Document:

Exhibit 10.2

 

FOURTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT

 

OF

 

BCI IV OPERATING PARTNERSHIP LP

 

A DELAWARE LIMITED PARTNERSHIP

 

June 13, 2018

 

 

TABLE OF CONTENTS

 

	
Article 1   DEFINED TERMS
    	
2
    
	
 
    	
 
    	
 
    
	
Article 2   PARTNERSHIP FORMATION AND IDENTIFICATION
    	
13
    
	
 
    	
 
    	
 
    
	
2.1
    	
Formation
    	
13
    
	
2.2
    	
Name, Office and   Registered Agent
    	
13
    
	
2.3
    	
Partners
    	
13
    
	
2.4
    	
Term and Dissolution
    	
13
    
	
2.5
    	
Filing of Certificate   and Perfection of Limited Partnership
    	
14
    
	
2.6
    	
Certificates Describing   Partnership Units and Special Partnership Units
    	
14
    
	
 
    	
 
    	
 
    
	
Article 3   BUSINESS OF THE PARTNERSHIP
    	
14
    
	
 
    	
 
    	
 
    
	
Article 4   CAPITAL CONTRIBUTIONS AND ACCOUNTS
    	
15
    
	
 
    	
 
    	
 
    
	
4.1
    	
Capital Contributions
    	
15
    
	
4.2
    	
Additional Capital   Contributions and Issuances of Additional Partnership Interests
    	
15
    
	
4.3
    	
Additional Funding
    	
17
    
	
4.4
    	
Capital Accounts
    	
17
    
	
4.5
    	
Percentage Interests
    	
18
    
	
4.6
    	
No Interest On   Contributions
    	
18
    
	
4.7
    	
Return Of Capital   Contributions
    	
18
    
	
4.8
    	
No Third Party Beneficiary
    	
18
    
	
 
    	
 
    	
 
    
	
Article 5   PROFITS AND LOSSES; DISTRIBUTIONS
    	
19
    
	
 
    	
 
    	
 
    
	
5.1
    	
Allocation of Profit   and Loss
    	
19
    
	
5.2
    	
Distribution of Cash
    	
21
    
	
5.3
    	
REIT Distribution   Requirements
    	
25
    
	
5.4
    	
No Right to   Distributions in Kind
    	
25
    
	
5.5
    	
Limitations on Return   of Capital Contributions
    	
25
    
	
5.6
    	
Distributions Upon   Liquidation
    	
25
    
	
5.7
    	
Substantial Economic   Effect
    	
26
    
	
 
    	
 
    	
 
    
	
Article 6   RIGHTS, OBLIGATIONS AND POWERS OF THE GENERAL PARTNER
    	
26
    
	
 
    	
 
    	
 
    
	
6.1
    	
Management of the   Partnership
    	
26
    
	
6.2
    	
Delegation of Authority
    	
28
    
	
6.3
    	
Indemnification and   Exculpation of Indemnitees
    	
29
    
	
6.4
    	
Liability of the   General Partner
    	
30
    
	
6.5
    	
Reimbursement of   General Partner
    	
31
    
	
6.6
    	
Outside Activities
    	
32
    
	
6.7
    	
Employment or Retention   of Affiliates
    	
32
    
	
6.8
    	
General Partner   Participation
    	
33
    
	
6.9
    	
Title to Partnership   Assets
    	
33
    
	
6.10
    	
Redemptions and   Exchanges of REIT Shares
    	
33
    
	
6.11
    	
No Duplication of Fees   or Expenses
    	
34
    

 

 

	
Article 7   CHANGES IN GENERAL PARTNER
    	
34
    
	
 
    	
 
    	
 
    
	
7.1
    	
Transfer of the General   Partner’s Partnership Interest
    	
34
    
	
7.2
    	
Admission of a   Substitute or Additional General Partner
    	
36
    
	
7.3
    	
Effect of Bankruptcy,   Withdrawal, Death or Dissolution of a General Partner
    	
36
    
	
7.4
    	
Removal of a General   Partner
    	
37
    
	
 
    	
 
    	
 
    
	
Article 8   RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
    	
38
    
	
 
    	
 
    	
 
    
	
8.1
    	
Management of the   Partnership
    	
38
    
	
8.2
    	
Power of Attorney
    	
38
    
	
8.3
    	
Limitation on Liability   of Limited Partners
    	
38
    
	
8.4
    	
Ownership by Limited   Partner of Corporate General Partner or Affiliate
    	
38
    
	
8.5
    	
Redemption Right
    	
38
    
	
8.6
    	
Registration
    	
41
    
	
8.7
    	
Distribution Reinvestment   Plan
    	
41
    
	
 
    	
 
    	
 
    
	
Article 9   TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
    	
41
    
	
 
    	
 
    	
 
    
	
9.1
    	
Purchase for Investment
    	
41
    
	
9.2
    	
Restrictions on   Transfer of Limited Partnership Interests
    	
42
    
	
9.3
    	
Admission of Substitute   Limited Partner
    	
43
    
	
9.4
    	
Rights of Assignees of   Partnership Interests
    	
44
    
	
9.5
    	
Effect of Bankruptcy,   Death, Incompetence or Termination of a Limited Partner
    	
44
    
	
9.6
    	
Joint Ownership of   Interests
    	
45
    
	
 
    	
 
    	
 
    
	
Article 10   BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS
    	
45
    
	
 
    	
 
    	
 
    
	
10.1
    	
Books and Records
    	
45
    
	
10.2
    	
Custody of Partnership   Funds; Bank Accounts
    	
45
    
	
10.3
    	
Fiscal and Taxable Year
    	
46
    
	
10.4
    	
Annual Tax Information   and Report
    	
46
    
	
10.5
    	
Tax Matters Partner;   Tax Elections; Special Basis Adjustments
    	
46
    
	
10.6
    	
Reports to Limited   Partners
    	
46
    
	
10.7
    	
Safe Harbor Election
    	
47
    
	
 
    	
 
    	
 
    
	
Article 11   AMENDMENT OF AGREEMENT; MERGER
    	
47
    
	
 
    	
 
    	
 
    
	
Article 12   GENERAL PROVISIONS
    	
48
    
	
 
    	
 
    	
 
    
	
12.1
    	
Notices
    	
48
    
	
12.2
    	
Survival of Rights
    	
48
    
	
12.4
    	
Severability
    	
48
    
	
12.5
    	
Entire Agreement
    	
48
    
	
12.6
    	
Pronouns and Plurals
    	
48
    
	
12.7
    	
Headings
    	
48
    
	
12.8
    	
Counterparts
    	
48
    
	
12.9
    	
Governing Law
    	
48
    
	
12.10
    	
Effectiveness
    	
48
    

 

 

EXHIBITS

 

	
EXHIBIT A   - 
    	
Partners,   Capital Contributions and Percentage Interests or Special Percentage Interests
    
	
 
    	
 
    
	
EXHIBIT B   - 
    	
Notice   of Exercise of Redemption Right
    

 

 

FOURTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
 OF
 BCI IV OPERATING PARTNERSHIP LP

 

RECITALS

 

This Fourth Amended and Restated Limited Partnership Agreement (this “Agreement”) is entered into as of June 13, 2018, between Black Creek Industrial REIT IV Inc., a Maryland corporation (the “General Partner”) and the Limited Partners set forth on Exhibit A attached hereto. Capitalized terms used herein but not otherwise defined shall have the meanings given them in Article 1.

 

AGREEMENT

 

WHEREAS, the General Partner intends to qualify as a real estate investment trust under the Internal Revenue Code of 1986, as amended;

 

WHEREAS, BCI IV Operating Partnership LP (the “Partnership”), was formed on August 12, 2014 as a limited partnership under the laws of the State of Delaware, pursuant to a Certificate of Limited Partnership filed with the Office of the Secretary of State of the State of Delaware on August 12, 2014;

 

WHEREAS, the General Partner and the Limited Partners orally entered into a Limited Partnership Agreement of the Partnership as of August 12, 2014;

 

WHEREAS, the General Partner contributed $200,000 to the Partnership in exchange for 20,000 Operating Partnership Units on November 19, 2014 and BCI IV Advisors Group LLC contributed $1,000 to the Partnership in exchange for 100 Special Partnership Units;

 

WHEREAS, the General Partner and the Limited Partners entered into a Limited Partnership Agreement dated February 9, 2016 and effective as of November 19, 2014 (the “Original Partnership Agreement”);

 

WHEREAS, the General Partner and the Limited Partners amended and restated the Original Partnership Agreement and entered into an Amended and Restated Limited Partnership Agreement dated July 1, 2016 (the “Amended and Restated Limited Partnership Agreement”);

 

WHEREAS, the General Partner and the Limited Partners amended and restated the Amended and Restated Partnership Agreement and entered into a Second Amended and Restated Limited Partnership Agreement dated June 30, 2017 and effective as of July 1, 2017 (the “Second Amended and Restated Limited Partnership Agreement”);

 

WHEREAS, the General Partner and the Limited Partners amended and restated the Second Amended and Restated Limited Partnership Agreement and entered into a Third Amended and Restated Limited Partnership Agreement dated March 5, 2018 (the “Third Amended and Restated Limited Partnership Agreement”);

 

 

WHEREAS, the General Partner desires to conduct its current and future business through the Partnership;

 

WHEREAS, in furtherance of the foregoing, the General Partner has contributed and desires to continue to contribute certain assets to the Partnership from time to time;

 

WHEREAS, in exchange for the General Partner’s contribution of assets, the Partnership has issued and will continue to issue Partnership Units to the General Partner in accordance with the terms of this Agreement;

 

WHEREAS, the Limited Partners have contributed and they and future Limited Partners may contribute certain of their property to the Partnership in exchange for Partnership Units or Special Partnership Units in accordance with the terms of this Agreement;

 

WHEREAS, in furtherance of the Partnership’s business, the Partnership may acquire Properties and other assets from time to time by means of the contribution of such Properties or other assets to the Partnership by the owners thereof in exchange for Partnership Units;

 

WHEREAS, the parties hereto wish to establish herein their respective rights and obligations in connection with all of the foregoing and certain other matters; and

 

WHEREAS, the parties hereto desire to clarify the timing of the initial calculation of the Performance Allocation by amending and restating the Third Amended and Restated Limited Partnership Agreement and entering into this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing, of mutual covenants between the parties hereto, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that this Agreement is hereby entered into and adopted in its entirety as follows:

 

ARTICLE 1
 DEFINED TERMS

 

The following defined terms used in this Agreement shall have the meanings specified below:

 

“ACT” means the Delaware Revised Uniform Limited Partnership Act, as it may be amended from time to time.

 

“ADDITIONAL FUNDS” has the meaning set forth in Section 4.3 hereof.

 

“ADDITIONAL SECURITIES” means any additional REIT Shares (other than REIT Shares issued in connection with a redemption pursuant to Section 8.5 hereof or REIT Shares issued pursuant to a distribution reinvestment plan of the General Partner) or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase REIT Shares, as set forth in Section 4.2(a)(ii).

 

“ADMINISTRATIVE EXPENSES” means (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) those administrative costs and expenses of the General Partner, including any salaries or other payments to directors, officers or employees of the 

 

2

 

General Partner, and any accounting and legal expenses of the General Partner, which expenses, the Partners have agreed, are expenses of the Partnership and not the General Partner, (iii) costs and expenses relating to the formation and continuity of existence and operation of the General Partner and any Subsidiaries thereof (which Subsidiaries shall, for purposes hereof, be included within the definition of General Partner), including taxes, fees and assessments associated therewith, (iv) costs and expenses relating to any Offering and registration of securities by the General Partner and all statements, reports, fees and expenses incidental thereto, including, without limitation, underwriting discounts and selling commissions applicable to any such Offering, and any costs and expenses associated with any claims made by any holders of such securities or any underwriters or placement agents thereof, (v) costs and expenses associated with any repurchase of any securities by the General Partner, (vi) costs and expenses associated with the preparation and filing of any periodic or other reports and communications by the General Partner under federal, state or local laws or regulations, including filings with the Commission, (vii) costs and expenses associated with compliance by the General Partner with laws, rules and regulations promulgated by any regulatory body, including the Commission and any securities exchange, (viii) costs and expenses associated with any 401(k) plan, incentive plan, bonus plan or other plan providing for compensation for the employees of the General Partner, (ix) costs and expenses incurred by the General Partner relating to any issuing or redemption of Partnership Interests and (x) all other operating or administrative costs of the General Partner incurred in the ordinary course of its business on behalf of or in connection with the Partnership; provided, however, that Administrative Expenses shall not include any administrative costs and expenses incurred by the General Partner that are attributable to Properties or partnership interests in a Subsidiary Partnership that are owned by the General Partner directly.

 

“ADVISOR” or “ADVISORS” means the Person or Persons, if any, appointed, employed or contracted with by the General Partner and responsible for directing or performing the day-to-day business affairs of the General Partner, including any Person to whom the Advisor subcontracts all or substantially all of such functions.

 

“ADVISORY AGREEMENT” means the agreement between the General Partner, the Partnership and the Advisor pursuant to which the Advisor will direct or perform the day-to-day business affairs of the General Partner.

 

“AFFILIATE” means, with respect to any Person, (i) any Person directly or indirectly owning, controlling or holding, with the power to vote, ten percent or more of the outstanding voting securities of such other Person; (ii) any Person ten percent or more of whose outstanding voting securities are directly or indirectly owned, controlled or held, with the power to vote, by such other Person; (iii) any Person directly or indirectly controlling, controlled by or under common control with such other Person; (iv) any executive officer, director, trustee or general partner of such other Person and (v) any legal entity for which such Person acts as an executive officer, director, trustee or general partner.

 

“AGGREGATE SHARE OWNERSHIP LIMIT” shall have the meaning set forth in the Charter.

 

3

 

“AGREED VALUE” means the fair market value of a Partner’s non-cash Capital Contribution as of the date of contribution as agreed to by such Partner and the General Partner.  The names and addresses of the Partners, number of Partnership Units or Special Partnership Units issued to each Partner, and the Agreed Value of non-cash Capital Contributions as of the date of contribution are set forth on Exhibit A.

 

“AGREEMENT” means this Fourth Amended and Restated Limited Partnership Agreement, as amended, modified supplemented or restated from time to time, as the context requires.

 

“ANNUAL TOTAL RETURN AMOUNT” means the overall investment return, expressed as a dollar amount per Partnership Unit, which shall be equal to the sum of (1) the Weighted-Average Distributions per Partnership Unit over the applicable period, and (2) the Ending VPU, adjusted to remove the negative impact on the overall investment return from the payment or the obligation to pay, or distribute, as applicable, the Performance Allocation and Distribution Fees, less the Beginning VPU.

 

“APPLICABLE PERCENTAGE” has the meaning provided in Section 8.5(b) hereof.

 

“ASSET” means any Property, Mortgage, other debt or other investment (other than investments in bank accounts, money market funds or other current assets) owned by the General Partner, directly or indirectly through one or more of its Affiliates.

 

“BEGINNING VPU”  means the VPU determined as of the end of the most recent month prior to the commencement of the applicable period.

 

“CAPITAL ACCOUNT” has the meaning provided in Section 4.4 hereof.

 

“CAPITAL CONTRIBUTION” means the total amount of cash, cash equivalents, and the Agreed Value of any Property or other asset (other than cash) contributed or agreed to be contributed, as the context requires, to the Partnership by each Partner pursuant to the terms of this Agreement.  Any reference to the Capital Contribution of a Partner shall include the Capital Contribution made by a predecessor holder of the Partnership Interest of such Partner.

 

“CARRYING VALUE” means, with respect to any asset of the Partnership, the asset’s adjusted net basis for federal income tax purposes or, in the case of any asset contributed to the Partnership, the fair market value of such asset at the time of contribution, reduced by any amounts attributable to the inclusion of liabilities in basis pursuant to Section 752 of the Code, except that the Carrying Values of all assets may, at the discretion of the General Partner, be adjusted to equal their respective fair market values (as determined by the General Partner), in accordance with the rules set forth in Regulations Section 1.704-1(b)(2)(iv)(f), as provided for in Section 4.4.  In the case of any asset of the Partnership that has a Carrying Value that differs from its adjusted tax basis, the Carrying Value shall be adjusted by the amount of depreciation, depletion and amortization calculated for purposes of the allocations of net profit and net loss pursuant to Article 5 hereof rather than the amount of depreciation, depletion and amortization determined for federal income tax purposes.

 

4

 

“CASH AMOUNT” means an amount of cash per Partnership Unit equal to the applicable Redemption Price determined by the General Partner.

 

“CERTIFICATE” means any instrument or document that is required under the laws of the State of Delaware, or any other jurisdiction in which the Partnership conducts business, to be signed and sworn to by the Partners of the Partnership (either by themselves or pursuant to the power-of-attorney granted to the General Partner in Section 8.2 hereof) and filed for recording in the appropriate public offices within the State of Delaware or such other jurisdiction to perfect or maintain the Partnership as a limited partnership, to effect the admission, withdrawal, or substitution of any Partner of the Partnership, or to protect the limited liability of the Limited Partners as limited partners under the laws of the State of Delaware or such other jurisdiction.

 

“CHARTER” means the Articles of Amendment and Restatement of the General Partner filed with the Maryland State Department of Assessments and Taxation, as amended, restated or supplemented from time to time.

 

“CLASS” means a class of REIT Shares or Partnership Units, as the context may require.

 

“CLASS I REIT SHARES” means the REIT Shares classified as Class I common shares in the Charter.

 

“CLASS I UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class I Unit as provided in this Agreement.

 

“CLASS T CONVERSION RATE” means the fraction, the numerator of which is the Net Asset Value Per Unit for each Class T Unit and the denominator of which is the Net Asset Value Per Unit for each Class I Unit.

 

“CLASS T REIT SHARES” means the REIT Shares classified as Class T common shares in the Charter.

 

“CLASS T UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class T Unit as provided in this Agreement.

 

“CLASS W CONVERSION RATE” means the fraction, the numerator of which is the Net Asset Value Per Unit for each Class W Unit and the denominator of which is the Net Asset Value Per Unit for each Class I Unit.

 

“CLASS W REIT SHARES” means the REIT Shares classified as Class W common shares in the Charter.

 

“CLASS W UNIT” means a Partnership Unit entitling the holder thereof to the rights of a holder of a Class W Unit as provided in this Agreement.

 

“CODE” means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time.  Reference to any particular provision of the Code shall mean that provision in the Code at the date hereof and any successor provision of the Code.

 

5

 

“COMMISSION” means the U.S. Securities and Exchange Commission.

 

“COMMON SHARE OWNERSHIP LIMIT” shall have the meaning set forth in the Charter.

 

“CONTROL” means the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities or other beneficial interests, by contract or otherwise.  “Controlled” and “Controlling” shall have correlative meanings.

 

“CONVERSION FACTOR” means 1.0, provided that in the event that the General Partner (i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its outstanding REIT Shares into a smaller number of REIT Shares, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on such date and, provided further, that in the event that an entity other than an Affiliate of the General Partner shall become General Partner pursuant to any merger, consolidation or combination of the General Partner with or into another entity (the “Successor Entity”), the Conversion Factor shall be adjusted by multiplying the Conversion Factor by the number of shares of the Successor Entity into which one REIT Share is converted pursuant to such merger, consolidation or combination, determined as of the date of such merger, consolidation or combination.  Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; provided, however, that if the General Partner receives a Notice of Redemption after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the General Partner had received the Notice of Redemption immediately prior to the record date for such dividend, distribution, subdivision or combination.

 

“DEALER MANAGER” means Black Creek Capital Markets, LLC or such other Person or entity selected by the board of directors of the General Partner to act as the dealer manager for the Offering.

 

“DEFAULTING LIMITED PARTNER” has the meaning provided in Section 5.2(c) hereof.

 

“DIRECTOR” shall have the meaning set forth in the Charter.

 

“DISTRIBUTION FEE” shall mean the distribution fee or any similar ongoing fee payable to the Dealer Manager as additional compensation for serving as the dealer manager for the Offering, pursuant to the then-current dealer manager agreement between the General Partner and the Dealer Manager.

 

“ENDING VPU”  means the VPU as of the end of the last month in the applicable period.

 

6

 

“EVENT OF BANKRUPTCY” as to any Person means the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code of 1978 or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within 90 days); insolvency or bankruptcy of such Person as finally determined by a court proceeding; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of his assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, provided that if such proceeding is commenced by another, such Person indicates his approval of such proceeding, consents thereto or acquiesces therein, or such proceeding is contested by such Person and has not been finally dismissed within 90 days.

 

“EXCEPTED HOLDER LIMIT” shall have the meaning set forth in the Charter.

 

“EXCHANGED REIT SHARES” has the meaning set forth in Section 6.10(b) hereof.

 

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

 

“GENERAL PARTNER” means Black Creek Industrial REIT IV Inc., a Maryland corporation, and any Person who becomes a substitute or additional General Partner as provided herein, and any of their successors as General Partner.

 

“GENERAL PARTNER LOAN” has the meaning provided in Section 5.2(c) hereof.

 

“GENERAL PARTNERSHIP INTEREST” means a Partnership Interest held by the General Partner that is a general partnership interest.

 

“HURDLE AMOUNT” means for the applicable period, an amount equal to 5.0% of the Beginning VPU.

 

“INDEMNITEE” means (i) any Person made a party to a proceeding by reason of its status as the General Partner, the Advisor or a director, officer or employee of the General Partner,  the Advisor or the Partnership, and (ii) such other Persons (including Affiliates of the General Partner, the Advisor or the Partnership) as the General Partner may designate from time to time, in its sole and absolute discretion.

 

“INDEPENDENT DIRECTORS” shall have the meaning set forth in the Charter.

 

“JOINT VENTURE” means those joint venture, co-investment, co-ownership or partnership arrangements in which the General Partner or any of its subsidiaries is a co-venturer or general partner established to acquire or hold Assets.

 

“LIMITED PARTNER” means any Person named as a Limited Partner on Exhibit A attached hereto, and any Person who becomes a Substitute Limited Partner, in such Person’s capacity as a Limited Partner in the Partnership.

 

7

 

“LIMITED PARTNERSHIP INTEREST” means the ownership interest of a Limited Partner in the Partnership at any particular time, including the right of such Limited Partner to any and all benefits to which such Limited Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Limited Partner to comply with all the provisions of this Agreement and of such Act.

 

“LIQUIDITY EVENT” shall include, but shall not be limited to, (i) a Listing, (ii) a sale, merger or other transaction in which the Stockholders either receive, or have the option to receive, cash, securities redeemable for cash, and/or securities of a publicly traded company, and (iii) the sale of all or substantially all of the General Partner’s Assets where Stockholders either receive, or have the option to receive, cash or other consideration.

 

“LISTING” means the listing of the REIT Shares on a national securities exchange. Upon such Listing, the REIT Shares shall be deemed “Listed.”

 

“LOSS CARRYFORWARD”  means an amount that shall equal zero as of the effective date of this Agreement and shall cumulatively increase by the absolute value of any negative Annual Total Return Amount and decrease by any positive Annual Total Return Amount, provided that the Loss Carryforward shall at no time be less than zero. The effect of the Loss Carryforward is that the recoupment of past Annual Total Return Amount losses will offset the positive Annual Total Return Amount for purposes of the calculation of the Performance Allocation.

 

“MORTGAGES” means, in connection with mortgage financing provided, invested in, participated in or purchased by the General Partner, all of the notes, deeds of trust, security interests or other evidences of indebtedness or obligations, which are secured or collateralized by Real Property owned by the borrowers under such notes, deeds of trust, security interests or other evidences of indebtedness or obligations.

 

“NAV” means net asset value, calculated pursuant to the Valuation Procedures.

 

“NAV CALCULATIONS” means the calculations used to determine the NAV of the General Partner, the REIT Shares, the Partnership and the Partnership Units, all as provided in the Valuation Procedures.

 

“NOTICE OF REDEMPTION” means the Notice of Exercise of Redemption Right substantially in the form attached as Exhibit B hereto.

 

“OFFER” has the meaning set forth in Section 7.1(c) hereof.

 

“OFFERING” means the offer and sale of REIT Shares to the public.

 

“OP UNITHOLDERS” means all holders of Partnership Interests other than the Special OP Unitholders.

 

“ORIGINAL LIMITED PARTNER” means the Limited Partners designated as “Original Limited Partners” on Exhibit A hereto.

 

8

 

“PARTNER” means any General Partner or Limited Partner.

 

“PARTNER NONRECOURSE DEBT MINIMUM GAIN” has the meaning set forth in Regulations Section 1.704-2(i).  A Partner’s share of Partner Nonrecourse Debt Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(i)(5).

 

“PARTNERSHIP” means ILT Operating Partnership LP, a Delaware limited partnership.

 

“PARTNERSHIP NAV”  The NAV of the Partnership, calculated pursuant to the Valuation Procedures.

 

“PARTNERSHIP INTEREST” means an ownership interest in the Partnership held by either a Limited Partner or the General Partner and includes any and all benefits to which the holder of such a Partnership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement.

 

“PARTNERSHIP LOAN” has the meaning provided in Section 5.2(c) hereof.

 

“PARTNERSHIP MINIMUM GAIN” has the meaning set forth in Regulations Section 1.704-2(d).  In accordance with Regulations Section 1.704-2(d), the amount of Partnership Minimum Gain is determined by first computing, for each Partnership nonrecourse liability, any gain the Partnership would realize if it disposed of the property subject to that liability for no consideration other than full satisfaction of the liability, and then aggregating the separately computed gains.  A Partner’s share of Partnership Minimum Gain shall be determined in accordance with Regulations Section 1.704-2(g)(1).

 

“PARTNERSHIP RECORD DATE” means the record date established by the General Partner for the distribution of cash pursuant to Section 5.2 hereof, which record date shall be the same as the record date established by the General Partner for a distribution to its shareholders of some or all of its portion of such distribution.

 

“PARTNERSHIP UNIT” means a fractional, undivided share of the Partnership Interests of all Partners issued hereunder, including Class I Units, Class T Units, and Class W Units but excluding the Partnership Interests represented by Special Partnership Units.  The allocation of Partnership Units of each Class among the Partners shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

 

“PERCENTAGE INTEREST” means the percentage ownership interest in the Partnership of each Partner, as determined by dividing the Partnership Units owned by a Partner by the total number of Partnership Units then outstanding.  The Percentage Interest of each Partner shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

 

“PERFORMANCE ALLOCATION” shall have the meaning set forth in Section 5.2(c).

 

“PERSON” means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.

 

9

 

“PROPERTY” means, as the context requires, all or a portion of each Real Property acquired by the General Partner, directly or indirectly through joint venture or co-ownership arrangements or other partnership or investment entities.

 

“PROSPECTUS” means the same as that term is defined in Section 2(10) of the Securities Act, including a preliminary prospectus, an offering circular as described in Rule 256 of the general rules and regulations under the Securities Act, or, in the case of an intrastate offering, any document by whatever name known, utilized for the purpose of offering and selling REIT Shares to the public.

 

“REAL PROPERTY” means land, rights in land (including leasehold interests), and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land.

 

“RECEIVED REIT SHARES” has the meaning set forth in Section 6.10(b) hereof.

 

“REDEMPTION” has the meaning provided in Section 8.5(a) hereof.

 

“REDEMPTION PRICE” means the Transaction Price on the Specified Redemption Date, multiplied by any discount determined by the General Partner, including but not limited to, any discount based upon the combined number of years that the applicable Partner has held the Partnership Units offered for redemption.

 

“REDEMPTION RIGHT” has the meaning provided in Section 8.5(a) hereof.

 

“REDEMPTION SHARES” has the meaning provided in Section 8.6(a) hereof.

 

“REGULATIONS” means the Federal income tax regulations promulgated under the Code, as amended and as hereafter amended from time to time.  Reference to any particular provision of the Regulations shall mean that provision of the Regulations on the date hereof and any successor provision of the Regulations.

 

“REGULATORY ALLOCATIONS” has the meaning set forth in Section 5.1(i) hereof.

 

“REIT” means a corporation, trust, association or other legal entity (other than a real estate syndication) that qualifies as a real estate investment trust under Sections 856 through 860 of the Code, and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder.

 

“REIT SHARE” means a common share of beneficial interest in the General Partner (or successor entity, as the case may be), including Class I REIT Shares, Class T REIT Shares and Class W REIT Shares.

 

“REIT SHARES AMOUNT” means, with respect to Tendered Units of a Class, a number of REIT Shares of the corresponding REIT Share Class equal to the product of the number of Partnership Units of such Class offered for exchange by a Tendering Party, multiplied by the Conversion Factor, as adjusted to and including the Specified Redemption Date; provided that in 

 

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the event the General Partner issues to all holders of REIT Shares rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase REIT Shares of such Class, or any other securities or property (collectively, the “rights”), and the rights have not expired at the Specified Redemption Date, then the REIT Shares Amount shall also include the rights issuable to a holder of the REIT Shares.

 

“RELATED PARTY” means, with respect to any Person, any other Person whose ownership of shares of the General Partner’s capital stock would be attributed to the first such Person under Code Section 544 (as modified by Code Section 856(h)(1)(B)).

 

“SAFE HARBOR” means, the election described in the Safe Harbor Regulation, pursuant to which a partnership and all of its partners may elect to treat the fair market value of a partnership interest that is transferred in connection with the performance of services as being equal to the liquidation value of that interest.

 

“SAFE HARBOR ELECTION” means the election by a partnership and its partners to apply the Safe Harbor, as described in the Safe Harbor Regulation and Internal Revenue Service Notice 2005-43 , issued on May 19, 2005.

 

“SAFE HARBOR REGULATION” means Proposed Treasury Regulations Section 1.83-3(l) issued on May 19, 2005.

 

“SECURITIES ACT” means the Securities Act of 1933, as amended from time to time, or any successor statute thereto.  Reference to any provision of the Securities Act shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, and the rules and regulations promulgated thereunder.

 

“SERVICE” means the United States Internal Revenue Service.

 

“SPECIAL OP UNITHOLDERS” means the holders of Special Partnership Units.

 

“SPECIAL PARTNERSHIP UNIT” means a unit of a series of Partnership Interests, designated as Special Partnership Units, issued pursuant to Section 4.1.  The number of Special Partnership Units outstanding and the Special Percentage Interests in the Partnership represented by such Special Partnership Units are set forth on Exhibit A, as such Exhibit may be amended from time to time.  A holder of a Special Partnership Unit shall have the same rights and preferences as a holder of a Partnership Unit under this Agreement that is a Limited Partner except as set forth in Sections 5.2(c), 8.5, and 9.2(a).

 

“SPECIAL PERCENTAGE INTEREST” shall mean the percentage ownership interest in the Partnership of each Special OP Unitholder, as determined by dividing the Special Partnership Units owned by each Special OP Unitholder by the total number of Special Partnership Units then outstanding.  The Special Percentage Interest of each Partner shall be as set forth on Exhibit A, as such Exhibit may be amended from time to time.

 

“SPECIFIED REDEMPTION DATE” means the last business day of the month that includes the day that is forty-five (45) days after the receipt by the General Partner of the Notice of Redemption.

 

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“SUBSIDIARY” means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities or (ii) the outstanding equity interests is owned, directly or indirectly, by such Person.

 

“SUBSIDIARY PARTNERSHIP” means any partnership of which the partnership interests therein are owned by the General Partner or a direct or indirect subsidiary of the General Partner.

 

“SUBSTITUTE LIMITED PARTNER” means any Person admitted to the Partnership as a Limited Partner pursuant to Section 9.3 hereof.

 

“SUCCESSOR ENTITY” has the meaning provided in the definition of “Conversion Factor” contained herein.

 

“SURVIVOR” has the meaning set forth in Section 7.1(d) hereof.

 

“TAX MATTERS PARTNER” has the meaning described in Section 10.5(a) hereof.

 

“TENDERED UNITS” has the meaning provided in Section 8.5(a) hereof.

 

“TENDERING PARTY” has the meaning provided in Section 8.5(a) hereof.

 

“TRANSACTION” has the meaning set forth in Section 7.1(c) hereof.

 

“TRANSACTION PRICE” shall mean the most recently disclosed NAV per REIT Share; provided that the General Partner may, in its discretion, adjust the Transaction Price to a price that the General Partner believes reflects the NAV per REIT Share more appropriately than the most recently disclosed NAV per REIT Share, including by updating a previously disclosed Transaction Price, in cases where the General Partner believes there has been a material change (positive or negative) to the NAV per REIT Share relative to the most recently disclosed NAV per REIT Share. Until the General Partner initially determines an NAV per share, the Transaction Price shall be equal to $10.00 per share.

 

“TRANSFER” has the meaning set forth in Section 9.2(a) hereof.

 

“VALUATION PROCEDURES”  means the valuation procedures adopted by the board of directrors of the General Partner, as amended from time to time.

 

“VPU”  means value per Partnership Unit, which on any given date shall be equal to (i) the Partnership NAV on such date, divided by (ii) the aggregate number of Partnership Units of all classes outstanding on such date. Until the General Partner initially determines a VPU, the VPU shall be deemed to equal $10.00.

 

“WEIGHTED-AVERAGE DISTRIBUTIONS PER PARTNERSHIP UNIT”  shall mean, for a particular period of time, an amount equal to the ratio of (i) the aggregate distributions accrued in respect of all Partnership Units during the applicable period, divided by (ii) the weighted-average number of Partnership Units of all classes outstanding during the applicable period, calculated in accordance with GAAP applied on a consistent basis.

 

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ARTICLE 2
 PARTNERSHIP FORMATION AND IDENTIFICATION

 

2.1                               Formation.  The Partnership was formed as a limited partnership pursuant to the Act and all other pertinent laws of the State of Delaware, for the purposes and upon the terms and conditions set forth in this Agreement.

 

2.2                               Name, Office and Registered Agent.  The name of the Partnership is BCI IV Operating Partnership LP.  The specified office and place of business of the Partnership shall be 518 17th Street, 17th Floor, Denver, Colorado 80202.  The General Partner may at any time change the location of such office, provided the General Partner gives notice to the Partners of any such change.  The name and address of the Partnership’s registered agent is The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The sole duty of the registered agent as such is to forward to the Partnership any notice that is served on him as registered agent.

 

2.3                               Partners.

 

(a)         The General Partner of the Partnership is Black Creek Industrial REIT IV Inc., a Maryland corporation.  Its principal place of business is the same as that of the Partnership.

 

(b)         The Limited Partners are those Persons identified as Limited Partners on Exhibit A hereto, as amended from time to time.

 

2.4                               Term and Dissolution.

 

(a)         The term of the Partnership shall continue in full force and effect until December 31, 2039, except that the Partnership shall be dissolved upon the first to occur of any of the following events:

 

(i)                                     The occurrence of an Event of Bankruptcy as to a General Partner or the dissolution, death, removal or withdrawal of a General Partner unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof;

 

(ii)                                  The passage of ninety (90) days after the sale or other disposition of all or substantially all of the assets of the Partnership (provided that if the Partnership receives an installment obligation as consideration for such sale or other disposition, the Partnership shall continue, unless sooner dissolved under the provisions of this Agreement, until such time as such note or notes are paid in full); or

 

(iii)                               The election by the General Partner that the Partnership should be dissolved.

 

(b)         Upon dissolution of the Partnership (unless the business of the Partnership is continued pursuant to Section 7.3(b) hereof), the General Partner (or its trustee, receiver, successor or legal representative) shall amend or cancel any Certificate(s) and liquidate the Partnership’s assets and apply and distribute the proceeds thereof in accordance with Section

 

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5.6 hereof.  Notwithstanding the foregoing, the liquidating General Partner may either (i) defer liquidation of, or withhold from distribution for a reasonable time, any assets of the Partnership (including those necessary to satisfy the Partnership’s debts and obligations), or (ii) distribute the assets to the Partners in kind.

 

2.5                               Filing of Certificate and Perfection of Limited Partnership.  The General Partner shall execute, acknowledge, record and file at the expense of the Partnership, any and all amendments to the Certificate(s) and all requisite fictitious name statements and notices in such places and jurisdictions as may be necessary to cause the Partnership to be treated as a limited partnership under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Partnership conducts business.

 

2.6                               Certificates Describing Partnership Units and Special Partnership Units.  At the request of a Limited Partner, the General Partner, at its option, may issue (but in no way is obligated to issue) a certificate summarizing the terms of such Limited Partner’s interest in the Partnership, including the number of Partnership Units and Special Partnership Units owned and the Percentage Interest and Special Percentage Interest represented by such Partnership Units and Special Partnership Units as of the date of such certificate.  Any such certificate (i) shall be in form and substance as approved by the General Partner, (ii) shall not be negotiable and (iii) shall bear a legend to the following effect:

 

This certificate is not negotiable. The Partnership Units and Special Partnership Units represented by this certificate are governed by and transferable only in accordance with the provisions of the Second Amended and Restated Limited Partnership Agreement of BCI IV Operating Partnership LP, as amended from time to time.

 

ARTICLE 3
 BUSINESS OF THE PARTNERSHIP

 

The purpose and nature of the business to be conducted by the Partnership is (i) to conduct any business that may be lawfully conducted by a limited partnership organized pursuant to the Act, provided, however, that such business shall be limited to and conducted in such a manner as to permit the General Partner at all times to qualify as a REIT, unless the General Partner otherwise ceases to qualify as a REIT, and in a manner such that the General Partner will not be subject to any taxes under Section 857 or 4981 of the Code, (ii) to enter into any partnership, joint venture, co-ownership or other similar arrangement to engage in any of the foregoing or the ownership of interests in any entity engaged in any of the foregoing and (iii) to do anything necessary or incidental to the foregoing. In connection with the foregoing, and without limiting the General Partner’s right in its sole and absolute discretion to qualify or cease qualifying as a REIT, the Partners acknowledge that the General Partner intends to qualify as a REIT for federal income tax purposes and upon such qualification the avoidance of income and excise taxes on the General Partner inures to the benefit of all the Partners and not solely to the General Partner.  Notwithstanding the foregoing, the Limited Partners agree that the General Partner may terminate its status as a REIT under the Code at any time to the full extent permitted under the Charter.  The General Partner on behalf of the Partnership shall also be empowered to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code.

 

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ARTICLE 4
 CAPITAL CONTRIBUTIONS AND ACCOUNTS

 

4.1                               Capital Contributions.  The General Partner and the initial Limited Partners have made capital contributions to the Partnership in exchange for the Partnership Interests set forth opposite their names on Exhibit A, as such exhibit may be amended from time to time.   The Partners shall own Partnership Units of the Class or series and in the amounts set forth in Exhibit A and shall have a Percentage Interest in the Partnership as set forth in Exhibit A. Notwithstanding the foregoing, the General Partner may keep Exhibit A current through separate revisions to the books and records of the Partnership that reflect periodic changes to the capital contributions made by the Partners and redemptions and other purchases of Partnership Units by the Partnership, and corresponding changes to the Partnership Interests of the Partners, without preparing a formal amendment to this Agreement, provided that such amendment shall be prepared upon the written request of any Limited Partner.

 

4.2                               Additional Capital Contributions and Issuances of Additional Partnership Interests.  Except as provided in this Section 4.2 or in Section 4.3, the Partners shall have no right or obligation to make any additional Capital Contributions or loans to the Partnership.  The General Partner may contribute additional capital to the Partnership, from time to time, and receive additional Partnership Interests in respect thereof, in the manner contemplated in this Section 4.2.  Limited Partnership Interests will be issued to the General Partner in exchange for contributions by the General Partner to the capital of the Partnership of the proceeds received by the General Partners from the issuance of REIT Shares.

 

(a)         Issuances of Additional Partnership Interests.

 

(i)                                     General.  The General Partner is hereby authorized to cause  the Partnership to issue such additional Partnership Interests in the form of Partnership Units for any Partnership purpose at any time or from time to time, to the Partners (including the General Partner) or to other Persons for such consideration and on such terms and conditions as shall be established by the General Partner in its sole and absolute discretion, all without the approval of any Limited Partners, including but not limited to Partnership Units issued in connection with the issuance of REIT Shares of or other interests in the General Partner, Class I Units issued to the Special OP Unitholders in lieu of payments or distributions of the Performance Allocation, Partnership Units issued to the Advisor in lieu of cash fees pursuant to the Advisory Agreement and Partnership Units issued in connection with acquisitions of properties. Any additional Partnership Interests issued thereby may be issued in one or more Classes (including the Classes specified in this Agreement or any other Classes), or one or more series of any of such Classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Limited Partnership Interests, all as shall be determined by the General Partner in its sole and absolute discretion and without the approval of any Limited Partner, subject to Delaware law, including, without limitation, (i) the allocations of items of Partnership income, gain, loss, deduction and credit to each such Class or series of Partnership Interests; (ii) the right of each such Class or series of Partnership Interests to share in Partnership distributions; and (iii) the rights of each such Class or series of Partnership Interests upon dissolution and liquidation of the Partnership; provided, however, that no additional Partnership Interests shall be issued to the General Partner unless:

 

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(1)         (A) the additional Partnership Interests are issued in connection with an issuance of REIT Shares of or other interests in the General Partner, which shares or interests have designations, preferences and other rights, all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Partnership Interests issued to the General Partner by the Partnership in accordance with this Section 4.2 (without limiting the foregoing, for example, the Partnership shall issue Partnership Interests consisting of Class I Units to the General Partner in connection with the issuance of Class I REIT Shares, shall issue Partnership Interests consisting of Class T Units to the General Partner in connection with the issuance of Class T REIT Shares and shall issue Class W Units to the General Partner in connection with the issuance of Class W REIT Shares) and (B) the General Partner shall make a Capital Contribution to the Partnership in an amount equal to the proceeds raised in connection with the issuance of such shares of stock of or other interests in the General Partner;

 

(2)         the additional Partnership Interests are issued in exchange for property owned by the General Partner with a fair market value, as determined by the General Partner, in good faith, equal to the value of the Partnership Interests; or

 

(3)         the additional Partnership Interests are issued to all Partners holding Partnership Units in proportion to their respective Percentage Interests.

 

Without limiting the foregoing, the General Partner is expressly authorized to cause the Partnership to issue Partnership Units for less than fair market value, so long as the General Partner concludes in good faith that such issuance is in the best interests of the General Partner and the Partnership.

 

(ii)                                  Upon Issuance of Additional Securities.  The General Partner shall not issue any Additional Securities other than to all holders of REIT Shares, unless (A) the General Partner shall cause the Partnership to issue to the General Partner, as the General Partner may designate, Partnership Interests or rights, options, warrants or convertible or exchangeable securities of the Partnership having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Additional Securities, and (B) the General Partner contributes the proceeds from the issuance of such Additional Securities and from any exercise of rights contained in such Additional Securities, directly and through the General Partner, to the Partnership (without limiting the foregoing, for example, the Partnership shall issue Partnership Interests consisting of Class I Units to the General Partner in connection with the issuance of Class I REIT Shares, shall issue Partnership Interests consisting of Class T Units to the General Partner in connection with the issuance of Class T REIT Shares and shall issue Partnership Interests consisting of Class W Units to the General Partner in connection with the issuance of Class W REIT Shares); provided, however, that the General Partner is allowed to issue Additional Securities in connection with an acquisition of a property to be held directly by the General Partner, but if and only if, such direct acquisition and issuance of Additional Securities have been approved and determined to be in the best interests of the General Partner and the Partnership.  Without limiting the foregoing, the General Partner is expressly authorized to issue Additional Securities for less than fair market value, and to cause the Partnership to issue to the General Partner corresponding Partnership Interests, so long as (x) the General Partner concludes in good faith that such issuance is in the best interests of the 

 

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General Partner and the Partnership, including without limitation, the issuance of REIT Shares and corresponding Partnership Units  pursuant to an employee share purchase plan providing for employee purchases of REIT Shares at a discount from fair market value or employee stock options that have an exercise price that is less than the fair market value of the REIT Shares, either at the time of issuance or at the time of exercise, and (y) the General Partner contributes all proceeds from such issuance to the Partnership.

 

(b)         Certain Deemed Contributions of Proceeds of Issuance of REIT Shares.  In connection with any and all issuances of REIT Shares, the General Partner shall make Capital Contributions to the Partnership of the proceeds therefrom, provided that if the proceeds actually received and contributed by the General Partner are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then the General Partner shall be deemed to have made Capital Contributions to the Partnership in the aggregate amount of the gross proceeds of such issuance and the Partnership shall be deemed simultaneously to have paid such offering expenses in accordance with Section 6.5 hereof and in connection with the required issuance of additional Partnership Units to the General Partner for such Capital Contributions pursuant to Section 4.2(a) hereof, and any such expenses shall be allocable solely to the Class of Partnership Units issued to the General Partner at such time.

 

4.3                               Additional Funding.  If the General Partner determines that it is in the best interests of the Partnership to provide for additional Partnership funds (“Additional Funds”) for any Partnership purpose, the General Partner may (i) cause the Partnership to obtain such funds from outside borrowings, or (ii) elect to have the General Partner or any of its Affiliates provide such Additional Funds to the Partnership through loans or otherwise, provided, however, that the Partnership may not borrow money from its Affiliates, unless a majority of the Directors of the General Partner (including a majority of Independent Directors) not otherwise interested in such transaction approve the transaction as being fair, competitive, and commercially reasonable and no less favorable to the Partnership than comparable loans between unaffiliated parties.

