (or any successor form thereunder) with respect to its inability to timely file its annual report on Form 10-K for a fiscal year and obtains a valid extension of such time to file, the financial information required to be delivered by this paragraph may be delivered later than one hundred (100) days after the end of such fiscal year but in no event later than the extended deadline for filing such annual report imposed by said Rule 12b-25.

 

(c)     As soon as practicable, and in any event within forty-five (45) days after the end of each fiscal quarter of the Parent, other than the last quarter of each fiscal year, a consolidated balance sheet as at the last day of such quarter and the related consolidated statement of income for such quarter and cumulative fiscal year-to-date for the Parent and its Subsidiaries, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in scope to the Bank and certified by the chief accounting officer of the Parent as to the fairness of such financial statements and that the same have been prepared in accordance with GAAP, subject to changes resulting from nonrecurring year-end adjustments; provided, however, that the delivery of the Parent's quarterly report on Form 10-Q promptly after its timely filing with the SEC thereof shall satisfy the requirements of this paragraph with regard to consolidation of financial statements;

 

24

 

 

(d)     As soon as practicable, and in any event within one hundred (100) days after the end of each fiscal year of the Parent, the consolidated balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year, and related consolidated statements of income, retained earnings, and changes in financial position for such fiscal year, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year, all in reasonable detail and satisfactory in scope to the Bank and certified by and containing an unqualified opinion of RSM US, LLP, or other independent certified public accountants of recognized national standing selected by the Parent and reasonably satisfactory to the Bank; provided, however, that, the delivery of the Parent's annual report on Form 10-K promptly after its timely filing with the SEC thereof shall satisfy the requirements of this paragraph with regard to consolidated financial statements;

 

(e)     Together with each delivery of those items required by clauses (a) and (b) above, a Certificate of Compliance in the form attached hereto as Exhibit “D”, executed by the chief financial officer or the Vice President-Comptroller of the Borrower; 

 

(f)      [Intentionally deleted.]

 

(g)     Together with each delivery of the financial statements required by clause (b) above, a certificate of the independent certified accountants stating that in making the examination necessary to said certification of the financial statements, they obtained no knowledge of any condition or event pertaining to financial or accounting matters that constitutes an Event of Default, or event which after notice by the Bank or lapse of time, or both, or would constitute an Event of Default; or if the accountants have obtained knowledge of any Event of Default or such event, a statement specifying the nature and period of existence thereof.

 

(h)     Promptly upon distribution thereof, copies of all annual or quarterly financial or other statements of Borrower and the Parent (including proxy statements, documents, and reports as the Borrower) shall send to any class of its shareholders;

 

(i)     At any time when the Borrower or the Parent is obligated to file reports with the SEC pursuant to the Exchange Act, promptly, and in any event within fifteen (15) days after the filing thereof, copies of all periodic reports, current reports, and registration statements which the Borrower files with the SEC or any equivalent governmental agency and, promptly upon written request therefor, copies of any financial statements which the Borrower files annually with any federal, state, or local regulatory agency or agencies;

 

(j)     With reasonable promptness such additional financial or other information as the Bank may from time to time reasonably request (including, without limitation, consolidating financial statements with respect to any Subsidiary); provided, however, that the Borrower shall not be required to furnish any information requested pursuant to this paragraph to the extent that such information is not then available or may not be produced without unreasonable effort or expense.

 

Bank is hereby authorized to deliver a copy of any financial statements or any other information relating to the business, operations, or financial condition of the Parent, the Borrower, or the Subsidiaries, which may be furnished to it or come to its attention pursuant to the Loan Documents or otherwise, to any regulatory body or agency having jurisdiction over the Bank or to any Person which shall or shall have the right or obligation to, succeed to all or any part of the Bank's interest in the Loan Documents.

 

6.2     Payment of Indebtedness to the Bank; Performance of other Covenants; Payment of Other Obligations. The Borrower will (a) make full and timely payment of the principal of and interest on the indebtedness owed hereunder; and (b) duly comply with all the terms and covenants contained in the Loan Documents.

 

25

 

 

6.3     Conduct of Business; Maintenance of Existence and Rights. The Borrower will, and will cause its Subsidiaries to, (i) do or cause to be done all things necessary to preserve and to keep in full force and effect its respective corporate existence and rights and privileges as a corporation, and will not liquidate or dissolve, and will take and fulfill, or cause to be taken and fulfilled, all actions and conditions necessary to qualify, and to preserve and keep in full force and effect its qualification, to do business as a foreign corporation in the jurisdictions in which the conduct of its business or the ownership or leasing of its properties requires such qualification, except where the failure to so qualify or maintain such qualification is reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole; provided, however, that this Section shall not be deemed to prohibit any transaction permitted by Sections 7.2 and 7.3 hereof, and (ii) obtain and maintain franchises, licenses, trade names, patents, trademarks, and permits which are necessary to the ownership of its property or to the continuance of its business except where the failure to obtain or maintain, either individually or in the aggregate, is reasonably likely to materially adversely affect the business earnings prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

6.4     Maintenance of Property. The Borrower will, and will cause its Subsidiaries to, maintain its property in good condition and repair and, from time to time, make all necessary repairs, renewals, replacements, additions, betterments, and improvements thereto, so that the business carried on in connection therewith may be conducted in the ordinary course at all times.

 

6.5     Right of Inspection; Discussions. The Borrower will, and will cause its Subsidiaries to, permit any Bank employee or agent designated by the Bank, at the Bank's expense, to visit and inspect any of the properties, corporate books, records, papers, and financial reports of the Borrower or such Subsidiary, including the making of any copies thereof and abstracts therefrom, and to discuss its affairs, finances, and accounts with its principal officers and independent certified accountants (and by this provision the Borrower hereby authorizes and directs said accountants to discuss with any such Person the finances and accounts of the Borrower and the Subsidiaries), all upon reasonable notice, at reasonable times during normal business hours, and with reasonable frequency. The Borrower will, and will cause each of its Subsidiaries to, also permit the Bank, or its designated representative, to audit or appraise any of its respective assets or financial and business records. Each such inspection (including any audit or appraisal) shall be at the expense of the Person making the inspection, unless such inspection shall be made during the continuance of an Event of Default (in which event the reasonable expenses of any Person making any such inspection shall be borne by the Borrower). Notwithstanding the foregoing sentence, it is understood and agreed by the Borrower that all expenses in connection with any such inspection incurred by the Borrower or any Subsidiary, any officers and employees thereof, and the independent certified accountants therefor shall be expenses payable by the Borrower and shall not be expenses of the Person making the inspection.

 

6.6     Notices. The Borrower will promptly, and in any event within fifteen (15) Business Days thereafter, give notice to the Bank of:

 

(a)     the institution of any suit, action, or proceeding against the Borrower or any Restricted Subsidiary which is reasonably likely, in the reasonable judgment of the Borrower, to have a materially adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole;

 

26

 

 

(b)     upon the obtaining of knowledge thereof by any Responsible Officer, any change in any taw which is reasonably likely to have a materially adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole;

 

(c)     copies of any notice of violation, order, or other document evidencing noncompliance with any environmental law which is reasonably likely to have a materially adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole;

 

(d)     upon the obtaining of actual knowledge thereof by any Responsible Officer, any Event of Default, specifying the nature and period of existence thereof, what action the Borrower has taken or is taking or proposes to take with respect thereto, and an estimate of the time necessary to cure such Event of Default;

 

(e)     upon any Responsible Officer being aware thereof, the occurrence of any (i) ERISA Termination Event; (ii) “prohibited transaction” (within the meaning of Section 4975 of the Code or Section 406 of ERISA), other than one to which an exemption applies; (iii) failure to make a timely contribution to any Pension Plan, if such failure has given rise to a lien under Section 412 (n) of the Code; or (iv) actual, asserted, or alleged violation of ERISA, the Code, or comparable provision of applicable foreign law, that, with respect to any of the events set forth in the forgoing clauses (i) through (iv), could result in a tax, penalty, or other consequence to the Borrower, any Subsidiary, or any ERISA Affiliate in connection with any Plan, which tax, penalty, or other consequence, individually or in the aggregate, would materially affect, individually or in the aggregate, the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken as a whole, what action the Borrower is taking or proposes to take with respect thereto, and, when known, any action taken by the IRS, the U.S. Department of Labor, the PBGC, any foreign governmental entity, or any other Person with respect thereto;

 

(f)     upon the obtaining of actual knowledge by any Responsible Officer, that any franchise or license held by the Borrower or any Restricted Subsidiary will be revoked, terminated, or suspended, other than any termination in connection with the sale of any assets pursuant to Sections 7.2 and 7.3 hereof, and other the revocations, terminations, and suspensions which, individually or in the aggregate, would not have a material adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole;

 

(g)     copies of all press releases and other written statements made available generally by the Borrower to its stockholders or to one or more financial news services concerning material developments in the business of the Borrower and the Restricted Subsidiaries, taken as a whole;

 

(h)     copies of any notice of the exercise of any remedy by any secured party with respect to any of the material assets or property of the Borrower and the Restricted Subsidiaries, taken as a whole;

 

(i)     copies of any Form 8-K filed under the Exchange Act; and

 

(j)     the occurrence of any material casualty to any material facility of the Borrower or any other force majeure (including, without limitation, any strike or other labor disturbance) materially affecting the operation or value of any such facility and which is reasonably likely to have a materially adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole (specifying whether or not such casualty or force majeure is covered by insurance).

