Amended and Restated Loan and Security Agreement by and among the Company, its subsidiaries and Slipstream Communications, LLC

EX-10.36 2 f10k2020ex10-36_creative.htm AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT BY AND AMONG THE COMPANY, ITS SUBSIDIARIES AND SLIPSTREAM COMMUNICATIONS, LLC

Exhibit 10.36

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS Amended and Restated Loan And Security Agreement (this “Agreement”), dated as of March 7, 2021 (the “Execution Date”), is by and among Creative Realities, Inc., a Minnesota corporation (“CRI”), Creative Realities, LLC, a Delaware limited liability company (“CRLLC”), Creative Realities Canada, Inc., an Ontario corporation (“CRCI”), Conexus World Global, LLC, a Kentucky limited liability company (“Conexus”), and Allure Global Solutions, Inc., a Georgia corporation (“AGSI” and together with CRI, CRLLC, CRCI and Conexus, collectively, referred to herein as, the “Borrower”); and Slipstream Communications, LLC, an Anguillan limited liability company (“Lender”).

 

RECITALS

 

A. Borrower (other than CRCI and other than AGSI which became a party thereto pursuant to a Joinder Agreement dated November 20, 2018) and Lender previously entered into that certain Loan and Security Agreement dated August 17, 2016 (as amended from time to time prior to the date hereof, the “Existing Credit Agreement”) pursuant to which Lender made: (i) a revolving loan to Borrower in the original principal amount of up to $1,000,000.00 (the “Existing Revolving Loan”); (ii) a term loan to Borrower in the original principal amount of $3,000,000.00 (the “Existing Term Loan”); (iii) a term loan to Borrower in the original principal amount of $264,000.00 (the “Existing Disbursed Escrow Loan”); (iv) a convertible term loan to Borrower in the original principal amount of $2,000,000.00 (the “Existing Special Convertible Loan” and together with each of the loans set forth in (i) through (iii) above, collectively, the “Existing Loans”). Each of the Existing Loans is evidenced by a promissory note with a maximum principal amount equal to the amount of the Existing Loan set forth in this Recital A (collectively, the “Existing Notes”).

 

B. As of the date hereof, the outstanding principal amount together with accrued and unpaid interest of the Existing Loans evidenced by the Existing Notes are as follows: (i) the Existing Note evidencing the Existing Revolving Loan, $1,000,000.00 principal plus accrued but unpaid interest of $104,666.97; (ii) the Existing Note evidencing the Existing Term Loan, $3,000,000.00 principal plus accrued but unpaid interest of $314,000.91; (iii) the Existing Note evidencing the Existing Disbursed Escrow Loan, $264,000.00 plus zero accrued but unpaid interest; (iv) the Existing Special Convertible Loan evidenced by the Existing Special Convertible Loan, $2,000,000.00 plus accrued but unpaid interest of $216,602.30 (the principal amounts outstanding plus the accrued but unpaid interest thereon as of the Closing Date, collectively referred to herein as, the “Existing Advances”).

 

C. Borrower has requested that Lender continue to make loans and other financial accommodations available to Borrower and Lender has agreed to the amendment and restatement of the Existing Credit Agreement and replacement of the Existing Notes by the terms of this Agreement so long as (i) the security interests, Liens and pledges granted to the Lender in the Existing Credit Agreement are preserved and reaffirmed, (ii) the execution and delivery of this Agreement and the documents and instruments executed in connection herewith not (a) effect a discharge or novation of any indebtedness or other obligation of the Borrower (other than CRCI) under the Existing Credit Agreement or any of the Existing Notes, but rather (for all but CRCI) a substitution of certain of the terms governing the payment and performance of such indebtedness and other obligations, or (b) release Borrower of any of its Obligations under any Loan Documents or adversely affect any of the Lender’s rights under any of the Loan Documents, except for the release of Borrower’s Obligations under the Existing Note evidencing the Existing Disbursed Escrow Loan upon Borrower’s issuance of the Disbursed Escrow Conversion Shares in accordance with Section 1.5, below, (iii) all security agreements, Liens, security interests, pledges and guarantees granted in accordance with the Existing Credit Agreement remain in full force and effect in favor of the Lender, and (iv) CRCI becomes a Borrower under this Agreement and executes such other loan documents as may be required by the Lender, pursuant to which CRCI will also pledge and grant a Lien on all of its personal property assets to secure its obligations under this Agreement.

 

D. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in Schedule A.

 

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the parties hereby agree as follows:

 

1. AMOUNT AND TERMS OF CREDIT

 

1.1 Existing Advances. Borrower acknowledges and agrees that (a) as of the Execution Date, the outstanding principal balance of the Existing Advances including accrued and unpaid interest under the Existing Notes are as set forth in Recital B, above; (b) on the Closing Date, (i) the Existing Credit Agreement and the Existing Notes shall be amended, restated, replaced and superseded in their entirety by this Agreement and the Notes (as defined below), (ii) the Existing Advances outstanding under the Existing Revolving Loan and the Existing Term Loan together with the accrued but unpaid interest thereon from the Effective Date to the Closing Date shall be deemed to be advances under the Consolidation Term Loan made pursuant to Section 1.3, below; (iii) the Existing Advances outstanding under the Existing Special Convertible Loan together with all accrued but unpaid interest thereon from the Execution Date to the Closing Date shall be deemed to be advances under the Special Convertible Term Loan made pursuant to Section 1.4, below; and (iv) the Existing Advances under the Existing Disbursed Escrow Loan shall be converted into shares of CRI’s common stock pursuant to Section 1.5, below.

 

1.2 Multi-Advance Line of Credit. Subject to the terms and conditions of this Agreement, upon Borrower’s request, Lender may, in its sole discretion, but without any obligation, make Advances under a Multi-Advance Line of Credit (the “Line of Credit”) to Borrower under this Section 1.2 from time to time, up to and including the Conversion Date, in a total amount at any time outstanding not to exceed $1,000,000.00 subject to reduction as set forth in this Agreement (the “Maximum Line of Credit Amount”). So long as no Event of Default has occurred and is continuing, Borrower may request Advances under the Line of Credit (a) with 30 days written notice to the Lender and (b) in a minimum Advance amount of $500,000.00. Advances repaid under the Line of Credit may be readvanced on or before the Conversion Date. Amounts outstanding under the Line of Credit from time to time shall be evidenced by a promissory note in form and substance acceptable to the Lender (the “Line of Credit Note”).

 

1.3 Consolidation Term Loan. Subject to the terms and conditions of this Agreement, Lender is hereby deemed to make an Advance on the Closing Date under a term loan (the “Consolidation Term Loan”) in the principal amount equal to the product of 1.03 times the sum of the Existing Advances outstanding on the Closing Date under the Existing Revolving Loan and the Existing Term Loan (which as of the Closing Date are deemed made under the Consolidation Term Loan to Borrower). For purposes of clarity, it is understood that in making the Consolidation Term Loan the Lender is not providing any additional funds to Borrower. Amounts repaid under the Consolidation Term Loan may not be reborrowed. The Consolidation Term Loan shall be evidenced by a promissory note in form and substance acceptable to the Lender (the “Consolidation Term Note,” which shall delivered in restatement of and replacement for (but not in repayment or satisfaction of) the Existing Notes evidencing the Existing Revolving Loan and the Existing Term Loan.

 

 

1.4 Special Convertible Term Loan. Subject to the terms and conditions of this Agreement, Lender is hereby deemed to make an Advance on the Closing Date under a term loan (the “Special Convertible Term Loan”) in the principal amount equal to the product of 1.03 times the Existing Advance outstanding on the Closing Date under the Existing Special Convertible Term Loan (which as of the Closing Date is deemed made under the Special Convertible Term Loan to Borrower). For purposes of clarity, it is understood that in making the Special Convertible Term Loan the Lender is not providing any additional funds to Borrower. Amounts repaid under the Special Convertible Term Loan may not be reborrowed. The Special Convertible Term Loan shall be evidenced by a promissory note in form and substance acceptable to the Lender (the “Special Convertible Term Note,” which shall delivered in restatement of and replacement for (but not in repayment or satisfaction of) the Existing Note evidencing the Existing Special Convertible Term Loan.

