LOAN AND SECURITY AGREEMENT by and between BLONDER TONGUE LABORATORIES, INC. and R. L. DRAKE HOLDINGS, LLC as Borrowers, BLONDER TONGUE FAR EAST, LLC as a Guarantor and a Credit Party STERLING NATIONAL BANK as Administrative Agent and THE LENDERS FROM TIME TO TIME PARTY HERETO Dated as of December 28, 2016

This Loan and Security Agreement is executed and entered into as of December 28, 2016, by and among:  (a) BLONDER TONGUE LABORATORIES, INC., a Delaware corporation (together with its successors and permitted assigns, "Parent"), and R. L. DRAKE HOLDINGS, LLC, a Delaware limited liability company (together with its permitted successors and assigns, "Drake"), as Borrowers (as such term is hereinafter defined), (b) BLONDER TONGUE FAR EAST, LLC, a Delaware limited liability company (together with its permitted successors and assigns, "Far East"), as a Guarantor and a Credit Party (as such terms are hereinafter defined), (c) the lenders from time to time party hereto (such lenders, together with their respective successors and permitted assigns, are referred to hereinafter collectively as the "Lenders" and each is a "Lender") and (d) STERLING NATIONAL BANK, a national banking association, as administrative and collateral agent (in such capacity, and including its successors and permitted assigns, the "Administrative Agent") for the Lender Parties (as hereinafter defined) and as Swing Lender (as such term is hereinafter defined).

Administrative Agent, each other Lender Party, each Borrower and each other Credit Party desire to enter into certain financing arrangements according to the terms and provisions as set forth hereinbelow.  Therefore, for value received, the receipt and sufficiency of which is hereby acknowledged, together with the mutual benefits provided herein, Administrative Agent, each other Lender Party, each Borrower and each other Credit Party hereby agree as follows:

"Account" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a right to payment of a monetary obligation, whether or not earned by performance, for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, or for services rendered or to be rendered and further includes, without limitation, any "payment intangible" (as defined in Article 9 of the UCC), together with all income, payments and proceeds thereof, owed by an issuer of a credit or debit card or any servicing or processing agent thereof, resulting from charges by a customer in connection with the sale of goods or for services rendered.

"Account Debtor" means a Person obligated on an Account, Chattel Paper, or General Intangible.

"Adjusted LIBOR Rate" means, for any Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by Administrative Agent to be equal to the sum of the LIBOR Rate plus the Applicable Margin for such Loan.

"Administrative Agent" has the meaning given to such term in the preamble hereto.

 

"Administrative Agent Account" means Sterling National Bank account number 6700044124, ABA number 221970443, or such other account as Administrative Agent may from time to time specify to Borrower Representative in writing.

"Administrative Agent's Liens" means Liens granted (or purported to be granted) by the Credit Parties in favor of Administrative Agent, for the benefit of Lender Parties, pursuant to this Agreement or any of the other Loan Documents.

"Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person.  For purposes of this definition, "control" of a Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Equity Interests, by contract, or otherwise; provided, that for purposes of the definition of Eligible Account and Section 9.12:  (a) any Person which owns (directly or indirectly) 10% or more of the outstanding Equity Interests of another Person, (b) each director (or comparable manager) of a Person and (c) each partnership in which a Person is a general partner shall, in each case, be deemed an Affiliate of such Person.

"Agreement" means this Loan and Security Agreement and all schedules, exhibits and addenda hereto, as may be renewed, extended, amended, supplemented, restated or otherwise modified from time to time.

"Agreement Date" means the date as of which this Agreement is dated as specified in the preamble to this Agreement.

"Anti-Corruption Laws" means all laws, rules, and regulations of any jurisdiction applicable to Credit Parties and their Subsidiaries from time to time concerning or relating to bribery or corruption, all as amended, supplemented or replaced from time to time.

"Anti-Terrorism Laws" shall mean any laws, rules and regulations of any jurisdiction applicable to Credit Parties and their Subsidiaries relating to terrorism, trade sanctions programs and embargoes, import/export licensing, bribery, or money laundering, all as amended, supplemented or replaced from time to time.

"Applicable Law" means, as to a Person, any law (statutory or common), treaty, ordinance, decree, rule, regulation, executive order or code of a Governmental Authority or judgment, decree, injunction, order or determination of a court or binding arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, without limitation, all Environmental Laws, all Anti-Terrorism Laws, all Anti-Corruption Laws, the Patriot Act and the Trading with the Enemy Act.

"Applicable Margin" means (a) with respect to Revolving Loans, 4.0% per annum and (b) with respect to the Term RE Loan, 4.5% per annum.

"Availability" means, with respect to Revolving Loans at any time of determination, an amount equal to (a) the Borrowing Base less (b) the unpaid principal balance of Revolving Loans, in each case determined at such time.

"Bank Products" means any one or more of the following financial products or accommodations extended to a Credit Party by a Lender or an Affiliate of a Lender:  (a) credit cards (including commercial credit cards and including so-called "procurement cards" or "P-Cards"), (b) credit card processing services, (c) debit cards, (d) stored value cards or (e) Cash Management Services.

"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C. § 101 et seq.).

"Borrowers" means, collectively, Parent, Drake and each other Person who becomes a Borrower hereunder in accordance with the terms of Section 8.16, whether now or hereafter existing (but in any event not including Far East, any other Guarantor or any Immaterial Subsidiary), and their successors and assigns.

"Borrower Representative" means Parent, as agent for each other Borrower pursuant to Section 2.2(d).

"Borrowing Base" means, as of any day of determination, an amount equal to the difference between:

(a) the sum of (i) eighty-five percent (85%) of the Net Amount of Eligible Accounts (exclusive of Eligible Accounts owing by VBrick), plus (ii) twenty-five percent (25%) of the Net Amount of Eligible Accounts owing by VBrick, plus (iii) the lesser of (1) eighty-five percent (85%) of the Net Amount of Eligible Inventory, (2) fifty percent (50%) of the lower of cost or market value of Eligible Inventory and (3) the Inventory Sublimit, minus

(b) the aggregate amount of reserves implemented by Administrative Agent pursuant to Section 2.1, in each case determined as of such day;

provided, however, that Administrative Agent shall have the continuing right to reduce the percentage specified in clause (a)(i) of this definition by one percentage point or fraction of a percentage point for every percentage point or fraction of a percentage point of dilution of Accounts over five percent.

"Borrowing Base Certificate" means a certificate of Borrower Representative, signed by a Responsible Officer of Borrower Representative, setting forth the calculation of the Borrowing Base, including a calculation of each component thereof, all in form, presentation and detail satisfactory to Administrative Agent in its Permitted Discretion.

"Borrowing Notice" means a request for a Revolving Loan made by the Borrower Representative in compliance with Section 2.2.

"Business Day" means (a) any day that is not a Saturday, Sunday or a day on which commercial banks in Dallas, Texas or New York, New York are required or permitted to be closed and (b) with respect to any borrowing, payment or other dealings with respect to any Loan, any day which is a Business Day described in clause (a) preceding and which is also a day on which dealings in Dollar deposits are carried out in the London interbank market.

"Capital Expenditures" has the meaning prescribed for such term by GAAP.

"Capital Lease" means, with respect to any Person, any lease of property by such Person which, in accordance with GAAP, should be reflected as a capital lease on the balance sheet of such Person.