 

27

 

 

6.7     Payment of Taxes; Liens. The Borrower will, and will cause its Subsidiaries to, pay and discharge promptly when due:

 

(a)     all taxes, assessments, and governmental charges and levies imposed upon it, its income, or profits or any of its properties, before the same shall become delinquent; and

 

(b)     all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords, and other similar Persons for labor, materials, supplies and rentals that, if unpaid, might by law become a Lien upon any of its property;

 

provided, however, that none of the foregoing need be paid while the same is being contested in good faith by appropriate proceedings diligently conducted so long as adequate reserves shall have been established in accordance with GAAP with respect thereto, title of the Borrower or, any subsidiary, as the case may be, to the particular property shall not be divested thereby, and the right of the Borrower or such Subsidiary to use said property shall not be materially adversely affected thereby; provided, further, that any delinquency or non-payment of an immaterial amount which does not result in the imposition of a Lien which is not a Permitted Lien shall not be an Event of Default hereunder. Each of the Borrower and its Subsidiaries will file all federal, state and local tax returns and all other tax reports as required by law.

 

6.8     Insurance of Properties. The Borrower will, and will cause each Subsidiary to maintain, with respect to its business and properties, insurance at all times by insurance companies of nationally recognized stature and responsibility which the Borrower believes to be financially sound, of a character usually insured by corporations engaged in the same or a similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against and for by such corporations, and carry or cause to be carried, with such insurers in customary amounts (with customary deductibles), such other insurance, including public liability insurance, as is usually carried by corporations engaged in the same or a similar business similarly situated; provided, however, that all insurance maintained pursuant to this paragraph shall be carried in amounts sufficient to prevent the Borrower or any Subsidiary from incurring liability as a co-insurer under law or the terms of the applicable policy or policies.

 

6.9     True Books. The Borrower will, and will cause its Subsidiaries to, keep proper books of record and account, in which entries will be made of all of its respective dealings and transactions in accordance with and to the extent required by GAAP, and establish on its books such accruals and reserves in amounts deemed adequate in the reasonable opinion of the Borrower, that, in accordance with GAAP, should be set aside in connection with the business of the Borrower and its Subsidiaries, including reserves for depreciation, obsolescence, amortization, third-party insurance payment, and claims and accruals for taxes based on or measured by income on profits, and for all other taxes.

 

6.10     Observance of Laws. The Borrower will, and will cause the Parent and its Subsidiaries to, conform to and duly observe all laws, regulations, and other valid requirements of any governmental authority with respect to the conduct of its business, the violation of which, individually or in the aggregate, is reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken as a whole.

 

28

 

 

6.11     Further Assurances. Upon request of the Bank, the Borrower will, and will cause Restricted Subsidiary to, duly execute and deliver or cause to be duly executed and delivered to. the Bank such further instruments or documents and do and cause to be done such further acts as may be reasonably necessary or proper in the reasonable opinion of the Bank to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents.

 

	 	
			6.12

				
			ERISA.

			

 

(a)        Each of the Borrower, its Subsidiaries, and the ERISA Affiliates will take all actions and fulfill all conditions necessary to maintain any and all Plans (other than a Multiemployer Plan) in substantial compliance with applicable requirements of ERISA, the Code, and applicable foreign law until such Plans are terminated, and the liabilities thereof discharged, in accordance with applicable law.

 

(b)        No domestic Pension Plan (other than a Multiemployer Plan) will fail to satisfy the minimum funding standard (within the meaning of Section 412 of the Code), and no foreign Pension Plan will be in violation of any funding requirement imposed by applicable foreign law, which deficiency or violation would or would be reasonably likely to, materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole.

 

6.13     Change of Name, Principal Place of Business, Office, or Agent. The Borrower will provide the Bank with prior written notice of any change in the name of the Borrower, the Parent, or any Restricted Subsidiary, the principal place of business of the Borrower, the Parent, or any Restricted Subsidiary, the office where the books and records of the Borrower, the Parent, or any Restricted Subsidiary are kept, or any change in the registered agent of the Borrower, the Parent, or any subsidiary for the purposes of service of process.

 

6.14     Financial Covenants. The Borrower will, in accordance with GAAP, maintain as of the last day of each fiscal quarter, commencing with the fiscal quarter ending October 31, 2017:

 

(a)        A ratio of Consolidated Funded Debt to the sum of Consolidated Net Worth plus two (2) times EBITDA of not more than 1.0 to 1.0, and Consolidated Net Worth must be a positive balance.

 

(b)        A ratio of Consolidated Funded Debt to Consolidated EBITDA for the four (4) fiscal quarters then ending of not more than 3.5 to 1.0.

 

SECTION 7. NEGATIVE COVENANTS.

 

The Borrower covenants and agrees that from the date of this Agreement until payment in full of all present or future indebtedness hereunder, and termination of all present or future credit facilities established hereunder, unless the Bank shall otherwise consent in writing, the Borrower will fully comply and will cause each Subsidiary to fully comply with the following provisions:

 

7.1     Limitations on Mortgages, Liens, Etc. The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume, or suffer or permit to exist, any Lien, other than in favor of Bank or the Permitted Liens.

 

7.2     Consolidation and Merger, Sale of Assets, Etc. The Borrower will not, and will not permit any Restricted Subsidiary to, merge into or consolidate with, or sell, lease, or otherwise dispose of all or substantially all of its assets, directly or indirectly, in one or a series of transactions, to any other Person, or permit any other Person to merge into or consolidate with it or any Restricted Subsidiary except:

 

29

 

 

(a)     The Borrower may permit any corporation to merge into it so long as: (i) the Borrower shall be the surviving corporation; (ii) immediately after giving effect to the transaction, the Borrower shall be permitted by the provisions of this Agreement to incur at least $1.00 of additional Funded Debt; and (iii) immediately before and after giving effect to the transaction, no Event of Default shall exist;

 

(b)     The Borrower may merge into or consolidate with, or sell all or substantially all of its assets to, any other corporation, so long as: (i) the corporation which survives such merger or results from such consolidation or acquires such assets shall be organized under the laws of the United States of America, a state thereof or the District of Columbia; (ii) the surviving corporation shall assume, by an instrument reasonably satisfactory in form and substance to the Bank, the obligations of the Borrower under this Agreement; (iii) immediately after giving effect to the transaction, the surviving corporation shall be permitted by the provisions of this Agreement to incur at least $1.00 of additional Funded Debt; (iv) immediately before and after giving effect to the transaction, no Event of Default shall exist; and (v) an opinion of counsel (reasonably satisfactory in form and substance to the Bank) shall be delivered to the Bank upon consummation of the transaction to the effect that this Agreement, the Revolving Credit Note, and the instrument referred to in the foregoing clause (ii) are legal, valid, and binding obligations of the surviving corporation, enforceable against the surviving corporation in accordance with their respective terms, and as to such other matters as to which the Bank shall have received a legal opinion on the date of this Agreement as the Bank may reasonably request;

 

(c)     Any Restricted Subsidiary may merge into or consolidate with (i) the Borrower; (ii) any other Restricted Subsidiary; or (iii) any other corporation, so long as (x) if such other corporation is the surviving corporation, it is organized under the laws of the United States of America, a state thereof, or the District of Columbia and, simultaneously with the consummation of such merger or consolidation, is designated a Restricted Subsidiary pursuant to Section 7.10 hereof; (y) immediately after and giving effect to such merger or consolidation, the Borrower shall be permitted by the Provisions of this Agreement to incur at least $1.00 of additional Funded Debt; and (z) immediately before and after giving effect to the transaction, no Event of Default shall exist; and

 

(d)     Any Restricted Subsidiary may sell all or substantially all of its assets to (i) the Borrower; (ii) any other Restricted Subsidiary; or (iii) any other corporation, so long as (v) such transaction complies with the provisions of Sections 7.2 and 7.3 hereof, (w) any indebtedness of such Restricted Subsidiary to the Borrower and to any other Restricted Subsidiary is repaid prior to or contemporaneously with such transaction, (x) no Investment of such Restricted Subsidiary in the Borrower or any other Restricted Subsidiary is included among the assets sold in such transaction, (y) immediately before and after giving effect to such transaction, the Borrower shall be permitted by the provisions of this Agreement to incur at least $1.00 of additional Funded Debt, and (z) immediately before and after giving effect to such transaction, no Event of Default shall exist.