 

4.4                               Capital Accounts.  A separate capital account (each a “Capital Account”) shall be established and maintained for each Partner in accordance with Regulations Section 1.704-1(b)(2)(iv).  If (i) a new or existing Partner acquires an additional Partnership Interest in exchange for more than a de minimis Capital Contribution, (ii) the Partnership distributes to a Partner more than a de minimis amount of Partnership property, or money as consideration for a Partnership Interest, (iii) the Partnership is liquidated within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g), or (iv) the Partnership grants a Partnership Interest (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Partnership, the General Partner shall revalue the property of the Partnership to its fair market value (as determined by the General Partner, in its sole and absolute discretion, and taking into account Section 7701(g) of the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f).  When the Partnership’s property is revalued by the General Partner, the Capital Accounts of the Partners shall be adjusted in accordance with Regulations Section 1.704-1(b)(2)(iv)(f) and (g), which generally require such Capital Accounts to be adjusted to reflect the manner in which the unrealized gain or loss inherent in such property (that has  not been reflected in the Capital Accounts previously) would be allocated among the Partners pursuant to Section 5.1 if there were a taxable disposition of such property for its fair market value (as 

 

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determined by the General Partner in its sole and absolute discretion, and taking into account Section 7701(g) of the Code, on the date of the revaluation).

 

4.5                               Percentage Interests.  If the number of outstanding Partnership Units increases or decreases during a taxable year, each Partner’s Percentage Interest shall be adjusted by the General Partner effective as of the effective date of each such increase or decrease.  If the Partners’ Percentage Interests are adjusted pursuant to this Section 4.5, the net profits and net losses (and items thereof) for the taxable year in which the adjustment occurs shall be allocated between the part of the year ending on the day when the Partnership’s property is revalued by the General Partner and the part of the year beginning on the following day either (i) as if the taxable year had ended on the date of the adjustment or (ii) based on the number of days in each part.  The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate net profits and net losses (or items thereof) for the taxable year in which the adjustment occurs.  The allocation of net profits and net losses (or items thereof) for the earlier part of the year shall be based on the Percentage Interests before adjustment, and the allocation of net profits and net losses (or items thereof) for the later part shall be based on the adjusted Percentage Interests.

 

4.6                               No Interest On Contributions.  No Partner shall be entitled to interest on its Capital Contribution.

 

4.7                               Return Of Capital Contributions.  No Partner shall be entitled to withdraw any part of its Capital Contribution or its Capital Account or to receive any distribution from the Partnership, except as specifically provided in this Agreement.  Except as otherwise provided herein, there shall be no obligation to return to any Partner or withdrawn Partner any part of such Partner’s Capital Contribution for so long as the Partnership continues in existence.

 

4.8                               No Third Party Beneficiary.  No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns.  None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners.  In addition, it is the intent of the parties hereto that no distribution to any Limited Partner shall be deemed a return of money or other property in violation of the Act.  However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Limited Partner is obligated to return such money or property, such obligation shall be the obligation of such Limited Partner and not of the General Partner.  Without limiting the generality of the foregoing, a deficit Capital Account of a Partner shall not be deemed to be a liability of such Partner nor an asset or property of the Partnership.

 

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ARTICLE 5
 PROFITS AND LOSSES; DISTRIBUTIONS

 

5.1                               Allocation of Profit and Loss.

 

(a)         General Partner Gross Income Allocation.  There shall be specially allocated to the General Partner an amount of (i) first, items of Partnership income and (ii) second, items of Partnership gain during each fiscal year or other applicable period, before any other allocations are made hereunder, in an amount equal to the excess, if any, of  the cumulative distributions made to the General Partner under Section 6.5(b) hereof, over the cumulative allocations of Partnership income and gain to the General Partner under this Section 5.1(a).

 

(b)         General Allocations.  The items of Profit and Loss and deduction of the Partnership for each fiscal year or other applicable period, other than any items allocated under Section 5.1(a), shall be allocated among the Partners in a manner that will, as nearly as possible (after giving effect to the allocations under Section 5.1(a), 5.1(c), 5.1(d), 5.1(e), 5.1(h), 5.1(i) and 5.3) cause the Capital Account balance of each Partner at the end of such fiscal year or other applicable period to equal (i) the amount of the hypothetical distribution that such Partner would receive if the Partnership were liquidated on the last day of such period and all assets of the Partnership, including cash, were sold for cash equal to their Carrying Values, taking into account any adjustments thereto for such period, all liabilities of the Partnership were satisfied in full in cash according to their terms (limited with respect to each nonrecourse liability to the Carrying Value of the assets securing such liability) and the remaining cash proceeds (after satisfaction of such liabilities) were distributed in full pursuant to Section 5.2(b); minus (ii) the sum of such Partner’s share of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain and the amount, if any and without duplication, that the Partner would be obligated to contribute to the capital of the Partnership, all computed as of the date of the hypothetical sale of assets.

 

(c)          Nonrecourse Deductions; Minimum Gain Chargeback.  Notwithstanding any provision to the contrary, (i) any expense of the Partnership that is a “nonrecourse deduction” within the meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance with the Partners’ respective Percentage Interests, (ii) any expense of the Partnership that is a “partner nonrecourse deduction” within the meaning of Regulations Section 1.704-2(i)(2) shall be allocated to the Partner or Partners that bear the “economic risk of loss” with respect to the liability to which such deductions are attributable in accordance with Regulations Section 1.704-2(i)(1), (iii) if there is a net decrease in Partnership Minimum Gain within the meaning of Regulations Section 1.704-2(f)(1) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(f) and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if there is a net decrease in Partner Nonrecourse Debt Minimum Gain within the meaning of Regulations Section 1.704-2(i)(4) for any Partnership taxable year, then, subject to the exceptions set forth in Regulations Section 1.704-(2)(g), items of gain and income shall be allocated among the Partners in accordance with Regulations Section 1.704-2(i)(4) and the ordering rules contained in Regulations Section 1.704-2(j).  A Partner’s “interest in partnership profits” for purposes of determining its share of the excess nonrecourse liabilities of the Partnership within the meaning of Regulations Section 1.752-3(a)(3) shall be such Partner’s Percentage Interest.

 

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(d)         Qualified Income Offset.  If a Partner unexpectedly receives in any taxable year an adjustment, allocation, or distribution described in subparagraphs (4), (5), or (6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a deficit balance in such Partner’s Capital Account that exceeds the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), such Partner shall be allocated specially for such taxable year (and, if necessary, later taxable years) items of income and gain in an amount and manner sufficient to eliminate such deficit Capital Account balance as quickly as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). This Section 5.1(d) is intended to constitute a “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.  After the occurrence of an allocation of income or gain to a Partner in accordance with this Section 5.1(d), to the extent permitted by Regulations Section 1.704-1(b), items of expense or loss shall be allocated to such Partner in an amount necessary to offset the income or gain previously allocated to such Partner under this Section 5.1(d).

 

(e)          Capital Account Deficits.  Loss (or items of expense or loss) shall not be allocated to a Limited Partner to the extent that such allocation would cause or increase a deficit in such Partner’s Capital Account at the end of any fiscal year (after reduction to reflect the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Partner’s shares of Partnership Minimum Gain and Partner Nonrecourse Debt Minimum Gain, as determined in accordance with Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5).  Any Loss or item of expense or loss in excess of that limitation shall be allocated to the General Partner.  After an allocation to the General Partner under the immediately preceding sentence, to the extent permitted by Regulations Section 1.704-1(b), Profit or items of income or gain shall be allocated to the General Partner in an amount necessary to offset the items allocated to the General Partner under the immediately preceding sentence.

 

(f)           Allocations Between Transferor and Transferee.  If a Partner transfers any part or all of its Partnership Interest, the distributive shares of the various items of Profit and Loss allocable among the Partners during such fiscal year of the Partnership shall be allocated between the transferor and the transferee Partner either (i) as if the Partnership’s fiscal year had ended on the date of the transfer, or (ii) based on the number of days of such fiscal year that each was a Partner without regard to the results of Partnership activities in the respective portions of such fiscal year in which the transferor and the transferee were Partners.  The General Partner, in its sole and absolute discretion, shall determine which method shall be used to allocate the distributive shares of the various items of Profit and profit and loss between the transferor and the transferee Partner.

 

(g)          Definition of Profit and Loss.  “Profit” and “Loss” and any items of income, gain, expense, or loss referred to in this Agreement shall be determined in accordance with federal income tax accounting principles, as modified by Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not include items of income, gain and expense that are specifically allocated pursuant to Section 5.1(a), 5.1(c), 5.1(d), 5.1(e) or 5.1(h).  All allocations of Profit and Loss (and all items contained therein) for federal income tax purposes shall be identical to all allocations of such items set forth in this Section 5.1, except as otherwise required by Section 704(c) of the Code and Regulations Section 1.704-1(b)(4).  The General 

 

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Partner shall have the authority to elect the method to be used by the Partnership for allocating items of income, gain, and expense as required by Section 704(c) of the Code including a method that may result in a Partner receiving a disproportionately larger share of the Partnership tax depreciation deductions, and such election shall be binding on all Partners.

 

(h)         Special Allocations of Class-Specific Items. To the extent that any items of income, gain, loss or deduction of the General Partner are allocable to a specific Class or Classes of REIT Shares as provided in the Prospectus, including, without limitation, Distribution Fees, such items, or an amount equal thereto, shall be specially allocated to the Class or Classes of Partnership Units corresponding to such Class or Classes of REIT Shares.

 

(i)                                     Curative Allocations.  The allocations set forth in Section 5.1(c) (d) and (e) of this Agreement (the “Regulatory Allocations”) are intended to comply with certain requirements of the Regulations.  The General Partner is authorized to offset all Regulatory Allocations either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss or deduction pursuant to this Section 5.1(i).  Therefore, notwithstanding any other provision of this Section 5.1 (other than the Regulatory Allocations), the General Partner shall make such offsetting special allocations of Partnership income, gain, loss or deduction in whatever manner it deems appropriate so that, after such offsetting allocations are made, each Partner’s Capital Account is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to Section 5.1(a), (b), (f) and (h).

 

5.2                               Distribution of Cash.

 

(a)         The Partnership may distribute cash on a monthly (or, at the election of the General Partner, more or less frequent) basis, in an amount determined by the General Partner in its sole and absolute discretion, to the Partners who are Partners on the Partnership Record Date with respect to such quarter (or other distribution period) in accordance with Section 5.2(b).

 

(b)         Except for distributions pursuant to Section 5.6 of this Agreement in connection with the dissolution and liquidation of the Partnership and subject to the provisions of Sections 5.2(c), 5.2(d), 5.3, 5.5 of this Agreement, distributions shall be made to the OP Unitholders in accordance with their respective Percentage Interests on the Partnership Record Date, provided that the aggregate distribution made hereunder to the Class T Unitholders and the Class W Unitholders shall be reduced by the respective aggregate Distribution Fee payable by the General Partner with respect to Class T REIT Shares and Class W REIT Shares with respect to such Record Date. In applying this Section 5.2(b), the amount distributed per Partnership Unit of any Class may differ from the amount per Partnership Unit of another Class on account of differences in Class-specific expense allocations with respect to REIT Shares as described in the Prospectus (and of corresponding special allocations among Classes of Partnership Units in accordance with Section 5.1(h) hereof) or for other reasons as determined by the board of directors of the General Partner. Any such differences shall correspond to differences in the amount of distributions per REIT Share for REIT Shares of different Classes, with the same adjustments being made to the amount of distributions per Partnership Unit for Partnership Units 

 

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of a particular Class as are made to the distributions per REIT Share by the General Partner with respect to REIT Shares having the same Class designation.

 

(c)          Notwithstanding the foregoing, so long as the Advisory Agreement has not been terminated (including by means of non-renewal), the Special OP Unitholders shall be entitled to a distribution (the “Performance Allocation”), promptly following the end of each year (which shall accrue on a monthly basis) in an amount equal to:

 

(i)             the lesser of (A) the amount equal to 12.5% of (1) the Annual Total Return Amount less (2) the Loss Carryforward, and (B) the amount equal to (x) the Annual Total Return Amount, less (y) the Loss Carryforward, less (z) the Hurdle Amount;

 

multiplied by:

 

(ii)          the weighted-average number of Partnership Units outstanding during the applicable year, calculated in accordance with GAAP as applied on a consistent basis;

 

(iii)       provided, that the Performance Allocation shall at no time be less than zero.

 

Except as described in the definition of Loss Carryforward in this Agreement, any amount by which the Annual Total Return Amount falls below the Hurdle Amount will not be carried forward to subsequent periods. If the Performance Allocation is distributable pursuant to this Section 5.2(c), the Special OP Unitholders shall be entitled to such distribution even in the event that the total percentage return to OP Unitholders over any longer or shorter period, or the total percentage return to any particular OP Unitholder over the same, longer or shorter period, has been less than the Annual Total Return Amount used to calculate the Hurdle Amount.  The Special OP Unitholders shall not be obligated to return any portion of any Performance Allocation paid based on the General Partner’s or the Partnership’s subsequent performance.

 

If the Performance Allocation is being calculated with respect to a year in which the General Partner completes a Liquidity Event, for purposes of determining the Annual Total Return Amount, the change in VPU shall be deemed to equal the difference between the Ending VPU as of the end of the prior calendar year and the value per Partnership Unit determined in connection with such Liquidity Event. In connection with a Listing, for purposes of determining the Annual Total Return Amount, the change in VPU shall be deemed to equal the difference between the Ending VPU as of the end of the prior calendar year and an amount equal to the market value of the listed shares based upon the average closing price or, if the average closing price is not available, the average of the bid and asked prices, for the 30-day period beginning 90 days after such Listing. Upon a Liquidity Event other than a Listing, for purposes of determining the Annual Total Return Amount, the change in VPU shall be deemed to equal the difference between the Ending VPU as of the end of the prior calendar year and an amount equal to the consideration per Fund Interest received by holders of Fund Interests in connection with such Liquidity Event.

 

The Performance Allocation with respect to any calendar year is distributable after the completion of the NAV Calculations for December of such year.  The

 

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Performance Allocation shall be distributable for each calendar year in which the Advisory Agreement is in effect, even if the Advisory Agreement is in effect for a partial calendar year. If the Performance Allocation is distributable with respect to any partial calendar year, the Performance Allocation shall be calculated based on the annualized total return amount determined using the total return achieved for the period of such partial calendar year. In the event the Advisory Agreement is terminated or its term expires without renewal, the partial period Performance Allocation shall be calculated and due and distributable upon the date of  such termination or non-renewal.  In such event, for purposes of determining the Annual Total Return Amount, the change in VPU shall be based on a good faith estimate of what the NAV Calculations would be as of that date; provided, that, if the Advisory Agreement is terminated with respect to a Liquidity Event, the Performance Allocation will be due and distributable in connection with such Liquidity Event and the Annual Total Return Amount will be calculated as set forth in in this Section 5.2(c).

 

In the event the Partnership commences a liquidation of its Assets during any calendar year, the Special OP Unitholders shall be distributed the Performance Allocation from the proceeds of the liquidation and the Performance Allocation shall be calculated at the end of the liquidation period prior to the distribution of the liquidation proceeds to the OP Unitholders.  The calculation of the Performance Allocation for any partial year shall be calculated consistent with the applicable provisions of this Section 5.2(c).

 

At the election of the Special OP Unitholders, all or a portion of the Performance Allocation shall be paid instead to the Advisor as a fee as set forth in Paragraph 9(a) of the Advisory Agreement. If the Special OP Unitholders do not elect on or before the first day of a calendar year to have all or a portion of the Performance Allocation paid as a fee to the Advisor, then the Performance Allocation shall be distributable to the Special OP Unitholders as set forth in this Section 5.2(c).

 

The Performance Allocation may be payable in cash or as a distribution of Class I Units at the election of the Special OP Unitholders. If the Special OP Unitholders elect to receive such distributions in Class I Units, the Special OP Unitholders will receive the number of Class I Units that results from dividing an amount equal to the value of the Performance Allocation by the NAV per Class I Unit at the time of such distribution. If the Special OP Unitholders elect to receive such distributions in Class I Units, the Special OP Unitholders may request the Partnership to redeem such Class I Units from the Special OP Unitholders at any time thereafter pursuant to Section 8.5.

 

The measurement of the change in VPU for the purpose of calculating the Annual Total Return Amount is subject to adjustment by the board of directors of the General Partner to account for any dividend, split, recapitalization or any other similar change in the Partnership’s capital structure or any distributions that the board of directors of the General Partner deems to be a return of capital if such changes are not already reflected in the Partnership’s net assets.

 

The Partnership shall not calculate or accrue the Performance Allocation with respect to any year in which the General Partner has not determined an initial VPU in 

 

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accordance with the Valuation Procedures. The Performance Allocation shall be calculated and accrued beginning as of the General Partner’s determination of an initial VPU in accordance with the Valuation Procedures and shall be calculated and accrued for periods thereafter. The Performance Allocation shall be calculated for the entire calendar year in which the General Partner determines an initial VPU and the Beginning VPU shall be deemed $10.00 for purposes of the calculation.

 

(d)         Notwithstanding any other provision of this Agreement, the General Partner is authorized to take any action that it determines to be necessary or appropriate to cause the Partnership to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code.  To the extent that the Partnership is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Partner or assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to the Partner equals or exceeds the amount required to be withheld by the Partnership, the amount withheld shall be treated as a distribution of cash in the amount of such withholding to such Partner, or (ii) if the actual amount to be distributed to the Partner is less than the amount required to be withheld by the Partnership, the actual amount shall be treated as a distribution of cash in the amount of such withholding and the additional amount required to be withheld shall be treated as a loan (a “Partnership Loan”) from the Partnership to the Partner on the day the Partnership pays over such amount to a taxing authority.  A Partnership Loan shall be repaid through withholding by the Partnership with respect to subsequent distributions to the applicable Partner or assignee.  In the event that a Limited Partner (a “Defaulting Limited Partner”) fails to pay any amount owed to the Partnership with respect to the Partnership Loan within fifteen (15) days after demand for payment thereof is made by the Partnership on the Limited Partner, the General Partner, in its sole and absolute discretion, may elect to make the payment to the Partnership on behalf of such Defaulting Limited Partner.  In such event, on the date of payment, the General Partner shall be deemed to have extended a loan (a “General Partner Loan”) to the Defaulting Limited Partner in the amount of the payment made by the General Partner and shall succeed to all rights and remedies of the Partnership against the Defaulting Limited Partner as to that amount.  Without limitation, the General Partner shall have the right to receive any distributions that otherwise would be made by the Partnership to the Defaulting Limited Partner until such time as the General Partner Loan has been paid in full, and any such distributions so received by the General Partner shall be treated as having been received by the Defaulting Limited Partner and immediately paid to the General Partner.

 

Any amounts treated as a Partnership Loan or a General Partner Loan pursuant to this Section 5.2(d) shall bear interest at the lesser of (i) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Partnership or the General Partner, as applicable, is deemed to extend the loan until such loan is repaid in full.

 

(e)          In no event may a Partner receive a distribution of cash with respect to a Partnership Unit if such Partner is entitled to receive a cash distribution as the holder of record of a REIT Share for which all or part of such Partnership Unit has been or will be exchanged.

 

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5.3                               REIT Distribution Requirements.  The General Partner shall use its commercially reasonable efforts to cause the Partnership to distribute amounts sufficient to enable the General Partner to make shareholder distributions that will allow the General Partner to (i) meet its distribution requirement for qualification as a REIT as set forth in Section 857 of the Code and (ii) avoid any federal income or excise tax liability imposed by the Code.

 

5.4                               No Right to Distributions in Kind.  No Partner shall be entitled to demand property other than cash in connection with any distributions by the Partnership.

 

5.5                               Limitations on Return of Capital Contributions.

 

Notwithstanding any of the provisions of this Article 5, no Partner shall have the right to receive and the General Partner shall not have the right to make, a distribution that includes a return of all or part of a Partner’s Capital Contributions, unless after giving effect to the return of a Capital Contribution, the sum of all Partnership liabilities, other than the liabilities to a Partner for the return of his Capital Contribution, does not exceed the fair market value of the Partnership’s assets.

 

5.6                               Distributions Upon Liquidation.  Immediately before liquidation of the Partnership, Class T Units will automatically convert to Class I Units at the Class T Conversion Rate and Class W Units will automatically convert to Class I Units at the Class W Conversion Rate. Upon liquidation of the Partnership, after payment of, or adequate provision for, debts and obligations of the Partnership, including any Partner loans, and after distribution of any accrued Performance Allocation to the Special OP Unitholders, any remaining assets of the Partnership shall be distributed to to all Partners in proportion to their respective positive Capital Account balances, determined after taking into account all allocations required to be made pursuant to Section 5.1 hereof and all prior distributions made pursuant to this Article 5, in compliance with Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).   Notwithstanding any other provision of this Agreement, the amount by which the value, as determined in good faith by the General Partner, of any property other than cash to be distributed in kind to the Partners exceeds or is less than the Carrying Value of such property shall, to the extent not otherwise recognized by the Partnership, be taken into account in computing Profit and Loss of the Partnership for purposes of crediting or charging the Capital Accounts of, and distributing proceeds to, the Partners, pursuant to this Agreement.  To the extent deemed advisable by the General Partner, appropriate arrangements (including the use of a liquidating trust) may be made to assure that adequate funds are available to pay any contingent debts or obligations.

 

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5.7                               Substantial Economic Effect.  It is the intent of the Partners that the allocations of Profit and Loss, under this Agreement have substantial economic effect (or be consistent with the Partners’ interests in the Partnership in the case of the allocation of losses attributable to nonrecourse debt) within the meaning of Section 704(b) of the Code as interpreted by the Regulations promulgated pursuant thereto.  Article 5 and other relevant provisions of this Agreement shall be interpreted in a manner consistent with such intent.

 

ARTICLE 6
 RIGHTS, OBLIGATIONS AND
 POWERS OF THE GENERAL PARTNER

 

6.1                               Management of the Partnership.

 

(a)         Except as otherwise expressly provided in this Agreement, the General Partner shall have full, complete and exclusive discretion to manage and control the business of the Partnership for the purposes herein stated, and shall make all decisions affecting the business and assets of the Partnership.  Subject to the restrictions specifically contained in this Agreement, the powers of the General Partner shall include, without limitation, the authority to take the following actions on behalf of the Partnership:

 

(i)                                     to acquire, purchase, own, operate, lease, dispose and exchange of any Assets, that the General Partner determines are necessary or appropriate or in the best interests of the business of the Partnership;

 

(ii)                                  to construct buildings and make other improvements on the properties owned or leased by the Partnership;

 

(iii)                               to authorize, issue, sell, redeem or otherwise purchase any Partnership Interests or any securities (including secured and unsecured debt obligations of the Partnership, debt obligations of the Partnership convertible into any Class or series of Partnership Interests, or options, rights, warrants or appreciation rights relating to any Partnership Interests) of the Partnership;

 

(iv)                              to borrow or lend money for the Partnership, issue or receive evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such indebtedness, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

 

(v)                                 to pay, either directly or by reimbursement, for all operating costs and general administrative expenses of the Partnership to third parties or to the General Partner or its Affiliates as set forth in this Agreement;

 

(vi)                              to guarantee or become a co-maker of indebtedness of the General Partner or any Subsidiary thereof, refinance, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any such guarantee or indebtedness, and secure such guarantee or indebtedness by mortgage, deed of trust, pledge or other lien on the Partnership’s assets;

 

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(vii)                           to use assets of the Partnership (including, without limitation, cash on hand) for any purpose consistent with this Agreement, including, without limitation, payment, either directly or by reimbursement, of all operating costs and general administrative expenses of the General Partner, the Partnership or any Subsidiary of either, to third parties or to the General Partner as set forth in this Agreement;

 

(viii)                        to lease all or any portion of any of the Partnership’s assets, whether or not the terms of such leases extend beyond the termination date of the Partnership and whether or not any portion of the Partnership’s assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the General Partner may determine;

 

(ix)                              to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Partnership, on such terms and in such manner as the General Partner may reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the Partners, the Partnership, or the Partnership’s assets;

 

(x)                                 to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Partnership’s assets or any other aspect of the Partnership business;

 

(xi)                              to make or revoke any election permitted or required of the Partnership by any taxing authority;

 

(xii)                           to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Partnership, for the conservation of Partnership assets, or for any other purpose convenient or beneficial to the Partnership, in such amounts and such types, as it shall determine from time to time;

 

(xiii)                        to determine whether or not to apply any insurance proceeds for any property to the restoration of such property or to distribute the same;

 

(xiv)                       to establish one or more divisions of the Partnership, to hire and dismiss employees of the Partnership or any division of the Partnership, and to retain legal counsel, accountants, consultants, real estate brokers, and such other persons, as the General Partner may deem necessary or appropriate in connection with the Partnership business and to pay therefor such remuneration as the General Partner may deem reasonable and proper;

 

(xv)                          to retain other services of any kind or nature in connection with the Partnership business, and to pay therefor such remuneration as the General Partner may deem reasonable and proper;

 

(xvi)                       to negotiate and conclude agreements on behalf of the Partnership with respect to any of the rights, powers and authority conferred upon the General Partner;

 

(xvii)                    to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Partnership;

 

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(xviii)                 to distribute Partnership cash or other Partnership assets in accordance with this Agreement;

 

(xix)                       to form or acquire an interest in, and contribute property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the contributions of property to, its Subsidiaries and any other Person in which it has an equity interest from time to time);

 

(xx)                          to establish Partnership reserves for working capital, capital expenditures, contingent liabilities, or any other valid Partnership purpose;

 

(xxi)                       to merge, consolidate or combine the Partnership with or into another Person;

 

(xxii)                    to do any and all acts and things necessary or prudent to ensure that the Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Code; and

 

(xxiii)                 to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts that the General Partner deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Partnership (including, without limitation, all actions consistent with allowing the General Partner at all times to qualify as a REIT unless the General Partner voluntarily terminates its REIT status) and to possess and enjoy all of the rights and powers of a general partner as provided by the Act.

 

(b)         Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that partnership funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Partnership.

 

6.2                               Delegation of Authority.  The General Partner may delegate any or all of its powers, rights and obligations hereunder, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Partnership, which Person may, under supervision of the General Partner, perform any acts or services for the Partnership as the General Partner may approve.

 

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6.3                               Indemnification and Exculpation of Indemnitees.

 

(a)         The Partnership shall indemnify an Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Partnership as set forth in this Agreement in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise, unless it is established that:  (i) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (ii) the Indemnitee actually received an improper personal benefit in money, property or services; or (iii) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Any indemnification pursuant to this Section 6.3 shall be made only out of the assets of the Partnership.

 

(b)         The Partnership shall reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Partnership as authorized in this Section 6.3 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

 

(c)          The indemnification provided by this Section 6.3 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Partners, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.

 

(d)         The Partnership may purchase and maintain insurance, on behalf of the Indemnitees and such other Persons as the General Partner shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Partnership’s activities, regardless of whether the Partnership would have the power to indemnify such Person against such liability under the provisions of this Agreement.

 

(e)          For purposes of this Section 6.3, the Partnership shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by it of its duties to the Partnership also imposes duties on, or otherwise involves services by, it to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.3; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by it to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Partnership.

 

(f)           In no event may an Indemnitee subject the Limited Partners to personal liability by reason of the indemnification provisions set forth in this Agreement.

 

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(g)          An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.3 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

 

(h)         The provisions of this Section 6.3 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

 

(i)             Notwithstanding the foregoing, the Partnership may not indemnify or hold harmless an Indemnitee for any liability or loss unless all of the following conditions are met:  (i) the Indemnitee has determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Partnership; (ii) the Indemnitee was acting on behalf of or performing services for the Partnership; (iii) the liability or loss was not the result of (A) negligence or misconduct, in the case that the Indemnitee is a director of the General Partner (other than an Independent Director), the Advisor or an Affiliate of the Advisor or (B) gross negligence or willful misconduct, in the case that the Indemnitee is an Independent Director; and (iv) the indemnification or agreement to hold harmless is recoverable only out of net assets of the Partnership.  In addition, the Partnership shall not provide indemnification for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the Indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the Indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against the Indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the Commission and of the published position of any state securities regulatory authority in which Securities were offered or sold as to indemnification for violations of securities laws.

 

6.4                               Liability of the General Partner.

 

(a)         Notwithstanding anything to the contrary set forth in this Agreement, the General Partner shall not be liable for monetary damages to the Partnership or any Partners for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if the General Partner acted in good faith.  The General Partner shall not be in breach of any duty that the General Partner may owe to the Limited Partners or the Partnership or any other Persons under this Agreement or of any duty stated or implied by law or equity provided the General Partner, acting in good faith, abides by the terms of this Agreement.

 

(b)         The Limited Partners expressly acknowledge that the General Partner is acting on behalf of the Partnership, itself and its shareholders collectively, that the General Partner is under no obligation to consider the separate interests of the Limited Partners (including, without limitation, the tax consequences to Limited Partners or the tax consequences of some, but not all, of the Limited Partners) in deciding whether to cause the Partnership to take (or decline to take) any actions.  In the event of a conflict between the interests of its shareholders on one hand and the Limited Partners on the other, the General Partner shall 

 

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endeavor in good faith to resolve the conflict in a manner not adverse to either its shareholders or the Limited Partners; provided, however, that for so long as the General Partner directly owns a controlling interest in the Partnership, any such conflict that the General Partner, in its sole and absolute discretion, determines cannot be resolved in a manner not adverse to either its shareholders or the Limited Partner shall be resolved in favor of the shareholders.  The General Partner shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Limited Partners in connection with such decisions, provided that the General Partner has acted in good faith.

 

(c)          Subject to its obligations and duties as General Partner set forth in Section 6.1 hereof, the General Partner may exercise any of the powers granted to it under this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents.  The General Partner shall not be responsible for any misconduct or negligence on the part of any such agent appointed by it in good faith.

 

(d)         Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of the General Partner to continue to qualify as a REIT or (ii) to prevent the General Partner from incurring any taxes under Section 857, Section 4981, or any other provision of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners.

 

(e)          Any amendment, modification or repeal of this Section 6.4 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the General Partner’s liability to the Partnership and the Limited Partners under this Section 6.4 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted.

 

6.5                               Reimbursement of General Partner.

 

(a)         Except as provided in this Section 6.5 and elsewhere in this Agreement (including the provisions of Articles 5 and 6 regarding distributions, payments, and allocations to which it may be entitled), the General Partner shall not be compensated for its services as general partner of the Partnership.

 

(b)         The General Partner shall be reimbursed on a monthly basis, or such other basis as the General Partner may determine in its sole and absolute discretion, for all Administrative Expenses incurred by the General Partner.

 

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6.6                               Outside Activities.  Subject to (a) Section 6.8 hereof, (b) the Charter and (c) any agreements entered into by the General Partner or its Affiliates with the Partnership, a Subsidiary or any officer, director, employee, agent, trustee, Affiliate or shareholder of the General Partner, the General Partner shall be entitled to and may have business interests and engage in business activities in addition to those relating to the Partnership, including business interests and activities substantially similar or identical to those of the Partnership.  Neither the Partnership nor any of the Limited Partners shall have any rights by virtue of this Agreement in any such business ventures, interests or activities.  None of the Limited Partners nor any other Person shall have any rights by virtue of this Agreement or the partnership relationship established hereby in any such business ventures, interests or activities, and the General Partner shall have no obligation pursuant to this Agreement to offer any interest in any such business ventures, interests and activities to the Partnership or any Limited Partner, even if such opportunity is of a character which, if presented to the Partnership or any Limited Partner, could be taken by such Person.

 

6.7                               Employment or Retention of Affiliates.

 

(a)         Any Affiliate of the General Partner may be employed or retained by the Partnership and may otherwise deal with the Partnership (whether as a buyer, lessor, lessee, manager, furnisher of goods or services, broker, agent, lender or otherwise) and may receive from the Partnership any compensation, price, or other payment therefor which the General Partner determines to be fair and reasonable.

 

(b)         The Partnership may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment, and such Persons may borrow funds from the Partnership, on terms and conditions established in the sole and absolute discretion of the General Partner.  The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

 

(c)          The Partnership may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or thereby becomes a participant upon such  terms and subject to such conditions as the General Partner deems are consistent with this Agreement, applicable law and the REIT status of the General Partner.

 

(d)         Except as expressly permitted by this Agreement, neither the General Partner nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Partnership, directly or indirectly, except pursuant to transactions that are, in the General Partner’s sole discretion, on terms that are fair and reasonable to the Partnership.

 

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6.8                               General Partner Participation.  The General Partner agrees that all business activities of the General Partner, including activities pertaining to the acquisition, development or ownership of any Asset shall be conducted through the Partnership or one or more Subsidiary Partnerships; provided, however, that the General Partner is allowed to make a direct acquisition, but if and only if, such acquisition is made in connection with the issuance of Additional Securities, which direct acquisition and issuance have been approved and determined to be in the best interests of the General Partner and the Partnership by a majority of the Independent Directors.

 

6.9                               Title to Partnership Assets.  Title to Partnership assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and no Partner, individually or collectively, shall have any ownership interest in such Partnership assets or any portion thereof.  Title to any or all of the Partnership assets may be held in the name of the Partnership, the General Partner or one or more nominees, as the General Partner may determine, including Affiliates of the General Partner.  The General Partner hereby declares and warrants that any Partnership assets for which legal title is held in the name of the General Partner or any nominee or Affiliate of the General Partner shall be held by the General Partner for the use and benefit of the Partnership or one or more Subsidiary Partnerships in accordance with the provisions of this Agreement; provided, however, that the General Partner shall use its commercially reasonable efforts to cause beneficial and record title to such assets to be vested in the Partnership as soon as reasonably practicable.  All Partnership assets shall be recorded as the property of the Partnership in its books and records, irrespective of the name in which legal title to such Partnership assets is held.

 

6.10                        Redemptions and Exchanges of REIT Shares.

 

(a)         Redemptions. In the event the General Partner redeems any REIT Shares (other than REIT Shares redeemed in accordance with the share redemption program of the General Partner through proceeds received from the General Partner’s distribution reinvestment plan), then the General Partner shall cause the Partnership to purchase from the General Partner a number of Partnership Units as determined based on the application of the Conversion Factor on the same terms that the General Partner redeemed such REIT Shares.  Moreover, if the General Partner makes a cash tender offer or other offer to acquire REIT Shares, then the General Partner shall cause the Partnership to make a corresponding offer to the General Partner to acquire an equal number of Partnership Units held by the General Partner that have the same Class designation as the REIT Shares that are subject to the offer. In the event any REIT Shares are redeemed by the General Partner pursuant to such offer, the Partnership shall redeem an equivalent number of the General Partner’s Partnership Units having the same Class designation as the redeemed REIT Shares for an equivalent purchase price based on the application of the Conversion Factor.

 

(b)         Exchanges. If the General Partner exchanges any REIT Shares of any Class (“Exchanged REIT Shares”) for REIT Shares of a different Class (“Received REIT Shares”), then the General Partner shall, and shall cause the Partnership to, exchange a number of Partnership Units having the same Class designation as the Exchanged REIT Shares, as determined based on the application of the Conversion Factor, for Partnership Units having the same Class designation as the Received REIT Shares on the same terms that the General Partner 

 

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exchanged the Exchanged REIT Shares. The exchange of Units shall occur automatically after the close of business on the applicable date of the exchange of REIT Shares, as of which time the holder of a Class of Units having the same designation as the Exchanged REIT Shares shall be credited on the books and records of the Partnership with the issuance, as of the opening of business on the next day, of the applicable number of Units having the same designation as the Received REIT Shares.

 

6.11                        No Duplication of Fees or Expenses. The Partnership may not incur or be responsible for any fee or expense (in connection with the Offering or otherwise) that would be duplicative of fees and expenses paid by the General Partner.

 

ARTICLE 7
 CHANGES IN GENERAL PARTNER

 

7.1                               Transfer of the General Partner’s Partnership Interest.

 

(a)         The General Partner shall not transfer all or any portion of its General Partnership Interest or withdraw as General Partner except as provided in, or in connection with a transaction contemplated by, Section 7.1(c), (d) or (e).

 

(b)         The General Partner agrees that its Percentage Interest will at all times be in the aggregate, at least 0.1%.

 

(c)          Except as otherwise provided in Section 6.4(b) or Section 7.1(d) or (e) hereof, the General Partner shall not engage in any merger, consolidation or other combination with or into another Person or sale of all or substantially all of its assets (other than in connection with a change in the General Partner’s state of incorporation or organizational form) in each case which results in a change of Control of the General Partner (a “Transaction”), unless:

 

(i)                                     the consent of Limited Partners holding more than 50% of the Percentage Interests and more than 50% of the Special Percentage Interests of the Limited Partners is obtained;

 

(ii)                                  as a result of such Transaction all Limited Partners will receive or have the right to receive for each Partnership Unit of each Class (other than the Special Units) an amount of cash, securities, or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid in the Transaction to a holder of one REIT Share having the same Class designation as the Partnership Unit in consideration of such REIT Share, provided that if, in connection with the Transaction, a purchase, tender or exchange offer (“Offer”) shall have been made to and accepted by the holders of more than 50% of the outstanding REIT Shares, each holder of Partnership Units shall be given the option to exchange its Partnership Units for the greatest amount of cash, securities, or other property which a Limited Partner holding Partnership Units would have received had it (A) exercised its Redemption Right and (B) sold, tendered or exchanged pursuant to the Offer the REIT Shares received upon exercise of the Redemption Right immediately prior to the expiration of the Offer; or

 

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(iii)                               the General Partner is the surviving entity in the Transaction and either (A) the holders of REIT Shares do not receive cash, securities, or other property in the Transaction or (B) all Limited Partners (other than the General Partner or any Subsidiary) have the right to receive in exchange for their Partnership Units of each Class (other than the Special Units), an amount of cash, securities, or other property (expressed as an amount per REIT Share) that is no less than the product of the Conversion Factor and the greatest amount of cash, securities, or other property (expressed as an amount per REIT Share) received in the Transaction by any holder of REIT Shares having the same Class designation as the Partnership Units being exchanged.

 

(d)         Notwithstanding Section 7.1(c), the General Partner may merge with or into or consolidate with another entity if immediately after such merger or consolidation (i)  substantially all of the assets of the successor or surviving entity (the “Survivor”), other than Partnership Units held by the General Partner, are contributed, directly or indirectly, to the Partnership as a Capital Contribution in exchange for Partnership Units with a fair market value equal to the value of the assets so contributed as determined by the Survivor in good faith and (ii) the Survivor expressly agrees to assume all obligations of the General Partner, as appropriate, hereunder. Upon such contribution and assumption, the Survivor shall have the right and duty to amend this Agreement as set forth in this Section 7.1(d). The Survivor shall in good faith arrive at a new method for the calculation of the Cash Amount, the REIT Shares Amount and Conversion Factor for a Partnership Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of REIT Shares of each Class or options, warrants or other rights relating thereto, and which a holder of Partnership Units of any Class could have acquired had such Partnership Units been exchanged immediately prior to such merger or consolidation. Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor. The Survivor also shall in good faith modify the definition of REIT Shares and make such amendments to Section 8.5 so as to approximate the existing rights and obligations set forth in Section 8.5 as closely as reasonably possible. The above provisions of this Section 7.1(d) shall similarly apply to successive mergers or consolidations permitted hereunder.

 

(e)          Notwithstanding Section 7.1(c),

 

(i)                                     a General Partner may transfer all or any portion of its General Partnership Interest to (A) a wholly-owned Subsidiary of such General Partner or (B) the owner of all of the ownership interests of such General Partner, and following a transfer of all of its General Partnership Interest, may withdraw as General Partner; and

 

(ii)                                  the General Partner may engage in any transaction that is not required to be submitted to the vote of the holders of the REIT Shares by (A) law or (B) the rules of any national securities exchange on which one or more Classes of REIT Shares are Listed.

 

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7.2                         Admission of a Substitute or Additional General Partner.  A Person shall be admitted as a substitute or additional General Partner of the Partnership only if the following terms and conditions are satisfied:

 

(a)         the Person to be admitted as a substitute or additional General Partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart thereof and such other documents or instruments as may be required or appropriate in order to effect the admission of such Person as a General Partner, and a certificate evidencing the admission of such Person as a General Partner shall have been filed for recordation and all other actions required by Section 2.5 hereof in connection with such admission shall have been performed;

 

(b)         if the Person to be admitted as a substitute or additional General Partner is a corporation or a partnership it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of such Person’s authority to become a General Partner and to be bound by the terms and provisions of this Agreement; and

 

(c)          counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel and the state or any other jurisdiction as may be necessary) that (x) the admission of the person to be admitted as a substitute or additional General Partner is in conformity with the Act and (y) none of the actions taken in connection with the admission of such Person as a substitute or additional General Partner will cause (i) the Partnership to be classified other than as a partnership for federal tax purposes, or (ii) the loss of any Limited Partner’s limited liability.

 

7.3                         Effect of Bankruptcy, Withdrawal, Death or Dissolution of a General Partner.

 

(a)         Upon the occurrence of an Event of Bankruptcy as to the sole remaining General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, deemed removal or dissolution of the sole remaining General Partner (except that, if the sole remaining General Partner is on the date of such occurrence a partnership, the withdrawal, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Partnership shall be dissolved and terminated unless the Partnership is continued pursuant to Section 7.3(b) hereof.  The merger of the General Partner with or into any entity that is admitted as a substitute or successor General Partner pursuant to Section 7.2 hereof shall not be deemed to be the withdrawal, dissolution or removal of the General Partner.

 

(b)         Following the occurrence of an Event of Bankruptcy as to the sole remaining General Partner (and its removal pursuant to Section 7.4(a) hereof) or the death, withdrawal, removal or dissolution of the sole remaining General Partner (except that, if a General Partner is, on the date of such occurrence, a partnership, the withdrawal of, death, dissolution, Event of Bankruptcy as to, or removal of a partner in, such partnership shall be deemed not to be a dissolution of such General Partner if the business of such General Partner is continued by the remaining partner or partners), the Limited Partners, within ninety (90) days

 

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after such occurrence, may elect to continue the business of the Partnership for the balance of the term specified in Section 2.4 hereof by selecting, subject to Section 7.2 hereof and any other provisions of this Agreement, a substitute General Partner by consent of a majority in interest of the Limited Partners.  If the Limited Partners elect to continue the business of the Partnership and admit a substitute General Partner, the relationship with the Partners and of any Person who has acquired an interest of a Partner in the Partnership shall be governed by this Agreement.

 

7.4                         Removal of a General Partner.

 

(a)         Upon the occurrence of an Event of Bankruptcy as to, or the dissolution of, a General Partner, such General Partner shall be deemed to be removed automatically; provided, however, that if a General Partner is on the date of such occurrence a partnership, the withdrawal, death or dissolution of, Event of Bankruptcy as to, or removal of, a partner in, such partnership shall be deemed not to be a dissolution of the General Partner if the business of such General Partner is continued by the remaining partner or partners.  The Limited Partners may not remove the General Partner, with or without cause.

 

(b)         If a General Partner has been removed pursuant to this Section 7.4 and the Partnership is continued pursuant to Section 7.3 hereof, such General Partner shall promptly transfer and assign its General Partnership Interest in the Partnership to the substitute General Partner approved by a majority in interest of the Limited Partners in accordance with Section 7.3(b) hereof and otherwise admitted to the Partnership in accordance with Section 7.2 hereof.  At the time of assignment, the removed General Partner shall be entitled to receive from the substitute General Partner the fair market value of the General Partnership Interest of such removed General Partner as reduced by any damages caused to the Partnership by such General Partner.  Such fair market value shall be determined by an appraiser mutually agreed upon by the General Partner and a majority in interest of the Limited Partners within ten (10) days following the removal of the General Partner.  In the event that the parties are unable to agree upon an appraiser, the removed General Partner and a majority in interest of the Limited Partners each shall select an appraiser.  Each such appraiser shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest within thirty (30) days of the General Partner’s removal, and the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals; provided, however, that if the higher appraisal exceeds the lower appraisal by more than 20% of the amount of the lower appraisal, the two appraisers, no later than forty (40) days after the removal of the General Partner, shall select a third appraiser who shall complete an appraisal of the fair market value of the removed General Partner’s General Partnership Interest no later than sixty (60) days after the removal of the General Partner.  In such case, the fair market value of the removed General Partner’s General Partnership Interest shall be the average of the two appraisals closest in value.

 

(c)          The General Partnership Interest of a removed General Partner, until transfer under Section 7.4(b), shall be converted to that of a special Limited Partner; provided, however, such removed General Partner shall not have any rights to participate in the management and affairs of the Partnership, and shall not be entitled to any portion of the income, expense, profit, gain or loss allocations or cash distributions allocable or payable, as the case may be, to the Limited Partners.  Instead, such removed General Partner shall receive and be

 

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entitled only to retain distributions or allocations of such items that it would have been entitled to receive in its capacity as General Partner, until the transfer is effective pursuant to Section 7.4(b).

 

(d)         All Partners shall have given and hereby do give such consents, shall take such actions and shall execute such documents as shall be legally necessary, desirable and sufficient to effect all the foregoing provisions of this Section.

 

ARTICLE 8
 RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

 

8.1                         Management of the Partnership.  The Limited Partners shall not participate in the management or control of Partnership business nor shall they transact any business for the Partnership, nor shall they have the power to sign for or bind the Partnership, such powers being vested solely and exclusively in the General Partner.