"Change of Control" means that (a) any "person" or "group" (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) shall have acquired beneficial ownership, directly or indirectly, of Equity Interests of Parent (or other securities convertible into such Equity Interests) representing fifty percent (50%) or more of the combined voting power of all Equity Interests of Parent entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Parent; provided, however, that the conversion of all or any portion of the Convertible Debt into shares of common stock of Parent in accordance with the terms of the Convertible Debt Documents shall not constitute a "Change of Control", (b) Robert J. Pallé shall cease to own and control, of record and beneficially, at least twenty-five percent (25%) of the Equity Interests of Parent, (c) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Parent by Persons who were neither (i) nominated by the board of directors of Parent nor (ii) appointed by directors so nominated, and (d) Parent shall no longer own, of record and beneficially, one-hundred percent (100%) of the Equity Interests and voting interest of each other Credit Party.

 

"Chattel Paper" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods.  "Chattel Paper" includes, without limitation, electronic chattel paper.

"Collateral" means all personal and real property of the Credit Parties in which a Lien is granted (or purported to be granted) to Administrative Agent (for the benefit of Lender Parties) or any other Lender Party, whether pursuant to this Agreement or any other Loan Document.

"Collateral Access Agreement" means a landlord waiver or subordination, bailee letter, acknowledgment agreement, use agreement or other agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in any of Credit Parties' books and records, Equipment, Inventory or other Collateral, in each case, in form and substance satisfactory to Administrative Agent in its Permitted Discretion.

"Collection Account" has the meaning given to such term in Section 5.3.

"Commercial Tort Claim" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, in the case of a Credit Party, any tort cause of action claimed by such Credit Party, including those listed on Schedule 7.32.

"Commitment" means, for each Lender, the obligation of such Lender to make Loans to Borrowers pursuant to the terms hereof in an aggregate amount not exceeding the amount set forth for such Lender in Schedule 1.1, as such amount may be modified from time to time pursuant to the terms hereof; provided, that no Lender's Commitment to make Revolving Loans shall exceed such Lender's Percentage Share of the Revolving Credit Limit.

"Compliance Certificate" means a certificate meeting the requirements of Section 8.6 and otherwise in form satisfactory to Administrative Agent in its Permitted Discretion.

"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 profits Taxes.

"Control Agreement" means, with respect to any Deposit Account or Securities Account, a control agreement, in form and substance acceptable to Administrative Agent in its Permitted Discretion, executed by Administrative Agent, the Credit Party owner of such Deposit Account or Securities Account and the applicable bank (with respect to a Deposit Account) or Securities Intermediary (with respect to a Securities Account), and pursuant to which Administrative Agent obtains "control" pursuant to the UCC over such Deposit Account or Securities Account (as applicable).

"Convertible Debt" means and refers to the obligations of the Parent and Drake due from time to time under and pursuant to the Convertible Debt Agreement.

 

"Convertible Debt Agreement" means that certain Amended and Restated Senior Subordinated Convertible Loan and Security Agreement, dated as of March 28, 2016, among (a) Parent and Drake, as borrowers, (b) Robert J. Pallé (as agent for the lenders), and (c) Robert J. Pallé, Carol M. Pallé,  Steven L. Shea and James H. Williams, as lenders.

"Convertible Debt Documents" means, collectively, the Convertible Debt Agreement, the Convertible Debt Mortgage and all other documents, instruments and agreements evidencing, securing  or otherwise relating to the Convertible Debt and the conversion of the Convertible Debt into Equity Interests of Parent, each as existing on the Agreement Date and as amended, supplemented, restated or otherwise modified from time to time with the consent of the Administrative Agent in its Permitted Discretion.

"Convertible Debt Mortgage" means that certain Amended and Restated Mortgage and Security Agreement, dated as of March 28, 2016, between Parent and Robert J. Pallé, as agent for the lenders in respect of the Convertible Debt.

"Credit Parties" means, collectively, each Borrower and each Guarantor.

"Debt" means, with respect to a Person, (a) all obligations for borrowed money of such Person, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other similar financial products, (c) all obligations or liabilities of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (d) all obligations of such Person in respect of the deferred purchase price of assets or services (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (e) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of the type otherwise described in this definition of any other Person, (f) asset securitizations and synthetic leases, (g) all obligations of such Person as a lessee under Capital Leases, (h) all net indebtedness, liabilities and other monetary obligations under interest rate, credit, commodity and foreign exchange swaps or similar transactions entered into for the purpose of hedging such Person's exposure to fluctuations in interest or exchange rates, currency valuations or commodity prices and all cancellations, buybacks, reversals, terminations, or assignments of any such transaction, and (i) all liabilities which would under GAAP be shown on such Person's balance sheet as a liability.

"Deed of Trust" means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by any Credit Party, each in favor of Administrative Agent and in form and substance satisfactory to Administrative Agent in its Permitted Discretion, encumbering the Real Property Collateral of such Credit Party.

"Default" means an event, condition or occurrence that, with the giving of notice, the passage of time, or both, would constitute an Event of Default.

"Default Rate" means a rate per annum equal to the lesser of (a) the sum of (i) the Adjusted LIBOR Rate for such Loan (which shall be adjusted, from time to time, simultaneously with any change in the LIBOR Rate) plus (ii) two percent (2.0%) and (b) the Maximum Rate.

"Defaulting Lender" means any Lender that fails to make any advance (or other extension of credit) that it is required to make hereunder on the date that it is required to do so hereunder.

 

"Defaulting Lender Rate" means the interest rate then applicable to Revolving Loans.

"Deposit Account" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a nonnegotiable certificate of deposit or a demand, time, savings, passbook, or similar account maintained with a bank.

"Designated Account" means account No. 6700074809 maintained at Sterling by Parent.

"Distribution" means, for any Person:  (a) any dividend, payment or distribution (whether in cash, securities or other property, but excluding dividends or distributions in the form of Equity Interests of such Person to (i) employees, officers and/or directors pursuant to equity incentive plans of such Person and (ii) customers and vendors of such Person in the ordinary course of such Person's business, as determined by such Person's board of directors or managers (or similar governing body) consistent with Applicable Law) made on account of any class of such Person's Equity Interests, or (b) any payment (whether in cash, securities or other property, but excluding dividends or distributions in the form of Equity Interests of such Person to (i) employees, officers and/or directors pursuant to equity incentive plans of such Person and (ii) customers and vendors of such Person in the ordinary course of such Person's business, as determined by such Person's board of directors or managers (or similar governing body) consistent with Applicable Law) on account of, or setting apart of assets for a sinking or analogous fund for,  the purchase, redemption, retirement, cancellation, termination, defeasance or acquisition of any (i) shares of its Equity Interests or (ii) options, warrants or other rights to purchase Equity Interests in such Person.

"Document" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, any bill of lading, dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, or any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold and dispose of the document and the goods it covers, and which purports to be issued by or addressed to a bailee and purporting to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.  "Document" includes, without limitation, electronic documents.

"Dollars" or "$" refers to lawful money of the United States of America.

"EBITDA" means, with respect to Parent and its consolidated Subsidiaries for any period, an amount equal to (a) consolidated net earnings (or loss), for such period minus (b) extraordinary gains for such period plus (c) Interest Expense (whether paid or accrued), income taxes, depreciation and amortization for such period plus (d) the Permitted EBITDA Add-Back Amount, in each case determined for Parent and its Subsidiaries on a consolidated basis in accordance with GAAP on a rolling twelve month basis ending on the last day of the measurement period.