 

	 	
			7.3

				
			Transfer and Sale of Assets; Sale and Leaseback.

			

 

(a)     The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, through a single transaction or a series of transactions, sell, lease, transfer, or otherwise dispose of or suffer to be sold, leased, transferred, abandoned, or otherwise disposed of, all or any part of its assets except:

 

30

 

 

(i)       The Borrower or any Restricted Subsidiary may sell its inventory, materials, and surplus and obsolete equipment in each case in the ordinary course of its business;

 

(ii)      The Borrower or any Restricted Subsidiary may sell all or substantially all of its assets to the extent permitted under this Agreement;

 

(iii)     Any Restricted Subsidiary may sell, lease, transfer, or otherwise dispose of any of its assets to the Borrower or any other Restricted Subsidiary; and

 

(iv)     The Borrower or any Restricted Subsidiary may sell, lease, or otherwise dispose of assets to a Person which is not an Affiliate of the Borrower for cash and/or indebtedness issued by the purchaser of such assets in consideration therefor (each such sale, lease, or other disposition of assets pursuant to this clause (iii) being hereinafter referred to as a “sale”), so long as such sale (i) is determined in good faith by the Borrower to be for a price or rental at least equal to the fair market sale or rental value of the assets sold, leased, or otherwise disposed of and to be in the best interest of the Borrower, and (ii) does not constitute a Substantial Sale of Assets.

 

(b)        The Borrower will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, sell, transfer, or otherwise dispose of any property, whether now owned or hereafter acquired, in connection with a transaction in which it is contemplated that such property, or any portion thereof, or any other property that the Borrower or such Restricted Subsidiary, as the case may be, intends to use for substantially the same purpose as the property so sold, transferred, or otherwise disposed of, will simultaneously or subsequently be leased back to the Borrower or any Restricted Subsidiary (a “Sale Leaseback Transaction”) unless:

 

(i)       Such Sale Leaseback Transaction involves a lease which (x) if such Lease is an operating lease, would be permitted pursuant to the provisions of this Agreement and, (y) if such Lease is a Capital Lease, the Attributable Indebtedness associated with such Capital Lease would be permitted pursuant to the provisions of this Agreement;

 

(ii)      Such Sale Leaseback Transaction relates solely to property or assets with respect to which the Borrower or any Restricted Subsidiary may create a Lien pursuant to the provisions of paragraphs (f), (g), or (h) of the definition of “Permitted Liens” set forth in Section 1.1 hereof; and

 

(iii)     Such Sale Leaseback Transaction either (x) complies with the provisions of this Agreement or (y) is consummated within twelve (12) months of the date on which the construction of all the leased assets has been completed, whichever is later.

 

7.4       Payment Restrictions. The Borrower will not, and will not permit any of its Restricted Subsidiaries to, enter into any agreement, instrument, or other document which prohibits or restricts in any way or to otherwise, directly or indirectly, create or cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i) pay dividends, or make any other distribution in respect of its capital stock or any other equity interest or participation in its profits owned by the Borrower or any Restricted Subsidiary, or pay or repay any indebtedness owed to the Borrower or any Restricted Subsidiary, (ii) make loans or advances to the Borrower, or (iii) transfer any of its properties or assets to the Borrower or any Restricted Subsidiary (subject to the rights of any holder of a Lien on any such properties or assets which Lien is a Permitted Lien).

 

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7.5     Limitations on Distributions. The Borrower will not declare or make, or permit any Restricted Subsidiary to declare or make, any distribution, dividend, payment or other distribution of assets, properties, cash, rights, obligations or securities (collectively, “Distributions”) on account of its capital stock, or purchase, redeem or otherwise acquire for value any capital stock, or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, except that:

 

(a)     The Borrower may pay dividends to its shareholders if no Event of Default has occurred and is continuing, either before the declaration and payment of such dividends or after giving effect thereto; and

 

(b)     Restricted Subsidiaries may make Distributions to the Borrower or to other Restricted Subsidiaries.

 

	 	
			7.6

				
			[RESERVED]

			

 

7.7     Regulation U. The Borrower will not permit any part of the proceeds of the loan or loans made pursuant to this Agreement to be used to purchase or carry or to reduce or retire any loan incurred to purchase or carry any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any such margin stock, or to be used for any other purpose which violates, or which would be inconsistent with, the provisions of Regulation U or other applicable regulation.

 

7.8     Transactions with Affiliates. Neither the Borrower nor any Restricted Subsidiary will enter into any transaction (including, without limitation, the purchase, sale, lease, or exchange of any property, the rendering of any services, or the payment of management fees) with any Affiliate, except: (i) transactions in the ordinary course of the business of the Borrower or such Restricted Subsidiary, and in good faith and upon commercially reasonable terms that are no less favorable to it than it would obtain in a comparable arm's length transaction with a Person other than an Affiliate; and (ii) transactions between the Borrower and any wholly-owned Restricted Subsidiary which are not otherwise prohibited by this Agreement.

 

7.9     Limitation on Nature of Business. The Borrower and the Restricted Subsidiaries will remain engaged in lines of business related to the businesses in which the Borrower and its Restricted Subsidiaries are currently engaged.

 

7.10     Restricted Subsidiaries. The Borrower will not hereafter designate any entity as a Restricted Subsidiary hereunder (and any such designation shall be without effect hereunder) unless:

 

	 	
			(i)

				
			The board of directors of the Borrower shall have duly adopted a resolution approving such designation, and the Bank shall have received a copy of such resolution certified by the secretary or assistant secretary of the company;

			

 

	 	
			(ii)

				
			Such entity satisfies the requirements of the definition of “Restricted Subsidiary” set forth in this Agreement;

			

 

	 	
			(iii)

				
			No Event of Default shall exist prior to, as a result of, or immediately after giving effect to, such designation;

			

 

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			(iv)

				
			Immediately after such designation and including such entity in such determination, the Borrower shall be permitted to incur at least $1.00 of additional Funded Debt pursuant to the provisions of this Agreement;

			

 

	 	
			(v)

				
			Such entity shall have executed a Guaranty pursuant to the provisions of Section 3.2 hereof and obtained, if required by the Bank, an opinion of counsel reasonably satisfactory to it as to the due authorization, execution, and delivery of such Guaranty by such corporation; and

			

 

	 	
			(vi)

				
			The Borrower shall promptly, and in any event within seven (7) Business Days after such designation, give notice to the Bank of the fact of such designation, the name, jurisdiction of incorporation or organization, principal business address, and business of such newly-designated Restricted Subsidiary, and certifications as to and computations showing compliance with the requirements of this Section, and shall deliver to the Bank with such notice the Guaranty and counsel opinion, if any; provided, however, that, for the purposes of this Section, any computation of any financial covenant in connection with the determination of the absence of an Event of Default or the ability of the Borrower to incur Indebtedness after giving effect to the designation of a corporation as a Restricted Subsidiary shall be made on a pro forma basis, and, without limitation, shall include the Indebtedness of such corporation in any such computation for the relevant period in the case of any such designation and include the net income or EBITDA of such corporation in such computation in the case of any such designation. Notwithstanding the foregoing provisions of this Section, to the extent that a Subsidiary is not designated a Restricted Subsidiary within ninety (90) days after the day on which such Subsidiary becomes a Subsidiary of the Borrower, such Subsidiary shall be deemed to be an Unrestricted Subsidiary. Any designation of a Person as a Restricted Subsidiary shall be irrevocable.

			

 

7.11     Changes in Governing Documents, Accounting Methods, Fiscal Year. The Borrower will not, and will not permit its Subsidiaries to, amend in any respect its constituent documents from that in existence on the date of this Agreement or change its respective accounting methods or practices, its depreciation or amortization policy or rates, or its fiscal year end from that in existence as of the date of the financial statements provided to the Bank pursuant to Section 4.5 hereof, except as required to comply with law or with GAAP.

 

7.12     Limitation on Incurrence of Funded Debt. The Borrower agrees that throughout the term of the Revolving Credit:

 

(a)       Neither the Borrower nor any Restricted Subsidiary shall at any time, directly or indirectly, incur, create, assume, guarantee or become liable in any manner with respect to any Funded Debt unless, immediately after giving effect to such incurrence: (i) the ratio of Consolidated Funded Debt (determined immediately after giving effect to such incurrence) to EBITDA (for the four (4) most recent full fiscal quarters) shall be equal to or less than 3.50 to 1.00; and (ii) no Event of Default shall exist.

 

(b)       For purposes of this Section 7.12, if Funded Debt is incurred by the Borrower or a Restricted Subsidiary for the purpose of acquiring Voting Stock of or any assets of any Person which is not a Restricted Subsidiary and, immediately after and giving effect to such acquisition, such Person will be a Restricted Subsidiary (in the case of an acquisition of Voting Stock) or such assets will be owned by Borrower of a Restricted Subsidiary (in the case of an acquisition of assets), then the amounts of EBITDA of such Person or of EBITDA attributable to such assets which would have been included in EBITDA if such Person had been a Restricted Subsidiary or such assets had been owned by Borrower or a Restricted Subsidiary during the relevant fiscal quarters shall be included in EBITDA for the relevant fiscal quarters for purposes of determining compliance with this Section 7.12.