 

8.2                         Power of Attorney.  Each Limited Partner hereby irrevocably appoints the General Partner its true and lawful attorney-in-fact, who may act for each Limited Partner and in its name, place and stead, and for its use and benefit, to sign, acknowledge, swear to, deliver, file or record, at the appropriate public offices, any and all documents, certificates, and instruments as may be deemed necessary or desirable by the General Partner to carry out fully the provisions of this Agreement and the Act in accordance with their terms, which power of attorney is coupled with an interest and shall survive the death, dissolution or legal incapacity of the Limited Partner, or the transfer by the Limited Partner of any part or all of its Partnership Interest.

 

8.3                         Limitation on Liability of Limited Partners.  No Limited Partner shall be liable for any debts, liabilities, contracts or obligations of the Partnership.  A Limited Partner shall be liable to the Partnership only to make payments of its Capital Contribution, if any, as and when due hereunder.  After its Capital Contribution is fully paid, no Limited Partner shall, except as otherwise required by the Act, be required to make any further Capital Contributions or other payments or lend any funds to the Partnership.

 

8.4                         Ownership by Limited Partner of Corporate General Partner or Affiliate.  No Limited Partner shall at any time, either directly or indirectly, own any stock or other interest in the General Partner or in any Affiliate thereof, if such ownership by itself or in conjunction with other stock or other interests owned by other Limited Partners would, in the opinion of counsel for the Partnership, jeopardize the classification of the Partnership as a partnership for federal tax purposes.  The General Partner shall be entitled to make such reasonable inquiry of the Limited Partners as is required to establish compliance by the Limited Partners with the provisions of this Section.

 

8.5                         Redemption Right.

 

(a)                                 Subject to Sections 8.5(b), 8.5(c), 8.5(d), 8.5(e) and 8.5(f) and the provisions of any agreements between the Partnership and one or more Limited Partners with respect to Partnership Units held by them, each Limited Partner, other than the General Partner, shall, after holding their Partnership Units for at least one year, have the right (subject to the terms and conditions set forth herein) to require the Partnership to redeem (a “Redemption”) all 

 

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or a portion of the Partnership Units (other than Special Units), held by such Limited Partner in exchange (a “Redemption Right”) for REIT shares having the same Class designation as the Partnership Units subject to the Redemption Right, issuable on, or the Cash Amount payable on, the Specified Redemption Date, as determined by the General Partner in its sole discretion, provided that such Partnership Units (the “Tendered Units”) shall have been outstanding for at least one year.  Any Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the Limited Partner exercising the Redemption Right (the “Tendering Party”).  Notwithstanding the foregoing, the Special OP Unitholders and the Advisor shall have the right to require the Partnership to redeem all or a portion of their Partnership Units pursuant to this Section 8.5 at any time irrespective of the period the Partnership Units have been held by the Special OP Unitholders or the Advisor. The Partnership shall redeem any such Partnership Units of the Special OP Unitholders or the Advisor for the Cash Amount unless the board of directors of the General Partner determines that any such redemption for cash would be prohibited by applicable law or this Agreement, in which case such Partnership Units will be redeemed for an amount of REIT Shares having the same Class designation as the Tendered Units with an aggregate NAV equivalent to the aggregate NAV of such Partnership Units. No Limited Partner, other than the Special OP Unitholders and the Advisor, may deliver more than two Notices of Redemption during each calendar year. A Limited Partner other than the Special OP Unitholders and the Advisor may not exercise the Redemption Right for less than 1,000 Partnership Units or, if such Limited Partner holds less than 1,000 Partnership Units, all of the Partnership Units held by such Partner. The Tendering Party shall have no right, with respect to any Partnership Units so redeemed, to receive any distribution paid with respect to Partnership Units if the record date for such distribution is on or after the Specified Redemption Date.

 

(b)         If the General Partner elects to redeem Tendered Units for REIT Shares having the same Class designation as the Tendered Units rather than cash, then the Partnership shall direct the General Partner to issue and deliver such REIT Shares to the Tendering Party pursuant to the terms set forth in this Section 8.5(b), in which case, (i) the General Partner, acting as a distinct legal entity, shall assume directly the obligation with respect thereto and shall satisfy the Tendering Party’s exercise of its Redemption Right, and (ii) such transaction shall be treated, for federal income tax purposes, as a transfer by the Tendering Party of such Tendered Units to the General Partner in exchange for REIT shares.  The percentage of the Tendered Units tendered for Redemption by the Tendering Party for which the General Partner elects to issue REIT Shares (rather than cash) is referred to as the “Applicable Percentage.”  In making such election to acquire Tendered Units, the Partnership shall act in a fair, equitable and reasonable manner that neither prefers one group or class of Limited Partners over another nor discriminates against a group or class of Limited Partners.  If the Partnership elects to redeem any number of Tendered Units for REIT Shares, rather than cash, on the Specified Redemption Date, the Tendering Party shall sell such number of the Tendered Units to the General Partner in exchange for a number of REIT Shares having the same Class designation as the Tendered Units equal to the product of the REIT Shares Amount and the Applicable Percentage.  The product of the Applicable Percentage and the REIT Shares Amount, if applicable, shall be delivered by the General Partner as duly authorized, validly issued, fully paid and accessible REIT Shares having the same Class designation as the Tendered Units, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit (as calculated in accordance with the Charter) and other restrictions provided in the Charter, the bylaws of the 

 

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General Partner, the Securities Act and relevant state securities or “blue sky” laws.  Notwithstanding the provisions of Section 8.5(a) and this Section 8.5(b), the Tendering Parties shall have no rights under this Agreement that would otherwise be prohibited under the Charter.

 

(c)                                  In connection with an exercise of Redemption Rights pursuant to this Section 8.5, the Tendering Party shall submit the following to the General Partner, in addition to the Notice of Redemption:

 

(1)                                 A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the actual and constructive ownership, as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) such Tendering Party and (ii) any Related Party and (b) representing that, after giving effect to the Redemption, neither the Tendering Party nor any Related Party will own REIT Shares in excess of the Ownership Limit (or, if applicable the Excepted Holder Limit);

 

(2)                                 A written representation that neither the Tendering Party nor any Related Party has any intention to acquire any additional REIT Shares prior to the closing of the Redemption on the Specified Redemption Date;

 

(3)                                 An undertaking to certify, at and as a condition to the closing of the Redemption on the Specified Redemption Date, that either (a) the actual and constructive ownership of REIT Shares by the Tendering Party and any Related Party remain unchanged from that disclosed in the affidavit required by Section 8.5(c)(1) or (b) after giving effect to the Redemption, neither the Tendering Party nor any Related Party shall own REIT Shares in violation of the Ownership Limit (or, if applicable, the Excepted Holder Limit);

 

(4)                                 With respect to any Cash Amount to be received by a Tendering Party, a waiver and release in a form acceptable to the General Partner; and

 

(5)                                 Any other documents as the General Partner may reasonably require.

 

(d)                                 Any Cash Amount to be paid to a Tendering Party pursuant to this Section 8.5 shall be paid on the Specified Redemption Date; provided, however, that the General Partner may elect to cause the Specified Redemption Date to be delayed for up to an additional 180 days to the extent required for the General Partner to provide financing to be used to make such payment of the Cash Amount, by causing the issuance of additional REIT Shares or otherwise.  Notwithstanding the foregoing, the General Partner agrees to use its commercially reasonable efforts to cause the closing of the acquisition of Tendered Units hereunder to occur as quickly as reasonably possible.

 

(e)                                  Notwithstanding any other provision of this Agreement, the General Partner shall place appropriate restrictions on the ability of the Limited Partners to exercise their Redemption Rights to prevent, among other things, (a) any person from owning shares in excess of the Common Share Ownership Limit, the Aggregate Share Ownership Limit and the Excepted Holder Limit, (b) the General Partner’s common stock from being owned by less than 100 persons, the General Partner from being “closely held” within the meaning of

 

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section 856(h) of the Code, and as and if deemed necessary to ensure that the Partnership does not constitute a “publicly traded partnership” under section 7704 of the Code.  If and when the General Partner determines that imposing such restrictions is necessary, the General Partner shall give prompt written notice thereof to each of the Limited Partners holding Partnership Units, which notice shall be accompanied by a copy of an opinion of counsel to the Partnership which states that, in the opinion of such counsel, restrictions are necessary in order to avoid having the Partnership be treated as a “publicly traded partnership” under section 7704 of the Code.

 

(f)           A redemption fee may be charged (other than to the Advisor, Special OP Unitholders and their respective affiliates) in connection with an exercise of Redemption Rights pursuant to this Section 8.5.

 

8.6                         Registration.  Subject to the terms of any agreement between the General Partner and one or more Limited Partners with respect to Partnership Units held by them:

 

(a)         Listing on Securities Exchange.  If the General Partner shall list or maintain the listing of any REIT Shares on any securities exchange or national market system, it will at its expense and as necessary to permit the registration and sale of the REIT Shares that may be issued upon redemption of Partnership Units pursuant to Section 8.5 hereof (the “Redemption Shares”) hereunder, list thereon, maintain and, when necessary, increase such listing to include such Redemption Shares.

 

(b)         Registration Not Required.  Notwithstanding the foregoing, the General Partner shall not be required to file or maintain the effectiveness of a registration statement covering the resale of Redemption Shares if, in the opinion of counsel to the General Partner, such Redemption Shares could be sold by the holders thereof pursuant to Rule 144 under the Securities Act, or any successor rule thereto.

 

8.7                         Distribution Reinvestment Plan.

 

OP Unitholders may have the opportunity to join the General Partner’s distribution reinvestment plan by completing an enrollment form which is available upon request.  A copy of the General Partner’s distribution reinvestment plan is also available upon request.  The shares of the General Partner’s common stock which may be issued under the General Partner’s distribution reinvestment plan are offered only by a prospectus.

 

ARTICLE 9
 TRANSFERS OF LIMITED PARTNERSHIP INTERESTS

 

9.1                         Purchase for Investment.

 

(a)         Each Limited Partner hereby represents and warrants to the General Partner and to the Partnership that the acquisition of his Partnership Interest is made as a principal for his account for investment purposes only and not with a view to the resale or distribution of such Partnership Interest.

 

(b)         Each Limited Partner agrees that he will not sell, assign or otherwise transfer his Partnership Interest or any fraction thereof, whether voluntarily or by operation of

 

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law or at judicial sale or otherwise, to any Person who does not make the representations and warranties to the General Partner set forth in Section 9.1(a) above and similarly agree not to sell, assign or transfer such Partnership Interest or fraction thereof to any Person who does not similarly represent, warrant and agree.

 

9.2                         Restrictions on Transfer of Limited Partnership Interests.

 

(a)         Subject to the provisions of 9.2(b) and (c), no Limited Partner may offer, sell, assign, hypothecate, pledge or otherwise transfer all or any portion of his Limited Partnership Interest, or any of such Limited Partner’s economic rights as a Limited Partner, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “Transfer”) without the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion; provided that the each of the Special OP Unitholders and the Advisor may transfer all or any portion of its respective Partnership Interest, or any of its economic rights as a Limited Partner, to any of its Affiliates without the consent of the General Partner.  Any such purported transfer undertaken without such consent shall be considered to be null and void ab initio and shall not be given effect.  The General Partner may require, as a condition of any Transfer to which it consents, that the transferor assume all costs incurred by the Partnership in connection therewith.

 

(b)         No Limited Partner may withdraw from the Partnership other than as a result of a permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a) above or clause (c) below or a Transfer pursuant to Section 9.5 below) of all of its Partnership Interest pursuant to this Article 9 or pursuant to a redemption of all of its Partnership Units pursuant to Section 8.5.  Upon the permitted Transfer or redemption of all of a Limited Partner’s Partnership Interest, such Limited Partner shall cease to be a Limited Partner.

 

(c)          Notwithstanding Section 9.2(a) and subject to Sections 9.2(d), (e) and (f) below, a Limited Partner may Transfer, without the consent of the General Partner, all or a portion of its Partnership Interest to (i) a parent or parent’s spouse, natural or adopted descendant or descendants, spouse of such descendant, or brother or sister, or a trust created by such Limited Partner for the benefit of such Limited Partner and/or any such person(s), of which trust such Limited Partner or any such person(s) is a trustee, (ii) a corporation controlled by a Person or Persons named in (i) above, or (iii) if the Limited Partner is an entity, its beneficial owners.

 

(d)         No Limited Partner may effect a Transfer of its Limited Partnership Interest, in whole or in part, if, in the opinion of legal counsel for the Partnership, such proposed Transfer would require the registration of the Limited Partnership Interest under the Securities Act or would otherwise violate any applicable federal or state securities or blue sky law (including investment suitability standards).

 

(e)          No Transfer by a Limited Partner of its Partnership Interest, in whole or in part, may be made to any Person if (i) in the opinion of legal counsel for the Partnership, the transfer would result in the Partnership’s being treated as an association taxable as a corporation (other than a qualified REIT subsidiary within the meaning of Section 856(i) of the Code), (ii) in the opinion of legal counsel for the Partnership, it would adversely affect the ability of the General Partner to continue to qualify as a REIT or subject the General Partner to any

 

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additional taxes under Section 857 or Section 4981 of the Code, or (iii) such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code.

 

(f)           No transfer by a Limited Partner of any Partnership Interest may be made to a lender to the Partnership or any Person who is related (within the meaning of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan constitutes a nonrecourse liability (within the meaning of Regulations Section 1.752-1(a)(2)), without the consent of the General Partner, which may be withheld in its sole and absolute discretion, provided that as a condition to such consent the lender will be required to enter into an arrangement with the Partnership and the General Partner to exchange or redeem for the Cash Amount any Partnership Units in which a security interest is held simultaneously with the time at which such lender would be deemed to be a Partner in the Partnership for purposes of allocating liabilities to such lender under Section 752 of the Code.

 

(g)          Any Transfer in contravention of any of the provisions of this Article 9 shall be void and ineffectual and shall not be binding upon, or recognized by, the Partnership.

 

(h)         Prior to the consummation of any Transfer under this Article 9, the transferor and/or the transferee shall deliver to the General Partner such opinions, certificates and other documents as the General Partner shall request in connection with such Transfer.

 

9.3                         Admission of Substitute Limited Partner.

 

(a)         Subject to the other provisions of this Article 9, an assignee of the Limited Partnership Interest of a Limited Partner (which shall be understood to include any purchaser, transferee, donee, or other recipient of any disposition of such Limited Partnership Interest) shall be deemed admitted as a Limited Partner of the Partnership only with the consent of the General Partner, which consent may be granted or withheld in its sole and absolute discretion, and upon the satisfactory completion of the following:

 

(i)                                     The assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof, including a revised Exhibit A, and such other documents or instruments as the General Partner may require in order to effect the admission of such Person as a Limited Partner.

 

(ii)                                  To the extent required, an amended Certificate evidencing the admission of such Person as a Limited Partner shall have been signed, acknowledged and filed for record in accordance with the Act.

 

(iii)                               The assignee shall have delivered a letter containing the representation set forth in Section 9.1(a) hereof and the agreement set forth in Section 9.1(b) hereof.

 

(iv)                              If the assignee is a corporation, partnership or trust, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee’s authority to become a Limited Partner under the terms and provisions of this Agreement.

 

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(v)                                 The assignee shall have executed a power of attorney containing the terms and provisions set forth in Section 8.2 hereof.

 

(vi)                              The assignee shall have paid all legal fees and other expenses of the Partnership and the General Partner and filing and publication costs in connection with its substitution as a Limited Partner.

 

(vii)                           The assignee has obtained the prior written consent of the General Partner to its admission as a Substitute Limited Partner, which consent may be given or denied in the exercise of the General Partner’s sole and absolute discretion.

 

(b)         For the purpose of allocating profits and losses and distributing cash received by the Partnership, a Substitute Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Partner upon the filing of the Certificate described in Section 9.3(a)(ii) hereof or, if no such filing is required, the later of the date specified in the transfer documents or the date on which the General Partner has received all necessary instruments of transfer and substitution.

 

(c)          The General Partner shall cooperate with the Person seeking to become a Substitute Limited Partner by preparing the documentation required by this Section and making all official filings and publications.  The Partnership shall take all such action as promptly as practicable after the satisfaction of the conditions in this Article 9 to the admission of such Person as a Limited Partner of the Partnership.

 

9.4                         Rights of Assignees of Partnership Interests.

 

(a)         Subject to the provisions of Sections 9.1 and 9.2 hereof, except as required by operation of law, the Partnership shall not be obligated for any purposes whatsoever to recognize the assignment by any Limited Partner of its Partnership Interest until the Partnership has received notice thereof.

 

(b)         Any Person who is the assignee of all or any portion of a Limited Partner’s Limited Partnership Interest, but does not become a Substitute Limited Partner and desires to make a further assignment of such Limited Partnership Interest, shall be subject to all the provisions of this Article 9 to the same extent and in the same manner as any Limited Partner desiring to make an assignment of its Limited Partnership Interest.

 

9.5                         Effect of Bankruptcy, Death, Incompetence or Termination of a Limited Partner.  The occurrence of an Event of Bankruptcy as to a Limited Partner, the death of a Limited Partner or a final adjudication that a Limited Partner is incompetent (which term shall include, but not be limited to, insanity) shall not cause the termination or dissolution of the Partnership, and the business of the Partnership shall continue if an order for relief in a bankruptcy proceeding is entered against a Limited Partner, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such Limited Partner for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Limited Partner possessed to assign all or any part of his Partnership Interest and to 

 

44

 

join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Limited Partner.

 

9.6                         Joint Ownership of Interests.  A Partnership Interest may be acquired by two individuals as joint tenants with right of survivorship, provided that such individuals either are married or are related and share the same home as tenants in common.  The written consent or vote of both owners of any such jointly held Partnership Interest shall be required to constitute the action of the owners of such Partnership Interest; provided, however, that the written consent of only one joint owner will be required if the Partnership has been provided with evidence satisfactory to the counsel for the Partnership that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners.  Upon the death of one owner of a Partnership Interest held in a joint tenancy with a right of survivorship, the Partnership Interest shall become owned solely by the survivor as a Limited Partner and not as an assignee.  The Partnership need not recognize the death of one of the owners of a jointly-held Partnership Interest until it shall have received notice of such death.  Upon notice to the General Partner from either owner, the General Partner shall cause the Partnership Interest to be divided into two equal Partnership Interests, which shall thereafter be owned separately by each of the former owners.

 

ARTICLE 10
 BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

 

10.1                  Books and Records.  At all times during the continuance of the Partnership, the Partners shall keep or cause to be kept at the Partnership’s specified office true and complete books of account in accordance with generally accepted accounting principles, including:  (a) a current list of the full name and last known business address of each Partner, (b) a copy of the Certificate of Limited Partnership and all Certificates of amendment thereto, (c) copies of the Partnership’s federal, state and local income tax returns and reports, (d) copies of this Agreement and amendments thereto and any financial statements of the Partnership for the three most recent years and (e) all documents and information required under the Act.  Any Partner or its duly authorized representative, upon paying the costs of collection, duplication and mailing, shall be entitled to inspect or copy such records during ordinary business hours.

 

10.2                  Custody of Partnership Funds; Bank Accounts.

 

(a)         All funds of the Partnership not otherwise invested shall be deposited in one or more accounts maintained in such banking or brokerage institutions as the General Partner shall determine, and withdrawals shall be made only on such signature or signatures as the General Partner may, from time to time, determine.

 

(b)         All deposits and other funds not needed in the operation of the business of the Partnership may be invested by the General Partner in investment grade instruments (or investment companies whose portfolio consists primarily thereof), government obligations, certificates of deposit, bankers’ acceptances and municipal notes and bonds. The funds of the Partnership shall not be commingled with the funds of any other Person except for such commingling as may necessarily result from an investment in those investment companies permitted by this Section 10.2(b).

 

45

 

10.3                  Fiscal and Taxable Year.  The fiscal and taxable year of the Partnership shall be the calendar year.

 

10.4                  Annual Tax Information and Report.  Within seventy-five (75) days after the end of each fiscal year of the Partnership, the General Partner shall furnish to each person who was a Limited Partner at any time during such year the tax information necessary to file such Limited Partner’s individual tax returns as shall be reasonably required by law.

 

10.5                  Tax Matters Partner; Tax Elections; Special Basis Adjustments.

 

(a)         The General Partner shall be the Tax Matters Partner of the Partnership within the meaning of Section 6231(a)(7) of the Code.  As Tax Matters Partner, the General Partner shall have the right and obligation to take all actions authorized and required, respectively, by the Code for the Tax Matters Partner.  The General Partner shall have the right to retain professional assistance in respect of any audit of the Partnership by the Service and all out-of-pocket expenses and fees incurred by the General Partner on behalf of the Partnership as Tax Matters Partner shall constitute Partnership expenses.  In the event the General Partner receives notice of a final Partnership adjustment under Section 6223(a)(2) of the Code, the General Partner shall either (i) file a court petition for judicial review of such final adjustment within the period provided under Section 6226(a) of the Code, a copy of which petition shall be mailed to all Limited Partners on the date such petition is filed, or (ii) mail a written notice to all Limited Partners, within such period, that describes the General Partner’s reasons for determining not to file such a petition.

 

(b)         All elections required or permitted to be made by the Partnership under the Code or any applicable state or local tax law shall be made by the General Partner in its sole and absolute discretion.

 

(c)          In the event of a transfer of all or any part of the Partnership Interest of any Partner, the Partnership, at the option of the General Partner, may elect pursuant to Section 754 of the Code to adjust the basis of the Partnership’s assets.  Notwithstanding anything contained in Article 5 of this Agreement, any adjustments made pursuant to Section 754 of the Code shall affect only the successor in interest to the transferring Partner and in no event shall be taken into account in establishing, maintaining or computing Capital Accounts for the other Partners for any purpose under this Agreement.  Each Partner will furnish the Partnership with all information necessary to give effect to such election.

 

10.6                  Reports to Limited Partners.

 

(a)         As soon as practicable after the close of each fiscal quarter (other than the last quarter of the fiscal year), the General Partner shall cause to be mailed to each Limited Partner a quarterly report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated basis with the General Partner, for such fiscal quarter, presented in accordance with generally accepted accounting principles. As soon as practicable after the close of each fiscal year, the General Partner shall cause to be mailed to each Limited Partner an annual report containing financial statements of the Partnership, or of the General Partner if such statements are prepared solely on a consolidated 

 

46

 

basis with the General Partner, for such fiscal year, presented in accordance with generally accepted accounting principles. The annual financial statements shall be audited by accountants selected by the General Partner.

 

(b)         Any Partner shall further have the right to a private audit of the books and records of the Partnership at the expense of such Partner, provided such audit is made for Partnership purposes and is made during normal business hours.

 

10.7                  Safe Harbor Election. The Partners agree that, in the event the Safe Harbor Regulation is finalized, the Partnership shall be authorized and directed to make the Safe Harbor Election and the Partnership and each Partner (including any person to whom an interest in the Partnership is transferred in connection with the performance of services) agrees to comply with all requirements of the Safe Harbor with respect to all interests in the Partnership transferred in connection with the performance of services while the Safe Harbor Election remains effective. The Tax Matters Partner shall be authorized to (and shall) prepare, execute, and file the Safe Harbor Election.

 

ARTICLE 11
 AMENDMENT OF AGREEMENT; MERGER

 

The General Partner’s consent shall be required for any amendment to this Agreement.  The General Partner, without the consent of the Limited Partners, may amend this Agreement in any respect or merge or consolidate the Partnership with or into any other partnership or business entity (as defined in Section 17-211 of the Act) in a transaction pursuant to Section 7.1(c), (d) or (e) hereof; provided, however, that the following amendments and any other merger, conversion or consolidation of the Partnership shall require (i) the consent of Limited Partners holding more than 50% of the Percentage Interests of the Limited Partners and (ii) in the case of any of the following (b), (c) or (d), the consent of Limited Partners holding more than 50% of the Special Percentage Interests of the Limited Partners:

 

(a)         any amendment affecting the operation of the Conversion Factor or the Redemption Right (except as provided in Section 8.5(d) or 7.1(d) hereof) in a manner adverse to the Limited Partners;

 

(b)         any amendment that would adversely affect the rights of the Limited Partners to receive the distributions payable to them hereunder, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.2 hereof;

 

(c)          any amendment that would alter the Partnership’s allocations of profit and loss to the Limited Partners, other than with respect to the issuance of additional Partnership Units pursuant to Section 4.2 hereof; or

 

(d)         any amendment that would impose on the Limited Partners any obligation to make additional Capital Contributions to the Partnership.

 

47

 

ARTICLE 12
 GENERAL PROVISIONS

 

12.1                  Notices.  All communications required or permitted under this Agreement shall be in writing and shall be deemed to have been given when delivered personally or upon deposit in the United States mail, registered, postage prepaid return receipt requested, to the Partners at the addresses set forth in Exhibit A attached hereto; provided, however, that any Partner may specify a different address by notifying the General Partner in writing of such different address. Notices to the Partnership shall be delivered at or mailed to its specified office.

 

12.2                  Survival of Rights.  Subject to the provisions hereof limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Partners and the Partnership and their respective legal representatives, successors, transferees and assigns.

 

12.3                  Additional Documents.  Each Partner agrees to perform all further acts and execute, swear to, acknowledge and deliver all further documents which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act.

 

12.4                  Severability.  If any provision of this Agreement shall be declared illegal, invalid, or unenforceable in any jurisdiction, then such provision shall be deemed to be severable from this Agreement (to the extent permitted by law) and in any event such illegality, invalidity or unenforceability shall not affect the remainder hereof.

 

12.5                  Entire Agreement.  This Agreement and exhibits attached hereto constitute the entire Agreement of the Partners and supersede all prior written agreements and prior and contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof.

 

12.6                  Pronouns and Plurals.  When the context in which words are used in the Agreement indicates that such is the intent, words in the singular number shall include the plural and the masculine gender shall include the neuter or female gender as the context may require.

 

12.7                  Headings.  The Article headings or sections in this Agreement are for convenience only and shall not be used in construing the scope of this Agreement or any particular Article.

 

12.8                  Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original copy and all of which together shall constitute one and the same instrument binding on all parties hereto, notwithstanding that all parties shall not have signed the same counterpart.

 

12.9                  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware; provided, however, that any cause of action for violation of federal or state securities laws shall not be governed by this Section 12.9.

 

12.10           Effectiveness.12.11                                   Pursuant to Section 17-201(d) of the Act, this Agreement shall be effective as of June 13, 2018.

 

48

 

IN WITNESS WHEREOF, the parties hereto have hereunder affixed their signatures to this Limited Partnership Agreement, all as of the date first above written.

 

	
 
    	
GENERAL   PARTNER:
    
	
 
    	
 
    
	
 
    	
BLACK   CREEK INDUSTRIAL REIT IV INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas G. McGonagle
    
	
 
    	
 
    	
Name:
    	
Thomas   G. McGonagle
    
	
 
    	
 
    	
Title:
    	
Managing   Director, Chief Financial Officer
    
					

 

 

	
 
    	
LIMITED PARTNER:
    
	
 
    	
 
    
	
 
    	
BLACK   CREEK INDUSTRIAL REIT IV INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Thomas G. McGonagle
    
	
 
    	
 
    	
Name:
    	
Thomas   G. McGonagle
    
	
 
    	
 
    	
Title:
    	
Managing   Director, Chief Financial Officer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
SPECIAL OP UNITHOLDER:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
BCI   IV ADVISORS GROUP LLC
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Evan H. Zucker
    
	
 
    	
 
    	
Name:
    	
Evan   H. Zucker
    
	
 
    	
 
    	
Title:
    	
Manager
    
					

 

 

EXHIBIT A

As of May 15, 2018

 

	
 
    	
 
    	
Cash
    	
 
    	
Agreed Value of
   Capital
    	
 
    	
Partnership Units
    	
 
    	
Special
   Partnership
    	
 
    	
Percentage
    	
 
    	
Special
   Percentage
    	
 
    
	
Partner
    	
 
    	
Contribution
    	
 
    	
Contribution
    	
 
    	
Class I
    	
 
    	
Class T
    	
 
    	
Class W
    	
 
    	
Units
    	
 
    	
Interest
    	
 
    	
Interest
    	
 
    
	
GENERAL PARTNER:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Black Creek Industrial REIT IV Inc.
   518 17th Street, 17th Floor
   Denver, CO 80202
    	
 
    	
$
    	
2,000
    	
 
    	
$
    	
2,000
    	
 
    	
200
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
0.003
    	
%
    	
—
    	
 
    
	
ORIGINAL LIMITED PARTNER:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Black Creek Industrial REIT IV Inc.
   518 17th Street, 17th Floor
   Denver, CO 80202
    	
 
    	
$
    	
64,534,236
    	
 
    	
$
    	
64,534,236
    	
 
    	
292,282
    	
 
    	
5,874,573
    	
 
    	
6,250
    	
 
    	
—
    	
 
    	
99.997
    	
%
    	
—
    	
 
    
	
SPECIAL OP UNITHOLDER:
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
BCI IV Advisors Group LLC
   518 17th Street, 17th Floor
   Denver, CO 80202
    	
 
    	
$
    	
1,000
    	
 
    	
$
    	
1,000
    	
 
    	
—
    	
 
    	
—
    	
 
    	
—
    	
 
    	
100
    	
 
    	
—
    	
 
    	
100
    	
%
    
	
Totals
    	
 
    	
$
    	
64,537,236
    	
 
    	
$
    	
64,537,236
    	
 
    	
292,482
    	
 
    	
5,874,573
    	
 
    	
6,250
    	
 
    	
100
    	
 
    	
100
    	
%
    	
100
    	
%
    

 

 

EXHIBIT B

NOTICE OF EXERCISE OF REDEMPTION RIGHT

 

In accordance with Section 8.5 of the Limited Partnership Agreement (the “Agreement”) of BCI IV Operating Partnership LP, the undersigned hereby irrevocably (i) presents for redemption          Partnership Units in BCI IV Operating Partership LP in accordance with the terms of the Agreement and the Redemption Right referred to in Section 8.5 thereof, (ii) surrenders such Partnership Units and all right, title and interest therein, and (iii) directs that the Cash Amount or REIT Shares Amount (as defined in the Agreement) as determined by the General Partner deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if REIT Shares (as defined in the Agreement) are to be delivered, such REIT Shares be registered or placed in the name(s) and at the address(es) specified below.

 

	
Dated:                                   ,           
    	
 
    	
 
    
	
 
    	
(Name   of Limited Partner)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Signature   of Limited Partner)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(Mailing   Address)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(City)      (State)          (Zip Code)
    
	
 
    	
 
    	
 
    
	
 
    	
Signature   Guaranteed by:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
If   REIT Shares are to be issued, issue to:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Name:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Social   Security
    	
 
    	
 
    
	
or   Tax I.D. Number:
    	
 
    	
 
    	
 
    	
 
    
						

 

B-1Exhibit 10.1

 

Execution Version

TERM LOAN AGREEMENT

 

Dated as of June
14, 2018

 

by and among

 

JAKKS PACIFIC, INC.,

DISGUISE, INC.,

JAKKS SALES LLC,

MAUI, INC.,

MOOSE MOUNTAIN MARKETING,
INC. and

KIDS ONLY, INC.,

as Borrowers,

 

JAKKS PACIFIC, INC.,

as Borrower Representative,

 

THE OTHER PERSONS
PARTY HERETO THAT ARE

DESIGNATED AS CREDIT
PARTIES,

 

GACP FINANCE CO.,
LLC,

as Agent for all
Lenders,

 

and

 

THE OTHER FINANCIAL
INSTITUTIONS PARTY HERETO,

as Lenders

 

     

     

    

 

TABLE OF CONTENTS 

 

	 	 	Page
	 	 	 
	ARTICLE I. THE CREDITS	1
	 	 	 
	Section 1.01	Term Loans	1
	Section 1.02	Evidence of Term Loan; Term Notes	1
	Section 1.03	Interest	1
	Section 1.04	Loan Accounts	2
	Section 1.05	Register	2
	Section 1.06	Protective Advances	2
	Section 1.07	Optional Prepayments	3
	Section 1.08	Mandatory Prepayments	3
	Section 1.09	Fees	4
	Section 1.10	Payments by Borrowers	5
	Section 1.11	Settlement	6
	Section 1.12	Procedures	7
	Section 1.13	Borrower Representative	7
	 	 	 
	ARTICLE II. BORROWING BASE	7
	 	 	 
	Section 2.01	Eligible Accounts	7
	Section 2.02	Eligible Licensed Inventory	7
	 	 	 
	ARTICLE III. CONDITIONS PRECEDENT	9
	 	 	 
	Section 3.01	Conditions to Effectiveness	9
	 	 	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES	9
	 	 	 
	Section 4.01	Corporate Existence and Power	9
	Section 4.02	Corporate Authorization; No Contravention	9
	Section 4.03	Governmental Authorization	9
	Section 4.04	Binding Effect	10
	Section 4.05	Litigation	10
	Section 4.06	No Default	10
	Section 4.07	ERISA Compliance	10
	Section 4.08	Margin Regulations	10
	Section 4.09	Ownership of Property; Liens	11
	Section 4.10	Taxes	11
	Section 4.11	Financial Statements; Projections	11
	Section 4.12	Material Adverse Effect	11
	Section 4.13	Indebtedness; Contingent Obligations	12
	Section 4.14	Environmental Matters	12
	Section 4.15	Regulated Entities	12
	Section 4.16	Solvency	12
	Section 4.17	Labor Relations	12
	Section 4.18	Brokers’ Fees; Transaction Fees	13
	Section 4.19	Insurance	13
	Section 4.20	Outstanding Stock	13
	Section 4.21	Perfection Certificate	13
	Section 4.22	Government Contracts	13
	Section 4.23	Customer and Trade Relations	13
	Section 4.24	Bonding	14
	Section 4.25	Disney Licenses	14

 

    	 	i	 

     

    

 

TABLE OF CONTENTS

(continued)

 

	Section 4.26	[Reserved]	14
	Section 4.27	Subordinated Indebtedness	14
	Section 4.28	Full Disclosure	14
	Section 4.29	OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws	14
	Section 4.30	Patriot Act	14
	Section 4.31	HK Collateral Documents	15
	 	 	 
	ARTICLE V. AFFIRMATIVE COVENANTS	15
	 	 	 
	Section 5.01	Financial Statements, Certificates and Other Reports	15
	Section 5.02	Appraisals	16
	Section 5.03	Notices	16
	Section 5.04	Preservation of Corporate Existence, Etc	17
	Section 5.05	Maintenance of Property	18
	Section 5.06	Insurance	18
	Section 5.07	Compliance with Laws	19
	Section 5.08	Inspection of Property and Books and Records	19
	Section 5.09	Use of Proceeds	19
	Section 5.10	Cash Management Systems	20
	Section 5.11	Further Assurances	20
	Section 5.12	Environmental Matters	21
	Section 5.13	OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws	21
	Section 5.15	Applicable License Agreements.	21
	Section 5.16	Post-Closing Obligations	21
	Section 5.17	Refinancing of 2018 Convertible Notes	21
	 	 	 
	ARTICLE VI. NEGATIVE COVENANTS	22
	 	 	 
	Section 6.01	Limitation on Liens	22
	Section 6.02	Disposition of Property	23
	Section 6.03	Consolidations and Mergers	24
	Section 6.04	Acquisitions; Loans and Investments	24
	Section 6.05	Limitation on Indebtedness	25
	Section 6.06	Employee Loans and Transactions with Affiliates	25
	Section 6.07	Fees and Compensation	26
	Section 6.08	Use of Proceeds	26
	Section 6.09	Contingent Obligations	26
	Section 6.10	Restricted Payments	27
	Section 6.11	Change in Business	28
	Section 6.12	Change in Structure	28
	Section 6.13	Changes in Accounting, Name or Jurisdiction of Organization	28
	Section 6.14	Amendments to Subordinated Indebtedness and Applicable License Agreements	28
	Section 6.15	No Negative Pledges	28
	Section 6.16	Issuances of Stock	28
	Section 6.17	Sale-Leasebacks	28
	Section 6.18	Hazardous Materials	29
	Section 6.19	Prepayments of Other Indebtedness	29
	 	 	 
	ARTICLE VII. FINANCIAL COVENANTS	29
	 	 	 
	Section 7.01	Reserved.	29
	Section 7.02	Fixed Charge Coverage Ratio	29
	Section 7.03	Minimum Liquidity	29

 

    	 	ii	 

     

    

 

TABLE OF CONTENTS

(continued)

 

	ARTICLE VIII. EVENTS OF DEFAULT	29
	 	 	 
	Section 8.01	Events of Default	29
	Section 8.02	Remedies	32
	Section 8.03	Rights Not Exclusive	32
	 	 	 
	ARTICLE IX. THE AGENT	32
	 	 	 
	Section 9.01	Appointment and Duties	32
	Section 9.02	Use of Discretion	33
	Section 9.03	Delegation of Rights and Duties	34
	Section 9.04	Reliance and Liability	34
	Section 9.05	Agent Individually	35
	Section 9.06	Lender Credit Decision	36
	Section 9.07	Withholding	36
	Section 9.08	Resignation of Agent	36
	Section 9.09	Release of Collateral or Guarantors	37
	Section 9.10	Additional Secured Parties	37
	 	 	 
	ARTICLE X. MISCELLANEOUS	38
	 	 	 
	Section 10.01	Amendments and Waivers	38
	Section 10.02	Notices	39
	Section 10.03	Electronic Transmissions	40
	Section 10.04	No Waiver; Cumulative Remedies	41
	Section 10.05	Costs and Expenses; Indemnification	41
	Section 10.06	Marshaling; Payments Set Aside	42
	Section 10.07	Binding Effect; Assignments and Participations	42
	Section 10.08	Non-Public Information; Confidentiality	44
	Section 10.09	Set-off; Sharing of Payments	46
	Section 10.10	Counterparts; Facsimile Signature	46
	Section 10.11	Severability	46
	Section 10.12	Captions	47
	Section 10.13	Interpretation	47
	Section 10.14	No Third Parties Benefited	47
	Section 10.15	Governing Law and Jurisdiction	47
	Section 10.16	Waiver of Jury Trial	48
	Section 10.17	Entire Agreement; Release; Survival	48
	Section 10.18	Patriot Act	48
	Section 10.19	Replacement of Lender	48
	Section 10.20	Joint and Several	49
	Section 10.21	Creditor-Debtor Relationship	49
	Section 10.22	Keep Well	49
	Section 10.23	Waiver of Immunities	49
	 	 	 
	ARTICLE XI.	50
	 	 	 
	Section 11.01	Taxes	50
	Section 11.02	Illegality	52
	Section 11.03	Increased Costs and Reduction of Return	52
	Section 11.04	Funding Losses	53
	Section 11.05	Inability to Determine Rates	53
	Section 11.06	Reserves on LIBOR Rate Loans	53
	Section 11.07	Certificates of Lenders	53
	 	 	 
	ARTICLE XII. DEFINITIONS	54
	 	 	 
	Section 12.01	Defined Terms in Other Articles	54
	Section 12.02	Definitions	54
	Section 12.03	Other Interpretive Provisions	78
	Section 12.04	Accounting Terms and Principles	79
	Section 12.05	Payments	79

 

    	 	iii	 

     

    

 

TABLE OF CONTENTS

(continued)

 

SCHEDULES

 

	Schedule 1	 	Term Loan Commitments
	Schedule 3.01	 	Conditions Precedent
	Schedule 4.05	 	Litigation
	Schedule 4.07	 	ERISA Compliance
	Schedule 4.10	 	Tax Audits
	Schedule 4.12	 	Material Adverse Effect
	Schedule 4.14	 	Environmental
	Schedule 4.17	 	Labor Relations
	Schedule 4.19	 	Insurance
	Schedule 4.21	 	Perfection Certificate
	Schedule 4.22	 	Government Contracts
	Schedule 4.23	 	Customer and Trade Relations
	Schedule 4.24	 	Bonding
	Schedule 5.01	 	Financial Statements, Certificates and Other Reports
	Schedule 5.10	 	HK Deposit Accounts Not at Wells Fargo
	Schedule 5.16	 	Post-Closing Obligations
	Schedule 6.01	 	Liens
	Schedule 6.04	 	Investments
	Schedule 6.05	 	Indebtedness
	Schedule 6.06	 	Transactions with Affiliates
	Schedule 6.09	 	Contingent Obligations
	Schedule 10.02	 	Notice Addresses

 

EXHIBITS

 

	Exhibit 5.01	 	Form of Compliance Certificate
	Exhibit 10.07	 	Form of Assignment
	Exhibit 12.02(a)	 	Form of Borrowing Base Certificate
	Exhibit 12.02(b)	 	Form of Term Note

 

    	 	iv	 

     

    

 

TERM LOAN AGREEMENT

 

This TERM LOAN AGREEMENT
(this “Agreement”) is entered into as of June 14, 2018, by and among JAKKS PACIFIC, INC., a Delaware corporation,
for itself and as successor by merger to Creative Designs International, Ltd., a Delaware corporation (“JAKKS”),
DISGUISE, INC., a Delaware corporation (“Disguise”), JAKKS SALES LLC, a Delaware limited liability company (formerly
known as JAKKS Sales Corporation, a Delaware corporation) (“JAKKS Sales”), MAUI, INC., an Ohio corporation (“Maui”),
MOOSE MOUNTAIN MARKETING, INC., a New Jersey corporation (“Moose”), KIDS ONLY, INC., a Massachusetts corporation
(“Kids” and together with JAKKS, Disguise, JAKKS Sales, Maui and Moose are sometimes referred to herein collectively
as “Borrowers” and individually as a “Borrower”), JAKKS, as Borrower Representative (“Borrower
Representative”), the other Persons party hereto that are designated as a “Credit Party,” the financial institutions
from time to time party hereto (collectively, “Lenders” and individually each a “Lender”),
and GACP FINANCE CO., LLC, a Delaware limited liability company (in its individual capacity, “GACP”), as Agent
for Secured Parties (in such capacity, “Agent”).

 

RECITALS

 

Borrowers have requested,
and Lenders have agreed to make available to Borrowers, a term loan facility (the “Term Loan Facility”) upon
and subject to the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

 

ARTICLE
I.

THE CREDITS

 

Section 1.01         Term
Loans. Subject to the terms and conditions of this Agreement, each Lender severally and not jointly agrees to make a
Term Loan, in Dollars, to Borrowers in the amount set forth opposite such Lender’s name in Schedule 1 under the heading “Term
Loan Commitments”. The Aggregate Term Loan Commitments shall expire upon the funding of the Term Loan by the Lenders. Once
repaid, whether such payment is voluntary, scheduled or mandatory, no portion of the Term Loan may be reborrowed.

 

Section 1.02         Evidence
of Term Loan; Term Notes. The Term Loan made by each Lender is evidenced by this Agreement and, if requested by such
Lender, a Term Note payable to such Lender in the original principal amount of such Lender’s Term Loan Commitment.

 

Section 1.03         Interest.

 

(a)          Interest.
Except as otherwise provided herein, each Term Loan shall bear interest on the outstanding principal amount thereof from the date
when made at a rate per annum equal to LIBOR plus the Applicable Margin. Each determination of an interest rate by Agent shall
be conclusive and binding on each Borrower and Lenders in the absence of manifest error. All computations of fees and interest
payable under this Agreement shall be made on the basis of a 360-day year and actual days elapsed. Interest and fees shall accrue
during each period during which interest or such fees are computed from the first day thereof to the last day thereof. Interest
on the Term Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any payment
or prepayment of any principal portion of the Term Loan.

 

     

     

    

 

(b)          Default
Rate. At the election of Agent or the Required Lenders while any Event of Default exists and is continuing (or automatically
while any Event of Default under Section 8.01(a), (f) or (g) exists), Borrowers shall pay interest on the Obligations, from
and after the date of occurrence of such Event of Default and for as long as it continues, at the Default Rate. All such interest
shall be payable on demand of Agent or the Required Lenders.

 

(c)          Maximum
Lawful Rate. Anything herein to the contrary notwithstanding, the obligations of Borrowers hereunder are subject to the limitation
that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only
to the extent) that contracting for or receiving such payment by the respective Lender would be contrary to the provisions of any
law applicable to such Lender limiting the highest rate of interest which may be lawfully contracted for, charged or received by
such Lender, and in such event Borrowers shall pay such Lender interest at the highest rate permitted by applicable law (“Maximum
Lawful Rate”); provided, that if at any time thereafter the rate of interest payable hereunder is less than the
Maximum Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total
interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest
payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.

 

Section 1.04         Loan
Accounts. Agent, on behalf of Lenders, shall record on its books and records the initial principal amount of the Term
Loan, the interest rate applicable, all payments of principal and interest thereon and the principal balance thereof from time
to time outstanding. Agent shall deliver to Borrower Representative on a monthly basis an interest statement setting forth such
record for the immediately preceding calendar month. Such record shall, absent manifest error, be conclusive evidence of the amount
of the Loans made by Lenders to Borrowers and the interest and payments thereon. Any failure to so record or any error in doing
so, or any failure to deliver such loan statement shall not, however, limit or otherwise affect the obligation of Borrowers hereunder
(and under any Note) to pay any amount owing with respect to the Loans or provide the basis for any claim against Agent.

 

Section 1.05         Register.
Agent, acting as a non-fiduciary agent of Borrowers solely for tax purposes and solely with respect to the actions described in
this Section, shall establish and maintain (a) a record of ownership (the “Register”), by book entry, of the
interests (including any rights to receive payment hereunder) of Agent and each Lender in the Obligations, each of their obligations
under this Agreement to participate in each Loan, and any assignment of any such interest, obligation or right and (b) accounts
in the Register in accordance with its usual practice. Notwithstanding anything to the contrary contained in this Agreement, the
Loans (including any Notes) are registered obligations and shall be maintained in “registered form” within the meaning
of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and transferable only upon notation of such transfer in the Register. Credit
Parties, Agent and Lenders shall treat each Person whose name is recorded in the Register as a Lender for all purposes of this
Agreement. Information contained in the Register with respect to any Lender shall be available for access by Borrowers, Borrower
Representative, Agent, and such Lender (as to only its Term Loan).

