Document:

Document

10.3

Prepared By:     Scott Meacham
        Crowe & Dunlevy
        324 N. Robinson Ave, Ste. 100
        Oklahoma City, OK 73102
_________________________________________________________________________________________________________
REAL ESTATE MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING
(with Power of Sale)
THIS REAL ESTATE MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING (hereinafter called the "Mortgage") is made effective as of the 26th  day of October, 2020, by and among TDG Operations, LLC, a Georgia limited liability company, having an address of 475 Reed Rd., Dalton, Georgia 30722, as mortgagor (the "Mortgagor"), and AmeriState Bank, an Oklahoma state banking corporation, having an address of 113 S. Pennsylvania St., Atoka, Oklahoma 74525, as mortgagee ("Mortgagee").
WHEREAS, Mortgagor and its affiliate through common ownership and control, The Dixie Group, Inc., a Tennessee corporation (“Co-Borrower”), have applied to Mortgagee for and Mortgagee has agreed to the extension of a $10,000,000.00 term loan until October 26, 2045, evidenced by that certain $10,000,000.00 Term Note dated as of October 26, 2020, as extended from time to time via amendment or otherwise, such promissory note from Mortgagor and Co-Borrower being payable to the order of the Mortgagee, accruing interest at the variable annual rate therein stated (such $10,000,000.00 Term Note, as hereafter amended, extended, renewed, rearranged, substituted for, replaced, changed in form, consolidated or otherwise modified from time to time, being  referred to herein as the  "Note").
NOW, THEREFORE, to secure to Mortgagee the payment of the aforesaid mortgage indebtedness and the indebtedness and obligations hereafter described, Mortgagor does hereby grant, bargain, sell, convey, mortgage and grant a security interest unto Mortgagee and its successors and assigns, with power of sale, all of its right, title and interest in and to the real property located in  Randolph County, Alabama, described in Exhibit A annexed hereto together with all and singular the tenements, hereditaments and appurtenances thereof; all buildings and improvements now or hereafter constructed thereon including (without limitation) all fixtures, now owned or hereafter acquired by Mortgagor and now or hereafter affixed to the aforesaid property, and all buildings or improvements (all of which property is herein called the "Collateral"), and all proceeds and products thereof.  The above-described real property, appurtenances, buildings, improvements and Collateral are hereinafter collectively called the "Mortgaged Premises" and are hereby declared to be subject to the lien of this Mortgage as continuing and continuous, first and prior mortgage lien and security interest, for the payment of the following described indebtedness and obligations:
A.    All indebtedness evidenced by the Note and all renewals, extensions, substitutions, replacements, changes in form, modifications, substitutions and rearrangements of the Note and of the indebtedness evidenced thereby.
B.    The performance by Mortgagor of each covenant, agreement and obligation of Mortgagor under this Mortgage and each covenant, agreement and obligation of Mortgagor under the Note and other loan documents or security instruments, including mortgages between or among the Mortgagor and the Mortgagee, as lender (collectively, the "Loan Documents").
C.    Any sums which may be advanced or paid by Mortgagee under the terms of this Mortgage on account of the default or failure of Mortgagor to comply with the covenants herein.
D.    The payment by Mortgagor and Co-Borrower to Mortgagee of any and all amounts reasonably expended by Mortgagee in exercising or attempting to exercise any right or remedy granted or otherwise available to Mortgagee upon the occurrence of an Event of Default under the Loan Documents.
E.    The payment by Mortgagor and Co-Borrower to Mortgagee of interest on all amounts expended by Mortgagee for any purpose specified in Paragraphs C and D above at the interest rate provided in the Note on the amount of each expenditure from the date thereof.
F.    All loans and advances which Mortgagee may hereafter make to Mortgagor or Co-Borrower and all other and additional debts, obligations and liabilities of every kind and character of Mortgagor now or hereafter arising in favor of Mortgagee, regardless of whether such debts, liabilities or obligations be direct or indirect, primary or secondary, joint, several, fixed or contingent, and irrespective of the manner in which the same may be incurred.
TO HAVE AND TO HOLD the Mortgaged Premises with all the rights, improvements and appurtenances thereunto belonging, or appertaining unto Mortgagee, its successors and assigns, forever.  Mortgagor covenants that Mortgagor is well and lawfully seized of a good and indefeasible fee simple estate in the Mortgaged Premises, that Mortgagor  is the lawful owner of and has a good and lawful right and title to sell, convey and mortgage and encumber the same, that the Mortgaged Premises are free and clear of all general and special taxes, liens, charges, assessments and encumbrances of every kind and character and that Mortgagor hereby warrants and will forever defend the title thereto against the claims or demands of all persons.
1.Payment of Indebtedness.  If Mortgagor and Co-Borrower shall pay the indebtedness herein described, including (without limitation) the Note, and shall in all things do and timely perform all other acts and agreements herein contained to be done, 

then, and in that event only, the Mortgagee shall cause a full satisfaction thereof to be filed for record in the real property records of the county in which this Mortgage is recorded.
2.Maintenance; Waste.  With respect to the Mortgaged Premises, Mortgagor covenants and agrees: (a) to keep the same in good condition and repair; (b) to pay all general and special taxes and assessments and other charges that may be levied or assessed upon or against the same as they become due and payable and to furnish to Mortgagee receipts showing payment of any such taxes and assessments, if demanded; (c) to pay all debts for repair or improvements now existing or hereafter arising which may become liens upon or charges against the Mortgaged Premises; (d) to comply with or cause to be complied with all material requirements of any governmental authority relating to the Mortgaged Premises; (e) pursuant to the terms and conditions of Paragraph 3 below, to promptly repair, restore, replace or rebuild any part of the Mortgaged Premises which may be damaged or destroyed by any casualty whatsoever; and (f) to promptly notify Mortgagee of any damage to the Mortgaged Premises in excess of Fifty Thousand Dollars ($50,000.00).  Mortgagor further covenants and agrees that Mortgagor will not: (a) commit or suffer to be committed any waste of or on the Mortgaged Premises; (b) initiate, join in or consent to any change in any private restrictive covenant, zoning ordinance or other public or private restrictions limiting, restricting or defining the uses which may be made of the Mortgaged Premises or any part thereof without the prior written consent of the Mortgagee; or (c) permit any lien or encumbrance of any kind or character to accrue or remain on the Mortgaged Premises or any part thereof other than the lien of this Mortgage.
3.Insurance.  Mortgagor will keep or cause the tenant thereof to keep the Mortgaged Premises insured for the benefit of Mortgagee against loss or damage by fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles, marine, smoke, vandalism and malicious mischief, all in amounts as set forth in the Loan Documents), and shall provide Mortgagee with evidence of liability insurance in amounts as set forth in the Loan Documents) and, if applicable, flood insurance in an amount equal to the maximum amount of coverage made available with respect to the Mortgaged Premises under the National Flood Insurance Program (or evidence satisfactory to Mortgagee that the Mortgaged Premises are not located in an area designated by the Secretary of Housing and Urban Development as an area having special flood or mudslide hazards and that flood insurance is not required for this mortgage loan under the terms of any law, regulation or rule governing Mortgagee's activities), and when and to the extent reasonably required by Mortgagee, against any other risk insured against by persons operating like properties in the locality of the Mortgaged Premises; all insurance herein provided for shall be in form and with insurance companies reasonably approved by Mortgagee; regardless of the types or amounts of insurance reasonably required by the Loan Documents and approved by Mortgagee, Mortgagor will assign and deliver to Mortgagee all certificates and copies of policies of insurance which insure against any loss or damage to the Mortgaged Premises as collateral and further security for the payment of the indebtedness secured by this Mortgage, with Mortgagee named as first mortgagee, loss payee or an additional insured, whichever is appropriate as determined by Mortgagee pursuant to a mortgage clause endorsement acceptable to Mortgagee, on each such certificate and policy of insurance. 
If Mortgagee by reason of such insurance receives any money for loss or damage, such amount shall, subject to the following proviso, be held by Mortgagee and paid to Mortgagor for the repair or restoration of the Mortgaged Premises, provided that Mortgagor shall not be in default hereunder.  If Mortgagor shall have delivered to Mortgagee within sixty (60) days after such casualty:  (a) evidence reasonably satisfactory to Mortgagee that any sale contract or long term loan commitment held by Mortgagor for the Mortgaged Premises will not be materially adversely affected by the casualty or the delay caused thereby in completion of or repairs in the Mortgaged Premises, (b) plans and specifications, in form and substance reasonably satisfactory to Mortgagee, for any such rebuilding or restoration, (c) a budget for rebuilding or restoration reasonably satisfactory to Mortgagee, and (d) evidence reasonably satisfactory to Mortgagee that Mortgagor has or will have upon receipt of insurance proceeds, all amounts necessary to pay the cost of such rebuilding or restoration. 
Mortgagee may retain and apply the insurance proceeds toward payment of the indebtedness and obligations secured by this Mortgage.  Mortgagee shall not be obligated to see to the proper application of any amount paid over to Mortgagor.  Not less than twenty (20) days prior to the expiration dates of each certificate or policy required of Mortgagor pursuant to this Paragraph, Mortgagor will deliver to Mortgagee a renewal certificate and copy of the policy or policies marked "premium paid" or accompanied by other evidence of payment satisfactory to Mortgagee.  In the event of a foreclosure of this Mortgage, the purchaser of the Mortgaged Premises shall succeed to all the rights of Mortgagor, including any right to unearned premiums, in and to all certificates and policies of insurance assigned and delivered to Mortgagee pursuant to the provisions of this Paragraph. 
Mortgagor specifically covenants and agrees that in the event Mortgagor has provided Mortgagee with evidence reasonably satisfactory to Mortgagee that flood insurance covering the Mortgaged Premises should not be required at the time of execution of this Mortgage and the Mortgaged Premises should thereafter become eligible for flood insurance under the National Flood Insurance Program, or under any subsequent Act of Congress of the United States, and should the Mortgaged Premises be located in an area now or thereafter designated by the Secretary of Housing and Urban Development as an area having special flood or mudslide hazards, Mortgagor and Mortgagor's successors in title shall maintain at its or their sole cost and expense flood insurance available under the National Flood Insurance Program, in such amounts and in such form as may be required by Mortgagee.
4.Alterations.  No building or other property now or hereafter subject to the lien of this Mortgage shall be removed, demolished or materially altered, without the prior written consent of Mortgagee, except that Mortgagor shall have the right, without such written prior consent, to remove and dispose of, free from the lien of this Mortgage, such Collateral as from time to time may become worn or obsolete, provided that either:  (a) simultaneously with or prior to such removal, any such Collateral shall be replaced with other Collateral of a value at least equal to that of the replaced Collateral and free from any title retention device, security agreement or other encumbrance, and by such removal or replacement, Mortgagor shall be deemed to have subjected such Collateral to the lien of this Mortgage; or (b) any net cash proceeds received from such disposition shall be paid over promptly to Mortgagee to be applied to the indebtedness hereby secured.
5.Default; Remedies.  Upon the failure of Mortgagor to pay or cause the applicable tenant thereof to pay any of the taxes, assessments, debts, liens or other charges as the same become due and payable, or to insure the Mortgaged Premises or deliver the certificates of insurance and copies of the policies of insurance as herein provided, or to perform Mortgagor's covenants and agreements herein, Mortgagee is hereby authorized, at its option, to insure the Mortgaged Premises, or any part thereof, and pay the costs of such insurance, and to pay such taxes, assessments, debts, liens or other charges herein described, or any part thereof, and to remedy Mortgagor's failure to perform hereunder and pay the costs associated therewith, and Mortgagor hereby agrees to refund on demand all sum or sums so paid, with interest thereon at the interest rate specified in the Note; and any such sum or sums so paid 
									
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together with interest thereon shall become a part of the indebtedness hereby secured; provided, however, that the retention of a lien hereunder for any sum so paid shall not be a waiver of subrogation or substitution which Mortgagee might otherwise have. 
In the event of the failure of Mortgagor within any applicable curative or grace period following any applicable written notice required from Mortgagee, if any, to pay any of the taxes, assessments, debts, liens or other charges herein described as the same become due and payable (subject to Mortgagor's right to protest the same pursuant to the terms, provisions and limitations of the Loan Documents) or to keep the Mortgaged Premises insured in the manner and time herein provided, or the failure to deliver renewal policies in the manner and time herein provided, or if any installment of principal or interest is not paid at or within the time required by the terms of the Note, or in the case of the failure of the Mortgagor to comply with the terms, provisions and conditions of paragraph 4 hereof in the event of actual destruction, demolition, removal, condemnation or taking of all or any major part of the Mortgaged Premises, or the failure to timely comply with the covenants and warranties of or to timely do any of the things herein agreed to be done within thirty (30) days following written notice from Mortgagee (except for payment obligations under the Note for which the requisite written notice therein prescribed (including the limitations of the frequency thereof)  and a fifteen (15) day curative period is established) or on the foreclosure of or default under any other mortgage or deed of trust encumbering the Mortgaged Premises or any note instrument secured thereby, provided, that the foregoing shall not be deemed to constitute Mortgagee's consent to any other mortgage, or on the breach of any of the terms, provisions, covenants or warranties of the Note, the Loan Documents or this Mortgage or any other instrument securing or evidencing the indebtedness hereby secured, then, in any of such events, all of such indebtedness secured hereby, including the outstanding loan evidenced by the Note and all other obligations, without deduction, at the option of Mortgagee, without further or other notice, shall become immediately due and payable, and Mortgagee shall be empowered and entitled, at its option, to foreclose this Mortgage and shall be entitled to the possession of the Mortgaged Premises and the rents, lease payments, security deposits and profits and proceeds thereof, and shall be entitled to have a receiver appointed to take possession of the Mortgaged Premises.
At the option of the Mortgagee, this Mortgage may be foreclosed by judicial proceedings, or by non-judicial foreclosure sale in accordance with applicable laws, and to sell and dispose of the Mortgaged Premises and all the right, title, and interest of Mortgagor therein, by sale at any place authorized by law as may be specified in the notice of such sale to the highest bidder. If this Mortgage is foreclosed by non-judicial foreclosure sale pursuant to the power of sale, Mortgagee shall give notice of the foreclosure by publication once a week for 3 successive weeks. Such notice shall state the time, place and terms of each such sale by publication in some newspaper published in the county or counties in which the Mortgaged Premises are to be sold, or a substantial and material part thereof, is located. At such foreclosure sale, Mortgagee may sell the Mortgaged Premises (or such part or parts thereof as Mortgagee may from time to time elect to sell) in front of the courthouse door of such county, at public outcry, to the highest bidder for cash. The sale shall be held between the hours of 11:00 a.m. and 4:00 p.m. on the day designated for the exercise of the power of sale hereunder. The Mortgaged Premises may be sold as a whole or in separate parts, parcels, or tracts, including separate parts, parcels or tracts located in the same county, and in such manner and order as the Mortgagee in its sole discretion may elect. The exercise of the power of sale with respect to a separate part, parcel, or tract of the Mortgaged Premises in one county does not extinguish or otherwise affect the right to exercise the power of sale with respect to the other parts, parcels, or tracts of the Mortgaged Premises in that or another county to satisfy the obligation secured by the Mortgage, and the right and power of sale arising out of any Event of Default shall not be exhausted by one or more sales of the Mortgaged Property. At the foreclosure, Mortgagee shall be entitled to bid and to purchase the Mortgaged Premises and shall be entitled to apply the indebtedness secured by the Mortgage, or any portion thereof, in payment for the Mortgaged Premises. The Mortgagee shall be authorized to retain an attorney to represent it in such proceedings. Upon such sale, Mortgagee or the attorney conducting said sale are hereby authorized and empowered to make due conveyance to the purchaser or purchasers in the name of Mortgagor. The Mortgagor hereby irrevocably appoints Mortgagee to be the attorney in fact of the Mortgagor and in the name and on behalf of the Mortgagor to execute and deliver any deeds, transfers, conveyances, assignments, assurances, and notices which the Mortgagor ought to execute and deliver and do and perform any and all such acts and things which Mortgagor ought to do and perform under the covenants herein contained and generally to use the name of Mortgagor in the exercise of all or any of the powers hereby conferred on Mortgagee. Upon any sale, whether under the power of sale hereby given or otherwise, it shall not be necessary for Mortgagee or any public officer acting under execution or order of court to have physically present or constructively in its possession any of the Mortgaged Premises. In case of a foreclosure sale of all or any part of the Mortgaged Property and of the application of the proceeds of sale to the payment of the indebtedness secured by the mortgage, Mortgagee shall be entitled to enforce payment of and to receive all amounts then remaining due and unpaid and to recover judgment for any portion thereof remaining unpaid, with interest. The remedies provided to Mortgagee in this paragraph shall be in addition to and not in lieu of any other rights and remedies provided in this Mortgage, the Note, the Loan Agreement or any other Loan Document, by law or in equity, all of which rights and remedies may be exercised by Mortgagee independently, simultaneously or consecutively in any order without being deemed to have waived any right or remedy previously or not yet exercised.
6.Receivership.  In the event Mortgagee elects to seek the appointment of a receiver following Mortgagor's non-performance, breach, default or violation of any condition, covenant or other agreement in this Mortgage or the note secured hereby, Mortgagee shall be entitled to appointment of a receiver without the necessity of establishing that the property is probably insufficient to discharge the mortgage debt, the express purpose and intent of this clause being hereby acknowledged by Mortgagor to provide for Mortgagor's express consent to the appointment of a receiver upon the occurrence of any breach, default, violation or other non-performance under this Mortgage by Mortgagor.
7.Taxes; Expenses.  Mortgagor will pay, before same become delinquent or any penalty attaches thereto for nonpayment, any and all taxes, assessments and charges, general or special, of every nature and to whomsoever assessed, that may be now or hereafter levied or assessed under any law now existing or hereafter enacted, directly or indirectly upon the Mortgaged Premises or any part thereof, upon the rents, issues, income or profits thereof or upon the indebtedness secured hereby.  Mortgagor will not suffer or permit any liens, security interests, levies, attachments or other encumbrances to become effective, or to be asserted, against any of the Mortgaged Premises, and will regularly and promptly submit to Mortgagee such evidence of the due and punctual payment of such taxes, assessments or charges as Mortgagee may require.  The foregoing notwithstanding, Mortgagor may in good faith contest, by a proper legal proceeding, the validity or amount of any such taxes, assessments or charges, provided Mortgagor deposits with Mortgagee as security for payment of such contested taxes, assessments or charges an amount equal thereto, and further provided that Mortgagor will pay such contested item and all costs and penalties, if any, at least thirty (30) days before the date the Mortgaged Premises may be sold by the taxing authorities because of nonpayment of said taxes, assessments or charges. 
									