 

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7.13     Amendment of Comerica Loan Agreement or Fifth Third Loan Agreement. The Borrower will not amend, modify or change (or permit the amendment, modification or change of) any of the terms or provisions of the Comerica Loan Agreement or the Fifth Third Loan Agreement if such amendment, modification or change would result in (a) the covenants contained in the Comerica Loan Agreement or the Fifth Third Loan Agreement being materially more restrictive than the covenants contained in this Agreement or (b) any other provision contained in the Comerica Loan Agreement or the Fifth Third Loan Agreement being materially more beneficial to the lender than the provisions contained in this Agreement, including, without limitation, the granting of a security interest or a mortgage on any real or personal property of the Borrower or any of its Subsidiaries.

 

SECTION 8. EVENTS OF DEFAULT.

 

The following events shall constitute “Events of Default” hereunder:

 

8.1     Payment of Obligations Under Loan Documents. The Borrower fails to make timely payment of any principal, interest, or other amount due on any indebtedness owed the Bank under the Loan Documents, or fails to make any other payment to the Bank as contemplated thereunder either by the terms hereof or otherwise when due, and such failure shall continue for five (5) days.

 

8.2     Representation or Warranty. Any representation or warranty made or deemed made by the Borrower or any Restricted Subsidiary herein or in any writing furnished in connection with or pursuant to the Loan Documents, or any report certificate, financial statement, or other information provided by others and furnished by the Borrower or any Restricted Subsidiary to the Bank in connection with or pursuant to the Loan Documents, shall be false or misleading in any material respect on the date when made or when deemed made.

 

8.3     Covenants under this Agreement. A default in the observance or performance of any of the conditions, covenants or agreements of Borrower set forth in Sections 6.5, 6.6(d), 6.14 or 7.1 through 7.13, inclusive.

 

8.4     Other Covenants Under the Loan Documents. The Borrower or any other Person fails to fully and promptly perform when due (i) any other agreement, covenant, term, or condition binding on it contained in this Agreement, and such failure shall have continued unremedied for thirty (30) days after notice thereof has been given to Borrower or (ii) any agreement, covenant, term or condition binding on it contained in any other Loan Document (taking into account applicable periods of notice and cure, if any).

 

8.5     Payment, Performance, or Default of other Monetary Obligations. The Borrower or any Restricted Subsidiary fails to make payment on any contract obligation or of principal or interest on any indebtedness other than that created under the Loan Documents or otherwise owed to the Bank, individually or in the aggregate, exceeding $2,500,000.00, beyond any period of grace provided with respect thereto, or fails to fully and promptly perform any other obligation, agreement, term, or condition contained in any agreement under which any such other Indebtedness is created, or there is otherwise a default or event of default thereunder, if the effect of any such failure or default is to cause, or permit the holder or holders of such indebtedness (or a trustee or other person or entity acting in behalf of such holder or holders) to cause, such indebtedness to become due prior to its stated maturity.

 

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8.6     Covenants or Defaults to the Bank or Others; Revocation of Guaranty. The Borrower or any Restricted Subsidiary fails to fully and promptly perform when due any agreement, covenant, term, or condition binding on it, contained in any lease, contract, or other agreement to which it is a party or in respect of which it is obligated, other than the Loan Documents and other than any monetary default (as described above), beyond any period of grace provided with respect thereto, or there is otherwise a default or event of default thereunder, if such failure or default would, either individually or in the aggregate, materially and adversely affect the business, earnings, prospects, properties, or conditions (financial or otherwise) of the Borrower and the Restricted Subsidiaries, taken as a whole; or any Restricted Subsidiary revokes or attempts to revoke any Guaranty.

 

8.7     Liquidation; Dissolution; Bankruptcy; Etc. Liquidation or dissolution of the Borrower, the Parent or any Restricted Subsidiary, suspension of the business of the Borrower or any Restricted Subsidiary, or the filing or commencement by the Borrower, the Parent or any Restricted Subsidiary of a voluntary petition, case, proceeding, or other action seeking reorganization, arrangement, readjustment of its debts, or any other relief under any existing or future law of any jurisdiction, domestic or foreign, state or federal, relating to bankruptcy, insolvency, reorganization or relief of debtors, or any other action of the Borrower, the Parent or any Restricted Subsidiary indicating its consent to, approval of, or acquiescence in, any such petition, case, proceeding, or other action seeking to have an order for relief entered with respect to it or its debts; the application by the Borrower, the Parent or any Restricted Subsidiary for, or the appointment, by consent or acquiescence of a receiver, trustee, custodian, or other similar official for the Borrower or any Restricted Subsidiary, or for all or a substantial part of its respective property; the making by the Borrower or any Restricted Subsidiary of an assignment for the benefit of creditors; or the inability of the Borrower or any Restricted Subsidiary, or the admission by the Borrower or any Restricted Subsidiary in writing of its inability to pay its debts as they mature.

 

8.8     Involuntary Bankruptcy, Etc. Commencement of an involuntary petition, case, proceeding, or other action against the Borrower, the Parent or any Restricted Subsidiary under the Bankruptcy Code or seeking reorganization, arrangement, readjustment of its debts, or any other relief under any existing or future law of any jurisdiction, domestic or foreign, state or federal, relating to bankruptcy, insolvency, reorganization, or relief of debtors; or the involuntary appointment of a receiver, trustee, custodian, or other similar official for the Borrower, the Parent or any Restricted Subsidiary, or for all or a substantial part of its respective property or assets; or there shall be commenced against the Borrower, the Parent or any Restricted Subsidiary any case, proceeding, or other action seeking issuance of a warrant of attachment, execution, distraint, or similar process against all or any substantial part of the assets, or property of such person which results in the entry of an order for such relief, and the continuance of any of such for sixty (60) days without being vacated, discharged, stayed, bonded, or dismissed.

 

8.9     Judgments. The rendition of a judgment or judgments against the Borrower or any Restricted Subsidiary for the payment of damages or money, individually or in the aggregate, in excess of $2,500,000, if the same is/are not discharged or if a writ of execution or similar process is issued with respect thereto and is not stayed within the time allowed by law for filing notice of appeal of the final judgment.

 

8.10     Attachment, Garnishment, Liens Imposed by Law. The issuance of a writ of attachment or garnishment against, or the imposition of a lien by operation of law on, any property of the Borrower or any Restricted Subsidiary, if the amount of the claim or the value of the affected property is in excess of $2,500,000, individually or in the aggregate, and if forty-five (45) days have elapsed and the proceeding or lien has not been vacated, satisfied, dismissed, or stayed pending appeal.

 

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			8.11

				
			ERISA.

			

 

(a)     Any domestic Pension Plan (other than a Multiemployer Plan) shall fail to satisfy the minimum funding standard (within the meaning of Section 412 of the Code) with respect to any plan year; or

 

(b)     Any waiver shall be sought or granted under Section 412(c) of the Code; or

 

(c)     Any foreign Pension Plan shall violate any funding requirement imposed by applicable foreign law; or

 

(d)     Any Pension Plan (other than a Multiemployer Plan) shall be, have been or be likely to be terminated or the subject of termination proceedings under ERISA; or

 

(e)     the Borrower, the Parent, any Subsidiary, or any ERISA Affiliate shall incur or be likely to incur a liability to or on account of a Pension Plan under Sections 4062, 4063, 4064, or 4201 of ERISA or comparable provision of applicable foreign law, and there shall result from one or more of the events set forth in the foregoing clauses (i) through (v) either a liability or a material risk of incurring a liability to the PBGC, any foreign governmental entity, or a Pension Plan, which could have a material and adverse effect on the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower or the Borrower and its Restricted Subsidiaries, taken as a whole.

 

8.12   Corporate Existence. Any act or omission (formal or informal) of the Borrower, the Parent or any Restricted Subsidiary or its officers, directors, or shareholders leading to, or resulting in, the termination, invalidation (partial or total), revocation, suspension, interruption, or unenforceability of (i) its corporate existence, rights, and privileges, or (ii) its licenses, franchises, or permits where the failure to maintain, either individually or in the aggregate, is reasonably likely to materially adversely affect the business, earnings, prospects, properties, or condition (financial or otherwise) of the Borrower and its Restricted Subsidiaries, taken as a whole.

 

SECTION 9. REMEDIES OF THE BANK.

