UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) September 16, 2014

TWINLAB CONSOLIDATED HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Nevada
000-55181
46-3951742
(State or other jurisdiction of incorporation)
(Commission
File Number)
(IRS Employer Identification No.)

632 Broadway, New York, New York 10012
(Address of Principal Executive Offices, including zip code)

212 651 8500
(Registrant’s telephone number, including area code)

(Former name, former address, if changed since last report)

Mirror Me, Inc.
1455 Kettner Blvd., #305
San Diego, CA 92101
(562) 618-1310
Fax (619) 704-0556

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




 
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EXPLANATORY NOTE

Twinlab Consolidated Holdings, Inc., a Nevada corporation formerly known as Mirror Me, Inc., is providing the disclosure contained in this Current Report on Form 8-K in connection with the closing of the Merger (as defined in Item 2.01 of this Current Report on Form 8-K) on September 16, 2014, under the following items of Form 8-K: Item 1.01, Item 2.01, Item 3.02, Item 5.01, Item 5.02, Item 5.06, and Item 9.01.  A table of contents of this Current Report on Form 8-K is as follows:
 
   
Page No.
Forward-Looking Statements
 
3
Item 1.01 Entry into a Material Definitive Agreement
 
6
Item 2.01 Completion of Acquisition or Disposition of Assets
 
6
Business
 
8
Risk Factors
 
25
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
36
Security Ownership of Certain Beneficial Owners and Management
 
46
Management
 
48
Executive Compensation
 
50
Certain Relationships and Related Transactions, and Director Independence
 
55
Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters
 
56
Recent Sales of Unregistered Securities
 
56
Description of Securities
 
57
Indemnification of Directors and Officers
 
58
Financial Statements
 
58
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
58
Item 3.02 Unregistered Sales of Equity Securities
 
59
Item 5.01 Changes in Control of Registrant
 
59
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
 
60
Item 5.03Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
 
60
Item 5.06 Change in Shell Company Status
 
61
Item 9.01 Financial Statements and Exhibits
 
 

References throughout this Current Report on Form 8-K to “we,” “our,” “us,” “the Company,” “TCH,” and similar terms refer to Twinlab Consolidated Holdings, Inc., unless otherwise expressly stated or the context otherwise requires. This Current Report contains summaries of the material terms of the agreements executed in connection with the transactions described herein. The summaries of these agreements are subject to, and qualified in their entirety by, reference to those agreements, all of which are incorporated herein by reference.

On August 28, 2014, the Company effectuated a 50 to 1 forward split of its $0.001 par value common stock, with a record date of September 9, 2014. Unless the context indicates or otherwise requires, all shares and per share amounts in this Form 8-K have been adjusted to reflect the forward split.


 
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this Current Report on Form 8-K that are not descriptions of historical facts are forward-looking statements that are based on management’s current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition and stock price could be materially negatively affected.  In some cases, you can identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” “would” or the negative of these terms or other comparable terminology. Factors that could cause actual results to differ materially from those currently anticipated include those set forth in the section titled “Risk Factors” including, without limitation, risks relating to:

·  
our need for substantial additional funds in order to continue our operations, and the uncertainty of whether we will be able to obtain the funding we need;

·  
our ability to retain or hire key management personnel;

·  
our ability to protect our intellectual property rights that are valuable to our business, including patent, trademark and other intellectual property rights;

·  
dependence on third-party manufacturers, suppliers, distributors and other potential commercial partners;

·  
the size and growth of the potential markets for our products, and the rate and degree of market acceptance of any of our products;

·  
competition in our industry;

·  
regulatory developments in the United States and foreign countries;

·  
consumer perception of our products due to adverse scientific research or findings, regulatory investigations, litigation, national media attention and other publicity regarding nutritional supplements;

·  
potential slow or negative growth in the vitamin, mineral and supplement market;

·  
increases in the cost of borrowings or unavailability of additional debt or equity capital, or both;

·  
volatile condition in the capital, credit and commodities markets and in the overall economy;

·  
dependency on retail stores for sales;

·  
the loss of significant customers;

 
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·  
compliance with new and existing federal, state, local or foreign legislation or regulation, or adverse determination by regulators anywhere in the world (including the banning of products) and, in particular, Food and Drug Administration Good Manufacturing Practices (“GMP”), Dietary Supplement Health and Education Act of 1994 (“DSHEA”), Food Safety Modernization Act (“FSMA”), California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65),” in the United States, the Natural Health Products Regulations in Canada, the Food Supplements Directive and Traditional Herbal Medicinal Products Directive (the “Herbal Products Directive”) in Europe and greater enforcement by any such federal, state, local or foreign governmental entities;

·  
material product liability claims and product recalls;

·  
our inability to obtain or renew insurance, or to manage insurance costs;

·  
international market exposure and compliance with anti-corruption laws in the U.S. and foreign jurisdiction;

·  
difficulty entering new international markets;

·  
legal proceedings initiated by regulators in the U.S. or abroad;

·  
unavailability of, or our inability to consummate, advantageous acquisitions in the future, or our inability to integrate acquisitions into the mainstream of our business.

·  
difficulty entering new international markets;

·  
loss of executive officers or other key personnel;

·  
loss of certain third-party suppliers;

·  
the availability and pricing of raw materials;

·  
disruptions in manufacturing operations that produce nutritional supplements and loss of manufacturing certifications;

·  
Increased competition and failure to compete effectively;

·  
our inability to respond to changing consumer preferences;

·  
interruption of business or negative impact on sales and earnings due to acts of God, acts of war, sabotage, terrorism, bio-terrorism, civil unrest or disruption of delivery service;

·  
work stoppages at our facilities;

·  
increased raw material, utility and fuel costs;

 
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·  
fluctuations in foreign currencies, including, in particular, the Euro, the Canadian dollar and the Chinese Yuan;

·  
interruptions in information processing systems and management information technology, including system interruptions and security breaches;

·  
failure to maintain and/or upgrade our information technology systems;

·  
our exposure to, and the expense of defending and resolving, product liability claims, intellectual property claims and other litigation;

·  
failure to maintain effective controls over financial reporting;

·  
other factors disclosed in this Report; and

·  
other factors beyond our control.

We operate in a very competitive and rapidly-changing environment and new risks emerge from time to time.  As a result, it is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.  In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.  You should not rely upon forward-looking statements as predictions of future events.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur.  Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements.  The forward-looking statements included in this report speak only as of the date hereof, and except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to actual results or to changes in our expectations.


 
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Item 1.01 Entry into a Material Definitive Agreement.

On September 4, 2014, Twinlab Consolidated Holdings, Inc., a Nevada corporation formerly known as Mirror Me, Inc. (the “Company”), entered into an Agreement and Plan of Merger and entered into a First Amendment to Agreement and Plan of Merger on September 16, 2014 (as amended, the “Merger Agreement”), by and among the Company, TCC MERGER CO (“Sub Co”), a Delaware corporation and wholly-owned subsidiary of the Company, and Twinlab Consolidation Corporation (“TCC”), a Delaware corporation, whereby TCC became a wholly-owned subsidiary of the Company.  The Merger Agreement provides for the merger of Sub Co with and into TCC (the “Merger”), with TCC surviving the Merger as a wholly-owned subsidiary of the Company.

The Merger closed on September 16, 2014. See Item 2.01 below for further description of the Merger.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On September 16, 2014, the Company completed the Merger, pursuant to the Merger Agreement, by and among the Company, Sub Co and TCC, whereby TCC became a wholly-owned subsidiary of the Company.

Pursuant to the terms of the Merger, the Company issued 199,995,000 shares of restricted common stock in exchange for 100% of TCC’s issued and outstanding common and preferred stock. Total issued and outstanding common stock of the Company, after giving effect to the Merger, is 220,000,000 shares.

As a result of the closing of the Merger, the Company has become a holding company and its main focus has been redirected to the operations of TCC. The Company now owns, through the acquired companies, all of the assets, liabilities and operations of TCC and its subsidiaries, which manufacture and market high-quality, science-based nutritional supplements.  The Company, subject to its ability to access the requisite capital, intends to pursue a business strategy that contemplates additional acquisitions and integration of acquired companies, as more fully described below under “Description of Business,” “Business Strategy.”

Accounting Treatment of the Merger

The Merger is being accounted for as a reverse triangular merger.  TCC is the accounting acquirer for financial reporting purposes and the Company is the accounting acquiree.  Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the Merger will be those of TCC and will be recorded at the historical cost basis of TCC. The consolidated financial statements after completion of the Merger will include the assets and liabilities of the Company and TCC, the operations of TCC and its subsidiaries, and the operations of the Company.

 
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Tax Treatment

The Merger is intended to constitute a tax-free reorganization within the meaning of the Internal Revenue Code of 1986.

Emerging Growth Company

Following the Merger, the Company continues to be an “emerging growth company,” as defined in Section 3(a)(80) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

An “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”), may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.  As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.
 
 
FORM 10 DISCLOSURE

Twinlab Consolidated Holdings, Inc. is providing below the information that would be included in a Form 10 if we were to file a Form 10. Please note that the information provided below relates to the current operations acquired through the closing of the Merger, as discussed above.
 
 

 
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DESCRIPTION OF BUSINESS

As a result of the closing of the Merger, the Company now owns through wholly-owned subsidiaries all of the assets, liabilities and operations of TCC which manufactures and markets high-quality, science-based nutritional supplements. The information set forth herein is only a summary of our business plans.

General Development of Business

Mirror Me, Inc. was formed as a Nevada corporation on October 24, 2013. On August 7, 2014, we changed our name from Mirror Me, Inc. to Twinlab Consolidated Holdings, Inc.  As a result of the closing of the Merger, the Company’s main focus has been redirected to the operations of TCC and its subsidiaries.  Hence, the Company will become a holding company and all operations will be conducted through its subsidiaries.

TCC and its subsidiaries manufacture and market high-quality, science based nutritional supplements. TCC, and immediately after the consummation of the Merger, the Company, maintains its principal executive offices at 632 Broadway, Suite 201, New York, New York 10012. TCC’s wholly-owned subsidiary is Twinlab Holdings, Inc. (formerly known as Idea Sphere Inc.) (“ THI ”).  Twinlab Holdings, Inc.’s wholly-owned subsidiaries are Twinlab Corporation, which manufactures and markets nutritional supplements under its own brands and for others, and ISI Brands, Inc., which holds title to the intellectual property used in the manufacturing and marketing activities of Twinlab Corporation.

For convenience in this report, the terms “Company,” “we” and “us” may be used to refer to Twinlab Consolidated Holdings, Inc. and/or its subsidiaries, except where indicated otherwise, and the term “TCC” may be used to refer to Twinlab Consolidation Corporation and/or its subsidiaries.

TCC’s products include vitamins, minerals, specialty supplements and sports nutrition products primarily under the Twinlab® brand name (including the Twinlab® Fuel family of sports nutrition products); diet and energy products under the Metabolife® brand name; a line of products that promote joint health under Trigosamine ® brand name;  and a full line of herbal teas under the Alvita® brand name. These products are sold primarily through health and natural food stores, national and regional drug store chains, supermarkets, and mass market retailers.

Development of the TCC Business

TCC was incorporated on October 1, 2013 in the state of Delaware. TCC was formed to effect a consolidation strategy in the fragmented vitamin, mineral, herbal and other nutritional supplements sectors of the health and wellness industry (the “H&W Industry”). Since our formation we have established a business plan to execute on this strategy. We are of the view that we are well positioned to capitalize on the opportunity for consolidation that we believe exists in the H&W Industry.

On August 7, 2014, TCC acquired Idea Sphere Inc., a Michigan corporation (“Idea Sphere”) and its subsidiaries. This transaction was conducted as a reverse triangular merger (the “IS Merger”) in which TCC established a wholly-owned subsidiary (“TCC Subco”) that merged with Idea Sphere.  On August 27, 2014, the name of Idea Sphere was changed to THI.  As a consequence of the closing of the IS Merger followed by the closing of the Merger, the Company’s main focus has been redirected to the operations of its operating subsidiary, Twinlab Corporation, which manufactures and markets high-quality, science-based nutritional supplements under a number of brand names.

 
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THI was incorporated on April 10, 2001 and shortly thereafter incorporated ISI Brands, Inc. as a wholly-owned subsidiary on December 4, 2001.  On December 19, 2003, THI successfully completed the acquisition of substantially all of the non-ephedra assets of Twin Laboratories Inc. out of a Chapter 11 bankruptcy pursuant to Section 363 of the United States Bankruptcy Code. The assets acquired by  THI at the time constitute the core of the operations that comprise the Company’s current business.

           On November 4, 2005, THI completed the acquisition out of a Chapter 11 bankruptcy of substantially all of the non-ephedra assets of Metabolife International Inc. and its subsidiary Alpine Health Products LLC, again pursuant Section 363 of the Bankruptcy Code.  Through this acquisition, THI expanded its presence in the diet and energy category.

On September 18, 2006, THI acquired the assets of Cole Water Company LLC (“Cole Water”), which owned an aquifer with a recharging spring of naturally calcium enriched water.  This transaction included the acquisition of real property at 51 Strawtown Pike, Peru, Indiana that holds the natural aquifer as well as a bottling facility.  Cole Water has marketed calcium enriched water under a number of brand names.  On December 31, 2013, THI discontinued operations of its water products line.

Forward Split

On August 28, 2014, the Company amended its Articles of Incorporation (the “Charter Amendment”) to effectuate a 50 to 1 forward split (the “Forward Split”) of its issued and unissued common and preferred shares as of September 9, 2014, the record date. As a consequence of the Forward Split, the issued and outstanding shares of common stock of the Company increased from 4,400,000 shares immediately prior to the Forward Split becoming effective to 220,000,000 shares following the Forward Split. The number of authorized common shares increased from 100,000,000 to 5,000,000,000 common shares.

The Company’s authorized preferred stock increased from 10,000,000 shares to 500,000,000 shares.  No shares of the preferred stock have been issued.  The Company is required to give notice of the Forward Split to the Financial Industry Regulatory Authority (“FINRA”) at least ten days before the split becomes effective.  The Company submitted an Issuer Company-Related Action Notification Form to FINRA regarding the Forward Stock Split on August 29, 2014 and the ten day notice period has elapsed.  An amendment to the Company’s Articles of Incorporation to effect the changes described above was filed with the Nevada Secretary of State on August 28, 2014.

Recent Change in Management

On September 12, 2014, Luz Vazquez submitted her letter of resignation from her position as President, Secretary, and Treasurer effective on the consummation of the Merger, and as the Sole Director of the Company, effective with the appointment of her successor(s) to the Board following consummation of the Merger.

Immediately after the consummation of the Merger, the Board of Directors of the Company (the “Board”) appointed Thomas A. Tolworthy as the Sole Director of the Company, such appointment to be effective September 16, 2014.  The resignation of Ms. Vazquez was accepted by the Company on September 16, 2014 immediately after the appointment of Mr. Tolworthy.

 
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Effective as of the effective date of the Merger, and in connection with the resignations of Luz Vazquez as an officer of the Company, the Board appointed the following persons to serve as officers of the Company: (a) Thomas Tolworthy as the Chief Executive Officer and President, (b) Mark Jaggi as Executive Vice President, Chief Financial Officer and Treasurer; (c) Richard Neuwirth as Executive Vice President, Chief Legal Officer and Secretary.

Change of Control

Mr. Tolworthy acquired 59.49% or 130,870,132 shares of common stock as a result of being a stockholder of TCC of which the Company acquired 100% of the ownership pursuant to the Merger.  Mr. Tolworthy has entered into an agreement with TCC, the benefit of which accrues to the Company, pursuant to which Mr. Tolworthy will contribute, for no consideration, up to 65,306,102 shares of the common stock he holds to facilitate acquisitions and the raising of capital by the Company, provide a pool of shares to be used for incentive awards by the Company and for use by the Company for other proper purposes, without such events diluting the interests of other shareholders.  If the Company elects to have Mr. Tolworthy contribute all shares it has the right to call, Mr. Tolworthy’s ownership would be reduced to 65,564,030 shares of the Company’s common stock, or 29.80%.  Mr. Tolworthy also has a contingent agreement to acquire up to 5,021,834 shares of the Company’s outstanding common stock if either or both of the transactions subject to Option No. 1 or Option No. 2, which are described under “Recent Developments” below, do not close.  Such shares are not included in the shares described above as owned by Mr. Tolworthy.

In addition, on September 16, 2014, simultaneously with the effectiveness of the Merger, pursuant to an agreement entered into prior thereto, the Company acquired 199,995,000  shares of common stock pursuant to a Termination and Buy-Back Agreement, dated as of September 12, 2014, with Ms. Luz Vazquez (for an aggregate purchase price of $8,000, which included satisfaction of certain indebtedness owed to Ms. Vazquez by the Company).   Following such purchase, Ms. Vazquez held 5,000 shares of the Company’s common stock.

Change in Fiscal Year

On September 12, 2014, the Board resolved, effective September 16, 2014, to change our fiscal year to end on December 31 of each year.

Business Overview

General

We are an integrated manufacturer, marketer, and distributor of branded nutritional supplements and other natural products sold primarily to and through domestic health and natural food stores and food, drug and mass market retailers. Internationally, we market and distribute branded nutritional supplements to and through health and natural product distributors and retailers. Our core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements and other natural products. We believe that the consolidation and integration of these acquired businesses will provide ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships.

 
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We manufacture and sell nutritional products, including primarily a full line of nutritional supplements under the Twinlab® brand (including the Twinlab® Fuel family of sports nutrition products). We also manufacture and sell diet and energy products under the Metabolife® brand name, a line of products that promote joint health under the Trigosamine® brand name, and a full line of herbal teas under the Alvita® brand name .

We manufacture and/or distribute one of the broadest branded product lines in the industry with approximately 850 individual stock keeping units (“SKUs”), including approximately 250 SKUs sold internationally. We believe that as a result of our emphasis on innovation, quality, loyalty, education and customer service, our brands are widely recognized in health and natural food stores and among their customers.  In addition, we act as contract manufacturers for private label customers.  Approximately 18% of our 2013 sales consisted of sales of products manufactured for these customers.

We were established to effect a consolidation strategy in the fragmented health and wellness industry. Utilizing the assets and expertise of the Twinlab Corporation, we intend to implement a strategic plan to provide elevated productivity, optimized manufacturing capability and distribution networks, increased market share and enhanced profit margins through selected acquisitions to emerge as a market leader. We have assembled a seasoned management team with extensive acquisition and integration expertise for the purpose of executing our strategic plan.

Business Strategy

We target consumers searching for high quality nutritional supplements and other natural products. We believe many of these consumers shop in sales channels that offer meaningful education, service and support to their customers.

The primary channel that offers this type of support to consumers in the United States has been health and natural food stores (“HNF”). Our primary focus and strength has been and remains on this channel. This strategy has enabled us to benefit from the growth of the HNF channel. The HNF channel consists of approximately 16,500 retailers, including (i) independent health and natural food stores, (ii) health and natural food stores affiliated with local, regional and national health and natural food chains (including health and natural food store chains, such as Whole Foods Market, and vitamin store chains, such as The Vitamin Shoppe and Vitamin World) and (iii) GNC stores.  The HNF channel principally caters to our primary target consumers: those who desire product education, service and high quality nutritional supplements and other natural products. We believe there are significant differences between mass market retailers (such as supermarkets, drugstores and warehouse clubs) that typically offer a limited selection of discounted natural products and lower-potency nutritional supplements and the HNF channel, where natural ingredients, quality, potency, selection and customer support are emphasized. The growth rate of the HNF channel peaked in the 1990’s but this channel still generates impressive growth and is a hot bed of consolidation.

We believe we are among the largest suppliers of nutritional supplements to the HNF channel.  We develop, manufacture, market and distribute a majority of our own products. We manufactured approximately 85% of our products in fiscal 2013 and believe that the quality of our products is among the highest in the industry. We market our branded products through our own sales force dedicated to the HNF channel. We seek to be a market leader in the development of new and innovative products and believe that we benefit from greater customer and product diversification than most of our larger competitors.

 
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We believe that consumers seeking high quality products are also purchasing them through other channels, such as products available through health care practitioners and direct to consumer channels and we continue to seek opportunities through acquisitions to explore reaching our target consumers through these and additional channels.

An integral part of our business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. We believe that the consolidation and integration of these acquired businesses provides ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships.  Prior to the Merger, as noted under “Recent Developments” and “Business Strategy and Operational Risks” below, TCC identified two possible acquisition candidates and entered into option agreements with each under which TCC had the right, but not the obligation to acquire the targeted businesses, one for $37 million (“Option No. 1”), the other for $10.5 million (“Option No. 2”).  TCC paid $2 Million for Option No. 1 and $.35 million for Option No. 2, in each case out of its available funds.  Option No. 1 may be exercised at any time on or before July 13, 2015 and Option No. 2 on or before December 13, 2014.

At the time TCC entered into Option No. 1 and Option No. 2, it did not have the necessary resources to exercise its options.  TCC has no track record of being able to source funding as an independent entity without third party support.  No change in TCC’s ability to access funding sources has occurred by reason of the Merger.  While it is the intention of the Company to attempt to raise the necessary funding through either the debt or the equity markets, there is no assurance that the Company will be successful in its efforts to obtain the funding necessary for Option No. 1, Option No. 2 or both, before the option periods expire.   If the Company cannot successfully raise the necessary funds, the Company would be unable to exercise either or both options.  If that were to occur, the Company would have no further obligations to the grantor of Option No. 1.  If the Company does not exercise Option No. 2 within the exercise period, it will pay the grantor break-up fees of approximately $400,000.  The Company believes that the inability of the Company to acquire the businesses that are subject to the options will not have a material adverse effect on the Company, although there can be no assurance that this will be the case.  See “Business Strategy and Operational Risks” under “Risk Factors” below.

Industry

According to Nutrition Business Journal , the total retail natural products market (the “Natural Products Market”) is highly fragmented and totaled approximately $137.4 billion in retail sales in calendar 2012. The Natural Products Market is comprised of the following submarkets (with estimated calendar 2012 sales indicated): (i) personal care, $13.1 billion, (ii) natural and organic foods, $47.9 billion, (iii) functional foods, $43.9 billion and (iv) vitamins, minerals and supplements, $32.5 billion. Historically, our primary focus has been on vitamins, minerals and supplements (the "VMS Market").  Our business plan could include expansion into the other three channels of the Natural Products Market: natural and organic personal care, natural and organic foods, and functional foods.

The total retail VMS Market is highly fragmented with estimated sales of $32.5 billion in calendar 2012, $30.0 billion in calendar 2011 and $28.1 billion in calendar 2010. We believe that the VMS Market reached its present size due to a number of factors, including (i) interest in healthier lifestyles, living longer and living well, (ii) the publication of research findings supporting the positive health effects of certain nutritional supplements and (iii) the aging of the "Baby Boom" generation combined with the tendency of consumers to purchase more nutritional supplements and natural foods as they age.

 
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Products

We primarily manufacture and market nutritional supplements. As of August 2014, we sold approximately 850 SKUs, including approximately 250 SKUs sold internationally. Our products include vitamins, minerals, specialty supplements and sports nutrition products primarily under the Twinlab® brands (including the Twinlab® Fuel family of sports nutrition products). We also manufacture and sell diet and energy products under the Metabolife® brand name, a line of products that promote joint health under the Trigosamine® brand name, and a full line of herbal teas under the Alvita® brand name.  To accommodate consumer preferences, our products come in various formulations and delivery forms, including capsules, tablets, softgels, chewables, liquids, sprays, powders and whole herbs.

We currently market our products through a multiple brand strategy to offer more customer choice and to encourage retailers to allocate additional shelf space to our brands. We have worked to enhance the strength of our brands by instituting business strategies that have included (i) consolidating or expanding our sales force in certain areas, as appropriate, to maximize each brand's geographic coverage, (ii) performance and growth-based incentives for sales representatives, (iii) introducing more sophisticated management information systems and (iv) periodic updating to brand packaging.

Sales, Marketing and Promotion

Sales

TCC and its subsidiaries are a fully integrated manufacturer, marketer and distributor of nutritional products and generated approximately $76 million in net revenue in 2013. Twinlab presently sells its products through over 45,000 retail stores in the U.S. and distributes its products in over 55 countries worldwide. Retail sales and market share are projected to further expand under TCC management's consolidation strategy. TCC plans to acquire companies with product distinction and innovation while simultaneously absorbing and integrating distribution networks with direct-selling capacities resulting in higher overall sales. TCC creates economies of scale by optimizing manufacturing and operating costs combined with initiating cross-selling of current/new products across the newly integrated distribution networks. Overall, there is considerable opportunity for TCC to command an increased market share of sales over a short period of time following consolidation.

Marketing and Promotion

Twinlab markets a number of brands to consumers shopping in numerous retail channels as well as online e-tailers. Each channel demands a different approach that meets its distinctive needs. The following is a brief overview of the channels in which we market our varied brands.
 
Sales Channels
 
Channel
 
Specifics
Health and Natural Foods (HNF)
Retailers who specialize in supplements (i.e., The Vitamin Shoppe, Vitamin World and GNC) and retailers ranging from Whole Foods to small health food stores

 
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Performance
Retailers and e-tailers that focus on sports nutrition (i.e., Max Muscle Sports Nutrition and Bodybuild-ing.com) retailers such as bike shops, and running shops and other sport-centric locations where supplements are sold
   
Food, Drug and Mass Market (“FDM”)
Retailers ranging from Walgreens Drugstores to Walmart ‘big box’ stores
   
Direct to Consumer (“DTC”)
Websites, catalogs, print ads, telemarketing, infomercials, banner ads
International
Distributors found in the 55 countries in which Twinlab currently does business
Convenience
Retailers ranging from national chains such as 7-Eleven to small local gas station convenience stores
Current Lines and Recent Launches

Twinlab Corporation (sometimes referred to herein as “Twinlab”) markets its products under five primary brand names: Twinlab (vitamins and minerals), Twinlab Fuel, MetaboLife, Trigosamine and Alvita Teas. The Company has recently launched Twinlab ProSeries, a premium brand of sports nutrition products for the serious athlete, Twinlab CleanSeries, a line of products free of unnatural ingredients and certified free of banned substances, and Twinlab Bariatric, a line of products that support bariatric patients.  Each individual brand of products has a core channel (or channels) for which it was designed and in which it accurately meets the channel-specific needs.

In some cases a product line crosses several channels. Twinlab Vitamins, Twinlab CleanSeries and Alvita Teas focus on the specialty and HNF channels. Twinlab sports nutrition brands (Fuel, ProSeries, and PerformanceSeries) cross from specialty to FDM and the performance channel, while Trigosamine and MetaboLife are primarily sold in FDM.  For this reason, marketing tactics vary by brand and channel.

Marketing Efforts by Brand

Twinlab Brand Vitamins

Twinlab is a legacy line of vitamins that has been in the market for over 45 years and carries a great deal of brand awareness from the health and natural food and specialty consumer. Twinlab vitamins are sold through the specialty and health and natural channel, where retail staff is relied-upon to educate consumers about new science and new products. This is sometimes referred to as ‘hand selling’, and for this reason, marketing and promotional efforts consist of many trade activities to educate distributors and retail staff. As a major industry player, Twinlab participates in two leading trade events, Expo West and Expo East, held annually to announce product introductions to retailers nationwide. Since Twinlab is a distributed brand (shipping to certain major retailers, but also to nationwide distributors who resell to smaller retailers), the Company also delivers training to distributor sales teams and participates in distributor and retailer shows designed to reach retailers and store managers.

 
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Marketing activities for the Twinlab brand have had two main focuses:

1.  
Trial and awareness of key existing products; and
 
2.  
Awareness, trial and education for new products.
 

Marketing and promotional efforts for the Twinlab Brand focus on both trade and consumer tactics:

Retailer Promotions – Promotional programs in stores can drive consumer awareness when they are making purchase decisions.  Manufacturer charge backs are created for retailers to support features and promotions of products throughout the year. They are called ‘charge-backs’ because retailers deduct the cost of these programs from their product purchases. These programs are designed to incentivize the retailer to display products in secondary placement (multiple store locations) and often require a discount to create excitement and deliver incremental savings in order to drive consumer purchases.

Sampling – Many Twinlab products are immediately experiential either because of their taste or effect. We use samples and retail demo programs to allow for trial and education of our products. These are generally conducted in-store using Twinlab or third party personnel.

Consumer and Trade Print Ads – Print advertising is coordinated with product introductions and spans trade magazines, distributor marketing communications and consumer magazines targeting the health and natural food channel.

Public Relations/Bloggers – Extensive outreach to media and blogger influencers has resulted in numerous features and reviews in online and print media channels. This channel is especially important in our sports nutrition businesses where online influencers can both positively or negatively affect the success of a product.

Coupons – Coupons are incorporated into different communication vehicles when appropriate to drive trial and create additional excitement around a product.

Trade Shows – Products need to be on the shelf in order for the public to buy.  Retailer relations and new product launches are focused on trade shows to create excitement around the brand and drive placement.  Display and promotion of products at several industry trade shows annually is a key component of support for the Twinlab brand.

Twinlab Bariatric Support

Twinlab Bariatric Support™ is a line of products specifically designed for persons who have undergone bariatric surgery – resulting in a decreased capacity to digest foods. The focus of Bariatric Support’s marketing campaign has mainly been on avenues that build awareness with the key influencers – namely, the doctors, surgeons, nurses, psychologists, and nutritionists who interact directly with pre- and post-op bariatric surgery patients. While their individual supplementation needs may change over time, bariatric surgery patients will typically continue to follow a supplement regimen for a lifetime.

 
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Alvita Teas

Started in 1922, Alvita Teas is an herbal therapeutic tea line with a rich history and loyal customers. In 2012, the brand commenced a rebranding exercise to update the look of the packaging while converting the products to organic ingredients. Current marketing efforts have been focused on communication tools and tactics to support the retail transition and educate on the key points of difference in the rebranding.

Public relations and social media have also been strategically planned and executed to best maximize our marketing goals. PR objectives have attracted editors and bloggers nationwide creating viral buzz and interest. The organic Alvita website continues to expand and serves to educate both consumers and retailers. Facebook is being engaged to aggressively create brand awareness, build a loyal consumer base and attract new customers.

Twinlab Fuel

Twinlab was one of the key early companies that created the sports nutrition industry in the 1970’s and ‘80’s, and the Twinlab Fuel brand name remains synonymous with products to improve personal physical performance. In 2012, management re-engineered the Company’s sports nutrition business in a way that would re-authenticate the original Fuel brands to the contemporary performance market.

Twinlab ProSeries .  ProSeies is a new line of premium high-performance products under Twinlab’s Fuel brand targeting the hardcore bodybuilder or extreme fitness enthusiast.  These products are advanced, cutting edge supplements designed to provide significant results, and the new brand and premium hardcore focus have created a fresh emphasis for the company that is getting results.  The Company positioned the products as a fresh departure with a credit to Twinlab’s authentic sports nutrition roots in the industry for over 45 years. The innovative products in this line are finding enthusiastic acceptance in the performance channel but also breaking into the mass market in certain cases.  ProSeries employs a critical cross-section of marketing activities ranging from attending performance shows to print and electronic media – including training videos on key performance sites.  Believing sampling is the surest way to drive sales, the ProSeries division has its own ‘Fuel Militia’ of fitness professionals and body builders that attend events, provide performance demonstrations and distribute samples to the public.

Twinlab CleanSeries .   CleanSeries, launched in 2012 is a new line of non-genetically modified organism tested products certified to be free of any banned substances.  This sports nutrition brand is purpose-built for the health and natural food channel where face-to-face education and hand-selling rule the day. The marketing is focused on in-store demos, couponing, events, retailer education sessions, social media and limited print advertising

Twinlab PerformanceSeries . PerformanceSeries is the Company’s new positioning for the existing Fuel line products that languished after the turn of the century.  Still driving sales based on their high quality and strong reputation, this line needed a new direction and new start.  The line has been reengineered to be high performance, high value foundational product line.  Excitement has been created around the brand by updating formulas where appropriate and redesigning the look and targeted appeal of the line.  Marketing activities center on the younger and mature athletes who avoid edgy products and seek strong value for their money.

 
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MetaboLife

The MetaboLife brand of diet and energy products is one of the nation’s most recognized brands and was acquired by Twinlab on November 4, 2005.  MetaboLife has been positioned to serve the FDM channel.  MetaboLife benefits from very high un-aided consumer awareness and targeted, advertorial marketing.

Trigosamine

The Trigosamine brand, acquired on November 20, 2013, focuses on support for joints – one of the larger product segments after the diet segment.  The brand is strong in mass market, and the Company is starting to sell the brand in the DTC channel. Trigosamine employs a unique marketing process.  The Company uses print advertising in national magazines to sell products directly to consumers.  Half page advertorials discuss joint issues and various ways to address them in addition to mentioning the product.  Readers are encouraged to order the product via phone, Internet or mail, but the advertorial also mentions that the product is available at major mass market retailers.  Because Trigosamine is carried by major mass market retailers, the brand utilizes retailer promotions.

Research and Development; Quality Control

We have a commitment to research and development (“R&D”) and to introducing innovative products to correspond with consumer trends and scientific research. We believe that product quality and innovation are fundamental to our long-term growth and success. Through our research and development efforts, we seek to (i) test the safety, purity and potency of products, (ii) develop testing methods for ensuring and verifying the consistency of the dosage of ingredients included in our products, (iii) develop new, more effective product delivery forms and (iv) develop new products either by combining existing ingredients used in nutritional supplements or identifying new ingredients that can be used in nutritional supplements. Our efforts are designed to lead not only to the development of new and improved products, but also to ensure effective manufacturing quality control measures.

We conduct research and development in our own facilities and we also work with outside firms to perform testing and other aspects of R&D. We currently employ various professionals in research and development and quality control with degrees in, among other things, chemistry, microbiology and engineering and, in many cases, these professionals have also received training in natural health food products. In addition, we retain the services of outside laboratories from time to time to validate our product standards and manufacturing protocols.

Our quality control and safety programs seek to ensure the safe and superior quality of our products and that they are manufactured in accordance with current Good Manufacturing Practices (“cGMPs”). The Company has always had an acute focus on safety, quality, efficacy and compliance with law. Our processing methods are monitored closely to ensure that only quality ingredients are used and to ensure product purity.

Marketing and Sales

 
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We believe our marketing and sales efforts help to promote demand for our products by educating retailers, who in turn educate their customers, as to the quality and attributes of our natural nutritional supplements and other products. Our branded products are currently sold in the United States primarily in the HNF channel. We believe that our products are attractive to retailers in the HNF channel due to factors such as the strength of our brand names, the breadth of our product offerings, the quality and efficacy of our products and the availability of service, sales support and educational materials. We have developed numerous Internet sites (including http://www.twinlab.com, www.metabolife.com , www.alvita.com , www.twinlabfuel.com , www.bariatricvitamins.com , www.cleanseries.twinlab.com , www.twinlabbeachbody.com ) that provide information about our branded lines and the various products within each brand. We have included our Internet site here and elsewhere only as an inactive textual reference. The information contained on the Internet site is not incorporated by reference into this Current Report on Form 8-K.

We employ a sales force dedicated to each of the individual channels in which we sell our products.  The dynamics and buying patterns of the various channels require specific approaches and skills necessitating specific sales approaches. Our sales representatives regularly visit each assigned customer in their respective areas to assist in the solicitation of orders for products, provide related product sales assistance and pitch new products to buyers. In addition to our field reps, we maintain a highly skilled internal phone-based sales force that keeps in touch with customers and through which they purchase our products. This technique covers a broad swath of the industry.

Manufacturing

At August 31, 2014, we employed approximately 200 manufacturing, shipping and packaging associates. We manufacture domestically in Utah and in some cases our products are manufactured by highly qualified third-party providers located in the US and Canada. The Company has industry-standard manufacturing and production facilities in its 170,000 square foot facility in American Fork, Utah.

Our manufacturing process generally consists of the following operations: (i) sourcing ingredients for products, (ii) warehousing raw ingredients, (iii) measuring ingredients for inclusion in products, (iv) blending, grinding, and chilsonating ingredients into a mixture with a homogeneous consistency and (v) encapsulating, tableting, pouring, pouching, bagging or boxing the blended mixture into the appropriate dosage form using either automatic or semiautomatic equipment. The next step, bottling and packaging, involves placing the product in packaging with appropriate tamper-evident features and sending the packaged product to a distribution point for delivery to retailers. We place special emphasis on quality control, including raw material verification, homogeneity testing, weight deviation measurements and quality sampling. See "Research and Development; Quality Control."

We manufactured approximately 85% of our products in fiscal 2013, based on net sales. By manufacturing the majority of our own products, we believe that we maintain better control over product quality, availability and product margins. Our manufacturing operations are performed primarily in our facilities located in Utah, although we also have numerous contract manufacturers geographically spread across the country.  These contract manufacturers include softgel manufacturers, liquid manufacturers and other specialty manufacturers as and when needed.  These contract manufacturers do business with us under both short and long term contracts depending on our needs.  The Company does not manufacture any of the basic materials used in packaging (bottles, boxes, shipping cartons, caps, tamper resistant films, etc.).

 
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Management Information and Communication Systems

We use customized computer software systems, as well as commercially-packaged software, for handling order entry and invoicing, manufacturing, inventory management, shipping, warehouse operations, customer service inquiries, accounting operations and management information. The Company currently uses an SAP system to maintain its accounts and various bolt on systems to manage the aforementioned work processes.  We believe that these systems are adequate for the foreseeable future operations of the Company, however we intend to update, integrate, and improve these systems on a continual basis.

Materials and Suppliers

We employ a purchasing staff that works with marketing, product development, formulations and quality control personnel to source raw materials for products as well as other items purchased by us. Raw materials are sourced for domestic and international approved suppliers principally from the United States, Europe and China. Raw materials used by us are available from a variety of suppliers and generally no one supplier accounts for more than 15% of our total raw material purchases.  We believe our relationships with our principal suppliers are good.  We have adopted dual sourcing for raw materials where available to mitigate the impact of raw materials shortages that happen from time to time.

Government Regulation

The formulation, manufacturing, packaging, labeling, advertising, distribution and sale (hereafter, "sale" or "sold" may be used to signify all of these activities) of our products are subject to regulation by one or more federal agencies. The primary federal level regulators are the Food and Drug Administration ("FDA") and the Federal Trade Commission ("FTC").  In addition, the Consumer Product Safety Commission ("CPSC"), the United States Department of Agriculture and the Environmental Protection Agency also regulate the industry. Our activities are also regulated by various governmental agencies for the states and localities in which our products are sold, as well as by governmental agencies in countries outside the United States in which our products are sold. Among other matters, regulation by the FDA and FTC is concerned with product safety, adherence to the cGMPs in manufacturing, packaging, or holding the products, and claims made with respect to a product. Specifically, the FDA, under the Federal Food, Drug, and Cosmetic Act ("FDCA"), as amended by DSHEA, regulates the formulation, manufacturing, packaging, labeling, distribution and sale of food, including dietary supplements.  The FDA also regulates over-the-counter ("OTC") drugs. The FTC regulates the advertising of these products. The National Advertising Division ("NAD") of the Council of Better Business Bureaus oversees an industry-sponsored, self-regulating system that permits competitors to resolve disputes over advertising claims. The NAD has no enforcement authority of its own, but may refer matters that appear to violate the FTC Act or the FDCA to the FTC or the FDA for further action, as appropriate.

Federal agencies, primarily the FDA and the FTC, have a variety of procedures and enforcement remedies available to them, including initiating investigations, issuing warning letters and cease-and-desist orders, requiring corrective labeling or advertising, requiring consumer redress (for example, requiring that a company offer to repurchase products previously sold to consumers), seeking injunctive relief or product seizures, imposing civil penalties or commencing criminal prosecution. In addition, certain state agencies have similar authority. These federal and state agencies have in the past used these remedies in regulating participants in the food, dietary supplement and over-the-counter drug industries, including the imposition of civil penalties in the millions of dollars against a few industry participants.

 
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Some of our products are regulated as conventional foods under the Nutrition Labeling and Education Act of 1990 (“NLEA”). The NLEA amended the FDCA to establish additional requirements for ingredient and nutrition labeling and labeling claims for conventional foods. If the NLEA labeling requirements change at a future time, we may need to revise our product labeling. Most of our products are classified as dietary supplements.

DSHEA was enacted in 1994, amending the FDCA. We believe DSHEA is generally favorable to consumers and to the dietary supplement industry. DSHEA establishes a statutory class of "dietary supplements." In general, a dietary supplement is a product (other than tobacco) intended to supplement the diet that bears or contains one or more of the following dietary ingredients: (A) a vitamin; (B) a mineral; (C) an herb or other botanical; (D) an amino acid; (E) a dietary substance for use by man to supplement the diet by increasing the total dietary intake; or (F) a concentrate, metabolite, constituent, extract, or combination of any ingredient described in (A) through (E). A dietary supplement must be intended for ingestion and labeled as a dietary supplement; and must not be represented as a conventional food or as a sole item of a meal or diet and cannot include an article approved as a, or approved for investigation as a, new drug, antibiotic, or biological (see 21 U.S.C. 321(ff)). Whatever their form may be, DSHEA places dietary supplements in a special category under the general umbrella of "foods," not drugs. Dietary ingredients marketed in the United States before October 15, 1994 may be marketed without the submission of a "new dietary ingredient" ("NDI") premarket notification to the FDA. Dietary ingredients not marketed in the United States before October 15, 1994, unless subject to certain exemptions, may require the submission, at least 75 days before marketing, of an NDI notification containing information establishing that the ingredient is reasonably expected to be safe for its intended use. Among other things, DSHEA prevents the FDA from regulating dietary ingredients in dietary supplements as "food additives" and allows the use of statements of structure function claims on product labels and in labeling, so long as those statements do not constitute disease claims and are truthful and sufficiently substantiated. The FDA has issued final regulations under DSHEA and has issued draft guidance on NDI notification requirements. Further guidance and regulations are expected. Several bills to amend DSHEA in ways that might make this law less favorable to consumers and industry have been proposed in Congress.

The FDA issued a Final Rule on GMPs (Good manufacturing Practices) for dietary supplements on June 22, 2007. The GMPs cover manufacturers, packagers, labelers, distributors,  and holders of finished dietary supplement products, including dietary supplement products manufactured outside the United States that are imported for sale into the United States. Among other things, these GMPs: (a) require identity testing on all incoming dietary ingredients, (b) call for a "scientifically valid system" for ensuring finished products meet all specifications, (c) include requirements related to process controls, including statistical sampling of finished batches for testing and requirements for written procedures and (d) require extensive recordkeeping. We have reviewed the GMPs and have taken steps to ensure compliance. While we believe we are in compliance, there can be no assurance that our operations or those of our suppliers will be in compliance in all respects at all times. Additionally, there is a potential risk of increased audits as the FDA and other regulators seek to ensure compliance with the GMPs.

 
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On December 22, 2006, Congress passed the Dietary Supplement and Nonprescription Drug Consumer Protection Act, which went into effect on December 22, 2007. The law requires, among other things, that companies that manufacture or distribute nonprescription drugs or dietary supplements report serious adverse events allegedly associated with their products to the FDA and institute recordkeeping requirements for all adverse events (serious and non-serious). There is a risk that consumers, the press and government regulators could misinterpret reported serious adverse events as evidence of causation by the ingredient or product complained of, which could lead to additional regulations, banned ingredients or products, increased insurance costs and a potential increase in product liability litigation, among other things.

The Consumer Product Safety Improvement Act of 2008 ("CPSIA") primarily addresses children's product safety but also improves the administrative process of the CPSC. Among other things, CPSA/CPSIA impact on dietary supplements is principally in requirements for use of child resistant closures (“CRCs”), performance validation of CRCs, and requirements for packaging and labeling of iron-containing products. The CPSIA also requires testing and certification of certain products and enhances the CPSC's authority to order recalls.

The FDA Food Safety Modernization Act ("FSMA"), enacted January 4, 2011, amended the FDCA to significantly enhance FDA's authority over various aspects of food regulation. The FSMA granted FDA mandatory recall authority when the FDA determines there is a reasonable probability that a food is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse health consequences or death to humans or animals. Other changes include, but are not limited to,  the FDA's expanded access to records; the authority to suspend food facility registrations and require high risk imported food to be accompanied by a certification; stronger authority to administratively detain food; the authority to refuse admission of an imported food if it is from a foreign establishment to which a U.S. inspector is refused entry for an inspection; and the requirement that importers verify that the foods they import meet domestic standards.

One of FSMA's more significant changes is the requirement of preventive controls for food facilities required to register with the FDA, except dietary supplement facilities in compliance with both GMPs and the serious adverse event reporting requirements. Although dietary supplement facilities are exempt from the preventative controls requirements, dietary ingredient facilities might not qualify for the exemption. FDA's proposed preventative controls regulations, issued in February 2013, would require that facilities develop and implement preventive controls to assure that identified hazards are significantly minimized or prevented, monitor the effectiveness of the preventive controls, and maintain numerous records related to those controls. When implemented, the preventative controls requirements may increase the costs of dietary ingredients and affect our ability to obtain dietary ingredients. An additional significant change related to FSMA is the requirement that importers implement a foreign supplier verification program ("FSVP"). FDA's proposed FSVP regulations, issued in July 2013, would require importers to implement supplier verification activities to ensure that the foods they import meet domestic standards. When implemented, the FSVP requirements may affect the cost and the availability of dietary supplements and dietary ingredients.

 
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As required by Section 113(b) of the FSMA, the FDA published in July 2011 a draft guidance document clarifying when the FDA believes a dietary ingredient is an NDI, when a manufacturer or distributor must submit an NDI premarket notification to the FDA, the evidence necessary to document the safety of an NDI and the methods for establishing the identity of an NDI. The draft guidance, if implemented as proposed, could have a material impact on our operations. Although our industry has strongly objected to several aspects of the draft guidance, it is unclear whether and what changes FDA will make to the final guidance. In addition, it is possible that the FDA will begin taking enforcement actions consistent with the interpretations in the draft guidance before issuing a final version.

The new FSMA requirements, as well as the FDA enforcement of the NDI guidance as written, could require us to incur additional expenses, which could be significant, and negatively impact our business in several ways, including, but not limited to, the detention and refusal of admission of imported products, the injunction of manufacturing of any dietary ingredients or dietary supplements until the FDA determines that such ingredients or products are in compliance and the potential imposition of fees for re-inspection of noncompliant facilities. Each of these events would increase our liability and could have a material adverse effect on our financial condition, results of operations or cash flows.

The FTC and the FDA have pursued a coordinated effort to challenge what they consider to be unsubstantiated and unsafe weight-loss products, and have also coordinated enforcement against dietary supplement claims in other areas, including immunity and children’s products. Their efforts to date have focused on manufacturers and marketers as well as media outlets, and have resulted in a significant number of investigations and enforcement actions, some resulting in civil penalties under the FTC Act of several million dollars. We expect that the FTC and the FDA will continue to focus on health-related claims for dietary supplements and foods, and our products could be the subject of an FTC/FDA inquiry.

The sale of our products in countries outside the United States is regulated by the governments of those countries. Our plans to commence or expand sales in those countries may be prevented or delayed or even suspended by such regulations or by regulators in those countries. In countries in which we have distributors, compliance with such regulations is generally undertaken by our distributors, but even in these cases we may cooperate by providing information to distributors and there can be no assurance we will not be liable if a distributor fails to comply. These distributors are independent contractors over whom we have limited control.

Competition

Health and Natural Foods

The natural products market and the VMS market are highly competitive. Our principal competitors in the VMS market that sell to the health and natural foods channel include a number of large, nationally-known brands (such as Bluebonnet, Country Life, Enzymatic Therapy, Garden of Life, Jarrow Formulas, Natural Factors, Nature's Plus, Nature's Way, Nordic Naturals, Now Foods, New Chapter and Solgar) and many smaller brands, manufacturers and distributors of nutritional supplements. Within the broader Natural Products Market, there are a number of large, nationally-known competitors, such as Hain Celestial. Because both the health and natural foods market and the VMS Market generally have low barriers to entry, additional competitors enter the market regularly.

 
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Private label products of our customers also provide competition to our products. Whole Foods Market, The Vitamin Shoppe, Sprouts Farmers Market, Natural Grocers and many health and natural food stores also sell a portion of their offerings under their own private labels. Private label products are often sold at a discount to branded products.

We believe that stores in the HNF channel are increasingly likely to align themselves with those companies that offer a wide variety of high-quality products, have a loyal consumer base, support their brands with strong marketing and education programs and provide consistently high levels of customer service. We believe that we compete favorably with other nutritional supplement companies because of our comprehensive line of products and brands, premium brand names, commitment to quality, ability to rapidly introduce innovative products, competitive pricing, strong and effective sales force, distribution strategy and sophisticated marketing and promotional support. The wide variety and diversity of the forms, potencies and categories of our products are important points of differentiation between us and many of our competitors.

Mass Market

Our sales are focused primarily in limited SKUs in the Trigosamine and Metabolife lines in the mass market retail channel of distribution, and our ProSeries brand of sports nutrition is making inroads in this channel. Metabolife and Trigosamine were focused on the mass market channel when acquired and do not have a notable presence elsewhere at retail.  It is possible that as increasing numbers of companies (or brands) sell nutritional supplement products and other natural products in the mass market channels (such as Pharmavite (Nature Made), The Carlyle Group (Nature's Bounty), Reckitt Benckiser Group (Schiff), Hain Celestial and Church & Dwight). In addition, several major pharmaceutical companies continue to offer nutritional supplement lines in the mass market, including Pfizer (Centrum) and Bayer (One-A-Day).

Performance

The performance channel is primarily made up of independent retailers that focus their product mix on performance products, as well as gyms, health clubs and other health and fitness locations that house small stores to cater to the needs of their clients. There is also a small vibrant market serviced by bicycle shops and other specialty sports equipment retailers, and even larger sporting goods stores, like Dick’s Sporting Goods and Sports Authority, are testing sports nutrition sets in their stores. The retail performance channel is supplied by two specialty distributors that focus exclusively on this channel (Europa Sports Nutrition, Lone Star Distribution).  In recent years the performance channel has become dominated by several online retailers ( www.bodybuilding.com , www.supplementwarehouse.com , www.dpsnutrition.com , www.netrition.com , www.allstarhealth.com , www.muscleandstrength.com ) that have the advantage of broad selection and aggressive pricing.

Competition in this channel is intense. The character of the target customer makes the barriers to entry in sports nutrition extremely low as consumers look for the next great product that will help them optimize their workout.  As a result, in addition to the somewhat large stable core brands (BSN, CytoSport, Five Star, Met-Rx, MHP, MRI, MusclePharm, Optimum Nutrition, Twinlab, VPX, etc.) there is a secondary level of innovative, small companies with niche products focused on a specific targeted customer.  Despite intense competition, the performance channel is attractive to us as the hardcore sports nutrition customer will spend several thousand dollars a year to look their best – far more than the average VMS customer. Twinlab believes it has a three-part advantage in the market; it has the stature of being one of the old and trusted brands, it has a long history of quality and efficacy (trustworthy products) and it has created a new and more edgy ProSeries that is getting attention due to the quality, efficacy and relevance of its highly authentic products.

 
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Intellectual Property

We own more than 100 trademarks that have been registered with the United States Patent and Trademark Office and have filed applications to register additional trademarks. In addition, we claim domestic trademark and service mark rights in numerous additional marks that we use. We own a number of trademark registrations in countries outside the United States. Federally registered trademarks in the United States have a perpetual life, as long as they are maintained and renewed on a timely basis and used properly as trademarks, subject to the rights of third parties to seek cancellation of the trademarks if they claim priority or confusion of usage. Most foreign trademark offices use similar trademark renewal processes. We regard our trademarks and other proprietary rights as valuable assets and believe they make a significant positive contribution to the marketing of our products.

We protect our legal rights concerning our trademarks by appropriate legal action. We rely on common law trademark rights to protect our unregistered trademarks. Common law trademark rights do not provide us with the same level of protection as afforded by a United States federal registration of a trademark. In addition, common law trademark rights are limited to the geographic area in which the trademark is actually used. We have registered and intend to register certain trademarks in certain limited jurisdictions outside the United States where our products are sold, but we may not register all or even some of our trademarks in every country in which we conduct business or intend to conduct business.

We own one U.S. patent but generally do not seek patent protection for our products. We sell a number of products that include patented ingredients. We purchase these ingredients from parties that we believe have the right to manufacture and sell those ingredients to us. However, there are a large number of patents that have been granted or applied for in the dietary supplement industry, and there may be an increased possibility that third parties will seek to compel us and our competitors to purchase their patented ingredients or file infringement actions. The cost of these patented ingredients is typically higher than the cost of non-patented ingredients.

Employees

As of the date of this report, we had 235 full-time employees and 4 part-time employees.  None of our employees is represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Description of Properties

We occupy approximately 6,700 rentable square feet of office space in New York, New York under a lease that expires in 2016. We occupy 3,600 rentable square feet of office space in Grand Rapids, Michigan, under a lease that expires in 2017.  We occupy approximately 170,000 square feet of manufacturing, R&D, warehousing and shipping space with roughly 30,000 square feet of office in American Fork, Utah under a lease that expires in February 2028. We also own a water capture and bottling facility in Peru, Indiana that is approximately 47,000 square feet. We believe that our facilities are sufficient to meet our current needs and that suitable additional space will be available as and when needed.

 
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TCH Properties
 
Twinlab Manufacturing Facility and Offices (Manufacturing, R&D, Finance, Sales, Legal, Administration)
Leased
American Fork, Utah
Twinlab Executive Offices (Marketing, and Sales)*
Leased
New York, New York
Twinlab Corporate Offices (Regulatory and Marketing)
Leased
Grand Rapids, Michigan
Cole Water Aquifer and Bottling Facility (Water Capture and Bottling)
Owned
Peru, Indiana
Undeveloped Land (+-5 Acres)
Owned
American Fork, Utah

* The Company has a subtenant in the New York office that rents approximately 50% of this space.


AVAILABLE INFORMATION

We file annual, quarterly and other reports and other information with the Securities and Exchange Commission (the “SEC”). You can read these SEC filings and reports over the Internet at the SEC's website at www.sec.gov. You can also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt to of a written request to us at Twinlab Consolidated Holdings, Inc., 632 Broadway, Suite 201, New York, New York 10012.

RISK FACTORS

In the course of conducting our business operations, we are exposed to a variety of risks that are inherent to the business and industry. The following discusses some of the key inherent risk factors that could affect our business and operations, as well as other risk factors which are particularly relevant to us. Other factors besides those discussed below or elsewhere in this report also could adversely affect our business and operations, and these risk factors should not be considered a complete list of potential risks that may affect us. As of the date of this report our management is aware of the following material risks.

Regulatory, Product Liability and Insurance Risks

Our products are subject to government regulation, both in the United States and abroad, which could increase our costs significantly and limit or prevent the sale of our products.

The manufacture, packaging, labeling, advertising, promotion, distribution, and sale of our products are subject to regulation by numerous national and local governmental agencies in the United States and other countries. The primary regulatory bodies in the United States are the FDA and FTC, and we are also subject to similar regulatory bodies in all the countries in which we do business. Failure to comply with regulatory requirements may result in various types of penalties or fines. These include injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. Individual U.S. states also regulate nutritional supplements. A state may interpret claims or products presumptively valid under federal law as illegal under that state's regulations. In markets outside the United States, we are usually required to obtain approvals, licenses, or certifications from a country's ministry of health or comparable agency, as well as labeling and packaging regulations, all of which vary from country to country. Approvals or licensing may be conditioned on reformulation of products or may be unavailable with respect to certain products or product ingredients. Any of these government agencies, as well as legislative bodies, can change existing regulations, or impose new ones, or could take aggressive measures, causing or contributing to a variety of negative consequences, including:

 
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·  
requirements for the reformulation of certain or all products to meet new standards,
·  
the recall or discontinuance of certain or all products,
·  
additional record keeping,
·  
expanded documentation of the properties of certain or all products,
·  
expanded or different labeling,
·  
adverse event tracking and reporting and
·  
additional scientific substantiation.

Any or all of these requirements could have a material adverse effect on us. There can be no assurance that the regulatory environment in which we operate will not change or that such regulatory environment, or any specific action taken against us, will not result in a material adverse effect on us.

If we experience product recalls, we may incur significant and unexpected costs, and our business reputation could be adversely affected.

We may be exposed to product recalls and adverse public relations if our products are alleged to cause injury or illness, or if we are alleged to have violated governmental regulations. A product recall could result in substantial and unexpected expenditures, which would reduce operating profit and cash flow. In addition, a product recall may require significant management attention. Product recalls may hurt the value of our brands and lead to decreased demand for our products. Product recalls also may lead to increased scrutiny by federal, state or international regulatory agencies of our operations and increased litigation and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We may experience product liability claims and litigation to prosecute such claims, and although we maintain product liability insurance, which we believe to be adequate for our needs, there can be no assurance that our insurance coverage will be adequate or that we will be able to obtain adequate insurance coverage in the future.   In addition, we may be subject to consumer fraud claims, including consumer class action claims regarding product labeling and advertising, and litigation to prosecute such claims; these claims are generally not covered by insurance.

As a manufacturer and a distributor of products for human consumption, we experience from time to time product liability claims and litigation to prosecute such claims. Additionally, the manufacture and sale of these products involves the risk of injury to consumers as a result of tampering by unauthorized third parties or product contamination. We carry insurance coverage in the types and amounts that we consider reasonably adequate to cover the risks we face from product liability claims. If insurance coverage is inadequate or unavailable or premium costs continue to rise, we may face additional claims not covered by insurance, and claims that exceed coverage limits or that are not covered could have a material adverse effect on us. In addition, consumer fraud claims, including consumer class action claims regarding product labeling and advertising, are increasingly common as to food and dietary supplement products.  Because insurance is generally not available for such claims, these could have a material adverse effect on us.

We may experience Lanham Act claims by competitors, and litigation to prosecute such claims.

 
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The Lanham Act empowers competitors to file suit regarding any promotional statements that the competitor believes to be false or misleading.  If the competitor prevails, it could obtain monetary damages (including potentially treble damages and attorneys’ fees).  The court can also order corrective advertising, or even a product recall if the offending claims are found on the product’s packaging and labeling. This could have a material adverse effect on us and on our products’ reputation.

Market and Channel Risks

Our success is linked to the size and growth rate of the vitamin, mineral and supplement market and an adverse change in the size or growth rate of that market could have a material adverse effect on us.

An adverse change in size or growth rate of the vitamin, mineral and supplement market could have a material adverse effect on us. Underlying market conditions are subject to change based on economic conditions, consumer preferences and other factors that are beyond our control, including media attention and scientific research, which may be positive or negative.

Because a substantial portion of our sales are to or through health food stores, we are dependent to a large degree upon the success of this channel as well as the success of specific retailers in the channel.

Over 75% of our sales are in the United States.  In this market, we sell approximately 45% of our products to or through health food stores. Because of this, we are dependent to a large degree upon the success of that channel as well as the success of specific retailers in the channel. There are some large chains of health food stores, such as Whole Foods Market and The Vitamin Shoppe, but many health food stores are individual stores or very small chains. We rely on these health food stores to purchase, market, and sell our products. A fair portion of our success is dependent, to a large degree, on the growth and success of the health and natural foods channel, which is outside our control. There can be no assurance that the health and natural foods channel will be able to grow or prosper as it faces price and service pressure from other channels, including the mass market. There can be no assurance that retailers in the health and natural foods channel, in the aggregate, will respond or continue to respond to our stated loyalty to this channel.

We are highly dependent upon consumers’ perception of the safety and quality of our products as well as similar products distributed by other companies in our industry, and adverse publicity and negative public perception regarding particular ingredients or products or our industry in general could limit our ability to increase revenue and grow our business.

Decisions about purchasing made by consumers of our products may be affected by adverse publicity or negative public perception regarding particular ingredients or products or our industry in general. This negative public perception may include publicity regarding the legality or quality of particular ingredients or products in general or of other companies or our products or ingredients specifically. Negative public perception may also arise from regulatory investigations, regardless of whether those investigations involve us. We are highly dependent upon consumers’ perception of the safety and quality of our products as well as similar products distributed by other companies. Thus, the mere publication of reports asserting that such products may be harmful could have a material adverse effect on us, regardless of whether these reports are scientifically supported. Publicity related to nutritional supplements may also result in increased regulatory scrutiny of our industry and/or the healthy foods channel. Adverse publicity may have a material adverse effect on our business, financial condition, and results of operations. There can be no assurance of future favorable scientific results and media attention or of the absence of unfavorable or inconsistent findings.

 
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We face intense competition from competitors that are larger, more established and that possess greater resources than we do, and if we are unable to compete effectively, we may be unable to maintain sufficient market share to sustain profitability.

Numerous manufacturers and retailers compete actively for consumers. There can be no assurance that we will be able to compete in this intensely competitive environment. In addition, nutritional supplements can be purchased in a wide variety of channels of distribution. These channels include mass market retail stores and the Internet. Because these markets generally have low barriers to entry, additional competitors could enter the market at any time. Private label products of our customers also provide competition to our products. Additional national or international companies may seek in the future to enter or to increase their presence in the healthy foods channel or the vitamin, mineral supplement market. Increased competition in either or both could have a material adverse effect on us.

The nutritional supplement industry increasingly relies on intellectual property rights and although we seek to ensure that we do not infringe the intellectual property rights of others, there can be no assurance that third parties will not assert intellectual property infringement claims against us, which claims may result in substantial costs and diversion of management and other resources and could have a material adverse effect on our business, financial condition and operating results.

Recently it has become more and more common for suppliers and competitors to apply for patents or develop proprietary technologies and processes. We seek to ensure that we do not infringe the intellectual property rights of others, but there can be no assurance that third parties will not assert intellectual property infringement claims against us. These developments could prevent us from offering or supplying competitive products or ingredients in the marketplace. They could also result in litigation or threatened litigation against us related to alleged or actual infringement of third-party rights. If an infringement claim is asserted or litigation is pursued, we may be required to obtain a license of rights, pay royalties on a retrospective or prospective basis or terminate our manufacturing and marketing of our products that are alleged to have infringed. Litigation with respect to such matters could result in substantial costs and diversion of management and other resources and could have a material adverse effect on our business, financial condition and operating results.

We may be affected adversely by increased utility and fuel costs.

Increasing fuel costs may affect our results of operations adversely in that consumer traffic to health and natural food stores may be reduced and the costs of our sales may increase as we incur fuel costs in connection with our manufacturing operations and the transportation of goods from our warehouse and distribution facilities to health and natural food stores. Also, high oil costs can affect the cost of our raw materials and components and the competitive environment in which we operate may limit our ability to recover higher costs resulting from rising fuel prices.

Adverse economic conditions may harm our business.

 
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Inflation or other changes in economic conditions that affect demand for nutritional supplements could adversely affect our revenue. Uncertainty about current global economic conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit markets, negative financial news and/or declines in income or asset values, each of which could have a material negative effect on the demand for our products. Other factors that could influence demand include conditions in the residential real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. These and other economic factors could have a material adverse effect on demand for our products and on our financial condition and operating results.

Business Strategy and Operational Risks

If we are unable to retain key personnel, our ability to manage our business effectively and continue our growth could be negatively impacted.

Key management employees include Thomas Tolworthy as the Chief Executive Officer and President, Mark Jaggi as Executive Vice President, Chief Financial Officer and Treasurer, Richard Neuwirth as Executive Vice President, Chief Legal Officer and Secretary, Kathleen Pastor as the Executive Vice President Retail Sales, and Greg Grochoski as Executive Vice President and Chief Science Officer. These key management employees are primarily responsible for our day-to-day operations, and we believe our success depends in part on our ability to retain them and to continue to attract additional qualified individuals to our management team. All key management employees have employment agreements. The loss or limitation of the services of any of our key management employees or the inability to attract additional qualified management personnel could have a material adverse effect on our business, financial condition and results of operations.

As a part of our business strategy, we have made and expect to continue to make acquisitions that could disrupt our operations and harm our operating results.

An element of our strategy includes expanding our product offerings, gaining shelf-space and gaining access to new skills and other resources through strategic acquisitions when attractive opportunities arise. Acquiring additional businesses and the implementation of other elements of our business strategy are subject to various risks and uncertainties. Some of these factors are within our control and some are outside our control. These risks and uncertainties include, but are not limited to, the following:

·  
any acquisition may result in significant expenditures of cash, stock and/or management resources,
·  
acquired businesses may not perform in accordance with expectations,
·  
we may encounter difficulties and costs with the integration of the acquired businesses,
·  
management’s attention may be diverted from other aspects of our business,
·  
we may face unexpected problems entering geographic and product markets in which we have limited or no direct prior experience,
·  
we may lose key employees of acquired or existing businesses,
·  
we may incur liabilities and claims arising out of acquired businesses,
·   
we may be unable to obtain financing and

 
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·  
we may incur indebtedness or issue additional capital stock which could be dilutive to holders of our common stock.

There can be no assurance that, except as described under “Recent Developments” below, attractive acquisition opportunities will be available to us, that we will be able to obtain financing (on acceptable terms or at all) for or otherwise consummate any acquisitions, including those described below, or that any acquisitions which are consummated will prove to be successful. There can be no assurance that we can successfully execute all aspects of our business strategy.

Because we depend on outside suppliers with whom we may not have long-term agreements for raw materials, we may be unable to obtain adequate supplies of raw materials for our products at favorable prices or at all, which could result in product shortages and back orders for our products, with a resulting loss of net sales and profitability.

We acquire all of our raw materials for the manufacture of our products from third-party suppliers. We also rely on third-party co-packers for some of our products. We have selective agreements for the continued supply of these materials and products. A number of our products contain one or more ingredients that may only be available from a single source or supplier. Any of our suppliers could discontinue selling to us at any time. Our suppliers or government regulators may interpret new regulations (including GMP regulations) in such a way as to cause a disruption in our supply chain as these parties undertake increased scrutiny of raw materials and components of raw materials and products, causing certain suppliers or us to discontinue, change or suspend the sale of certain ingredients or components. Although we believe that we could establish alternate sources for most of these materials, any delay in locating and establishing relationships with other sources could result in product shortages and back orders for the products, with a resulting loss of net sales and profitability. We are also subject to delays associated with raw materials. These can be caused by conditions not within our control, including:

·  
weather,
·  
crop conditions,
·  
transportation interruptions,
·  
strikes by supplier employees and
·  
natural disasters or other catastrophic events.

These factors could result in a delay in or disruption of the supply of certain raw materials. Any significant delay in or disruption of the supply of raw materials could have a material adverse effect upon us.

Our success is dependent on the accuracy, reliability, and proper use of sophisticated and dependable information processing systems and management information technology and any interruption in these systems could have a material adverse effect on our business, financial condition and results of operations.

 
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Our success is dependent on the accuracy, reliability and proper use of sophisticated and dependable information processing systems and management information technology. Our information technology systems are designed and selected in order to facilitate order entry and customer billing, maintain customer records, accurately track purchases and incentive payments, manage accounting, finance and manufacturing operations, generate reports, and provide customer service and technical support. Any interruption in these systems could have a material adverse effect on our business, financial condition and results of operations. Like other companies, our information technology systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers, and other security issues. We have technology security initiatives and disaster recovery plans in place or in process to mitigate our risk to these vulnerabilities, but these measures may not be adequate.

Because we manufacture approximately 85% of our products, we are dependent upon the uninterrupted and efficient operation of our single manufacturing facility, which is subject to power failures, the breakdown, failure or substandard performance of equipment, the improper installation or operation of equipment, natural or other disasters and the need to comply with the requirements or directives of government agencies, including the FDA.

We are dependent upon the uninterrupted and efficient operation of our manufacturing facility in American Fork, Utah. Those operations are subject to power failures, the breakdown, failure or substandard performance of equipment, the improper installation or operation of equipment, natural or other disasters and the need to comply with the requirements or directives of government agencies, including the FDA. There can be no assurance that the occurrence of these or any other operational problems at our facility would not have a material adverse effect on our business, financial condition and results of operations.

We may become a party to lawsuits that arise in the ordinary course of business in the future.

We may become a party to lawsuits that arise in the ordinary course of business in the future. The possibility of such litigation, and its timing, is in large part outside our control. It is possible that future litigation could arise that could have material adverse effects on us.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our business reputation and cause our stock price to decline.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

If our goodwill or intangible assets become impaired we may be required to record a significant charge to earnings.

 
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Under generally accepted accounting principles, we review our amortizable intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill and indefinite-lived intangible assets are tested for impairment at least annually. Factors that may indicate that the carrying value of our goodwill or intangible assets may not be recoverable include a decline in stock price and market capitalization, reduced future cash flow estimates and slower growth rates in our industry. Our results of operations may be materially impacted if we are required to record a significant charge due to an impairment of our goodwill or intangible assets.

We may need additional capital in the future to finance our operations and to execute our business strategy of growing through acquisitions, which we may not be able to raise or it may only be available on terms unfavorable to us and or our stockholders. This may result in our inability to fund our working capital requirements and harm our operational results.

We believe that current cash on hand and the other sources of liquidity will be sufficient enough to fund our operations in the ordinary course of business through fiscal 2015. However, if we experience extraordinary expenses or other events beyond our control, or if we execute our acquisition strategy, we will need to raise additional funds to execute our strategy and to continue our operations.

Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited.

Changes in accounting standards, especially those that relate to management estimates and assumptions, are unpredictable and may materially impact how we report and record our financial condition.

Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policies require use of estimates and assumptions that may affect the value of our assets or liabilities and financial results and are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain. From time to time the Financial Accounting Standards Board (“FASB”) and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. In addition, accounting standard setters and those who interpret the accounting standards (such as the FASB, the SEC, banking regulators and our outside auditors) may change or even reverse their previous interpretations or positions on how these standards should be applied. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in our restating prior period financial statements.

We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 
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We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.  As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.

THI’s financials had a qualified opinion.

Prior to the recapitalization that occurred immediately prior to the IS Merger, THI and its subsidiaries had significant obligations for borrowed money that these companies did not have the ability to service on a current basis.  Accordingly, THI’s accountants’ audit report contained a “going concern” exception.  Although THI and its subsidiaries restructured this debt, there can be no assurance that future operations will generate enough cash flow to allow THI to meet its obligations in the ordinary course of business.

Risks Relating To Our Common Stock

Our common stock currently has no trading volume and holders of our securities may not be able to sell quickly any significant number of shares.

Our common stock is quoted on the OTCPK. There has been no trading volume of our common stock. Because of this, holders of our securities may not be able to sell quickly any significant number of such shares, and any attempted sale of a large number of our shares will likely have a material adverse impact on the price of our common stock. When a limited number of shares begin trading, the price per share is subject to volatility and may be subject to rapid price swings in the future. The Company plans to make application to be traded on the OTCQB, although there can be no assurance that the Company’s stock will be admitted to trading on the OTCQB.

 
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Because the trading price of our common stock is below $5.00 per share it is deemed a low-priced “Penny” stock and an investment in our common stock should be considered high risk and subject to marketability restrictions.

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Since the trading price of the common stock is below $5.00 per share, trading in the common stock will be subject to the penny stock rules of the Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:

·  
Deliver to the customer, and obtain a written receipt for, a disclosure document;
·  
Disclose certain price information about the stock;
·  
Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
·  
Send monthly statements to customers with market and price information about the penny stock; and
·  
In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.
 
 
Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.

We have the ability to issue additional shares of our common stock and shares of preferred stock without asking for stockholder approval, which could cause your investment to be diluted.

Our Articles of Incorporation authorizes the Board of Directors to issue up to 5,000,000,000 shares of common stock and 10,000,000 shares of preferred stock.  The power of the Board of Directors to issue shares of common stock, preferred stock or warrants or options to purchase shares of common stock or preferred stock is generally not subject to shareholder approval.  Accordingly, any additional issuance of our common stock, or preferred stock that may be convertible into common stock, may have the effect of diluting one’s investment.

FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 
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If we are admitted to trading on the OTCQB and fail to remain current on our reporting requirements with the SEC, we could be removed from the OTCQB, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTCQB, generally must be reporting issuers under Section 12 of the Exchange Act and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTCQB.  More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTCQB by requiring an issuer to be current in its filings with the Commission.  Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTCQB for failure to timely file twice in a two-year period, then we will be ineligible for quotation on the OTCQB.  As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  As of the date of this filing, we have no late filings reported by FINRA.

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are Being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

We have a limited number of personnel that are required to perform various roles and duties. These individuals developed our internal control procedures and are responsible for monitoring and ensuring compliance with those procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.

Concentrated Ownership.  An excess of a majority of our outstanding voting securities are held by one individual and that individual can elect all directors who in turn elect all officers, without the votes of any other stockholders.

 
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Our Chief Executive Officer owns 59.49% of our outstanding voting securities and, accordingly, has effective control of us and may have effective control of us for the near and long term future.  Votes of other stockholders can have little effect when we are managed by our Board of Directors and operated through our officers, all of whom can be elected by one individual.

We do not expect to pay dividends in the near future.

We do not expect to declare or pay any dividends on our common stock in the foreseeable future. The declaration and payment in the future of any cash or stock dividends on the common stock will be at the discretion of our Board of Directors and will depend upon a variety of factors, including our ability to service our outstanding indebtedness, if any, and to pay dividends on securities ranking senior to the common stock, our future earnings, if any, capital requirements, financial condition and such other factors as our Board of Directors may consider to be relevant from time to time.  Our earnings, if any, are expected to be retained for use in expanding our business.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Forward-Looking Statements” elsewhere in this report. You should review the “Risk Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

All references to “we,” “us,” “our” and “THI” in the following financial discussion and analysis refer solely to THI. THI became the wholly-owned subsidiary of TCC upon the closing of a merger (the “IS Merger”) pursuant to which a wholly-owned subsidiary of TCC formed solely for the purpose of the IS Merger merged with and into THI. TCC became the wholly-owned subsidiary of the Company upon the closing of a merger (the “Merger”) pursuant to which a wholly-owned subsidiary of the Company formed solely for the purpose of the Merger merged with and into TCC.  The IS Merger is accounted for as a reverse merger and recapitalization, with THI as the accounting acquirer and TCC as the accounting acquired company for financial reporting purposes. The Merger is accounted for as a reverse merger and recapitalization, with TCC as the accounting acquirer and the Company as the accounting acquired company for financial reporting purposes. As a result, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the IS Merger will be those of THI and will be recorded at the historical cost basis of THI, and the consolidated financial statements of the Company after completion of the Merger will include the assets and liabilities of the Company, TCC and THI, and the operations of the combined enterprise of the Company, TCC and THI from and after the closing date of the Merger.
 

This Management’s Discussion and Analysis is intended to provide additional understanding about the Company and its planned operations as a manufacturer and retailer of nutritional supplements and other natural products.

 
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OVERVIEW AND OUTLOOK

Background

On September 4, 2014, the Company entered into an Agreement and Plan of Merger (as amended by the First Amendment to Agreement and Plan of Merger dated September 16, 2014) contemplating a reverse triangular merger for the acquisition of 100% of ownership of TCC. Effective September 16, 2014, the Company completed the acquisition of TCC. As a result of acquiring TCC, our entire operations are currently based upon the operations of the entities acquired.

Our Operations

We are an integrated manufacturer, marketer, distributor and retailer of branded nutritional supplements and other natural products sold to and through domestic health and natural food stores, mass market retailers, specialty stores and websites. Internationally, we market and distribute branded nutritional supplements and other natural products to and through health and natural product distributors and retailers. We also offer contract manufacturing services and private label products to third parties. An integral part of our core business strategy is to acquire, integrate and operate businesses in the natural products industry that manufacture, market and distribute branded nutritional supplements. We believe that the consolidation and integration of these acquired businesses provides ongoing financial synergies through increased scale and market penetration, as well as strengthened customer relationships.

We manufacture and sell nutritional products, including primarily a full line of nutritional supplements under the Twinlab® brand (including the Twinlab® Fuel family of sports nutrition products). We also manufacture and sell diet and energy products under the Metabolife® brand name, a line of products that promote joint health under the Trigosamine® brand name, and a full line of herbal teas under the Alvita® brand name.

We also perform contract manufacturing services for third parties.  Our contract manufacturing business involves the manufacture of custom products to the specifications of a customer who requires a large quantity of finished product.  We do not market these products – we simply manufacture them and deliver them to the customer who then in-turn markets and sells the products to the retailer or end user under their own brand name.

We manufacture and/or distribute one of the broadest branded product lines in the industry with approximately 850 SKUs, including approximately 250 SKUs sold internationally. We believe that as a result of our emphasis on innovation, quality, loyalty, education and customer service, our brands are widely recognized in health and natural food stores and among their customers.

Recent Developments

Twinlab Note Conversions into Equity

On May 1, 2014, Twinlab Corporation borrowed $3,000,000 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015.  The interest rate was 10% per annum. On September 5, 2014, Twinlab Corporation entered into an assignment, assumption and conversion agreement with the individual to convert this debt.  On September 5, 2014, the note was converted into 1,477,833 shares of TCC common stock.  Accrued interest on the note will be paid to the payee in cash.

 
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On August 15, 2014, Twinlab Corporation borrowed $3,200,000 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015. The interest rate was 10% per annum. On September 5, 2014, Twinlab Corporation entered into a conversion agreement with the individual to convert this debt.  On September 5, 2014, the note and accrued interest thereon were converted into 4,210,526 shares of TCC common stock.

On September 3, 2014, Twinlab Corporation borrowed $2,800,000 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015.  The interest rate was 10% per annum. In connection with such loan, TCC issued to the individual a warrant to acquire 5,592,105 shares of TCC common stock at a purchase price of $.76 per share, which warrant was assumed by the Company in connection with the Merger. On September 5, 2014, Twinlab Corporation entered into a conversion agreement with the individual to convert this debt.  On September­ 5, 2014, the note and accrued interest thereon were converted into 3,684,211 shares of TCC common stock.
 
Issuance of Twinlab Holdings Preferred Stock/Debt Exchange

On July 30, 2014, THI amended its articles of incorporation and authorized and designated preferences for its Series A and Series B Preferred stock.  THI authorized 3,000 shares of Series A preferred stock and 7,000 shares of Series B preferred stock.  Shares of Series B preferred stock accrue dividends at a rate of 5% of the base amount per share and have no voting power.  The Series B preferred stock may be redeemed at the option of THI at a price equal to the base amount plus any accrued dividends.

On July 31, 2014, THI entered into a “Debt Repayment Agreement” with a related party pursuant to which the related party exchanged debt totaling approximately $90 million in consideration of (i) the issuance by THI to such party of 7,000 shares of Series B cumulative preferred stock and THI’s undertaking to pay such party $4,900,000 per year in structured monthly payments for 3 years provided that such payment obligations will terminate at such earlier time as the trailing ninety day volume weighted average closing sales price of Twinlab Consolidated Holdings, Inc. on all domestic securities exchanges on which it is listed equals or exceeds $5.06 per share.

On July 31, 2014, THI issued 500 additional shares of 2011 Series A cumulative preferred stock in exchange for undeclared and unpaid dividends and the surrender of the warrants rights associated with this class of stock.

Issuance of TCC Preferred Stock

On September 3, 2014, TCC amended its certificate of incorporation to authorize 10,000 shares of preferred stock and authorized the issuance of one share of Series A Redeemable Preferred Stock. Thomas Tolworthy, an individual who is a related party, purchased this share of Series A Redeemable Preferred Stock from TCC for $200,000.  In connection therewith, Mr. Tolworthy  agreed to surrender 65,306,102 shares of common stock of TCC to the Company at the direction of the Board of TCC, such shares to be used for proper corporate purposes, including the funding of employee incentive plans, acquisitions and as otherwise determined by the Board.  The Series A Redeemable Preferred Stock does not vote and on the fifth anniversary of the issue date TCC is required to redeem such outstanding share for the purchase price of $200,000.

 
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Change of Name

On August 27, 2014, Idea Sphere Inc. amended its articles of incorporation and changed its name to Twinlab Holdings, Inc.

IS Merger

On August 7, 2014, TCC Merger Company, Inc., a wholly-owned subsidiary of TCC, merged with and into THI in a private transaction in which 43,542,955 TCC common shares were exchanged for the total outstanding common and preferred shares of THI.  As a result of this merger, TCC became the parent of THI and its subsidiaries.

Merger

On September 16, 2014, the Company completed the Merger, pursuant to the Merger Agreement, by and among the Company, Sub Co and TCC, whereby TCC became a wholly-owned subsidiary of the Company.  Upon completion of the Merger, all holders of shares of TCC common stock received, for each one share of TCC common stock held by them, one share of the Company’s common stock and the holder of one share of TCC preferred stock received 26,870,132 shares of the Company’s common stock.


Working Capital Facility

On August 7, 2014 and on September 16, 2014, contemporaneously with the IS Merger and the Merger, respectively, Twinlab entered into amendments of its revolving credit facility with Fifth Third Bank, which has a credit limit of $15 million dollars, primarily for the purpose of obtaining the banks's consent to such mergers.  The line of credit is secured by all assets of the Company and its subsidiaries.  Each parent company of Twinlab Corporation, including the Company, TCC and THI, and its sister company ISI Brands, Inc., has guaranteed Twinlab’s obligations under the line of credit.  TCC obtained all necessary consents from its lender in order to consummate the Merger.

Sale Lease Back

On August 21, 2014, TCC entered into an agreement with Essex Capital Corporation, a related party, for a sale leaseback of equipment in the amount of $2,200,000 replacing a lease on the same equipment with a balance of $1,210,295.

Purchase of Option Agreement

In September 2014, TCC entered into an option agreement ("Option No. 1") that gives TCC an exclusive option to purchase 100% of the equity of a marketer and distributor of nutritional products (“Target No. 1”) on certain agreed upon terms.  TCC paid $2,000,000 to acquire Option No. 1.  Option No. 1 can be exercised on or before July 13, 2015.  As an option, the Company will have the right, but not the obligation, to acquire the equity of Target No. 1 for a purchase price of $37,000,000, payable in cash at the closing of the acquisition without reduction for the option purchase price.  At present none of the Company, TCC or any other subsidiary of the Company has sufficient funds necessary to close on the acquisition of the equity of Target No. 1, if it were to exercise Option No. 1.  The Company believes that it and TCC will be able to raise the necessary funds to exercise Option No. 1 on a timely basis, although there can be no assurance that the Company and TCC will be successful.

 
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Purchase of Option Agreement

In September 2014, TCC entered into an option agreement (“Option No. 2”) that gives TCC an exclusive option to purchase substantially all of the assets and assume certain operating liabilities of a manufacturer of nutritional products on certain agreed upon terms (“Target No. 2”).  TCC agreed to pay $350,000 to acquire Option No. 2, which is payable on or before September 27, 2014.  Option No. 2 can be exercised on or before December 13, 2014.  As an option, TCC has the right, but not the obligation, to acquire the assets of Target No. 2, for a purchase price of $10,500,000,  payable in cash at the closing of the acquisition.  The purchase price for the assets of Target No. 2 would not be reduced by the option purchase price.  If the Company does not exercise Option No. 2 within the exercise period, it will pay the grantor break-up fees of approximately $400,000.  At present none of the Company, TCC or any other subsidiary of the Company has sufficient funds necessary to close on the acquisition of the assets of Target No. 2, if it were to exercise the option.  The Company believes that it and  TCC will be able to raise the necessary funds to exercise Option No. 2 on a timely basis, although there can be no assurance that the Company and TCC will be successful.

Critical Accounting Policies and Estimates

This discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with the U.S. generally accepted accounting principles generally accpeted in the United States of America. The preparation of our financial statements required us to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Significant estimates included values and lives assigned to acquired intangible assets, reserves for customer returns and allowances, uncollectible accounts receivable, valuation adjustments for slow moving, obsolete and/or damaged inventory and valuation and recoverability of long-lived assets. Actual results may differ from these estimates.

Our critical accounting policies and estimates include the following:


Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant management estimates include those with respect to returns and allowances, allowance for doubtful accounts, reserve for inventory obsolescence and recoverability of long-lived assets.

Revenue Recognition

Revenue from product sales, net of estimated returns and allowances, is recognized when evidence of an arrangement is in place, related prices are fixed and determinable, contractual obligations have been satisfied, title and risk of loss have been transferred to the customer and collection of the resulting receivable is reasonably assured. Shipping terms are generally freight on board (“FOB”) shipping point.

 
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Accounts Receivable and Allowances

Substantially all of THI’s accounts receivable are from distributors or mass market customers. THI grants credit to customers and generally does not require collateral or other security. THI performs credit evaluations of its customers and provides for expected claims, related to promotional items; customer discounts; shipping shortages; and damages, and doubtful accounts based upon historical bad debt and claims experience. These allowances approximated $1,826,000 and $2,039,000 as of December 31, 2013 and 2012. THI sells predominately in the North American and European markets, with international sales transacted in U.S. Dollars.

Inventories

Inventories are stated at the lower of cost or market. Costs are determined using the weighted average cost method.

Impairment of Long-Lived Assets

Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.

For additional information on our accounting policies, see Note 2 of the accompanying Consolidated Financial Statements.

Recent Accounting Pronouncements

In April 2014, FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)." ASU No. 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for the Company’s fiscal year ending December 31, 2015, and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
 
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This amended guidance will enhance the comparability of revenue recognition practices and will be applied to all contracts with customers. Expanded disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized are requirements under the amended guidance. This guidance will be effective for the Company’s fiscal year ending December 31, 2017 and may be applied retrospectively. We are currently evaluating the potential impact if any of adopting this guidance on our consolidated financial statements.

 
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RESULTS OF OPERATIONS
(All Dollar Amounts in Thousands)

As a result of our recent acquisition and change in the business and operations, a discussion of the past financial results of the Company is not pertinent and the financial results of TCC, the accounting acquirer, are considered the financial results of the Company on a going-forward basis.

Comparison of Six Months Ended June 30, 2014 and 2013

The following table summarizes our results of operations for the six months ended June 30, 2014 and 2013, together with the changes in those items in dollars and as a percentage:

   
Six months ended
June 30,
       
   
2014
   
2013
   
Dollar change
   
% change
 
Net sales
  $ 34,147     $ 37,695     $ (3,548 )     9.4 %
Cost of sales
    25,846       25,602       244       1.0 %
                                 
Gross profit
    8,301       12,093       (3,792 )     31.4 %
Selling, general and administrative
    11,902       12,942       (1,040 )     8.0 %
                                 
Loss from operations
    (3,601 )     (849 )     (2,752 )     324.1 %
Interest and other expense, net
    (2,716 )     (1,879 )     (837 )     44.5 %
                                 
Loss before provision for income taxes
    (6,317 )     (2,728 )     (3,589 )     131.6 %
Provision for income taxes
    (20 )     (14 )     (6 )     42.9 %
                                 
Net loss
  $ (6,337 )   $ (2,742 )   $ (3,595 )     131.1 %

Net Sales.   Net sales decreased by $3,548, or 9.4%, to $34,147 for the six months ended June 30, 2014 from $37,695 for the six months ended June 30, 2013. The decrease in net sales was primarily related to our inability to process orders on a timely basis due to operating cash constraints.

Gross Profit.   Gross profit decreased by $3,792, or 31.4%, to $8,301 for the six months ended June 30, 2014 from $12,093 for the six months ended June 30, 2013. This decrease in gross profit was primarily attributable to the net sales volume decline and a change in the product mix toward lower margin items.

Selling, General and Administrative.   Selling, general and administrative expenses decreased by $1,040, or 8.0%, to $11,902, for the six months ended June 30, 2014 from $12,942 for the six months ended June 30, 2013. This decrease in selling, general and administrative expenses was primarily attributable to lower advertising expenses.

Interest and Other Expense, Net.   Net interest and other expense was $2,716 for the six months ended June 30, 2014 and $1,879 for the six months ended June 30, 2013.  This increase was a result of a gain on sales of securities in 2013 that offset interest expense in 2013.

 
 
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Comparison of Years Ended December 31, 2013 and 2012
The following table summarizes our results of operations for the years ended December 31, 2013 and 2012, together with the changes in those items in dollars and as a percentage:

   
Years ended December 31,
       
   
2013
   
2012
   
Dollar change
   
% change
 
Net sales
  $ 76,230     $ 84,236     $ (8,006 )     9.5 %
Cost of sales
    52,647       58,324       (5,677 )     9.7 %
                                 
Gross profit
    23,583       25,912       (2,329 )     9.0 %
Selling, general and administrative
    23,391       24,060       (669 )     2.8 %
                                 
Income from operations
    192       1,852       (1,660 )     89.6 %
Interest and other expense, net
    (2,641 )     (4,714 )     2,073       44.0 %
                                 
Loss before provision for income taxes
    (2,449 )     (2,862 )     413       14.4 %
Provision for income taxes
    (33 )     (19 )     (14 )     73.7 %
                                 
Net loss
    (2,482 )     (2,881 )     399       13.8 %

Net Sales.   Net sales decreased by $8,006, or 9.5%, to $76,230 for fiscal 2013 from $84,236 for fiscal 2012. The decrease in net sales was primarily related to the exiting of unprofitable customers in the Food, Drug and Mass (FDM) channel, and lower order fill rates due to a continued working capital deficiency.

Gross Profit.   Gross profit decreased by $2,329, or 9%, to $23,583 for fiscal 2013 from $25,912 for fiscal 2012. This decrease in gross profit was primarily attributable to changes in product mix and decreases in overall volume, offset partially by certain improvements in exiting unprofitable customers.