 

1.5 Conversion of Existing Disbursed Escrow Loan. On the Closing Date, Borrower shall issue to Lender (or Lender’s designee) 97,144 shares of the common stock of CRI (the “Disbursed Escrow Conversion Shares”) in full satisfaction of the amounts outstanding under the Existing Disbursed Escrow Loan. Lender acknowledges and agrees that upon Borrower’s delivery of the Disbursed Escrow Conversion Shares, the Obligations of the Borrower under the Existing Note evidencing the Existing Disbursed Escrow Loan shall be deemed paid-in-full and Borrower shall not have any further obligation to Lender thereunder whether or not the Lender marks the Existing Note evidencing the Existing Disbursed Escrow Loan “cancelled” or “paid-in-full” and returns such note to the Borrower (and Lender hereby agrees to make a reasonable effort to do so). Borrower shall deliver confirmation from CRI’s transfer agent of the issuance of the Disbursed Escrow Conversion Shares.

 

1.6 Evidence of Indebtedness; Single Loan. Each of the loans set forth in Sections 1.2 through 1.4, above (collectively referred to herein as, the “Loans”) shall be evidenced by this Agreement. Upon the request of Lender, Borrower will execute and deliver a promissory note evidencing any or all of the Loans then outstanding. The Loans and all other Obligations of the Borrower to Lender arising in connection with this Agreement and the other Loan Documents shall constitute one general obligation of Borrower, secured by all of the Collateral.

 

1.7 Use of Proceeds. Borrower shall use the proceeds of the Loans solely for working capital and general business requirements of the Borrower.

 

1.8 Interest. Borrower shall pay interest to Lender on the outstanding balance of the Loans at the applicable Loan Rate. All computations of interest shall be made by Lender on the basis of a 360-day year, in each case for the actual number of days occurring in the period for which such interest or fee is payable. In no event will Lender charge interest at a rate exceeding the highest rate of interest permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Effective upon the occurrence of an Event of Default and so long as the same shall be continuing, the Loan Rate shall automatically be increased by six percentage points per annum (6.0%) (such increased rate, the “Default Rate”). Notwithstanding anything to the contrary, that portion of any interest which is the Default Rate shall be paid in cash. In the event that the Loan Rate or the Default Rate exceeds the highest rate of interest permissible under applicable law, then the Loan Rate and/or the Default Rate shall be the maximum amount as allowed by applicable law. Interest shall accrue on the principal balance of the Loans and shall be paid on a monthly basis and all then-accrued but unpaid interest shall be paid on the Maturity Date. All accrued and unpaid interest existing after the Termination Date, interest shall be paid upon demand made by Lender.

 

1.9 Fees. Borrower shall pay a fully earned and non-refundable fee equal to 3.0% of the original principal balance of the Consolidating Term Loan and the Special Convertible Term Loan. The fee for each loan shall be paid by capitalizing it in the original principal balance of each applicable Loan (as evidenced by the multiplier in Sections 1.3 and 1.4, above), and it is understood that the Lender is not lending any additional funds to Borrower for purposes of Borrower paying said fees.

 

 

1.10 Payments. Borrower hereby jointly and severally promises to pay the amounts outstanding under the Loans as follows:

 

(a) PIK Interest Only. Commencing on the first day of the month immediately following the Closing Date and each month thereafter, up to and including October 1, 2021, accrued interest shall be paid-in-kind (“PIK”) by the Borrower and added to the outstanding principal balance of each of the Loans.

 

(b) Cash Interest Only. Commencing on November 1, 2021 and on the first day of each month, up to and including (i) March 1, 2022 in the case of the Line of Credit and the Special Convertible Loan, Borrower shall make a payment of any accrued and unpaid interest (other than PIK interest previously capitalized as set forth in subsection (a), above), to Lender in cash or shares of the common stock of CRI, to the extent permitted by Section 1.11, below, such payment method at the sole discretion of the Borrower and subject to Section 1.11; and (ii) the Maturity Date, in the case of the Consolidation Term Loan, Borrower shall make a payment of any accrued and unpaid interest (other than PIK interest previously capitalized as set forth in subsection (a), above), to Lender in cash. Notwithstanding anything to the contrary, as and to the extent Borrower repays any principal of the Line of Credit, other than in cash, the Maximum Line of Credit Amount shall be permanently reduced by such amount.

 

(c) Principal and Interest. Commencing on April 1, 2022, and on the first day of each month thereafter until the Maturity Date, Borrower shall make a payment in cash or shares of the common stock of CRI, to the extent permitted by Section 1.11, and subject to the terms of Section 1.11, in an equal monthly installment of principal with respect to the Line of Credit and the Special Convertible Loan sufficient to fully amortize the Line of Credit and the Special Convertible Term Loan on the Maturity Date, together with any accrued but unpaid interest outstanding under each such Loan.

 

(d) Payment in full at Maturity. On the Maturity Date, Borrower shall pay all outstanding principal on the Loans together with any accrued and unpaid interest related thereto.

 

If any interest or any other payment to Lender under this Agreement becomes due and payable on a day other than a Business Day, such payment date shall be extended to the next succeeding Business Day.

 

1.11 Payments on Line of Credit and Special Convertible Term Loan Made in CRI Common Stock. Subject to Sections 1.14 and 8, at the election of Borrower (in its sole discretion), any or all payments of principal and interest on the Line of Credit and Special Convertible Term Loan may be made to Lender (or Lender’s designee) in shares of CRI’s common stock (the “Payment Shares,” and together with the Disbursed Escrow Conversion Shares and any share of capital into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock, the “Shares”). Payment Shares will be valued at a 30% discount to the volume-weighted average price (VWAP) of a share of CRI common stock over the ten (10) closing price of CRI common stock on the trading days immediately prior to the date of payment, as reported on the Nasdaq Capital Market; provided, however that the Payment Shares shall not be valued below $0.50 per Share (the “Payment Share Floor”).

 

1.12 Prepayment Premium. Borrower may prepay all or a portion of any Loan at any time without premium or penalty.

 

 

1.13 Receipt of Payments. Borrower shall make each payment under this Agreement without set-off, counterclaim or deduction, and free and clear of all Taxes, not later than 5:00 p.m., New York City time on the day when due in lawful money of the United States of America in immediately available funds to such account as Lender shall designate in writing to CRI from time to time (the “Payment Account”). For purposes of computing interest and fees, all payments shall be deemed received by Lender on the day of receipt of immediately available funds. Except as expressly set forth in this Section 1 with respect to payments of principal and interest, all payments of principal, interest, fees and other Obligations shall be paid in cash in U.S. Dollars.

 

1.14 Bankruptcy Event; Restrictions on Issuances of Shares. Notwithstanding anything to the contrary, including the provisions of this Section 1 and Section 8.2, in the event (a) of any Bankruptcy Event, effective immediately prior thereto, (b) any issuance of Shares is prohibited by Section 8.2 or (c) the valuation of the Payment Shares set forth in Section 1.11 determined in anticipation of a payment in Shares is less than the Payment Share Floor, all payments pursuant to this Agreement which Borrower is obligated to, or has the right to, pay in Shares, shall be paid in U.S. Dollars.

 

1.15 Failure to Pay in Full. In the event that at any time any payments are due under this Agreement and less than the full amount is paid by Borrower, such payments shall first be applied in unpaid fees, then to accrued but unpaid interest on each Loan in such amounts as Lender in its sole and complete discretion shall determine and then to all principal then due in such amount for each Loan as Lender in its sole and complete discretion shall determine.

 

1.16 Joinder. By executing and delivering this Agreement, CRCI hereby becomes a party hereto and a Borrower hereunder.

 

2. CONDITIONS

 

2.1 Conditions Precedent. Lender shall not be obligated to make any Advance, or to perform any other action hereunder and the Existing Credit Agreement shall remain in effect, until, all of the following conditions have been satisfied in form and substance satisfactory to Lender and its counsel:

 

(i)

the Loan Documents have been executed and delivered by the Borrower on or before the Closing Date, including for purposes of clarity appropriate UCC-3 amendments to financing statements continuing the UCC-1 financing statements filed under the Existing Credit Agreement and, as applicable, amending CRI’s address thereunder, and Lender and its counsel shall have received evidence of the filing thereof;

 

(ii)

Lender has received executed Notes, with the principal amounts filled in pursuant to this Agreement;

 

(iii)

Officers’ Certificates by officers of each Borrower; and

 

(iv)

Within five (5) business days after the Execution Date, deliver Canadian security interest recording and proof of recording and equivalent of a first priority perfected security interest in Collateral owned by CRCI:

 

(v)

Within five (5) business days after the Execution Date, deliver to Lender UCC (or in the case of CRCI, the PPSA), judgment, and tax lien search results with respect to Borrower from each Borrower’s jurisdiction of formation; and.