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Upon violation of the foregoing undertaking in any part, or upon the passage by the State of Florida of any law imposing payment of the whole or any part of the aforesaid taxes or assessments upon Mortgagee, or deducting from the value of the Mortgaged Premises for the purpose of taxation any liens thereon, or changing in any way the laws now in force for the taxation of mortgages or debts secured by mortgage for state or local purposes, or the manner of the collection of any such taxes so as to materially adversely affect this Mortgage, or upon the rendering by any court of competent jurisdiction of a decision holding that any undertaking by Mortgagor to pay such taxes or assessments, or any of them, or any similar undertaking, is in whole or in part legally inoperative or void, then in such event, unless the applicable law permits Mortgagor to pay the same and Mortgagor in fact promptly pays all such taxes, the indebtedness secured hereby will, at the option of Mortgagee, without notice to any party, become immediately mature, due and payable.  Mortgagor also agrees to pay any and all taxes which may be levied or assessed directly or indirectly upon the Note (except only any federal and state income taxes on the Note), this Mortgage and the indebtedness hereby secured, and further agrees to pay all reasonable expenses incurred in connection with the creation of the indebtedness hereby secured, including, without limitation, attorney's fees, title insurance fees, survey expenses and recording costs, without regard to any law which may be hereafter enacted imposing payment of the whole or any part thereof upon Mortgagee; and, upon violation of the foregoing agreement to pay such taxes and assessments, or if the rate of said taxes and expenses added to the respective rates of interest provided for in the Note shall exceed the then maximum legal rate of interest, then, and in any such event, the indebtedness hereby secured, without deduction, shall, at the option of Mortgagee become immediately due and payable, anything contained in this Mortgage or in the Note notwithstanding.  The additional amounts which may become due and payable hereunder shall be regarded as part of the indebtedness secured by this Mortgage.  This paragraph shall also apply to the amount to be paid under the present Florida mortgage registration tax laws, all of which amount the Mortgagor agrees to pay.
8.Tax and Insurance Accounts.  For so long as ad valorem real estate taxes, special assessments and hazard and casualty insurance premiums are being timely paid and Mortgagor provides Mortgagee with evidence of such payment and no other condition or event exists or has occurred or failed to occur which but for the passage of time or the giving of notice or both would constitute an Event of Default under the Loan Documents and no such Event of Default exists, Mortgagee will waive the monthly escrow of such taxes, any special assessments and such insurance premiums, thereby permitting Mortgagor to forego such monthly escrow deposits.  Such monthly tax and insurance deposits shall be held by Mortgagee and shall not bear or accrue interest, shall not be trust funds and upon default all such funds may be applied by Mortgagee on account of the Note and the other obligations secured hereby.  Failure of Mortgagor so to make such monthly deposits or any deficiency in the amount thereof, unless made good or cured by Mortgagor prior to the next succeeding monthly installment due date, shall constitute an event of default hereunder.  It shall be the responsibility of Mortgagor to furnish Mortgagee with tax bills or statements in sufficient time to timely pay the taxes and assessments before any penalty attaches or interest charges accrue thereon and the insurance premiums before any of the policies lapse.
9.Expenses of Collection.  It is agreed that if, and as often as, this Mortgage or the Note are placed in the hands of an attorney for collection or for representation of Mortgagee in any bankruptcy, insolvency, probate or other judicial proceeding, or this Mortgage is referred to an attorney for collection or foreclosure, or to protect the priority or validity of this Mortgage, or to prosecute or defend any suit affecting the Mortgaged Premises, or to enforce or defend any of Mortgagee's rights hereunder, Mortgagor shall pay to Mortgagee its reasonable attorneys' fees, together with all court costs, expenses for abstracting or title examination, title insurance or other disbursements, costs or expenses relating to the Mortgaged Premises, all of which sums, together with interest thereon, shall be secured hereby.
10.Appraisement.  In case of judicial foreclosure hereof and sale hereunder, appraisement of the Mortgaged Premises is hereby expressly waived, or not waived, at the sole option of Mortgagee, such option to be exercised thereby at the time judgment is entered in such foreclosure, or at any time prior thereto.
11.Sale in Parcels.  In case of any sale under this Mortgage by virtue of judicial proceedings or otherwise, the Mortgaged Premises may be sold in one or more parcels and as an entirety.
12.Condemnation Awards.  Mortgagor covenants and agrees that if at any time all or any portion of the Mortgaged Premises shall be taken or damaged under the power of eminent domain, the award received by condemnation proceedings for any property so taken or any payment received in lieu of such condemnation proceedings shall be paid directly to Mortgagee and, subject to compliance with the next succeeding sentence of this Paragraph 12, applied as a principal prepayment on the Note in such order as Mortgagee shall determine in its sole discretion.  Subject to the same terms and conditions for payment of insurance proceeds to Mortgagor as set forth in Paragraph 3 above, such award or payment from condemnation proceedings shall be paid to Mortgagor for the purpose of altering, restoring or rebuilding any part of the Mortgaged Premises which may have been altered, damaged or destroyed as a result of any such taking or damage; provided, that Mortgagee shall not be obligated to see to the application of any amount paid over to Mortgagor.  If the terms for payment of such award to Mortgagor are not met, then Mortgagee may retain and apply the award toward payment of the indebtedness secured by this Mortgage.  Mortgagor, immediately upon obtaining knowledge of the institution of any proceedings or negotiations for the condemnation of the Mortgaged Premises, or any portion thereof, will notify Mortgagee in writing of the pendency of such negotiations or proceedings.  Mortgagee may participate in any such negotiations or proceedings, and Mortgagor from time to time will execute and deliver to Mortgagee all instruments requested by Mortgagee to permit such participation.
13.Certificate.  Mortgagor, upon written request of Mortgagee, made either personally or by mail, shall certify, by a writing duly acknowledged, to Mortgagee or to any proposed assignee of this Mortgage, the amount of principal and interest then secured by this Mortgage and whether Mortgagor has knowledge of any offsets or defenses against the indebtedness hereby secured, within ten (10) days after such request by Mortgagee.
14.Notice.  Unless expressly provided to the contrary therein, every provision for notice, demand, consent or request shall be deemed fulfilled only upon compliance with the notice provisions more particularly described in Paragraph 25 hereof.
15.Renewals/Extensions/Future Advances.  This  Mortgage shall secure the payment of the indebtedness evidenced by the Note and any and all additional or other future loans or advances to Mortgagor by the holder hereof in connection with the Mortgaged Premises or any improvements now or hereafter located thereon, together with any renewals, extensions, replacements, modifications, rearrangements, consolidations, substitutions or extensions of the Note.
									
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16.Inspection.  Mortgagee and any persons authorized by Mortgagee shall have the right to enter and inspect the Mortgaged Premises at all reasonable times upon reasonable prior notice to Mortgagor. 
17.Indulgences, Extensions, No Waiver.  No failure by Mortgagee to insist upon the strict performance by Mortgagor of any of the terms and provisions hereof shall be deemed to be a waiver of any of the terms and provisions hereof, and Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Mortgagor of any and all of the terms and provisions of this Mortgage to be performed by Mortgagor.  Neither Mortgagor nor any other person now or hereafter obligated for the payment of the whole or any part of the indebtedness now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor or of any other person so obligated to take action to foreclose this Mortgage or otherwise enforce any of the provisions of this Mortgage or of any obligations secured by this Mortgage, or by reason of the release, regardless of consideration, of the whole or any part of the security held for the indebtedness secured by this Mortgage, or by reason of any agreement or stipulation between any subsequent owner or owners of the Mortgaged Premises and Mortgagee extending, from time to time, the time of payment or modifying the terms of the Note or this Mortgage if the consent of Mortgagor has been obtained in connection with such modification to the extent Mortgagor remains liable on the Note, and in the latter event, Mortgagor and all such other persons shall continue to be liable to make such payments according to the terms of any such agreement of extension or modification unless expressly released and discharged in writing by Mortgagee.  Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate lien on the Mortgaged Premises, Mortgagee may release the obligation of anyone at any time liable for any of the indebtedness secured by this Mortgage or any part of the security held for such indebtedness and may from time to time extend the time of payment or otherwise modify the terms of the Note and/or this Mortgage without, as to the security for the remainder thereof, in any way impairing or affecting the lien of this Mortgage or the priority of such lien, as security for the payment of the indebtedness as it may be so extended or modified, over any subordinate lien.  Mortgagee may resort for the payment of indebtedness hereby secured to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect.
18.Prohibited Acts.  Mortgagor will not, without the express prior written approval of Mortgagee:  (a) sell, convey, mortgage, pledge or otherwise transfer or encumber all or any part of the Mortgaged Premises or any interest therein (such prohibition on encumbrance is deemed not to include mechanics' or materialmen's liens for which Mortgagor has provided indemnification, bonding or other action sufficient to prevent enforcement of such lien satisfactory to Mortgagee within thirty (30) days after the inception of such lien); or (b) create or suffer to exist any security interest, chattel mortgage or title retention device covering all or any part of the Collateral; or (c) permit any sale, conveyance, assignment, transfer, pledge, creation of any security interest, or other disposal of an encumbrance of, whether by operation of law or otherwise, any ownership interest in Mortgagor (except for any such  transfer by operation of law by virtue of the death of a  member owner to the surviving spouse or another existing member of Mortgagor and prompt written notice thereof to the Mortgagee).  The occurrence of any of the aforesaid events, whether by operation of law or otherwise, without Mortgagee's prior written approval, shall, subject only to any applicable notice and curative provisions hereof, at Mortgagee's option, constitute an event of default hereunder, and Mortgagee may declare the indebtedness hereby secured immediately due and payable and exercise any or all of Mortgagee's rights herein provided without other or further notice.  This provision shall apply to each and every sale, agreement to sell, conveyance, mortgage, transfer or encumbrance, regardless of whether or not Mortgagee has consented to or waived its rights hereunder, whether by action or inaction, in connection with any previous sale, conveyance, mortgage, transfer or encumbrance, whether one or more.  
19.Cumulative Remedies.  The rights of Mortgagee arising under the clauses and covenants contained in this Mortgage shall be separate, distinct and cumulative and none of them shall be in exclusion of the other.  No act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision, anything herein or otherwise to the contrary notwithstanding.
20.Financial Reports.  With respect to the Mortgaged Premises and Mortgagor's operation thereof, Mortgagor agrees to keep proper books of record and account in accordance with generally accepted accounting principles consistently applied.  Mortgagee shall have the right to examine the books of record and accounts of Mortgagor and to discuss the business affairs, finances and accounts of Mortgagor and to be informed as to the same by Mortgagor, all at such reasonable times and intervals as Mortgagee may request.  Mortgagor shall submit to Mortgagee annual financial statements, all to be delivered to and held by the Mortgagee on a confidential basis.
21.Security Interest.  This Mortgage shall also be considered to be and shall be construed as a security agreement and a fixture filing with respect to any and all of the items and types of the Collateral herein described or referenced which may be subject to a security interest as a fixture filing pursuant to the Alabama Uniform Commercial Code, and Mortgagor hereby grants and pledges to Mortgagee a first and prior continuing security interest in and to Collateral, including the fixtures attached to and used exclusively in the operation and maintenance of the Mortgaged Premises (including all proceeds and products thereof), whether now owned or hereafter acquired, but specifically excluding personal property or fixtures used in the manufacturing business conducted on the Mortgaged Premises. Mortgagee shall be entitled to exercise any and all rights that it may have hereunder, under the Alabama Uniform Commercial Code with respect to the Collateral.
A.    Additional Documents.  Mortgagor will from time to time, within ten (10) days after request by Mortgagee, execute, acknowledge and deliver any fixture filing, continuation statement, or other similar documents that Mortgagee may reasonably request in order to protect, preserve, continue, perfect, extend or maintain the security interest under and the priority of this Mortgage and will, upon demand, pay any expenses and fees incurred by Mortgagee in the preparation, execution and filing of any such documents.
B.    Fixture Filing.  This Mortgage shall be filed of record in the real property records of  Volusia County and the real estate records of each county where any part of the Mortgaged Premises is located as a fixture filing and covers all of the items and types of Collateral constituting or to constitute fixtures as defined in the Florida Uniform Commercial Code, and this Mortgage shall constitute a "fixture filing" as set forth in the Florida Uniform Commercial Code.
22.Bankruptcy.  The entire indebtedness secured by this Mortgage shall become immediately due and payable at the option of Mortgagee if by order of a court of competent jurisdiction, a receiver or liquidator or trustee of Mortgagor (as defined in the 
									
		5
	

Loan Documents), or of all or any part of the Mortgaged Premises, shall be appointed and shall not have been discharged within thirty (30) days; or, if by decree of any such court, Mortgagor shall be insolvent or the Mortgaged Premises shall have been sequestered and such decree shall have continued undischarged and unstayed for thirty (30) days after the entry thereof; or if Mortgagor shall file or have filed against it a proceeding seeking relief under any provision or chapter of any bankruptcy or insolvency law or shall consent to the filing of any bankruptcy petition against Mortgagor under any such law; or Mortgagor shall file a petition or answer seeking reorganization, rehabilitation or an arrangement with creditors; or if (without limitation of the generality of the foregoing) Mortgagor shall make an assignment for the benefit of creditors, become insolvent or shall admit in writing an inability to pay debts generally as they become due, or shall consent to the appointment of a receiver, trustee or liquidator of Mortgagor, or of all or any part of the Mortgaged Premises.
23.Leases/Assignment of Rents and Profits.  With respect to any and all applicable subsisting and future leases or rentals (collectively the "Leases") affecting the Mortgaged Premises, Mortgagor represents and agrees as follows to the fullest extent permitted by applicable law and regulation pertaining to the Mortgaged Premises and the tenants/residents thereof:  (a) to perform faithfully Mortgagor's covenants under the Leases and neither do nor neglect to do, nor permit to be done, anything (other than pursuing the enforcement of the terms of such leases in the exercise of remedies thereunder, i.e., forcible entry and detainer, eviction, etc.) which might cause the modification or termination of any of the Leases (or of the obligations of any lessee or tenant or any person claiming through such lessee or tenant, respectively), or which might diminish or impair the value of any of the Leases or the rents provided for therein (or the interest of Mortgagor or Mortgagee therein or thereunder); (b) to permit no assignment of any of the Leases or any subletting thereunder and not to anticipate for more than one (1) month in advance of any rents (except only for prepayments by corporate lessees upon notice thereof from Mortgagor to Mortgagee) that may become collectible under any of the Leases; (c) except for this Mortgage and any other mortgage expressly permitted by the terms hereof, not to execute a mortgage or create or permit a lien affecting the Mortgaged Premises; (d) to execute and/or deliver to Mortgagee, within ten (10) days after request therefor, such rent rolls, collateral assignments, estoppel certificates (reciting, among other things, that all outstanding Leases are effective and binding), and other instruments as might be reasonably required by Mortgagee with respect to any Lease now or hereafter affecting the Mortgaged Premises; and (e) that all representations made by Mortgagor to Mortgagee in connection with the Leases are and will be true and correct.
Mortgagor hereby mortgages, pledges and collaterally grants and assigns to Mortgagee as additional security for the Note and the other obligations all of such Leases now existing or hereafter made of all or any part of the Mortgaged Premises together with all rents, lease payments, other profits and security deposits due or held or hereafter to become due or held in connection therewith.   This assignment is intended to grant unto Mortgagee all rights, powers, remedies and privileges afforded to a mortgagee under 46 O. S. Section 4(A), as amended, and no additional duties or obligations (fiduciary or otherwise) except those expressly required of or imposed on mortgagees by the aforesaid statutory provision as a result of this or any other such collateral assignment pertaining to all or any portion of the Mortgaged Premises or exercise or attempted exercise of its rights hereunder or any other such collateral assignment executed by Mortgagor in connection with the Mortgaged Premises or any portion thereof.
24.Subrogation.  To the extent funds are advanced under the Note hereby secured for the purpose of paying any indebtedness secured by any mortgage lien having priority over the lien of this Mortgage, Mortgagee shall be subrogated to any and all rights, superior titles, liens and equities owned or claimed by the holder of such prior mortgage.  Except with respect to the priority of any mortgage to which Mortgagee is subrogated pursuant to the provisions hereof, the terms and provisions of this Mortgage shall govern the rights and remedies of Mortgagee and shall supersede the rights and remedies provided under any mortgage to which Mortgagee is subrogated.
25.Notices.  All notices required hereunder or pursuant to the Loan Documents, the Note or any other collateral or security documents therein defined or described shall be mailed or delivered in accordance with and subject to the terms and provisions of Section 6.1 of the Loan Documents:
Mortgagor:

TDG Operations, LLC
475 Reed Rd.
Dalton, Georgia 30722

Mortgagee:

Ameristate Bank
P. O. Box 718, 
Atoka, Oklahoma, 74525

Either party hereto may designate a new or different address for notice purposes to the other party by complying with the terms and provisions hereof.
26.Mortgage Covenants; Statutory Mortgage Condition.  Mortgagor's grant of the mortgage provided for in this Mortgage is made with mortgage covenants and upon the statutory mortgage condition, for the breach of which this Mortgage is subject to foreclosure as provided by law.
27.No Waiver of Right of Redemption.  Any waiver or sale by Mortgagor of its statutory right of redemption shall have no effect.
28.Governing Law. THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF OKLAHOMA AND THE LAW OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH STATE; PROVIDED, HOWEVER, THE LAWS OF THE STATE OF ALABAMA SHALL GOVERN THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS GRANTED IN THIS MORTGAGE.  GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON-
									
		6
	

EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN OR FOR ATOKA, OKLAHOMA (OR ANY COURT OF COMPETENT JURISDICTION WHERE ANY PORTION OF THE MORTGAGED PROPERTY IS LOCATED) OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, AND GRANTOR HEREBY AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY STATE OR FEDERAL COURT SITTING IN OR FOR ATOKA, OKLAHOMA (OR ANY COURT OF COMPETENT JURISDICTION WHERE ANY PORTION OF THE MORTGAGED PROPERTY IS LOCATED) MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO GRANTOR AT THE ADDRESS OF GRANTOR FOR THE GIVING OF NOTICES PURSUANT TO PARAGRAPH 25 HEREOF, AND SERVICE SO MADE SHALL BE COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.  
29.Construction.  Wherever used in this Mortgage, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, the word "Mortgagor" shall mean any one, more than one or all of the "Mortgagor and/or any subsequent owner or owners of the Mortgaged Premises," the word "Mortgagee" shall mean "Mortgagee or any subsequent holder or holders of this Mortgage," the phrase "Note" shall mean "Note secured by this Mortgage", the word "person" shall mean "an individual, corporation, partnership or unincorporated association".  The paragraph headings contained herein are included as a matter of convenience and are not intended to define, limit or modify the terms of this Mortgage.  This Mortgage shall be binding on Mortgagor and all successors and assigns of each of Mortgagor and shall inure to the benefit of Mortgagee and all heirs, personal representatives, executors, successors and assigns of Mortgagee.
30.Amendment.  This Mortgage cannot be changed except by an agreement in writing signed by the party against whom enforcement of the change is sought.
31.Multiple Counterparts.  This instrument may be executed in any number of multiple counterparts, each of which shall for all purposes be deemed to be an original and one instrument, and all of which are identical, except that to facilitate recordation, in any particular counterpart portions of Exhibit A hereto which describes properties situated in counties or jurisdictions other that the county and jurisdiction in which such counterpart is to be recorded may have been omitted.
32.Legal Name.  Mortgagor's exact legal name is correctly set forth at the end of this Mortgage.  Mortgagor will not cause or permit any change to be made in its name, identity, or limited liability structure, unless Mortgagor shall have notified Mortgagee in writing at least thirty (30) days prior to the effective date of such change and shall have taken all action required by Mortgagee for the purpose of further perfecting or protecting the lien and security interest of Mortgagee in the Mortgaged Premises.  Mortgagor's principal residence and the place where Mortgagor keeps books and records, including recorded data of any kind or nature, regardless of the medium or recording, including without limitation, software, writings, plans, specifications and schematics concerning the Mortgaged Premises, has for the preceding four months been and will continue to be (unless Mortgagor notifies Mortgagee of any change in writing at least thirty (30) days prior to the date of such change) the address of Mortgagor set forth herein.  
IN WITNESS WHEREOF, Mortgagor has duly executed and delivered this instrument to Mortgagee.
    
    TDG Operations, LLC

    By: ______________________________________
        Jon Faulkner
        Vice President and Manager
                                        
                            "Mortgagor
									
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ACKNOWLEDGMENT
STATE OF ALABAMA     )
                    )  SS.
COUNTY OF ___________________    )

    I, ______________________________, a Notary Public, in and for said County in said State, hereby certify that Jon Faulkner whose name as Vice President and Manager of the TDG Operations, LLC, a limited liability company, is signed to the foregoing conveyance and who is known to me, acknowledged before me on this day that, being informed of the contents of the conveyance, he, as such officer and with full authority, executed the same voluntarily for and as the act of said company.

Given under my hand this the ____ day of October, 2020.

My Commission Expires:                                            
                        Notary Public 
                        Printed Name:                        
(SEAL)                        Commission No.:                    

EXHIBIT A

THE FOLLOWING DESCRIBED PROPERTY IN THE CITY OF ROANOKE, RANDOLPH COUNTY, ALABAMA CONTAINING 24.784 ACRES AND DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER (NW 1/4 OF SE 1/4) OF SECTION 2, TOWNSHIP 22 SOUTH, RANGE 12 EAST OF THE HUNTSVILLE MERIDIAN; RUN THENCE S 89 DEG. 51 MIN. 17 SEC. E 270.00' WITH THE SOUTH LINE OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 2 TO A POINT ON THE WEST RIGHT OF WAY OF SHADY LANE DRIVE (60' RIGHT OF WAY):
RUN THENCE N 01 DEG. 54 MIN. 43 SEC. E 100.05' TO A POINT MARKED BY AN IRON PIN FOUND AND THE POINT OF BEGINNING OF THE TRACT HEREIN DESCRIBED, SAID POINT IS ALSO THE WEST END OF SUNSET DRIVE; RUN THENCE ALONG THE WEST END OF SUNSET DRIVE AND THE WEST SIDE OF SHADY LANE DRIVE S 01 DEG. 54 MIN. 43 SEC. W 628.38' TO A POINT MARKED BY AN IRON PIN FOUND THAT IS 500' MEASURED AT RIGHT ANGLES FROM THE CENTERLINE OF RUNWAY OF THE ROANOKE MUNICIPAL AIRPORT; RUN THENCE N 68 DEG. O3 MIN. 42 SEC. W PARALLEL TO AND 500' OFF THE CENTERLINE OF SAID RUNWAY A DISTANCE OF 753.22' ALONG THE PROPERTY OF CITY OF ROANOKE TO A POINT MARKED BY AN IRON PIN FOUND; RUN THENCE N 00 DEG. 56 MIN. 00 SEC. W 916.29' ALONG THE PROPERTY OF LAWS MECHANICAL AND ALADDIN MANUFACTURING CORP TO A POINT MARKED BY AN IRON PIN FOUND; RUN THENCE S 89 DEG. 58 MIN. 04 SEC. E 200.24' TO A POINT MARKED BY AN IRON PIN FOUND AT THE NORTHWEST CORNER OF THE CITY OF ROANOKE PROPERTY THAT IS THE SITE OF AN ELEVATED WATER TANK; CONTINUE AROUND THE ELEVATED TANK SITE S 26 DEG. 34 MIN. 24 SEC. E 101.00' TO A POINT MARKED BY AN IRON PIN FOUND; CONTINUE AROUND THE ELEVATED TANK SITE S 65 DEG. 43 MIN. 23 SEC. E. 82.00' TO A POINT MARKED BY AN IRON PIN FOUND; CONTINUE AROUND THE ELEVATED TANK SITE N 65 DEG. 47 MIN. 15 SEC. E 82.00' TO A POINT MARKED BY AN IRON PIN FOUND; CONTINUE AROUND THE ELEVATED TANK SITE N 26 DEG. 38 MIN. 16 SEC. E 101.00' TO A POINT MARKED BY AN IRON PIN FOUND ON THE ALADDIN MANUFACTURING CORP. PROPERTY LINE; RUN THENCE ALONG THE ALADDIN MANUFACTURING CORP. PROPERTY LINE S 89 DEG. 58 MIN. 04 SEC. E 719.46' TO A POINT MARKED BY AN IRON PIN FOUND AT THE PROPERTY OF MALIA ANN AND BRENDA JEAN HILL; RUN THENCE ALONG THE HILL PROPERTY LINE S 04 DEG. 41 MIN. 51 SEC. E 420.00' TO A POINT MARKED BY AN IRON PIN FOUND; CONTINUE ALONG THE HILL PROPERTY LINE S 89 DEG. 58 MIN. 04 SEC. E 525.00' TO A POINT MARKED BY AN IRON PIN FOUND ON THE WESTERLY RIGHT OF WAY OF OLD U.S. 431/LAFAYETTE HIGHWAY; CONTINUE ALONG SAID LAFAYETTE HIGHWAY S 08 DEG. 22 MIN. 17 SEC. E 154.21' TO A POINT MARKED BY AN IRON PIN FOUND ON THE NORTH RIGHT OF WAY OF SUNSET DRIVE (100' RIGHT OF WAY); RUN THENCE ALONG THE NORTH RIGHT OF WAY OF SUNSET DRIVE N 89 DEG. 51 MIN. 17 SEC. W 1006.97' TO THE POINT OF BEGINNING.
TOGETHER WITH THE EASEMENT BENEFITING THE SUBJECT PROPERTY AND RESERVED UNDER THAT CERTAIN CORPORATION QUIT CLAIM DEED WITH RESERVATIONS OF EASEMENT, AS RECORDED IN BOOK 270, PAGE 259, RANDOLPH COUNTY, REAL PROPERTY RECORDS.

									
			

3618109.4  FINALDocument

10.4

LOAN AGREEMENT

THIS LOAN AGREEMENT (the “Loan Agreement” or “Agreement”) is made and entered into on October 29, 2020, by and between Greater Nevada Credit Union, a non-profit cooperative corporation organized under the laws of the State of Nevada, together with its successors and assigns, (the “Lender”), The Dixie Group, Inc., a Tennessee corporation, (“Dixie”) and TDG Operations, LLC, a Georgia limited liability company (“TDG” and together with The Dixie Group, Inc., individually and collectively, the “Borrower”), jointly and severally. Borrowers are referred to each as an “Obligor” and collectively as the “Obligors”, and Lender and Obligors are referred to each individually as a “Party” and collectively as the “Parties”.

Table of Contents

1.    Definitions.    2
2.    The Loan and Disbursements.    7
3.    Representations and Warranties.    13
4.    Covenants of Parties.    16
5.    Security Agreement and Collateral for the Loan.    26
6.    Events of Default.    27
7.    Lender’s Remedies    29
8.    Miscellaneous.    31

PRELIMINARY STATEMENT

WHEREAS, Borrower desires financing in the sum of $15,000,000.00 for the purpose of debt refinance, working capital, and to pay certain loan closing costs and other purposes.
WHEREAS, subject to the terms and conditions of this Loan Agreement and the other Loan Documents, Lender is willing to make the Loan to Borrower; and

    WHEREAS, Lender has applied for and obtained a commitment for a loan note guarantee from the United States Department of Agriculture under its Business & Industry CARES ACT loan program, for the issuance of a loan note guarantee for 90% of the principal amount of the Loan.

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10.4

Statement of Agreement

NOW, THEREFORE, in consideration of the foregoing premises, which are hereby affirmed by each Obligor to be true and correct, the mutual agreements of the Parties set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties do covenant and agree as follows:

1.    Definitions.  For the purposes of this Loan Agreement, capitalized terms used but not otherwise defined in this Loan Agreement shall have the meaning as follows:

1.1    “Affiliate(s)” means, with respect to the subject Person: (a) any Person directly or indirectly owning fifty-one percent (51%) or more of the membership or equity interests or rights in the subject Person or of which the subject Person owns fifty-one percent (51%) or more of such voting stock or rights; (b) any Person controlling or controlled by or under common control with the subject Person; (c) any officer, director or managing employee or agent of the subject Person; (d) any immediate family member of the subject Person; or (e) any Affiliate of such named Person.

1.2     “Assignment of Leases and Rents” means the assignment document by that name from Borrower for the benefit of Lender and dated the date hereof.

1.3    “Borrower” means any such party so identified in the opening paragraph of this Agreement, together with its successors and assigns.

1.4    “Business Day” means any day on which Lender is open for business.

1.5    [Reserved]

1.6    “Certificate of Title” shall have the meaning assigned thereto in the Code.

1.7    “Chattel Paper” shall have the meaning assigned thereto in the Code. 

1.8    “Change in Control” means that (a) Permitted Holders fail to own and control, directly or indirectly, the Stock of The Dixie Group, Inc. representing the right to vote 20% of the total voting rights for the election of members of its Board of directors, (b) and “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of the Stock of The Dixie Group, Inc. representing the right to vote 35% of the total voting rights for the election of members of the Board of Directors, (c) a majority of the members of the Board of Directors do not constitute Continuing Directors, or (d) The Dixie Group, Inc. fails to own and control, directly or indirectly, 100% of the Stock of TDG Operations, LLC other than by merger of TDG Operations, LLC into The Dixie Group, Inc.

1.9    “Closing” or “Closing Date” means the effective date of this Agreement as above first written.

2

10.4

1.10    “Code” means the Uniform Commercial Code as in effect under the laws of the State of Tennessee from time to time, as the same may be amended. 

1.11    “Collateral” means the Personal Property Collateral, the Real Property Collateral and such other security interests described in Section 5.1 hereof and in each of the Collateral Documents, together with any other personal or real Property otherwise pledged, transferred or assigned to Lender as security for the repayment and performance of the Obligations, or any portion thereof, whether occurring in the past, concurrently herewith or in the future.

1.12    “Collateral Documents” means the Future Advance Mortgages, Assignment of Rents and Leases, Security Agreement and Fixture Filing, the Security Agreement, the UCC Financing Statements and all other documents and agreements intended to pledge any of the Collateral as security for the Loan, together with all amendments and supplements to any of the forgoing agreements that have been entered into in accordance with the terms thereof.

1.13    “Continuing Directors” means (a) any member of the Board of Directors who was a director of The Dixie Group, Inc on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was approved, appointed or nominated for election to the Board of Directors by either the Permitted Holders or a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors of The Dixie Group, Inc. and whose initial assumption of office resulted from such contest or the settlement thereof.

1.14    “Covenant Compliance Certificate” means the Covenant Compliance Certificate as more particularly described on Schedule 4.1(b) hereof.

1.15    “Deposit Accounts” shall have the meaning assigned thereto in the Code.

1.16    Environmental Indemnity Agreement” means the agreement by that name dated as of the date hereof between Borrower and Lender, together with any amendments, supplements and modifications thereof.

1.17    “Environmental Laws” shall mean as defined in the Environmental Indemnity Agreement applicable state, federal or local environmental laws or regulations pertaining to the protection of human health and the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. § 9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 1101 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Hazardous Materials Transportation Act of 1974, 49 U.S.C. § 1801 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 300f et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Endangered Species Act, 16 U.S.C. 1531 et seq.; any laws regulating the use of biological agents or substances including medical or 
3

10.4

infectious wastes, each as amended or supplemented, and any applicable and analogous future or present local, state, and federal statutes, regulations, and ordinances promulgated pursuant thereto.

1.18    “Equipment” shall have the meaning assigned thereto in the Code.

1.19    “Event of Default” shall have the meaning set forth in Section 6.

1.20    “Financial Covenants” shall have the meaning set forth in Section 4.3.

1.21    “Financial Statements” means an income statement, balance sheet, profit and loss statement and statement of cash flows, and any other such statement relating the financial condition, present, past, or future, of such Person; all of the foregoing shall be accompanied by any supporting schedules, prepared in accordance with GAAP, and in a form and of substance satisfactory to Lender. 

1.22    “Fixtures” shall have the meaning assigned thereto in the Code.

1.23    “GAAP” means generally accepted accounting principles and practices as in effect from time to time and recognized as such by the American Institute of Certified Public Accountants, consistently applied.

1.24    “Governmental Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission, board, bureau, agency or instrumentality of political subdivision thereof, or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or pertaining to any government of any court, whether of the United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction of the District of Columbia.