Selling, General and Administrative.   Selling, general and administrative expenses decreased by $669, or 2.8%, to $23,391 for fiscal 2013 from $24,060 for fiscal 2012. This decrease in selling, general and administrative expenses was primarily attributable to the realization of efficiencies in the finance and sales departments as well as lower shipping costs.

Interest and Other Expense, Net.   Net interest and other expense was $2,641 for fiscal 2013 and $4,714 for fiscal 2012 and primarily consisted of interest on term and shareholder loans and the sale of a product line in 2013.

Liquidity and Capital Resources

As of June 30, 2014, we had cash of $315. As of December 31, 2013, we had cash of $300. Net cash provided by/(used in) operating activities was $3,897 and ($5,987) for the years ended December 31, 2013 and 2012, respectively.

The following table summarizes total current assets, liabilities and working capital at June 30, 2014, compared to December 31, 2013.

 
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June 30, 2014
   
December 31, 2013
   
Increase/(Decrease)
 
Current Assets
  $ 22,823     $ 23,228     $ (405 )
Current Liabilities
  $ 91,844     $ 88,292     $ 3,552  

Our primary source of operating cash has been from trade receivables and payables management as well as changes in inventory stocking levels and related party loans, which have been converted into equity, see “Recent Developments.”

Management believes current levels of liquidity are sufficient for current operations, but additional capital will be needed to execute the business plan, which includes an acquisition strategy, buying more inventory and other operational expenses. There can be no assurance that such capital will be available on acceptable terms or at all.

Sources of Liquidity

Since December 31, 2013 we have raised an aggregate of approximately $9,000 to fund our operations, all of which was received from our issuance to related parties of convertible notes which were subsequently converted into equity (see “Recent Developments”).

Cash Flows

The following provides information regarding our cash flows for the years ended December 31, 2013 and 2012, and the six months ended June 30, 2014 and 2013:

   
Years ended
December 31,
   
Six months ended
June 30,
 
   
2013
   
2012
   
2014
   
2013
 
Net cash provided by (used in) operating activities
  $ 3,897     $ (5,987 )   $ (4,155 )   $ (1,710 )
Net cash provided by investing activities
  $   8,087     $ 510     $ (112 )   $ 7,818  
Net cash provided by (used in) financing activities
  $ (11,764 )   $ 3,318     $ 4,282     $ (6,059 )
Net increase/(decrease) in Cash
  $ 220     $ (2,159 )   $ 15     $ 49  

Net cash used in operating activities . Net cash used in operating activities was $4,155 during the six months ended June 30, 2014 compared to $1,710 during the six months ended June 30, 2013. The increase in cash used in operating activities in the first six months of 2014 was primarily due to the increase in net loss during the six months ended June 30, 2014 as compared to the six months ended June 30, 2013.

Net cash used in operating activities was $5,987 for the year ended December 31, 2012 compared to $3,897 net cash provided by operating activities for the year ended December 31, 2013.  The cash provided by operating activities for the year ended December 31, 2013 was primarily the result of lowering of inventory levels. The cash used in operating activities for the year ended December 31, 2012 was primarily the result of an increase in inventory levels.

 
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Net cash provided by investing activities .   Net cash provided by investing activities was $7,818 during the six months ended June 30, 2013 compared to net cash used of approximately $112 during the six months ended June 30, 2014. The cash provided by investing activities for the six months ended June 30, 2013 was primarily the result of the sale of assets.

Net cash provided by investing activities was $510 during the year ended December 31, 2012 compared to approximately $8,087 during the year ended December 31, 2013. The cash provided by investing activities for the year ended December 31, 2013 was primarily the result of the sale of assets. The cash provided by investing activities for the year ended December 31, 2012 was primarily the result of the sale of marketable securities.

Net cash used in financing activities. Net cash used in financing activities was $6,059 during the six months ended June 30, 2013 compared to net cash provided of $4,282 during the six months ended June 30, 2014. The cash used in financing activities for the six months ended June 30, 2013 was primarily the result of repayments of debt. The cash provided in financing activities for the six months ended June 30, 2014 was primarily the result of proceeds from the issuance of debt.

Net cash provided by financing activities was $3,318 for the year ended December 31, 2012 compared to $11,764 net cash used in financing activities for the year ended December 31, 2013. The cash used in financing activities for the year ended December 31, 2013 was primarily the result of repayments of debt. The cash provided by financing activities for the year ended December 31, 2012 was primarily the result of a change in our revolving credit facility.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we pursue our acquisition strategy, including under the option rights described under “Recent Developments” above.  Further, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

We expect that our existing cash and cash equivalents and currently committed funding under our bank facility will enable us to fund our operating expenses and capital expenditure requirements for our existing operations, and not including the acquisitions described under “Recent Developments” above or any additional capital expenditure requirements should those acquisitions actually occur, for at least the foreseeable future. Our future capital requirements will depend on many factors, including,  in particular, any requirements we may have in connection with the integration of acquisitions which will include, but not be limited to, upgrading of the Company’s ERP/MRP systems and acquiring additional machinery.

 
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Until such time, if ever, as we can generate substantial product revenues, we intend to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. There can be no assurance that any of those sources of funding will be available when needed on acceptable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or relationships with third parties when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts; abandon our business strategy of growth through acquisitions; or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.

Operation Plan

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents information about the beneficial ownership of the Company’s common stock on September 16, 2014 by those persons known to beneficially own more than 5% of our capital stock and by our Directors and executive officers.  The percentage of beneficial ownership for the following table is based on 220,000,000 shares of common stock outstanding.

Beneficial ownership is determined in accordance with the rules of the SEC and does not necessarily indicate beneficial ownership for any other purpose.  Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power.  It also includes shares of common stock that the stockholder has a right to acquire within 60 days after September 16, 2014, pursuant to options, warrants, conversion privileges or other rights.  The percentage of ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the SEC, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.

 
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Security Ownership of Certain Beneficial Owners and Management
 
Title of Class
 
Name and address of Beneficial Owner (1)
 
Amount of
Beneficial Ownership
   
Percent of Class
 
Common
Thomas Tolworthy, Chief Executive Officer, President and Sole Director
    130,870,132 (2)     59.49 %
Common
Mark Jaggi, Executive Vice President, Chief Financial Officer and Treasurer
    1,600,000       *  
Common
Richard Neuwirth, Executive Vice President, Chief Legal Officer and Secretary
 
    2,000,000       *  
Common
Kathleen Pastor, Executive Vice President Retail Sales
    2,000,000       *  
Common
David L. Van Andel (3)
    53,924,234       24.51 %
Common
Little Harbor LLC
    26,590,000       12.09 %
Common
All directors and officers as
 a group (5 persons)
    136,470,132       62.58 %
 
(1)  
As used in this table, “beneficial ownership” means the sole or united power to vote, or to direct the voting of, a security, or the sole or united investment power with respect to a security (i.e., the power to dispose of, or to direct the disposition of, a security).  Each Parties’ address is in care of the Company at 632 Broadway, Suite 201, New York, New York 10012.
 
(2)  
Mr. Tolworthy also has a contingent agreement to acquire up to 5,021,834 shares of the Company’s outstanding common stock if either or both of the transactions subject to Option No. 1 or Option No. 2 do not close.  Such shares are not included in the shares described above as owned by Mr. Tolworthy.
 
(3)  
Includes 14,789,173 shares owned by the David L. Van Andel Trust u/a dated November 30, 1993, of which Mr. Van Andel is the sole trustee and the principal beneficiary, 26,590,000 shares owned by Little Harbor LLC of which he is the sole manager and a holder as sole trustee of the David L. Van Andel Trust u/a dated November 30, 1993 of 80.5% of the membership interests, 6,952,956 shares owned by Great Harbor LLC of which he is the sole manager and a holder as sole trustee of the David L. Van Andel Trust u/a dated November 30, 1992 of 100% of the membership interests and 5,592,105 shares that Mr. Van Andel has the right to acquire under a warrant that is immediately excercisable.  Mr. Van Andel disclaims beneficial ownership of any shares held by the limited liability companies named above that would exceed his percentage interest in such limited liability companies.  The business address of Mr. Van Andel and each of the limited liability companies is 3133 Orchard Vista Drive SE, Grand Rapids, Michigan 49546.

* Indicates less than one percent (1%).

Changes in Control

There are no arrangements, known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.

 
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following sets forth information about our directors and executive officers as of the date of this report:
Name
 
Age
 
Position
 
Term
Commencing
Thomas Tolworthy
 
60
 
President and Chief Executive Officer; Sole Director
 
Effective upon the closing of the Merger
Mark Jaggi
 
40
 
Executive Vice President, Treasurer and Chief Financial Officer
 
Effective upon the closing of the Merger
Richard Neuwirth
 
45
 
Executive Vice President, Secretary and Chief Legal Officer
 
Effective upon the closing of the Merger
Kathleen Pastor
 
42
 
Executive Vice President Retail Sales
 
Effective upon the closing of the Merger

Thomas Tolworthy – President and Chief Executive Officer; Sole Director

Thomas Tolworthy joined Twinlab in April 2011 as Chief Executive Officer. Prior to Twinlab he spent 10 years with The Vitamin Shoppe, including six years as CEO where he grew its retail business from 80 to 500 stores, increased revenue from $180 million to more than $700 million and took the company public in 2009.   Mr. Tolworthy spent 12 years with Barnes & Noble. During his five-year tenure as President in the 1990s he led the company’s expansion, opening of 400 new stores and was part of the executive team that took the company public. He currently serves on the Board of Directors of Vitamin Angels, a respected nonprofit organization that donates vitamins for use in developing areas and countries as well as Pet Supplies Plus and Performance Bicycle .

Mark Jaggi, Chief Financial Officer and Treasurer

Mr. Jaggi serves as CFO and has experience with multiple turnarounds. Mr. Jaggi is also experienced in corporate integrations and divestments in the manufacturing arena. Mr. Jaggi is an award-winning former employee of the Ford Motor Company with deep management experience in the nutrition industry.  He has played an important role in the recent financial and operational activities of Twinlab.  Mr. Jaggi has a BS in Finance from the University of Utah, David Eccles School of Business and a MBA from Duke University, Fuqua School of Business.

Richard Neuwirth, Executive Vice President, Chief Legal Officer & Secretary

Mr. Neuwirth was a key player in the Twinlab sale to Idea Sphere in 2003, and also played a key role in the acquisition of MetaboLife in 2005. More recently, Mr. Neuwirth has played an important role in the reorganization of the Twinlab debt in 2011 and the company’s turnaround.  Mr. Neuwirth is a seasoned litigator and product liability expert having worked at King & Spalding prior to Twinlab.  Mr. Neuwirth is a member of the New York Bar Association, has a BBA from Emory University and a JD from George Washington University.

 
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Kathleen Pastor, Executive President Retail Sales

Ms. Pastor has become a key figure in the reorganization and optimization of Twinlab’s sales efforts. Her professional sales career started with Country Life, LLC, a New York-based company in the natural health industry, where she spent eight years focused on growing top-line revenue. Promoted to her current position in the fall of 2011, Ms. Pastor has brought execution to sales and customer service resulting in significant growth of Twinlab’s revenue in her areas of responsibility.  Ms. Pastor attended Northeastern University.

Family Relationships

There are no family relationships among any of our officers or directors.

Code of Ethics

We intend to prepare a Code of Ethics and Standards for Business Conduct after the Merger.  This is expected to occur in the fourth quarter of 2014.

Corporate Governance

We currently do not have standing audit, nominating and compensation committees of the board of directors, or committees performing similar functions. Until formal committees are established, our entire board of directors, perform the same functions as an audit, nominating and compensation committee.

Involvement in Certain Legal Proceedings

None of our directors or executive officers has, during the past ten years:

·  
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
 
·  
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
 
·  
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
 
·  
been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
 
·  
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
 

 
49

 


·  
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
 

EXECUTIVE COMPENSATION

Overview of Compensation Program

We currently have not appointed members to serve on the Compensation Committee of the Board of Directors. Until a formal committee is established, our entire Board of Directors has responsibility for establishing, implementing and continually monitoring adherence with the Company’s compensation philosophy.  The Board of Directors ensures that the total compensation paid to the executives is fair, reasonable and competitive.

Compensation Philosophy and Objectives

The Board of Directors believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by the Company, and which aligns executives’ interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value.  As a result of the size of the Company and only having four executive officers, the Board evaluates both performance and compensation on an informal basis.  Upon hiring additional executives, the Board intends to establish a Compensation Committee to evaluate both performance and compensation to ensure that the Company maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly-situated executives of our peer companies.  To that end, the Board believes executive compensation packages provided by the Company to its executives, including the named executive officers, should include both cash and stock-based compensation that reward performance as measured against established goals.

Role of Executive Officers in Compensation Decisions

The Board of Directors makes all compensation decisions for, and approves recommendations regarding equity awards to, the executive officers and Directors of the Company.  Decisions regarding the non-equity compensation of other employees of the Company are made by management.

Summary Compensation

Summary Compensation Table

The table below summarizes the total compensation paid to or earned by our Executive Officers, for the last two fiscal years ended December 31, 2013 and 2012.

 
50

 


SUMMARY COMPENSATION TABLE
 
 
 
Name and Principal Positions
 
(a)
 
 
 
 
Year
 
(b)
 
 
 
 
Salary ($)
 
(c)
 
 
 
 
Bonus ($)
 
(d)
 
 
 
Stock Awards ($)
 
(e)
 
 
 
Option Awards ($)
 
(f)
Non-Equity Incentive Plan Compensation
($)
 
 
(g)
 
 
Non-qualified Deferred Compensation Earnings ($)
 
(h)
 
 
All Other Compen-sation($)
 
(i)
 
 
 
Total ($)
 
 
(j)
Thomas Tolworthy (1)
                 
Chief Executive Officer, President and Director
2012
439,978
100,000
0-
0-
0-
8,750
-0-
548,728
 
2013
500,000
100,000
   
0-
8,925
 
608,925
Mark Jaggi (2)
                 
Executive Vice President, Chief Financial Officer and Treasuer
2012
147,087
-0-
0-
0-
0-
4,347
-0-
151,434
 
2013
240,644
8,000
   
0-
7,750
 
256,394
Richard Neuwirth (3)
                 
Executive Vice President, Chief Legal Officer and Secretary
2012
254,734
-0-
0-
0-
0-
7,774
-0-
262,508
 
2013
262,500
8,000
   
0-
7,774
 
278,274
Kathleen Pastor (4)
                 
Executive Vice President Retail Sales
2012
303,361
31,514
0-
0-
0-
3,782
-0-
338,657
 
2013
315,001
8,000
   
0-
8,925
 
331,926
Luz Vazquez (5)
                 
Former Chief Executive Officer and Director
2012
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
 
2013
-0-
-0-
-0-
-0-
-0-
-0-
-0-
-0-
 
(1)  
Mr. Tolworthy was appointed as Chief Executive Officer and President and as the Sole Director of the Company on the closing date of the Merger on September 16, 2014.  Mr. Tolworthy was appointed Chief Executive Officer and President of TCC on October 1, 2013, and is currently employed pursuant to that certain employment agreement dated as of August 7, 2014.  Subsequent to the Merger Mr. Tolworthy’s employment agreement was assumed by the Company. Such employment agreement contemplates a base salary based on an annualized rate of Five Hundred Thousand Dollars from the start date through December 31, 2014 and beginning on January 1, 2015, an initial base salary based on an annualized rate of Six Hundred Thousand Dollars ($600,000) per year, plus a discretionary cash bonus for the remainder of 2014 and a performance-based target annual bonus payable upon achievement of applicable performance metrics thereafter.  Mr. Tolworthy’s base salary may be reduced on an annual basis (starting on January 1, 2016) by up to $100,000 per year (but at no time to a base salary rate below $300,000 per year); provided, however, in the event of such reduction for any given year, Mr. Tolworthy’s target annual bonus for which Executive is eligible for such year shall be increased by an amount such that (for the applicable year) the sum of his annualized base salary plus target annual bonus shall equal two-times the initial base salary.  Mr. Tolworthy’s employment relationship with TCC is at-will, subject to Mr. Tolworthy’s right to receive a severance package in the event of termination without cause or resignation for good reason consisting of, subject to certain conditions (including his execution and delivery of a general release), an amount equal to two times the sum of (A) Mr. Tolworthy’s Base Salary plus (B) the average of the last 3 annual bonuses received by Mr. Tolworthy for the three immediately preceding fiscal years or, if Mr. Tolworthy has been employed for less than three years under this Agreement, the average of all annual bonuses received while employed under the employment agreement, and monthly cash payments equal to monthly costs of his COBRA premium for up to twelve months.  Mr. Tolworthy’s employment agreement is also subject to certain restrictive covenants, including confidentiality and, during his employment with TCC and for a period of twelve (12) months immediately thereafter, non-competition and non-solicitation covenants.  Mr. Tolworthy shall be eligible to participate in the Company’s equity incentive or similar plan(s) or program(s) as and when implemented and maintained by the Company
 

 
51

 


 
(2)  
Mr. Jaggi was appointed as Chief Financial Officer and Treasurer on the closing date of the Merger on September 16, 2014.  For Mr. Jaggi amounts in the table above for 2012 reflect partial year compensation as he was hired by Twinlab Corporation on March 30, 2012.  Mr. Jaggi was appointed Chief Financial Officer and Executive Vice President of Twinlab Corporation pursuant to that certain employment agreement dated May 3, 2012.  Such employment agreement contemplates a base salary on an original annualized rate of Two Hundred Fifty Thousand Dollars, plus a performance-based target annual bonus based on the company’s profitability.  Mr. Jaggi’s employment relationship with Twinlab Corporation is at-will, subject to Mr. Jaggi’s right to receive, subject to certain conditions (including his execution and delivery of a general release), a severance pay in the event of termination without cause or resignation for good reason consisting of twenty-six weeks of salary and other minor benefits, with additional severance available in the event of termination due to a change of control.  Mr. Jaggi’s employment agreement further provides for customary confidentiality and, for the term of his employment with the company, non-competition and non-solicitation covenants.  At the discretion of the Board, a new employment agreement with the Company may be signed with Mr. Jaggi after the consummation of the Merger.
 
(3)  
Mr. Neuwirth was appointed as Executive Vice President, Chief Legal Officer and Secretary on the closing date of the Merger on September 16, 2014.  Mr. Neuwirth was appointed Chief Legal Officer, General Counsel and Executive Vice President of Twinlab Corporation pursuant to that certain employment agreement dated January 2, 2012.  Such employment agreement contemplates a base salary on an original annualized rate of Two Hundred Fifty Thousand Dollars, plus a performance-based target annual bonus based on the company’s profitability.  Mr. Neuwirth’s employment relationship with Twinlab Corporation is at-will, subject to Mr. Neuwirth’s right to receive, subject to certain conditions (including his execution and delivery of a general release), a severance pay in the event of termination without cause or resignation for good reason consisting of twenty-six weeks of salary and other minor benefits, with additional severance available in the event of termination due to a change of control.  Mr. Neuwirth’s employment agreement further provides for customary confidentiality and, for the term of his employment with the company, non-competition and non-solicitation covenants.  At the discretion of the Board, a new employment agreement with the Company may be signed with Mr. Neuwirth after the consummation of the Merger.
 
(4)  
Ms. Pastor was appointed as Executive Vice President Retail Sales on the closing date of the Merger on September 16, 2014.  In 2012, a portion of Ms. Pastor’s compensation was based, in part, on commissions; in 2013, Ms. Pastor’s base compensation arrangements were changed to straight salary.  Ms. Pastor was appointed Executive Vice President Retail Sales of Twinlab Corporation pursuant to that certain employment agreement dated September 7, 2011.  Such employment agreement contemplates a base salary on an original annualized rate of Three Hundred Thousand Dollars, plus a performance-based target annual bonus based on the company’s profitability.  Ms. Pastor’s employment relationship with Twinlab Corporation is at-will, subject to Ms. Pastor’s right to receive, subject to certain conditions (including his execution and delivery of a general release), a severance pay in the event of termination without cause or resignation for good reason consisting of twenty-six weeks of salary and other minor benefits, with additional severance available in the event of termination due to a change of control..  Ms. Pastor’s employment agreement further provides for customary confidentiality and, for the term of his employment with the company, non-competition and non-solicitation covenants.  At the discretion of the Board, a new employment agreement with the Company may be signed with Ms. Pastor after the consummation of the Merger.
 

 
52

 


 
(5)  
Ms. Vazquez resigned as Chief Executive Officer and President effective as of the close of business on September 16, 2014 and as the Sole Director of the Company effective with the appointment of her successor(s) to the Board following the consummation of the Merger.  Ms. Vasquez did not have a written employment with the Company and received no salary for her services.
 
Outstanding Equity Awards at Year End

Outstanding Equity Awards at Year End
 
Option Awards
   
Stock Awards
 
Name
 
 
 
 
 
 
(a)
 
Number of securities underlying unexercised options
(#)
exercisable
 
 
(b)
   
Number of securities underlying unexercised options
(#)
exercisable
 
 
(c)
   
Equity incentive plan awards: Number
of securities underlying unexercised options
(#)
 
 
(d)
   
Option exercise price
($)
 
 
 
 
 
(e)
   
Option expiration date
 
 
 
 
 
 
(f)
   
Number of shares or units of stock that have not vested
(#)
 
 
 
(g)
 
Market value of shares or units that have not vested
($)
 
 
 
 
(h)
 
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested
(#)
 
(i)
   
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested
($)
 
(j)
 
Thomas Tolworthy
    -0-       -0-       -0-       N/A       N/A       49,836,800 (1)       -0-       N/A  
Mark Jaggi
    -0-       -0-       -0-       N/A       N/A       1,383,360 (2)       -0-       N/A  
Richard Neuwirth
    -0-       -0-       -0-       N/A       N/A       1,729,200 (2)       -0-       N/A  
Kathleen Pastor
    -0-       -0-       -0-       N/A       N/A       1,729,200 (2)       -0-       N/A  
Luz Vazquez
    -0-       -0-       -0-       N/A       N/A       -0-  
N/A
    -0-       N/A  
 
(1)  
Mr. Tolworthy acquired his common shares in TCC on November 4, 2013 pursuant to a Restricted Stock Purchase Agreement.  The shares issued to him were subject to time vesting only.  Half the shares vested on the purchase date and the remaining half vest in 24 equal monthly installments.  Under his agreement, the vesting of Mr. Tolworthy’s unvested shares would be accelerated on the occurrence of a Corporate Transaction (that is, a merger, consolidation or sale of the Company or substantially all of its assets).  Neither the IS Merger nor the Merger constituted a Corporate Transaction, and the shares of the Company common stock received in the Merger are subject to the same vesting conditions as the TCC common shares owned immediately prior to the Merger.  The shares were acquired for their par value (that is, $0.0001 per share) and Mr. Tolworthy filed an election under Internal Revenue Code section 83(b) to include in his gross income in 2013 any compensation taxable in connection with his acquisition of such stock.
 

 
53

 


 
(2)  
Each of Mr. Jaggi, Mr. Neuwirth and Ms. Pastor acquired his or her common shares in TCC on November 4, 2013 pursuant to a grant of a right to purchase pursuant to the Twinlab Consolidation Corporation 2013 Stock Incentive Plan.  Fifty percent of the shares issued to each were subject to time vesting, and the other fifty percent were subject to vesting upon the earlier of a Corporate Transaction or six years.  Upon the Merger, vesting under the TCC 2013 Stock Incentive Plan will be amended to provide that all shares that are unvested upon the Merger will vest ratably on a monthly basis over 48 months following the closing of the Merger.  Neither the IS Merger nor the Merger constituted a Corporate Transaction under the 2013 Stock Incentive Plan.  The shares were acquired for their par value (that is, $0.0001 per share) and each of Mr. Jaggi, Mr. Neuwirth and Ms. Pastor filed an election under Internal Revenue Code section 83(b) to include in his or her gross income in 2013 any compensation taxable in connection with his or her acquisition of such stock.
 
Equity Compensation Plans
 
The following table provides summary information with respect to the Company’s equity compensation plan under which the Company’s common shares may be issued to employees or non-employees (such as consultants or advisors) as of December 31, 2013, which was approved by shareholders of TCC. As of December 31, 2013, the only equity compensation plan in effect was the Twinlab Consolidation Corporation 2013 Stock Incentive Plan (the “TCC Plan”), which plan was assumed by the Company in connection with the Merger.  The TCC Plan originally established a pool of 20,000,000 shares of TCC common stock for issuance as incentive awards to employees of TCC for the purposes of attracting and retaining qualified employees who will aid in the success of TCC. The Board of Directors intends to review and either amend and restate the TCC Plan or adopt a replacement and/or additional plan in the near future, which may include an increase in the number of securities available for issuance under the plan and will seek stockholder approval thereof.  As noted under “Description of Business-Change of Control,” Mr. Tolworthy has agreed to surrender some of his shares of the Company’s stock for purposes of the TCC Plan or other incentive compensation plan.  Information relating to employee stock purchase plans and employee savings plans (such as 401(k) plans) is not included.
 
Equity Compensation Plan Information
 
PLAN CATEGORY
 
(A)
NUMBER OF SECURITIES TO
BE ISSUED UPON EXERCISE
OF OUTSTANDING
OPTIONS, WARRANTS AND
RIGHTS
   
(B)
WEIGHTED-AVERAGE EXERCISE
PRICE OF OUTSTANDING
OPTIONS, WARRANTS AND
RIGHTS
   
(C)
NUMBER OF SECURITIES REMAINING
AVAILABLE FOR FUTURE ISSUANCE
UNDER EQUITY COMPENSATION PLANS
(EXCLUDING SECURITIES REFLECTED
IN COLUMN (A))
 
   
   
Equity compensation plans approved by shareholders
   
0
     
0
     
8,571,420
 
Equity compensation plans not approved by shareholders
   
0
     
0
     
0
 
Total
   
0
     
0
     
8,571,420
 


 
54

 


Director Compensation

As a result of having one board member we do not currently have an established compensation package for board members.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

On September 9, 2014, we issued 215,600,000 shares of our common stock in order to effect a 50:1 forward split.

On September 16, 2014, we issued 199,995,000 shares of our restricted common stock (post 50:1 forward split) in connection with the consummation of the merger with TCC. In exchange, we acquired 100% of the outstanding common stock and preferred stock of TCC.

Promoters and Certain Control Persons

We did not have any promoters at any time since inception in 2013.

Mr. Tolworthy, acquired beneficial control of approximately 59.49% of the total shares of common stock outstanding of the Company as follows:

Mr. Tolworthy acquired 59.49% or 130,870,132 shares of common stock as a result of being a stockholder of TCC of which the Company acquired 100% of the ownership pursuant to the Merger.

In addition, on September 16, 2014, simultaneously with the effectiveness of the Merger, pursuant to an agreement entered into prior thereto, the Company acquired 199,995,000 (post 50:1 forward split) shares of common stock pursuant to a private transaction with Ms. Luz Vazquez (for an aggregate purchase price of $8,000, which amount also included satisfaction of certain indebtedness owed to Ms. Vazquez by the Company).

Director Independence

We currently do not have any independent directors, as the term “independent” is defined in Section 803A of the NYSE Amex LLC Company Guide. Since the Over the Counter Bulletin Board (“OTCQB”) does not have rules regarding director independence, the Board makes its determination as to director independence based on the definition of “independence” as defined under the rules of the New York Stock Exchange (“NYSE”) and American Stock Exchange (“Amex”).

LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.

 
55

 


MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

Our common stock is traded in the OTC Markets PK (OTCPK), under the symbol “TLCC”.  We have been eligible to participate in the OTCPK since June 25, 2014 and from that time until the date of this report our common stock has yet to commence trading.

Holders of Common Stock

As of September 9, 2014, there were approximately 42 stockholders of record of our common stock.  This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

Dividends

Any decisions regarding dividends will be made by our board of directors.  We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.  Our board of directors has complete discretion on whether to pay dividends.  Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

RECENT SALES OF UNREGISTERED SECURITIES

On September 16, 2014, pursuant to the Merger Agreement, we issued a total of 199,995,000 shares of our restricted common stock (post 50:1 forward split) to the stockholders of TCC, in exchange for 100% of the issued and outstanding shares of common and preferred stock of TCC.

We made each of the aforementioned common stock issuances in reliance upon the exemption from registration under Rule 506 of Regulation D under the Securities Act for private offerings not involving a public distribution. We believe that the issuance and sale of the above securities were exempt from the registration and prospectus delivery requirements of the Securities Act by virtue of Rule 506 of Regulation D. The securities were issued directly by us and did not involve a public offering or general solicitation. The recipients of the securities were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and Exchange Act reports. We reasonably believed that the recipients, immediately prior to issuing the securities, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision. There were no commissions paid on the issuance and sale of the shares.

 
56

 


DESCRIPTION OF SECURITIES

Common Stock

Our articles of incorporation authorize the   issuance of 5,000,000,000 shares of common stock, $0.001 par value per share, of which 220,000,000 shares were outstanding as of the date of this Current Report.  Common stock holders are entitled to one vote for each share on all matters to be voted on by the stockholders.  Holders of common stock have no cumulative voting rights. Common stock holders are entitled to share ratably in dividends, if any, as may be declared, from time to time by the board of directors in its discretion, from funds legally available to be distributed.  In the event of a liquidation, dissolution or winding up of the Company, the common stockholders are entitled to share pro rata all assets remaining after payment in full of all liabilities.  Holders of common stock have no preemptive rights to purchase our common stock.  There are no conversion rights or redemption or sinking fund provisions with respect to the common stock.  All of the outstanding shares of common stock are validly issued, fully paid and non-assessable.

Preferred Stock

Our articles of incorporation authorizes the   issuance of 10,000,000 shares of preferred stock, $0.001 par value per share, of which no shares of preferred stock are outstanding as of the date of this Current Report.  The preferred stock may be issued from time to time by the board of directors as shares of one or more classes or series.  Our board of directors, subject to the provisions of our Articles of Incorporation and limitations imposed by law, is authorized to:

·       adopt resolutions;
·       to issue the Shares;
·       to fix the number of shares;
·       to change the number of shares constituting any series; and
·       to provide for or change the following:
-  
the voting powers;
-  
designations;
-  
preferences; and
-  
relative, participating, optional or other special rights, qualifications, limitations or restrictions, including the following:
*      dividend rights (including whether dividends are cumulative);
*      dividend rates;
*      terms of redemption (including sinking fund provisions);
*      redemption prices;
*      conversion rights; and
 
*
liquidation preferences of the shares constituting any class or series of the preferred stock.

In each of the listed cases, we will not need any further action or vote by the stockholders.

 
57

 


One of the effects of undesignated preferred stock may be to enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of us by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management.  The issuance of shares of preferred stock pursuant to the Board of Director’s authority described above may adversely affect the rights of holders of common stock.  For example, preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation preference or both, may have full or limited voting rights and may be convertible into shares of common stock.  Accordingly, the issuance of shares of preferred stock may discourage bids for the common stock at a premium or may otherwise adversely affect the market price of the common stock.

Transfer Agent

The Company’s transfer agent for its common stock is West Coast Stock Transfer, Inc., 721 N. Vulcan Ave., Suite 205, Encinitas, California 92024.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our Articles of Incorporation and Bylaws both provide for the indemnification of our officers and directors to the fullest extent permitted by Nevada law.

In addition, on October 1, 2013, TCC and each of Thomas A Tolworthy, Mark Jaggi, and Richard H. Neuwirth, each in his capacity as a director, officer or employee of TCC (each, an “Indemnitee”), entered into certain Indemnification Agreements, whereby TCC agreed to provide for indemnification of, and to advance expenses to, the Indemnitees to the fullest extent permitted b applicable law and, to the extent that directors’ and officers’ liability insurance is maintained by TCC, to provide for the continued coverage of the Indemnitees under any such directors’ and officers’ liability insurance policy of TCC.

Limitation of Liability of Directors

Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if he acted in good faith and in a manner he believed to be in our best interests.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

Item 3.02           Change of Registered Independent Public Accounting Firm.

On September 12, 2014, our Board dismissed Seale & Beers, CPA (“S&B”), the registered independent public accounting firm for the Company, effective immediately.  The dismissal of S&B was a result of the Company’s Merger.  We have had no disagreements with S&B with respect to accounting practices or procedures or financial disclosures.  S&B was notified of its dismissal.

 
58

 


On September 12, 2014, our Board approved the engagement of Tanner LLC (“Tanner”) to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2014.  The decision to change our independent registered public accounting firm was the result of the determination by our Board that it was in the best interests of the Company following the Merger.

During the years ended December 31, 2013 and 2012 and through September 12, 2014, the date that Tanner was retained as the independent registered public accounting firm of the Company:

·   The Company did not consult Tanner regarding either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on its financial statements;
 
·   Neither a written report nor oral advice was provided to the Company by Tanner that they concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; and
 
·   The Company did not consult Tanner regarding any matter that was either the subject of a “disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or any of the reportable events set forth in Item 304(a)(1)(v) of Regulation S-K.
 
Item 3.02           Unregistered Sales of Equity Securities.

Pursuant to the Merger Agreement, we issued a total of 199,995,000 shares of our restricted common stock (post 50:1 forward split) to the stockholders of TCC, in exchange for 100% of the issued and outstanding shares of common stock of TCC.

We made each of the aforementioned common stock issuances in reliance upon the exemption from registration under Rule 506 of Regulation D under the Securities Act for private offerings not involving a public distribution. We believe that the issuance and sale of the above securities were exempt from the registration and prospectus delivery requirements of the Securities Act by virtue of Rule 506 of Regulation D. The securities were issued directly by us and did not involve a public offering or general solicitation. The recipients of the securities were afforded an opportunity for effective access to files and records of our company that contained the relevant information needed to make their investment decision, including our financial statements and Exchange Act reports. We reasonably believed that the recipients, immediately prior to issuing the securities, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment. The recipients had the opportunity to speak with our management on several occasions prior to their investment decision. There were no commissions paid on the issuance and sale of the shares

Item 5.01           Change in Control of Registrant

Mr. Tolworthy, acquired beneficial control of approximately 59.49% of the total shares of common stock outstanding of the Company as follows:

 
59

 


Mr. Tolworthy acquired 59.49% or 130,870,132 shares of common stock on September 16, 2014 as a result of being a stockholder of TCC of which the Company acquired 100% of the ownership pursuant to the Merger.

In addition, on September 16, 2014, simultaneously with the effectiveness of the Merger, pursuant to an agreement entered into prior thereto, the Company acquired 199,995,000 (post 50:1 forward split) shares of common stock pursuant to a private transaction with Ms. Luz Vazquez (for an aggregate purchase price of $8,000, which amount included satisfaction of certain indebtedness owed to Ms. Vazquez by the Company).

Item 5.02           Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers

On September 12, 2014, Luz Vazquez submitted her letter of resignation from her positions as President, Secretary, and Treasurer of the Company effective on the consummation of the Merger, and as the Sole Director of the Company effective with the appointment of her successor(s) to the Board following the consummation of the Merger.

On September 16, 2014, immediately after the consummation of the Merger, the Board appointed Thomas A. Tolworthy as the Sole Director of the Company.  The resignation of Ms. Vazquez was accepted by the Company on September 16, 2014 immediately after the appointment of Mr. Tolworthy.

On September 16, 2014, in connection with the resignations of Luz Vazquez as an officer of the Company, the Board appointed the following persons to serve as officers of the Company: (a) Thomas A. Tolworthy as the Chief Executive Officer and President, (b) Mark Jaggi as Executive Vice President, Chief Financial Officer and Treasurer; and (c) Richard Neuwirth as Executive Vice President, Chief Legal Officer and Secretary.

Item 5.03                      Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

On September 12, 2014, the Board approved a change effective September 16, 2014 in the Company’s fiscal year from November 30 to December 31.  The change will become effective for the Company’s 2014 fiscal year, which will begin December 1, 2013 and end December 31, 2014.  A report covering the transition period will be filed with the Form 10-Q for the 3 rd quarter of 2014.

Item 5.06                      Change in Shell Company Status

Management has determined that, as a result of the closing of the acquisition described under Item 2.01 of this Current Report on Form 8-K, the Company has ceased to be a shell company as defined in Rule 12b-2 of the Exchange Act. Please refer to Item 2.01 of this current report for a detailed description of the acquisition and the business of the Company following the acquisition.

 
60

 


Item 9.01           Financial Statements and Exhibits

(a) Financial Statements of Business Acquired. In accordance with Item 9.01(a), the following are filed herewith:

·  
Audited consolidated financial statements of Twinlab Holdings, Inc. and its subsidiaries (f/k/a IdeaSphere Inc.) for the years ended December 31, 2013 and 2012.
·  
Unaudited condensed consolidated financial statements of Twinlab Holdings, Inc. and its subsidiaries (f/k/a IdeaSphere Inc.) for the six months ended June 30, 2014 and 2013.

(b) Pro Forma Financial Information. In accordance with Item 9.01(b), the Unaudited Pro Forma financial information of Twinlab Consolidated Holdings, Inc., and its subsidiaries, including Twinlab Consolidation Corporation and Twinlab Holdings, Inc., as of the six months ended June 30, 2014 and for the year ended December 31, 2013 and for the six month period ended June 30, 2014 are filed herewith.

(c) Shell Company Transactions.  The information provided pursuant to 9.01(a) and 9.01(b) of this report is incorporated by reference in its entirety.

(d) Exhibits.  The following exhibits are filed as part of the Report on Form 8-K.
 
Exhibit
Number
Exhibit Description
   
2.1
Agreement and Plan of Merger – Dated September 4, 2014 (incorporated by reference to Exhibit 2.1 of Form 8-K filed on September 4, 2014).
   
   
2.1.1
First Amendment to Agreement and Plan of Merger – Dated September 16, 2014 (incorporated by reference to Exhibit 2.1.1 of Form 8-K filed on September 17, 2014).
   
   
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 of Form S-1 filed on December 27, 2013).
   
   
3.1.1
Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1.1 of Form 8-K filed on August 8, 2014).
   
   
3.1.(c)
Certificate of Change, dated August 28, 2014, incorporated by reference to  Exhibit 3.1(c) of Form 8-K filed on August 29, 2014.
   
   
3.2
Bylaws (incorporated by reference to Exhibit 3.2 of Form S-1 filed on December 27, 2013).
   
   
4.1**
Subscription and Surrender Agreement, dated as of September 3, 2014 between Twinlab Consolidation Corporation and Thomas Tolworthy.
   
   

 
61

 


10.1*
Employment Agreement, dated as of August 7, 2014, between Twinlab Consolidation Corporation and Thomas Tolworthy.
   
   
10.2*
Employment Agreement, dated as of May 3, 2012, between Twinlab Consolidation Corporation and Mark R. Jaggi.
   
   
10.3*
Employment Agreement, dated as of January 2, 2012, between Twinlab Consolidation Corporation and Richard H. Neuwirth.
   
   
10.4*
Employment Agreement, dated as of September 7, 2011, between Twinlab Consolidation Corporation and Kate Pastor (formerly Kate Pastor-Dippold).
   
   
10.5.1**
Fifth Third Bank Credit Agreement
   
   
10.5.2** First Amendment to  Fifth Third Bank Credit Agreement
   
   
10.5.3** Second Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.4**     Third Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.5**  Fourth Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.6** Fifth Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.7**  Sixth Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.8**  Seventh Amendment to Fifth Third Bank Credit Agreement
   
   
10.5.9**  Eighth  Amendment to Fifth Third Bank Credit Agreement
   
   
10.5.10**  Ninth Amendment to Fifth Third Bank Credit Agreement     
   
   
10.5.11**  Tenth Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.12** Eleventh Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.13**  Twelfth Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.14**  Thirteen Amendment to Fifth Third Bank Credit Agreement   
   
   
10.5.15**  Fourteenth Amendment to Fifth Third Bank Credit Agreement   
   
   
 10.5.16**
Guaranty dated as of September 16, 2014 made by Twinlab Consolidated Holdings, Inc. to, and for the benefit of Fifth Third Bank
   
10.5.17**    Guaranty dated as of August 7, 2014 made by Twinlab Consolidated Corporation to, and for the benefit of Fifth Third Bank
   
   
 10.5.18**
Guaranty dated as of January 7, 2008 made by Idea Sphere, Inc., Rebus, LLC, Natural2U   LLC,  701 Corporation, ISI Brands Inc., Planet Earth Ventures , LLC, Health Med, Inc., Health Letter, Inc., Med Letter, Inc., TGI Organic, LLC, PE Group, LLC and Natural Pet Nutrition, L.L.C. to, and for the benefit of Fifth Third Bank
   
   
10.6*
Twinlab Consolidation Corporation 2013 Stock Incentive Plan.
   
   
10.7**
Debt Repayment Agreement dated as of July 31, 2014 between Little Harbor LLC and Twinlab Holdings, Inc. (f/k/a Idea Sphere Inc.).
   
   
10.8**
Commercial Lease Agreement dated August 22, 2014 between Essex Capital Corporation and Twinlab Corporation.
   
   
10.9**
Restricted Stock Purchase Agreement dated as of November 4, 2013 between Twinlab Consolidation Corporation and Thomas Tolworthy.
   
   
16.1
Letter from Seale & Bears, CPAs dated September 12, 2014 (incorporated by reference to Exhibit 16.1 of Form 8-K filed on September 12, 2014).
   
   
21.1**
Subsidiaries of the Company
*
Indicates management contract or compensatory plan or arrangement and filed herewith.
**
 
Filed herewith.
***
Furnished herewith.

 

 
62

 



SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 
TWINLABS CONSOLIDATED HOLDINGS, INC.
 
     
     
 
By: /S/ Thomas A. Tolworthy
 
 
Thomas A. Tolworthy, President &
Chief Executive Officer
 

Date: September 22, 2014


 
63

 

INDEX TO FINANCIAL STATEMENTS


   
Page
Audited Consolidated Financial Statements of Twinlab Holdings Inc. and Subsidiaries
(f/k/a Idea Sphere Inc.)
 
Report of Independent Registered Public Accounting Firm
 
F-1
Consolidated Balance Sheets
 
F-2
Consolidated Statements of Operations
 
F-3
Consolidated Statements of Stockholders’ Deficit
 
F-4
Consolidated Statements of Cash Flows
 
F-5
Notes to Consolidated Financial Statements
 
F-7
     
Unaudited Condensed Consolidated Financial Statements of Twinlab Holdings Inc. and Subsidiaries
(f/k/a Idea Sphere Inc.)
 
Consolidated Condensed Balance Sheets  (Unaudited)
 
F-26
Consolidated Condensed Statements of Operations (Unaudited)
 
F-27
Consolidated Condensed  Statements of Cash Flows (Unaudited)
 
F-28
Notes to Consolidated Condensed Financial Statements (Unaudited)
 
F-29
     
Unaudited Pro Forma Condensed Combined Financial Information
of TCC Holdings, Inc. and Subsidiaries, THI (f/k/a Idea Sphere Inc.) and Twinlab Consolidation Corporation
 
Unaudited Pro Forma Condensed Combined Financial Information
 
F-39
Unaudited Pro Forma Condensed Combined  Balance Sheets
 
F-40
Unaudited Pro Forma Condensed Combined  Statements of Operations
 
F-41
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
 
F-42


 
64

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Twinlab Holdings, Inc.


We have audited the accompanying consolidated balance sheets of Twinlab Holdings, Inc. and subsidiaries (collectively, the Company) as of December 31, 2013 and 2012, the related consolidated statements of operations and comprehensive loss, stockholders’ deficit, and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of the Company’s internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Twinlab Holdings, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As more fully described in Note 2, the Company has negative working capital, has incurred operating losses and negative cash flows from operating activities, expects to incur further losses, and has an accumulated deficit.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Tanner LLC    
Salt Lake City, Utah
September 19, 2014

F-1

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Consolidated Balance Sheets
(In thousands, except share data)
December 31


             
 
           
             
             
Assets
 
2013
   
2012
 
             
Current assets:
           
Cash
  $ 300     $ 80  
Restricted cash
    374       371  
Marketable securities
    60       788  
Accounts receivable, net
    6,282       7,039  
Inventories, net
    14,844       19,225  
Prepaid expenses and other current assets
    1,368       1,101  
                 
Total current assets
    23,228       28,604  
                 
Property, plant and equipment, net
    5,040       11,477  
Intangible assets, net
    8,032       7,938  
Other assets
    877       298  
                 
Total assets
  $ 37,177     $ 48,317  
                 
Liabilities and Stockholders' Deficit
               
                 
Current liabilities:
               
Checks written in excess of cash
  $ 411     $ -  
Accounts payable
    8,127       8,432  
Accrued expenses and other current liabilities
    4,332       3,999  
Current portion of long-term debt
    75,422       29,711  
                 
Total current liabilities
    88,292       42,142  
                 
Deferred gain on sale of assets
    2,169       -  
Long-term debt, less current portion
    22,651       78,900  
                 
Total liabilities
    113,112       121,042  
                 
Commitments and contingencies
               
                 
Stockholders' deficit:
               
Series A cumulative preferred stock, no par value:
               
  2,500 shares authorized and outstanding
    24,932       24,932  
Common stock, no par value: 600,000 shares,
               
  authorized; 416,263 shares outstanding
    65,433       65,433  
Accumulated deficit
    (166,248 )     (163,766 )
Accumulated other comprehensive income (loss)
    (52 )     676  
                 
Total stockholders' deficit
    (75,935 )     (72,725 )
                 
Total liabilities and stockholders' deficit
  $ 37,177     $ 48,317  


See accompanying notes to consolidated financial statements.
 
 

F-2

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share data)
Years Ended December 31,


             
   
2013
   
2012
 
             
Net sales
  $ 76,230     $ 84,236  
Cost of sales
    52,647       58,324  
                 
Gross profit
    23,583       25,912  
                 
Selling, general and administrative expenses
    23,391       24,060  
                 
Income from operations
    192       1,852  
                 
Other income (expense):
               
Interest expense
    (5,581 )     (5,778 )
Interest income
    34       33  
Realized gain on marketable securities
    892       1,011  
Gain on sale of product line
    1,656       -  
Gain on sale of land
    240       -  
Other income
    118       20  
                 
Net other expense
    (2,641 )     (4,714 )
                 
Loss before income tax provision
    (2,449 )     (2,862 )
                 
Income tax provision
    (33 )     (19 )
                 
Net loss
    (2,482 )     (2,881 )
                 
Other comprehensive income (loss):
               
Unrealized gain (loss) on marketable securities
    (728 )     676  
                 
Total comprehensive loss
  $ (3,210 )   $ (2,205 )
                 
Net loss per share - basic and diluted
  $ (5.96 )   $ (6.92 )
                 
Weighted average number of common shares
               
outstanding - basic and diluted
    416,263       416,263  

 
See accompanying notes to consolidated financial statements.
 
 

F-3

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Consolidated Statements of Stockholders’ Deficit
(In thousands, except share data)

Years Ended December 31, 2013 and 2012

                                           
                                           
                           
Accumulated
             
                           
Other
         
Total
 
   
Preferred Stock
   
Common Stock
   
Comprehensive
   
Accumulated
   
Stockholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Income (Loss)
   
Deficit
   
Deficit
 
                                           
                                           
Balance, December 31, 2011
    2,500     $ 24,932       416,263     $ 65,433     $ -     $ (160,885 )   $ (70,520 )
                                                         
Net change in unrealized gain on marketable
                                                       
securities
    -       -       -       -       676       -       676  
Net loss
    -       -       -       -       -       (2,881 )     (2,881 )
                                                         
Balance, December 31, 2012
    2,500       24,932       416,263       65,433       676       (163,766 )     (72,725 )
                                                         
Net change in unrealized loss on marketable
                                                       
securities
    -       -       -       -       (728 )     -       (728 )
Net loss
    -       -       -       -               (2,482 )     (2,482 )
                                                         
Balance, December 31, 2013
    2,500     $ 24,932       416,263     $ 65,433     $ (52 )   $ (166,248 )   $ (75,935 )

See accompanying notes to consolidated financial statements.



F-4

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Consolidated Statements of Cash Flows
(In thousands)
Years Ended December 31, 2013 and 2012

 
             
   
2013
   
2012
 
             
Cash flows from operating activities:
           
Net loss
  $ (2,482 )   $ (2,881 )
Adjustments to reconcile net loss to net cash
               
 provided by (used in) operating activities:
               
Depreciation and amortization
    1,772       1,925  
Non-cash interest on shareholder loans
    739       769  
Loss (gain) on sale of property, plant and equipment
    (240 )     11  
Provision for obsolete inventory
    (470 )     143  
Provision for losses on accounts receivable
    (93 )     144  
Amortization of deferred gain on sale of property,
               
plant and equipment
    (148 )     -  
Realized gain on sale of marketable securities
    (892 )     (1,011 )
Changes in operating assets and liabilities:
               
Accounts receivable
    850       (872 )
Inventories
    4,851       (5,360 )
Prepaid expenses and other current assets
    (217 )     36  
Checks in excess of cash
    411       -  
Accounts payable
    (305 )     497  
Accrued expenses and other current liabilities
    121       612  
                 
Net cash provided by (used in) operating activities
    3,897       (5,987 )
                 
Cash flows from investing activities:
               
Purchases of property, plant and equipment
    (418 )     (502 )
Proceeds from sale of marketable securities
    892       1,012  
Proceeds from sale of property, plant, and equipment
    8,146       -  
Purchase of intangible assets
    (530 )     -  
Increase in restricted cash
    (3 )     -  
                 
Net cash provided by investing activities
    8,087       510  
                 
Cash flows from financing activities:
               
Net change in revolving Senior Credit Facility
    (5,249 )     7,032  
Proceeds from issuance of debt
    2,351       -  
Net payments of debt
    (8,379 )     (3,380 )
Payment of financing costs
    (416 )     (334 )
Payment of security deposits
    (71 )     -  
                 
Net cash provided by (used in) financing activities
    (11,764 )     3,318  
                 
Net change in cash
    220       (2,159 )
                 
Cash at beginning of year
    80       2,239  
                 
Cash at end of year
  $ 300     $ 80  

See accompanying notes to consolidated financial statements.



F-5

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Consolidated Statements of Cash Flows
(In thousands) – Continued
Years Ended December 31, 2013 and 2012

 
   
2013
   
2012
 
Supplemental disclosure of cash flow information:
       
Cash paid for interest
  $ 3,546     $ 3,617  
Cash paid for income taxes
  $ 17     $ -  
                 
Supplemental disclosure of non-cash investing
               
  and financing transactions:
               
Deferred gain on sale of product line
  $ 100     $ -  
Deferred gain on sale of property, plant and equipment
  $ 2,429     $ -  
Noncash proceeds from sale of assets
  $ 473     $ -  
Change in unrealized holding gain (loss) on marketable
         
securities
  $ (728 )   $ 676  

 
See accompanying notes to consolidated financial statements.



F-6

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)


1.      Nature of
Operations
and Summary
of Significant
Account ing
Policies
 
 
Nature of Operations
Twinlab Holdings, Inc. (“THI”) and its subsidiaries (f/k/a Idea Sphere Inc.) (the “Company”) manufacture and market high-quality, science-based nutritional supplements, and also provide health and wellness information. The consolidated financial statements include the accounts of THI and its wholly-owned subsidiaries, Twinlab Corporation (“Twinlab”), and ISI Brands, Inc.
   
Products include vitamins, minerals, specialty supplements and sports nutrition products primarily under the Twinlab® brand name (including the Twinlab® Fuel family of sports nutrition products); diet and energy products under the Metabolife® brand name; a line of products that promote joint health under the Trigosamine® brand name; and a full line of herbal teas under the Alvita® brand name.  These products are sold primarily through health and natural food stores, national and regional drug store chains, supermarkets, and mass market retailers.
   
Principles of Consolidation
The consolidated financial statements include the accounts of THI and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
 
   
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Actual results could differ from those estimates.  Significant management estimates include those with respect to returns and allowances, allowance for doubtful accounts, reserve for inventory obsolescence and recoverability of long-lived assets.
 


F-7

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


1.      Nature of
Operations
and Summary
of Significant
Accounting
Policies
         Continued
 
Revenue Recognition
Revenue from product sales, net of estimated returns and allowances, is recognized when evidence of an arrangement is in place, related prices are fixed and determinable, contractual obligations have been satisfied, title and risk of loss have been transferred to the customer and collection of the resulting receivable is reasonably assured. Shipping terms are generally freight on board (“FOB”) shipping point.
 
   
Cash Equivalents
Highly liquid investments with maturities of three months or less when purchased are considered cash equivalents. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed federally insured limits.  At December 31, 2013, the Company had no cash and cash equivalent balances in excess of federally insured limits.
 
   
At December 31, 2013 and 2012, the Company had restricted cash of $374 and $371, respectively.  As part of the Senior Credit Facility agreement, the Company is required to maintain a balance of $370 in a funding account.
 
   
Marketable Securities
Marketable securities consist of equity securities.  The Company designates the classification of its marketable securities at the time of purchase and reevaluates this designation as of each balance sheet date.  As of December 31, 2013 and 2012, the Company classified its marketable securities as available-for-sale and these securities are recorded at their quoted market values.  The cost of a security sold or the amount reclassified out of accumulated other comprehensive income into earnings is determined by specific identification of the security.  Unrealized holding gains or losses on available-for-sale securities are excluded from income and are reported in accumulated other comprehensive income until realized.  Losses are also recognized when management has determined there has been an other-than-temporary decline in fair value.
 
   
Fair Value Measurements
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.



F-8

 
 

 

TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


The following table summarizes the financial instruments of the Company measured at fair value on a recurring basis as of December 31, 2013 and 2012.
 
1.        Nature of
Operations
and Summary
of Significant
Accounting
Policies
         Continued
 
Fair Value Measurements – Continued
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
 
 
Level 1 – inputs are quoted prices in active markets for identical ssets that the reporting entity has the ability to access at the measurement date.
 
   
Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.
 
Level 3 – inputs are unobservable inputs for the asset that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The following table summarizes the financial instruments of the Company measured at fair value on a recurring basis as of December 31, 2013 and 2012.

     
2013
Description
 
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Marketable securities
  $ 60       -       -     $ 60  
  
                               
                                 
Total
  $ 60       -       -     $ 60  
                                 

     
2012
Description
 
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Marketable securities
  $ 788       -       -     $ 788  
  
                               
                                 
Total
  $ 788       -       -     $ 788  


F-9

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


1.        Nature of
Operations
and Summary
of Significant
Accounting
Policies
         Continued
 
Accounts Receivable and Allowances
Substantially all of the Company’s accounts receivable are from distributors or mass market customers. The Company grants credit to customers and generally does not require collateral or other security. The Company performs credit evaluations of its customers and provides for expected claims, related to promotional items; customer discounts; shipping shortages; and damages, and doubtful accounts based upon historical bad debt and claims experience.  These allowances approximated $1,826 and $2,039 as of December 31, 2013 and 2012. The Company sells predominately in the North American and European markets, with international sales transacted in U.S. Dollars.
 
   
Inventories
Inventories are stated at the lower of cost or market. Costs are determined using the weighted average cost method.
 
   
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation, including amounts amortized under capital leases, is calculated on the straight-line method over the estimated useful lives of the related assets, which are 35 years for buildings, 7 to 10 years for machinery and equipment, 8 years for furniture and fixtures, and 3 years for computers. Leasehold improvements are amortized over the shorter of the useful life of the asset or the term of the lease.
 
   
Normal repairs and maintenance are expensed as incurred. When properties are retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts and any gain or loss is included in the results of operations.
 
   
Intangible Assets
Intangible assets consist primarily of trademarks and customer relationships, which are amortized on a straight-line basis over their estimated useful lives of 30 and 16 years, respectively. The valuation and classification of these assets and the assignment of amortizable lives involve significant judgment and the use of estimates.
 
   
The Company believes that its long-term growth strategy supports its fair value conclusions. For intangible assets, the recoverability of these amounts is dependent upon achievement of the Company’s projections and the execution of key initiatives related to revenue growth and improved profitability.
 


F-10

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


1.      Nature of
Operations
and Summary
of Significant
Accounting
Policies
Continued
 
Deferred Financing Costs
Costs directly related to the issuance of debt are capitalized as other assets in the consolidated balance sheets and are amortized using the straight-line method that approximates the effective interest rate method over corresponding periods of the related debt. Amortization of deferred financing costs is included in interest expense in the accompanying consolidated statements of operations.
 
   
Impairment of Long-Lived Assets
Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment when changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of the asset exceeds the expected undiscounted cash flows of the asset, an impairment charge is recognized equal to the amount by which the carrying amount exceeds fair value. The testing of these intangibles under established guidelines for impairment requires significant use of judgment and assumptions. Changes in forecasted operations and other assumptions could materially affect the estimated fair values. Changes in business conditions could potentially require adjustments to these asset valuations.
 
   
Shipping and Handling Costs
Shipping and handling fees when billed to customers are included as a component of net sales. The total costs associated with shipping and handling are included as a component of selling, general and administrative expenses and totaled $3,913 and $4,521 in 2013 and 2012, respectively.
 
   
Advertising and Promotion Costs
The Company advertises its branded products through national and regional media and through cooperative advertising programs with customers. Costs for cooperative advertising programs are expensed as earned by customers and recorded within selling, general and administrative expenses. The Company’s advertising expenses were $2,563 and $1,560 in 2013 and 2012, respectively. Customers are also offered in-store promotional allowances and certain products are also promoted with direct to consumer rebate programs. Costs for these promotional programs are expensed as incurred as a reduction to net sales.
 
   
Research and Development Costs
Research and development costs are expensed as incurred and totaled $1,395 and $1,335 in 2013 and 2012, respectively.
 



F-11

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued
1.      Nature of
Operations
and Summary
of Significant
Accounting
Policies
Continued
 
Income Taxes
The Company accounts for income taxes using an asset and liability approach. Deferred income taxes are determined by applying currently enacted tax laws and rates to the cumulative temporary differences between the carrying values of assets and liabilities for financial statement and income tax purposes. Valuation allowances against deferred tax assets are recorded when management concludes that it is more likely than not that such deferred tax assets will not be realized.
   
The Company’s federal and state income tax returns prior to the year ended December 31, 2010 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.
   
The Company recognizes interest and penalties associated with uncertain tax positions as part of selling, general and administrative expenses and includes accrued interest and penalties with the related tax liability in the consolidated balance sheets.
 
   
The Company may from time to time be assessed interest and/or penalties by major taxing jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results. In the event the Company received an assessment for interest and/or penalties, it has been classified in the consolidated statement of operations as selling, general and administrative expenses.
 
   
The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits.
 
   
Significant Concentrations of Risk
Sales to the Company’s top three major customers aggregated to approximately 29% and 27% of total sales in 2013 and 2012, respectively. Sales to one of those customers were approximately 12% of total sales in both 2013 and 2012, respectively. Accounts receivable from these customers were approximately 20% and 33% of total accounts receivable as of December 31, 2013 and 2012, respectively.
 
   
Recent Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)." ASU No. 2014-08 amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial results should be presented as discontinued operations. This new accounting guidance is effective for the Company’s fiscal year ending December 31, 2015, and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
 
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This amended guidance will enhance the comparability of revenue recognition practices and will be applied to all contracts with customers. Expanded disclosures related to the nature, amount, timing, and uncertainty of revenue that is recognized are requirements under the
 
F-12

 
 

 
 

TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued
1.      Nature of
Operations
and Summary
of Significant
Accounting
Policies
Continued
 
amended guidance. This guidance will be effective for the Company’s fiscal year ending December 31, 2017 and may be applied retrospectively. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements.
   
Geographic Concentrations
Net revenues from customers residing in the following foreign countries were as follows for the fiscal years ended December 31, 2013 and 2012:
 

   
2013
   
% of Total Revenues
   
2012
   
% of Total Revenues
 
Mexico
  $ 1,901       2.5 %   $ 1,590       1.9 %
Canada
  $ 1,387       1.8 %   $ 1,355       1.6 %
Other
  $ 10,230       13.4 %   $ 8,374       9.9 %
 
   
Reclassifications
Certain amounts in the 2012 consolidated financial statements have been reclassified to conform with the current year presentation.
 
   
Subsequent Events
Management has evaluated events and transactions for potential recognition or disclosure through the date of the independent auditors’ report, which is the date the consolidated financial statements were available to be issued.
 
2.      Going
Concern
Considerations
and
Management
Plans
 
Since its formation on April 10, 2001, the Company has operated at a loss. Through 2003, these losses were primarily associated with start-up activities and brand and infrastructure development. Since then, losses were primarily attributable to lower than planned sales resulting from high customer inventory positions at the beginning of the year, delayed product introductions and postponed marketing activities, acquisition-related and other restructuring costs, and interest and refinancing charges associated with the Company’s debt refinancing.  Losses have been funded primarily through issuance of preferred and common stock, borrowings from the Company’s stockholders, and third-party debt of which a significant amount has been personally guaranteed by the Company’s stockholders (see Note 9).
 
   
The Company is highly leveraged with a history of recurring losses, caused in large part by interest expense on the Company’s debt.  In addition, the Company had a working capital deficiency as of December 31, 2013 and 2012. The Company also has significant debt due within the next 12 months.
 
   
During 2013, management believes it has continued to address and make significant progress with the operating issues; however, these continuing conditions raise substantial doubt about the Company's ability to continue as a going concern.
 


F-13

 
 

 

TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


 
2.      Going
Concern
Considerations
and
Management
Plans
Continued
 
Management has addressed operating issues through the following actions: focusing on growing the core business and brands, with international expansion; continuing emphasis on major customers and private label opportunities with major customers, key products and introducing new products; and reducing manufacturing and operating costs and continuing to negotiate lower prices from major suppliers. Management has restructured and extended the Company’s Subordinated Bank Debt to mature on October 1, 2014.  Management believes that it will be able to restructure the debt obligations that are currently due in 2014 to extend the due date to years subsequent to 2014; however, there can be no assurance that the Company will be able to restructure its existing debt obligations or meet its debt obligations as they become due.  Additionally, management believes that by improving operations, continuing to focus on cost reductions, and delaying debt payment obligations as discussed above, the Company will be able to fund operations over the next twelve months; however, there can be no assurance that the Company will be able to improve operations, reduce costs, or, as discussed above, restructure existing debt obligations.
 
   
The accompanying consolidated financial statements have been prepared on a going concern basis which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
3.      Capital Stock
 
Common Stock
As of December 31, 2013 and 2012, there were 600,000 shares of no par value common stock authorized. The Company had 416,263 shares of common stock issued and outstanding at December 31, 2013 and 2012.  At December 31, 2013 and 2012, four principal shareholders owned over 90% of the issued and outstanding common shares.
 
   
From time to time, under a Senior Credit Facility, the Company had accepted capital contributions from certain of its shareholders and, in exchange, has issued debt of the Company or its wholly-owned subsidiary, Twinlab Corporation.  In 2011, the Board of Directors approved the conversion of $52,989 of net outstanding shareholders’ debt at a conversion price of $150 per share of common stock.
 
   
Preferred Stock
In 2011, the Company amended its articles of incorporation and authorized 2,500 units of Preferred Stocks known as the 2011 Series A Cumulative Preferred Stock (“Preferred Units”) with no par value.
 



F-14

 
 

 
 

3.   Capital Stock
       Continued
 
 
Preferred Stock – Continued
The 2011 Preferred Units rank senior to all classes of the Company’s capital stock.  These units have no maturity date, have no voting rights, are subject to liquidation preferences ($25,000 as of December 31, 2013) and are redeemable at the Company’s option, as defined.  The holders of these units are entitled to dividends which are accrued at a rate per annum of 5% and payable upon the Company’s board of directors declaring dividends. No dividends have been declared through December 31, 2013.
 
   
During the years ended December 31, 2013 and 2012, the Company did not issue any Preferred Units. In connection with Preferred Units issued in 2011, the Company issued warrants entitling the holders to purchase 10% of the outstanding shares of common stock at the date of exercise. These warrants have an exercise price of $150 per share of common stock with a term of 5 years. As of the date of issuance, these warrants were determined to have minimal value.
 
 

4.      Marketable
 Securities
 
Marketable securities consist of the following as of December 31:
   
2013
   
2012
 
             
Equity securities:
           
     Cost
  $ 112     $ 112  
     Fair value
  $ 60     $ 788  
     Unrealized (loss) gain
  $ (52 )   $ 676  


5.      Inventories
 
Inventories consist of the following as of December 31:
   
2013
   
2012
 
             
Raw material
  $ 5,302     $ 5,197  
Work in process
    2,023       2,954  
Finished goods
    9,191       13,215  
 
               
    $ 16,516     $ 21,366  
                 
Reserve for obsolete inventory
    (1,672 )     (2,141 )
                 
    $ 14,844     $ 19,225  

During 2013 and 2012 , the Company purchased finished goods from a related party totaling $1,737 and $5,812, respectively. As of December 31, 2013 and 2012 , outstanding accounts payable to this related party totaled $0 and $798 respectively.
 

F-15

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


Property, plant and equipment consist of the following as of December 31:
 
6.      Property, Plant
and Equipment
     
   
2013
   
2012
 
             
  Machinery and equipment
  $ 10,007     $ 9,926  
  Computers and other
    6,339       6,113  
  Buildings
    -       4,304  
  Land
    577       3,327  
  Aquifer
    2,855       2,855  
  Leasehold improvements
    1,514       1,404  
                 
      21,292       27,929  
                 
  Less accumulated depreciation and
    amortization
    (16,252 )     (16,452 )
                 
    $ 5,040     $ 11,477  
 
   
Assets held under capital leases are included in “Machinery and equipment” and amounted to $2,019 and $246 as of December 31, 2013 and 2012, respectively.
 
   
Depreciation and amortization expense totaled $904 and $1,005 in 2013 and 2012, respectively.
 
   
In 2013, the Company entered into a sale-leaseback arrangement relating to its office facilities. Under the terms of the arrangement, the Company’s office building and surrounding land, which had a carrying amount of $4,848, were sold for $7,276. Proceeds from the sale were used to pay a portion of the Senior Credit Facility loans. The Company then leased the property back under a 15-year operating lease that requires monthly lease payments of $60, which increase throughout the term of the lease. The Company recorded a deferred gain for the amount of the gain on the sale of the asset, to be recognized as a reduction in rent expense over the life of the lease.
 
   
I n 2013, the Company entered into a sale-leaseback arrangement relating to equipment. Under the terms of the arrangement, certain equipment items, were sold for $2,000. Proceeds from the sale were used to pay a portion of the Senior Credit Facility loans. The Company then leased the equipment back under a 42-month capital lease that requires monthly lease payments of $58 and bears an interest rate of 13%. The Company will have the option to purchase the equipment at the end of the lease.
 


F-16

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued
 


7.      Intangible
 Assets
 
Intangible assets consist of the following as of December 31:
                         
                         
                         
   
Gross Carrying Amount at January 1, 2013
   
Accumulated Amortization
   
Net Book Value at December 31, 2013
   
Amortization Periods (Years)
 
                         
Trademarks
  $ 10,142     $ (3,005 )   $ 7,137       30  
Customer relationships
    1,824       (929 )     895       16  
                                 
    $ 11,966     $ (3,934 )   $ 8,032          


   
Gross Carrying Amount at January 1, 2012
   
Accumulated Amortization
   
Net Book Value at December 31, 2012
   
Amortization Periods (Years)
 
                         
Trademarks
  $ 9,611     $ (2,681 )   $ 6,930       30  
Customer relationships
    1,824       (816 )     1,008       16  
                                 
    $ 11,435     $ (3,497 )   $ 7,938          
 
   
Amortization of the trademarks and customer relationships was $448 and $432 in 2013 and 2012, respectively.
 
   
Estimated aggregate amortization expense for the trademarks and customer relationships for each of the five fiscal years subsequent to 2013 is as follows:
 
   
Years Ending December 31,
   
           
   
2014
   
 $             444
   
2015
   
444
   
2016
   
444
   
2017
   
444
   
2018
   
444
   
Thereafter
   
5,812
           
         
 $          8,032
 
 


F-17

 
 

 
 
 
TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


 
8.      Long-Term     Long-term debt consists of the following as of December 31 :
 Debt
 
 
 
           
   
2013
   
2012
 
             
Direct Stockholder Loans:   Notes payable to stockholders which are unsecured, with interest rates ranging from LIBOR plus 2% to LIBOR plus 3.5% (2.25% to 3.75% as of December 31, 2013).  One of the notes requires quarterly installments through July 7, 2014.  Two notes are due on demand. The other note is due through December 31, 2015.
  $ 44,721     $ 46,468  
                 
Subordinated Bank Debt: Notes payable to a financial institution with certain stockholders as co-obligors and/or guarantors, with interest rates ranging from LIBOR plus 2% to LIBOR plus 3.5% (2.25% to 3.75% as of December 31, 2013). One note has monthly installments plus interest due through October 1, 2014. The other note has interest only payments due through October 1, 2014.
    28,041       29,241  
                 
Related-Party Debt:   Notes payable to other entities owned or governed by stockholders which are unsecured, with interest rates ranging from LIBOR plus 2% (2.25% as of December 31, 2013) to 8%, maturing through December 31, 2017.  One of the notes has provided full, unconditional, joint and several guarantees at a cost to the Company of $150 per quarter.
    15,778       15,145  


F-18
 
 
 

 

TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


8.      Long-Term
Debt
          Continued
 
     
   
2013
   
2012
 
   
( Continued )
 
             
Senior Credit Facility: Revolving $15,000 asset-based credit facility payable to a financial institution with an interest rate equal to LIBOR plus 6% (6.25% as of December 31, 2013), due on demand.  The Company is required to pay an unused commitment fee of 0.75% per annum. Collateralized by a first priority lien on all of the assets of the Company.  Certain stockholders have also personally guaranteed the Senior Credit Facility.
    7,514       12,763  
                 
Senior Credit Facility: Note payable to a financial institution with an interest rate equal to LIBOR plus 6%, paid-in-full during 2013.
    -       4,733  
                 
Capital Lease Obligations:   Capital leases with rates ranging from 10.13% to 13.21% and maturing dates ranging from February 2014 to October 2016.
    2,019       261  
                 
Total long-term debt
    98,073       108,611  
Less current portion
    (75,422 )     (29,711 )
                 
Noncurrent long-term debt
  $ 22,651     $ 78,900  
 
 
Future aggregate maturities of long-term debt as of December 31, 2013 were as follows:
 
Years Ending December 31,
     
       
2014
  $ 75,422  
2015
    11,497  
2016
    645  
2017
    10,509  
         
Total payments
  $ 98,073  
 
 

F-19

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued

8.      Long-Term
Debt
       Continued
 
Total unused borrowing capacity under all financing arrangements was $2,833 and $1,015 at December 31, 2013 and 2012, respectively.
 
   
Certain of the long-term debt agreements require the Company to meet certain affirmative and negative covenants, including maintenance of specified ratios. In management’s opinion, the Company was in compliance with the covenants as of December 31, 2013.
 
 

9.      Income Taxes
 
The Company has recorded a provision for income taxes in 2013 and 2012 of $33 and $19 for the minimum state tax due. The Company’s total income tax expense differs from the amount computed by applying the statutory Federal income tax rate of 34% to the loss before income taxes principally due to the recorded valuation allowance.
 
   
Significant components of the Company’s deferred tax assets and liabilities are as follows as of December 31:
 
   
2013
   
2012
 
Deferred income tax assets:
           
  Inventory valuation reserves
  $ 640     $ 820  
  Net operating loss carryforwards
    51,423       51,762  
  Other
    5,120       3,617  
                 
      57,183       56,199  
Less valuation allowance
    (56,628 )     (55,684 )
                 
      555       515  
                 
Deferred income tax liabilities:
               
   Depreciation and amortization
    (555 )     (515 )
                 
Net deferred income tax assets
  $ -     $ -  
 


F-20

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued


9.      Income Taxes
         Continued
 
The Company had federal net operating loss carryforwards of approximately $139,000 at December 31, 2013 and state net operating loss carryforwards of approximately $112,000 at December 31, 2013, which is available to reduce future federal and state income taxes. The federal and state net operating loss carryforwards expire from 2021 through 2031. As a result of recurring losses incurred, the Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2013 and 2012 as the Company believes it is more likely than not that it will not realize the full benefit of these assets. The valuation allowance related to deferred tax assets changed by $944 and $2,607 in 2013 and 2012, respectively.
 
10.   Retirement
Programs
 
The Company maintains a defined contribution retirement plan (the “Plan”) which is qualified under Section 401(k) of the Internal Revenue Code.  All employees over the age of 18 are eligible for participation in the Plan, on the 1st day of the 1st month following thirty (30) days of employment with the Company.  The Plan is a safe harbor plan, requiring the Company to match 100% of the first 1% of eligible salary contributed per pay period by participating employees, and to match 50% on the next 5% of eligible salary contributed per pay period by participating employees (with matching capped at 6% per pay period). Employer contributions vest ratably over two years.  The Company recognized expenses of $329 and $331 related to the Plan in 2013 and 2012, respectively. The Plan provides for the Company to pay the administrative expenses related to the Plan.
 
11.   Commitments
and
Contingencies
 
Litigation
From time to time the Company and its subsidiaries are parties to litigation arising in the ordinary course of their business operations. Such litigation primarily involves claims for personal injury, property damage, breach of contract and claims involving employee relations and certain administrative proceedings.  Based on current information, the Company believes that the ultimate conclusion of the various pending litigation of the Company, in the aggregate, will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
 
   
In February 2012, a current stockholder and former director and officer of the Company, filed suit against the Company, three of its individual stockholders and certain banks.  The Company believes that the claims are without merit and is vigorously defending the matter. Based on the inherent uncertainties of the litigation as well as the Company’s belief at this stage that the claims as presented in the case at this time are without merit, the Company does not at this time believe this matter will result in any material loss contingency for the Company.  An agreement was reached to settle this matter in 2014.  See Note 12.


F-21

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued

11.   Commitments
 and
 Contingencies
          Continued
 
Leases
The Company has operating leases for certain factory, warehouse, office space, and machinery and equipment. Certain leases provide for payment of real estate taxes, common area maintenance, insurance and certain other expenses. Lease terms may have escalating rent provisions and rent holidays which are expensed on a straight-line basis over the term of the lease, and expire at various dates through 2016. Certain rent expenditures in 2013 were made on a month-to-month basis as the underlying operating lease has expired. Total rental expense for the operating leases was $748 and $390 for 2013 and 2012, respectively.
 
Certain leases of machinery and office equipment with a related party are classified as capital leases and expire at various dates through 2014. The future minimum lease payments in the aggregate and for each of the five succeeding years are as follows:
 
 
Fiscal Year
 
Operating Leases
   
Capital Leases
 
             
2014
  $ 970     $ 677  
2015
    949       697  
2016
    718       645  
                 
    $ 2,637     $ 2,019  
 
   
Employee Agreements
The Company has entered into employment agreements with certain members of management.  The terms of each agreement are different.  However, one or all of these agreements include stipulated base salary, bonus potential, vacation benefits, severance, and non-competition agreements.
 
   
Minimum Purchase Commitment
The Company entered into an agreement with a certain supplier in April 2013. As part of the agreement, the Company is required to make a minimum purchase with the supplier of at least $5,000 over the term of the 5-year agreement.
 
12.   Subsequent
 Events
 
 
 
In May of 2014, Twinlab Corporation entered into note agreements with 2 vendors.  The principal amounts are $412 and $948, bear interest at 6% and 4.5% per annum and are due May 2015 and November 2014, respectively.
 
On May 13, 2014 Idea Sphere Inc. reached an agreement with Estate of Mark Fox in the matter of Fox v. Idea Sphere Inc., et al. for an amount of $200, which was paid on May 22, 2014.  On May 14, 2014 the Estate of Mark Fox transferred all 13,472.8125 common shares in their possession to Idea Sphere.


F-22

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued

12.   Subsequent
 Events
          Continued
 
 
Twinlab Note Conversions into Equity
On May 1, 2014, Twinlab Corporation borrowed $3,000 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015.  The interest rate was 10% per annum. On September 3, 2014, Twinlab Corporation entered into an assignment, assumption and conversion agreement with the individual to convert this debt.  On September 5, 2014, the note was converted into 1,477,833 shares of TCC common stock.  Accrued interest on the note will be paid to the payee in cash.
 
On August 15, 2014, Twinlab Corporation borrowed $3,200 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015. The interest rate was 10% per annum. On September 5, 2014, Twinlab Corporation entered into a conversion agreement with the individual to convert this debt. On September 5, 2014, the note and accrued interest thereon were converted into 4,210,526 shares of TCC common stock.
 
On September 3, 2014, Twinlab Corporation borrowed $2,800 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015.  The interest rate was 10% per annum. In connection with such loan, TCC issued to the individual a warrant to acquire 5,592,105 shares of TCC common stock at a purchase price of $0.76 per share, which warrant was assumed by the Company in connection with the Merger. On September 5, 2014, Twinlab Corporation entered into a conversion agreement with the individual to convert this debt.  On September­ 5, 2014, the note and accrued interest thereon were converted into 3,684,211 shares of TCC common stock.
 
   
Issuance of Twinlab Holdings Preferred Stock/Debt Exchange
On July 30, 2014, Twinlab Holdings, Inc., formerly Idea Sphere Inc. (“THI”), amended its articles of incorporation and authorized and designated preferences for its Series A and Series B Preferred stock.  THI authorized 3,000 shares of Series A preferred stock and 7,000 shares of Series B preferred stock.  Shares of Series B preferred stock accrue dividends at a rate of 5% of the base amount per share and have no voting power.  The Series B preferred stock may be redeemed at the option of THI at a price equal to the base amount plus any accrued dividends.
 
On July 31, 2014, THI entered into a “Debt Repayment Agreement” with a related party pursuant to which the related party exchanged debt totaling approximately $90 million  in consideration of (i) the issuance by THI to such party of 7,000 shares of Series B cumulative preferred stock and THI’s undertaking to pay such party $4,900 per year in structured monthly payments for 3 years provided that such payment obligations will terminate at such earlier time as the trailing ninety day volume weighted average closing sales price of Twinlab Consolidated Holdings, Inc. on all domestic securities exchanges on which it is listed equals or exceeds $5.06 per share.
 
 
 
 
 
 
 

F-23

 
 

 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued

12.   Subsequent
 Events
         Continued
 
 
On July 31, 2014, THI issued 500 additional shares of 2011 Series A cumulative preferred stock in exchange for undeclared and unpaid dividends and the surrender of the warrants rights associated with this class of stock.
 
Issuance of TCC Preferred Stock
On September 3, 2014, TCC amended its certificate of incorporation to authorize 10,000 shares of preferred stock and authorized the issuance of one share of Series A Redeemable Preferred Stock. Thomas Tolworthy, an individual who is a related party, purchased this share of Series A Redeemable Preferred Stock from TCC for $200.  In connection therewith, Mr. Tolworthy  agreed to surrender 65,306,102 shares of common stock of TCC to the Company at the direction of the Board of TCC, such shares to be used for proper corporate purposes, including the funding of employee incentive plans, acquisitions and as otherwise determined by the Board.  The Series A Redeemable Preferred Stock does not vote and on the fifth anniversary of the issue date TCC is required to redeem such outstanding share for the purchase price of $200.
 
Sale Lease Back
On August 21, 2014, TCC entered into an agreement with Essex Capital Corporation for a sale leaseback of equipment in the amount of $2,200 replacing a lease on the same equipment with a balance of $1,210.
 
Change of Name
On August 27, 2014, Idea Sphere Inc. amended its articles of incorporation and changed its name to Twinlab Holdings, Inc.
 
IS Merger
On August 7, 2014, TCC Merger Company, Inc., a wholly-owned subsidiary of TCC, merged with and into THI in a private transaction in which 43,542,955 TCC common shares were exchanged for the total outstanding common and preferred shares of THI.
 
Merger
On September 4, 2014, Twinlab Consolidated Holdings, Inc., a Nevada corporation formerly known as Mirror Me, Inc. (“TCH”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among TCH, TCC MERGER CO  (“Sub Co”), a Delaware corporation and wholly-owned subsidiary of TCH, and Twinlab Consolidation Corporation (“TCC”), a Delaware corporation.  The Merger Agreement provides for the merger of Sub Co with and into TCC (the “Merger”), with TCC surviving the Merger as a wholly-owned subsidiary of TCH.
 
On September 16, 2014, the Company completed the Merger, pursuant to the Merger Agreement, by and among the Company, Sub Co and TCC, whereby TCC became a wholly-owned subsidiary of the Company.  Upon completion of the Merger, all holders of shares of TCC common stock received, for each one share of TCC common stock held by them, one
 


F-24

 
 

 


TWINLAB HOLDINGS, INC. AND SUBSIDIARIES (F/K/A IDEA SPHERE INC.)
Notes to Consolidated Financial Statements
(Dollar amounts in thousands, except share amounts)
Continued

12.  Subsequent
Events
          Continued
 
 
share of the Company’s common stock and the holder of one share of TCC preferred stock received 26,870,132 shares of the Company’s common stock.
   
Working Capital Facility
On August 7, 2014 and on September 16, 2014, contemporaneously with the IS Merger the Merger, respectively, Twinlab entered into amendments of its revolving credit facility with Fifth Third Bank, which has a credit limit of $15 million dollars, primarily for the purpose of obtaining the bank's consent to such mergers.  The line of credit is secured by all assets of the Company and its subsidiaries.  Each parent company of Twinlab Corporation, including the Company, TCC and THI and its sister company, ISI Brands, Inc., has guaranteed Twinlab’s obligations under the line of credit.  TCC obtained all necessary consents from its lender in order to consummate the Merger.
 
   
Purchase of Option Agreement
In September 2014, TCC entered into an option agreement ("Option No. 1") that gives TCC an exclusive option to purchase 100% of the equity of a marketer and distributor of nutritional products (“Target No. 1”) on certain agreed upon terms.  TCC paid $2,000 to acquire Option No. 1.  Option No. 1 can be exercised on or before July 13, 2015.  As an option, the Company will have the right, but not the obligation, to acquire the equity of Target No. 1 for a purchase price of $37,000, payable in cash at the closing of the acquisition without reduction for the option purchase price.  At present none of the Company, TCC or any other subsidiary of the Company has sufficient funds necessary to close on the acquisition of the equity of Target No. 1, if it were to exercise Option No. 1.  The Company believes that it and TCC will be able to raise the necessary funds to exercise Option No. 1 on a timely basis, although there can be no assurance that the Company and TCC will be successful.
 
Purchase of Option Agreement
In September 2014, TCC entered into an option agreement (“Option No. 2”) that gives TCC an exclusive option to purchase substantially all of the assets and assume certain operating liabilities of a manufacturer of nutritional products on certain agreed upon terms (“Target No. 2”).  TCC agreed to pay $350 to acquire Option No. 2, which is payable on or before September 27, 2014.  Option No. 2 can be exercised on or before December 13, 2014.  As an option, TCC has the right, but not the obligation, to acquire the assets of Target No. 2, for a purchase price of $10,500,  payable in cash at the closing of the acquisition.  The purchase price for the assets of Target No. 2 would not be reduced by the option purchase price.  If the Company does not exercise Option No. 2 within the exercise period, it will pay the grantor break-up fees of approximately of $400.  At present none of the Company, TCC or any other subsidiary of the Company has sufficient funds necessary to close on the acquisition of the assets of Target No. 2, if it were to exercise the option.  The Company believes that it and  TCC will be able to raise the necessary funds to exercise Option No. 2 on a timely basis, although there can be no assurance that the Company and TCC will be successful.
 
 
F-25

 
 

 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
 
   
June 30,
   
December 31,
 
   
2014
   
2013
 
ASSETS
           
             
Current assets:
           
Cash
  $ 315     $ 300  
Restricted cash
    375       374  
Marketable securities
    48       60  
Accounts receivable, net
    7,620       6,282  
Inventories, net
    13,014       14,844  
Prepaid expenses and other current assets
    1,451       1,368  
Total current assets
    22,823       23,228  
                 
Property and equipment, net
    4,768       5,040  
Intangible assets, net
    7,801       8,032  
Other assets
    843       877  
                 
Total assets
  $ 36,235     $ 37,177  
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
                 
Current liabilities:
               
Checks written in excess of cash
  $ 743     $ 411  
Accounts payable
    8,388       8,127  
Accrued expenses and other current liabilities
    2,523       4,332  
Current portion of long-term debt
    80,190       75,422  
Total current liabilities
    91,844       88,292  
                 
Long term liabilities:
               
Deferred gain on sale of assets
    2,161       2,169  
Long-term debt, less current portion
    24,514       22,651  
Total liabilities
    118,519       113,112  
                 
Stockholders' deficit:
               
Series A cumulative preferred stock, no par value, 2,500 shares
               
authorized, 2,500 and 2,500 shares issued and outstanding
    24,932       24,932  
Common stock, no par value, 600,000 shares
               
authorized, 402,790 shares outstanding, respectively
    65,433       65,433  
Accumulated deficit
    (172,585 )     (166,248 )
Accumulated other comprehensive loss
    (64 )     (52 )
Total stockholders' deficit
    (82,284 )     (75,935 )
                 
Total liabilities and stockholders' deficit
  $ 36,235     $ 37,177  
                 
See accompanying notes to condensed consolidated financial statements.
 
 
F-26

 
 

 
 
 

TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
 
   
For the six months ended
 
   
June 30,
 
   
2014
   
2013
 
             
Net sales
  $ 34,147     $ 37,695  
Cost of sales
    25,846       25,602  
                 
Gross profit
    8,301       12,093  
                 
Selling, general and administrative expenses
    11,902       12,942  
                 
Loss from operations
    (3,601 )     (849 )
                 
Other income (expense):
               
Interest expense
    (2,735 )     (2,839 )
Interest income
    11       16  
Realized gain on marketable securities
    -       820  
Other expense, net
    8       124  
                 
Net other expense
    (2,716 )     (1,879 )
                 
Loss before income tax provision
    (6,317 )     (2,728 )
                 
Income tax provision
    (20 )     (14 )
                 
Net loss
  $ (6,337 )   $ (2,742 )
                 
Other comprehensive loss:
               
Unrealized loss on marketable securities
    (12 )     (596 )
                 
Total comprehensive loss
  $ (6,349 )   $ (3,338 )
                 
Net loss per share – basic and diluted
  $ (15.73 )   $ (6.59 )
                 
Weighted average number of common
               
shares outstanding – basic and diluted
    402,790       416,263  
                 
See accompanying notes to condensed consolidated financial statements.
 

F-27

 
 

 

TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
 
   
For the six months ended
 
   
June 30,
 
   
2014
   
2013
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (6,337 )   $ (2,742 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
    612       681  
Non-cash interest on shareholder loans and deferred financing
    2,383       535  
Realized gain on sale of marketable securities
    -       (820 )
Changes in operating assets and liabilities:
               
Accounts receivable
    (1,338 )     (1,383 )
Inventories
    1,830       2,318  
Prepaid expenses and other current assets
    (91 )     (460 )
Checks written in excess of cash
    332       826  
Accounts payable
    261       (959 )
Accrued expenses and other current liabilities
    (1,807 )     294  
Net cash used in operating activities
    (4,155 )     (1,710 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Proceeds from the sale of assets
    -       7,316  
Purchases of property and equipment
    (110 )     (319 )
Proceeds from sale of marketing securities
    -       820  
Change in restricted cash
    (2 )     1  
Net cash provided by (used in) investing activities
    (112 )     7,818  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Net change in revolving Senior Credit facility
    1,442       (979 )
Proceeds from issuance of debt
    4,752       1,756  
Net payments of debt
    (1,912 )     (6,520 )
Payment of financing costs
    -       (316 )
                 
Net cash provided by (used in) financing activities
    4,282       (6,059 )
                 
Net change in cash
    15       49  
                 
Cash at beginning of period
    300       80  
                 
Cash at end of period
  $ 315     $ 129  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Cash paid for interest
  $ 1,653     $ 1,829  
Cash paid for income taxes
  $ 16     $ 12  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS
               
Deferred gain on sale of property, plant and equipment
  $ -     $ 2,284  
Change in unrealized holding gain on marketable securities
  $ 12     $ 596  
See accompanying notes to condensed consolidated financial statements.
 

F-28

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of operations
Twinlab Holdings, Inc. and its subsidiaries (f/k/a Idea Sphere Inc.) (the “Company”) manufacture and market high-quality, science-based nutritional supplements, and also provide health and wellness information. The consolidated financial statements include the accounts of Twinlab Holdings, Inc. and its wholly-owned subsidiaries, Twinlab Corporation (“Twinlab”), Natural2U LLC, 701 Corporation, ISI Brands, Inc., Health Med, Inc. and Rebus LLC.

Products include vitamins, minerals, specialty supplements and sports nutrition products primarily under the Twinlab® brand name (including the Twinlab® Fuel family of sports nutrition products); diet and energy products under the Metabolife® brand name; a line of products that promote joint health under the Trigosamine® brand name; and a full line of herbal teas under the Alvita® brand name. These products are sold primarily through health and natural food stores and national and regional drug store chains, supermarkets, and mass market retailers.

 
Principles of consolidation
The consolidated financial statements include the accounts of Twinlab Holdings, Inc. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Basis of presentation and unaudited information
The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
 
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant management estimates include those with respect to returns and allowances, allowance for doubtful accounts, reserve for inventory obsolescence and recoverability of long-lived assets.