"Eligible Account" means, with respect to any Borrower, an Account of such Borrower which is acceptable to Administrative Agent for purposes of determining the Borrowing Base and meets all criteria for inclusion in the Borrowing Base as determined and established by Administrative Agent from time to time in its Permitted Discretion.  Without limiting the discretion of Administrative Agent to establish other criteria of ineligibility, unless otherwise agreed by Administrative Agent, Eligible Accounts of any Borrower shall not include any Account: (a) which is not owned exclusively by such Borrower, (b) which is not subject to a first priority and perfected security interest in favor of Administrative Agent or which is subject to any other Lien (other than Permitted Liens securing the Convertible Debt), (c) with respect to which more than 90 days have elapsed since the date of the original invoice or which is unpaid, in whole or in part, more than 60 days after its original due date, (d) if thirty-five percent (35%) or more of the aggregate Dollar

 

amount of outstanding Accounts owed at such time by the Account Debtor thereon to such Borrower or any of its Affiliates is classified as ineligible under clause (c) above, (e) which are owed by an Account Debtor whose total obligations (including the obligations of such Account Debtor's Affiliates) owing to such Borrower and/or its Affiliates would exceed (i) with respect to Toner Cable Equipment, Inc., thirty-five percent (35%), (ii) with respect to Best Buy, World Cinema, Inc., Charter Communications and North American Cable, thirty percent (30%), and (iii) with respect to all other Account Debtors, twenty percent (20%), of the aggregate amount of all Eligible Accounts of the Borrowers, to the extent of such excess, (f) which represents a sale on a bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment, or other repurchase or return basis or a progress billing under an agreement which requires further performance by such Borrower, is otherwise contingent on Borrower's completion of any future performance or is subject to any other terms by reason of which the payment by the Account Debtor may be conditioned (it being agreed that Accounts owing by VBrick pursuant to the arrangement in effect on the Agreement Date shall not be considered ineligible under this clause (f)), (g) with respect to which any of the following events has occurred as to the Account Debtor on such Account: death or judicial declaration of incompetency, if the Account Debtor is an individual, the filing of any petition for relief under the Bankruptcy Code or other insolvency laws, a general assignment for the benefit of creditors, the appointment of a receiver or trustee, application or petition for dissolution, its dissolution, the sale or transfer of all or any material part of the assets or the cessation of the business as a going concern, (h) owed by an Account Debtor which does not maintain its chief executive office in the United States or Canada (not including Quebec) or is not organized under the laws of the United States or Canada (not including Quebec) or any state or province thereof, (i) which is not payable in United States Dollars, (j) owed by an Account Debtor which is an Affiliate or employee of any Borrower or any of Borrowers' Affiliates, (k) with respect to which either the perfection, enforceability, or validity of Administrative Agent's Lien in such Account, or Administrative Agent's right or ability to obtain direct payment to Administrative Agent of the proceeds of such Account, is governed by any federal, state, provincial or local statutory requirements other than those of the UCC, or comparable law of Canada (not including Quebec), (l) owed by an Account Debtor to which such Borrower or any of its Affiliates are indebted in any way, or which is subject to any right of setoff or recoupment, or if the Account Debtor thereon has disputed liability or made any claim with respect to any other Account due from such Account Debtor, but in each such case only to the extent of such indebtedness, setoff, recoupment, dispute, or claim, (m) which is evidenced by a promissory note or other instrument or by chattel paper, (n) which arises out of a sale not made in the ordinary course of such Borrower's business, (o) with respect to which the goods giving rise to such Account have not been shipped and delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been fully performed by such Borrower, and, if applicable, accepted by the Account Debtor, or with respect to which the Account Debtor has revoked its acceptance of any such goods or services, (p) which arises out of an enforceable contract or order which, by its terms, forbids, restricts or makes void or unenforceable the granting of a Lien by such Borrower to Administrative Agent with respect to such Account or otherwise requires the consent of the respective Account Debtor in order for the Administrative Agent to obtain direct payment of the proceeds of such Account, (q) with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States or (ii) any state of the United States or province or territory of Canada or any department, agency or instrumentality of such state, province or territory, (r) with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Country, (s) with respect to which the books and records evidencing or otherwise relating to such Account are located in a public warehouse, are in possession of a bailee or are in a facility leased by such Borrower, unless the warehouseman, bailee or lessor, as the case may be, has executed an enforceable Collateral Access Agreement, (t) with respect to which Administrative Agent believes that the prospect of collection of such Account is impaired or that the Account may not be paid by reason of the Account Debtor's financial inability to pay, or (u) owed by an Account Debtor, to the extent the amount owing thereon exceeds the credit limit extended to such Account Debtor by the relevant Borrower.  The identification of specific exclusions from eligibility herein is not exclusive or exhaustive.  Administrative Agent reserves the right in its Permitted Discretion to establish additional or different criteria for determining Eligible Accounts, at any time, without prior notice.

 

"Eligible Inventory" means, with respect to any Borrower, Inventory of such Borrower which is acceptable to Administrative Agent for purposes of determining the Borrowing Base and meets all criteria for inclusion in the Borrowing Base as determined and established by Administrative Agent from time to time in its Permitted Discretion.  Without limiting the discretion of Administrative Agent to establish other criteria of ineligibility, unless otherwise agreed by Administrative Agent, Eligible Inventory shall not include any Inventory (a) which is not owned exclusively by such Borrower or as to which Borrower does not have good, valid and marketable title thereto, (b) which is not subject to a first priority and perfected security interest in favor of Administrative Agent or which is subject to any other Lien (other than Permitted Liens securing the Convertible Debt), (c) other than finished goods and raw materials Inventory, (d) which is not in good condition, or is unmerchantable or does not meet all standards imposed by any Governmental Authority having regulatory authority over such goods or their use or sale, (e) which is not currently either usable or salable, at prices approximating at least cost, in the normal course of such Borrower's business, or is slow moving or stale, (f) which is obsolete or returned (it being agreed, however, that returned Inventory which is in its unopened, original box and returned to general stock shall not be ineligible under this clause (f) as returned Inventory) or repossessed or used goods taken in trade or goods that constitute spare parts, packaging and shipping materials or supplies used or consumed in such Borrower's business, (g) which is located outside the United States or is in-transit from vendors or suppliers, (h) as to which such Borrower does not have actual and exclusive possession thereof (either directly or through a bailee or agent of such Borrower who has executed a Collateral Access Agreement) or which is located in a public warehouse or is in possession of a bailee or in a facility leased by such Borrower or an Affiliate thereof unless the warehouseman, bailee, or lessor, as the case may be, has delivered to Administrative Agent a Collateral Access Agreement and unless it is segregated or otherwise separately identifiable from goods of others, if any, stored on the premises, (i) which is on consignment from any consignor, or on consignment to any consignee, (j) is subject to a bill of lading or other document of title or (k) that contains or bears any Proprietary Rights licensed to such Borrower by another Person (not including any Inventory subject to an "off the shelf" license as to which Administrative Agent has consented to) unless such Borrower has delivered to Administrative Agent a consent or sublicense agreement from such licensor in form and substance acceptable to Administrative Agent in its Permitted Discretion or Administrative Agent is otherwise satisfied that it may sell or otherwise dispose of such Inventory in accordance with Section 11.2 without infringing the rights of the licensor of such Proprietary Rights or violating any contract of such Borrower with such licensor (and without payment of any royalties other than any royalties due with respect to the sale or disposition of such Inventory pursuant to the existing license agreement).  The identification of specific exclusions from eligibility herein is not exclusive or exhaustive.  Administrative Agent reserves the right in its Permitted Discretion to establish additional or different criteria for determining Eligible Inventory, at any time, without prior notice.