1.25    “Indebtedness” means, collectively, all liabilities (including, without limitation, capital lease obligations) of the subject Person, whether owing by such Person alone or with one or more others in a joint, several, or joint and several capacity, whether now owing or hereafter arising, whether owing absolutely or contingently, whether created by loan, overdraft, guaranty of payment, or other contract or by quasi-contract or tort, statute or other operation of law or otherwise, including but not limited to the Obligation.

1.26    “Intercompany Transaction” means any Account, Chattel Paper, General Intangible, Instrument, Document or other Indebtedness or obligation arising from business done with or for, or Indebtedness owed between or among, the subject Person and any Subsidiary or Affiliate of such Person.
1.27    “Inventory” shall have the meaning assigned thereto in the Code.
1.28    “Lender” means such party so identified in the opening paragraph of this Agreement, together with its successors and assigns.
1.29    “Lien” includes: (i) any interest in property (real property, personal property or mixed, and tangible or intangible) securing an obligation owed to, or a claim by, a Person other 
4

10.4

than the owner of the property, whether such interest is based on law, statute, or contract, and including, but not limited to, the security interest, security title or lien arising from a security agreement, mortgage, mortgage, deed to secure debt, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes; and (ii) any covenants, conditions, restrictions, leases and other encumbrances affecting any property.

1.30    “Loan Documents” means this Loan Agreement, the Note, the Collateral Documents, the USDA Guarantee, any Covenant Compliance Certificate, any financing statements, collateral documents, consents and all other documents, instruments, certificates and agreements executed and/or delivered by any Obligor or any third party in favor of Lender in connection with the Loan or any Collateral, whether executed and/or delivered prior to the Closing Date, concurrently herewith or at any time hereafter; all of the foregoing together with any modifications, extensions, renewals, amendments or replacements thereof.

1.31    “Loan” means, the secured loan from Lender to Borrower in the principal amount of $15,000,000 as evidenced by the Note and made pursuant to the terms of this Loan Agreement and other Loan Documents, together with any other loan made by Lender, whether now existing or in the future, stating that it is governed by or subject to this Loan Agreement; all of the foregoing together with any modifications, extensions, renewals, amendments or replacements thereof.

1.32    “Material Adverse Change” means for the subject Person, the occurrence of events or circumstances which, if unchanged, would materially and adversely impair such Person’s: (i) financial condition, or (ii) ability to meet its financial obligations as they become due, or (iii) ability to conduct its business as conducted immediately prior to the occurrence of such events or circumstances. 

1.33    “Maturity Date” means October 29, 2030.

1.34    “Mortgage” means individually, and “Mortgages” means collectively, those certain Future Advance Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Financing Statements each executed by Borrower for the benefit of Lender of even date herewith pursuant to Section 5.1, granting mortgage liens on the real property located in the State of Alabama, as further described under the definition of “Real Property”, together with any amendments and supplements to any of the forgoing incorporated by reference herein.
1.35    “Obligations” means: (a) any and all principal and interest outstanding under the Note, together with any and all other Indebtedness, obligations, performance and liabilities of Borrower to Lender, or any affiliate of Lender, from time to time, including, without limitation, any and all Indebtedness, liabilities and obligations of Borrower which may at any time become due under this Loan Agreement and under any other Loan Document; all of the foregoing whether now existing or hereafter arising, whether advanced, now or in the future, paid down and re-advanced, whether related or unrelated to the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated, whether Borrower may be liable individually or jointly with others, whether obligated as guarantor, surety, accommodation party or otherwise, whether recovery upon such 
5

10.4

amounts may be or hereafter may become barred by any statute of limitations, whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable, and irrespective of the effect of any bankruptcy or insolvency action; (b) all renewals, extensions and modifications of any of the foregoing or any part thereof; and (c) any of the foregoing that arise after the filing of a petition by or against Borrower under the United States Bankruptcy Code, even if the obligations do not accrue because of the automatic stay under United States Bankruptcy Code Section 362 or otherwise.
1.36    “Obligor” and “Obligors” means as defined in the opening paragraph of this Agreement.
1.37    “Parties” means any such party identified in the caption of this Agreement.

1.38    “Permitted Holders” means Daniel K. Frierson, his family and their respective spouses, children, grandchildren and any trusts for the sole benefit of any of the foregoing Persons.

1.39    “Permitted Indebtedness” means as specified in Section 4.2(f) hereof.

1.40    “Permitted Liens” means those Liens specified in Section 4.2(g) hereof.

1.41    “Person” means an individual person, corporation, limited liability company, trust, joint venture, limited or general partnership, any government or agency or political subdivision of any government, or any other entity or organization.

    1.42    “Personal Property Collateral” shall have the meaning as set forth in Section 5.1(a).

1.43    “Project” means the refinancing of equipment hereunder pursuant to a CARES ACT loan from Lender to Borrower as evidenced by this Loan Agreement and that certain Promissory Note of even date herewith and secured by the Personal Property Collateral described in the Security Agreement and by the Real Property Collateral located at 209 Carpet Drive, Atmore, Alabama 36502 and the facility located at 1130 Lafayette Highway, Roanoke, Alabama 36274, as more particularly described in the Mortgages, together with all improvements, easements, rights of way and fixtures relating thereto, but excluding other equipment that may be affixed to the Real Property Collateral but is not included in the Personal Property Collateral.

1.44    [Reserved.] 

1.45    “Promissory Note” or “Note” means, the Promissory Note dated the date hereof and in the principal amount of $15,000,000.00, from Borrower to Lender, together with any modifications, extensions, renewals, amendments or replacements thereof. 

    1.46    “Real Property Collateral” means certain real property of Borrower, and other rights arising from or incidental thereto, as more particularly provided in the Mortgages or as otherwise pledged or assigned to Lender as security for the Obligations, or any portion thereof, whether occurring in the past, concurrently herewith or in the future, including, but not limited to 
6

10.4

the Project; all of the foregoing together with other interests arising from or related thereto, all improvements, buildings and Fixtures now or hereafter located thereon, together with all mineral and water rights, and any and all proceeds arising from any of the foregoing, and any appurtenances and other rights, rents, royalties, claims or benefits arising from or pertaining thereto.
    
1.47    “Security Agreement” means the Security Agreement executed by Borrower in favor of Lender pursuant to Section 5.1 hereof, in form satisfactory to Lender, and granting to Lender a first priority lien in and on the Personal Property Collateral.
1.48    “Servicer” means as defined in Section 2.11 hereof.
1.49    “Solvent” or “Solvency” mean, with respect to the subject Person, where such Person: (i) owns property (real property, personal property, or a combination thereof) whose aggregate fair saleable value is greater than the amount required to pay all of such Person’s Indebtedness (including contingent debt (it being understood that the amount of contingent liabilities at any time shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability)); (ii) is able to pay all of its Indebtedness as such Indebtedness comes due or matures; and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage.
1.50    “Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).
1.51    “Subsidiary” means any corporation, limited liability company, general or limited partnership or other entity or business enterprise in which subject Person, directly or indirectly, owns more than fifty percent (50%) of the stock, equity, capital or other interests (legal or beneficial) which is effectively controlled, directly or indirectly, by such Person.
1.52    “Substances” means as defined in the Environmental Indemnity Agreement, any hazardous or toxic substance or wastes as defined by or under any Environmental Laws, including, but not limited to, friable asbestos, PCBs in regulated concentrations, petroleum products, fertilizers, pesticides and any animal, agricultural or agricultural waste or byproducts, but excluding substances used in minimal amounts in the ordinary course of business to produce the Inventory in material compliance with applicable Environmental Laws.
1.53    “Tangible Net Worth” means total assets (excluding goodwill, patents, trademarks, trade names, organization expense, treasury stock, unamortized debt discount and expense, deferred research and development costs, deferred marketing expenses, and other like intangibles) less Total Liabilities.
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1.54    “Total Liabilities” means all of the subject Person’s liabilities, including accrued and deferred income taxes and any reserves against assets, determined in accordance with GAAP, consistently applied.
1.55    “USDA” means the United States Department of Agriculture and any successor federal agency.
1.56    “USDA Conditional Commitment” means the Conditional Commitment for Guarantee, Form RD 4279-3, issued to Lender on October 08, 2020, and all exhibits and amendments thereto, for the issuance of a Loan Note Guarantee for 90% of the principal amount of the Loan plus up to 90-days interest thereon.
1.57    “USDA Loan Note Guarantees” means the Loan Note Guarantees issued by the USDA to Lender in pursuant to the USDA Conditional Commitment, USDA Form 4279-5, and which are assigned to Notes numbered 2 through 10.  
1.58     [Reserved.]
2.    The Loan and Disbursements.  Lender hereby agrees to make or continue to make the Loan, as applicable, to Borrower on the terms and conditions set forth herein. The obligation of the Borrower to repay the Loan and the terms for repayment shall be evidenced by, and set forth in, the Note.
2.1    Loan.  Subject to the terms and conditions of this Loan Agreement and the other Loan Documents, Lender hereby agrees to make the Loan  to Borrower in the original principal amount of Fifteen Million and No/100 dollars ($15,000,000.00).  At Closing, the proceeds of the Loan will be used to pay for debt refinancing and to pay all costs of Closing pursuant to the closing settlement statement (the “Settlement Statement”) executed by Lender and Borrower at Closing with any undisbursed amount being available for draw by the Borrower on a monthly basis to meet their working capital needs. The obligation to repay the Loan, and the interest rates and terms of payment, are set forth in the Note and secured by the Mortgages and other Collateral Documents.  The Loan shall mature on the Maturity Date. 

2.2    Borrower’s Equity Contribution.  Borrower will demonstrate that it has a minimum of ten  percent (10%) investment in the Project at Loan Closing using one of the three following methods: 

a)    A Minimum ten percent (10%) Tangible Balance Sheet Equity at Closing.  “Tangible Balance Sheet Equity” must be met in the form of either cash or tangible earning assets contributed to the business and reflected on the business’ balance sheet.  Tangible Balance Sheet Equity will be determined by using a balance sheet of Borrower prepared in accordance with GAAP and will not include appraisal surplus, bargain purchase gains, goodwill and other intangible assets.  The balance sheet must take into account any new assets, the guaranteed loan amount, and any non-guaranteed debt as liabilities of the Borrower, regardless of whether the Loan has been fully disbursed or remain(s) to be 
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disbursed.  The balance sheet and the calculation of Tangible Balance Sheet Equity must be acceptable to Lender and the USDA;

b)    A cash ownership equity investment equal to at least ten percent (10%) of the Borrower’s total fixed assets before depreciation; or

c)    A minimum of ten percent (10%) investment to the Project.

2.3    [Reserved]

2.4    Loan Payments. All sums paid by Borrower on the Loan and hereunder shall be paid directly to Lender or its designated Servicer in immediately available funds no later than 2:00 p.m., central standard time, on the date on which payment is due, except if such date is not a Business Day such payment shall then be due on the first (1st) Business Day after such date, but interest shall continue to accrue until the date payment is received. Any payment received after 2:00 p.m., central standard time, shall be deemed to have been received on the immediately following Business Day for all purposes, including, without limitation, the accrual of interest on principal. Lender shall send Borrower statements of all amounts due hereunder, which statements shall be considered correct and conclusively binding on Borrower unless Borrower notifies Lender to the contrary within five (5) Business Days of its receipt of any statement which it deems to be incorrect. 
2.5    Purpose of Loan.  The purpose of the Loan is to provide the necessary financing to refinance  debt incurred after February 15, 2020 owed to Wells Fargo Capital Finance, LLC in the amount of Fourteen Million Four Hundred Thousand and No/100 Dollars ($14,400,000.00), as set forth in the Borrower’s application submitted to the USDA for issuance of the USDA Guarantee and the USDA Conditional Commitment (including any USDA approved amendments thereto).  Loan funds will be used for debt refinancing and to pay loan closing costs in accordance with the USDA Conditional Commitment.  Loan funds cannot be used for payment to any owner, partner, stockholder, beneficiary of Borrower, other Affiliates.

2.6    Set-Off. Lender may, in its sole and absolute discretion, charge against any Deposit Account of Borrower held by or under the control of Lender, or advance to Borrower and charge to the Loan, all or any part of any Obligation due from Borrower, including, without limitation: (i) interest, principal, fees and expenses due under the Note or as otherwise provided in this Agreement or the other Loan Documents; (ii) any overdraft amounts in any of Borrower’s Deposit Accounts; and (iii) any reasonable and customary costs incurred by Lender to protect or inspect the Collateral as provided in the Loan Documents.

2.7    Lender’s Right to Apply Payments.  Notwithstanding any provision herein to the contrary, if an Event of Default has occurred and is continuing, Borrower irrevocably waives the right to direct the application of any and all payments and collections at any time or times hereafter received by Lender from or on behalf of Borrower or from any of the Collateral, and Borrower does hereby irrevocably agree that Lender shall have the continuing exclusive right to apply such payments and collections received at any time or times hereafter by Lender or its agent against the Obligations, in the manner set forth in Section 7.2 hereof.
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2.8    Conditions Precedent to Closing of Loan. Lender will disburse the proceeds of the Loan to Borrower in accordance with the terms and conditions of this Loan Agreement if all matters, documents, papers and certificates required under this Loan Agreement and the other Loan Documents have been furnished to Lender’s satisfaction, including, without limitation, the following documents and matters, each in form and of substance satisfactory to Lender, due on or before the Closing Date, unless otherwise provided, PROVIDED, HOWEVER, that Lender shall have no obligation to advance any sum to Borrower if Borrower is not in full compliance with all covenants hereunder if an Event of Default has occurred and is continuing:

2.8(a)    Execution and Delivery of All Loan Documents. All Loan Documents have been duly executed and delivered, and any other such matters as set forth herein shall have been satisfied;

2.8(b)    Authority and Compliance Documents. Any documents Lender may require: (i) to establish the authority of any Obligor to enter into this Agreement and the other Loan Documents including, but not limited to, governing instruments, certificates of incumbency and resolutions of the appropriate governing body; and (ii) to establish the good standing of any Obligor with any relevant governing, taxing, or regulatory body, including, but not limited to, certificates of existence and tax compliance certificates; all of the foregoing in a form and of substance satisfactory to Lender and certified as to completeness and accuracy by the appropriate officer of such Obligor; 

2.8(c)    Title Insurance and Surveys.  In connection with the Real Property Collateral, Borrower shall cause to be delivered to Lender, at or prior to Closing, a pro forma ALTA title insurance policy in the name of Lender, together with any endorsements required by Lender, and containing no exceptions which are unacceptable to Lender, and endorsed as of the Closing Date and in amounts satisfactory to Lender; and (ii) an ALTA/NSPS Land Title Survey of the Real Property Collateral, certified to Lender, the USDA and the Title Insurance Company and dated within 30 days prior to Closing, in form and content satisfactory to Lender;

2.8(d)    Assurance of Lien Position. Assurances of Lender’s requisite lien position with respect to the Collateral, including, but not limited to, Lender’s receipt of consents and waivers from third parties claiming rights in the Collateral under statute, contract or otherwise;  

2.8(e)    Third-Party Lenders. Lender shall have assurances that Borrower does not have any other loan outstanding from any third-party lender or other Person except as expressly set forth on Schedule 2.8(e) attached hereto; 

2.8(f)    Financial Statements and Other Periodic Reports. Each Obligor’s interim Financial Statements and all other periodic reports described on Schedule 4.1(b) for the most recently ended reporting period closest to the Closing Date, and any other financial information with respect to any Obligor as Lender may reasonably require, including, but not limited to, the most recent annual Financial Statements of each Obligor; 

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2.8(g)    Payment of Fees and Closing Costs. Payment of all fees and closing costs required hereunder and under the other Loan Documents;

2.8(h)    [Reserved];   

2.8(i)     USDA Conditional Commitment and USDA Guarantee. (i) Borrower shall have satisfied all conditions precedent and all terms, conditions, covenants and requirements under the USDA Conditional Commitment to the satisfaction of Lender and the USDA and (ii) USDA shall have issued the USDA Guarantee in form and of substance satisfactory to Lender; 

2.8(j)    Opinion of Counsel. An opinion letter, or letters, each from an attorney acceptable to Lender, which shall provide, among other things requested by Lender, that: (i) Borrower is duly organized, validly existing and in good standing under the laws of the state of Borrower’s charter and any other state or jurisdiction where such Borrower regularly does business; (ii) each Obligor has the full power and authority to undertake the activities contemplated by the Loan Documents; (iii) all Loan Documents have been duly authorized, executed and delivered by each Obligor; (iv) the Collateral Documents create a lien on or security interest in the Collateral except when otherwise specified in such opinion letter; (v) the Loan Documents and their terms do not violate any laws including, without limitation, any usury laws or similar laws of the jurisdictions where any Obligor or any Collateral is located; (vi) each Loan Document constitutes the valid and legally binding obligation of Borrower and its enforceable in accordance with its terms under the laws of the State of Tennessee; and (vii) such other matters are Lender and its legal counsel may request;

2.8(k)    [Reserved]

2.8(l)    [Reserved]
2.8(m)    Borrower’s Equity Contribution.  Borrower will provide Lender with a evidence of Borrower’s Equity Contribution, as required under Section 2.2 above.  
2.8(o)    Permits and Licenses.  Borrower has acquired, or has the ability to acquire without undue delay, all required permits, pathways and registrations from the appropriate Governmental Authorities for the full operation of the Personal Property Collateral and the Real Property Collateral.;
2.8(p)    [Reserved]  
2.8(q)  Other Filings.  TDG shall have made such filings with the Nevada Secretary of State as needed to qualify to transact business in the State of Nevada; and
2.8 (r)     Other Matters.   Such other matters as Lender may reasonably require have been completed to its satisfaction.