 

If any one or more of the Events of Default described in Section 8 shall occur, the Bank may, at its option at any time thereafter, take one or more of the following actions: (i) declare all amounts due and payable hereunder by the Borrower to the Bank and all other obligations and indebtedness owed by the Borrower to the Bank to be forthwith due and payable (with the exception of an Event of Default described in Sections 8.7 or 8.8, in which case the amounts due and payable hereunder by the Borrower to the Bank and all other obligations and indebtedness owed by the Borrower to the Bank shall automatically become due and payable), whereupon the indebtedness owed to the Bank by the Borrower hereunder and all other obligations owed by the Borrower to the Bank with accrued interest thereon, whether contingent or direct, shall forthwith become due and payable, without presentment, demand, protest, or other notice of any kind from the Bank, all of which are hereby expressly waived, anything contained in the Loan Documents to the contrary notwithstanding, and all commitments to make Advances shall terminate; (ii) require the Borrower to grant a lien or a security interest in all assets of the Borrower to the Bank, subject to the provisions of Section 3.l(b) hereof, and (iii) immediately proceed to do all other things provided for by law or the Loan Documents to enforce its rights hereunder and to collect all amounts owing to the Bank by the Borrower. No right, power, or remedy conferred upon the Bank by the Loan Documents shall be exclusive of any other right, power, or remedy referred to therein or now or hereafter available at law or in equity.

 

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Upon the occurrence and during the continuance of any Event of Default, Borrower shall immediately upon demand by Bank deposit with Bank cash collateral in the amount equal to the maximum amount available to be drawn at any time under any Letter of Credit then outstanding.

 

SECTION 10. CHANGES IN LAW OR CIRCUMSTANCES;

INCREASED COSTS; PRICING GRID.

 

10.1     Reimbursement of Prepayment Costs. If Borrower makes any payment of principal with respect to any LIBOR-based Advance (or converts or refunds, or attempts to convert or refund any such Advance) on any day other than the last day of the Interest Period applicable thereto (whether voluntarily, by acceleration, or otherwise), or if Borrower fails to borrow, refund or convert any LIBOR-based Advance after notice has been given by Borrower to Bank in accordance with the terms hereof requesting such Advance, or if Borrower fails to make any payment of principal or interest in respect of a LIBOR-based Advance when due, Borrower shall reimburse Bank on demand for any resulting loss, cost or expense incurred by Bank as a result thereof, including, without limitation, any such loss, cost or expense incurred in obtaining, liquidating, employing or redeploying deposits from third parties, whether or not Bank shall have funded or committed to fund such Advance. Such amount payable by Borrower to Bank may include, without limitation, an amount equal to the excess, if any, of (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, refunded or converted, for the period from the date of such prepayment or of such failure to borrow, refund or convert, through the last day of the relevant Interest Period, at the applicable rate of interest for said Advance(s) provided under this Agreement, over (b) the amount of interest (as reasonably determined by Bank) which would have accrued to Bank on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurocurrency market. Calculation of any amounts payable to Bank under this paragraph shall be made as though such Bank shall have actually funded or committed to fund the relevant Advance through the purchase of an underlying deposit in an amount equal to the amount of such Advance and having a maturity comparable to the relevant Interest Period; provided, however, that Bank may fund any LIBOR-based Advance in any manner it deems fit and the foregoing assumptions shall be utilized only for the purpose of the calculation of amounts payable under this paragraph. Upon the written request of Borrower, Bank shall deliver to Borrower a certificate setting forth the basis for determining such losses, costs and expenses, which certificate shall be conclusively presumed correct, absent manifest error.

 

10.2     Bank's LIBOR Lending Office. For any Advance to which the LIBOR-based Rate is applicable, if Bank shall designate a LIBOR Lending Office which maintains books separate from those of the rest of Bank, Bank shall have the option of maintaining and carrying the relevant Advance on the books of such LIBOR Lending Office.

 

10.3     Inability to Determine Rate. In the event that the Bank shall have determined, which determination shall be final, conclusive and binding, that by reason of circumstances occurring after the date of this Agreement affecting the London interbank Eurodollar market, (a) adequate and fair means do not exist for ascertaining the LIBOR-based Rate on the basis provided for in this Agreement or (b) Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount and Interest Period of such LIBOR-based Advance, the Bank shall give notice (by telephone confirmed in writing or by telecopy) to the Borrower of such determination, whereupon (i) no LIBOR-based Advance shall be made until the Bank notifies the Borrower that the circumstances giving rise to such notice no longer exist, and (ii) any request by the Borrower for a LIBOR-based Advance shall be deemed to be a request for an advance at the Prime-based Rate.

 

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10.4     Illegality: Impracticability. In the event that Bank shall determine, which determination shall be final, conclusive and binding, that the making, maintaining oi;- continuance of any portion of a LIBOR-based Advance (i) has become unlawful as a result of compliance by the Bank with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any of the same not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause Bank material hardship, as a result of contingencies occurring after the date of this Agreement materially and adversely affect the London interbank market or Bank's ability to make LIBOR- based Advances generally, then, and in any such event, Bank shall give notice (by telephone confirmed in writing or by telecopy) to Borrower of such determination. Thereafter, (x) the obligation of Bank to make any LIBOR-based Advances or to convert any portion of the loan to a LIBOR-based Advance shall be suspended until such notice shall be withdrawn by Bank, and (y) any request by Borrower for a LIBOR-based Advance shall be deemed to be a request for an advance as a Prime-based Advance.

 

10.5     Increased Cost of LIBOR-based Advances. In the event that any applicable law, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not currently applicable to Bank or any interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Bank with any request or directive (whether or not having the force of law) made by any such authority, central bank or comparable agency after the date hereof:

 

(a)     shall subject Bank to any tax, duty or other charge with respect to any Advance or any Note or shall change the basis of taxation of payments to Bank of the principal of or interest on any Advance or the Revolving Credit Note or any other amounts due under this Agreement in respect thereof (except for changes in the rate of tax on the overall net income or revenues of Bank imposed by the United States of America or the jurisdiction in which such Bank's principal executive office is located); or

 

(b)     shall impose, modify or deem applicable any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by Bank or shall impose on Bank or the interbank markets any other condition affecting any Advance or the Revolving Credit Note;

 

and the result of any of the foregoing is to increase the costs to Bank of making, funding or maintaining any part of the Indebtedness hereunder as a LIBOR-based Advance or to reduce the amount of any sum received or receivable by the Bank under this Agreement or under the Revolving Credit Note in respect of a LIBOR-based Advance then Bank shall promptly notify the Borrower in writing of such fact and demand compensation therefor and, within fifteen (15) days after such notice, Borrower agrees to pay to Bank such additional amount or amounts as will compensate Bank for such increased cost or reduction. A certificate of Bank setting forth the basis for determining such additional amount or amounts necessary to compensate Bank shall be conclusively presumed to be correct save for manifest error. For purposes of this Agreement, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed a “change in law”, regardless of the date enacted, adopted or issued.

 

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10.6     Other Increased Costs. In the event that after the date hereof the adoption of or any change in any applicable taw, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect and whether or not presently applicable to Bank, or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by Bank with any guideline, request or directive of any such authority (whether or not having the force of law), including any risk based capital guidelines, affects or would affect the amount of capital required or expected to be maintained by Bank (or any corporation controlling Bank) and Bank determines that the amount of such capital is increased by or based upon the existence of Bank's obligations or Advances hereunder and such increase has the effect of reducing the rate of return on Bank's (or such controlling corporation's) capital as a consequence of such obligations or Advances hereunder to a level below that which Bank (or such controlling corporation) could have achieved but for such circumstances (taking into consideration its policies with respect to capital adequacy) by an amount deemed by Bank to be material, then the Borrower shall pay to Bank, from time to time, upon request by such Bank, additional amounts sufficient to compensate such Bank (or such controlling corporation) for any increase in the amount of capital and reduced rate of return which Bank reasonably determines to be allocable to the existence of Bank's obligations or Advances hereunder, provided, however, that for purposes of this Agreement, (x) the Dodd- Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in law”, regardless of the date enacted, adopted or issued. A statement as to the amount of such compensation, prepared in good faith and in reasonable detail by Bank, shall be submitted by Bank to the Borrower, reasonably promptly after becoming aware of any event described in this Section 10.6 and shall be conclusive, absent manifest error in computation.

 

10.7     Margin Adjustment. Adjustments to the Applicable Margin, the Applicable Facility Fee Percentage and the Applicable Letter of Credit Percentage, based on Schedule 10.7, shall be implemented on a quarterly basis as follows:

 

(a)     Such adjustments shall be given prospective effect only, effective as to all Advances outstanding hereunder, the Applicable Facility Fee Percentage and the Applicable Letter of Credit Percentage, upon the date of delivery of the financial statements under Sections 6.1(a) and 6.1(b) hereunder and the Certificate of Compliance under Section 6.1(c) hereof, in each case establishing applicability of the appropriate adjustment and in each case with no retroactivity or claw-back. If Borrower shall fail timely to deliver such financial statements or the Certificate of Compliance and such failure continues for three (3) days, then (but without affecting the Event of Default resulting therefrom) from the date delivery of such financial statements and report was required until such financial statements and report are delivered, the Applicable Margin, the Applicable Facility Fee Percentage and Applicable Letter of Credit Percentage shall be at the highest level on the pricing grid attached to this Agreement as Schedule 10.7.