 

Section 1.06         Protective
Advances. Agent shall be authorized at any time after the Closing Date, to make advances (“Protective Advances”)
up to an aggregate principal amount not to exceed at any time $3,000,000, if Agent deems such Protective Advances necessary or
desirable to preserve or protect Collateral, or to enhance the collectability or repayment of the Obligations. Each Lender shall
participate in each Protective Advance in accordance with its Term Loan Percentage. All Protective Advances shall constitute Term
Loans, shall bear interest at the Default Rate and shall be due and payable upon demand of the Agent.

 

    	 	2	 

     

    

 

Section 1.07         Optional
Prepayments.

 

(a)          Generally.
The Borrowers may, upon prior notice by Borrower Representative to Agent, at any time and from time to time voluntarily prepay
the Term Loan in whole or in part; provided that (i) such notice must be received by Agent not later than 11:00 a.m. three (3)
Business Days prior to any date of prepayment and (ii) any such prepayment shall be in a minimum amount equal to $1,000,000 and
in increments of $100,000 in excess thereof or, if less, the entire principal amount of the Term Loan then outstanding. Together
with each prepayment under this Section 1.07, the Borrowers shall pay any amounts required pursuant to Sections 1.03,
1.09 and 11.04.

 

(b)          Notice.
The notice of any prepayment of the Term Loan shall not thereafter be revocable by the Borrowers or Borrower Representative and
Agent will promptly notify each Lender thereof and of such Lender’s Term Loan Percentage of such prepayment. The payment
amount specified in such notice shall be due and payable on the date specified therein.

 

Section 1.08         Mandatory
Prepayments.

 

(a)          Termination
Date. The Borrowers shall pay to the Lenders in full on the Termination Date the principal amount of the Term Loan outstanding
on the Termination Date, together with any amounts required pursuant to Sections 1.03, 1.09 and 11.04.

 

(b)          Asset
Dispositions; Events of Loss. If the aggregate amount of the Net Proceeds received by a Credit Party in connection with a Disposition
or an Event of Loss and all other Dispositions and Events of Loss occurring during any Fiscal Year exceeds $500,000, then (i) Borrower
Representative shall promptly notify Agent of such proposed Disposition or Event of Loss (including the amount of the estimated
Net Proceeds in respect thereof) and (ii) subject to the Intercreditor Agreement, promptly upon receipt by a Credit Party of the
Net Proceeds of such Disposition or Event of Loss, Borrowers shall deliver or cause to be delivered to Agent for distribution to
Lenders as a prepayment of the Obligations, an amount equal to the lesser of (A) such Net Proceeds or (B) the outstanding Obligations.
If no Default or Event of Default has occurred and is continuing, such prepayment shall not be required to the extent a Credit
Party reinvests the Net Proceeds of such Disposition or Event of Loss in productive assets (other than Inventory) of a kind then
used or usable in the business of a Borrower, within 180 days after the date of such Disposition or Event of Loss; provided,
that Borrower Representative notifies Agent of such Credit Party’s intent to reinvest, the proposed date of such reinvestment
at the time such proceeds are received and the date reinvestment occurs. Pending such reinvestment, subject to the Intercreditor
Agreement, an amount equal to the lesser of (A) such Net Proceeds or (B) the outstanding Obligations, shall be delivered to Agent,
for distribution to the Lenders. Notwithstanding the foregoing, amounts otherwise payable pursuant to this Section 1.08(a) on account
of Revolving Loan Priority Collateral (as defined in the Intercreditor Agreement), if any, shall not be payable hereunder to the
extent that they are paid to the ABL Lenders pursuant to the ABL Credit Agreement.

 

    	 	3	 

     

    

 

(c)          Issuance
of Securities. Except to the extent applied to any obligations pursuant to the ABL Credit Agreement and the Share Increase
Transaction (if any), immediately upon the receipt by any Credit Party of the Net Issuance Proceeds of the issuance of Stock or
Stock Equivalents (including any capital contribution) or debt securities (other than Net Issuance Proceeds from the issuance of
(i) debt securities in respect of Indebtedness permitted hereunder, and (ii) Excluded Equity Issuances), Borrowers shall deliver,
or cause to be delivered, to Agent, for distribution to Lenders as a prepayment of the Term Loan, an amount equal to the lesser
of (A) such Net Issuance Proceeds or (B) the outstanding Obligations in accordance with their Term Loan Percentages.

 

(d)          No
Availability. If (a) on any date both (i) the Term Loan Push-Down Reserve is being applied against the Borrowing Base and (ii)
the then outstanding principal balance of the Revolving Loans exceeds the Maximum Revolving Loan Balance (such amount, the “ABL
Excess”), and (b) Borrowers do not repay the outstanding Revolving Loans in the amount of the ABL Excess within one Business
Day of such date (or within five Business Days if the ABL Excess results solely from changes to Reserves (other than the Term Loan
Push-Down Reserve), the criteria of Eligible Accounts or Eligible Inventory, or advance rates in the Borrowing Base, in each case
as implemented by the ABL Agent in accordance with the terms of the ABL Credit Agreement and the Intercreditor Agreement), then
the Borrowers shall immediately repay the Term Loan in amount equal to the lesser of (1) the amount of the Term Loan Push-Down
Reserve and (2) the ABL Excess.

 

Section 1.09         Fees.

 

(a)          Fees.
Borrowers shall pay to Agent, for Agent’s own account, fees in the amounts and at the times set forth in the Fee Letter.

 

(b)          Prepayment
Fee. If (i) Borrowers make any voluntary prepayment of the Term Loan, or (ii) Borrowers make or are required to make any mandatory
prepayment of the Term Loan pursuant to Sections 1.08(b), (c) or (d) (other than any scheduled installment),
or (iii) all or any portion of the Term Loan has become or is deemed to be due and payable pursuant to Article VIII, in
each case whether before or after acceleration of the Obligations, then in each case, Borrowers shall pay to Agent, for the pro
rata benefit of the applicable Lenders, as liquidated damages and compensation for the costs of being prepared to make funds available
hereunder, a fee (the “Prepayment Fee”) equal to the following amounts:

 

	Prepayment Date	 	Prepayment Fee
	From and after the Closing Date through and including the first anniversary of the Closing Date (the “Prepayment Period”)	 	
        (A) If
        a Share Increase Transaction has not occurred, an amount equal to (1) the amount of interest which would have accrued on the
        Prepaid Principal Amount during the Prepayment Period (calculated using the interest rate accruing under Section
        1.03(a) on the date of such prepayment), minus the aggregate amount of cash interest actually paid on such Prepaid
        Principal Amount to the date of prepayment plus (2) 2.00% of the Prepaid Principal Amount; or

         

        

        (B) If a Share Increase
        Transaction has occurred, an amount equal to the greater of (1) the amount of interest which would have accrued on the Prepaid
        Principal Amount during the Prepayment Period (calculated using the interest rate accruing under Section 1.03(a) on the
        date of such prepayment), minus the aggregate amount of cash interest actually paid on such Prepaid Principal Amount to the date
        of prepayment or (2) 2.00% of the Prepaid Principal Amount.

	 	 	 
	After the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date	 	An amount equal to 2.00% of the Prepaid Principal Amount.
	 	 	 
	After the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date	 	An amount equal to 1.00% of the Prepaid Principal Amount.

 

    	 	4	 

     

    

 

Credit Parties
agree that the Prepayment Fee is a reasonable calculation of Lenders’ lost profits in view of the difficulties and impracticality
of determining actual damages resulting from an early repayment of the Term Loan.

 

Section 1.10         Payments
by Borrowers.

 

(a)          Generally.
All payments to be made by each Credit Party under the Loan Documents shall be made without set off, recoupment, counterclaim or
deduction of any kind, shall, except as otherwise expressly provided herein, be made to Agent (for the ratable account of the Persons
entitled thereto) at the address for payment specified by Agent and shall be made in Dollars, by wire transfer or ACH transfer
in immediately available funds (which shall be the exclusive means of payment hereunder), no later than 1:00 p.m. on the date due.
Any payment which is received by Agent later than 1:00 p.m. may in Agent’s discretion be deemed to have been received on
the immediately succeeding Business Day and any applicable interest or fee shall continue to accrue. Each Credit Party hereby irrevocably
waives the right to direct the application during the continuance of an Event of Default of any and all payments in respect of
any Obligation and any proceeds of Collateral.

 

(b)          Non-Business
Day. Subject to the provisions set forth in the definition of “Interest Period” herein, if any payment hereunder
is stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of interest or fees, as applicable.

 

(c)          Amortization.
The Borrowers shall pay the principal amount of the Term Loan as follows: (i) 10% per annum in arrears in monthly installments
commencing on the last Business Day of June 2019 and continuing on the last Business Day of each month thereafter and (ii) a final
installment equal to the remaining outstanding principal balance of the Term Loan, payable on the Termination Date. Unless sooner
paid in full, the outstanding principal balance of the Term Loan must be paid in full on the Termination Date.

 

(d)          Application
Following an Event of Default. During the continuance of an Event of Default, Agent may, and shall upon the direction of Required
Lenders, apply any payments received by Agent in accordance with clauses first through sixth below. Notwithstanding any provision
herein to the contrary, all payments made by Credit Parties to Agent after any or all of the Obligations have been accelerated
(so long as such acceleration has not been rescinded), including proceeds of Collateral, shall be applied as follows and in such
priority:

 

    	 	5	 

     

    

 

(i)          first,
to all amounts owing to Agent or the Lenders in respect of Protective Advances;

 

(ii)         second,
to payment of costs and expenses, including Attorney Costs, of Agent payable or reimbursable by Credit Parties under the Loan Documents;

 

(iii)        third,
without duplication, to payment of Attorney Costs of Lenders payable or reimbursable by Borrowers under this Agreement;

 

(iv)        fourth,
to payment of all accrued unpaid interest on the Obligations and fees owed to Agent and Lenders;

 

(v)         fifth,
to payment of principal of the Obligations;

 

(vi)        sixth,
to payment of any other amounts owing constituting Obligations; and

 

(vii)       seventh,
any remainder shall be for the account of and paid to whoever may be lawfully entitled thereto.

 

Each of Lenders or
other Persons entitled to payment shall receive an amount equal to its pro rata share of amounts available to be applied pursuant
to clauses first, fourth, fifth and sixth above; provided, that no payments by a Guarantor and no proceeds of Collateral
of a Guarantor shall be applied to Excluded Rate Contract Obligations of such Guarantor.

 

Section 1.11         Settlement.

 

(a)          Settlement.
At least once each calendar month (each, a “Settlement Date”), Agent shall advise each Lender by telephone or
fax of the amount of such Lender’s Term Loan Percentage of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Term Loan. Agent shall pay to each Lender such Lender’s Term Loan Percentage of principal, interest
and fees paid by Borrowers since the previous Settlement Date for the benefit of such Lender on the Term Loan held by it. Such
payments shall be made by wire transfer to such Lender not later than 2:00 p.m. on the next Business Day following each Settlement
Date.

 

(b)          Return
of Payments. If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from the Borrowers and such related payment is not received by Agent, then Agent will be entitled
to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind. If Agent determines at
any time that any amount received by Agent under any Loan Document must be returned to any Credit Party or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of any Loan Document, Agent will
not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion
of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to
pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind, and Agent will be entitled to
set-off against future distributions to such Lender any such amounts (with interest) that are not repaid on demand.

 

    	 	6	 

     

    

 

Section 1.12         Procedures.
Agent is hereby authorized by each Credit Party and each other Secured Party to establish commercially reasonable procedures (and
to amend such procedures from time to time) to facilitate administration and servicing of the Term Loan and other matters incidental
thereto. Without limiting the generality of the foregoing, Agent is hereby authorized to establish procedures to make available
or deliver, or to accept, notices, documents and similar items on, by posting to or submitting and/or completion on, E-Systems.

 

Section 1.13         Borrower
Representative. JAKKS hereby (a) is designated and appointed by each Credit Party as its representative and agent on
its behalf (the “Borrower Representative”) and (b) accepts such appointment as Borrower Representative, in each
case, for the purposes of issuing, delivering or receiving any notices, requests, certificates, instructions and consents under
the Loan Documents and taking all other actions on behalf of any Credit Party or Credit Parties under the Loan Documents. Agent
and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice
or communication from all Credit Parties. Each warranty, covenant, agreement and undertaking made on behalf of a Credit Party by
Borrower Representative shall be deemed for all purposes to have been made by such Credit Party and shall be binding upon and enforceable
against such Credit Party to the same extent as if the same had been made directly by such Credit Party.

 

ARTICLE
II.

BORROWING BASE

 

Section 2.01         Eligible
Accounts. Agent shall have the right to establish, modify or eliminate Reserves against Eligible Domestic Accounts and
Eligible Foreign Accounts from time to time in its Permitted Discretion. In addition, Agent reserves the right, from time to time,
to adjust any of the applicable criteria and to establish new criteria and to adjust advance rates with respect to Eligible Domestic
Accounts or Eligible Foreign Accounts, in its Permitted Discretion. “Eligible Domestic Accounts” and “Eligible
Foreign Accounts” shall have the meaning as set forth in the ABL Credit Agreement as in effect on the Closing Date, as may
be amended in accordance with the Intercreditor Agreement.

 

Section 2.02         Eligible
Licensed Inventory. Agent shall have the right to establish, modify, or eliminate Reserves against Eligible Licensed
Inventory from time to time in its Permitted Discretion. In addition, Agent reserves the right, from time to time, to adjust any
of the applicable criteria, to establish new criteria and to adjust advance rates with respect to Eligible Licensed Inventory in
its Permitted Discretion, subject to the approval of Required Lenders in the case of adjustments or new criteria or changes in
advance rates which have the effect of making more credit available. “Eligible Licensed Inventory” shall mean (i) Disney
Inventory and (ii) Inventory that is subject to any license under which one or more Borrowers is the licensee and for which the
Borrowers have obtained appropriate waivers and documentation from applicable Licensors consenting to, among other things, the
grant of a security interest in favor of the Agent and the Agent’s ability to liquidate such Inventory, in each case in form
and substance satisfactory to the Agent in the Agent’s Permitted Discretion; provided, that Eligible Licensed Inventory
shall not include any of the following:

 

(a)          Condition.
Inventory that is excess, obsolete, damaged, unsaleable, shopworn or seconds;

 

(b)          Locations
< $100M. Inventory is located at any site if the aggregate book value of Inventory at any such location is less than $100,000;

 

(c)          Consignment.
Inventory that is placed on consignment;

 

    	 	7	 

     

    

 

(d)          Off-Site.
Inventory that (i) is not located on premises owned, leased or rented by a Credit Party and set forth in the Perfection Certificate
or (ii) is stored at a leased location, unless (A) a reasonably satisfactory landlord waiver is delivered to Agent, or (B) Reserves
satisfactory to Agent have been established with respect thereto, (iii) is stored with a bailee or warehouseman unless (A) a reasonably
satisfactory, acknowledged bailee letter is received by Agent with respect thereto and (B) Reserves satisfactory to Agent have
been established with respect thereto, or (iv) is located at an owned location subject to a mortgage in favor of a lender other
than Agent, unless a reasonably satisfactory mortgagee waiver is delivered to Agent;

 

(e)          In-Transit.
Inventory that is in transit, except for Inventory in transit between domestic locations of Credit Parties as to which Agent’s
Liens have been perfected at origin and destination;

 

(f)          Customized.
Inventory subject to any licensing, trademark, trade name, patent or copyright agreements with any third parties (A) which would
require any consent of any third party for the sale or disposition of that Inventory (which consent has not been obtained) or the
payment of any monies to any third party upon such sale or other disposition (to the extent of such monies) and (B) for which such
agreement has not been collaterally assigned to Agent for the benefit of Secured Parties;

 

(g)          Packing/Shipping
Materials. Inventory that consists of packing or shipping materials, or manufacturing supplies;

 

(h)         Tooling.
Inventory that consists of tooling or replacement parts;

 

(i)           Display.
Inventory that consists of display items;

 

(j)          Returns.
Inventory that consists of damaged or defective goods that have been returned by the buyer;

 

(k)          Freight.
Inventory that consists of any costs associated with “freight in” charges in excess of normal freight charges;

 

(l)          Hazardous
Materials. Inventory that consists of Hazardous Materials or goods that can be transported or sold only with licenses that
are not readily available;

 

(m)         Un-insured.
Inventory that is not covered by casualty insurance reasonably acceptable to Agent;

 

(n)          Not
Owned/Other Liens. Inventory that is not owned by a Credit Party or is subject to Liens other than Permitted Liens described
in Section 6.01(b), (c), (d) and (f) or rights of any other Person (including the rights of a purchaser that
has made progress payments and the rights of a surety that has issued a bond to assure a Credit Party’s performance with
respect to that Inventory);

 

(o)          Not
Perfected. Inventory that is not subject to a first priority Lien in favor of Agent on behalf of itself and Secured Parties,
except for Liens described in Section 6.01(d) (subject to Reserves);

 

    	 	8	 

     

    

 

(p)          Negotiable
Bill of Sale. Inventory that is covered by a negotiable document of title, unless such document is delivered to Agent with
all necessary endorsements, free and clear of all Liens except Liens in favor of Agent, on behalf of itself and Secured Parties;
or

 

(q)          Not
Ordinary Course. Inventory (other than raw materials) that is not of a type held for sale in the Ordinary Course of Business
of a Credit Party.

 

ARTICLE
III.

CONDITIONS PRECEDENT

 

Section 3.01         Conditions
to Effectiveness. The obligation of each Lender to make the Term Loans hereunder is subject to satisfaction of the conditions
set forth on Schedule 3.01, in a manner satisfactory to Agent. For the purpose of determining satisfaction with such conditions,
each Lender that has signed and delivered this Agreement shall be deemed to have accepted, and to be satisfied with, each document
or other matter required under this Section unless the Agent shall have received written notice from such Lender prior to the Closing
Date specifying its objection thereto.

 

ARTICLE
IV.

REPRESENTATIONS AND WARRANTIES

 

Credit Parties, jointly
and severally, represent and warrant to Agent and each Secured Party that the following are true, correct and complete as of the
Closing Date and as of the date each Borrowing Base Certificate is delivered to Agent pursuant to Schedule 5.01:

 

Section 4.01         Corporate
Existence and Power. Each Credit Party, each of its respective Subsidiaries (other than the Specified Foreign Subsidiaries)
and, to the knowledge of Credit Parties, each of the Specified Foreign Subsidiaries: (a) is a corporation, limited liability company
or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation, organization or formation, as applicable; (b) has the power and authority and all governmental licenses,
authorizations, Permits, consents and approvals to own its assets, carry on its business and execute, deliver, and perform its
obligations under, the Loan Documents to which it is a party; (c) is duly qualified as a foreign corporation, limited liability
company or limited partnership, as applicable, and licensed and in good standing, under the laws of each jurisdiction where its
ownership, lease or operation of Property or the conduct of its business requires such qualification or license; and (d) is in
compliance with all Requirements of Law; except, in each case referred to in clause (c) or (d) above, to the extent that the failure
to do so would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

Section 4.02         Corporate
Authorization; No Contravention. The execution, delivery and performance by each Credit Party (and any Subsidiary thereof,
if applicable) of each Loan Document to which such Person is party, have been duly authorized by all necessary action, and do not
and will not: (a) contravene the terms of any of that Person’s Organization Documents; (b) conflict with or result in any
material breach or contravention of, or result in the creation of any Lien under, any document evidencing any material Contractual
Obligation to which such Person is a party or any order, injunction, writ or decree of any Governmental Authority to which such
Person or its Property is subject; or (c) violate any Requirement of Law in any material respect.

 

Section 4.03         Governmental
Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against,
any Credit Party or any Subsidiary of any Loan Document except (a) recordings and filings in connection with the Liens granted
to Agent under the Collateral Documents and (b) those obtained or made on or prior to the Closing Date.

 

    	 	9	 

     

    

 

Section 4.04         Binding
Effect. This Agreement and each other Loan Document to which any Credit Party or any Subsidiary is a party constitute
the legal, valid and binding obligations of each such Person which is a party thereto, enforceable against such Person in accordance
with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors’ rights generally or by equitable principles relating to enforceability.

 

Section 4.05         Litigation.
Except as specifically disclosed in Schedule 4.05, there are no actions, suits, proceedings, claims or disputes pending, or to
the knowledge of each Credit Party, threatened in writing, at law, in equity, in arbitration or before any Governmental Authority,
against any Credit Party, any Subsidiary or any of their respective Properties which: (a) purport to affect or pertain to any Loan
Document, or any transactions contemplated thereby; (b) would reasonably be expected to result in monetary judgment(s) or relief,
individually or in the aggregate, in excess of $500,000; or (c) seek an injunction or other equitable relief which would reasonably
be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature is issued
by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of any Loan
Document, or directing that the transactions provided therein not be consummated as provided therein. As of the Closing Date, no
Credit Party or any Subsidiary is the subject of an audit or, to each Credit Party’s knowledge, any review or investigation
by any Governmental Authority (excluding the IRS and other taxing authorities) concerning the violation or possible violation of
any Requirement of Law.

 

Section 4.06         No
Default. No Default or Event of Default exists or would result from the incurring of any Obligations by any Credit Party
or the grant or perfection of Agent’s Liens on the Collateral. No Credit Party and no Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which, individually or together with all such defaults, would reasonably be
expected to have a Material Adverse Effect.

 

Section 4.07         ERISA
Compliance. Schedule 4.07 sets forth, as of the Closing Date, a complete and accurate list of, and separately identifies,
(a) all Title IV Plans, (b) all Multiemployer Plans and (c) all material Benefit Plans. Each Benefit Plan, and each trust thereunder,
intended to qualify for tax exempt status under Section 401 or 501 of the Code or other Requirements of Law so qualifies and is
in compliance in all material respects with applicable provisions of ERISA, the Code and other Requirements of Law. Except for
those that would not reasonably be expected to result in Liabilities in excess of $500,000 in the aggregate, there are no existing
or pending (or to the knowledge of any Credit Party, threatened in writing) claims (other than routine claims for benefits in the
normal course), sanctions, actions, lawsuits or other proceedings or investigation involving any Benefit Plan to which any Credit
Party or any of its Subsidiaries incurs or otherwise has or could have an obligation or any Liability. No ERISA Event has occurred
or is reasonably expected to occur that, when taken together with all other such ERISA Events, could reasonably be expected to
result in a Material Adverse Effect or the imposition of a Lien on any property of any Credit Party or any of its Subsidiaries.

 

Section 4.08         Margin
Regulations. No Credit Party or any of its Subsidiaries owns any Margin Stock or is engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part
of the proceeds of the Loans will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of
Governors. Neither any Credit Party nor any of its Subsidiaries expects to acquire any Margin Stock.

 

    	 	10	 

     

    

 

Section 4.09         Ownership
of Property; Liens. Each Credit Party, each of its respective Subsidiaries (other than the Specified Foreign Subsidiaries)
and, to the knowledge of Credit Parties, each of the Specified Foreign Subsidiaries, have good record and marketable title in fee
simple to, or valid leasehold interests in, all Real Estate, and good and valid title to all owned personal property and valid
leasehold interests in all leased personal property, in each instance, necessary or used in the ordinary conduct of their respective
businesses, in each case subject to no Liens other than Permitted Liens.

 

Section 4.10         Taxes.
All federal, state, local and foreign income and franchise and other material Tax returns, reports and statements (collectively,
the “Tax Returns”) required to be filed by any Tax Affiliate have been filed with the appropriate Governmental
Authorities, all such Tax Returns are true and correct in all material respects, and all Taxes reflected therein or otherwise due
and payable have been paid when due and owing except for those Contested in Good Faith. Except as set forth on Schedule 4.10, as
of the Closing Date, no Tax Return is under audit or examination by any Governmental Authority, and no notice of any audit or examination
or any assertion of any claim for Taxes is given or made by any Governmental Authority. Proper and accurate amounts have been withheld
by each Tax Affiliate from their respective employees for all periods in full and complete compliance with the Tax, social security
and unemployment withholding provisions of applicable Requirements of Law and such withholdings have been timely paid to the respective
Governmental Authorities. No Tax Affiliate has participated in a “reportable transaction” within the meaning of Treasury
Regulation Section 1.60011-4(b) or is a member of an affiliated, combined or unitary group other than the group of which a Tax
Affiliate is the common parent.

 

Section 4.11         Financial
Statements; Projections. (a) Each of (i) the audited Financial Statements delivered pursuant hereto, and the related
audited consolidated statements of income or operations, shareholders’ equity and cash flows for each Fiscal Year and (ii)
the unaudited Financial Statements delivered pursuant hereto for the fiscal months covered thereby, in each case: (A) were prepared
in accordance with GAAP consistently applied throughout the respective periods covered thereby, subject to, in the case of the
unaudited Financial Statements, normal year-end adjustments and the lack of footnote disclosures; and (B) taken as a whole, are
complete and correct in all material respects, and accurately and fairly present in all material respects the consolidated financial
condition and of the Consolidated Group as of the dates thereof and results of operations for the periods covered thereby. (b)
The pro forma unaudited consolidated balance sheet of the Consolidated Group delivered on the Closing Date was prepared by Credit
Parties giving pro forma effect to the funding of the Loans, was based on the unaudited consolidated and consolidating balance
sheets of the Consolidated Group dated March 31, 2018, and was prepared in accordance with GAAP, with only such adjustments thereto
as would be required in a manner consistent with GAAP. (c) All financial performance projections delivered to Agent represent Borrowers’
good faith estimate of future financial performance and are based on fair and reasonable assumptions and investigations by Borrowers.
(d) No Credit Party has any Contingent Obligations, liabilities for Taxes or other financial obligations which are material in
the aggregate, except as disclosed in the Financial Statements, other than Contingent Obligations owing by JAKKS to Licensors under
all License Agreement Guaranties, and other Contingent Obligations disclosed in JAKKS’ Form 10-K or 10-Q, as applicable,
filed with the Securities and Exchange Commission.

 

Section 4.12         Material
Adverse Effect. Except as specifically disclosed in Schedule 4.12, since December 31, 2017, there has been no event,
change, circumstance or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in
Material Adverse Effect.

 

    	 	11	 

     

    

 

Section 4.13         Indebtedness;
Contingent Obligations. Credit Parties and their Subsidiaries have no Indebtedness other than Indebtedness permitted
pursuant to Section 6.05 and have no Contingent Obligations other than Contingent Obligations permitted pursuant to Section
6.09.

 

Section 4.14         Environmental
Matters. Except as set forth in Schedule 4.14, (a) the operations of each Credit Party and each Subsidiary are and have
been in compliance with all applicable Environmental Laws, including obtaining, maintaining and complying with all Permits required
by any applicable Environmental Law, (b) no Credit Party and no Subsidiary is party to, and no Credit Party and no Subsidiary and
no Real Estate currently (or to the knowledge of any Credit Party previously) owned, leased, subleased, operated or otherwise occupied
by or for any such Person is subject to or the subject of, any Contractual Obligation or any pending (or, to the knowledge of any
Credit Party, threatened) order, action, investigation, suit, proceeding, audit, claim, demand, dispute or notice of violation
or of potential liability or similar notice relating in any manner to any Environmental Law, (c) no Lien in favor of any Governmental
Authority securing, in whole or in part, Environmental Liabilities has attached to any Property of any Credit Party or any Subsidiary
and, to the knowledge of any Credit Party, no facts, circumstances or conditions exist that could reasonably be expected to result
in any such Lien attaching to any such Property, (d) no Credit Party and no Subsidiary has caused or suffered to occur a Release
of Hazardous Materials at, to or from any Real Estate, (e) to the knowledge of Credit Parties, all Real Estate currently or previously
owned, leased, subleased, operated or otherwise occupied by or for any such Credit Party and each Subsidiary is free of contamination
by any Hazardous Materials and (f) no Credit Party and no Subsidiary (i) is or has been engaged in, or has permitted any current
or former tenant to engage in, operations in violation of any Environmental Law or (ii) knows of any facts, circumstances or conditions
reasonably constituting notice of a violation of any Environmental Law, including receipt of any information request or notice
of potential responsibility under the Comprehensive Environmental Response, Compensation and Liability Act or similar Environmental
Laws, in each case of any of clause (a) through (f) above, except with respect to the existence of any matter that could not reasonably
be expected to result in, either individually or in the aggregate, Material Environmental Liabilities to Credit Parties and their
Subsidiaries. Each Credit Party has made available to Agent copies of all existing environmental reports, reviews and audits and
all documents pertaining to actual or potential Environmental Liabilities, in each case to the extent such reports, reviews, audits
and documents are in their possession, custody, control or otherwise available to the Credit Parties.

 

Section 4.15         Regulated
Entities. None of any Credit Party, any Person controlling any Credit Party, or any Subsidiary, is (a) an “investment
company” within the meaning of the Investment Company Act of 1940 or (b) subject to regulation under any federal or state
statute, rule or regulation limiting its ability to incur Indebtedness, pledge its assets or perform its Obligations under the
Loan Documents.

 

Section 4.16         Solvency.
Both before and after giving effect to (a) any Loan made and (b) the payment and accrual of all transaction costs in connection
with the foregoing, Credit Parties, taken as a whole, and the Borrowers, taken as a whole, are Solvent.

 

Section 4.17         Labor
Relations. There are no strikes, work stoppages, slowdowns or lockouts existing, pending (or, to the knowledge of any
Credit Party, threatened) against or involving any Credit Party or any Subsidiary, except for those that would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 4.17, as of the Closing Date, (a) there
is no collective bargaining or similar agreement with any union, labor organization, works council or similar representative covering
any employee of any Credit Party or any Subsidiary, (b) no petition for certification or election of any such representative is
existing or pending with respect to any employee of any Credit Party or any Subsidiary and (c) no such representative has sought
certification or recognition with respect to any employee of any Credit Party or any Subsidiary.

 

    	 	12	 

     

    

 

Section 4.18         Brokers’
Fees; Transaction Fees. Except for fees payable to Agent and Lenders, none of Credit Parties or any of their respective
Subsidiaries has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee
in connection with the transactions contemplated hereby.

 

Section 4.19         Insurance.
Schedule 4.19 lists all insurance policies of any nature maintained by the Credit Parties, as of the Closing Date, including issuers,
coverages and deductibles. Each Credit Party and each of its Subsidiaries and their respective Properties are insured with financially
sound and reputable insurance companies which are not Affiliates of Borrowers, in such amounts, with such deductibles and covering
such risks as are customarily carried by companies engaged in similar businesses of the same size and character as the business
of Credit Parties and, to the extent relevant, owning similar Properties in localities where such Person operates.

 

Section 4.20         Outstanding
Stock. All issued and outstanding Stock and Stock Equivalents of each Credit Party and each Subsidiary are duly authorized
and validly issued, fully paid, non-assessable, as applicable, and free and clear of all Liens other than, with respect to the
Stock and Stock Equivalents of Borrowers and Subsidiaries of Borrowers, those in favor of Agent, for the benefit of Secured Parties.
All such securities were issued in compliance with all applicable state and federal laws concerning the issuance of securities.

 

Section 4.21         Perfection
Certificate. The Perfection Certificate contains a complete and accurate description of (a) each Credit Party’s
legal name, organizational type, jurisdiction of organization or formation and organizational identification number, if any, (b)
the chief executive office, mailing address and principal place of business of each Credit Party, (c) the addresses of all owned
and leased Real Estate of each Credit Party, the name and contact information of the landlord with respect to each leased location
and the expiration date of the related lease, (d) all the locations where any Credit Party maintains tangible personal property
(including goods, inventory and equipment) having an aggregate value in excess of $100,000 per location and all books and records
of such Credit Party, (e) with respect to each Credit Party, any change of the name, jurisdiction of organization, corporate structure
in any way (e.g. by merger, consolidation, change in corporate form, change in jurisdiction of organization or otherwise) or chief
executive office of such Credit Party within the five 5 year period immediately preceding the date of the Perfection Certificate,
(f) with respect to each Credit Party, any acquisition of all or substantially all of the equity interests of, or all or substantially
all of the assets of, another entity within the past five years, (g) all stock, membership interests, partnership interests
or other equity interest held by any Credit Party, (h) all copyrights, patents and trademarks and other intellectual property
owned by any Credit Party, (i) certain information regarding each Credit Party’s use of trademarks, (j) all license
agreements pursuant to which a Credit Party licenses from a third party a patent or other invention used in such Credit Party’s
products, (k) all instruments (as such term is defined in New York UCC Article 9) owed to any Credit Party (other than such checks
for payment of accounts in the ordinary course of business) and (l) such other information contained therein with respect to Credit
Parties, as updated in accordance with Schedule 5.01.

 

Section 4.22         Government
Contracts. Except as set forth in Schedule 4.22, as of the Closing Date, no Credit Party is a party to any contract
or agreement with any Governmental Authority and no Credit Party’s Accounts are subject to the Federal Assignment of Claims
Act (31 U.S.C. Section 3727) or any similar state or local law.

 

Section 4.23         Customer
and Trade Relations. Except as specifically disclosed in Schedule 4.23, as of the Closing Date, there exists no
actual or, to the knowledge of any Credit Party, threatened termination or cancellation of, or any material adverse modification
or change in (a) the business relationship of any Credit Party or any of its respective Subsidiaries with any customer or group
of customers whose purchases during the preceding 12 calendar months caused them to be ranked among the ten largest customers of
such Credit Party or any of its Subsidiaries or (b) the business relationship of any Credit Party or any of its Subsidiaries with
any supplier essential to its operations.

 

    	 	13	 

     

    

 

Section 4.24         Bonding.
Except as set forth in Schedule 4.24, as of the Closing Date and as of the date of each update thereto, no Credit Party is a party
to or bound by any surety bond agreement, indemnification agreement therefor or bonding requirement with respect to products or
services sold by it.

 

Section 4.25         Disney
Licenses. No default has occurred or is existing under the Disney Licenses or any other Applicable License Agreements.

 

Section 4.26         [Reserved].

 

Section 4.27         Subordinated
Indebtedness. As of the Closing Date, Borrowers have delivered to Agent a complete and correct copy of any Subordinated
Indebtedness Documents. All Obligations constitute Indebtedness entitled to the benefits of the subordination provisions contained
therein or in a Subordination Agreement, as applicable. Each of the representations and warranties given by each applicable Credit
Party in such Subordinated Indebtedness Documents is true and correct in all material respects and such representations and warranties
are incorporated into this Agreement by this Section, mutatis mutandis.

 

Section 4.28         Full
Disclosure. None of the representations or warranties made by any Credit Party in the Loan Documents or any exhibit,
report, written statement or certificate furnished by or on behalf of any Credit Party or any of their Subsidiaries pursuant thereto,
as of the date such representations and warranties are made or deemed made, contains any untrue statement of a material fact or
omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or delivered.

 

Section 4.29         OFAC;
Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws. No Credit Party or any of its Subsidiaries is in violation
of any Sanctions. No Credit Party or any of its Subsidiaries or, to the knowledge of each Credit Party, any director, officer,
employee, agent or Affiliate of such Credit Party or such Subsidiary (a) is a Sanctioned Person or a Sanctioned Entity, (b) has
any assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons
or Sanctioned Entities. Each of the Credit Parties and its Subsidiaries has implemented and maintains in effect policies and procedures
designed to ensure compliance with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. Each of the Credit Parties
and its Subsidiaries, and to the knowledge of each Credit Party, each director, officer, employee, agent and Affiliate of such
Credit Party and each such Subsidiary, is in compliance with all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws.
No proceeds of any Loan made or Letter of Credit issued hereunder will be used to fund any operations in, finance any investments
or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity, or otherwise used in any manner that would
result in a violation of any Sanction, Anti-Corruption Law or Anti-Money Laundering Law by any Person (including any Lender or
other individual or entity participating in any transaction).

 

Section 4.30         Patriot
Act. Credit Parties and each of their Subsidiaries are in compliance with (a) the Trading with the Enemy Act, and each
of the foreign assets control regulations of the United States Treasury Department and any other enabling legislation or executive
order relating thereto, (b) the Patriot Act and (c) other federal or state laws relating to “know your customer” and
anti-money laundering rules and regulations. No part of the proceeds of any Loan will be used directly or indirectly for any payments
to any government official or employee, political party, official of a political party, candidate for political office, or anyone
else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977.

 

    	 	14	 

     

    

 

Section 4.31         HK
Collateral Documents.

 

(a)          No
Filing or Stamp Taxes. Except for registration fees associated with the registration of the HK Collateral Documents at the
Hong Kong Companies Registry, there are no Requirements of Law for the HK Collateral Documents to be filed, recorded or enrolled
with any court or other authority or that any stamp, registration or similar tax be paid on or in relation to the HK Collateral
Documents or the transactions contemplated by the HK Collateral Documents.

 

(b)          Ranking
of Collateral. The Agent has a valid and perfected lien on the Collateral under the HK Collateral Documents, which lien is
not subject to any prior ranking or pari passu ranking Collateral, other than as may be granted in favor of the ABL Agent to the
extent provided in the Intercreditor Agreement.

 

(c)          Ownership.
The entire issued share capital of JAKKS HK is legally and beneficially owned and controlled by JAKKS. The entire issued share
capital of each HK Credit Party (other than JAKKS HK) is legally and beneficially owned and controlled (directly or indirectly)
by JAKKS HK. The shares in the capital of each HK Credit Party are fully paid and are not subject to any option to purchase or
similar rights.

 

(d)          Legal
and beneficial ownership. Each HK Credit Party is the sole legal and beneficial owner of the respective assets over which it
purports to grant Collateral.

 

(e)          Shares.
The constitutional documents of HK Credit Parties do not restrict or inhibit any transfer of the shares of any HK Credit Party
on creation or enforcement of the HK Collateral Documents. There are no agreements in force which provide for the issue or allotment
of, or grant any person the right to call for the issue or allotment of, any share or loan capital of any HK Credit Party (including
any option or right of pre-emption or conversion).

 

(f)          Representations
and Warranties. The representations and warranties contained in each HK Collateral Document are true and accurate at the time
they are expressed to be given in each case in accordance with the facts and circumstances then existing.

 

ARTICLE
V.

AFFIRMATIVE COVENANTS

 

Each Credit Party covenants
and agrees that until Final Satisfaction:

 

Section 5.01         Financial
Statements, Certificates and Other Reports. Each Credit Party shall maintain, and shall cause each Subsidiary to (a)
maintain books and records and a system of accounting established and administered in accordance with sound business practices
and in conformity with GAAP; provided, that quarterly financial statements shall not be required to have footnote disclosures
and are subject to normal year-end adjustments, (b) maintain at a location in the United States that is subject to a collateral
access agreement, true, correct, and current copies of the financial data for the financial transactions of JAKKS Hong Kong, JAKKS
Canada, and each other Foreign Subsidiary in a manner consistent with past practice, and (c) upon the reasonable request of Agent,
shall cause copies of the books and records of JAKKS Hong Kong and JAKKS Canada that substantiate the transactions recorded in
such general ledger to be located at a location in the United States that is subject to a collateral access agreement. Borrowers
shall deliver to Agent and each Lender by Electronic Transmission and in detail reasonably satisfactory to Agent and the Required
Lenders each of the reports described on Schedule 5.01 as set forth thereon, in each case certified by a Responsible Officer of
Borrower Representative.

 

    	 	15	 

     

    

 

Section 5.02         Appraisals.
Upon Agent’s request, from time to time, Agent may obtain appraisals, in form and substance and from appraisers reasonably
satisfactory to Agent, stating (i) the then Net Orderly Liquidation Value, or such other value as determined by Agent, of all or
any portion of the Inventory and (ii) the fair market value, or such other value as determined by Agent (including replacement
cost for purposes of Flood Insurance), of any Real Estate owned by any Credit Party, including any appraisal required to comply
with FIRREA; provided, that Credit Parties shall only be obligated to reimburse Agent for the expenses of such appraisals
occurring twice per year or more frequently so long as an Event of Default has occurred and is continuing.

 

Section 5.03         Notices.
Borrowers shall notify promptly (and in no event later than three Business Days after a Responsible Officer becomes aware thereof)
Agent and each Lender by Electronic Transmission of:

 

(a)          Default;
Event of Default. The occurrence or existence of (i) any Default or Event of Default, or any event or circumstance that could
reasonably be expected to become a Default or Event of Default or (ii) any “Default” or “Event of Default”
(each as defined in the ABL Credit Agreement), or any event or circumstance that could reasonably be expected to become a “Default”
or “Event of Default” (each as defined in the ABL Credit Agreement) under the ABL Facility;

 

(b)          Breach.
Any breach or nonperformance of, or any default under, any Contractual Obligation of any Credit Party or any Subsidiary, or any
violation of, or non-compliance with, any Requirement of Law, which would reasonably be expected to result, either individually
or in the aggregate, in a Material Adverse Effect;

 

(c)          Proceeding.
(i) Any dispute, litigation, investigation, proceeding or suspension which may exist at any time between any Credit Party or any
Subsidiary and any Governmental Authority which would reasonably be expected to result, either individually or in the aggregate,
in Liabilities in excess of $500,000 and (ii) the commencement of, or any material development in, any litigation or proceeding
affecting any Credit Party or any Subsidiary (A) in which the amount of damages claimed is $500,000 or more, (B) in which injunctive
or similar relief is sought and if adversely determined, would reasonably be expected to have a Material Adverse Effect, or (C)
in which the relief sought is an injunction or other stay of the performance of any Loan Document;

 

(d)          Material
Environmental Liabilities. Any event, change, circumstance or occurrence (including any unpermitted Release, any violation
of or liability under any Environmental Law or any other Requirement of Law) that, individually or in the aggregate, has had or
could reasonably be expected to result in Material Environmental Liabilities;

 

(e)          Liens.
Any Credit Party shall have knowledge, or received notice, of any Lien on any Property of any Credit Party other than Permitted
Liens;

 

(f)           Environmental.
(i) The receipt by any Credit Party of any notice of violation of or potential liability or similar notice under Environmental
Law, (ii)(A) unpermitted Releases, (B) the existence of any condition that could reasonably be expected to result in violations
of or Liabilities under, any Environmental Law or (C) the commencement of, or any material change to, any action, investigation,
suit, proceeding, audit, claim, demand, dispute alleging a violation of or Liability under any Environmental Law which in the case
of clauses (A), (B) and (C) above, in the aggregate for all such clauses, would reasonably be expected to result in Material Environmental
Liabilities, (iii) the receipt by any Credit Party of notification that any Property of any Credit Party is subject to any Lien
in favor of any Governmental Authority securing, in whole or in part, Environmental Liabilities and (iv) any proposed acquisition
or lease of Real Estate, if such acquisition or lease would have a reasonable likelihood of resulting in Material Environmental
Liabilities;

 

    	 	16	 

     

    

 

(g)          Material
Adverse Effect. Subsequent to the date of the most recent audited financial statements delivered to Agent and Lenders pursuant
to this Agreement, any event, change, circumstance or occurrence (including any violation of or liability under ERISA or any other
Requirement of Law and any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown
or other labor disruption) that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse
Effect (it being acknowledged that the Borrowers have notified the Agent and Lenders about the TRU Event);

 

(h)          Financial
Reporting Change. Any material change in accounting policies or financial reporting practices by any Credit Party or any Subsidiary;

 

(i)           Subsidiary;
Stock. The creation, establishment or acquisition of any Subsidiary or the issuance by or to any Credit Party of any Stock
or Stock Equivalent;

 

(j)           Tax.
(i) The creation, or filing with the IRS or any other Governmental Authority, of any Contractual Obligation or other document extending,
or having the effect of extending, the period for assessment or collection of any income or franchise or other material Taxes with
respect to any Tax Affiliate and (ii) the creation of any Contractual Obligation of any Tax Affiliate, or the receipt of any request
directed to any Tax Affiliate, to make any material adjustment under Section 481(a) of the Code, by reason of a change in accounting
method or otherwise; and

 

(k)          Breach
of Applicable License Agreement. Any notice of breach or nonperformance of, or any default under any Applicable License Agreement
or any material communication from the applicable Licensor to any Credit Party under any Applicable License Agreement.

 

Each notice pursuant
to this Section shall be delivered by Electronic Transmission, accompanied by a statement by a Responsible Officer of Borrower
Representative, setting forth details of the occurrence referred to therein (including, if applicable, each clause or provision
of any Loan Document that have been breached or violated), and stating what action Borrowers or other Person propose to take with
respect thereto and at what time.

 

Section 5.04         Preservation
of Corporate Existence, Etc. Each Credit Party shall, and shall cause each of its Subsidiaries to:

 

(a)          preserve
and maintain in full force and effect its organizational existence and good standing under the laws of its jurisdiction of incorporation,
organization or formation, as applicable, except as permitted by Section 6.03; and

 

(b)          preserve
and maintain in full force and effect all rights, privileges, qualifications, permits, licenses and franchises necessary in the
normal conduct of its business except where the failure to do so would not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.

 

    	 	17	 

     

    

 

Section 5.05         Maintenance
of Property. Each Credit Party shall, and shall cause each of its Subsidiaries to, maintain and preserve all its Property
which is used or useful in its business in good working order and condition, ordinary wear and tear excepted and shall make all
necessary repairs thereto and renewals and replacements thereof except where the failure to do so would not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.