 

 

2.2 Additional Conditions. The obligations of the Lender hereunder in connection with the Closing are subject to the following conditions being met:

 

(i)

The accuracy in all material respects when made and on the Closing Date of the representations and warranties of the Borrower contained herein (unless as of a specific date herein);

 

(ii)

all obligations, covenants and agreements of the Borrower required to be performed at or prior to the Closing Date shall have been performed;

 

(iii)

the delivery by the Borrower of the items set forth in Section 2.1 of this Agreement; and

 

(iv)

there shall have been no Material Adverse Effect with respect to the Borrower since the date hereof.

 

2.3 Conditions Subsequent. Borrowers shall hereby satisfy the following conditions on or before the date set forth for each condition below, each in form and substance acceptable to the Lender and its counsel:

 

(i)

Within five (5) business days after the Closing Date, issue to the Lender or its designee a certificate in proper form representing the Disbursed Escrow Conversion Shares pursuant to Section 1.5, above.

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS

 

To induce Lender to enter into this Agreement and to make the Loans, each Borrower hereby jointly and severally represents and warrants to Lender (each of which representations and warranties shall survive the execution and delivery of this Agreement), and promises to and agrees with Lender until the Termination Date as follows:

 

3.1 Corporate Existence; Compliance with Law. Each Borrower: (a) is, as of the Closing Date, and will continue to be (i) a corporation (or in the case of both Conexus and CRLLC, a limited liability company) duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) duly qualified to do business and in good standing (or comparable status in the case of CRCI) in each other jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect, and (iii) in compliance with all Requirements of Law, except to the extent failure to comply therewith could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (b) has and will continue to have (i) the requisite corporate (or in the case of both Conexus CRLLC, a limited liability company) power and authority and the legal right to execute, deliver and perform its obligations under the Loan Documents, and to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business as now, heretofore or proposed to be conducted, and (ii) all licenses, permits, franchises, rights, powers, consents or approvals from or by all Persons or Governmental Authorities having jurisdiction over such Borrower that are necessary or appropriate for the conduct of its business.

 

3.2 Executive Offices; Corporate or Other Names. (a) Each Borrower’s name as it appears in official filings in the state or province of its incorporation or organization, (b) the type of entity of each Borrower, (c) the organizational identification number issued by each Borrower’s state or province of incorporation or organization or a statement that no such number has been issued, (d) each Borrower’s state or province of organization or incorporation, and (e) the location of each Borrower’s chief executive office, corporate offices, other locations of Collateral and locations where records with respect to Collateral are kept, are as set forth in Disclosure Schedule 3.2 and, except as set forth in such schedule, such locations have not changed during the preceding 12 months.

 

 

3.3 Corporate Power; Authorization; Enforceable Obligations. The execution, delivery and performance by each Borrower of the Loan Documents to which it is a party, and the creation of all Liens provided for herein and therein: (a) are and will continue to be within the Borrower’s power and authority; (b) have been and will continue to be duly authorized by all necessary or proper action; (c) are not and will not be in violation of any Requirement of Law or, conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of Borrower, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Borrower debt or otherwise) or other understanding to which Borrower is a party or by which any property or asset of Borrower is bound or affected or any other Contractual Obligation of Borrower; (d) do not and will not result in the creation or imposition of any Lien (other than Permitted Encumbrances) upon any of the Collateral; and (e) except as set forth in Section 8.3, below, do not and will not require the consent or approval of any Governmental Authority or any other Person. As of the Closing Date, each Loan Document shall have been duly executed and delivered on behalf of Borrower, and each such Loan Document upon such execution and delivery shall be and will continue to be a legal, valid and binding obligation of Borrower, enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency and other similar laws affecting creditors’ rights generally. The Disbursed Escrow Conversion Shares and all other Shares, when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, free and clear of all Liens imposed by any Borrower other than restrictions on transfer provided for in applicable securities laws.

 

3.4 Financial Statements; Books and Records. All Financial Statements are true, correct and complete and reflect fairly and accurately the financial condition of Borrower (on a consolidated basis) as of the date thereof in accordance with GAAP, except (solely with respect to any interim Financial Statements) the absence of footnotes and normal year-end adjustments. Borrower shall keep adequate Books and Records with respect to the Collateral and its business activities in which proper entries, reflecting all consolidated and consolidating financial transactions, and payments and credits received on, and all other dealings with, the Collateral, will be made in accordance with GAAP and all Requirements of Law and on a basis consistent with the Financial Statements.

 

3.5 Material Adverse Change. Since the date of Borrower’s most recently audited Financial Statements, no events have occurred that alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. Borrower is not in default, and to Borrower’s knowledge no third party is in default, under or with respect to any of its Contractual Obligations, that alone or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect.

 

3.6 No Default or Event of Default. As of the Execution Date and as of the Closing Date there is no Default or Event of Default (both as defined in the Existing Agreement) shall have occurred and be continuing.

 

3.7 Real Estate; Property. The real estate listed in Disclosure Schedule 3.7 constitutes all of the real property owned, leased, or used by Borrower in its business, and Borrower will not execute any material agreement or contract in respect of such real estate after the date of this Agreement without giving Lender written notice thereof. Borrower holds and will continue to hold good and marketable fee simple title to all of its owned real estate, and good and marketable title to all of its other properties and assets, and valid and insurable leasehold interests in all of its leases (both as lessor and lessee, sublessee or assignee), and none of the properties and assets of Borrower are or will be subject to any Liens, except Permitted Encumbrances.

 

 

3.8 Outstanding Indebtedness. All outstanding Indebtedness of Borrower as of the Closing Date, including a statement as to whether such Indebtedness is secured or unsecured and, if secured, what constitutes the collateral security therefor, is disclosed on Disclosure Schedule 3.8.

 

3.9 Government Regulation. Borrower is not subject to or regulated under any domestic or foreign federal, national, provncial or state statute, rule or regulation that restricts or limits such Person’s ability to incur Indebtedness, pledge its assets, or to perform its obligations under the Loan Documents. The making of the Loan, the application of the proceeds and repayment thereof, and the consummation of the transactions contemplated by the Loan Documents do not and will not violate any Requirement of Law.

 

3.10 Taxes. Except as disclosed in Disclosure Schedule 3.10, all Tax returns, reports and statements required by any Governmental Authority to be filed by Borrower has, as of the Closing Date, been filed and will, until the Termination Date, be filed with the appropriate Governmental Authority and no Tax Lien has been filed against Borrower or its property. Proper and accurate amounts have been and will be withheld by Borrower from its employees for all periods in compliance with all Requirements of Law and such withholdings have and will be timely paid to the appropriate Governmental Authorities. Except as described on Disclosure Schedule 3.10, (i) no Borrower is liable for any Taxes of any other Person pursuant to any agreement, and (ii) to Borrower’s knowledge, no Borrower is liable for any Taxes as a transferee.

 

3.11 Litigation. No Litigation is pending or, to the knowledge of Borrower, threatened by or against Borrower or against its properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect. Except as set forth in Disclosure Schedule 3.11, as of the Closing Date there is no Litigation pending or threatened against Borrower that seeks damages in excess of $10,000 or injunctive relief, or that alleges criminal misconduct of Borrower. Borrower shall notify Lender promptly in writing upon learning of the existence, threat or commencement of any Litigation against Borrower or any allegation of criminal misconduct against Borrower.

 

3.12 Intellectual Property. As of the Closing Date, Borrower owns, or is licensed to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license could not reasonably be expected to have a Material Adverse Effect. Borrower will maintain the patenting and registration of all Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office, or other appropriate Governmental Authority and Borrower will promptly patent or register, as the case may be, all material new Intellectual Property.

 

3.13 Conduct of Business. Borrower (a) shall conduct its business substantially as now conducted or as otherwise permitted hereunder, and (b) shall at all times maintain, preserve and protect all of the Collateral and Borrower’s other property, used or useful in the conduct of its business and keep the same in good repair, working order and condition (ordinary wear and tear excepted) and make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices.

 

3.14 SEC Filings. CRI has filed all reports, schedules, forms, statements and other documents required to be filed by CRI under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. CRI has never been an issuer subject to Rule 144(i) under the Securities Act.