Revenue recognition
We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable.
 
Revenue from product sales, net of estimated returns and allowances, is recognized when evidence of an arrangement is in place, related prices are fixed and determinable, contractual obligations have been satisfied, title and risk of loss have been transferred to the customer and collection of the resulting receivable is reasonably assured. Shipping terms are generally freight on board (“FOB”) shipping point.

F-29

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash equivalents
Highly liquid investments with maturities of three months or less when purchased are considered cash equivalents. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed federally insured limits. At June 30, 2014 and December 31, 2013, the Company had no cash and cash equivalent balances in excess of federally insured limits.

At June 30, 2014 and December 31, 2013, the Company had restricted cash of $375 and $374, respectively. As part of the Senior Credit Facility agreement, the Company is required to maintain a balance of $370 in a funding account.

Fair value of financial instruments
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

Significant concentration of credit risk
Sales to the Company’s top three major customers aggregated to approximately 27% and 28% of total sales for the six months ended June 30, 2014 and 2013, respectively. Sales to one of those customers were approximately 13.4% and 11.9% of total sales in both 2014 and 2013, respectively. Accounts receivable from these customers were approximately 28% and 26% of total accounts receivable as of June 30, 2014 and December 31, 2013, respectively.

Geographic concentrations
Net revenues from customers residing in the following foreign countries were as follows for the six months ended June 30, 2014 and June 30, 2013:
 
   
June 30, 2014
   
% of Total Revenues
   
June 30, 2013
   
% of Total Revenues
 
Mexico
  $ 638       1.9 %   $ 898       2.4 %
Canada
  $ 1,871       5.5 %   $ 440       1.2 %
Other
  $ 4,617       13.5 %   $ 5,506       14.6 %
                                        



F-30

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair value of financial instruments
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – inputs are quoted prices in active markets for identical assets that the reporting entity has the ability to access at the measurement date.

Level 2 – inputs are other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly.

Level 3 – inputs are unobservable inputs for the asset that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.

The following table summarizes the financial instruments of the Company measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013.

   
June 30 , 2014
 
Description
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Marketable securities
  $ 48     $ -     $ -     $ 48  
Total
  $ 48     $ -     $ -     $ 48  

   
December 31, 2013
 
Description
 
Level 1
   
Level 2
   
Level 3
   
Total
 
Marketable securities
  $ 60     $ -     $ -     $ 60  
Total
  $ 60     $ -     $ -     $ 60  



F-31

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net loss per common share
Basic net income or loss per common share (“Basic EPS”) is computed by dividing net income or loss by the weighted average number of common shares outstanding.  Diluted net income or loss per common share (“Diluted EPS”) is computed by dividing net income or loss by the sum of the weighted average number of common shares outstanding and the dilutive potential common share equivalents then outstanding.  Potential common share equivalents consist of the weighted average number of shares issuable upon the exercise of outstanding stock options and warrants to acquire common stock, and shares issuable upon conversion of preferred stock.  If the potential common share equivalents are dilutive, the Company computes Diluted EPS using the treasury stock method.

Due to the fact that for all periods presented the Company has incurred net losses, common share equivalents of .01 and .00 for the three months ended June 30, 2014 and 2013 and .02 and .01 for the six months ended June 30, 2014 and 2013 respectively, are not included in the calculation of Diluted EPS because they are anti-dilutive.

Income taxes
The Company accounts for income taxes using an asset and liability approach. Deferred income taxes are determined by applying currently enacted tax laws and rates to the cumulative temporary differences between the carrying values of assets and liabilities for financial statement and income tax purposes. Valuation allowances against deferred tax assets are recorded when management concludes that it is more likely than not that such deferred tax assets will not be realized.

The Company’s federal and state income tax returns prior to the year ended December 31, 2010 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

The Company recognizes interest and penalties associated with uncertain tax positions as part of selling, general and administrative expenses and includes accrued interest and penalties with the related tax liability in the consolidated balance sheets.

The Company may from time to time be assessed interest and/or penalties by major taxing jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results. In the event the Company received an assessment for interest and/or penalties, it has been classified in the consolidated statement of operations as selling, general and administrative expenses.

The Company has concluded that there are no significant uncertain tax positions requiring disclosure, and there are no material amounts of unrecognized tax benefits.

NOTE 2 – GOING CONCERN
 
Since its formation on April 10, 2001, the Company has operated at a loss. Through 2003, these losses were primarily associated with start-up activities and brand and infrastructure development. Since then, losses were primarily attributable to lower than planned sales resulting from high customer inventory positions at the beginning of the year, delayed product introductions and postponed marketing activities, acquisition-related and other restructuring costs, and interest and refinancing charges associated with the Company’s debt refinancing. Losses have been funded primarily through issuance of preferred and common stock, borrowings from the Company’s stockholders, and third-party debt of which a significant amount has been personally guaranteed by the Company’s stockholders.

The Company is highly leveraged with a history of recurring losses, caused in large part by interest expense on the Company’s debt. In addition, the Company had a working capital deficiency as of June 30, 2014 and December 31, 2013. The Company also has significant debt due within the next 12 months.

During 2014, management believes it has continued to address and make significant progress with the operating issues; however, these continuing conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management has addressed operating issues through the following actions: focusing on growing the core business and brands, with international expansion; continuing emphasis on major customers and private label opportunities with major customers, key products and introducing new products; and reducing manufacturing and operating costs and continuing to negotiate lower prices from major suppliers. Management believes that it will be able to restructure the debt obligations that are currently due in 2014 to extend the due date to years subsequent to 2014; however, there can be no assurance that the Company will be able to restructure its existing debt obligations or meet its debt obligations as they become due.  As discussed in Note 8 management was able to convert a majority of the Company’s outstanding debt to equity.  Additionally, management believes that by improving operations, continuing to focus on cost reductions, and delaying debt payment obligations as discussed above, the Company will be able to fund operations over the next twelve months; however, there can be no assurance that the Company will be able to improve operations, reduce costs, or, as discussed above, restructure remaining debt obligations.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis which assumes continuity of operations and realization of assets and liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

F-32

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


NOTE 3 – CAPITAL STOCK

Common Stock
As of June 30, 2014 and December 31, 2013, there were 600,000 shares of no par value common stock authorized. The Company had 402,790 and 416,263 shares of common stock issued and outstanding at June 30, 2014 and December 31, 2013, respectively.  At June 30, 2014 and December 31, 2013, three and four principal stockholders, respectively owned over 90% of the issued and outstanding common shares.

From time to time, under a Senior Credit Facility, the Company had accepted capital contributions from certain of its shareholders and, in exchange, has issued debt of the Company or its wholly-owned subsidiary, Twinlab Corporation.  In 2011, the Board of Directors approved the conversion of $52,989 of net outstanding shareholders’ debt at a conversion price of $150 per share of common stock.

Preferred Stock
In 2011, the Company amended its articles of incorporation and authorized 2,500 units of Preferred Stocks known as the 2011 Series A Cumulative Preferred Stock (“Preferred Units”) with no par value.

The 2011 Preferred Units rank senior to all classes of the Company’s capital stock.  These units have no maturity date, have no voting rights, are subject to liquidation preferences ($25,000 as of December 31, 2013) and are redeemable at the Company’s option, as defined.  The holders of these units are entitled to dividends which are accrued at a rate per annum of 5% and payable upon the Company’s board of directors declaring dividends. No dividends have been declared through March 31, 2014.

During the periods ended June 30, 2014 and December 31, 2013, the Company did not issue any Preferred Units. In connection with Preferred Units issued in 2011, the Company issued warrants entitling the holders to purchase 10% of the outstanding shares of common stock at the date of exercise. These warrants have an exercise price of $150 per share of common stock with a term of 5 years. As of the date of issuance, these warrants were determined to have minimal value.

NOTE 4 – INVENTORIES

Inventories consist of the following at:

   
June 30 , 2014
   
December 31, 2013
 
             
Raw materials
  $ 4,424     $ 5,302  
Work in process
    1,412       2,023  
Finished goods
    8,961       9,191  
                 
    $ 14,797     $ 16,516  
                 
Reserve for obsolete inventory
    (1,783 )     (1,672 )
                 
    $ 13,014     $ 14,844  



F-33

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)



NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following at:

   
June 30 , 2014
   
December 31, 2013
 
             
Machinery and equipment
  $ 10,648     $ 10,007  
Computers and other
    6,442       6,339  
Buildings
    -       -  
Land
    577       577  
Aquifer
    2,855       2,855  
Leasehold improvements
    1,514       1,514  
      22,036       21,292  
                 
Less: accumulated depreciation and amortization
    (17,268 )     (16,252 )
                 
    $ 4,768     $ 5,040  

Assets held under capital leases are included in “Machinery and equipment” and amounted to $1,654 and $2,019 as of June 30, 2014 and December 31, 2013, respectively.

Depreciation and amortization expense totaled $381 and $464 for the six months ended June 30, 2014 and 2013, respectively.


NOTE 6 – INTANGIBLE ASSETS

Intangible assets consist of the following at:

   
Gross Carrying Amount at January 1, 2014
   
Accumulated Amortization
   
Net Book Value at June 30 , 2014
   
Amortization Periods (Years)
 
                         
Trademarks
  $ 10,142     $ ( 3,181 )   $ 6,961       30  
Customer relationships
    1,824       (984 )     840       16  
                                 
    $ 11,966     $ (4,165 )   $ 7,801          

Amortization of the trademarks and customer relationships was $231 and $217 for the six months ended June 30, 2014 and 2013, respectively.




F-34

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


NOTE 7 – LONG-TERM DEBT

Long term-debt consists of the following as of June 30 , 2014 and December 31, 2013:

   
June 30 ,
2014
   
December 31, 2013
 
Direct Stockholder Loans: Notes payable to stockholders which are unsecured, with interest rates ranging from LIBOR plus 2% to LIBOR plus 3.5% (2.25% to 3.75% as of December 31, 2013). One of the notes requires quarterly installments through January 7, 2015. Two notes are due on demand. The other note is due through December 31, 2015.
  $ 44,052     $ 44,721  
                 
Subordinated Bank Debt: Notes payable to a financial institution with certain stockholders as co-obligors and/or guarantors, with interest rates ranging from LIBOR plus 2% to LIBOR plus 3.5% (2.25% to 3.75% as of December 31, 2013). One note has monthly installments plus interest due through October 1, 2014.  The other note has interest only payments due through October 1, 2014.
    27,441       28,041  
                 
Related-Party Debt: Notes payable to other entities owned or governed by stockholders which are unsecured, with interest rates ranging from LIBOR plus 2% (2.25% as of December 31, 2013) to 8%, maturing through December 31, 2017.  One of the notes has provided full, unconditional, joint and several guarantees at a cost to the Company of $150 per quarter.
    21,306       15,778  
                 
Senior Credit Facility: Revolving $15,000 asset-based credit facility payable to a financial institution with an interest rate equal to LIBOR plus 6% (6.25% as of December 31, 2013), due on demand. The Company is required to pay an unused commitment fee of 0.75% per annum. Collateralized by a first priority lien on all of the assets of the Company. Certain stockholders have also personally guaranteed the Senior Credit Facility.
    8,957       7,514  
 
Vendor Term Notes: Loans payable to vendors with rates ranging from 6% to 4.5% and maturing dates of November 2014 and May 2015.
    1,294       -  
 
 
 
   
 
 
 
 
Capital Lease Obligations: Capital leases with rates ranging from 10.13% to 13.21% and maturing dates ranging from February 2014 to October 2016.
    1,654       2,019  
                 
Total long-term debt
    104,704       98,073  
Less current portion
    (80,190 )     (75,422 )
Noncurrent long-term debt
  $ 24,514     $ 22,651  

Future aggregate maturities of long-term debt as of:

    Period ending June 30,    
2015
  $ 80,190  
2016
    11,491  
2017
    286  
2018
    12,737  
    $ 104,704  

Certain of the long-term debt agreements require the Company to meet certain affirmative and negative covenants, including maintenance of specified ratios. In management’s opinion, the Company was in compliance with the covenants as of June 30, 2014 and December 31, 2013.
 
F-35

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


 
NOTE 8 – SUBSEQUENT EVENTS

Twinlab Note Conversions into Equity
 
On May 1, 2014, Twinlab Corporation borrowed $3,000 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015.  The interest rate was 10% per annum. On September 5, 2014, Twinlab Corporation entered into an assignment, assumption and conversion agreement with the individual to convert this debt.  On September 5, 2014, the note was converted into 1,477,833 shares of TCC common stock.  Accrued interest on the note will be paid to the Payee in cash.
 
On August 15, 2014, Twinlab Corporation borrowed $3,200 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015. The interest rate was 10% per annum. in connection with such loan. On September 5, 2014, Twinlab Corporation entered into a conversion agreement with the individual to convert this debt.  On September 5, 2014, the note and accrued interest thereon were converted into 4,210,526 shares of TCC common stock.
 
On September 3, 2014, Twinlab Corporation borrowed $2,800 from an individual who is a related party, evidenced by an unsecured convertible promissory note due on January 31, 2015.  The interest rate was 10% per annum. TCC issued to the individual a warrant to acquire 5,592,105 shares of TCC common stock at a purchase price of $0.76 per share, which warrant was assumed by the Company in connection with the Merger. On September 5, 2014, Twinlab Corporation entered into a conversion agreement with the individual to convert this debt.  On September­ 5, 2014, the note and accrued interest thereon were converted into 3,684,211 shares of TCC common stock.
 
Issuance of Twinlab Holdings Preferred Stock/Debt Exchange
 
On July 30, 2014, Twinlab Holdings, Inc., formerly Idea Sphere Inc. (“THI”), amended its articles of incorporation and authorized and designated preferences for its Series A and Series B Preferred stock.  THI authorized 3,000 shares of Series A preferred stock and 7,000 shares of Series B preferred stock.  Shares of Series B preferred stock accrue dividends at a rate of 5% of the base amount per share and have no voting power.  The Series B preferred stock may be redeemed at the option of THI at a price equal to the base amount plus any accrued dividends.
 
On July 31, 2014, THI entered into a “Debt Repayment Agreement” with a related party pursuant to which the related party exchanged debt totaling approximately $90,250 in consideration of (i) the issuance by THI to such party of 7,000 shares of Series B cumulative preferred stock and THI’s undertaking to pay such party $4,900 per year in structured monthly payments for 3 years provided that such payment obligations will terminate at such earlier time as the trailing ninety day volume weighted average closing sales price of Twinlab Consolidated Holdings, Inc. on all domestic securities exchanges on which it is listed equals or exceeds $5.06 per share.
 
On July 31, 2014, THI issued 500 additional shares of 2011 Series A cumulative preferred stock in exchange for undeclared and unpaid dividends and the surrender of the warrants rights associated with this class of stock.

 
F-36

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)


 
NOTE 8 – SUBSEQUENT EVENTS
(Continued)

Issuance of TCC Preferred Stock
 
On September 3, 2014, TCC amended its certificate of incorporation to authorize 10,000 shares of preferred stock and authorized the issuance of one share of Series A Redeemable Preferred Stock. Thomas Tolworthy, an individual who is a related party, purchased this share of Series A Redeemable Preferred Stock from TCC for $200.  In connection therewith, Mr. Tolworthy  agreed to surrender 65,306,102 shares of common stock of TCC to the Company at the direction of the Board of TCC, such shares to be used for proper corporate purposes, including the funding of employee incentive plans, acquisitions and as otherwise determined by the Board.  The Series A Redeemable Preferred Stock does not vote and on the fifth anniversary of the issue date TCC is required to redeem such outstanding share for the purchase price of $200.
 
Sale lease Back
 
On August 21, 2014, TCC entered into an agreement with Essex Capital Corporation for a sale leaseback of equipment in the amount of $2,200 replacing a lease on the same equipment with a balance of $1,210.
 
 
Change of Name
 
On August 27, 2014, Idea Sphere Inc. amended its articles of incorporation and changed its name to Twinlab Holdings, Inc.
 
IS Merger
 
On August 7, 2014, TCC Merger Company, Inc., a wholly-owned subsidiary of TCC, merged with and into THI in a private transaction in which 43,542,955 TCC common shares were exchanged for the total outstanding common and preferred shares of THI.
 
Merger
 
On September 4, 2014, Twinlab Consolidated Holdings, Inc., a Nevada corporation formerly known as Mirror Me, Inc. (“TCH”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among TCH, TCC MERGER CO  (“Sub Co”), a Delaware corporation and wholly-owned subsidiary of TCH, and Twinlab Consolidation Corporation (“TCC”), a Delaware corporation.  The Merger Agreement provides for the merger of Sub Co with and into TCC (the “Merger”), with TCC surviving the Merger as a wholly-owned subsidiary of TCH.
 
On September 16, 2014, the Company completed the Merger, pursuant to the Merger Agreement, by and among the Company, Sub Co and TCC, whereby TCC became a wholly-owned subsidiary of the Company.  Upon completion of the Merger, all holders of shares of TCC common stock received, for each one share of TCC common stock held by them, one share of the Company’s common stock and the holder of one share of TCC preferred stock received 26,870,132 shares of the Company’s common stock.
 
 
 
 
F-37

 
 

 
TWINLAB HOLDINGS, INC. AND SUBSIDIAIRES (F/K/A IDEA SPHERE INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

 
 
NOTE 8 – SUBSEQUENT EVENTS
(Continued)

Working Capital facility
 
On August 7, 2014 and September 16, 2014, contemporaneously with the IS Merger and the Merger, respectively, Twinlab entered into amendments of its revolving credit facility with Fifth Third Bank, which has a credit limit of $15 million dollars, primarily for the purpose of obtaining the bank's consent to such mergers.  The line of credit is secured by all assets of the Company and its subsidiaries.  Each parent company of Twinlab Corporation, including the Company, TCC and THI and its sister company, ISI Brands, Inc., has guaranteed Twinlab’s obligations under the line of credit.  TCC obtained all necessary consents from its lender in order to consummate the Merger.
 
Purchase of Option Agreement
           
In September 2014, TCC entered into an option agreement ("Option No. 1") that gives TCC an exclusive option to purchase 100% of the equity of a marketer and distributor of nutritional products (“Target No. 1”) on certain agreed upon terms.  TCC paid $2,000 to acquire Option No. 1.  Option No. 1 can be exercised on or before July 13, 2015.  As an option, the Company will have the right, but not the obligation, to acquire the equity of Target No. 1 for a purchase price of $37,000, payable in cash at the closing of the acquisition without reduction for the option purchase price.  At present none of the Company, TCC or any other subsidiary of the Company has sufficient funds necessary to close on the acquisition of the equity of Target No. 1, if it were to exercise Option No. 1.  The Company believes that it and TCC will be able to raise the necessary funds to exercise Option No. 1 on a timely basis, although there can be no assurance that the Company and TCC will be successful.
 
Purchase of Option Agreement
 
In September 2014, TCC entered into an option agreement (“Option No. 2”) that gives TCC an exclusive option to purchase substantially all of the assets and assume certain operating liabilities of a manufacturer of nutritional products on certain agreed upon terms (“Target No. 2”).  TCC agreed to pay $350 to acquire Option No. 2, which is payable on or before September 27, 2014.  Option No. 2 can be exercised on or before December 13, 2014.  As an option, TCC has the right, but not the obligation, to acquire the assets of Target No. 2, for a purchase price of $10,500,  payable in cash at the closing of the acquisition.  The purchase price for the assets of Target No. 2 would not be reduced by the option purchase price.  If the Company does not exercise Option No. 2 within the exercise period, it will pay the grantor break-up fees of approximately of $400.  At present none of the Company, TCC or any other subsidiary of the Company has sufficient funds necessary to close on the acquisition of the assets of Target No. 2, if it were to exercise the option.  The Company believes that it and  TCC will be able to raise the necessary funds to exercise Option No. 2 on a timely basis, although there can be no assurance that the Company and TCC will be successful.

 


F-38

 
 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined balance sheet presents the historical balance sheets of Twinlab Holdings, Inc. and subsidiaries (f/k/a Idea Sphere Inc.) (THI), Twinlab Consolidation Corporation, Inc. (“TCC”) and Twinlab Consolidated Holdings, Inc. (f/k/a Mirror Me, Inc.) (TCH) as of June 30, 2014, and accounts for the merger of TCC with TCH as a reverse merger transaction, with TCC as the accounting acquirer, (THI merged with and into TCC on August 7, 2014) based on the information and assumptions in the Notes to the Unaudited Pro Forma Condensed Combined Financial Statements, and giving effect to the transaction as if it had occurred as of June 30, 2014. The transaction was completed on September 16, 2014.

The TCH balance sheet information was derived from its unaudited balance sheet as of May 30, 2014 included in its quarterly report on Form 10-Q that was filed with the Securities and Exchange Commission (SEC) on July 18, 2014. The TCC balance sheet information was derived from its unaudited balance sheet as of June 30, 2014.  The THI balance sheet information was derived from its unaudited balance sheet as of June 30, 2014 that is included in this Form 8-K.

The unaudited pro forma condensed combined statements of operations are based on the historical statements of operations of TCH, TCC, and THI and combine the results of operations of TCH, TCC, and THI for the year ended December 31, 2013 (November 30 for TCH) and the six months ended June 30, 2014 (May 30 for TCH), giving effect to the transaction as if it occurred on January 1, 2013, and reflecting the pro forma adjustments expected to have a continuing impact on the combined results.

The historical results of operations of TCH were derived from TCH’s unaudited statement of operations for the six months ended May 30, 2014 included in its quarterly report on Form 10-Q that was filed with the SEC on July 18, 2014 and the audited statement of operations for the year ended November 30, 2013 included in its annual report on the Form S-1 that was filed with the SEC on December 17, 2013.  The historical results of operations of THI were derived from its unaudited statement of operations for the six months ended June 30, 2014 and its audited statement of operations for the year ended December 31, 2013 that are included in this Form 8-K.   The historical results of operations of TCC were derived from its unaudited statements of operation for the six months ended June 30, 2014 and its unaudited statement of operations for the year ended December 31, 2013.

The unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have actually been obtained had the reverse acquisition been completed on the assumed date or for the periods presented, or that may be realized in the future. Furthermore, while the pro forma financial information reflects transaction costs incurred with the merger of THI with and into TCC on August 7, 2014, the pro forma financial information does not reflect the impact of any reorganization or restructuring expenses or operating efficiencies resulting from the transaction. The unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements referred to above.

F-39

 
 

 
 
 
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
 
(In thousands, except share data)
 
JUNE 30, 2014
 
                     
 
                   
                     
               
Pro Forma
Pro Forma
   
THI
 
TCH
 
TCC
 
Adjustments
Combined
ASSETS
                   
                     
Current assets:
                   
Cash
 
 $        315
 
 $        13
 
 $                11
 
 $         6,000
(D,E)
 $           6,339
Restricted cash
 
           375
 
            -
 
                   -
 
                 -
 
                375
Marketable securities
 
            48
 
            -
 
                   -
 
                 -
 
                  48
Accounts receivable, net
 
        7,620
 
            -
 
                   -
 
                 -
 
              7,620
Inventories, net
 
      13,014
 
            -
 
                   -
 
                 -
 
            13,014
Prepaid expenses and other current assets
        1,451
 
            -
 
                   -
 
                 -
 
              1,451
Total current assets
 
      22,823
 
           13
 
                   11
 
            6,000
 
            28,847
                     
Property and equipment, net
 
        4,768
 
            -
 
                   -
 
                 -
 
              4,768
Intangible assets, net
 
        7,801
 
             7
 
                   -
 
                 -
 
              7,808
Other assets
 
           843
 
            -
 
                   -
 
                 -
 
                843
                     
Total assets
 
 $   36,235
 
 $        20
 
 $                11
 
 $         6,000
 
 $         42,266
                     
Current liabilities:
                   
Checks written in excess of cash
 
 $        743
 
 $         -
 
 $                -
 
 $              -
 
 $              743
Accounts payable
 
        8,388
 
           41
 
                   -
 
                 -
 
              8,429
Accrued expenses and other current liabilities
        2,523
 
            -
 
                   -
 
                 -
 
              2,523
Current portion of long-term debt
 
      80,190
 
             7
 
                   -
 
         (69,227)
(A,B,C)
            10,970
Current portion of related party payment liability
             -
 
            -
 
                   -
 
            4,554
(B)
              4,554
Total current liabilities
 
      91,844
 
           48
 
                   -
 
         (64,673)
 
            27,219
                     
Long term liabilities:
                   
Deferred gain on sale of assets
 
        2,161
 
            -
 
                   -
 
                 -
 
              2,161
Long-term debt, less current portion
 
      24,514
 
            -
 
                   -
 
         (22,749)
(A,B)
              1,765
Long-term liability - Related party payment liability, less current portion
             -
 
            -
 
                   -
 
            7,072
(B)
              7,072
Total liabilities
 
    118,519
 
           48
 
                   -
 
         (80,350)
 
            38,217
                     
Stockholders' deficit:
                   
Series A cumulative preferred stock, no par value, 3,000 shares
       
authorized and outstanding, respectively
 
      24,932
 
            -
 
                   -
 
         (24,932)
(G)
                   -
                     
Series B cumulative preferred stock, no par value, 7,000 shares
             -
 
            -
 
                   -
 
          77,350
(A)
 
authorized and outstanding, respectively
             
         (77,350)
(G)
                   -
                     
Preferred stock, $0.001 par value, 500,000,000 shares
           
 authorized, and no shares issued and outstanding
             -
 
            -
 
                   -
 
                 -
(F)
                   -
                     
Common stock, no par value, 600,000 shares
               
authorized, 402,790.3177  shares outstanding.
      65,433
 
            -
 
                   -
 
         (65,433)
(G)
                   -
                     
Common stock, no par value, 300,000,000 shares
               
authorized, 173,124,868 issued and outstanding
             -
 
            -
 
                   11
 
                (11)
(G)
                   -
                     
                     
   Common stock, $0.001 par value, 5,000,000,000 shares
           
authorized,  220,000,000 issued and outstanding
             -
 
             4
 
                   -
 
               216
(F)
                220
                     
                     
Additional paid in capital
 
             -
 
           40
 
                   -
 
          24,932
(G)
          176,478
               
          65,433
(G)
 
               
            6,000
(D,E)
 
               
          77,350
(G)
 
               
            3,000
(C)
 
               
              (216)
(F)
 
               
                 11
(G)
 
               
                (72)
(I)
 
Treasury Stock
                   
Accumulated deficit
 
   (172,585)
 
          (72)
 
                   -
 
                 72
(I)
         (172,585)
Accumulated other comprehensive loss
 
           (64)
 
            -
 
                   -
 
                 -
 
                 (64)
Total stockholders' deficit
 
     (82,284)
 
          (28)
 
                   11
 
          86,350
 
              4,049
                     
Total liabilities and stockholders' deficit
 
 $   36,235
 
 $        20
 
 $                11
 
 $         6,000
 
 $         42,266
                     
See notes to the unaudited pro forma condensed combined financial statements.
   


F-40

 
 

 


UNAUDITED PRO FORMA CONDENSED COMBINED
 
( Dollar amounts in thousands except share data )
 
STATEMENTS OF OPERATIONS
 
FOR THE SIX MONTHS ENDED JUNE 30, 2014
 
   
THI
   
TCH
   
TCC
   
Pro Forma
Adjustments
   
Pro Forma
Combined
 
Net sales
  $ 34,147     $ -     $ -     $ -     $ 34,147  
Cost of sales
    25,846       -       -       -       25,846  
   Gross profit
    8,301       -       -       -       8,301  
Selling, general and administrative expenses
    11,902       61       -       -       11,963  
  Loss from operations
    (3,601 )     (61 )     -       -       (3,662 )
Other income (expense):
                                       
   Interest expenses
    (2,735 )     -       -       1,783  (H)     (952 )
   Interest income
    11       -       -       -       11  
   Other income, net
    8       -       -       -       8  
      Net other expense (expense)
    (2,716 )     -       -       1,783       (933 )
      Income (loss) before income tax provisions
    (6,317 )     (61 )     -       1,783       (4,595 )
      Income tax provision
    (20 )     -       -       -       (20 )
      Net income (loss)
  $ (6,337 )   $ (61 )   $ -     $ 1,783     $ (4,615 )
Other comprehensive income (loss):
                                       
   Unrealized loss on marketable securities
    (12 )     -       -       -       (12 )
      Total comprehensive income (loss)
  $ (6,349 )   $ (61 )   $ -     $ 1,783     $ (4,627 )
Net loss per share – basic and diluted
  $ (15.73 )   $ (0.01 )   $ -     $ -     $ (0.02 )
Weighted average number of common shares outstanding basic and diluted
    402,790       4,068,132       115,187,508       104,341,570  (J)     220,000,000  

See notes to the unaudited pro forma condensed combined financial statements.


F-41

 
 

 


UNAUDITED PRO FORMA CONDENSED COMBINED
 
( Dollar amounts in thousands except share data )
 
STATEMENTS OF OPERATIONS
 
FOR THE YEAR ENDED DECEMBER 31, 2013
 

   
THI
   
TCH
   
TCC
   
Pro Forma
Adjustments
   
Pro Forma
Combined
 
Net sales
  $ 76,230     $ -     $ -     $ -     $ 76,230  
Cost of sales
    52,647       -       -       -       52,647  
   Gross profit
    23,583       -       -       -       23,583  
Selling, general and administrative expenses
    23,391       11       -       -       23,402  
Gain (loss) from operations
    192       (11 )     -       -       181  
Other income (expense):
                                       
   Interest expense
    (5,581 )     -       -       3,573  (H)     (2,008 )
   Interest income
    34       -       -       -       34  
   Realized gain on marketable securities
    892       -       -       -       892  
   Other income, net
    2,014       -       -       -       2,014  
      Net other income (expense)
    (2,641 )     -       -       3,573       932  
      Income (loss) before income tax provisions
    (2,449 )     (11 )     -       3,573       1,113  
      Income tax provision
    (33 )     -       -       -       (33 )
      Net income (loss)
  $ (2,482 )   $ (11 )   $ -     $ 3,573     $ 1,080  
Other comprehensive income (loss):
                                       
   Unrealized loss on marketable securities
    (728 )     -       -       -       (728 )
                                         
      Total comprehensive income (loss)
  $ (3,210 )   $ (11 )   $ -     $ 3,573     $ 352  
Net income (loss) per share – basic and diluted
  $ (5.96 )   $ (0.00 )   $ -     $ -     $ 0.00  
Weighted average number of common shares outstanding – basic and diluted
    416,263       4,068,132       115,187,508       100,328,097  (J)     220,000,000  

See notes to the unaudited pro forma condensed combined financial statements.

F-42

 
 

 


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Dollar amounts in thousands except share data)


On September 4, 2014, TCH and TCC entered into an Agreement and Plan of Merger, the merger under which became effective on September 16, 2014,  wherein TCH acquired 100% of TCC’s capital stock through the issuance of TCH’s common stock.  As a result of the transaction, TCC will merge with and into TCH, the surviving entity.  After the effective date of the transaction, the former TCC stockholders will own just under 100% of the issued and outstanding common shares of TCH.  The transaction will be accounted for as a reverse acquisition.

Pro forma adjustments to the attached financial statements include the following:


 
(A)  
To reflect the exchange of 7,000 shares of THI Series B cumulative preferred stock, no par value, for debt.
 
(B)  
To reflect the reclassification of debt to Little Harbor LLC payment liability (a related party).
 
(C)  
 To reflect the conversion of the $3,000 May 1, 2014, unsecured convertible promissory note into 1,477,833 shares of TCC common stock
 
(D)  
To reflect the August 15, 2014 issuance of a $3,200 convertible promissory note and subsequent conversion into 4,210,526 shares of TCC common stock.

(E)  
To reflect the September 3, 2014 issuance of a $2,800 convertible promissory note and subsequent conversion into 3,684,211 shares of TCC common stock.

(F)  
On August 28, 2014 TCH performed a 50/1 stock split resulting in:
-  
Common shares authorized increasing from 100,000,000 to 5,000,000,000
-  
Common shares outstanding increasing from  4,400,000 to 220,000,000
-  
Preferred stock authorized increasing from 10,000,000 to 500,000,000 with 0 shares outstanding.
 
(G)  
To record the acquisition on September 16, 2014 of TCC by TCH through the issuance of 199,995,000 shares of its Rule 144 restricted common stock in exchange for 100% of TCC’s issued and outstanding shares of common and preferred stock.  

(H)  
To reflect the reduction in interest expense based on the debt removed from the balance sheet in Note A and the increase in interest expense based on Note B.

(I)  
To remove the accumulated deficit of TCH (the accounting acquiree).
 
(J)  
To adjust the weighted average number of common shares in accordance with Note F above.

F-43

 
 





EXHIBIT 4.1

 
SUBSCRIPTION AND SURRENDER AGREEMENT
 
This SUBSCRIPTION AND SURRENDER AGREEMENT (this “ Agreement ”) dated as of September 3, 2014, by and between Twinlab Consolidation Corporation, a Delaware Corporation (“ Company ”) and Thomas Tolworthy (“ Purchaser ”).
 
WITNESSETH :
 
WHEREAS, Purchaser desires to subscribe for, and Company desires to issue to Purchaser, a share of preferred stock in the Company pursuant to the terms set forth in this Agreement; and
 
WHEREAS, Purchaser is the holder of 104,000,000 shares of common stock of the Company (the “ Common Stock ”);
 
WHEREAS, Purchaser desires to contribute, transfer, assign, convey and deliver to the Company, and the Company desires to accept and acquire from Purchaser, a portion of its shares of Common Stock pursuant to the terms of this Agreement.
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
 
1.   Subscription .  Subject to the terms and conditions of this Agreement, Purchaser hereby subscribes for one (1) share of Series A Redeemable Preferred Stock, $0.0001 par value per share, with rights and preferences as set forth in that certain Certificate of Designation, Preferences and Rights dated September 3, 2014 (“ Series A Preferred Share ”), of the Company, in exchange for a total consideration of $200,000 (the “ Purchase Price ”). At the closing of the transaction contemplated hereby, (i) Purchaser shall fulfill its subscription by paying the Purchase Price by wire transfer of immediately available funds to an account designated by the Company, and (ii) the Company shall deliver to Purchaser a stock certificate duly executed by the Company representing the Series A Preferred Share.
 
2.   Surrender of Common Stock .
 
(a)   In consideration of one dollar ($1.00), the receipt and sufficiency of which are hereby acknowledged by Purchaser, Purchaser hereby irrevocably agrees to contribute, transfer, assign, convey and deliver up to a total amount of 65,306,102 shares of Common Stock (the “ Surrendered Shares ”) upon demand and pursuant to the directions of the board of directors of the Company from time to time. The Surrendered Shares shall be cancelled and returned to treasury by the Company. If certificated, the surrender of any Surrendered Shares shall be made by prompt delivery by Purchaser of the stock certificate(s) for such Surrendered Shares as directed by the board of directors of the Company.  As a result of such cancellation, the parties hereto agree and affirm that Purchaser shall have absolutely and irrevocably released any and all of his interests in all of the Surrendered Shares.
 
(b)   The Company agrees that the Surrendered Shares shall be used for any lawful purposes of the Company, including, but not limited to, the following:
 

 
1

 

 
 
(i)   Up to 17,312,492 Surrendered Shares shall be used as stock awards or stock grants pursuant to the terms and conditions of the 2013 Stock Incentive Plan of the Company and/or any other employee stock inventive plans the Company may from time to time institute;
 
(ii)   Up to 200,000 Surrendered Shares shall be used as stock awards or grants to any independent member of the board of directors of the Company; and
 
(iii)   the remainder of the Surrendered Shares shall be used for the consummation of any future issuance of capital stock, acquisitions of other companies, enterprises, going concerns or assets, or any other lawful purpose as the board of directors of the Company, in its discretion, may deem necessary, proper or advisable.
 
3.   Acknowledgements, Representations, Warranties and Agreement of Purchaser .  In connection with the execution of this Agreement and to induce the Company to sell the Series A Preferred Share to Purchaser, Purchaser  hereby represents, warrants and agrees as follows:
 
(a)   Purchaser is fully aware that the offering and sale of capital stock in the Company, including the Series A Preferred Share being acquired by such Purchaser, have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “ Securities Act ”), or any other applicable securities laws of any national, provincial, state or local jurisdictions (whether U.S. or non-U.S.), and the offering has been made in reliance upon U.S. federal and state exemptions for transactions not involving a public offering.  In furtherance thereof, such Purchaser represents and warrants that it is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D under the Securities Act.  Purchaser acknowledges that at no time was it presented with, or solicited by, any leaflet, public promotional meeting, newspaper or magazine article, radio or television advertisement or any other form of general advertising or general solicitation with respect to the offering of the Series A Preferred Share by the Company.
 
(b)   Purchaser acknowledges that the Company has not been and will not be registered as an investment company under the U.S. Investment Company Act of 1940, as amended (the “ Investment Company Act ”).
 
(c)   Purchaser is sufficiently knowledgeable and experienced (either alone or together with any advisors retained by Purchaser in connection with evaluating the merits and risks of the prospective investment in the Company) in financial and business matters to be capable of evaluating the merits and risks of investing in the Company and to make an informed decision relating thereto.  Purchaser has the financial capability for making the investment, can afford a complete loss of the investment, and the investment is a suitable one for such Purchaser.  Purchaser understands and recognizes that an investment in the Company involves certain risks and Purchaser understands and accepts such risks.
 
(d)   Purchaser is aware of its inability to liquidate its investment readily in case of an emergency or otherwise and the fact that the Series A Preferred Share being purchased may have to be held for an indefinite period of time.  Purchaser’s overall commitment to investments which are not readily marketable is not excessive in view of its net worth and financial circumstances and the purchase of the Series A Preferred Share will not cause such commitment to become excessive.
 

 
2

 


 
(e)   Purchaser is acquiring the Series A Preferred Share for its own account for the purpose of investment and not with a view to, or for sale in connection with, the distribution thereof, nor with any present intention of distributing or selling the Series A Preferred Share.  Purchaser hereby agrees not to make any sale, transfer or other disposition of any such Series A Preferred Share unless either (i) the Series A Preferred Share first shall have been registered under the Securities Act and all other applicable national, provincial, state and/or local jurisdiction’s securities laws (whether U.S. or non-U.S.), or (ii) an exemption from such registration is available, and the Company has received such documents and agreements from such Purchaser and the transferee as the Company reasonably requests at such time.
 
(f)   Purchaser has good and marketable title to the Surrendered Shares, free and clear of any mortgage, pledge, lien, encumbrance, charge, security, security interest or other claim against title, other than general restrictions under federal and state securities laws or the charter documents of the Company. Upon consummation of the transactions contemplated by Section 2 hereof, Purchaser will deliver to the Company, from time to time (as applicable), good and marketable title to the Surrendered Shares, free and clear of any mortgage, pledge, lien, encumbrance, charge, security  interest or other claim against title, other than general transfer restrictions under federal and state securities laws.
 
4.   Covenant of Purchaser .   From and after the date of this Agreement, Purchaser shall execute and deliver (or cause to be executed and delivered) such further instruments of conveyance and transfer and take such additional action as the Company may reasonably request to effect, consummate, confirm or evidence the contribution to the Company of the Surrendered Shares.
 
5.   Representations and Warranties of the Company .  The Company represents and warrants to Purchaser as follows:
 
(a)   Organization, Authority, etc .  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite power and authority to own or lease and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted.  The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement.
 
(b)   Binding Effect .  This Agreement is a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that the enforcement thereof may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights generally and to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).
 
(c)   No Solicitation .  No form of general solicitation or general advertising was used by the Company or its representatives in connection with the offer or sale of the Series A Preferred Share.  No registration of the Series A Preferred Share pursuant to the provisions of the Securities Act, or any state securities or “blue sky” laws, will be required by the offer, sale or issuance of the Series A Preferred Share.
 

 
3

 


 
6.   Miscellaneous .
 
(a)   Amendment .  Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally or by course of dealing, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought.
 
(b)   Notices .  All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand; (b) on the first business day following date sent if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent (if such date is a business day at the recipient’s address, otherwise on the next business day at the recipient’s address) by facsimile or e-mail of a PDF document (with confirmation of receipt by recipient); in each case a party’s refusal or willful avoidance of delivery shall be deemed to constitute delivery.  Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 6(b)):
 
If to the Company:               Twinlab Consolidation Corporation
632 Broadway, Suite 201
New York, New York 10012
Facsimile: (212) 505-5413
E-mail: rneuwirth@twinlab.com
Attention: General Counsel

To Purchaser:                       Mr. Thomas Tolworthy
4 Avenue at Port Imperial
Apt. 4205
West New York, NJ 07093
Facsimile: (212) 505-5413
E-mail: ttolworthy@twinlab.com
 
(c)   Parties in Interest .  All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, whether so expressed or not.
 
(d)   Headings .  The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement.
 
(e)   Choice of Law .  It is the intention of the parties that the internal laws, and not the laws of conflicts, of the State of Delaware should govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto.
 
(f)   Counterparts .  This Agreement and any amendments hereto may be signed in counterparts and, to the extent signed and delivered by means of a facsimile machine or by .pdf, .tif, .gif, .jpeg or similar attachment to electronic mail, shall be treated in all manner and respects as an original contract and shall be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.
 
(g)   Entire Agreement .  This Agreement constitutes the entire agreement between the Company and Purchaser with respect to the subject matter hereof and supersedes all prior agreements and understandings related to such subject matter.
 
[ The Remainder of this Page Intentionally Left Blank ]
 

 
4

 

IN WITNESS WHEREOF, Purchaser and the Company have executed this Agreement as of the date first written above.


 
 
COMPANY:

TWINLAB CONSOLIDATION CORPORATION

By:    /S/ Richard H. Neuwirth                
                                                                                       Name:  Richard H. Neuwirth
Title:    Chief Legal Officer & Secretary


 

 
PURCHASER:
 
THOMAS A. TOLWORTHY
 
 
By:    /S/ Thomas A. Tolworthy               




[ Signature Page to Subscription and Surrender Agreement ]
 
5
 





EXHIBIT 10.1
 
EMPLOYMENT AGREEMENT

This Employment Agreement (the “ Agreement ”) is made as of August 7, 2014, between Twinlab Consolidation Corporation, a Delaware Corporation (the “ Company ”) and Thomas A. Tolworthy (“ Executive ”).

WHEREAS, the Company desires to employ Executive and Executive desires to be employed by the Company beginning on August 7, 2014 (the “ Start Date ”) on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties hereto agree as follows:

1.   Position, Duties, and Office Location .
 
(a)   The Company shall employ Executive, and Executive hereby accepts employment with the Company, as the Company’s Chief Executive Officer (“ CEO ”) and President.  This full-time position and employment will commence on the Start Date.  In this position, Executive shall report to the Board of Directors of the Company (the “ Board ”) and shall render such services in connection with, and have supervision and control over and responsibility for, the day-to-day business and affairs of the Company (and, if and as applicable, its affiliated entities) as are consistent with Executive’s position and shall have such other powers and duties as may be prescribed by the Board, provided that such duties are consistent with Executive’s position or other positions that he may hold from time to time.

(b)   Initially, Executive will be based primarily out of the Company’s offices in New York, New York. Executive understands, acknowledges and agrees that (i) from time to time or temporarily, Executive may be required to (and shall) travel to, attend meetings at, and work at or from other offices of the Company including the Company’s offices in St. Petersburg, Florida, and (ii) such travel, attendance and work requirements shall not constitute a material change in the geographic location at which Executive provides services to the Company for purposes of Section 6(d) below.  Executive further understands, acknowledges and agrees that the Company is contemplating implementation of a transition plan pursuant to which it may relocate its main offices to Florida (or such other location as the Company may otherwise decide) and that various functions, positions, personnel and employment may be transferred to such location over time which may include transferring/relocating Executive’s position, duties and primary office location to such main office of the Company (or other location) during Executive’s employment.  Executive acknowledges and agrees that such required transfer/relocation in connection with the transition plan shall not constitute a Good Reason condition under or for purposes of Section 6(d) of this Agreement.

(c)   Executive will be loyal to the Company during Executive’s employment and devote Executive’s full-time business efforts and attention to Executive’s employment with the Company and the business and affairs of the Company.  Except as set forth on Schedule I to this Agreement, during Executive’s period of employment with the  Company, Executive shall not serve as an officer or director of, or otherwise perform services for compensation for, any entity other than the Company or its affiliates without the prior written consent of the Board (not to be unreasonably withheld); provided that Executive may serve as an officer or director of, or otherwise participate in, civic, educational, social, charitable, and religious organizations so long as such activities do not interfere with Executive’s employment obligations, performance and/or duties to the Company.

 
1

 

 
(d)    For so long as Executive, during his employment, is the single largest direct shareholder of the Company’s outstanding common stock he shall (at Executive’s option) be elected and appointed (and, reelected and reappointed if and when required) to be a Chairman of the Board subject to the affirmative vote of Executive and one other then-existing Board member.  During the term of Executive’s employment with the Company, Executive shall not be entitled to any additional compensation for his service on the Board.

2.   Base Salary .
 
(a)   During Executive’s employment and for all services performed, Executive shall be paid a base salary based on an annualized rate of Five Hundred Thousand Dollars from the Start Date through December 31, 2014 (the “Interim Base Salary”) and beginning on January 1, 2015, an initial base salary based on an annualized rate of Six Hundred Thousand Dollars ($600,000) per year (the “ Initial Base Salary ”).  Executive’s base salary shall be paid in accordance with the Company’s normal payroll practices, currently bi-weekly pay periods, and from which the Company shall withhold taxes in accordance with applicable regulations. Executive’s base salary will be subject to annual review and adjustment by the Company, provided that, unless otherwise mutually agreed by the parties in writing, any increase in Executive’s base salary shall not serve to limit or reduce any other obligation to Executive under this Agreement.  The base salary in effect at any given time is referred to herein as “Base Salary.”
 
(b)   Notwithstanding anything to the contrary herein, Executive’s Base Salary may be reduced on an annual basis (starting on January 1, 2016) by up to $100,000 per year (but at no time to a base salary rate below $300,000 per year); provided, however, in the event of such reduction for any given year, Executive’s Target Annual Bonus (as defined below) for which Executive is eligible for such year shall be increased by an amount such that (for the applicable year) the sum of Executive’s annualized Base Salary plus Target Annual Bonus shall equal two-times the Initial Base Salary.
 
3.   Incentive Compensation .
 
(a)   Bonus Programs .  With respect to Executive’s employment for the remainder of fiscal year 2014, Executive will be eligible to receive a discretionary cash bonus if, as and in such amount (if any) as determined by the Compensation Committee of the Board (the “Compensation Committee”) (if any) or by the Board (if there is no Compensation Committee) in the sole discretion thereof.  With respect to each fiscal year after 2014, Executive will be eligible to participate in any performance-based bonus program that the Company provides for all or most of its key executives at a bonus level commensurate with Executive’s position in the Company as determined in accordance with the terms of the applicable bonus program.     Executive’s target annual bonus for the year to which the given bonus relates under such program (the “ Target Annual Bonus ”) shall be the greater of (i) one hundred percent (100%) of Executive’s Initial Base Salary, or (ii) the Target Annual Bonus amount calculated for the applicable year consistent with Section 2(b) above (if Executive’s Base Salary for the applicable year is below the Initial Base Salary rate as contemplated in Section 2(b)). The actual amount of the annual bonus for a given year will be determined by the Compensation Committee (if any) or by the Board (if there is no Compensation Committee) pursuant to the applicable program and the attainment of applicable Company and/or individual performance metrics and may be between 0% and 200% of the Target Annual Bonus for the given year to which the bonus relates.  The metrics upon which any performance-based bonus and bonus program are based (which may include qualitative and/or quantitative Company and/or individual performance metrics) and corresponding bonus levels shall be reviewed and may be modified and set annually by the Board and/or Compensation Committee in its sole discretion, but in consultation with Executive, and subject to and commensurate with the Board’s approval of the annual operations budget for the Company.  In all instances, to earn and be entitled to payment of any bonus, Executive must be employed in good standing by the Company on the day such bonus is paid.  Annual bonuses (if any) will be payable in a single lump-sum in cash between January 1 and March 15 of the year following the fiscal year to which such bonus relates.  At whatever time paid, any bonus paid to Executive will be paid, less any required taxes and withholding in accordance with applicable regulations.
 

 
2

 

 
 
(b)   Equity Awards .   Executive shall be eligible to participate in the Company’s equity incentive or similar plan(s) or program(s) as and when implemented and maintained by the Company; and will be eligible to receive from time-to-time long-term equity incentive grants, including, stock options, restricted stock or other stock-based awards, as determined in the discretion of the Compensation Committee (if any) or the Board (if there is no Compensation Committee) and subject to any applicable performance metrics and/or budgetary or other business considerations, in accordance with the terms and conditions of the applicable plan(s).  Any such equity incentive awards shall be granted in accordance with the applicable plan(s) as then in effect; will be evidenced by an award agreement issued under the applicable plan; and shall be subject to and governed by the terms and conditions of the applicable plans(s) and award agreement(s) for all purposes (including, without limitation with respect to vesting and the effect and consequences of any termination of Executive’s employment or service relationship with the Company).  The target aggregate grant date fair value of such long-term equity incentive grants in any given fiscal year shall be equal to the combined total of Executive’s Base Salary and earned annual bonus for such fiscal year, provided that the actual amount of any such award shall be determined in the good faith reasonable discretion of the Compensation Committee and/or the Board.
 
4.   Benefits . As a full-time employee, Executive will be eligible to participate in the Company’s comprehensive benefits plans and programs available to employees generally, subject to the terms and conditions (including eligibility criteria) of such plans and programs.  The specific terms of all benefit plans and programs are as set out in applicable policy statements, program or plan documents, and/or insurance policies, and are subject to change at any time in the Company’s sole discretion.  Notwithstanding the foregoing, Executive will not be eligible or entitled to participate in any plan, program or practice (if any) providing for payment of severance or separation pay (or similar pay or benefit) to employees whose employment with the Company is terminated; and any severance or similar pay or benefits to which Executive is or may be entitled in connection with any termination of employment will be determined under the terms of this Agreement.  Executive will be entitled to up to twenty (20) paid-time-off (PTO) days per full calendar year (pro rata for any partial years), subject to the terms of the Company’s PTO policy.   It is understood and agreed that (and notwithstanding anything to the contrary in the Company’s PTO policy) Executive’s annual PTO allotment does not accrue and, unless otherwise required by applicable law, Executive may not rollover any unused PTO remaining at the end of one calendar year into the next calendar year and Executive will not be paid for any unused PTO days remaining at the end of a given year.  Executive will be paid for any unused PTO for the then current calendar year during which Executive’s employment terminates.
 
5.   Business Expenses . Executive will be reimbursed for reasonable business expenses incurred during Executive’s employment, including pre-approved business related travel expenses, in accordance with the Company’s business expense policy and subject to documentation (and any other) requirements as provided in that policy.
 

 
3

 


6.   At-Will Employment; Termination of Employment .  Executive’s employment relationship with the Company shall be at-will and is thus subject to termination by Executive or the Company at any time for any reason or no reason, with or without cause; provided, however, that if the Company terminates Executive’s employment without Cause at any time (pursuant to Section 6(b) below) or if Executive terminates Executive’s employment for “Good Reason” (as defined in and under Section 6(c) below), during the term of this Agreement, Executive will be eligible for the “Severance Pay” as provided for in and subject to Sections 7(b) and 7(c) of this Agreement.  The date on which any termination (for whatever reason, and whether terminated by Executive or the Company) is effective is referred to herein as the “ Termination Date .”
 
(a)   Termination Due to Executive’s Death .  Executive’s employment hereunder shall terminate effective immediately upon Executive’s death, and such termination shall not be deemed termination by the Company for “Cause” as defined in Section 6(b).
 
(b)   Termination by the Company for Cause .  The Company may terminate Executive’s employment hereunder for Cause effective upon notice (which may be with immediate effect, subject to any applicable cure period provided below).  For purposes of this Agreement, “ Cause ” shall mean termination for any of the following reasons: (i) Executive’s indictment for, conviction for, or plea of “guilty” or “no contest” to any crime (whether or not involving the Company) constituting any felony or constituting a misdemeanor involving moral turpitude or fraud in the jurisdiction involved; (ii) an act by Executive of physical violence causing bodily harm to another person on Company property or off Company property but in the performance of Executive’s duties as a Company employee; (iii) Executive’s reporting to work under the influence of alcohol or a controlled substance (except prescription drugs used as prescribed); (iv) Executive’s gross neglect or misconduct in the performance of Executive’s duties, or willful failure or refusal to perform Executive’s duties; (v) conduct by Executive which is materially injurious or materially damaging to the Company or the reputation of the Company; (vi) a material violation by Executive of this Agreement or the Company’s policies which (if curable) is not cured to the reasonable satisfaction of the Board within fifteen (15) days after written notice thereof to Executive; or (vii) Executive inability to substantially perform Executive’s essential job duties (with or without reasonable accommodation) for a continuous period of 90 days or for 120 days (which need not be continuous) in any 12 month period due to physical or mental disability.
 
(c)   Termination by the Company without Cause .  The Company may terminate Executive’s employment hereunder at any time without Cause (which may be effective immediately upon notice or upon such other date as may be set in such notice).  Any termination by the Company of Executive’s employment under this Agreement which is not due to Executive’s death under Section 6(a) or which does not constitute a termination for Cause under Section 6(b) shall be deemed a termination without Cause.
 
(d)   Termination by Executive .  Executive may terminate Executive’s employment at any time for any reason, including but not limited to for Good Reason.  A termination by Executive other than for Good Reason will be effective upon such date set forth in a written notice to the Company; provided, however, the Company may accelerate the effective date of such termination by Executive to any earlier date after receiving such notice (and such acceleration shall not constitute a termination by the Company without Cause for any purpose).  For purposes of this Agreement, “ Good Reason ” shall mean that Executive has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events without Executive’s consent: (i) a material diminution in Executive’s Base Salary (not including any diminution consistent with Section 2(b) above), except for a proportional reduction pursuant to a Company-wide reduction of all executive salaries due to economic conditions; (ii) a material diminution in Executive’s authority, duties or responsibilities; (iii) a material change in the geographic location at which Executive provides services to the Company (except as otherwise provided in Section 1(b) above); (iv) any other action or inaction that constitutes a material breach of this Agreement by the Company; or (v) Executive is not reelected to or is otherwise removed from the Board.
 

 
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In order for Executive to terminate Executive’s employment for “Good Reason,” Executive must first notify either the Board or the Company’s Chief Legal Officer in writing of the specific act or omission constituting a “Good Reason” condition within a period not to exceed sixty (60)   days of the initial existence or occurrence of the condition, upon the notice of which the Company shall have thirty (30) days to remedy the condition (the “ Cure Period ”).  If the Company does not remedy or otherwise correct the condition noticed within the thirty (30) day period, Executive may resign/terminate Executive’s employment for “Good Reason” by written notice delivered to the Board within the following thirty (30) days after the end of the Cure Period.  If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.  The foregoing procedure in this paragraph is referred to in this Agreement as the “ Good Reason Process .”
 
7.   Compensation Upon Termination .
 
(a)   Termination in General .  If Executive’s employment with the Company is terminated for any reason (whether by the Company or Executive), then Executive (or his authorized representative or estate, if applicable) shall be entitled to: (i) any Base Salary earned through the Termination Date, payout of any remaining unused PTO for the year during which the Termination Date occurs (subject to and in accordance with Section 4 of this Agreement), and any unpaid expense reimbursements through the Termination Date (subject to an in accordance with Section 5 of this Agreement), to be paid on or before the time required by law but in no event more than 30 days after the effective date of such termination; and (ii) any vested benefits Executive may have accrued under any employee benefit plan (including any Company qualified retirement plan or other written benefit plan applicable to Executive) through the Termination Date, which vested benefits will be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “ Vested Rights ”). In addition, Executive and Executive’s qualified beneficiaries, if participating in the Company’s group health insurance plan immediately before the Termination Date, shall be entitled to elect continuation coverage at Executive’s sole expense under the federal law known as COBRA or similar state law (if applicable), in accordance with and subject to the terms, conditions and requirements of such applicable law.
 
(b)   Termination by the Company Without Cause or by the Executive For Good Reason .  If the Company terminates Executive’s employment without Cause as provided in and under Section 6(c) or if Executive resigns/terminates Executive’s employment for “Good Reason” under Section 6(d), then (1) Executive will be entitled to his Vested Rights (and any COBRA rights under applicable law); and (2) in addition, and subject to the conditions set forth in Section 7(c) below, the Company will provide the following (collectively, the “ Severance Pay ”):
 
(i)   the Company will pay Executive an amount equal to two times the sum of (A) Executive’s Base Salary plus (B) the average of the last 3 annual bonuses received by Executive for the three immediately preceding fiscal years (or, of Executive has been employed for less than three years under this Agreement, the average of all annual bonuses received while employed under this Agreement); and
 

 
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(ii)   if Executive was participating in the Company’s group health plan immediately prior to the Termination Date and elects COBRA health continuation coverage, then the Company shall pay to Executive a monthly cash payment for  12 months or Executive’s COBRA health continuation period, whichever ends earlier, in an amount equal to the monthly cost of such COBRA premium for Executive (and, if applicable, Executive’s qualified and participating dependents).
 
The amounts payable under Sections 7(b)(i) and 7(b)(ii) shall be paid in substantially equal installments in accordance with the Company’s payroll practice and schedule over a period of 52 weeks commencing within 60 days after the effective date of the termination of Executive’s employment; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the Severance Pay shall begin to be paid in the second calendar year by the last day of such 60-day period, provided, further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the effective date of the termination of Executive’s employment.  Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).

In the event of Executive’s death while receiving Severance Pay, Executive’s designated beneficiary (or, if none, Executive’s estate) will receive the remaining Severance Pay installments.

(c)   Conditions to Severance Pay . For Executive to be and remain eligible for Severance Pay, the following conditions must be met: (i) Executive must timely sign, not revoke within any applicable revocation period, and continue to honor a separation and general release agreement in a form acceptable to the Company (the “ General Release Agreement ”), containing, among other provisions, (x) a general release of any and all claims that Executive might otherwise have relating to Executive’s employment and/or the termination of Executive’s employment, or relating to any other act, omission or statement up to the date on which Executive executes the general release, against and in favor of the Company and its affiliated and related entities (including the Company’s Affiliates, defined as other entities controlling, controlled by or under common control with the Company) and related persons (including the officers, executives, directors, employees, owners, shareholders, and agents of the Company and each related entity), provided that the release will not waive Executive’s Vested Rights (as defined above), or any rights Executive may otherwise have to indemnification under an Indemnification Agreement with Company or the Company’s Articles of Incorporation or Bylaws for acts or omissions during Executive’s employment with the Company, and (y) non-disparagement and post-employment cooperation obligations; (ii) the General Release Agreement must become effective and irrevocable within 60 days after the Termination Date; (iii) Executive must resign (upon written request by Company) from all positions with or representing the Company or any Affiliate, including but not limited to membership on boards of directors; and (iv) Executive must comply with all provisions of Sections 9, 10 and 12 below.
 

 
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If Executive fails to execute such General Release Agreement in a form acceptable to the Company before the expiration of the earlier of the time frame specified by the Company in such form of General Release Agreement or the end of the sixty (60) day period immediately following the Termination Date, or if Executive (after timely executing the General Release Agreement timely revokes it, if a revocation right and period is provided thereunder), Executive shall not be entitled to the Severance Pay.  If Executive breaches any of the provisions contained in Section(s) 9, 10 and/or 12, all payments of the Severance Pay shall immediately cease.

(d)   Offsets to Severance Pay .  To the extent permitted by applicable law, Severance Pay for any week will be reduced by (i) any disability benefits to which Executive is entitled for that week under any disability insurance policy or program (including, but not limited to, workers’ disability compensation); (ii) any payment due to Executive under or by virtue of the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance; (iii) any unemployment insurance compensation collected by Executive following the Termination Date through the end of the period during which Severance Pay is payable under this Agreement; and (iv) any amounts that Executive owes to the Company.
 
8.   Withholding and Deductions . All pay and benefits will be subject to withholding and deductions required by law or court order.  The Company may offset any amounts Executive owes it against any amounts it owes Executive hereunder to the extent permitted by federal, state, and local law.
 
9.   Confidentiality; Return of Property .
 
(a)   Confidential Information . Executive acknowledges that the continued success of the Company and its Affiliates depends upon the use and protection of a large body of confidential and proprietary information.  All of such confidential and proprietary information now existing or to be developed in the future shall be referred to herein as “ Confidential Information .”  Confidential Information will be interpreted as broadly as possible to include all information or any sort (whether merely remembered or embodied in a tangible or intangible form) that is (i) related to the Company’s or its Affiliates’ current or potential business and (ii) is not generally or publicly known.  Confidential Information includes, without limitation, the information, observations and data obtained by Executive during the course of Executive’s performance under this Agreement concerning the business and affairs of the Company and its Affiliates and/or during any prior employment with the Company and/or any of its predecessors, information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates’ business or industry of which Executive becomes aware through Executive’s employment with the Company, the persons or entities that are current, former or prospective suppliers or customers of any one or more of them during Executive’s course of performance under this Agreement, product research and development, product formulations, and product formulation techniques and processes, as well as development, transition and transformation plans, methodologies and methods of doing business, all trade secrets, intellectual property, strategic, marketing and expansion plans, including plans regarding planned and potential sales, financial and business plans, employee lists and telephone numbers, locations of sales representatives, new and existing programs and services, prices and terms, customer service, support and equipment.  Therefore, Executive agrees that Executive shall only use such Confidential Information as may be required on behalf of the Company or its Affiliates in connection with Executive’s performance under this Agreement and solely in the best interests of the Company and/or its Affiliates; and that Executive shall not disclose to or for the benefit of any unauthorized person or for Executive’s use for Executive’s own account any of such Confidential Information without the prior written consent of the Company’s Chief Executive Officer, unless and to the extent that any Confidential Information (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions, or (ii) is required to be disclosed pursuant to any applicable law or court order.
 

 
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(b)   Third Party Information .  Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on the Company’s and its Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes.  During the Executive’s employment with the Company and thereafter, and without in any way limiting the provisions of Section 9(a) above, Executive will only use Third Party Information in connection with Executive’s performance under this Agreement, will hold Third Party Information in the strictest confidence, and will not disclose Third Party Information to anyone other than personnel of the Company and its Affiliates who need to know such information in connection with their work for the Company or as otherwise directed by the Company’s Chief Executive Officer.
 
(c)   Mandatory Disclosure . In the event Executive is requested or compelled by court order, decree, subpoena or other process or requirement of law to disclose Confidential Information or Third Party Information, Executive shall to the extent permissible and practicable under the circumstances provide reasonably prompt written notice (unless such notice is prohibited by law) to the Company of any such requirement so that the Company may, at its option and expense, seek a protective order or other appropriate remedy. Executive agrees to cooperate with the Company in any such proceeding, at the expense of the Company, provided that the foregoing shall not be construed to require Executive to undertake litigation or other legal proceedings on its own behalf.  In the event that such protective order or other remedy is not obtained, Executive agrees to furnish only that portion of the confidential information which Executive is advised by Executive’s own counsel should be disclosed and, at the Company’s expense, to use reasonable efforts to obtain assurance that confidential treatment will be accorded the information.
 
(d)   Return of Information and Property . Upon termination of Executive’s employment, or at any other time as the Company may request in writing, Executive agrees to deliver to the Company any and all property of the Company or any Affiliate and any and all documents, materials, data and information (in whatever form, whether hardcopy, electronic or otherwise, and in whatever medium) relating to the business of the Company or any Affiliate, including without limitation all such items that constitute or contain Confidential Information, documents, computer files, keys, corporate credit cards and company provided computers, automobiles or other equipment.  All such property will be returned promptly and in good condition except for normal wear.
 
10.   Ideas, Concepts, Inventions and Other Intellectual Property . All business ideas and concepts and all inventions, improvements, developments and other intellectual property made or conceived by Executive, either solely or in collaboration with others, during Executive’s employment, whether or not during working hours, and relating to the business or any aspect of the business of the Company or any Affiliate or to any business or product the Company or any Affiliate is actively planning to enter or develop, shall become and remain the exclusive property of the Company, and the Company’s successors and assigns. Executive shall disclose promptly in writing to the Company all such inventions, improvements, developments and other intellectual property, and will cooperate in confirming, protecting, and obtaining legal protection of the Company’s ownership rights. Executive’s commitments in this Section 10 will continue in effect after termination of Executive’s employment as to ideas, concepts, inventions, improvements and developments, and other intellectual property made or conceived in whole or in part before the Termination Date. Executive represents and warrants that except as may be described on Schedule II to this Agreement signed separately by Executive and the Company’s CEO or Chief Legal Officer, there are no ideas, concept, inventions, improvements, developments, or other intellectual property that Executive invented or conceived before becoming employed by the Company or at any time prior to the Start Date to which Executive, or any assignee of Executive, now claims title and that are to be excluded from this Agreement.
 

 
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11.   Non Contravention .  Executive represents and warrants that (a) Executive is not party to or bound by any employment, non-competition, non-solicitation, confidentiality or other agreement that purports to prohibit or restrict Executive from engaging in employment with the Company pursuant hereto, or using expertise that Executive possesses (other than information constituting a trade secret or other proprietary or confidential information of another person or entity protected under applicable law) for the benefit of the Company; and (b) that the execution, delivery, and performance of this Agreement by Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which Executive is bound.  Without limiting the foregoing, Executive will not use in the course of Executive’s employment, or disclose to the Company or its personnel, any information belonging to any other person or entity that constitutes a trade secret of such person or entity under applicable law or other non-public information (including such information belonging to or obtained from a prior employer or other party) which is otherwise lawfully protected from disclosure under applicable law or agreement.
 
12.   Non-Competition, Non-Solicitation, Conflicts .    For purposes of this Section 12, references to the “Company” shall include, individually and collectively, the Company and its Affiliates and its/their respective successors and assigns. Executive agrees as follows:
 
(a)   Non Competition . Executive will not, during Executive’s employment with the Company and for a period of twelve (12) months immediately thereafter, (i) directly or indirectly compete with the Company, or (ii) be employed by, perform services for, advise or assist, own any interest in or loan or otherwise provide funds to any other business or entity that is engaged (or seeking Executive’s services with a view to becoming engaged) in any Competitive Business. “ Competitive Business ” means a business that is engaged, directly or indirectly, in the business of developing, manufacturing, marketing (including catalogue, mail order, internet/on-line, or other direct-to-consumer marketing), selling and/or distributing (including wholesale distributing) herbal teas or dietary supplements, including without limitation, vitamins, minerals, liquid proteins, protein powders, amino acids, herbal blends, phytonutrients, enzymes, probiotics, diet and weight loss supplements, ready-to-drink liquid supplements, meal replacements and/or bars, and/or any other business or products engaged in by the Company or any Affiliate or being actively developed by management of the Company or such Affiliate.  (Each of the products referenced in the preceding sentence is referred to herein as a “ Competitive Product ”).  The foregoing restrictions in this Section 12(a) shall be limited to the United States, Canada and any other foreign countries in which the Company or any Affiliate, directly or indirectly (including, without limitation, indirectly through sales representatives, distributors, partners, joint ventures, licensees, or the internet/on-line) sells, offers, markets, develops, produces, manufactures, promotes, provides, distributes, or solicits business for its products at any time during the Executive’s employment with the Company.
 
(b)   Non-Solicitation .  Executive will not during Executive’s employment with the Company (and/or any Affiliate) and for a period of twelve (12) months thereafter, directly or indirectly, (i) solicit, encourage or induce, or attempt to solicit, encourage or induce, any employee of the Company to leave the employ of the Company, or in any way interfere with the relationship between the Company and any employee thereof, (ii) hire any person who was an employee of the Company at any time during Executive’s employment with the Company, or (iii) (A) solicit, encourage or induce, or attempt to solicit, encourage or induce, any customer, supplier, licensee, licensor, franchisee or other business relation of the Company to cease doing business with the Company, (B) solicit, or attempt to solicit, the business or patronage of any such customer, supplier, licensee, franchisee or other business relation of the Company in connection with any Competitive Product, or (C) in any way interfere with the relationship between any such customer, supplier, licensee, licensor, franchisee or other business relation and the Company (including, without limitation, making any negative or disparaging statements or communications regarding he Company).  For purposes of this paragraph 12(b), the term “employee” shall include consultants and independent contractors of the Company.
 

 
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(c)   Exceptions; Waiver Request .
 
(i)   Nothing in this Section 12 prohibits Executive from being a passive owner of not more than 2% of any class of securities of a publicly traded entity (or any amount of any class of securities of the Company), provided that Executive does not engage in any other activity prohibited by this Section 12 or Section 9.
 
(ii)   Executive may submit a written request to the Company for a waiver of some or all of the restrictions provided by this Section 12.  The Company agrees to consider such a request, but may grant or deny the request in its absolute discretion.  In the event that the Company grants any such waiver, Executive agrees that the Company shall be released from any obligation to make further payments of Severance Pay upon Executive’s acceptance of employment with a Competitive Business, but that the release of such obligation shall not otherwise modify the terms of any Separation Agreement and Release signed by Executive in connection with the receipt of such Severance Pay (including, without limitation, the general release of claims by Executive thereunder) and that any such Separation Agreement and Release shall remain in full force and effect.
 
(d)   Conflicts of Interest . During Executive’s employment, Executive will not acquire any financial interest in, accept gifts or favors from, or establish any relationship other than on behalf of the Company with, any customer, supplier, distributor, or other person who does or seeks to do business with the Company, unless Executive has disclosed the financial interest, gift, favor, or relationship to the Company’s Chief Legal Officer in writing and has received written approval for that activity or transaction; provided, however, that this restriction does not apply to casual and normal social/business relationships that do not involve exchange of money, gifts or favors other than normal business expenditures such as lunches or event attendance without significant cost.  If any member of Executive’s family engages or proposes to engage in any relationship or activity that would be covered by the preceding sentence if engaged in by Executive, Executive will immediately disclose that proposed or actual relationship or activity as provided above.
 
(e)   Reasonableness of Restrictions; Enforcement and Remedies .  Executive understands that the obligations, covenants and restrictions contained in Sections 9, 10 and 12 of this Agreement are intended to protect the Company’s interests in its Confidential Information, customer and business relationships, goodwill, and employee training and relationships, and agrees that such obligations and restrictions (and the scope of precluded activities, geographic scope and duration thereof) are necessary, reasonable and appropriate for this purpose.  Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by Executive of Executive’s promises set forth in Sections 9, 10 and/or 12, that the Company would be irreparably harmed by such breach, and that, in any event, money damages would be an inadequate remedy for any such breach.  Executive further acknowledges and agrees that (i) without the restrictions set forth in Section 9, 10 and 12, Executive would be in a position to compete unfairly with the Company, and (ii) Execu tive’s education and experience are such that the restrictions set forth in Section 9, 10 and 12 will not interfere with Executive’s ability to earn a livelihood.  Accordingly, Executive agrees and consents that the Company (or, for avoidance of doubt, its successors and assigns) shall be entitled to temporary, preliminary and permanent injunctive relief, specific performance, and/or other appropriate equitable relief (in addition to all other remedies it may have for damages or otherwise, in law or in equity) to restrain any such breach or threatened breach without showing or proving any actual damage to the Company (or, if applicable, successors or assigns) and without posting a bond or other security; and the Company (or, if applicable, its successors and assigns) shall be entitled to an award of its attorneys’ fees and costs incurred in enforcing any of the Executive’s obligations and restrictions under Section 9, 10 and/or 12   of this Agreement.
 

 
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13.   Corporate Opportunity .   During Executive’s employment with the Company, Executive shall submit to the Company’s CEO all bona fide business, commercial and investment opportunities or offers presented to Executive or of which Executive becomes aware which related to the business of the Company at any time during such period employment (“ Corporate Opportunities ”).  Unless approved by the CEO, Executive shall not accept or pursue, directly or indirectly, any Corporate Opportunities on or for Executive’s own behalf or benefit.
 
14.   Section 409A .
 
(a)   Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death.  If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.  Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which the date of separation from service occurs, from such date of separation from service until the payment.
 
(b)   All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement.  All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred.  The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any lifetime or other aggregate limitation applicable to medical expenses).  Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
 
(c)   To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.”  The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
 

 
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(d)   The parties intend that this Agreement will be administered in accordance with Section 409A of the Code.  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.  Each payment pursuant to this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
 
(e)   The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
 
15.   Additional Limitation – 280G Matters .
 
(a)   Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code and the applicable regulations thereunder (the “ Aggregate Payments ”), would be subject to the excise tax imposed by Section 4999 of the Code, then the Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less than the amount at which Executive becomes subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction shall only occur if it would result in Executive receiving a higher After Tax Amount (as defined below) than Executive would receive if the Aggregate Payments were not subject to such reduction.  In such event, the Aggregate Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code:  (1) cash payments not subject to Code Section 409A; (2) cash payments subject to Code Section 409A; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
 
(b)   For purposes of this Section 15, the “ After Tax Amount ” means the amount of the Aggregate Payments less all federal, state, and local income, excise and employment taxes imposed on Executive as a result of Executive’s receipt of the Aggregate Payments.  For purposes of determining the After Tax Amount, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
 

 
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(c)   The determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 15(a) shall be made by a nationally recognized accounting firm selected by the Company (the “ Accounting Firm ”), which shall provide detailed supporting calculations both to the Company and Executive within 15 business days of the Termination Date, if applicable, or at such earlier time as is reasonably requested by the Company or Executive.  Any determination by the Accounting Firm shall be binding upon the Company and Executive.
 
16.   Severability . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any action in any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein; and each portion and provision declared to be invalid, illegal or unenforceable (in whole or in part) by a court or arbitrator of competent jurisdiction shall be construed, interpreted and enforced by such court or arbitrator to be modified and apply to the fullest extent permitted by law.
 
17.   No Strict Construction .   The language used in this Agreement shall be deemed to be the language chose by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.
 
18.   Survival .   Executive’s obligations under Sections 7 through 10 and 12 through 25 shall survive and continue in full force in accordance with their terms notwithstanding the expiration or termination  of the Executive’s employment with the Company (for whatever reason and whether by the Company or Executive).
 
19.   Counterparts, Electronic Signatures .   This Agreement may be executed in separate counterparts, each of which is deemed an original and all of which taken together constitute one and the same agreement. This Agreement may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution of the Agreement, and if so signed or delivered such electronic signatures shall be deemed to have the same legal effect as delivery of an original signature and may be relied on by each party as if the document were a manually signed original and will be binding on each party for all purposes.
 
20.   Successors and Assigns .  This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive, the Company and their respective heirs successors and assigns, except that Executive may not assign Executive’s rights or delegate Executive’s duties or obligations hereunder without the prior consent of the Company.  This Agreement may be assigned by the Company to any of its Affiliates or to any entity that acquires more than fifty-percent (50%) of the voting interests in the Company or all or substantially all of the assets of the Company.  Upon and after such succession or assignment by the Company, reference in this Agreement to the Company shall be deemed to mean or include (as applicable) such successor or assign.
 

 
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21.   Complete Agreement . This Agreement, including any Schedules hereto, embodies the complete agreement and understanding among the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, whether written or oral, with respect to such subject matter.
 
22.   Amendments and Waivers . This Agreement cannot be amended, and the obligations under this Agreement cannot be waived, unless the amendment or waiver is agreed to in writing by Executive and the Company’s CEO, and no course of conduct or failure or delay to enforce or exercise any rights under this Agreement (including, but not limited to, the Company’s right to terminate Executive for Cause) shall affect the validity, binding effect or enforceability of this Agreement or be deemed to be a waiver or implied waiver of any provision of this Agreement.
 
23.   Arbitration .  Any dispute or controversy between the parties hereto, whether during the employment term or thereafter, including without limitation, any and all matters relating to this Agreement, Executive’s employment with the Company and/or the cessation thereof, and all matters arising under any federal, state, or local statute, rule or regulation, or principle of contract law or common law, including but not limited to any medical leave statutes, wage payment statutes, employment discrimination statutes, employee benefit statutes, and any other equivalent federal, state, or local statute, will be settled by arbitration administered by the American Arbitration Association (“ AAA ”) in New York, New York or, in the event the Company’s primary offices and Executive’s then existing (or final) work location with the Company have relocated to Florida (or other state outside of New York) then in the city and state of such relocation. The arbitration will be conducted pursuant to the arbitration rules in the AAA’s Employment Arbitration Rules and Mediation Procedures (or their equivalent), which arbitration will be confidential, final, and binding to the fullest extent permitted by law. There shall be one (1) arbitrator, selected jointly by the parties hereto, or if the parties cannot so agree on a single arbitrator, selected in accordance with AAA’s procedures. Each party hereto will be responsible for paying its attorney’s fees and costs incurred under this Section 23, except as may otherwise be provided by the arbitrator in order to comply with applicable substantive law or to the extent otherwise provided in this Agreement.  Further, the parties hereto will equally share any costs levied by the AAA, including the cost of the arbitrator and use of a hearing room, provided that Executive will not be obliged to pay for any portion of such costs beyond the maximum amount permitted in order that this arbitration provision be legally enforceable. The foregoing provisions of this Section 23 shall not be deemed (a) to preclude either party hereto from pursuing a court action for the purposes of obtaining a temporary restraining order or preliminary injunctive relief to protect or enforce its rights hereunder or in circumstances in which such relief is appropriate, (b) to prohibit any court of competent jurisdiction from making preliminary findings of fact in connection with granting or denying preliminary injunctive relief pending a final determination of factual issues by the arbitrator, or (c) to preclude either party from seeking permanent injunctive or other equitable relief after and in accordance with the decision and findings of the arbitrator.
 

 
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24.   Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws principles.
 
25.   Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand; (b) on the first business day following date sent if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent (if such date is a business day at the recipient’s address, otherwise on the next business day at the recipient’s address) by facsimile or e-mail of a PDF document (with confirmation of receipt by recipient); in each case a party’s refusal or willful avoidance of delivery shall be deemed to constitute delivery.  Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 25):
 
If to the Company:                                                      Twinlab Consolidation Corporation
632 Broadway, Suite 201
New York, New York 10012
Facsimile: (212) 505-5413
E-mail: rneuwirth@twinlab.com
Attention: The Board of Directors


If to Executive:                                                      Thomas A. Tolworthy
4 Avenue at Port Imperial
Apt. 4205
West New York, NJ 07093
E-mail: ttolworthy@twinlab.com




[ Remainder of page intentionally left blank.  Signature page(s) immediately follow. ]

 
15

 


IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be effective as of the 7th day of August, 2014, intending to be legally bound thereby.


TWINLAB CONSOLIDATION                                                                                               EXECUTIVE
CORPORATION


__________________________________                                                                                      /S/ Thomas A. Tolworthy            
By:                                                                                                         Thomas A. Tolworthy
Its:

 
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SCHEDULE I

WORK ALLOWED TO PERFORMED OUTSIDE OF COMPANY EMPLOYMENT


1.  
Pet Supplies Plus, Member of Board of Directors.
2.  
Performance Bicycle, Member of Board of Directors
3.  
Vitamin Angels, Member of Board of Directors







 
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SCHEDULE II

EXECUTIVE’S PRE-EMPLOYMENT INTELLECTUAL PROPERTY


 
To:           Twinlab Consolidation Corporation
 
From:           ____________________
 
Date:  _____________________
 
SUBJECT:                       Prior Inventions
 
The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by the Company that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:
 
           No inventions or improvements
 
           See below:
 
_______________________________________________________________
 
_______________________________________________________________
 
_______________________________________________________________
 
           Additional sheets attached
 
The following is a list of all patents and patent applications in which I have been named as an inventor:
 
           None
 
           See below:
 
_______________________________________________________________
 
_______________________________________________________________
 
_______________________________________________________________
 


 
18
 





EXHIBIT 10.2
 
May 3, 2012
CONFIDENTIAL

Mark R. Jaggi
c/o Twinlab Corporation
600 E. Quality Drive
American Fork, UT 84003

Dear Mark:

I am pleased to offer you continued employment as an executive of Twinlab Corporation (hereinafter the “Company”), on the terms set forth in this letter (“Agreement”).

You may choose to accept this offer by countersigning this Agreement in the space provided below and returning the same to Linda Yost in the Company’s Utah offices (address below) within five (5) business days following the date above.  Upon your acceptance as provided above, this Agreement shall be effective as of the date first stated above. Please note that if you accept this offer of continued employment, you will accept the terms of this Agreement in lieu of any previous employment agreements, commission agreements, fee agreements, severance pay agreements or other commitments regarding employment made to you by the Company, and you will waive any and all claims under such agreements .
 
 
1. Terms of Employment . The terms of our employment relationship shall continue to be at will and subject to termination by you or the Company at any time for any reason or no reason, with or without cause. However, if the Company terminates your employment at any time other than for “Cause” (defined in Section 7(a) below) or if you terminate your employment with the Company at any time for “Good Reason” (defined in Section 7(b) below), during the term of this Agreement you will receive Severance Pay as provided for in Section 7.

2. Position, Duties, and Office Location . Your position should you accept this offer of continued employment will be Executive Vice-President and Chief Financial Officer .   You agree that this position shall also include you acting as the Chief Financial Officer and Treasurer of the Company’s parent company, Idea Sphere Inc. (“Parent”) as well as Parent’s subsidiaries. You will report to the Company’s President & CEO. The Company may, with your consent, transfer you to other executive level positions, if consistent with your skills and experience, within the Company or an affiliated company, and this Agreement may be assigned by the Company to any of its affiliated companies.  This full-time position will be based in the Company’s Utah offices, currently located at 600 E. Quality Drive, American Fork, Utah.  The Company may transfer you to another office location but only if such other office is located within 50 miles of your initial office location in the Company’s Utah office.  A transfer to an office located more than 50 miles from your initial office location will be deemed a material change in the geographic location at which you must perform the services pursuant to this Agreement.

 
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Your duties will be executive level duties commensurate with your position. You will be loyal to the Company during the employment and devote your full time business efforts and attention to your employment, provided that you may engage in civic and professional activities that do not interfere with your employment, and you may accept positions on boards of directors of other entities with the advance approval of the Company’s President & CEO (such approval having already been provided with respect to Vitasource Inc., as set forth more fully in Section 9(d)(iii) hereof) .
 
 
3. Salary . Beginning with the first scheduled payroll following your acceptance of this offer of continued employment, your initial base salary will be Two Hundred and Five Thousand Dollars ($205 ,000 ) per year, which shall be paid in accordance with the Company’s normal payroll practices, currently bi‐weekly pay periods, and from which the Company shall withhold taxes in accordance with applicable regulations.  Beginning with the first regularly scheduled payroll subsequent to March 30, 2013 (the one year anniversary of your employment with the Company), your salary will be raised to an annual salary rate of $250,000 per year.  Your salary will be subject to annual review by the Company.  However, if your salary is materially reduced from the rates set forth above , except as provided for in Section 7(b)(i), you will have the right to resign for Good Reason pursuant to and in accordance with the terms of Section 7(b) below.

4. Bonus .   It is the Company’s intent of to create an annual performance bonus schedule that will provide you and other key executives with an annual bonus opportunity based upon the Company’s profitability.  It is currently the intent of the Company to present such a bonus program to the Company’s Board of Directors for approval, with the intent that upon such approval the plan would become effective for the calendar year commencing January 1, 2012.  For each subsequent year, the Company retains the right to annually review and modify the set(s) of metrics that determine how and the extent to which bonus opportunities are achieved for such subsequent year.

To the degree you are entitled to a performance bonus pursuant to the applicable bonus schedule for a given year, your performance bonus will be paid to you, less any required taxes and withholding in accordance with applicable regulations, by March 15 of the following year (or in the event that the Company changes its fiscal year to be other than a calendar year, then within 45 days of the close of the applicable fiscal year).
 
 

 
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5. Fringe Benefits and Moving Expenses . As a full-time employee, you will continue to be entitled to participate in the Company’s comprehensive benefits programs. The specific terms of all benefit programs are as set out in applicable policy statements, program documents, and insurance policies, and are subject to change at any time in the Company’s sole discretion.  You will continue to accrue paid time off (PTO), in accordance with the Company’s PTO policy, at the rate of twenty (20) days per calendar year effective from your initial date of employment with the Company, March 30, 2012.  Subject to applicable provisions of the Company’s PTO policy, including approval by your supervisor for particular PTO requests, you will be able to request PTO up to your full annual availability after three months of full-time employment.

This position required you to temporarily relocate to Utah by April 2, 2012, and you continue to be required to permanently relocate by no later than July 31, 2012 to work out of the Company’s Utah offices.  The Company will reimburse you for up to $40,000 of reasonable, documented relocation expenses for your relocation to Utah, including but not limited to, realtor fees, packing and moving fees, etc. Also included in this reimbursement will be the reasonable expenses associated with temporary housing for up to ninety days from your start date, as needed. In each case you must provide the Company with receipts or other reasonable documentation of the expenditure in order to receive reimbursement for the same. To the degree such reimbursed relocation expenses are deemed taxable income to you, the Company shall provide you with an additional payment to cover the income taxes due on such income (i.e., the relocation reimbursement shall be “grossed up” to account for income taxes). Should you terminate your employment with the Company prior to April 1, 2013, you shall refund to the Company any relocation reimbursements received prior to the date of termination.

6. Business Expenses . You will be reimbursed for business expenses that you incur during your employment, including business related travel expenses, in accordance with the Company’s business expense policy and subject to documentation requirements as provided in that policy.

7. Severance Pay . You will be entitled to Severance Pay as described in this Section if the Company terminates your employment other than for “Cause”, or if you terminate your employment for “Good Reason”, both as defined below. Except for such Severance Pay as may be available to you pursuant to and in accordance with the terms of this Section, you will not be entitled to other compensation or benefits from the Company after termination of employment except any vested benefits accrued before the termination of employment under the terms of any Company qualified retirement plan or written benefit plan applicable to you (“Vested Rights”) and, to the degree provided for under applicable Company policy, unpaid salary and accrued (in accordance with Company policy) but unused Personal Time Off through the date of termination. Notwithstanding the foregoing, you and your qualified beneficiaries shall continue to be entitled to elect continuation coverage under the federal law known as COBRA, in accordance with the terms of that law.

 
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(a) “ Cause ” for termination without Severance Pay means termination due to your death or for any of the following reasons:

(i)  
you are convicted of, or plead “guilty” or “no contest” to, any crime (whether or not involving the Company) constituting a felony or involving moral turpitude in the jurisdiction involved;
(ii)  
you are guilty of gross neglect or misconduct in the performance of your duties;
(iii)  
your willful failure or refusal to perform your duties;
(iv)  
your material violation of this Agreement or the Company’s policies;
(v)  
you engage in conduct which is materially injurious or materially damaging to the Company or the reputation of the Company; or
(vi)  
you are unable to substantially perform your job duties for a continuous period of 90 days or for 120 days in any 12 month period due to physical or mental disability.

In order for the Company to terminate your employment for “Cause”, the Company must notify you in writing of the specific act or omission constituting “Cause”.  If the “Cause” arises under Section 7(a)(ii), 7(a)(iii), 7(a)(iv), or 7(a)(v), the Company must give you thirty (30) days to correct the act or omission constituting “Cause”. If you do not correct it, the Company may terminate your employment for “Cause” by written notice delivered to you within the following thirty days.  The foregoing notwithstanding, in the event that you are terminated for “Cause” (pursuant to any provision of Section 7(a)) as the result of your theft of Company property, your embezzlement or fraud relating to the Company, an act of physical violence by you causing bodily harm to another person on Company property or off Company property but in the performance of your duties as a Company employee, or your coming to work under the influence of alcohol or a controlled substance (except prescription drugs used as prescribed) , you shall not be entitled to a cure period or right to correct and the Company may effect termination for “Cause” immediately upon written notice to you.  In addition, the Company reserves the right to suspend your employment with pay or to alter your duties during any cure period, if in the Company’s sole discretion, the Company reasonably believes it is in the best interests of the Company’s business to do so during said cure period, provided no such suspension or alteration will materially interfere with your right to cure if applicable.
 
 

 
4

 


If the Company becomes aware after termination of your employment other than for Cause that you directly engaged in embezzlement or fraud relating to the Company before the termination, the Company may re‐characterize your termination as having been for Cause. If such a post‐termination finding of Cause occurs and severance payments are discontinued, then any General Release signed by you shall be considered null and void. If the Company recharacterizes the termination as being for Cause as provided above, you may, within ten (10) days of receiving notice of such termination, request in writing a meeting with the Company’s President & CEO to appeal the finding of Cause as the basis of your termination; such hearing to be held within a reasonable time following receipt by the Company of your written request.
 
 
(b) “ Good Reason ” for you to terminate your employment with Severance Pay means any of the following, except when done with your consent:
 
(i)  
A material diminution in your base compensation other than a proportional reduction pursuant to a Company‐wide reduction of all executive salaries due to economic conditions .
 
 
(ii)  
A material diminution in your authority, duties, or responsibilities.
 
 
(iii)  
A material change in the geographic location at which you must perform the services.
 