 

Section 5.06         Insurance.

 

(a)          Requirements.
Each Credit Party shall, and shall cause each of its Subsidiaries to, (i) maintain in full force and effect all policies of insurance
of any kind with respect to the Property and businesses of Credit Parties and such Subsidiaries (including policies of life, fire,
theft, product liability, public liability, Flood Insurance (other than Real Estate not located in a Special Flood Hazard Area),
property damage, other casualty, employee fidelity, workers’ compensation, business interruption and employee health and
welfare insurance) with financially sound and reputable insurance companies or associations (in each case that are not Affiliates
of Borrowers) of a nature and providing such coverage as is sufficient and as is customarily carried by businesses of the size
and character of the business of Credit Parties and (ii) cause all such insurance relating to any Property or business of any Credit
Party to name Agent as additional insured or lenders loss payee as agent for Lenders, as appropriate. All policies of insurance
on real and personal Property of Credit Parties will contain an endorsement, in form and substance acceptable to Agent, showing
loss payable to Agent (Form CP 1218 or equivalent and naming Agent as lenders loss payee as agent for Lenders) and extra expense
and business interruption endorsements. Such endorsement, or an independent instrument furnished to Agent, will provide that the
insurance companies will give Agent at least 30 days’ prior written notice before any such policy or policies of insurance
is altered or canceled and that no act or default of Credit Parties or any other Person shall affect the right of Agent to recover
under such policy or policies of insurance in case of loss or damage. Each Credit Party shall direct all present and future insurers
under its “All Risk” policies of property insurance to pay all proceeds payable thereunder directly to Agent. If any
insurance proceeds are paid by check, draft or other instrument payable to any Credit Party and Agent jointly, Agent may endorse
such Credit Party’s name thereon and do such other things as Agent may deem advisable to reduce the same to cash. Agent reserves
the right at any time, upon review of each Credit Party’s risk profile, to require additional forms and limits of insurance.
Within 45 days after written notice from Agent to Credit Parties that any Real Estate is located in a Special Flood Hazard Area,
Credit Parties shall satisfy the Federal Flood Insurance requirements.

 

(b)          Agent’s
Right to Purchase. Unless Credit Parties provide Agent with evidence of the insurance coverage required by this Agreement,
Agent may purchase insurance at Credit Parties’ expense to protect Agent’s and Lenders’ interests in Credit Parties’
and their Subsidiaries’ Properties. This insurance need not protect Credit Parties’ and their Subsidiaries’ interests.
The coverage that Agent purchases may not pay any claim that any Credit Party or any Subsidiary makes or any claim that is made
against such Credit Party or any Subsidiary in connection with said Property. Borrowers may later cancel any insurance purchased
by Agent, but only after providing Agent with evidence that insurance has been obtained as required by this Agreement. If Agent
purchases insurance, Credit Parties will be responsible for the costs of that insurance, including interest and any other charges
Agent may impose in connection with the placement of insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance shall be added to the Obligations. The costs of the insurance may be more than the cost of
insurance Credit Parties may be able to obtain on their own.

 

    	 	18	 

     

    

 

(c)          Settlement.
Credit Parties appoint Agent as their attorney-in-fact to settle or adjust all property damage claims under its casualty insurance
policies; provided, that such power of attorney shall only be exercised so long as an Event of Default has occurred and
is continuing. Agent shall have no duty to exercise such power of attorney, but may do so at its discretion.

 

Section 5.07         Compliance
with Laws. Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business, except where the failure to comply would not reasonably
be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

Section 5.08         Inspection
of Property and Books and Records. Each Credit Party shall, and shall cause each of its Subsidiaries to, with respect
to each owned, leased, or controlled property, during normal business hours and upon reasonable advance notice (unless an Event
of Default shall have occurred and be continuing, in which event no notice shall be required and Agent shall have access at any
and all times during the continuance thereof): (a) provide access to such property to Agent and any of its Related Persons, as
frequently as Agent determines to be appropriate; and (b) permit Agent and any of its Related Persons to conduct field examinations,
audit, inspect and make extracts and copies (or take originals if reasonably necessary) from all of such Credit Party’s books
and records (provided, that any such examination, audit, inspections, extraction or copying in respect of any personnel
records (including medical records) will be subject to any applicable privacy or confidentiality restrictions whether imposed by
contract or Requirement of Law), and evaluate and make physical verifications and appraisals of the Inventory and other Collateral
in any manner and through any medium that Agent considers advisable, in each instance, at Credit Parties’ expense; provided,
that the Agent agrees that as long as no Default or Event of Default has occurred and is continuing and as long as such field examinations,
audits and other inspections are conducted or obtained by the ABL Agent at least once in each six (6) month period and with professionals
reasonably satisfactory to the Agent, the Agent shall not exercise its rights to obtain field examinations hereunder, so long as
the ABL Agent furnishes a copy of each such field examination undertaken by it to the Agent (which the Credit Parties shall authorize
and direct the ABL Agent to so do); provided, further that (x) Credit Parties shall only be obligated to reimburse Agent
for the expenses for two such field examinations, audits and inspections per year or more frequently if an Event of Default has
occurred and is continuing or during a Trigger Period and (y) Agent and each of its Related Persons shall not have access to license
agreements with third parties which by their terms prohibit disclosure to non-Credit Parties for so long as any Inventory covered
by such agreements is not included in the Borrowing Base. Any Lender may accompany Agent or its Related Persons in connection with
any inspection at such Lender’s expense.

 

Section 5.09         Use
of Proceeds. Borrowers shall use the proceeds of the Loans solely as follows: (a) to pay the costs and expenses required
to be paid on the Closing Date; (b) to repurchase the 2018 Convertible Notes; and (c) for working capital, capital expenditures
and other general corporate purposes not in contravention of any Requirement of Law and not in violation of this Agreement. Borrowers
shall not use any proceeds of the Loans to purchase or carry any Margin Stock or to extend credit to others for the purpose of
purchasing or carrying any Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of
Governors.

 

    	 	19	 

     

    

 

Section 5.10         Cash
Management Systems. (a) Each Credit Party (other than the HK Credit Parties) shall enter into, and cause each depository,
securities intermediary or commodities intermediary to enter into, Control Agreements, and (b) each HK Credit Party shall deliver,
and cause each depository to acknowledge, the Bank Account Notices referenced in the HK Security Debenture, in each case providing
for “springing” cash dominion with respect to each deposit, securities, commodity or similar account maintained by
such Person (other than (a) any payroll account or disbursing account so long as such account is a zero balance account, (b) petty
cash accounts, amounts on deposit in which do not exceed $15,000 in the aggregate at any one time and (c) withholding Tax and fiduciary
accounts) at all times. In addition, at Agent’s request, Credit Parties will enter into Control Agreements providing for
“springing” cash dominion over disbursement accounts as of the Closing Date, except as set forth in the preceding sentence.
Unless and until an Event of Default has occurred and is continuing or Availability falls below $10,000,000, Agent shall not deliver
to the relevant depository, securities intermediary or commodities intermediary a notice or other instruction which provides for
exclusive control over such account by Agent. Credit Parties shall not maintain cash on deposit in disbursement accounts in excess
of outstanding checks and wire transfers payable from such accounts and amounts necessary to meet minimum balance requirements.
Except as set forth on Schedule 5.10 with respect to existing deposit accounts maintained with Shanghai Commercial Bank Ltd., HK
Credit Parties shall maintain all of their deposit accounts only with Wells Fargo.

 

Section 5.11         Further
Assurances.

 

(a)          Each
Credit Party shall ensure that all written information, exhibits and reports furnished to Agent or Lenders do not and will not
contain any untrue statement of a material fact and do not and will not omit to state any material fact or any fact necessary to
make the statements contained therein not misleading in light of the circumstances in which made, and will promptly disclose to
Agent and Lenders and correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement
or recordation thereof.

 

(b)          Promptly
upon request by Agent, Credit Parties shall (and, subject to the limitations set forth herein and in the Collateral Documents,
shall cause each of their Subsidiaries to) take such additional actions and execute such documents as Agent may reasonably require
from time to time in order (i) to carry out more effectively the purposes of any Loan Document, (ii) to subject to the Liens created
by any of the Collateral Documents any of the Properties, rights or interests covered by any of the Collateral Documents, (iii)
to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and the Liens intended to be
created thereby, and (iv) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to Secured Parties the
rights granted or now or hereafter intended to be granted to Secured Parties under any Loan Document.

 

(c)          Without
limiting the generality of the foregoing, Credit Parties shall cause each of their Domestic Subsidiaries (other than Excluded Domestic
Subsidiaries) and Foreign Subsidiaries (other than Excluded Foreign Subsidiaries), promptly after formation or acquisition thereof,
to guarantee the Obligations and shall, and shall cause each such Subsidiary, to grant to Agent, for the benefit of Secured Parties,
a security interest in, subject to the limitations hereinafter set forth, all of such Subsidiary’s Property, whether now
existing or hereinafter acquired, to secure the Obligations and with respect to any Real Estate with a fair market value in excess
of $500,000, within 30 days after the Closing Date or any acquisition thereof, as applicable, such Person shall execute and/or
deliver, or cause to be executed and/or delivered, to Agent, the Mortgage Supporting Documents. Each Credit Party shall, and shall
cause each of its Domestic Subsidiaries (other than Excluded Domestic Subsidiaries) to, pledge all of the Stock and Stock Equivalents
of each of its Domestic Subsidiaries (other than Excluded Domestic Subsidiaries) and Foreign Subsidiaries (other than Excluded
Foreign Subsidiaries) and 65% of the outstanding voting Stock and Stock Equivalents and 100% of the outstanding non-voting Stock
and Stock Equivalents of each of Excluded Foreign Subsidiary directly owned by a Credit Party, in each instance, to Agent, for
the benefit of Secured Parties, to secure the Obligations, promptly after formation or acquisition of such Subsidiary. In connection
with each pledge of Stock and Stock Equivalents, Credit Parties shall deliver, or cause to be delivered, to Agent, irrevocable
proxies and stock powers and/or assignments, as applicable, duly executed in blank.

 

    	 	20	 

     

    

 

(d)          If
the ABL Lenders receive (directly or indirectly) any additional guaranty, letter of credit, or any other credit enhancement after
the Closing Date, each applicable Credit Party shall grant the same to Agent for the benefit of the Lenders.

 

Section 5.12         Environmental
Matters. Each Credit Party shall, and shall cause each of its Subsidiaries to, comply with, and maintain its Real Estate,
whether owned, leased, subleased or otherwise operated or occupied, in compliance with, all applicable Environmental Laws (including
by implementing any Remedial Action necessary to achieve such compliance) or that is required by orders and directives of any Governmental
Authority except where the failure to comply would not reasonably be expected to, individually or in the aggregate, result in a
Material Environmental Liability. Without limiting the foregoing, if an Event of Default is continuing or if Agent at any time
has a reasonable basis to believe that there exist violations of Environmental Laws by any Credit Party or any Subsidiary or that
there exist any Environmental Liabilities, then each Credit Party shall, promptly upon receipt of request from Agent, cause the
performance of, and allow Agent and its Related Persons access to such Real Estate for the purpose of conducting, such environmental
audits and assessments, including subsurface sampling of soil and groundwater, and cause the preparation of such reports, in each
case as Agent may from time to time reasonably request. Such audits, assessments and reports, to the extent not conducted by Agent
or any of its Related Persons, shall be conducted and prepared by reputable environmental consulting firms reasonably acceptable
to Agent and shall be in form and substance reasonably acceptable to Agent.

 

Section 5.13         OFAC;
Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws. Each Credit Party will, and will cause each of its Subsidiaries
to comply with all applicable Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws. Each of the Credit Parties and its
Subsidiaries shall implement and maintain in effect policies and procedures designed to ensure compliance by the Credit Parties
and their Subsidiaries and their respective directors, officers, employees, agents and Affiliates with all Sanctions, Anti-Corruption
Laws and Anti-Money Laundering Laws. Each of the Credit Parties shall and shall cause their respective Subsidiaries to comply with
all Sanctions, Anti-Corruption Laws and Anti-Money Laundering Laws.

 

Section 5.14         Term
Loan Push-Down Reserve Maintained by ABL Agent. The Credit Parties shall request that the ABL Agent implement and maintain
the Term Loan Push-Down Reserve against the Borrowing Base at all times.

 

Section
5.15         Applicable
License Agreements. Borrowers shall maintain each Applicable License Agreement
in full force and effect (it being understood that the expiration and immediate, automatic renewal of an Applicable License Agreement
shall not constitute a breach of this Section 5.15).

 

Section 5.16         Post-Closing
Obligations. Borrowers agree to take such actions or deliver, or cause to be delivered, to Agent, each in form and substance
reasonably satisfactory to Agent, each item specified on Schedule 5.14 within the periods specified with respect to such actions
and items, or such later date to which Agent may consent in writing.

 

Section 5.17         Refinancing
of 2018 Convertible Notes. The proceeds of the Loans shall be deposited into a deposit account subject to a Control
Agreement, and the use of such proceeds shall be restricted in a manner satisfactory to Agent to the repayment of all or a portion
of the outstanding 2018 Convertible Notes on or before the maturity date thereof. To the extent any of the 2018 Convertible Notes
are not repaid (or otherwise defeased or retired) on the maturity date thereof, (a) the Credit Parties shall have extended such
maturity date to a date that is no sooner than that date that is six months after the Stated Maturity Date, and (b) any remaining
proceeds of the Loans may be used by Borrowers for working capital, capital expenditures and other general corporate purposes not
in contravention of any Requirement of Law and not in violation of this Agreement.

 

    	 	21	 

     

    

 

ARTICLE
VI.

NEGATIVE COVENANTS

 

Each Credit Party covenants
and agrees that until Final Satisfaction, no Credit Party shall, and no Credit Party shall suffer or permit any Subsidiary (excluding,
in all cases, the JV Entities), directly or indirectly, to:

 

Section 6.01         Limitation
on Liens. Make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its Property,
whether now owned or hereafter acquired, other than the following (“Permitted Liens”):

 

(a)          any
Lien existing on the Property of a Credit Party or a Subsidiary on the Closing Date and set forth in Schedule 6.01 securing Indebtedness
outstanding on such date and permitted by Section 6.05(c), including replacement Liens on the Property currently subject
to such Liens securing Indebtedness permitted by Section 6.05(c);

 

(b)          any
Lien created under any Loan Document;

 

(c)          Liens
for Taxes (i) which are not past due or remain payable without penalty, or (ii) the nonpayment of which is being contested in good
faith by appropriate proceedings diligently prosecuted which stay the filing or enforcement of any Lien and for which adequate
reserves in accordance with GAAP are being maintained by such Person and the aggregate Liabilities secured by such Lien do not
exceed $500,000;

 

(d)          carriers’,
warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens arising
by operation of law, in the Ordinary Course of Business, which are not past due or remain payable without penalty or which are
being Contested in Good Faith;

 

(e)          Liens
(other than any Lien imposed by ERISA) consisting of pledges or deposits required in the Ordinary Course of Business in connection
with workers’ compensation, unemployment insurance and other social security legislation or to secure the performance of
tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, leases, governmental contract, trade contracts,
performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money)
disclosed on Schedule 4.24 or to secure liability to insurance carriers, in an aggregate amount pursuant to this Section 6.01(e)
not to exceed $500,000;

 

(f)          Liens
(other than for payment of Taxes) arising out of judgments, attachments or awards not resulting in an Event of Default;

 

(g)          easements,
rights of way, zoning and other restrictions, minor defects or other irregularities in title, and other similar encumbrances incurred
in the Ordinary Course of Business which, either individually or in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the Property subject thereto or interfere in any material respect with the
ordinary conduct of the businesses of any Credit Party or any Subsidiary;

 

(h)          Liens
on any Property acquired or held by any Credit Party or any Subsidiary securing Indebtedness incurred or assumed for the purpose
of financing (or refinancing) all or any part of the cost of acquiring such Property but subject to the dollar limitation in Section
6.05(d); provided, that (i) any such Lien attaches to such Property concurrently with or within 20 days after the acquisition
thereof, (ii) such Lien attaches solely to the Property so acquired in such transaction and the proceeds thereof, and (iii) the
principal amount of the debt secured thereby does not exceed 100% of the cost of such Property;

 

    	 	22	 

     

    

 

(i)          Liens
securing Capital Lease Obligations permitted under Section 6.05(d);

 

(j)          any
interest or title of a lessor or sublessor under any lease permitted by this Agreement;

 

(k)          Liens
evidenced by precautionary UCC financing statements with respect to any true lease permitted by this Agreement;

 

(l)           licenses
and sublicenses granted by a Credit Party and leases or subleases (by a Credit Party as lessor or sublessor) to third parties in
the Ordinary Course of Business;

 

(m)         Liens
in favor of collecting banks arising by operation of law under Section 4-210 of the UCC or, with respect to collecting banks located
in the State of New York, under 4- 208 of the UCC;

 

(n)          Liens
(including the right of set-off) in favor of a bank or other depository institution arising as a matter of law encumbering deposits;
and

 

(o)          Liens
in favor of customs and revenue authorities arising as a matter of law which secure payment of customs duties in connection with
the importation of goods in the Ordinary Course of Business.

 

(p)          Liens
securing the ABL Facility (as in effect on the date of this Agreement and as modified in accordance with this Agreement and the
Intercreditor Agreement), so long as those Liens are subject to the terms of the Intercreditor Agreement.

 

(q)          Liens
arising under the factoring agreements with Standard Chartered Bank with respect to Accounts owing from Wal-Mart to any of the
HK Credit Parties, so long as such Liens are limited to such Accounts and the Proceeds thereof.

 

Section 6.02         Disposition
of Property. Sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions)
any Property or enter into any agreement to do any of the foregoing, except:

 

(a)          dispositions
to any Person of inventory, or worn out or surplus equipment, all in the Ordinary Course of Business, provided that such disposition
shall not be made to any Affiliate who is not a Credit Party;

 

(b)          dispositions
(other than of any Stock of any Credit Party or any Subsidiary thereof or any Accounts of any Credit Party) not otherwise permitted
hereunder which are made for fair market value so long as Borrowers make any mandatory prepayment in the amount of the Net Proceeds
of such disposition if and to the extent required by Section 1.08; provided, that (i) at the time of any disposition,
no Event of Default shall exist or shall result from such disposition, (ii) not less than 90% of the aggregate sales price from
such disposition shall be paid in cash, (iii) the aggregate fair market value of all assets so sold by Credit Parties and their
Subsidiaries, together, shall not exceed in any Fiscal Year $1,000,000 and (iv) after giving effect to such disposition, Credit
Parties are in compliance on a pro forma basis with the covenants set forth in ARTICLE VII;

 

    	 	23	 

     

    

 

(c)          (i)
dispositions of Cash Equivalents in the Ordinary Course of Business made to a Person that is not an Affiliate of any Credit Party
and (ii) conversions of Cash Equivalents into cash or other Cash Equivalents;

 

(d)          transactions
permitted under Section 6.01(l); and

 

(e)          dispositions
of inventory that are comprised of goods which are defective.

 

Section 6.03         Consolidations
and Mergers. Merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction
or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor
of any Person, except upon not less than five Business Days prior written notice to Agent, (a) any Subsidiary that is a Credit
Party may merge with, or dissolve or liquidate into, any other Credit Party, (b) any Subsidiary that is not a Credit Party may
merge with, or dissolve or liquidate into, a Borrower or a Wholly-Owned Subsidiary which is a Domestic Subsidiary; provided,
that (i) such Borrower or such Wholly-Owned Subsidiary is the continuing or surviving entity and (ii) all actions required to maintain
perfected Liens on the Stock of the surviving entity and other Collateral in favor of Agent have been completed, and (c) any Foreign
Subsidiary may merge with or dissolve or liquidate into another Foreign Subsidiary; provided, that if a Foreign Subsidiary
that is not an Excluded Foreign Subsidiary is a constituent entity in such merger, dissolution or liquidation, such Foreign Subsidiary
that is not an Excluded Foreign Subsidiary shall be the continuing or surviving entity.

 

Section 6.04         Acquisitions;
Loans and Investments. Purchase or acquire, or make any commitment to purchase or acquire any Stock or Stock Equivalents,
or any obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary;
make or commit to make any Acquisitions, or any other acquisition of all or substantially all of the assets of another Person,
or of any business or division of any Person, including by way of merger, consolidation or other combination; or make or purchase,
or commit to make or purchase, any advance, loan, extension of credit or capital contribution to or any other investment in, any
Person including a Borrower, any Affiliate of a Borrower or any Subsidiary (each an “Investment”), except for:

 

(a)          Investments
in cash and Cash Equivalents;

 

(b)          Investments
consisting of (i) extensions of credit or capital contributions by any Credit Party to or in any other then existing Credit Party,
(ii) extensions of credit or capital contributions by a Borrower or any other Credit Party to or in any then existing Foreign Subsidiaries
not to exceed $5,000,000 in the aggregate at any time outstanding for all such extensions of credit and capital contributions;
provided, that (A) if any Credit Party executes and delivers to any Borrower a note (collectively, the “Intercompany
Notes”) to evidence any Investments described in the foregoing clauses (i) and (ii) above, that Intercompany Note shall
be pledged and delivered to Agent pursuant to the Guaranty and Security Agreement as additional collateral security for the Obligations;
(B) each Borrower shall accurately record all intercompany transactions on its books and records; (C) at the time any such intercompany
loan or advance is made by any Borrower to any other Credit Party and after giving effect thereto, the Borrowers, on a consolidated
basis, shall be Solvent; and (D) the aggregate amount of such intercompany Indebtedness owing by any Credit Party individually
or in the aggregate shall not exceed $5,000,000 at any one time outstanding;

 

    	 	24	 

     

    

 

(c)          Investments
received as the non-cash portion of consideration received in connection with transactions permitted pursuant to Section 6.02(b);

 

(d)          Investments
acquired in connection with the settlement of delinquent Accounts in the Ordinary Course of Business or in connection with the
bankruptcy or reorganization of suppliers or customers;

 

(e)          Investments
existing on the Closing Date and set forth in Schedule 6.04; and

 

(f)           loans
or advances to employees permitted under Section 6.06.

 

Section 6.05         Limitation
on Indebtedness. Create, incur, assume, permit to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:

 

(a)          the
Obligations;

 

(b)          Indebtedness
consisting of Contingent Obligations described in clause (j) of the definition of “Indebtedness” and permitted pursuant
to Section 6.09;

 

(c)          Indebtedness
existing on the Closing Date and set forth in Schedule 6.05 including Permitted Refinancings thereof;

 

(d)          Indebtedness
not to exceed $1,000,000 in the aggregate at any time outstanding, consisting of Capital Lease Obligations or secured by Liens
permitted by Section 6.01(h) and Permitted Refinancings thereof;

 

(e)          unsecured
intercompany Indebtedness permitted pursuant to Section 6.04(b);

 

(f)          Permitted
Surety Bonds;

 

(g)          post-closing
payment obligations existing on the Closing Date with respect to acquisitions made by JAKKS prior to the Closing Date not to exceed
$2,100,000 in the aggregate;

 

(h)          401(k)
deferrals and matches that are paid within 30 days of the applicable payroll withholding date;

 

(i)          Subordinated
Indebtedness (including for the purpose of refinancing the 2018 Convertible Notes as contemplated by Section 5.17);

 

(j)          Indebtedness
under the ABL Loan Documents (as in effect on the Closing Date and as modified in accordance with this Agreement and the Intercreditor
Agreement); and

 

(k)          Indebtedness
arising under the factoring agreements with Standard Chartered Bank with respect to Accounts owing from Wal-Mart to any of the
HK Credit Parties.

 

Section 6.06         Employee
Loans and Transactions with Affiliates. Enter into any transaction with any Affiliate of a Borrower or of any such Subsidiary,
except:

 

(a)          as
expressly permitted by this Agreement;

 

    	 	25	 

     

    

 

(b)          in
the Ordinary Course of Business and pursuant to the reasonable requirements of the business of such Credit Party or such Subsidiary
upon fair and reasonable terms no less favorable to such Credit Party or such Subsidiary than would be obtained in a comparable
arm’s length transaction with a Person not an Affiliate of a Borrower or such Subsidiary and which are disclosed in writing
to Agent;

 

(c)          loans
or advances to employees of Credit Parties for travel, entertainment and relocation expenses and other ordinary business purposes
in the Ordinary Course of Business not to exceed $1,000,000 in the aggregate outstanding at any time;

 

(d)          non-cash
loans or advances made by JAKKS to employees of Credit Parties that are simultaneously used by such Persons to purchase Stock or
Stock Equivalents of JAKKS;

 

(e)          all
such transactions existing as of the Closing Date are described in Schedule 6.06;

 

(f)          [reserved];

 

(g)          all
transactions, payments, outstanding intercompany balances, Property transfers and other activities constituting the transfer pricing
system consistent with past practice between any Credit Party and its respective Affiliates; and

 

(h)          property
transfers between Borrowers in the Ordinary Course of Business and consistent with past practice, not otherwise prohibited hereunder
or by any Loan Documents.

 

Section 6.07         Fees
and Compensation. Pay any management, consulting or similar fees to any Affiliate of any Credit Party or to any officer,
director or employee of any Credit Party or any Affiliate of any Credit Party, except:

 

(a)          payment
of compensation to officers, employees, consultants, sales representatives and other agents, in each case for actual services rendered
to Credit Parties and their Subsidiaries in the Ordinary Course of Business and, to the extent required by any organizational documents,
that have been approved by JAKKS’ board of directors or independent compensation committee, as applicable; and

 

(b)          payment
of directors’ fees and reimbursement of actual out-of-pocket expenses incurred by directors and officers in the Ordinary
Course of Business in connection with attending board of director meetings;

 

Section 6.08         Use
of Proceeds. Use any portion of the Loan proceeds, directly or indirectly, (a) to purchase or carry Margin Stock or
repay or otherwise refinance Indebtedness of any Credit Party or others incurred to purchase or carry Margin Stock, (b) to Borrowers’
knowledge, to make any payments to a Sanctioned Entity or a Sanctioned Person, to fund any investments, loans or contributions
in, or otherwise make such proceeds available to, a Sanctioned Entity or a Sanctioned Person, to fund any operations, activities
or business of a Sanctioned Entity or a Sanctioned Person, or in any other manner that would result in a violation of Sanctions
by any Person, (iii) to Borrowers’ knowledge, in furtherance of an offer, payment, promise to pay, or authorization of the
payment or giving of money, or anything else of value, to any Person in violation of any Sanctions, Anti-Corruption Laws or Anti-Money
Laundering Laws, or (iv) or otherwise in any manner which is in contravention of any Requirement of Law or in violation of this
Agreement.

 

Section 6.09         Contingent
Obligations. Create, incur, assume or suffer to exist any Contingent Obligations except in respect of the Obligations
and except:

 

    	 	26	 

     

    

 

(a)          endorsements
for collection or deposit in the Ordinary Course of Business;

 

(b)          Rate
Contracts entered into in the Ordinary Course of Business for bona fide hedging purposes and not for speculation;

 

(c)          Contingent
Obligations existing as of the Closing Date and listed in Schedule 6.09, including extension and renewals thereof which do not
increase the amount of such Contingent Obligations or impose materially more restrictive or adverse terms on Credit Parties or
their Subsidiaries as compared to the terms of the Contingent Obligation being renewed or extended;

 

(d)          Indemnification
obligations in favor of (i) sellers in connection with Acquisitions permitted hereunder, (ii) purchasers in connection with dispositions
permitted under Section 6.02(b) and (iii) title insurers to cause such title insurers to issue to Agent title insurance
policies;

 

(e)          Guaranties
(other than License Agreement Guaranties) made in the Ordinary Course of Business of obligations of any Credit Party, which obligations
are otherwise permitted hereunder; provided, that if such obligation is subordinated to the Obligations, such guaranty shall
be subordinated to the same extent; and

 

(f)          Contingent
Obligations owing by JAKKS to Licensors under all License Agreement Guaranties.

 

Section 6.10         Restricted
Payments. Declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any Stock or Stock Equivalent, purchase, redeem or otherwise acquire for value any Stock or Stock Equivalent
now or hereafter outstanding or make any payment or prepayment of principal of, premium, if any, interest, fees, redemption, exchange,
purchase, retirement, defeasance, sinking fund or similar payment with respect to, Subordinated Indebtedness (each, a “Restricted
Payment”); except that

 

(a)          any
Wholly-Owned Subsidiary of a Borrower may declare and pay dividends to a Borrower or any Wholly-Owned Subsidiary of a Borrower;

 

(b)          any
Credit Party may declare and make dividend payments or other distributions payable solely in its Stock or Stock Equivalents;

 

(c)          JAKKS
may pay interest arising in the Ordinary Course of Business under the 2018 Convertible Notes, Oasis Convertible Notes and 2020
Convertible Notes;

 

(d)          JAKKS
may refinance, defease, retire or extend the maturity date of the 2018 Convertible Notes, provided that at the time of such refinancing,
defeasance, retirement or extension and after giving effect thereto, no Default or Event of Default has occurred and is continuing.
For the avoidance of doubt, JAKKS may not repurchase or repay the 2020 Convertible Notes or the Oasis Convertible Notes;

 

(e)          [reserved]
and

 

(f)          JAKKS
may redeem common Stock owned by employees for the express purpose of permitting such employees to satisfy their respective income
tax obligations that result directly from the vesting of restricted Stock grants owned by such employees, in an aggregate amount
not to exceed $1,000,000 in any Fiscal Year.

 

    	 	27	 

     

    

 

Section 6.11         Change
in Business. Engage in any line of business substantially different from those lines of business carried on by it on
the Closing Date.

 

Section 6.12         Change
in Structure. Except as expressly permitted under Section 6.03, make any material changes in its equity capital
structure, issue any Stock or Stock Equivalents or amend any of its Organization Documents in any material respect and, in each
case, in any respect adverse to Agent or Lenders. Nothing in this Section 6.12 shall prohibit the issuance of common stock
in connection with the conversion of any of the 2018 Convertible Notes, Oasis Convertible Notes and 2020 Convertible Notes to the
extent not otherwise prohibited by the terms of this Agreement.

 

Section 6.13         Changes
in Accounting, Name or Jurisdiction of Organization. (a) Make any significant change in accounting treatment or reporting
practices, except as required by GAAP and in compliance with Section 12.04, (b) change the Fiscal Year or method for determining
Fiscal Quarters of any Credit Party or of any consolidated Subsidiary, (c) change its name as it appears in official filings in
its jurisdiction of organization or (d) change its jurisdiction of organization, in the case of clauses (c) and (d) above, without
at least 20 days’ prior written notice to Agent and the acknowledgement of Agent that all actions required by Agent to continue
the perfection of its Liens have been completed.

 

Section 6.14         Amendments
to Subordinated Indebtedness and Applicable License Agreements. Change or amend the terms of any (i) Applicable License
Agreements, (ii) Subordinated Indebtedness Documents except to the extent permitted by the Subordination Agreement, or (iii) any
other Subordinated Indebtedness not subject to a Subordination Agreement, if the effect of such change or amendment is to: (A)
increase the interest rate on such Indebtedness; (B) shorten the dates upon which payments of principal or interest are due on
such Indebtedness; (C) add or change in a manner adverse to Credit Parties any event of default or add or make more restrictive
any covenant with respect to such Indebtedness; (D) change in a manner adverse to Credit Parties the prepayment provisions of such
Indebtedness; (E) change the subordination provisions thereof (or the subordination terms of any guaranty thereof); or (F) change
or amend any other term if such change or amendment would materially increase the obligations of Credit Parties or confer additional
material rights on the holder of such Indebtedness in a manner adverse to Credit Parties, Agent or Lenders.

 

Section 6.15         No
Negative Pledges. (i) Restrict or limit the ability of any Credit Party or Subsidiary to pay dividends or make any other
distribution on any of such Credit Party’s or Subsidiary’s Stock or Stock Equivalents or to pay fees, including management
fees, or make other payments and distributions to a Borrower or any other Credit Party; or (ii) enter into, assume or become subject
to any Contractual Obligation prohibiting or otherwise restricting the existence of any Lien upon any of its assets in favor of
Agent, except (a) in connection with any document or instrument governing Liens permitted pursuant to Section 6.01(h) and
(i), provided that any such restriction contained therein relates only to the asset or assets subject to such Permitted Liens,
and (b) with respect to Inventory subject to a license agreement with third parties, provided that any such Inventory is not included
in the Borrowing Base.

 

Section 6.16         Issuances
of Stock. Issue any Stock or Stock Equivalents (i) if such issuance would result in an Event of Default under Section
8.01(j) and (ii) with respect to each direct or indirect Subsidiary of any Borrower, unless such Stock and Stock Equivalents
are pledged to Agent, for the benefit of Secured Parties, as security for the Obligations, on substantially the same terms and
conditions as the Stock and Stock Equivalents of Credit Parties owned by JAKKS are pledged to Agent as of the Closing Date.

 

Section 6.17         Sale-Leasebacks.
Engage in a sale leaseback, synthetic lease or similar transaction involving any of its assets.

 

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Section 6.18         Hazardous
Materials. Cause or suffer to exist any Release of any Hazardous Material at, to or from any Real Estate that would
violate any Environmental Law, form the basis for any Environmental Liabilities or otherwise adversely affect the value or marketability
of any Real Estate (whether or not owned by any Credit Party or any Subsidiary), other than such violations, Environmental Liabilities
and effects that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 6.19         Prepayments
of Other Indebtedness. Purchase, redeem, defease or prepay any portion of, or any interest with respect to, any Indebtedness
prior to its scheduled maturity, other than

 

(a)          the
Obligations,

 

(b)          Indebtedness
secured by a Permitted Lien if the asset securing such Indebtedness has been sold or otherwise disposed of in a transaction permitted
hereunder,

 

(c)          a
Permitted Refinancing of Indebtedness permitted under Section 6.05(c) or (d),

 

(d)          prepayments
of other Indebtedness (excluding Subordinated Indebtedness) so long as the amounts prepaid do not exceed $1,000,000 in the aggregate,

 

(e)          prepayment
of intercompany Indebtedness to Credit Parties,

 

(f)           prepayments
permitted under Section 6.10; and

 

(g)          the
payment of the Indebtedness created under the ABL Loan Documents (subject to the Intercreditor Agreement).

 

ARTICLE
VII.

FINANCIAL COVENANTS

 

Each Credit Party covenants
and agrees that until Final Satisfaction:

 

Section
7.01         Reserved.

 

Section 7.02         Fixed
Charge Coverage Ratio. On any date that Availability is less than $10,000,000, Credit Parties shall not permit the Fixed
Charge Coverage Ratio of the Credit Parties for the 12 fiscal month period ending as of the last day of the most recent fiscal
month for which monthly financial statements have been delivered to Agent in accordance with Section 5.01, and on the end
of each fiscal month thereafter, to be less than 1.25 to 1.00.

 

Section 7.03         Minimum
Liquidity. The Credit Parties shall not permit Liquidity to be less than $10,000,000
at any time.

 

ARTICLE
VIII.

EVENTS OF DEFAULT

 

Section 8.01         Events
of Default. Any of the following shall constitute an “Event of Default”:

 

(a)          Non-Payment.
Any Credit Party fails (i) to pay when due any amount of principal of, or interest on, any Loan, including after maturity of the
Loans, or (ii) to pay within three Business Days after the same shall become due, interest on any Loan, any fee or any other amount
payable under any Loan Document;

 

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(b)          Representation
or Warranty. (i) Any representation, warranty or certification by or on behalf of any Credit Party or any of its Subsidiaries
made or deemed made in any Loan Document, or which is contained in any certificate, document or financial or other statement by
any such Person, or their respective Responsible Officers, furnished at any time under any Loan Document, shall prove to have been
incorrect in any material respect (without the duplication of any materiality provisions contained therein) on or as of the date
made or deemed made or (ii) any information contained in any Borrowing Base Certificate is untrue or incorrect in any respect (other
than (A) inadvertent, immaterial errors not exceeding $100,000 in the aggregate in any Borrowing Base Certificate, (B) errors understating
the Borrowing Base or the Term Loan Borrowing Base and (C) errors occurring when Availability continues to exceed $15,000,000 after
giving effect to the correction of such errors).

 

(c)          Specific
Defaults. Any Credit Party fails to perform or observe any term, covenant or agreement contained in any of the Fee Letter,
Section 5.01, Section 5.03(a), Section 5.06, Section 5.08, Section 5.09, Section 5.10,
Section 5.13, Section 5.14, Section 5.15, Section 5.16, Section 5.17 or ARTICLE VI or
ARTICLE VII.

 

(d)          Other
Defaults. Any Credit Party or Subsidiary fails to perform or observe any other term, covenant or agreement contained in any
Loan Document, and such default shall continue unremedied for a period of 30 days after the earlier to occur of (i) the date upon
which a Responsible Officer of any Credit Party becomes aware of such default and (ii) the date upon which written notice thereof
is given to Borrower Representative by Agent or Required Lenders;

 

(e)          Cross
Default. (1) Any Credit Party or any Subsidiary fails to make any payment when due or to perform or observe any other condition
or covenant, or any other default or event of default shall occur or condition exist, under any agreement or instrument relating
to (i) any Indebtedness (other than the Obligations) or Contingent Obligation (other than the Obligations), having an aggregate
principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined
or syndicated credit arrangement) of more than $5,000,000 (or, in the case of any such Indebtedness (other than the Obligations)
or Contingent Obligation (other than the Obligations) related to any Disney License or Disney Inventory, $2,500,000), (ii) the
2020 Convertible Notes, or (iii) the Oasis Convertible Notes and in each case such failure continues after the applicable grace
or notice period, if any, specified in the document relating thereto on the date of such failure; or (2) any default under an Applicable
License Agreement occurs;

 

(f)           Insolvency;
Voluntary Proceedings. The Borrowers, on a consolidated basis, cease or fail, or Credit Parties and their Subsidiaries on a
consolidated basis, cease or fail, to be Solvent, or any Credit Party or any Subsidiary: (i) generally fails to pay, or admits
in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity
or otherwise; (ii) commences any Insolvency Proceeding with respect to itself; or (iii) takes any action to effectuate or authorize
any of the foregoing;

 

(g)          Involuntary
Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against any Credit Party or any Subsidiary, and
any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) any Credit Party or Subsidiary
admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order
under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the application for, or any Credit Party or any Subsidiary
acquiesces in, the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor),
or other similar Person for itself or a substantial portion of its Property or business;

 

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(h)          Judgments.
One or more judgments, orders, decrees or arbitration awards shall be entered against any Credit Party or any Subsidiary, and the
same shall remain unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after the entry thereof, or any action
shall be legally taken by a judgment creditor to levy upon assets or properties of any Credit Party or any Subsidiary to enforce
any such judgment and such judgment either (i) involving in the aggregate a liability of $500,000 or more (excluding amounts covered
by insurance to the extent the relevant independent third party insurer has not denied coverage therefor) or (ii) is for injunctive
relief and could reasonably be expected to result in a Material Adverse Effect;

 

(i)           Collateral.
Any material provision of any Loan Document shall for any reason cease to be valid and binding on or enforceable against any Credit
Party or any Subsidiary party thereto or any Credit Party or any Subsidiary shall so state in writing or bring an action to limit
its obligations or liabilities thereunder; or any Collateral Document shall for any reason (other than pursuant to the terms thereof)
cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for
any reason cease to be a perfected and first priority security interest subject only to Permitted Liens;

 

(j)           Change
in Control. A Change in Control shall have occurred;

 

(k)          ERISA.
An ERISA Event shall have occurred that, when taken together with all other such ERISA Events, would reasonably be expected to
result in liability of any Credit Party (including any liability arising indirectly from its ERISA Affiliates) in an aggregate
amount exceeding $500,000;

 

(l)           Damage;
Casualty. Any event occurs, whether or not insured or insurable, as a result of which revenue-producing activities cease or
are substantially curtailed at facilities of Credit Parties generating more than 10% of Borrowers’ consolidated revenues
for the Fiscal Year preceding such event and such cessation or curtailment continues for more than 30 days;

 

(m)          Material
Agreements. Any default or breach by any Borrower occurs and is continuing under one or more license agreements generating
in the aggregate more that 10% of Borrowers’ consolidated revenues for the Fiscal Year preceding such event, or such agreement
or agreements are terminated for any reason;

 

(n)          Invalidity
of Subordination Provisions. The subordination provisions of any agreement or instrument governing any Subordinated Indebtedness
shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any Person shall contest
in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the
Obligations, for any reason shall not have the priority contemplated by this Agreement or such subordination provisions;

 

(o)          ABL
Loan Documents. Any default, any breach of any condition or covenant, or any other event shall occur or condition shall exist,
under the ABL Loan Documents or any instrument relating to any such Indebtedness, if the effect of such event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee
or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due
and payable prior to its stated maturity;

 

    	 	31	 

     

    

 

(p)          Invalidity
of Intercreditor Agreement. The Intercreditor Agreement shall for any reason be revoked or invalidated, or otherwise cease
to be in full force and effect (other than in accordance with its terms), any Credit Party shall contest in any manner the validity
or enforceability thereof or deny that it has any further liability or obligation thereunder, the Obligations, for any reason,
shall not have the priority contemplated by the Intercreditor Agreement or any party (other than Agent or any Lender) to the Intercreditor
Agreement fails to perform or observe any term, covenant or agreement contained therein; or

 

(q)          HK
Credit Parties. It is or becomes unlawful for a HK Credit Party to perform any of its obligations under the Loan Documents,
or any HK Credit Party repudiates or rescinds a Loan Document or evidences an intention to repudiate/rescind a Loan Document.

 

Section 8.02         Remedies.
Upon the occurrence and during the continuance of any Event of Default, Agent may and shall at the request of the Required Lenders:

 

(a)          declare
all or any portion of the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, all fees and
premium (including any amounts due under Section 1.09) and all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable; without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by each Credit Party; and

 

(b)          exercise
on behalf of itself and Lenders all rights and remedies available to it and Lenders under the Loan Documents or applicable law;

 

provided,
that, upon the occurrence of any event specified in Section 8.01(f) or (g) above (in the case of clause (i) of Section
8.01(g), upon the expiration of the 60-day period mentioned therein), the unpaid principal amount of all outstanding Loans
and all interest and other amounts as aforesaid shall automatically become due and payable without further act of Agent or any
Lender.

 

Section 8.03         Rights
Not Exclusive. The rights provided for in the Loan Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing
or hereafter arising.

 

ARTICLE
IX.

THE AGENT

 

Section 9.01         Appointment
and Duties.

 

(a)          Appointment
of Agent. Each Lender hereby appoints GACP (together with any successor Agent pursuant to Section 9.08) as Agent hereunder
and authorizes Agent to (i) execute and deliver the Loan Documents and accept delivery thereof on its behalf from any Credit Party,
(ii) take such action on its behalf and to exercise all rights, powers and remedies and perform the duties as are expressly delegated
to Agent under such Loan Documents and (iii) exercise such powers as are incidental thereto.

 

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(b)          Duties
as Collateral and Disbursing Agent. Without limiting the generality of Section 9.01(a), Agent shall have the sole and
exclusive right and authority (to the exclusion of Lenders), and is hereby authorized, to (i) act as the disbursing and collecting
agent for Lenders with respect to all payments and collections arising in connection with the Loan Documents (including in any
bankruptcy, insolvency or similar proceeding), and each Person making any payment in connection with any Loan Document to any Secured
Party is hereby authorized to make such payment to Agent, (ii) file and prove claims and file other documents necessary or desirable
to allow the claims of Secured Parties with respect to any Obligation in any bankruptcy, insolvency or similar proceeding (but
not to vote, consent or otherwise act on behalf of such Person), (iii) act as collateral agent for each Secured Party for purposes
of the perfection of all Liens created by such agreements and all other purposes stated therein, (iv) manage, supervise and otherwise
deal with the Collateral, (v) take such other action as is necessary or desirable to maintain the perfection and priority of the
Liens created or purported to be created by the Loan Documents, (vi) except as may be otherwise specified in any Loan Document,
exercise all remedies given to Agent and the other Secured Parties with respect to the Collateral, whether under the Loan Documents,
applicable Requirements of Law or otherwise and (vii) execute any amendment, consent or waiver under the Loan Documents on behalf
of any Lender that has consented in writing to such amendment, consent or waiver; provided, that Agent hereby appoints,
authorizes and directs each Lender to act as collateral sub-agent for Agent and Lenders for purposes of the perfection of Liens
with respect to any deposit account maintained by a Credit Party with, and cash and Cash Equivalents held by, such Lender, and
may further authorize and direct Lenders to take further actions as collateral sub-agents for purposes of enforcing such Liens
or otherwise to transfer the Collateral subject thereto to Agent, and each Lender hereby agrees to take such further actions to
the extent, and only to the extent, so authorized or directed.

 

(c)          Limited
Duties. Under the Loan Documents, Agent (i) is acting solely on behalf of Secured Parties, with duties that are entirely administrative
in nature, notwithstanding the use of the defined term “Agent”, the terms “agent”, “Agent”
and “collateral agent” and similar terms in any Loan Document to refer to Agent, which terms are used for title purposes
only, (ii) is not assuming any obligation under any Loan Document other than as expressly set forth therein or any role as agent,
fiduciary or trustee of or for any Lender or any other Person and (iii) shall have no implied functions, responsibilities, duties,
obligations or other liabilities under any Loan Document, and each Secured Party, by accepting the benefits of the Loan Documents,
hereby waives and agrees not to assert any claim against Agent based on the roles, duties and legal relationships expressly disclaimed
in clauses (i) through (iii) above.