 

 

3.15 Solvency. Each of the Borrowers is solvent.

 

3.16 Full Disclosure. No information contained in any Loan Document, the Financial Statements or any written statement furnished by or on behalf of Borrower under any Loan Document, or to induce Lender to execute the Loan Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made.

 

3.17 Reservation of Securities. CRI shall maintain a reserve from its duly authorized shares of Common Stock for issuance pursuant to the Warrants in such amounts as may then be required to issue all of the shares underlying the Warrants.

 

3.18 Further Assurances. At any time and from time to time, upon the written request of Lender and at the sole expense of Borrower, Borrower shall promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Lender may reasonably deem desirable (a) to obtain the full benefits of this Agreement and the other Loan Documents, (b) to protect, preserve and maintain Lender’s rights in any Collateral, or (c) to enable Lender to exercise all or any of the rights and powers herein granted.

 

4. REPORTS AND NOTICES

 

4.1 Reports and Information. From the Closing Date until the Termination Date, Borrower shall deliver to Lender such reports and information as Lender may reasonably request.

 

4.2 Notices. Borrower shall advise Lender promptly, in reasonable detail, of: (a) any Lien, other than Permitted Encumbrances, attaching to or asserted against any of the Collateral; or (b) the occurrence of any Default or other event that has had or could reasonably be expected to have a Material Adverse Effect.

 

5. NEGATIVE COVENANTS

 

Borrower covenants and agrees that, without Lender’s prior written consent, from the Closing Date until the Termination Date, Borrower shall not, directly or indirectly, by operation of law or otherwise:

 

(a) form any subsidiary or merge with or into, consolidate with, acquire all or substantially all of the assets or capital stock of, or otherwise combine with or make any investment in or make any loan or advance to, any Person;

 

(b) cancel any debt owing to it or create, incur, assume or permit to exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing as of the Closing Date (including increases, extensions, renewals and replacements thereof) and listed on Disclosure Schedule 3.8, (iii) deferred Taxes, (iv) by endorsement of Instruments or items of payment for deposit to the general account of Borrower, (v) Purchase Money Indebtedness, (v) unsecured Indebtedness incurred after the Closing Date that is junior to the Obligations in an aggregate amount outstanding at any time not to exceed $500,000;

 

 

(c) make any changes in any of its business objectives, purposes, or operations that could reasonably be expected to adversely affect repayment of the Obligations or could reasonably be expected to have a Material Adverse Effect or engage in any business other than that presently engaged in or proposed to be engaged in on the Closing Date, or amend its Articles of Incorporation (or Articles or Certificate of Organization, as applicable) or Bylaws or other organizational documents;

 

(d) create or permit any Lien on any of its properties or assets, except for Permitted Encumbrances including those set forth on Disclosure Schedule 5(d);

 

(e) sell, transfer, issue, convey, assign or otherwise dispose of any of its material assets or properties;

 

(f) change (i) its name as it appears in official filings in the state or province of its incorporation or organization, (ii) its chief executive office, corporate offices or other Collateral locations, or location of its records concerning the Collateral, (iii) the type of legal entity that it is, (iv) its organization identification number, if any, issued by its state or province of incorporation or organization, or (v) its state or province of incorporation or organization, in each instance without giving at least 30 days prior written notice thereof to Lender and taking all actions, at Borrower’s expense, deemed necessary or appropriate by Lender to continuously protect and perfect Lender’s Liens upon the Collateral; and

 

(g) make or permit any Restricted Payment.

 

6. SECURITY INTEREST

 

6.1 Grant of Security Interest. As collateral security for the prompt and complete payment and performance of the Obligations, each Borrower hereby grants to the Lender a security interest in and Lien upon (and all such comparable rights under the PPSA with respect to CRCI) all of its property and assets, whether real or personal, tangible or intangible, and whether now owned or hereafter acquired, or in which it now has or at any time in the future may acquire any right, title, or interest, including without limitation all of the following property (collectively, the “Collateral”):

 

(i) all Accounts, as such capitalized term is defined in the Code;

 

(ii) all Deposit Accounts, as such capitalized term is defined in the Code, all other bank accounts and all funds on deposit therein;

 

(iii) all money, cash and cash equivalents;

 

(iv) all Investment Property, as such capitalized term is defined in the Code;

 

(v) all stock; provided however in the case of the stock of CRCI, only 60% of its voting stock);

 

(vi) all Goods, including Inventory, Equipment and Fixtures, as such capitalized terms are defined in the Code;

 

(vii) all Chattel Paper, Documents and Instruments, as such capitalized terms are defined in the Code;

 

(viii) all Books and Records;

 

 

(ix) all General Intangibles, including all Intellectual Property, contract rights, choses in action, Payment Intangibles and Software, as such capitalized terms are defined in the Code;

 

(x) all Letter-of-Credit Rights, as such capitalized term is defined in the Code;

 

(xi) all Supporting Obligations, as such capitalized term is defined in the Code; and

 

(xii) to the extent not otherwise included, all Proceeds (as such capitalized term is defined in the Code), tort claims, insurance claims and other rights to payment not otherwise included in the foregoing, and products of all and any of the foregoing and all accessions to, substitutions and replacements for, and rents and profits of, each of the foregoing.

 

6.2 Other Agreements and Acknowledgments. Each Borrower and Lender agree that this Agreement creates, and is intended to create, valid and continuing Liens upon the Collateral in favor of Lender in the manner described herein. Borrower represents, warrants and promises to Lender that: (i) Borrower has rights in and the power to transfer each item of the Collateral upon which it purports to grant a Lien pursuant to the Loan Documents, free and clear of any and all Liens or claims of others, other than Permitted Encumbrances; (ii) the security interests granted pursuant to this Agreement will, upon completion of filings and other actions required under applicable law, constitute valid perfected security interests in all of the Collateral in favor of the Lender as security for the prompt and complete payment and performance of the Obligations, enforceable in accordance with the terms hereof against any and all creditors of and purchasers from Borrower (other than purchasers of Inventory in the ordinary course of business) and such security interests will, upon the satisfaction of the aforementioned conditions, be prior to all other Liens on the Collateral in existence on the date hereof except for Permitted Encumbrances that have priority by operation of law; and (iii) no effective security agreement, mortgage, deed of trust, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is or will be on file or of record in any public office, except those relating to Permitted Encumbrances. Borrower promises to defend the right, title and interest of Lender in and to the Collateral against the claims and demands of all Persons whomsoever.

 

6.3 Collection of Outstanding Accounts. Borrower agrees to use commercially reasonable efforts, and consistent with past practices, to collect on the Accounts.

 

7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES

 

7.1 Events of Default. The occurrence of any one or more of the following events (regardless of the reason therefor) shall constitute an “Event of Default” hereunder which shall be deemed to be continuing until waived in writing by Lender in accordance with Section 11.3 or until cured by Borrower:

 

(a) Borrower shall fail to make any payment in respect of any Obligations when due and payable or declared due and payable;

 

(b) Borrower shall fail or neglect to perform, keep or observe any of the covenants, promises, agreements, requirements, conditions or other terms or provisions contained in this Agreement or any of the other Loan Documents, after ten days written notice from Lender to Borrower of the same (other than a failure to satisfy the conditions subsequent set forth in Section 2.3 in accordance with the timeframes set forth therein) and with no cure having been effected by Borrower within such ten-day period (such ten-day cure period not being applicable to the conditions subsequent in Section 2.3, above);

 

 

(c) an event of default shall occur under any Contractual Obligation of the Borrower (other than this Agreement and the other Loan Documents), and such event of default (i) involves the failure to make any required payment, whether of principal, interest or otherwise, and whether due by scheduled maturity, required prepayment, acceleration, demand or otherwise, in respect of any Indebtedness (other than the Obligations) of such Person in an aggregate amount exceeding the Minimum Actionable Amount, or (ii) causes (or permits any holder of such Indebtedness or a trustee to cause) such Indebtedness, or a portion thereof, in an aggregate amount exceeding the Minimum Actionable Amount, to become due prior to its stated maturity or prior to its regularly scheduled date of payment;

 

(d) any representation or warranty in this Agreement or any other Loan Document, or in any written statement pursuant hereto or thereto, or in any report, financial statement or certificate made or delivered to Lender by Borrower shall be materially untrue or incorrect as of the date when made or deemed made;

 

(e) there shall be commenced against Borrower any Litigation seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that remains unstayed or undismissed for 30 consecutive days; or Borrower shall have concealed, removed or permitted to be concealed or removed, any part of its property with intent to hinder, delay or defraud any of its creditors or made or suffered a transfer of any of its property or the incurring of an obligation that may be fraudulent under any bankruptcy, fraudulent transfer or other similar law; or