 
(iv)  
Any other action or inaction that constitutes a material breach of this Agreement by the Company
 
In order for you to be entitled to resign for “Good Reason”, you must first notify either the Company’s President & CEO or the Company’s Chief Legal Officer in writing of the specific act or omission constituting “Good Reason” within a period not to exceed ninety (90) days of the initial existence of the condition, upon the notice of which the Company shall have thirty (30) days to remedy the condition.  If the Company does not remedy or otherwise correct the condition noticed within the thirty (30) day period, you may resign for “Good Reason” by written notice delivered to either the Company’s President & CEO or the Company’s Chief Legal Officer within the following thirty days.

(c)  " Change in Control " means (i) a corporate reorganization or other transaction (or series of related transactions)   involving the Company or Idea Sphere Inc., a Michigan corporation and the parent corporation of the Company (“Parent”), which results in either (A) the shareholders of Parent immediately prior to such reorganization or other transaction owning less than 50% of the combined voting power of the capital stock of the surviving company immediately following such reorganization or other transaction or (B) Parent owning less than 50% of the combined voting power or capital stock of Company immediately following such reorganization or other transaction; or (ii) the sale of all or substantially all of the assets of the Company or the Parent; or (iii) if Continuing Directors at any time fail to constitute at least a majority of the Board of Parent.  In addition, notwithstanding anything contained in this Agreement to the contrary, if your employment is terminated prior to a Change of Control and you reasonably demonstrate that such termination was at the request of or in response to a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control (a “Third Party”), and who subsequently effectuates a Change of Control, then for all purposes of this Agreement, the date of a Change of Control shall mean the date immediately prior to the date of such termination of your employment.

 
5

 


(d)  “ Continuing Directors ” means the individuals who were either (i) first elected or appointed as a director of Parent prior to the date of this Agreement, or (ii) subsequently appointed as a director of Parent, if appointed or nominated by at least a majority of the Continuing Directors in office at the time of the nomination or appointment, but specifically excluding any individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors of the Parent.

 
(e) “ Severance Pay ” will consist of:

(i)  
Continuation of your salary for 26 weeks following the date on which your employment terminates, in the event that both (A) you are either terminated by the Company other than for Cause or resign from the Company for Good Reason, and (B) the date on which your employment terminates is not within six (6) months after the effective date of a Change of Control.
(ii)  
Continuation of your salary for fifty-two (52) weeks following the date on which your employment terminates, in the event that both (A) you either are terminated by the Company other than for Cause or resign from the Company for Good Reason, and (B) the date on which your employment with the Company terminates is within six (6) months after the effective date of a Change of Control.
(iii)  
In the event that salary continuation is available pursuant to either Section 7(e)(i) or 7(e)(ii), the Company will, at its sole discretion, provide one of the following benefits:
A.  
Contribution by the Company toward your COBRA premiums (for you and your qualified beneficiaries) at the same percentage rate of contribution as the Company made towards your medical and dental coverage premiums during your period of employment for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section (subject at all times to (1) your continued payment of the remaining COBRA premiums not covered by the Company contribution referenced above and (2) your continued eligibility for COBRA coverage).  To the extent required by law, or if the Company reasonably deems it necessary to avoid taxation of benefits to you, the Company may treat the contributions as taxable income, in which case they will be reported as W-2 compensation and subject to appropriate payroll tax withholding.

 
6

 


B.  
Reimbursement by the Company for a portion of your COBRA premiums (for you and your qualified beneficiaries).  The reimbursement amount will be a percentage of the COBRA premiums equal to the percentage rate of contribution as the Company made towards your medical and dental coverage premiums during your period of employment and will be paid for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section (subject at all times to (1) your continued payment of the COBRA premiums in full and (2) your continued eligibility for COBRA coverage).  To the extent required by law, or if the Company reasonably deems it necessary to avoid taxation of benefits to you, the Company may treat the reimbursements as taxable income, in which case they will be reported as W-2 compensation and subject to appropriate payroll tax withholding.
C.  
An increase in your salary continuation payments that, on a monthly basis, is equal to the contribution amount that the Company made on a monthly basis towards your medical and dental coverage premiums during your period of employment, continuing for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section but in no event any longer than the period for which COBRA continuation coverage would be available.  This amount is taxable income, and will be reported as W-2 compensation and subject to appropriate payroll tax withholding.
(iv)  
In the event that salary continuation is available pursuant to either Section 7(e)(i) or 7(e)(2), up to $5,000 of outplacement assistance from an outplacement assistance firm selected by you and approved by the Company (whose approval will not be unreasonably withheld); such assistance to be used within six (6) months of the date of your termination of employment with the Company.  The Company will contract directly with the approved outplacement assistance firm and will make payment for services directly to such firm.

In the event of your death while receiving Severance Pay, your designated beneficiary (or, if none, your estate) will receive the remaining Severance Pay.

(f) Conditions to Severance Pay . To be eligible for Severance Pay, you must meet the following conditions:

 
7

 


(i)  
You must promptly sign and continue to honor a general release, in a form acceptable to the Company, of any and all claims that you might otherwise have relating to the termination of your employment, or relating to any other act, omission or statement up to the date on which you execute the general release, against the Company, the Company’s Affiliates (defined as other entities controlling, controlled by, or under common control with the Company), and the officers, directors, employees, owners, and agents of the Company and each Affiliate, provided that the release will not waive your right to the Severance Pay, your Vested Rights (as defined above), or any rights you may otherwise have to indemnification under the Company’s Articles of Incorporation or Bylaws for acts or omissions during your employment with the Company.
(ii)  
You must resign (upon written request by Company) from all positions with or representing the Company or any Affiliate, including but not limited to membership on boards of directors.
(iii)  
You must provide the Company for a period of 90 days after the employment termination date with consulting services regarding matters within the scope of your former duties, upon request by the Company’s President & CEO, provided that you will only be required to provide those services by telephone at your reasonable convenience and without substantial interference with your other activities or commitments.
(iv)  
To maintain continuing eligibility for Severance Pay, you must comply with the Covenant Not to Compete and all other provisions of Section 9 below.

 
(g) Offsets to Severance Pay . Severance Pay for any week will be reduced by:

(i)  
any disability benefits to which you are entitled for that week under any disability insurance policy or program (including but not limited to worker’s disability compensation);
(ii)  
any severance pay payable to you by the Company under any other agreement or Company policy;
(iii)  
any payment due to you under the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance; and
(iv)  
any amounts that you owe to the Company.

 
8

 


8. Withholding and Deductions . All pay and benefits will be subject to withholding and deductions required by law or court order.

9. Other Matters .

(a) Loyalty and Confidentiality; Certain Property and Information .

(i)   Loyalty and Confidentiality . You will be loyal to the Company during your employment and will forever hold in the strictest confidence, and not use or disclose, any non‐public information about the Company or any Affiliate or their businesses, including but not limited to information regarding techniques, processes, developmental or experimental work, financial or ownership information, trade secrets, customer or prospect names or information, current or planned products, services, sales, vendors and employees, except as disclosure or use may be required in connection with your work for the Company or such Affiliate. Your commitment not to use or disclose information does not apply to information that becomes publicly known without any breach of this Agreement by you, or which was legally in your possession, without violation of any person’s duty of confidentiality to the Company or any Affiliate, prior to your employment with the Company or an Affiliate. In the event you are requested or compelled by court order, decree, subpoena or other process or requirement of law to disclose confidential information you shall to the extent permissible and practicable under the circumstances provide reasonably prompt written notice (unless such notice is prohibited by law) to the Company of any such requirement so that the Company may, at its option and expense, seek a protective order or other appropriate remedy. You agree to cooperate with the Company in any such proceeding, at the expense of the Company, provided that the foregoing shall not be construed to require you to undertake litigation or other legal proceedings on its own behalf. In the event that such protective order or other remedy is not obtained, you agree to furnish only that portion of the confidential information which you are advised by your own counsel should be disclosed and, at the Company’s expense, to use reasonable efforts to obtain assurance that confidential treatment will be accorded the information. Your commitments in this section will continue in effect after termination of the Employment.

(ii)   Certain Property and Information . Upon termination of your employment, you will deliver to the Company any and all property of the Company or any Affiliate and any and all materials and information (in whatever form) relating to the business of the Company or any Affiliate, including without limitation all customer lists and information, financial information, business notes, business plans, documents, keys, credit cards and company provided computers, automobiles or other equipment. All such property will be returned promptly and in good condition except for normal wear.

 
9

 


Your commitment to this Section 9(a) will continue in effect after termination of your employment. The parties agree that any breach of your covenants in this Section 9(a) would cause the Company irreparable harm, and that injunctive relief would be appropriate.

(b) Ideas, Concepts, Inventions and Other Intellectual Property . All business ideas and concepts and all inventions, improvements, developments and other intellectual property made or conceived by you, either solely or in collaboration with others, during your employment, whether or not during working hours, and relating to the business or any aspect of the business of the Company or any Affiliate or to any business or product the Company or any Affiliate is actively planning to enter or develop, shall become and remain the exclusive property of the Company, and the Company’s successors and assigns. You shall disclose promptly in writing to the Company all such inventions, improvements, developments and other intellectual property, and will cooperate in confirming, protecting, and obtaining legal protection of the Company’s ownership rights. Your commitments in this Section 9(b) will continue in effect after termination of your employment as to ideas, concepts, inventions, improvements and developments, and other intellectual property made or conceived in whole or in part before the date your employment terminates. The parties agree that any breach of your covenants in this Section 9(b) would cause the Company irreparable harm, and that injunctive relief would be appropriate.

You represent and warrant that except as may be described on an Exhibit to this Agreement signed separately by you and the Chief Legal Officer, there are no ideas, concept, inventions, improvements, developments, or other intellectual property that you invented or conceived before becoming employed by the Company to which you, or any assignee of you, now claims title and are to be excluded from this Agreement.

(c) Non‐Contravention . You represent and warrant that:

(i)  
No Restrictive Agreements . You are not party to or bound by any agreement that purports to prohibit or restrict you from:
o  
engaging in your employment pursuant hereto; or
o  
using any information and expertise that you possess (other than information constituting a trade secret of another person or firm under applicable law) for the benefit of the Company.

 
10

 


(ii)  
No Abuse of Trade Secrets . You will not use in the course of your employment, or disclose to the Company or its personnel, any information belonging to any other person that constitutes a trade secret of another person under applicable law.

Your representations and warranties in this Section 9(c) shall continue in effect after termination of employment only as to any breach during your employment.

(d) Covenant Not to Compete . During your employment and to maintain continued eligibility for Severance Pay, if any, you agree as follows:

i. Non‐Compete . You will not (A) directly or indirectly compete with the Company, or (B) be employed by, perform services for, advise or assist, own any interest in or loan or otherwise provide funds to any other business that is engaged (or seeking your services with a view to becoming engaged) in any Competitive Business. “Competitive Business” means a business that is engaged directly or indirectly in (X) the business of developing, manufacturing, marketing (including catalogue and mail order marketing), selling and/or distributing (including wholesale distributing) vitamins, minerals, nutrition supplements (including, without limitation, amino acids and proteins), herbal products, phytonutrients, herb teas, nutritional drinks, or food bars, and (Y) any other business engaged in by the Company or any Affiliate or being actively developed by management of the Company or such Affiliate.

ii. No Interference with Covered Relationships . You will not directly or indirectly solicit, or provide assistance to anyone else seeking to solicit, any person having or contemplating a Covered Relationship (“Covered Relationship” means a customer, vendor, employment or any other contractual or independent contractor relationship) with the Company or an Affiliate to refrain from entering into or terminating the Covered Relationship, or entering into any similar relationship with anyone else instead of the Company or such Affiliate.

 
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iii. Exceptions . Nothing in this Section 9(d) prohibits you from owning not more than 2% of any class of securities of publicly traded entity, provided that you do not engage in other activity prohibited by this Section 9.  In addition, you have notified the Company that based on a longstanding personal relationship with the founder, you have in the past provided, and wish to continue to provide, part-time consulting services to Vitasource, Inc., including activities such as reviewing monthly financial statements and advising Vitasource on methods to “professionalize” their business from a financial and administrative perspective.  You have further notified the Company that in exchange for the services you have provided to Vitasource you have received an ownership interest in Vitasource currently equal to approximately 6%, and that you may in the future be offered additional equity and/or asked join Vitasource’s Board of Directors.  The prohibitions of Section 9(d) notwithstanding, the Company hereby grants your request to continue to provide consulting services to Vitasource Inc. on a similar basis as you have in the past and, if requested, sit on Vitasource’s Board of Directors during your employment with the Company (and any applicable severance period), provided at all times that: (a) your work for Vitasource is performed solely on your personal time during off-hours from your work with the Company and does not, in the Company’s sole discretion, materially infringe on  your ability to perform your duties for the Company as required pursuant to this Agreement; (b) you do not utilize Company resources for such consulting work; (c) you do not violate your obligations of confidentiality with respect to Company information; and (d) your equity ownership interest in Vitasource does not exceed 10%.     

Your commitments in this Section 9(d) will continue in effect after termination of employment and so long as you are receiving any Severance Pay. It is agreed that the Company shall not seek to prevent you from gaining employment with a Competitive Business, but that acceptance by you of such employment will automatically terminate your right to any continued Severance Pay to which you may otherwise be entitled under Section 7.

(e) Conflicts of Interest . During your employment, you will not acquire any financial interest in, accept gifts or favors from, or establish any relationship other than on behalf of the Company with, any customer, supplier, distributor, or other person who does or seeks to do business with the Company, unless you have disclosed the financial interest, gift, favor, or relationship to the Company’s Chief Legal Officer in writing and have received written approval for that activity or transaction; provided, however, that this restriction does not apply to casual and normal social/business relationships that do not involve exchange of money, gifts or favors other than normal business expenditures such as lunches or event attendance without significant cost.

 
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If any member of your family engages or proposes to engage in any relationship or activity that would be covered by the preceding sentence if engaged in by you, you will immediately disclose that proposed or actual relationship or activity as provided above.

10.   Section 409A . This Agreement is intended to be exempt from Section 409A of the Internal Revenue Code as an involuntary separation pay plan as that term is understood under Treasury Regulation § 1.409A-1(b)(9) and shall be interpreted and operated consistently with those intentions.

11. Entire Agreement, Waiver of Claims . You agree that this Agreement contains all commitments and obligations of the Company to you, and all your commitments and obligations to the Company, and that any and all prior agreements, commitments, or obligations, including but not limited to any commission or commission override agreements, are hereby superseded and cancelled.

12. Amendments and Waivers . This Agreement cannot be amended, and the obligations under this Agreement cannot be waived, unless the amendment or waiver is agreed to in writing by you and Company’s President & CEO. No failure to pursue any breach or non‐performance of this Agreement shall be deemed a waiver of any prior or subsequent breach or non‐performance.

13. Arbitration . Any dispute or controversy between the parties hereto, whether during the employment term or thereafter, including without limitation, any and all matters relating to this Agreement, your employment with the Company and the cessation thereof, and all matters arising under any federal, state, or local statute, rule or regulation, or principle of contract law or common law, including but not limited to any medical leave statutes, wage payment statutes, employment discrimination statutes, employee benefit statutes, and any other equivalent federal, state, or local statute, will be settled by arbitration administered by the American Arbitration Association (“AAA”) in New York, New York. The arbitration will be conducted pursuant to AAA’s National Rules for Resolution of Employment Disputes (or their equivalent), which arbitration will be confidential, final, and binding to the fullest extent permitted by law. There shall be one (1) arbitrator, selected jointly by the parties hereto, or if the parties cannot so agree on a single arbitrator, selected in accordance with AAA’s procedures. Each party hereto will be responsible for paying its attorney’s fees and costs incurred under this Section 13, except as may otherwise be provided by the arbitrator in order to comply with applicable substantive law. Further, the parties hereto will equally share any costs levied by the AAA, including the cost of the arbitrator and use of a hearing room, provided that you will not be obliged to pay for any portion of such costs beyond the maximum amount permitted in order that this arbitration provision be legally enforceable.

 
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14. Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws principles.

To accept employment on the terms of this Agreement, please sign below.
 
 
Very truly,

/S/ Thomas A. Tolworthy                
Thomas A. Tolworthy
President & CEO

By signing below I accept continued employment with Twinlab Corporation on the terms of this Agreement.


/S/ Mark R. Jaggi                       
Mark R. Jaggi
 
 
Date: ___________________________________
 

 

 
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EXHIBIT 10.3
 
January 2, 2012
CONFIDENTIAL

Richard H. Neuwirth
c/o Twinlab Corporation
632 Broadway, Suite 201
New York, NY 10012

Dear Rich:

I am pleased to offer you continued employment as an executive of Twinlab Corporation (hereinafter the “Company”), on the terms set forth in this letter (“Agreement”).

You may choose to accept this offer by countersigning this Agreement in the space provided below and returning the same to Linda Yost in the Company’s Utah offices (address below) within five (5) business days following the date above.  Upon your acceptance as provided above, this Agreement shall be effective as of the date first stated above. Please note that if you accept this offer of continued employment, you will accept the terms of this Agreement in lieu of any previous employment agreements, commission agreements, fee agreements, severance pay agreements or other commitments regarding employment made to you by the Company, and you will waive any and all claims under such agreements .
 
 
1. Terms of Employment . The terms of our employment relationship shall continue to be at will and subject to termination by you or the Company at any time for any reason or no reason, with or without cause. However, if the Company terminates your employment at any time other than for “Cause” (defined in Section 7(a) below) or if you terminate your employment with the Company at any time for “Good Reason” (defined in Section 7(b) below), during the term of this Agreement you will receive Severance Pay as provided for in Section 7.

2. Position, Duties, and Office Location . Your position should you accept this offer of continued employment will continue to be Executive Vice-President, Chief Legal Officer and General Counsel. You will report to the Company’s President & CEO. The Company may, with your consent, transfer you to other executive level positions, if consistent with your skills and experience, within the Company or an affiliated company, and this Agreement may be assigned by the Company to any of its affiliated companies.  This full-time position will be based in the Company’s New York offices, currently located at 632 Broadway, Suite 201, New York, New York.  The Company may transfer you to another office location but only if such other office is located within 50 miles of your initial office location in the Company’s New York office.  A transfer to an office located more than 50 miles from your initial office location will be deemed a material change in the geographic location at which you must perform the services pursuant to this Agreement.

 
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Your duties will be executive level duties commensurate with your position. You will be loyal to the Company during the employment and devote your full time business efforts and attention to your employment, provided that you may engage in civic and professional activities that do not interfere with your employment, and you may accept positions on boards of directors of other entities with the advance approval of the Company’s President & CEO.
 
 
3. Salary . Your base salary will be Two Hundred and Fifty Thousand Dollars ($250 ,000 ) per year, which shall be paid in accordance with the Company’s normal payroll practices, currently bi‐weekly pay periods, and from which the Company shall withhold taxes in accordance with applicable regulations.  Your salary will be subject to annual review by the Company.  However, if your salary is materially reduced from the rates set forth above , except as provided for in Section 7(b)(i), you will have the right to resign for Good Reason pursuant to and in accordance with the terms of Section 7(b) below.

4. Bonus .   It is the Company’s intent to create an annual performance bonus schedule that will provide you and other key executives with an annual bonus opportunity based upon the Company’s profitability.  It is currently the intent of the Company to present such a bonus program to the Company’s Board of Directors for approval, with the intent that upon such approval the plan would become effective for the calendar year commencing January 1, 2012.  For each subsequent year, the Company retains the right to annually review and modify the set(s) of metrics that determine how and the extent to which bonus opportunities are achieved for such subsequent year.

To the degree you are entitled to a performance bonus pursuant to the applicable bonus schedule for a given year, your performance bonus will be paid to you, less any required taxes and withholding in accordance with applicable regulations, by March 15 of the following year (or in the event that the Company changes its fiscal year to be other than a calendar year, then within 45 days of the close of the applicable fiscal year).
 
 
5. Fringe Benefits . As a full-time employee, you will continue to be entitled to participate in the Company’s comprehensive benefits programs. The specific terms of all benefit programs are as set out in applicable policy statements, program documents, and insurance policies, and are subject to change at any time in the Company’s sole discretion.  You will continue to accrue paid time off (PTO), in accordance with the Company’s PTO policy, at the rate of twenty-five (25) days per calendar year.

 
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6. Business Expenses . You will be reimbursed for business expenses that you incur during your employment, including business related travel expenses, in accordance with the Company’s business expense policy and subject to documentation requirements as provided in that policy.

7. Severance Pay . You will be entitled to Severance Pay as described in this Section if the Company terminates your employment other than for “Cause”, or if you terminate your employment for “Good Reason”, both as defined below. Except for such Severance Pay as may be available to you pursuant to and in accordance with the terms of this Section, you will not be entitled to other compensation or benefits from the Company after termination of employment except any vested benefits accrued before the termination of employment under the terms of any Company qualified retirement plan or written benefit plan applicable to you (“Vested Rights”) and, to the degree provided for under applicable Company policy, unpaid salary and accrued (in accordance with Company policy) but unused Personal Time Off through the date of termination. Notwithstanding the foregoing, you and your qualified beneficiaries shall continue to be entitled to elect continuation coverage under the federal law known as COBRA, in accordance with the terms of that law.

(a) “ Cause ” for termination without Severance Pay means termination due to your death or for any of the following reasons:

(i)  
you are convicted of, or plead “guilty” or “no contest” to, any crime (whether or not involving the Company) constituting a felony or involving moral turpitude in the jurisdiction involved;
(ii)  
you are guilty of gross neglect or misconduct in the performance of your duties;
(iii)  
your willful failure or refusal to perform your duties;
(iv)  
your material violation of this Agreement or the Company’s policies;
(v)  
you engage in conduct which is materially injurious or materially damaging to the Company or the reputation of the Company; or
(vi)  
you are unable to substantially perform your job duties for a continuous period of 90 days or for 120 days in any 12 month period due to physical or mental disability.

 
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In order for the Company to terminate your employment for “Cause”, the Company must notify you in writing of the specific act or omission constituting “Cause”.  If the “Cause” arises under Section 7(a)(ii), 7(a)(iii), 7(a)(iv), or 7(a)(v), the Company must give you thirty (30) days to correct the act or omission constituting “Cause”. If you do not correct it, the Company may terminate your employment for “Cause” by written notice delivered to you within the following thirty days.  The foregoing notwithstanding, in the event that you are terminated for “Cause” (pursuant to any provision of Section 7(a)) as the result of your theft of Company property, your embezzlement or fraud relating to the Company, an act of physical violence by you causing bodily harm to another person on Company property or off Company property but in the performance of your duties as a Company employee, or your coming to work under the influence of alcohol or a controlled substance (except prescription drugs used as prescribed) , you shall not be entitled to a cure period or right to correct and the Company may effect termination for “Cause” immediately upon written notice to you.  In addition, the Company reserves the right to suspend your employment with pay or to alter your duties during any cure period, if in the Company’s sole discretion, the Company reasonably believes it is in the best interests of the Company’s business to do so during said cure period, provided no such suspension or alteration will materially interfere with your right to cure if applicable.
 
 
If the Company becomes aware after termination of your employment other than for Cause that you directly engaged in embezzlement or fraud relating to the Company before the termination, the Company may re‐characterize your termination as having been for Cause. If such a post‐termination finding of Cause occurs and severance payments are discontinued, then any General Release signed by you shall be considered null and void. If the Company recharacterizes the termination as being for Cause as provided above, you may, within ten (10) days of receiving notice of such termination, request in writing a meeting with the Company’s President & CEO to appeal the finding of Cause as the basis of your termination; such hearing to be held within a reasonable time following receipt by the Company of your written request.
 
 
(b) “ Good Reason ” for you to terminate your employment with Severance Pay means any of the following, except when done with your consent:
 
(i)  
A material diminution in your base compensation other than a proportional reduction pursuant to a Company‐wide reduction of all executive salaries due to economic conditions .
 
 
(ii)  
A material diminution in your authority, duties, or responsibilities.
 
 
(iii)  
A material change in the geographic location at which you must perform the services.
 

 
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(iv)  
Any other action or inaction that constitutes a material breach of this Agreement by the Company.
 
In order for you to be entitled to resign for “Good Reason”, you must first notify either the Company’s President & CEO or the Company’s Chief Legal Officer in writing of the specific act or omission constituting “Good Reason” within a period not to exceed ninety (90) days of the initial existence of the condition, upon the notice of which the Company shall have thirty (30) days to remedy the condition.  If the Company does not remedy or otherwise correct the condition noticed within the thirty (30) day period, you may resign for “Good Reason” by written notice delivered to either the Company’s President & CEO or the Company’s Chief Legal Officer within the following thirty days.

(c)  " Change in Control " means (i) a corporate reorganization or other transaction (or series of related transactions)   involving the Company or Idea Sphere Inc., a Michigan corporation and the parent corporation of the Company (“Parent”), which results in either (A) the shareholders of Parent immediately prior to such reorganization or other transaction owning less than 50% of the combined voting power of the capital stock of the surviving company immediately following such reorganization or other transaction or (B) Parent owning less than 50% of the combined voting power or capital stock of Company immediately following such reorganization or other transaction; or (ii) the sale of all or substantially all of the assets of the Company or the Parent; or (iii) if Continuing Directors at any time fail to constitute at least a majority of the Board of Parent.  In addition, notwithstanding anything contained in this Agreement to the contrary, if your employment is terminated prior to a Change of Control and you reasonably demonstrate that such termination was at the request of or in response to a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control (a “Third Party”), and who subsequently effectuates a Change of Control, then for all purposes of this Agreement, the date of a Change of Control shall mean the date immediately prior to the date of such termination of your employment.

(d)  “ Continuing Directors ” means the individuals who were either (i) first elected or appointed as a director of Parent prior to the date of this Agreement, or (ii) subsequently appointed as a director of Parent, if appointed or nominated by at least a majority of the Continuing Directors in office at the time of the nomination or appointment, but specifically excluding any individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors of the Parent.

 
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(e) “ Severance Pay ” will consist of:

(i)  
Continuation of your salary for 26 weeks following the date on which your employment terminates, in the event that both (A) you are either terminated by the Company other than for Cause or resign from the Company for Good Reason, and (B) the date on which your employment terminates is not within six (6) months after the effective date of a Change of Control.
(ii)  
Continuation of your salary for fifty-two (52) weeks following the date on which your employment terminates, in the event that both (A) you either are terminated by the Company other than for Cause or resign from the Company for Good Reason, and (B) the date on which your employment with the Company terminates is within six (6) months after the effective date of a Change of Control.
(iii)  
In the event that salary continuation is available pursuant to either Section 7(e)(i) or 7(e)(ii), the Company will, at its sole discretion, provide one of the following benefits:
A.  
Contribution by the Company toward your COBRA premiums (for you and your qualified beneficiaries) at the same percentage rate of contribution as the Company made towards your medical and dental coverage premiums during your period of employment for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section (subject at all times to (1) your continued payment of the remaining COBRA premiums not covered by the Company contribution referenced above and (2) your continued eligibility for COBRA coverage).  To the extent required by law, or if the Company reasonably deems it necessary to avoid taxation of benefits to you, the Company may treat the contributions as taxable income, in which case they will be reported as W-2 compensation and subject to appropriate payroll tax withholding.
B.  
Reimbursement by the Company for a portion of your COBRA premiums (for you and your qualified beneficiaries).  The reimbursement amount will be a percentage of the COBRA premiums equal to the percentage rate of contribution as the Company made towards your medical and dental coverage premiums during your period of employment and will be paid for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section (subject at all times to (1) your continued payment of the COBRA premiums in full and (2) your continued eligibility for COBRA coverage).  To the extent required by law, or if the Company reasonably deems it necessary to avoid taxation of benefits to you, the Company may treat the reimbursements as taxable income, in which case they will be reported as W-2 compensation and subject to appropriate payroll tax withholding.

 
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C.  
An increase in your salary continuation payments that, on a monthly basis, is equal to the contribution amount that the Company made on a monthly basis towards your medical and dental coverage premiums during your period of employment, continuing for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section but in no event any longer than the period for which COBRA continuation coverage would be available.  This amount is taxable income, and will be reported as W-2 compensation and subject to appropriate payroll tax withholding.
(iv)  
In the event that salary continuation is available pursuant to either Section 7(e)(i) or 7(e)(2), up to $5,000 of outplacement assistance from an outplacement assistance firm selected by you and approved by the Company (whose approval will not be unreasonably withheld); such assistance to be used within six (6) months of the date of your termination of employment with the Company.  The Company will contract directly with the approved outplacement assistance firm and will make payment for services directly to such firm.

In the event of your death while receiving Severance Pay, your designated beneficiary (or, if none, your estate) will receive the remaining Severance Pay.

(f) Conditions to Severance Pay . To be eligible for Severance Pay, you must meet the following conditions:

(i)  
You must promptly sign and continue to honor a general release, in a form acceptable to the Company, of any and all claims that you might otherwise have relating to the termination of your employment, or relating to any other act, omission or statement up to the date on which you execute the general release, against the Company, the Company’s Affiliates (defined as other entities controlling, controlled by, or under common control with the Company), and the officers, directors, employees, owners, and agents of the Company and each Affiliate, provided that the release will not waive your right to the Severance Pay, your Vested Rights (as defined above), or any rights you may otherwise have to indemnification under the Company’s Articles of Incorporation or Bylaws for acts or omissions during your employment with the Company.

 
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(ii)  
You must resign (upon written request by Company) from all positions with or representing the Company or any Affiliate, including but not limited to membership on boards of directors.
(iii)  
You must provide the Company for a period of 90 days after the employment termination date with consulting services regarding matters within the scope of your former duties, upon request by the Company’s President & CEO, provided that you will only be required to provide those services by telephone at your reasonable convenience and without substantial interference with your other activities or commitments.
(iv)  
To maintain continuing eligibility for Severance Pay, you must comply with the Covenant Not to Compete and all other provisions of Section 9 below.

 
(g) Offsets to Severance Pay . Severance Pay for any week will be reduced by:

(i)  
any disability benefits to which you are entitled for that week under any disability insurance policy or program (including but not limited to worker’s disability compensation);
(ii)  
any severance pay payable to you by the Company under any other agreement or Company policy;
(iii)  
any payment due to you under the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance; and
(iv)  
any amounts that you owe to the Company.

8. Withholding and Deductions . All pay and benefits will be subject to withholding and deductions required by law or court order.

9. Other Matters .

(a) Loyalty and Confidentiality; Certain Property and Information .

 
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(i)   Loyalty and Confidentiality . You will be loyal to the Company during your employment and will forever hold in the strictest confidence, and not use or disclose, any non‐public information about the Company or any Affiliate or their businesses, including but not limited to information regarding techniques, processes, developmental or experimental work, financial or ownership information, trade secrets, customer or prospect names or information, current or planned products, services, sales, vendors and employees, except as disclosure or use may be required in connection with your work for the Company or such Affiliate. Your commitment not to use or disclose information does not apply to information that becomes publicly known without any breach of this Agreement by you, or which was legally in your possession, without violation of any person’s duty of confidentiality to the Company or any Affiliate, prior to your employment with the Company or an Affiliate. In the event you are requested or compelled by court order, decree, subpoena or other process or requirement of law to disclose confidential information you shall to the extent permissible and practicable under the circumstances provide reasonably prompt written notice (unless such notice is prohibited by law) to the Company of any such requirement so that the Company may, at its option and expense, seek a protective order or other appropriate remedy. You agree to cooperate with the Company in any such proceeding, at the expense of the Company, provided that the foregoing shall not be construed to require you to undertake litigation or other legal proceedings on its own behalf. In the event that such protective order or other remedy is not obtained, you agree to furnish only that portion of the confidential information which you are advised by your own counsel should be disclosed and, at the Company’s expense, to use reasonable efforts to obtain assurance that confidential treatment will be accorded the information. Your commitments in this section will continue in effect after termination of the Employment.

(ii)   Certain Property and Information . Upon termination of your employment, you will deliver to the Company any and all property of the Company or any Affiliate and any and all materials and information (in whatever form) relating to the business of the Company or any Affiliate, including without limitation all customer lists and information, financial information, business notes, business plans, documents, keys, credit cards and company provided computers, automobiles or other equipment. All such property will be returned promptly and in good condition except for normal wear.

 
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Your commitment to this Section 9(a) will continue in effect after termination of your employment. The parties agree that any breach of your covenants in this Section 9(a) would cause the Company irreparable harm, and that injunctive relief would be appropriate.

(b) Ideas, Concepts, Inventions and Other Intellectual Property . All business ideas and concepts and all inventions, improvements, developments and other intellectual property made or conceived by you, either solely or in collaboration with others, during your employment, whether or not during working hours, and relating to the business or any aspect of the business of the Company or any Affiliate or to any business or product the Company or any Affiliate is actively planning to enter or develop, shall become and remain the exclusive property of the Company, and the Company’s successors and assigns. You shall disclose promptly in writing to the Company all such inventions, improvements, developments and other intellectual property, and will cooperate in confirming, protecting, and obtaining legal protection of the Company’s ownership rights. Your commitments in this Section 9(b) will continue in effect after termination of your employment as to ideas, concepts, inventions, improvements and developments, and other intellectual property made or conceived in whole or in part before the date your employment terminates. The parties agree that any breach of your covenants in this Section 9(b) would cause the Company irreparable harm, and that injunctive relief would be appropriate.

You represent and warrant that except as may be described on an Exhibit to this Agreement signed separately by you and the Chief Legal Officer, there are no ideas, concept, inventions, improvements, developments, or other intellectual property that you invented or conceived before becoming employed by the Company to which you, or any assignee of you, now claims title and are to be excluded from this Agreement.

(c) Non‐Contravention . You represent and warrant that:

(i)  
No Restrictive Agreements . You are not party to or bound by any agreement that purports to prohibit or restrict you from:
o  
engaging in your employment pursuant hereto; or
o  
using any information and expertise that you possess (other than information constituting a trade secret of another person or firm under applicable law) for the benefit of the Company.

 
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(ii)  
No Abuse of Trade Secrets . You will not use in the course of your employment, or disclose to the Company or its personnel, any information belonging to any other person that constitutes a trade secret of another person under applicable law.

Your representations and warranties in this Section 9(c) shall continue in effect after termination of employment only as to any breach during your employment.

(d) Covenant Not to Compete . During your employment and to maintain continued eligibility for Severance Pay, if any, you agree as follows:

i. Non‐Compete . You will not (A) directly or indirectly compete with the Company, or (B) be employed by, perform services for, advise or assist, own any interest in or loan or otherwise provide funds to any other business that is engaged (or seeking your services with a view to becoming engaged) in any Competitive Business. “Competitive Business” means a business that is engaged directly or indirectly in (X) the business of developing, manufacturing, marketing (including catalogue and mail order marketing), selling and/or distributing (including wholesale distributing) vitamins, minerals, nutrition supplements (including, without limitation, amino acids and proteins), herbal products, phytonutrients, herb teas, nutritional drinks, or food bars, and (Y) any other business engaged in by the Company or any Affiliate or being actively developed by management of the Company or such Affiliate.

ii. No Interference with Covered Relationships . You will not directly or indirectly solicit, or provide assistance to anyone else seeking to solicit, any person having or contemplating a Covered Relationship (“Covered Relationship” means a customer, vendor, employment or any other contractual or independent contractor relationship) with the Company or an Affiliate to refrain from entering into or terminating the Covered Relationship, or entering into any similar relationship with anyone else instead of the Company or such Affiliate.

iii. Exception . Nothing in this Section 9(d) prohibits you from owning not more than 2% of any class of securities of publicly traded entity, provided that you do not engage in other activity prohibited by this Section 9.

 
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Your commitments in this Section 9(d) will continue in effect after termination of employment and so long as you are receiving any Severance Pay. It is agreed that the Company shall not seek to prevent you from gaining employment with a Competitive Business, but that acceptance by you of such employment will automatically terminate your right to any continued Severance Pay to which you may otherwise be entitled under Section 7.

(e) Conflicts of Interest . During your employment, you will not acquire any financial interest in, accept gifts or favors from, or establish any relationship other than on behalf of the Company with, any customer, supplier, distributor, or other person who does or seeks to do business with the Company, unless you have disclosed the financial interest, gift, favor, or relationship to the Company’s Chief Legal Officer in writing and have received written approval for that activity or transaction; provided, however, that this restriction does not apply to casual and normal social/business relationships that do not involve exchange of money, gifts or favors other than normal business expenditures such as lunches or event attendance without significant cost.

If any member of your family engages or proposes to engage in any relationship or activity that would be covered by the preceding sentence if engaged in by you, you will immediately disclose that proposed or actual relationship or activity as provided above.

10.   Section 409A . This Agreement is intended to be exempt from Section 409A of the Internal Revenue Code as an involuntary separation pay plan as that term is understood under Treasury Regulation § 1.409A-1(b)(9) and shall be interpreted and operated consistently with those intentions.

11. Entire Agreement, Waiver of Claims . You agree that this Agreement contains all commitments and obligations of the Company to you, and all your commitments and obligations to the Company, and that any and all prior agreements, commitments, or obligations, including but not limited to any commission or commission override agreements, are hereby superseded and cancelled.

12. Amendments and Waivers . This Agreement cannot be amended, and the obligations under this Agreement cannot be waived, unless the amendment or waiver is agreed to in writing by you and Company’s President & CEO. No failure to pursue any breach or non‐performance of this Agreement shall be deemed a waiver of any prior or subsequent breach or non‐performance.

 
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13. Arbitration . Any dispute or controversy between the parties hereto, whether during the employment term or thereafter, including without limitation, any and all matters relating to this Agreement, your employment with the Company and the cessation thereof, and all matters arising under any federal, state, or local statute, rule or regulation, or principle of contract law or common law, including but not limited to any medical leave statutes, wage payment statutes, employment discrimination statutes, employee benefit statutes, and any other equivalent federal, state, or local statute, will be settled by arbitration administered by the American Arbitration Association (“AAA”) in New York, New York. The arbitration will be conducted pursuant to AAA’s National Rules for Resolution of Employment Disputes (or their equivalent), which arbitration will be confidential, final, and binding to the fullest extent permitted by law. There shall be one (1) arbitrator, selected jointly by the parties hereto, or if the parties cannot so agree on a single arbitrator, selected in accordance with AAA’s procedures. Each party hereto will be responsible for paying its attorney’s fees and costs incurred under this Section 13, except as may otherwise be provided by the arbitrator in order to comply with applicable substantive law. Further, the parties hereto will equally share any costs levied by the AAA, including the cost of the arbitrator and use of a hearing room, provided that you will not be obliged to pay for any portion of such costs beyond the maximum amount permitted in order that this arbitration provision be legally enforceable.

14. Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws principles.

To accept employment on the terms of this Agreement, please sign below.
 
 
Very truly,


/S/ Thomas A. Tolworthy                
Thomas A. Tolworthy
President & CEO

By signing below I accept continued employment with Twinlab Corporation on the terms of this Agreement.


/S/Richard Neuwirth                    
Richard H. Neuwirth
 
 

 
 
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EXHIBIT 10.4

September 7, 2011
CONFIDENTIAL

Kate Pastor-Dippold
1 Sky Terrace
Boonton NJ 07005

Dear Kate:

I am pleased to offer you a promotion to be an executive of Twinlab Corporation (hereinafter the “Company”), on the terms set forth in this letter (“Agreement”).

You may choose to accept this promotion by countersigning this Agreement in the space provided below and returning the same to Richard Neuwirth in the Company’s New York offices (address below) within 10 business days following the date above.  Upon your acceptance as provided above, this Agreement shall be effective as of the date first stated above. Please note that if you accept this offer of promotion, you will accept the terms of this Agreement in lieu of any previous employment agreements, commission override agreements, severance pay agreements or commitments made to you by the Company, and you will waive any and all claims under such agreements
 
 
1. Terms of Employment . The terms of our employment relationship shall continue to be at will and subject to termination by you or the Company at any time. However, if the Company terminates your employment at any time other than for “Cause” (defined in Section 7(a) below) or if you terminate your employment with the Company at any time for “Good Reason” (defined in Section 7(b) below), during the term of this Agreement you will receive Severance Pay as provided for in Section 7.

2. Position, Duties, and Office Location . Your position should you accept this promotion will be Executive Vice-President, Retail Sales. You will report to the Company’s President & CEO. You will be responsible to manage the Company’s branded product domestic retail sales operations within the organizational structure of such operations as may be set forth by the President & CEO from time to time. The Company may, with your consent, transfer you to other executive level positions, if consistent with your skills and experience, within the Company or an affiliated company, and this Agreement may be assigned by the Company to any of its affiliated companies.  You will continue to work out of your home office as part of the Company’s outside sales force, but you will also be provided with an office in the Company’s New York office.  The Company may transfer you to another office location but only if such other office is located within 50 miles of your initial office location in the Company’s New York office.  A transfer to an office located more than 50 miles from your initial office location will be deemed a material change in the geographic location at which you must perform the services pursuant to this Agreement.

 
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Your duties will be executive level duties commensurate with your position. You will be loyal to the Company during the employment and devote your full time business efforts and attention to your employment, provided that you may engage in civic and professional activities that do not interfere with your employment, and you may accept positions on boards of directors of other entities with the advance approval of the Company’s President & CEO.
 
 
3. Salary . Your initial base salary will be Three Hundred Thousand Dollars ($300,000) per year, which shall be paid in accordance with the Company’s normal payroll practices, currently bi‐weekly pay periods, and from which the Company shall withhold taxes in accordance with applicable regulations.  Your salary will be subject to annual review by the Company.  However, if your salary is materially reduced, except as provided for in Section 7(b)(i), you will have the right to resign for Good Reason pursuant to and in accordance with the terms of Section 7(b) below.

4. Bonus .   It is the Company’s intent of to create an annual performance bonus schedule that will provide you and other key executives with an annual bonus opportunity based upon the Company’s profitability.  It is currently the intent of the Company to present such a bonus program to the Company’s Board of Directors for approval, with the intent that upon such approval the plan would become effective for the calendar year commencing January 1, 2012.  For each subsequent year, the Company retains the right to annually review and modify the set(s) of metrics that determine how and the extent to which bonus opportunities are achieved for such subsequent year.

To the degree you are entitled to a performance bonus pursuant to the applicable bonus schedule for a given year, your performance bonus will be paid to you, less any required taxes and withholding in accordance with applicable regulations, by March 15 of the following year (or in the event that the Company changes its fiscal year to be other than a calendar year, then within 45 days of the close of the applicable fiscal year).
 
 
5. Fringe Benefits . You will be entitled to participate during your employment in the standard salaried employee benefit programs of the Company (or any affiliates to which the Company assigns this Agreement), and such other programs which may be applicable to your position consisting at least of employee and dependent health care coverage (specifics of coverage and employee contributions as provided in the plan), term life insurance (in an amount not to exceed any applicable statutory maximum), annual paid personal time off (“PTO,” which includes vacation and/or sick days) of five (5) weeks, short and long term disability programs, and the opportunity to participate in a 401(k) or other qualified retirement plan. The specific terms of all benefit programs are as set out in applicable policy statements, program documents, and insurance policies, and are subject to change at any time in the Company’s sole discretion, as long as programs having the above minimum provisions are provided. Newly eligible employees are entitled to participate in the Company’s group benefit and 401(k) plans on the first day of the month following 30 days of employment.

 
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6. Business Expenses . You will be reimbursed for business expenses that you incur during your employment, including business related travel expenses, in accordance with the Company’s business expense policy and subject to documentation requirements as provided in that policy.

7. Severance Pay . You will be entitled to Severance Pay as described in this Section if the Company terminates your employment other than for “Cause”, or if you terminate your employment for “Good Reason”, both as defined below. Except for such Severance Pay as may be available to you pursuant to and in accordance with the terms of this Section, you will not be entitled to other compensation or benefits from the Company after termination of employment except any vested benefits accrued before the termination of employment under the terms of any Company qualified retirement plan or written benefit plan applicable to you (“Vested Rights”) and, to the degree provided for under applicable Company policy, unpaid salary and accrued (in accordance with Company policy) but unused Personal Time Off through the date of termination. Notwithstanding the foregoing, you and your qualified beneficiaries shall continue to be entitled to elect continuation coverage under the federal law known as COBRA, in accordance with the terms of that law.

(a) “ Cause ” for termination without Severance Pay means termination due to your death or for any of the following reasons:

(i)  
you are convicted of, or plead “guilty” or “no contest” to, any crime (whether or not involving the Company) constituting a felony or involving moral turpitude in the jurisdiction involved;
(ii)  
you are guilty of gross neglect or misconduct in the performance of your duties;
(iii)  
your willful failure or refusal to perform your duties;
(iv)  
your material violation of this Agreement or the Company’s policies;
(v)  
you engage in conduct which is materially injurious or materially damaging to the Company or the reputation of the Company; or
(vi)  
you are unable to substantially perform your job duties for a continuous period of 90 days or for 120 days in any 12 month period due to physical or mental disability.

 
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In order for the Company to terminate your employment for “Cause”, the Company must notify you in writing of the specific act or omission constituting “Cause”.  If the “Cause” arises under Section 7(a)(ii), 7(a)(iii), 7(a)(iv), or 7(a)(v), the Company must give you thirty (30) days to correct the act or omission constituting “Cause”. If you do not correct it, the Company may terminate your employment for “Cause” by written notice delivered to you within the following thirty days.  The foregoing notwithstanding, in the event that you are terminated for “Cause” (pursuant to any provision of Section 7(a)) as the result of your theft of Company property, your embezzlement or fraud relating to the Company, an act of physical violence by you causing bodily harm to another person on Company property or off Company property but in the performance of your duties as a Company employee, or your coming to work under the influence of alcohol or a controlled substance (except prescription drugs used as prescribed) , you shall not be entitled to a cure period or right to correct and the Company may effect termination for “Cause” immediately upon written notice to you.  In addition, the Company reserves the right to suspend your employment with pay or to alter your duties during any cure period, if in the Company’s sole discretion, the Company reasonably believes it is in the best interests of the Company’s business to do so during said cure period, provided no such suspension or alteration will materially interfere with your right to cure if applicable.
 
 
If the Company becomes aware after termination of your employment other than for Cause that you directly engaged in embezzlement or fraud relating to the Company before the termination, the Company may re‐characterize your termination as having been for Cause. If such a post‐termination finding of Cause occurs and severance payments are discontinued, then any General Release signed by you shall be considered null and void. If the Company recharacterizes the termination as being for Cause as provided above, you may, within ten (10) days of receiving notice of such termination, request in writing a meeting with the Company’s President & CEO to appeal the finding of Cause as the basis of your termination; such hearing to be held within a reasonable time following receipt by the Company of your written request.
 
 
(b) “ Good Reason ” for you to terminate your employment with Severance Pay means any of the following, except when done with your consent:
 
(i)  
A material diminution in your base compensation other than a proportional reduction pursuant to a Company‐wide reduction of all executive salaries due to economic conditions .
 
 
(ii)  
A material diminution in your authority, duties, or responsibilities.
 
 
(iii)  
A material change in the geographic location at which you must perform the services.
 

 
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(iv)  
Any other action or inaction that constitutes a material breach of this Agreement by the Company
 
In order for you to be entitled to resign for “Good Reason”, you must first notify either the Company’s President & CEO or the Company’s Chief Legal Officer in writing of the specific act or omission constituting “Good Reason” within a period not to exceed ninety (90) days of the initial existence of the condition, upon the notice of which the Company shall have thirty (30) days to remedy the condition.  If the Company does not remedy or otherwise correct the condition noticed within the thirty (30) day period, you may resign for “Good Reason” by written notice delivered to either the Company’s President & CEO or the Company’s Chief Legal Officer within the following thirty days.

(c)  " Change in Control " means (i) a corporate reorganization or other transaction (or series of related transactions)   involving the Company or Idea Sphere Inc., a Michigan corporation and the parent corporation of the Company (“Parent”), which results in either (A) the shareholders of Parent immediately prior to such reorganization or other transaction owning less than 50% of the combined voting power of the capital stock of the surviving company immediately following such reorganization or other transaction or (B) Parent owning less than 50% of the combined voting power or capital stock of Company immediately following such reorganization or other transaction; or (ii) the sale of all or substantially all of the assets of the Company or the Parent; or (iii) if Continuing Directors at any time fail to constitute at least a majority of the Board of Parent.  In addition, notwithstanding anything contained in this Agreement to the contrary, if your employment is terminated prior to a Change of Control and you reasonably demonstrate that such termination was at the request of or in response to a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control (a “Third Party”), and who subsequently effectuates a Change of Control, then for all purposes of this Agreement, the date of a Change of Control shall mean the date immediately prior to the date of such termination of your employment.

(d)  “ Continuing Directors ” means the individuals who were either (i) first elected or appointed as a director of Parent prior to the date of this Agreement, or (ii) subsequently appointed as a director of Parent, if appointed or nominated by at least a majority of the Continuing Directors in office at the time of the nomination or appointment, but specifically excluding any individual whose initial assumption of office occurs as a result of either an actual or threatened election contest or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors of the Parent.

 
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(e) “ Severance Pay ” will consist of:

(i)  
Continuation of your salary for 26 weeks following the date on which your employment terminates, in the event that both (A) you are either terminated by the Company other than for Cause or resign from the Company for Good Reason, and (B) the date on which your employment terminates is not within six (6) months after the effective date of a Change of Control.
(ii)  
Continuation of your salary for fifty-two (52) weeks following the date on which your employment terminates, in the event that both (A) you either are terminated by the Company other than for Cause or resign from the Company for Good Reason, and (B) the date on which your employment with the Company terminates is within six (6) months after the effective date of a Change of Control.
(iii)  
In the event that salary continuation is available pursuant to either Section 7(e)(i) or 7(e)(ii), the Company will, at its sole discretion, provide one of the following benefits:
A.  
Contribution by the Company toward your COBRA premiums (for you and your qualified beneficiaries) at the same percentage rate of contribution as the Company made towards your medical and dental coverage premiums during your period of employment for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section (subject at all times to (1) your continued payment of the remaining COBRA premiums not covered by the Company contribution referenced above and (2) your continued eligibility for COBRA coverage).  To the extent required by law, or if the Company reasonably deems it necessary to avoid taxation of benefits to you, the Company may treat the contributions as taxable income, in which case they will be reported as W-2 compensation and subject to appropriate payroll tax withholding.
B.  
Reimbursement by the Company for a portion of your COBRA premiums (for you and your qualified beneficiaries).  The reimbursement amount will be a percentage of the COBRA premiums equal to the percentage rate of contribution as the Company made towards your medical and dental coverage premiums during your period of employment and will be paid for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section (subject at all times to (1) your continued payment of the COBRA premiums in full and (2) your continued eligibility for COBRA coverage).  To the extent required by law, or if the Company reasonably deems it necessary to avoid taxation of benefits to you, the Company may treat the reimbursements as taxable income, in which case they will be reported as W-2 compensation and subject to appropriate payroll tax withholding.

 
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C.  
An increase in your salary continuation payments that, on a monthly basis, is equal to the contribution amount that the Company made on a monthly basis towards your medical and dental coverage premiums during your period of employment, continuing for the same time period as that for which you are entitled to salary continuation pursuant to this Sub-section but in no event any longer than the period for which COBRA continuation coverage would be available.  This amount is taxable income, and will be reported as W-2 compensation and subject to appropriate payroll tax withholding.
(iv)  
In the event that salary continuation is available pursuant to either Section 7(e)(i) or 7(e)(2), up to $5,000 of outplacement assistance from an outplacement assistance firm selected by you and approved by the Company (whose approval will not be unreasonably withheld); such assistance to be used within six (6) months of the date of your termination of employment with the Company.  The Company will contract directly with the approved outplacement assistance firm and will make payment for services directly to such firm.

In the event of your death while receiving Severance Pay, your designated beneficiary (or, if none, your estate) will receive the remaining Severance Pay.

(f) Conditions to Severance Pay . To be eligible for Severance Pay, you must meet the following conditions:

(i)  
You must promptly sign and continue to honor a general release, in a form acceptable to the Company, of any and all claims that you might otherwise have relating to the termination of your employment, or relating to any other act, omission or statement up to the date on which you execute the general release, against the Company, the Company’s Affiliates (defined as other entities controlling, controlled by, or under common control with the Company), and the officers, directors, employees, owners, and agents of the Company and each Affiliate, provided that the release will not waive your right to the Severance Pay, your Vested Rights (as defined above), or any rights you may otherwise have to indemnification under the Company’s Articles of Incorporation or Bylaws for acts or omissions during your employment with the Company.

 
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(ii)  
You must resign (upon written request by Company) from all positions with or representing the Company or any Affiliate, including but not limited to membership on boards of directors.
(iii)  
You must provide the Company for a period of 90 days after the employment termination date with consulting services regarding matters within the scope of your former duties, upon request by the Company’s President & CEO, provided that you will only be required to provide those services by telephone at your reasonable convenience and without substantial interference with your other activities or commitments.
(iv)  
To maintain continuing eligibility for Severance Pay, you must comply with the Covenant Not to Compete and all other provisions of Section 9 below.

 
(g) Offsets to Severance Pay . Severance Pay for any week will be reduced by:

(i)  
any disability benefits to which you are entitled for that week under any disability insurance policy or program (including but not limited to worker’s disability compensation);
(ii)  
any severance pay payable to you by the Company under any other agreement or Company policy;
(iii)  
any payment due to you under the Federal Worker Adjustment and Retraining Notification Act or any comparable state statute or local ordinance; and
(iv)  
any amounts that you owe to the Company.

8. Withholding and Deductions . All pay and benefits will be subject to withholding and deductions required by law or court order.

9. Other Matters .

(a) Loyalty and Confidentiality; Certain Property and Information .

 
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(i)   Loyalty and Confidentiality . You will be loyal to the Company during your employment and will forever hold in the strictest confidence, and not use or disclose, any non‐public information about the Company or any Affiliate or their businesses, including but not limited to information regarding techniques, processes, developmental or experimental work, financial or ownership information, trade secrets, customer or prospect names or information, current or planned products, services, sales, vendors and employees, except as disclosure or use may be required in connection with your work for the Company or such Affiliate. Your commitment not to use or disclose information does not apply to information that becomes publicly known without any breach of this Agreement by you, or which was legally in your possession, without violation of any person’s duty of confidentiality to the Company or any Affiliate, prior to your employment with the Company or an Affiliate. In the event you are requested or compelled by court order, decree, subpoena or other process or requirement of law to disclose confidential information you shall to the extent permissible and practicable under the circumstances provide reasonably prompt written notice (unless such notice is prohibited by law) to the Company of any such requirement so that the Company may, at its option and expense, seek a protective order or other appropriate remedy. You agree to cooperate with the Company in any such proceeding, at the expense of the Company, provided that the foregoing shall not be construed to require you to undertake litigation or other legal proceedings on its own behalf. In the event that such protective order or other remedy is not obtained, you agree to furnish only that portion of the confidential information which you are advised by your own counsel should be disclosed and, at the Company’s expense, to use reasonable efforts to obtain assurance that confidential treatment will be accorded the information. Your commitments in this section will continue in effect after termination of the Employment.

(ii)   Certain Property and Information . Upon termination of your employment, you will deliver to the Company any and all property of the Company or any Affiliate and any and all materials and information (in whatever form) relating to the business of the Company or any Affiliate, including without limitation all customer lists and information, financial information, business notes, business plans, documents, keys, credit cards and company provided computers, automobiles or other equipment. All such property will be returned promptly and in good condition except for normal wear.

 
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Your commitment to this Section 9(a) will continue in effect after termination of your employment. The parties agree that any breach of your covenants in this Section 9(a) would cause the Company irreparable harm, and that injunctive relief would be appropriate.

(b) Ideas, Concepts, Inventions and Other Intellectual Property . All business ideas and concepts and all inventions, improvements, developments and other intellectual property made or conceived by you, either solely or in collaboration with others, during your employment, whether or not during working hours, and relating to the business or any aspect of the business of the Company or any Affiliate or to any business or product the Company or any Affiliate is actively planning to enter or develop, shall become and remain the exclusive property of the Company, and the Company’s successors and assigns. You shall disclose promptly in writing to the Company all such inventions, improvements, developments and other intellectual property, and will cooperate in confirming, protecting, and obtaining legal protection of the Company’s ownership rights. Your commitments in this Section 9(b) will continue in effect after termination of your employment as to ideas, concepts, inventions, improvements and developments, and other intellectual property made or conceived in whole or in part before the date your employment terminates. The parties agree that any breach of your covenants in this Section 9(b) would cause the Company irreparable harm, and that injunctive relief would be appropriate.

You represent and warrant that except as may be described on an Exhibit to this Agreement signed separately by you and the Chief Legal Officer, there are no ideas, concept, inventions, improvements, developments, or other intellectual property that you invented or conceived before becoming employed by the Company to which you, or any assignee of you, now claims title and are to be excluded from this Agreement.

(c) Non‐Contravention . You represent and warrant that:

(i)  
No Restrictive Agreements . You are not party to or bound by any agreement that purports to prohibit or restrict you from:
o  
engaging in your employment pursuant hereto; or
o  
using any information and expertise that you possess (other than information constituting a trade secret of another person or firm under applicable law) for the benefit of the Company.

 
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(ii)  
No Abuse of Trade Secrets . You will not use in the course of your employment, or disclose to the Company or its personnel, any information belonging to any other person that constitutes a trade secret of another person under applicable law.

Your representations and warranties in this Section 9(c) shall continue in effect after termination of employment only as to any breach during your employment.

(d) Covenant Not to Compete . During your employment and to maintain continued eligibility for Severance Pay, if any, you agree as follows:

i. Non‐Compete . You will not (A) directly or indirectly compete with the Company, or (B) be employed by, perform services for, advise or assist, own any interest in or loan or otherwise provide funds to any other business that is engaged (or seeking your services with a view to becoming engaged) in any Competitive Business. “Competitive Business” means a business that is engaged directly or indirectly in (X) the business of developing, manufacturing, marketing (including catalogue and mail order marketing), selling and/or distributing (including wholesale distributing) vitamins, minerals, nutrition supplements (including, without limitation, amino acids and proteins), herbal products, phytonutrients, herb teas, nutritional drinks, or food bars, and (Y) any other business engaged in by the Company or any Affiliate or being actively developed by management of the Company or such Affiliate.

ii. No Interference with Covered Relationships . You will not directly or indirectly solicit, or provide assistance to anyone else seeking to solicit, any person having or contemplating a Covered Relationship (“Covered Relationship” means a customer, vendor, employment or any other contractual or independent contractor relationship) with the Company or an Affiliate to refrain from entering into or terminating the Covered Relationship, or entering into any similar relationship with anyone else instead of the Company or such Affiliate.

iii. Exception . Nothing in this Section 9(d) prohibits you from owning not more than 2% of any class of securities of publicly traded entity, provided that you do not engage in other activity prohibited by this Section 9.

 
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Your commitments in this Section 9(d) will continue in effect after termination of employment and so long as you are receiving any Severance Pay. It is agreed that the Company shall not seek to prevent you from gaining employment with a Competitive Business, but that acceptance by you of such employment will automatically terminate your right to any continued Severance Pay to which you may otherwise be entitled under Section 7.

(e) Conflicts of Interest . During your employment, you will not acquire any financial interest in, accept gifts or favors from, or establish any relationship other than on behalf of the Company with, any customer, supplier, distributor, or other person who does or seeks to do business with the Company, unless you have disclosed the financial interest, gift, favor, or relationship to the Company’s Chief Legal Officer in writing and have received written approval for that activity or transaction; provided, however, that this restriction does not apply to casual and normal social/business relationships that do not involve exchange of money, gifts or favors other than normal business expenditures such as lunches or event attendance without significant cost.

If any member of your family engages or proposes to engage in any relationship or activity that would be covered by the preceding sentence if engaged in by you, you will immediately disclose that proposed or actual relationship or activity as provided above.

10.   Section 409A . This Agreement is intended to be exempt from Section 409A of the Internal Revenue Code as an involuntary separation pay plan as that term is understood under Treasury Regulation § 1.409A-1(b)(9) and shall be interpreted and operated consistently with those intentions.

11. Entire Agreement, Waiver of Claims . You agree that this Agreement contains all commitments and obligations of the Company to you, and all your commitments and obligations to the Company, and that any and all prior agreements, commitments, or obligations, including but not limited to any commission or commission override agreements, are hereby superseded and cancelled.

12. Amendments and Waivers . This Agreement cannot be amended, and the obligations under this Agreement cannot be waived, unless the amendment or waiver is agreed to in writing by you and Company’s President & CEO. No failure to pursue any breach or non‐performance of this Agreement shall be deemed a waiver of any prior or subsequent breach or non‐performance.

 
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13. Arbitration . Any dispute or controversy between the parties hereto, whether during the employment term or thereafter, including without limitation, any and all matters relating to this Agreement, your employment with the Company and the cessation thereof, and all matters arising under any federal, state, or local statute, rule or regulation, or principle of contract law or common law, including but not limited to any medical leave statutes, wage payment statutes, employment discrimination statutes, employee benefit statutes, and any other equivalent federal, state, or local statute, will be settled by arbitration administered by the American Arbitration Association (“AAA”) in New York, New York. The arbitration will be conducted pursuant to AAA’s National Rules for Resolution of Employment Disputes (or their equivalent), which arbitration will be confidential, final, and binding to the fullest extent permitted by law. There shall be one (1) arbitrator, selected jointly by the parties hereto, or if the parties cannot so agree on a single arbitrator, selected in accordance with AAA’s procedures. Each party hereto will be responsible for paying its attorney’s fees and costs incurred under this Section 13, except as may otherwise be provided by the arbitrator in order to comply with applicable substantive law. Further, the parties hereto will equally share any costs levied by the AAA, including the cost of the arbitrator and use of a hearing room, provided that you will not be obliged to pay for any portion of such costs beyond the maximum amount permitted in order that this arbitration provision be legally enforceable.

14. Governing Law . This agreement shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws principles.

To accept employment on the terms of this Agreement, please sign below.
 
 
Very truly,


/S/ Thomas A. Tolworthy                
Thomas A. Tolworthy
President & CEO

By signing below I accept continued employment with Twinlab Corporation on the terms of this Agreement.


/S/ Kate Pastor-Dippold                  
Kate Pastor-Dippold
 
 
Date: ___________________________________



 
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EXHIBIT 10.5.1
 
EXECUTION VERSION
CREDIT AGREEMENT

This Credit Agreement (this “ Agreement ”), entered into as of January 7, 2008, by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , a Michigan banking corporation (“ Lender ”), is as follows:

Section 1.                       Definitions; Construction .

1.1            Definitions .  All financial terms used in this Agreement but not defined in this Agreement have the meanings given to them by GAAP.  All terms that are defined in the Uniform Commercial Code, as now or hereafter enacted in the State of Ohio, that are not otherwise defined herein or in any other Loan Document, shall have the meanings set forth in such Uniform Commercial Code.  The following definitions are used herein:

Affiliate ” means, as to any Person (the “ Subject Person ”), any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, the Subject Person.  For purposes of this definition, “control” of a Person means the power, direct or indirect, (a) to vote 10% or more of the securities (or other Ownership Interests) having voting power for the election of directors (or managers in the case of a limited liability company) of the Person or (b) otherwise to direct or cause the direction of the manage­ment and policies of the Person, whether by contract or otherwise.  Without limiting the generality of the foregoing, each of the following will be deemed an Affiliate of each Loan Party for purposes of this Agreement:  all of (i) the Loan Parties, (ii) the Loan Parties’ respective officers, directors, and managers, and (iii) Parent’s shareholders which have the power, direct or indirect, to vote 10% or more of the Ownership Interests of Parent.

Agreement ” has the meaning given in the introductory paragraph hereof.

Agreement Regarding Credit Insurance ” means the Agreement Regarding Credit Insurance between Lender and Borrower dated as of the date of this Agreement.

Alticor ” means Alticor Inc., a Michigan corporation, and its successors and assigns.

Alticor Note ” means the Consolidated, Amended and Restated Promissory Note, dated as of October 31, 2007, in the original principal amount of $7,924,806.39, made by Borrower and Parent to the order of Alticor, as now exists or may, after the date of this Agreement, be renewed, extended, consolidated, or adjusted subject to Section 5.2 and any Refinancing Debt with respect thereto.

A/P Trade Payable Agreements ” means those agreements in substantially the form of Schedule 1.1A with the A/P Trade Payable Creditors.

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A/P Trade Payable Agreements Reserves ” means a Borrowing Base Reserve established by Lender in an aggregate amount, as of the first day of each month, equal to that portion of the payments due under the A/P Trade Payable Agreements over the three month period immediately following such date of determination ( i.e. , a rolling three month period) with respect only to the Over-60 Amounts.  The “ Over-60 Amounts ” means the Indebtedness owing to the A/P Trade Payable Creditors under the A/P Trade Payable Agreements which, as of December 31, 2007, was 60 days or more past due under their respective payment terms.

A/P Trade Payable Creditors ” means those Persons listed on Schedule 1.1B and their successors and assigns.

Blocked Account ” means, collectively, the “LaSalle Accounts”, as defined in the Blocked Account Agreement.

Blocked Account Agreement ” means the Blocked Account and Control Agreement dated on or about the date of this Agreement among LaSalle, Borrower, Parent, and Lender.

Borrower ” has the meaning given in the introductory paragraph hereof.

Borrower Security Agreement ” means the Security Agreement dated as of the date of this Agreement between Borrower and Lender.

Borrower’s Facilities ” means, collectively, those facilities described on Schedule 1.2 which are owned or leased by Borrower, as such Schedule may be amended from time to time.  “ Borrower’s Facility ” means each of the foregoing facilities.

Borrowing Base ” means, as of the relevant date of determination, the sum of:

(a)           77% (subject to Section 2.1(e) ) of the then net amount of Eligible Accounts ( i.e. , less sales, excise or similar taxes, and less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed);

plus            (b)           the lesser of: (i) $10,000,000 (subject to Section 2.1(e) ); and (ii) the sum of: (A) 30% (subject to Section 2.1(e) ) of the then net amount of Raw Materials which are Eligible Inventory, (B) 55% (subject to Section 2.1(e) ) of the then net amount of Finished Goods which are Eligible Inventory, and (C) 50% (subject to Section 2.1(e) ) of the then net amount of Semi-Finished Goods which are Eligible Inventory; and

less            (c)           all then Borrowing Base Reserves.

Borrowing Base Certificate ” has the meaning given in Section 4.3(f) .

Borrowing Base Reserve Implementation ” has the meaning given in Section 2.1(a) .

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Borrowing Base Reserves ” means those reserves against the Borrowing Base deemed necessary by Lender from time to time in good faith based on such credit and collateral considerations as Lender may deem appropriate in its discretion exercised in good faith to reflect contingencies or risks which may adversely affect any or all of the Loan Collateral, the business, operations, or financial condition of Loan Parties taken as a whole or the security of the Obligations, including (i) 100% of the aggregate net mark-to-market exposure, as determined by Lender in good faith, of all Rate Management Obligations then owing by Borrower to Lender or its Affiliate under a Rate Management Agreement, (ii) the then A/P Trade Payable Agreements Reserves, (iii) reserves implemented by Lender from time to time with respect to license agreements where Borrower is the licensee (including under the Existing License Agreements); and (iv) reserves for obsolete, excess, and slow-moving Inventory.

                      “ Business Day ” means (a) with respect to all notices and determinations in connection with, and payments of principal and interest on, Loans bearing interest with reference to the LIBOR Rate, any day (other than a Saturday or Sunday) on which commercial banks are open in London, England and New York, New York for dealings in deposits in the London Interbank Market and (b) in all other cases, any day on which commercial banks in Cincinnati, Ohio are required by law to be open for business.  Periods of days referred to in this Agreement will be counted in calendar days unless Business Days are expressly prescribed.

Capital Contribution Agreement ” means the Capital Contribution Agreement among Mark A. Fox, William W. Nicholson, David L. Van Andel, John Paul DeJoria, Parent, Borrower, and Lender dated as of the date of this Agreement.

Capital Contribution Payments ” means, for any period, aggregate amounts received by Lender in cash under the Capital Contribution Agreement and applied by Lender against the unpaid balance of the Loans in accordance with this Agreement.

Capital Expenditures ” means the aggregate of all expenditures by Loan Parties which should be capitalized in accordance with GAAP and, without duplication, the amount of Capitalized Lease Obligations incurred by Loan Parties on a consolidated basis.
 
Capital Source ” means CapitalSource Finance LLC, a Delaware limited liability company.
 
Capitalized Lease ” means any lease by a Loan Party of any Property (whether real, personal or mixed) as lessee which, in accordance with GAAP, is required to be accounted for as a capital lease on the balance sheet of a Loan Party.
 
Capitalized Lease Obligations ” means all rental obligations of Loan Parties which, on a consolidated basis under GAAP, are or will be required to be capitalized on a Loan Party’s books, in each case taken at the amount thereof accounted for as Indebtedness in accordance with such principles.
 

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Change of Control ” means any of the following (or any combination of the following) whether arising from any single transaction or event or any series of transactions or events (whether as the most recent transaction in a series of transactions or otherwise) which, individually or in the aggregate, results in:
 
(a)           a change in the ownership of Parent, such that (i) the Investment Group, together, fails to: (A) own legally and beneficially, free and clear of any Liens, at least 75%, on a fully diluted basis, of the outstanding Ownership Interests of Parent or (B) have the power to direct or cause the direction of the management and policies of Parent or (ii) any of William W. Nicholson, David L. Van Andel, Mark A. Fox or John Paul DeJoria, legally or beneficially, fail to own, free and clear of any Liens, at least 15%, on a fully diluted basis, of the outstanding Ownership Interests of Parent;

(b)           a change in the ownership of Borrower, such that Parent fails to: (i) own legally and beneficially, free and clear of any Liens (except in favor of Lender), 100%, on a fully diluted basis, of the outstanding Ownership Interests of Borrower or (ii) have the power to direct or cause the direction of the management and policies of Borrower;

(c)           during any period of 24 consecutive months (“ Measurement Period ”), the Approved Directors cease for any reason to constitute at least a majority of the Board of Directors of Parent.  “ Approved Directors ” means individuals, who at the beginning of the Measurement Period constitute the Board of Directors of Parent, together with any new director elected during the Measurement Period whose election by the Board of Directors, or whose nomination for election by Parent’s shareholders, was approved by a vote of at least two thirds (2/3) of the directors then in office;

(d)           the Board of Directors of Borrower ceasing to be composed of individuals who are appointed by Parent; or

(e)           William W. Nicholson or an Approved Successor (as defined below) ceases, for any reason, to serve as the chief executive officer of Borrower and Parent actively involved in Borrower’s and Parent’s management.  For purposes of the foregoing, an “ Approved Successor ” is the chief executive officer of Borrower and Parent elected by the Board of Directors of Borrower and Parent not more than 90 days after William W. Nicholson or any Approved Successor ceases to serve as the chief executive officer of Borrower and Parent and who is reasonably acceptable to Lender.

Closing Date ” means the date hereof or such later date as is mutually agreeable to Borrower and Lender.

Closing Costs ” means, to the extent included in the determination of Net Income, the closing costs related to the closing of the transactions contemplated by this Agreement (including attorneys’ fees and prepayment penalties owing to lenders being refinanced with the proceeds of the Loans).

Closing Fee ” has the meaning given in Section 2.7 .

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Collection Account ” has the meaning given in Section 2.4(b) .

Commercial Letter of Credit ” has the meaning given in Section 2.3(a) .

Contested Claim ” has the meaning given in Section 4.6 .

Contra ” has the meaning given in the definition of “Eligible Accounts”.

Controlled Disbursement Account ” has the meaning given in Section 2.4(a).

Costs ” has the meaning given in Section 4.10 .

Default Rate ” means the applicable rates of interest set forth in the applicable Note plus an additional 3.0% per annum.  Lender agrees that if an Event of Default occurs solely as a result of a death of an Individual Guarantor, Lender will not, so long as no other Event of Default exists, impose the Default Rate until the date that is 30 days after the date of such Event of Default.  Lender agrees that if an Event of Default occurs solely as a result of a Fixed Charge Coverage Ratio violation, Lender will not, so long as no other Event of Default exists, impose the Default Rate based upon such Event of Default so long as Capital Contribution Payments are made within 5 Business Days of such violation in compliance with the Capital Contribution Agreement; provided that if such Capital Contribution Payments are not made within 5 Business Days of such violation in compliance with the Capital Contribution Agreement, Lender may, in addition to its other rights and remedies pursuant to this Agreement and the other Loan Documents, impose the Default Rate on and after the date of such Fixed Charge Coverage Ratio violation.

Dilution Percentage ” has the meaning given in Section 2.1(e) .

Disposition Proceeds ” has the meaning given in Section 5.7 .

Dispositions ” has the meaning given in Section 5.7 .

Dollars ” and “ $ ” means dollars in lawful currency of the United States of America unless otherwise indicated.

EBITDA ” means, for any period, the total (without duplication) in Dollars of (all as determined in accordance with GAAP on a consolidated basis): (a) Net Income, plus (b) the aggregate amount of Loan Parties’ depreciation and amortization expense for the applicable period to the extent deducted in the determination of Net Income, plus (c) the aggregate amount of Loan Parties’ interest expense for the applicable period to the extent deducted in the determination of Net Income, and plus (d) the aggregate amount of Loan Parties’ income and franchise tax expense for the applicable period to the extent deducted in the determination of Net Income.  For purposes of determining EBITDA, “Net Income” will be determined exclusive of any amounts, during such period, attributable to: (i) any upward inventory adjustments except to the extent of an upward inventory adjustment as certified by Loan Parties’ independent certified public accountants under GAAP as part of preparing Loan Parties’ annual audited Financial Statements and for which Lender is given notice of the amount thereof; (ii) any gain arising from the sale of capital assets; (iii) any gain arising from the write-up of any assets; (iv) any extraordinary gains and items of income; (v) any gains recognized by a Loan Party as earnings which relate to adjustments made by a Loan Party as a result of any extraordinary accounting adjustment; and (vi) any other non-operating, non-recurring gains.

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Eligible Accounts ” means, as of the relevant date of determination, those trade accounts owned solely by Borrower, evidenced by Borrower’s standard invoice therefor, payable in cash in Dollars and which arise out of a bona fide, lawful and final sale of Finished Goods or the provision of services, in each case in the ordinary course of Borrower’s business as presently conducted by it to a Person who has entered into a binding written agreement with Borrower therefor, and with respect to which the services covered thereby have been rendered and accepted by the account debtor or its designee or the Finished Goods covered thereby have been delivered to the account debtor or its designee and accepted by such account debtor or designee, (a) that are due and payable within 31 days after the invoice date therefor (61 days with respect to Foreign Accounts that are otherwise Eligible Accounts), (b) that are subject to the first priority security interest of Lender, (c) that are not subject to any Lien of any other Person except to the extent, if applicable, of any Permitted Liens, (d) that strictly comply with all of Borrower’s warranties and representations to Lender in the Loan Documents, and (e) with regard to which Borrower strictly complies with its covenants with Lender in the Loan Documents; provided that Eligible Accounts shall not include the following:

(i)           Accounts with respect to which more than 90 days have elapsed since the date of the original invoice applicable thereto (or 120 days with respect to Foreign Accounts that are otherwise Eligible Accounts);

(ii)           Accounts with respect to which the account debtor is a shareholder, member, partner, officer, employee or agent of Borrower or any other Affiliate of Borrower;

(iii)           Accounts with respect to which the account debtor is not (A) a resident of the United States or Providence of Canada with respect to an individual or (B) organized and qualified to do business under the laws of any State of the United States or Providence of Canada with respect to Persons other than individuals (each, a “ Foreign Account ”), unless the Foreign Account (1) is supported by an irrevocable letter of credit issued (x) by a financial institution satisfactory to Lender in its discretion exercised in good faith and (y) on terms acceptable to Lender in its discretion exercised in good faith, and, if so requested by Lender, delivered to Lender in pledge for negotiation and presentment or (2) is insured to the satisfaction of Lender by satisfactory credit insurance of which Lender is the sole loss payee;

(iv)           Government Accounts unless (A) it arises from a government contract, a copy of which has been delivered to Lender, (B) it arises from a completed task order that has been approved for billing by the applicable Governmental Authority account debtor and (C) the Federal Assignment of Claims Act or, as applicable, a State Assignment of Claims Law, has been complied with to Lender’s satisfaction and Borrower has duly executed and delivered to Lender all required instruments and documents, which are required to be executed and delivered by Borrower under the Federal Assignment of Claims Act, or as applicable, State Assignment of Claims Law, to assign Borrower’s interests in such Accounts to Lender; provided that should any Governmental Authority notify Lender that it is refusing to recognize any assignment made under the Federal Assignment of Claims Act or a State Assignment of Claims Law with respect to any Government Account, such Government Account will immediately become an ineligible Account;

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(v)           Accounts with respect to which the account debtor is any State of the United States or any city, town municipality or division thereof that requires (A) Borrower to support its obligations to such account debtor with a performance bond issued by a surety company or (B) Lender to comply with any a State Assignment of Claims Law or any municipal assignment of claims law or equivalent;

(vi)           Accounts which are subject to set-off, credit, returns, rebates, contras, allowance or adjustment (a “ Contra ”) by the account debtor (except discounts allowed for prompt payment); provided that if a Contra exists with respect to an Account, the net amount not subject to the Contra owed, as of any date, by such account debtor to Borrower in respect of such Account, as determined by Lender in its discretion exercised in good faith, will, if otherwise eligible, be an Eligible Account;

(vii)           (A) Accounts owing from any single account debtor, other than Wal-Mart Stores, Inc. and its Affiliates, but only to the extent, as of any date, that the total amount of such account debtor’s otherwise Eligible Accounts (but for the application of this clause (vii)) owing to Borrower exceeds 20% of the face amount (less maximum discounts, credits and allowances which may be taken by, or granted to, such account debtor in connection therewith) of the then outstanding Eligible Accounts of Borrower, and only with respect to the excess amount above such 20% limitation or (B) Accounts owing from Wal-Mart Stores, Inc. and its Affiliates, but only to the extent, as of any date, that the total amount of such account debtors’ otherwise Eligible Accounts (but for the application of this clause (vii)) owing to Borrower exceeds 25% of the face amount (less maximum discounts, credits and allowances which may be taken by, or granted to, such account debtor in connection therewith) of the then outstanding Eligible Accounts of Borrower, and only with respect to the excess amount above such 25% limitation;

(viii)           Accounts owed by a particular account debtor when 50% or more of the total Accounts of such account debtor are ineligible under this definition;

(ix)           Accounts owed by any account debtor which has filed or has had filed against it or its Affiliates a petition for bankruptcy, insolvency, reorganization or any other type of relief under insolvency laws for so long as such case, proceeding, or other action is still pending;

(x)           Accounts owed by any account debtor which has made a general assignment for the benefit of creditors;

(xi)           Accounts with respect to which the account debtor (the “ Subject Customer ”) is located in any one or more of New Jersey, Minnesota, or West Virginia, unless, (A) with respect to Accounts with respect to which the Subject Customer is located in New Jersey, Borrower has properly qualified to do business in New Jersey or has filed a Notice of Business Activities Report with the New Jersey Division of Taxation for the then current year, (B) with respect to Accounts with respect to which the Subject Customer is located in Minnesota, Borrower has properly qualified to do business in Minnesota or has filed a Notice of Business Activities Report with the Minnesota Division of Taxation for the then current year, or (C) with respect to Accounts with respect to which the Subject Customer is located in West Virginia, Borrower has filed, or is exempt from filing, a Business Activity Report with the Tax Commissioner of the State of West Virginia for the then current year; provided that Accounts shall not fail to be Eligible Accounts solely under this clause (xi) from the Closing Date until January 31, 2008, if Borrower is diligently pursuing such qualifications or filings during such period;

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(xii)           Accounts which are evidenced by a promissory note or other instrument (other than a check prior to the collection thereof) or chattel paper;

(xiii)           Accounts which (A) are generated by a sale on approval, a bill and hold sale, a guaranteed sale, a sale on consignment, or other type of conditional sale or which are subject to progress billing or (B) consist (or to the extent consisting) of retainage;

(xiv)           Accounts for which Borrower was required to have issued a surety bond (whether bid, performance or otherwise) with respect to Borrower’s performance of the services giving rise to the Account;

(xv)           Accounts which (A) consist (or to the extent consisting) of deposits, (B) consist (or to the extent consisting) of vendor warranty claims, (C) consist (or to the extent consisting) of finance charges, service charges, or interest on delinquent Accounts, (D) are proceeds of consigned Inventory, (E) are C.O.D. sales, (F) consist (or to the extent consisting) of credits in past due balances, and (G) are debit memoranda; or

(xvi)           Accounts deemed to be ineligible by Lender based upon such other credit, creditworthiness, and collateral considerations as Lender may deem appropriate, in Lender’s judgment exercised in good faith.  Accounts which are deemed to be Eligible Accounts, but which subsequently fail to meet the foregoing criteria for Eligible Accounts, shall immediately cease to be Eligible Accounts for the purpose of determining the Borrowing Base.  If, at any time, Lender exercises its discretion under this clause (xvi) to make any Accounts ineligible solely as a result of the exercise of Lender’s rights under this clause (xvi) (“ Discretionary Ineligible Accounts Determination ”), Lender will give Borrower 5 Business Days advance written notice of such Discretionary Ineligible Accounts Determination unless an Event of Default then exists, in which case Lender will give Borrower contemporaneous oral or written notice of such Discretionary Ineligible Accounts Determination.

Eligible Inventory ” means, as of the relevant date of determination, Inventory owned solely by Borrower and held at a Borrower’s Facility which is comprised of: (a) finished goods owned and held by Borrower at a Borrower’s Facility for sale in the ordinary course of Borrower’s business as presently conducted by it (“ Finished Goods ”), (b) bulk tablets, capsules, soft gels and other completed items of Inventory that have been completely manufactured and are awaiting only bottling and other packaging before being classified by Borrower as Finished Goods on its books (“ Semi-Finished Goods ”), or (c) raw materials, in their unmanufactured or unblended state, owned and held by Borrower at a Borrower’s Facility that will be converted or fabricated into Semi-Finished Goods and then Finished Goods in the ordinary course of Borrower’s business as presently conducted by it (“ Raw Materials ”).  Inventory will be valued at the lower of fair market value or cost based on FIFO (other than with respect to determining the Net Orderly Liquidation Value thereof).  The following Inventory shall be ineligible:

(i)           work-in-process (other than Semi-Finished Goods);

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(ii)           obsolete, slow-moving or unsalable items of Inventory or any reserves established in Borrower’s Financial Statements delivered to Lender in respect of any Inventory;

(iii)           any Inventory in which Lender does not have a valid, first priority and fully perfected security interest;

(iv)           Inventory located outside the continental United States;

(v)           any Inventory located at any leased location, public warehouse or any other location owned or controlled by a third party unless (subject to any additional requirements imposed by Lender, in its discretion exercised in good faith, to protect Borrower’s title thereto or Lender’s Lien thereon) Lender has first received: (A) a bailee waiver letter or warehouseman’s agreement acceptable to Lender from such warehouseman or bailee and such warehousemen or bailee has not issued a negotiable document of title as to any of the Eligible Inventory or (B) a landlord’s waiver acceptable to Lender with respect to such leased premises;

(vi)           (A) any Inventory that is subject to the first priority security interest of any Person other than Lender, (B) any Inventory subject to a Lien of any Person except to the extent, if applicable, of any Permitted Liens, or (C) any Inventory subject to a claim of title by a government authority under 48 C.F.R. Section 52.232.16;

(vii)           Inventory which consists of supplies, packaging or hazardous substances under applicable law;

(viii)           Inventory which has been consigned to or by Borrower or has been sold to Borrower in any sale on approval or sale and return transaction;

(ix)           Inventory that is in transit to or from a Borrower’s Facility other than Inventory that is in transit from a Borrower’s Facility to another Borrower’s Facility and that is in transit for less than 3 days;

(x)           Inventory (A) with respect to which insurance proceeds are not payable to Lender as loss payee in accordance with the Loan Documents or (B) which is subject to a negotiable warehouse receipt or other negotiable instrument;

(xi)           Inventory that is subject to any trademark, trade name, patent or licensing arrangement, any contractual arrangement, or any law, rule or regulation that could, in any instance in Lender’s judgment exercised in good faith, limit or impair the ability of Lender to promptly exercise any of its rights with respect thereto; provided that , and without limitation to Lender’s ability to implement or modify any Borrowing Base Reserves, so long as a written agreement in a form satisfactory to Lender between Lender and the holder of any licenses under the applicable agreement is in effect, Inventory subject to the licensing arrangements under the applicable agreement will not be deemed ineligible solely as a result of this clause (xi); provided further , so long as Borrower is diligently and in good faith proceeding to obtain agreements with holders of the licenses in forms acceptable to Lender, Lender will not make Inventory subject to any such license agreements ineligible until the earlier of (a) three months after the Closing Date and (b) the date that Lender has determined in its discretion exercised in good faith that such agreement is unlikely to be executed;

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(xii)           any Inventory which (A) is the subject of a recall, withdrawal, off-sale order, warning letter, seizure or other enforcement action by the FDA or (B) has been acquired, manufactured, labeled, stored, or distributed in violation of applicable law;

(xiii)           any Inventory which does not meet the applicable specifications of Borrower’s customers for such Inventory; and

(xiv)           any other Inventory deemed ineligible by Lender, in its discretion exercised in good faith, based on such credit and collateral considerations as Lender may deem appropriate.  Inventory which is deemed to be Eligible Inventory, but which subsequently fails to meet the foregoing criteria for Eligible Inventory, shall immediately cease to be Eligible Inventory for the purpose of determining the Borrowing Base.  If, at any time, Lender exercises its discretion under this clause (xiv) to make any Inventory ineligible solely as a result of the exercise of Lender’s rights under this clause (xiv) (“ Discretionary Ineligible Inventory Determination ”), Lender will give Borrower 5 Business Days advance written notice of such Discretionary Ineligible Inventory Determination unless an Event of Default then exists, in which case Lender will give Borrower contemporaneous oral or written notice of such Discretionary Ineligible Inventory Determination.

Environmental Laws ” means all federal, state, local and foreign laws from time to time in effect relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial toxic or hazardous substances or wastes into the environment (including ambient air, surface water, ground water or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes, and any and all regulations, codes, plans, orders, decrees, judgments, and injunctions entered, promulgated or approved thereunder.

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

ERISA Affiliate ” has the meaning given in Section 3.13 .

Event of Default ” has the meaning given in Section 6.1 .
 
Event of Loss ” means, with respect to any Equipment or Mortgaged Property, any of the following: (a) any loss, destruction or damage of such Equipment or Mortgaged Property or (b) any condemnation or taking by exercise of the power of eminent domain of such Equipment or Mortgaged Property by any Governmental Authority.
 

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Existing License Agreements ” means, collectively, (a) the Amended and Restated License and Services Agreement dated as of February 13, 2007, by and between Weil Lifestyle, LLC, an Arizona limited liability company, as licensor, and Parent and Borrower, as licensee, (b) the License and Services Agreement dated as of October 1, 2006, by and between Alan Greene, MD, Cheryl Greene, Green Ink, Inc., and Ag Sales and Marketing, Inc., as licensor, and Parent and Borrower, as licensee, (c) the Supply Agreement dated as of June 25, 2002, by and between Nutratech, Inc., a New Jersey corporation, as licensor, and Borrower, as assignee of Twin Laboratories Inc., as licensee, (d) the “Super Citrimax Full Strength” Licensing Agreement dated as of December 3, 2003, by and between InterHealth Nutraceuticals Incorporated, a California corporation, as licensor, and Parent, as assignee of Metabolife International, Inc., as licensee, (e) the Non-Exclusive License Agreement dated as of January 22, 2004, by and between Biocell Technology LLC, a California limited liability company, as licensor, and Borrower, as licensee, (f) the Agreement dated as of April 12, 2004, by and between Grow Company, Inc., a New Jersey corporation, as licensor, and Borrower, as licensee, (g) the Chromemate Licensing Agreement dated as of December 3, 2003, by and between InterHealth Nutritionals Incorporated, a California corporation, as licensor, and Parent, as assignee of Metabolife International, Inc., as licensee, (h) the Product Development Agreement dated as of May 3, 2001, by and between Long Beach ApS, a Danish corporation, as licensor, and Parent, as assignee of Metabolife International, Inc., as licensee, (i) the License Agreement dated as of May 15, 2002, by and among Fungi Perfecti LLC, a Washington limited liability company, and Paul Stamets, an individual, as licensor, and Natural2U, as licensee, (j) the Rejuvenated and Amended License Agreement Between Natural 2U LLC and New Chapter, Inc. dated as of September 10, 2007, by and between Natural2U, as licensor, and New Chapter, Inc., as licensee, (k) the Product Distribution & Labelling Agreement Neptune Krill Oil (NKO) dated as of March 2, 2005, by and between Neptune Technologies & Bioressources Inc., as licensor, and Parent, as licensee, (l) the License Agreement dated as of May 19, 2005, by and among Taiyo International, Inc., a wholly-owned subsidiary of Taiyo Kagaku Co., Ltd., and NutriScience Innovations, LLC, as licensor, and Parent, as licensee, (m) the Confidential Trademark License Agreement dated as of August 10, 2005 by and between Ocean Nutrition Canada Limited, as licensor, and Parent, as licensee, (n) the License And Product Supply Agreement dated as of October 6, 2003, by and between Unigen Pharmaceuticals, Inc., a Delaware corporation, as licensor, and Borrower, as assignee of Twin Laboratories, Inc., as licensee, (o) the License And Product Supply Agreement dated as of February 24, 2004, by and between Unigen Pharmaceuticals, Inc., a Delaware corporation, as licensor, and Borrower, as licensee, (p) the License and Product Supply Agreement dated as of April 1, 2005, by and between Unigen Pharmaceuticals, Inc., a Delaware corporation, as licensor, and Borrower, as licensee, (q) the Inovis USA, Inc. Software License Agreement No. SLA-US-MMX022704TLX0101 dated as of March 8, 2004, by and between Inovis USA, Inc., a Georgia corporation, as licensor, and Borrower, as licensee, (r) the License Assignment Agreement And Amendment To License Agreement dated as of December 5, 2003, by and among SAP America, Inc., a Delaware corporation, as licensor, and Borrower and Parent, as licensee, (s) the Agreement Between TABS Group, Inc. And Ideasphere, Inc. dated as of May 12, 2006, by and between TABS Group, Inc., as licensor, and Parent, as licensee, (t) the Friend Agreement dated as July 31, 2007, by and between National Osteoporosis Foundation, as licensor, and Borrower, doing business as Cole Water Corp., as licensee, (u) the Order Confirmation and Agreement for One-Time Orders dated as of May 7, 2007, by and between AC Nielsen (US), Inc., as licensor, and Parent, as licensee, (v) Customer Agreement dated as of March, 2007, by and between International Business Machines Corporation, as licensor, and Parent, as licensee, (w) Manufacturer Agreement dated as of June 28, 2005, by and between CVS Pharmacy, Inc., as licensor, and Parent, as licensee, (x) Product Supply Agreement dated as of March 23, 2007, by and between Ganeden Biotech, Inc., a Delaware corporation, as licensor, and Parent, as licensee, (y) the License and Service Agreement dated as of September 1, 2007, by and between Hollace Rice, an individual and resident of the State of California, as licensor, and Borrower, as licensee, and (z) the Information Services Agreement dated as of April 12, 2007, by and between SPINS, Inc., a Delaware corporation, as licensor, and Parent, as licensee, in each case as may heretofore or hereafter be amended, renewed, consolidated, restated or replaced from time to time.
 