 

(d)          Binding
Effect. Each Secured Party, by accepting the benefits of the Loan Documents, agrees that (i) any action taken by Agent or the
Required Lenders (or, if required hereby, a greater proportion of Lenders) in accordance with the provisions of the Loan Documents,
(ii) any action taken by Agent in reliance upon the instructions of Required Lenders (or such greater proportion) and (iii) the
exercise by Agent or the Required Lenders (or such greater proportion) of the powers set forth herein or therein, together with
such other powers as are incidental thereto, shall be authorized and binding upon all of Secured Parties.

 

Section 9.02         Use
of Discretion.

 

(a)          Agent
shall not have any duty to take any discretionary action or exercise any discretionary powers, except as directed in writing by
the Required Lenders (or such other number or percentage of Lenders as provided for herein or in the other Loan Documents); provided,
that Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose Agent to liability
or that is contrary to any Loan Document or applicable Requirement of Law. Agent shall not, except as expressly set forth herein
and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information
relating to any Credit Party or its Affiliates that is communicated to or obtained by Agent or any of its Affiliates in any capacity.

 

    	 	33	 

     

    

 

(b)          Notwithstanding
anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder
and under the other Loan Documents against Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings
at law in connection with such enforcement shall be instituted and maintained exclusively by, Agent in accordance with the Loan
Documents for the benefit of Secured Parties; provided, that the foregoing shall not prohibit (i) Agent from exercising
on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other
Loan Documents, (ii) any Lender from exercising setoff rights in accordance with Section 10.09 or (iii) any Lender from
filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any
Credit Party under any bankruptcy or other debtor relief law; provided further, that if at any time there is no Person acting
as Agent hereunder and under the other Loan Documents, then (A) the Required Lenders shall have the rights otherwise ascribed to
Agent pursuant to Section 8.02 and (B) in addition to the matters set forth in clauses (ii) and (iii) of the preceding proviso
and subject to Section 10.09, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies
available to it and as authorized by the Required Lenders.

 

Section 9.03         Delegation
of Rights and Duties. Agent may delegate or exercise any of its duties, rights, powers and remedies under any Loan Document
by or through any trustee, co-agent, employee, attorney-in-fact and any other Person (including any Secured Party). Any such Person
shall benefit from this ARTICLE IX to the extent provided by Agent.

 

Section 9.04         Reliance
and Liability.

 

(a)          Agent
may, without incurring any liability hereunder, (i) treat the payee of any Note as its holder until such Note is assigned in accordance
with Section 10.07, (ii) rely on the Register, (iii) consult with any of its Related Persons and any other advisors, accountants
and other experts (including advisors to, and accountants and experts engaged by, any Credit Party) and (iv) rely and act upon
any document and information and any telephone message or conversation, in each case believed by it to be genuine and transmitted,
signed or otherwise authenticated by the appropriate parties.

 

(b)          None
of Agent and its Related Persons shall be liable for any action taken or omitted to be taken by any of them under or in connection
with any Loan Document, and each Secured Party, each Borrower and each other Credit Party hereby waive and shall not assert (and
each Borrowers shall cause each other Credit Party to waive and agree not to assert) any right, claim or cause of action based
thereon, except to the extent of liabilities resulting primarily from the gross negligence or willful misconduct of Agent or, as
applicable, such Related Person (each as determined in a final, non-appealable judgment by a court of competent jurisdiction) in
connection with the duties expressly set forth herein. Without limiting the foregoing, Agent:

 

(i)          shall
not be responsible or otherwise incur liability for any action or omission taken in reliance upon the instructions of the Required
Lenders or for the actions or omissions of any of its Related Persons selected with reasonable care (other than employees, officers
and directors of Agent, when acting on behalf of Agent);

 

(ii)         shall
not be responsible to any Secured Party or other Person for the due execution, legality, validity, enforceability, effectiveness,
genuineness, sufficiency or value of, or the attachment, perfection or priority of any Lien created or purported to be created
under or in connection with, any Loan Document;

 

    	 	34	 

     

    

 

(iii)        makes
no warranty or representation, and shall not be responsible, to any Secured Party or other Person for any statement, document,
information, representation or warranty made or furnished by or on behalf of any Credit Party or any Related Person of any Credit
Party, including as to completeness, accuracy, scope or adequacy thereof, or for the scope, nature or results of any due diligence
performed by Agent in connection with the Loan Documents; and

 

(iv)        shall
not have any duty to ascertain or to inquire as to the performance or observance of any provision of or the satisfaction of any
condition under any Loan Document or as to the existence or continuation of any Default or Event of Default and shall not be deemed
to have notice or knowledge of such occurrence or continuation unless it has received a notice from Borrower Representative, any
Lender describing such Default or Event of Default clearly labeled “notice of default” (in which case Agent shall promptly
give notice of such receipt to all Lenders);

 

and, for each
of the items set forth in clauses (i) through (iv) above, each Lender and each Borrower hereby waives and agrees not to assert
(and each Borrower shall cause each other Credit Party to waive and agree not to assert) any right, claim or cause of action it
might have against Agent based thereon.

 

(c)          Each
Lender acknowledges and agrees that (i) it is shall not rely on any audit or other report provided by Agent or its Related Persons
(an “Agent Report”), (ii) it received Agent Report solely as a courtesy, without consideration, (iii) Agent
Report (A) was prepared by Agent or its Related Persons based upon information provided by Credit Parties solely for Agent’s
own internal use, (B) may not be complete and (C) may not reflect all information and findings obtained by Agent or its Related
Persons regarding the operations and condition of Credit Parties, (iv) neither Agent nor any of its Related Persons is making any
representations or warranties with respect to (A) any information contained in any Agent Report or in any related documentation,
(B) the scope or adequacy of Agent’s and its Related Persons’ due diligence, or (C) the presence or absence of any
errors or omissions contained in any Agent Report or in any related documentation and (v) neither Agent nor any of its Related
Persons shall have any duties or obligations with respect to any Agent Report or to correct or update any Agent Report. Each Lender
releases, and agrees that it will not assert, any claim against Agent or its Related Persons that in any way relates to any Agent
Report, and agrees to indemnify and hold harmless Agent and its Related Persons from all claims, liabilities and expenses relating
to a breach by any Lender of its agreements hereunder.

 

Section 9.05         Agent
Individually. Agent and its Affiliates may make loans and other extensions of credit to, acquire Stock and Stock Equivalents
of, engage in any kind of business with, any Credit Party or Affiliate thereof as though it were not acting as Agent and may receive
separate fees and other payments therefor. To the extent Agent or any of its Affiliates makes any Loan or otherwise becomes a Lender
hereunder, it shall have and may exercise the same rights and powers hereunder and shall be subject to the same obligations and
liabilities as any other Lender and the terms “Lender,” “Required Lender” and any similar terms shall,
except where otherwise expressly provided in any Loan Document, include Agent or such Affiliate, as applicable, in its individual
capacity as Lender, Lender or as one of the Required Lenders.

 

    	 	35	 

     

    

 

Section 9.06         Lender
Credit Decision.

 

(a)          Each
Lender acknowledges that it shall, independently and without reliance upon Agent, any Lender or any of their Related Persons or
upon any document (including any offering and disclosure materials in connection with the syndication of the Loans) solely or in
part because such document was transmitted by Agent or any of its Related Persons, conduct its own independent investigation of
the financial condition and affairs of each Credit Party and make and continue to make its own credit decisions in connection with
entering into, and taking or not taking any action under, any Loan Document or with respect to any transaction contemplated in
any Loan Document, in each case based on such documents and information as it shall deem appropriate. Except for documents expressly
required by any Loan Document to be transmitted by Agent to Lenders, Agent shall not have any duty or responsibility to provide
any Lender with any information concerning any Credit Party or any Affiliate of any Credit Party that may come in to the possession
of Agent or any of its Related Persons.

 

(b)          If
any Lender has elected to abstain from receiving material non- public information (“MNPI”) concerning Credit
Parties or their Affiliates, such Lender acknowledges that, notwithstanding such election, Agent and/or Credit Parties will, from
time to time, make available syndicate-information (which may contain MNPI) as required by the terms of, or in the course of administering
the Loans to the credit contact(s) identified for receipt of such information on the Lender’s administrative questionnaire
who are able to receive and use all syndicate-level information (which may contain MNPI) in accordance with such Lender’s
compliance policies and contractual obligations and applicable law, including federal and state securities laws; provided,
that if such contact is not so identified in such questionnaire, the relevant Lender hereby agrees to promptly (and in any event
within one Business Day) provide such a contact to Agent and Credit Parties upon request therefor by Agent or Credit Parties. Notwithstanding
such Lender’s election to abstain from receiving MNPI, such Lender acknowledges that if such Lender chooses to communicate
with Agent, it assumes the risk of receiving MNPI concerning Credit Parties or their Affiliates.

 

Section 9.07         Withholding.
Agent may withhold from any payment to any Lender under a Loan Document an amount equal to any applicable withholding Tax. If the
IRS or any other Governmental Authority asserts a claim that Agent did not properly withhold Tax from amounts paid to or for the
account of any Lender (for any reason), or Agent reasonably determines that it was required to withhold Taxes from a prior payment
but failed to do so, such Lender shall promptly indemnify Agent fully for all amounts paid, directly or indirectly, by such Agent
as Tax or otherwise, including penalties and interest, and together with all expenses incurred by Agent, including legal expenses,
allocated internal costs and out-of-pocket expenses. Agent may offset against any payment to any Lender under a Loan Document,
any applicable withholding Tax that was required to be withheld from any prior payment to such Lender but which was not so withheld,
as well as any other amounts for which Agent is entitled to indemnification from such Lender under this Section and Section
10.05(c).

 

Section 9.08         Resignation
of Agent.

 

(a)          Agent
may resign at any time by delivering notice of such resignation to Lenders and Borrower Representative, effective on the date set
forth in such notice or, if no such date is set forth therein, upon the date such notice shall be effective in accordance with
the terms of this Section. If Agent delivers any such notice, the Required Lenders shall have the right to appoint a successor
Agent. If, after 30 days after the date of the retiring Agent’s notice of resignation, no successor Agent is appointed by
the Required Lenders that has accepted such appointment, then the retiring Agent may, on behalf of Lenders, appoint a successor
Agent from among Lenders. So long as no Event of Default exists, each appointment under this Section shall be subject to the prior
consent of Borrower Representative, which may not be unreasonably withheld.

 

    	 	36	 

     

    

 

(b)          Effective
immediately upon its resignation, (i) the retiring Agent shall be discharged from its duties and obligations under the Loan Documents,
(ii) Lenders shall assume and perform all of the duties of Agent until a successor Agent shall have accepted a valid appointment
hereunder, (iii) the retiring Agent and its Related Persons shall no longer have the benefit of any provision of any Loan Document
other than with respect to any actions taken or omitted to be taken while such retiring Agent was, or because such Agent had been,
acting as Agent under the Loan Documents and (iv) subject to its rights under Section 9.02, the retiring Agent shall take
such action as may be reasonably necessary to assign to the successor Agent its rights as Agent under the Loan Documents. Effective
immediately upon its acceptance of a valid appointment as Agent, a successor Agent shall succeed to, and become vested with, all
the rights, powers, privileges and duties of the retiring Agent under the Loan Documents.

 

Section 9.09         Release
of Collateral or Guarantors. Each Secured Party hereby consents to the release and hereby directs Agent to release (or,
in the case of clause (ii) of Section 9.09(b), release or subordinate) the following:

 

(a)          any
Subsidiary from its guaranty of any Obligation if all of the Stock and Stock Equivalents of such Subsidiary owned by any Credit
Party are sold or transferred in a transaction permitted under the Loan Documents (including pursuant to a waiver or consent);
and

 

(b)          any
Lien held by Agent for the benefit of Secured Parties against (i) any Collateral that is sold, transferred, conveyed or otherwise
disposed of by a Credit Party in a transaction permitted by the Loan Documents (including pursuant to a waiver or consent), (ii)
any Property subject to a Lien permitted hereunder in reliance upon Section 6.01(h) or (i) and (iii) all of the Collateral
and all Credit Parties, upon Final Satisfaction.

 

Each Lender hereby
directs Agent, and Agent hereby agrees, upon receipt of at least five Business Days’ advance notice from Borrower Representative,
to execute and deliver or file such documents and to perform other actions reasonably necessary to release the guaranties and Liens
when and as directed in this Section.

 

Section 9.10         Additional
Secured Parties. The benefit of the provisions of the Loan Documents directly relating to the Collateral or any Lien
granted thereunder shall extend to and be available to any Secured Party that is not a Lender party hereto as long as, by accepting
such benefits, such Secured Party agrees, as among Agent and all other Secured Parties, that such Secured Party is bound by (and,
if requested by Agent, shall confirm such agreement in a writing in form and substance acceptable to Agent) this ARTICLE IX
and Section 10.01, Section 10.03, Section 10.05(c), Section 10.07, Section 10.08, Section
10.09, Section 10.14, Section 10.21 and Section 11.01 and the decisions and actions of Agent and the Required
Lenders (or a greater proportion of Lenders or other parties hereto as required herein) to the same extent a Lender is bound; provided,
that notwithstanding the foregoing, (a) each of Agent and Lenders party hereto shall be entitled to act at its sole discretion,
without regard to the interest of such Secured Party, regardless of whether any Obligation to such Secured Party thereafter remains
outstanding, is deprived of the benefit of the Collateral, becomes unsecured or is otherwise affected or put in jeopardy thereby,
and without any duty or liability to such Secured Party or any such Obligation and (b) except as otherwise set forth herein, such
Secured Party shall not have any right to be notified of, consent to, direct, require or be heard with respect to, any action taken
or omitted in respect of the Collateral or under any Loan Document.

 

    	 	37	 

     

    

 

ARTICLE
X.

MISCELLANEOUS

 

Section 10.01       Amendments
and Waivers.

 

(a)          No
amendment or waiver of any provision of any Loan Document, and no consent with respect to any departure by any Credit Party therefrom,
shall be effective unless the same shall be in writing and signed by Agent, the Required Lenders (or by Agent with the consent
of the Required Lenders), and Borrowers, and then such waiver shall be effective only in the specific instance and for the specific
purpose for which given; provided, that unless in writing and signed by all Lenders directly affected thereby (or by Agent
with the consent of such Lenders), in addition to the Required Lenders (or by Agent with the consent of the Required Lenders) and
Borrowers, no such waiver, amendment, or consent shall:

 

(i)          Increase
or extend the Commitment of any Lender;

 

(ii)         postpone
or delay any date fixed for, or reduce or waive, any scheduled installment of principal or any payment of interest, fees or other
amounts due to Lenders (or any of them) hereunder or under any other Loan Document (except mandatory prepayments pursuant to Section
1.08 may be postponed, delayed, reduced, waived or modified with the consent of Required Lenders);

 

(iii)        reduce
the principal of, or the rate of interest specified herein or the amount of interest payable in cash specified herein on any Loan,
or of any fees or other amounts payable hereunder or under any other Loan Document, except interest at the Default Rate;

 

(iv)        amend
or modify Section 1.10(d);

 

(v)         change
the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans which shall be required for Lenders
or any of them to take any action hereunder;

 

(vi)        amend
this Section or the definition of Required Lenders or any provision providing for consent or other action by all Lenders; or

 

(vii)       (A)
discharge any Credit Party from its respective payment Obligations under the Loan Documents, except as otherwise may be provided
in any Loan Document so long as such does not discharge any Borrower or all or substantially all of the value of the guaranties
from the Guarantors (except in connection with the merger of any Guarantor into any other Credit Party), in which case all Lenders’
consent is required, or (B) release all or substantially all of the Collateral;

 

provided,
that all Lenders shall be deemed to be directly affected by an amendment or waiver of the type described in the preceding clauses
(v), (vi) and (vii) above.

 

(b)          No
amendment, waiver or consent shall, unless in writing and signed by Agent, in addition to the consents required under Section
10.01(a), affect the rights or duties of Agent under any Loan Document.

 

    	 	38	 

     

    

 

(c)          No
amendment or waiver shall, unless signed by Agent and Required Lenders (or by Agent with the consent of Required Lenders): (i)
amend or waive this Section 10.01(c) or the definitions of the terms used in this Section 10.01(c) insofar as the
definitions affect the substance of this Section 10.01(c); or (ii) amend or modify the definitions of Eligible Domestic
Accounts, Eligible Foreign Accounts, Eligible Licensed Inventory, Borrowing Base, Term Loan Borrowing Base or Term Loan Push-Down
Reserve, including any increase in the percentage advance rates in the definition of Borrowing Base, in a manner which would increase
the availability of credit under the Term Loan. No amendment or waiver shall, unless signed by all Lenders (or by Agent with the
consent of all Lenders) in addition to the Required Lenders (or by Agent with the consent of the Required Lenders), change the
definition of (x) the term Required Lenders, (y) the percentage of Lenders which shall be required for Lenders to take any action
hereunder or (z) any specific right of Required Lenders to grant or withhold consent or take or omit to take any action hereunder.

 

(d)          Notwithstanding
anything to the contrary contained in this Section, (i) Borrowers may amend the Perfection Certificate upon notice to Agent, and
(ii) Agent and Borrowers may amend or modify any Loan Document to grant a new Lien for the benefit of Secured Parties, extend an
existing Lien over additional Property for the benefit of Secured Parties or join additional Persons as Credit Parties; provided,
that no Accounts or Inventory of such Person shall be included as Eligible Accounts or Eligible Licensed Inventory until a field
examination (and, if required by Agent, an Inventory appraisal) with respect thereto is completed to the satisfaction of Agent,
including the establishment of Reserves required in Agent’s Permitted Discretion.

 

Section 10.02       Notices.

 

(a)          Addresses.
All notices and other communications required or expressly authorized to be made by any Loan Document shall be given in writing,
unless otherwise expressly specified herein, and (i) addressed to the address set forth on Schedule 10.02 (or with respect to Lenders
after the Closing Date, as set forth in the Assignment), (ii) given in accordance with any E-System approved by or set up by or
at the direction of Agent or (iii) addressed to such other address as notified in writing (A) in the case of Borrowers and Agent,
to the other parties hereto and (B) in the case of all other parties, to Borrower Representative and Agent. Transmissions made
by electronic mail or E-Fax to Agent shall be effective only (x) for notices where such transmission is specifically authorized
by this Agreement, (y) if such transmission is delivered in compliance with procedures of Agent applicable at the time and previously
communicated to Borrower Representative, and (z) if receipt of such transmission is acknowledged by Agent.

 

(b)          Effectiveness.
(i) All communications described in Section 10.02(a) and all other notices, demands, requests and other communications made
in connection with any Loan Document shall be effective and be deemed to have been received (i) if delivered by hand, upon personal
delivery, (ii) if delivered by overnight courier service, one Business Day after delivery to such courier service, (iii) if delivered
by mail, three Business Days after deposit in the mail, (iv) if delivered by facsimile (other than to post to an E-System) during
normal business hours, upon sender’s receipt of confirmation of proper transmission, (v) if delivered by facsimile (other
than to post to an E-System) after normal business hours, upon the later of (A) sender’s receipt of confirmation of proper
transmission and (B) the next Business Day, and (vi) if delivered by posting to any E-System, on the later of the Business Day
of such posting and the Business Day access to such posting is given to the recipient thereof in accordance with the standard procedures
applicable to such E-System; provided, that that no communications to Agent pursuant to ARTICLE I shall be effective
until received by Agent.

 

    	 	39	 

     

    

 

Each Lender shall notify
Agent in writing of any changes in the address to which notices to such Lender should be directed, of addresses of its Lending
Office, of payment instructions in respect of all payments to be made to it hereunder and of such other administrative information
as Agent shall reasonably request.

 

Section 10.03         Electronic
Transmissions.

 

(a)          Authorization.
Subject to Section 10.02(a), each of Agent, Lenders, each Credit Party and each of their Related Persons, is authorized
(but not required) to transmit, post or otherwise make or communicate, in its sole discretion, Electronic Transmissions in connection
with any Loan Document and the transactions contemplated therein. Each Credit Party and each Secured Party hereto acknowledges
and agrees that the use of Electronic Transmissions is not necessarily secure and that there are risks associated with such use,
including risks of interception, disclosure and abuse and each indicates it assumes and accepts such risks by hereby authorizing
the transmission of Electronic Transmissions.

 

(b)          Accuracy.
The posting, completion and/or submission by any Credit Party of any communication pursuant to an E System shall constitute a representation
and warranty by Credit Parties that any representation, warranty, certification or other similar statement made therein is correct
and complete except as expressly noted in such communication or E-System.

 

(c)          Signatures.
Subject to Section 10.02(a), (i)(A) no posting to any E-System shall be denied legal effect merely because it is made electronically,
(B) each E Signature on any such posting shall be deemed sufficient to satisfy any requirement for a “signature” and
(C) each such posting shall be deemed sufficient to satisfy any requirement for a “writing,” in each case including
pursuant to any Loan Document, any applicable provision of any UCC, the federal Uniform Electronic Transactions Act, the Electronic
Signatures in Global and National Commerce Act and any substantive or procedural Requirement of Law governing such subject matter
and (ii) each party hereto or beneficiary hereto agrees not to contest the validity or enforceability of any posting on any E-System
or E-Signature; provided, that nothing herein shall limit such party’s or beneficiary’s right to contest whether
any posting to any E-System or E- Signature has been altered after transmission.

 

(d)          Separate
Agreements. All uses of an E-System shall be governed by and subject to the separate terms, conditions and privacy policy posted
or referenced in such E-System (or such terms, conditions and privacy policy as may be updated from time to time, including on
such E System) and related Contractual Obligations executed by Agent and Credit Parties in connection with the use of such E-System.

 

(e)          LIMITATION
OF LIABILITY. ALL E-SYSTEMS AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS” AND “AS AVAILABLE”.
NO WARRANTY OF ANY KIND IS MADE BY AGENT, ANY LENDER OR ANY OF THEIR RELATED PERSONS IN CONNECTION WITH ANY E SYSTEMS OR ELECTRONIC
COMMUNICATION, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD-PARTY RIGHTS
OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS. Each Credit Party and each Secured Party agree that Agent has no responsibility
for maintaining or providing any equipment, software, services or any testing required in connection with any Electronic Transmission
or otherwise required for any E-System.

 

    	 	40	 

     

    

 

Section 10.04       No
Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any party hereto, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. No course of dealing between any Credit Party, any Affiliate of any Credit Party, Agent or any Lender
shall be effective to amend, modify or discharge any provision of any Loan Document.

 

Section 10.05       Costs
and Expenses; Indemnification.

 

(a)          Costs
and Expenses. Each Credit Party agrees to pay or reimburse upon demand (i) Agent for all reasonable out-of-pocket costs and expenses
incurred by it or any of its Related Persons, in connection with the investigation, development, preparation, negotiation, syndication,
execution, interpretation or administration of, any modification of any term of or termination of, any Loan Document, any commitment
or proposal letter therefor, any other document prepared in connection therewith or the consummation and administration of any
transaction contemplated therein, in each case including Attorney Costs of Agent, the cost of environmental audits, Collateral
audits and appraisals, background checks and similar expenses, to the extent permitted hereunder, (ii) Agent for all reasonable
costs and expenses incurred by it or any of its Related Persons in connection with internal audit reviews, field examinations and
Collateral examinations (which shall be reimbursed, in addition to the out-of-pocket costs and expenses of such examiners, at the
per diem rate per individual charged by Agent for its examiners), (c) each of Agent and its Related Persons, for all costs and
expenses incurred in connection with (A) any refinancing or restructuring of the credit arrangements provided hereunder in the
nature of a “work-out,” (B) the enforcement or preservation of any right or remedy under any Loan Document or of any
Obligation or any rights in any of the Collateral or (C) the commencement, defense, conduct of, intervention in, or the taking
of any other action (including any preparation for and/or response to any subpoena or request for document production) with respect
to, any proceeding (including any bankruptcy or insolvency proceeding) related to any Credit Party, any Subsidiary, any Loan Document,
Obligation or Related Transaction, including Attorney Costs and (iii) the Lenders for Attorney Costs of one law firm on behalf
of all Lenders (other than Agent) incurred in connection with any of the matters referred to in clause (ii) above (and in the event
of any conflict, such additional law firms for similarly situated Lenders).

 

(b)          Indemnity.
Each Credit Party agrees to indemnify, hold harmless and defend Agent, each Lender and each of their respective Related Persons
(each such Person, an “Indemnitee”) from and against all Liabilities that may be imposed on, incurred by or
asserted against any such Indemnitee in any matter relating to or arising out of, in connection with or as a result of (i) any
Loan Document, any Related Agreement, any Obligation (or the repayment thereof), the use or intended use of the proceeds of any
Loan or any securities filing of, or with respect to, any Credit Party, (ii) any commitment letter, proposal letter or term sheet
with any Person or any Contractual Obligation, arrangement or understanding with any broker, finder or consultant, in each case
entered into by or on behalf of any Credit Party or any Affiliate of any of them in connection with any of the foregoing and any
Contractual Obligation entered into in connection with any E-Systems or other Electronic Transmissions, (iii) any actual or prospective
investigation, litigation or other proceeding, whether or not any such Indemnitee or any of its Related Persons, any holders of
securities or creditors is a party thereto, or (iv) any other act, event or transaction related, contemplated in or attendant to
any of the foregoing (collectively, the “Indemnified Matters”); provided, that no Credit Party shall
have any liability under this Section to any Indemnitee with respect to any Indemnified Matter to the extent such liability has
resulted primarily from the gross negligence or willful misconduct of such Indemnitee, as determined by a court of competent jurisdiction
in a final non-appealable judgment or order. Furthermore, each Credit Party waives and agrees not to assert against any Indemnitee,
and shall cause each other Credit Party to waive and not assert against any Indemnitee, any right of contribution with respect
to any Liabilities that may be imposed on, incurred by or asserted against any Related Person. Without limiting the foregoing,
“Indemnified Matters” includes all Environmental Liabilities imposed on, incurred by or asserted against any Indemnitee,
including those arising from, or otherwise involving, any Property of any Credit Party or any Related Person of any Credit Party
or any actual, alleged or prospective damage to Property or natural resources or harm or injury alleged to have resulted from any
Release of Hazardous Materials on, upon or into such Property or natural resource or any Property on or contiguous to any Real
Estate of any Credit Party or any Related Person of any Credit Party, whether or not, with respect to any such Environmental Liabilities,
any Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in possession, the successor-in-interest to any Credit
Party or any Related Person of any Credit Party or the owner, lessee or operator of any Property of any Related Person through
any foreclosure action, in each case except to the extent such Environmental Liabilities (i) are incurred solely following foreclosure
by Agent or following Agent or any Lender having become the successor-in-interest to any Credit Party or any Related Person of
any Credit Party and (ii) are attributable to acts of such Indemnitee. This Section 10.05(b) shall not apply with respect
to Taxes other than any Taxes that represent Liabilities arising from any non-Tax claim.

 

    	 	41	 

     

    

 

(c)          Lenders’
Obligations. To the extent that Credit Parties for any reason fail to indefeasibly pay any amount required under Section
10.05(a) or (b) to be paid by any of them to Agent (or any sub-agent thereof) or any Related Party of any of the foregoing,
each Lender severally and ratably agrees to pay to Agent (or any such sub-agent) or such Related Party, as applicable, such unpaid
amount; provided, that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as applicable,
was incurred by or asserted against Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any
of the foregoing acting for Agent (or any such sub-agent) in connection with such capacity.

 

(d)          Waiver.
In no event shall any Indemnitee be liable on any theory of liability for any special, indirect, consequential or punitive damages
(including any loss of profits, business or anticipated savings). Each Credit Party signatory hereto hereby waives, releases and
agrees (and shall cause each other Credit Party to waive, release and agree) not to sue upon any such claim for any special, indirect,
consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor

 

Section 10.06       Marshaling;
Payments Set Aside. No Secured Party shall be under any obligation to marshal any Property in favor of any Credit Party
or any other Person or against or in payment of any Obligation. To the extent that any Secured Party receives a payment from a
Borrower, from any other Credit Party, from the proceeds of the Collateral, from the exercise of its rights of setoff, any enforcement
action or otherwise, and such payment is subsequently, in full or in part, invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party, then to the extent of such recovery, the obligation
or 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 occurred.

 

Section 10.07       Binding
Effect; Assignments and Participations. This Agreement shall become effective when it is executed by Borrowers and Agent
and when Agent is notified by each Lender that such Lender has executed it. Thereafter, it shall be binding upon and inure to the
benefit of the parties hereto and Secured Parties and, to the extent provided in this Section, their respective successors and
permitted assigns; provided, that any assignment by any Lender shall be subject to the provisions of this Section; provided 
further, that no Credit Party may assign or transfer any of its rights or obligations under any Loan Document without the prior
written consent of Agent and each Lender.

 

    	 	42	 

     

    

 

(a)          Right
to Assign. Each Lender may sell, transfer, negotiate or assign (a “Sale”) all or a portion of its rights
and obligations hereunder to (i) any existing Lender, (ii) any Affiliate or Approved Fund of any existing Lender or (iii) any other
Person with the consent (which consent shall not be unreasonably withheld) of Agent; provided, that (w) the aggregate outstanding
principal amount (determined as of the effective date of the applicable Assignment) of the Loans and Commitments subject to any
such Sale shall be in a minimum amount of $1,000,000, unless such Sale is made to an existing Lender or an Affiliate or Approved
Fund of any existing Lender, is of the assignor’s (together with its Affiliates and Approved Funds) entire interest or is
made with the prior consent of Borrower Representative (to the extent required) and Agent, (x) such Sales shall be effective only
upon the acknowledgement in writing of such Sale by Agent, and (y) interest accrued prior to and through the date of any such Sale
may not be assigned. No Sale shall be made to (A) a Credit Party, an Affiliate of a Credit Party, a holder of Subordinated Indebtedness
or an Affiliate of such a holder, or (B) so long as no Event of Default exists, a Disqualified Institution.

 

(b)          Procedure.
The parties to each Sale shall execute and deliver to Agent an Assignment via an electronic settlement system designated by Agent
(or, if previously agreed with Agent, via a manual execution and delivery of the Assignment) evidencing such Sale, together with
any existing Note subject to such Sale (or any affidavit of loss therefor acceptable to Agent), any Tax forms required to be delivered
pursuant to Section 11.01(e) and payment of an assignment fee in the amount of $3,500 to Agent, unless waived or reduced
by Agent; provided, that (i) if a Sale by a Lender is made to an Affiliate or an Approved Fund of such assigning Lender,
then no assignment fee shall be due in connection with such Sale, and (ii) if a Sale by a Lender is made to an assignee that is
not an Affiliate or Approved Fund of such assignor Lender, and concurrently to one or more Affiliates or Approved Funds of such
Assignee, then only one assignment fee of $3,500 shall be due in connection with such Sale (unless waived or reduced by Agent).
Upon receipt of all the foregoing, and any consent required under this Section, from and after the effective date specified in
such Assignment, Agent shall record in the Register the information contained in such Assignment.

 

(c)          Effectiveness.
Upon Agent’s recording of an Assignment in the Register, (i) the assignee thereunder shall become a party hereto and have
the rights and obligations of a Lender with respect to the Term Loan Facility, (ii) the related Obligations (including any applicable
Note) shall be transferred to such assignee through such entry, (iii) the assignor thereunder shall relinquish its rights with
respect to the assigned Term Loan Facility to the extent assigned and be released from its obligations under the Loan Documents,
other than those relating to events or circumstances occurring prior to such assignment (and, if all of such Lender’s rights
and obligations under the Loan Documents are being assigned, such Lender shall cease to be a party hereto) and (iv) the assignor
shall file the necessary UCC financing statement amendment identifying the assignee as the secured party thereunder.

 

(d)          Grant
of Security Interests. Without the consent of any Person, each Lender may grant a security interest in, or otherwise assign
as collateral, any of its rights under this Agreement to any Person (including any federal reserve bank) without notice to any
Person; provided, that no such Person shall be entitled to any rights of such Lender hereunder (unless foreclosure is made
through an assignment in accordance with Section 10.07(a)), and no such Lender shall be relieved of any of its obligations
hereunder.

 

    	 	43	 

     

    

 

(e)          Participants
and SPVs. Without the consent of any Person, each Lender may, (a) with notice to Agent, grant to an SPV the option to make
all or any part of any Loan that such Lender would otherwise be required to make hereunder (which funding by such SPV shall satisfy
such Lender’s obligations) and such SPV may assign to such Lender the right to receive payment with respect to any Obligation
and (b) without notice to any Person, sell participations to one or more Persons (other than a Credit Party or any Affiliate of
any Credit Party) in or to all or a portion of its rights and obligations under the Loan Documents; provided, that (i) no
such SPV or participant shall be entitled to any rights of such Lender hereunder and no such Lender shall be relieved of any of
its obligations hereunder, except that (x) each such participant and SPV shall be entitled to the benefit of ARTICLE XI,
but, with respect to Section 11.01, only to the extent such participant or SPV delivers the Tax forms such Lender is required
to collect pursuant thereto and then only to the extent of any amount to which such Lender would be entitled in the absence of
any such grant or participation, except to the extent such greater amount results from any Change in Law that occurs after the
date such grant or participation is made and (y) each such SPV may receive other payments that would otherwise be made to such
Lender with respect to Loans funded by such SPV to the extent provided in the applicable option agreement and set forth in a notice
provided to Agent by such Lender, provided, that no SPV or participant shall have the right to enforce any of the terms
of any Loan Document, and (ii) unless such SPV or participant is an Affiliate or an Approved Fund of such Lender, the consent of
such SPV or participant shall not be required for any amendments, waivers or consents under any Loan Document or to exercise or
refrain from exercising any powers or rights such Lender in respect of the Loan Documents, except for those described in clauses
(ii) and (iii) of Section 10.01(a) to the extent such participant or SPV would be affected thereby or in clause (vi) of
Section 10.01(a). No party hereto shall institute (and each Borrower shall not allow any Credit Party not to institute)
against any such SPV grantee any bankruptcy, reorganization, insolvency, liquidation or similar proceeding, prior to the date that
is one year and one day after the payment in full of all outstanding commercial paper of such SPV; provided, that each Lender
designating such SPV agrees to indemnify each Indemnitee against any Liability that may be incurred by such Indemnitee as a result
of failing to institute such proceeding. The agreement in the preceding sentence shall survive the termination of the Commitments
and the payment in full of the Obligations. Each Lender that sells a participation shall maintain a register on which it enters
the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in
the Loans or other obligations under the Loan Documents (the “Participant Register”); provided, that
no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant
or any information relating to a participant’s interest) to any Person other than Agent except to the extent that such disclosure
is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section
5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest
error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation
for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, Agent shall have no
responsibility for maintaining a Participant Register.

 

Section 10.08       Non-Public
Information; Confidentiality.

 

(a)          Non-Public
Information. Each of Agent and each Lender acknowledges and agrees that it may receive MNPI hereunder concerning Credit Parties
and their Affiliates and agrees to use such information in compliance with all relevant policies, procedures and applicable Requirements
of Laws (including United States federal and state security laws and regulations).

 

    	 	44	 

     

    

 

(b)          Confidential
Information. Each of Agent and each Lender agrees to use all reasonable efforts to maintain, in accordance with its customary
practices, the confidentiality of information obtained by it pursuant to any Loan Document (including due diligence materials provided
by the Credit Parties) and designated in writing by any Credit Party as confidential, except that such information may be disclosed
(i) with Borrower Representative’s consent, (ii) to Related Persons of such Lender or Agent, as applicable, that are advised
of the confidential nature of such information and are instructed to keep such information confidential in accordance with the
terms hereof, (iii) to the extent such information presently is or hereafter becomes (A) publicly available other than as a result
of a breach of this Section or (B) available to such Lender or Agent or any of their Related Persons, as applicable, from a source
(other than any Credit Party) not known by them to be subject to disclosure restrictions, (iv) to the extent disclosure is required
by applicable Requirements of Law or other legal process or requested or demanded by any Governmental Authority, (v) (A) to any
insurance association or organization, any examiner or any nationally recognized rating agency or (B) otherwise to the extent consisting
of general portfolio information not identifying Credit Parties, (vi) to current or prospective assignees, pledgees or participants
and their respective Related Persons, in each case to the extent such Persons agree to be bound by provisions substantially similar
to the provisions of this Section and as long as such Person is not a Disqualified Institution, (vii) to any other party hereto,
and (viii) in connection with the exercise or enforcement of any right or remedy under any Loan Document or with any litigation
or other proceeding, or to the extent necessary to respond to public statements or disclosures by Credit Parties or their Related
Persons referring to a Lender or Agent or any of their Related Persons. In the event of any conflict between the terms of this
Section and those of any other Contractual Obligation of any Credit Party (whether or not a Loan Document), the terms of this Section
shall govern.

 

(c)          Tombstones.
Each Credit Party consents to the publication by Agent or any Lender of any press releases, tombstones, advertising or other promotional
materials in accordance with all applicable Requirements of Law (including via any Electronic Transmission) relating to the financing
transactions contemplated by this Agreement using such Credit Party’s name, product photographs, logo or trademark.

 

(d)          Press
Release and Related Matters. No Credit Party shall, or shall permit any of its Affiliates to, issue any press release or other
public disclosure (other than any document filed with any Governmental Authority relating to a public offering of securities of
any Credit Party) using the name, logo or otherwise referring to GACP or of any of its Affiliates, the Loan Documents or any transaction
contemplated herein or therein to which GACP or any of its affiliates is party without the prior written consent of GACP or such
Affiliate except to the extent required to do so under applicable Requirements of Law and then, only after consulting with GACP.

 

(e)          Distribution
of Materials to Lenders. Credit Parties acknowledge and agree that the Loan Documents and all reports, notices, communications
and other information or materials provided or delivered by, or on behalf of, Credit Parties hereunder (collectively, the “Borrower
Materials”) may be disseminated by, or on behalf of, Agent, and made available, to Lenders by posting such Borrower Materials
on an E-System. Credit Parties authorize Agent to download copies of their logos from its website and post copies thereof on an
E-System

 

(f)           Material
Non-Public Information. Credit Parties hereby agree that if either they, any parent company or any Subsidiary has publicly
traded equity or debt securities in the U.S., they shall (and shall cause such parent company or Subsidiary, as applicable, to)
(i) identify in writing, and (ii) to the extent reasonably practicable, clearly and conspicuously mark such Borrower Materials
that contain only information that is publicly available or that is not material for purposes of U.S. federal and state securities
laws as “PUBLIC.” Credit Parties agree that by identifying such Borrower Materials as “PUBLIC” or publicly
filing such Borrower Materials with the Securities and Exchange Commission, then Agent and Lenders shall be entitled to treat such
Borrower Materials as not containing any MNPI for purposes of U.S. federal and state securities laws. Credit Parties agree that
the following documents and materials shall be deemed to be PUBLIC, whether or not so marked, and do not contain any MNPI: (A)
the Loan Documents and (B) materials of a customary nature prepared by Credit Parties or Agent in connection with the administration
or syndication of the Loans. Before distribution of any Borrower Materials, Credit Parties agree to execute and deliver to Agent
a letter authorizing distribution of the evaluation materials to prospective Lenders and their employees willing to receive MNPI,
and a separate letter authorizing distribution of evaluation materials that do not contain MNPI and represent that no MNPI is contained
therein.

 

    	 	45	 

     

    

 

Section 10.09       Set-off;
Sharing of Payments.

 

(a)          Right
of Setoff. Each of Agent and each Lender, and each Affiliate of any of them is hereby authorized, without notice or demand
(each of which is hereby waived by each Credit Party), from time to time during the continuance of any Event of Default and to
the fullest extent permitted by applicable Requirements of Law, to set off and apply any deposits at any time held and other Indebtedness,
claims or other obligations at any time owing by Agent, such Lender, or any of their respective Affiliates to or for the credit
or the account of Borrowers or any other Credit Party against any Obligation of any Credit Party now or hereafter existing, whether
or not any demand was made under any Loan Document with respect to such Obligation and even though such Obligation may be unmatured.
No Lender shall exercise any such right of setoff without the prior consent of Agent or Required Lenders. Each of Agent and each
Lender agrees promptly to notify Borrower Representative and Agent after any such setoff and application made by such Lender or
its Affiliates; provided, that the failure to give such notice shall not affect the validity of such setoff and application.
The rights under this Section are in addition to any other rights and remedies (including other rights of setoff) that Agent, Lenders,
their Affiliates and the other Secured Parties, may have.

 

(b)          Sharing
of Payments, Etc. If any Lender, directly or through an Affiliate, obtains any payment of any Obligation of any Credit Party
and such payment exceeds the amount such Lender is entitled to receive under the Loan Documents, such Lender shall purchase for
cash from other Lenders such participations in their Obligations as necessary for such Lender to share such excess payment with
such Lenders to ensure such payment is applied to repay the Obligations in accordance herewith; provided, that (i) if such
payment is rescinded or otherwise recovered from such Lender in full or in part, such purchase shall be rescinded and the purchase
price therefor shall be returned to such Lender without interest and (ii) such Lender shall, to the fullest extent permitted by
applicable Requirements of Law, be able to exercise all its rights of payment (including the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of the applicable Credit Party in the amount of such participation.

 

Section 10.10     Counterparts;
Facsimile Signature. This Agreement may be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute one and the same agreement. Signature pages may be
detached from multiple separate counterparts and attached to a single counterpart. Delivery of an executed signature page of this
Agreement by facsimile transmission or Electronic Transmission shall be as effective as delivery of a manually executed counterpart
hereof.

 

Section 10.11      Severability.
The illegality or unenforceability of any provision of any Loan Document or any instrument or agreement required thereunder shall
not in any way affect or impair the legality or enforceability of the remaining provisions of such Loan Document or any instrument
or agreement required thereunder.

 

    	 	46	 

     

    

 

Section 10.12       Captions.
The captions and headings of each Loan Document are for convenience of reference only and shall not affect the interpretation thereof.

 

Section 10.13       Interpretation.
Each Loan Document is the result of negotiations among and has been reviewed by counsel to Credit Parties, Agent, each Lender and
other parties thereto, and is the product of all parties thereto. Accordingly, the Loan Documents shall not be construed against
Lenders or Agent merely because of Agent’s or Lenders’ involvement in the preparation of such documents and agreements.
Without limiting the generality of the foregoing, each of the parties hereto has had the advice of counsel with respect to Section
10.15 and Section 10.16.

 

Section 10.14       No
Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of Borrowers,
Credit Parties, Lenders, party hereto, Agent and, subject to the provisions of Section 9.10, each other Secured Party, and
their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct
or indirect cause of action or claim in connection with, any Loan Document. Neither Agent nor any Lender shall have any obligation
to any Person not a party to any Loan Document.

 

Section 10.15       Governing
Law and Jurisdiction.

 

(a)          Governing
Law. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN ALL MATTERS ARISING OUT OF, IN CONNECTION WITH OR RELATING TO THIS AGREEMENT,
INCLUDING, ITS VALIDITY, INTERPRETATION, CONSTRUCTION, PERFORMANCE AND ENFORCEMENT (INCLUDING, ANY CLAIMS SOUNDING IN CONTRACT
OR TORT LAW ARISING OUT OF THE SUBJECT MATTER HEREOF AND ANY DETERMINATIONS WITH RESPECT TO POST-JUDGMENT INTEREST).

 

(b)          Submission
to Jurisdiction. Subject to Section 10.15(d), any legal action or proceeding with respect to any Loan Document shall
be brought exclusively in the courts of the State of New York located in the City of New York, Borough of Manhattan, or of the
United States of America for the Southern District of New York and, by execution and delivery of this Agreement, each Credit Party
hereby accepts for itself and in respect of its Property, generally and unconditionally, the jurisdiction of the aforesaid courts.
Each Credit Party hereby irrevocably waives any objection, including any objection to the laying of venue or based on the grounds
of forum non conveniens that any of them may now or hereafter have to the bringing of any such action or proceeding in such jurisdictions.

 

(c)          Service
of Process. Each Credit Party hereby irrevocably waives personal service of any and all legal process, summons, notices and
other documents and other service of process of any kind and consents to such service in any suit, action or proceeding brought
in the United States of America with respect to, arising out of or in connection with any Loan Document by any means permitted
by applicable Requirements of Law, including by the mailing thereof (by registered or certified mail, postage prepaid) to the address
of Borrowers specified herein (and shall be effective when such mailing shall be effective, as provided therein). Each Credit Party
agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

(d)          Non-Exclusive
Jurisdiction. Nothing contained in this Section shall affect the right of Agent or any Lender to serve process in any other
manner permitted by applicable Requirements of Law or commence legal proceedings or otherwise proceed against any Credit Party
in any other jurisdiction.

 

    	 	47	 

     

    

 

Section 10.16       Waiver
of Jury Trial. THE PARTIES HERETO, TO THE EXTENT PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
OR PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION
CONTEMPLATED HEREBY AND THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.