 

(f) a case or proceeding shall have been commenced involuntarily against Borrower in a court having competent jurisdiction seeking a decree or order: (i) under the United States Bankruptcy Code or any other applicable federal, national, provincial, state or foreign bankruptcy or other similar law, and seeking either (A) the appointment of a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for such Person or of any substantial part of its properties, or (B) the reorganization or winding up or liquidation of the affairs of any such Person, and such case or proceeding shall remain undismissed or unstayed for 60 consecutive days or such court shall enter a decree or order granting the relief sought in such case or proceeding; or (ii) invalidating or denying any Person’s right, power, or competence to enter into or perform any of its obligations under any Loan Document or invalidating or denying the validity or enforceability of this Agreement or any other Loan Document or any action taken hereunder or thereunder; or

 

(g) Borrower shall (i) commence any case, proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it or seeking appointment of a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for it or any substantial part of its properties, (ii) make a general assignment for the benefit of creditors, (iii) consent to or take any action in furtherance of, or, indicating its consent to, approval of, or acquiescence in, any of the acts set forth in paragraphs (e) or (f) of this Section or clauses (i) and (ii) of this paragraph, or (iv) shall admit in writing its inability to, or shall be generally unable to, pay its debts as such debts become due; or

 

(h) a judgment or judgments for the payment of money in excess of the Minimum Actionable Amount in the aggregate shall be rendered against Borrower, unless the same shall be fully covered by insurance and the issuer(s) of the applicable policies shall have acknowledged full coverage in writing within 15 days of judgment, or (ii) vacated, stayed, bonded, paid or discharged within a period of 15 days from the date of such judgment.

 

 

7.2 Remedies. (a) If any Default shall have occurred and be continuing, then Lender may, upon written notice to Borrower, take any one or more of the following actions: (i) declare all or any portion of the Obligations to be forthwith due and payable, whereupon such Obligations shall become and be due and payable; or (ii) exercise any rights and remedies provided to Lender under the Loan Documents or at law or equity, including all remedies provided under the Code; provided, however, that upon the occurrence of any Event of Default specified in Sections 7.1 (e), (f) or (g), the Obligations shall become immediately due and payable without presentment, protest, declaration, notice or demand by Lender, all of which are expressly waived by Borrower.

 

(b) Without limiting the generality of the foregoing, Borrower expressly agrees that upon the occurrence of any Event of Default, Lender may collect, receive, assemble, process, appropriate and realize upon the Collateral, or any part thereof, and may forthwith sell, lease, assign, give an option or options to purchase or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at public or private sale or sales, at any exchange at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Lender shall have the right upon any such public sale, to the extent permitted by law, to purchase for the benefit of Lender the whole or any part of said Collateral so sold. Such sales may be adjourned, or continued from time to time with or without notice. Lender shall have the right to conduct such sales on Borrower’s premises or elsewhere and shall have the right to use any Borrower’s premises without rent or other charge for such sales or other action with respect to the Collateral for such time as Lender deems necessary or advisable.

 

(c) Upon the occurrence and during the continuance of an Event of Default and at Lender’s request, Borrower agrees, to assemble the Collateral and make it available to Lender at places that Lender shall reasonably select, whether at its premises or elsewhere. Until Lender is able to effect a sale, lease, or other disposition of the Collateral, Lender shall have the right to complete, assemble, use or operate the Collateral or any part thereof, to the extent that Lender deems appropriate, for the purpose of preserving such Collateral or its value or for any other purpose. Lender shall have no obligation to Borrower to maintain or preserve the rights of Borrower as against third parties with respect to any Collateral while such Collateral is in the possession of Lender. Lender may, if it so elects, seek the appointment of a receiver or keeper to take possession of any Collateral and to enforce any of Lender’s remedies with respect thereto without prior notice or hearing. To the maximum extent permitted by applicable law, Borrower waives all claims, damages, and demands against Lender, its Affiliates, agents, and the officers and employees of any of them arising out of the repossession, retention or sale of any Collateral except such as are determined in a final judgment by a court of competent jurisdiction to have arisen solely out of the gross negligence or willful misconduct of such Person. Borrower agrees that ten days’ prior notice by Lender to Borrower of the time and place of any public sale or of the time after which a private sale may take place is reasonable notification of such matters. Borrower shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Lender is entitled.

 

(d) Lender’s rights and remedies under this Agreement shall be cumulative and nonexclusive of any other rights and remedies that Lender may have under any Loan Document or at law or in equity. Recourse to the Collateral shall not be required. All provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited, to the extent necessary, so that they do not render this Agreement invalid or unenforceable, in whole or in part.

 

7.3 Proceeds. The Proceeds of any sale, disposition or other realization upon any Collateral shall be applied by Lender upon receipt to the Obligations in such order as Lender may deem advisable in its sole and complete discretion, and after the indefeasible payment and satisfaction in full in cash of all of the Obligations, and after the payment by Lender of any other amount required by any provision of law, including Sections 9-608(a)(l) and 9-615(a)(3) of the Code (but only after Lender has received what Lender considers reasonable proof of a subordinate party’s security interest), the surplus, if any, shall be paid to Borrower or its representatives or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct.

 

 

8. REPRESENTATIONS, WARRANTIES AND COVENANTS REGARDING SHARES

 

8.1 Lender Representations, Warranties and Covenants. The Lender represents and warrants to and agrees with the Borrower as follows:

 

(a) The Lender is acquiring the Shares as principal for its own account and not with a view to or for distributing or reselling such Shares or any part thereof in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state securities law, has no present intention of distributing any of such Shares in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Shares in violation of the Securities Act or any applicable state securities law.

 

(b) The Lender is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D promulgated under the Securities Act.

 

(c) The Lender understands that the Shares are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that CRI is relying in part upon the truth and accuracy of, and the Lender’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Lender set forth herein in order to determine the availability of such exemptions and the eligibility of the Lender to acquire the Shares. Each certificate (or book entry) representing any of the Shares shall be endorsed with the following legend:

 

“NEITHER THE OFFER NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, ENCUMBERED, OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR RECEIPT BY THE COMPANY AND ITS COUNSEL OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE IN FORM AND SUBSTANCE TO THE COMPANY AND ITS COUNSEL THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND UNDER ALL APPLICABLE STATE SECURITIES LAWS.

 

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE ACT, AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO A VALID EXEMPTION FROM REGISTRATION UNDER THE ACT.”

 

Upon request, CRI shall remove either or both of the foregoing legends from a certificate or book entry or issue a new certificate free of any such legend if, in connection with such request, CRI shall receive a written opinion of legal counsel, addressed to CRI and reasonably satisfactory in form and substance to CRI, to the effect that (i) such Shares are registered for resale under the Securities Act, (ii) such Shares are sold or transferred pursuant to and in compliance with Rule 144 promulgated under the Securities Act, or (iii) such Shares are eligible for sale under Rule 144 without application of the requirements of paragraph (c) thereof. 

 

 

(d) The Lender understands that its investment in the Shares involves a high degree of risk. The Lender (i) is able to bear the economic risk of an investment in the Shares including a total loss thereof, (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment in the Shares and (iii) is familiar with the financial condition and business of CRI given its current position as a lender and its affiliate’s ownership of CRI common stock, and has had an opportunity to ask any questions of and receive answers from the officers of CRI with respect thereto and others matters related to an investment in the Shares. The Lender has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.

 

(e) The Lender understands that (i) the Shares may not be offered for sale, sold, assigned or transferred unless (A) registered pursuant to the Securities Act or (B) an exemption exists permitting such Shares to be sold, assigned or transferred without such registration; (ii) any sale of the Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Shares under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the U.S. Securities and Exchange Commission (the “Commission”) thereunder.

 

8.2 Compliance with Securities Laws and Principal Market Rules. Notwithstanding anything in this Agreement to the contrary, but subject to Section 1.14:

 

(a) The total number of Shares that may be issued under this Agreement shall be limited to 2,347,559 shares of CRI Common Stock (the “Exchange Cap”), which equals 19.99% of CRI’s outstanding shares of Common Stock as of the date hereof (rounded down to the nearest full share), unless CRI stockholder approval is obtained to issue more than such 19.99% in accordance with the rules of The Nasdaq Stock Market. The Exchange Cap shall be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction.