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Extraordinary Expenses ” means, for any period, the total (without duplication) in Dollars of (all as determined in accordance with GAAP on a consolidated basis): (a) any extraordinary losses incurred by a Loan Party during such period, (b) any extraordinary expense recognized by a Loan Party during such period which relates to adjustments made by a Loan Party as a result of any extraordinary accounting adjustment, and (c) any other non-operating, non-recurring losses or expenses incurred by a Loan Party during such period, all to the extent deducted from Net Income.
 

FDA ” means the United States Food and Drug Administration and any successor thereof.
 
Federal Assignment of Claims Act ” means the Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 and 41 U.S.C. § 15).

FIFO ” means a first-in, first-out method of inventory cost accounting in accordance with GAAP.

Fifth Third Shareholder Loans ” means the Indebtedness owing to Lender (or its successors or assigns) under the documents, instruments and agreements attached hereto as Schedule 1.3 (collectively, the “ Fifth Third Shareholder Loans Documents ”).

Financial Covenants ” means each of the financial covenants contained in Sections 5.3 , 5.10 , 5.11 and 5.12 .  The Financial Covenants set forth in Sections 5.3 , 5.10 , 5.11 and 5.12 will be based solely on Loan Parties’ consolidated financial performance.

Financial Statements ” has the meaning given in Section 3.8 .

Finished Goods ” has the meaning given in the definition of Eligible Inventory.
 
 
Fiscal Quarter ” means, in respect of a date as of which the applicable Financial Covenant is being calculated or financial report is being furnished, any fiscal quarter of a Fiscal Year, the first Fiscal Quarter of a Fiscal Year beginning on January 1 and ending on March 31, the second Fiscal Quarter of a Fiscal Year beginning on April 1 and ending on June 30, the third Fiscal Quarter of a Fiscal Year beginning on July 1 and ending on September 30, and the fourth Fiscal Quarter of a Fiscal Year beginning on October 1 and ending on December 31.

Fiscal Year ” means Loan Parties’ fiscal year for financial accounting purposes, beginning on January 1st and ending on December 31st.

Fixed Charge Coverage Ratio ” means, as of any date of determination, the ratio resulting from dividing : (a) the sum of (i) EBITDA for any Test Period, (ii) plus any Extraordinary Expenses incurred in that same Test Period up to an aggregate amount equal to $100,000, plus (iii) the Closing Costs incurred in that same Test Period, less (iv) Loan Parties’ aggregate consolidated Non-financed Capital Expenditures made in cash during that same Test Period, by (b) Fixed Charges for that same Test Period.
 

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Fixed Charges ” means, for the applicable Test Period, the total (without duplication), in Dollars, of (all as determined on a consolidated basis in accordance with GAAP): (a) the principal amount of Loan Parties’ consolidated long-term debt and obligations, in each case, paid during the applicable Test Period; (b) the principal portion of Loan Parties’ aggregate consolidated Capitalized Lease Obligations paid during the applicable Test Period; (c) Loan Parties’ aggregate consolidated cash payments of interest during the applicable Test Period (including interest paid on the Obligations, the Fifth Third Shareholder Loans, the Alticor Note, the Owner/Affiliate Subordinated Debt, the LaSalle Debt, the Capitalized Lease Obligations and any other Indebtedness for the applicable Test Period); (d) Loan Parties’ aggregate consolidated cash payments of income and franchise taxes during such Test Period (whether or not in the form of Tax Distributions); and (e) dividends and distributions paid by Parent to its shareholders for such Test Period ( provided that nothing herein shall be deemed to allow any such dividends and distributions unless expressly permitted under Section 5.6 ).
 
Foreign Accounts ” has the meaning given in the definition of Eligible Accounts.

Funded Indebtedness ” means, as of any date of determination, the principal portion of all Indebtedness (without duplication) of Loan Parties on a consolidated basis: (a) in respect of any borrowed money (including the Obligations and excluding the Owner/Affiliate Subordinated Debt, the Indebtedness evidenced by the Alticor Note, the LaSalle Debt and the Fifth Third Shareholder Loans); (b) evidenced by any loan or credit agreement, promissory note, debenture, bond, or other similar written obligation to pay money (including the Loan Documents and excluding the Owner/Affiliate Subordinated Debt Documents, the Alticor Note, the Fifth Third Shareholder Loans Documents and the LaSalle Debt Documents); (c) under any Capitalized Lease, Synthetic Lease or any form of off-balance sheet financing; (d) for the deferred and unpaid purchase price of any Property or business or any services (other than trade accounts and accrued liabilities payable incurred in the ordinary course of business and constituting current liabilities not more than ninety (90) days in arrears measured from the date of billing or accrual), all as determined in accordance with GAAP; and (e) any guaranty or endorsement of, or responsibility for any Indebtedness of the types described in this definition.

Funding Account ” has the meaning given in Section 2.4(a) .

Health Letter ” has the meaning given in the definition of “Loan Parties”.

Health Med ” has the meaning given in the definition of “Loan Parties”.

GAAP ” means generally accepted accounting principles in the United States of America, consistently applied, as in effect at the time any determination is made or Financial Statement or information is required or furnished under this Agreement.

Government Accounts ” means Accounts with respect to which the account debtor is a United States Debtor or another Governmental Authority.

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

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Guarantor Material Adverse Effect ” means a material adverse effect, as determined by Lender in good faith, on (a) an Individual Guarantor’s: (i) business, assets, operations, or financial condition or (ii) ability to perform any of his respective payment obligations under his applicable Individual Guaranty or the Capital Contribution Agreement or (b) the ability of Lender to exercise any of its rights or remedies under the Loan Documents or by law provided.

Guaranty Obligations ” means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (a) to purchase any such Indebtedness or any Property constituting security therefor, (b) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including, without limitation, keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (c) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (d) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof.  The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made.

Inactive Subsidiary ” means each of Planet Earth, Health Med, TGI Organic, PE Group, Natural Pet Nutrition, Health Letter, Med Letter and Luxembourg Sub.

Increased LOC Costs ” has the meaning given in Section 2.3(k) .

Indebtedness ” means all of a Person’s indebtedness, obligations, and liabilities to any other Person, including: (a) in respect of Loan Parties, the Obligations (including any and all Rate Management Obligations), the Owner/Affiliate Subordinated Debt, the Alticor Note, the LaSalle Debt, (b) all Guaranty Obligations, and (c) all other debts, claims and indebtedness, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or owing and however arising, whether under written or oral agreement, operation of law, or otherwise, to the extent the foregoing would be classified as a liability on a Person’s balance sheet in accordance with GAAP.

Individual Guaranties ” means each Guaranty made by an Individual Guarantor in favor of Lender and Lender’s Affiliates.

Individual Guarantors ” means each of, and collectively, Mark A. Fox, William W. Nicholson, David L. Van Andel, Peter A. Lusk, and John Paul DeJoria.

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Investment Group ” means, collectively, Mark A. Fox; William W. Nicholson; TRPE LLC, a Delaware limited liability company; David L. Van Andel, as Trustee under The David Van Andel Trust dated November 30, 1993, as amended; Sofisco Nominees LTD., a limited liability company incorporated in the Island of Nevis; Daniel Harrop; Oblates of St. Francis de Sales, Incorporated, a Delaware non-profit corporation; and Tom Grimmett, as Trustee under JP’s Nevada Trust, dated February 3, 2005, as amended.

Investments ” has the meaning given in Section 5.9 .

ISI Brands ” has the meaning given in the definition of “Loan Parties”.

Joint Venture Agreements ” means the respective articles of incorporation (or equivalent in the case of a corporation), articles of organization (or equivalent in the case of a limited liability company), bylaws (or equivalent in the case of a corporation), operating agreement (or equivalent in the case of a limited liability company), agreement of limited partnership, shareholders (or stockholders) agreements, resolutions, actions, or other applicable charter or other governing documents for the Joint Ventures.

Joint Ventures ” means, individually and collectively, Mycopesticide LLC, a Delaware limited liability company (“ Mycopesticide ”), and A2 Milk Company LLC, a Delaware limited liability company (“ A2 Milk Company ”).

Knowledge ” of a Person means, when used in the context of the phrase “to a Person’s Knowledge” or a similar reference to “Knowledge,” that such Person is without actual knowledge that the representation, warranty or other statement is untrue.

LaSalle ” means LaSalle Bank Midwest National Association and its successors and assigns.

LaSalle Debt ” means (a) the Indebtedness evidenced by the LaSalle Debt Notes, the LaSalle Letter Agreement (as defined in the LaSalle Intercreditor Agreement) and (b) all other LaSalle Obligations (as defined in the LaSalle Intercreditor Agreement), all as now exist or may, after the date of this Agreement, be renewed, extended, consolidated, adjusted or increased subject to Section 5.2 and any Refinancing Debt with respect thereto.

LaSalle Debt Default ” means any of the following (or any combination of the following): (a) the occurrence and continuance of a default or breach by Parent, Borrower and/or, as applicable, any other Loan Party of or under any of the LaSalle Debt Documents, after the lapse of any applicable notice and cure periods, that would permit any LaSalle to accelerate the maturity of the LaSalle Debt, (b) the maturity of any of the LaSalle Debt Notes or the LaSalle Letter Agreement (as defined in the LaSalle Intercreditor Agreement) or (c) any acceleration of any of the LaSalle Debt.

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LaSalle Debt Documents ” means, collectively, (a) the LaSalle Debt Notes, (b) the LaSalle Letter Agreement (as defined in the LaSalle Intercreditor Agreement), (c) the other LaSalle Obligations Documents (as defined in the LaSalle Intercreditor Agreement), and (d) any other document, instrument or agreement evidencing the LaSalle Debt, as any or all of the foregoing documents, instruments, and agreements are now in effect or, subject to Section 5.2 , as at any time after the date of this Agreement amended, modified, supplemented, restated, renewed, extended, or otherwise changed and any documents, instruments, or agreements given, subject to Section 5.2 , in substitution of any of them (including in connection with any Refinancing Debt with respect thereto).

LaSalle Debt Notes ” has the meaning given on Schedule 1.4 .

LaSalle Intercreditor Agreement ” means the Intercreditor Agreement between LaSalle and Lender dated as of the date of this Agreement, among other things, subordinating the respective LaSalle Debt to the Obligations.

Lender ” has the meaning given in the introductory paragraph hereof.

Lender E-mail Address ” has the meaning given in Section 9.10 .

Letter of Credit ” means a Standby Letter of Credit or a Commercial Letter of Credit issued by Lender pursuant to Section 2.3 .

Letter of Credit Availability ” means, as at any time, an amount equal to the lesser of: (a) an amount equal to (i) $2,000,000 less (ii) the then Letter of Credit Exposure and (b) the then Revolving Loan Availability.

Letter of Credit Collateral Account ” has the meaning given in Section 6.5 .

Letter of Credit Deficiency ” means any failure of the Letter of Credit Availability to be greater than or equal to zero Dollars.

Letter of Credit Documents ” means, with respect to each and every Letter of Credit, (a) a standby letter of credit application and agreement on Lender’s then customary form (the “ Standby Letter of Credit Application ”) or a commercial letter of credit application and agreement on Lender’s then customary form (the “ Commercial Letter of Credit Application ”) (a Standby Letter of Credit Application and a Commercial Letter of Credit Application being collectively and each, a “ Letter of Credit Application ”), and (b) any other agreements, certificates, documents and information as Lender may reasonably request relating to a Letter of Credit.

Letter of Credit Exposure ” means, as at any time, the sum of (a) the Letter of Credit Face Amount of all outstanding Letters of Credit and (b) all unreimbursed drawings under any Letters of Credit (whether or not outstanding).

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Letter of Credit Face Amount ” of any Letter of Credit means, as at any time, the face amount of the Letter of Credit, after giving effect to all drawings paid thereunder and other reductions of the face amount and to all reinstatements of the face amount effected, pursuant to the terms of the Letter of Credit, prior to such time.

Letter of Credit Obligations ” means, as at any time, the sum of (a) the aggregate Letter of Credit Face Amount for all outstanding Letters of Credit plus (b) the aggregate outstanding amount of Borrower’s unpaid obligations in respect of all Letters of Credit (whether or not outstanding) under this Agreement and the Letter of Credit Documents, including any Indebtedness of Borrower incurred or arising in connection with any Letters of Credit (including any drafts or acceptances thereunder, all amounts charged or chargeable to Borrower, including any and all Lender charges, expenses, fees and commissions payable hereunder or under any Letter of Credit Document, and all duties and taxes and costs of insurance that pertain to such Letters of Credit that are payable by Borrower pursuant to Section 4.10 or under any Letter of Credit Document).

LIBOR Rate ” has the meaning given in the Revolving Note.

LIBOR Rate Revolving Loan ” means that portion of the Revolving Loans which, as of any date, bears interest at an interest rate per annum equal to the LIBOR Rate plus the applicable margin as set forth in the Revolving Note.

Lien ” means any mortgage, deed of trust, pledge, hypothecation, collateral assignment, deposit arrangement, charge, security interest, encumbrance, lien (statutory or other), or any preference, priority or other security agreement or any preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any lease deemed under the Uniform Commercial Code to be intended for security, and the authorized filing by or against a Person as debtor of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).

Line of Credit ” has the meaning given in Section 2.1(a) .

Loan Collateral ” means, collectively, the Collateral (as defined in each of the Security Agreements), the Mortgaged Property (as defined in the Mortgage), the Patent Collateral (as defined in the Patent Security Agreement), the Pledged Collateral (as defined in the Parent Pledge Agreement), the Trademark Collateral (as defined in the Trademark Security Agreement), the Property subject to the Agreement Regarding Credit Insurance, and any other security or collateral provided from time to time by, or on behalf of, any Loan Party or any other Person for the Obligations.

Loan Documents ” means, collectively, this Agreement, the Notes, the Individual Guaranties, the Loan Party Guaranty, the Security Documents, the Capital Contribution Agreement, the Owner/Affiliate Subordination Agreements, the LaSalle Intercreditor Agreement, each Rate Management Agreement between Borrower and Lender or any Affiliate of Lender, the Letter of Credit Documents, and every other document or agreement executed by any Person evidencing, governing, guarantying or securing any of the Obligations, and “ Loan Document ” means any one of the Loan Documents, and as now in effect or as at any time after the date of this Agreement amended, modified, supplemented, restated, or otherwise changed and any substitute or replacement agreements, instruments, or documents accepted by Lender or, as applicable, an Affiliate of Lender.

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Loan Party ” and “ Loan Parties ” mean, respectively, each of Borrower; Parent; Health Letter, Inc., a Michigan corporation (“ Health Letter ”); Health Med, Inc., a Michigan corporation (“ Health Med ”); ISI Brands Inc., a Michigan corporation (“ ISI Brands ”); Med Letter, Inc., a Michigan corporation (“ Med Letter ”); Natural2U LLC, a Michigan limited liability company (“ Natural2U ”); Natural Pet Nutrition, L.L.C., a Delaware limited liability company (“ Natural Pet Nutrition ”); PE Group, LLC, a Delaware limited liability company (“ PE Group ”); Planet Earth Ventures, LLC, a Michigan limited liability company (“ Planet Earth ”); REBUS, LLC, a Delaware limited liability company (“ Rebus ”); 701 Corporation, a Michigan corporation (“ 701 Corporation ”); and TGI Organic, LLC, a Michigan limited liability company (“ TGI Organic ”), and, collectively, Borrower, Parent, Health Letter, Health Med, ISI Brands, Med Letter, Natural2U, Natural Pet Nutrition, PE Group, Planet Earth, Rebus, 701 Corporation, and TGI Organic.  Without limiting the generality of the foregoing and for the avoidance of doubt, the Joint Ventures are not Loan Parties.

Loan Party Guaranty ” the Guaranty made by the Non-Borrower Loan Parties in favor of Lender and Lender’s Affiliates with respect to all of the Obligations.

Loan Party Security Agreement ” means the Security Agreement dated as of the date of this Agreement between the Non-Borrower Loan Parties and Lender.
 
 
Loans ” means the Revolving Loans (including the Letter of Credit Exposure), the Term Loans, and any other loans or other extensions of credit or financial accommodations under Section 2 from time to time from Lender or its Affiliates to Borrower.

LOC Fee ” has the meaning given in Section 2.3(j) .

Lock Box ” has the meaning given in Section 2.4(b) .

Luxembourg Sub ” means IdeaSphere Luxembourg S.a.r.l., a corporation organized and existing under the laws of Luxembourg.

Material Adverse Effect ” means a material adverse effect, as determined by Lender in good faith, on (a) Loan Parties’ (taken as a whole): (i) business, assets, operations, or financial condition or (ii) ability to perform any of their respective payment obligations, Financial Covenant or other negative covenants in Section 5 , or other material obligations under this Agreement or any of the other Loan Documents, (b) the recoverable value of the Loan Collateral or Lender’s rights or interests therein, (c) the enforceability of any of the Loan Documents, or (d) the ability of Lender to exercise any of its rights or remedies under the Loan Documents or by law provided.

Material Agreements ” means any of the following contracts, instruments or other agreements to which any Loan Party is a party or to which any of its assets are subject:

(a)           any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for lease payments in excess of $50,000 per annum;


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(b)           any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the term of which extends over a period of more than one year from the date hereof or which involves consideration in excess of $100,000;

(c)           any agreement concerning a partnership or joint venture;

(d)           any agreement (or group of related agreements) under which a Loan Party has created, incurred, assumed, or guaranteed any Indebtedness for borrowed money, or any Capitalized Lease Obligation, in excess of $50,000 or under which a Person has imposed a Lien on any of a Loan Party’s assets, tangible or intangible, in excess of such amount;

(e)           any material agreement concerning confidentiality or non-competition;

(f)           any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other material plan or arrangement for the benefit of any of a Loan Party’s current or former shareholders, members, managers, directors, officers, or employees;

(g)           any collective bargaining agreement;

(h)           any written agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $100,000 or providing material severance benefits;

(i)           any agreement under which a Loan Party has advanced or loaned any amount to any of its shareholders, members, managers, directors, officers, or employees outside the ordinary course of business consistent with past custom and practice (including with respect to quality and frequency);

(j)           any agreement under which the consequences of a default or termination would have a Material Adverse Effect;

(k)           any agreement under which it has granted any Person any registration rights (including, without limitation, demand and piggyback registration rights);

(l)           any agreement under which a Loan Party has advanced or loaned any other Person amounts in the aggregate exceeding $25,000; or

(m)           any other agreement (or group of related agreements) entered into other than in the ordinary course of business, the performance of which extends over a period of more than one year from the date entered into or which involves consideration in excess of $100,000.

Med Letter ” has the meaning given in the definition of “Loan Parties”.

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Mortgage ” means the Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date of this Agreement and granted by Borrower to Lender on Borrower’s fee simple estate in the real property described therein situated in Utah County, Utah (commonly known as 600 East Quality Drive, American Fork, Utah 84003), constituting a first Lien thereon.

Multiemployer Plan ” means a “multiemployer plan” as defined in ERISA.

Natural Pet Nutrition ” has the meaning given in the definition of “Loan Parties”.

Net Income ” means, for any applicable period, with respect to Loan Parties, their after tax net income, all as determined on a consolidated basis in accordance with GAAP.  Net Income will exclude, however, the earnings of the Joint Ventures unless (and only to the extent) such earnings shall actually have been received by a Loan Party during such applicable period in the form of a cash distribution.
 
Net Orderly Liquidation Value ” means, as of any date, with respect to Borrower’s Inventory, the orderly liquidation value thereof as determined in a manner acceptable to Lender by an appraiser acceptable to Lender in the exercise of its discretion in good faith, net of all costs of liquidation thereof, pursuant to then current appraisal.

Net Proceeds ” means any payments, proceeds, or other amounts received by a Loan Party (or by any Person on its behalf), with respect to any of the matters described in Section 2.2(g) , net of (a) any applicable tax paid by a Loan Party thereon, (b) any payment required on any Permitted Purchase Money Indebtedness secured by a Lien on any Equipment on which Lender does not have a first priority security interest to the extent permitted by this Agreement, and (c) any reasonable out-of-pocket expense incurred by a Loan Party, including reasonable attorneys’ fees, to obtain such payment, proceed or other amount.
 
Non-Borrower Loan Party ” means a Loan Party exclusive of Borrower, and “ Non-Borrower Loan Parties ” means all Loan Parties exclusive of Borrower.
 
Non-financed Capital Expenditures ” means the total amount of Capital Expenditures for any period, as determined on a consolidated basis in accordance with GAAP, made by Loan Parties determined exclusive of those Capital Expenditures made from (a) funds borrowed by a Loan Party (for purposes of this clause (a) “funds borrowed” will not include funds borrowed from Lender as a Revolving Loan) or pursuant to any Capitalized Lease or (b) the proceeds of condemnation or eminent domain proceedings or any insurance proceeds resulting from any Event of Loss.

Notes ” means each of, and collectively: (a) the Revolving Note, (b) the Term Loan A Note, (b) the Term Loan B Note, (c) the Term Loan C Note, and (d) any other promissory note made from time to time by Borrower in favor of Lender to evidence any of the Obligations.

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Obligations ” means, collectively, (i) the Loans, the Letter of Credit Obligations, the Rate Management Obligations, and all other loans, advances, debts, liabilities, obligations, indemnities, covenants and duties of Loan Parties (individually and collectively) owed to Lender (or any other Affiliate of Fifth Third Bancorp) of any kind, present or future, under, or arising out of, this Agreement, the Notes and the other Loan Documents and whether for the payment of money, whether arising out of overdrafts on checking, deposit or other accounts or electronic funds transfers (whether through automatic clearing houses, wire transfers or otherwise) or out of Lender’s non-receipt of, or inability to collect, funds or otherwise not being made whole in connection with depository transfer checks or other similar arrangements and whether direct or indirect (including acquired by assignment), related or unrelated, absolute or contingent, due or to become due, now existing or hereafter arising and however acquired, and including all interest, charges, expenses, fees and any other sums chargeable to one or more Loan Party (individually and collectively) in connection with any of the foregoing, including all reasonable attorneys’ fees and (ii) all indebtedness, liabilities, obligations, indemnities, covenants and duties of Loan Parties (individually and collectively) owed to Lender (or any other Affiliate of Fifth Third Bancorp) of any kind, present or future, under or arising out of, any or all of: (a) all treasury and cash management agreements and services, (b) all obligations with respect to any credit, debit or other cards issued (or processed) by Lender (or any Affiliate of Lender), and (c) all equipment leases.  For the avoidance of any doubt, the Fifth Third Shareholder Loans shall not be deemed to be part of the Obligations.

OFAC ” means the U.S. Department of Treasury Office of Foreign Assets Control (or any successor agency).

Officers ” means, individually and collectively, William W. Nicholson (Chief Executive Officer); Mark A. Fox (President and Chief Operating Officer); Robert Conologue (Chief Financial Officer); and Richard H. Neuwirth (Chief Legal Officer and Secretary); or any addition or successor to any of the foregoing.

Organizational Documents ” means for each Loan Party, as applicable, such Person’s articles of incorporation (or equivalent in the case of a corporation), articles of organization (or equivalent in the case of a limited liability company), bylaws (or equivalent in the case of a corporation), operating agreement (or equivalent in the case of a limited liability company), agreement of limited partnership, shareholders (or stockholders) agreements, resolutions, actions, or other applicable charter or other governing documents.

Other Taxes ” means any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under the Notes or from the execution or delivery of, or otherwise with respect to, this Agreement, the Notes, or any other Loan Document, but excluding any such taxes, charges or levies based on the income of Lender or any of its Affiliates.

Overadvance ” has the meaning given in Section 2.1(a) .

Owner/Affiliate Subordinated Creditors ” means JVA Enterprises Capital, LLC, David L. Van Andel, William W. Nicholson, Mark A. Fox and John Paul DeJoria.

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                      “ Owner/Affiliate Subordinated Debt ” means, collectively, (a) the Indebtedness evidenced by the Owner/Affiliate Subordinated Debt Notes; and (b) all other Subordinated Obligations (as defined in each Owner/Affiliate Subordination Agreement), all as now exist or may, after the date of this Agreement, be renewed, extended, consolidated, adjusted or increased subject to Section 5.2 and any Refinancing Debt with respect thereto.

Owner/Affiliate Subordinated Debt Default ” means any of the following (or any combination of the following): (a) the occurrence and continuance of a default or breach by Parent, Borrower and/or, as applicable, any other Loan Party of or under any of the Owner/Affiliate Subordinated Debt Documents, after the lapse of any applicable notice and cure periods, that would permit any Owner/Affiliate Subordinated Creditor to accelerate the maturity of the applicable Owner/Affiliate Subordinated Debt, (b) the maturity of an Owner/Affiliate Subordinated Debt Note or (c) any acceleration of any of the Owner/Affiliate Subordinated Debt.

Owner/Affiliate Subordinated Debt Documents ” means, collectively, (a) the Owner/Affiliate Subordinated Debt Notes, (b) the other Subordinated Obligations Documents (as defined in each Owner/Affiliate Subordination Agreement), and (c) any other document, instrument or agreement evidencing the Owner/Affiliate Subordinated Debt, as any or all of the foregoing documents, instruments, and agreements are now in effect or, subject to Section 5.2 , as at any time after the date of this Agreement amended, modified, supplemented, restated, renewed, extended, or otherwise changed and any documents, instruments, or agreements given, subject to Section 5.2 , in substitution of any of them (including in connection with any Refinancing Debt with respect thereto).

Owner/Affiliate Subordinated Debt Notes ” has the meaning given on Schedule 1.5 .

Owner/Affiliate Subordination Agreements ” means, collectively, each Subordination Agreement between an Owner/Affiliate Subordinated Creditor and Lender dated as of the date of this Agreement, among other things, subordinating the applicable Owner/Affiliate Subordinated Debt to the Obligations.

Ownership Interest ” means all shares, interests, participations, rights to purchase, options, warrants, general or limited partnership interests, limited liability company interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or nonvoting, including common stock, preferred stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the Rules and Regulations promulgated by the Securities and Exchange Commission (17 C.F.R. § 240.3a11-1) under the Securities and Exchange Act of 1934, as amended).

Parent ” has the meaning given in the introductory paragraph hereof.

Parent Pledge Agreement ” means the Pledge Agreement dated as of the date of this Agreement between Parent and Lender.

Participant Consents ” has the meaning given in Section 8.2 .

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Participant Instructions ” has the meaning given in Section 8.2 .

Participants ” has the meaning given in Section 8.1 .

Patent Security Agreement ” means the Patent Collateral Assignment and Security Agreement between ISI Brands and Lender dated as of the date of this Agreement.

PE Group ” has the meaning given in the definition of “Loan Parties”.

Pension Plan ” means an “employee pension benefit plan”, as defined in ERISA, excluding any Multiemployer Plan.

Permitted Dissolutions ” means, so long as there does not exist an Event of Default, the dissolution of any Inactive Subsidiary upon at least 10 Business Days prior notice to Lender.

Permitted Liens ” means: (a) current taxes and assessments not yet due and payable; (b) any Liens granted to Lender or its Affiliates to secure the repayment or performance of the Obligations; (c) any Liens arising from a Contested Claim in the manner, and to the extent, provided for in Section 4.6 ; (d) any purchase money security interests granted by, or Capitalized Lease Obligations incurred by, a Loan Party in connection with any Permitted Purchase Money Indebtedness; (e) Liens of mechanics, materialmen, shippers, warehousemen, and other like Liens for services or materials incurred in the ordinary course of business for which payment is not yet due; (f) Liens on cash deposits in connection with bids, tenders or real property leases or as security for surety or appeal bonds in the ordinary course of business; (g) Liens resulting from any judgment that is not an Event of Default; (h) easements, permits, rights of way and other restrictions that do not materially interfere with or impair the use or operation of Borrower’s Facilities; (i) cash pledges or cash deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; (j) any precautionary Liens of lessors on Equipment under true operating leases of such Equipment; and (k) Liens listed on Schedule 3.9 , provided that those Liens secure only the Indebtedness which the Liens secure on the Closing Date or any Refinancing Debt thereof.

Permitted Mergers ” means, collectively, the merger or consolidation of an Inactive Subsidiary with and into Parent, with Parent being the survivor so long that with respect to the merger or consolidation Borrower shall provide prompt written notice to Lender upon the consummation of such merger or consolidation.

Permitted Purchase Money Indebtedness ” means purchase money Indebtedness or Capitalized Lease Obligations incurred by a Loan Party to acquire any Equipment if each of the following conditions is satisfied: (a) the total outstanding amount of purchase money Indebtedness and Capitalized Lease Obligations incurred by Loan Parties does not, as of any date, exceed an aggregate amount equal to $2,000,000, (b) such purchase money Indebtedness and Capitalized Lease Obligations will not be secured by any of the Loan Collateral other than the specific Equipment financed thereby and the identifiable cash proceeds thereof, and (c) the principal amount of such purchase money Indebtedness and Capitalized Lease Obligations will not, at the time of the incurrence thereof, exceed the value of the Property so acquired.

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Person ” means any individual, partnership, joint venture, trust, limited liability company, business trust, joint stock company, unincorporated association, corporation, institution, entity, or any Governmental Authority.

Planet Earth ” has the meaning given in the definition of “Loan Parties”.

Presentments ” has the meaning given in Section 2.4(a) .

Prime Rate ” has the meaning given in the Revolving Note.

Prime Rate Revolving Loan ” means that portion of the Revolving Loans which, as of any date, bears interest at an interest rate per annum equal to the Prime Rate plus the applicable margin as set forth in the Revolving Note.

Property ” means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
 
Projections ” has the meaning given in Section 4.3(i) .

Rate Management Agreement ” means any agreement, device or arrangement providing for payments which are related to fluctuations of commodities, interest rates, exchange rates, forward rates, or equity prices, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and any agreement pertaining to equity derivative transactions ( e.g. , equity or equity index swaps, options, caps, floors, collars and forwards), including any ISDA Master Agreement, and any schedules, confirmations and documents and other confirming evidence between the parties confirming transactions thereunder, all whether now existing or hereafter arising, and in each case as amended, modified or supplemented from time to time.

Rate Management Obligations ” means any and all obligations of a Loan Party to Lender or any Affiliate of Fifth Third Bancorp, whether absolute, contingent or otherwise and howsoever and whensoever (whether now or hereafter) created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under or in connection with (a) any and all Rate Management Agreements, and (b) any and all cancellations, buy-backs, reversals, terminations or assignments of any Rate Management Agreement, in each case with respect to the Loans.

Raw Materials ” has the meaning given in the definition of Eligible Inventory.

Refinance ” means, in respect of any Funded Indebtedness, the Owner/Affiliate Subordinated Debt, the Alticor Note, the LaSalle Debt and the Fifth Third Shareholder Loans, to refinance, extend, renew, defease, amend, modify, supplement, restructure, replace, refund or repay (in full), or to issue other Indebtedness in exchange or replacement for, such Indebtedness in whole or in part.  “Refinanced” and “Refinancing” shall have correlative meanings.

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Refinancing Debt ” means, as to any Funded Indebtedness, the Owner/Affiliate Subordinated Debt, the Alticor Note, the LaSalle Debt and the Fifth Third Shareholder Loans, the Refinance of such Indebtedness, provided that the following conditions (together with any other conditions set forth in any other Loan Documents) are satisfied:

(a)           the weighted average life to maturity of such Refinancing Debt shall be greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced;

(b)           the principal amount of such Refinancing Debt shall be less than or equal to the sum of the principal amount then outstanding of, plus accrued and unpaid interest on and financing fees related to, the Indebtedness being Refinanced;

(c)           the respective obligor or obligors shall be the same on the Refinancing Debt as on the Indebtedness being Refinanced;

(d)           the priority of payment of such Refinancing Debt shall be the same as or lower than the ranking of the Indebtedness being Refinanced, including the execution of a subordination agreement with Lender, on no less favorable terms to Lender, than exists under any subordination agreement that is applicable to the Indebtedness being Refinanced; provided, however , that any Refinancing of the Alticor Note shall be on terms and conditions acceptable to Lender in its discretion;

(e)           the security, if any, for the Refinancing Debt shall be the same as that for the Indebtedness being Refinanced (except to the extent that less security is granted to holders of the Refinancing Debt);

(f)           the terms of such Refinancing Debt (including covenants, events of default and remedies) are no less favorable, when taken as a whole, to Loan Parties than the terms of this Agreement at the time such Indebtedness is being Refinanced; and

(g)           Loan Parties are in compliance with the Financial Covenants, on a pro forma basis, after giving effect to the incurrence of such Refinancing Debt and the scheduled repayment of the Indebtedness being Refinanced.  To determine whether there is pro forma compliance with the Financial Covenants, Parent will, on a pro forma basis, provide a worksheet to Lender at least 10 days before incurring such Refinancing Debt, which (i) restates the Financial Statements received by Lender for the Fiscal Quarter or the Fiscal Year, as applicable, ended most closely before the date such Refinancing Debt is proposed to be incurred as if the proposed Refinancing Debt had been made, and the Indebtedness had been Refinanced, at the beginning of the applicable Test Period and (ii) calculates the Fixed Charge Coverage Ratio under Section 5.10 , the Senior Funded Indebtedness to EBITDA Ratio under Section 5.11 , and the minimum Tangible Net Worth under Section 5.12 in each case taking into account such proposed Refinancing Debt as if the proposed Refinancing Debt had been made, and the Indebtedness had been refinanced, at the beginning of the applicable Test Period.

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Remittances ” means all checks, drafts, money orders, and other items and all cash and other remittances of every kind due any Loan Party on its Accounts or other Loan Collateral.

Reports ” has the meaning given in Section 9.10 .

Revolving Credit Exposure ” means, as of any date, the sum of the then outstanding Revolving Loans and the Letter of Credit Obligations.

Revolving Commitment ” means $20,000,000, subject to Section 2.2(h) .

Revolving Loan Availability ” means, as at any time, an amount, in Dollars, equal to:

(a)           an amount equal to the lesser of: (i) the Borrowing Base and (ii) the Revolving Commitment;

less            (b)           the aggregate outstanding principal amount of all Revolving Loans; and

less            (c)           the Letter of Credit Exposure.

Revolving Loans ” has the meaning given in Section 2.1(a) .

Revolving Note ” has the meaning given in Section 2.1(c) .

Security Agreements ” means, collectively, the Borrower Security Agreement and the Loan Party Security Agreement.

Security Documents ” means, collectively, the Mortgage, the Security Agreements, the Parent Pledge Agreement, the Patent Security Agreement, the Trademark Security Agreement, the Agreement Regarding Credit Insurance and all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust and other documents executed in connection with this Agreement and granting to Lender or Lender’s Affiliates Liens on the Loan Collateral to secure the Obligations, together with all financing statements and other documents necessary to record or perfect the Liens granted by any of the foregoing, and “ Security Document ” means any one of the Security Documents, in each case as supplemented, restated, or otherwise changed or modified and any substitute or replacement agreements, instruments, or documents accepted by Lender or, as applicable, such Affiliate of Lender.

                      “ Semi-Finished Goods ” has the meaning given in the definition of Eligible Inventory.

Senior Funded Indebtedness to EBITDA Ratio ” means, as of any date of determination, the ratio resulting from dividing : (a) Funded Indebtedness as of the end of the applicable Test Period by (b) the sum of (i) EBITDA for that same Test Period plus (ii) any Extraordinary Expenses incurred in that same Test Period ( provided, that the aggregate amount of Extraordinary Expenses added back pursuant to this clause (ii) for the Test Period that ended on December 31, 2007 shall not exceed $8,100,000; and provided, further , the aggregate amount of Extraordinary Expenses added back for the Test Period ending on, and for each Test Period ending after, March 31, 2008 shall not exceed $100,000 for each such Test Period), plus (iii) Closing Costs for that same Test Period.
 

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Specific Guarantor Event ” means Peter A. Lusk dies or becomes legally incompetent.
 

Specific Guarantor Standstill Period ” means the period described as follows: a “Specific Guarantor Standstill Period” will begin, for purposes of this Agreement, on the date that a Specific Guarantor Event occurs.  A “Specific Guarantor Standstill Period” will end upon the earliest to occur of the following: (a) the 181 st day after the beginning of the Specific Guarantor Standstill Period, (b) the date that the Termination Date occurs if on such Termination Date the Obligations have not been paid in full, (c) the date which is ten (10) Business Days prior to the expiration of the time period in which creditor claims may be presented against the estate of the applicable Individual Guarantor as determined pursuant to the laws of the jurisdiction in which the Individual Guarantor’s estate is probated, or (d) the occurrence of any other Event of Default on or after the beginning of the Specific Guarantor Standstill Period which has not been cured as confirmed in a writing signed by Lender and delivered to Borrower or waived in a writing signed by Lender and delivered to Borrower.

Standby Letter of Credit ” has the meaning given in Section 2.3(a) .

State Assignment of Claims Law ” means a state or local statute or regulation comparable to the Federal Assignment of Claims Act or that restricts or conditions assignment of Government Accounts.
 
 
Stated Advance Rate Change ” has the meaning given in Section 2.1(e) .

Subsidiary ”  means any Person as to which any other Person owns, directly or indirectly, more than 50% of the outstanding (a) shares of Ownership Interests or (b) other interests having ordinary voting power for the election of directors, officers, managers, trustees or other controlling Persons.

Synthetic Lease ” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease under GAAP.

Tangible Net Worth ” means Loan Parties’ book net worth, determined on a consolidated basis in accordance with GAAP, based on a FIFO method of cost accounting for inventory (including the sum of common stock, paid in capital, and earned surplus, if applicable), adjusted as follows: (a) minus the sum of (i) all intangibles under GAAP (other than Loan Parties’ trademarks); (ii) all Affiliate, employee, officer, member, manager, and director Accounts, other than Accounts owing from Affiliates in the ordinary course of business; and (iii) any (A) gain from any write-up of assets, (B) gain from the acquisition of debt securities or Ownership Interests of a Loan Party or from cancellation or forgiveness of Indebtedness, (C) gain or income from accretion of any negative goodwill, or (D) gain recognized by a Loan Party as earnings which relate to any extraordinary accounting adjustments or non-recurring items of income or include any amounts attributable to extraordinary gains or extraordinary items of income or any other non-operating, non-recurring gain from time to time occurring to the extent, in each case, the gains or items of income are non-cash; (b) plus an amount equal to the then outstanding principal amount of, and accrued but unpaid interest on, the Owner/Affiliate Subordinated Debt Notes (so long as the applicable Owner/Affiliate Subordination Agreement has not been materially breached by the applicable Owner/Affiliate Subordinated Creditor or a Loan Party) to the extent the Owner/Affiliate Subordinated Debt Notes are included as a liability of a Loan Party on its balance sheet in accordance with GAAP; (c) plus an amount equal to the then outstanding principal amount of, and accrued but unpaid interest on, the LaSalle Debt Notes (so long as the LaSalle Intercreditor Agreement has not been materially breached by LaSalle or a Loan Party) to the extent the LaSalle Debt Notes are included as a liability of a Loan Party on its balance sheet in accordance with GAAP; and (d) plus an amount equal to the then outstanding principal amount of, and accrued but unpaid interest on, the Alticor Note (so long as the Alticor Note has not been materially breached by a Loan Party) to the extent the Alticor Note is included as a liability of a Loan Party on its balance sheet in accordance with GAAP.

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Tax Distribution ” has the meaning given in Section 5.6(a) .

Tax Refund ” means any refund of any taxes, or fees or interest in respect thereof which are paid to Loan Party by any Governmental Authority.

Term Loan A ” has the meaning given in Section 2.2(a) .

Term Loan A Note ” has the meaning given in Section 2.2(b) .

Term Loan B ” has the meaning given in Section 2.2(c) .

Term Loan B Note ” has the meaning given in Section 2.2(d) .

Term Loan C ” has the meaning given in Section 2.2(e) .

Term Loan C Closing Date ” has the meaning given in Section 2.2(e) .

Term Loan C Draw Conditions ” has the meaning given in Section 7.3 .

Term Loan C Note ” has the meaning given in Section 2.2(f) .

Term Loan Notes ” means, collectively, the Term Loan A Note, the Term Loan B Note, and the Term Loan C Note.

Term Loans ” means, collectively, Term Loan A, Term Loan B and Term Loan C.

Termination Date ” means: (a) with respect to the Line of Credit, the Letter of Credit Obligations and the other Obligations (other than the Term Loans), the earlier of: (i) December 2, 2008 and (ii) the date upon which the entire outstanding balance under the Revolving Note shall become due pursuant to the provisions hereof (whether as a result of acceleration by Lender or otherwise); (b) with respect to Term Loan A, the earliest of: (i) December 2, 2008, (ii) the date upon which Term Loan A shall be repaid in full, and (iii) the date upon which the entire outstanding balance under the Term Loan A Note shall become due pursuant to the provisions hereof (whether as a result of acceleration by Lender or otherwise); (c) with respect to Term Loan B, the earliest of: (i) December 2, 2008, (ii) the date upon which Term Loan B shall be repaid in full, and (iii) the date upon which the entire outstanding balance under the Term Loan B Note shall become due pursuant to the provisions hereof (whether as a result of acceleration by Lender or otherwise); and (d) with respect to Term Loan C, the earliest of: (i) December 2, 2008, (ii) the date upon which Term Loan C shall be repaid in full, and (iii) the date upon which the entire outstanding balance under the Term Loan C Note shall become due pursuant to the provisions hereof (whether as a result of acceleration by Lender or otherwise).

Termination Notice ” has the meaning given in Section 6.4(b) .

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Test Period ” means each 12 Month Period ending at the end of each Fiscal Quarter or Fiscal Year.  The first Test Period for the purposes of this Agreement shall end on the Fiscal Year ended on December 31, 2007; provided , that with respect to determining the Fixed Charge Coverage Ratio under Section 5.10 as of (a) December 31, 2007, “ Test Period ” means the period beginning on October 1, 2007 and ending on December 31, 2007, (b) March 31, 2008, “ Test Period ” means the period beginning on October 1, 2007 and ending on March 31, 2008, (c) June 30, 2008, “ Test Period ” means the period beginning on October 1, 2007 and ending on June 30, 2008, and (d) September 30, 2008, “ Test Period ” means the period beginning on October 1, 2007 and ending on September 30, 2008.

TGI Organic ” has the meaning given in the definition of “Loan Parties”.

Trademark Security Agreement ” means the Trademark Security Agreement between ISI Brands and Lender dated as of the date of this Agreement.

12 Month Period ” means, in respect of a date as of which the applicable Financial Covenant is being calculated, the four consecutive Fiscal Quarters ending on or immediately preceding the date as of which the Financial Covenant is being calculated ( i.e. , a rolling four Fiscal Quarter (or 12 month) period).

UCC ” means the Uniform Commercial Code adopted in each applicable jurisdiction, as amended or superseded from time to time.

United States Debtor ” means an account debtor that is the United States or any department, agency or instrumentality of the United States.

Voluntary Termination Date ” has the meaning given in Section 6.4(b) .

Voting Ownership Interests ” means Ownership Interests which are ordinarily, in the absence of contingencies, entitled to vote with respect to the election (or designation) of corporate directors, managers in a limited liability company, or Persons or bodies performing similar functions.

1.2            Construction .  “Hereunder,” “herein,” “hereto,” “this Agreement” and words of similar import refer to this entire document; “including” is used by way of illustration and not by way of limitation, unless the context clearly indicates the contrary; the singular includes the plural and conversely; and any action required to be taken by a Person is to be taken promptly, unless the context clearly indicates the contrary.  The term “ good faith ” means honesty in fact in the conduct or transaction concerned.  The definition of any agreement, document or instrument includes all schedules, attachments and exhibits thereto and all renewals, extensions, supplements, modifications, restatements and amendments thereof but only to the extent such renewals, extensions, supplements, modifications, restatements or amendments thereof are not prohibited by the terms of any Loan Document.  All references to statutes include (a) all regulations promulgated thereunder, (b) any amendments of such statutes or regulations promulgated thereunder, and (c) any successor statutes and regulations, including any comparable provision of the applicable statute, ordinance, code, regulation or other law as amended or superseded after the date of this Agreement; provided , that any representation or warranty as to compliance with any such statute or regulation shall be limited to such statute or regulation as in effect as of the date of such representation or warranty.

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Section 2.                       Loans .

2.1            Revolving Loans .  (a)  Subject to the terms and conditions hereof and in reliance upon the representations and warranties of Loan Parties herein, Lender hereby extends to Borrower a line of credit facility (the “ Line of Credit ”) pursuant to which Lender will make loans to Borrower on a revolving basis upon Borrower’s request from time to time until the Termination Date applicable to the Line of Credit (the “ Revolving Loans ”) in an amount not exceeding the Revolving Loan Availability.  Lender may create and maintain Borrowing Base Reserves against the Borrowing Base.  If, at any time, Lender implements a Borrowing Base Reserve  (“ Borrowing Base Reserve Implementation ”): (i) in excess of $100,000, Lender will give Borrower 5 Business Days advance written notice of such Borrowing Base Reserve Implementation unless an Event of Default then exists, in which case Lender will give Borrower contemporaneous oral or written notice of such Borrowing Base Reserve Implementation, and (ii) in an amount less than or equal to $100,000, Lender will give Borrower prompt notice of such Borrowing Base Reserve Implementation.  Borrower may borrow, repay, in whole or in part, and reborrow under the Line of Credit; provided that if Revolving Loan Availability shall at any time be less than zero Dollars (such condition being an “ Overadvance ”), Borrower shall immediately, without demand or notice, reduce the outstanding balance of the Revolving Loans, and/or provide cash collateral to reduce that portion of the Overadvance attributable to any Letter of Credit Exposure in the same manner that cash collateral is provided pursuant to Section 6.5 , or both, so that after all such actions, such Overadvance shall no longer exist.

(b)           The initial drawing of the Line of Credit shall be used, in part, to refinance the existing Indebtedness with Capital Source, including to pay any fees, commissions and costs of accountants, consultants and attorneys related thereto, and the proceeds of the Line of Credit remaining after the refinancing shall be used by Borrower solely for general working capital purposes and corporate purposes not in violation of the terms of this Agreement or any of the other Loan Documents.  All future proceeds of the Line of Credit shall be used by Borrower solely for general corporate, working capital, and Investment purposes not in violation of the terms of this Agreement or any of the other Loan Documents.

(c)           Borrower shall execute and deliver to Lender a Revolving Credit Promissory Note in the form of Exhibit 2.1 (the “ Revolving Note ”), dated as of the date of this Agreement, in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note and, if applicable, a LIBOR Breakage Fee (as defined in the Revolving Note), Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

(d)           The entire unpaid balance of the Line of Credit and the Letter of Credit Obligations, plus all accrued and unpaid interest, any other charges, advances and fees, if any, outstanding with respect to the then Revolving Credit Exposure shall be due and payable in full on the Termination Date with respect to the Line of Credit.

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(e)(i)           Borrower acknowledges that Lender, from time to time, may do any one or more of the following in its discretion exercised in good faith: (A) decrease the dollar limits on outstanding advances against the Borrowing Base or applicable to the Eligible Inventory advance sublimits or (B) decrease the Eligible Inventory and the Eligible Accounts advance rates if one or more of the following events occur or conditions exist: (1) an Event of Default has occurred and is continuing; (2) with regard to the Eligible Accounts advance rate, (I) the dilution percentage (“ Dilution Percentage ”) with respect to Borrower’s Eligible Accounts ( i.e., reductions in the amount of Accounts because of returns, discounts, price adjustments, credit memoranda, credits, allowances and other offsets, and any other Contras (to the extent that Borrower’s customer and Borrower do not exchange payments to settle the Contra)) increases above 10%, and if such Dilution Percentage, as of any date of determination by Lender (“ Dilution Determination Date ”): ( x ) increases above 10%, the advance rate against Eligible Accounts (starting at 80%) will reduce (effective with the next delivery of the Borrowing Base Certificate to Lender) 1% for each 1% (or fraction thereof) increase in the Dilution Percentage above 10% or ( y ) decreases below 5%, then the advance rate against Eligible Accounts will increase (effective with the next delivery of the Borrowing Base Certificate to Lender) to 85%, (II) the percentage of accounts receivable which are 90 days or more past the date of the original invoices applicable thereto increases, in comparison to the percentage of accounts receivable which are within 90 days from the date of the original invoices applicable thereto, by an amount which Lender, in good faith, determines is material, or (III) any material adverse change occurs, determined by Lender in good faith, from the Closing Date in respect of the credit rating or credit quality of Borrower’s account debtors taken as a whole; or (3) with respect to the Eligible Inventory advance rate, there occurs a material change, as determined by Lender in its discretion, in the type, quantity, or quality of Borrower’s Eligible Inventory, taken as a whole, as compared to the type, quantity, or quality of Borrower’s Eligible Inventory on the Closing Date, including, without limitation, a material change, as determined by Lender in its discretion, in the Net Orderly Liquidation Value of Borrower’s Inventory established by the most recent appraisal received and approved by Lender in accordance with Section 4.2 .

(ii)           If, at any time, Lender decreases any of the dollar limits on outstanding advances against the Borrowing Base or applicable to the Eligible Inventory advance sublimits or decreases such advance rates from that which, in any case, is expressly stated in clauses (a) or (b) of the definition of the Borrowing Base ( i.e., exclusive of those changes which result from the effect of applying applicable eligibility criteria and reserves) (“ Stated Advance Rate Change ”), Lender will give Borrower 15 days advance written notice of such Stated Advance Rate Change, unless an Event of Default then exists, in which case Lender will give Borrower contemporaneous oral or written notice of such Stated Advance Rate Change.

2.2            Term Loans .

(a)           Subject to the terms and conditions of this Agreement, Lender will make a loan to Borrower in an amount equal to $5,000,000 ( “ Term Loan A ”) on the Closing Date.  No part of Term Loan A may, on the repayment thereof, be redrawn or reborrowed by Borrower.  The entire unpaid principal balance of, and accrued interest on, Term Loan A, if not sooner repaid, will be due and payable on the Termination Date with respect to Term Loan A.  The proceeds of Term Loan A shall be used to refinance the existing Indebtedness with Capital Source, including to pay any fees, commissions and costs of accountants, consultants and attorneys related thereto, to repay other Indebtedness as reflected on the disbursement letter executed on the Closing Date and to pay closing costs.

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(b)           Borrower shall execute and deliver to Lender a Term Promissory Note in the form of Exhibit 2.2(b) (the “ Term Loan A Note ”), dated as of the date of this Agreement, in the principal amount of $5,000,000, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan A Note.

(c)           Subject to the terms and conditions of this Agreement, Lender will make a loan to Borrower in an amount equal to $10,000,000  (“ Term Loan B ”) on the Closing Date.  No part of Term Loan B may, on the repayment thereof, be redrawn or reborrowed by Borrower.  The entire unpaid principal balance of, and accrued interest on, Term Loan B, if not sooner repaid, will be due and payable on the Termination Date with respect to Term Loan B.  The proceeds of Term Loan B shall be used for working capital and general corporate purposes not in violation of this Agreement.

(d)           Borrower shall execute and deliver to Lender a Term Promissory Note in the form of Exhibit 2.2(d) (the “ Term Loan B Note ”), dated as of the date of this Agreement, in the principal amount of $10,000,000, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.

(e)           Subject to the terms and conditions of this Agreement, including the Term Loan C Draw Conditions, Lender will make a loan to Borrower in an amount equal to $2,000,000 (“ Term Loan C ”) on the date that all of the Term Loan C Draw Conditions have been fully satisfied (“ Term Loan C Closing Date ”).  No part of Term Loan C may, on the repayment thereof, be redrawn or reborrowed by Borrower.  The entire unpaid principal balance of, and accrued interest on, Term Loan C, if not sooner repaid, will be due and payable on the Termination Date with respect to Term Loan C.  The proceeds of Term Loan C shall be used working capital purposes.

(f)           Borrower shall execute and deliver to Lender a Term Promissory Note in the form of Exhibit 2.2(f) (the “ Term Loan C Note ”), dated as of the Term Loan C Closing Date, in the principal amount of $2,000,000, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan C Note.

(g)           In addition to the scheduled payments of principal on the Term Loans set forth in the Term Loan Notes, the following payments shall be made to, or retained by, Lender and applied as provided in Section 2.2(h) :

(i)           Within one Business Day after the date of receipt thereof by a Loan Party, an amount equal to 100% of the Net Proceeds from any sale of any asset (exclusive of (A) sales of Inventory in the ordinary course of business, (B) sales or other Dispositions of Equipment, the proceeds of which are used for the replacement of such Equipment as contemplated by Section 5.7 , (C) Disposition of Accounts permitted by Section 5.7 ; and (D) Dispositions of Investments of the types described in clauses (iii) , (iv) (as to cash deposits), (v) , (vi) , and (ix) of Section 5.9(c) so long as the proceeds thereof are reinvested in other Investments that are permitted to be owned or made as provided in Section 5.9 or in Capital Expenditures to the extent permitted by Section 5.3 );

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(ii)           Within one Business Day after the date of receipt thereof by a Loan Party, 100% of the Net Proceeds from any insurance or condemnation proceeds payable in respect of, or arising out of, any loss or damage to any of Borrower’s Property (other than dispositions of (i) Equipment, which is the subject of an Event of Loss, in connection with the repair or replacement of such Equipment as contemplated by Section 5.7 and (ii) the Mortgaged Property, which is the subject of an Event of Loss, in connection with the repair or replacement of such Mortgaged Property to the extent permitted by the Mortgage); and

(iii)           Within one Business Day after the date of receipt thereof by: (A) Parent, 100% of the Net Proceeds from any issuance by Parent or any other Loan Party of any Ownership Interests after the Closing Date (other than pursuant to an equity purchase program approved by the Board of Directors of Parent for key employees of Loan Parties so long as not more than 3% of the Ownership Interests of Parent are sold to such employees pursuant thereto), (B) any Loan Party of any dividend or distribution to a Loan Party from a Person other than a Loan Party, (C) any Loan Party from a borrowing by such Loan Party of additional Owner/Affiliate Subordinated Debt after the Closing Date, or (D) any Loan Party of a Tax Refund, or (E) any other proceeds of a Recapitalization Event (as defined in the LaSalle Intercreditor Agreement).

(h)           With respect to mandatory prepayments described in Section 2.2(g) , such prepayments shall, absent the occurrence and continuance of an Event of Default: (i) first , be applied to the remaining installments of principal under the Term Loan C Note, in the inverse order of maturity, until Term Loan C has been paid in full, (ii) second , at any time after Term Loan C shall have been repaid in full (or, if Term Loan C is not drawn), be applied to the remaining installments of principal under the Term Loan B Note, in the inverse order of maturity, until Term Loan B has been paid in full; (iii) third , at any time after Term Loan B shall have been repaid in full, be applied to the remaining installments of principal under the Term Loan A Note, in the inverse order of maturity, until Term Loan A has been paid in full; (iv) fourth , at any time after Term Loan A shall have been repaid in full, be applied to the outstanding balance of the Revolving Loans; (v) fifth , after the Revolving Loans have been paid in full, such payments shall be applied to cash collateralize outstanding Letter of Credit Obligations; and (vi) sixth , after all Letter of Credit Obligations are fully cash collateralized, in repayment of any of the other Obligations then due and payable, and the Revolving Commitment will, at Lender’s sole option, be contemporaneously reduced by an amount deemed appropriate by Lender in the exercise of its discretion in good faith.  Nothing in this Section 2.2(h) shall be construed to constitute Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.  No partial prepayment under Section 2.2 will change the due dates or the amount of the scheduled principal payments otherwise required by the Term Loan Notes or this Agreement.

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(i)           Subject to the terms of the applicable Term Loan Notes and this Agreement and, if applicable, a LIBOR Breakage Fee (as defined in the Term Loan Notes), Borrower may prepay the Term Loans in whole or part at any time.  Any prepayment of the Term Loans will be applied to the last to mature of the payments required under the Term Loan Notes.  Except as provided in the preceding sentence, no partial prepayment will change the due dates or the amount of the scheduled payments otherwise required by the applicable Term Loan Notes.

2.3            Letters of Credit .

(a)           Until the Termination Date with respect to the Line of Credit and subject to the other terms and conditions of this Agreement, Borrower may request Lender to issue one or more of its standard (i) standby letters of credit (“ Standby Letter of Credit ”) in favor of such beneficiary(ies) as are designated by Borrower or (ii) commercial letters of credit (“ Commercial Letter of Credit ”) in favor of such beneficiary(ies) as are designated by Borrower by, in each case, delivering to Lender: (A) a Letter of Credit Application completed to the satisfaction of Lender, together with the proposed form of the Letter of Credit (which, in all respects, will comply with the applicable requirements of Section 2.3(b) ), (B) a Borrowing Base Certificate which calculates the Letter of Credit Availability by giving effect to the proposed Letter of Credit, and (C) such other Letter of Credit Documents that Lender then reasonably requires.  Lender, in addition to the other terms of this Agreement, will have no obligation to issue the proposed Letter of Credit if, after giving effect to the proposed Letter of Credit, there would exist a Letter of Credit Deficiency.  The making of each Letter of Credit request by Borrower will be deemed to be a representation by Borrower that the Letter of Credit may be issued in accordance with, and will not violate the terms of, this Section 2.3 .

(b)           Each Letter of Credit issued under this Agreement will, among other things, (i) be in such form requested by Borrower as is acceptable to Lender in its discretion exercised in good faith, (ii) be denominated in Dollars, and (iii) be issued to support Borrower’s obligations that finance its business needs incurred in the ordinary course of Borrower’s business as presently conducted by it (and, in the case of Commercial Letters of Credit, solely to purchase Inventory or Equipment).  In no event will Lender have any obligation to issue any Standby Letter of Credit with a term of more than one year or any Commercial Letter of Credit with a term of more than 180 days; furthermore, and, in addition to the foregoing term limitation, Lender will have no obligation to issue any Letter of Credit with an expiry date later than 30 days before the scheduled Termination Date applicable to the Line of Credit.  Each Letter of Credit Application and each Letter of Credit will set forth which rules or customs apply to the Letter of Credit.  Such rules and customs may include, but are not limited to, the International Standby Practices, as published by the International Chamber of Commerce (“ ISP ”) or the Uniform Customs and Practice for Documentary Credits, as published by ISP.  In any event, the Letter of Credit shall be governed by (A) the rules or customs set forth in the Letter of Credit and (B) the internal laws of the State of Ohio and the United States of America, except to the extent such laws are inconsistent with the rules or customs adopted in the Letter of Credit Documents and Letter of Credit as set forth above.

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(c)           Upon receipt of a request from Borrower to issue any Letter of Credit and of all attendant Letter of Credit Documents satisfactorily completed, Lender, within three Business Days, may either (i) issue the requested Letter of Credit to the beneficiary thereof and transmit a copy to Borrower, or (ii) elect, in its discretion exercised in good faith, not to issue the proposed Letter of Credit.  If Lender elects not to issue such Letter of Credit, (A) Lender will communicate in writing to Borrower the reason(s) why Lender has declined such request, and (B) Borrower will be permitted to seek the issuance of a letter of credit from a third-party financial institution and provide cash collateral therefor on commercially reasonable terms.

(d)           All Letter of Credit Obligations (other than the LOC Fee which is payable as provided in Section 2.3(j) ) are payable as set forth in the applicable Letter of Credit Documents.  Borrower promises to pay Lender the amount of all Letter of Credit Obligations immediately when due, irrespective of any claim, setoff, defense or other right which Borrower may have at any time against Lender or any other Person.  Subject to the terms of Section 6.5 , Borrower hereby irrevocably instructs Lender, on the same Business Day that Lender is obligated to fund a drawing or make any expenditure or any other payment under a Letter of Credit or incurs any cost or expense under any Letter of Credit, to reimburse Lender for any drawing, expenditure or other payment made, or cost or expense incurred, by Lender debiting Borrower’s loan account with Lender as an advance of the Revolving Loans pursuant to Section 2.1 as a Prime Rate Revolving Loan.  If the advance of a Revolving Loan to reimburse Lender for any drawing, expenditure or other payment made, or cost or expense incurred, by Lender in respect of any Letter of Credit results (or to the extent that it results) in any Overadvance or any Letter of Credit Deficiency, then Borrower will (without duplication of Section 2.1(a) ) immediately eliminate (i) any Overadvance in accordance with the terms of Section 2.1(a) and (ii) any Letter of Credit Deficiency by cash collateralizing the outstanding Letter of Credit Obligations or otherwise reducing outstanding Letter of Credit Obligations so that such Letter of Credit Deficiency shall no longer exist.

(e)           All Letter of Credit Obligations will constitute part of the Obligations and be secured by the Loan Collateral.

(f)           In determining whether to pay under any Letter of Credit, Lender will be responsible only to confirm in good faith that any documents required to have been delivered under a Letter of Credit appear to comply substantially on their face with the requirements of the Letter of Credit, and any action taken or omitted by Lender in good faith under or in connection with any Letter of Credit will not subject Lender to any liability to Borrower; provided, however, nothing in this Section 2.3(f) will relieve Lender of any liability it may have to Borrower to the extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by Borrower from Lender’s gross negligence or willful misconduct.  Lender shall not be obligated to cause any Letter of Credit to be extended or amended unless the requirements of this Section 2.3 are met as though a new Letter of Credit were being requested and issued.

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(g)           In addition to amounts payable as elsewhere provided in this Section 2.3 , Borrower will protect, indemnify, pay and save Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys’ fees) which Lender (provided that it acts (or omits to act) in good faith and except for Lender’s gross negligence or willful misconduct) may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit or the provision of any credit support or enhancement in connection therewith exclusive of claims, demands, liabilities, damages, losses, costs, charges and expenses to the extent caused by the gross negligence or willful misconduct of Lender.  The agreement in this Section 2.3(g) shall survive repayment of all other Obligations.

(h)           As between Borrower and Lender, Borrower assumes all risks of the acts and omissions of, or misuse of any of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing, Lender shall not be responsible for: (i) the existence of any claim, set-off, defense or other right which Borrower may have at any time against any beneficiary, or any transferee, of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), Lender or any other Person, whether in connection with this Agreement or the other Loan Documents, the transactions contemplated in this Agreement, or any unrelated transaction; (ii) any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iii) any default, negligence, misfeasance, suspension, insolvency, or bankruptcy of any shipper or any other Person involved in any transaction covered thereby or any correspondent or agent of Lender to whom any drafts, documents or instruments may be entrusted; (iv) any delay, interruption, omission or error in transmission or delivery of any document, certificate, draft, or message; (v) payment by Lender under any Letter of Credit against presentation of a draft or certificate which substantially complies with the terms of such Letter of Credit; (vi) the invalidity or unenforceability of the Letter of Credit; (vii) the examination of documents presented under a Letter of Credit exclusively by electronic or electro-optical means; or (viii) any other circumstances or happening whatsoever, other than the gross negligence or willful misconduct of Lender, whether or not similar to any of the foregoing, including any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority.  Nothing to the contrary in this Section 2.3 shall (A) be deemed to have relieved Lender from liability, if any, to Borrower for any willful misconduct or gross negligence of Lender, as determined by a court of competent jurisdiction in a final non-appealable judgment or order or (B) affect, impair or prevent the vesting of any rights or powers of Lender under this Section 2.3 .

(i)           In furtherance and extension, and not in limitation, of the specific provisions set forth above, any action taken or omitted by Lender in good faith under or in connection with any of the Letters of Credit or any related certificates, if taken or omitted in the absence of gross negligence or willful misconduct, shall not put Lender under any resulting liability to Borrower or relieve Borrower of any of its obligations hereunder to Lender.

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(j)           Borrower will pay to Lender, with respect to each Letter of Credit issued by Lender, a fee (“ LOC Fee ”) at a rate: (i) per annum equal to 2.25% on the amount available to be drawn under each Standby Letter of Credit from, and including, the issuance date (and, as applicable, each renewal date) of the Standby Letter of Credit to and including the expiry date thereof and (ii) equal to 2.25% on the stated amount of each Commercial Letter of Credit.  In addition, Borrower will pay to Lender, on its demand for payment, Lender’s then current issuance, opening, closing, transfer, amendment, draw, renewal, negotiation and other letter of credit administration fees, charges and out of pocket expenses with respect to each Letter of Credit.  The LOC Fee is fully earned by Lender when paid and non-refundable and shall be due and payable in advance by Borrower upon the issuance (and each renewal) of each Letter of Credit.  The LOC Fee will be calculated on the basis of the actual number of days elapsed in a 360-day year.  If any Letter of Credit is cancelled for any reason before the stated expiry date thereof, the LOC Fee paid in advance will not be refunded and will be retained by Lender solely for its account.

(k)           If (i) any law, treaty, rule, regulation, guideline or determination of a central bank or a Governmental Authority or interpretation or application thereof by a central bank or Governmental Authority or (ii) compliance by Lender with any request or directive (whether having the force of law) from, or compliance by Lender with any official pronouncement or statement of, a central bank or other Governmental Authority shall either (A) impose, modify, deem or make applicable any reserve, special deposits, assessment or similar requirement against letters of credit issued by Lender or (B) impose on Lender any other condition regarding this Agreement or any Letter of Credit, and, in Lender’s judgment exercised in good faith, the result of any event referred to in clause (A) or (B) above is the increase of the cost to Lender of issuing or maintaining any Letter of Credit, then, on demand by Lender, Borrower will immediately pay to Lender, from time to time as specified by Lender, additional amounts sufficient to compensate Lender for such increased cost (the “ Increased LOC Costs ”); provided, however , that Lender may charge Borrower for such Increased LOC Costs only to the extent that such cost is generally charged by Lender to its other similarly situated borrowers assuming Lender is legally empowered to do so.  A certificate as to such Increased LOC Costs incurred by Lender, submitted by Lender to Borrower, shall be prima facie evidence as to the amount thereof.

(l)           Prior to or contemporaneously with the issuance of any Commercial Letter of Credit, Borrower will, at Lender’s request, (i) in the case of import-export acceptances or domestic shipment of goods, present evidence satisfactory to Lender: (A) regarding the terms and conditions of the underlying import-export transaction or the domestic shipment transaction, including dates of shipment, and (B) regarding the existence of necessary import, export or other license for the import, export, shipping or warehousing of the Property covered by documents of title delivered to Lender in connection with the Commercial Letter of Credit and (ii) instruct all suppliers, carriers, forwarders, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments, with respect to such Commercial Letter of Credit, in which Lender holds a security interest to deliver them to Lender and/or subject to Lender’s order, and if they shall come into Borrower’s possession, to deliver them, upon request, to Lender in their original form.  Borrower shall also, at Lender’s request, designate Lender as the consignee on all bills of lading and other negotiable and non-negotiable documents.

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2.4            Funding of Revolving Loans; Collections .

(a)           Prior to the Termination Date with respect to the Line of Credit and subject to the other terms and conditions of this Agreement, all disbursements of Revolving Loans will initially be made into a non-interest bearing, disbursement funding account maintained at Lender or an Affiliate of Lender (the “ Funding Account ”) structured and utilized for that purpose in accordance with Lender’s (or as applicable, the applicable Lender Affiliate’s) policies and procedures, current account number 7164494820.  Prior to the Termination Date with respect to the Line of Credit and subject to the other terms and conditions of this Agreement, funds in the Funding Account will then be made available to Borrower via a non-interest bearing controlled disbursement account maintained by Borrower at Lender or an Affiliate of Lender (the “ Controlled Disbursement Account ”) in accordance with Lender’s (or as applicable, the applicable Lender Affiliate’s) policies and procedures (current account number: 7480792592).  Notwithstanding the foregoing in this Section 2.4(a) , Lender may, at any time hereafter, elect not to credit proceeds of Revolving Loans to the Controlled Disbursement Account, but Lender instead may establish non-controlled disbursement account or accounts (such as an operating account but exclusive of the Funding Account) for Borrower at Lender or an Affiliate of Lender and disburse proceeds of the Revolving Loans by crediting such non-controlled disbursement account(s) of Borrower at Lender or an Affiliate of Lender.  Borrower hereby authorizes Lender, without any further written or oral request of Borrower, to transfer funds automatically from the Funding Account to the Controlled Disbursement Account in amounts necessary for the payment of checks and other items drawn on, and debits by Lender of, the Controlled Disbursement Account as such checks and other items (“ Presentments ”) are presented to Lender or the applicable Lender Affiliate for payment, and debits are made by Lender, subject to the terms and conditions of this Agreement.  If any Presentments in the Controlled Disbursement Account are paid by Lender in excess of funds available in the Funding Account for any reason, the amounts so paid by Lender will be an overdraft and deemed to be an advance of the Revolving Loans as a Prime Rate Revolving Loan for all purposes of this Agreement; however , under no circumstances will Lender have any obligation to pay any Presentments in the Controlled Disbursement Account in excess of funds available in the Funding Account.  Notwithstanding anything to the contrary in this Section 2.4(a) , Lender reserves the right to discontinue providing controlled disbursement accounts to its customers, including Borrower.  In addition to advances of Revolving Loans made pursuant to Lender’s (or as applicable, Lender’s Affiliate’s) controlled disbursement account system, Lender will, from time to time prior to the Termination Date with respect to the Line of Credit and subject to the other terms and conditions of this Agreement, make advances of Revolving Loans as a Prime Rate Revolving Loan via wire transfers or ACH payments so long as Borrower has given Lender written notice, via facsimile transmission, electronic mail or otherwise, no later than 1:00 p.m. Cincinnati, Ohio time on the date Borrower shall request that such Revolving Loan be advanced in the case of wire transfers and any other deadline imposed by Lender from time to time for ACH payments.  The making of each Revolving Loan, whether via the controlled disbursement account system or a written request by Borrower, will be deemed to be a representation by Borrower that (A) the Revolving Loan will not violate the terms of Section 2.1 and (B) all Eligible Inventory and Eligible Accounts then comprising the Borrowing Base meet all of Lender’s criteria for Eligible Inventory and for Eligible Accounts.  Lender shall have no duty to follow, nor any liability for, the application of any proceeds of any Revolving Loan in good faith in the absence of gross negligence or willful misconduct.

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(b)           Borrower has established through Lender, and will continue the use of, the post office box at the U.S. Post Office bearing the address: 2314 Momentum Place, Chicago, IL 60689-5323, or such other address or addresses as Lender may notify Borrower from time to time (the “ Lock Box ”).  For those of Borrower’s customers and account debtors which forward their Remittances in paper form to Borrower, Borrower will notify those customers and account debtors to forward all of their Remittances to the Lock Box (such notices to be in such form and substance as Lender may require from time to time).  Lender will have sole access to the Lock Box at all times until the Loans have been fully paid and satisfied and this Agreement has terminated, and Borrower will take all action necessary to grant Lender such sole access.  Until the Loans have been fully paid and satisfied and this Agreement has terminated, at no time will Borrower remove any item from the Lock Box without Lender’s prior written consent, and Borrower will not notify any customer or account debtor to pay any Remittance to any other place or address without Lender’s prior written consent.  If Borrower should neglect or refuse to notify any customer or account debtor to pay any Remittance to the Lock Box, Lender will be entitled to make such notification.  Upon retrieval of Remittances and other proceeds of Accounts and other Loan Collateral from the Lock Box, Lender will deposit the same into a collection, non-interest bearing DDA depository account maintained at Lender, current account number: 7164494887 (the “ Collection Account ”).  Borrower will notify all of its customers and account debtors, which pay their Accounts by electronic funds transfer, to forward all Remittances directly to the Collection Account by wire transfer or automated clearinghouse funds transfer (ACH) (such notices to be in such form and substance as Lender may require from time to time). Any Remittance or other proceeds of Accounts or other Loan Collateral received by Borrower shall be deemed held by Borrower in trust and as fiduciary for Lender, and Borrower immediately shall deliver the same, in its original form, to Lender by overnight delivery for deposit into the Lock Box or any local branch of Lender or an Affiliate of Lender, or Borrower shall utilize Lender’s electronic deposit and cash management system ( i.e. , remote capture) to deposit such Remittances directly into the Collection Account.  Pending such deposit, Borrower will not commingle any such Remittance or other proceeds of Accounts or other Loan Collateral with any of Borrower’s other funds or Property, but Borrower will hold it separate and apart therefrom in trust for Lender until delivery is made to Lender by overnight delivery carrier as described above.  Until the Loans have been fully paid and satisfied and this Agreement has terminated, all deposits to the Collection Account will be Lender’s Property to be applied against the Obligations in the following order (in the absence of the occurrence of an Event of Default): (i) first , to the Revolving Loans and (ii) next , to any other Obligations then due in such order and method of application as may be elected by Lender in its discretion exercised in good faith. The Collection Account will be subject only to the signing authority designated from time to time by Lender, and Borrower shall have no interest therein or control over such deposits or funds.  Lender shall have sole access to the Lock Box and the Collection Account until the Loans have been fully paid and satisfied and this Agreement has terminated.   Any Remittance received by a Non-Borrower Loan Party shall be deemed held by such Non-Borrower Loan Party in trust and as fiduciary for Lender and will be immediately delivered to the Lock Box and, if in electronic form, the Collection Account.    To the extent any Loan Party, other than Borrower, receives or is to receive any proceeds of any Loan Collateral, Borrower will cause such Loan Party to comply, and cause such Loan Party’s customers to comply, with the provisions of this Section 2.4(b) .

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(c)           Each Business Day, Lender will, or will cause the applicable Lender Affiliate, automatically and without notice, request or demand by Borrower, in accordance with Lender’s (or as applicable, the applicable Lender Affiliate’s) automatic sweep program, transfer all collected and available funds in the Collection Account: (i) for application against the unpaid principal balance of all Prime Rate Revolving Loans and (ii) to be held in the Collection Account to the extent of any LIBOR Rate Revolving Loans.  Pursuant to that automatic sweep program, Lender will either make Prime Rate Revolving Loans to the extent necessary to cover Presentments to the Controlled Disbursement Account or to maintain a minimum collected, positive ( i.e., “peg”) balance in the Funding Account of $370,000 at all times; however , in no event will the principal amount of the Revolving Loans advanced pursuant to the herein described automatic sweep program exceed the Revolving Loan Availability.  The “peg” balance in the Funding Account will receive a credit in accordance with, and subject to, Lender’s cash management program from time to time in effect to be used solely against Lender’s service charges and costs related to the establishment and maintenance of the Funding Account, the Controlled Disbursement Account, the Lock Box, the Collection Account, the automatic sweep program, and Lender’s and its Affiliates’ treasury and cash management services.  Without limitation of the provisions in the Security Agreement, and without limitation to the provisions below relating to the ownership of the Lock Box and the Collection Account and the deposits and funds therein, Lender shall have, and Borrower hereby grants to Lender, a Lien on all funds held in the Funding Account, the Controlled Disbursement Account, the Lock Box and the Collection Account as security for the Obligations.  The Funding Account, Controlled Disbursement Account, Lock Box and Collection Account will not be subject to any deduction, set-off, banker’s lien or any other right in favor of any Person other than Lender or an Affiliate of Lender.  If any Remittance deposited in the Collection Account is dishonored or returned unpaid for any reason, Lender, in its discretion, may charge the amount of such dishonored or returned Remittance directly against Borrower and any account maintained by Borrower with Lender or the applicable Lender Affiliate and such amount shall be deemed part of the Obligations.  Neither Lender nor the applicable Lender Affiliate shall be liable for any loss or damage resulting from any error, omission, failure or negligence on the part of Lender or the applicable Lender Affiliate in good faith with respect to the operation of the Funding Account, Controlled Disbursement Account, Lock Box, Collection Account, or the services to be provided by Lender or the applicable Lender Affiliate under this Agreement except to the extent, but only to the extent, of any direct damages, as opposed to any consequential, special or lost profit damages suffered by Borrower from gross negligence or willful misconduct of Lender or the applicable Lender Affiliate.  Until a payment is received by Lender for Lender’s account in finally collected funds, all risks associated with such payment will be borne solely by Loan Parties.

(d)           For the purposes of calculating interest, determining Revolving Loan Availability and the amount of Eligible Accounts, all Remittances and other proceeds of Accounts and other Loan Collateral deposited into the Collection Account shall be credited (conditional on final collection) against the outstanding Revolving Loan balance and the then Eligible Accounts as funds become collected and available in accordance with Lender’s funds availability policies from time to time in effect.

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(e)           From time to time, Lender or the applicable Lender Affiliate may adopt such regulations and procedures and changes it may deem reasonable and appropriate with respect to the operation of the Funding Account, the Controlled Disbursement Account, the Lock Box, the Collection Account, the automatic sweep program and the other services to be provided by Lender or the applicable Lender Affiliate under this Agreement, and such regulations, procedures and changes need not be reflected by an amendment to this Agreement in order to be effective.  Lender will give notice of such regulations, procedures and changes to Borrower in the ordinary course of Lender’s business.

(f)           All service charges and costs related to the establishment and maintenance of the Funding Account, the Controlled Disbursement Account, the Collection Account, the Lock Box, the Blocked Account, and Lender’s and its Affiliates’ treasury and cash management services shall be the sole responsibility of Loan Parties, whether the same are incurred by Lender, Lender’s Affiliates or Borrower, and Lender, at its discretion, may charge the same against Borrower and any account maintained by Borrower with Lender or the applicable Lender Affiliate and the same shall be deemed part of the Obligations.

(g)           To provide for collection and forwarding, on an interim basis, to Lender of Remittances and other proceeds of accounts and other Loan Collateral that continue to be sent on and after the date of this Agreement to LaSalle, LaSalle has, pursuant to the Blocked Account Agreement, established the Blocked Account into which such Remittances may be deposited until such Remittances shall be forwarded to the Collection Account.  Borrower will diligently use all reasonable efforts to cause its account debtors, as required by Section 2.4(b) , to begin making payment directly to the Collection Account as quickly as possible and, in any event, within 90 days after the Closing Date.  The interim use of the Blocked Account will not diminish or alter Borrower’s obligations under this Section 2.4 .  Borrower will use all reasonable commercial efforts to cause all available funds in the Blocked Account to be transferred each Business Day, at Borrower’s expense, to the Collection Account by any method acceptable to Lender, including by depository transfer check (DTC), automated clearing house (ACH) debit, or wire transfer of available funds.  All deposits to the Blocked Account will be Lender’s Property to be applied against the Obligations in such order and method of application as may be elected by Lender in its discretion exercised in good faith and will be subject only to the signing authority designated from time to time by Lender, and Borrower shall have no interest therein, access to or control over the deposits or funds therein.  Any amounts paid by Lender to LaSalle under the Blocked Account Agreement shall be part of the Obligations payable by Borrower upon Lender’s demand.

2.5            Payment; Time of Payment; Late Payments .

(a)           Borrower and Parent promise to pay and to perform, observe and comply with when due all of the Obligations.  All payments to be made by a Loan Party on account of the Obligations will be made by Loan Parties without setoff, deduction, offset, recoupment or counterclaim in immediately available funds.  Borrower shall make all payments of principal, interest and all other Obligations no later than 2:00 p.m., Cincinnati, Ohio time, on the Business Day such payments are due; any and all amounts paid after such time shall be credited on the next Business Day.  As an accommodation to Borrower, on the date any payment of interest or principal of the Loans, or any fee, charge or other Obligation is due, Lender is hereby authorized, in its discretion, to charge such amounts to the loan account with Lender as an advance of the Revolving Loans as a Prime Rate Revolving Loan.  All payments by Borrower and Parent under this Agreement will be in lawful money of the United States of America, and, unless otherwise provided in this Agreement or instructed by Lender in writing from time to time, Borrower will make all payments required under this Agreement and under any of the other Loan Documents in immediately available funds to an account designated by Lender from time to time.

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(b)           If any payment is not made when due under this Agreement or any of the other Loan Documents (and not paid within any applicable cure period) and, at the time payment was due, there was insufficient Revolving Loan Availability to charge such payment to the loan account with Lender as an advance of the Revolving Loans, Borrower shall pay to Lender a late payment fee equal to two percent (2%) of any payment not paid when due (whether by maturity, acceleration or otherwise).  All Obligations shall, after the occurrence and during the continuance of an Event of Default, at Lender’s sole option, bear interest at the Default Rate without notice to any Loan Party; provided that (i) this Section 2.5(b) shall not be deemed to constitute a waiver of any Event of Default or an agreement by Lender to permit any late payments whatsoever and (ii) if Lender charges a late fee with respect to a particular Event of Default, it may also not charge, solely with respect to such Event of Default, interest at the Default Rate.  In no event shall the interest rate accruing under the Notes be increased to be in excess of the maximum interest rate permitted by applicable state or federal usury laws then in effect.

2.6            One General Obligation; Cross-Collateralized .  All advances of credit to, or for the benefit of, Borrower and/or the other Loan Parties under this Agreement and under any other Loan Document constitute one loan, and all of the Obligations constitute one obligation.  The Loans and all other advances or extensions of credit to, or for the benefit of, Borrower and/or the other Loan Parties under this Agreement or the other Loan Documents and all other Obligations are made on the security of all of the Loan Collateral.  The limits on outstanding advances against the Borrowing Base are not intended and shall not be deemed to limit in any way Lender’s security interest in, or other Liens on, the Accounts, Inventory, Equipment, General Intangibles, or any other Loan Collateral.

2.7            Closing Fee .  Borrower shall pay to Lender on the Closing Date a closing fee in the aggregate amount of $277,500 (the “ Closing Fee ”), which Closing Fee is fully-earned and non-refundable as of the Closing Date.

2.8            Unused Line Fee .  Commencing on February 1, 2008 and continuing on the first day of each and every calendar month thereafter until the Revolving Loans are fully paid and satisfied and the Revolving Commitment is terminated (and, as applicable, on the date this Agreement is terminated), Borrower will pay to Lender a fee (“ Unused Line Fee ”) in an amount equal to the result obtained by multiplying: (i) the difference between (a) the then effective Revolving Commitment and (b) the average daily Revolving Loans outstanding during the preceding calendar month (or portion thereof during which any portion of the Revolving Loans was outstanding or during which the Revolving Commitment was in effect) for which the Unused Line Fee is being determined by (ii) the result obtained (expressed as a percentage) by multiplying 0.25% by a fraction, the numerator of which is the sum of days in such calendar month (or portion thereof) during which the Revolving Commitment was in effect (or during which any portion of the Revolving Loans was outstanding) and the denominator of which is 360.

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2.9            Joint Obligations .  The obligations of Loan Parties under the Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.  Each Loan Party irrevocably designates Parent as its representative and agent on its behalf for the purposes of giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Loan Party or Loan Parties under the Loan Documents which are permitted to be taken by a Loan Party.  Parent hereby accepts such appointment.  Lender may regard any notice or other communication pursuant to any Loan Document from Parent as a notice or communication from all Loan Parties, and may give any notice or communication required or permitted to be given to any Loan Party or Loan Parties hereunder to Parent on behalf of such Loan Party or Loan Parties.  Each Loan Party agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Parent shall be deemed for all purposes to have been made by such Loan Party and shall be binding upon and enforceable against such Loan Party to the same extent as if the same had been made directly by such Loan Party.

Section 3.                       Representations And Warranties .

Borrower and Parent hereby warrant and represent to Lender the following:

3.1            Organization and Qualification .  Each Loan Party is a duly organized and validly existing corporation or, as applicable, limited liability company under the laws of its state of incorporation or, as applicable, organization as listed on Schedule 3.1 , has the power and authority to carry on its business and to enter into and perform this Agreement and the other Loan Documents to which it is a party or otherwise bound, and is qualified and licensed to do business in each jurisdiction listed on Schedule 3.1 and each other jurisdiction in which the failure to be so qualified and in good standing would have a Material Adverse Effect.  The shareholders of Borrower are not party to a shareholder agreement.

3.2            Due Authorization .  The execution, delivery and performance by each Loan Party of this Agreement, the Notes and the other Loan Documents to which it is a party or otherwise bound have been duly authorized by all necessary corporate and, as applicable, limited liability company action, and does not contravene any law or any governmental rule or order binding on a Loan Party or any of its Organizational Documents, nor violate any Material Agreement by which a Loan Party is bound nor result in the creation of a Lien on any assets of a Loan Party except the Liens granted to Lender under the Loan Documents.  Each Loan Party has duly executed and delivered to Lender this Agreement and the other Loan Documents to which it is a party and they are valid and binding obligations of each Loan Party enforceable according to their respective terms, except as limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the rights of creditors generally.  No notice to, or consent by, any Governmental Authority is needed in connection with this loan transaction other than the filing of Uniform Commercial Code financing statements in favor of Lender and the Mortgage.

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3.3            Litigation .  Except as set forth on Schedule 3.3 , as of the Closing Date, there are no suits or proceedings pending or, to the Knowledge of the Officers, threatened, against or affecting any Loan Party, and no proceedings before any Governmental Authority are pending or to the Knowledge of the Officers, threatened, against any Loan Party.  To the Knowledge of the Officers, there is no liability to any Loan Party arising out of any injury to individuals or Property as a result of the manufacture, sale, delivery, ownership, possession, or use of any goods manufactured or distributed by, or on behalf of, any Loan Party prior to the Closing Date.

3.4            Margin Stock .  No part of the Loans will be used to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any margin stock (within the meaning of Regulations U and X of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any margin stock.  If requested by Lender, Borrower shall furnish to Lender statements in conformity with the requirements of Federal Reserve Form U-1.

3.5            Material Agreements .  Attached as Schedule 3.5 is a true and accurate listing of all Material Agreements of Loan Parties (excluding purchase orders not subject to a written agreement and the Loan Documents) which are in effect as of the Closing Date, true, correct, and complete copies of which were provided to Lender before the Closing Date.

3.6            Licenses, Trademarks, Patents, etc .  Each Loan Party has obtained any and all licenses, permits, franchises, governmental authorizations, patents, trademarks, copyrights or other rights necessary for the ownership of its properties and the conduct of its business, which, if not so obtained by such Loan Party, would reasonably be expected to have a Material Adverse Effect.  All of each Loan Party’s material licenses, permits, franchises, governmental authorizations, registered patents, registered trademarks and service marks, and registered copyrights are in full force and effect, and none of the foregoing are, to the Knowledge of the Officers, in conflict with the rights of others such that it would have a Material Adverse Effect.   Schedule 3.6 hereto provides a list of: (i) any of the following which are registered with the United States Patent and Trademark Office or the United States Copyright Office: patents, copyrights, trademarks, service marks or trade names and (ii) any licenses (to or from a Loan Party) of any of the following which are registered with the United States Patent and Trademark Office or the United States Copyright Office: patents, trademarks, service marks or copyrights (excluding in the case of this clause (ii), off-the-shelf or click-through software licenses and similar licenses that are immaterial to a Loan Party’s business).