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2.9    Fees and Deposits. In addition to any other payment or reimbursement obligations of any Obligor set forth in this Agreement and the other Loan Documents, Borrower shall pay the following fees and make the following deposits:   

2.9(a)    Closing Fee. Borrower shall pay or cause to be paid to Lender and other parties at Closing the following fees: (i) the loan origination fee to Lender in the amount of $150,000.00; (ii) the USDA fees for the issuance of the USDA Guarantee(s) equal to $270,00.00; and (iii) the fees and costs listed on the settlement statement executed by the Parties for Closing.

2.10    [Reserved]    

    2.11    Servicing the Loan and the Servicer.  Lender is granted the right to appoint a Person to assist Lender in servicing the Loan (the “Servicer”) and has appointed Greater Commercial Lending (“GCL”) to be the initial Servicer.  Lender may substitute any Servicer upon providing written notice thereof to Borrower.  Upon such appointment, the Servicer shall have full authority to act on Lender’s behalf on all matters applicable to the Loan, the Borrower, the Collateral and the Project, including, without limitation, the following:

2.11(a)     The Servicer shall have full authority to service the Loan and to take any and all actions on behalf of the Lender under this Loan Agreement and under all other Loan Documents with respect to the Loan, the Borrower, and the Project including, without limitation, administering the Loan, dispersing loan proceeds, approving the disbursement of funds from the Project Accounts, approving payment requests, holding required reserves and deposits, receiving and administering Loan payments and other payments under the Loan Documents, communicating with Borrower, requesting and receiving reports and information, administering inspections, providing notices to Borrower and any Persons, providing demands for payment under the Note, approving or declining the taking of actions, providing consents and approvals (or declinations) for waivers, amendments or other approvals, enforcing of all rights and remedies under the Loan Documents on Lender’s behalf, and any other activities relating to the Loan.  

2.11(b)     All reports, documents, notices, schedules, financial statements and other materials that are to be delivered to Lender under this Loan Agreement and the other Loan Documents are to be delivered to, and addressed to, the Servicer in addition to the Lender.  

2.11(c)     All payments under the Note, and payments of other Obligations due Lender, are to be made to Servicer, which, upon receipt in full by Servicer, shall be deemed made to and received by Lender.

2.11(d)     GCL shall be the initial Servicer of the Loan.  The appointment of Servicer, and its duties and authorizations, may be modified, transferred to another Person, or terminated by Lender, upon the delivery of written notice thereof from Lender to Borrower and the then current Servicer.  Such notice to be delivered at least ninety (90) days prior to the date of modification, transfer or termination, as the case may be, and such notice shall include the following information; the effective date of the change in Servicer and contact information for the Servicer, including contact person, phone number, email address and mailing address.
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10.4

3.    Representations and Warranties.   To induce Lender to make and/or continue to make the Loan, Borrower, as noted, makes the following representations and warranties which shall be true and correct at Closing and at all times during the term of this Agreement and so long as any Obligations remaining outstanding or unsatisfied:

3.1    Good Standing/Ownership. Borrower is duly organized, validly existing and in good standing under the laws of the State of its charter or organization as provided in the opening paragraph of this Agreement, and is duly authorized to transact business in each other state or jurisdiction in which it regularly does business, and has the requisite corporate, company or partnership power and authority, as applicable, to own its property and to carry on its business in each jurisdiction in which it regularly does business.

3.2    Authority and Compliance. (a) Each Obligor has full power and authority to execute and deliver this Agreement and the Loan Documents and to incur and perform the Obligations provided for herein and therein, all of which have been duly authorized by any and all proper and necessary corporate, company or partnership action, as applicable, of such Obligor; (b) each Obligor is in compliance with all laws and regulatory requirements to which it is subject; and (c) no consent or approval of any public authority or other third party is required as a condition to the validity of any of the Loan Documents with respect to any Obligor.

3.3    Binding Agreement. This Agreement and the other Loan Documents executed by each Obligor constitute valid and legally binding obligations of each such Obligor enforceable in accordance with their terms.

3.4    Litigation. Except as set forth on Schedule 3.4, there is no proceeding involving any Obligor pending or, to the knowledge of such Obligor, threatened, before any court or Governmental Authority, agency or arbitration authority.

3.5    No Conflicting Agreements. There is no charter, bylaw, operating agreement, stock provision, partnership agreement or other document, instrument or agreement pertaining to the organization, power, or authority of each Obligor, nor a provision of any existing material agreement, mortgage, indenture or contract binding on each Obligor or affecting such Obligor’s properties, which would conflict with or in any way prevent the execution, delivery, or carrying out of the terms of this Agreement and the other Loan Documents.

3.6    Ownership of Assets. Each Obligor has good title to its assets, including, without limitation, the Collateral, and such assets are free and clear of all judgments, liens, and encumbrances, except for the Permitted Liens. 

3.7    Taxes. All taxes and assessments due and payable by any Obligor have been paid or are being contested in good faith by appropriate proceedings, and each Obligor has filed all tax returns which it is required to file.

3.8    Environmental Matters.  Except as may be otherwise disclosed to and acknowledged by Lender in writing prior to Closing and otherwise as would not reasonably be 
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10.4

expected to cause a Material Adverse Change, any real property owned or leased by Borrower, including, without limitation, the Real Property Collateral (collectively, the “Subject Property”), (i) has never been and is not now being used in violation of Environmental Laws; (ii) there are no proceedings that have been commenced against such Obligor concerning any alleged violations of any Environmental Laws on or related to the Subject Property, nor does such Obligor have any reason to know of any; (iii) the Subject Property is free of any Substances and is not being used for the storage, treatment or disposal of any Substances, or if there are any Substances on the Real Property, such Obligor is maintaining them in accordance with all applicable laws; (iv) if such Obligor is transporting any Substances, such transportation is being conducted in compliance with all applicable laws; and (v) such Obligor has all required permits for the use and discharge of any Substances on the Real Property and all uses and discharges on such Subject Property are being made in compliance with such permits.

3.9    Compliance with Laws. Except as otherwise disclosed to and acknowledged by Lender prior to Closing, each Obligor is in material compliance with all federal, state, and local laws, regulations and governmental requirements applicable to it or to any of its property, business operations, employees, and transactions (including, but not limited to, any, Environmental Laws, OSHA, ERISA, Pension Benefit Guaranty Board, and laws regulating wetlands).

3.10    Accurate Financial Information and Periodic Reports. The financial information and other reports, including, without limitation, those periodic reports described on Schedule 4.1(b), furnished to Lender by each Obligor are complete and accurate in all material respects and will be complete and accurate in all mutual respects, and disclose, without limitation, any and all direct and contingent liabilities of such Obligor, and accurately reflect the matters addressed therein, including, without limitation, that no change has occurred in the financial condition of such Obligor since such information was furnished that would cause a Material Adverse Change with respect to such Obligor.

3.11    Solvency.  (i) Each Obligor is Solvent, and the incursion of the Loan, the pledge of the Collateral and the execution and performance of the Loan Documents will not cause any Obligor to no longer be Solvent; (ii) each Obligor has made adequate provision for the payment of all of its creditors; and (iii) no Obligor has entered into any transaction contemplated in this Agreement or any other Loan Document to provide preferential treatment to Lender or any other creditor of such Obligor in anticipation of seeking relief under federal or state bankruptcy or insolvency laws.   

3.12    ERISA. Except as otherwise disclosed to Lender in writing: (i) no employee benefit plan established or maintained, or to which contributions have been made, by Borrower, which is subject to Part 3 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), has an “accumulated funding deficiency” (as such term is defined in Section 302 of ERISA) as of the date hereof, or would have had such an accumulated funding deficiency on such day if such year were the first year of such plan to which such Part 3 applied; (ii) no “Prohibited Transaction” or “Reportable Event”, as defined under ERISA, occurred with respect to such employee benefit plan as of the date hereof; (iii) no material 
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10.4

liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any such plan; (iv) each such employee benefit plan (if any exists) complies and will comply fully with all applicable requirements of ERISA and of the Internal Revenue Code of 1986 as amended (“Internal Revenue Code”) and with all applicable rulings and regulations issued under the provisions of ERISA and the Internal Revenue Code; and (v) this Agreement and the consummation of the transactions contemplated herein will not involve any prohibited transaction within the scope of ERISA or Section 4975 of the Internal Revenue Code.

3.13    Ownership Structure and Subsidiaries. The ownership structure of Borrower is listed on Schedule 3.13 hereof.

3.14    Place of Business, Charter State and Residence. (a) The Dixie Group, Inc.’s chief executive office and principal place of business is located at 475 Reed Road, Dalton, GA 30722 and its state of incorporation is Tennessee; and (b) TDG Operation, LLC’s chief executive office and principal place of business is located at 475 Reed Road, Dalton, GA 30722 and its state of organization is Georgia. 

3.15    Location of Personal Property Collateral and Records. All tangible Personal Property Collateral, including, without limitation, any Equipment, and any records, documents or instruments relating to such Collateral, are located only at such locations as listed in Schedule 3.15 hereof.

3.16    [Reserved]

3.17    Labor Relations. Neither Obligor is a party to any collective bargaining agreement, except for the union agreement at its plant in Atmore, Alabama previously disclosed to Lender, and there are no material grievances, disputes or controversies with any union or any other organization of such Obligor’s employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization.
3.18    Trade Relations. There exists no actual or threatened termination, cancellation or limitation of, or any modification or change in, the business relationship between either Obligor and any customer or any group of customers whose purchases individually or in the aggregate are material to the business of such Obligor, or with any material supplier, franchisor or franchisee of any such Obligor and there exists no present condition or state of facts or circumstances which would materially affect or prevent any such Obligor from conducting its business after the consummation of the transactions contemplated by this Agreement in substantially the same manner in which it has heretofore been conducted.
3.19    Name; No Merger. Except as provided in Schedule 3.19, (a) neither Obligor has changed its name or been known by any other name within the last five (5) years; (b) no Obligor uses or has ever used any trade or fictitious name in the conduct of its business except as identified as a “d/b/a” in the caption of this Agreement; each such Obligor is the sole owner of all such names listed in the caption of this Agreement; and any and all business done, and all invoices issued, in such names are such Obligor’s sales, business and invoices; (c) any trade name of any Obligor permitted under (b) above, if any, represents a division or trading style of 
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10.4

such Obligor and not a separate Subsidiary or Affiliate or independent entity; and (d) no Obligor has been the surviving entity in a merger effected within the last five (5) years.
3.20    Partnerships; Contingent Liabilities. Except as indicated in the Financial Statements of Borrower delivered to Lender prior to Closing, neither Borrower are a partner or joint venturer with any other Person or a participant in any business enterprise for which it is generally liable, nor does either Borrower have any contingent liabilities of any description except for Permitted Indebtedness and as otherwise expressly disclosed in this Agreement.

3.21    Regulation U.  No proceeds from the Loan shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock in violation of the provisions of Regulation U of the Board of Governors of the Federal Reserve System.

3.22    Commercial Loan. The Loan is not a “consumer transaction”, as defined in the Code or any other applicable law, rule or regulation, and none of the Collateral has been, is currently or will be future purchased or held primarily for personal, family or household purposes.

3.23    Racketeering. No Obligor is engaged in any activity that might constitute a pattern of racketeering activity or in any other conduct that might subject all or a material portion of such Obligor’s assets to forfeiture. 

3.24    Equal Opportunity and ADA.  (a)    Equal Opportunity. For all construction contracts in excess of $10,000, the Borrower will ensure that the General Contractor complies with Executive Order 11246, “Equal Employment Opportunity,” as amended by Executive Order 11375, and as supplemented by applicable Department of Labor regulations (41 CFR part 60). (b) Americans with Disabilities Act (ADA): If the construction of or addition to the Project accommodates the public and is a commercial facility, as defined by the ADA, the Project will comply with the ADA.  

4.    Covenants of Parties.

4.1    Affirmative Covenants. During the term of this Agreement and so long as any Obligations remaining outstanding or unsatisfied, each Obligor covenants and agrees as follows:

4.1(a)    Continuation of Pre-Closing Conditions, Representations and Warranties. All conditions precedent to the making of the Loan shall remain satisfied at all times in all material respects during the term of this Agreement, and all representations and warranties made by each Obligor in the Loan Documents shall be deemed to be made at all times during the term of this Agreement.

4.1(b)    Financial Statements and Periodic Reports. Each Obligor, as noted, shall furnish or cause to be furnished to Lender such information reports and financial statements as identified on Schedule 4.1(b) attached hereto and made a part hereof, on the dates set forth therein or on a more frequent basis if reasonably requested by Lender.

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4.1(c)     Insurance. In addition to any other insurance requirements under any other Loan Documents: (i) each Obligor shall maintain with financially sound and reputable insurance companies insurance of the kinds, covering the risks, and in the amounts reasonably comparable to those usually carried by similar entities and individuals and sufficient to avoid the application of any co-insurance provisions, such insurance shall include, but not be limited to, liability insurance, flood insurance (to the extent required by Federal law or regulation including, without limitation, the Flood Disaster Protection Act of 1973), comprehensive hazard/casualty insurance on buildings, business theft (fidelity bond), contents and equipment and such coverage on the Collateral in amounts satisfactory to Lender; and (ii) Borrower shall exhibit or deliver certificates of such policies of insurance to Lender and provide appropriate clauses in the insurance policies indicating Lender’s status as co-insured mortgagee, additional insured, or lender loss payee, as applicable, as to the Collateral, as its interest may appear; PROVIDED, FURTHER, that Borrower hereby assigns to Lender the right, and further designates Lender as its lawful attorney-in-fact, to collect and receive any indemnity payment otherwise owed to such Obligor under any policy of insurance, regardless of whether Lender is named in such policy as a person entitled to collect upon the same.

4.1(d)    Audits, Inspections and Appraisals. (i) Each Obligor shall permit the Lender’s officers or other representatives to visit and inspect during business hours any of the locations of any Obligor, the Project or the location of any Collateral (provided that, while an Event of Default exists, Lender may make such visits and inspections at any time without prior notice) to examine and audit all of such Obligor’s Collateral, books of account, financial statements and ledgers, digital and printed records, contracts, reports, writings, Certificates of Title and other documents, papers and statements, to make copies and extracts therefrom and to discuss its affairs, finances and accounts with its officers, employees and independent accountants; and (ii) Lender may, on the occurrence of an Event of Default and at Borrower’s sole cost and expense, require appraisals for all or some portion of the Collateral at any time, and such appraisals shall be done by an appraiser reasonably acceptable to Lender and shall be in form, substance and amount satisfactory to Lender; (iii) each Obligor, as applicable, assigns to Lender all right, title and interest of such Obligor in and to any leases or other agreements between any such Obligor and various persons having in their possession any or all of the Collateral, and such persons may rely upon this Agreement or a copy hereof as authority of Lender for entry upon said premises to the same extent and for the same purpose as such Obligor may enter thereupon; and (iv) the results of any of foregoing examinations, audits, appraisals, inspections and evaluations described in Subsections (i), (ii) and (iii) of this Section, and any reports produced in connection therewith, shall remain the sole and exclusive property of Lender, and no Obligor shall be entitled to inspect or review same; PROVIDED, HOWEVER, that each such Obligor agrees to remain bound to the party having possession of the Collateral for the performance of all obligations with respect to such Collateral, and the entry of Lender under the terms of this Agreement upon such premises shall not constitute an acceptance by Lender of any obligation of any such Obligor to any person having possession of such Collateral.

4.1(e)    Maintenance, Remediation and Notification of Environmental Claims. Borrower shall: (i) maintain any Substances brought upon the Real Property Collateral in accordance with all applicable laws and promptly take all action that is needed to abate any 
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10.4

material environmental risk or comply with any Environmental Laws on or related to the Real Property Collateral at its sole expense, subject to such legal and/or equitable defenses available to Borrower; (ii) promptly, upon Borrower having actual knowledge thereof, inform Lender in writing of any environmental risk or violation of any Environmental Laws on or related to the Real Property Collateral or the commencement of any proceeding against it or receipt of any notices by it concerning any alleged violation of Environmental Laws on or related to the Real Property and which would likely result in a Material Adverse Change; (iii) at Lender’s reasonable request or where notice to Lender is required under Subsection (v) hereof, obtain additional environmental audits covering any Real Property Collateral from experts reasonably acceptable to Lender; (iv) permit Lender, or any person or firm designated by Lender, to inspect the Real Property Collateral on reasonable notice, not less than two (2) business days, and during normal business hours; and (v) upon Borrower having actual knowledge thereof, immediately notify Lender in writing of: (A) any and all enforcement, cleanup, remedial, removal, or other governmental or regulatory actions instituted, completed, or threatened pursuant to any applicable federal, state, or local laws, ordinances or regulations relating to any Substances affecting its business operations; and (B) all claims made or threatened by any third party against it relating to damages, contributions, cost recovery, compensation, loss or injury resulting from any Substances and which would likely result in a Material Adverse Change. 