 

(b) If Lender and its affiliates (the “Lender Group”) beneficially own (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 promulgated thereunder) the largest ownership position of shares of CRI common stock immediately prior to the proposed issuance of Payment Shares and such shares are less than 19.99% of the then-issued and outstanding shares of CRI common stock, the issuance of such Payment Shares may not cause the Lender Group to beneficially own in excess of 19.99% of the issued and outstanding shares of CRI common stock after such issuance unless CRI stockholder approval is obtained for ownership in excess of 19.99%.

 

(c) If the Lender Group does not beneficially own the largest ownership position of shares of CRI common stock immediately prior to the proposed issuance of Payment Shares, CRI may not issue Payment Shares to the extent that such issuance would result in Lender Group beneficially owning more than 19.99% of the then issued and outstanding shares of CRI common stock unless (A) such ownership would not be the largest ownership position in CRI, or (B) CRI stockholder approval is obtained for ownership in excess of 19.99%.

 

(d) CRI may not issue any Payment Shares under the Agreement if such issuance would be considered equity compensation under Nasdaq’s rules unless CRI stockholder approval is obtained for such issuance.

 

 

8.3 CRI Shareholder Approval. CRI will use its commercially reasonable best efforts to file as soon as practicable but in any event within 30 days of the Closing Date a preliminary proxy statement with the Commission seeking the approval from its shareholders of the issuance of the Shares in compliance with the rules of the Nasdaq Capital Market. CRI will thereafter use its commercially reasonable best efforts to file a definitive proxy statement to cause to be held a CRI shareholder meeting for such approval. The definitive proxy statement shall include a statement that the Board of Directors of CRI has approved the transactions contemplated by this Agreement, including the issuance of the Shares, resolved that the same are in the best interests of the shareholders of CRI and recommends that the shareholders of CRI vote to approve the issuance of the Shares.

 

8.4 Registration Rights.

 

(a) CRI shall prepare and file with the Commission as soon as reasonably practicable but in any event within 45 days of the Closing Date a registration statement on Form S-3 registering the resale of the Shares (as amended from time to time, the “Registration Statement”), subject to applicable limitations on the amount of Shares that may be registered for resale on the Registration Statement by Lender without being deemed a primary offering by or on behalf of CRI under applicable guidelines of the Commission. CRI will use commercially reasonable best efforts to ensure that the Registration Statement is declared effective within 90 days following the Closing Date for the resale of the Shares. CRI will agree to make such filings as are necessary to keep the Registration Statement effective until the earliest of (i) such time as all Shares held by Lender and registered under the Registration Statement have been sold; or (ii) the date on which Lender may sell such Shares without restriction under Rule 144 promulgated under the Securities Act (including, without limitation, volume restrictions). Upon the Registration Statement becoming declared effective by the Commission, (i) CRI will promptly notify Lender of the effectiveness of the Registration Statement, and (ii) if after the date the Registration Statement is declared effective, Lender seeks to sell the Shares, CRI shall take all actions reasonably necessary to allow, and shall use reasonable best efforts to ensure that CRI’s transfer agent and counsel facilitate the sale or transfer of the subject Shares pursuant to the Registration Statement.

 

(b) CRI shall:

 

(i) advise Lender within two (2) business days:

 

(1) when the Registration Statement or any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective;

 

(2) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information with respect thereto;

 

(3) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose;

 

(4) of the receipt by CRI of any notification with respect to the suspension of the qualification of the Shares included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

 

 

(5) if it learns that any statement included in the Registration Statement or related prospectus is misleading and omits to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a prospectus, in the light of the circumstances under which they were made) not misleading.

 

Notwithstanding anything to the contrary set forth herein, CRI shall not, when so advising Lender of such events, provide Lender with any material, nonpublic information regarding CRI;

 

(ii) use its commercially reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement as soon as reasonably practicable;

 

(iii) upon the occurrence of any event contemplated above, except for such times as CRI is permitted hereunder to suspend, and has suspended, the use of a prospectus forming part of the Registration Statement, CRI shall use its best efforts to as soon as reasonably practicable prepare a post-effective amendment to such Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter delivered to Lender, such prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

 

(iv) furnish to the Lender such number of copies of the prospectus, including all amendments and supplements thereto as well as the preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as it may reasonably request in order to facilitate the disposition of the Shares;

 

(v) use all commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Participating Holders; provided, however, that CRI shall not be required in connection therewith or as a condition thereto to qualify to do business in, or to file a general consent to service of process in, or to subject itself to taxation in regard to its ordinary operations by, any such states or jurisdictions;

 

(vi) use its commercially reasonable best efforts to cause all the Shares to be listed on each securities exchange or market, if any, on which equity securities issued by CRI have been listed; and

 

(vii) use its commercially reasonable best efforts to take all other steps necessary to effect the registration of the Shares.

 

(c) Borrower’s obligations under this Section 8.4 shall survive the termination of this Agreement.

 

 

8.5 Indemnification. Borrower shall, notwithstanding any termination of this Agreement, indemnify, defend and hold harmless Lender (to the extent a seller under any Registration Statement), the officers, directors, agents, partners, members, managers, stockholders, affiliates, employees and investment advisers of each of them, each person who controls Lender (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, partners, members, managers, stockholders, agents, affiliates, employees and investment advisers of each such controlling person (all the foregoing, the “Indemnified Parties”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, demands, suits, actions, judgments, damages, liabilities, costs (including, without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, that arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any prospectus included in any Registration Statement or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein (in the case of any prospectus or form of prospectus or supplement thereto, in light of the circumstances under which they were made) not misleading, or (ii) any violation or alleged violation by CRI of the Securities Act, Exchange Act or any state securities law or any rule or regulation thereunder, in connection with the performance of its obligations under this Section, except to the extent, but only to the extent, that such untrue statements, untrue statements, omissions or omissions are based upon information regarding Lender furnished in writing by Lender to CRI expressly for use therein. CRI shall notify Lender promptly of the institution, threat or assertion of any proceeding arising from or in connection with the transactions contemplated by this Section of which CRI is or becomes aware. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of an indemnified party and shall survive the transfer of any Shares by Lender. Borrower’s obligations under this Section 8.5 shall survive the termination of this Agreement.

 

9. SUCCESSORS AND ASSIGNS

 

Each Loan Document shall be binding on and shall inure to the benefit of Borrower, Lender and their respective successors and assigns, except as otherwise provided herein or therein. Borrower may not assign, transfer, hypothecate, delegate or otherwise convey its rights, benefits, obligations or duties under any Loan Document without the prior express written consent of Lender. Any such purported conveyance by Borrower without the prior express written consent of Lender shall be void. There shall be no third-party beneficiaries (including the Senior Lender) of any of the terms and provisions of any of the Loan Documents, except that Indemnified Parties and Lender’s designees who receives any Shares shall be an intended third-party beneficiary of the Company’s obligations set forth in Section 8.

 

10. RELEASE (a) Each Borrower hereby acknowledges and agrees that: (i) no Borrower has any claim or cause of action against the Lender (or any of its Affiliates or its or their officers, directors, employees, managers, members, partner, shareholders, attorneys or consultants) in connection with the Loan Documents (as defined in the Existing Credit Agreement) and (ii) the Lender has heretofore properly performed and satisfied in a timely manner all of its obligations to Borrower under the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) that are required to have been performed on or prior to the date hereof. Notwithstanding the foregoing, the Lender wishes (and Borrower agrees) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of the Lender's rights, interests, security and/or remedies under the Existing Credit Agreement and the other Loan Documents (as defined in the Existing Credit Agreement) or under this Agreement or any other Loan Document. Accordingly, for and in consideration of the agreements contained in this Agreement and other good and valuable consideration, each Borrower (for itself and each other Borrower and the successors, assigns, heirs and representatives of each of the foregoing) (collectively, the "Releasors") does hereby fully, finally, unconditionally and irrevocably release and forever discharge Lender and each of its Affiliates and its and their managers, members, partners, officers, directors, employees, shareholders attorneys and consultants in their capacities as or for the Lender (collectively, the "Released Parties") from any and all debts, claims, obligations, damages, costs, attorneys' fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent or fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done directly arising out of, connected with or related to the Existing Credit Agreement or any other Loan Document (as defined in the Existing Credit Agreement), or any act, event or transaction related or attendant thereto, or the agreements of the Lender contained therein, or the possession, use, operation or control of any of the assets of any Borrower, or the making of any Loans or other Advances, or the management of such Loans or Advances or the Collateral, in each case, solely to the extent arising from any act, omission or thing whatsoever done or omitted to be done on or prior to the Closing Date.