3.7            Laws and Taxes .  Each Loan Party is in compliance with: (a) all judgments, orders, injunctions, and decrees of any federal, state, foreign, or local court or other Governmental Authority that is binding on any Loan Party or its Property under applicable law and (b) each statute, law, ordinance, regulation, and rule of any federal, foreign, state, or local Governmental Authority that is applicable to any Loan Party or its Property except for, in each instance, any non-compliance which would not reasonably be expected to have a Material Adverse Effect.  Each Loan Party has filed all required tax returns and reports (or filed appropriate extensions therefor) that are now required to be filed by it in connection with any federal, state and local tax, duty or charge levied, assessed or imposed upon any Loan Party or its assets, including unemployment, social security, and real estate taxes except those state or local tax returns that a Loan Party may inadvertently fail to file and with respect to which such failure to file does not result in liabilities (including interest and penalties) greater than, in the aggregate, $25,000.  Each Loan Party has paid all taxes which are due and payable as of the Closing Date.  No taxing authority has asserted or assessed in writing any additional tax liabilities against any Loan Party for any period for which any Loan Party has filed (or was required to have previously filed) tax returns which are outstanding on the Closing Date, and no Loan Party has previously filed for any extension of time for the payment of any tax other than in the ordinary course of business.  There are not in effect any waivers by any Loan Party of applicable statutes of limitations for federal, foreign, state or local taxes for any period.   No Loan Party is a party to any tax-sharing agreement or arrangement.  Loan Parties’ Fiscal Year is from January 1st to December 31st.

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3.8            Financial Condition .  All Financial Statements of any Loan Party which have been delivered to Lender on or prior to Closing Date fairly present, in all material respects, the financial condition and results of operations of Loan Parties as of the date and for the periods indicated therein.  All Financial Statements of Loan Parties that are delivered to Lender after the Closing Date will be true and correct, in all material respects, and will fairly present, in all material respects, the financial condition and results of operations of Loan Parties as of the date and for the periods indicated therein.  Except (a) as described in Loan Parties’ Financial Statements (including the notes thereto), (b) Schedule 3.8 with respect to Financial Statements delivered on or prior to the date hereof, and (c) in the case of unaudited, interim Financial Statements, normal year-end adjustments and the absence of footnotes, the Financial Statements of Loan Parties have been prepared in accordance with GAAP.  No Loan Party has any Indebtedness of any kind that is prohibited by the terms of this Agreement.  There has been no material adverse change in the financial condition of any Loan Party, nor has any Loan Party suffered any damage, destruction or loss which has resulted in a Material Adverse Effect since the submission of the most recent Financial Statements to Lender.  Notwithstanding the foregoing, the representations and warranties set forth in this Section 3.8 shall not apply to projections contained in any such Financial Statements.  Such projections will be subject to Section 4.3(i) .  For purposes of this Agreement, “ Financial Statements ” means the financial statements and reports delivered to Lender pursuant to Sections 4.3(a) , 4.3(b) , and Loan Parties’ (i) annual financial statements for the Fiscal Years ended on December 31, 2005 and December 31, 2006 and (ii) interim, unaudited financial statements for the period ended October 31, 2007.

3.9            Title .  Each Loan Party has good title to its Property (exclusive of that Property for which it has only a leasehold estate), free and clear of all Liens of any kind, except for any Permitted Liens.

3.10            Defaults .  Each Loan Party is in compliance with all Material Agreements applicable to it except for such noncompliance which would not be reasonably expected to have a Material Adverse Effect.  Without limiting the generality of the foregoing, each payment due under the A/P Trade Payable Agreements required to be made prior to the Closing Date has been timely made, and no Loan Party is in breach of its obligations under any A/P Trade Payable Agreement.  There does not now exist any default or violation by any Loan Party of or under any of the terms, conditions or obligations of its Articles of Incorporation, Bylaws or other governing documents, and the consummation of the transactions contemplated by this Agreement will not result in any such default or violation.

3.11            Environmental Laws .  (a)  Each Loan Party has obtained all permits, licenses and other authorizations or approvals which are required under Environmental Laws which, if not so obtained by such Loan Party, would reasonably be expected to have a Material Adverse Effect. Each Loan Party is in compliance in all respects with all terms and conditions of the required permits, licenses, authorizations and approvals, and is also in compliance in all respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in the Environmental Laws except for such noncompliance which would not be reasonably expected to have a Material Adverse Effect.

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(b)           The Officers do not have Knowledge of, and no Loan Party has received written notice of, any events, conditions, circumstances, activities, practices, incidents, actions or plans which would, with reasonable certainty, either (i) interfere with or prevent compliance or continued compliance, with Environmental Laws, or (ii) give rise to any common law or legal liability under any Environmental Laws, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, or investigation under any Environmental Laws, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic or hazardous substance or waste which, individually or collectively, would reasonably be expected to have a Material Adverse Effect.

(c)           There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice or demand letter, notice of violation, investigation or proceeding pending or, to the Knowledge of the Officers, threatened against any Loan Party, relating in any way to Environmental Laws except that which is within any applicable insurance coverage with respect to which the insurer has admitted liability and which would not reasonably be expected to have a Material Adverse Effect.

3.12            Subsidiaries; Partnerships; Affiliates .  All Persons, as of the Closing Date, who are Loan Parties’ and the Joint Ventures’ respective shareholders, members, managers, officers, and directors are, in each case, identified on Schedule 3.12(a) .  Except as identified on Schedule 3.12(a) , no Loan Party has any Subsidiaries.  Other than the Joint Venture Agreements, no Loan Party is a party to any partnership agreement or joint venture agreement.  Except those Affiliates and transactions as set forth on Schedule 3.12(b) , no Affiliate of any Loan Party: (a) sells or leases any goods or real property to any Loan Party, (b) provides any services to any Loan Party exclusive of any individual who is an Affiliate in his or her capacity as an director, manager, employee or officer of a Loan Party, (c) purchases or leases any goods or real property, or purchases any services from, a Loan Party, or (d) is a party to any contract or commitment with any Loan Party (exclusive of any employment contracts with any individuals described in clause (b) above).  Parent is, and will remain, a holding company: (A) whose primary business will be the holding of the Ownership Interests of Loan Parties and (B) whose sole Subsidiaries are identified on Schedule 3.12(a) .

3.13            ERISA .  Each Loan Party and all Persons that, along with Loan Parties, would be treated as a single employer under ERISA or the Internal Revenue Code of 1986, as amended (an “ ERISA Affiliate ”), are in compliance with all of their obligations arising out of, or in connection with, any “employee benefit plan”, as that term is defined in Section 3(3) of ERISA which (i) any Loan Party or an ERISA Affiliate sponsors or maintains or for which any Loan Party has an obligation to contribute and (ii) provides as of the Closing Date, or within the six years immediately preceding the Closing Date has provided, benefits to eligible employees (or their beneficiaries) of any Loan Party, except: (a) as set forth on Schedule 3.13 and (b) for such violations which would not reasonably be expected to have a Material Adverse Effect.  Neither any Loan Party nor any of its ERISA Affiliates: (i) maintains a Pension Plan subject to Title IV of ERISA or (ii) is obligated to contribute to any Multiemployer Plan.  Each Pension Plan that any Loan Party or any of its ERISA Affiliates sponsors, maintains, or for which any Loan Party or any of its ERISA Affiliates is required to make contributions, as of the Closing Date, is set forth on Schedule 3.13 .

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3.14            Capitalization .   Schedule 3.14 sets forth the Ownership Interests of Loan Parties and the Joint Ventures which are authorized and the number of such Ownership Interests which are outstanding as of the Closing Date.  All outstanding Ownership Interests of Loan Parties are duly authorized and validly issued, are, as applicable, fully paid and nonassessable, and all capital contributions have been made with respect thereto that pursuant to Organizational Documents are required to have been made.  Set forth in Schedule 3.14 is a complete and accurate list of all Persons who are record owners of the Ownership Interests of Loan Parties as of the Closing Date.  All warrants, subscriptions, options, instruments, agreements and rights (excluding rights under statutes and governmental regulations) under which any Ownership Interests of Loan Parties are or may be redeemed, retired, converted, encumbered, bought, sold or issued are described in Schedule 3.14 .

3.15            Restrictions; Labor Disputes; Labor Contracts .  No Loan Party is a party or subject to, any charge, corporate restriction, judgment, decree or order, for which any Loan Party’s compliance or non-compliance could have a Material Adverse Effect.  Except as set forth on Schedule 3.15 , as of the Closing Date, no Loan Party is (i) a party to any collective bargaining agreement or other labor contract or (ii) the subject of any material labor dispute.  As of the Closing Date, no union or other labor organization is, to the Knowledge of any of the Officers, seeking to organize, or to be recognized as, a collective bargaining unit of employees of any Loan Party or for any similar purpose.  To the Knowledge of any of the Officers, no key employee of any Loan Party is subject to any agreement in favor of anyone other than any Loan Party which restricts or limits that individual’s right to engage in the type of business activity conducted by any Loan Party in any manner which could materially impair the ability of such individual to carry out his or her duties with any Loan Party or to use any Property or confidential information or which grants to any Person, other than Loan Parties, any rights to inventions or other ideas susceptible to legal protection developed or conceived by any such key employee for Loan Parties.  To the Knowledge of any of the Officers, none of the Joint Ventures is subject to any restriction under applicable law or its respective Organizational Documents on the declaration or payment of dividends or similar distributions of its respective net income to Loan Parties.

3.16            Specifically Designated National and Blocked Persons .  Neither any Loan Party nor, to the Knowledge of the Officers, any of its Affiliates is a country, individual, or entity named on the Specifically Designated National and Blocked Persons (SDN) list issued by the OFAC .

3.17             Investment Company .   No Loan Party is (a)(i) an “investment company”, (ii) an “investment adviser”, or (iii) a company “controlled” by an “investment company”, as each such term is defined in the Investment Company Act of 1940, as amended, or (b) a “holding company” as that term is defined in, and is not otherwise subject to regulation under, the Public Utility Holding Company Act of 2005, as amended.

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3.18            Full Disclosure .  No representation or warranty made by any Loan Party or any of its Affiliates, as the case may be, in this Agreement, any other Loan Document to which it is a party, or any other document furnished from time to time in connection herewith or therewith contained at the time such representation or warranty was made or such document was furnished, or, with respect to any information delivered after the date of this Agreement, will contain at the time such representation is made or such document is furnished, any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements herein or therein not materially misleading when read as a whole together with all other representations and warranties related thereto. Notwithstanding the foregoing, Loan Parties make no representations or warranties regarding the accuracy of any projections, predictions or other estimation of future events, or any information or data, pertaining generally to Loan Parties’ industry.

3.19            FDA; State Authorities; PACA .  (a) Except as set forth on Schedule 3.19 , Borrower and each of Borrower’s Facilities at which it manufactures Inventory are in compliance with all applicable rules, regulations, and laws of the FDA, including its good manufacturing practice (GMP) requirements, and applicable State law except for such violations which would not reasonably be expected to have a Material Adverse Effect, (b) as of the Closing Date, except as set forth on Schedule 3.19 , there are no pending recall, withdrawal, off-sale order, warning letter, seizures or other enforcement action by the FDA against Borrower or any warning letters from the FDA still pending against Borrower other than as set forth on Schedule 3.19 , and (c) the results of the last inspection by the FDA and applicable State authorities of Borrower’s Facilities are set forth on Schedule 3.19 .  Borrower does not purchase from any supplier any food and food products (for example, but not limited to, meats, cheeses, breads, fruits and vegetables (whether fresh or frozen)), and no Inventory of Borrower is comprised of goods subject to the Perishable Agricultural Commodities Act and/or “farm products” under the Uniform Commercial Code and/or the Food Security Act of 1985.

Section 4.                       Affirmative Covenants .  Borrower and Parent covenant with, and represent and warrant to, Lender that, from and after the Closing Date until the Obligations are paid and satisfied in full:

4.1            Access to Business Information .  Each Loan Party shall maintain books of account and records in accordance with GAAP (subject to Section 4.3(c) ) and give representatives of Lender access thereto during normal business hours and upon reasonable advance notice unless an Event of Default has occurred and is continuing in which case no advance notice shall be necessary, including permission to: (a) examine, copy and make abstracts from any such books and records and such other information in each Loan Parties’ possession which might be helpful to Lender in evaluating the status of the Loans as it may reasonably request from time to time, with Lender endeavoring to not unreasonably interfere with Borrower’s business while taking such actions and (b) communicate directly with any of any Loan Party’s employees, officers, managers, accountants or other financial advisors and agents with respect to the business, financial conditions and other affairs of Loan Parties; provided that, so long as an Event of Default does not exist, Lender will communicate primarily with the Officers or persons designated by the Officers to so communicate with Lender.

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4.2            Inspection of Collateral; Appraisal .  Each Loan Party shall give Lender reasonable access to the Loan Collateral and the other Property securing the Obligations for the purpose of performing examinations thereof and to verify its condition or existence.  Whenever an Event of Default exists (and at such other times not more frequently than once per calendar year) as Lender requests, Lender may, at the sole expense of Borrower, obtain appraisals or updates thereof of Borrower’s Inventory from an appraiser, and prepared on a basis, satisfactory to Lender, such appraisals and updates to include information required by applicable law and regulations and by the internal policies of Lender.  The appraisers performing the appraisal and the methods of appraisal used by the appraisers doing the appraisal are subject to Lender’s approval in its discretion exercised in good faith.  From and after the date Lender receives and approves the most recent appraisal undertaken pursuant to this Section 4.2 , the Net Orderly Liquidation Value of Borrower’s Inventory will, for purposes of Section 2.1(e) , equal the Net Orderly Liquidation Value of Borrower’s Inventory established by the most recent appraisal.  Lender will provide Borrower a copy of the most recent appraisal promptly on the receipt of it by Lender.

4.3            Financial Information; Reporting .  Each Loan Party shall maintain a standard system for accounting, and Loan Parties shall furnish to Lender:

(a)           Within 30 days after the end of each month and each Fiscal Quarter, a copy of Loan Parties’ consolidated Financial Statements for that month and, as applicable, Fiscal Quarter and for the year to date in a form reasonably acceptable to Lender, prepared and certified as fairly presenting, in all material respects, the financial condition and results of operation of Loan Parties as of and for the periods then ending, by the principal financial officer of Parent;

(b)           Within 120 days after the end of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2007), a copy of Loan Parties’ consolidated Financial Statements for that year audited by Ernst & Young, LLP or by such other an independent certified public accounting firm reasonably acceptable to Lender, accompanied by an audit opinion of such accountants with the only qualification being due to lack of going concern due to lack of shareholder financial statements and letters of continuing support.  Within 45 days after the delivery of such annual Financial Statements, Borrower will deliver to Lender all management letters, if any, and any other material reports provided by such accountants;

(c)           All of the statements referred to in (a) and (b) above of this Section 4.3 shall be prepared and presented in accordance with GAAP (and, in the case of clause (a) above, subject to normal year-end adjustments and the absence of footnotes).  For purposes of the statements referred to in (a) and (b) above of this Section 4.3 , the consolidated reporting group shall be Loan Parties;

(d)           With each of the month-end and Fiscal Quarter-end statements submitted under (a) above (other than the last month and Fiscal Quarter which shall be due within 90 days after the end of such month and Fiscal Quarter) and the Fiscal Year-end statements submitted under (b) above, a Compliance Certificate and Management Report in the form attached hereto as Exhibit 4.3(d) signed by the principal financial officer of Parent, (i) stating among other things, that he or she is familiar with all Loan Documents and that to the knowledge of such principal financial officer no Event of Default specified in this Agreement or in any of the other Loan Documents, nor any event which upon notice, lapse of time, the satisfaction of any other condition, or all of them, would constitute such an Event of Default, has occurred and is continuing, or, if any such condition or event existed or exists, specifying it and describing what action Loan Parties have taken or proposes to take with respect thereto, (ii) setting forth in summary form, with respect to the Fiscal Quarter-end and the Fiscal Year-end statements, figures showing the financial status of Loan Parties in respect of the Financial Covenants and restrictions contained in this Agreement, including showing the following amounts on a per Fiscal Quarter basis:  Fixed Charges, EBITDA, Funded Indebtedness, the gross amount of Capital Expenditures, and the amount of Non-financed Capital Expenditures, and (iii) providing, with respect to the Fiscal Quarter-end and the Fiscal Year-end statements, a summary of the operations of Loan Parties’ business for such period and identifying the key operating metrics of Loan Parties for such period;

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(e)           Upon request, copies of all federal, state and local income tax returns and such other information as Lender may reasonably request;

(f)           By no later than Tuesday of each week (based on values through the immediately preceding Friday), and more frequently if Lender shall require or Borrower shall so elect: a borrowing base certificate substantially in the form of Exhibit 4.3(f) (“ Borrowing Base Certificate ”) and any related documents required by Lender, (A) containing a summary of Accounts created since the last Borrowing Base Certificate and (B) reporting the value of Borrower’s Inventory since the last Borrowing Base Certificate which is listed separately for each Borrower’s Facility.  Values shown on reports of Inventory shall be at the lower of fair market value or cost based on FIFO in accordance with GAAP;
 
(g)           By no later than the 20 th day after the end of each calendar month, or sooner if available and more frequently if Lender shall require or Borrower shall so elect: (A) monthly agings of Accounts, broken down by invoice date, in each case reconciled to the Borrowing Base Certificate for the end of such month and Borrower’s general ledger, and setting forth any changes in the reserves made for bad debts or any extensions of the maturity of, any refinancing of, or any other material changes in the terms of any Accounts, together with such further information with respect thereto as Lender may require; and (B) monthly agings of accounts payable each Loan Party listed by invoice date, in each case reconciled to Loan Parties’ general ledger for the end of such month;
 
(h)           By no later than the 20 th day after the end of each calendar month, or sooner if available and more frequently if Lender shall require or Borrower shall so elect, an inventory report in a form reasonably acceptable to Lender.  Values shown on reports of Inventory shall be at the lower of cost or market value determined in accordance with a “first in-first out” cost accounting system;
 
(i)           By no later than the 15th day before the end of each Fiscal Year, a business plan for Loan Parties, including projected balance sheet, cash flows, and income statement, for the next Fiscal Year (“ Projections ”).  All Projections delivered to Lender by Loan Parties will be delivered with (i) a statement of the assumptions on which the Projections were prepared and (ii) a representation that the assumptions, except as otherwise noted thereon, were prepared on a consistent basis with the operation of Loan Parties’ business for the time periods indicated and with factors known to exist as of the date of such Projections or anticipated by the Officers to exist during the periods covered by the Projections.  Parent and Borrower shall certify to Lender with the delivery of such Projections that no Loan Party has any reason to believe that the Projections are false or misleading in any material respect; provided , that any certification or representation pursuant to this Section 4.3(i) shall be subject to the qualification set forth in the last sentence of Section 3.18 ;
 
(j)           Promptly upon receipt by a Loan Party, notices of recalls or other enforcement actions by the FDA and the results of inspections by the FDA or any State authorities of any of Borrower’s Facilities;
 

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(k)           By April 30, 2008, a copy of Loan Parties’ audited Financial Statements in accordance with Section 4.3(b) for the Fiscal Years ending December 31, 2005 and December 31, 2006; and
 
(l)           Such other information (including non-financial information) as Lender may from time to time reasonably request.
 
4.4            Condition and Repair .  Each Loan Party shall maintain its Equipment and all of the other Loan Collateral used in the operation of its business in good repair and working order subject to reasonable wear and tear, and shall make all appropriate repairs, improvements and replacements thereof so that the business carried on in connection therewith may be properly conducted at all times.

4.5            Insurance .  At its own cost, each Loan Party shall obtain and maintain: (a) insurance against loss, destruction or damage to its properties and business of the kinds and in the amounts customarily insured against by firms with established businesses engaged in the same or similar businesses as Loan Parties and, in any event, sufficient to fully protect Lender’s interest in the Loan Collateral and (b) insurance against public liability and third party property damage of the kinds and in the amounts customarily insured against by firms with established businesses engaged in the same or similar businesses as Loan Parties.  All such policies shall (i) be issued by financially sound and reputable insurers, (ii) name Lender as an additional insured and, where applicable, as loss payee under a lender loss payable endorsement satisfactory to Lender, and (iii) provide that the insurer will provide at least thirty (30) days written notice to Lender before such policy is altered or canceled.  All of the insurance policies required hereby shall be evidenced by one or more certificates of insurance delivered to Lender by Borrower on the Closing Date and at such other times as Lender may request from time to time.

4.6            Taxes; Contested Claims .  Each Loan Party shall pay when due all taxes, assessments and other governmental charges imposed upon it or its assets, franchises, business, income or profits before any penalty or interest accrues thereon, provided that notwithstanding anything to the contrary contained herein, for purposes of this Agreement such amounts shall not be considered to be due or otherwise imposed upon Loan Parties until such amounts are shown as being due and payable (i) on a filed tax return, (ii) on an executed closing agreement between the applicable taxing authority and a Loan Party, or (iii) on a final, nonappealable order of a court of competent jurisdiction.  Each Loan Party shall pay when due all claims (including claims for labor, services, materials, rent and supplies) for sums which by law might be a Lien or charge upon any of its assets; provided that no such charge or claim need be paid if and for so long as each of the following conditions continue to be met (“ Contested Claims ”): (a) such Contested Claim is being diligently contested in good faith so long as Lender is notified of such contest, (b) Loan Parties establish an adequate reserve or other appropriate provision for the payment of such Contested Claim and all other Contested Claims required by GAAP, (c) any Lien arising from such Contested Claim does not, when added to all amounts secured by all other then Contested Claims, secure amounts in excess of $50,000 in the aggregate as of any date, (d) no material Property would reasonably be expected to be lost, forfeited or materially damaged as a result of such Contested Claim; and (e) any Lien arising from such Contested Claim, or from any other then Contested Claim, will not prevent Lender from having a perfected first priority security interest in, or as applicable, mortgage Lien on, the applicable Loan Collateral or with respect to future advances made hereunder subject to any Permitted Liens.

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4.7            Existence; Business .  Each Loan Party (exclusive of an Inactive Subsidiary dissolved pursuant to a Permitted Dissolution) shall (a) maintain its existence as a corporation or, as applicable, limited liability company, (b) continue to engage primarily in business substantially the same general character in which Loan Parties are presently engaged or any businesses reasonably related thereto, and (c) refrain from entering into any lines of business substantially different from the business or activities in which Loan Parties are presently engaged.

4.8            Compliance with Laws .  Each Loan Party shall comply with all federal, state and local laws, regulations and orders applicable to it or its assets, including all Environmental Laws, in all respects material to each Loan Party’s business or assets and shall promptly notify Lender of any material violation of any rule, regulation, statute, ordinance, order or law relating to the public health or the environment of which any Officer has Knowledge and of any complaint or written notifications received by any Loan Party with regard to any material environmental or safety and health rule, regulation, statute, ordinance or law except in any case where the failure to comply with such laws would not reasonably be expected to have a Material Adverse Effect.  Each Loan Party shall obtain and maintain any and all licenses, permits, franchises, governmental authorizations, patents, trademarks, copyrights or other rights with respect to the ownership of its properties and the conduct of its business and as may be required from time to time by applicable law, the non-maintenance of which could be reasonably expected to have a Material Adverse Effect.   At least every six months, or more often if Lender shall request, Loan Parties will promptly notify Lender if any Loan Party obtains any registration of any of the following with the United States Patent and Trademark Office or the United States Copyright Office: patents, copyrights, trademarks, service marks or trade names.  Loan Parties will promptly notify Lender of any licenses (to or from a Loan Party) of any of the following which are registered with the United States Patent and Trademark Office or the United States Copyright Office: patents, trademarks, service marks or copyrights (excluding off-the-shelf or click-through software licenses and similar licenses that are immaterial to Loan Parties’ business) and any new license agreements respecting the purchase or manufacture of Inventory.

4.9            Notice of Default; Labor Matters; Affiliates .  Each Loan Party shall, within three (3) Business Days of any Knowledge thereof by any Officer, give written notice to Lender of: (a) the occurrence of any event or the existence of any condition which would be, after notice or lapse of applicable grace periods, an Event of Default, (b) the occurrence of any event or the existence of any condition which would prohibit or limit the ability of any Loan Party to reaffirm any of the representations or warranties, or to perform any of the covenants, set forth in this Agreement, (c) any labor dispute to which any Loan Party may become a party and which would reasonably be expected to have a Material Adverse Effect, (d) any strikes, walkouts, or lockouts relating to any of its plants or other facilities, and (e) the entering into of any labor contract relating to any of its plants or other facilities (other than those set forth on Schedule 3.15 ) or any material change to the terms of any labor contract set forth on Schedule 3.15 .

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           4.10            Costs .  Loan Parties shall jointly and severally reimburse Lender for any and all Other Taxes actually paid by Lender upon Lender’s written request for payment together with reasonable supporting documentation.  Loan Parties shall jointly and severally reimburse Lender for any and all actual out-of-pocket fees, costs and expenses including reasonable attorneys’ fees, other professionals’ fees, appraisal fees, environmental assessment fees (including Phase I and Phase II assessments, but only if a Loan Party has received written notice that it may have violated any applicable Environmental Law), expert fees, court costs, litigation and other expenses (collectively, the “ Costs ”) all of which shall be reasonable in amount, actually paid by Lender or any of its officers, employees, Affiliates or agents in connection with: (a) the preparation, negotiation, procurement, review, administration or enforcement of this Agreement, any of the other Loan Documents or any instrument, agreement, document, policy, consent, waiver, subordination, release of lien, termination statement, satisfaction of mortgage, financing statement or other lien search, recording or filing related thereto (or any amendment, modification or extension to, or any replacement or substitution for, any of the foregoing), whether or not any particular portion of the transactions contemplated during such negotiations is ultimately consummated, and (b) the defense, preservation and protection of Lender’s rights and remedies thereunder, including its security interest in the Loan Collateral or any other Property pledged to secure the Loans, whether incurred in bankruptcy, insolvency, foreclosure or other litigation or proceedings or otherwise.  The Costs shall be due and payable upon written demand by Lender.  If any Loan Party fails to pay any of such Costs upon such demand, Lender is entitled to disburse such sums as an advance under the Line of Credit.  If there is insufficient Revolving Loan Availability to charge such Costs to the loan account with Lender as an advance of the Revolving Loans, the Costs shall bear interest from the due date for payment at the Default Rate.  This provision shall survive the termination of this Agreement and/or the repayment of any amounts due or the performance of any Obligation.  Notwithstanding anything to the contrary in this Section 4.10 , in connection with each field examination or verification by Lender of any of the Loan Collateral or Loan Parties conducted after the Closing Date, Borrower will pay to Lender either (but not both): (i) a fee at the then current rate (currently $850.00) per day (based on an 8 hour day plus reasonable out-of-pocket expenses incurred, including travel, lodging and meals) per auditor or field examiner for the services of Lender’s auditors and field examiners or (ii) the out-of-pocket fees, costs and expenses paid to third party auditors which conduct the field examination or verification; provided that, so long as an Event of Default has not occurred and Lender has not, in good faith, determined that Loan Parties’ financial condition or performance or Revolving Loan Availability has materially diminished, Lender shall not seek reimbursement from Borrower for more than a total of three (3) periodic, repeat audits ( i.e., exclusive of any new business audit) per calendar year undertaken by Lender’s auditors or field examiners of Loan Parties (including of the Loan Collateral).

4.11            Depository/Banking Services .  So long as this Agreement is in effect, Lender shall be the principal depository in which substantially all of Loan Parties’ funds are deposited, and the principal bank of account of Loan Parties subject to Section 2.4(g) .  Borrower shall not maintain more than (Euro) $50,000 on deposit account at deposit account number   0106516 001 00978 with ABN AMRO Bank Luxembourg.

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4.12            Other Amounts Deemed Loans .  If a Loan Party fails to (a) pay any tax, assessment, governmental charge or levy, (b) maintain insurance within the time permitted or required by this Agreement, (c) subject to Section 4.6 , discharge any Lien prohibited hereby, or (d) comply with any other Obligation, Lender may, but shall not be obligated to, upon prior written notice to Parent (in the absence of an existing Event of Default), pay, satisfy, discharge or bond the same for the account of Loan Parties, and to the extent permitted by law and at the option of Lender, all monies so paid by Lender on behalf of a Loan Party shall be deemed to be a Loan and part of the Obligations.  Lender shall give prompt written notice to Parent of any action taken by Lender under this Section 4.12 .

4.13            Capital Contribution Agreement .  Borrower and Parent will cause any amounts due under the Capital Contribution Agreement from the Shareholders (as defined in the Capital Contribution Agreement) to be deposited directly with Lender and applied as a reduction of the Revolving Loans.

           4.14            Further Assurances .  Each Loan Party shall execute, acknowledge and deliver, or cause to be executed, acknowledged or delivered, all such further assurances and other agreements or instruments, and take or cause to be taken all such other action, as Lender shall reasonably request from time to time to give full effect to the Loan Documents and the transactions contemplated thereby.

Section 5.                       Negative Covenants .  Borrower and Parent covenant with, and represent and warrant to, Lender that, from and after the Closing Date until the Obligations are paid and satisfied in full:

5.1            Indebtedness .  No Loan Party will incur, create, assume or permit to exist any:
 
 
(a)           Indebtedness for borrowed money other than: (i) the Obligations and the Fifth Third Shareholder Loans; (ii) the Owner/Affiliate Subordinated Debt and the Indebtedness evidenced by the Alticor Note; (iii) the LaSalle Debt; (iv) Permitted Purchase Money Indebtedness; (v) such Rate Management Obligations and credit card Obligations owing to Lender or its Affiliates pursuant to such terms and conditions as agreed to by Lender and Borrower; (vi) additional unsecured loans or advances from one or more Owner/Affiliate Subordinated Creditors constituting Owner/Affiliate Subordinated Debt so long as (A) such Indebtedness is subject to an Owner/Affiliate Subordination Agreement, (B) the incurrence of such Indebtedness does not create an Event of Default and (C) the terms and conditions applicable to such Indebtedness (including maturity date, interest rate and amortization) are acceptable to Lender in its discretion; (vii) Indebtedness listed on Schedule 5.1 ; and (viii) other Indebtedness for borrowed money not otherwise authorized by this Section 5.1 that has been specifically approved in writing by Lender;

(b)           Indebtedness under a Rate Management Agreement except as provided in Section 5.1(a)(v) ;

(c)           Indebtedness representing reimbursement obligations and other liabilities of a Loan Party with respect to surety bonds (whether bid, performance or otherwise), letters of credit, banker’s acceptances, drafts (other than checks in the ordinary course or to make payments permitted by this Agreement) or similar documents or instruments issued for a Loan Party’s account excluding: (i) Letters of Credit issued under this Agreement and (ii) letters of credit issued by a third-party financial institution to the extent expressly permitted by Section 2.3(c) ;

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(d)           Indebtedness secured by a Lien (other than a Permitted Lien) on or payable out of the proceeds or production from any Property of a Loan Party regardless of whether such liability has been assumed by a Loan Party;

(e)           Indebtedness representing the balance deferred and unpaid of the purchase price of any Property or services except (i) Permitted Purchase Money Indebtedness, (ii) any such balance that constitutes an account payable to a trade creditor created, incurred, assumed or guaranteed by a Loan Party in the ordinary course of business of such Loan Party (or Non-financed Capital Expenditures permitted by Section 5.3 ) in connection with obtaining goods, materials or services that is not more than ninety (90) days in arrears as measured from the date of billing, unless the trade payable is being contested in good faith, and (iii) any such balance for any services that constitutes a liability accrual, created, incurred, assumed or guaranteed by a Loan Party in the ordinary course of business of a Loan Party that is not more than ninety (90) days in arrears as measured from the date due, unless such accrual is being contested in good faith; or

(f)           Indebtedness evidenced by notes, bonds, debentures, installment contracts, Capitalized Leases, Synthetic Leases, or similar obligations except to the extent permitted under Sections 5.1(a) through 5.1(e) .

5.2            Prepayments; Subordinated Debt .

(a)           No Loan Party will voluntarily prepay any Indebtedness owing by such Loan Party prior to the stated maturity date thereof other than: (i) the Obligations, (ii) Indebtedness to trade creditors in the ordinary course of business or where the prepayment on such Indebtedness shall result in a discount on the amount due or other benefit to a Loan Party deemed material by it, or (iii) as set forth in Section 5.2(b) .

(b)           No Loan Party will: (i) make any payment (including any principal, premium, interest, fee or charge) with respect to any of the Owner/Affiliate Subordinated Debt except to the extent, and in the manner, expressly permitted by the applicable Owner/Affiliate Subordination Agreement; or (ii) repurchase, redeem, defease, acquire or reacquire for value any of the Owner/Affiliate Subordinated Debt.

(c)           No Loan Party will: (i) make any payment (including any principal, premium, interest, fee or charge) with respect to any of the LaSalle Debt except to the extent, and in the manner, expressly permitted by the LaSalle Intercreditor Agreement; or (ii) repurchase, redeem, defease, acquire or reacquire for value any of the Third-Party.

(d)           No Loan Party will seek, agree to or permit, directly or indirectly, the amendment, waiver or other change to: (i) any of the terms of payment (including, principal, interest or premium provisions) of or applicable to, or the provisions governing the priority of or security for the payment and performance of the obligations under or applicable to, or acceleration, termination, financial or negative covenant, or default provisions of or applicable to, any of the Owner/Affiliate Subordinated Debt Documents, the Alticor Note or the LaSalle Debt Documents, (ii) increase the total amount of Indebtedness owing to (A) LaSalle from that which exists on the Closing Date, (B) Alticor from that which exists on the Closing Date, or (C) Owner/Affiliate Subordinated Creditors from that which exists on the Closing Date unless in compliance with Section 5.1 , or (iii) any other material term of or applicable to any of the Owner/Affiliate Subordinated Debt Documents, the Alticor Note or the LaSalle Debt Documents.  For purposes of this Section 5.2(d) , “material” means any modification, waiver, or amendment of any of the Owner/Affiliate Subordinated Debt Documents, the Alticor Note or the LaSalle Debt Documents which, in the judgment of Lender exercised in good faith, would (1) adversely affect any of Lender’s rights or remedies under the Loan Documents or Lender’s security interest in or other Lien on the Loan Collateral (including the priority of Lender’s interests) or (2) create or result in an Event of Default.

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5.3            Capital Expenditures .  Loan Parties will not make or incur any Capital Expenditures during any Fiscal Year, commencing with the Fiscal Year ended on December 31, 2007, in an aggregate amount which exceeds $2,000,000.

5.4            Pledge or Encumbrance of Assets; Subsidiaries .

(a)           No Loan Party will create, incur, assume or permit to exist, arise or attach any Lien on any present or future asset.  Notwithstanding the foregoing in this Section 5.4(a) , with respect to Parent’s Voting Ownership Interests in Luxembourg Sub, the provisions of this Section 5.4(a) shall be limited to 65% of the outstanding Voting Ownership Interests of Parent in Luxembourg Sub.  Borrower will not, and Parent will not permit Borrower to, create, directly or indirectly, any prohibition or restriction on the creation or existence of a Lien in favor of Lender upon the assets of Borrower, nor create any contractual obligation which may restrict or inhibit Lender’s rights or abilities to sell or otherwise dispose of all or any part of the Loan Collateral after the occurrence of an Event of Default, other than contractual restrictions arising under the Loan Documents, any Rate Management Agreements permitted by Section 5.1 , Permitted Purchase Money Indebtedness and to the extent created by contract, Permitted Liens.

(b)           Until the Obligations are paid and satisfied in full and this Agreement is terminated, each Loan Party (“ Subject Loan Party ”) will continue to: (i) own legally and beneficially, free and clear of any Liens, at least the percentage shown on Schedule 3.12(a) as of the Closing Date, on a fully diluted basis, of the outstanding Ownership Interests of each of the other Loan Parties shown on Schedule 3.12(a) (“ Owned Loan Parties ”) to be owned by the respective Subject Loan Party and (ii) have the power to direct or cause the direction of the manage­ment and policies of each of the Owned Loan Parties shown on Schedule 3.12(a) to be owned by the respective Subject Loan Party.

(c)           Until the Obligations are paid and satisfied in full and this Agreement is terminated, Parent will continue to: (i) own legally and beneficially, free and clear of any Liens, at least 50%, on a fully diluted basis, of the outstanding Ownership Interests of each of the Joint Ventures and (ii) have the right to co-manage each of the Joint Ventures.

(d)           No Non-Borrower Loan Party will directly or indirectly: (i) transfer or make any distributions of any of its Properties to any Person except to Borrower or (ii)  make any loans, advances or extensions of credit to any Person, including any of the other Non-Borrower Loan Parties or their respective Affiliates, except to Borrower.

(e)           No Non-Borrower Loan Party shall directly or indirectly create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Non-Borrower Loan Party to: (i) pay dividends or make any other distribution on any of such Non-Borrower Loan Party’s Ownership Interests owned by Borrower or Parent; (ii) pay any Indebtedness owed to Borrower or Parent; (iii) make loans or advances to Borrower or Parent; or (iv) transfer any of its Property to Borrower or Parent.

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(f)           Until the Obligations are fully and finally paid, Borrower will not make or grant any further assignments, transfers, or other dispositions of the Policy (as defined in the Agreement Regarding Credit Insurance) or any right or interest therein.

5.5            Guarantees .  No Loan Party will enter into any direct or indirect indemnities or guarantees other than (a) customary indemnification obligations and warranties under leases and other contracts in the ordinary course of business, (b) indemnities arising under the Loan Documents and any Rate Management Agreements permitted by Section 5.1 , (c) guarantees of the Indebtedness of any other Loan Party so long as such Indebtedness is permitted by Section 5.1 , (d) by endorsement of checks for deposit in the ordinary course of business, and (e) in favor of Lender.

5.6            Dividends and Distributions .

(a)           Neither Borrower nor Parent will declare or pay any dividend or distributions on its Ownership Interests (including any return of capital) except that Borrower may make cash dividends or distributions to Parent solely in order, and in such amounts sufficient:

(i)           for Parent to pay (“ Tax Distributions ”): (A) the federal, state and local income tax liabilities of Borrower which are then due (to the extent Borrower is consolidated with Parent for income tax purposes), or (B) any state franchise taxes of Parent which are then due, and

(ii)           for Parent to make Investments in the Joint Ventures to the extent permitted by Section 5.9(ii) .

(b)            Neither Borrower nor Parent will redeem, retire, purchase, repurchase or otherwise acquire, directly or indirectly, or exercise any call rights relating to, any of its Ownership Interests in any Fiscal Year.

                      (c)           Neither Borrower nor Parent will pay (i) any management, consulting or other fees and reimbursements of out-of-pocket expense to any of its Affiliates or (ii) any fees or expenses of the members of Parent’s or Borrower’s Board of Directors, in the aggregate for clauses (i) and (ii) in excess of an aggregate amount equal to $400,000 per calendar year.

(d)           Borrower shall not pay out-of-pocket expenses or other overhead expenses of Parent except in the ordinary course of business consistent with past practice.

5.7            Merger; Amendment of Material Documents; Disposition of Assets .  No Loan Party shall: (a) change its Fiscal Year, (b) merge or consolidate with any Person or otherwise reorganize, liquidate or wind-up or dissolve itself, (c) amend or change, or allow to be amended or changed, any of its Organizational Documents or any Joint Venture Agreement in a manner that would reasonably be expected to have a Material Adverse Effect or would create or result in an Event of Default, or (d) sell, lease, transfer or otherwise dispose of, or grant any Person an option to acquire, or sell and leaseback, any of its assets, whether now owned or hereafter acquired (“ Dispositions ”), except for:

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(i)           bona fide sales of Inventory in the ordinary course of business; provided, however , a sale in the ordinary course of business will not include a transfer in total or partial satisfaction of Indebtedness (other than Indebtedness arising out of the contractual obligation to sell such Inventory);

(ii)           the purchase, termination and re-investment of Investments that are permitted to be owned or made as described in clauses (v), (viii), (ix), and (x) of Section 5.9(c) (it being understood that repayments of loans or advances that constitute Investments permitted by clauses (iii) and (vi) of Section 5.9(c) shall not constitute Dispositions);

(iii)           sales of delinquent Accounts (other than Eligible Accounts) in the ordinary course of business for the purposes of collection only (and not for the purpose of any bulk sale or securitization transaction);

(iv)           (A) the surrender of contractual rights in the ordinary course of business or (B) the settlement, release or surrender of any contract, tort or other litigation claims in the ordinary course of business other than any commercial tort claim pledged to Lender under the Security Agreement;

(v)           dispositions of Equipment (A) which has suffered an Event of Loss or (B) with a net book value of less than ( x ) $100,000 with respect to any single piece of Equipment or ( y ) $200,000 in the aggregate per year with respect to multiple pieces of Equipment, which, in each instance under this item (v)(B) , is obsolete, surplus, or worn-out so long as, in each instance ( i.e. , under clauses (A) and (B)), all proceeds thereof (“ Disposition Proceeds ”) are paid to Lender (exclusive of any Equipment which is the subject of a Permitted Lien on which Lender does not have a first priority security interest) to be applied against the Obligations in accordance with Section 2.2(h) ; provided that Borrower may use Disposition Proceeds to purchase replacement Equipment so long as: (1) such replacement Equipment is not materially less in value than the Equipment which was sold or otherwise disposed of by Loan Parties, (2) no Event of Default has occurred and is continuing, (3) such replacement Equipment (I) is free and clear of all Liens except: ( aa ) a first priority security interest in favor of Lender and ( bb ) any other Permitted Lien (exclusive of a Lien arising from any Permitted Purchase Money Indebtedness unless the Equipment disposed of was subject to a Lien arising from Permitted Purchase Money Indebtedness, in which case the Disposition Proceeds may be used to repay such Permitted Purchase Money Indebtedness so long as such replacement Equipment is financed with Permitted Purchase Money Indebtedness) and (II) will not be a fixture under applicable law, (4) Borrower effects the replacement within 120 days after such disposition and provides notices thereof to Lender, and (5) all Disposition Proceeds with respect to any Equipment (exclusive of any Equipment which is the subject of a Permitted Lien on which Lender does not have a first priority security interest to the extent permitted by this Agreement) are paid to Lender for application to the Revolving Loans (subject to the establishment of a Borrowing Base Reserve therefor in the amount thereof) pending such replacement by Borrower; and

(vi)           Permitted Dissolutions and Permitted Mergers.

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5.8            Transactions with Affiliates . No Loan Party shall (a) directly or indirectly make any loans or advances to any of its employees, officers, shareholders or directors, or other Affiliates except to the extent permitted by Sections 5.9 (ii) and 5.9(iii) ; (b) enter into any transaction with any of its Affiliates, except (i) as set forth in Schedule 3.12(b) , (ii) to the extent permitted by Section 5.9 , (iii) for such transactions entered into in the ordinary course of business upon fair and commercially reasonable terms that are no less favorable to a Loan Party than could be obtained in a comparable arms-length transaction with an unaffiliated Person, (iv) as permitted by Sections 5.6 and 5.7 , and (v) salary, benefits, bonuses, and other employment compensation paid to individuals who are Affiliates of Loan Parties in the ordinary course of business; or (c) divert (or permit anyone to divert) any of Borrower’s business opportunities to any Affiliate or any other Person in which a Loan Party or their respective holders of Ownership Interests holds a direct or indirect interest.

5.9            Investments .  No Loan Party shall purchase or otherwise acquire: (a) all or substantially all of the assets of any Person or the assets comprising any line of business or business unit or division, (b) any partnership, joint venture or limited liability company interest in or with any Person, or (c) the securities of, create, form or invest in any Person (including a Subsidiary), or hold beneficially evidences of Indebtedness of, or make any investment or acquire any interest in, or make any advance or loan to, or assume any liability on behalf of, any other Person (all such investments, loans and advances referred to herein collectively, as “ Investments ”) other than:

(i)           Investments by a Loan Party in another Loan Party to the extent, and in the amount, existing on the Closing Date;

(ii)           loans, advances and equity contributions made after the Closing Date (a “ JV Investment ”) made by Parent or 701 Corporation, as applicable, to, or in, the Joint Ventures so long as (A) Borrower, after making a dividend to Parent to allow Parent to make (or in the case of 701 Corporation, to allow Parent to contribute to 701 Corporation funds to make) such JV Investment, has excess Revolving Loan Availability equal to at least $2,500,000, and (B) the Joint Ventures do not receive more than an aggregate amount equal to $500,000 as JV Investments;

(iii)           advances to employees with respect to expenses incurred by those employees, which expenses (A) are ordinary and necessary business expenses, (B) are reimbursable by Borrower, and (C) do not exceed in the aggregate, $100,000, outstanding at any one time;

(iv)           prepaid expenses in the ordinary course of business, and lease, utility, workers’ compensation, performance and other similar deposits in the ordinary course of business;

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(v)           short term Investments of excess working capital in one or more of the following so long as no Revolving Loans are then outstanding: (A)  Investments (of one year or less) in direct or guaranteed obligations of the United States, or any agencies thereof; (B) Investments in commercial paper maturing within one year from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A from Standard & Poor’s (or any successor rating agency) or at least Aa2 from Moody’s Investor Services (or any successor rating agency); (C) Investments (of one year or less) in certificates of deposit of banks or trust companies organized under the laws of the United States or any jurisdiction thereof, provided that such banks or trust companies are insured by the Federal Deposit Insurance Corporation and have combined capital and surplus and undivided profits in excess of $500,000,000; and (D) money market funds substantially all of the assets of which are as described in clauses (A), (B) or (C) above;

(vi)           non-cash advances to Borrower’s customers made in connection with sales of goods or services to those customers in the ordinary course of business of Borrower;

(vii)           Investments received in satisfaction of judgments, settlements of debts or compromises of obligations or as consideration for the settlement, release or surrender of a contract, tort or other litigation claim, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of an account debtor;

(viii)           Investments in Rate Management Agreements permitted by Section 5.1 ;

(ix)           deposits of cash with banks or other financial institutions permitted by Section 4.11 ;

(x)           Investments, expressly approved in writing by Lender, made solely to fund any deferred compensation plans of Borrower for its employees which have been expressly approved in advance and in writing by Lender; and

(xi)           other Investments expressly approved in writing by Lender.

5.10            Fixed Charge Coverage Ratio .  Loan Parties will not permit the Fixed Charge Coverage Ratio to be less than the ratio set opposite the following Test Periods ending on any of the following dates or occurring during any of the following periods:

Test Periods
Fixed Charge Coverage Ratio
For each of the Test Periods ending on
and after December 31, 2007
 
1.10 to 1

5.11            Senior Funded Indebtedness to EBITDA Ratio .  Loan Parties will not permit the Senior Funded Indebtedness to EBITDA Ratio to exceed the ratio set opposite the following Test Periods ending on any of the following dates or occurring during any of the following periods:
Test Periods
Senior Funded Indebtedness to EBITDA Ratio
For each of the Test Periods ending on
and after December 31, 2007
5.750 to 1
   

5.12            Minimum Tangible Net Worth .  Loan Parties will not permit their Tangible Net Worth to be less than $1,500,000 as of the end of any Test Period.


Section 6.                       Events of Default and Remedies .
 
6.1            Events of Default .  The occurrence of any of the following events, whether or not caused by or within the control of a Loan Party, shall be an event of default under this Agreement (each, an “ Event of Default ”):

(a)           Any representation or warranty made with respect by, or with respect to, a Loan Party or any of its Affiliates, in any of the Loan Documents or in any other written statement, certificate or document delivered to Lender pursuant to any such Loan Document, was false or incorrect when made or reaffirmed in any material respect; or

(b)           (i) A Loan Party fails to pay any of the Obligations when due and payable, by acceleration or otherwise (except as provided in clause (ii) below of this subparagraph (b)); provided that with respect to any sum payable under this Agreement or the Notes, other than any payment of principal, interest or any other fee expressly set forth herein, it will not be an Event of Default for failure to pay such sum unless such sum is not paid to Lender within two (2) Business Days after the date Lender notifies Parent of the failure to make such payment or (ii) Borrower fails to cure any Overadvance in accordance with Section 2.1(a) ; or

(c)           A Loan Party fails to observe, comply with or perform any other covenant, condition or agreement herein or in any of the other Loan Documents ( i.e., exclusive of those defaults covered by the other clauses (a), (b), and (d) through (w) of this Section 6.1 ) and fails to cure such default by the date that is 30 days after the earlier of the date: (i) Lender notifies Parent of such default or (ii) on which any Loan Party has knowledge of such default; provided that such 30-day grace period shall not apply to: (A) a breach of any covenant that, in Lender’s good faith judgment, cannot be cured; (B) any failure to maintain insurance in accordance with Section 4.5 or any Security Document or to permit inspection by Lender, or its agent, of the Loan Collateral or of the books and records of Loan Parties in accordance with Sections 4.1 or 4.2 ; (C) any breach of Sections 4.9(a) , 4.9(b) , 4.13 , or 4.14 ; (D) subject to Section 6.6 , any breach of any negative covenant set forth in Section 5 ; (E) a breach or default of any other Loan Document if a period of cure is expressly provided for in such other Loan Document with respect to a breach or default under such other Loan Document; (F) any breach if, within the 12 calendar months immediately preceding the occurrence of such current breach, a Loan Party has twice previously breached the same provision of this Agreement or any other applicable Loan Document; or (G) a breach or default under Section 4.3(f) or 4.3(j) , in which case a 5 Business Day grace period shall apply; or

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(d)           A court enters a decree or order for relief with respect to a Loan Party or an Individual Guarantor in an involuntary case under any applicable bankruptcy, insolvency or other similar law then in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other similar official) of a Loan Party or an Individual Guarantor for any substantial part of its or his respective Property, or orders the wind-up or liquidation of its or his affairs; or a petition initiating an involuntary case under any such bankruptcy, insolvency or similar law is filed and is pending for sixty (60) days without dismissal; or

(e)           A Loan Party or an Individual Guarantor commences a voluntary case under any applicable bankruptcy, insolvency or other similar law in effect, or makes any general assignment for the benefit of creditors, or fails generally to pay its or his respective debts as such debts become due, or takes any authorizing action in furtherance of any of the foregoing; or

(f)           (i)  There occurs an Owner/Affiliate Subordinated Debt Default which has not been waived in writing by the Owner/Affiliate Subordinated Creditors except to the extent the remedies thereunder are stayed under the applicable Owner/Affiliate Subordination Agreement; (ii) There occurs a LaSalle Debt Default which has not been waived in writing by LaSalle except to the extent the remedies thereunder are stayed under the LaSalle Intercreditor Agreement; (iii) A Loan Party defaults under the terms of any of the A/P Trade Payable Agreements, and such default gives the applicable A/P Trade Payable Creditor the right to accelerate the Indebtedness which is the subject of such A/P Trade Payable Agreement, and such default is not cured within any applicable cure period, if any, set forth in such A/P Trade Payable Agreement, or if no such cure period is set forth, within 3 Business Days; (iv) A Loan Party defaults under the terms of the Alticor Note, and such default gives Alticor the right to accelerate the Indebtedness which is evidenced by the Alticor Note, and such default is not cured within any applicable cure period, if any, set forth in such Alticor Note, or if no such cure period is set forth, within 3 Business Days; or (v) A Loan Party defaults under the terms of any other Indebtedness for borrowed money or lease that, individually or in the aggregate (when added to all other Indebtedness, if any, of any one or more Loan Party then in default), involves Indebtedness for borrowed money or lease payments in excess of $1,000,000 and such default gives any creditor or lessor the right to accelerate the maturity of any such Indebtedness for borrowed money or lease payments and such default is not cured within any applicable cure period; or

(g)           Any one or more judgments, orders or decrees for the payment of money, in an amount which exceeds aggregate available insurance proceeds by more than $350,000 individually (or any number of final judgments, awards, orders, or decrees outstanding, as of any date, in excess of $400,000 in the aggregate with respect to any one or more Loan Party), is rendered against a Loan Party and remains undischarged for 30 days during which time execution is not effectively stayed, vacated, or discharged; or

(h)           Any event occurs which would with reasonable certainty have a Material Adverse Effect or a Guarantor Material Adverse Effect; or

(i)           There occurs a Change of Control; or


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(j)           The dissolution of Borrower, Parent or any other Loan Party except any Inactive Subsidiary pursuant to a Permitted Dissolution; or

(k)           The commencement of any foreclosure proceedings, proceedings in aid of execution, attachment actions, or levies by any Person against, or the filing by any taxing authority of a Lien (except a Permitted Lien) against, any of the Loan Collateral which has not been vacated, discharged or stayed within 30 days after the commencement thereof; or

(l)           There occurs an uninsured casualty loss with respect to any of the Loan Collateral having an aggregate fair market value greater than $100,000; or

(m)           Lender ceases to be Loan Parties’ (i) principal depository bank in which substantially all of Loan Parties’ funds are deposited or (ii) principal bank of account; or

(n)           (i) The validity or effectiveness of any of the Loan Documents or its transfer, grant, pledge, mortgage, or assignment by the party executing such Loan Document is materially impaired (other than in accordance with its express terms and conditions); (ii) any party (other than Lender or any Affiliate of Lender) executing any of the Loan Documents asserts that any of such Loan Documents is not a legal, valid and binding obligation of the party thereto enforceable in accordance with its terms; (iii) the security interest or other Lien purporting to be created by any of the Loan Documents shall for any reason cease to be a valid, perfected Lien (other than in accordance with its express terms and conditions); or (iv) any Person is released from any of its covenants or obligations under any of the Loan Documents except as permitted by Lender in writing or in accordance with the express terms and conditions of such Loan Documents; or

(o)           A contribution failure occurs with respect to any employee benefit plan maintained by a Loan Party or a Loan Party’s ERISA Affiliate sufficient to give rise to a Lien under Section 302(f) of ERISA; or

(p)           The filing of any Lien against the Loan Collateral or any part thereof (exclusive of Permitted Liens) which is not removed to the satisfaction of Lender within a period of 10 days after the earlier of the date (i) Lender notifies Parent of such Lien or (ii) on which any Loan Party has Knowledge of such Lien; or

(q)           Subject to Section 5.7 with respect to a permitted disposition of an asset thereunder, the abandonment by any Loan Party of any Loan Collateral having an aggregate fair market value of greater than $50,000; or

(r)           There occurs a nonpayment by Borrower of any Rate Management Obligation when due or the breach by Borrower of any material term, provision or condition contained in any Rate Management Agreement; or

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(s)           any Inventory, in excess of an aggregate amount equal to $100,000, which is being stored for, or on behalf of, Borrower by a third-party is being stored by such third party in violation of applicable law or is the subject of seizure or other enforcement action by the FDA or any applicable State authority; or

(t)           The occurrence of any default or breach by any of the Shareholders (as defined in the Capital Contribution Agreement) under the Capital Contribution Agreement; or

(u)           (i) an Individual Guarantor defaults under his Individual Guaranty, (ii) an Individual Guarantor denies his obligation to guarantee the Obligations or attempts to limit or terminate his obligation to guarantee the Obligations subject to the terms of his Individual Guaranty, (iii) David L. Van Andel, John Paul DeJoria, William W. Nicholson or Mark A. Fox dies or becomes legally incompetent, or (iv) a Specific Guarantor Event occurs unless, on or before the end of the Specific Guarantor Standstill Period, either of the following occurs: (A) Lender expressly waives in writing the Event of Default arising from the Specific Guarantor Event (although Lender shall be under no obligation whatsoever to do so) or (B) Borrower provides additional collateral or other security or a substitute guarantor, which, in each case, is satisfactory to Lender in its discretion exercised in good faith; or

(v)           (i) a Non-Borrower Loan Party defaults under the Loan Party Guaranty or (ii) a Non-Borrower Loan Party denies its obligations under the Loan Party Guaranty or attempts to limit or terminate its obligation to guarantee the Obligations; or

(w)           (i) any Owner/Affiliate Subordination Agreement is terminated or ceases, for any reason, to be in full force and effect (other than as agreed in writing by Lender or in accordance with its express terms), (ii) any of the Owner/Affiliate Subordinated Creditors denies in writing its, his or her obligations under the applicable Owner/Affiliate Subordination Agreement or attempts to limit or terminate or revoke its, his or her obligations under the applicable Owner/Affiliate Subordination Agreement, (iii) the LaSalle Intercreditor Agreement is terminated or ceases, for any reason, to be in full force and effect (other than as agreed in writing by Lender or in accordance with its express terms), or (iv) LaSalle denies in writing its obligations under the LaSalle Intercreditor Agreement or attempts to limit or terminate or revoke its obligations under the LaSalle Intercreditor Agreement.

6.2            Remedies .  If any Event of Default occurs and is continuing, Lender may cease advancing money hereunder, and Lender may elect to exercise any one or more of the following remedies, all without presentment, demand, protest or notice of any kind, as the same are hereby expressly waived by Borrower and Parent, unless otherwise required by applicable law:

(a)           cease advancing any Revolving Loans, declare all Obligations to be immediately due and payable, whereupon such Obligations shall immediately become due and payable, and terminate this Agreement and all obligations of Lender under this Agreement;

(b)           proceed to enforce payment of the Obligations and to realize upon the Loan Collateral or any Property securing the Obligations, including causing all or any part of the Loan Collateral to be transferred or registered in its name or in the name of any other Person, with or without designation of the capacity of such nominee, and Loan Parties shall be liable for any deficiency remaining after disposition of any Loan Collateral;

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(c)           offset and apply to all or any part of the Obligations, all moneys, credits and other Property of any nature whatsoever of each Loan Party now or at any time hereafter in the possession of, in transit to or from, under the control or custody of, or on deposit with (whether held by a Loan Party individually or jointly with another Person), Lender or its Affiliates, including certificates of deposit; and/or

(d)           exercise any and all rights and remedies provided by applicable law and the Loan Documents.

6.3            No Remedy Exclusive .  No remedy set forth herein is exclusive of any other available remedy or remedies, but each is cumulative and in addition to every other remedy available under this Agreement, the Loan Documents or as may be now or hereafter existing at law, in equity or by statute, and each may be exercised together, separately and in any order.  Borrower and Parent waive any requirement of marshaling of assets that may be secured by any of the Loan Documents.

6.4            Effect of Termination; Voluntary Termination .

(a)           The termination of this Agreement shall not affect any rights of any party or any obligation of any party to the other, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into, rights created or Obligations incurred prior to such termination have been fully disposed of, concluded or liquidated.  The security interest, other Liens and rights granted to Lender hereunder and under the Loan Documents shall continue in full force and effect, notwithstanding the fact that no Loans are outstanding, until all of the Obligations have been paid in full and this Agreement is terminated.

(b)           Borrower and Parent may voluntarily terminate this Agreement (i) by giving Lender written notice (“ Termination Notice ”) of the date on which this Agreement is to terminate (“ Voluntary Termination Date ”) at least five (5) Business Days before the Voluntary Termination Date, and (ii) by paying on any such Voluntary Termination Date all of the Obligations.  Upon the Voluntary Termination Date, (1) all Loans and all other Obligations will automatically and immediately become due and payable, (2) Borrower will cause all Letters of Credit to be replaced or cash collateralized on terms satisfactory to Lender; and (3) Lender’s obligations under this Agreement and the other Loan Documents arising on and after that effective date of termination will automatically terminate immediately, without notice or demand, which Borrower and Parent hereby expressly waives.

6.5            Actions in Respect of Letters of Credit . If any Event of Default shall have occurred and be continuing, Lender may, whether in addition to taking any of the actions described in this Section 6 or otherwise, if any Letters of Credit shall have been issued, make demand upon Loan Parties to, and forthwith upon such demand Loan Parties will, pay to Lender in same day funds at Lender’s office designated in such demand, for deposit in a special non-interest bearing cash collateral account (the “ Letter of Credit Collateral Account ”) to be maintained at such office of Lender, an amount equal to the Letter of Credit Exposure.  The Letter of Credit Collateral Account shall be in the name of Lender (as a cash collateral account), and under the sole dominion and control of Lender exercised in good faith (with sole right of withdrawal) and subject to the terms of this Agreement and the other Loan Documents.  On each drawing under a Letter of Credit, Lender shall seek reimbursement from any amounts then on deposit in the Letter of Credit Collateral Account; however , if (a) no amounts are then on deposit in the Letter of Credit Collateral Account, (b) the amount then on deposit in the Letter of Credit Collateral Account is insufficient to pay the amount of such drawing, or (c) Lender is legally prevented or restrained from immediately applying amounts on deposit in the Letter of Credit Collateral Account, then the amount of each unreimbursed drawing under such Letter of Credit and payment required to be made under this Section 6.5 shall automatically be converted into a Revolving Loan as a Prime Rate Revolving Loan made on the date of such drawing for all purposes of this Agreement.  To the extent that Lender applies amounts on deposit in the Letter of Credit Collateral Account as provided in this Section 6.5 , and, thereafter, such application (or any portion thereof) is rescinded or any amount so applied must otherwise be returned by Lender upon the insolvency, bankruptcy or reorganization of any Loan Party or otherwise, then the amount so rescinded or returned shall automatically be converted into a Revolving Loan as a Prime Rate Revolving Loan made on the date of such drawing for all purposes of this Agreement.  In the event the amount on deposit in the Letter of Credit Collateral Account at any time exceeds the Letter of Credit Exposure at such time, Lender shall promptly apply the excess amount to any of the other Obligations then outstanding in any order or method elected by Lender unless no Event of Default shall have occurred and be continuing, in which case such excess shall be returned to Borrower or as a court of competent jurisdiction otherwise directs.

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6.6            Capital Contribution Payments .  In the event that there is an Event of Default under Section 5.10 (and there is no other Event of Default then in existence), Borrower may cure such Event of Default if (a) Capital Contribution Payments are made in strict compliance with the terms of the Capital Contribution Agreement and (b) Lender receives Capital Contribution Payments, in cash, in an amount sufficient (if treated as being EBITDA for the applicable Test Period) to cause compliance with the Fixed Charge Coverage Ratio.  For purposes of calculating the Fixed Charge Coverage Ratio with respect to all applicable Test Periods, EBITDA, solely for purposes of the Fixed Charge Coverage Ratio, shall be deemed to include the amount of Capital Contribution Payments that were received by Lender in accordance with this Section 6.6 as if such Capital Contribution Payments were made in the Test Period for which there was an Event of Default under Section 5.10 that gave rise to the requirement to make the applicable Capital Contribution Payments.

Section 7.                       Conditions Precedent; Post-Closing Covenants .

7.1            Conditions to Initial Loans .  Lender shall have no obligation to make or advance the initial Revolving Loans and Term Loan A and Term Loan B until each of the following conditions precedent shall have been satisfied:

(a)           Loan Parties shall execute and deliver, or cause to be executed and delivered by the applicable Person, as applicable, to Lender, in form and substance reasonably satisfactory to Lender, each of the following:

(i)           The Notes, the Individual Guaranties, the Capital Contribution Agreement, the Loan Party Guaranty, and the Security Documents;

(ii)           A Borrowing Base Certificate completed as of the Closing Date;

(iii)           Certificate regarding resolutions of the directors and, as applicable, managers of Loan Parties in a form reasonably acceptable to Lender;

(iv)           A favorable opinion of counsel to Loan Parties in form and substance reasonably acceptable to Lender;

(v)           The certificates of insurance as described in Section 4.5 ;

(vi)           UCC searches, tax lien and litigation searches, insurance certificates, notices or other documents which Lender may require to reflect, perfect or protect Lender’s first priority Lien in the Loan Collateral and all other Property pledged to secure the Obligations;

(vii)           All requisite releases of, or requisite commitments from the holders thereof acceptable to Lender to release, all liens and file all termination statements necessary to release all Liens (other than Permitted Liens) against the Loan Collateral and any other Property pledged to secure the Loans and all requisite waivers and subordination agreements, in a form satisfactory to Lender, to be executed and delivered by Loan Parties’ landlords, bailees, consignees, warehousemen and mortgagees which Lender deems necessary; and

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(viii)           Such additional information, materials and Loan Documents as Lender may reasonably request, including those on the closing checklist prepared by Lender’s counsel.

(b)           Loan Parties shall reimburse Lender for any and all fees, costs and out-of-pocket expenses including reasonable attorneys’ fees and other professionals’ fees, appraisal fees, and other expenses incurred or paid by Lender or any of its officers, employees or agents in connection with the preparation, negotiation, procurement, review or execution of this Agreement, the other Loan Documents and all other instruments, agreements, documents, policies, consents, waivers, subordinations, releases of liens, termination statements, satisfaction of mortgages, financing statements, lien searches, recordings, or filings related thereto, whether or not any particular portion of the transactions contemplated during such negotiations is ultimately consummated.

(c)           Minimum excess Revolving Loan Availability of $3,000,000 at closing ( i.e. , taking into account all applicable borrowing limits, Borrowing Base Reserves, ineligibles and closing costs, whether or not paid at closing and on disbursement of funds and repayment of debts to be paid at closing) and after subtracting therefrom the total, as of such date, of the amount, if any, (i) of Loan Parties’ accounts payable which remain unpaid greater than sixty (60) days past the date of the original invoices applicable thereto, or with respect to accounts payable for which a Loan Party has received extended terms, which remain unpaid as of the due date thereof (exclusive of that accounts payable which is the subject of the A/P Trade Payable Agreements), and (ii) any book overdraft of any Loan Party.

(d)           The execution and delivery of each of the A/P Trade Payable Agreements.

(e)           The execution and delivery of the Owner/Affiliate Subordination Agreements by the applicable Loan Parties and the applicable Owner/Affiliate Subordinated Creditors party thereto.

(f)           The execution and delivery of the LaSalle Intercreditor Agreement by the applicable Loan Parties and LaSalle.

(g)           An irrevocable commitment of title insurance on the real property subject to the Mortgage from a title insurance company, acceptable to Lender, on the Closing Date (the “ Title Policy ”) in amount not less than $13,600,000 so as to afford full “extended form coverage” and showing as exceptions only items acceptable to Lender.  The Title Policy must contain those additional endorsements which are required by Lender.

7.2            Conditions to Each Revolving Loan and Issuance of Letters of Credit .  Lender shall have no obligation to advance additional Revolving Loans or issue any Letters of Credit unless, as to each such Loan, the following statements shall be true and correct:

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(a)           Each of the representations and warranties contained herein and in the other Loan Documents shall be correct in all material respects, and each shall be deemed to be reaffirmed as of the date of each such Revolving Loan or Letter of Credit with the same effect as though such representations and warranties had been made again on and as of each day of the term of this Agreement (other than with respect to representations and warranties which specifically relate to a prior date) subject to such changes as are not prohibited hereby or do not constitute Events of Default;

(b)           No event shall have occurred and be continuing, or would result from such Revolving Loan or Letter of Credit, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or lapse of time or both;

(c)           (i) The aggregate unpaid principal amount of the Revolving Loans after giving effect to such Revolving Loan shall not violate the lending limits set forth in Section 2.1 of this Agreement and (ii) the Letter of Credit Availability, after giving effect to such Letter of Credit, is greater than zero Dollars; and

(d)           No law or regulation prohibits, and no order, judgment or decree of any arbitrator or Governmental Authority enjoins or restrains Lender, from making the requested advance.

The request by Borrower of the proceeds of a Revolving Loan and the issuance of each Letter of Credit shall be deemed to constitute a representation and warranty by Borrower that the conditions in this Section 7.2 , other than (i) those that have been waived in writing by Lender, or (ii) the type described in clause (d) of this Section 7.2 ,  have been satisfied.

7.3            Conditions to Drawing of Term Loan C .  Lender shall have no obligation to advance any portion of Term Loan C unless the following statements shall be true and correct and the following conditions are met (“ Term Loan C Draw Conditions ”):

(a)           Each of the representations and warranties contained herein and in the other Loan Documents shall be correct in all material respects, and each shall be deemed to be reaffirmed as of the date Term Loan C is advanced with the same effect as though such representations and warranties had been made again on and as of each day of the term of this Agreement (other than with respect to representations and warranties which specifically relate to a prior date) subject to such changes as are not prohibited hereby or do not constitute Events of Default;

(b)           No event shall have occurred and be continuing, or would result from such advance of Term Loan C, which constitutes an Event of Default, or would constitute an Event of Default but for the requirement that notice be given or lapse of time or both;

(c)           (i) Lender has received Loan Parties’ Financial Statements for the Fiscal Year ending December 31, 2007 in accordance with this Agreement and (ii) the Fixed Charge Coverage Ratio is at least 1.10 to 1 for six consecutive months (without giving effect to any Capital Contribution Payments) after the Closing Date; and

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(d)           No law or regulation prohibits, and no order, judgment or decree of any arbitrator or Governmental Authority enjoins or restrains Lender, from making the requested advance.

The request by Borrower of the proceeds of Term Loan C shall be deemed to constitute a representation and warranty by Borrower that the conditions in this Section 7.3 , other than (i) those that have been waived in writing by Lender, or (ii) the type described in clause (d) of this Section 7.3 ,  have been satisfied.


Section 8.                       Participations .

8.1            Participation .  Lender, in the ordinary course of its commercial banking business and in accordance with applicable law, may at any time after the Closing Date, sell to one or more lenders or other entities (“ Participants ”) participating interests in the Loans, the Loan Collateral or other security provided to Lender, or any other interests of Lender under this Agreement or the other Loan Documents; provided that , if no Event of Default then exists, Lender will seek the prior written approval of Borrower and Parent, not to be unreasonably withheld, conditioned or delayed (a) to sell any such participating interests to a Person that is not an Affiliate of Lender and (b) as to the identity of the proposed Participant; provided that no such consent is necessary if the proposed Participant is an Affiliate of Lender.

8.2            Participant Consents .  Loan Parties acknowledge that Participants have and will have certain rights under their respective participation agreements with Lender that may, subject to the terms of the participation agreements, require Lender to obtain the consent (collectively, “ Participant Consents ”) of some or all of the Participants before Lender takes or refrains from taking certain actions (other than as expressly required by the Loan Documents) or grants certain waivers, consents or approvals in respect of the Loans, the Loan Documents or the Loan Collateral.  None of the Participants, however, will have Participant Consent rights which are greater than those rights and remedies Lender has under the Loan Documents.  In addition, from time to time, Lender may request instructions from the Participants in respect of the actions, waivers, consents or approvals which by the terms of any of the Loan Documents Lender is permitted or required to take or to grant or to not take or grant (“ Participant Instructions ”).  If the Participant Consents are, pursuant to the terms of the respective participation agreements, required or Participant Instructions are requested, Lender will (i) be absolutely empowered to take or refrain from taking any action (other than as expressly required by the Loan Documents) or withhold any waiver, consent or approval and (ii) not be under any liability whatsoever to any Person, including Borrower, Parent and any Participant, from taking or refraining from taking any action or withholding any waiver, consent or approval under any of the Loan Documents until it has received the requisite Participant Consents or, as applicable, the Participant Instructions.  Further, in the event a Participant fails to fund its portion of any of the Loans, Lender shall be under no obligation to fund any portion of any of the Loans that was not funded by such Participant.  Borrower and Parent do hereby indemnify, defend, save and hold Lender, its Affiliates, and their respective officers, directors, attorneys, and employees harmless of, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses, joint or several (including all accounting fees and reasonable attorneys’ fees), that Lender or any such indemnified party may incur as a result of a Participant failing to fund its portion of any Loan or failing to give a Participant Consent.

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8.3            Information .  Subject to the confidentiality provisions of Section 9.13 , Borrower and Parent authorize Lender to disclose to any Participant or prospective Participant or any assignee or prospective assignee of Lender’s rights under the Loan Documents any and all financial information in Lender’s possession concerning Loan Parties which has been delivered to Lender by one or more Loan Party pursuant to the Loan Documents or in connection with Lender’s credit evaluation of Loan Parties or which has been obtained independently by Lender in its credit evaluation or audit of Loan Parties.

8.4            Law Requirements .  Nothing in the Loan Documents will prohibit Lender from pledging or assigning its interests in the Loans to any Federal Reserve Bank in accordance with applicable law; provided , that no such pledge or assignment to any Federal Reserve Bank shall release Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender.

8.5            Exceptions .  Notwithstanding the foregoing, Lender may not assign or sell participations in all or any portion of Lender’s interests under this Agreement or any other Loan Document in contravention of the Federal Assignment of Claims Act or to any Person who is (a) listed on the Specially Designated Nationals and Blocked Persons List maintained by the OFAC or on any other similar list maintained by the OFAC pursuant to any authorizing statute, Executive Order or regulation or (b) either (i) included with the term “designated national” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (ii) designated under Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 25, 2001) or similarly designated under any related enabling legislations or any other similar Executive Orders.

Section 9.                       Miscellaneous Provisions .

9.1            General .  This Agreement, the exhibits and the other Loan Documents are the complete agreement of the parties hereto and supersede all previous understandings and agreements relating to the subject matter hereof; provided that nothing herein or in any of the Loan Documents shall be construed to supersede, or to have merged into, any of the Fifth Third Shareholder Loans Documents, all of which will remain in full force and effect.  Loan Parties and Lender agree that none of the collateral release documents and instruments executed in connection with the Fifth Third Shareholder Loan Documents shall be construed to be, and each Loan Party agrees that they are not, a release of any of the Loan Collateral.  This Agreement may be amended only in writing signed by the party against whom enforcement of the amendment is sought.  This Agreement may be executed in counterparts.  If any part of this Agreement is held invalid, illegal or unenforceable, the remainder of this Agreement shall not in any way be affected.  This Agreement is and is intended to be a continuing agreement and shall remain in full force and effect until the Obligations are finally and irrevocably paid in full and the Line of Credit is terminated.   Any documents delivered by, or on behalf of, any Person by fax transmission or other electronic delivery of an image file reflecting the execution thereof: (i) may be relied on by all Persons as if the document were a manually signed original and (ii) will be binding on all Persons for all purposes of the Loan Documents.  If there is any conflict, ambiguity, or inconsistency, in Lender’s judgment, between the terms of this Agreement or any of the other Loan Documents, then the applicable terms and provisions, in Lender’s judgment, providing Lender with greater rights, remedies, powers, privileges, or benefits will control.

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9.2            Waivers .  Borrower and Parent each waives notice of non-payment (except as expressly required by this Agreement or the other Loan Documents), demand, presentment, protest or notice of protest of any Accounts or other Loan Collateral, the benefit of all valuation and appraisement laws following the occurrence and during the continuance of an Event of Default, and all other notices (except those notices specifically provided for in this Agreement).  To the fullest extent not prohibited by law, Borrower and Parent each waives and agrees not to assert any claim against Lender under any theory for consequential, special, indirect or punitive damages.

9.3            Binding Effect .  This Agreement shall be binding upon and inure to the benefit of the respective legal representatives, successors and assigns of the parties hereto; however , neither Borrower nor Parent may assign or transfer any of its rights or delegate any of its Obligations under this Agreement or any of the Loan Documents to which it is a party or otherwise bound, by operation of law or otherwise.  Lender (and any subsequent assignee) may (a) transfer and assign any or all of its rights or delegate any or all of its duties under this Agreement to an assignee selected by Lender in good faith or (b) transfer or assign partial interests in the Loans to other Persons or grant participations in the Loans to Participants in accordance with Section 8 .  Subject to the confidentiality provisions of Section 9.13 , Lender may disclose to all prospective and actual assignees and Participants all financial, business and other information about Loan Parties which Lender may possess at any time.

9.4            Subsidiaries .   If Borrower has any Subsidiaries at any time during the term of this Agreement with the consent of Lender, other than the Joint Ventures, the term “Borrower” in each representation, warranty and covenant herein shall mean Borrower as consolidated with each such Subsidiary, and Borrower shall cause each Subsidiary to be in compliance therewith.  The existence of references to Borrower’s Subsidiaries any place in this Agreement is for a matter of convenience only.  Any references to Subsidiaries of Borrower set forth herein shall not in any way be construed as consent by Lender to the establishment, maintenance or acquisition of any Subsidiary.

9.5            Security .  The Obligations are secured as provided in this Agreement, the Security Documents, in the other Loan Documents and in each other document or agreement that by its terms secures the repayment or performance of the Obligations.

9.6            Survival .  All representations, warranties, covenants and agreements made by Loan Parties herein and in the other Loan Documents shall survive the execution and delivery of this Agreement, the other Loan Documents and the issuance of the Notes.

9.7            Delay or Omission .  No delay or omission on the part of Lender in exercising any right, remedy or power arising from any Event of Default shall impair any such right, remedy or power or any other right remedy or power or be considered a waiver or any right, remedy or power or any Event of Default nor shall the action or omission to act by Lender upon the occurrence of any Event of Default impair any right, remedy or power arising as a result thereof or affect any subsequent Event of Default of the same or different nature.

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9.8            Notices .  Any notice required, permitted or contemplated hereunder shall, except as expressly provided in this Agreement, be in writing and addressed to the party to be notified at the address set forth below or at such other address as each party may designate for itself from time to time by notice hereunder and shall be deemed validly given: (a) when delivered in hand, (b) on completion of a facsimile transmission to the number listed below so long as (i) receipt of confirmation of the telecopy is made by the sending party and (ii) an original notice is also sent to the receiving party contemporaneously with facsimile by overnight courier in accordance with subparagraph (c) of this Section 9.8 , (c) the next Business Day after such notice was delivered to a regularly scheduled nationally recognized overnight delivery carrier (such as FedEx, UPS, or DHL) with delivery fees either prepaid or an arrangement, satisfactory with such carrier, made for the payment of such fees, or (d) five (5) Business Days after such notice was mailed by registered or certified mail, return receipt requested, addressed as follows:

To Loan Parties:                                   Idea Sphere Inc.
632 Broadway
11th Floor
New York, New York 10012
Attn: Mark A. Fox, President
                                                                                  Richard H. Neuwirth, General Counsel
Fax: (212) 505-5413

To Lender:                                             Fifth Third Bank
38 Fountain Square Plaza
MD #10AT63
Cincinnati, Ohio  45263
Attention:  Structured Finance Group
Fax: (513) 534-8400

Any party may change such address by sending written notice of the change to the other party.

9.9            No Partnership .  Nothing contained herein or in any of the Loan Documents is intended to create or shall be construed to create any partnership, joint venture or other relationship between Lender and Borrower or Lender and any other Loan Party other than as expressly set forth herein or therein and shall not create any joint venture, partnership or other relationship.

9.10            Electronic Communication .  Lender may, in its discretion, elect, from time to time, to receive certain information, including reports, otherwise required by the terms of this Agreement or the other Loan Documents (“ Reports ”) from any Loan Party via electronic mail transmission (“ e-mail ”).  Lender will designate from time to time its e-mail address to Parent (the “ Lender E-mail Address ”).  All e-mail transmissions of Reports from a Loan Party shall contain the information as specified in this Agreement, shall be formatted or displayed in a manner and order substantially similar to that shown in this Agreement or otherwise required by Lender and shall conform to the specifications described in this Agreement. Loan Parties will be solely responsible for the confidentiality of the contents of e-mail transmissions during transmission to the Lender E-mail Address.  Loan Parties will be responsible for the accuracy of all information provided to Lender via e-mail transmission to the Lender E-mail Address, and any information so received by Lender will be deemed to have been submitted by and received from Loan Parties.  In the event of a failure of the transmission of the Reports, it is the responsibility of Loan Parties to transmit the contents of any pending transmission to Lender using an alternative method which is timely and in accordance with this Agreement.  Borrower and Parent agree that, by sending Lender the Reports via e-mail transmission, Loan Parties are certifying the truthfulness and accuracy in all material respects of the Reports submitted each and every time a Loan Party sends Lender the Reports.  Borrower and Borrower further agree that, on each occasion when a Loan Party sends Lender e-mail transmissions containing Reports, each Loan Party is warranting and representing to Lender the truthfulness and accuracy in all material respects of the representations and warranties relevant to that Report set forth in the relevant Loan Document.  Borrower and Parent consent to and represent that it is Loan Parties’ intent that by a Loan Party’s insertion of a Loan Party’s name in the subject line of the transmitting e-mail, or on the Reports (including the header and/or the certification line), Loan Parties intend such to constitute a legally binding and enforceable signature of the applicable Loan Party, and in all aspects the legal equivalent of a Loan Party’s handwritten signature.

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9.11            Indemnification .  If after receipt of any payment of all or part of the Obligations, Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, or diversion of trust funds, or for any other reason, this Agreement shall continue in full force and effect and Borrower and Parent shall be liable to, and shall indemnify, save and hold Lender, its officers, directors, attorneys, and employees harmless of and from the amount of such payment surrendered.  The provisions of this Section shall be and remain effective notwithstanding any contrary action which may have been taken by Lender in reliance on such payment, and any such contrary action so taken shall be without prejudice to Lender’s rights under this Agreement and the other Loan Documents and shall be deemed to have been conditioned upon such payment becoming final, indefeasible and irrevocable.  In addition, Borrower and Parent shall indemnify, defend, save and hold Lender, its Affiliates, and their respective officers, directors, attorneys, and employees harmless of, for, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses (including all accounting fees and reasonable attorneys’ fees) that Lender or any such indemnified party, jointly or severally, incurs arising out of: (a) this Agreement or any of the other Loan Documents, (b) any transaction contemplated by, or referred to in, or any matter related to, this Agreement or any of the other Loan Documents, (c) the making of any Loan or the use of the proceeds thereof, (d) the Loan Collateral, or (e) any act taken by Lender hereunder except in any such case to the extent arising out of the bad faith, willful misconduct or gross negligence of such indemnified party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The provisions of this Section shall survive the termination of this Agreement.

9.12            Power of Attorney . Borrower and Parent each hereby appoints Lender, as its attorney-in-fact to indorse its name on all instruments and other documents payable to Borrower or Parent in order for Lender to perform its treasury management services under this Agreement, including under Section 2.4 .  Upon the occurrence and during the continuation of an Event of Default, Lender shall be entitled, but not required, to perform any action or execute any document required to be taken or executed by Borrower or Parent under this Agreement and the other Loan Documents; provided that neither Borrower nor Parent shall be relieved of such obligation under this Agreement and the other Loan Documents.  The powers of attorney described in this Section are coupled with an interest which cannot be revoked until repayment of all Obligations.

9.13            Confidentiality .  Lender agrees that it will not to disclose without the prior consent of Borrower and Parent (other than to Lender’s employees, auditors, advisors, consultants, Affiliates and counsel, it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such information and Lender shall be responsible for the compliance of such person with this Section) any information with respect to Loan Parties to the extent and in the manner such information is kept confidential in accordance with Lender’s privacy policies and procedures with respect to its customers generally and as mandated by applicable law, provided that Lender may disclose any such information: (a) as has become generally available to the public unless such availability is as a result of the breach of this Section 9.13 , (b) as may be required in any report, statement or testimony submitted to or examination conducted by any Governmental Authority having or claiming to have jurisdiction over Lender, (c) as may be required in response to any summons, subpoena, or civil investigative demand or in connection with any litigation or governmental investigation, (d) in order to comply with any requirement of applicable law, (e) to any prospective or actual transferee or Participant in connection with any contemplated transfer or participation of any of the Obligations or any interest therein, provided that each such prospective or actual transferee or Participant agrees to be bound by the confidentiality provisions contained in this Section 9.13 , (f) to other financial institutions or investment funds with respect to which Lender has a contractual relationship in accordance with Lender’s regular banking procedures in order to carry out the services to be performed by Lender for Loan Parties, provided that each such other financial institution or investment fund agrees to be bound by the confidentiality provisions contained in this Section 9.13 , (g) to any nationally recognized rating agency that requires access to information regarding Lender’s investment portfolio in connection with such rating agency’s issuance of ratings with respect to Lender, provided that Lender advises such rating agency of the confidential nature of such information, (h) as may be required in connection with protecting, preserving, exercising or enforcing (or planning to exercise or enforce) any of Lender’s rights in, under or related to the Loan Documents after the occurrence of an Event of Default, (i) as permitted by Section 9.10 , (j) to respond to routine informational requests in accordance with the Code of Ethics for the Exchange of Credit Information promulgated by The Robert Morris Associates (or any successor thereto) or other applicable industry standards relating to the exchange of credit information, and (k) which became available to Lender from a source other than a Loan Party or its representatives and not in breach of this Section 9.13 , provided that Lender does not have reason to know that such source is bound by a confidentiality agreement regarding such information.

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9.14            Governing Law; Jurisdiction; Waiver of Jury Trial .   This Agreement and the other Loan Documents shall be governed by the domestic laws of the State of Ohio.  Borrower and Parent agree that the state and federal courts in Hamilton County, Ohio have non-exclusive jurisdiction over all matters arising out of the Loan Documents, WITHOUT LIMITATION ON THE ABILITY OF LENDER, ITS SUCCESSORS AND ASSIGNS, TO INITIATE AND PROSECUTE IN ANY APPLICABLE JURISDICTION ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF THE OBLIGATIONS AND THE EXERCISE OF ALL OF LENDER’S RIGHTS AGAINST LOAN PARTIES WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY OF LOAN PARTIES, INCLUDING DISPOSITIONS OF THE LOAN COLLATERAL, and that service of process in any such proceeding shall be effective if mailed to Borrower and Parent at the address described in the Notices section of this Agreement, with a copy sent to Borrower’s Counsel.  LENDER, PARENT, AND BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR ANY OF THE OTHER LOAN DOCUMENTS.

9.15            PATRIOT ACT NOTICE .  To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each party who opens an account.  Lender will ask each party to a financial transaction their name, address and other information that will allow Lender to identify such party.  Lender may also ask to see other documents that substantiate a party’s identity.

[ Signature Page Follows ]
 
 

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73

 


IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Agreement by their duly authorized officers as of the date first above written.

TWINLAB CORPORATION
 
 
 
By:   /S/ Mark A. Fox                                                                               
        Mark A. Fox, President and
        Chief Operating Officer
 
 
 
 
IDEA SPHERE INC.
 
 
 
By:    /S/ Mark A. Fox                                                                              
        Mark A. Fox, President and
        Chief Operating Officer
 
 
 
 
FIFTH THIRD BANK
 
 
 
By:   /S/ Andrew P. Hanson                                                                           
       Andrew P. Hanson, Vice President

SIGNATURE PAGE TO
CREDIT AGREEMENT   
(Twinlab Corporation)
 
74

 




STATE OF        ________________       )
                    )  ss
COUNTY OF    ________________        )

The foregoing instrument was acknowledged before me this ____ day of January, 2008, by Mark A. Fox, President and Chief Operating Officer of Twinlab Corporation, a Delaware corporation, on behalf of such corporation.

My Commission Expires:                                                                

 

 
  NOTARY PUBLIC
 
[Notary Seal]
 

 
 

 

 
STATE OF        ________________        )
                      )  ss
COUNTY OF    ________________        )

 
The foregoing instrument was acknowledged before me this ____ day of day of January, 2008, by Mark A. Fox, President and Chief Operating Officer of Idea Sphere Inc., a Michigan corporation, on behalf of such corporation.

My Commission Expires:                                                                

 

 
  NOTARY PUBLIC
 
[Notary Seal]
 

ACKNNOWLEDGMENT PAGE TO
CREDIT AGREEMENT   
(Twinlab Corporation)
 
75
 





EXHIBIT 10.5.2
 
FIRST AMENDMENT TO CREDIT AGREEMENT
AND
AMENDMENT TO LOAN DOCUMENTS

THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND AMENDMENT TO LOAN DOCUMENTS (this “ Amendment ”), dated as of December 2, 2008 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008 (the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender (i) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to January 2, 2009; and (ii) make certain other amendments to the Credit Agreement and certain of the other Loan Documents.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of a new definition of “First Amendment”, in its proper alphabetical order, to provide in its entirety as follows:

First Amendment ” means the First Amendment to Credit Agreement dated as of December 2, 2008, among Borrower, Parent, and Lender.


1.2            Each reference to “December 2, 2008” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “January 2, 2009” for such reference to “December 2, 2008” where “December 2, 2008” appears therein.

 
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2.             Amendments to Notes .  Subject to the satisfaction of the conditions of this Amendment, the Notes are hereby amended as follows:

2.1            The reference to “December 2, 2008” as the stated Maturity Date (as defined in the Revolving Note) in the opening paragraph on page 1 of the Revolving Note is hereby amended by substituting a reference to “January 2, 2009” for such reference to “December 2, 2008” where “December 2, 2008” appears therein.  Accordingly, the entire principal balance outstanding under the Revolving Note, together with all accrued and unpaid interest and any other charges, advances and fees, if any, outstanding under the Revolving Note, shall be due and payable in full on the earlier of January 2, 2009, without any further notice or demand of Lender, which are hereby waived by Borrower, or upon acceleration of the Revolving Note under the terms of the Credit Agreement, as amended by this Amendment, the Revolving Note, as amended by this Amendment, and the other Loan Documents.

2.2            The reference to “December 2, 2008” as the stated Maturity Date (as defined in the Term Loan A Note) in the opening paragraph on page 1 of the Term Loan A Note is hereby amended by substituting a reference to “January 2, 2009” for such reference to “December 2, 2008” where “December 2, 2008” appears therein.  The reference to “December 1, 2008” in the schedule of payments set forth in the third paragraph on page 1 of the Term Loan A Note is hereby amended by substituting a reference to “January 1, 2009” for such reference to “December 1, 2008” where “December 1, 2008” appears therein. Accordingly, the entire principal balance outstanding under the Term Loan A Note, together with all accrued and unpaid interest and any other charges, advances and fees, if any, outstanding under the Term Loan A Note, shall be due and payable in full on the earlier of January 2, 2009, without any further notice or demand of Lender, which are hereby waived by Borrower, or upon acceleration of the Term Loan A Note under the terms of the Credit Agreement, as amended by this Amendment, the Term Loan A Note, as amended by this Amendment, and the other Loan Documents.