 

(b)     From the date hereof until the required date of delivery (or, if earlier, delivery) of the financial statements under Section 6.1(a) or 6.1(b) hereof, as applicable, and the Certificate of Compliance under Section 6.1(e) hereof, for the fiscal quarter ending October 31, 2017, the Applicable Margin, the Applicable Facility Fee Percentage and Applicable Fee Percentage shall be those set forth under the Level 1 column of the pricing matrix attached to this Agreement as Schedule 10.7. Thereafter, the Applicable Margin, the Applicable Facility Fee Percentage and Applicable Fee Percentage shall be based upon the quarterly financial statements and Certificate of Compliance, subject to recalculation as provided in Section 10.7(a) above.

 

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SECTION 11. MISCELLANEOUS.

 

11.1     Course of Dealing: Amendment; Supplemental Agreements. No course of dealing between the parties hereto shall be effective to amend, modify, or change any provision of this Agreement. This Agreement may not be amended, modified, or changed in any respect except by an agreement in writing signed by the party against whom such change is to be enforced. The parties hereto may, subject to the provisions of this Section, from time to time, enter into written agreements supplemental hereto for the purpose of adding any provisions to this Agreement or changing in any manner the rights and obligations of the parties hereunder. Any such supplemental agreement in writing shall be binding upon the parties thereto.

 

11.2     Waiver By the Bank of Requirements. The Bank may, in its sole discretion, sign and deliver to the Borrower a written statement waiving any of the requirements of this Agreement and in such event the waiver shall be effective only in the specific instance and for the specific purpose for which given.

 

11.3     Waiver of Default. The Bank may, in its sole discretion, by written notice to the Borrower, at any time and from time to time, waive any Event of Default and its consequences, or any default in the performance or observance of any condition, covenant, or other term hereof and its consequences. Any such waiver shall be for such period and subject to such conditions as shall be specified in any such notice. In the case of any such waiver, the Borrower and the Bank shall be restored to their former positions prior to such Event of Default or default and shall have the same rights as they had thereto, and any Event of Default or default so waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Event of Default or default, or impair any right consequent thereto.

 

11.4     Notices. Notwithstanding any provisions to the contrary contained in the other Loan Documents, all notices, requests and demands to or upon the parties to this Agreement pursuant to any Loan Document shall be deemed to have been given or made when delivered by hand, or when delivered (or when delivery is refused) via national recognized overnight courier, addressed as follows or to such other address as may be hereafter designated in writing by one party to the other:

 

The Borrower:                   NEWBEVCO, INC. 

8100 SW 10th St. #4000

Plantation, Florida 33324

Attention: President

and

Attention: Legal Counsel

 

The Bank:                          BRANCHBANKINGANDTRUSTCOMPANY

200 West 2nd Street

Winston-Salem, North Carolina 27101

Attention: Max Greer

 

except in cases where it is expressly herein provided that such notice, request, or demand is not effective until received by the party to whom it is addressed.

 

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11.5     No Waiver; Cumulative Remedies. No omission or failure of the Bank to exercise and no delay in exercising by the Bank of any right, power, or privilege hereunder, shall impair such right, power, or privilege, shall operate as a waiver thereof or be construed to be a waiver thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies provided in the Loan Documents are cumulative and not exclusive of any rights or remedies provided by law, and the warranties, representations, covenants, and agreements made therein shall be cumulative, except in the case of irreconcilable inconsistency, in which case the provisions of this Agreement shall control.

 

11.6     Reliance Upon, Survival of, and Materiality of Representations and Warranties, Agreements, and Covenants. All representations and warranties, agreements, and covenants made by the Borrower in the Loan Documents are material and shall be deemed to have been relied upon by the Bank and shall survive the execution and delivery of the Loan Documents and the making of the loan or loans herein contemplated, and shall continue in full force and effect so long as any indebtedness is owed to the Bank by the Borrower pursuant hereto or so long as there shall be any commitment by the Bank to make loans to the Borrower hereunder. All statements contained in any certificate to the Bank by Borrower, the Parent or any Subsidiary at any time by or on behalf of the Borrower pursuant hereto shall constitute representations and warranties by the Borrower hereunder.

 

11.7     Set-Off. Upon the occurrence of any Event of Default, the Bank is hereby authorized at any time and from time to time, without notice to the Borrower, to set off, appropriate, and apply any and all monies, securities and other property of the Borrower and all proceeds thereof, now or hereafter held or received by, or in transit to, the Bank from or for the Borrower, and also upon any and all deposits (general or special) and credits of the Borrower, if any, at the Bank or all items hereinabove referred to against all indebtedness of the Borrower owed to the Bank, whether under the Loan Documents or otherwise, whether now existing or hereafter arising. The Bank shall be deemed to have exercised such right of set-off and to have made a charge against such items immediately upon the occurrence of such Event of Default although made or entered on its books subsequent thereof.

 

11.8     Severability and Enforceability of Provisions. If any one or more of the provisions of the Loan Documents is determined to be invalid, illegal, or unenforceable in any respect as to one or more of the parties, all remaining provisions nevertheless shall remain effective and binding on the parties thereto and the validity, legality, and enforceability thereof shall not be affected or impaired thereby. To the extent permitted by applicable law, the parties hereby waive any provision of law that renders any provision hereof invalid, illegal, or unenforceable in any respect.

 

11.9     Payment of Expenses, Including Attorneys' Fees and Taxes. The Borrower agrees (a) to pay or reimburse the Bank for all its reasonable and customary out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, execution, and delivery of, and any amendment, supplement, or modification to, or waiver or consent under, the Loan Documents; and the consummation of the transactions contemplated thereby, including, without limitation, the reasonable and customary fees and disbursements of counsel for the Bank, taxes, and all recording or filing fees, (b) except as expressly provided otherwise herein, to pay or reimburse the Bank for all of its costs and expenses incurred in connection with the administration, supervision, collection, or enforcement of, or the preservation of any rights under, the Loan Documents, including, without limitation, the reasonable fees and disbursements of counsel for the Bank, including attorneys' fees out of court, in trial, on appeal, in bankruptcy proceedings, or otherwise, (c) without limiting the generality of provision (a) hereof, to pay or reimburse the Bank for, and indemnify and hold the Bank harmless against liability for, any and all documentary stamp taxes, non-recurring intangible taxes, or other taxes, together with any interest, penalties, or other liabilities in connection therewith, that the Bank now or hereafter determines, are payable with respect to the Loan Documents, the obligations evidenced by the Loan Documents, any Advances under the Loan Documents, and any guaranties or mortgages or other security instruments, and (d) to pay, indemnify, and hold the Bank harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance, and administration of the Loan Documents with the exception of the willful or gross negligence of the Bank. The agreements in this Section shall survive repayment of all other amounts payable hereunder or pursuant hereto, now or in the future, and shall be secured by all collateral that secures the loan or loans described herein.

 

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11.10     Obligations Absolute. The obligations of the Borrower under this Agreement are primary, absolute, independent, unconditional, and irrevocable, and shall be paid and performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation, the following circumstances:

 

(a)        Any lack of validity or enforceability of any portion of any letter of credit, this Agreement, or any agreement or instrument relating thereto;

 

(b)        Any amendment or waiver of or any consent to or actual departure from any letter of credit, this Agreement, or any agreement or instrument relating thereto;

 

(c)        Any exchange, release, or nonperfection of any collateral;

 

(d)        Any delay, extension of time, renewal, compromise, or other indulgence or modification granted to or agreed by the Bank, with or without notice to or approval by the Borrower in respect of any of the Borrower's indebtedness to the Bank under this Agreement; or

 

(e)        The failure of the Bank to give any notice to the Borrower hereunder.

 

11.11     Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Bank and the Borrower, and, to the extent permitted herein, their respective successors, assignees, or transferees. In the event of such transfer or assignment, the rights and privileges herein conferred upon the Bank shall automatically extend to and be vested in the successor, assignee, or transferee of the Bank, and the Bank shall be relieved of all liability hereunder. The Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Bank.

 

11.12     Counterparts; Effective Date. This Agreement may be signed in any number of separate counterparts, no one of which need contain all of the signatures of the parties, and as many of such counterparts as shall together contain all of the signatures of the parties shall be deemed to constitute one and the same instrument. A set of the counterparts of this Agreement signed by all parties hereto shall be lodged with the Bank. This Agreement shall become effective upon the receipt by the Bank of signed counterparts of this Agreement from each of the parties hereto or telecopy confirmation of the signing of counterparts of this Agreement by each of the parties hereto.