 

Section 10.17      Entire
Agreement; Release; Survival. THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS RELATING TO THE SUBJECT MATTER THEREOF AND ANY PRIOR LETTER OF INTEREST, COMMITMENT LETTER, CONFIDENTIALITY
AND SIMILAR AGREEMENTS (EXCLUDING THE FEE LETTER) INVOLVING ANY CREDIT PARTY AND ANY LENDER OR ANY OF THEIR RESPECTIVE AFFILIATES
RELATING TO A FINANCING OF SUBSTANTIALLY SIMILAR FORM, PURPOSE OR EFFECT OTHER THAN THE FEE LETTER. IN THE EVENT OF ANY CONFLICT
BETWEEN THE TERMS OF THIS AGREEMENT AND ANY OTHER LOAN DOCUMENT, THE TERMS OF THIS AGREEMENT SHALL GOVERN (UNLESS SUCH TERMS OF
SUCH OTHER LOAN DOCUMENTS ARE NECESSARY TO COMPLY WITH APPLICABLE REQUIREMENTS OF LAW, IN WHICH CASE SUCH TERMS SHALL GOVERN TO
THE EXTENT NECESSARY TO COMPLY THEREWITH). Execution of this Agreement by Credit Parties constitutes a full, complete and irrevocable
release of any and all claims which each Credit Party may have at law or in equity in respect of all prior discussions and understandings,
oral or written, relating to the subject matter of the Loan Documents. (i) Any indemnification or other protection provided to
any Indemnitee pursuant to this Section, Section 10.05 and ARTICLE IX and XI and (ii) the provisions of Section
8.1 of the Guaranty and Security Agreement, in each case, shall (x) survive the Final Satisfaction and (y) with respect to clause
(i) above, inure to the benefit of any Person that at any time held a right thereunder (as an Indemnitee or otherwise) and, thereafter,
its successors and permitted assigns.

 

Section 10.18      Patriot
Act. Each Lender that is subject to the Patriot Act hereby notifies Credit Parties that pursuant to the requirements
of the Patriot Act, it is required to obtain, verify and record information that identifies each Credit Party, which information
includes the name and address of each Credit Party and other information that will allow such Lender to identify each Credit Party
in accordance with the Patriot Act. In addition, Agent and each Lender shall have the right to periodically conduct due diligence
on all Credit Parties, their senior management and key principals and legal and beneficial owners. Each Credit Party agrees to
provide reasonable cooperation in respect of the conduct of such due diligence and further agrees that the reasonable out-of-pocket
costs and charges for any such due diligence by Agent shall constitute costs and expenses reimbursable hereunder and be for the
account of Borrowers.

 

Section 10.19       Replacement
of Lender. Within forty-five days after: (i) receipt by Borrower Representative of written notice and demand from any
Lender that is not Agent or an Affiliate of Agent (an “Affected Lender”) for payment of additional costs as
provided in Section 11.01, Section 11.03 or Section 11.06; or (ii) any failure by any Lender (other than Agent
or an Affiliate of Agent) to consent to a requested amendment, waiver or modification to any Loan Document to which Required Lenders
have consented but the consent of each Lender (or each Lender directly affected thereby, as applicable) is required with respect
thereto (“Non-Consenting Lender”), Borrowers may, at their option, notify Agent and such Affected Lender or
Non-Consenting Lender, as applicable, of Borrowers’ intention to obtain, at Borrowers’ expense, a replacement Lender
(“Replacement Lender”) for such Affected Lender or Non- Consenting Lender, which Replacement Lender shall be
reasonably satisfactory to Agent. In the event Borrowers obtain a Replacement Lender within 45 days following notice of its intention
to do so, the Affected Lender or Non-Consenting Lender, as applicable, shall sell and assign its Loans and Commitments to such
Replacement Lender, at par; provided, that Borrowers have reimbursed such Affected Lender for its increased costs for which
it is entitled to reimbursement under this Agreement through the date of such sale and assignment. In the event that a replaced
Lender does not execute an Assignment pursuant to Section 10.07 within five Business Days after receipt by such replaced
Lender of notice of replacement pursuant to this Section and presentation to such replaced Lender of an Assignment evidencing an
assignment pursuant to this Section, Borrowers shall be entitled (but not obligated) to execute such an Assignment on behalf of
such replaced Lender, and any such Assignment so executed by Borrowers, the Replacement Lender and Agent, shall be effective for
purposes of this Section and Section 10.07.

 

    	 	48	 

     

    

 

Section 10.20       Joint
and Several. The obligations of Credit Parties hereunder and under the other Loan Documents are joint and several. Without
limiting the generality of the foregoing, reference is hereby made to ARTICLE II of the Guaranty and Security Agreement,
to which the obligations of each Borrower and the other Credit Parties are subject.

 

Section 10.21       Creditor-Debtor
Relationship. The relationship between Agent and each Lender, on the one hand, and Credit Parties, on the other hand,
is solely that of creditor and debtor. No Secured Party has any fiduciary relationship or duty to any Credit Party arising out
of or in connection with, and there is no agency, tenancy or joint venture relationship between Secured Parties and Credit Parties
by virtue of, any Loan Document or any transaction contemplated therein.

 

Section 10.22       Keep
Well. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes
to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations
under the Guaranty and Security Agreement in respect of Swap Obligations; provided, that each Qualified ECP Guarantor shall
only be liable under this Section for the maximum amount of such liability that can be hereby incurred without rendering its obligations
under this Section, or otherwise under the Guaranty and Security Agreement, voidable under applicable Requirements of Law relating
to fraudulent conveyance or fraudulent transfer, and not for any greater amount. The obligations of each Qualified ECP Guarantor
under this Section shall remain in full force and effect until the guaranties in respect of Swap Obligations have been discharged,
or otherwise released or terminated in accordance with the terms of this Agreement. Each Qualified ECP Guarantor intends that this
Section constitute, and this Section shall be deemed to constitute, a “keepwell, support, or other agreement” for the
benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Section 10.23       Waiver
of Immunities. Each HK Credit Party irrevocably waives, to the extent permitted by applicable law, with respect to itself
and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar
grounds from: (a) suit; (b) jurisdiction of any court; (c) relief by way of injunction or order for specific performance or recovery
of property; (d) attachment of its assets (whether before or after judgment); and (e) execution or enforcement of any judgment
to which it or its revenues or assets might otherwise be entitled in any proceedings in the courts of any jurisdiction (and irrevocably
agrees, to the extent permitted by applicable law, that it will not claim any immunity in any such proceedings.

 

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ARTICLE
XI.

 

TAXES, YIELD PROTECTION
AND ILLEGALITY

 

Section 11.01        Taxes.

 

(a)          Payments
Free of Taxes. Except as required by a Requirement of Law, each payment by any Credit Party under any Loan Document shall be
made free and clear of all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding),
assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax, penalties or
other Liabilities with respect thereto (collectively, “Taxes”). If any Taxes shall be required by any Requirement
of Law to be deducted from or in respect of any amount payable under any Loan Document to any Secured Party (i) if such Tax is
an Indemnified Tax, such amount payable shall be increased as necessary to ensure that, after all required deductions for Indemnified
Taxes are made (including deductions applicable to any increases to any amount under this Section), such Secured Party receives
the amount it would have received had no such deductions been made, (ii) the relevant Credit Party shall make such deductions,
(iii) the relevant Credit Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance
with applicable Requirements of Law and (iv) within 30 days after such payment is made, the relevant Credit Party shall deliver
to Agent an original or certified copy of a receipt evidencing such payment or other evidence of payment reasonably satisfactory
to Agent.

 

(b)          Other
Taxes. In addition, Borrowers agree to pay, and authorize Agent to pay in their name, any stamp, documentary, excise or property
Tax, charges or similar levies imposed by any applicable Requirement of Law or Governmental Authority and all Liabilities with
respect thereto (including by reason of any delay in payment thereof), in each case arising from the execution, delivery or registration
of, or otherwise with respect to, any Loan Document or any transaction contemplated therein (collectively, “Other Taxes”).
Within 30 days after any payment of Other Taxes by any Credit Party, Borrowers shall furnish to Agent, at its address referred
to in Section 10.02, evidence of payment reasonably satisfactory to Agent.

 

(c)          No
Tax Advice. The Credit Parties hereby acknowledge and agree that (i) neither GACP nor any Affiliate of GACP has provided any
Tax advice to any Tax Affiliate in connection with the transactions contemplated hereby or any other matters and (ii) the Credit
Parties have received appropriate Tax advice to the extent necessary to confirm that the structure of any transaction contemplated
by the Credit Parties in connection with this Agreement complies in all material respects with applicable federal, state and foreign
Tax laws.

 

(d)          Indemnification.
Borrowers shall reimburse and indemnify, within 30 days after demand, each Secured Party for all Indemnified Taxes (including any
Indemnified Taxes imposed by any jurisdiction on amounts payable under this Section) paid or payable by such Secured Party and
any Liabilities arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally asserted.
A certificate of Secured Party (or of Agent on behalf of such Secured Party) claiming any compensation under this Section 11.01(d),
setting forth the amounts to be paid thereunder and delivered to Borrower Representative with copy to Agent, shall be conclusive,
binding and final for all purposes, absent manifest error. In determining such amount, Agent and such Secured Party may use any
reasonable averaging and attribution methods.

 

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(e)          Documentation
from Lenders.

 

(i)          Non-U.S.
Lender Party. Each Non-U.S. Lender Party that, at any of the following times, is entitled to an exemption from United States
withholding Tax or, after a change in any Requirement of Law, is subject to such withholding Tax at a reduced rate under an applicable
Tax treaty, shall (w) on or prior to the date such Non-U.S. Lender Party becomes a “Non-U.S. Lender Party” hereunder,
(x) on or prior to the date on which any such form or certification expires or becomes obsolete, (y) after the occurrence of any
event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (i), and (z)
from time to time if requested by Borrower Representative or Agent (or, in the case of a participant or SPV, the relevant Lender),
provide Agent and Borrower Representative (or, in the case of a participant or SPV, the relevant Lender) with two completed originals
of each of the following, as applicable: (A) Forms W-8ECI (claiming exemption from U.S. withholding Tax because the income is effectively
connected with a U.S. trade or business), W-8BEN (claiming exemption from, or a reduction of, U.S. withholding Tax under an income
Tax treaty) and/or W- 8IMY (together with appropriate forms, certifications and supporting statements) or any successor forms,
(B) in the case of a Non-U.S. Lender Party claiming exemption under Sections 871(h) or 881(c) of the Code, Form W-8BEN (claiming
exemption from U.S. withholding Tax under the portfolio interest exemption) or any successor form and a certificate in form and
substance acceptable to Agent that such Non-U.S. Lender Party is not (1) a “bank” within the meaning of Section 881(c)(3)(A)
of the Code, (2) a “10 percent shareholder” of a Borrower within the meaning of Section 881(c)(3)(B) of the Code or
(3) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code or (C) any other applicable document
prescribed by the IRS certifying as to the entitlement of such Non-U.S. Lender Party to such exemption from United States withholding
Tax or reduced rate with respect to all payments to be made to such Non-U.S. Lender Party under the Loan Documents. Unless Borrower
Representative and Agent have received forms or other documents satisfactory to them indicating that payments under any Loan Document
to or for a Non-U.S. Lender Party are not subject to United States withholding Tax or are subject to such Tax at a rate reduced
by an applicable Tax treaty, the Credit Parties and Agent shall withhold amounts required to be withheld by applicable Requirements
of Law from such payments at the applicable statutory rate.

 

(ii)         U.S.
Lender Party. Each U.S. Lender Party shall (A) on or prior to the date such U.S. Lender Party becomes a “U.S. Lender
Party” hereunder, (B) on or prior to the date on which any such form or certification expires or becomes obsolete, (C) after
the occurrence of any event requiring a change in the most recent form or certification previously delivered by it pursuant to
this Section and (D) from time to time if requested by Borrower Representative or Agent (or, in the case of a participant or SPV,
the relevant Lender), provide Agent and Borrower Representative (or, in the case of a participant or SPV, the relevant Lender)
with two completed originals of Form W-9 (certifying that such U.S. Lender Party is entitled to an exemption from U.S. backup withholding
Tax) or any successor form.

 

(iii)        Each
Lender having sold a participation in any of its Obligations or identified an SPV as such to Agent shall collect from such participant
or SPV the documents described in this Section and provide them to Agent.

 

(iv)        If
a payment made to a Non-U.S. Lender Party would be subject to United States federal withholding Tax imposed by FATCA if such Non-U.S.
Lender Party fails to comply with the applicable reporting requirements of FATCA, such Non-U.S. Lender Party shall deliver to Agent
and Borrower Representative any documentation under any Requirement of Law or reasonably requested by Agent or Borrower Representative
sufficient for Agent or Borrowers to comply with their obligations under FATCA and to determine that such Non-U.S. Lender has complied
with its obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for the purposes of
this clause (iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

    	 	51	 

     

    

 

(f)           If
any Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Indemnified Taxes as
to which it has been indemnified pursuant to this Section, it shall pay to the relevant Credit Party an amount equal to such refund
(but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net
of all out-of-pocket expenses (including Taxes) of such Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund). Such Credit Party, upon the request of such Lender, shall repay to such Lender
the amount paid over pursuant to this Section 11.01(f) (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) in the event that such Lender is required to repay such refund to such Governmental Authority. Notwithstanding
anything to the contrary in this Section, in no event shall the Lender be required to pay any amount to a Credit Party pursuant
to this Section 11.01(f) the payment of which would place the Lender in a less favorable net after-Tax position than the
Lender would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This
Section shall not be construed to require any Lender to make available its Tax returns (or any other information relating to its
Taxes that it deems confidential) to the Credit Party or any other Person.

 

Section 11.02       Illegality.
If any Lender shall determine that any Change in Law or that any central bank or other Governmental Authority has asserted that
it is unlawful, for any Lender to make LIBOR Rate Loans, then, on notice thereof by such Lender to Borrowers through Agent, the
obligation of such Lender to make LIBOR Rate Loans shall be suspended until such Lender shall have notified Agent and Borrower
Representative that the circumstances giving rise to such determination no longer exists. Upon any such notice, Borrowers shall
prepay in full all LIBOR Rate Loans of such Lender then outstanding, together with interest accrued thereon, together with any
amounts required to be paid in connection therewith pursuant to Section 11.04.

 

Section 11.03        Increased
Costs and Reduction of Return.

 

(a)          If
any Lender shall determine that, due to a Change in Law,

 

(i)          there
shall be any increase in the cost to such Lender of making, funding or maintaining any LIBOR Rate Loans or (ii) such Lender shall
be subject to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of
“Excluded Taxes” and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments or other
obligations, or its deposit reserves, other liabilities or capital attributable thereto, then Borrowers shall, within 30 days of
demand therefor by such Lender (with a copy of such demand to Agent), pay to Agent, for the account of such Lender, additional
amounts as are sufficient to compensate such Lender for such increased costs or such Taxes.

 

    	 	52	 

     

    

 

(b)          If
any Lender shall have determined that (i) the introduction or any change in any Capital Adequacy Regulation, (ii) any interpretation
or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation
or administration thereof, or (iii) compliance by such Lender or any entity controlling the Lender with any Capital Adequacy Regulation,
affects the amount of capital required or expected to be maintained by such Lender or any entity controlling such Lender and (taking
into consideration such Lender’s or such entities’ policies with respect to capital adequacy and such Lender’s
desired return on capital) determines that the amount of such capital is increased as a consequence of this Agreement, then, within
30 days of demand of such Lender (with a copy to Agent), Borrowers shall pay to such Lender, from time to time as specified by
such Lender, additional amounts sufficient to compensate such Lender (or the entity controlling the Lender) for such increase.
Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests,
rules, guidelines or directives thereunder or issued in connection therewith shall be deemed to be a change in a Capital Adequacy
Regulation under this Section 11.03(b), regardless of the date enacted, adopted or issued.

 

(c)          Borrowers
shall not be required to compensate any Lender pursuant to Section 11.03(a) or (b) for any amounts incurred more
than 180 days prior to the date that such Lender notifies Borrower Representative, in writing, of its claim of compensation thereof;
provided, that if the event giving rise to such increase is retroactive, then such 180-day period shall be extended to include
the period of retroactive effect.

 

Section 11.04        Funding
Losses. Borrowers agree to reimburse each Lender and to hold each Lender harmless from any loss or expense which such
Lender may sustain or incur as a consequence of: (a) the failure of Borrowers to make any payment or mandatory prepayment of principal
of any LIBOR Rate Loan (including payments made after any acceleration thereof); (b) the failure of Borrowers to make any prepayment
after Borrowers have given a notice in accordance with Section 1.11; or (c) the prepayment (including pursuant to Section
1.08 or Article XI) of a LIBOR Rate Loan on a day which is not the last day of the Interest Period with respect thereto; including
any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBOR Rate Loans
hereunder or from fees payable to terminate the deposits from which such funds were obtained. Each LIBOR Rate Loan made by a Lender
(and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR
used in determining the interest rate for such LIBOR Rate Loan by a matching deposit or other borrowing in the interbank Eurodollar
market for a comparable amount and for a comparable period, whether or not such LIBOR Rate Loan is in fact so funded.

 

Section 11.05       Inability
to Determine Rates. If Agent or Required Lenders shall have determined in good faith that adequate and reasonable means
do not exist for ascertaining LIBOR for any requested Interest Period or that the LIBOR for any requested Interest Period does
not adequately and fairly reflect the cost to Lenders of funding or maintaining such Loan, Agent (either individually or upon direction
of Required Lenders) will forthwith give notice of such determination to Borrower Representative and each Lender. Thereafter, interest
on the Term Loan shall accrue and be payable at a reasonable equivalent of LIBOR.

 

Section 11.06       Reserves
on LIBOR Rate Loans. Borrowers shall pay to each Lender, as long as such Lender shall be required under regulations
of the Federal Reserve Board to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency
funds or deposits, additional costs on the unpaid principal amount of each LIBOR Rate Loan equal to actual costs of such reserves
allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent
manifest error), payable on each date on which interest is payable on such Loan; provided, that if Lender fails to give
notice of such additional costs at least 15 days prior to such date, such additional interest shall be payable 15 days from receipt
of such notice.

 

Section 11.07       Certificates
of Lenders. Any Lender claiming reimbursement or compensation pursuant to this ARTICLE XI shall deliver to Borrower
Representative (with a copy to Agent) a certificate setting forth in reasonable detail the amount payable to such Lender hereunder
and such certificate shall be conclusive and binding on Borrowers in the absence of manifest error.

 

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ARTICLE
XII.

DEFINITIONS

 

Section 12.01      Defined
Terms in Other Articles. The following terms are defined in the Sections referenced opposite such terms:

 

	“Affected Lender”	10.19
	“Agent Report”	9.04(c)
	“Borrower” and “Borrowers”	Preamble
	“Borrower Materials”	10.08(e)
	“Borrower Representative”	Preamble
	“Eligible Domestic Accounts”	2.01
	“Eligible Foreign Accounts”	2.01
	“Eligible Licensed Inventory”	2.02
	“Event of Default”	8.01
	“Indemnified Matters”	10.05(b)
	“Indemnitees”	10.05(b)
	“Investments”	6.04
	 “Lender”	Preamble
	 “Maximum Lawful Rate”	1.03(c)
	“MNPI”	9.06(b)
	“Mortgage Supporting Documents”	Schedule 3.01
	“Other Taxes”	11.01(b)
	“Participant Register”	10.07(e)
	“Permitted Liens”	6.01
	“Prepayment Fee”	1.09(b)
	“Prepayment Period”	1.09(b)
	“Protective Advance”	1.06
	“Register”	1.05
	“Restricted Payments”	6.10
	“Replacement Lender”	10.19
	 “Sale”	10.07(a)
	 “Settlement Date”	1.11(a)
	 “Tax Returns”	4.10
	“Taxes”	11.01(a)
	“Term Loan Facility”	Recitals

 

Section 12.02       Definitions.
In addition to the terms defined elsewhere in this Agreement, the following terms have the following meanings:

 

“2018 Convertible
Notes” has the meaning of “Securities” as defined in the 2018 Indenture.

 

“2018 Indenture”
means that certain Indenture, dated as of July 24, 2013, between JAKKS and Wells Fargo Bank, National Association, a national banking
association organized under the laws of the United States, as trustee for the Holders (as defined therein), pursuant to which JAKKS
issued the 2018 Convertible Notes.

 

    	 	54	 

     

    

 

“2020 Convertible
Notes” means the convertible senior notes due 2020 to be issued pursuant to the 2020 Indenture in an aggregate principal
amount not to exceed $115,000,000.

 

“2020 Indenture”
means that certain Indenture entered into on June 9, 2014, between JAKKS and Wells Fargo Bank, National Association, a national
banking association organized under the laws of the United States, as trustee for the Holders (as defined therein), pursuant to
which JAKKS issued the 2020 Convertible Notes as further described in the 2020 OM.

 

“2020 OM”
means that certain Offering Memorandum dated June 3, 2014, relating to the offering of $100,000,000 aggregate principal amount
of convertible senior notes of JAKKS due 2020.

 

“ABL Agent”
means (a) Wells Fargo Bank, National Association, in its capacity as agent for the ABL Lenders under the ABL Credit Agreement,
(b) any successor to Wells Fargo Bank, National Association by assignment or otherwise and (c) any other party that may become
agent under the ABL Credit Agreement in connection with a refinancing, renewal or replacement thereof.

 

“ABL Credit Agreement”
means the Credit Agreement dated as of March 27, 2014 among the Borrower Representative, Borrowers, the Guarantors (as defined
in the ABL Credit Agreement), the ABL Agent and the ABL Lenders, as the same has been amended prior to the Closing Date and may
be amended, restated, amended and restated or otherwise modified from time to time as permitted by the Intercreditor Agreement.

 

“ABL Facility”
means the secured revolving credit facility created pursuant to the ABL Credit Agreement and the other ABL Loan Documents.

 

“ABL Lenders”
means the lenders from time to time party to the ABL Credit Agreement.

 

“ABL Loan”
means any extension of credit by a lender pursuant to the ABL Credit Agreement.

 

“ABL Loan Documents”
means the ABL Credit Agreement and each other document related to or evidencing the ABL Facility, including the Loan Documents,
as defined in the ABL Credit Agreement, as each may be amended, restated or otherwise modified from time to time in accordance
with the terms of the Intercreditor Agreement.

 

“Account”
means, as at any date of determination, all “accounts” (as such term is defined in the UCC) of Credit Parties, including
the unpaid portion thereof, as stated on the respective invoice of a Credit Party, net of any credits, rebates or offsets owed
to such customer.

 

“Account Debtor”
means the customer of a Credit Party who is obligated on or under an Account.

 

“Acquisition”
means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess
of 50% of the Stock and Stock Equivalents of any Person or otherwise causing any Person to become a direct or indirect Subsidiary,
or (c) a merger or consolidation or any other combination with another Person.

 

“Affiliate”
means, with respect to any Person, each officer, director, general partner or joint- venturer of such Person and any other Person
that directly or indirectly controls, is controlled by, or is under common control with, such Person; provided, that (a)
no Secured Party shall be an Affiliate of any Credit Party or of any Subsidiary solely by reason of the provisions of the Loan
Documents, and (b) Feder Kaszovitz LLP shall be deemed not to be an Affiliate of any Credit Party or any Subsidiary. For purposes
of this definition, “control” means the possession of either (i) the power to vote, or the beneficial ownership of,
10% or more of the voting Stock of such Person (either directly or through the ownership of Stock Equivalents) or (ii) the power
to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise.

 

    	 	55	 

     

    

 

“Agent”
means GACP, in its capacity as Agent for Lenders or its successor appointed pursuant to Section 9.07.

 

“Aggregate Term
Loan Commitments” means the sum of all of the Term Loan Commitments of the Lenders. As of the Closing Date, the Aggregate
Term Loan Commitments are $20,000,000.

 

“Anti-Corruption
Laws” means the FCPA, the U.K. Bribery Act of 2010, as amended, and all other applicable laws and regulations or ordinances
concerning or relating to bribery, money laundering or corruption in any jurisdiction in which any Credit Party or any of its Subsidiaries
or Affiliates is located or is doing business.

 

“Anti-Money Laundering
Laws” means the applicable laws or regulations in any jurisdiction in which any Credit Party or any of its Subsidiaries or
Affiliates is located or is doing business that relates to money laundering, any predicate crime to money laundering, or any financial
record keeping and reporting requirements related thereto.

 

“Applicable Advance
Rate” means (a) with respect to Eligible Domestic Accounts, the lesser of (i) 10% and (ii) the remainder of 95% minus the
corresponding advance rate under the ABL Credit Agreement (i.e., 10% as of the Closing Date, calculated as the remainder
of 95% minus 85%), (b) with respect to Eligible Foreign Accounts, the lesser of (i) 20% and (ii) the remainder of 95% minus the
corresponding advance rate under the ABL Credit Agreement (i.e., 20% as of the Closing Date, calculated as the remainder
of 95% minus 75%).

 

“Applicable License
Agreement” means any license which governs Eligible Licensed Inventory.

 

“Applicable Margin”
means 9.00% per annum.

 

“Approved Fund”
means, with respect to any Lender, any Person (other than a natural Person) that (a) (i) is or will be engaged in making, purchasing,
holding or otherwise investing in commercial loans and similar extensions of credit in the Ordinary Course of Business or (ii)
temporarily warehouses loans for any Lender or any Person described in clause (i) above and (b) is advised or managed by (i) such
Lender, (ii) any Affiliate of such Lender or (iii) any Person (other than an individual) or any Affiliate of any Person (other
than an individual) that administers or manages such Lender.

 

“Arbor Toys Company
Limited” means Arbor Toys Company Limited, a company incorporated in Hong Kong with registered number 1011343.

 

“A.S. Design
Limited” means A.S. Design Limited, a company incorporated in Hong Kong with registered number 453139.

 

“Assignment”
means an assignment agreement entered into by a Lender, as assignor, and any Person, as assignee, pursuant to the terms and provisions
of Section 10.07 (with each consent required by Section 10.07), accepted by Agent, substantially in the form of Exhibit
10.07 or any other form approved by Agent.

 

    	 	56	 

     

    

 

“Attorney Costs”
means and includes all reasonable fees and disbursements of any law firm or other external counsel.

 

“Availability”
means “Availability” as defined in the ABL Credit Agreement.

 

“Bankruptcy Code”
means the Federal Bankruptcy Reform Act of 1978.

 

“Benefit Plan”
means any employee benefit plan as defined in Section 3(3) of ERISA (whether governed by the laws of the United States or otherwise)
to which any Credit Party incurs or otherwise has any obligation or liability, contingent or otherwise.

 

“Borrowing”
means a borrowing hereunder consisting of Loans made to or for the benefit of Borrowers on the same day by Lenders pursuant to
ARTICLE I.

 

“Borrowing Base”
means, the “Borrowing Base” as defined in the ABL Credit Agreement, as may be amended in accordance with the Intercreditor
Agreement.

 

“Borrowing Base
Certificate” means a certificate of Borrower Representative, on behalf of each Credit Party, in substantially the form of
Exhibit 12.02(a), duly completed as of a date acceptable to Agent in its sole discretion.

 

“Business Day”
means any day that is not a Saturday, Sunday or a day on which banks are required or authorized to close in New York City (and,
in respect of any HK Credit Party, Hong Kong) and, when determined in connection with notices and determinations in respect of
LIBOR or any LIBOR Rate Loan or any funding, conversion, continuation, Interest Period or payment of any LIBOR Rate Loan, that
is also a day on which dealings in Dollar deposits are carried on in the London interbank market.

 

“Capital Adequacy
Regulation” means any guideline, request or directive of any central bank or other Governmental Authority, or any other law,
rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any Lender or of any corporation
controlling a Lender.

 

“Capital Lease”
means, with respect to any Person, any lease of, or other arrangement conveying the right to use, any Property by such Person as
lessee that has been or should be accounted for as a capital lease on a balance sheet of such Person prepared in accordance with
GAAP.

 

“Capital Lease
Obligations” means, at any time, with respect to any Capital Lease, any lease entered into as part of any sale leaseback
transaction of any Person or any synthetic lease, the amount of all obligations of such Person that is (or that would be, if such
synthetic lease or other lease were accounted for as a Capital Lease) capitalized on a balance sheet of such Person prepared in
accordance with GAAP.

 

“Cash Equivalents”
means: (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guaranteed or insured by the
United States federal government, (ii) issued by any agency of the United States federal government the obligations of which are
fully backed by the full faith and credit of the United States federal government, or (iii) solely with respect to Investments
made by a Foreign Subsidiary, issued by, or unconditionally guaranteed by, Canada or the government of a country with similar credit
quality rating and backed by the full faith and credit of Canada or such other government, as applicable; (b) any readily-marketable
direct obligations issued by any other agency of the United States federal government, any state of the United States or any political
subdivision of any such state or any public instrumentality thereof, in each case having a rating of at least “A-1”
from S&P or at least “P-1” from Moody’s; (c) any commercial paper rated at least “A-1” by S&P
or “P-1” by Moody’s and issued by any Person organized under the laws of any state of the United States; (d)
any Dollar- denominated time deposit, insured certificate of deposit, overnight bank deposit or bankers’ acceptance issued
or accepted by (i) any Lender or (ii) any commercial bank that is (A) organized under the laws of the United States, any state
thereof or the District of Columbia (and solely with respect to Investments made by a Foreign Subsidiary, any bank organized under
the laws of a foreign jurisdiction that otherwise complies with the criteria in clause (a)(iii) above), (B) ”adequately capitalized”
(as defined in the regulations of its primary federal banking regulators) and (C) has Tier 1 capital (as defined in such regulations)
in excess of $250,000,000; and (e) shares of any United States money market fund that (i) has substantially all of its assets invested
continuously in the types of investments referred to in clause (a), (b), (c) or (d) above with maturities as set forth in the proviso
below, (ii) has net assets in excess of $500,000,000 and (iii) has obtained from either S&P or Moody’s the highest rating
obtainable for money market funds in the United States; provided, that the maturities of all obligations specified in any
of clauses (a), (b), (c) or (d) above shall not exceed 365 days.

 

    	 	57	 

     

    

 

“Change in Control”
means the time at which (a) any Person (including a Person's Affiliates and associates) or group (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934) (other than the shareholders of JAKKS on the Closing Date) becomes the
beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of a percentage of the capital stock of JAKKS
equal to at least twenty-five percent (25%), (b) there shall be consummated any consolidation or merger of JAKKS pursuant to which
JAKKS’ capital stock would be converted into cash, securities or other property, other than a merger or consolidation of
JAKKS in which the holders of such capital stock immediately prior to the merger have substantially the same proportionate ownership
in the aggregate, directly or indirectly, of capital stock of the surviving Person immediately after the merger as it had of JAKKS’
capital stock immediately prior to such merger, (c) all or substantially all of JAKKS’ assets shall be sold, leased, conveyed
or otherwise disposed of as an entirety or substantially as an entirety to any Person (including any Affiliate or associate of
JAKKS) in one or a series of transactions, (d) any Change of Management shall occur, unless on or before 90 days following the
date of such Change of Management, a successor has commenced employment with JAKKS and is actively performing the functions of
the departed individual, (e) except pursuant to a transaction permitted under Section 6.03, JAKKS shall fail to own less than
the percentage interest of the issued and outstanding capital stock of each other Credit Party as set forth in the Perfection Certificate
as of the Closing Date, free and clear of all Liens, other than Permitted Liens, (f) during any period of 12 consecutive months,
a majority of the members of the board of directors of JAKKS cease to be composed of individuals (i) who were members of that board
of directors on the first day of such period, (ii) whose election or nomination to that board of directors was approved by individuals
referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board of directors
or (iii) whose election or nomination to that board of directors was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a majority of that board of directors (excluding, in the
case of both clauses (ii) and (iii), any individual whose initial nomination for, or assumption of office as, a member of that
board of directors occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal
of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf
of the board of directors), (g) any Person, or two or more Persons acting in concert, shall have acquired by contract or otherwise,
or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of
the power to exercise, directly or indirectly, a controlling influence over the management or policies of JAKKS, or control over
the capital stock of JAKKS entitled to vote for members of the board of directors of JAKKS on a fully-diluted basis (and taking
into account all such securities that such Person or Persons have the right to acquire pursuant to any option right) representing
thirty percent (30%) or more of the combined voting power of such securities, or (h) a “Fundamental Change” occurs
under and as defined in the 2018 Indenture, the Oasis Convertible Note or the 2020 Indenture.

 

    	 	58	 

     

    

 

“Change in Law”
means any of the following: (a) the introduction of, or any change in, or in the interpretation of, any Requirement of Law after
the Closing Date, (b) any guideline or request from any central bank or other Governmental Authority (whether or not having the
force of law), including any compliance thereto after the Closing Date, (c) the Dodd-Frank Wall Street Reform and Consumer Protection
Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, regardless of the date enacted,
adopted or issued and (d) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities,
in each case pursuant to Basel III, regardless of the date enacted, adopted or issued.

 

“Change of Management”
means if any of the individuals performing the functions of the president or chief financial officer, respectively, on the Closing
Date shall cease for any reason to perform such functions, whether by reason of death, disability, resignation, action by the board
of directors or shareholders of Borrowers, or otherwise.

 

“Closing Date”
means June 14, 2018.

 

“Code”
means the Internal Revenue Code of 1986.

 

“Collateral”
means all Property and interests in Property and proceeds thereof now owned or hereafter acquired by any Credit Party and any other
Person who has granted a Lien to Agent, in or upon which a Lien is granted or purported to be granted or now or hereafter exists
in favor of any Lender or Agent for the benefit of Secured Parties, whether under this Agreement or under any other documents executed
by any such Persons and delivered to Agent.

 

“Collateral Documents”
means, collectively, the Guaranty and Security Agreement, the Mortgages, each Control Agreement, the HK Collateral Documents, and
all other security agreements, pledge agreements, patent and trademark security agreements, lease assignments, guaranties and other
similar agreements pursuant to which any Credit Party or any other Person pledging or granting a lien on Collateral or guarantying
the payment and performance of the Obligations now or hereafter delivered pursuant to or in connection with the transactions contemplated
hereby, and all financing statements (or comparable documents now or hereafter filed in accordance with the UCC or comparable law)
contemplated thereunder.

 

“Commodity Exchange
Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.). “Commitment Percentage” means, as to any Lender,
the percentage equivalent of such Lender’s Term Loan Commitment divided by the Aggregate Term Loan Commitment.

 

“Compliance Certificate”
means a certificate given by Borrower Representative to Agent pursuant to Schedule 5.01, in substantially the form of Section
5.01.

 

“Connection Income
Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise
Taxes or branch profit Taxes.

 

“Consolidated
Group” means JAKKS and all Persons whose financial results are consolidated with JAKKS for financial reporting purposes under
GAAP.

 

“Contested in
Good Faith” means contested in good faith and by appropriate proceedings diligently prosecuted, which proceedings have the
effect of preventing the forfeiture or sale of the Property subject thereto and for which adequate reserves in accordance with
GAAP are being maintained.

 

    	 	59	 

     

    

 

“Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person: (a) with respect to any Indebtedness,
lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in full
or in part) against loss with respect thereto; (b) with respect to any letter of credit issued for the account of that Person or
as to which that Person is otherwise liable for reimbursement of drawings; (c) under any Rate Contracts; (d) to make take-or-pay
or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for the obligations
of another Person through any agreement to purchase, repurchase or otherwise acquire such obligation or any Property constituting
security therefor, to provide funds for the payment or discharge of such obligation or to maintain the solvency, financial condition
or any balance sheet item or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if not a fixed and determined amount, the maximum amount so guaranteed
or supported.

 

“Contractual
Obligations” means, as to any Person, any provision of any security issued by such Person or of any agreement, indenture,
mortgage, deed of trust, instrument or other document (other than a Loan Document) to which such Person is a party or to which
it or any of its Property is bound or subject.

 

“Control Agreement”
means, with respect to any deposit account, securities account, commodity account, securities entitlement or commodity contract,
an agreement, in form and substance satisfactory to Agent, among ABL Agent, Agent, the financial institution or other Person at
which such account is maintained or with which such entitlement or contract is carried and Credit Party maintaining such account,
effective to grant “control” (within the meaning of Articles 8 and 9 under the applicable UCC) over such account to
Agent and ABL Agent, as applicable (subject to the Intercreditor Agreement).

 

“Copyrights”
means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating
to copyrights and all mask work, database and design rights, whether or not registered or published, all registrations and recordations
thereof and all applications in connection therewith.

 

“Credit Parties”
means each Borrower and each Guarantor.

 

“Default”
means any event or circumstance that, with the passing of time or the giving of notice or both, would (if not cured or otherwise
remedied during such time) become an Event of Default.

 

“Default Rate”
means a per annum rate equal to 2% plus the rate otherwise applicable to such Term Loan as provided in Section 1.03(a).

 

“Disguise Limited”
means Disguise Limited, a company incorporated in Hong Kong with registered number 1287686.

 

“Disqualified
Institution” means, on any date, (a) any Person designated by Borrower Representative as a “Disqualified Institution”
by written notice delivered to Agent prior to the date hereof, and (b) those Persons who are direct competitors of the Borrowers
identified in writing by Borrower Representative to Agent from time to time, subject to the written consent of Agent; provided,
that “Disqualified Institutions” shall exclude any Person that Borrower Representative has designated as no longer
being a “Disqualified Institution” by written notice delivered to Agent from time to time; provided further,
that in connection with any assignment or participation, the Assignee or Participant with respect to such proposed assignment or
participation that is an investment bank, a commercial bank, a finance company, a fund, or other Person which merely has an economic
interest in any such direct competitor, and is not itself such a direct competitor of Borrower or its Subsidiaries, shall not be
deemed to be a Disqualified Institution for the purposes of this definition. For the avoidance of doubt, Borrower Representative
may not retroactively designate a Person as a Disqualified Institution after an assignment has been made to such Person.

 

    	 	60	 

     

    

 

“Disney Entities”
means Disney Consumer Products, Inc. and/or any one or more of its Affiliates, including, without limitation, including Disney
Enterprises, Inc., Disney Consumer Products Latin America, Inc., Disney Interactive, Inc., Disney Children’s Book Group,
LLC, Disney Licensed Publishing, Disney Publishing Worldwide, Inc., Walt Disney Company Limited, Walt Disney Company (Asia Pacific)
Limited, Walt Disney Company (Australia) Pty Ltd., Walt Disney Company (Australia) Limited, Walt Disney Music Company, Walt Disney
Music Company/Wonderland Music Company, Inc., Walt Disney Music Company/Wonderland Music Company, Inc./Five Hundred South Songs
and Seven Peaks Music, Walt Disney Records (a division of ABC, Inc.), Marvel Characters, Inc., Marvel Enterprises Inc., Marvel
Characters B.V., Spider-Man Merchandising L.P. and Lucasfilm Ltd.

 

“Disney Consent
Agreement” means a consent and agreement of Disney consenting to, among other things, the grant of a security interest in
favor of the Agent and the Agent’s ability to liquidate the Disney Inventory, in form and substance satisfactory to the Agent
in the Agent’s Permitted Discretion.

 

“Disney Inventory”
means Inventory that is subject to any license under which one or more Borrowers is the licensee and any Disney Entity is the Licensor
and for which the Borrowers have obtained the Disney Consent Agreement.

 

“Disney License”
means any Applicable License Agreement between any Credit Party and any Disney Entity.

 

“Disposition”
means (a) the sale, lease, conveyance or other disposition of Property, other than sales or other dispositions expressly permitted
under Section 6.02(a), (c) and (d), and (b) the sale or transfer by a Borrower or any Subsidiary of any Stock
or Stock Equivalent issued by any Subsidiary of a Borrower and held by such transferor Person.

 

“Dollars,”
“dollars” and “$” each mean lawful money of the United States of America. “Domestic Subsidiary”
means any Subsidiary other than a Foreign Subsidiary.

 

“EBITDA”
means, with respect to any period for any Person, (a) Net Income plus (b) without duplication and to the extent deducted in determining
Net Income the sum of:

 

(i)            Interest
Expense;

 

(ii)           provision
for income tax expenses (or minus any income tax credits);

 

(iii)          depreciation
and amortization expense;

 

(iv)          any
non-cash expenses, non-cash charges or non-cash losses but excluding any non-cash expense, charge or loss that is an accrual of,
or a reserve for, a cash expenditure to be made in a future period and any non-cash charge that relates to the write-down or write-off
of Accounts and Inventory;

 

(v)           transaction
fees and expenses incurred in connection with this consummation of this Agreement;

 

    	 	61	 

     

    

 

(vi)          any
loss (or minus any gain) from foreign currency translation;

 

(vii)         capital
losses (or minus any capital gains) arising from any disposition, minus (c) without duplication and to the extent included in Net
Income;

 

(viii)        interest
income;

 

(ix)           any
extraordinary gains and any non-cash gains or non-cash income;

 

(x)            income
(or minus any loss) of any joint venture or other Person that is not a Subsidiary of a Borrower (except to the extent of the amount
of dividends actually received in cash by any Borrower or any Subsidiary).

 

“Electronic Transmission”
means each document, instruction, authorization, file, information and any other communication transmitted, posted or otherwise
made or communicated by e-mail or E-Fax, or otherwise to or from an E-System.

 

“Eligible Accounts”
means, collectively, Eligible Domestic Accounts and Eligible Foreign Accounts.

 

“Environmental
Laws” means all Requirements of Law and Permits imposing liability or standards of conduct for or relating to the regulation
and protection of human health, safety, the workplace, the environment and natural resources, and including public notification
requirements and environmental transfer of ownership, notification or approval statutes.

 

“Environmental
Liabilities” means all Liabilities (including costs of Remedial Actions, natural resource damages and costs and expenses
of investigation and feasibility studies, including the cost of environmental consultants and Attorney Costs) that may be imposed
on, incurred by or asserted against any Credit Party or any Subsidiary as a result of, or related to, any claim, suit, action,
investigation, proceeding or demand by any Person, whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute or common law or otherwise, arising under any Environmental Law or in connection with any environmental,
health or safety condition or with any Release and resulting from the ownership, lease, sublease or other operation or occupation
of property by any Credit Party or any Subsidiary, whether on, prior or after the Closing Date.

 

“Equipment”
means all “equipment,” as such term is defined in the UCC, now owned or hereafter acquired by any Credit Party, wherever
located.

 

“ERISA”
means the Employee Retirement Income Security Act of 1974.

 

“ERISA Affiliate”
means, collectively, any Credit Party and any Person under common control or treated as a single employer with, any Credit Party,
within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

    	 	62	 

     

    

 

“ERISA Event”
means any of the following: (a) a reportable event described in Section 4043(b) of ERISA (or, unless the 30-day notice requirement
is duly waived under the applicable regulations, Section 4043(c) of ERISA) with respect to a Title IV Plan; (b) the withdrawal
of any ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (c) the complete or partial withdrawal of any ERISA Affiliate from any Multiemployer
Plan; (d) with respect to any Multiemployer Plan, the filing of a notice of reorganization, insolvency or termination (or treatment
of a plan amendment as termination) under Section 4041A of ERISA; (e) the filing of a notice of intent to terminate a Title IV
Plan (or treatment of a plan amendment as termination) under Section 4041 of ERISA; (f) the institution of proceedings to terminate
a Title IV Plan or Multiemployer Plan by the PBGC; (g) the failure to make any required contribution to any Title IV Plan or Multiemployer
Plan when due; (h) the imposition of a lien under Section 412 or 430(k) of the Code or Section 303 or 4068 of ERISA on any property
(or rights to property, whether real or personal) of any ERISA Affiliate; (i) the failure of a Benefit Plan or any trust thereunder
intended to qualify for tax exempt status under Section 401 or 501 of the Code or other Requirements of Law to qualify thereunder;
(j) a Title IV plan is in “at risk” status within the meaning of Code Section 430(i); (k) a Multiemployer Plan is in
“endangered status” or “critical status” within the meaning of Section 432(b) of the Code; and (l) any
other event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan or for the imposition of any material
liability upon any ERISA Affiliate under Title IV of ERISA other than for PBGC premiums due but not delinquent.

 

“Event of Loss”
means, with respect to any Property, (a) any loss, destruction or damage of such Property; (b) any pending or threatened institution
of any proceedings for the condemnation or seizure of such Property or for the exercise of any right of eminent domain; or (c)
any actual condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation
of such Property or the requisition of the use of such Property.

 

“Excluded Domestic
Subsidiary” means any Domestic Subsidiary that is a direct or indirect Subsidiary of an Excluded Foreign Subsidiary.

 

“Excluded Equity
Issuance” means Net Issuance Proceeds resulting from the issuance of (a) Stock or Stock Equivalents by JAKKS to management
or employees of a Credit Party under any employee stock option or stock purchase plan or other employee benefits plan in existence
from time to time, (b) Stock or Stock Equivalents by a Wholly-Owned Subsidiary of a Borrower to a Borrower or another Wholly-Owned
Subsidiary of a Borrower constituting an Investment permitted hereunder and Stock or Stock Equivalents by a Foreign Subsidiary
of such Foreign Subsidiary to qualify directors where required pursuant to a Requirement of Law or to satisfy other requirements
of applicable law, in each instance, with respect to the ownership of Stock of Foreign Subsidiaries.

 

“Excluded Foreign
Subsidiary” means a Foreign Subsidiary which is (a) a controlled foreign corporation (as defined in the Code) that has not
guaranteed or pledged any of its assets to secure, or with respect to which there shall not have been pledged two-thirds or more
of the voting Stock and Stock Equivalents to secure, any Indebtedness (other than the Loans) of a Credit Party or (b) a Foreign
Subsidiary owned by a Foreign Subsidiary described in clause (a) above. Notwithstanding the generality of the foregoing, in no
event shall any of the JAKKS HK Credit Parties be an “Excluded Foreign Subsidiary.”