2.3            The reference to “December 2, 2008” as the stated Maturity Date (as defined in the Term Loan B Note) in the opening paragraph on page 1 of the Term Loan B Note is hereby amended by substituting a reference to “January 2, 2009” for such reference to “December 2, 2008” where “December 2, 2008” appears therein.  The reference to “December 1, 2008” in the schedule of payments set forth in the third paragraph on page 1 of the Term Loan B Note is hereby amended by substituting a reference to “January 1, 2009” for such reference to “December 1, 2008” where “December 1, 2008” appears therein. Accordingly, the entire principal balance outstanding under the Term Loan B Note, together with all accrued and unpaid interest and any other charges, advances and fees, if any, outstanding under the Term Loan B Note, shall be due and payable in full on the earlier of January 2, 2009, without any further notice or demand of Lender, which are hereby waived by Borrower, or upon acceleration of the Term Loan B Note under the terms of the Credit Agreement, as amended by this Amendment, the Term Loan B Note, as amended by this Amendment, and the other Loan Documents.

3.            Reservation of Rights Regarding Existing Defaults; Continued Imposition of Default Rate .

3.1            As previously communicated by Lender in those certain letters dated May 22, 2008, and July 23, 2008, respectively, from Lender to Borrower and the other parties thereto (collectively, the “ Prior Reservation of Rights Letters ”), and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that certain Events of Default have occurred and continue to exist (collectively, the “ Current Defaults ”): (a) under Section 6.1(t) of the Credit Agreement arising out of a breach of clause (i) of Section 2 of the Capital Contribution Agreement as a result of the failure to make all of the required Capital Contribution (as defined in the Capital Contribution Agreement) on or before May 7, 2008, (b) under Section 5.11 of the Credit Agreement as a result of the violation of the Senior Funded Indebtedness to EBITDA Ratio Financial Covenant for the Test Periods ended June 30, 2008 and September 30, 2008, and (c) under Section 5.12 of the Credit Agreement as a result of the violation of the Tangible Net Worth Financial Covenant for the Test Period ended June 30, 2008.  The Current Defaults are not intended to be a complete list of all Events of Default now existing or having previously occurred and will not be deemed to limit or estop Lender from exercising any rights or remedies with respect to any such other Event of Default.  The Current Defaults, all other breaches of the Capital Contribution Agreement, and any other Event of Default existing under the Credit Agreement are hereinafter, collectively, the “ Existing Defaults ”.  At this time, the Existing Defaults are still not being waived by Lender, and Lender has not determined what actions, if any and in addition to any actions heretofore taken or taken pursuant to this Amendment, that Lender may take and at what time Lender may take any actions with respect to the Existing Defaults.  Accordingly, Lender is not waiving, and has not by entering into this Amendment or otherwise waived, the Existing Defaults.  Notwithstanding any actions heretofore taken or any actions taken pursuant to this Amendment, Lender expressly reserves all of its rights and remedies available to it under the Capital Contribution Agreement, the Credit Agreement and the other Loan Documents, and at law and in equity.

3.2            Borrower and Parent hereby acknowledge that, as a result of the continuance of certain of the Current Defaults, Lender has imposed effective at all times on and after August 1, 2008 (and will continue to impose) the Default Rate to the Obligations.  The foregoing action is in addition to all other remedies of Lender under the Capital Contribution Agreement, the Credit Agreement or any other Loan Documents as a result of the Current Defaults, and is not intended, nor shall be deemed, to limit any of Lender’s other rights and remedies as set forth in the Prior Reservation of Rights Letters or this Amendment. Without limiting the generality of this section or Section 3.1 , Lender expressly reserves the right to impose application of the Default Rate to the Obligations to be effective at all times on and after the occurrence of the Current Defaults, even though, at this time, Lender has elected to apply the Default Rate only for more limited period of time.

 
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4.             Reaffirmation of Security .  Borrower and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Borrower ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and Borrower acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            5.             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender:  (a) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (b) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 16 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (c) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

            6.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       6.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment and the execution and delivery of, and the performance of its obligations under and arising out of, this Amendment have been duly authorized by all necessary corporate action.

                       6.2            This Amendment constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

                       6.3            Borrower’s and Parent’s representations and warranties contained in the Loan Documents are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

                       6.4            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Current Defaults (as defined in Section 3.1 ).

 
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            7.             Costs and Expenses; Fee .  As a condition of this Amendment, (i) Borrower will pay to Lender a fee of $20,000, payable in full on the Effective Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment, including, without limitation, reasonable attorneys’ fees.

8.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

            9.             Release .  Each of Borrower and Parent hereby releases Lender from any and all liabilities, damages and claims arising from or in any way related to the Obligations or the Loan Documents, other than such liabilities, damages and claims which arise after the execution of this Amendment.  The foregoing release does not release or discharge, or operate to waive performance by, Lender of its express agreements and obligations stated in the Loan Documents on and after the date of this Amendment.

            10.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under this Amendment shall constitute an Event of Default under the Credit Agreement.

            11.             Continuing Effect of Credit Agreement .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect.

            12             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  Each Note, as amended by this Amendment, will be construed as one instrument.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Revolving Note as amended by this Amendment, (c) the Term Loan A Note will be deemed to be references to the Term Loan A Note as amended by this Amendment, and (d) the Term Loan B Note will be deemed to be references to the Term Loan B Note as amended by this Amendment.  This Amendment may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            13             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

 
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            14             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            15.             Governing Law .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles).

16.             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties .   As a condition of this Amendment, Borrower and Parent shall cause (i) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below and (ii) each of the Individual Guarantors to execute the Reaffirmation of Individual Guaranties below.

17.             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors to execute the Reaffirmation of Subordination below.

18.             Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the Contributors (as defined in the Capital Contribution Agreement) to execute the Reaffirmation of Capital Contribution Agreement below.

[ Signature Page Follows ]

 
5

 

           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.
 
 
By:    /S/ Mark A. Fox                                                                          
        Mark A. Fox, President and
        Chief Operating Officer
 
 
FIFTH THIRD BANK
 
 
By:   /S/ Andrew P. Hanson                                                                       
       Andrew P. Hanson, Vice President

SIGNATURE PAGE TO
FIRST AMENDMENT TO CREDIT AGREEMENT
AND AMENDMENT TO LOAN DOCUMENTS
 
6
 







EXHIBIT 10.5.3
 
EXECUTION VERSION

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of March 26, 2009 (the “ Signature Date ”) to be effective as of January 2, 2009 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008 (as amended, the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to May 8, 2009; (ii) decrease the maximum Revolving Commitment (subject to availability) from $20,000,000 to $18,000,000; (iii) waive the Current Defaults (as defined in Section 2 ); (iv) make certain changes to the required Financial Covenant levels with respect to the Senior Funded Indebtedness to EBITDA Ratio and certain other amendments relating to certain of the Financial Covenants; (v) make certain changes to the interest rates applicable to the Obligations, including, without limitation, an increase in the LIBOR Rate Margin (as defined in each Note) to 5.50% per annum, the implementation of a one-month LIBOR-based rate, and the unavailability of a Prime Rate-based interest rate except in certain circumstances; and (vi) make certain other amendments to the Credit Agreement and certain of the other Loan Documents.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their entireties as follows:

 
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Curable Financial Covenants ” means each of, and collectively, (i) the Fixed Charge Coverage Ratio under Section 5.10 and (ii) the minimum Tangible Net Worth covenant under Section 5.12 .

LIBOR Rate Loan ” means that portion of the Loans which, as of any date, bears interest at an interest rate per annum equal to the LIBOR Rate plus the applicable margin as set forth in the applicable Note.

Mycopesticide Adjustment ” means that certain one-time, non-recurring, non-cash adjustment to Net Income relating to the permanent impairment of 701 Corporation’s investment in Mycopesticide, up to an aggregate amount of $1,500,000, made in connection with the audit of Borrower’s annual financial statements for the Fiscal Year ended December 31, 2008.

Prime Rate Loan ” means that portion of the Loans which, as of any date, bears interest at an interest rate per annum equal to the Prime Rate plus the applicable margin as set forth in the applicable Note.

Second Amendment ” means the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, among Borrower, Parent, and Lender.


1.2            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their entireties by substituting the following in their respective places:

Alticor Note ” means the Amended and Restated Promissory Note, dated as of December 31, 2008, in the original principal amount of $8,434,312.37, made by Borrower and Parent to the order of Alticor, as now exists or may, after the date of the Second Amendment, be renewed, extended, consolidated, or adjusted subject to Section 5.2 and any Refinancing Debt with respect thereto.

Default Rate ” means the applicable rates of interest set forth in the applicable Note plus an additional 2.0% per annum.  Lender agrees that if an Event of Default occurs solely as a result of the death of an Individual Guarantor, Lender will not, so long as no other Event of Default exists, impose the Default Rate until the date that is 30 days after the date of such Event of Default.  Lender agrees that if an Event of Default occurs solely as a result of a Fixed Charge Coverage Ratio and/or a minimum Tangible Net Worth violation, Lender will not, so long as no other Event of Default exists, impose the Default Rate based upon such Event of Default so long as Capital Contribution Payments are made within 5 Business Days after such violation in compliance with the Capital Contribution Agreement; provided that if such Capital Contribution Payments are not made within 5 Business Days after such violation in compliance with the Capital Contribution Agreement, Lender may, in addition to its other rights and remedies pursuant to this Agreement and the other Loan Documents, impose the Default Rate on and after the date of the Test Period of such Fixed Charge Coverage Ratio and/or minimum Tangible Net Worth violation.

 
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Fixed Charge Coverage Ratio ” means, as of any date of determination, the ratio resulting from dividing: (a) the sum of (i) EBITDA for any Test Period, plus (ii) the Mycopesticide Adjustment to the extent deducted from Net Income for such Test Period, plus (iii) any Extraordinary Expenses (other than the Mycopesticide Adjustment) incurred in that same Test Period up to an aggregate amount equal to $100,000, plus (iv) the Closing Costs incurred in that same Test Period, less (v) Loan Parties’ aggregate consolidated Non-financed Capital Expenditures made in cash during that same Test Period, by (b) Fixed Charges for that same Test Period.

LaSalle ” means Bank of America, N.A., successor-in-interest to LaSalle Bank Midwest National Association, and its successors and assigns.

 
Revolving Commitment ” means $18,000,000, subject to Section 2.2(h) .

Senior Funded Indebtedness to EBITDA Ratio ” means, as of any date of determination, the ratio resulting from dividing: (a) Funded Indebtedness as of the end of the applicable Test Period by (b) the sum of (i) EBITDA for that same Test Period plus (ii) the Mycopesticide Adjustment to the extent deducted from Net Income for such Test Period, plus (iii) any Extraordinary Expenses (other than the Mycopesticide Adjustment) incurred in that same Test Period up to an aggregate amount of $100,000, plus (iv) Closing Costs for that same Test Period.


1.3            Each reference to “January 2, 2009” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “May 8, 2009” for such reference to “January 2, 2009” where “January 2, 2009” appears therein.


1.4             Section 2.1(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           On the Signature Date (as defined in the Second Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to the Second Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Second Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

 
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1.5             Section 2.2(b) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(b)           On the Signature Date (as defined in the Second Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(b) to the Second Amendment (as amended and restated, the “ Term Loan A Note ”), dated to be effective as of the Effective Date (as defined in the Second Amendment), in the original principal amount of $4,285,712, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan A Note.


1.6             Section 2.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(d)           On the Signature Date (as defined in the Second Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) to the Second Amendment (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Second Amendment), in the original principal amount of $9,000,004, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.


1.7             Section 2.2(i) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(i)           Subject to the terms of the applicable Term Loan Notes and this Agreement, Borrower may prepay the Term Loans in whole or part at any time.  Any prepayment of the Term Loans will be applied to the last to mature of the payments required under the Term Loan Notes.  Except as provided in the preceding sentence, no partial prepayment will change the due dates or the amount of the scheduled payments otherwise required by the applicable Term Loan Notes.


1.8             Section 2.3(d) of the Credit Agreement is hereby amended by the deletion of the reference to “as a Prime Rate Revolving Loan”, such reference to be omitted in its entirety therefrom.

 
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1.9            Each reference to “2.25%” in Section 2.3(j) of the Credit Agreement is hereby amended by substituting a reference to “5.50%” for such reference to “2.25%” where “2.25%” appears therein.

1.10             Section 2.4(a) of the Credit Agreement is hereby amended by the deletion of each reference to “as a Prime Rate Revolving Loan”, each such reference to be omitted in its entirety therefrom.


1.11            The first two sentences of Section 2.4(c) of the Credit Agreement are hereby amended in their entirety by substituting the following in their place:

Each Business Day, Lender will, or will cause the applicable Lender Affiliate to, automatically and without notice, request or demand by Borrower, in accordance with Lender’s (or as applicable, the applicable Lender Affiliate’s) automatic sweep program, transfer all collected and available funds in the Collection Account for application against the unpaid principal balance of all Revolving Loans.  Pursuant to that automatic sweep program, Lender will either make Revolving Loans to the extent necessary to cover Presentments to the Controlled Disbursement Account or to maintain a minimum collected, positive (i.e., “peg”) balance in the Funding Account of $370,000 at all times; however , in no event will the principal amount of the Revolving Loans advanced pursuant to the herein described automatic sweep program exceed the Revolving Loan Availability.


1.12             Section 2.5(a) of the Credit Agreement is hereby amended by the deletion of the reference to “as a Prime Rate Revolving Loan”, such reference to be omitted in its entirety therefrom.


1.13            On and after the Signature Date, the reference to “0.25%” in Section 2.8 of the Credit Agreement is hereby amended by substituting a reference to “0.50%” for such reference to “0.25%” where “0.25%” appears therein.


1.14             Section 4.2 of the Credit Agreement is hereby amended by the addition of the following text, to be inserted at the end of the existing text of Section 4.2 :

Notwithstanding anything to the contrary in this Section 4.2 , unless an Event of Default has occurred and is continuing, Lender shall not require an appraisal of Borrower’s Inventory for the Fiscal Year ending December 31, 2009.

 
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1.15            The reference to “Tuesday” in Section 4.3(f) of the Credit Agreement is hereby amended by substituting a reference to “Wednesday” for such reference to “Tuesday” where “Tuesday” appears therein.


1.16            The reference to “Shareholders” in Section 4.13 of the Credit Agreement is hereby amended by substituting a reference to “Contributors” for such reference to “Shareholders” where “Shareholders” appears therein.


1.17             Section 5.11 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

5.11            Senior Funded Indebtedness to EBITDA Ratio .  Loan Parties will not permit the Senior Funded Indebtedness to EBITDA Ratio to exceed the ratio set opposite the following Test Periods ending on any of the following dates or occurring during any of the following periods:

Test Periods
Senior Funded Indebtedness to EBITDA Ratio
   
For the Test Period ended on
December 31, 2008
9.50 to 1
   
For the Test Period ending on
March 31, 2009
8.50 to 1
   

1.18            The reference to “Shareholders” in Section 6.1(t) of the Credit Agreement is hereby amended by substituting a reference to “Contributors” for such reference to “Shareholders” where “Shareholders” appears therein.


1.19             Section 6.5 of the Credit Agreement is hereby amended by the deletion of each reference to “as a Prime Rate Revolving Loan”, each such reference to be omitted in its entirety therefrom.


1.20             Section 6.6 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

 
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6.6            Capital Contribution Payments .  In the event that there is an Event of Default under one or more of the Curable Financial Covenants (and there is no other Event of Default then in existence), Borrower may cure such Event of Default(s) if (a) Capital Contribution Payments are made in strict compliance with the terms of the Capital Contribution Agreement and (b) Lender receives Capital Contribution Payments, in cash, in an amount sufficient, (i) if treated as being EBITDA for the applicable Test Period, to cause compliance with the Fixed Charge Coverage Ratio, and (ii) if the amount of the Tangible Net Worth Cure Calculation is deemed to be Borrower’s Tangible Net Worth as of the end of the applicable Test Period, to cause compliance with the minimum Tangible Net Worth covenant.  For purposes of calculating the Fixed Charge Coverage Ratio with respect to all applicable Test Periods, EBITDA, solely for purposes of the Fixed Charge Coverage Ratio under Section 5.10 , shall be deemed to include the amount of Capital Contribution Payments that were received by Lender in accordance with this Section 6.6 as if such Capital Contribution Payments were made in the Test Period for which there was an Event of Default under Section 5.10 that gave rise to the requirement to make the applicable Capital Contribution Payments. As used herein, “ Tangible Net Worth Cure Calculation ” means, with respect to all applicable Test Periods, an amount equal to (1) Tangible Net Worth plus (2) the amount of Capital Contribution Payments that were received by Lender in accordance with this Section 6.6 as if such Capital Contribution Payments were made as of the end of the Test Period for which there was an Event of Default under Section 5.12 .


1.21            The Disclosure Schedules to the Credit Agreement are hereby amended in their entirety by substituting the Disclosure Schedules attached hereto in their place. Exhibit 4.3(d) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(d) in its place.   Exhibit 4.3(f) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(f) in its place.


2.             Waiver of Current Defaults .   As previously communicated by Lender to Borrower, and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that certain Events of Default have occurred and continue to exist as of the Signature Date (collectively, the “ Current Defaults ”): (a) under Section 6.1(t) of the Credit Agreement arising out of a breach of clause (i) of Section 2 of the Capital Contribution Agreement as a result of the failure to timely make all of the required Capital Contribution (as defined in the Capital Contribution Agreement) that was due on each of May 7, 2008, and February 6, 2009, (b) under Section 5.10 of the Credit Agreement as a result of the violation of the Fixed Charge Coverage Ratio Financial Covenant for the Test Periods ended March 31, 2008, June 30, 2008, and December 31, 2008, (c) under Section 5.11 of the Credit Agreement as a result of the violation of the Senior Funded Indebtedness to EBITDA Ratio Financial Covenant for the Test Periods ended June 30, 2008 and September 30, 2008, (d) under Section 5.12 of the Credit Agreement as a result of the violation of the Tangible Net Worth Financial Covenant for the Test Periods ended March 31, 2008, June 30, 2008, September 30, 2008, and December 31, 2008, (e) under Section 5.4(c) of the Credit Agreement as a result of Parent's divestiture of its interest in Mycopesticide, (f) under Section 5.1 of the Credit Agreement as a result of insurance premium financing entered into prior to the Signature Date with AICCO and Euler Hermes, each as hereinafter defined, (g) under Section 6.1(f) of the Credit Agreement as a result of the occurrence of defaults prior to the Signature Date under the Fifth Third Shareholder Loans, which defaults are enumerated in the loan documents disclosed on Schedule 5.1 hereto, (h) under Section 6.1(b) of the Credit Agreement as a result of the failure to make timely payment of Rate Management Obligations prior to the Signature Date, (i) under Section 6.1(f) of the Credit Agreement as a result of the occurrence of defaults prior to the Signature Date under the LaSalle Debt related to late payments on the LaSalle Debt and cross defaults stemming from defaults under the Credit Agreement and Fifth Third Shareholder Loans, (j) under Section 5.8 of the Credit Agreement as a result of that certain Promissory Note dated as of December 31, 2007 in an original principal amount of $881,453.86 made by Mark A. Fox to the order of Borrower, (k) under Section 6.1(c) of the Credit Agreement as a result of ISI Brands’ failure to provide prompt written notice to Lender of ownership interests obtained in, or abandonment of, certain Trademark License Rights and Trademarks (as each is defined in the Trademark Security Agreement), (l) under Section 6.1(c) of the Credit Agreement as a result of the Loan Parties’ failure to effectuate the release of certain Liens on or before 90 days after the Closing Date in accordance with the Trademark Security Agreement (the “ Trademark Lien Release Default ”), and (m) under Section 4.9 of the Credit Agreement as a result of the Loan Parties’ failure to timely provide written notice to Lender of any of the foregoing Events of Default set forth in the immediately preceding clauses (a) through (l).  Borrower has requested that Lender waive the Current Defaults.  Lender hereby waives the Current Defaults for the specific periods indicated; provided that Lender’s waiver of the Trademark Lien Release Default is conditioned on the Liens of Highbridge, Chemical Bank, CapitalSource, and Blechman et al (as each is defined in Exhibit 3.6 to the Credit Agreement) being released of record on or before April 30, 2009.  The waiver provided in this Section 2 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (i) constitute or deemed to be a waiver of any other Event of Default, past, present or future, or (ii) obligate Lender to waive any Event of Default, past, present or future, in each case other than those specifically waived by this Amendment, or reduce, restrict or in any way affect the discretion of Lender in considering any future waiver requested by Borrower.

 
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3.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            4.             Conversion of Prime Rate Loans; Other Documents .

4.1            On the Signature Date, all Prime Rate Loans outstanding will be automatically converted to bear interest as LIBOR Rate Loans.

4.2            With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender:  (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(b) attached to this Amendment (the “ Amended and Restated Term Loan A Note ”); (c) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (e) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 15 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (f) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

            5.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       5.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan A Note, and the Amended and Restated Term Loan B Note, as applicable (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

 
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                       5.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

                       5.3            Borrower’s and Parent’s representations and warranties contained in the Loan Documents are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

                       5.4            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Current Defaults (as defined in Section 2 ).

            6.             Costs and Expenses; Fee .  As a condition of this Amendment, (i) Borrower will pay to Lender a fee of $80,000, payable in full on the Effective Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment, including, without limitation, reasonable attorneys’ fees.

7 .             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

            8.             Release .  Each of Borrower and Parent hereby releases Lender from any and all liabilities, damages and claims arising from or in any way related to the Obligations or the Loan Documents, other than such liabilities, damages and claims which arise after the Signature Date.  The foregoing release does not release or discharge, or operate to waive performance by, Lender of its express agreements and obligations stated in the Loan Documents on and after the Signature Date.

           9 .             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

            10.             Continuing Effect of Credit Agreement .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect.

 
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            11.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, (c) the Term Loan A Note will be deemed to be references to the Amended and Restated Term Loan A Note, and (d) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            12.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            13.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            14.             Governing Law .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles).

15.             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties .   As a condition of this Amendment, Borrower and Parent shall cause (i) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below and (ii) each of the Individual Guarantors to execute the Reaffirmation of Individual Guaranties below.

16.             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors to execute the Reaffirmation of Subordination below.

17.             Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the Contributors (as defined in the Capital Contribution Agreement) to execute the Reaffirmation of Capital Contribution Agreement below.

18.             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

 
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19.             Evidence of Debt Extension .  As a condition of this Amendment, with the signing of this Amendment, Borrower will deliver to Lender evidence, in form and substance satisfactory to Lender, that the maturity of each of the LaSalle Debt, the Owner/Affiliate Subordinated Debt, and the Indebtedness evidenced by the Alticor Note has been extended to a date that is on or after June 8, 2009.

20.             Capital Contribution .  Borrower, Parent and Lender acknowledge that, based upon information submitted by Borrower to Lender: (i) a Capital Contribution Triggering Event (as defined in the Capital Contribution Agreement) has occurred as a result of Borrower’s violation of the Fixed Charge Coverage Ratio for the Test Period ended December 31, 2008, and (ii) as a result of such Capital Contribution Triggering Event, the Contributors are required to make Capital Contributions (as defined in the Capital Contribution Agreement) of cash in an aggregate amount not less than $2,017,000 (collectively, the “ December 31, 2008 Capital Contribution ”), in accordance with the Capital Contribution Agreement.  As a condition of this Amendment, with the signing of this Amendment, Borrower will deliver to Lender, in form and substance satisfactory to Lender, evidence that the Contributors have made, on or before the Signature Date, the December 31, 2008 Capital Contribution in full.

21.             AICCO Premium Finance Documents .  Lender has been advised that Parent has entered, and will continue to enter from time to time, into certain Premium Finance Agreement, Disclosure Statement and Security Agreements by and among Parent, on behalf of itself and its subsidiaries (including, without limitation, Borrower), Lockton Companies Inc. of New York, (“ Lockton ”), and AICCO, Inc. (“ AICCO ”) (such agreements, together with all other documents or agreements executed and/or delivered by Parent in connection therewith, collectively, the “ AICCO Premium Finance Documents ”).  Borrower has requested that Lender consent to the AICCO Premium Finance Documents.  Lender hereby consents, without representation, warranty or recourse, to Parent’s execution of the AICCO Premium Finance Documents and the transactions contemplated thereby, including, but not limited to, Parent’s grant of a Lien to AICCO as expressly set forth in the AICCO Premium Finance Documents, so long as, as of any date, each of the following conditions shall have been, and continue to be, satisfied: (a) the AICCO Subordination Letter shall be in full force and effect, (b) none of Lockton, AICCO, or any Loan Party shall have materially breached the AICCO Subordination Letter, denied in writing its obligations under AICCO Subordination Letter or attempted to limit, terminate or revoke its obligations under the AICCO Subordination Letter, (c) the aggregate principal amount of Indebtedness outstanding under the AICCO Premium Finance Documents does not exceed $2,500,000, and (d) the transactions contemplated by the AICCO Premium Finance Documents are on terms and conditions acceptable to Lender, including, but not limited to, an applicable annual interest rate not to exceed 8%.  As used herein, “ AICCO Subordination Letter ” means that certain letter dated as of March 13, 2009 made by AICCO in favor of Lender and acknowledged by Parent and Lockton.  The consent provided in this Section 21 , either alone or together with other consents which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (i) obligate Lender to consent to any other Indebtedness or Lien of any kind, in each case past, present or future, other than the Indebtedness and Lien pursuant to the AICCO Premium Finance Documents specifically consented to by this Section 21 , or (ii) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by any Loan Party.

 
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22.             Euler Hermes Premium Finance Documents .  Lender has been advised that Borrower has entered, and will continue to enter from time to time, into certain Premium Finance Agreement and Disclosure Statements by and between Borrower and Euler Hermes ACI (also known as Euler Hermes American Credit Indemnity Company, “ Euler Hermes ”) (such agreements, together with all other documents or agreements executed and/or delivered by Borrower in connection therewith, collectively, the “ Euler Hermes Premium Finance Documents ”).  Borrower has requested that Lender consent to the Euler Hermes Premium Finance Documents.  Lender hereby consents, without representation, warranty or recourse, to Borrower’s execution of the Euler Hermes Premium Finance Documents and the transactions contemplated thereby, so long as, as of any date, each of the following conditions shall have been, and continue to be, satisfied: (a) the aggregate principal amount of Indebtedness outstanding under the Euler Hermes Premium Finance Documents does not exceed $100,000, and (b) the transactions contemplated by the Euler Hermes Premium Finance Documents are on terms and conditions acceptable to Lender, including, but not limited to, (1) an applicable annual interest rate not to exceed 8% and (2) that the Euler Hermes Premium Finance Documents do not evidence any Lien or right of setoff in favor of Euler Hermes and Euler Hermes does not claim any Lien or right of setoff pursuant thereto.  The consent provided in this Section 22 , either alone or together with other consents which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (i) obligate Lender to consent to any other Indebtedness of any kind, in each case past, present or future, other than the Indebtedness pursuant to the Euler Hermes Premium Finance Documents specifically consented to by this Section 22 , or (ii) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by any Loan Party.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.
 
 
By:   /S/ Mark A. Fox                                                                               
        Mark A. Fox, President and
        Chief Operating Officer
 
 
FIFTH THIRD BANK
 
 
By:   /S/ Andrew P. Hanson                                                                           
       Andrew P. Hanson, Vice President

SIGNATURE PAGE TO
SECOND AMENDMENT TO CREDIT AGREEMENT
 
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EXHIBIT 10.5.4
 
EXECUTION VERSION

THIRD AMENDMENT TO CREDIT AGREEMENT

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of August 7, 2009 (the “ Signature Date ”) to be effective as of May 8, 2009 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008 and the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009 (as amended, the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to September 8, 2009; (ii) decrease the maximum Revolving Commitment (subject to availability) from $18,000,000 to $16,000,000; (iii) waive the Existing Defaults (as defined in Section 2 ); (iv) make certain changes to the required Financial Covenant levels with respect to the Senior Funded Indebtedness to EBITDA Ratio and the minimum Tangible Net Worth Financial Covenants and make certain other amendments relating to certain of the Financial Covenants; (v) make certain changes to the interest rates applicable to the Obligations, including, without limitation, an increase in the LIBOR Rate Margin (as defined in each Note) to 6.50% per annum; and (vi) make certain other amendments to the Credit Agreement and certain of the other Loan Documents.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definition, in its proper alphabetical order, to provide in its entirety as follows:

 
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Third Amendment ” means the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, among Borrower, Parent, and Lender.


1.2            The following definition in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

Revolving Commitment ” means $16,000,000, subject to Section 2.2(h) .


1.3            Each reference to “May 8, 2009” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “September 8, 2009” for such reference to “May 8, 2009” where “May 8, 2009” appears therein.


1.4             Section 2.1(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           On the Signature Date (as defined in the Third Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to the Third Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Third Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.


1.5             Section 2.2(b) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(b)           On the Signature Date (as defined in the Third Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(b) to the Third Amendment (as amended and restated, the “ Term Loan A Note ”), dated to be effective as of the Effective Date (as defined in the Third Amendment), in the original principal amount of $3,869,044, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan A Note.

1.6             Section 2.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(d)           On the Signature Date (as defined in the Third Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) to the Third Amendment (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Third Amendment), in the original principal amount of $8,416,673, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.


1.7            Effective on and after July 16, 2009, each reference to “5.50%” in Section 2.3(j) of the Credit Agreement is hereby amended by substituting a reference to “6.50%” for such reference to “5.50%” where “5.50%” appears therein.


1.8             Section 5.11 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

5.11            Senior Funded Indebtedness to EBITDA Ratio .  Loan Parties will not permit the Senior Funded Indebtedness to EBITDA Ratio to exceed the ratio set opposite the following Test Periods ending on any of the following dates or occurring during any of the following periods:

Test Periods
Senior Funded Indebtedness to EBITDA Ratio
   
For the Test Period ended on
June 30, 2009
9.00 to 1
   
For each Test Period ending on or after
September 30, 2009
5.75 to 1
   

1.9             Section 5.12 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

 
5.12
Minimum Tangible Net Worth .  Loan Parties will not permit their Tangible Net Worth to be less than $1,000,000 as of the end of any Test Period ending on or after June 30, 2009.


 
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1.10             Schedule 1.3 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.3 in its place. Schedule 1.5 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.5 in its place.   Schedule 3.3 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.3 in its place. Schedule 3.5 of the Credit Agreement is hereby supplemented by the addition of the document attached hereto as the Supplement to Schedule 3.5 .   Schedule 3.12(b) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.12(b) in its place. Exhibit 4.3(d) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(d) in its place.   Exhibit 4.3(f) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(f) in its place.    Schedule 5.1 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 5.1 in its place.

2.             Waiver of Existing Defaults .   As previously communicated by Lender to Borrower, and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that certain Events of Default have occurred on or before March 31, 2009 and continue to exist as of the Signature Date (collectively, the “ Current Defaults ”).   In addition to the Current Defaults, the following Events of Default, which may have occurred before, on, or after March 31, 2009, have occurred and continue to exist as of the Signature Date (collectively, the “ Specifically Enumerated Defaults ”) : (a) under Section 6.1(t) of the Credit Agreement arising out of a breach of clause (i) of Section 2 of the Capital Contribution Agreement as a result of the failure to timely make all of the required Capital Contribution (as defined in the Capital Contribution Agreement) that was due on May 7, 2009, (b) under Section 5.10 of the Credit Agreement as a result of the violation of the Fixed Charge Coverage Ratio Financial Covenant for the Test Period ended March 31, 2009, (c) under Section 5.11 of the Credit Agreement as a result of the violation of the Senior Funded Indebtedness to EBITDA Ratio Financial Covenant for the Test Periods ended December 31, 2008 and March 31, 2009, (d) under Section 5.12 of the Credit Agreement as a result of the violation of the Tangible Net Worth Financial Covenant for the Test Period ended March 31, 2009, (e) under Section 6.1(c) of the Credit Agreement as a result of the Loan Parties’ failure to timely submit audited Financial Statements for the Fiscal Year ended December 31, 2008 in accordance with the Credit Agreement, (f) under Section 6.1(c) of the Credit Agreement as a result of the Loan Parties’ failure to effectuate the release of certain Liens on or before April 30, 2009 in accordance with the Second Amendment (the “ Trademark Lien Release Default ”), (g) under Section 6.1(f) of the Credit Agreement as a result of the occurrence of defaults prior to the Signature Date under the Fifth Third Shareholder Loans, which defaults are enumerated in the loan documents disclosed on Schedule 5.1 hereto, (h) under Section 6.1(f) of the Credit Agreement as a result of the occurrence of defaults prior to the Signature Date under the LaSalle Debt related to cross defaults stemming from defaults under the Credit Agreement and the Fifth Third Shareholder Loans, (i) under Section 6.1(c) of the Credit Agreement as a result of the Loan Parties’ failure to timely deliver audited consolidated Financial Statements in accordance with Section 4.3(b) of the Credit Agreement, (j) under Section 6.1(c) of the Credit Agreement as a result of the Loan Parties’ failure to deliver Compliance Certificate and Management Reports in accordance with Section 4.3(d) of the Credit Agreement and (k) under Section 4.9 of the Credit Agreement as a result of the Loan Parties’ failure to timely provide written notice to Lender of any of the foregoing Events of Default set forth in the immediately preceding clauses (a) through (j).  The Specifically Enumerated Defaults and the Current Defaults are, collectively, the " Existing Defaults ".  Borrower has requested that Lender waive the Existing Defaults.  Lender hereby waives the Existing Defaults for the specific periods indicated; provided that Lender’s waiver of the Trademark Lien Release Default is conditioned on the Liens of Highbridge, Chemical Bank, CapitalSource, and Blechman et al (as each is defined in Exhibit 3.6 to the Credit Agreement) being released of record on or before August 31, 2009.  The waiver provided in this Section 2 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (i) obligate Lender to waive any Event of Default, whether past, present, or future, other than the Existing Defaults, (ii) constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (iii) reduce, restrict or in any way affect the discretion of Lender in considering any future waiver requested by Borrower.

 
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3.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            4.             Acknowledgment Regarding Test Periods; Other Documents .

4.1            Borrower hereby acknowledges and agrees that: (i) certain of the Test Periods on which certain Financial Covenants are to be tested as set forth in the Credit Agreement (as amended by this Amendment) may occur after the stated Termination Date and (ii) notwithstanding the inclusion of any such Test Periods in the Financial Covenants, all of the Obligations shall be due and payable in full on the earlier of the stated Termination Date or upon acceleration of the Obligations in accordance with the Loan Documents and Lender has made no commitment to extend the Credit Agreement or any Obligations or other financial accommodations to Borrower except as expressly set forth in the Credit Agreement and the other Loan Documents.

4.2            With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(b) attached to this Amendment (the “ Amended and Restated Term Loan A Note ”); (c) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (e) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 15 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (f) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

            5.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

 
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                       5.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan A Note, and the Amended and Restated Term Loan B Note, as applicable (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

                       5.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

                       5.3            Borrower’s and Parent’s representations and warranties contained in the Loan Documents are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

5.4            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Existing Defaults (as defined in Section 2 ).

            6.             Costs and Expenses; Fee .  As a condition of this Amendment, (i) Borrower will pay to Lender a fee of $80,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment, including, without limitation, reasonable attorneys’ fees.

7.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

            8.             Release .  Each of Borrower and Parent hereby releases Lender from any and all liabilities, damages and claims arising from or in any way related to the Obligations or the Loan Documents, other than such liabilities, damages and claims which arise after the Signature Date.  The foregoing release does not release or discharge, or operate to waive performance by, Lender of its express agreements and obligations stated in the Loan Documents on and after the Signature Date.

            9.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

 
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            10.             Continuing Effect of Credit Agreement .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect.

            11.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, (c) the Term Loan A Note will be deemed to be references to the Amended and Restated Term Loan A Note, and (d) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            12.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            13.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            14.             Governing Law .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles).

15.             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties .   As a condition of this Amendment, Borrower and Parent shall cause (i) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below and (ii) each of the Individual Guarantors to execute the Reaffirmation of Individual Guaranties below.

16.             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors to execute the Reaffirmation of Subordination below.

17.             Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the Contributors (as defined in the Capital Contribution Agreement) to execute the Reaffirmation of Capital Contribution Agreement below.

 
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18.             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

19.             Evidence of Debt Extension .  As a condition of this Amendment, with the signing of this Amendment, Borrower will deliver to Lender evidence, in form and substance satisfactory to Lender, that the maturity of each of (a) the Indebtedness owing by David L. Van Andel, William W. Nicholson, and Mark A. Fox to Wells Fargo Bank, National Association, (b) the Indebtedness evidenced by the Alticor Note, and (c) the Fifth Third Shareholder Loans has been extended to a date that is on or after September 8, 2009.

20.             Acknowledgment Regarding Capital Contribution .  Borrower, Parent and Lender acknowledge that, based upon information submitted by Borrower to Lender: (i) a Capital Contribution Triggering Event (as defined in the Capital Contribution Agreement) has occurred as a result of Borrower’s violation of the Fixed Charge Coverage Ratio for the Test Period ended June 30, 2009, and (ii) as a result of such Capital Contribution Triggering Event, the Contributors are required to make Capital Contributions (as defined in the Capital Contribution Agreement) of cash in an aggregate amount not less than $3,800,000 (collectively, the “ June 30, 2009 Capital Contribution ”), in accordance with the Capital Contribution Agreement.  On or before August 7, 2009, Borrower will deliver to Lender, in form and substance satisfactory to Lender, evidence that the Contributors have made the June 30, 2009 Capital Contribution in full.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers on the Signature Date to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.
 
 
By:    /S/ Mark A. Fox                                                                          
        Mark A. Fox, President and
        Chief Operating Officer
 
 
FIFTH THIRD BANK
 
 
By:   /S/ Andrew P. Hanson                                                                       
       Andrew P. Hanson, Vice President

SIGNATURE PAGE TO
THIRD AMENDMENT TO CREDIT AGREEMENT
 
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FOURTH AMENDMENT TO CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of March 30, 2010 (the “ Signature Date ”) to be effective as of March 8, 2010 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, and the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, which Credit Agreement is further amended by the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009 (as heretofore amended, the “ Forbearance Agreement ”), and the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) waive the Existing Defaults (as defined in Section 2.1 ); (ii) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to March 8, 2011; (iii) increase the maximum Revolving Commitment (subject to availability) to $18,000,000; and (iv) make certain other amendments to the Credit Agreement and certain of the other Loan Documents, as set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:

 
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Fifth Third Shareholder Loan Payment Period ” means, in respect of a date as of which the applicable Fifth Third Shareholder Loan Reserve is being determined, a period of thirteen consecutive calendar weeks, more particularly set forth as follows: (a) the thirteen consecutive calendar weeks beginning on April 9 and ending on July 8 of each calendar year, (b) the thirteen consecutive calendar weeks beginning on July 9 and ending on October 8 of each calendar year, (c) the thirteen consecutive calendar weeks beginning on October 9 of each calendar year and ending on January 8 of the immediately succeeding calendar year, and (d) the thirteen consecutive calendar weeks beginning on January 9 and ending on April 8 of each calendar year.  For purposes of the Fifth Third Shareholder Loan Reserve, the first “Fifth Third Shareholder Loan Payment Period” shall be the Fifth Third Shareholder Loan Payment Period commencing on April 9, 2010.

Fifth Third Shareholder Loan Reserve ” means, as of any date of determination during each Fifth Third Shareholder Loan Payment Period, an amount equal to the amount set forth opposite the periods below:

Period
Reserve Amount
 
The first calendar week of each Fifth Third Shareholder Loan Payment Period
$0
The second calendar week of each Fifth Third Shareholder Loan Payment Period
$118,750
The third calendar week of each Fifth Third Shareholder Loan Payment Period
$237,500
The fourth calendar week of each Fifth Third Shareholder Loan Payment Period
$356,250
The fifth calendar week of each Fifth Third Shareholder Loan Payment Period
$475,000
The sixth calendar week of each Fifth Third Shareholder Loan Payment Period
$593,750
The seventh calendar week of each Fifth Third Shareholder Loan Payment Period
$712,500
The eighth calendar week of each Fifth Third Shareholder Loan Payment Period
$831,250
The ninth calendar week of each Fifth Third Shareholder Loan Payment Period
$950,000
The tenth calendar week of each Fifth Third Shareholder Loan Payment Period
$1,068,750
The eleventh calendar week of each Fifth Third Shareholder Loan Payment Period
$1,187,500
The twelfth calendar week of each Fifth Third Shareholder Loan Payment Period
$1,306,250
The period commencing with the thirteenth calendar week of each Fifth Third Shareholder Loan Payment Period until the date on which the scheduled principal payment for such Fifth Third Shareholder Loan Payment Period is made in full
$1,425,000


 
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Fourth Amendment ” means the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, among Borrower, Parent, and Lender.

A2 Milk Adjustment ” means that certain one-time, non-recurring, non-cash adjustment to Net Income relating to the permanent impairment of Parent’s investment in A2 Milk Company, up to an aggregate amount of $359,000.


1.2             Section 1.1 of the Credit Agreement is hereby amended by the deletion of the definitions of “Senior Funded Indebtedness to EBITDA Ratio”, “Specific Guarantor Event”, and “Specific Guarantor Standstill Period”, such definitions to be omitted in their respective entireties therefrom.

1.3            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their entireties by substituting the following in their respective places:

Borrowing Base Reserves ” means those reserves against the Borrowing Base deemed necessary by Lender from time to time in good faith based on such credit and collateral considerations as Lender may deem appropriate in its discretion exercised in good faith to reflect contingencies or risks which may adversely affect any or all of the Loan Collateral, the business, operations, or financial condition of Loan Parties taken as a whole or the security of the Obligations, including (i) 100% of the aggregate net mark-to-market exposure, as determined by Lender in good faith, of all Rate Management Obligations then owing by Borrower to Lender or its Affiliate under a Rate Management Agreement, (ii) reserves implemented by Lender from time to time with respect to license agreements where Borrower is the licensee (including under the Existing License Agreements); (iii) reserves for obsolete, excess, and slow-moving Inventory; and (iv) the applicable Fifth Third Shareholder Loan Reserve.

Capital Contribution Agreement ” means the Amended and Restated Capital Contribution Agreement among Mark A. Fox, William W. Nicholson, David L. Van Andel, John Paul DeJoria, Parent, Borrower, and Lender dated as of the Signature Date (as defined in the Fourth Amendment).

Fixed Charge Coverage Ratio ” means, as of any date of determination, the ratio resulting from dividing: (a) the sum of (i) EBITDA for any Test Period, plus (ii) the A2 Milk Adjustment to the extent deducted from Net Income for such Test Period, plus (iii) any Extraordinary Expenses (other than the A2 Milk Adjustment) incurred in that same Test Period up to an aggregate amount equal to $100,000, plus (iv) the Closing Costs incurred in that same Test Period, less (v) Loan Parties’ aggregate consolidated Non-financed Capital Expenditures made in cash during that same Test Period, by (b) Fixed Charges for that same Test Period.

 
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Fixed Charges ” means, for the applicable Test Period, the total (without duplication), in Dollars, of (all as determined on a consolidated basis in accordance with GAAP): (a) the principal amount of Loan Parties’ consolidated long-term debt and obligations, in each case, paid during the applicable Test Period (other than scheduled principal payments on the Fifth Third Shareholder Loans); (b) the principal portion of Loan Parties’ aggregate consolidated Capitalized Lease Obligations paid during the applicable Test Period; (c) Loan Parties’ aggregate consolidated cash payments of interest during the applicable Test Period (including interest paid on the Obligations, the Fifth Third Shareholder Loans, the Alticor Note, the Owner/Affiliate Subordinated Debt, the LaSalle Debt, the Capitalized Lease Obligations and any other Indebtedness for the applicable Test Period); (d) Loan Parties’ aggregate consolidated cash payments of income and franchise taxes during such Test Period (whether or not in the form of Tax Distributions); and (e) dividends and distributions paid by Parent to its shareholders for such Test Period ( provided that nothing herein shall be deemed to allow any such dividends and distributions unless expressly permitted under Section 5.6 ).

Individual Guarantors ” means each of, and collectively, Mark A. Fox, William W. Nicholson, David L. Van Andel, and John Paul DeJoria.

Revolving Commitment ” means $18,000,000, subject to Section 2.2(h) .

1.4            The reference to “$10,000,000” in the definition of “Borrowing Base” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “$12,000,000” for such reference to “$10,000,000” where “$10,000,000” appears therein.

1.5            Clause (g) of the definition of “Refinancing Debt” in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(g)           Loan Parties are in compliance with the Financial Covenants, on a pro forma basis, after giving effect to the incurrence of such Refinancing Debt and the scheduled repayment of the Indebtedness being Refinanced.  To determine whether there is pro forma compliance with the Financial Covenants, Parent will, on a pro forma basis, provide a worksheet to Lender at least 10 days before incurring such Refinancing Debt, which (i) restates the Financial Statements received by Lender for the Fiscal Quarter or the Fiscal Year, as applicable, ended most closely before the date such Refinancing Debt is proposed to be incurred as if the proposed Refinancing Debt had been made, and the Indebtedness had been Refinanced, at the beginning of the applicable Test Period and (ii) calculates the Fixed Charge Coverage Ratio under Section 5.10 and the minimum Tangible Net Worth under Section 5.12 in each case taking into account such proposed Refinancing Debt as if the proposed Refinancing Debt had been made, and the Indebtedness had been refinanced, at the beginning of the applicable Test Period.

 
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1.6            Each reference to “March 8, 2010” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “March 8, 2011” for such reference to “March 8, 2010” where “March 8, 2010” appears therein.

1.7            The third sentence of Section 2.1(a) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

“If, at any time, Lender implements a Borrowing Base Reserve other than a Fifth Third Shareholder Loan Reserve (“ Borrowing Base Reserve Implementation ”): (i) in excess of $100,000, Lender will give Borrower 5 Business Days advance written notice of such Borrowing Base Reserve Implementation unless an Event of Default then exists, in which case Lender will give Borrower contemporaneous oral or written notice of such Borrowing Base Reserve Implementation, and (ii) in an amount less than or equal to $100,000, Lender will give Borrower prompt notice of such Borrowing Base Reserve Implementation.

1.8             Section 2.1(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           On the Signature Date (as defined in the Fourth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to the Fourth Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Fourth Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

1.9             Section 2.2(b) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(b)           On the Signature Date (as defined in the Fourth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(b) to the Fourth Amendment (as amended and restated, the “ Term Loan A Note ”), dated to be effective as of the Effective Date (as defined in the Fourth Amendment), in the original principal amount of $3,452,376, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan A Note.

 
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1.10             Section 2.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(d)           On the Signature Date (as defined in the Fourth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) to the Fourth Amendment (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Fourth Amendment), in the original principal amount of $7,833,342, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.

1.11            On and after the Signature Date, each reference to “10.50%” in Section 2.3(j) of the Credit Agreement is hereby amended by substituting a reference to “6.0%” for such reference to “10.50%” where “10.50%” appears therein.

1.12            On and after the Signature Date, the reference to “0.50%” in Section 2.8 of the Credit Agreement is hereby amended by substituting a reference to “0.75%” for such reference to “0.50%” where “0.50%” appears therein.

1.13             Section 5.11 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

5.11           [ Intentionally Omitted ].
   

1.14             Section 6.1(f) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(f)           (i)  There occurs an Owner/Affiliate Subordinated Debt Default which has not been waived in writing by the Owner/Affiliate Subordinated Creditors except to the extent the remedies thereunder are stayed under the applicable Owner/Affiliate Subordination Agreement; (ii) There occurs a LaSalle Debt Default which has not been waived in writing by LaSalle except to the extent the remedies thereunder are stayed under the LaSalle Intercreditor Agreement; (iii) A Loan Party defaults under the terms of the Alticor Note, and such default gives Alticor the right to accelerate the Indebtedness which is evidenced by the Alticor Note, and such default is not cured within any applicable cure period, if any, set forth in such Alticor Note, or if no such cure period is set forth, within 3 Business Days; (iv) There occurs a default or event of default under the Fifth Third Shareholder Loan Documents; (v) There occurs a default or event of default under the Indebtedness owing by David L. Van Andel, William W. Nicholson, and Mark A. Fox to Wells Fargo Bank, National Association; or (vi) A Loan Party defaults under the terms of any other Indebtedness for borrowed money or lease that, individually or in the aggregate (when added to all other Indebtedness, if any, of any one or more Loan Party then in default), involves Indebtedness for borrowed money or lease payments in excess of $1,000,000 and such default gives any creditor or lessor the right to accelerate the maturity of any such Indebtedness for borrowed money or lease payments and such default is not cured within any applicable cure period; or

 
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1.15             Section 6.1(u) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(u)           (i) an Individual Guarantor defaults under his Individual Guaranty, (ii) an Individual Guarantor denies his obligation to guarantee the Obligations (or, as it respects John Paul DeJoria, the portion of the Obligations guaranteed by John Paul DeJoria) or attempts to limit or terminate his obligation to guarantee the Obligations subject to the terms of his Individual Guaranty, or (iii) an Individual Guarantor dies or becomes legally incompetent; or

1.16            The first sentence of Section 6.6 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

“In the event that there is an Event of Default under one or more of the Curable Financial Covenants (and there is no other Event of Default then in existence), Borrower may cure such Event of Default(s) if (a) Capital Contribution Payments are made in strict compliance with the terms of the Capital Contribution Agreement and (b) Lender receives Capital Contribution Payments, in cash, in an amount sufficient, (i) if treated as being EBITDA for the applicable Test Period, to cause compliance with the Fixed Charge Coverage Ratio, and (ii) if the amount of the Tangible Net Worth Cure Calculation is deemed to be Borrower’s Tangible Net Worth as of the end of the applicable Test Period, to cause compliance with the minimum Tangible Net Worth covenant.”


1.17             Schedule 1.2 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.2 in its place.   Schedule 1.3 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.3 in its place.   Schedule 1.4 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.4 in its place.   Schedule 1.5 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.5 in its place.   Schedule 3.1 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.1 in its place.   Schedule 3.3 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.3 in its place. Schedule 3.5 of the Credit Agreement is hereby supplemented by the addition of the document attached hereto as the Supplement to Schedule 3.5 .   Schedule 3.6 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.6 in its place.   Schedule 3.12(a) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.12(a) in its place.   Schedule 3.12(b) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.12(b) in its place.   Schedule 3.19 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.19 in its place.   Exhibit 4.3(d) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(d) in its place.   Exhibit 4.3(f) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(f) in its place.    Schedule 5.1 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 5.1 in its place.

 
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2.             Waiver of Existing Defaults; Acknowledgment Regarding Forbearance .

2.1             Waiver of Existing Defaults .   As previously communicated by Lender to Borrower, and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that the following Events of Default have occurred and continue to exist as of the Signature Date (collectively, the “ Current Defaults ”): (a) the “Existing Defaults” as defined in the Forbearance Agreement (including the additions to such “Existing Defaults” set forth in Recital B of the First Amendment to Forbearance Agreement, (b) under Section 5.11 of the Credit Agreement (prior, and without giving effect, to this Amendment) as a result of the violation of the Senior Funded Indebtedness to EBITDA Ratio Financial Covenant for the Test Period ended December 31, 2009, (c) under Section 6.1(f) of the Credit Agreement as a result of the occurrence of defaults prior to the Signature Date under the Fifth Third Shareholder Loans, which defaults are enumerated in the loan documents disclosed on Schedule 1.3 hereto, (d) under Section 6.1(f) of the Credit Agreement as a result of the occurrence of defaults prior to the Signature Date under the LaSalle Debt related to cross defaults stemming from defaults under the Credit Agreement and the Fifth Third Shareholder Loans (the “ LaSalle Cross-Defaults ”) and as a result of the occurrence of defaults prior to the Signature Date under the Alticor Note, and (e) under Section 4.9 of the Credit Agreement as a result of the Loan Parties’ failure to timely provide written notice to Lender of any of the foregoing Events of Default set forth in the immediately preceding clauses (a) through (d).  Borrower has requested that Lender waive the Current Defaults.  Lender hereby waives the Current Defaults for the specific periods indicated; provided that Lender’s waiver of the LaSalle Cross-Defaults is conditioned on Lender’s receipt of the LaSalle Debt Documents required pursuant to, and in accordance with, Section 3.1 .  The waiver provided in this Section 2.1 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (i) obligate Lender to waive any Event of Default, whether past, present, or future, other than the Current Defaults, (ii) constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (iii) reduce, restrict or in any way affect the discretion of Lender in considering any future waiver requested by Borrower.

2.2             Acknowledgment Regarding Forbearance .  Lender, Parent, and Borrower hereby specifically acknowledge and agree that: (i) on and after the Signature Date, the Forbearance Period (as defined in the Forbearance Agreement) has ended and such terms are of no further force or effect with respect to any event or period occurring thereafter, (ii) the Terminated Forbearance Provisions (as defined below) are hereby terminated, and (iii) no party has any further rights, commitments or other obligations under, or arising out of, the Terminated Forbearance Provisions.  As used herein, the “ Terminated Forbearance Provisions ” means, collectively, (a) Section 2.1 , Section 2.2 , Section 2.3 and Section 7 of the Forbearance Agreement and (b) Section 1 of the First Amendment to Forbearance Agreement.

 
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3.             Additional Covenants .

3.1             Evidence of LaSalle Debt Extension and Waiver .  On or before April 30, 2010, Borrower will deliver to Lender evidence, in form and substance satisfactory to Lender: (a) that the maturity of the LaSalle Debt has been extended to a date that is on or after March 8, 2011 and (b) that LaSalle has waived the LaSalle Cross-Defaults (as defined in Section 2.1 ).

3.2             Business Plan .  On or before April 10, 2010, Borrower will deliver to Lender a formal business plan, in form and substance satisfactory to Lender, with respect to Borrower’s operations and financial condition.

3.3             Consultant . On or before May 31, 2010, Borrower will retain a consultant reasonably acceptable to Lender (the “ Consultant ”).  Bank will provide Borrower with names of three consultants that are acceptable to Lender promptly upon execution of this Amendment.  The Consultant will conduct an assessment of the business plan delivered by Borrower to Lender pursuant to, and in accordance with, Section 3.2 , and will prepare and deliver to Lender a detailed written report summarizing its assessment.  Lender shall have the right to contact the Consultant directly without any Loan Party’s participation in such discussions; provided that Borrower shall have the right to have Bob Conologue, as Chief Financial Officer of Borrower (or his successor in such capacity), attend any discussion between Lender and the Consultant on Loan Parties’ behalf.  The fee for the Consultant shall be the sole responsibility of Borrower.  Bank acknowledges Borrower’s desire to limit the fees for the Consultant to $50,000.  Provided that the scope of Consultant’s services are consistent with the provisions of this Section 3.3 , and Consultant makes itself available to Bank for discussions consistent with this Section 3.3 , Bank does not object to Borrower’s desire to negotiate such a fee cap with Consultant.

3.4             Appraisals .  On or before April 30, 2010, Lender shall have received, at the sole cost of Borrower, current appraisals of each of Borrower's Inventory and Equipment, in each case from an appraiser, and prepared on a basis, satisfactory to Lender and which such appraisals shall include information required by applicable law and regulations and by the internal policies of Lender.  The appraisers performing the appraisals and the methods of appraisal used by the appraisers doing the appraisals are subject to Lender’s approval in its discretion exercised in good faith.

3.5             FTWM Debt Payments .  On or before March 31, 2010, Borrower shall pay to Lender an amount equal to $2,500,000 for application against the outstanding principal balance of the Fifth Third Shareholder Loans.  If Borrower fails to make any payment of principal or interest in respect of the Fifth Third Shareholder Loans when due, Lender is entitled (but in no event obligated), and Borrower hereby irrevocably authorizes Lender, to disburse such sums as an advance of the Revolving Loans.  If an advance of a Revolving Loan by Lender pursuant to this Section 3.5 results (or to the extent that it results) in any Overadvance, then Borrower will (without duplication of Section 2.1(a) of the Credit Agreement) immediately eliminate any Overadvance in accordance with the terms of Section 2.1(a) of the Credit Agreement.

 
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3.6             Individual Guarantor Statements .  On or before May 1, 2010, Borrower shall furnish to Lender: (a) a personal financial statement, in form and substance satisfactory to Lender, with respect to each of the Individual Guarantors (other than David L. Van Andel) as of the end of the calendar year ended December 31, 2009, and (b) a liquidity statement, in form and substance satisfactory to Lender, with respect to David L. Van Andel as of the end of the calendar year ended December 31, 2009.

3.7             Default of Additional Covenants .  Without limiting any other term or provision of this Amendment or any other Loan Document, Borrower and Parent acknowledge that failure to comply with the covenants and obligations set forth in this Section 3 will constitute an immediate Event of Default under the Credit Agreement and other Loan Documents.

4.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender

4.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(b) attached to this Amendment (the “ Amended and Restated Term Loan A Note ”); (c) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (e) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 4.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); (f) an Amended and Restated Capital Contribution Agreement, in form and substance satisfactory to Lender in its sole discretion, duly signed by the Contributors, Parent and Borrower; and (g) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

4.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties .  As a condition of this Amendment, Borrower and Parent shall cause (i) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below and (ii) each of the Individual Guarantors to execute the Reaffirmation of Individual Guaranties below.

4.3             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors to execute the Reaffirmation of Subordination below.

 
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4.4             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

4.5             Fifth Third Shareholder Loan Documents .  Borrower shall execute and deliver, or cause to be executed and delivered, to Lender, all in form and substance satisfactory to Lender: (a) an Amended, Restated, and Consolidated Draw Loan Note and Agreement  with respect to the existing Fifth Third Shareholder Loans (the “ Fifth Third Shareholder Loan Note ”) and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to the Fifth Third Shareholder Loans contemplated by the Fifth Third Shareholder Loan Note.  

5.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            6.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       6.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, as applicable, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan A Note, the Amended and Restated Term Loan B Note, and the other Loan Documents being executed and/or delivered in connection  herewith (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

                       6.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

 
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                       6.3            Borrower’s and Parent’s representations and warranties contained in the Loan Documents are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

6.4            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Existing Defaults (as defined in Section 2.1 ).

            7.             Costs and Expenses; Fee .  As a condition of this Amendment, (i) Borrower will pay to Lender a fee of $250,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment, including, without limitation, reasonable attorneys’ fees.

8.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

            9.             Release .  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, “ Claims ”) against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing’s respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, “ Lender Parties ”) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

 
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            10.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

            11.             Continuing Effect of Credit Agreement .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect.

            12.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, (c) the Term Loan A Note will be deemed to be references to the Amended and Restated Term Loan A Note, and (d) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            13.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            14.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            15.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Illinois law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

16.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

17.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers on the Signature Date to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.
 
 
By:   /S/ Mark A, Fox                                                                           
        Mark A. Fox, President and
        Chief Operating Officer
 
 
FIFTH THIRD BANK
 
 
By:   /S/ Andrew P. Hanson                                                                       
       Andrew P. Hanson, Vice President

SIGNATURE PAGE TO
FOURTH AMENDMENT TO CREDIT AGREEMENT
 
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EXHIBIT 10.5.6
 
EXECUTION VERSION

FIFTH AMENDMENT TO CREDIT AGREEMENT

THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of March 28, 2011 (the “ Signature Date ”) to be effective as of December 31, 2010 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, and the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) acknowledge certain prepayments of the Term Loans; (ii) agree to suspend the scheduled monthly principal payments on Term Loan B during the period commencing on January 1, 2011 through, and including, June 1, 2011; (iii) waive the Current Defaults (as defined in Section 3.1 ); (iv) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to June 8, 2011; and (v) make certain other amendments to the Credit Agreement and certain of the other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

 
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1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical order, to provide in their respective entireties as follows:

 
Fifth Amendment ” means the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, among Borrower, Parent, and Lender.

 
LaSalle Consent Letter ” means that certain Consent Letter Regarding Monthly Principal Payments dated as of the Signature Date (as defined in the Fifth Amendment) made by Lender and accepted by LaSalle and Borrower.

Suspended Term Loan B Payments ” means, collectively, the principal payments on Term Loan B, in the amount of $83,333.00 each, that have been suspended by Lender pursuant to, and in accordance with, the Loan Documents.


1.2            The following definition in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

Fixed Charges ” means, for the applicable Test Period, the total (without duplication), in Dollars, of (all as determined on a consolidated basis in accordance with GAAP): (a) the principal amount of Loan Parties’ consolidated long-term debt and obligations, in each case, paid during the applicable Test Period (other than scheduled principal payments on the Fifth Third Shareholder Loans, the Term Loan A Prepayment (as defined in the Fifth Amendment), the Term Loan B Prepayment (as defined in the Fifth Amendment), and the Additional Term Loan B Prepayment (as defined in the Fifth Amendment)); (b) the principal portion of Loan Parties’ aggregate consolidated Capitalized Lease Obligations paid during the applicable Test Period; (c) Loan Parties’ aggregate consolidated cash payments of interest during the applicable Test Period (including interest paid on the Obligations, the Fifth Third Shareholder Loans, the Alticor Note, the Owner/Affiliate Subordinated Debt, the LaSalle Debt, the Capitalized Lease Obligations and any other Indebtedness for the applicable Test Period); (d) Loan Parties’ aggregate consolidated cash payments of income and franchise taxes during such Test Period (whether or not in the form of Tax Distributions); (e) dividends and distributions paid by Parent to its shareholders for such Test Period ( provided that nothing herein shall be deemed to allow any such dividends and distributions unless expressly permitted under Section 5.6 ); and (f) the principal amount of the Suspended Term Loan B Payments during the applicable Test Period.

 
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1.3            Each reference to “March 8, 2011” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “June 8, 2011” for such reference to “March 8, 2011” where “March 8, 2011” appears therein.


1.4             Section 2.1(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           On the Signature Date (as defined in the Fifth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to the Fifth Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Fifth Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.


1.5             Section 2.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(d)           On the Signature Date (as defined in the Fifth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) to the Fifth Amendment (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Fifth Amendment), in the original principal amount of Term Loan B as of the Signature Date, and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.


1.6             Section 5.2(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           No Loan Party will: (i) make any payment (including any principal, premium, interest, fee or charge) with respect to any of the LaSalle Debt except to the extent, and in the manner, expressly permitted by the LaSalle Intercreditor Agreement or the LaSalle Consent Letter; or (ii) repurchase, redeem, defease, acquire or reacquire for value any of the LaSalle Debt.


 
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2.
Acknowledgments Regarding Term Loan Prepayments; Suspension of Certain Scheduled Payments on Term Loan B; Suspension of Fifth Third Shareholder Loan Reserve; Acknowledgment Regarding LaSalle Consent Letter .

2.1             Acknowledgments Regarding Term Loan Prepayments .  Lender, Parent, and Borrower hereby acknowledge that: (a) on or about December 6, 2010, Lender applied a portion of the proceeds from the Capital Contribution Payments received by Lender to the payment in full of Term Loan A (such prepayment being the “ Term Loan A Prepayment ”); (b) on or about December 20, 2010, Lender applied proceeds from the sale of the “DRINK POSITIVE” trademark received by Lender, in an aggregate amount equal to $350,000, to the unpaid principal balance of Term Loan B (such prepayment being the “ Term Loan B Prepayment ”); and (c) prior to the Effective Date, Borrower made additional principal payments, in an aggregate amount equal to $666,664.00, on the unpaid principal balance of Term Loan B (collectively, the “ Additional Term Loan B Prepayment ”).

2.2             Suspension of Certain Scheduled Payments on Term Loan B .  Notwithstanding anything to the contrary in the Term Loan B Note, Borrower’s obligation to make to Lender principal payments on Term Loan B, in the amount of $83,333.00 each, is hereby suspended for the period commencing on January 1, 2011 through, and  including, June 1, 2011; provided that the entire unpaid principal balance of the Term Loan B Note, together with all accrued and unpaid interest and any other charges, advances and fees, if any, outstanding thereunder, shall be due and payable in full on the earlier of the Maturity Date (as defined in the Term Loan B Note) or upon acceleration of the Indebtedness evidenced by the Term Loan B Note in accordance with the terms of the Credit Agreement.

2.3             Suspension of Fifth Third Shareholder Loan Reserve .  Notwithstanding anything to the contrary in the Loan Documents, the implementation of the Fifth Third Shareholder Loan Reserve under the Borrowing Base is hereby suspended for the period commencing on April 9, 2011 through, and including, June 8, 2011.  For the avoidance of doubt, the Fifth Third Shareholder Loan Reserve shall be implemented in accordance with the Loan Documents at all times during the period commencing on the Effective Date through, and including, April 8, 2011.

2.4             Acknowledgment Regarding LaSalle Consent Letter . Borrower hereby acknowledges and agrees that: (a) certain of the Permitted Monthly Principal Payments (as defined in the LaSalle Consent Letter) may occur after the stated Termination Date and (b) notwithstanding the inclusion of any such payments in the Permitted Monthly Principal Payments (as defined in the LaSalle Consent Letter), all of the Obligations shall be due and payable in full on the earlier of the stated Termination Date or upon acceleration of the Obligations in accordance with the Loan Documents and Lender has made no commitment to extend the Credit Agreement or any Obligations or other financial accommodations to Borrower except as expressly set forth in the Credit Agreement and the other Loan Documents.   Lender hereby acknowledges and agrees that, as a result of Lender’s consent to the Permitted Monthly Principal Payments (as defined in the LaSalle Consent Letter) which were paid in October, 2010 and February, 2011, no Event of Default occurred or is existing based solely upon the occurrence of such Permitted Monthly Principal Payments (as defined in the LaSalle Consent Letter).

 
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3.             Waiver of Current Defaults; Acknowledgment Regarding Default Rate .

3.1             Waiver of Current Defaults .   As previously communicated by Lender in those certain letters dated June 2, 2010, August 27, 2010 and October 15, 2010, respectively, from Lender to Borrower and the other parties thereto (collectively, the “ Prior Reservation of Rights Letters ”), and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that the following Events of Default have occurred and continue to exist as of the Signature Date (collectively, the “ Current Defaults ”): (a) the Financial Covenant Default, the Capital Contribution Default, the Credit Agreement Cross-Default, the LaSalle Default, the Business Plan Default, and the Consultant Default (as each is defined in the Prior Reservation of Rights Letter dated June 2, 2010); and (b) the Financial Covenant Default, the Capital Contribution Default, the Credit Agreement Cross-Default, the LaSalle Default, and the Letter Default (as each is defined in the Prior Reservation of Rights Letter dated August 27, 2010).  Borrower has requested that Lender waive the Current Defaults.  Lender hereby waives the Current Defaults for the specific periods and occurrences indicated.  The waiver provided in this Section 3.1 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (i) obligate Lender to waive any Event of Default, whether past, present, or future, other than the Current Defaults, (ii) constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (iii) reduce, restrict or in any way affect the discretion of Lender in considering any future waiver requested by Borrower.

3.2             Acknowledgment Regarding Default Rate . On and after the Signature Date, Lender will no longer impose the Default Rate to the Obligations based upon the Current Defaults; provided that nothing herein is intended, or shall be construed, to limit Lender’s ability to impose the Default Rate to the Obligations based upon the occurrence of any Event of Default other than the Current Defaults.

4.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

4.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (c) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment, the other Amendment Documents (as defined below), and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 4.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (e) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

 
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4.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (i) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (ii) each of the Individual Guarantors to execute the Reaffirmation of Individual Guaranties below, and (iii) each of the Contributors (as defined in the Capital Contribution Agreement) to execute the Reaffirmation of Capital Contribution Agreement below.

4.3             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors to execute the Reaffirmation of Subordination below.

4.4             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

4.5             Fifth Third Shareholder Loan Documents .  Borrower shall execute and deliver, or cause to be executed and delivered, to Lender, all in form and substance satisfactory to Lender: (a) an Amended, Restated, and Consolidated Draw Loan Note and Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Fifth Third Shareholder Loan Note ”) and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to the Fifth Third Shareholder Loans contemplated by the Fifth Third Shareholder Loan Note.  

5.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            6.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

 
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                       6.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, as applicable, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan B Note, and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

                       6.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

6.3            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Current Defaults (as defined in Section 3.1 ).

            7.             Costs and Expenses; Fee .  As a condition of this Amendment, (i) Borrower will pay to Lender an amendment fee of $10,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment, including, without limitation, reasonable attorneys’ fees.

8.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment; provided that nothing herein or in any of the Loan Documents shall be construed to supersede, or to have merged into, any of the Fifth Third Shareholder Loan Documents, all of which will remain in full force and effect.

            9.             Release .  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, “ Claims ”) against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing’s respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, “ Lender Parties ”) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

 
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            10.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

            11.             Continuing Effect of Credit Agreement .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect.

            12.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, and (c) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            13.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            14.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            15.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

16.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

17.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers on the Signature Date to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.
 
 
By:   /S William W. Nicholson                                                                                 
William W. Nicholson, Chief Executive Officer
 
 
FIFTH THIRD BANK
 
 
By:  /S/ Andrew P. Hanson                                                              
       Andrew P. Hanson, Vice President

SIGNATURE PAGE TO
FIFTH AMENDMENT TO CREDIT AGREEMENT
 
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EXHIBIT 10.5.7
 
EXECUTION VERSION

SIXTH AMENDMENT TO CREDIT AGREEMENT

THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of June 30, 2011 (the “ Signature Date ”) to be effective as of June 8, 2011 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, and the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) agree to suspend the scheduled monthly principal payments on Term Loan B during the period commencing on July 1, 2011 through, and including, August 1, 2011, which scheduled monthly principal payments shall recommence on September 1, 2011; (ii) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to September 8, 2011; (iii) decrease the maximum Revolving Commitment (subject to availability) to $15,000,000; and (iv) make certain other amendments to the Credit Agreement and certain of the other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

 
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1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definition, in its proper alphabetical order, to provide in its entirety as follows:

 
Sixth Amendment ” means the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, among Borrower, Parent, and Lender.


1.2            The following definition in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

Revolving Commitment ” means $15,000,000, subject to Section 2.2(h) .


1.3            Each reference to “June 8, 2011” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “September 8, 2011” for such reference to “June 8, 2011” where “June 8, 2011” appears therein.


1.4             Section 2.1(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           On the Signature Date (as defined in the Sixth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to the Sixth Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Sixth Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.


1.5             Section 2.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(d)           On the Signature Date (as defined in the Sixth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) to the Sixth Amendment (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Sixth Amendment), in the original principal amount of Term Loan B as of the Signature Date (as defined in the Sixth Amendment), and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.

 
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1.6    Exhibit 4.3(f) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(f) in its place.


 
2.
Suspension and Reinstatement of Certain Scheduled Payments on Term Loan B; Suspension and Reinstatement of Fifth Third Shareholder Loan Reserve .

2.1             Suspension and Reinstatement of Certain Scheduled Payments on Term Loan B .  Notwithstanding anything to the contrary in the Term Loan B Note, Borrower’s obligation to make to Lender scheduled monthly principal payments on Term Loan B, in the amount of $83,333.00 each, is hereby suspended for the period commencing on July 1, 2011 through, and including, August 1, 2011; provided that (a) nothing herein shall be deemed to suspend Borrower’s obligation to make to Lender scheduled monthly principal payments on Term Loan B on and after September 1, 2011, and (b) the entire unpaid principal balance of the Term Loan B Note, together with all accrued and unpaid interest and any other charges, advances and fees, if any, outstanding thereunder, shall be due and payable in full on the earlier of the Maturity Date (as defined in the Term Loan B Note) or upon acceleration of the Indebtedness evidenced by the Term Loan B Note in accordance with the terms of the Credit Agreement.

2.2             Suspension and Reinstatement of Fifth Third Shareholder Loan Reserve .  Notwithstanding anything to the contrary in the Loan Documents, the implementation of the Fifth Third Shareholder Loan Reserve under the Borrowing Base is hereby suspended for the period commencing on June 8, 2011 through, and including, July 8, 2011.  For the avoidance of doubt, the Fifth Third Shareholder Loan Reserve shall be implemented in accordance with the Loan Documents at all times on and after July 9, 2011.

3.             Additional Covenants .

3.1             Individual Guarantor Statements .  On or before July 15, 2011, Borrower shall furnish to Lender a personal financial statement, in form and substance satisfactory to Lender, with respect to David L. Van Andel as of the end of the calendar year ended December 31, 2010.

3.2             Evidence of LaSalle Debt Extension .  On or before August 15, 2011, Borrower will deliver to Lender evidence, in form and substance satisfactory to Lender, that the maturity of the LaSalle Debt has been extended to a date that is on or after September 8, 2011.

3.3             Default of Additional Covenants .  Without limiting any other term or provision of this Amendment or any other Loan Document, Borrower and Parent acknowledge that failure to comply with the covenants and obligations set forth in this Section 3 will constitute an immediate Event of Default under the Credit Agreement and other Loan Documents.

 
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4.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

4.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (c) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment, the other Amendment Documents (as defined below), and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 4.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (e) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

4.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation and Amendment of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors (other than Mark A. Fox) to execute the Reaffirmation and Amendment of Capital Contribution Agreement below.

4.3             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors (other than Mark A. Fox) to execute the Reaffirmation of Subordination below.

4.4             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

4.5             Fifth Third Shareholder Loan Documents .  Borrower shall execute and deliver, or cause to be executed and delivered, to Lender, all in form and substance satisfactory to Lender: (a) an Amended, Restated, and Consolidated Draw Loan Note and Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Fifth Third Shareholder Loan Note ”) and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to the Fifth Third Shareholder Loans contemplated by the Fifth Third Shareholder Loan Note.

 
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5.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            6.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       6.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, as applicable, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan B Note, and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

                       6.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

6.3            No Event of Default has occurred and is continuing under the Credit Agreement.

            7.             Costs and Expenses; Fee .  As a condition of this Amendment, (i) Borrower will pay to Lender an amendment fee of $100,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (ii) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby, including, without limitation, reasonable attorneys’ fees.

8.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment; provided that nothing herein or in any of the Loan Documents shall be construed to supersede, or to have merged into, any of the Fifth Third Shareholder Loan Documents, all of which will remain in full force and effect.

 
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            9.             Release .  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, “ Claims ”) against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing’s respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, “ Lender Parties ”) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

            10.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

            11.             Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or, as applicable, as amended (or amended and restated) by one of the other Amendment Documents, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

            12.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, and (c) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

 
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            13.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            14.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            15.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

16.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

17.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

18.             Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) Mark A. Fox is not executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors (other than Mark A. Fox) pursuant to this Amendment; (b) Mark A. Fox is not executing the Reaffirmation and Amendment of Capital Contribution Agreement required to be executed by the Contributors (other than Mark A. Fox) pursuant to this Amendment; (c) Mark A. Fox is not executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors (other than Mark A. Fox) pursuant to this Amendment; (d) none of Anthony Robbins, Peter Lusk, or Mark A. Fox is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (e) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (f) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, Peter Lusk, or Mark A. Fox from his respective obligations under any of such Loan Documents, as applicable.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers on the Signature Date to be effective as of the Effective Date.

TWINLAB CORPORATION
IDEA SPHERE INC.


By:    /S/ Thomas A. Tolworthy                                                                          
Thomas A. Tolworthy, President and CEO

FIFTH THIRD BANK


By:    /A/ Andrew P. Hanson                                                                                      
Andrew P. Hanson, Vice President


SIGNATURE PAGE TO
SIXTH AMENDMENT TO CREDIT AGREEMENT
 
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EXHIBIT 10.5.8

 
SEVENTH AMENDMENT TO CREDIT AGREEMENT

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of October 6, 2011 (the “ Signature Date ”) to be effective as of September 8, 2011 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010 and the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to July 8, 2013; (ii) waive the Current Defaults (as defined in Section 2.1 ); and (iii) make certain other amendments to the Credit Agreement and certain of the other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:

 
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Cole Water Property ” means the real estate and improvements thereon located in Miami County, Indiana, commonly known as 51 Strawtown Pike, Peru, Indiana.

 
Mortgaged Property ” means the “Trust Estate”, as defined in the Mortgage.

Seventh Amendment ” means the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011, among Borrower, Parent, and Lender.

Seventh Amendment LaSalle Consent Letter ” has the meaning given in Section 4.6 of the Seventh Amendment.


1.2            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their entireties by substituting the following in their respective places:

Borrowing Base ” means, as of the relevant date of determination, the sum of:

(a)           70% (subject to Section 2.1(e)) of the then net amount of Eligible Accounts (i.e., less sales, excise or similar taxes, and less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed);

plus           (b)           the lesser of: (i) $12,000,000 (subject to Section 2.1(e)); and (ii) the sum of: (A) 30% (subject to Section 2.1(e)) of the then net amount of Raw Materials which are Eligible Inventory, (B) 55% (subject to Section 2.1(e)) of the then net amount of Finished Goods which are Eligible Inventory, and (C) 50% (subject to Section 2.1(e)) of the then net amount of Semi-Finished Goods which are Eligible Inventory; and

less           (c)           all then Borrowing Base Reserves.

Curable Financial Covenant ” means the Fixed Charge Coverage Ratio under Section 5.10 .

Default Rate ” means the applicable rates of interest set forth in the applicable Note plus an additional 2.0% per annum.  Lender agrees that if an Event of Default occurs solely as a result of the death of an Individual Guarantor, Lender will not, so long as no other Event of Default exists, impose the Default Rate until the date that is 30 days after the date of such Event of Default.  Lender agrees that if an Event of Default occurs solely as a result of a Fixed Charge Coverage Ratio violation, Lender will not, so long as no other Event of Default exists, impose the Default Rate based upon such Event of Default so long as Capital Contribution Payments are made within 10 Business Days after such violation in compliance with the Capital Contribution Agreement; provided that if such Capital Contribution Payments are not made within 10 Business Days after such violation in compliance with the Capital Contribution Agreement, Lender may, in addition to its other rights and remedies pursuant to this Agreement and the other Loan Documents, impose the Default Rate on and after the date of the Test Period of such Fixed Charge Coverage Ratio violation.

EBITDA ” means, for any period, the total (without duplication) in Dollars of (all as determined in accordance with GAAP on a consolidated basis): (a) Net Income, plus (b) the aggregate amount of Loan Parties’ depreciation and amortization expense for the applicable period to the extent deducted in the determination of Net Income, plus (c) the aggregate amount of Loan Parties’ interest expense for the applicable period to the extent deducted in the determination of Net Income, plus (d) the aggregate amount of Loan Parties’ income and franchise tax expense for the applicable period to the extent deducted in the determination of Net Income, and plus (e) any non-cash loss incurred during the applicable period arising from the sale or other disposition of the Cole Water Property to the extent deducted in the determination of Net Income.  For purposes of determining EBITDA, “Net Income” will be determined exclusive of any amounts, during such period, attributable to: (i) any upward inventory adjustments except to the extent of an upward inventory adjustment as certified by Loan Parties’ independent certified public accountants under GAAP as part of preparing Loan Parties’ annual audited Financial Statements and for which Lender is given notice of the amount thereof; (ii) any gain arising from the sale of capital assets; (iii) any gain arising from the write-up of any assets; (iv) any extraordinary gains and items of income; (v) any gains recognized by a Loan Party as earnings which relate to adjustments made by a Loan Party as a result of any extraordinary accounting adjustment; and (vi) any other non-operating, non-recurring gains.

Fixed Charges ” means, for the applicable Test Period, the total (without duplication), in Dollars, of (all as determined on a consolidated basis in accordance with GAAP): (a) the principal amount of Loan Parties’ consolidated long-term debt and obligations, in each case, paid during the applicable Test Period (other than the Seventh Amendment Fifth Third Shareholder Loans Paydown (as defined in the Seventh Amendment) and other scheduled principal payments, if any, on the Fifth Third Shareholder Loans, the Term Loan A Prepayment (as defined in the Fifth Amendment), the Term Loan B Prepayment (as defined in the Fifth Amendment), the Additional Term Loan B Prepayment (as defined in the Fifth Amendment), any Cole Water Mandatory Prepayment (as defined in the Seventh Amendment), and any Mortgaged Property Mandatory Prepayment (as defined in the Seventh Amendment)); (b) the principal portion of Loan Parties’ aggregate consolidated Capitalized Lease Obligations paid during the applicable Test Period; (c) Loan Parties’ aggregate consolidated cash payments of interest during the applicable Test Period (including interest paid on the Obligations, the Fifth Third Shareholder Loans, the Alticor Note, the Owner/Affiliate Subordinated Debt, the LaSalle Debt, the Capitalized Lease Obligations and any other Indebtedness for the applicable Test Period); (d) Loan Parties’ aggregate consolidated cash payments of income and franchise taxes during such Test Period (whether or not in the form of Tax Distributions); (e) dividends and distributions paid by Parent to its shareholders for such Test Period ( provided that nothing herein shall be deemed to allow any such dividends and distributions unless expressly permitted under Section 5.6 ); and (f) the principal amount of the Suspended Term Loan B Payments during the applicable Test Period.

 
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LaSalle ” means Bank of America, N.A., successor by merger to LaSalle Bank Midwest National Association and its successors and assigns.

LaSalle Debt ” means (a) the Indebtedness evidenced by the LaSalle Loan Agreement, the LaSalle Debt Notes and (b) all other LaSalle Obligations (as defined in the LaSalle Intercreditor Agreement), all as now exist or may, after the date of this Agreement, be renewed, extended, consolidated, adjusted or increased subject to Section 5.2 and any Refinancing Debt with respect thereto.

LaSalle Debt Default ” means any of the following (or any combination of the following): (a) the occurrence and continuance of a default or breach by Borrower and/or, as applicable, any other Loan Party of or under any of the LaSalle Debt Documents, after the lapse of any applicable notice and cure periods, that would permit any LaSalle to accelerate the maturity of the LaSalle Debt, (b) the maturity of any of the LaSalle Loan Agreement or the LaSalle Debt Notes or (c) any acceleration of any of the LaSalle Debt.

LaSalle Debt Documents ” means, collectively, (a) the LaSalle Loan Agreement, (b) the LaSalle Debt Notes, and (c) the other LaSalle Obligations Documents (as defined in the LaSalle Intercreditor Agreement) and any other document, instrument or agreement evidencing the LaSalle Debt, as any or all of the foregoing documents, instruments, and agreements are now in effect or, subject to Section 5.2 , as at any time after the date of this Agreement amended, modified, supplemented, restated, renewed, extended, or otherwise changed and any documents, instruments, or agreements given, subject to Section 5.2 , in substitution of any of them (including in connection with any Refinancing Debt with respect thereto).

LaSalle Debt Notes ” means any promissory notes evidencing the LaSalle Debt.

LaSalle Loan Agreement ” means that certain Loan Agreement, having an effective date of October 1, 2011, among Borrower, LaSalle, David Van Andel, William W. Nicholson and Mark A. Fox.

LaSalle Consent Letter ” means each of, and collectively, (a) that certain Consent Letter Regarding Monthly Principal Payments dated as of March 28, 2011 made by Lender and accepted by LaSalle and Borrower; (b) that certain Consent Letter Regarding Monthly Principal Payments dated as of August 30, 2011 made by Lender and accepted by LaSalle and Borrower; (c) the Seventh Amendment LaSalle Consent Letter, and (d) each other Consent Letter Regarding Monthly Principal Payments, if any, dated  on or after October 1, 2011 made by Lender and accepted by LaSalle and Borrower.

 
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1.3            Each reference to “September 8, 2011” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “July 8, 2013” for such reference to “September 8, 2011” where “September 8, 2011” appears therein.


1.4            Clause (g) of the definition of “Refinancing Debt” in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(g)           Loan Parties are in compliance with the Financial Covenants, on a pro forma basis, after giving effect to the incurrence of such Refinancing Debt and the scheduled repayment of the Indebtedness being Refinanced.  To determine whether there is pro forma compliance with the Financial Covenants, Parent will, on a pro forma basis, provide a worksheet to Lender at least 10 days before incurring such Refinancing Debt, which (i) restates the Financial Statements received by Lender for the Fiscal Quarter or the Fiscal Year, as applicable, ended most closely before the date such Refinancing Debt is proposed to be incurred as if the proposed Refinancing Debt had been made, and the Indebtedness had been Refinanced, at the beginning of the applicable Test Period and (ii) calculates the Fixed Charge Coverage Ratio under Section 5.10 taking into account such proposed Refinancing Debt as if the proposed Refinancing Debt had been made, and the Indebtedness had been refinanced, at the beginning of the applicable Test Period.


1.5             Section 1.1 of the Credit Agreement is hereby amended by the deletion of the definition of “Tangible Net Worth”, such definition to be omitted in its entirety therefrom.

1.6             Section 2.1(c) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)           On the Signature Date (as defined in the Seventh Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to the Seventh Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Seventh Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b) and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

 
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1.7             Section 2.1(e)(i) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(e)(i)           Borrower acknowledges that Lender, from time to time, may do any one or more of the following in its discretion exercised in good faith: (A) decrease the dollar limits on outstanding advances against the Borrowing Base or applicable to the Eligible Inventory advance sublimits or (B) decrease the Eligible Inventory and the Eligible Accounts advance rates if one or more of the following events occur or conditions exist: (1) an Event of Default has occurred and is continuing; (2) with regard to the Eligible Accounts advance rate, (I) the dilution percentage (“ Dilution Percentage ”) with respect to Borrower’s Eligible Accounts (i.e., reductions in the amount of Accounts because of returns, discounts, price adjustments, credit memoranda, credits, allowances and other offsets, and any other Contras (to the extent that Borrower’s customer and Borrower do not exchange payments to settle the Contra)) increases above 20%, and if such Dilution Percentage, as of any date of determination by Lender (“ Dilution Determination Date ”) increases above 20%, the advance rate against Eligible Accounts will reduce (effective with the next delivery of the Borrowing Base Certificate to Lender) 1% for each 1% (or fraction thereof) increase in the Dilution Percentage above 20%, (II) the percentage of accounts receivable which are 90 days or more past the date of the original invoices applicable thereto increases, in comparison to the percentage of accounts receivable which are within 90 days from the date of the original invoices applicable thereto, by an amount which Lender, in good faith, determines is material, or (III) any material adverse change occurs, determined by Lender in good faith, from the Closing Date in respect of the credit rating or credit quality of Borrower’s account debtors taken as a whole; or (3) with respect to the Eligible Inventory advance rate, there occurs a material change, as determined by Lender in its discretion, in the type, quantity, or quality of Borrower’s Eligible Inventory, taken as a whole, as compared to the type, quantity, or quality of Borrower’s Eligible Inventory on the Closing Date, including, without limitation, a material change, as determined by Lender in its discretion, in the Net Orderly Liquidation Value of Borrower’s Inventory established by the most recent appraisal received and approved by Lender in accordance with Section 4.2 .


1.8             Section 2.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

 
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(d)           On the Signature Date (as defined in the Seventh Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) to the Seventh Amendment (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Seventh Amendment), in the original principal amount of Term Loan B as of the Signature Date (as defined in the Seventh Amendment), and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.


1.9             Section 4.3(g) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

 
(g)
By no later than the 20 th day after the end of each calendar month, or sooner if available and more frequently if Lender shall require or Borrower shall so elect: (A) monthly agings of Accounts, broken down by invoice date, in each case reconciled to the Borrowing Base Certificate for the end of such month and Borrower’s general ledger, and setting forth any changes in the reserves made for bad debts or any extensions of the maturity of, any refinancing of, or any other material changes in the terms of any Accounts, together with such further information with respect thereto as Lender may require; and (B) monthly agings of accounts payable owing each Loan Party listed by invoice date, in each case reconciled to Loan Parties’ general ledger for the end of such month, together with such further information with respect thereto as Lender may require (including a report summarizing, with respect to each vendor, the current payment plan structure, shipping status, and the date and amount of the most recent payment made to such vendor);
 

1.10             Section 5.12 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

5.12           [ Intentionally Omitted ].


1.11             Section 6.6 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

6.6            Capital Contribution Payments .  In the event that there is an Event of Default under the Curable Financial Covenant (and there is no other Event of Default then in existence), Borrower may cure such Event of Default if (a) Capital Contribution Payments are made in strict compliance with the terms of the Capital Contribution Agreement and (b) Lender receives Capital Contribution Payments, in cash, in an amount sufficient, if treated as being EBITDA for the applicable Test Period, to cause compliance with the Fixed Charge Coverage Ratio.  For purposes of calculating the Fixed Charge Coverage Ratio with respect to all applicable Test Periods, EBITDA, solely for purposes of the Fixed Charge Coverage Ratio under Section 5.10 , shall be deemed to include the amount of Capital Contribution Payments that were received by Lender in accordance with this Section 6.6 as if such Capital Contribution Payments were made in the Test Period for which there was an Event of Default under Section 5.10 that gave rise to the requirement to make the applicable Capital Contribution Payments.

 
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1.12             Exhibit 4.3(d) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(d) in its place.   Exhibit 4.3(f) of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(f) in its place.


2.             Waiver of Current Defaults; Suspension of Fifth Third Shareholder Loan Reserve .

2.1             Waiver of Current Defaults .  As previously communicated by Lender in that certain letter dated September 1, 2011 from Lender to Borrower and the other parties thereto (the “ Reservation of Rights Letter ”), and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that the following Events of Default have occurred and continue to exist as of the Signature Date (collectively, the “ Current Defaults ”): the Financial Covenant Default, the Capital Contribution Default, and the Credit Agreement Cross-Default (as each is defined in the Reservation of Rights Letter).  Lender hereby waives the Current Defaults for the specific periods and occurrences indicated.  The waiver provided in this Section 2.1 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (a) obligate Lender to waive any Event of Default, whether past, present, or future, other than the Current Defaults, (b) constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (c) reduce, restrict or in any way affect the discretion of Lender in considering any future waiver requested by Borrower.