 

 

11. GENERAL PROVISIONS

 

11.1 Complete Agreement; Modification of Agreement. This Agreement and the other Loan Documents constitute the complete agreement between the parties with respect to the subject matter hereof and thereof, supersede all prior agreements, commitments, understandings or inducements (oral or written, expressed or implied). No Loan Document may be modified, altered or amended except by a written agreement signed by Lender and Borrower.

 

11.2 Expenses. Borrower agrees to pay its own costs and expenses (including the fees and expenses of all counsel, advisors, consultants and auditors retained in connection therewith), incurred in connection with the preparation, negotiation, execution and delivery of, and, other than as specifically set forth herein, the performance of obligations under, the Loan Documents. Borrower agrees to also pay Lender’s costs and expenses (including the fees and expenses of all counsel, advisors, consultants and auditors retained in connection therewith), incurred in connection with the preparation, negotiation, execution and delivery of, and, other than as specifically set forth herein, the performance of obligations under, the Loan Documents and the enforcement of the rights and remedies hereunder.

 

11.3 No Waiver. Neither Lender’s failure, at any time, to require strict performance by Borrower of any provision of any Loan Document, nor Lender’s failure to exercise, nor any delay in exercising, any right, power or privilege hereunder, shall operate as a waiver thereof or waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or future exercise thereof or the exercise of any other right, power or privilege. Any suspension or waiver of a Default or other provision under the Loan Documents shall not suspend, waive or affect any other Default or other provision under any Loan Document, and shall not be construed as a bar to any right or remedy that Lender would otherwise have had on any future occasion. None of the undertakings, indemnities, agreements, warranties, covenants and representations of Borrower to Lender contained in any Loan Document and no Default by Borrower under any Loan Document shall be deemed to have been suspended or waived by Lender, unless such waiver or suspension is by an instrument in writing signed by an officer or other authorized employee of Lender and directed to Borrower specifying such suspension or waiver (and then such waiver shall be effective only to the extent therein expressly set forth), and Lender shall not, by any act (other than execution of a formal written waiver), delay, omission or otherwise, be deemed to have waived any of its rights or remedies hereunder.

 

 

11.4 Severability. Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of any Loan Document shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of such Loan Document. Except as otherwise expressly provided for in the Loan Documents, no termination or cancellation (regardless of cause or procedure) of any financing arrangement under the Loan Documents shall in any way affect or impair the Obligations, duties, covenants, representations and warranties, indemnities, and liabilities of Borrower or the rights of Lender relating to any unpaid Obligation, (due or not due, liquidated, contingent or unliquidated), or any transaction or event occurring prior to such termination, or any transaction or event, the performance of which is not required until after the Termination Date, all of which shall not terminate or expire, but rather shall survive such termination or cancellation and shall continue in full force and effect until the Termination Date; provided, however, that all indemnity obligations of Borrower under the Loan Documents shall survive the Termination Date.

 

11.5 Notices. Except as otherwise provided herein, whenever any notice, demand, request or other communication shall or may be given to or served upon any party by any other party, or whenever any party desires to give or serve upon any other party any communication with respect to this Agreement, each such communication shall be in writing and shall be deemed to have been validly served, given or delivered (a) three days after deposit in the United States Mail, registered or certified mail, return receipt requested, with proper postage prepaid, (b) upon confirmed receipt, when sent by email transmission, (c) one Business Day after deposit with a reputable overnight courier with all charges prepaid or (d) when hand-delivered, all of which shall be addressed to the party to be notified and sent to the address or facsimile number indicated on the signature pages hereto or to such other address (or facsimile number) as may be substituted by notice given as herein provided.

 

11.6 Counterparts. Any Loan Document may be authenticated in any number of separate counterparts by any one or more of the parties thereto, and all of said counterparts taken together shall constitute one and the same instrument. Valid and binding signatures to any Loan Document may be delivered in original ink, by facsimile or by email or other means of electronic transmission.

 

11.7 Governing Law. The Loan Documents and the obligations arising under the Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such state, without regard to the principles thereof regarding conflicts of laws.

 

11.8 Submission To Jurisdiction; Waiver Of Jury Trial. (A) BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK CITY, NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, HOWEVER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LENDER. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.

 

 

(B) THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN LENDER AND BORROWER ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

 

11.9 Reinstatement. This Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment of all or any part of the Obligations is rescinded or must otherwise be returned or restored by Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Borrower, or otherwise, all as though such payments had not been made.

 

11.10 Joint and Several. Each Borrower agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to Lender the prompt payment and performance of, all Obligations under this Agreement and all agreements under the Loan Documents.

 

11.11 Amendment And Restatement; No Novation. This Agreement constitutes an amendment and restatement of the Existing Credit Agreement and the Existing Notes, as amended, effective from and after the date hereof. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby shall constitute a novation of any indebtedness or other obligations owing to Lender under the Existing Credit Agreement and Existing. As of the Closing Date, the credit facilities described in the Existing Credit Agreement, as amended, shall be amended, supplemented, modified and restated in their entirety by the facilities described herein, and all loans and other obligations of the Borrowers outstanding as of such date under the Existing Credit Agreement and Existing Notes, as amended, shall be deemed to be loans and obligations outstanding under the corresponding facilities described herein, without any further action by Lender.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, this Amended and Restated Loan and Security Agreement has been duly executed as of the date first written above.

 

BORROWER:   Creative Realities, Inc. Creative Realities, LLC Creative Realities Canada, Inc. Conexus World Global, LLC Allure Global Solutions, Inc.   /s/ Richard Mills By: Richard Mills Title: Chief Executive Officer	LENDER:   Slipstream Communications, LLC   /s/ Brian Friedman By: Brian Friedman Title: General Counsel
Address for Notice (for all Borrowers): Creative Realities, Inc. Attention: Chief Financial Officer 13100 Magisterial Dr, Ste. 100 Louisville, KY 40223	Address for Notice: Slipstream Communications, LLC Attention Mr. Brian Friedman 750 E. Main St., Suite 600 Stamford, CT 06902

 

 

SCHEDULE A – DEFINITIONS

 

Capitalized terms used in this Agreement and the other Loan Documents shall have (unless otherwise provided elsewhere in this Agreement or in the other Loan Documents) the following respective meanings:

 

“Advance” means any advance or deemed advance of Loan proceeds under this Agreement, as outlined in Section 1 or otherwise.

 

“Affiliate” means, with respect to any Person: (a) each other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, 10% or more of the voting capital stock having ordinary voting power for the election of directors of such Person; (b) each other Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; or (c) each of such Person’s officers, directors, joint venturers and partners. For the purpose of this definition, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise.

 

“Agreement” means this Agreement, including all appendices, exhibits or schedules attached or otherwise identified thereto, restatements and modifications and supplements thereto, and any appendices, exhibits or schedules to any of the foregoing, each as effect at the time such reference becomes operative.

 

“Bankruptcy Event” means the occurrence of any event referred to in either Section 7.1(f) or (g).

 

“Books and Records” means all books, records, board minutes, contracts, licenses, insurance policies, environmental audits, business plans, files, computer files, computer discs and other data and software storage and media devices, accounting books and records, financial statements (actual and pro forma), filings with Governmental Authorities and any and all records and instruments relating to the Collateral or Borrower’s business.

 

“Borrower” means each of, and collectively all of, Creative Realities, Inc., Creative Realities, LLC, Creative Realities Canada, Inc., Conexus World Global, LLC and Allure Global Solutions, Inc.

 

“Business Day” means any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York.

 

“Closing Date” means the time on the Business Day on which the conditions precedent set forth in Section 2.1 and 2.2 have been satisfied or specifically waived in writing by Lender, and the Consolidation Term Loan and the Special Convertible Term Loan are deemed made pursuant hereto.

 

“Code” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, the Lender’s Lien on any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, then the term “Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Agreement relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions; provided further, that to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern.

 

 

“Collateral” has the meaning assigned to it in Section 6.1.

 

“Contractual Obligation” means as to any Person, any provision of any security issued by such Person or of any written agreement, instrument, or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“Conversion Date” means March 31, 2022.

 

“Default” means any Event of Default or any event that, with the passage of time or notice or both, would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning assigned to it in Section 1.4.