4.1(f)     Environmental Indemnity. Borrower shall comply with all of the terms, provisions and indemnifications set forth in the Environmental Indemnity Agreement.

4.1(g)    Purpose of Loan. Borrower shall use the proceeds of the Loan only for the purpose or purposes represented to Lender in Section 2.5.

4.1(h) Notice of Litigation. Borrower shall promptly, and in any event, no later than ten (10) days after being served or otherwise receiving notice, notify Lender in the event that any legal action is filed against such Obligor, excepting workers’ compensation claims and matters for which the damages sought are less than Five Million and No/100 Dollars ($5,000,000.00) (“Litigation Threshold”) in the aggregate. 

4.1(i)    Free of Liens. Borrower shall maintain, at all times, the Collateral free of any Lien or encumbrance other than Permitted Liens.

4.1(j)    Compliance with Laws.  Borrower shall comply with all applicable federal, state, and local laws and regulations including, but not limited to, consumer protection laws, Food Safety Laws, Environmental Laws, OSHA, ERISA, and the Pension Benefit Guaranty Board.

4.1(k)    Payment of Obligations. Borrower shall duly and punctually pay all Obligations, including, without limitation, principal and interest on the Note, and each Obligor shall duly and punctually pay all other Indebtedness of such Obligor to any other Person other than Lender, it being understood, however, that this Section shall not be deemed to permit any Indebtedness other than Permitted Indebtedness. 

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10.4

4.1(l)    Maintenance of Properties. Borrower shall: (i) keep all its properties, including, without limitation, the Collateral, in good repair and in good working order and condition, reasonable wear and tear excepted, and from time to time make all needed and proper repairs, renewals, replacements, additions, and improvements thereto; (ii) comply with the provisions of all leases to which it is a party or under which it occupies property so as to prevent any loss or forfeiture thereof or thereunder; and (iii) preserve and maintain all licenses, trademarks, privileges, permits, franchises, certificates and the like necessary for the operation of the Personal Property Collateral at its intended capacity.

4.1(m)    Notice to Lender. Borrower shall immediately notify Lender: (i) on the occurrence of any Event of Default; (ii) of any fact, condition or event, that would be giving of notice or passage of time, or both, could become an Event of Default; (iii) of any event causing a material loss or depreciation in the value of the Collateral and the amount of such loss or depreciation; (iv) on the failure of any Obligor to observe its undertakings hereunder; (v) on the occurrence of a Material Adverse Change with respect to any Obligor.

4.1(n)    Landlord and Storage Agreements. Borrower shall provide Lender with copies of all agreements between Borrower and any landlord, custodian or warehouseman which owns any premises at which any Collateral may reside, from time to time and shall promptly deliver to Lender any warehouse receipts, if applicable, and obtain lien waivers and subordinations as Lender may require covering any of the Collateral.

4.1(o)    [Reserved]

 4.1(p)    Qualified in Nevada.  TDG is duly qualified to transact business in the State of Nevada as a foreign limited liability company, and will remain duly qualified to transact business in the State of Nevada for the term of the Loan. 

4.1(q)    Continuing Guaranty.  If Borrower acquires, forms or purchases any other entity, such entity shall, without any further action by the Parties, unconditionally guarantee the repayment of all of the Obligations and waive any right to notice or demand and shall further execute and deliver to Lender an unlimited and continuing guaranty evidencing same; it being understood, however, that this Section shall not be deemed to permit any mergers or acquisitions or creation of any Subsidiary in violation of the provisions of this Agreement.

4.1(r)    Equipment Covered by Certificates of Title. If any Collateral is subject to or covered by any Certificate of Title statute, Borrower shall note Lender’s security interest thereon, and, on Lender’s request, promptly deliver each original copy of any such Certificate of Title covering such Collateral to Lender, or its designee, to be held until satisfaction in full of all of the Obligations, and Borrower shall take any steps necessary to perfect Lender’s security interest in such Collateral and shall further authorize Lender to do the same; PROVIDED, FURTHER, that Borrower shall not apply for any replacement Certificate of Title regarding any Collateral nor take any other steps or actions that may otherwise impair Lender’s security interest in the same. 

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10.4

4.1(s)    Commercial Tort Claims. Borrower shall promptly notify Lender should Borrower obtain any “Commercial Tort Claim” (as defined in the Code) relative to any of the Collateral and take such steps as shall be requested by Lender to further evidence and perfect Lender’s security interest in the same. 

    4.1(t)    [Reserved]
    4.1(u)    [Reserved]
4.1(v)    Continuing Enforceability Covenants.   

(i)    Continuing Enforceability of Loan Documents. The terms and conditions of each presently existing Loan Document shall remain in full force and effect and the transactions contemplated in this Agreement and the other Loan Documents executed concurrently herewith shall not be construed as a novation, waiver or release of the repayment or performance of any indebtedness, obligation or liability of any Obligor arising under any Loan Document, as such may have been modified, amended, restated and renewed from time to time.

(ii)    Continuing Priority of Liens and Security Interests. Each Obligor acknowledges and agrees that this Agreement, together with any transactions contemplated herein or occurring contemporaneously herewith, shall not disturb the existing priority of any Loan Document, or any lien or security interest in favor of Lender granted or created thereunder, and any such Loan Document, lien or security interest shall retain the same priority and effective date as originally provided in any such Loan Document.

(iii)    Cross-Collateralization of the Loan. Each Obligor hereby acknowledges and agrees that the repayment of the Note, whether presently outstanding, executed concurrently herewith or arising at any time hereafter, together with the repayment and performance of any and all other indebtedness, obligations and liabilities of Borrower to Lender, including, without limitation, the Obligations, arising under any Loan Document or any other agreement, document or instrument executed in favor of Lender, shall be secured with equal force and effect by the Collateral, as may be modified from time to time, and any and all security documents, instruments and agreements executed with respect thereto, whether or not any such indebtedness, obligation or liability is specifically referenced or identified in any such document, instrument or agreement. 

(iv)    [Reserved]      

(v)    Release of Claims. Each Obligor acknowledges and agrees that no Obligor has any claim, defense, claim of offset or cause of action of any nature against Lender, its successors, assigns, representatives or officers, which would or will impair, reduce or diminish such Obligor’s liability to Lender under the Loan and any other Loan Documents or otherwise subject Lender, its successors, assigns, representatives or officers, to any direct or indirect liability, including, without limitation, any claim based on any act or omission of Lender or any officer, agent or representative of Lender related to the Loan or the administration of the Loan or any claim arising by reason or on account of or related directly or indirectly to any 
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10.4

contractual relationship or transaction between any Obligor and Lender, its successors, assigns, agents, representatives or officers; PROVIDED, FURTHER, THAT, TO THE EXTENT THAT ANY SUCH CLAIM, DEFENSE, CLAIM OF OFFSET OR CAUSE OF ACTION OF ANY NATURE EXISTS AS OF THE DATE HEREOF, THEY ARE HEREBY WAIVED, RELEASED AND DISCHARGED BY EACH OBLIGOR AS AGAINST LENDER, ITS SUCCESSORS, ASSIGNS, REPRESENTATIVES AND OFFICERS. 

4.1(w)    USDA Guarantee Requirements. So long as any of the Obligations covered by any USDA Guarantee remains outstanding, each Obligor shall comply with all requirements, terms and conditions set forth therein and under the USDA Conditional Commitment, and each Obligor hereby acknowledges and agrees that it is has received, read and understands the terms and conditions thereof. In the event of any inconsistency between the terms, conditions and requirements of the USDA Conditional Commitment and this Agreement or any other Loan Document the terms of USDA Conditional Commitment shall control, provided that any provision of any Loan Document which imposes additional obligations upon any Obligor or provides additional rights or remedies to Lender shall be deemed to be supplemental to, and not inconsistent with, the USDA Conditional Commitment and provided, further, that any pre-condition, continuing obligation or requirement applicable to Lender in favor of the USDA under the USDA Conditional Commitment shall be construed to be an obligation and requirement of each Obligor and a condition precedent to Lender’s obligations hereunder, all at Borrower’s sole cost and expense.  Additionally, USDA concurrence is required for any servicing action in accordance with regulations at 7 CFR 4279 subpart C, 7 CFR part 4287 subpart D, and servicing requirements identified in Form RD 4279-4, “Lender’s Agreement” will apply once the USDA RD Form 4279-5 Loan Note Guarantee is issued.      

    4.2    Negative Covenants. During the term of this Agreement and so long as any Obligations remaining outstanding or unsatisfied, each Obligor, as noted, further covenants and agrees as follows:

4.2 (a)    Merger/Changes.  Borrower shall not: (i) enter into any merger, reorganization or consolidation; (ii) make any substantial change in the basic type of business now conducted by it; (iii) undergo any Change of Control; or (iv) change or otherwise modify its accounting methods, practices or fiscal reporting period for accounting or tax purposes, in each case without the prior consent of the Lender.

4.2 (b)    Name; Location of Collateral. No Obligor shall without the prior written approval from Lender: (i) change the locations at which the Collateral or any books, records, contracts, writings, documents of title, or other documents, agreements or instruments related thereto are located, stored or maintained, (ii) adopt or make use of any fictitious or trade name not disclosed elsewhere in this Agreement; or (iii) change its name, identity or corporate structure or its state of charter or organization.

4.2 (c)    Judgments, etc. No Obligor shall allow any judgment or judgments for the payment of money in excess of the aggregate sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) (the “Judgment Threshold”), excluding amounts with respect to which an insurance carrier admits full coverage (except for applicable deductibles), to remain 
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10.4

undischarged, un-vacated, un-bonded in full or un-stayed for a period of sixty (60) days, unless execution thereof is stayed by a court of competent jurisdiction.  

4.2 (d)    Sale of Collateral. Borrower shall not sell, transfer, assign, lease, pledge, abandon or otherwise dispose of any of the Collateral or any interest therein, without prior consent of the Lender and USDA (as may be required), except for machinery or equipment which has become obsolete and for which suitable replacement equipment, of equal value or usage, shall have been procured which becomes Collateral for the Loan.

        4.2 (e)    Loan to and from Members, Stockholders, Affiliates and Others.  Except for Permitted Indebtedness, Borrower shall not make any Loan, advances, extensions of credit to, or guaranty, co-sign or become surety for, any other Person, including, without limitation, loans or advances to Affiliates.  Loans/advances to stockholders, partners, members, owners, officers, or other Affiliates are prohibited.  Except as provided herein, loans from stockholders, owners, officers or Affiliates must be subordinated to the Loan or converted to stock or partnership interests, and no payments are to be made on these debts unless (i) the Loan is current and in good standing and (ii) Lender consents to such payment. (iii) the payment will not cause Borrower to be in non-compliance with any of the financial and other covenants under this Loan Agreement or result in the occurrence of an Event of Default, and (iv) Lender has given its prior consent to such payments.

4.2 (f)    Indebtedness/Guarantees.   Borrower shall not create, incur, assume or suffer to exist any Indebtedness or obligation for money borrowed, or guarantee, endorse, or otherwise be or become contingently liable on any debt or obligations to any Person without first obtaining the written consent of Lender, except for the following (“Permitted Indebtedness”) (i) the Indebtedness as set forth on Schedule 4.2(f) attached hereto and incorporated herein by reference and (ii) in addition to any other Indebtedness permitted under this Section, obligations to any Person (including, without limitation, to any Affiliate) other than the Lender not exceeding Five Million and 00/100 Dollars ($5,000,000.00) in any calendar year; and

4.2 (g)    Liens and Security Interests. Borrower shall not create, incur, assume, or suffer to exist any mortgage, security deed, mortgage, security interest, pledge, encumbrance, Lien or charge of any kind (including charges on property purchased under conditional sales or other title-retention agreements) on the Collateral, now owned or hereafter acquired, except for (collectively, “Permitted Liens”) (i) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings and against which reserves deemed adequate by Lender have been set up (excluding any Lien imposed pursuant to any of the provisions of ERISA); (ii) Liens arising in the ordinary course of business (such as (A) Liens of carriers, warehousemen, mechanics and materialmen and other similar liens imposed by applicable Law and (B) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of governmentally imposed social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations for sums not overdue or being diligently contested in good faith by appropriate proceedings and not involving any advances or borrowed money or the deferred purchase price of property or services and, in each case, for which Borrower maintain adequate 
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10.4

reserves in accordance with GAAP and the execution or other enforcement of which is effectively stayed; (iii) subject to the limitation set forth in Section 4.2(f), Liens arising in connection with capital leases or operating leases (and attaching only to the property being leased) or Liens that constitute purchase money security interests on any property securing permitted debt incurred for the purpose of financing all or any part of the cost of acquiring such property, provided that any such purchase money security interest attaches to such property within twenty (20) days after the acquisition of such property and attaches solely to the property so acquired; (v) Liens arising under the Loan Documents; and (vi) (a) easements, rights of way, zoning ordinances and other similar encumbrances affecting the Real Property Collateral that do not create a Material Adverse Change on the value or use of the Real Property Collateral or in the operations as expected to be operated thereon and (b) liens on the Real Property Collateral to secure Borrower’s loan from AmeriState Bank in the principal amount of $10,000,000 dated October 26, 2020 ((a) and (b) collectively, “Permitted Real Estate Encumbrances”), provided however, that Borrower shall obtain the subordination of any easement or right of way referred to in (vi)(a) to Lender’s Mortgage upon request of Lender.

4.2 (h)    Affiliate Transactions. Borrower shall not purchase, finance the purchase of, acquire or lease property from, or sell, transfer or lease any assets or property to, any Affiliate of Borrower except in the ordinary course of Borrower’s business, under terms and conditions equivalent to or better than the terms and conditions which would apply if disinterested parties were involved and otherwise in accordance with the Loan Documents.

4.2 (i)    Security Instruments and Financing Statements. Borrower shall not permit any financing statement, mortgage, mortgage, deed to secure debt or other security instrument, filing or document, excepting filings related to Permitted Liens, to be on file with respect to any of the Collateral.

4.2 (j)    Acquisitions. Borrower shall not purchase or acquire the obligations, assets, equity, stock or any other interest of any Person, except direct obligations of the United States of America or certificates of deposit or other investments issued by Lender (if offered) and except for up to an annual aggregate of $5,000,000 for fixed assets, without the prior consent of Lender.

4.2 (k)    Restrictions of Distributions and Compensation. 

    (i) Compensation of officers and directors will be limited to an amount that, when taken, will not adversely affect the repayment ability of the Borrowers. This amount shall be set annually by shareholder vote on the Borrower’s annual compensation plan.

    (ii) Dividend payments will be limited to an amount that, when taken, will not adversely affect the ability of the Borrowers to pay all Obligations when due. No dividend payments will be made unless (1) an after-tax profit was made in the preceding fiscal year, (2) the Borrower is and will remain in compliance with covenants of this Loan Agreement and the Conditional Commitment, and (3) all Borrower Obligations are paid to a current status. This is not intended to apply to dividend payments to cover personal tax liability resulting from profitability of Borrower’s ordinary business.
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4.2 (l)    Lease Transactions. Borrower shall not enter into any sale and lease-back arrangement on any of the Collateral, either directly or indirectly, without the prior consent of Lender which shall not be unreasonably withheld or delayed.

4.2 (m)    Amendments. Borrower shall not amend any instrument evidencing a Permitted Lien or the indebtedness secured thereby. 

4.2 (n)    [Reserved] 

4.2 (o)    Adverse Transactions. Obligors shall not enter into any transaction, or permit any Subsidiary to enter into any transaction, which does or may materially and adversely affect the Collateral or Borrower’s ability to repay the Obligations.

4.2 (p)    Subsidiary Divestiture. No Obligor shall transfer, sell, pledge, encumber or otherwise assign any shares of stock or other interest in any Subsidiary or permit any Subsidiary to sell or otherwise dispose of substantially all of its assets without the prior written consent of Lender.

4.2 (q)    Partnerships or Joint Ventures. Other than those existing and disclosed to Lender in writing before the Closing Date, Borrower shall not become or agree to become a general or limited partner in any general or limited partnership or party to any joint venture.

4.2 (r)    Capital Expenditures. The Borrower will not invest in additional fixed asset purchases (in addition to the fixed assets financed by the Lender) in excess of $5,000,000 in an annual aggregate amount, without Lender approval. The Borrower will not lease, sell, transfer, or otherwise encumber equipment or fixed assets without the concurrence of the Lender (except for replacement of equipment the ordinary course of business). The disposition of fixed assets included as Collateral for the Loan must have the prior concurrence of Lender and the USDA.

4.2 (s)     [Reserved]

4.2(t)    Sale of Business.  Borrower shall not enter into any binding agreement for the sale of its business or a material portion thereof, or sell its business or a material portion thereof, without first obtaining the written concurrence of Lender, which will not be unreasonably withheld.