"Eligible Transferee" means (a) at any time that an Event of Default has occurred and is continuing, any Person approved by Administrative Agent and (b) so long as no Event of Default is continuing, (i) any Lender (other than a Defaulting Lender) and any Affiliate of any Lender, (ii) a commercial bank, savings and loan association or savings bank organized under the laws of the United States or any state thereof, and having total assets in excess of $1,000,000,000, (iii) a commercial bank organized under the laws of any other country or political subdivision thereof so long as (1) such bank is acting through a branch or agency located in the United States or is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country and (2) such bank has total assets in excess of $1,000,000,000, and (iv) any other Person (other than a natural person) that is an "accredited investor" as defined in Regulation D under the Securities Act that extends credit or buys loans in the ordinary course of its business.

 

 "Environmental Laws" means any and all applicable federal, state, provincial, foreign or local statutes, laws, rules, regulations, ordinances, codes, binding and enforceable guidelines, binding and enforceable written policies or rules of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case relating to the environment, the effect on the environment or employee health or relating to emissions, discharges, releases or threatened releases of Hazardous Materials or any other pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

"Equipment" has the meaning prescribed for such term as defined by the UCC (which definition is incorporated herein by reference), wherever located, and whether now or hereafter existing, and all parts thereof, all accessions thereto and all replacements therefor.  The Equipment includes, without limitation, with respect to a Person, all personal property used or useable by such Person in its business.

"Equity Interests" means, with respect to a Person, shares of capital stock, partnership interests, membership or limited liability company interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such interest.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

"ERISA Affiliate" means (a) any Person, trade or business (whether or not incorporated) subject to ERISA whose employees are treated as being employed by the same employer as the employees of any Credit Party under Section 414(b) of the IRC, (b) any Person, trade or business (whether or not incorporated) subject to ERISA whose employees are treated as being employed by the same employer as the employees of any Credit Party under Section 414(c) of the IRC, (c) solely for purposes of  Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which any Credit Party is a member under Section 414(m) of the IRC, or (d) solely for purposes of  Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with any Credit Party and whose employees are aggregated with the employees of any Credit Party under Section 414(o) of the IRC.

"ERISA Benefit Plan" means any "employee benefit plan" (as defined in  Section 3(3) of ERISA) as to which any Credit Party or any ERISA Affiliate (a) is (currently or hereafter), or at any time during the immediately preceding six (6) years has, sponsored, maintained or contributed to on behalf of any of its employees or (b) has (currently or hereafter), or has had at any time within the preceding six (6) years, any liability (contingent or otherwise).

"Event of Default" has the meaning prescribed by Section 10.1.

"Exchange Act" means the Securities Exchange Act of 1934, as in effect from time to time.

"Excluded Account" means (a) any Deposit Account of a Credit Party specially and exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of any Credit Party's employees, (b) the TD Holding Account, so long as the amount held therein does not exceed $250,000 (unless any amount in excess thereof is transferred to the Parent Sterling Collection Account within one (1) Business Day, as set forth in Section 5.3) and (c) the TD Operating Account, so long as the amount held therein is $0 until such account is closed in accordance with Section 5.3.

 

"Excluded Property" means, with respect to any Credit Party, collectively, (i) property of such Credit Party subject to Liens permitted by clauses (d) or (m) of the definition of Permitted Liens solely in the event and to the extent that a grant or perfection of a Lien in favor of Administrative Agent on any such property is prohibited by or results in a breach or termination of, or constitutes a default under, the documentation governing such Liens or the obligations secured by such Liens (other than to the extent that such terms would be rendered ineffective pursuant to Section 9.406, 9.407, 9.408 or 9.409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction and other than to the extent all necessary consents to creation, attachment and perfection of the Administrative Agent's Liens thereon have been obtained) and, in any event, immediately upon the ineffectiveness, lapse or termination of such terms or the obtainment of such consents, such property shall cease to constitute Excluded Property and shall be Collateral, (ii) any personal property lease, contract, permit, license, franchise or letter of credit right of such Credit Party, solely in the event and to the extent that a grant or perfection of a Lien on such personal property lease, contract, permit, license, franchise or letter of credit right is prohibited by applicable law or results in a breach or termination of, or constitutes a default under, any such personal property lease, contract, permit, license, franchise or letter of credit right (other than to the extent that such law or terms would be rendered ineffective pursuant to Section 9.406, 9.407, 9.408 or 9.409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction and other than to the extent all necessary consents to creation, attachment and perfection of the Administrative Agent's Liens thereon have been obtained) and, in any event, immediately upon the ineffectiveness, lapse or termination of such law or terms or the obtainment of such consents, such personal property lease, contract, permit, license, franchise or letter of credit right shall cease to constitute Excluded Property and shall be Collateral, (iii) the voting equity interests of controlled foreign corporations (as defined in the IRC) of such Credit Party in excess of 65% of the voting rights of such corporations and (iv) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law, provided that upon submission and acceptance by the United States Patent and Trademark Office of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision) such intent-to-use trademark application shall cease to constitute Excluded Property and shall be Collateral.

"Excluded Taxes" means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient:  (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case (i) imposed as a result of such Recipient 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) in the case of any Recipient that is a Foreign Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to Applicable Law in effect on the date on which (i) such Recipient acquires such interest in the Loan or Commitment or (ii) such Recipient changes its lending office, except in each case to the extent that, pursuant to Section 3.5, amounts with respect to such Taxes were payable either to such Recipient's assignor immediately before such Recipient became a party hereto or to such Recipient immediately before it changed its lending office, (c) Taxes resulting from such Recipient's failure to comply with Section 3.5(f) and (d) any U.S. federal withholding Taxes imposed under FATCA.

 

"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), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the IRC, any intergovernmental agreement entered into in connection with the implementation of such Sections of the IRC and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.

"Fiscal Month" means a calendar month.

"Fiscal Quarter" means one of four fiscal quarters of a Fiscal Year, each consisting of a period of three (3) consecutive Fiscal Months, with the first of such quarters beginning on the first day of a such Fiscal Year and the last of such quarters ending on the last day of such Fiscal Year.

"Fiscal Year" means Parent's fiscal year for financial accounting purposes, beginning on January 1 and ending on December 31 of such year.

"Fixed Charge Coverage Ratio" means, for Parent and its consolidated Subsidiaries on any date of determination, the ratio of (a) (i) EBITDA less (ii) the sum of (A) unfinanced Capital Expenditures plus (B) taxes paid in cash, plus (C) to the extent Distributions have not been reflected in net income, cash Distributions that are made and permitted pursuant to Section 9.10(ii), to, (b) the sum of (i) Interest Expense paid in cash, plus (ii) principal payments made or required to be made on any and all long term Debt (other than in respect of the Revolving Loans), in each case determined for Parent and its Subsidiaries on a consolidated basis in accordance with GAAP on a rolling twelve month basis on such date of determination.

"Foreign Lender" means a Lender that is not a U.S. Person.

"GAAP" means generally accepted accounting principles in the United States, as in effect from time to time, consistently applied.  Notwithstanding anything herein to the contrary, all financial statements delivered hereunder shall be prepared and all financial covenants contained herein shall be calculated, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any similar account principal) permitting a Person to value its financial liabilities at the fair value thereof.

"General Intangibles" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and in any event includes, without limitation, all intangible personal property of every kind and nature (other than Accounts, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Securities Accounts, Documents, Instruments, Investment Property, Letter of Credit Rights, Letters of Credit and money), including, without limitation, contract rights, business records, rights and claims against carriers and shippers, customer lists, registrations, licenses, franchises, tax refund claims, rights to indemnification, warranty or guaranty contract, claims for any damages arising out of or for breach or default under or in connection with any contract, rights to exercise or enforce remedies, powers and privileges under any contract and rights and claims to any amounts payable under any contract of insurance, including without limitation, business interruption, property, casualty, key employee life or any other insurance.