 

“Event of Default” has the meaning assigned to it in Section 7.1.

 

“Financial Statements” means the consolidated and consolidating income statement, balance sheet and statement of cash flows of Creative Realities, Inc. prepared in accordance with GAAP.

 

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

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

 

“Indebtedness” of any Person means: (a) all indebtedness of such Person for borrowed money or for the deferred or unpaid purchase price of property or services (including reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured, but not including obligations to trade creditors incurred in the ordinary course of business and not more than 45 days past due); (b) all obligations evidenced by notes, bonds, debentures or similar instruments; (c) all indebtedness created or arising under any conditional sale or other title-retention agreements 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); (d) all capital lease obligations; (e) all guarantees of Indebtedness of other Persons; (f) all Indebtedness referred to in clauses (a), (b), (c), (d) or (e) above that is 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 contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; (g) the Obligations; and (h) all liabilities under Title IV of the Employee Retirement Income Security Act of 1974 (or any successor legislation thereto), as amended from time to time, and any regulations promulgated thereunder.

 

“Intellectual Property” means any and all Licenses, patents, copyrights, trademarks, trade secrets and customer lists.

 

“IRC” and “IRS” mean respectively, the Internal Revenue Code of 1986 and the Internal Revenue Service, and any successors thereto.

 

“Lender” means Slipstream Communications, LLC. and in the event of the assignment by Lender of any of its rights or obligations, shall mean the assignee.

 

 

“License” means any written agreement now owned or hereafter acquired by any Person granting any right with respect to (i) any copyright or copyright registration, (ii) any invention on which a patent is inexistence, (iii) the use of any trademark or trademark registration, or (iv) other license of rights or interests now held or hereafter acquired by any Person.

 

“Lien” means any mortgage, security deed or deed of trust, pledge, hypothecation, assignment, deposit arrangement, proxy, voting agreement, lien, charge, claim, security interest, security title, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Code or comparable law of any jurisdiction).

 

“Litigation” means any claim, lawsuit, litigation, investigation or proceeding of or before any arbitrator or Governmental Authority.

 

“Loan Documents” means this Agreement, the Warrants and all security agreements and other documents, instruments, certificates, and notices at any time delivered by any Person (other than Lender) in connection with any of the foregoing.

 

“Loan Rate” means (i) with respect to the Line of Credit Loan and the Special Convertible Term Loan, a fixed rate equal to ten percent (10.0%) per annum; and (ii) with respect to the Consolidation Term Loan, a fixed rate equal to eight percent (8.0%) per annum.

 

“Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to or have a material adverse effect on (a) the business, assets, operations, or financial or other condition of Borrower, (b) Borrower’s ability to pay or perform the Obligations under the Loan Documents in accordance with the terms thereof, (c) the Collateral or Lender’s Liens on the Collateral or the priority of any such Lien, or (d) Lender’s rights and remedies under this Agreement and the other Loan Documents.

 

“Maturity Date” means March 31, 2023.

 

“Minimum Actionable Amount” means $100,000.

 

“Notes” means, collectively, the Line of Credit Note, the Consolidation Term Note and the Special Convertible Term Note.

 

“Obligations” means all loans, advances, debts, expense reimbursement, fees, liabilities, and obligations for the performance of covenants, tasks or duties or for payment of monetary amounts (whether or not such performance is then required or contingent, or amounts are liquidated or determinable) owing by Borrower to Lender, of any kind or nature, present or future, whether or not evidenced by any note, agreement or other instrument, whether arising under any of the Loan Documents or under any other agreement between Borrower and Lender, and all covenants and duties regarding such amounts. This term includes all principal, interest (including interest accruing at the then-applicable rate provided in this Agreement after the maturity of the Loans and interest accruing at the then-applicable Loan Rate after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), fees, Charges, expenses, attorneys’ fees and any other sum chargeable to Borrower under any of the Loan Documents, and all principal and interest due in respect of the Loans.

 

 

“Permitted Encumbrances” means the following encumbrances: (a) Liens for Taxes or assessments or other charges or levies, either not yet due or payable; (b) pledges or deposits securing obligations under worker’s compensation, unemployment insurance, social security or public liability laws or similar legislation; (c) pledges or deposits securing bids, tenders, contracts (other than contracts for the payment of money) or leases to which Borrower is a party as lessee made in the ordinary course of business in an aggregate amount outstanding at anytime not in excess of $75,000; (d) deposits securing public or statutory obligations of Borrower; (e) inchoate and unperfected workers’, mechanics’, or similar liens arising in the ordinary course of business so long as such Liens attach only to Equipment, fixtures or real estate; (f) carriers’, warehousemans’, suppliers’ or other similar possessory liens arising in the ordinary course of business and securing indebtedness not yet due and payable in an outstanding aggregate amount not in excess of $75,000 at any time so long as such Liens attach only to Inventory; (g) deposits of money securing, or in lieu of, surety, appeal or customs bonds in proceedings to which Borrower is a party; (h) zoning restrictions, easements, licenses, or other restrictions on the use of real property or other minor irregularities in title (including leasehold title) thereto, so long as the same do not materially impair the use, value, or marketability of such real estate; (i) Purchase Money Liens securing Purchase Money Indebtedness (or rent) to the extent permitted under Section 5(b); (j) all of those Liens in existence on the Closing Date and disclosed on Disclosure Schedule 5(d); and (k) Liens in favor of Lender securing the Obligations.

 

“Person” means any individual, sole proprietorship, partnership, limited liability partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation, entity or government (whether domestic or foreign, federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof), and shall include such Person’s successors and assigns.

 

“PPSA” means the Personal Property Security Act of the province of Ontario.

 

“Purchase Money Indebtedness” means (a) any Indebtedness incurred for the payment of all or any part of the purchase price of any fixed asset, (b) any Indebtedness incurred for the sole purpose of financing or refinancing all or any part of the purchase price of any fixed asset, and (c) any renewals, extensions or refinancings thereof.

 

“Purchase Money Lien” means any Lien upon any fixed assets which secures the Purchase Money Indebtedness related thereto, but only if such Lien shall at all times be confined solely to the asset the purchase price of which was financed or refinanced through the incurrence of the Purchase Money Indebtedness secured by such Lien and only if such Lien secures only such Purchase Money Indebtedness.

 

“Real Property” has the meaning assigned to it in Section 3.6.

 

“Requirement of Law” means as to any Person, the Articles of Incorporation and Bylaws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

“Restricted Payment” means: (a) the declaration or payment of any cash dividend or the incurrence of any liability to make any other payment or distribution of cash or other property or assets on or in respect of Borrower’s capital stock; (b) any payment or distribution made in respect of any subordinated Indebtedness of Borrower in violation of any subordination or other agreement made in favor of Lender; (c) any payment on account of the purchase, redemption, defeasance or other retirement of Borrower’s capital stock or any other payment or distribution made in respect of any thereof, either directly or indirectly; provided, however, that no payment to Lender shall constitute a Restricted Payment.

 

 

“Taxes” means taxes, levies, imposts, deductions, Charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on or measured by the net income of Lender.

 

“Termination Date” means the date on which all Obligations under this Agreement are indefeasibly paid in full, in cash, and Borrower shall have no further right to borrow any moneys or obtain other credit extensions or financial accommodations under this Agreement.

 

“Warrants” means the Warrants issued by CRI to Lender set forth on Schedule B hereto, including but not limited to Warrants issued by CRI to Lender in connection with the Existing Agreement and any amendment to the Existing Agreement, including the Warrant dated on or about August 17, 2016, the Warrant dated November 13, 2017, the Warrant dated January 6, 2018 and the Warrant dated April 27, 2018, and any replacements or substitutions thereof.

 

Any accounting term used in this Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP consistently applied. All capitalized terms used in this Agreement or other Loan Documents but undefined shall, unless the context indicates otherwise, have the meanings provided for by the Code. The words “herein,” “hereof’ and “hereunder” or other words of similar import refer to this Agreement as a whole, including the exhibits and schedules thereto, as the same may from time to time be amended, modified or supplemented, and not to any particular section, subsection or clause contained in this Agreement.

 

For purposes of this Agreement and the other Loan Documents, the following additional rules of construction shall apply, unless specifically indicated to the contrary: (a) wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and the plural; (b) the term “or” is not exclusive; (c) the term “including” (or any form thereof) shall not be limiting or exclusive; (d) all references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations; and (e) all references to any instruments or agreements, including references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.

 

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