4.3    Financial Covenants. During the term of this Agreement and so long as any Obligations remaining outstanding or unsatisfied, Borrower shall at all times maintain the following (collectively, the “Financial Covenants”):

4.3 (a)    Maximum Debt to Net Worth.   Borrower shall maintain a ratio of (i) Indebtedness to (ii) Tangible Net Worth of less than 9.0 to 1.0 measured annually, beginning at the end of the second year after Closing for the term of the Loan, and based on year-end CPA-audited financial statements; 

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10.4

4.3 (b)    Debt Service Coverage Ratio:  Borrower’s Debt Service Coverage Ratio shall not fall below 1.20 to 1.00 beginning the second full year of operations of the Project, to be measured as of the last day of each fiscal year beginning fiscal year end 2021, annually for the term of the Loan and based on year-end CPA-reviewed financial statements. “Debt Service Coverage Ratio” shall be measured by EBITDA divided by aggregate annualized business debt service.    
4.3 (c) Current Ratio:  Borrower will at all times maintain a Current Ratio of not less than 1:1, with “Current Ratio” being the ratio of Current Assets to Current Liabilities. 
4.3 (d)    Global Definitions. For purposes of this Section 4.3,  unless otherwise defined, capitalized terms shall be as defined or determined under GAAP. 

4.3 (e)    Testing Frequency and Calculations. The Financial Covenants shall be tested annually and calculated based upon the Financial Statements of the Borrower, prepared and delivered to Lender in accordance with Schedule 4.1(b).  

4.3 (f)    Other Conditions. Unless otherwise agreed to by Lender in writing or as otherwise set forth in this Section 4.3, Borrower’s compliance with the Financial Covenants shall be determined after eliminations for Intercompany Transactions and reported on the Financial Statements and Covenant Compliance Certificate prepared in accordance with Schedule 4.1(b).

4.4        [Reserved] 

4.5    Accelerating Transfers

    4.5 (a)  “Accelerating Transfer” means (i) any sale, contract to sell, conveyance, encumbrance, or other transfer, whether voluntary, involuntary, by operation of law or otherwise, of all or any material part of the Property or any interest in it or (ii) a Change in Control occurs, in each case without Borrower providing Lender with at least thirty (30) days written notice thereof and Lender providing its written consent to such action in its sole and absolute discretion. 

    4.5 (b)      Borrower agrees that Borrower shall not make any Accelerating Transfer, unless the transfer is preceded by Lender’s express written consent to the particular transaction and transferee.  Lender may withhold such consent in its sole discretion.  If any Accelerating Transfer occurs, Lender in its sole discretion may declare all of the Loan to be immediately due and payable, and Lender may invoke any rights and remedies provided by Section 7 of this Agreement. 
5.    Security Agreement and Collateral for the Loan.

5.1    Security Agreement and Collateral.  In addition to the pledges and liens set forth in, or created by, the Security Agreement, the Mortgage and under or in accordance with the other terms of this Loan Agreement, Borrower pledges and assigns to Lender the following property as collateral security for the repayment and performance of all or some portion of the 
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10.4

Obligations and other covenants and agreements herein and in the other Loan Documents, as herein provided:

5.1 (a)    Personal Property Collateral. Borrower hereby grants to Lender a first-priority perfected security interest in the following types of property, rights and interests (with all capitalized terms as defined in the Code) as collateral security for the repayment, satisfaction and performance in full of all of the Obligations and to secure Borrower’s performance of and compliance with each and every covenant, agreement, representation, warranty and indemnity under this Agreement and under each and every other Loan Document (collectively, the “Personal Property Collateral”):

(i)    All Machinery and Equipment more specifically described in the “Security Agreement” between Borrower and Lender dated evenly herewith; and  

(ii)    All of the foregoing whether now owned or hereafter acquired and wherever located, together with any proceeds thereof, and any appurtenances, accessions and other rights, claims or benefits arising from or pertaining thereto, including, but not limited to, any claims to any of the foregoing property, and any claims Borrower has against any third parties, for the damage to or destruction of any or all portions of such property and or for proceeds payable under, or unearned premiums with respect to, policies of insurance.

5.1 (b)    Real Property Collateral. As collateral security for the repayment, satisfaction and performance in full of all of the Obligations and to secure Borrower’s performance of and compliance with each and every covenant, agreement, representation, warranty and indemnity under this Agreement and under each and every other Loan Document, pursuant to the Mortgages the Borrower grants to Lender a Lien on the Real Property Collateral, including the land, structures, improvements and fixtures, and in and to all leases, all as more particularly described in Schedule 5.1 subject only to the Permitted Liens. 

5.2    [Reserved]

5.3    Additional Security Covenants. Borrower agrees to execute and deliver to Lender at Closing and at any time thereafter so long as any Obligations remain outstanding, any security documents, instruments or other agreements as reasonably requested by Lender and related to the Collateral, or any portion thereof, and further authorizes Lender to file any such documents, instruments or other agreements, or other proper notice of Lender’s security interest, and any continuation statements or amendments thereto, with any filing authority that Lender deems appropriate. PROVIDED, FURTHER, that each Obligor agrees that to the extent accepted by the applicable filing authority, a carbon, photographic or other reproduction of this Agreement, or any memorandum thereof, with respect to the Collateral shall be sufficient as a financing statement and may be filed as such by Lender, and that Lender may execute any financing statement filed pursuant to this Section either in its own name or in that of any applicable Obligor.

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10.4

5.4    Term. Notwithstanding anything set forth herein to the contrary, Lender’s security interests in the Collateral as provided in this Section 5 and as otherwise provided in this Loan Agreement, the Note and the other Loan Documents, shall continue for as long as any Obligor is indebted to Lender or other person pursuant to this Loan Agreement, the Note or other Loan Documents.

6.    Events of Default.   The occurrence of any of the following shall constitute an event of default  (each an “Event of Default”):

6.1    Payment. Any payment of principal, interest, or other sum owed to Lender under the Note, under this Loan Agreement or under any of the other Loan Documents, or otherwise due from any Obligor to Lender, is not when due and such delinquency has not been cured within fifteen (15) days, whether scheduled payments, at stated maturity, upon acceleration, or otherwise. 

6.2    Additional Defaults. (i) Any provision or covenant of any Loan Document is breached; or (ii) any warranty, representation, or statement made or furnished to Lender by any Obligor in writing in connection with the Loan and the Loan Documents, including any warranty, representation, or statement included in any Obligor’s Periodic Reports under Schedule 4.1(b), or to induce Lender to make or continue to make the Loan, is or becomes untrue or misleading in any material respect or (iii) any default or Event of Default under any of the Loan Documents occurs that, in the case of each of clauses (i), (ii) and (iii) is not cured within the applicable cure period described in Section 7.1 below, if any; 

6.3    Cross-Default. (i) A default under one or more other Obligations of Lender to Borrower which is not cured within any applicable cure period shall be an Event of Default hereunder; (ii) any default by Borrower that occurs under any other agreement with Lender other than the Loan Documents, whether now existing or hereafter arising, including, without limitation, a default under any agreement that evidences any Indebtedness, other than the Loan, owed by Borrower to Lender; or (iii) any default under any loan, credit or financing agreement by Borrower, whether now existing or hereafter arising, which is not cured within the applicable cure period, if any; 

6.4    Dissolution, Insolvency or Bankruptcy. (i) The dissolution, termination of existence, liquidation or insolvency of Borrower; (ii) the appointment of a receiver, custodian, trustee, executor, administrator, successor, personal representative, special administrator, guardian, attorney-in-fact, trustee, committee, conservator, or other fiduciary or agent over any part of the property of Borrower; (iii) any assignment for the benefit of creditors of Borrower; (iv) commencement of any proceeding by Borrower under state or federal bankruptcy laws or other insolvency laws; (v) the commencement of any involuntary proceeding against Borrower under state or federal bankruptcy laws or other insolvency laws, which is not dismissed within sixty (60) days after such commencement; or (vi) any merger, consolidation or sale of Borrower’s other than as permitted hereunder; 

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10.4

6.5    Material Adverse Changes. Any Material Adverse Change occurs that materially adversely affects the ability of any Obligor to meet its obligations under this Loan Agreement, the Note or the other Loan Documents; 

6.6    Uninsured Losses; Unauthorized Dispositions. Any material loss, theft, damage or destruction not fully covered by insurance (as required by this Loan Agreement and subject to such deductibles as Lender shall have agreed to in writing), or sale, lease or encumbrance of any of the Collateral or the making of any levy, seizure, or attachment thereof or thereon except in all cases as may be specifically permitted by other provisions of this Agreement; 

6.7    Business Disruption; Condemnation. (i) Any cessation of a substantial part of the business of any Obligor for a period which significantly affects such Obligor’s capacity to continue its business, on a profitable basis such that it is reasonably likely that Borrower will not be in compliance with Financial Covenants contained herein; (ii) the loss of any permits or licenses from any Governmental Authority to operate the Project at full nameplate capacity that continues for a period of 30 days; (iii) any Obligor shall be enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of its business affairs; (iv) any material lease or agreement pursuant to which any Obligor leases, uses or occupies any of its properties shall be canceled or terminated prior to the expiration of its stated term; or (v) any part of the Collateral shall be taken through condemnation or the value of such properties shall be impaired through condemnation; 

6.8    Change in Control; Accelerating Transfers. If: (i) a Change of Control, or (ii) if an Accelerating Transfer occurs in violation of Section 4.5 hereof; 

6.9    Sale of Assets. The sale or transfer of all or substantially all of Borrower’s assets without the prior written consent of Lender; 

6.10    First Priority, Perfected Security Interest. If for any reason (other than solely as a result of Lender's failure to timely file any mortgage reinscription and/or Code continuation statements), Lender’s priority position with respect to any Collateral ceases to be a fully perfected, first-priority security interest or lien, except for Permitted Liens, either by virtue of the filing of a Code financing statement, a mortgage, security deed or other security instrument, by virtue of the operation of statute, or otherwise, or if any person shall make any filing altering or terminating any financing statement or other security instrument in favor of Lender without Lender’s prior written consent which is not reinstated or resolved to Lender’s satisfaction within ten (10) days of the filing thereof; or

6.11    Lender Insecurity. Lender reasonably and in good faith deems itself insecure due to a Material Adverse Change (i) in circumstances affecting the Borrower or affecting Lender’s Lien on any of the Collateral or (ii) diminishing the value of the Collateral.

7.    Lender’s Remedies  

7.1    Remedies. Upon: (i) the occurrence of an Event of Default under Section 6.1 or 6.4, or (ii) the occurrence of any Event of Default, other than an Event of Default under Section 
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10.4

6.1 or 6.4, which shall remain uncured thirty (30) days after the occurrence thereof, or, if such default cannot be cured within thirty (30) days, remains uncured after a total of ninety (90) days  where Borrower has promptly initiated and diligently pursued such cure, Lender shall, to the fullest extent permitted by law, have the following rights and remedies, such rights and remedies being cumulative, non-exclusive and exercisable by Lender in its sole and absolute discretion and in addition to those available to Lender under any other Loan Document or otherwise available at law or in equity:

7.1 (a)    Acceleration. To declare the entire unpaid principal amount of the Loan, accrued interest thereon and all other Obligations to be immediately due and payable, without presentment, demand, or notice of any kind, and to terminate any advances under the Loan;

7.1 (b)    Immediate Possession and Control of Collateral. To take immediate possession and control of all Collateral whether now owned or hereafter acquired, without notice, demand, presentment, or resort to legal process, and, for those purposes, to enter the Project and any other premises where any such Collateral is located and remove such Collateral therefrom or render it unusable;
7.1 (c)    Assembly of Collateral. To require Borrower and other Obligors to assemble and make the Personal Property Collateral available to Lender at a place to be designated by Lender which is also reasonably convenient to Borrower;
7.1 (d)    Sale of Collateral. To retain all Personal Property Collateral in full or partial satisfaction of any unpaid Obligations as provided in the Code or sell such Personal Property Collateral at public or private sale after giving at least ten (10) days’ notice of the time and place of the sale in accordance with the Code, with or without having such Collateral physically present at the place of the sale; 

7.1 (e)    Repair and Improvements of Collateral. To make any repairs and improvements to the Collateral which Lender deems necessary or desirable for the purposes of sale;

7.1 (f)    Set-off. To exercise any and all rights of set-off which Lender may have against any account, fund, or property of any kind, tangible or intangible, belonging to any Obligor which shall be in Lender’s possession or under its control;

7.1 (g)    Appointment of Receiver. To appoint or have so appointed a receiver, without bond, to take exclusive possession and control of the Collateral, or any portion thereof, together with any and all documents, instruments, agreements, books and records related thereto, for the purpose of preserving, improving, maintaining, and/or disposing of the Collateral, or any portion thereof, and collecting rents and proceeds arising therefrom and further exercising any such other rights and remedies as may be customary or otherwise available at law and in equity; the foregoing rights and remedies to be exercised by such receiver in its sole discretion or as otherwise directed by court order, and any and all costs, fees and expenses related thereto shall be an Obligation payable on demand;

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10.4

7.1 (h)    Removal of Records. To remove from the Real Property Collateral and each Obligor’s premises, or any other location, all of the records described in Section 4.1(d) and keep and retain the same in Lender’s possession until all of the Obligations shall have been fully paid and discharged and Lender has no further obligation under this Agreement and the other Loan Documents;

7.1 (i)    Cure. To cure any Event of Default in such manner as deemed appropriate by Lender; 

7.1 (j)    Foreclosure. To foreclose on any Collateral pursuant to the terms of the Mortgages and any of the other Loan Document, or at law or in equity; and

7.1 (k) Law of Equity.  To take any other action or remedy available under applicable law or in equity.

7.2    Proceeds. The proceeds from any disposition of all or any part of the Collateral shall be allocated by Lender as it determines in its reasonable discretion and in accordance with applicable Law.  

7.3    Resort to Obligors. Lender may, at its option, pursue any and all rights and remedies directly against any and every Obligor, in the same or separate actions, at the same time or at different times, and with or without resort to any Collateral or any other Obligor.
 
7.4    Deficiency. To the extent the proceeds realized from the disposition of the Collateral shall fail to satisfy all of the Obligations, each Obligor, to the extent that such Obligor is also a Borrower hereunder and under the other Loan Documents, shall remain liable to pay any deficiency in the total amount owed to Lender under the Note and Loan Documents.

7.5    Advances/Reimbursements. All amounts due to Lender as a result of expenditures made by Lender or losses suffered by Lender shall bear interest at the highest default rate as provided under the Note, or as otherwise provided in this Agreement, from the date demanded until paid in full. Unless otherwise specified in the Loan Documents, such advances and other sums, together with accrued interest, shall be due and payable from Borrower upon demand.

7.6    Marshaling of Assets; Payments Set Aside. Lender shall be under no obligation to marshal any assets or securities in favor of any Obligor or any other Person, or against or in payment of any or all of the Obligations. To the extent that any sum credited against the Obligations is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state of federal law, common law or equitable cause, then to the extent of such recovery, the Obligations or such part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred.

7.7    Attorney in Fact. In addition to any other rights and remedies of Lender under this Agreement and the other Loan Documents, whether available on the occurrence of an Event 
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Default or otherwise, on the occurrence of an Event of Default (and only for so long as such Event of Default is continuing), Borrower hereby irrevocably designates, makes, constitutes and appoints Lender (and all Persons designated by Lender) as Borrower’s true and lawful attorney (and agent-in-fact) and Lender, or Lender’s agent, may, without notice to Borrower and in Borrower’s or Lender’s name, but at the cost and expense of Borrower: (i) sell, transfer, settle, adjust, compromise, discharge or release any of the Collateral; (ii) prepare, file and sign Borrower’s name to a proof of claim in bankruptcy or similar document against any Account Debtor or to any notice of lien, assignment or satisfaction of lien or similar document in connection with any of the Collateral; (iii) receive and open all mail addressed to Borrower and notify postal authorities to change the address for delivery thereof to such address as Lender may designate; (iv) endorse the name of Borrower upon any of the items of payment or proceeds relating to any Collateral and deposit the same to the account of Lender or any other Lender on account of the Obligations; (v) endorse the name of Borrower upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Collateral; (vi) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the other Collateral and to which Borrower has access; (vii) for and in the name of Borrower, give instructions and direct any bank or financial institution in which proceeds of the Collateral are deposited to turn over said proceeds to Lender; and (viii) do all other acts and things necessary, in Lender’s determination, to fulfill Borrower’s obligations under this Agreement and the other Loan Documents. 

7.8    License of Rights. In advertising for sale and in selling any Collateral, subsequent to an Event of Default, Lender is hereby granted a license or other right to use, without charge, each Obligor’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter or any property of a similar nature as it pertains to the Collateral and such Obligor’s rights under all licenses and all franchise agreements shall inure to Lender’s benefit.