"Governmental Authority" means any federal, state or local government, any subdivision thereof, and any agency, entity, instrumentality or authority owned or controlled thereby.

"Guarantor" means, collectively, each Person executing a Guaranty Agreement in favor of Administrative Agent (including, without limitation, Far East and any other direct or indirect Subsidiary of Parent, whether now or hereafter existing, other than a Borrower hereunder or an Immaterial Subsidiary).

 

"Guaranty" means, with respect to a Person, any direct or indirect guaranty by such Person of any Debt or other obligation of another Person or any obligation by such Person to purchase or acquire or otherwise protect or insure a creditor against loss in respect of Debt or other obligations of another Person, but excluding customary contractual indemnities in contracts made in the ordinary course of business or under organizational documents.

"Guaranty Agreement" means each Guaranty Agreement now or hereafter executed by a Guarantor in favor of Administrative Agent, for the benefit of Lender Parties, pursuant to which such Guarantor guarantees the payment and/or performance of all or any portion of the Obligations of the Borrowers, in form and substance acceptable to Administrative Agent in its Permitted Discretion, as amended, restated, supplemented or otherwise modified from time to time.

"Hazardous Materials" means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.

"Hedge Agreement" means a "swap agreement" as that term is defined is defined in Section 101 (53B) (A) of the Bankruptcy Code.

"Immaterial Subsidiary" means each Subsidiary of Parent identified as such on Schedule 7.1, but only for so long as (a) the aggregate fair market value of the total assets of any individual Immaterial Subsidiary does not exceed $10,000 and (b) the aggregate fair market value of the total assets of all Subsidiaries designated as Immaterial Subsidiaries does not exceed $25,000 (it being understood that a Subsidiary identified as an Immaterial Subsidiary shall no longer be classified as such if it fails to abide by clauses (a) or (b) above, and in such event, Parent shall cause such Subsidiary to comply with Section 8.16 of this Agreement).

"Indemnified Claims" means any and all claims, demands, actions, causes of action, judgments, obligations, liabilities, losses, damages and consequential damages, penalties, fines, costs, fees, expenses, Lender Expenses and disbursements (including without limitation, fees and expenses of attorneys and other professional consultants and experts in connection with investigation or defense) of every kind, known or unknown, existing or hereafter arising, foreseeable or unforeseeable, which may be imposed upon, threatened or asserted against, or incurred or paid by, an Indemnified Person at any time and from time to time, because of, resulting from, in connection with, or arising out of any transaction, act, omission, event or circumstance in any way connected with the Collateral, the Loan Documents (including enforcement of Administrative Agent's or Lenders' rights thereunder or defense of Administrative Agent's or Lenders' actions thereunder), any Default or Event of Default or any acts or omissions taken by such Indemnified Person in connection with this Agreement or administration of the Loan Documents.

"Indemnified Persons" means, collectively, Administrative Agent, Swing Lender, each Lender and their Affiliates, Equity Interest owners, officers, directors, members, managers, employees, agents and representatives.

"Indemnified Taxes" means (a) any Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document and (b) to the extent not otherwise described in the foregoing clause (a) of this definition, Other Taxes.

 

"Installment Payment Date" means, with respect to the Term RE Loan, the first day of each calendar month, commencing on February 1, 2017 and continuing thereafter until the earlier of the Termination Date or the date on which the Term RE Loan has been paid in full.

"Instrument" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in the ordinary course of business is transferred by delivery with any necessary endorsement or assignment.

"Intangible Assets" means, for any Person, assets that are treated as intangible pursuant to GAAP, including, without limitation: (a) obligations owing to such Person by its stockholders, officers, directors, members, managers, partners, employees, subsidiaries, Affiliates or any Person in which any such stockholder, officer, director, member, manager, partner, employee, subsidiary, or Affiliate owns any interest and (b) any asset which is intangible or lacks intrinsic or marketable value or collectability, including, without limitation, goodwill, noncompetition agreements, patents, copyrights, trademarks, franchises, organization or research and development costs.

"Interest Expense" means, for a Person for a period, total interest expense for such Person for such period, as determined in accordance with GAAP.

"Inventory" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, with respect to a Person, goods (including goods in-transit) that (a) are held or to be held by such Person for sale or lease or to be furnished under a contract of service, (b) are leased or to be leased by such Person as lessor or (c) consist of raw materials, work in process, finished goods or materials used or consumed in such Person's business.

"Inventory Sublimit" means an amount equal to the product of (a) three (3) times (b) the amount determined pursuant to clause (a)(i) of the definition of Borrowing Base.

"Investment" means, with respect to any Person, any investment made, directly or indirectly by such Person in, to or with respect to any other Person, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP, whether by (a) acquisition of shares of capital stock or other Equity Interests, indebtedness, securities or other obligations, (b) a loan, guarantee, advance, capital contribution or other like investment, or (c) any purchase or other acquisition (or any commitment to make any such purchase or other acquisition) of all or a material portion of the assets of (or any division or business line of) any other Person, in each case, whether made in cash, by the transfer of property or otherwise (including, without limitation, any joint venture relationship).

"Investment Property" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a security (whether certificated or uncertificated) security entitlement, securities account, commodity contract, or commodity account.

"IP License Agreement" any license agreement granting to a Borrower a license of Proprietary Rights that is used in Borrowers' Inventory.

 

"IRC" means the Internal Revenue Code of 1986, as amended and in effect from time to time.

"IRS" means the United States Internal Revenue Service.

"Joinder Agreement" has the meaning given to such term in Section 8.16.

"Lender" and "Lenders" have the respective meanings set forth in the preamble hereto and shall include the Swing Lender and any other Person made a party to this Agreement in accordance with the provisions of Section 14.13.

"Lender Expenses" has the meaning prescribed by Section 14.5.

"Lender Parties" means, collectively, Administrative Agent, Swing Lender and each Lender.

"Letter of Credit Rights" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference, and includes, without limitation, a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance and whether or not evidenced by a writing.

"Leverage Ratio" means, with respect to Parent and its consolidated Subsidiaries as of any date of determination, the ratio of (a) the difference of (i) the total liabilities of Parent and its consolidated Subsidiaries as reflected on a consolidated balance sheet of Parent  and its consolidated Subsidiaries prepared as of such date in accordance with GAAP, minus (ii) the Subordinated Debt of Parent and its consolidated Subsidiaries as of such date to (b) the Tangible Net Worth of Parent and its consolidated Subsidiaries as of such date.

"LIBOR Rate" means the rate per annum published on each Business Day in the "Money Rates" table of The Wall Street Journal (or such other presentation within The Wall Street Journal as may be adopted hereafter for such information) as the one-month LIBOR rate, adjusted daily; provided, that, if any change in market conditions or any change in Applicable Law shall at any time after the date hereof, in the reasonable opinion of the Administrative Agent, make it unlawful or impractical for any Lender (other than as a result of such Lender's creditworthiness) to fund or maintain Loans at the LIBOR Rate or to continue such funding or maintaining, or to determine or change interest rates based on the LIBOR Rate, then the LIBOR Rate shall be adjusted to a rate per annum determined by the Administrative Agent in its Permitted Discretion in order to adequately and fairly reflect Administrative Agent's costs (provided that, upon Borrower Representative's request, the Administrative Agent shall furnish to Borrower Representative a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment).

"Lien" means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute, or contract, and including a security interest, collateral assignment, charge, claim, or lien arising from a security agreement, mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, conditional sale, trust receipt, lease, consignment or bailment for security purposes or similar agreement, or any contingent or other agreement to provide any of the foregoing.