 

11.13     Participations. The Borrower recognizes that the Bank may enter into participation agreements with other financial institutions, including one or more banks or other lenders, whereby Bank will allocate a portion of the loan or loans contemplated hereunder. For the benefit of such other banks and lenders, the Borrower agrees that such other banks and lenders shall have the same rights of set-off against the Borrower granted the Bank in Section 11.7 hereof. The Bank will use its best efforts to advise the Borrower of the names of any participants and the extent of their interest herein.

 

42

 

 

11.14     Law of Florida. This Agreement and the Revolving Credit Note have been delivered at Atlanta, Georgia, and shall be governed by and construed and enforced in accordance with the laws of the State of Florida, except to the extent that the Uniform Commercial Code, other personal property law or real property law of a jurisdiction where Collateral is located is applicable and except as and to the extent expressed to the contrary in any of the Loan Documents. Whenever 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 to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

11.15     Consent to Jurisdiction. Borrower and Bank hereby irrevocably submit to the non-exclusive jurisdiction of any Florida state court or United States Federal court for the Southern District of Florida sitting in Fort Lauderdale in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents, and Borrower and Bank hereby irrevocably agree that all claims in respect of such action or proceeding may be heard and determined in any such Florida state court or United States Federal court for the Southern District of Florida. Borrower irrevocably consents to the service of any and all process in any such action or proceeding brought in any court in or of the State of Florida by the delivery of copies of such process to Borrower at its address specified on the signature page hereto or by certified mail directed to such address or such other address as may be designated by Borrower in a notice to the other parties that complies as to delivery with the terms of Section 11.4. Nothing in this Section shall affect the right of the Bank to serve process in any other manner permitted by law or limit the right of Bank to bring any such action or proceeding against Borrower or any Restricted Subsidiary or any of its or their property in the courts of any other jurisdiction. Borrower hereby irrevocably waives any objection to the laying of venue of any such suit or proceeding in the above described courts.

 

11.16     Title and Headings; Table of Contents. The titles and headings preceding the text of Sections and Sections of this Agreement and the Table of Contents have been included solely for convenience of reference and shall neither constitute a part of this Agreement nor affect its meaning, interpretation, or effect.

 

11.17     Complete Agreement; No Other Consideration. The Loan Documents contain the final, complete, and exclusive expression of the understanding of the Borrower and the Bank with respect to the transactions contemplated by the Loan Documents and supersede any prior or contemporaneous agreement or representation, oral or written, by or between the parties related to the subject matter hereof. Without limiting the generality of the foregoing, there does not exist any consideration or inducement other than as stated herein for the execution, delivery and performance by the Borrower of the Loan Documents.

 

11.18     Legal or Governmental Limitations. Anything contained in this Agreement to the contrary notwithstanding, the Bank shall not be obligated to extend credit or make loans to the Borrower in an amount in violation of any limitations or prohibitions provided by any applicable statute or regulation.

 

11.19     Interest. If the obligation of Borrower to pay interest on the principal balance of the Revolving Credit Notes is or becomes in excess of the maximum interest rate which Borrower is permitted by law to contract or agree to pay, giving due consideration to the execution date of this Agreement, then, in that event, the rate of interest applicable with respect to such Bank's Percentage shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not of interest.

 

43

 

 

11.20     Independence of Covenants. Each covenant hereunder shall be given independent effect (subject to any exceptions stated in such covenant) so that if a particular action or condition is not permitted by any such covenant (taking into account any such stated exception), the fact that it would be permitted by an exception to, or would be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default.

 

11.21     WAIVER OF TRIAL BY JURY. THE BORROWER AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE LOAN DOCUMENTS AND ANY OTHER DOCUMENT EXECUTED IN CONJUNCTION WITH THE LOAN OR LOANS HEREUNDER, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL OR WRITTEN), OR ACTION OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK TO ENTER INTO ANY LOAN TRANSACTIONS HEREUNDER.

 

11.22     AMENDMENT AND RESTATEMENT. This Agreement constitutes an amendment and restatement of the Existing Credit Agreement effective from and after the date hereof. The execution and delivery of this Agreement shall not constitute a novation of any indebtedness or other obligations owing to the Bank under the Existing Credit Agreement based on facts or events occurring or existing prior to the execution and delivery of this Agreement. The parties hereto agree that, on the date hereof, the following shall be deemed to occur automatically, without further action by any party hereto: (a) the Existing Credit Agreement shall be deemed to be amended and restated in its entirety pursuant to this Agreement; (b) all obligations under the Existing Credit Agreement shall in all respects be continuing and be deemed to obligations outstanding hereunder; and (c) all references in the other Loan Documents to the Existing Credit Agreement shall be deemed to refer without further amendment to this Agreement.

 

44

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

 

 

	 	BORROWER:
	 	 	 
	 	NEWBEVCO, INC.
	 	 	 
	 	 	 
	 	By:	
			/s/ George R. Bracken 

			
	 	
			
			George R. Bracken

			

			
			Vice President

			

			
	 	 	 
	 	 	 
	 	BANK:
	 	 	 
	 	
			
			BRANCH BANKING AND TRUST COMPANY

			

			
	 	 	 
	 	 	 
	 	By:	 
	 	Name:	 
	 	Its:	 
	 	Name:	 

 

45

 

 

Exhibit “A”

 

AMENDED AND RESTATED REVOLVING CREDIT NOTE

 

	
			$50,000,000

				
			October 4, 2017

			

 

On the Termination Date, FOR VALUE RECEIVED, NEWBEVCO, INC., a Delaware corporation (“Borrower”), promises to pay to the order of Branch Banking and Trust Company (“Bank”), in lawful money of the United States of America, the sum of Fifty Million Dollars ($50,000,000), or so much of said sum as may from time to time have been advanced and then be outstanding hereunder pursuant to the Amended and Restated Credit Agreement dated as October 4, 2017, made by and between the Borrower and Bank, as the same may be amended from time to time (the “Agreement”), together with interest thereon as hereinafter set forth.

 

Each of the Advances made hereunder shall bear interest at the Applicable Interest Rate from time to time applicable thereto under the Agreement or as otherwise determined thereunder, and interest shall be computed, assessed and payable as set forth in the Agreement.

 

This Note is a note under which Advances (including refundings and conversions), repayments and readvances may be made from time to time, but only in accordance with the terms and conditions of the Agreement. This Note evidences borrowings under, is subject to, is secured in accordance with, and may be accelerated or matured under, the terms of the Agreement, to which reference is hereby made. Definitions and terms of the Agreement are hereby incorporated by reference herein.

 

Borrower waives presentment for payment, demand, protest and notice of dishonor and nonpayment of this Note and agrees that no obligation hereunder shall be discharged by reason of any extension, indulgence, release, or forbearance granted by any holder of this Note to any party now or hereafter liable hereon or any present or subsequent owner of any property, real or personal, which is now or hereafter security for this Note.

 

This Amended and Restated Revolving Credit Note amends and restates, but is not a novation or an accord and satisfaction of, the Revolving Credit Note dated as of November 23, 2012 in the original principal amount of $50,000,000.

 

Nothing herein shall limit any right granted Bank by any other instrument or by law.

 

	 	NEWBEVCO, INC.
	 	 	 
	 	 	 
	 	By:	 
	 	 	 
	 	Its:	 

 

 

 

 

EXHIBIT “B” 

 

REOUEST FOR ADVANCE

 

	
			No. __________________ 

				
			Dated: _____________

			

 

To:                  Branch Banking and Trust Company

 

Re:         Amended and Restated Credit Agreement by and between Branch Banking and Trust Company (“Bank”) and Newbevco, Inc. (“Borrower”) dated as of October 4, 2017 (as amended from time to time, the “Agreement”).

 

Pursuant to the Agreement, the Borrower requests an Advance from Bank as follows:

 

	 	
			A.

				
			Date of Advance:

			

 

	 	
			B.

				
			Amount of Advance: $____________

			
	 	 	
			Deposit to: 

			
	 	 	☐    Branch Banking and Trust Company Bank Account No.                      
	 	 	
			☐    Other: _______________________

			

 

	 	
			C.

				
			Type of Activity: 

			
	 	 	
			1.       Advance           ☐  

			
	 	 	
			2.       Refunding        ☐   

			
	 	 	
			3.       Conversion      ☐  

			

	 	
			D.

				
			Interest Rate:

			
	 	 	
			1.       Prime-based Rate        ☐ 

			
	 	 	
			2.       LIBOR-based Rate     ☐ 

			

 

The Borrower certifies to the matters specified in Section 2.1(c) of the Agreement.

 

	 	
			NEWBEVCO, INC.

			
	 	 	 
	 	 	 
	 	
			By:

				 
	 	 	 
	 	
			Its:

				 

 

 

 

 

Exhibit “C”

 

JOINDER AGREEMENT

 

 

THIS JOINDER AGREEMENT is dated as of ______________________, 20__ by                                                  ,a                              corporation (“New Guarantor”).