8.    Miscellaneous.

8.1    General Indemnity. Unless resulting solely from acts or conduct of Lender constituting willful misconduct or gross negligence and in addition to any other indemnity obligations of any Obligor under this Agreement or any other Loan Document, each Obligor hereby releases and shall indemnify, defend and hold harmless Lender and its successors and assigns, and each entity which may be a current or future participant in the Loan or any portion thereof, their  respective officers, employees and agents, of and from any claims, demands, liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including, without limitation, reasonable legal fees) resulting from: (a) acts or conduct of any Obligor under, pursuant or related to this Agreement and the other Loan Documents; (b) any Obligor’s breach or violation of any representation, warranty, covenant or undertaking contained in this Agreement or the other Loan Documents; (c) any Obligor’s failure to comply with any applicable Laws (including, without limitation, any Environmental Law, etc.); and (d) any claim by any other Obligor, or any principal, officer, agent, employee, or creditor thereof, against Lender arising out of any transaction whether hereunder or in any way related to the Loan Documents and all costs, expenses, fines, penalties or other damages resulting therefrom.
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8.2    Discharge of Taxes, Obligors’ Obligations, Etc. Lender, in its sole discretion, shall have the right at any time, and from time to time, with at least ten (10) calendar days prior notice to Obligor and if the applicable Obligor fails to do so, to: (a) pay for the performance of any Obligor’s obligations hereunder; and (b) discharge taxes, Liens, fines or penalties at any time levied against any Obligor or Lender in connection with the Loan or placed on the Collateral, or any of it, in violation of this Agreement unless such Obligor is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens and maintaining proper reserves therefor in accordance with GAAP.  Such payments and advances shall: (i) be added to the Obligations; (ii) be secured with equal force and effect by the Collateral; and (iii) bear interest at the highest rate (including any default rate) applicable to the Loan, until reimbursed to Lender.  Such payments and advances made by Lender shall not be construed as a waiver by Lender of a Default or Event of Default under this Agreement or any other Loan Document.
  
8.3    Notice. All notices, demands, or other communications given under the Loan Documents shall be in writing, and shall be sent via overnight courier or mailed to the address of each party as set forth below, said mailing to be certified United States government mail to the mailing address. Obligors must provide written direction to Lender, or Lender must provide written direction to the designated Obligor for notice hereunder in order to change the address to which said notice shall be sent.  Notices shall deemed to have been duly given, served, and delivered:  (a) on the date personally delivered; (b) on the date of receipt by the addressee of any item transmitted by United States registered or certified mail (return receipt requested), postage prepaid; (c) on the date of receipt by the addressee of any item transmitted by e-mail other commercial electronically transmitted means, or (d) on the first (1st) Business Day following the date on which delivered to a commercially-responsible overnight courier which provides service between the point of origin and the point of destination, addressed to the party which is to receive such notice at the address stated above or to such other address(es) as may be designated in writing by the other parties:

If to Lender, to:    Greater Nevada Credit Union
            c/o Greater Commercial Lending
            5200 Neil Road
            Reno, NV 89502
            Attention: Commercial Services        

If to any Obligor, to:    The Dixie Group, Inc.,
            c/o TDG Operation, LLC
            475 Reed Road
            Dalton, GA 30722
            Attention: Jon Faulkner

8.4    Waiver. No failure or delay on the part of Lender in exercising any power or right hereunder, and no failure of Lender to give any Obligor any notice of an Event of Default, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power 
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preclude any other or further exercise thereof or the exercise of any other right or power hereunder. No modification or waiver of any provision of any Loan Document or consent to any departure by any Obligor from any Loan Document shall in any event be effective unless the same shall be in writing and signed by Lender, and such waiver or consent shall be effective only in the specific instance and for the particular purpose for which it was given.

8.5    Benefit. The Loan Documents shall be binding upon and shall inure to the benefit of each Obligor and Lender and their respective successors and assigns.

8.6    Assignment and Participation. Lender may assign or sell all or any portion of the Loans and the Loan Documents, in whole or in part, to any other person or entity. In the event of an assignment or sale of Lender’s entire interest, Lender shall thereafter be relieved of all liability hereunder (excluding causes of action for Lender’s gross negligence or intentional acts prior to such transfer).  In addition, Lender may, at any time and without notice to Borrower, sell a participation interest in all or part of the Loans and the Loan Documents to one or more other financial institution.  Borrower hereby authorizes Lender to disclose to any actual or prospective assignee or loan participant of Lender all information (including, without limitation, financial information) provided to Lender by Borrower in connection with the Loans.  No Borrower may assign the Loan Documents or any interest therein without Lender’s prior written consent.

8.7    No Third-Party Beneficiaries. The Loan Documents, including this Agreement, and the terms, conditions, covenants and agreements of the Parties set forth therein are for the sole benefit of the Parties, together with their successors and assigns, and no third party shall be deemed to have any privity of contract nor any right to rely on or use against any Party any term, condition, covenant or agreement contained therein to any extent or for any purpose whatsoever, nor shall any third party have any right of action of any kind arising therefrom or be deemed to be a third party beneficiary thereof.

8.8    Governing Law and Jurisdiction. This Agreement and the other Loan Documents, unless otherwise specifically provided therein, and all matters relating thereto, shall be governed by and construed and interpreted in accordance with the laws of the State of Tennessee; PROVIDED, HOWEVER, to the extent that the creation, validity, perfection, enforceability or priority of any lien or security interest, or the rights and remedies with respect to any lien or security interest, in the Collateral are governed by the laws of a jurisdiction other than the State of Tennessee, then the laws of such jurisdiction shall govern, except as superseded by applicable United States Federal Law. EACH OBLIGOR AGREES THAT ALL DISPUTES BETWEEN ANY OBLIGOR AND LENDER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN THE STATE OF TENNESSEE, BUT EACH OBLIGOR AND LENDER ACKNOWLEDGE THAT ANY APPEALS FROM SUCH FEDERAL COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE STATE OF TENNESSEE BUT STILL LOCATED IN THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT. EACH OBLIGOR 
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WAIVES ANY AND ALL DISPUTES AND ANY AND ALL OBJECTIONS THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OBLIGOR OR THEIR RESPECTIVE PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. 

8.9    WAIVER OF JURY TRIAL. EACH OBLIGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, COUNTERCLAIM, SETOFF, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING OUT OF OR IN ANY WAY PERTAINING OR RELATED TO THE OBLIGATIONS, OR (B) IN ANYWAY CONNECTED WITH OR PERTAINING OR RELATED TO OR INCIDENTAL TO ANY DEALINGS OF LENDER AND OBLIGORS WITH RESPECT TO LOAN DOCUMENTS OR THE LOAN, OR IN CONNECTION WITH THE TRANSACTIONS RELATED HERETO OR CONTEMPLATED BY OR THE EXERCISE OF ANY PARTY'S RIGHTS AND REMEDIES HEREUNDER, OR THE CONDUCT OF THE RELATIONSHIP OF THE PARTIES HERETO, IN ALL OF THE FOREGOING CASES WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. EACH OBLIGOR AGREES THAT LENDER MAY FILE A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT OF EACH OBLIGOR IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY, AND THAT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY DISPUTE OR CONTROVERSY WHATSOEVER BETWEEN ANY OBLIGOR AND LENDER SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

8.10    Severability. Invalidity of any one or more of the terms, conditions or provisions of this Agreement shall in no way affect the balance hereof, which shall remain in full force and effect.

8.11    Construction of Terms. (a) Whenever the context and construction or words so requires, all words used in the singular number herein shall be deemed to have been used in the plural, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall include the masculine and feminine; (b) all references to “Sections” shall mean, with respect to the applicable Loan Document, the articles, sections, or paragraphs thereof, however denoted, if denoted at all, and the terms “herein,” “hereinbelow,” “hereunder,” and similar terms are references to the particular Loan Document in its entirety and not merely the particular article, section, or exhibit in which any such term appears; (c) captions and headings are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of the Loan Document or the intent of any provision thereof; (d) all references to any Loan Document shall include all amendments, extensions, renewals, restatements or replacements of the same; (e) the terms “include”, “including” and similar terms shall be construed as if followed by the phrase “without being limited to” and “Real Property” “Real Estate,” “Personal Property” and “Collateral” shall be construed as if followed by the phrase “or any part thereof”; (f) no inference in favor of any party shall be drawn from the fact that such party has drafted any portion of the Loan Documents; (g) in the event of any inconsistency between the terms of this 
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Agreement and any other Loan Document (with the exception of the Note) the terms of this Agreement shall control, provided that any provision of any Loan Document, other than this Agreement, which imposes increased or additional obligations upon any Obligor or provides enhanced or additional rights or remedies to Lender shall be deemed to be supplemental to, and not inconsistent with, this Agreement and the other Loan Documents; and (h) any right, remedy, consent or choice of action in favor of Lender under this Agreement and the other Loan Documents shall be exercisable by Lender in its sole and absolute discretion, unless otherwise expressly noted.

8.12    Representation and Disclosure. Each Obligor acknowledges that: (a) each Obligor had the opportunity to seek the advice of independent counsel and has shared equally in the drafting of this Agreement and the other Loan Documents, and (b) it did not rely upon any advice from legal counsel to Lender in the preparation of the Loan Documents or in the closing of the Loan.

8.13    Execution in Counterparts. The Loan Agreement and other Loan Documents may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument, and in making proof of the Loan Document, it shall not be necessary to produce or account for more than one such counterpart.

8.14    Examinations/Communications. Lender’s examinations, inspections, or receipt of information pertaining to the matters set forth in the Loan Documents shall not in any way be deemed to reduce the full scope and protection of the Loan Documents or the obligations of each Obligor related to the Loan Documents. Lender shall have no duty or obligation of any nature to make any investigation, inspection or review regarding any Collateral at any time, with any such investigation that is undertaken being solely for the benefit of Lender.

8.15    No Partnership. Nothing in the Loan Documents, and no action or inaction whatsoever on the part of Lender undertaken in connection with the Loan, shall be deemed to make Lender a partner or joint venturer with any Obligor, and Borrower shall indemnify and hold Lender harmless from and against any and all claims, losses, causes of action, expenses (including attorneys’ fees) and damages arising from the relationship between Lender and any Obligor being construed as or related to be anything other than that of a lender, borrower, guarantor or pledgor, as applicable.

8.16    Notice of Conduct. Each Obligor agrees to use commercially reasonable efforts to give Lender written notice of any action or inaction, to the extent that such Obligor has actual knowledge thereof, by Lender or any agent or attorney of Lender in connection with the Loan Documents or the Obligations of any party under the Loan Documents that such Obligor reasonably believes may be actionable against Lender or any agent or attorney of Lender or a defense to payment of any Obligations, including commission of a tort or violation of any contractual duty implied by law, and a reasonable opportunity to cure or correct such action or inaction. Upon request of Lender from time to time, Borrower shall also confirm in writing the status of the Loan, and the Obligations, and provide other information reasonably requested by Lender.

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10.4

8.17    Costs, Expenses and Attorneys’ Fees. In addition to any payment or reimbursement obligations of any Obligor hereunder and under the other Loan Documents, Borrower shall pay to Lender immediately on demand, the full amount of all reasonable out-of-pocket costs and expenses, including all reasonable and documented attorneys’ fees of its outside counsel to Lender, costs of experts that are reasonably necessary in connection with the transactions contemplated by this Loan Agreement and the other Loan Documents and all other reasonable out-of-pocket expenses incurred by Lender: (a) in connection with the analysis, negotiation, preparation, execution, administration, delivery and termination of this Loan Agreement and each of the other Loan Documents and any amendment, modification, restatement, supplement, waiver or consent with respect thereto; (b) upon the occurrence of an Event of Default, and the continuation thereof beyond any applicable cure period, the costs of additional appraisals, environmental studies, collateral and financial audits, title insurance, survey updates and any legal, financial and/or operational reviews; (c) the perfection, preservation, protection and continuation of the liens and security interest granted Lender in the Collateral and the custody, preservation, protection, repair and operation of any of the Collateral; (d) the pursuit by Lender of its rights and remedies under the Loan Documents and applicable law; and (e) defending any counterclaim, cross-claim or other action, or participating in any bankruptcy proceeding, mediation, arbitration, litigation or dispute resolution of any other nature involving Lender, any Obligor or any Collateral.  

8.18    Further Assurances. At any time after the date hereof, each Obligor, at the request of Lender, shall execute and deliver such further documents and agreements and take such further actions as Lender reasonably deems necessary or appropriate to permit each transaction contemplated by the Loan Documents to be consummated in accordance with the provisions thereof and to perfect, preserve, protect, continue and enforce Lender’s rights and remedies regarding all liens, security interests and rights of Lender under the Loan Documents, security agreements, financing statements, continuation statements, new or replacement promissory note(s), and/or agreements supplementing, extending or otherwise modifying any promissory note(s), this Loan Agreement, and/or any mortgage or security agreement, and certificates as to the amount of the indebtedness evidenced by the Note.

8.19    Time of the Essence. Time is of the essence to all Loan Documents.

8.20    Integration.  This Agreement and the other Loan Documents supersede any and all prior expressions, written or oral (including, but not limiting to any commitment letter or term sheets), among the Parties related to, describing or governing the terms of, the Loan and any transaction related thereto.

8.21    USA Patriot Act Notice. Lender hereby notifies each Obligor that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Obligor, which information includes the name and address of such Obligor, and other information includes the name and address of Obligors and other information that will allow Lender, as applicable, to identify each Obligor in accordance with the Act.

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10.4

8.22    Obligors’ Agent. Lender shall have the right to deal with any executive officer in regard to all matters arising hereunder and under the other Loan Documents, or otherwise concerning the rights, duties and obligations of Lender and any Obligor hereunder or under the other Loan Documents. PROVIDED, FURTHER, the foregoing authorization shall continue to be binding and effective against each Obligor and may be relied upon by Lender with regards to all future modifications, amendments, increases, waivers and restructurings of the indebtedness and obligations of any Obligor and the Loan Documents and any collateral security with respect thereto, together with any hereafter additional indebtedness and Obligations of any Obligor that may arise in favor of Lender.

8.23    Subordination.  Each Obligor, individually and on behalf of such Obligor’s Subsidiaries and Affiliates, subordinates any claims, including any right of payment, rents, subrogation, contribution and indemnity, that it may have from or against any other Obligor or its Subsidiaries and Affiliates, and any successor or assign of any such Person, including any trustee, receiver or debtor-in-possession, howsoever arising, due or owing or whether heretofore, now or hereafter existing, to the full payment of all of the Obligations to Lender.

8.24    Savings Clause. Each Obligor acknowledges and agrees that if any such Obligor’s indebtedness, liability or obligation under any Loan Document, or if any liens or security interests in favor of Lender securing same, whether now existing or hereafter arising, would, but for the application of this Section, be unenforceable under applicable law as determined by a court of competent jurisdiction, such indebtedness, liability, obligation, lien or security interest shall be valid and enforceable to the maximum extent that would not cause such indebtedness, liability, obligation, lien or security interest to be unenforceable under such applicable law, and such indebtedness, liability, obligation, lien or security interest shall be deemed to have been automatically modified accordingly at all relevant times and without any further action by the Parties.

8.25    No Duty to Investigate or Advise. Each Obligor acknowledges and agrees that Lender will have no obligation to investigate or disclose the financial condition or affairs of any other Obligor for the benefit of such Obligor nor to advise of or disclose to such Obligor any fact respecting, or any change in the financial condition or affairs of any other Obligor which might come to the knowledge of Lender at any time, whether or not Lender knows or believes or has reason to know or believe that any such fact or change is unknown to such Obligor or might (or does) materially increase the risk of such Obligor as a co-obligor or might (or would) affect the willingness of such Obligor to continue as a co-obligor with respect to the Obligations.

8.26    Survival. All representations, warranties, covenants and agreements of each Obligor in this Agreement and any other Loan Document shall survive the execution of such Loan Document, and all indemnity and other reimbursement obligations of any Obligor under this Agreement and any other Loan Document shall survive the termination of such Loan Document.

8.27    Additional Provisions. Riders, schedules and exhibits attached hereto, if any, are hereby incorporated into this Agreement as if set forth verbatim.

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10.4

8.28    Equal Credit Opportunity Act.  In accordance with Title V of Public Law 93-495, the Equal Credit Opportunity Act, with respect to any aspect of a credit transaction, neither the Lender nor the USDA will discriminate against any applicant on the basis of race, color, religion, national origin, sex, marital status or age (providing the applicant has the capacity to contract), or because all or part of the applicant’s income derives from a public assistance program, or because the applicant has, in good faith, exercised any right under the Consumer Protection Act. If applicable to the Loan, the Lender will comply with the requirements of the Equal Credit Opportunity Act as contained in the Federal Reserve Board’s Regulation implementing that Act (see 12 CFR part 202). Such compliance will be accomplished prior to loan closing.

[Remainder of Page Intentionally Left Blank – Signature Page Follows]

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10.4

SIGNATURE PAGE OF LOAN AGREEMENT
IN WITNESS WHEREOF, the Parties hereto have executed this Loan Agreement under seal to be effective as of the date first above written:
    BORROWER:
    THE DIXIE GROUP, INC., a Tennessee corporation
     
By:__________________________  
Name: 
Title: 

    TDG OPERATIONS, LLC, a Georgia limited liability company
     
By:__________________________  
Name: 
Title: 

    LENDER:

GREATER NEVADA CREDIT UNION, a Nevada non-profit corporative corporation
            
    
By:__________________________  
Name: 
Title: 

39

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