"Loan" means any loan or advance made by Lenders to Borrowers under this Agreement and includes Revolving Loans, the Term RE Loan and Swing Loans made by Swing Lender, and "Loans" means, collectively, all such loans and advances.

 

"Loan Documents" means this Agreement, each Deed of Trust, each Guaranty Agreement (if any), each Subordination Agreement, the Term RE Note, each Pledge Agreement, each Control Agreement, each Collateral Access Agreement, and any other documents, instruments or agreements heretofore, now or hereafter evidencing, securing, guaranteeing or otherwise relating to, or executed by any Credit Party in connection with, the Obligations, the Collateral or any other aspect of the transactions contemplated by this Agreement, and in each case including any and all renewals, extensions, modifications, amendments, or restatements of any of the foregoing.

"Machinery" refers to Collateral that would be classified within the definition of "Equipment" but for the fact that such items have become so affixed to the related Real Property that an interest has arisen therein under real property law.

"Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X of the Federal Reserve Board.

"Material Adverse Effect" means the occurrence of any of the following:  (i) a material adverse change in, or effect on, the business, assets, operations, prospects or financial condition of the Credit Parties, taken as a whole, (ii) a material impairment of the ability of any Credit Party to perform any obligations under the Loan Documents to which it is a party, (iii) a material adverse effect upon the Collateral or the validity, perfection or priority of Administrative Agent's Liens on the Collateral, or (iv) a material adverse effect upon the legality, validity, binding effect or enforceability of any Loan Document.

"Maturity Date" means December 28, 2019.

"Maximum Rate" means the maximum rate of interest permitted to be charged under Applicable Law from time to time in effect; provided, that in the event that Texas law is applicable hereto and Applicable Law provides for an interest ceiling on any day under Chapter 303 of the Texas Finance Code, as amended (the "Texas Finance Code"), for that day the ceiling shall be the "monthly ceiling" as referred to and in effect from time to time under the provisions of Section 303.004 of the Texas Finance Code.

"Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Credit Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding six plan years, has made or been obligated to make contributions.

"Net Amount" means, (a) with respect to an Eligible Account of any Borrower at any time, an amount equal to:  (i) the gross amount of such Account less (ii) sales, excise or similar taxes, and all returns, discounts, claims, credits, rebates and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed, (b) with respect to any Eligible Inventory at any time, the net orderly liquidation value of such Inventory, as determined pursuant to the most recent appraisal acceptable to Administrative Agent in its discretion, and (c) with respect to Real Property Collateral at any time, the fair market value thereof, as determined pursuant to the most recent appraisal acceptable to Administrative Agent in its discretion.

"Obligations" means all obligations, liabilities and indebtedness now or hereafter owing by any Credit Party to any Lender Party pursuant to or otherwise arising in connection with this Agreement or any other Loan Documents, including, without limitation, all loan repayment obligations, accrued interest obligations (including interest that accrues after the commencement of an insolvency proceeding, regardless of whether allowed or allowable in whole or in part as a claim in such insolvency proceeding), Indemnified Claims, Lender Expenses (including any fees or expenses that accrue after the commencement of an insolvency proceeding, regardless of whether allowed or allowable in whole or in part as a claim in such insolvency proceeding), all obligations or liabilities arising from Bank Products, premiums, fees or guarantees arising out of, under, pursuant to, in connection with or evidenced by this Agreement or any other Loan Document, in each case, whether direct or indirect, primary or secondary, joint, several, or joint and several, fixed or contingent, including indebtedness and obligations, if any, which may be assigned to or acquired by any Lender Party, and any and all renewals and extensions of the foregoing or of any part thereof.

 

"OFAC" means the Office of Foreign Assets Control of the United States Department of the Treasury.

"Other Connection Taxes" means, with respect to any Recipient, Taxes that are imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

"Other Taxes" means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

"Participant Register" has the meaning given to such term in Section 14.13(e).

"Patriot Act" means the USA Patriot Act (Title III of Pub. L. 107–56), as amended, supplemented or replaced from time to time.

"Payment Intangibles" means all "payment intangibles" as defined in the UCC, which definition is incorporated herein by reference.

"PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.

"Percentage Share" means, with respect to any Lender, (a) unless otherwise specifically set forth therein, when used in Sections 2.1, 2.2 or 3.2, in any request for Loans pursuant to Section 2.2, or when no Loans are outstanding hereunder, the percentage set forth opposite such Lender's name on Schedule 1.1 and (b) when used otherwise, the percentage obtained by dividing (i) the sum of the unpaid principal balance of such Lender's Loans at the time in question by (ii) the sum of the aggregate unpaid principal balance of all Loans at such time.

"Perfection Certificate" means any perfection certificate executed by the Credit Parties on and as of the Agreement Date which provides information with respect to the assets and/or property of such Credit Parties as of the Agreement Date and is in form acceptable to Administrative Agent in its Permitted Discretion and any additional similar perfection certificate delivered by one or more Credit Parties to the Administrative Agent after the Agreement Date pursuant to Section 8.16.

"Permitted Debt" shall have the meaning given to such term in Section 9.5.

 

"Permitted Discretion" means, a determination made by the Administrative Agent or a Lender Party (as applicable) in the exercise of its commercially reasonable business judgment (from the perspective of a secured asset-based lender).

"Permitted EBITDA Add-Back Amount" means, for any period, an amount equal to the sum of:  (a) the aggregate amount of any non-cash intangible asset impairment expenses incurred by Parent and its consolidated Subsidiaries during such period to the extent recognized in accordance with GAAP and in an aggregate amount not exceeding $2,800,000 during the term of this Agreement plus (b) the aggregate amount of any non-cash expenses incurred by the Parent and its consolidated Subsidiaries in connection with the termination of any pension plan in accordance with resolutions adopted by such Person's board of directors, to the extent that such expense reduces Parent's consolidated net income (loss), plus (c) the amount of any non-cash inventory reserve established by Parent or its consolidated Subsidiaries, as set forth in Parent's financial statements from time to time during such period, in an amount not exceeding $1,000,000 for any twelve-month period and only to the extent such reserve(s) reduce the Parent's consolidated net income (loss), plus (d) the amount of any non-cash equity-based compensation expenses of the Parent and its consolidated Subsidiaries during such period contemplated by FASB Accounting Standards Codification Topic 718 in an amount not exceeding $200,000 at any time, plus (e) fees, costs and expenses (including, without limitation attorneys' fees) incurred by Parent and its consolidated Subsidiaries during such period in connection with the preparation, negotiation and closing of the transactions contemplated by this Agreement and the other Loan Documents.

"Permitted Investment" means, with respect to any Credit Party, (a) advances made in connection with purchases of goods and services in the ordinary course of business, (b) acquisitions (not otherwise prohibited by this Agreement) of Equipment by such Credit Party for use in the ordinary course of business, (c) Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business, (d) guarantees constituting Permitted Debt, (e) direct obligations of the United States of America or any agency thereof, or obligations guaranteed by the United States of America, that mature within one year from the date of acquisition thereof, (f) certificates of deposit maturing within one year from the date of acquisition, issued by a commercial bank organized under the laws of the United States of America or any state thereof having capital and surplus aggregating at least $100,000,000, (g) commercial paper of an issuer rated at least A-1 by Standard & Poor's Corporate or P-1 from Moody's Investor Services Inc., (h) money market mutual funds so long as substantially all of the assets of such fund are comprised of securities of the type described in clauses (e), (f) and (g) above, (i) travel and similar advances to employees made in the ordinary course of business, and (j) loans made by Parent to certain of its employees from time to time who receive grants of restricted Equity Interests issued by Parent, in an amount equal to income tax liability arising from receipt of such restricted Equity Interests in the year in which granted, which loans are due and payable in full no later than one year after the date of such grant; provided that the aggregate outstanding amount of such loans shall not exceed $100,000, at any time.