 

“Excluded Rate
Contract Obligation” means, with respect to any Guarantor, any guaranty of any Swap Obligations if, and only to the extent
that and for so long as, all or a portion of the guaranty of such Guarantor of, or the grant by such Guarantor of a security interest
to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation
or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of
such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity
Exchange Act at the time the guaranty of such Guarantor or the grant of such security interest becomes effective with respect to
such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply
only to the portion of such Swap Obligation that is attributable to swaps for which such guaranty or security interest is or becomes
illegal.

 

    	 	63	 

     

    

 

“Excluded Tax”
means with respect to any Secured Party: (a) Taxes measured by net income (including branch profit Taxes) and franchise Taxes imposed
in lieu of net income Taxes, in each case (i) imposed on any Secured Party as a result of being organized under the laws of, or
having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing
such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes; (b) withholding Taxes to the extent that
the obligation to withhold amounts existed on the date that such Person became a Secured Party under this Agreement in the capacity
under which such Person makes a claim under Section 11.01(a) or designates a new Lending Office, except in each case to
the extent such Person is a direct or indirect assignee (other than pursuant to Section 10.18) of any other Secured Party
that was entitled, at the time the assignment to such Person became effective, to receive additional amounts under Section 11.01(a);
(c) Taxes that are directly attributable to the failure (other than as a result of a change in any Requirement of Law) by any Secured
Party to deliver the documentation required to be delivered pursuant to (i); and (d) any United States federal withholding Taxes
imposed under FATCA.

 

“E-Fax”
means any system used to receive or transmit faxes electronically.

 

“E-Signature”
means the process of attaching to or logically associating with an Electronic Transmission an electronic symbol, encryption, digital
signature or process (including the name or an abbreviation of the name of the party transmitting the Electronic Transmission)
with the intent to sign, authenticate or accept such Electronic Transmission.

 

“E-System”
means any electronic system approved by Agent, including Syndtrak®, Intralinks® and ClearPar® and any other Internet
or extranet-based site, whether such electronic system is owned, operated or hosted by Agent, any of its Related Persons or any
other Person, providing for access to data protected by passcodes or other security system.

 

“Facilities”
means, collectively, the ABL Facility and the Term Loan Facility.

 

““FATCA”
means Sections 1471 through 1474 of the IRC, as of the date of this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), and (a) any current or future regulations or official interpretations
thereof, (b) any agreements entered into pursuant to Section 1471(b)(1) of the IRC, and (c) any intergovernmental agreement entered
into by the United States (or any fiscal or regulatory legislation, rules, or practices adopted pursuant to any such intergovernmental
agreement entered into in connection therewith).

 

“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

“Federal Flood
Insurance” means federally backed Flood Insurance available under the National Flood Insurance Program to owners of real
property improvements located in Special Flood Hazard Areas in a community participating in the National Flood Insurance Program.

 

“Federal Funds
Rate” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted
average of the rates on overnight federal funds transactions with members of the Federal Reserve System, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized
standing selected by it (and, if any such rate is below zero, then the rate determined pursuant to this definition shall be deemed
to be zero).

 

    	 	64	 

     

    

 

“Federal Reserve
Board” means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions.

 

“Fee Letter”
means the Fee Letter, dated as of the Closing Date, by and among the Borrower Representative, the other Borrowers, GACP, and the
other parties thereto, as amended, amended and restated, supplemented or replaced and in effect from time to time.

 

“FEMA”
means the Federal Emergency Management Agency, a component of the U.S. Department of Homeland Security that administers the National
Flood Insurance Program.

 

“Final Satisfaction”
means the date all of the following have occurred (a) payment and satisfaction in full of the Term Loan and all other Obligations
under the Loan Documents, (b) deposit of cash collateral with respect to all contingent Obligations, in amounts and on terms and
conditions and with parties satisfactory to Agent and each Indemnitee that is, or may be, owed such Obligations (excluding contingent
Obligations as to which no claim has been asserted) and (c) to the extent requested by Agent, receipt by Agent and Secured Parties
of liability releases from Credit Parties each in form and substance acceptable to Agent.

 

“Financial Statements”
means with respect to each applicable accounting period, consolidated and consolidating balance sheets of the Consolidated Group
as at the end of such period and the related consolidated and consolidating statements of income or operations, shareholders’
equity and cash flows for such period, certified by an appropriate Responsible Officer of Borrower Representative as being complete
and correct and fairly presenting, in all material respects, in accordance with GAAP, the financial position and the results of
operations of the Consolidated Group, subject to normal year-end adjustments and absence of footnote disclosures.

 

“FIRREA”
means the Financial Institutions Reform, Recovery and Enforcement Act of 1989. “Fiscal Quarter” means any of the quarterly
accounting periods of Credit Parties, ending on March 31, June 30, September 30, and December 31 of each year.

 

“Fiscal Year”
means any of the annual accounting periods of Credit Parties ending on December 31 of each year.

 

“Fixed Charge
Coverage Ratio” means, with respect to any period for the Consolidated Group, the ratio of (a) EBITDA to (b) Fixed Charges
(but excluding from Fixed Charges the use of any funds by JAKKS to repurchase and prepay the purchase price for its common stock
in accordance with Section 6.10(e)).

 

“Fixed Charges”
means, with respect to any period for any Person, the sum of (a) Interest Expense, (b) the principal payments made or due on Indebtedness,
(c) Restricted Payments, including cash dividends, and (d) federal income taxes and other taxes measured by net income actually
paid in cash by the Consolidated Group.

 

“Flood Insurance”
means, for any Real Estate located in a Special Flood Hazard Area, Federal Flood Insurance or private insurance that (a) meets
the requirements set forth by FEMA in its Mandatory Purchase of Flood Insurance Guidelines and (b) shall be in an amount equal
to the full, unpaid balance of the Loans and any prior liens on the Real Estate up to the maximum policy limits set under the National
Flood Insurance Program, or as otherwise required by Agent, with deductibles not to exceed $50,000.

 

    	 	65	 

     

    

 

“Foreign Subsidiary”
means, with respect to any Person, a Subsidiary of such Person that is a “controlled foreign corporation” under Section
957 of the Code.

 

“GAAP”
means generally accepted accounting principles in the United States of America, as in effect from time to time, set forth in the
opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, in the
statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions and comparable stature
and authority within the accounting profession) that are applicable to the circumstances as of the date of determination, applied
consistently as provided in and subject to Section 12.04.

 

“GACP”
means Great American Capital Partners and its successors.

 

“Governmental
Authority” means any nation, sovereign or government, any state or other political subdivision thereof, any agency, authority
or instrumentality thereof and any entity or authority exercising executive, legislative, Taxing, judicial, regulatory or administrative
functions of or pertaining to government, including any central bank, stock exchange, regulatory body, arbitrator, public sector
entity, supra-national entity (including the European Union and the European Central Bank) and any self- regulatory organization
(including the National Association of Insurance Commissioners).

 

“Guarantor”
means JAKKS HK and each other Subsidiary of Borrowers that is or becomes a party to the Guaranty and Security Agreement, and any
other Person that has guaranteed any Obligations.

 

“Guaranty and
Security Agreement” means that certain Guaranty and Security Agreement, dated as of even date herewith, made by Credit Parties
in favor of Agent, for the benefit of Secured Parties, as the same may be amended, restated, supplemented ort otherwise modified
from time to time.

 

“Hazardous Material”
means any substance, material or waste that is classified, regulated or otherwise characterized under any Environmental Law as
hazardous, toxic, a contaminant or a pollutant or by other words of similar meaning or regulatory effect, including petroleum or
any fraction thereof, asbestos, polychlorinated biphenyls and radioactive substances.

 

“HK Collateral
Documents” means the HK Security Debenture, the HK Share Charge, the HK Security Trust and all documents delivered to Agent
or any Lender in connection with any of the foregoing, as each such document may be amended, restated, supplemented or otherwise
modified from time to time.

 

“HK Credit Parties”
means Credit Parties incorporated or otherwise registered at the Hong Kong Companies Registry or Credit Parties otherwise having
a place of business in Hong Kong.

 

“HK Security
Debenture” means the Debenture dated as of the Closing Date, made by HK Credit Parties in favor of Agent for the benefit
of Secured Parties in respect of all the assets and undertaking of HK Credit Parties, as the same may be amended, restated, supplemented
or otherwise modified from time to time.

 

“HK Security
Trust” means the Security Trust dated as of Closing Date, made by HK Credit Parties in favor of Agent for the benefit of
Secured Parties in respect of Collateral granted by HK Credit Parties, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

 

“HK Share Charge”
means the Share Charge dated as of Closing Date, made by JAKKS, JAKKS Hong Kong and JAKKS Pacific (Asia) Limited in favor of Agent
for the benefit of Secured Parties in respect of all the issued shares in the HK Credit Parties, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

    	 	66	 

     

    

 

“Hong Kong”
means the Hong Kong Special Administrative Region of the People’s Republic of China.

 

“Indebtedness”
of any Person means, without duplication: (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed
as the deferred purchase price of Property or services (other than Accounts owing in the Ordinary Course of Business); (c) the
face amount of all letters of credit issued for the account of such Person and without duplication, all drafts drawn thereunder
and all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments issued
by such Person; (d) all obligations evidenced by notes, bonds, debentures or similar instruments; (e) all indebtedness created
or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect
to Property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such Property); (f) all Capital Lease Obligations; (g) the principal balance
outstanding under any synthetic lease, off-balance sheet loan or similar off balance sheet financing product; (h) all obligations,
whether or not contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own Stock or Stock Equivalents
(or any Stock or Stock Equivalent of a direct or indirect parent entity thereof) prior to the date that is 180 days after the Stated
Maturity Date, valued at, in the case of redeemable preferred Stock, the greater of the voluntary liquidation preference and the
involuntary liquidation preference of such Stock plus accrued and unpaid dividends; (i) all indebtedness referred to in clauses
(a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness; and (j) all Contingent Obligations described in clause
(a) of the definition thereof in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through
(i) above.

 

“Indemnified
Tax” means (a) any Tax other than an Excluded Tax and (b) to the extent not otherwise described in clause (a) above, Other
Taxes.

 

“Insolvency Proceeding”
means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, administration, liquidation, receivership, administrative receivership, dissolution, winding-up or relief of debtors,
or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case in clauses (a) and
(b) above, undertaken under U.S. federal, state or foreign law, including the Bankruptcy Code.

 

“Intellectual
Property” means all rights, title and interests in or relating to intellectual property and industrial property arising under
any Requirement of Law and all IP Ancillary Rights relating thereto, including all Copyrights, Patents, Trademarks, Internet Domain
Names, Trade Secrets and IP Licenses.

 

“Intercreditor
Agreement” means that certain Intercreditor Agreement dated as of the Closing Date by and between the Agent and the ABL Agent,
and acknowledged by the Credit Parties and other parties thereto (if any), as amended, restated, or otherwise modified from time
to time.

 

“Interest Expense”
means, with respect to any period for any Person, total interest expense calculated in accordance with GAAP (including that portion
attributable to Capital Leases in accordance with GAAP and capitalized interest) with respect to all outstanding Indebtedness,
including all commissions, discounts and other fees and charges owed with respect to letters of credit for such period (in each
case calculated without regard to any limitations on payment thereof).

 

    	 	67	 

     

    

 

“Interest Payment
Date” means, with respect to any LIBOR Rate Loan, the last day of each Interest Period applicable to such Loan.

 

“Interest Period”
means, with respect to any LIBOR Rate Loan, the period commencing on the Business Day such Loan is disbursed or continued and ending
on the date one, two or three months thereafter, as selected by Borrower Representative; provided, that:

 

(a)            if
any Interest Period pertaining to a LIBOR Rate Loan would otherwise end on a day which is not a Business Day, that Interest Period
shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on the immediately preceding Business Day;

 

(b)           any
Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business
Day of the calendar month at the end of such Interest Period; and

 

(c)           no
Interest Period for any Loan shall extend beyond the Termination Date.

 

“Internet Domain
Name” means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or
relating to internet domain names.

 

“Inventory”
means all of the “inventory” (as such term is defined in the UCC) of Credit Parties, including all merchandise, raw
materials, parts, supplies, works in progress and finished goods intended for sale, together with all the containers, packing,
packaging, shipping and similar materials related thereto, and including such inventory as is temporarily out of a Credit Party’s
custody or possession, including inventory on the premises of others and items in transit.

 

“Investment Grade”
means, in reference to any Person, that such Person has (a) a rating from S&P of (i) A-1 or better for its commercial paper
or (ii) BBB or better for its long term debt, or (b) a rating from Moody's of (i) P-1 or better for its commercial paper or (ii)
Baa or better for its long term debt.

 

“IP Ancillary
Rights” means, with respect to any Intellectual Property, as applicable, all foreign counterparts to, and all divisionals,
reversions, continuations, continuations-in-part, reissues, reexaminations, renewals and extensions of, such Intellectual Property
and all income, royalties, proceeds and Liabilities at any time due or payable or asserted under or with respect to any of the
foregoing or otherwise with respect to such Intellectual Property, including all rights to sue or recover at law or in equity for
any past, present or future infringement, misappropriation, dilution, violation or other impairment thereof, and, in each case,
all rights to obtain any other IP Ancillary Right.

 

“IP License”
means all Contractual Obligations (and all related IP Ancillary Rights), whether written or oral, granting any right, title and
interest in or relating to any Intellectual Property.

 

“IRS” means
the Internal Revenue Service of the United States and any successor thereto.

 

“JAKKS Canada”
means JAKKS Pacific (Canada), Inc., a company organized under the laws of the province of New Brunswick, Canada.

 

    	 	68	 

     

    

 

“JAKKS HK”
is a collective reference to each of JAKKS Hong Kong, JAKKS Pacific (Asia) Limited, Moose Mountain Toymakers Limited, Disguise
Limited, A.S. Design Limited, Arbor Toys Company Limited, Kids Only, Limited and Tollytots Limited.

 

“JAKKS Hong Kong”
means JAKKS Pacific (H.K.) Limited, a company incorporated in Hong Kong with registered number 468246.

 

“JAKKS Pacific
(Asia) Limited” means JAKKS Pacific (Asia) Limited, a company incorporated in Hong Kong with registered number 971208.

 

“JV Entities”
means each of Pacific Animation Partners, LLC, DreamPlay Toys, LLC, DreamPlay, LLC, JAKKS Pacific Trading Limited, JAKKS Meisheng
Trading (Shanghai) Limited, and JAKKS Meisheng Animation (H.K.) Limited.

 

“Kids Only, Limited”
means Kids Only, Limited, a company incorporated in Hong Kong with registered number 455075.

 

“Lender”
means each Lender with a Term Loan Commitment (or if the Term Loan Commitments have terminated, who hold Term Loans).

 

“Lending Office”
means, with respect to any Lender, the office or offices of such Lender specified as its “Lending Office” on Schedule
10.02, or such other office or offices of such Lender as it may from time to time notify Borrower Representative and Agent.

 

“Liabilities”
means all claims, actions, suits, judgments, damages, losses, liability, obligations, responsibilities, fines, penalties, sanctions,
costs, fees, Taxes, commissions, charges, disbursements and expenses (including those incurred upon any appeal or in connection
with the preparation for and/or response to any subpoena or request for document production relating thereto), in each case of
any kind or nature (including interest accrued thereon or as a result thereto and fees, charges and disbursements of financial,
legal and other advisors and consultants), whether joint or several, whether or not indirect, contingent, consequential, actual,
punitive, treble or otherwise.

 

“LIBOR”
means, for each Interest Period, the greater of (i) 1.50% per annum, and (ii) the rate per annum as published by ICE Benchmark
Administration Limited (or any successor page or other commercially available source as Agent may designate from time to time)
as of 11:00 a.m., London time, two Business Days prior to the commencement of the requested Interest Period, for a term, and in
an amount, comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate
Loan or as a continuation of a LIBOR Rate Loan) by Borrowers in accordance with this Agreement (and, if any such published rate
is below zero, then the rate determined shall be deemed to be zero). Each determination of the LIBOR Rate shall be made by Agent
and shall be conclusive in the absence of manifest error.

 

“LIBOR Rate Loan”
means a Loan that bears interest based on LIBOR.

 

“License Agreement
Guaranty” means a guaranty by JAKKS of the obligations of any of its Subsidiaries owing to a Licensor under a licensing agreement
between such Subsidiary and such Licensors.

 

“Licensor”
means an owner of certain Intellectual Property that licenses all or any portion of such Intellectual Property to a Credit Party
or any of its Subsidiaries.

 

    	 	69	 

     

    

 

“Lien”
means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien
(statutory or otherwise), security interest or other security arrangement and any other preference, priority or preferential arrangement
of any kind or nature whatsoever, including those created by, arising under or evidenced by any conditional sale contract or other
title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially
the same economic effect as any of the foregoing.

 

“Liquidity”
means an amount equal to the sum of (a) Availability plus (b) all unrestricted and unencumbered (other than Liens created
pursuant to any Loan Document or any ABL Loan Document and Liens of the type described in Section 6.01(n)) cash and Cash
Equivalents of the Credit Parties (provided, that at any time fifteen (15) days after the Closing Date (or such later time as agreed
to by the Agent), such cash and Cash Equivalents must be held in deposit accounts and/or securities accounts in the United States
that are subject to Control Agreements granting “control” (as defined in the UCC) to the Agent over such deposit accounts
and securities accounts.

 

“Loan Documents”
means this Agreement, the Notes, the Fee Letter, the Intercreditor Agreement, the Collateral Documents and all documents delivered
to Agent and/or any Lender in connection with any of the foregoing, as each such document may be amended, restated, supplemented
or otherwise modified from time to time.

 

“Margin Stock”
as defined in Regulation U of the Board of Governors as in effect from time to time.

 

“Material Adverse
Effect” means an effect that results in or causes, or could reasonably be expected to result in or cause, a material adverse
change in or a material adverse effect on any of (a) the condition (financial or otherwise) or prospects of any Credit Party or,
business, performance, operations or Property of Credit Parties and their Subsidiaries taken as a whole, (b) the ability of any
Credit Party or any other Person (other than Agent or Lenders) to perform its obligations under any Loan Document, or (c) the validity
or enforceability of any Loan Document or the rights and remedies of Agent, Lenders and the other Secured Parties under any Loan
Document. Without limiting the generality of the foregoing, any event or occurrence which results or would reasonably be expected
to result in Liabilities to Credit Parties in excess of $5,000,000 individually or in the aggregate shall be deemed to have a Material
Adverse Effect.

 

“Material Environmental
Liabilities” means Environmental Liabilities exceeding $500,000 in the aggregate.

 

“Meisheng Transaction”
means the acquisition by Hongkong Meisheng Cultural Company Limited of additional shares of common stock of the Borrower Representative,
resulting in the increase of Hongkong Meisheng Cultural Company Limited’s shareholdings and voting rights in the Borrower
Representative to 51%.

 

“Moose Mountain
Toymakers Limited” means Moose Mountain Toymakers Limited, a company incorporated in Hong Kong with registered number 540751.

 

“Mortgage”
means any deed of trust, leasehold deed of trust, mortgage, leasehold mortgage, deed to secure debt, leasehold deed to secure debt
or other document creating a Lien on Real Estate or any interest in Real Estate.

 

    	 	70	 

     

    

 

“Multiemployer
Plan” means any multiemployer plan, as defined in Section 3(37) or 4001(a)(3) of ERISA, as to which any ERISA Affiliate incurs
or otherwise has any obligation or liability, contingent or otherwise.

 

“National Flood
Insurance Program” means the program created by the U.S. Congress pursuant to the National Flood Insurance Act of 1968 and
the Flood Disaster Protection Act of 1973, as revised by the National Flood Insurance Reform Act of 1994, that mandates the purchase
of flood insurance to cover real property improvements located in Special Flood Hazard Areas in participating communities and provides
protection to property owners through a federal insurance program.

 

“Net Income”
means, with respect to any Person, for any period, the consolidated net income (or loss) of such Person and its Subsidiaries for
such period determined in accordance with GAAP.

 

“Net Issuance
Proceeds” means, in respect of any issuance of debt or equity, cash proceeds (including cash proceeds as and when received
in respect of non-cash proceeds received or receivable in connection with such issuance), net of underwriting discounts and reasonable
out-of-pocket costs and expenses paid or incurred in connection therewith in favor of any Person not an Affiliate of a Borrower.

 

“Net Orderly
Liquidation Value” means the cash proceeds of Inventory which could be obtained in an orderly liquidation (net of all liquidation
expenses, costs of sale, operating expenses and retrieval and related costs), as determined pursuant to the most recent third-party
appraisal of such Inventory delivered to Agent by an appraiser acceptable to Agent.

 

“Net Proceeds”
means proceeds in cash, checks or other cash equivalent financial instruments (including Cash Equivalents) as and when received
by the Person making a Disposition, as well as insurance proceeds and condemnation and similar awards received on account of an
Event of Loss, net of: (a) in the event of a Disposition (i) the direct costs relating to such Disposition excluding amounts payable
to a Borrower or any Affiliate of a Borrower, (ii) sale, use or other transaction Taxes paid or payable as a result thereof, and
(iii) amounts required to be applied to repay principal, interest and prepayment premiums and penalties on Indebtedness secured
by a Lien on the asset which is the subject of such Disposition and (b) in the event of an Event of Loss, (i) so long as no Default
or Event of Default has occurred and is continuing, all money actually applied to repair or reconstruct the damaged Property or
Property affected by the condemnation or taking, (ii) all of the costs and expenses reasonably incurred in connection with the
collection of such proceeds, award or other payments, and (iii) any amounts retained by or paid to parties having superior rights
to such proceeds, awards or other payments.

 

“Non-U.S. Lender
Party” means each of Agent, each Lender, each SPV and each participant, in each case that is not a United States person as
defined in Section 7701(a)(30) of the Code.

 

“Note”
means any Term Note and “Notes” means all such Notes.

 

“Oasis Convertible
Note” means the convertible senior note due November 1, 2020 issued to Oasis Investments II Master Fund Ltd. in
a face amount of $21,550,000.

 

“Obligations”
means all Term Loans, and other Indebtedness, advances, debts, liabilities, obligations, covenants and duties owing by any Credit
Party to any Lender, Agent, or any other Person required to be indemnified, that arises under any Loan Document, whether or not
for the payment of money, whether arising by reason of an extension of credit, loan, guaranty, indemnification or in any other
manner, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired; provided, that Obligations of any Guarantor shall not include any Excluded
Rate Contract Obligations solely of such Guarantor.

 

    	 	71	 

     

    

 

“OFAC”
means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

 

“Ordinary Course
of Business” means, in respect of any transaction involving any Person, the ordinary course of such Person’s business,
as conducted by any such Person in accordance with past practice and undertaken by such Person in good faith and not for purposes
of evading any covenant or restriction in any Loan Document.

 

“Organization
Documents” means, (a) for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of preferred shareholders of such corporation and any shareholder rights agreement, (b) for
any partnership, the partnership agreement and, if applicable, certificate of limited partnership, (c) for any limited liability
company, the operating agreement and articles or certificate of formation or (d) any other document setting forth the manner of
election or duties of the officers, directors, managers or other similar persons, or the designation, amount or relative rights,
limitations and preference of the Stock of a Person.

 

“Other Connection
Taxes” means, with respect to any Secured Party, Taxes imposed as a result of a present or former connection between such
Secured Party and the jurisdiction imposing such Tax, other than any such connection arising solely from Secured Party having executed,
delivered, become a party to, performed its obligations or received a payment under, received or perfected as a security interest
under, engaged in any other transaction pursuant to or enforced any Loan Document or any related document, or sold or assigned
an interest in any Loan or Loan Document.

 

“Patents”
means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating
to letters patent and applications therefor.

 

“Patriot Act”
means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, P.L. 107-56.

 

“PBGC”
means the United States Pension Benefit Guaranty Corporation any successor thereto. “Perfection Certificate” means
a written certificate from Borrower Representative setting forth certain information regarding Credit Parties and their Properties
as contemplated by ARTICLE IV, in form and substance acceptable to Agent and attached hereto as Schedule 4.21.

 

“Permits”
means, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant,
franchise, variance or permission from, and any other Contractual Obligations with, any Governmental Authority, in each case whether
or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

 

“Permitted Discretion”
means a determination made in good faith and in the exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.

 

“Permitted Refinancing”
means Indebtedness constituting a refinancing or extension of (A) Indebtedness permitted under Section 6.05(c) or (d)
that (a) has an aggregate outstanding principal amount not greater than the aggregate principal amount of the Indebtedness being
refinanced or extended, (b) has a weighted average maturity (measured as of the date of such refinancing or extension) and maturity
no shorter than that of the Indebtedness being refinanced or extended, (c) is not entered into as part of a sale leaseback transaction,
(d) is not secured by a Lien on any assets other than the collateral securing the Indebtedness being refinanced or extended, (e)
the obligors of which are the same as the obligors of the Indebtedness being refinanced or extended and (f) is otherwise on terms
no less favorable to Credit Parties and their Subsidiaries, taken as a whole, than those of the Indebtedness being refinanced or
extended; or (B) Indebtedness under the ABL Loan Documents, to the extent permitted under the Intercreditor Agreement and subject
to joining the Intercreditor Agreement or entering into another intercreditor agreement acceptable to Agent.

 

    	 	72	 

     

    

 

“Permitted Surety
Bonds” means unsecured guaranties and reimbursement obligations incurred in the Ordinary Course of Business with respect
to surety and appeal bonds, performance bonds, bid bonds, appeal bonds, completion guaranty and similar obligations in an aggregate
amount not to exceed $100,000.

 

“Person”
means any individual, partnership, corporation (including a business trust and a public benefit corporation), joint stock company,
estate, association, firm, enterprise, trust, limited liability company, unincorporated association, joint venture and any other
entity or Governmental Authority.

 

“Pledged Collateral”
has the meaning specified in the Guaranty and Security Agreement and shall include any other Collateral required to be delivered
to Agent pursuant to the terms of any Collateral Document.

 

“Prepaid Principal
Amount” means the principal amount of the Term Loan (including, if applicable, the amount of any capitalized interest) that
(a) is voluntary or mandatorily prepaid by the Borrowers, or (b) has become or is deemed to be due and payable in accordance with
ARTICLE VIII.

 

“Property”
means any interest in any kind of property or asset (other than cash), whether real, personal or mixed, and whether tangible or
intangible.

 

“Qualified ECP
Guarantor” means, in respect of any Swap Obligation, each Credit Party that has total assets exceeding $10,000,000 at the
time the relevant guaranty or grant of the relevant security interest becomes effective with respect to such Swap Obligation or
such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause
another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section
1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“Rate Contracts”
means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) designed to provide protection against fluctuations
in interest or currency exchange rates and any other agreements or arrangements designed to provide such protection.

 

“Real Estate”
means any real property owned, leased, subleased or otherwise operated or occupied by any Credit Party or any Subsidiary.

 

“Related Persons”
means, with respect to any Person, each Affiliate of such Person and each director, officer, employee, investor, agent, trustee,
representative, attorney, accountant and each insurance, environmental, legal, financial and other advisor (including those retained
in connection with the satisfaction or attempted satisfaction of any condition set forth in ARTICLE III) and other consultants
and agents of or to such Person or any of its Affiliates.

 

“Releases”
means any release, threatened release, spill, emission, leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Material into or through the environment.

 

“Remedial Action”
means all actions required to (a) clean up, remove, treat or in any other way address any Hazardous Material in the indoor or outdoor
environment, (b) prevent or minimize any Release so that a Hazardous Material does not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment or (c) perform pre remedial studies and investigations and post-remedial
monitoring and care with respect to any Hazardous Material.

 

    	 	73	 

     

    

 

“Required Lenders”
means at any time (a) Lenders then holding more than 50% of the sum of the Aggregate Term Loan Commitment then in effect, or (b)
if the Aggregate Term Loan Commitments have terminated, Lenders then holding more than 50% of the sum of the aggregate unpaid principal
amount of Term Loans then outstanding.

 

“Requirement
of Law” means, with respect to any Person, the common law and any federal, state, local, foreign, multinational or international
laws, statutes, codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions,
decrees (including administrative or judicial precedents or authorities) and the interpretation or administration thereof by, and
other determinations, directives, requirements or requests of, any Governmental Authority, in each case whether or not having the
force of law and that are applicable to or binding upon such Person or any of its Property or to which such Person or any of its
Property is subject.

 

“Reserves”
means, with respect to the Term Loan Borrowing Base (a) reserves established by Agent from time to time against Eligible Accounts
pursuant to Section 2.01 and Eligible Licensed Inventory pursuant to Section 2.02, and (b) such other reserves against
Eligible Accounts or Eligible Licensed Inventory that Agent may, in its Permitted Discretion, establish from time to time. Without
limiting the generality of the foregoing, Reserves established to ensure the payment of accrued interest expenses or Indebtedness
shall be deemed to be an exercise of Agent’s Permitted Discretion.

 

“Responsible
Officer” means the chief executive officer or the president of a Borrower or Borrower Representative, as applicable, or any
other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants
or delivery of financial information, the chief financial officer or the treasurer of a Borrower or Borrower Representative, as
applicable, or any other officer having substantially the same authority and responsibility.

 

“S&P”
means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

 

“Sanctioned Entity”
means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, or (d) a Person resident in or determined to be resident in a country, in
each case of clauses (a) through (d) that is a target of Sanctions, including a target of any country sanctions program administered
and enforced by OFAC.

 

“Sanctioned Person”
means, at any time (a) any Person named on the list of Specially Designated Nationals and Blocked Persons maintained by OFAC, OFAC’s
consolidated Non-SDN list or any other Sanctions-related list maintained by any Governmental Authority, (b) a Person or legal entity
that is a target of Sanctions, (c) any Person operating, organized or resident in a Sanctioned Entity, or (d) any Person directly
or indirectly owned or controlled (individually or in the aggregate) by or acting on behalf of any such Person or Persons described
in clauses (a) through (c) above.

 

“Sanctions”
means individually and collectively, respectively, any and all economic sanctions, trade sanctions, financial sanctions, sectoral
sanctions, secondary sanctions, trade embargoes anti-terrorism laws and other sanctions laws, regulations or embargoes, including
those imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by
OFAC, the U.S. Department of State, the U.S. Department of Commerce, or through any existing or future executive order, (b) the
United Nations Security Council, (c) the European Union or any European Union member state, (d) Her Majesty’s Treasury of
the United Kingdom, or (d) any other Governmental Authority with jurisdiction over any Lender or any Credit Party or any of their
respective Subsidiaries or Affiliates.

 

    	 	74	 

     

    

 

“Secured Party”
means Agent, each Lender, each other Indemnitee and each other holder of any Obligation of a Credit Party.

 

“Share Increase
Transaction” means the acquisition (including the Meisheng Transaction) by a Person of shares of common stock of the Borrower
Representative that has been approved by Required Lenders in their sole and absolute discretion and which results in the increase
of such Person’s shareholdings and voting rights in the Borrower Representative to 51% or greater.

 

“Software”
means (a) all computer programs, including source code and object code versions, (b) all data, databases and compilations of data,
whether machine readable or otherwise, and (c) all documentation, training materials and configurations related to any of the foregoing.

 

“Solvent”
means, with respect to any Person as of any date of determination, that, as of such date, (a) the value of the assets of such Person
(both at fair value and present fair saleable value) is greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person, (b) such Person is able to pay all liabilities of such Person as such liabilities mature
and (c) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities
at any time, such liabilities shall be computed at 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.

 

“Special Flood
Hazard Area” means an area that FEMA’s current flood maps indicate has at least a 1% chance of a flood equal to or
exceeding the base flood elevation (a 100-year flood) in any given year.

 

“Specified Foreign
Subsidiaries” means each of JAKKS Pacific (UK) Ltd., a company organized under the laws of the United Kingdom, JAKKS Pacific
Iberia, S.L., a company organized under the laws of Spain, JAKKS France, S.A.S., a company organized under the laws of France,
JAKKS Pacific Germany GmbH, a company organized under the laws of Germany, JKP Mexico Holdings, S.A. de C.V., JAKKS Pacific (Canada),
Inc., a company organized under the laws of Canada, and JKID, Ltd. a company organized under the laws of the United Kingdom.

 

“SPV” means
any special purpose funding vehicle identified as such in a writing by any Lender to Agent.

 

“Stated Maturity
Date” means June 14, 2021.

 

“Stock”
means all shares of capital stock (whether denominated as common stock or preferred stock), equity interests, beneficial, partnership
or membership interests, joint venture interests, participations or other ownership or profit interests in or equivalents (regardless
of how designated) of or in a Person (other than an individual), whether voting or non-voting.

 

“Stock Equivalents”
means all securities convertible into or exchangeable for Stock or any other Stock Equivalent and all warrants, options or other
rights to purchase, subscribe for or otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible,
exchangeable or exercisable.

 

    	 	75	 

     

    

 

“Subordinated
Indebtedness” means (a) the 2018 Convertible Notes, the Oasis Convertible Note, the 2020 Convertible Notes and (b) any Indebtedness
of any Credit Party or any Subsidiary which is subordinated to the Obligations as to right and time of payment and as to other
rights and remedies thereunder and having such other terms as are, in each case, reasonably satisfactory to Agent in its sole discretion.

 

“Subordinated
Indebtedness Documents” means, collectively, the documents evidencing the Subordinated Indebtedness, if any.

 

“Subordination
Agreement” means any subordination agreement by and among Agent, Credit Parties and the issuer of any Subordinated Indebtedness
on terms and conditions satisfactory to Agent in its sole discretion, as the same may be amended, restated and/or modified from
time to time subject to the terms thereof. For purposes of this definition, the Intercreditor Agreement is not a Subordination
Agreement.

 

“Subsidiary”
means, with respect to any Person, any corporation, partnership, joint venture, limited liability company, association or other
entity, the management of which is, directly or indirectly, controlled by, or of which an aggregate of more than 50% of the voting
Stock is, at the time, owned or controlled directly or indirectly by, such Person or one or more Subsidiaries of such Person. Unless
the context provides otherwise, each reference to Subsidiary under the Loan Documents shall be deemed to be a reference to a Subsidiary
of a Credit Party. For the avoidance of doubt, DreamPlay, LLC shall not be deemed to be a “Subsidiary” hereunder for
as long as JAKKS does not increase its 5% ownership therein as in effect on the Closing Date.

 

“Swap Obligation”
means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes
a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

“Tax Affiliate”
means, (a) each member of the Consolidated Group, (b) each other Credit Party and (c) any Affiliate of a Borrower with which such
Borrower files or is eligible to file consolidated, combined or unitary Tax returns.

 

“Term Loan”
means an extension of credit by a Lender to the Borrowers, including any Protective Advance.

 

“Term Loan Borrowing
Base” means, as of any date of determination by Agent, from time to time, an amount equal to the sum of:

 

(1) the Applicable
Advance Rate of the book value of the Eligible Domestic Accounts at such time; plus

 

(2) the Applicable
Advance Rate of the book value of the Eligible Foreign Accounts at such time; plus

 

(3) 90% of the Net
Orderly Liquidation Value of Eligible Licensed Inventory; minus

 

(4) the then-current
amount of all Reserves.

 

“Term Loan Commitment”
means for each Lender, the amount set forth opposite such Lender’s name in Schedule 1 under the heading “Term Loan
Commitments” as such amount as the same may be reduced or increased from time to time in accordance with this Agreement.

 

    	 	76	 

     

    

 

“Term Loan Outstandings”
means, as of any date of determination, the aggregate outstanding principal balance of the Term Loans made under this Agreement.

 

“Term Loan Percentage”
means, as to any Lender, the percentage equivalent of such Lender’s Term Loan Commitment, divided by the Aggregate Term Loan
Commitment; provided that following acceleration of the Term Loan, such term means, as to any Lender, the percentage equivalent
of the principal amount of the Term Loan held by such Lender, divided by the aggregate principal amount of the Term Loan held by
all Lenders.

 

“Term Loan Push-Down
Reserve” means the amount, as of any date of determination, equal to the difference, if a positive number, between the Term
Loan Outstandings minus the Term Loan Borrowing Base.

 

“Term Note”
means a promissory note of Borrowers payable to a Lender in substantially the form of Exhibit 12.02(b), evidencing Indebtedness
of Borrowers under the Commitment of such Lender, as the same may be amended, restated, supplemented ort otherwise modified from
time to time.

 

“Termination
Date” means the earliest to occur of (i) June 14, 2021, (ii) the date of termination of the ABL Credit Agreement, (iii) the
date that is 91 days prior to the maturity of the 2020 Convertible Notes,, (iv) the date that is 91 days prior to the maturity
of the Oasis Convertible Notes, or (v) the date on which the maturity of the Obligations is accelerated (or deemed accelerated)
in accordance with ARTICLE VIII.

 

“Title IV Plan”
means a pension plan subject to Title IV of ERISA, other than a Multiemployer Plan, to which any ERISA Affiliate incurs or otherwise
has any obligation or liability, contingent or otherwise.

 

“Tollytots Limited”
means Tollytots Limited, a company incorporated in Hong Kong with registered number 1251086.

 

“Trade Secrets”
means all right, title and interest (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating to
trade secrets.

 

“Trademark”
means all rights, title and interests (and all related IP Ancillary Rights) arising under any Requirement of Law in or relating
to trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers and, in each case, all goodwill associated therewith, all registrations and recordations
thereof and all applications in connection therewith.

 

“Trigger Period”
means the period (a) commencing on the day that (i) an Event of Default occurs or (ii) Availability is less than $5,000,000 and
(b) continuing until the date that (i) no Event of Default exists and (ii) Availability has been equal to or greater than $5,000,000
for a period of 60 consecutive calendar days.

 

“TRU Event”
means the bankruptcy and subsequent liquidation of Toys “R” Us, Inc. and its subsidiaries.

 

“UCC” means
the Uniform Commercial Code of any applicable jurisdiction and, if the applicable jurisdiction shall not have any Uniform Commercial
Code, the Uniform Commercial Code as in effect from time to time in the State of New York.

 

    	 	77	 

     

    

 

“United States”
and “U.S.” each means the United States of America.

 

“U.S. Lender
Party” means each of Agent, each Lender, each SPV and each participant, in each case that is a United States person as defined
in Section 7701(a)(30) of the Code.

 

“Wells Fargo”
means Wells Fargo Bank, National Association.

 

“Wholly-Owned
Subsidiary” of a Person means any Subsidiary of such Person, all of the Stock and Stock Equivalents of which (other than
directors’ qualifying shares required by law) are owned by such Person, either directly or through one or more Wholly-Owned
Subsidiaries of such Person.

 

Section 12.03       Other
Interpretive Provisions.

 

(a)          Defined
Terms. Unless otherwise specified herein or therein, all terms defined in any Loan Document shall have the defined meanings
when used in any certificate or other document made or delivered pursuant thereto. The meanings of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. Terms (including uncapitalized terms) not otherwise defined herein
and that are defined in the UCC shall have the meanings therein described.

 

(b)          The
Agreement. The words “hereof,” “herein,” “hereunder” and words of similar import when used
in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision of such Loan Document; and
section, schedule and exhibit references are to such Loan Document unless otherwise specified.

 

(c)          Certain
Common Terms. The term “documents” includes any and all instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced. The term “including” is not limiting and means “including without
limitation.”

 

(d)          Performance;
Time. Whenever any performance obligation hereunder or under any other Loan Document (other than a payment obligation) shall
be stated to be due or required to be satisfied on a day other than a Business Day, such performance shall be made or satisfied
on the next succeeding Business Day. All references to time shall be based upon New York time. In the computation of periods of
time from a specified date to a later specified date, the word “from” means “from and including”; the words
“to” and “until” each mean “to but excluding,” and the word “through” means “to
and including.” If any provision of any Loan Document refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be interpreted to encompass any and all means, direct or indirect, of taking,
or not taking, such action.

 

(e)          Contracts.
Unless otherwise expressly provided herein or in any other Loan Document, references to agreements and other contractual instruments,
including the Loan Documents, shall be deemed to include all subsequent amendments, thereto, restatements and substitutions thereof
and other modifications and supplements thereto which are in effect from time to time, but only to the extent such amendments and
other modifications are not prohibited by the terms of any Loan Document.

 

(f)           Laws.
References to any statute or regulation may be made by using either the common or public name thereof or a specific cite reference
and, except as otherwise provided with respect to FATCA, are to be construed as including all statutory and regulatory provisions
related thereto or consolidating, amending, replacing, supplementing or interpreting the statute or regulation.

 

    	 	78	 

     

    

 

Section 12.04       Accounting
Terms and Principles. All accounting determinations required to be made pursuant hereto shall, unless expressly otherwise
provided herein, be made in accordance with GAAP. No change in the accounting principles used in the preparation of any financial
statement hereafter adopted by the Consolidated Group shall be given effect for purposes of measuring compliance with any provision
of ARTICLE VI or ARTICLE VII unless Borrowers, Agent and the Required Lenders agree to modify such provisions to
reflect such changes in GAAP and, unless such provisions are modified, all financial statements, Compliance Certificates and similar
documents provided hereunder shall be provided together with a reconciliation between the calculations and amounts set forth therein
before and after giving effect to such change in GAAP. Notwithstanding any other provision contained herein, all terms of an accounting
or financial nature used herein shall be construed, and all computations of amounts and ratios referred to in ARTICLE VI
and ARTICLE VII shall be made, without giving effect to any election under Accounting Standards Codification 825-10 (or
any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any
Credit Party or any Subsidiary at “fair value.” A breach of a financial covenant contained in ARTICLE VII shall
be deemed to have occurred as of any date of determination by Agent or as of the last day of any specified measurement period,
regardless of when the financial statements reflecting such breach are delivered to Agent.

 

Section 12.05       Payments.
Agent may set up commercially reasonable standards and procedures to determine or redetermine the equivalent in Dollars of any
amount expressed in any currency other than Dollars and otherwise may, but shall not be obligated to, rely on any determination
made by any Credit Party. Any such determination or redetermination by Agent shall be conclusive and binding for all purposes,
absent manifest error. No determination or redetermination by any Secured Party or any Credit Party and no other currency conversion
shall change or release any obligation of any Credit Party or of any Secured Party (other than Agent and its Related Persons) under
any Loan Document, each of which agrees to pay separately for any shortfall remaining after any conversion and payment of the amount
as converted. Agent may round up or down, and may set up commercially reasonable appropriate mechanisms to round up or down, any
amount hereunder to nearest higher or lower amounts and may determine reasonable de minimis payment thresholds.

 

Section 12.06       Intercreditor
Agreement. Each Lender hereby (a) agrees that this Agreement and the other Loan Documents, and the rights and remedies of the
Agent and the Lenders hereunder and thereunder, are subject to the terms of the Intercreditor Agreement (and to the extent any
term of this Agreement or any other Loan Document conflicts or is inconsistent with the terms thereof, the terms of the Intercreditor
Agreement shall control), (b) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor
Agreement, and (c) hereby authorizes and instructs the Agent to enter into the Intercreditor Agreement.

 

[signature pages
follow]

 

    	 	79	 

     

    

 

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

 

	“Borrowers”	 	 
	 	 	 
	JAKKS PACIFIC, INC.	 	MOOSE MOUNTAIN MARKETING, INC.
	 	         	 	 	         
	By:	 	 	By:	 
	Name:	 	 	Name:	 
	Title:	 	 	Title:	 
	 	 	 
	MAUI, INC.	 	KIDS ONLY, INC.
	 	 	 	 	 
	By:	 	 	By:	 
	Name:	 	 	Name:	 
	Title:	 	 	Title:	 
	 	 	 
	DISGUISE, INC.	 	 
	 	 	 	 
	By:	 	 	 
	Name:	 	 	 
	Title:	 	 	 
	 	 	 
	JAKKS SALES LLC	 	 
	 	 	 	 
	By:	 	 	 
	Name:	 	 	 
	Title:	 	 	 
	 	 	 
	“Borrower Representative”	 	 
	 	 	 
	JAKKS PACIFIC, INC.	 	 
	 	 	 	 
	By:	 	 	 
	Name:	 	 	 
	Title:	 	 	 

 

[Signature Page to Term Loan Agreement]

 

     

     

    

 

	“Guarantors”	 	 
	 	 	 
	JAKKS PACIFIC (H.K.) LIMITED	 	JAKKS PACIFIC (ASIA) LIMITED
	 	         	 	 	         
	By:	 	 	By:	 
	Name:	 	 	Name:	 
	Title:	 	 	Title:	 
	 	 	 
	DISGUISE LIMITED	 	MOOSE MOUNTAIN TOYMAKERS LIMITED
	 	 	 	 	 
	By:	 	 	By:	 
	Name:	 	 	Name:	 
	Title:	 	 	Title:	 
	 	 	 
	A.S. DESIGN LIMITED	 	ARBOR TOYS COMPANY LIMITED
	 	 	 	 	 
	By:	 	 	By:	 
	Name:	 	 	Name:	 
	Title:	 	 	Title:	 
	 	 	 
	KIDS ONLY, LIMITED	 	TOLLYTOTS LIMITED
	 	 	 	 	 
	By:	 	 	By:	 
	Name:	 	 	Name:	 
	Title:	 	 	Title:	 

 

[Signature Page to Term Loan Agreement]

 

     

     

    

 

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

 

	 	GACP FINANCE CO., LLC, as Agent
	 	 	         
	 	By:	 
	 	Name:	 
	 	Title:	 
	 	 
	 	GACP II L.P., as a Lender
	 	 	 
	 	By:	 
	 	Name: 	 
	 	Title:	 

 

[Signature Page to Term Loan Agreement]

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