 

WHEREAS, pursuant to Section 3.2 of that certain Amended and Restated Credit Agreement dated as of October 4, 2017 (as may be amended, restated, supplemented or replaced from time to time, the “Credit Agreement”) by and among Newbevco, Inc. (“Borrower”) and Branch Banking and Trust Company (“Bank”), the New Guarantor has been designated a Restricted Subsidiary of Borrower and accordingly, the New Guarantor must execute and deliver a Joinder Agreement in accordance with the Credit Agreement and become obligated as a guarantor under that certain Continuing and Unconditional Guaranty dated October 4, 2017, executed by the Restricted Subsidiaries in favor of Bank with respect to the indebtedness of Borrower to Bank (“Guaranty”).

 

NOW THEREFORE, as a further inducement to Banks to continue to provide credit accommodations to Borrower and the Account Parties (as defined in the Credit Agreement), New Guarantor hereby covenants and agrees as follows:

 

	 	
			1.

				
			All capitalized terms used herein shall have the meanings assigned to them in the Credit Agreement unless expressly defined to the contrary.

			

 

	 	
			2.

				
			New Guarantor hereby enters into this Joinder Agreement in order to comply with Section 3.2 of the Credit Agreement and does so in consideration of the Advances made or to be made from time to time under the Credit Agreement (and the other Loan Documents), from which New Guarantor shall derive direct and indirect benefit as with the parties the Guaranty (all as set forth and on the same basis as in the Guaranty).

			

 

	 	
			3.

				
			New Guarantor shall be considered, and deemed to be, for all purposes of the Credit Agreement, the Guaranty and the other Loan Documents, a guarantor and obligated party under the Guaranty as fully as though New Guarantor had executed and delivered the Guaranty at the time originally executed and delivered under the Credit Agreement and New Guarantor hereby ratifies and confirms its obligations under the Guaranty, all in accordance with the terms thereof.

			

 

	 	
			4.

				
			No Default or Event of Default (each such term being defined in the Credit Agreement) has occurred and is continuing under the Credit Agreement.

			

 

	 	
			5.

				
			This Joinder Agreement shall be governed by the laws of the State of Florida and shall be binding upon New Guarantor and its successors and assigns.

			

 

 

 

 

IN WITNESS WHEREOF, the undersigned New Guarantor has executed and delivered this Joinder Agreement as of _____________________________, 20__.

 

 

	 	
			[NEW GUARANTOR]

			
	 	 	 
	 	 	 
	 	
			By:

				 
	 	 	 
	 	
			Its:

				 

 

 

 

 

EXHIBIT “D”

 

CERTIFICATE OF COMPLIANCE

  

	
			To:

				
			Branch Banking and Trust Company

			
	 	 
	
			Re:

				
			NewBevCo., Inc. Amended and Restated Credit Agreement dated as of October 4, 2017 together with subsequent amendments (the “Agreement”)

			

 

This Certificate of Compliance (“Report”) is furnished pursuant to Section 6.1(e) of the Agreement and sets forth various information as of                                                                      , 20__ (the “Computation Date”).

 

1.     Consolidated Funded Debt to Consolidated Net Worth. On the Computation Date, the rate of Consolidated Funded Debt to the sum of Consolidated Net Worth plus two (2) times

EBITDA, which is required to be not more than 1.0 to 1.0, was ________ to 1.0 as computed in the supporting documents attached hereto as Schedule 1.

 

2.     Consolidated Funded Debt to Consolidated EBITDA. On the Computation Date, the ratio of Consolidated Funded Debt to Consolidated EBITDA, which is required to be not more than 3.5 to 1.0, was          to 1.0 as computed in the supporting documents attached hereto as Schedule 2.

 

The undersigned officer of Borrower hereby certifies that:

 

A.     All of the information set forth in this Report (and in any Schedule attached hereto) is true and correct in all material respects.

 

B.     As of the Computation Date, the Borrower has observed and performed all of its covenants and other agreements contained in the Agreement and in the Revolving Credit Note and any other Loan Documents to be observed, performed and satisfied by them.

 

C.     I have reviewed the Agreement and this Report is based on an examination sufficient to assure that this Report is accurate.

 

D.     Except as stated in Schedule 3 hereto (which shall describe any existing Event of Default or event which with the passage of time and/or the giving of notice, would constitute an Event of Default and the notice and period of existence thereof and any action taken with respect thereto or contemplated to be taken by Borrower), no Event of Default, or event which with the passage of time and/or the giving of notice would constitute an Event of Default, has occurred and is continuing on the date of this Report.

 

Capitalized terms used in this Report and in the schedules hereto, unless specifically defined to the contrary, have the meanings given to them in the Agreement.

 

 

 

 

IN WITNESS WHEREOF, Borrower has caused this Report to be executed and delivered by its duly authorized officer this       day of                           201___.

 

	 	
			NEWBEVCO, INC.

			
	 	 	 
	 	 	 
	 	
			By:

				 
	 	 	 
	 	
			Its:

				 

 

 

 

 

Schedule 1.1.A - Liens

 

 

Shasta Beverages, Inc.

 

	
			Debtor(s)

				
			Secured

			Party(ies)

				
			Filing No.

				
			Filing Date

				
			Filing Type

				
			Collateral

			
	
			Shasta Beverages, Inc.

				
			AirLiquide Industrial U.S. LP

				
			2009-068-9056

				
			3/4/2009

				
			Original

				
			Equipment

			
	
			Shasta Beverages, Inc.

				
			AirLiquide Industrial U.S. LP

				
			2009 031-6213

				
			1/30/2009

				
			Original

				
			Equipment

			
	
			Shasta Beverages, Inc.

				
			AirLiquide Industrial U.S. LP

				
			2990 038 4567

				
			2/4/2009

				
			Original

				
			Equipment

			
	
			Shasta Beverages, Inc.

				
			AirLiquide Industrial U.S. LP

				
			2009-060-7454

				
			2/25/2009

				
			Original

				
			Equipment

			
	
			Shasta Beverages, Inc.

				
			AirLiquide Industrial U.S. LP

				
			2010-135-7833

			(amendment to 2009-031-6213)

				
			4/20/2010

				
			Amendment

				
			Equipment

			
	
			Shasta Beverages, Inc.

				
			AirLiquide Industrial U.S. LP

				
			181-367-815

				
			4/10/2009

				
			Original

				
			Equipment

			

 

 

 

Borrower and other Subsidiaries

 

None

 

 

 

 

Schedule 1.1.B - Subsidiaries

 

1.       BevCo Sales, Inc., a Delaware corporation

 

2.       Beverage Corporation International, Inc., a Delaware corporation

 

3.       Big Shot Beverages, Inc., a Delaware corporation

 

4.       Everfresh Beverages, Inc., a Delaware corporation

 

5.       Faygo Beverages, Inc., a Michigan corporation

 

6.       LaCroix Sparkling Water, Inc., a Delaware corporation

 

7.       National Beverage Vending Company, a Delaware corporation

 

8.       National Retail Brands, Inc., a Delaware corporation

 

9.       NewBevCo, Inc., a Delaware corporation

 

10.     NutraFizz Products Corp., a Delaware corporation

 

11.     PACO, Inc., a Delaware corporation

 

12.     Shasta Beverages, Inc., a Delaware corporation

 

13.     Shasta Beverages International, a Delaware corporation

 

14.     Shasta Sales, Inc., a Delaware corporation

 

15.     Shasta Sweetener Corp., a Delaware corporation

 

16.     Shasta West, Inc., a Delaware corporation

 

17.     Sundance Beverage Company, a Delaware corporation

 

 

 

 

Schedule 1.1.C - Investments

 

 

None

 

 

 

 

Schedule 4.6 - Litigation

 

 

None

 

 

 

 

Schedule 10.7 - Margins and Fees

 

 

 

	
			Basis For Pricing

				
			Level I

				
			Level II

				
			Level III

				
			Level IV

				
			Level V

			
	
			Consolidated Funded Debt To EBITDA

				
			<0.75 to

			1.0

				
			2:0.75 to 1.0

			and

			<1.5 to 1.0

				
			2:1.5 to 1.0

			and

			<2.0 to 1.0

				
			2:2.0 to 1.0

			and

			<2.5 to 1.0

				
			2:2.5 to 1.0

			
	
			Applicable Facility Fee Percentage (expressed as basis points)

				
			20.00

				
			25.00

				
			30.00

				
			30.00

				
			30.00

			
	
			Applicable Letter of Credit Percentage (expressed as basis points)

				
			90.00

				
			100.00

				
			135.00

				
			160.00

				
			180.00

			
	
			Applicable Prime-Based Rate Margin (expressed as basis points)

				
			-50.00

				
			-25.00

				
			0.00

				
			0.00

				
			50.00

			
	
			Applicable Libor - Based Rate Margin (expressed as basis points)

				
			90.00

				
			100.00

				
			135.00

				
			160.00

				
			180.00

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