"Permitted Liens" means, with respect to any Credit Party, (a) Administrative Agent's Liens, (b) Liens for unpaid taxes, assessments or other governmental charges or levies that either (i) are not delinquent or (ii) do not have priority over the Administrative Agent's Liens and are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and for which adequate reserves are maintained on the books of such Credit Party in accordance with GAAP, (c) Liens, if any, described in Schedule 7.22, but only to the extent such Liens secure Permitted Debt existing on the Agreement Date and any Refinancing Debt, (d) Liens which constitute purchase money Liens and secure Debt permitted under clause (d) of Section 9.5, but only to the extent such Liens attach only to the property acquired by the incurrence of such purchase money secured Debt and such Liens only secure the Debt incurred to acquire such property or any related Refinancing Debt, (e) the interests of lessors or sublessors under operating leases entered into in the ordinary course of business and not prohibited by any other provision hereof, (f) statutory Liens in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers or suppliers, incurred in the ordinary course of business of such Credit Party and not in connection with the borrowing of money, and which Liens are for sums not delinquent or sums being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and for which adequate reserves are maintained on the books of such Credit Party in accordance with GAAP, (g) Liens arising from deposits made in connection with obtaining worker's compensation or other unemployment insurance, (h) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business, (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business, (j) judgment liens in respect of judgments that do not constitute an Event of Default, (k) non-exclusive licenses of intellectual property rights granted by such Credit Party in the ordinary course of business, (l) with respect to real property, zoning restrictions, easements, rights of way, restrictions, reservations, declarations, licenses, covenants, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of such Credit Party, or, in the case of the Real Property Collateral, encumbrances that have been insured over by the mortgagee title insurance policy insuring Administrative Agent's interest in such Real Property Collateral, (m) Liens on cash deposits to secure the performance of tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, insurance, leases, government contracts, trade contracts, performance and return of money bonds, letters of credit and other similar obligations (exclusive of obligations for the payment of borrowed money) entered into in the ordinary course of business, (n) security deposits to public utilities or to any municipalities or Governmental Authority or other public authorities when required by such utility, municipality, Governmental Authority or other public authority in connection with the supply of services or utilities and (o) statutory or common law rights of setoff of depository banks with respect to funds of Credit Parties at such banks to secure fees and charges in connection with returned items or the standard fees and charges of such banks in connection with Deposit Accounts maintained by Credit Parties at such banks (but not any other Debt or other obligations).

 

"Person" means any individual, corporation, joint venture, general or limited partnership, trust, unincorporated organization or Governmental Authority.

"Pledge Agreement" means, collectively, each Pledge Agreement now or hereafter executed by any Credit Party in favor of the Administrative Agent, for the benefit of the Lender Parties, pursuant to which such Credit Party pledges and grants to Administrative Agent as security for the Obligations, a security interest in all or any portion of the Equity Interests owned by it, in form and substance acceptable to Administrative Agent in its Permitted Discretion as amended, restated, supplemented or otherwise modified from time to time.

"Proprietary Rights" means collectively, all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational, foreign laws or otherwise, including, without limitation, inventions, invention disclosures, designs, blueprints, plans, specifications, licenses, permits, patents, patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, patent, trademark and service mark applications, trade secrets, domain names, good will and all licenses and rights related to any of the foregoing, including, without limitation, all royalties, license fees or other payments due under or in respect of any of the foregoing, all extensions, renewals, reissues, divisions and continuations of any of the foregoing, and all rights to sue at law or in equity for past, present and future infringement, misappropriation, violation or other impairment of any of the foregoing, including the right to receive all proceeds and damages therefrom.

 

"Protective Advances" has the meaning set forth in Section 2.4.

"Real Property" means any estates or interests in real property now owned or hereafter acquired by any Credit Party and the improvements thereto.

"Real Property Collateral" means the Real Property identified on Schedule 7.17 and any Real Property hereafter acquired by any Credit Party.

"Recipient" means any of (a) the Administrative Agent, (b) the Swing Lender and (c) any Lender, as applicable and "Recipients" means all of the foregoing collectively.

"Refinancing Debt" means, with respect to any Debt of any Person, refinancings, renewals, or extensions thereof so long as (a) the terms and conditions of such refinancings, renewals, or extensions do not materially impair the prospects of repayment of the Obligations or materially impair such Person's creditworthiness, (b) the terms of such refinancings, renewals and extensions are not less favorable to the obligor thereon or to the Lender Parties than the Debt so refinanced, renewed or extended (individually or in the aggregate), (c) such refinancings, renewals, or extensions do not result in an increase in the principal amount of the Debt so refinanced, renewed, or extended, (d) such refinancings, renewals, or extensions do not result in an increase in the interest rate with respect to the Debt so refinanced, renewed, or extended, (e) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Debt so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are materially more burdensome or restrictive to such Person, (f) if the Debt that is refinanced, renewed, or extended (or any Lien securing such Debt) was subordinated in right of payment or priority to the Obligations (or any Lien securing any Obligations), then the terms and conditions of the refinancing, renewal, or extension must include subordination terms and conditions that are at least as favorable to the Lender Parties as those that were applicable to the refinanced, renewed, or extended Debt and any Liens securing such Debt, and (g) the Debt that is refinanced, renewed, or extended is not recourse to any Person that is liable on account of the Obligations other than that Person or those Persons which were obligated with respect to the Debt that was refinanced, renewed, or extended.

"Register" has the meaning given to such term in Section 14.13(b).

"Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to an ERISA Benefit Plan that is subject to Title IV of ERISA other than those events as to which the 30 day notice period is waived under 29 C.F.R. Sections 4043.22, .23, .25, .27 or .28.

"Reporting Date" means, with respect to any Schedule hereto, (i) initially, the Agreement Date and (ii) thereafter, the most recent date as to which such Schedule was updated or required to be updated, as applicable, in accordance with the terms hereof.

"Required Lenders" means (a) Administrative Agent and (b) Lenders whose aggregate Percentage Shares equal or exceed fifty-one percent (51%); provided, however, at any time there are two (2) or more Lenders, Required Lenders must include at least (2) Lenders.

"Responsible Officer" means, for any Person, the chief executive officer, chief financial officer, chief operating officer, controller or president of such Person and, in addition, with respect to a Borrowing Base Certificate or a Compliance Certificate, the treasurer of such Person or any other Person authorized by board resolution and approved by Administrative Agent in its Permitted Discretion.

"Revolving Credit Limit" means $5,000,000.

 

"Revolving Loans" has the meaning set forth in Section 2.1(a).

"Revolving Note" has the meaning set forth in Section 2.1(a).

"Sanctioned Country" means, at any time, a country or territory which is the subject or target of any Sanctions.

"Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC, the U.S. Department of State, any other U.S. government entity, the United Nations Security Council or any similar list maintained by Canada, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any Person described in clauses (a) or (b) of this definition.

"Sanctions" means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, the U.S. Department of Commerce or the U.S. Department of the Treasury or (b) the United Nations Security Council, the European Union of Her Majesty's Treasury of the United Kingdom or the relevant sanctions authority of Canada, and in each case, the regulations promulgated thereunder.

"Securities Account" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference.

"Securities Act" means the Securities Act of 1933, as amended from time to time, and any successor statutes

"Securities Intermediary" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference.

"Settlement" has the meaning set forth in Section 2.5(b)

"Settlement Date" has the meaning set forth in Section 2.5(b).

"Shareholder's Equity" means, as of any date, stockholder's or member's equity as determined in accordance with GAAP or, in the case of a partnership, a partner's partnership interest.

"Solvent" means, when used with respect to any Person at any time of determination, that:

(a) the assets of such Person, at a fair valuation, are in excess of the total amount of its liabilities (including contingent, subordinated, unmatured and unliquidated liabilities); and

(b) the present fair saleable value of such Person's assets is greater than the total amount of its existing debts (including contingent, subordinated, unmatured and unliquidated liabilities) as such debts become absolute and matured; and

(c) such Person is then able and expects to be able to pay its debts (including contingent, subordinated, unmatured and unliquidated liabilities) as they mature; and

(d) such Person has capital sufficient to carry on its business as conducted and as proposed to be conducted.

 

For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

"Sterling" means Sterling National Bank, a national banking association.

"Subordinated Debt" means (a) Debt (whether secured or unsecured) that is subordinated to the Obligations pursuant to a Subordination Agreement (including, without limitation, the Convertible Debt) or (b) unsecured Debt that is subordinated in right of payment to the Obligations, on terms acceptable to Administrative Agent in its Permitted Discretion, in each case that does not have a final maturity on or before the date that is six months after the Maturity Date.

"Subordination Agreement" means any subordination agreement among Administrative Agent, the applicable Credit Party and the applicable third party creditor (including, without limitation, any Affiliate of such Credit Party), pursuant to which all obligations and indebtedness now or hereafter owing by such Credit Party to such creditor are subordinated to the Obligations in right of payment and claim, and all Liens securing such obligations and indebtedness are subordinated to Administrative Agent's Liens in the Collateral, in form and substance satisfactory to Administrative Agent in its Permitted Discretion.

"Subsidiary" means, with respect to a Person, any other Person of which more than ten percent (10%) of the voting Equity Interests is owned or controlled directly or indirectly by such Person or one or more of its Subsidiaries, or a combination thereof; provided, that for the purposes of this definition, any Person that is required to be consolidated with a Credit Party in accordance with GAAP will be considered to be a Subsidiary of such Credit Party.

"Supporting Obligations" has the meaning prescribed for such term as defined by the UCC, which definition is incorporated herein by reference and includes letters of credit and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles, Instruments or Investment Property.

"Swing Lender" means Sterling or any successor Lender in such capacity.

"Swing Loan" has the meaning specified therefor in Section 2.2(b) hereof.

"Swing Loan Sublimit" means the lesser of (a) the Availability and (ii) $4,500,000.

"Tangible Net Worth" means, for Parent and its consolidated Subsidiaries on any date of determination, (a) Shareholder's Equity plus (b) Subordinated Debt minus (c) Intangible Assets, in each case determined for Parent and its consolidated Subsidiaries as of such date on a consolidated basis in accordance with GAAP.

"Taxes" means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority or taxing authority thereof or therein, including any interest, additions to tax or penalties applicable thereto.

"TD Holding Account" means deposit account #7862471765 held by Far East with TD Bank.

"TD Operating Account" means deposit account #4325119926 held by Parent with TD Bank.

 

"Termination Date" means the earlier of (a) the Maturity Date, (b) the day on which the obligations of Lenders to make Loans hereunder have been terminated pursuant to Section 12.1 or (c) the day on which the Obligations first become due and payable in full (or, with the exception of contingent indemnity obligations for which no claim has been asserted are paid in full) and the obligation of Lenders to make Loans hereunder are terminated.

"Term RE Loan" has the meaning given to such term in Section 2.1(b).

"Term RE Loan Amount" means $3,500,000.00.

"Term RE Note" has the meaning given to such term in Section 2.1(b).

"Termination Event" shall mean (i) a Reportable Event with respect to any ERISA Benefit Plan; (ii) the existence with respect to any ERISA Benefit Plan of a non-exempt "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the IRC) for which any Credit Party could have liability that would result in a Material Adverse Effect; (iii) the withdrawal of any Credit Party or any ERISA Affiliate from an ERISA Benefit Plan or Multiemployer Plan during a plan year in which such entity was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iv) the providing of notice of intent to terminate an ERISA Benefit Plan in a distress termination described in Section 4041(c) of ERISA; (v) the institution by the PBGC of proceedings to terminate an ERISA Benefit Plan or Multiemployer Plan; (vi) any event or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Benefit Plan or Multiemployer Plan, or (b) that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vii) the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Credit Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization.

"Total Facility" means on any date of determination an amount equal to the sum of (a) the Revolving Credit Limit plus (b) the Term RE Loan Amount.

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

"UCC" means the Uniform Commercial Code in effect in the State of New York, as amended from time to time.

"U.S. Person" means any Person that is a "United States Person" as defined in Section 7701(a)(30) of the IRC.

"U.S. Tax Compliance Certificate" has the meaning given to such term in Section 3.5.

"VBrick" means VBrick Systems, Inc.

Any request for a Loan pending at a time when any condition precedent specified by Section 6.1 or Section 6.2 is not satisfied may be declined by Administrative Agent without prior notice.

In order to induce the Lender Parties to enter into this Agreement and make Loans, each Credit Party, jointly and severally, makes each of the following representations and warranties to the Lender Parties as being true, complete and correct in all respects as of the Agreement Date and as of the date of the making of each Loan thereafter, as though made on and as of the date of such Loan (except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all respects as of such earlier date):

No Credit Party nor any Subsidiary of any Credit Party, nor to the knowledge of any Credit Party, their respective agents acting in any capacity in connection with the Loans or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

Until termination of this Agreement and the payment and performance in full of the Obligations (other than contingent indemnification obligations), each Credit Party agrees, jointly and severally, as follows:

Each Borrowing Base Certificate, schedule, reconciliation, aging, copy or report delivered to Administrative Agent shall bear a signed statement by a Responsible Officer of Borrower Representative certifying the accuracy and completeness of all information included therein.  The execution and delivery of a Borrowing Base Certificate shall in each instance constitute a representation and warranty by each Borrower to Administrative Agent and Lenders that: (x) no Account included therein as an Eligible Account should be excluded from inclusion in the Borrowing Base pursuant to the terms of the definition of "Eligible Accounts" and (y) no Inventory included therein as Eligible Inventory should be excluded from inclusion in the Borrowing Base pursuant to the terms of the definition of "Eligible Inventory".  In the event any request for a Revolving Loan, if a Borrowing Base Certificate or other information required by this Section 8.5 is delivered to Administrative Agent by Borrower Representative electronically or otherwise without signature, such request, or such Borrowing Base Certificate or other information shall, upon such delivery, be deemed to be signed and certified on behalf of Borrower Representative by a Responsible Officer thereof and constitute a representation to Administrative Agent and Lenders as to the authenticity thereof.  Administrative Agent shall have the right to review and adjust any such calculation of the Borrowing Base to reflect, without duplication, exclusions from Eligible Accounts or Eligible Inventory, reserves pursuant to Section 2.1, declines in value of Eligible Inventory as determined pursuant to appraisals thereof conducted pursuant to Section 5.5, or such other matters as are necessary to determine the Borrowing Base.  Administrative Agent shall have the continuing right to establish and adjust reserves in determining or re-determining the Borrowing Base, pursuant to Section 2.1.

 

Until termination of this Agreement and the payment and performance in full of the Obligations (other than contingent indemnification obligations), each Credit Party agrees, jointly and severally, as follows:

or to such other address as each party may designate for itself by like notice.

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the Agreement Date.