2.2             Suspension of Fifth Third Shareholder Loan Reserve .  Notwithstanding anything to the contrary in the Loan Documents, the implementation of the Fifth Third Shareholder Loan Reserve under the Borrowing Base is hereby suspended at all times on and after the Signature Date, and the Fifth Third Shareholder Loan Reserve in effect as of the Signature Date will be released on the Signature Date.

3.             Additional Covenants .

3.1             FTWM Debt Payment .  On or before the date that is 30 days from the Signature Date, Borrower shall pay to Lender an amount equal to $25,000,000 for application against the outstanding principal balance of the Fifth Third Shareholder Loans (the “ Seventh Amendment Fifth Third Shareholder Loans Paydown ”).

3.2             Preferred Stock .  On or before the date that is 30 days from the Signature Date, Borrower shall execute and deliver to Lender, or cause to be executed and delivered to Lender, as applicable, all in form and substance (and on terms and conditions) satisfactory to Lender in its sole discretion (collectively, the “ Preferred Stock Documents ”): (a) all documents, instruments and agreements executed and delivered by Borrower or any other Person in connection with Borrower’s issuance of preferred stock, and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender in connection with any of the foregoing.

 
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3.3             Application of Net Proceeds from Mortgaged Property . Notwithstanding anything to the contrary in the Credit Agreement, any other Loan Document, or any Fifth Third Shareholder Loan Document, with respect to any mandatory prepayment described in Section 2.2(g)(i) of the Credit Agreement arising out of a sale or other disposition of all or any portion of the Mortgaged Property (a “ Mortgaged Property Mandatory Prepayment ”), the Net Proceeds of any such Mortgaged Property Mandatory Prepayment shall, absent the occurrence and continuance of an Event of Default (in which case it shall be applied in the order and manner determined by Lender), be applied as follows:

(i)            first , 100% of such Net Proceeds shall be applied to the remaining installments of principal under the Term Loan B Note, in the inverse order of maturity, until Term Loan B has been paid in full;

(ii)            second , at any time after Term Loan B shall have been repaid in full, (a) 90% of any such remaining Net Proceeds shall be applied to the then outstanding principal balance of the Revolving Loans and (b) 10% of any such remaining Net Proceeds shall be applied to the remaining installments of principal under the Fifth Third Shareholder Loans, in the inverse order of maturity (or, if no periodic installments of principal are then scheduled under the Fifth Third Shareholder Loans, to the then outstanding principal balance of the Fifth Third Shareholder Loans), in each case until the Fifth Third Shareholder Loans have been paid in full (and in any case under the foregoing clause (a) or (b) above, any Net Proceeds remaining after the application set forth in such clause (a) or (b), as applicable, shall be applied as set forth in the other clause (a) or (b), as applicable);

(iii)            third , at any time after the Fifth Third Shareholder Loans and the Revolving Loans shall have been repaid in full, any remaining Net Proceeds shall be applied to cash collateralize any outstanding Letter of Credit Obligations; and

(iv)            fourth , after all Letter of Credit Obligations are fully cash collateralized, if any, any remaining Net Proceeds shall be applied in repayment of any of the other Obligations then due and payable.  Nothing in this Section 3.3 shall be construed to constitute Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.  No partial prepayment under Section 2.2 of the Credit Agreement or under this Section 3.3 will change the due dates or the amount of the scheduled principal payments otherwise required by the Term Loan B Note, the Fifth Third Shareholder Loan Documents, the Credit Agreement, this Amendment (including, without limitation, the Seventh Amendment Fifth Third Shareholder Loans Paydown, as it respects the Fifth Third Shareholder Loans), or any other Loan Document.

3.4             Application of Net Proceeds from Cole Water Property . Notwithstanding anything to the contrary in the Credit Agreement, any other Loan Document, or any Fifth Third Shareholder Loan Document, with respect to any mandatory prepayment described in Section 2.2(g)(i) of the Credit Agreement arising out of a sale or other disposition of all or any portion of the Cole Water Property (a “ Cole Water Mandatory Prepayment ”), the Net Proceeds of any such Cole Water Mandatory Prepayment shall, absent the occurrence and continuance of an Event of Default (in which case it shall be applied in the order and manner determined by Lender), be applied as follows:

 
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(i)            first , (a) 90% of such Net Proceeds shall be applied to the then outstanding principal balance of the Revolving Loans and (b) 10% of such Net Proceeds shall be applied first to the remaining installments of principal under the Term Loan B Note, in the inverse order of maturity, until Term Loan B has been paid in full, then to the remaining installments of principal under the Fifth Third Shareholder Loans, in the inverse order of maturity (or, if no periodic installments of principal are then scheduled under the Fifth Third Shareholder Loans, to the then outstanding principal balance of the Fifth Third Shareholder Loans), in each case until the Fifth Third Shareholder Loans have been paid in full (and in any case under the foregoing clause (a) or (b) above, any Net Proceeds remaining after the application set forth in such clause (a) or (b), as applicable, shall be applied as set forth in the other clause (a) or (b), as applicable);

(ii)            second , at any time after the Fifth Third Shareholder Loans and the Revolving Loans shall have been repaid in full, any remaining Net Proceeds shall be applied to cash collateralize any outstanding Letter of Credit Obligations; and

(iii)            third , at any time after the Fifth Third Shareholder Loans and the Revolving Loans shall have been repaid in full, any remaining Net Proceeds shall be applied in repayment of any of the other Obligations then due and payable.  Nothing in this Section 3.3 shall be construed to constitute Lender’s consent to any transaction that is not permitted by other provisions of this Agreement or the other Loan Documents.  No partial prepayment under Section 2.2 of the Credit Agreement or under this Section 3.3 will change the due dates or the amount of the scheduled principal payments otherwise required by the Term Loan B Note, the Fifth Third Shareholder Loan Documents, the Credit Agreement, this Amendment (including, without limitation, the Seventh Amendment Fifth Third Shareholder Loans Paydown, as it respects the Fifth Third Shareholder Loans), or any other Loan Document.

3.5             Default of Additional Covenants .  Without limiting any other term or provision of this Amendment or any other Loan Document, Borrower and Parent acknowledge that failure to comply with the covenants and obligations set forth in this Section 3 will constitute an immediate Event of Default under the Credit Agreement and other Loan Documents.

4.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

4.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d) attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (c) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment, the other Amendment Documents (as defined below), and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 4.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (e) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

 
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4.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation and Amendment of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors (other than Mark A. Fox) to execute the Reaffirmation and Amendment of Capital Contribution Agreement below.

4.3             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors (other than Mark A. Fox) to execute the Reaffirmation of Subordination below.

4.4             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

4.5             Fifth Third Shareholder Loan Documents .  Borrower shall execute and deliver, or cause to be executed and delivered, to Lender, all in form and substance satisfactory to Lender: (a) an Amended, Restated, and Consolidated Draw Loan Note and Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Fifth Third Shareholder Loan Note ”) and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to the Fifth Third Shareholder Loans contemplated by the Fifth Third Shareholder Loan Note (collectively with the Fifth Third Shareholder Loan Note, the “ Shareholder Note Documents ”).

4.6             Seventh Amendment LaSalle Consent Letter . As a condition of this Amendment, Borrower and Parent shall execute and deliver to Lender, and shall cause LaSalle to execute and deliver to Lender, that certain Consent Letter Regarding Monthly Principal Payments and Retention by Fifth Third of $25,000,000 Payment dated as of the October 1, 2011 made by Lender and accepted by LaSalle and Borrower (the “ Seventh Amendment LaSalle Consent Letter ”), in form and substance acceptable to Lender, and including, among other things, LaSalle’s consent to the application of the Seventh Amendment Fifth Third Shareholder Loan Paydown in accordance with this Amendment.

5.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

 
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            6.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       6.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, as applicable, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan B Note, the Shareholder Note Documents, the Seventh Amendment LaSalle Consent Letter and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

                       6.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

6.3            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Current Defaults.

            7.             Costs and Expenses; Fee .  As a condition of this Amendment, (a) Borrower will pay to Lender an amendment fee of $200,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (b) Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby, including, without limitation, reasonable attorneys’ fees.

8.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment; provided that nothing herein or in any of the Loan Documents shall be construed to supersede, or to have merged into, any of the Fifth Third Shareholder Loan Documents, all of which will remain in full force and effect.

            9.             Release .  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, “ Claims ”) against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing’s respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, “ Lender Parties ”) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

 
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            10.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

            11.             Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or, as applicable, as amended (or amended and restated) by one of the other Amendment Documents, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

            12.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, and (c) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            13.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            14.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            15.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

16.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

 
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17.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

18.             Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) Mark A. Fox is not executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors (other than Mark A. Fox) pursuant to this Amendment; (b) Mark A. Fox is not executing the Reaffirmation and Amendment of Capital Contribution Agreement required to be executed by the Contributors (other than Mark A. Fox) pursuant to this Amendment; (c) Mark A. Fox is not executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors (other than Mark A. Fox) pursuant to this Amendment; (d) none of Anthony Robbins, Peter Lusk, or Mark A. Fox  is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (e) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (f) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, Peter Lusk, or Mark A. Fox from his respective obligations under any of such Loan Documents, as applicable.

19.             Consent to Cole Water Property .  Lender hereby consents, without recourse, representation or warranty, to the sale by Borrower of the real estate and improvements thereon located in Miami County, Indiana, commonly known as 51 Strawtown Pike, Peru, Indiana.  This consent either alone or together with other consents which Lender may give from time to time, shall not, by course of dealing, implication or otherwise, (a) obligate Lender to consent to any other sales of Loan Collateral, in each case, past, present or future, other than as specifically consented to by this Amendment or as expressly permitted by the Credit Agreement, as amended hereby, or (b) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by Borrower.


[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers on the Signature Date to be effective as of the Effective Date.

TWINLAB CORPORATION
IDEA SPHERE INC.


By:    /S/ Thomas A. Tolworthy                                                                          
Thomas A. Tolworthy, President and CEO

FIFTH THIRD BANK


By:    /S/ Thomas A. Tolworthy                                                                                     
Andrew P. Hanson, Vice President


SIGNATURE PAGE TO
SEVENTH AMENDMENT TO CREDIT AGREEMENT
 
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EXHIBIT 10.5.9
                          
Execution Version

EIGHTH AMENDMENT TO CREDIT AGREEMENT

THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), dated as of December 23, 2011 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, and the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) amend the Credit Agreement and other Loan Documents to extend the stated Termination Date to January 5, 2014; (ii) waive the Current Defaults (as defined in Section 2.1 ); and (iii) make certain other amendments to the Credit Agreement and certain of the other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement and the other Loan Documents to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendments to Credit Agreement .  Subject to the satisfaction of the conditions of this Amendment, the Credit Agreement is hereby amended as follows:

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:

 
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Capital Contributions Credit ” has the meaning given in the Capital Contribution Agreement.

Conditions to Payment of Preferred Cash Dividends ” means, with respect to any proposed Permitted Preferred Cash Dividend Payment, each of the following conditions:  (a) no Event of Default then exists or would result from the making of such proposed Permitted Preferred Cash Dividend Payment, (b) after giving effect to the making of such proposed Permitted Preferred Cash Dividend Payment, on a pro forma basis, Borrower would have Revolving Loan Availability in the principal amount of at least $2,500,000, after subtracting therefrom the total, as of such date, of the amount, if any, (i) of Borrower’s accounts payable which remain unpaid greater than sixty (60) days past the invoice date with respect thereto, unless the same are the subject of an A/P Trade Payable Agreement, and (ii) any book overdraft of Borrower, and (c) after giving effect to the making of such proposed Permitted Preferred Cash Dividend Payment, Borrower is in compliance with the Fixed Charge Coverage Ratio, calculated on a pro forma basis as if such Permitted Preferred Cash Dividend Payment had been made on the first day of the relevant Test Period.

Debt-to-Equity Conversion Documents ” has the meaning given in Section 4.9 of the Eighth Amendment.

Eighth Amendment ” means the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011, among Borrower, Parent, and Lender.

Eighth Amendment LaSalle Consent Letter ” has the meaning given in Section 4.7 of the Eighth Amendment.

Extraordinary Expense Cap ” means:

(a)           for the Test Period ending on December 31, 2011, an aggregate amount equal to $175,000;

(b)           for each of the Test Periods ending on March 31, 2012 and June 30, 2012, an aggregate amount equal to $183,683; and

(c)           for any Test Period ending on or after September 30, 2012, an aggregate amount equal to $500,000.

Extraordinary Expense Carryover Amount ” means:

 
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(a)            for each of the Test Periods ending on December 31, 2011, March 31, 2012, and June 30, 2012, an aggregate amount equal to $316,317; and

(b)            for any Test Period ending on or after September 30, 2012, an amount equal to zero Dollars.

Preferred Stock Documents ” has the meaning given in Section 4.8 of the Eighth Amendment.

Prepaid Capital Contribution Payments ” means, for all purposes of this Agreement and the other Loan Documents, aggregate amounts (a) representing Capital Contributions (as defined in the Capital Contribution Agreement) satisfied by the Capital Contributions Credit, in an aggregate amount up to $15,000,000 with respect to all Capital Contributions resulting from any Capital Contribution Triggering Event occurring on or after October 30, 2011, and (b) with respect to which Contributors’ (as defined in the Capital Contribution Agreement) obligation to make such Capital Contributions is deemed satisfied pursuant to, and in accordance with, the terms of the Capital Contribution Agreement.

Voluntary Capital Contribution Payments ” means, for any period, aggregate amounts which are (a) voluntarily paid by one or more Contributors (as defined in the Capital Contribution Agreement), (b) received by Lender in cash pursuant to, and in accordance with, the terms of the Capital Contribution Agreement, and (c) applied by Lender against the unpaid balance of the Loans in accordance with this Agreement.

1.2            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their entireties by substituting the following in their respective places:

Capital Contribution Payments ” means, for any period, aggregate amounts received by Lender in cash under the Capital Contribution Agreement and applied by Lender against the unpaid balance of the Loans in accordance with this Agreement.  For the avoidance of any doubt, “Capital Contribution Payments” shall not include (a) Prepaid Capital Contribution Payments or (b) any other Capital Contributions subject to the Capital Contribution Credit.

 
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EBITDA ” means, for any period, the total (without duplication) in Dollars of (all as determined in accordance with GAAP on a consolidated basis): (a) Net Income, plus (b) the aggregate amount of Loan Parties’ depreciation and amortization expense for the applicable period to the extent deducted in the determination of Net Income, plus (c) the aggregate amount of Loan Parties’ interest expense for the applicable period to the extent deducted in the determination of Net Income, plus (d) the aggregate amount of Loan Parties’ income and franchise tax expense for the applicable period to the extent deducted in the determination of Net Income, plus (e) any non-cash loss incurred during the applicable period arising from the sale or other disposition of the Cole Water Property to the extent deducted in the determination of Net Income.  For purposes of determining EBITDA, “Net Income” will be determined exclusive of any amounts, during such period, attributable to: (i) any upward inventory adjustments except to the extent of an upward inventory adjustment as certified by Loan Parties’ independent certified public accountants under GAAP as part of preparing Loan Parties’ annual audited Financial Statements and for which Lender is given notice of the amount thereof; (ii) any gain arising from the sale of capital assets; (iii) any gain arising from the write-up of any assets; (iv) any extraordinary gains and items of income; (v) any gains recognized by a Loan Party as earnings which relate to adjustments made by a Loan Party as a result of any extraordinary accounting adjustment; and (vi) any other non-operating, non-recurring gains.

Fifth Third Shareholder Loans ” means the Indebtedness owing to Lender (or its successors or assigns) evidenced by (a) that certain Amended, Restated, and Consolidated Draw Loan Note and Agreement dated as of December 23, 2011 made by David L. Van Andel and William W. Nicholson to the order of Fifth Third Bank in the original principal amount of $36,300,000 (as may be further amended, restated, modified, supplemented or replaced from time to time, the “ Fifth Third Shareholder Note ”), and (b) the other Fifth Third Shareholder Loan Documents (as defined in the Fifth Third Shareholder Note) (all of the foregoing, as the same may be further amended, restated, modified, supplemented or replaced from time to time, collectively, the “ Fifth Third Shareholder Loan Documents ”).

Fixed Charge Coverage Ratio ” means, as of any date of determination, the ratio resulting from dividing: (a) the sum of (i) EBITDA for any Test Period, plus (ii) the then applicable Extraordinary Expense Carryover Amount, plus (iii) any Extraordinary Expenses incurred in that same Test Period up to the then applicable Extraordinary Expense Cap, less (iv) Loan Parties’ aggregate consolidated Non-financed Capital Expenditures made in cash during that same Test Period, by (b) Fixed Charges for that same Test Period.

 
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Fixed Charges ” means, for the applicable Test Period, the total (without duplication), in Dollars, of (all as determined on a consolidated basis in accordance with GAAP): (a) the principal amount of Loan Parties’ consolidated long-term debt and obligations, in each case, paid during the applicable Test Period (other than the Eighth Amendment Loan Paydowns (as defined in the Eighth Amendment), any Cole Water Mandatory Prepayment (as defined in the Seventh Amendment), and any Mortgaged Property Mandatory Prepayment (as defined in the Seventh Amendment)); (b) the principal portion of Loan Parties’ aggregate consolidated Capitalized Lease Obligations paid during the applicable Test Period; (c) Loan Parties’ aggregate consolidated cash payments of interest during the applicable Test Period (including interest paid on the Obligations, the Fifth Third Shareholder Loans, the Alticor Note, the Owner/Affiliate Subordinated Debt, the LaSalle Debt, the Capitalized Lease Obligations and any other Indebtedness for the applicable Test Period); (d) Loan Parties’ aggregate consolidated cash payments of income and franchise taxes during such Test Period (whether or not in the form of Tax Distributions); and (e) all dividends and distributions paid by Parent to its shareholders for such Test Period (including each Permitted Preferred Cash Dividend Payment) ( provided that nothing herein shall be deemed to allow any such dividends and distributions unless expressly permitted under Section 5.6 ).  For the avoidance of any doubt, “Fixed Charges” shall be determined exclusive of any principal and/or interest payments on the Fifth Third Shareholder Loans made by Persons other than Borrower after the Effective Date (as defined in the Eighth Amendment).

Owner/Affiliate Subordination Agreements ” means, collectively: (a) the Subordination Agreement between Mark A. Fox and Lender dated as of the date of this Agreement, among other things, subordinating the applicable Owner/Affiliate Subordinated Debt to the Obligations; (b) the Subordination Agreement between JVA Enterprises Capital, LLC and Lender dated as of the date of this Agreement, among other things, subordinating the applicable Owner/Affiliate Subordinated Debt to the Obligations; (c) the Subordination Agreement between John Paul DeJoria and Lender dated as of the date of this Agreement, among other things, subordinating the applicable Owner/Affiliate Subordinated Debt to the Obligations; (d) the Amended and Restated Subordination Agreement between William W. Nicholson and Lender dated as of December 23, 2011, among other things, subordinating the applicable Owner/Affiliate Subordinated Debt to the Obligations; and (e) the Amended and Restated Subordination Agreement between David L. Van Andel and Lender dated as of December 23, 2011, among other things, subordinating the applicable Owner/Affiliate Subordinated Debt to the Obligations.

 
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Test Period ” means each 12 Month Period ending at the end of each Fiscal Quarter or Fiscal Year.  The first Test Period occurring on or after the Effective Date (as defined in the Eighth Amendment), for the purposes of this Agreement shall end on the Fiscal Year ended on December 31, 2011; provided , that with respect to determining the Fixed Charge Coverage Ratio under Section 5.10 as of (a) December 31, 2011, “ Test Period ” means the period beginning on October 1, 2011 and ending on December 31, 2011, (b) March 31, 2012, “ Test Period ” means the period beginning on October 1, 2011 and ending on March 31, 2012, (c) June 30, 2012, “ Test Period ” means the period beginning on October 1, 2011 and ending on June 30, 2012, and (d) September 30, 2012, “ Test Period ” means the period beginning on October 1, 2011 and ending on September 30, 2012.

1.3            Clause (a) of the definition of “Change of Control” in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

 
(a)
a change in the ownership of Parent, such that David L. Van Andel, William W. Nicholson and John Paul DeJoria, collectively, fail to: (i) own legally and beneficially, free and clear of any Liens, more than 50%, on a fully diluted basis, of the outstanding Ownership Interests of Parent or (ii) have the power to direct or cause the direction of the management and policies of Parent;

1.4            Each reference to “July 8, 2013” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “January 5, 2014” for such reference to “July 8, 2013” where “July 8, 2013” appears therein.

1.5             Section 2.1(c)  of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)            On the Effective Date (as defined in the Eighth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 to this Agreement (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Effective Date (as defined in the Eighth Amendment), in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b)  and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

1.6             Section 2.2(d)  of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

 
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(d)           On the Effective Date (as defined in the Eighth Amendment), Borrower shall execute and deliver to Lender an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d)  to the this Agreement (as amended and restated, the “ Term Loan B Note ”), dated to be effective as of the Effective Date (as defined in the Eighth Amendment), in the original principal amount of Term Loan B as of the Effective Date (as defined in the Eighth Amendment), and bearing interest at such rates, and payable upon such terms, as specified in the Term Loan B Note.

1.7             Section 5.6(a)  of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(a)           Neither Borrower nor Parent will declare or pay any dividend or distributions on its Ownership Interests (including any return of capital) except that:

(i)            Borrower may make cash dividends or distributions to Parent solely in order, and in such amounts sufficient: (A) for Parent to pay (“ Tax Distributions ”): (1) the federal, state and local income tax liabilities of Borrower which are then due (to the extent Borrower is consolidated with Parent for income tax purposes), or (2) any state franchise taxes of Parent which are then due, and (B) for Parent to make Investments in the Joint Ventures to the extent permitted by Section 5.9(ii) ;

(ii)           Borrower may make cash dividends or distributions to Parent, and Parent may make cash dividends or distributions to a Contributor (as defined in the Capital Contribution Agreement), in each case solely to the extent, and in the manner, expressly permitted by the applicable Owner/Affiliate Subordination Agreement;  and

(iii)           Borrower may make cash dividends or distributions to Parent, and Parent may make cash dividends or distributions to its preferred shareholders, in each case solely in order, and in such amounts sufficient, for Parent to pay cash dividends that have been declared by Parent's Board of Directors on Parent's preferred stock, in an aggregate amount not to exceed $1,250,000 in any Fiscal Year (collectively, “ Permitted Preferred Cash Dividends ”), so long as, with respect to each proposed Permitted Preferred Cash Dividend and after giving effect thereto, each of the Conditions to Payment of Preferred Cash Dividends has been satisfied.


 
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1.8             Section 5.10 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

5.10            Fixed Charge Coverage Ratio .  Loan Parties will not permit the Fixed Charge Coverage Ratio to be less than the ratio set opposite the following Test Periods ending on any of the following dates or occurring during any of the following periods:

Test Periods
Fixed Charge Coverage Ratio
   
For each of the Test Periods ending on
and after December 31, 2011
  1.0 to 1  

1.9             Section 6.6 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

6.6            Capital Contribution Payments .  In the event that there is an Event of Default of the Curable Financial Covenant (and there is no other Event of Default then in existence), Borrower may cure such Event of Default if (a) one or more of the following occurs (collectively, “ Capital Contribution Events ”): (i) Capital Contribution Payments are made in strict compliance with the terms of the Capital Contribution Agreement, (ii) Prepaid Capital Contribution Payments are deemed to have been made in strict compliance with the terms of the Capital Contribution Agreement, or (iii) Voluntary Capital Contribution Payments are made pursuant to, and in accordance, with the terms of the Capital Contribution Agreement; and (b) the proceeds of such Capital Contribution Events are (1) received by Lender in cash (other than as it respects any Prepaid Capital Contribution Payments) and (2) are in an amount sufficient, if treated as being EBITDA for the applicable Test Period, to cause compliance with the Fixed Charge Coverage Ratio.  For purposes of calculating the Fixed Charge Coverage Ratio with respect to all applicable Test Periods, EBITDA, solely for purposes of the Fixed Charge Coverage Ratio under Section 5.10 , shall be deemed to include the amount received (or deemed to have been received) as a consequence of the applicable Capital Contribution Event by Lender in accordance with this Section 6.6 as if such Capital Contribution Events occurred in the Test Period for which there was an Event of Default under Section 5.10 that resulted in the Capital Contribution Triggering Event applicable to such Capital Contribution Events.  Borrower agrees to include in each Compliance Certificate delivered to Lender Borrower’s identification of the then amount of the Prepaid Capital Contribution Payments and the Capital Contributions Credit.

 
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1.10                        Section 9.8 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

9.8            Notices .  Any notice required, permitted or contemplated hereunder shall, except as expressly provided in this Agreement, be in writing and addressed to the party to be notified at the address set forth below or at such other address as each party may designate for itself from time to time by notice hereunder and shall be deemed validly given: (a) when delivered in hand, (b) on completion of a facsimile transmission to the number listed below so long as (i) receipt of confirmation of the telecopy is made by the sending party and (ii) an original notice is also sent to the receiving party contemporaneously with facsimile by overnight courier in accordance with subparagraph (c) of this Section 9.8 , (c) the next Business Day after such notice was delivered to a regularly scheduled nationally recognized overnight delivery carrier (such as FedEx, UPS, or DHL) with delivery fees either prepaid or an arrangement, satisfactory with such carrier, made for the payment of such fees, or (d) five (5) Business Days after such notice was mailed by registered or certified mail, return receipt requested, addressed as follows:

To Loan Parties:                                   Idea Sphere Inc.
632 Broadway
Suite 201
New York, New York 10012
Attn: Thomas A. Tolworthy, President
Richard H. Neuwirth, General Counsel
Fax: (212) 505-5413
To Lender:                                          38 Fountain Square Plaza
MD #10AT63
Cincinnati, Ohio  45263
Attention:  William R. Harrod

 
and
 
111 Lyons Street N.W.
MD  RMOB2C
Grand Rapids, Michigan  49503
Attention:  Andrew P. Hanson
 

 
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1.11             Exhibit 2.1 to the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 2.1 .   Exhibit 2.2(d) to the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 2.2(d) .   Exhibit 4.3(d) the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Exhibit 4.3(d) .   Schedule 1.2 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.2 in its place. Schedule 1.3 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.3 in its place. Schedule 1.4 of the Credit Agreement is hereby deleted in its entirety. Schedule 1.5 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 1.5 in its place. Schedule 3.3 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.3 in its place. Schedule 3.5 of the Credit Agreement is hereby supplemented by the document attached hereto as Schedule 3.5 in its place.    Schedule 3.6 of the Credit Agreement is hereby amended by the document attached hereto as Schedule 3.6 in its place. Schedule 3.8 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.8 in its place.   Schedule 3.9 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.9 in its place.   Schedule 3.12(a)  of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.12(a)  in its place.   Schedule 3.12(b)  of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.12(b)  in its place. Schedule 3.14 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.14 in its place.   Schedule 3.15 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.15 in its place. Schedule 3.19 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 3.19 in its place.   Schedule 5.1 of the Credit Agreement is hereby amended in its entirety by substituting the document attached hereto as Schedule 5.1 in its place.

2.             Waiver of Current Defaults; Rescission of Acceleration and Acknowledgment Regarding Default Rate; Lender Consents .

2.1             Waiver of Current Defaults .  As previously communicated by Lender in that certain letter dated November 7, 2011 from Lender to Borrower and the other parties thereto, and based upon financial and other information submitted by Borrower to Lender, Borrower and Parent acknowledge that the following Events of Default have occurred and continue to exist as of the Effective Date (collectively, the “ Current Defaults ”): (a) pursuant to Section 3.1 of the Seventh Amendment as a result of Borrower's failure to make the Seventh Amendment Fifth Third Shareholder Loans Paydown (as defined in the Seventh Amendment) in accordance with Section 3.1 of the Seventh Amendment; (b) pursuant to Section 6.1(f)  of the Credit Agreement as a result of the occurrence and continuation of certain Events of Default (as defined in the Fifth Third Shareholder Note) under the Fifth Third Shareholder Loan Documents, which defaults are enumerated in the Shareholder Note Documents; (c) pursuant to Section 6.1(c)  of the Credit Agreement as a result of (i) Borrower's violation of the Fixed Charge Coverage Ratio Financial Covenant for the Test Period ended September 30, 2011 and (ii) a breach of Section 2 of the Capital Contribution Agreement due to the failure of the Contributors (as defined in the Capital Contribution Agreement) to make all of the required Capital Contributions (as defined in the Capital Contribution Agreement) in cash in immediately available funds on or before November 14, 2011 (the “ Capital Contribution Default ”); (d) pursuant to Section 6.1(t)  of the Credit Agreement due to the Capital Contribution Default; (e) under Section 6.1(c) of the Credit Agreement as a result of payments made prior to the Effective Date in contravention of the express terms of the Owner/Affiliate Subordination Agreements; (f) pursuant to Section 10.3 of the LaSalle Loan Agreement due to the defaults under the Credit Agreement enumerated herein; and (g) under Section 4.9 of the Credit Agreement as a result of the Loan Parties' failure to timely provide written notice to Lender of any of the foregoing Events of Default set forth in the immediately preceding clauses (a) through (f).  Borrower and Parent have requested that Lender waive the Current Defaults.  On the terms, and subject to the conditions, of this Amendment, Lender hereby waives the Current Defaults for the specific periods and occurrences indicated.  The waiver provided in this Section 2.1 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (A) obligate Lender to waive any Event of Default, whether past, present, or future, other than the Current Defaults, (B) constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (C) reduce, restrict or in any way affect the discretion of Lender in considering any future waiver requested by Borrower or any other Loan Party.  

 
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2.2             Rescission of Acceleration and Acknowledgment Regarding Default Rate . On and after the Effective Date: (a) Lender hereby rescinds its election to accelerate the Obligations, (b) Lender hereby revokes its demand for immediate payment in full of the Obligations, and (c) Lender will no longer impose the Default Rate to the Obligations based upon the Current Defaults; provided that nothing herein is intended, or shall be construed, to limit Lender's ability to accelerate, make demand for, or impose the Default Rate to the Obligations based upon the occurrence of any Event of Default other than the Current Defaults.

2.3             Lender Consents . Borrower and Parent have requested that Lender consent to the Preferred Stock Documents, the Debt-to-Equity Conversion Documents, and the transactions contemplated thereby (collectively, the “ Pending Equity Transactions ”). On the terms, and subject to the conditions, of this Amendment, Lender hereby consents, without recourse, representation or warranty, to the Pending Equity Transactions.  The consent provided in this Section 2.3 , either alone or together with other waivers which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (a) obligate Lender to consent to any other like occurrence or transaction, in each case past, present or future, other than the Pending Equity Transactions or as expressly permitted by the Loan Documents without Lender's consent, or (b) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by Borrower or any other Loan Party.

3.            [ Intentionally Omitted ].

4.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

4.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (b) an Amended and Restated Term Promissory Note in the form of Exhibit 2.2(d)  attached to this Amendment (the “ Amended and Restated Term Loan B Note ”); (c) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment, the other Amendment Documents (as defined below), and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of Borrower; (d) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 4.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (e) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower's credit facilities with Lender contemplated by this Amendment.

4.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation and Amendment of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors (other than Mark A. Fox) to execute the Reaffirmation and Amendment of Capital Contribution Agreement below.

 
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4.3             Reaffirmations of Subordination; Amended and Restated Subordination Agreements .  As a condition of this Amendment, Borrower and Parent shall cause: (a) each of John Paul DeJoria and JVA Enterprises Capital, LLC to execute the Reaffirmation of Subordination below and (b) each of William W. Nicholson and David L. Van Andel to execute an Amended and Restated Subordination Agreement in favor of Lender, in form and substance satisfactory to Lender in its sole discretion.

4.4             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

4.5             Fifth Third Shareholder Loan Documents .  As a condition of this Amendment, Borrower shall execute and deliver, or cause to be executed and delivered, to Lender, all in form and substance satisfactory to Lender (collectively, the “ Shareholder Note Documents ”): (a) a Loan Assumption Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Loan Assumption Agreement ”), duly executed by David L. Van Andel and William W. Nicholson, (b) an Amended, Restated, and Consolidated Draw Loan Note and Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Fifth Third Shareholder Loan Note ”), duly executed by David L. Van Andel and William W. Nicholson,  and (c) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to the Fifth Third Shareholder Loans contemplated by the Loan Assumption Agreement and/or the Fifth Third Shareholder Loan Note.

4.6             Eighth Amendment Loan Paydowns .  On or about November 23, 2011, Borrower received $5,000,000, in immediately available funds, in anticipation of the consummation of the Preferred Stock Documents (the “ Initial Preferred Stock Proceeds ”).  As a condition of this Amendment, on or before the Effective Date (collectively, the “ Eighth Amendment Loan Paydowns ”): (a) Borrower shall cause that portion of the Initial Preferred Stock Proceeds that has not been used by Borrower prior to the Effective Date for working capital purposes to be applied to the outstanding principal balance of the Revolving Loans, (b) Borrower shall pay to Lender an amount equal to $5,000,000, in immediately available funds which may not be Initial Preferred Stock Proceeds or proceeds of Revolving Loans, for application against the outstanding principal balance of the Revolving Loans, and (c) Borrower shall pay to Lender an amount equal to $15,000,000, in immediately available funds which may not be Initial Preferred Stock Proceeds or proceeds of Revolving Loans, for application against the outstanding principal balance of the Fifth Third Shareholder Loans.  Upon Lender's receipt of the Eighth Amendment Loan Paydowns in accordance with this Section 4.6 , Lender, Parent, and Borrower hereby acknowledge and agree that Borrower's obligations pursuant to Section 3.1 of the Seventh Amendment are of no further force or effect.

 
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4.7             Eighth Amendment LaSalle Consent Letter . As a condition of this Amendment, Borrower and Parent shall execute and deliver to Lender a consent letter, duly executed by LaSalle and acknowledged by Borrower (the “ Eighth Amendment LaSalle Consent Letter ”), in form and substance acceptable to Lender, and including, among other things, LaSalle's consent to the application of the Eighth Amendment Loan Paydowns in accordance with this Amendment.

4.8             Preferred Stock Documents .  As a condition of this Amendment, on or before the Effective Date, Borrower shall execute and deliver to Lender, or cause to be executed and delivered to Lender, as applicable, all in form and substance (and on terms and conditions) satisfactory to Lender in its sole discretion (collectively, the “ Preferred Stock Documents ”): (a) all documents, instruments and agreements executed and delivered by Parent or any other Person in connection with Parent's issuance of preferred stock, and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender in connection with any of the foregoing.  Upon Lender's receipt of the Preferred Stock Documents in accordance with this Section 4.7 , Lender, Parent, and Borrower hereby acknowledge and agree that Borrower's obligations pursuant to Section 3.2 of the Seventh Amendment are of no further force or effect.

4.9             Debt-to-Equity Conversion Documents .  As a condition of this Amendment, on or before the Effective Date, Borrower shall execute and deliver to Lender, or cause to be executed and delivered to Lender, as applicable, all in form and substance (and on terms and conditions) satisfactory to Lender in its sole discretion (collectively, the “ Debt-to-Equity Conversion Documents ”): (a) all documents, instruments and agreements executed and delivered by Borrower or any other Person in connection with the conversion of the Owner/Affiliate Subordinated Debt outstanding on the Effective Date (prior to giving effect to this Amendment and the transactions contemplated hereby) owing by Borrower to each of David L. Van Andel, William W. Nicholson, and John Paul DeJoria, and (b) all other documents, instruments and agreements deemed necessary or desirable by Lender in connection with any of the foregoing.

5.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents (other than solely to the extent of the Eighth Amendment Loan Paydowns); (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

 
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            6.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       6.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, as applicable, this Amendment, the Amended and Restated Revolving Note, the Amended and Restated Term Loan B Note, the Loan Assumption Agreement, the Eighth Amendment LaSalle Consent Letter, the Preferred Stock Documents, the Debt-to-Equity Conversion Documents, and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”) and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

                       6.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

6.3            No Event of Default has occurred and is continuing under the Credit Agreement, other than the Current Defaults.

            7.             Costs and Expenses .  As a condition of this Amendment, Borrower will pay and reimburse Lender, promptly upon Lender's request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby, including, without limitation, reasonable attorneys' fees.

8.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment; provided that nothing herein or in any of the Loan Documents shall be construed to supersede, or to have merged into, any of the Fifth Third Shareholder Loan Documents, all of which will remain in full force and effect.

            9.             Release .  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, “ Claims ”) against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing's respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, “ Lender Parties ”) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment, any other Loan Document, or any Fifth Third Shareholder Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Effective Date.

 
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            10.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party's obligations under any Amendment Document shall constitute an Event of Default under the Credit Agreement.

            11.             Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or, as applicable, as amended (or amended and restated) by one of the other Amendment Documents, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

            12.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to: (a) the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Revolving Note will be deemed to be references to Amended and Restated Revolving Note, and (c) the Term Loan B Note will be deemed to be references to the Amended and Restated Term Loan B Note.  Any Amendment Document may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

            13.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            14.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            15.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

16.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

 
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17.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

18.             Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) Mark A. Fox is not executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors (other than Mark A. Fox) pursuant to this Amendment; (b) Mark A. Fox is not executing the Reaffirmation and Amendment of Capital Contribution Agreement required to be executed by the Contributors (other than Mark A. Fox) pursuant to this Amendment; (c) Mark A. Fox is not executing the Reaffirmation of Subordination required to be executed by John Paul DeJoria and JVA Enterprises Capital, LLC pursuant to this Amendment; (d) none of Anthony Robbins, Peter Lusk, or Mark A. Fox  is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (e) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (f) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, Peter Lusk, or Mark A. Fox from his respective obligations under any of such Loan Documents, as applicable.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers as of the Effective Date.

TWINLAB CORPORATION
IDEA SPHERE INC.


By:    /S/ Thomas A Tolworthy                                                                          
Thomas A. Tolworthy, President and CEO

FIFTH THIRD BANK


By:    /S/ Andrew P. Hanson                                                                                     
Andrew P. Hanson, Vice President

 






 

SIGNATURE PAGE TO
EIGHTH AMENDMENT TO CREDIT AGREEMENT
 
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EXHIBIT 10.5.10
 
NINTH AMENDMENT TO CREDIT AGREEMENT

THIS NINTH AMENDMENT TO CREDIT AGREEMENT (this " Amendment "), dated to be effective as of September 30, 2012 (the " Effective Date "), by and among TWINLAB CORPORATION , a Delaware corporation (" Borrower "), IDEA SPHERE INC. , a Michigan corporation (" Parent "), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (" Lender "), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011 and the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011 (such Credit Agreement, as heretofore amended, being the " Credit Agreement ").  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender make certain amendments to the Credit Agreement, all as more specifically set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.             Amendment .

            1.1                        Application of Net Proceeds from Mortgaged Property . Notwithstanding anything to the contrary in the Credit Agreement or any other Loan Document with respect to any mandatory prepayment described in Section 2.2(g)(i)  of the Credit Agreement arising out of a sale or other disposition of all or any portion of the Mortgaged Property, other than that portion of the Mortgaged Property described as follows: Parcels of land located in American Fork, Utah County, Utah, and described as follows:   Lot 32 and Lot 33, amended Plat "J", Utah Valley Business Park Subdivision, according to the Official Plat thereof, on file and of record in the Office of the Utah County Recorder (the " Specified Mortgaged Property "), the Net Proceeds of any such sale or sales (other than a sale of the Specified Mortgaged Property) shall, absent the occurrence and continuance of an Event of Default (in which case it shall be applied in the order and manner determined by Lender), be applied as follows:

 
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(i)             first , 100% of such Net Proceeds shall be applied to the remaining installments of principal under the Term Loan B Note, in the inverse order of maturity, until Term Loan B has been paid in full;

(ii)             second , at any time after Term Loan B shall have been repaid in full, (A) 90% of such Net Proceeds shall be applied as a non-permanent paydown to the then outstanding principal balance of the Revolving Loans and (B) 10% of such Net Proceeds shall be applied as a permitted partial prepayment of the principal owing under the Eighth Amendment Subordinated Note as defined in the Owner/Affiliate Subordination Agreements on the condition precedent that the proceeds thereof are immediately used to make a partial prepayment of the principal amount of the Fifth Third Shareholder Loans in the exact amount of such prepayment of the Eighth Amendment Subordinated Note (and in any case under the foregoing clause (A) or (B) above, any Net Proceeds remaining after the application set forth in such clause (A) or (B), as applicable, shall be applied as set forth in the other clause (A) or (B), as applicable);

(ii)             third , at any time after the Revolving Loans, Term Loan B and the Fifth Third Shareholder Loans shall have been repaid in full, any such remaining Net Proceeds shall be applied to cash collateralize any outstanding Letter of Credit Obligations; and

(iii)             fourth , after all Letter of Credit Obligations are fully cash collateralized, any such remaining Net Proceeds shall be applied in repayment of any of the other Obligations then due and payable.  Nothing in this Section 1.1 shall be construed to constitute Lender's consent to any transaction that is not permitted by other provisions of the Loan Documents.  No partial prepayment under Section 2.2 of the Credit Agreement or under this Section 1.1 will change the due dates or the amount of the scheduled principal payments otherwise required by the Term Loan B Note, the Credit Agreement or any other Loan Document.

1.2             Application of Net Proceeds from Sale of Specified Mortgaged Property . Notwithstanding anything to the contrary in the Credit Agreement any other Loan Document, with respect to any mandatory prepayment described in Section 2.2(g)(i)  of the Credit Agreement arising out of a sale or other disposition of the Specified Mortgaged Property, the Net Proceeds of any such sale shall, absent the occurrence and continuance of an Event of Default (in which case it shall be applied in the order and manner determined by Lender), be applied as follows: (i)  first 90% of such Net Proceeds shall be applied as a non-permanent paydown to the then outstanding principal balance of the Revolving Loans and (ii)  second 10% of such Net Proceeds shall be applied to the remaining installments of principal under the Term Loan B Note, in the inverse order of maturity.   No partial prepayment under Section 2.2 of the Credit Agreement or under this Section 1.2 will change the due dates or the amount of the scheduled principal payments otherwise required by the Term Loan B Note, the Credit Agreement or any other Loan Document.

 
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1.3             Application of Net Proceeds from Sale of Cole Water Property . Notwithstanding anything to the contrary in the Credit Agreement or any other Loan Document, with respect to any mandatory prepayment described in Section 2.2(g)(i)  of the Credit Agreement arising out of a sale or other disposition of all or any portion of the Cole Water Property, the Net Proceeds of any such sale or sales shall, absent the occurrence and continuance of an Event of Default (in which case it shall be applied in the order and manner determined by Lender), be applied as follows:

(i)             first , (A) 90% of such Net Proceeds shall be applied to the then outstanding principal balance of the Revolving Loans as a non-permanent reduction of the Revolving Loans and (B) 10% of such Net Proceeds shall be applied first to the remaining installments of principal under the Term Loan B Note, in the inverse order of maturity, until Term Loan B has been paid in full and applied second as a permitted partial prepayment of the principal owing under the Eighth Amendment Subordinated Note on the condition precedent that the proceeds thereof are immediately used to make a partial prepayment of the principal amount of the Fifth Third Shareholder Loans in the exact amount of such prepayment of the Eighth Amendment Subordinated Note (and in any case under this clause (A) or (B) above, any Net Proceeds remaining after the application set forth in such clause (A) or (B), as applicable, shall be applied as set forth in the other clause (A) or (B), as applicable);

                                     (ii)     second , at any time after the Revolving Loans, Term Loan B and the Fifth Third Shareholder Loans shall have been repaid in full, any such remaining Net Proceeds shall be applied to cash collateralize any outstanding Letter of Credit Obligations; and

(iii)  third , after all Letter of Credit Obligations are fully cash collateralized, any such remaining Net Proceeds shall be applied in repayment of any of the other Obligations then due and payable.  Nothing in this Section 1.3 shall be construed to constitute Lender's consent to any transaction that is not permitted by other provisions of this Amendment or the other Loan Documents.  No partial prepayment under Section 2.2 of the Credit Agreement or under this Section 1.3 will change the due dates or the amount of the scheduled principal payments otherwise required by the Term Loan B Note, the Credit Agreement or any other Loan Document.

2.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

2.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender: (a) evidence, in form and substance satisfactory to Lender in its sole discretion, that this Amendment and the transactions contemplated hereby were duly authorized by the Board of Directors of Borrower; (b) evidence, in form and substance satisfactory to Lender in its sole discretion, that the Reaffirmation of Guaranty and Security (as referenced in Section 2.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party (other than Borrower); and (c) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower's credit facilities with Lender contemplated by this Amendment.

 
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2.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors (other than Mark A. Fox) to execute the Reaffirmation of Capital Contribution Agreement below.

2.3             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors (other than Mark A. Fox) to execute the Reaffirmation of Subordination below.

2.4             Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

3.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

            4.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       4.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, as applicable, this Amendment and the execution and delivery of, and the performance of its obligations under and arising out of, the Amendment have been duly authorized by all necessary corporate action.

                       4.2            This Amendment constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

4.3            No Event of Default has occurred and is continuing under the Credit Agreement.

 
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            5.             Costs and Expenses .  As a condition of this Amendment, Borrower will pay and reimburse Lender, promptly upon Lender's request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby, including, without limitation, reasonable attorneys' fees.

6.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

            7.             Release .  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, " Claims ") against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing's respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, " Lender Parties ") that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  " Prior Related Event " means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Effective Date.

            8.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party's obligations under this Amendment shall constitute an immediate Event of Default under the Credit Agreement.

            9.             Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

 
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            10.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment.  This Amendment may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (a) may be relied on by each party as if the document were a manually signed original and (b) will be binding on each party for all purposes.

            11.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

            12.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument.

            13.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

14.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

15.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

16.             Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) Mark A. Fox is not executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors (other than Mark A. Fox) pursuant to this Amendment; (b) Mark A. Fox is not executing the Reaffirmation of Capital Contribution Agreement required to be executed by the Contributors (other than Mark A. Fox) pursuant to this Amendment; (c) Mark A. Fox is not executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors (other than Mark A. Fox) pursuant to this Amendment; (d) none of Anthony Robbins, Peter Lusk, or Mark A. Fox  is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (e) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (f) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, Peter Lusk, or Mark A. Fox from his respective obligations under any of such Loan Documents, as applicable.

 
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17.             Consent to Sale of Specific Mortgaged Property .  Lender hereby consents, without recourse, representation or warranty, to the sale by Borrower of the Specific Mortgaged Property so long as the Net Proceeds thereof are (a) no less than $1,300,000 and (b) applied in accordance with Section 1.2 .  This consent either alone or together with other consents which Lender may give from time to time, shall not, by course of dealing, implication or otherwise, (i) obligate Lender to consent to any other sales of Loan Collateral, in each case, past, present or future, other than as specifically consented to by this Amendment or as expressly permitted by the Credit Agreement, as amended hereby, or (ii) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by Borrower.  Upon such sale and the application of the Net Proceeds in accordance with Section 1.2 of this Amendment, Lender will execute and record a mortgage release in the form acceptable to Lender and Borrower.


[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.

TWINLAB CORPORATION
IDEA SPHERE INC.


By:    /S/ Thomas A. Tolworthy                                                                          
Thomas A. Tolworthy, President and CEO

FIFTH THIRD BANK


By:    /S/ Andrew P. Hanson                                                                                        
Andrew P. Hanson, Vice President






SIGNATURE PAGE TO
NINTH AMENDMENT TO CREDIT AGREEMENT

 
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EXHIBIT 10.5.11
 
Execution Version
TENTH AMENDMENT TO CREDIT AGREEMENT

THIS TENTH AMENDMENT TO CREDIT AGREEMENT (this " Amendment "), dated to be effective as of November 1, 2013 (the " Effective Date "), by and among TWINLAB CORPORATION , a Delaware corporation (" Borrower "), IDEA SPHERE INC. , a Michigan corporation (" Parent "), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (" Lender "), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011, the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011, and the Ninth Amendment to Credit Agreement dated to be effective as of September 30, 2012 (such Credit Agreement, as heretofore amended, being the " Credit Agreement ").  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender make certain amendments to the Credit Agreement, all as more specifically set forth herein.  Lender is willing to consent to such requests and to amend the Credit Agreement to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.   Amendment .

1.1.   Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:

Applicable Advance Rate Percentage ” means (a) as of the Tenth Amendment Effective Date, 78%, (b) if, as of any applicable Dilution Determination Date occurring after the Tenth Amendment Effective Date, the Dilution Percentage is less than 5.0%, 85% and (c) if, as of any applicable Dilution Determination Date occurring after the Tenth Amendment Effective Date, the Dilution Percentage is greater than 5.0%, 80%.

Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq .), as amended from time to time and any successor statute.

Dilution Determination Date ” means the date of determination by Lender of the applicable Dilution Percentage based on field examinations conducted by or on behalf of Lender.

Excluded Swap Obligations ” means, with respect to any Guarantor and solely in its capacity as a Guarantor and not as a direct obligor thereof, any Swap Obligation if, and to the extent that, all or a portion of the Guaranty of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guaranty of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation; provided that if a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guaranty or security interest is or becomes illegal.

Guarantor ” means each of the Individual Guarantors and each of the Non-Borrower Loan Parties.

Guaranty ” means the Loan Party Guaranty and each of the Individual Guaranties.

Swap Obligation ” means any obligation of any Person to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 “ Tenth Amendment ” means the Tenth Amendment to Credit Agreement dated to be effective as of the Tenth Amendment Effective Date, among Borrower, Parent, and Lender.

Tenth Amendment Effective Date ” means November 1, 2013.


 
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1.2.   The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their entireties by substituting the following in their respective places:

Borrowing Base ” means, as of the relevant date of determination, the sum of:

(a)           the Applicable Advance Rate Percentage (subject to Section 2.1(e) ) of the then net amount of Eligible Accounts (i.e., less sales, excise or similar taxes, and less returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed);

plus           (b)           the lesser of: (i) $12,000,000 (subject to Section 2.1(e) ); and (ii) the sum of: (A) 30% (subject to Section 2.1(e) ) of the then net amount of Raw Materials which are Eligible Inventory, (B) 55% (subject to Section 2.1(e) ) of the then net amount of Finished Goods which are Eligible Inventory, and (C) 50% (subject to Section 2.1(e) ) of the then net amount of Semi-Finished Goods which are Eligible Inventory; and

less           (c)           all then Borrowing Base Reserves.

Obligations ” means, collectively, (i) the Loans, the Letter of Credit Obligations, the Rate Management Obligations, and all other loans, advances, debts, liabilities, obligations, indemnities, covenants and duties of Loan Parties (individually and collectively) owed to Lender (or any other Affiliate of Fifth Third Bancorp) of any kind, present or future, under, or arising out of, this Agreement, the Notes and the other Loan Documents and whether for the payment of money, whether arising out of overdrafts on checking, deposit or other accounts or electronic funds transfers (whether through automatic clearing houses, wire transfers or otherwise) or out of Lender’s non-receipt of, or inability to collect, funds or otherwise not being made whole in connection with depository transfer checks or other similar arrangements and whether direct or indirect (including acquired by assignment), related or unrelated, absolute or contingent, due or to become due, now existing or hereafter arising and however acquired, and including all interest, charges, expenses, fees and any other sums chargeable to one or more Loan Party (individually and collectively) in connection with any of the foregoing, including all reasonable attorneys’ fees and (ii) all indebtedness, liabilities, obligations, indemnities, covenants and duties of Loan Parties (individually and collectively) owed to Lender (or any other Affiliate of Fifth Third Bancorp) of any kind, present or future, under or arising out of, any or all of: (a) all treasury and cash management agreements and services, (b) all obligations with respect to any credit, debit or other cards issued (or processed) by Lender (or any Affiliate of Lender), and (c) all equipment leases; provided, however, that, with respect to any Guarantor, the “Obligations” shall not include Excluded Swap Obligations in respect of such Guarantor.    For the avoidance of any doubt, the Fifth Third Shareholder Loans shall not be deemed to be part of the Obligations.

 
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1.3.   Section 2.1(e)(i) of the Credit Agreement is hereby amended in its entirety by substituting the following in its respective place:

(e)(i)           Borrower acknowledges that Lender, from time to time, may do any one or more of the following in its discretion exercised in good faith: (A) decrease the dollar limits on outstanding advances against the Borrowing Base or applicable to the Eligible Inventory advance sublimits or (B) decrease the Eligible Inventory and the Eligible Accounts advance rates if one or more of the following events occur or conditions exist: (1) an Event of Default has occurred and is continuing; (2) with regard to the Eligible Accounts advance rate, (I) the dilution percentage (“ Dilution Percentage ”) with respect to Borrower’s Eligible Accounts (i.e., reductions in the amount of Accounts because of returns, discounts, price adjustments, credit memoranda, credits, allowances and other offsets, and any other Contras (to the extent that Borrower’s customer and Borrower do not exchange payments to settle the Contra)) increases above 10%, and if such Dilution Percentage, as of any Dilution Determination Date, increases above 10%, the advance rate against Eligible Accounts will reduce (effective with the next delivery of the Borrowing Base Certificate to Lender) 1% for each 1% (or fraction thereof) increase in the Dilution Percentage above 10%, (II) the percentage of accounts receivable which are 90 days or more past the date of the original invoices applicable thereto increases, in comparison to the percentage of accounts receivable which are within 90 days from the date of the original invoices applicable thereto, by an amount which Lender, in good faith, determines is material, or (III) any material adverse change occurs, determined by Lender in good faith, from the Closing Date in respect of the credit rating or credit quality of Borrower’s account debtors taken as a whole; or (3) with respect to the Eligible Inventory advance rate, there occurs a material change, as determined by Lender in its discretion, in the type, quantity, or quality of Borrower’s Eligible Inventory, taken as a whole, as compared to the type, quantity, or quality of Borrower’s Eligible Inventory on the Closing Date, including, without limitation, a material change, as determined by Lender in its discretion, in the Net Orderly Liquidation Value of Borrower’s Inventory established by the most recent appraisal received.


2.   Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

2.1.   Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender, in each case in form and substance acceptable to Lender in its sole discretion and, as applicable, duly executed by all parties thereto (other than Lender, as applicable): (a) evidence that the Reaffirmation of Guaranty and Security (as referenced in Section 3.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Loan Party; (b) a fee letter; and (c) all other documents, instruments and agreements, in form and substance satisfactory to Lender in its sole discretion, deemed necessary or desirable by Lender to effect the amendments to Borrower's credit facilities with Lender contemplated by this Amendment.

 
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2.2.   Reaffirmation and Amendment of Guaranty and Security; Reaffirmation and Amendment of Individual Guaranties; Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation and Amendment of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox, as a result of his death) to execute the Reaffirmation and Amendment of Individual Guaranties below, and (c) each of the Contributors to execute the Reaffirmation of Capital Contribution Agreement below.

2.3.   Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors (other than Mark A. Fox as a result of his death) to execute the Reaffirmation of Subordination below.

2.4.   Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.

3.   Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

4.   Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

4.1.   Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under this Amendment, and the execution and delivery of, and the performance of its obligations under and arising out of this Amendment has been duly authorized by all necessary corporate action.

4.2.   This Amendment constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

 
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4.3.   The Loan Parties’ representations and warranties contained in this Amendment are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, except to the extent any such representation or warranty is stated to relate solely to an earlier date (and except that such representations and warranties shall not be further qualified by materiality where, by their respective terms, they are already qualified by reference to materiality, including a Material Adverse Effect), subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

4.4.   After giving effect to the Amendment, no Event of Default has occurred and is continuing under the Credit Agreement.

5.   Costs and Expenses .  As a condition of this Amendment, (a) Borrower will pay to Lender an amendment fee of $2,500, payable in full on the Effective Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (b) Borrower will pay and reimburse Lender, promptly upon Lender's request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby, including, without limitation, reasonable attorneys' fees.

6.   Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

7.   Release .  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, " Claims ") against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing's respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, " Lender Parties ") that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  " Prior Related Event " means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Effective Date.

 
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8.   Default .  Any default by Borrower or Parent in the performance of any of such Loan Party's obligations under this Amendment shall constitute an immediate Event of Default under the Credit Agreement.

9.   Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or amended, or amended and restated, in connection herewith, as applicable, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

10.   One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to the Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment.  This Amendment may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (a) may be relied on by each party as if the document were a manually signed original and (b) will be binding on each party for all purposes.

11.   Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

12.   Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

13.   Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

14.   Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

15.   WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 
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16.   Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (i) John Paul DeJoria is no longer (a) an “Individual Guarantor”, (b) an “Owner/Affiliate Subordinated Creditor”, (c) a “Contributor” (as that term is defined in the Capital Contribution Agreement), or (d) a “LaSalle Shareholder Obligor” (as that term is defined in the Lasalle Intercreditor Agreement); (ii) (a) neither, as a result of his death, Mark A. Fox nor, as a result of no longer being an Individual Guarantor, John Paul DeJoria is executing the Reaffirmation and Amendment of Individual Guaranties required to be executed by the Individual Guarantors pursuant to this Amendment; (b) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Capital Contribution Agreement required to be executed by the Contributors pursuant to this Amendment; (c) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors pursuant to this Amendment; (d) none of Anthony Robbins, Peter Lusk, Mark A. Fox (as a result of his death), or John Paul DeJoria is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (iii) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (iv) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, the estate of Mark Fox or Peter Lusk from his respective obligations under any of such Loan Documents, as applicable.

17.   Excluded Swap Obligations.   Notwithstanding anything to the contrary contained in the Credit Agreement or any other Loan Document, in no event shall the proceeds of any Loan Collateral provided by a Guarantor be applied by Lender to any Excluded Swap Obligations in respect of such Guarantor.


[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.

TWINLAB CORPORATION
IDEA SPHERE INC.


By:   /S Thomas A. Tolworthy                                                                               
Thomas A. Tolworthy, President and CEO

FIFTH THIRD BANK


By:    /S/ Andrew P. Hanson                                                                                           
Andrew P. Hanson, Vice President




SIGNATURE PAGE TO
TENTH AMENDMENT TO CREDIT AGREEMENT
 (Twinlab Corporation, et al. )
 
8
 






EXHIBIT 10.5.12
 
EXECUTION VERSION
ELEVENTH AMENDMENT TO CREDIT AGREEMENT

THIS ELEVENTH AMENDMENT TO CREDIT AGREEMENT (this " Amendment "), is executed as of January 14, 2014 (the “ Signature Date ”), and dated to be effective as of January 5, 2014 (the " Effective Date "), by and among TWINLAB CORPORATION , a Delaware corporation (" Borrower "), IDEA SPHERE INC. , a Michigan corporation (" Parent "), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (" Lender "), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011, the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011, the Ninth Amendment to Credit Agreement dated to be effective as of September 30, 2012, and the Tenth Amendment to Credit Agreement dated to be effective as of November 1, 2013 (such Credit Agreement, as heretofore amended, being the " Credit Agreement ").  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) extend the stated Termination Date to July 7, 2014 and (ii) make certain other amendments to the Credit Agreement and certain other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and amend the Credit Agreement and the other Loan Documents, as applicable, to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.   Amendment .

 
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1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:
Capital Contribution Credit ” has the meaning given in the Capital Contribution Agreement.

Contributor ” has the meaning given in the Capital Contribution Agreement.

Credit Term ” has the meaning given in the Capital Contribution Agreement.

 “ Eleventh Amendment ” means the Eleventh Amendment to Credit Agreement, dated to be effective as of the Eleventh Amendment Effective Date, among Borrower, Parent and Lender.

Eleventh Amendment Effective Date ” means January 5, 2014.

1.2            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their entireties by substituting the following in their respective places:

Capital Contribution Agreement ” means the Amended and Restated Capital Contribution Agreement among Mark A. Fox, William W. Nicholson, David L. Van Andel, John Paul DeJoria, Parent, Borrower, and Lender dated as of March 30, 2010, as amended by the Reaffirmation and Amendment of Capital Contribution Agreement dated as of June 30, 2011, the Reaffirmation and Amendment of Capital Contribution Agreement dated as of October 6, 2011, the Reaffirmation and Amendment of Capital Contribution Agreement dated as of December 23, 2011, and the Reaffirmation and Amendment of Capital Contribution Agreement dated to be effective as of the Eleventh Amendment Effective Date, as the same may be further amended, restated, or otherwise modified from time to time.

Fifth Third Shareholder Loans ” means the Indebtedness owing to Lender (or its successors or assigns) evidenced by (a) that certain Amended, Restated, and Consolidated Draw Loan Note and Agreement, dated to be effective as of the Eleventh Amendment Effective Date, made by David L. Van Andel and William W. Nicholson to the order of Fifth Third Bank in the original principal amount of $33,302,872.92 (as may be further amended, restated, modified, supplemented or replaced from time to time, the “ Fifth Third Shareholder Note ”), and (b) the other Fifth Third Shareholder Loan Documents (as defined in the Fifth Third Shareholder Note) (all of the foregoing, as the same may be further amended, restated, modified, supplemented or replaced from time to time, collectively, the “ Fifth Third Shareholder Loan Documents ”).

 
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Prepaid Capital Contribution Payments ” means, for all purposes of this Agreement and the other Loan Documents, aggregate amounts (a) representing Capital Contributions (as defined in the Capital Contribution Agreement) satisfied by the Capital Contribution Credit, in an aggregate amount up to $15,000,000, with respect to all Capital Contributions resulting from any Capital Contribution Triggering Event occurring with respect to any Test Period ended during the Credit Term, and (b) with respect to which Contributors’ obligation to make such Capital Contributions is deemed satisfied pursuant to, and in accordance with, the terms of the Capital Contribution Agreement.

Test Period ” means each 12 Month Period ending at the end of each Fiscal Quarter or Fiscal Year.  The first Test Period for purposes of this Agreement, as amended by the Eleventh Amendment, shall be the Fiscal Year ended December 31, 2013; provided that , with respect to determining the Fixed Charge Coverage Ratio under Section 5.10 as of (a) March 31, 2014, “ Test Period ” means the period beginning on January 1, 2014 and ending on March 31, 2014, (b) June 30, 2014, “ Test Period ” means the period beginning on January 1, 2014 and ending on June 30, 2014, and (c) September 30, 2014, “ Test Period ” means the period beginning on January 1, 2014 and ending on September 30, 2014.

Voluntary Capital Contribution Payments ” means, for any period, aggregate amounts which are (a) voluntarily contributed by one or more Contributors on or after the Eleventh Amendment Effective Date in excess of any Capital Contributions (as defined in the Capital Contribution Agreement) required under the Capital Contribution Agreement as of such date of contribution, (b) received by Lender in cash pursuant to, and in accordance with, the terms of the Capital Contribution Agreement, and (c) applied by Lender against the unpaid balance of the Revolving Loans.

1.3            Clause (a) of the definition of “Change of Control” in Section 1.1 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(a)           a change in the ownership of Parent, such that David L. Van Andel and William W. Nicholson, collectively, fail to: (i) own legally and beneficially, free and clear of any Liens, more than 50%, on a fully diluted basis, of the outstanding Ownership Interests of Parent or (ii) have the power to direct or cause the direction of the management and policies of Parent;

1.4            The definition of “ Capital Contributions Credit ” in Section 1.1 of the Credit Agreement is hereby deleted in its entirety.

 
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1.5            Each reference to “January 5, 2014” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “July 7, 2014” for such reference to “January 5, 2014” where “January 5, 2014” appears therein.

1.6             Section 2.1(c)  of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)            Contemporaneously with Borrower’s execution of the Eleventh Amendment, Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to the Eleventh Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Eleventh Amendment Effective Date, in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b)  and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

1.7             Section 6.6 of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

6.6            Capital Contribution Payments .  In the event that there is an Event of Default of the Curable Financial Covenant (and there is no other Event of Default then in existence), Borrower may cure such Event of Default if (a) one or more of the following occurs (collectively, “ Capital Contribution Events ”): (i) Capital Contribution Payments are made in strict compliance with the terms of the Capital Contribution Agreement, (ii) solely with respect to the Test Period ended December 31, 2013, Prepaid Capital Contribution Payments are deemed to have been made in strict compliance with the terms of the Capital Contribution Agreement, or (iii) Voluntary Capital Contribution Payments are made pursuant to, and in accordance with, the terms of the Capital Contribution Agreement; and (b) the proceeds of such Capital Contribution Events are (1) received by Lender in cash (other than as it respects any Prepaid Capital Contribution Payments solely as it respects the Test Period ended December 31, 2013) and (2) are in an amount sufficient, if treated as being EBITDA for the applicable Test Period, to cause compliance with the Fixed Charge Coverage Ratio.  For purposes of calculating the Fixed Charge Coverage Ratio with respect to all applicable Test Periods, EBITDA, solely for purposes of the Fixed Charge Coverage Ratio under Section 5.10 , shall be deemed to include the amount received (or deemed to have been received) as a consequence of the applicable Capital Contribution Event by Lender in accordance with this Section 6.6 as if such Capital Contribution Events occurred in the Test Period for which there was an Event of Default under Section 5.10 that resulted in the Capital Contribution Triggering Event applicable to such Capital Contribution Events.  Borrower agrees to include in (A) the Compliance Certificate delivered to Lender for the Fiscal Year ended December 31, 2013 the then amount, if any, of the Prepaid Capital Contribution Payments, the Capital Contribution Credit and any Voluntary Capital Contribution Payments and (B) each Compliance Certificate delivered to Lender for any Fiscal Quarter or Fiscal Year ending on and after March 31, 2014 the then amount, if any, of any Voluntary Capital Contribution Payments.

 
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1.8            Lender’s notice addresses set forth in Section 9.8 of the Credit Agreement are hereby amended in their entirety by substituting the following in their places:

To Lender:                                Fifth Third Bank
1000 Town Center #1400
Southfield, Michigan 48075
Attention:  Andrew P. Arton
Fax Number:  (248) 365-7567

and

Fifth Third Bank
111 Lyons Street N.W.
MD  RMOB2C
Grand Rapids, Michigan  49503
Attention:  Andrew P. Hanson

2.   Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

2.1.   Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender, in each case in form and substance acceptable to Lender in its sole discretion and, as applicable, duly executed by all parties thereto (other than Lender, as applicable): (a) this Amendment, duly signed by Borrower and Parent; (b) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (c) evidence that this Amendment, the Amended and Restated Revolving Note, and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of each of Borrower and Parent, as applicable; (d) evidence that the Reaffirmation of Guaranty and Security (as referenced in Section 2.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Non-Borrower Loan Party; (e) a fee letter; and (f) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower's credit facilities with Lender contemplated by this Amendment.

2.2.   Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation and Amendment of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox, as a result of his death) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors to execute the Reaffirmation and Amendment of Capital Contribution Agreement below.

 
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2.3.   Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors (other than Mark A. Fox, as a result of his death) to execute the Reaffirmation of Subordination below.

2.4.   Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.
2.5.   Amended and Restated Fifth Third Shareholder Loan Note .  As a condition of this Amendment, Borrower shall cause to be executed and delivered to Lender, in form and substance satisfactory to Lender, an Amended, Restated, and Consolidated Draw Loan Note and Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Amended and Restated Fifth Third Shareholder Loan Note ”), duly executed by David L. Van Andel and William W. Nicholson.

3.   Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

4.   Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

4.1.   Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment, the Amended and Restated Revolving Note, and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”), as applicable, and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

4.2.   The Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

 
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4.3.   The Loan Parties’ representations and warranties contained in the Credit Agreement are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, except to the extent any such representation or warranty is stated to relate solely to an earlier date (and except that such representations and warranties shall not be further qualified by materiality where, by their respective terms, they are already qualified by reference to materiality, including a Material Adverse Effect), subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

4.4.   No Event of Default has occurred and is continuing under the Credit Agreement.

5.   Post-Closing Covenant .  On or before January 31, 2014, Borrower shall provide to Lender evidence, in form and substance satisfactory to Lender, that the contractual maturity of each of (a) the Indebtedness evidenced by the Alticor Note and (b) the Owner/Affiliate Subordinated Debt owing to JVA Enterprises Capital, LLC has been extended to a date no earlier than July 7, 2014. 

6.   Costs and Expenses .  As a condition of this Amendment, (a) Borrower will pay to Lender an amendment fee of $60,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (b) Borrower will pay and reimburse Lender, promptly upon Lender's request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby and in connection herewith, including, without limitation, reasonable attorneys' fees.

7.   Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

8.   Release .  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, " Claims ") against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing's respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, " Lender Parties ") that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  " Prior Related Event " means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

 
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9.   Default .  Any default by Borrower or Parent in the performance of any of such Loan Party's obligations under this Amendment shall constitute an immediate Event of Default under the Credit Agreement.

10.   Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or amended, or amended and restated, in connection herewith, as applicable, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

11.   One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to the (a) Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) Revolving Note will be deemed to be references to the Amended and Restated Revolving Note, (c) Fifth Third Shareholder Loan Note shall be deemed to be references to the Amended and Restated Fifth Third Shareholder Loan Note, and (d) Capital Contribution Agreement will be deemed to be references to the Capital Contribution Agreement as amended by the Reaffirmation and Amendment of Capital Contribution Agreement provided herewith.  This Amendment and the other Amendment Documents may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

12.   Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

13.   Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

14.   Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

15.   Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

 
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16.   WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

17.   Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) John Paul DeJoria is no longer (i) an “Individual Guarantor”, (ii) an “Owner/Affiliate Subordinated Creditor”, (iii) a “Contributor”, or (iv) a “LaSalle Shareholder Obligor” (as that term is defined in the Lasalle Intercreditor Agreement); (b) (i) neither, as a result of his death, Mark A. Fox nor, as a result of no longer being an Individual Guarantor, John Paul DeJoria is executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors pursuant to this Amendment; (ii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation and Amendment of Capital Contribution Agreement required to be executed by the Contributors pursuant to this Amendment; (iii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors pursuant to this Amendment; and (iv) none of Anthony Robbins, Peter Lusk, Mark A. Fox (as a result of his death), or John Paul DeJoria is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (c) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (d) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, the estate of Mark A. Fox or Peter Lusk from his or its respective obligations under any of such Loan Documents, as applicable.

18.   Acknowledgement of Reaffirmation and Amendment of Capital Contribution Agreement .   Borrower and Parent each hereby acknowledges and agrees that the Capital Contribution Agreement is amended pursuant to the Reaffirmation and Amendment of Capital Contribution Agreement provided herewith and the terms and conditions pursuant to which Contributors are required to make Capital Contribution Payments are set forth in the Capital Contribution Agreement, as amended by the Reaffirmation and Amendment of Capital Contribution Agreement below.

19.   Acknowledgment Regarding Test Periods .  Borrower and Parent hereby acknowledge and agree that: (a) the definition of “Test Period” in the Credit Agreement (as amended by this Amendment) provides for one or more Test Periods occurring after the stated Termination Date and (b) notwithstanding the inclusion of any such Test Period, all of the Obligations shall be due and payable in full on the earlier of the stated Termination Date or upon acceleration of the Obligations in accordance with the Loan Documents and Lender has made no commitment to extend the Credit Agreement or any Obligations or other financial accommodations to Borrower except as may be expressly set forth in the Credit Agreement and the other Loan Documents.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.


By:     /S/ Thomas A. Tolworthy                                                                                    
 Thomas A. Tolworthy, President and CEO


FIFTH THIRD BANK


By:    /S/ Andrew P. Hanson               
 Andrew P. Hanson, Vice President




SIGNATURE PAGE TO
ELEVENTH AMENDMENT TO CREDIT AGREEMENT
 (Twinlab Corporation)
 
10
 



 
 



EXHIBIT 10.5.13
 
EXECUTION VERSION

TWELFTH AMENDMENT TO CREDIT AGREEMENT

THIS TWELFTH AMENDMENT TO CREDIT AGREEMENT (this " Amendment "), is executed as of July 25, 2014 (the “ Signature Date ”), and dated to be effective as of July 7, 2014 (the " Effective Date "), by and among TWINLAB CORPORATION , a Delaware corporation (" Borrower "), IDEA SPHERE INC. , a Michigan corporation (" Parent "), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (" Lender "), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011, the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011, the Ninth Amendment to Credit Agreement dated to be effective as of September 30, 2012, the Tenth Amendment to Credit Agreement dated to be effective as of November 1, 2013, and the Eleventh Amendment to Credit Agreement dated to be effective as of January 5, 2014 (such Credit Agreement, as heretofore amended, being the " Credit Agreement ").  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) extend the stated Termination Date to January 7, 2015 and (ii) make certain other amendments to the Credit Agreement and certain other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and amend the Credit Agreement and the other Loan Documents, as applicable, to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.   Amendment .

 
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1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:
 “ Twelfth Amendment ” means the Twelfth Amendment to Credit Agreement, dated to be effective as of the Twelfth Amendment Effective Date, among Borrower, Parent and Lender.

Twelfth Amendment Effective Date ” means July 7, 2014.

1.2            Each reference to “July 7, 2014” in the definition of “Termination Date” in Section 1.1 of the Credit Agreement is hereby amended by substituting a reference to “January 7, 2015” for such reference to “July 7, 2014” where “July 7, 2014” appears therein.

1.3             Section 2.1(c)  of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(c)            Contemporaneously with Borrower’s execution of the Twelfth Amendment, Borrower shall execute and deliver to Lender an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to the Twelfth Amendment (as amended and restated, the “ Revolving Note ”), dated to be effective as of the Twelfth Amendment Effective Date, in the principal amount of the Revolving Commitment, and bearing interest at such rates, and payable upon such terms, as specified in the Revolving Note.  Subject to compliance with the applicable provisions of Section 6.4(b)  and the Revolving Note, Borrower may prepay the Revolving Loans in whole or part at any time without premium or penalty.

2.   Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

2.1.   Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender, in each case in form and substance acceptable to Lender in its sole discretion and, as applicable, duly executed by all parties thereto (other than Lender, as applicable): (a) this Amendment, duly signed by Borrower and Parent; (b) an Amended and Restated Revolving Credit Promissory Note in the form of Exhibit 2.1 attached to this Amendment (the “ Amended and Restated Revolving Note ”); (c) evidence that this Amendment, the Amended and Restated Revolving Note, and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of each of Borrower and Parent, as applicable; (d) evidence that the Reaffirmation of Guaranty and Security (as referenced in Section 2.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Non-Borrower Loan Party; (e) a fee letter; and (f) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower's credit facilities with Lender contemplated by this Amendment.

 
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2.2.   Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox, as a result of his death, and John Paul DeJoria, as a result of no longer being an Individual Guarantor) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors to execute the Reaffirmation of Capital Contribution Agreement below.

2.3.   Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of the Owner/Affiliate Subordinated Creditors (other than Mark A. Fox, as a result of his death, and John Paul DeJoria, as a result of no longer being an Owner/Affiliate Subordinated Creditor) to execute the Reaffirmation of Subordination below.

2.4.   Reaffirmation of Acknowledgment to Intercreditor Agreement .  As a condition of this Amendment, Borrower and Parent shall cause each of the applicable parties party thereto to execute the Reaffirmation of Acknowledgment to Intercreditor Agreement below.
2.5.   Amended and Restated Fifth Third Shareholder Loan Note .  As a condition of this Amendment, Borrower shall cause to be executed and delivered to Lender, in form and substance satisfactory to Lender, an Amended, Restated, and Consolidated Draw Loan Note and Agreement with respect to the existing Fifth Third Shareholder Loans (the “ Amended and Restated Fifth Third Shareholder Loan Note ”), duly executed by David L. Van Andel and William W. Nicholson.

3.   Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.

4.   Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

4.1.   Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment, the Amended and Restated Revolving Note, and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”), as applicable, and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

 
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4.2.   The Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

4.3.   The Loan Parties’ representations and warranties contained in the Credit Agreement are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, except to the extent any such representation or warranty is stated to relate solely to an earlier date (and except that such representations and warranties shall not be further qualified by materiality where, by their respective terms, they are already qualified by reference to materiality, including a Material Adverse Effect), subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

4.4.   No Event of Default has occurred and is continuing under the Credit Agreement.

5.   [ Intentionally omitted ].

6.   Costs and Expenses .  As a condition of this Amendment, (a) Borrower will pay to Lender an amendment fee of $50,000, payable in full on the Signature Date; such fee, when paid, will be fully earned and non-refundable under all circumstances, and (b) Borrower will pay and reimburse Lender, promptly upon Lender's request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby and in connection herewith, including, without limitation, reasonable attorneys' fees.

7.   Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

8.   Release .  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, " Claims ") against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing's respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, " Lender Parties ") that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  " Prior Related Event " means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

 
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9.   Default .  Any default by Borrower or Parent in the performance of any of such Loan Party's obligations under this Amendment shall constitute an immediate Event of Default under the Credit Agreement.

10.   Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or amended, or amended and restated, in connection herewith, as applicable, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

11.   One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to the (a) Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) Revolving Note will be deemed to be references to the Amended and Restated Revolving Note, and (c) Fifth Third Shareholder Loan Note shall be deemed to be references to the Amended and Restated Fifth Third Shareholder Loan Note.  This Amendment and the other Amendment Documents may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

12.   Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

13.   Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

14.   Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

15.   Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

16.   WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 
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17.   Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) John Paul DeJoria is no longer (i) an “Individual Guarantor”, (ii) an “Owner/Affiliate Subordinated Creditor”, (iii) a “Contributor”, or (iv) a “LaSalle Shareholder Obligor” (as that term is defined in the Lasalle Intercreditor Agreement); (b) (i) neither, as a result of his death, Mark A. Fox nor, as a result of no longer being an Individual Guarantor, John Paul DeJoria is executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors pursuant to this Amendment; (ii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Capital Contribution Agreement required to be executed by the Contributors pursuant to this Amendment; (iii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors pursuant to this Amendment; and (iv) none of Anthony Robbins, Peter Lusk, Mark A. Fox (as a result of his death), or John Paul DeJoria is executing the Reaffirmation of Acknowledgment to Intercreditor Agreement required to the executed by the parties thereto pursuant to this Amendment; (c) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (d) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, the estate of Mark A. Fox or Peter Lusk from his or its respective obligations under any of such Loan Documents, as applicable.


[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.


By:    /S Thomas A. Tolworthy                                                                                     
 Thomas A. Tolworthy, President and CEO


FIFTH THIRD BANK


By:    /S. Andrew P. Hanson            
 Andrew P. Hanson, Vice President




SIGNATURE PAGE TO
TWELFTH AMENDMENT TO CREDIT AGREEMENT
 (Twinlab Corporation)
 
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EXHIBIT 10.5.14
 
EXECUTION VERSION
 
THIRTEENTH AMENDMENT TO CREDIT AGREEMENT

THIS THIRTEENTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), is executed as of August 7, 2014 (the “ Signature Date ”), and dated to be effective as of July 31, 2014 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), IDEA SPHERE INC. , a Michigan corporation (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011, the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011, the Ninth Amendment to Credit Agreement dated to be effective as of September 30, 2012, the Tenth Amendment to Credit Agreement dated to be effective as of November 1, 2013, the Eleventh Amendment to Credit Agreement dated to be effective as of January 5, 2014, and the Twelfth Amendment to Credit Agreement dated to be effective as of July 7, 2014 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) consent to the TCC Merger (as defined below), (ii) consent to the Debt Transfer (as defined below) and (iii) make certain other amendments to the Credit Agreement and certain other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and amend the Credit Agreement and the other Loan Documents, as applicable, to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.

Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

 
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1.   Amendment .

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:

Debt Transfer ” means, collectively, the assumption by Little Harbor of the following Indebtedness owing by Borrower and/or Parent, as applicable, effective on or about the Thirteenth Amendment Effective Date: (i) certain of the Owner/Affiliate Subordinated Debt owing to William W. Nicholson and/or David L. Van Andel, (ii) all of the Owner/Affiliate Subordinated Debt owing to JVA Enterprises Capital, LLC, (iii) all of the Indebtedness owing to Alticor under the Alticor Note, (iv) all of the LaSalle Debt, and (v) all of the Indebtedness owing to SOFISCO Nominees Limited.

Great Harbor ” means Great Harbor Capital, LLC, a Delaware limited liability company.
 
Little Harbor ” means Little Harbor, LLC, a Nevada limited liability company.
 
Little Harbor Debt Repayment Agreement ” means that certain Debt Repayment Agreement dated to be effective as of August 1, 2014 by and between Parent and Little Harbor.
 
Little Harbor Subordination Agreement ” means the Subordination Agreement between Little Harbor and Lender dated to be effective as of the Thirteenth Amendment Effective Date, among other things, subordinating the Little Harbor Subordinated Debt to the Obligations.
 
Little Harbor Subordinated Debt ” means, collectively, (a) the Indebtedness evidenced by the Little Harbor Debt Repayment Agreement; and (b) all other Subordinated Obligations (as defined in the Little Harbor Subordination Agreement), all as exists as of the Thirteenth Amendment Effective Date or may, after the Thirteenth Amendment Effective Date, be renewed, extended, consolidated, adjusted or increased subject to Section 5.2 and any Refinancing Debt with respect thereto.
 
Little Harbor Subordinated Debt Default ” means any of the following (or any combination of the following): (a) the occurrence and continuance of a default or breach by Parent, Borrower and/or, as applicable, any other Loan Party of or under any of the Little Harbor Subordinated Debt Documents, after the lapse of any applicable notice and cure periods, that would permit Little Harbor to accelerate the maturity of the Little Harbor Subordinated Debt or (b) any acceleration of any of the Little Harbor Subordinated Debt.
 

 
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Little Harbor Subordinated Debt Documents ” means, collectively, (a) the Little Harbor Debt Repayment Agreement, (b) the other Subordinated Obligations Documents (as defined in the Little Harbor Subordination Agreement), and (c) any other document, instrument or agreement evidencing the Little Harbor Subordinated Debt, as any or all of the foregoing documents, instruments, and agreements are in effect as of the Thirteenth Amendment Effective Date or, subject to Section 5.2 , as at any time after the Thirteenth Amendment Effective Date are amended, modified, supplemented, restated, renewed, extended, or otherwise changed and any documents, instruments, or agreements given, subject to Section 5.2 , in substitution of any of them (including in connection with any Refinancing Debt with respect thereto).
 
TCC ” means Twinlab Consolidation Corporation, a Delaware corporation.
 
TCC Guaranty ” means the Guaranty dated as of the Thirteenth Amendment Signature Date, between TCC and Lender.
 
TCC Investment Group ” means each of, and collectively, (a) Thomas Tolworthy and (b) David L. Van Andel, either directly or indirectly through one or both of Little Harbor and Great Harbor.
 
TCC Merger ” means the merger of Parent and TCC Merger Sub pursuant to the TCC Merger Agreement, the result of which Parent shall be the surviving corporation and TCC shall own 100% of the outstanding Ownership Interests of Parent.
 
TCC Merger Agreement ” means, collectively, the Agreement and Plan of Merger and the Certificate of Merger, in each case dated as of the Thirteenth Amendment Signature Date with regard to the TCC Merger.
 
TCC Merger Sub ” means TCC Merger Company, Inc., a Michigan corporation.
 
TCC Security Agreement ” means the Security Agreement dated as of the Thirteenth Amendment Signature Date, between TCC and Lender.
 
Thirteenth Amendment ” means the Thirteenth Amendment to Credit Agreement, dated to be effective as of the Thirteenth Amendment Effective Date, among Borrower, Parent and Lender.
 
Thirteenth Amendment Effective Date ” means July 31, 2014.
 

 
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Thirteenth Amendment Signature Date ” means the “Signature Date” as defined in the Thirteenth Amendment.
 
1.2            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their respective entireties by substituting the following in their respective places:
 
Change of Control ” means any of the following (or any combination of the following) whether arising from any single transaction or event or any series of transactions or events (whether as the most recent transaction in a series of transactions or otherwise) which, individually or in the aggregate, results in:
 
(a)           a change in the ownership of Parent, such that TCC fails to: (i) own legally and beneficially, free and clear of any Liens (except in favor of Lender), 100%, on a fully diluted basis, of the outstanding Ownership Interests of Parent or (ii) have the power to direct or cause the direction of the management and policies of Parent;

(b)           a change in the ownership of Borrower, such that Parent fails to: (i) own legally and beneficially, free and clear of any Liens (except in favor of Lender), 100%, on a fully diluted basis, of the outstanding Ownership Interests of Borrower or (ii) have the power to direct or cause the direction of the management and policies of Borrower;

(c)           during any period of 24 consecutive months (“ Measurement Period ”), the Approved Directors cease for any reason to constitute at least a majority of the Board of Directors of Parent.  “ Approved Directors ” means individuals, who at the beginning of the Measurement Period constitute the Board of Directors of Parent, together with any new director elected during the Measurement Period whose election by the Board of Directors, or whose nomination for election by Parent’s shareholders, was approved by a vote of at least two thirds (2/3) of the directors then in office;

(d)           (i) the Board of Directors of Borrower ceasing to be composed of individuals who are appointed by Parent or (ii) the Board of Directors of Parent ceasing to be composed of individuals who are appointed by TCC;

(e)           Thomas Tolworthy or an Approved Successor (as defined below) ceases, for any reason, to serve as the chief executive officer of Borrower and Parent actively involved in Borrower’s and Parent’s management.  For purposes of the foregoing, an “ Approved Successor ” is the chief executive officer of Borrower and Parent elected by the Board of Directors of Borrower and Parent not more than 90 days after Thomas Tolworthy or any Approved Successor ceases to serve as the chief executive officer of Borrower and Parent and who is reasonably acceptable to Lender;

 
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(f)           a change in the ownership of TCC, such that the TCC Investment Group fails to, collectively: (i) own legally and beneficially, on terms acceptable to Lender in its good faith discretion, at least 50.1%, on a fully diluted basis, of the outstanding Ownership Interests of TCC or (ii) have the power to direct or cause the direction of the management and policies of TCC; or

(g)           a change in the ownership of TCC, such that David L. Van Andel (either directly or indirectly through one or both of Little Harbor and Great Harbor) fails to own legally and beneficially, on terms acceptable to Lender in its good faith discretion, at least 20%, on a fully diluted basis, of the outstanding Ownership Interests of TCC.

Fixed Charges ” means, for the applicable Test Period, the total (without duplication), in Dollars, of (all as determined on a consolidated basis in accordance with GAAP): (a) the principal amount of Loan Parties’ consolidated long-term debt and obligations, in each case, paid during the applicable Test Period (including all payments made under the Little Harbor Subordinated Debt Documents; provided that nothing herein shall be deemed to allow any such payments unless expressly permitted under the other provisions of the Loan Documents); (b) the principal portion of Loan Parties’ aggregate consolidated Capitalized Lease Obligations paid during the applicable Test Period; (c) Loan Parties’ aggregate consolidated cash payments of interest during the applicable Test Period (including, as applicable, interest paid on the Obligations, the Fifth Third Shareholder Loans, the Alticor Note, the Owner/Affiliate Subordinated Debt, the LaSalle Debt, the Capitalized Lease Obligations, and any other Indebtedness for the applicable Test Period); (d) Loan Parties’ aggregate consolidated cash payments of income and franchise taxes during such Test Period (whether or not in the form of Tax Distributions); and (e) all dividends and distributions paid by Parent to its shareholders for such Test Period (including each Permitted Preferred Cash Dividend Payment) ( provided that nothing herein shall be deemed to allow any such dividends and distributions unless expressly permitted under Section 5.6 ).  For the avoidance of any doubt, “Fixed Charges” shall be determined exclusive of any principal and/or interest payments on the Fifth Third Shareholder Loans made by Persons other than Borrower after the Effective Date (as defined in the Eighth Amendment).

Funded Indebtedness ” means, as of any date of determination, the principal portion of all Indebtedness (without duplication) of Loan Parties on a consolidated basis: (a) in respect of any borrowed money (including the Obligations and excluding the Owner/Affiliate Subordinated Debt, the Indebtedness evidenced by the Alticor Note, the LaSalle Debt, the Fifth Third Shareholder Loans, and the Little Harbor Subordinated Debt, as applicable); (b) evidenced by any loan or credit agreement, promissory note, debenture, bond, or other similar written obligation to pay money (including the Loan Documents and excluding the Owner/Affiliate Subordinated Debt Documents, the Alticor Note, the Fifth Third Shareholder Loans Documents, the LaSalle Debt Documents, and the Little Harbor Subordinated Debt Documents, as applicable); (c) under any Capitalized Lease, Synthetic Lease or any form of off-balance sheet financing; (d) for the deferred and unpaid purchase price of any Property or business or any services (other than trade accounts and accrued liabilities payable incurred in the ordinary course of business and constituting current liabilities not more than ninety (90) days in arrears measured from the date of billing or accrual), all as determined in accordance with GAAP; and (e) any guaranty or endorsement of, or responsibility for any Indebtedness of the types described in this definition.

 
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Indebtedness ” means all of a Person’s indebtedness, obligations, and liabilities to any other Person, including: (a) in respect of Loan Parties, as applicable, the Obligations (including any and all Rate Management Obligations), the Owner/Affiliate Subordinated Debt, the Alticor Note, the LaSalle Debt, and the Little Harbor Subordinated Debt, (b) all Guaranty Obligations, and (c) all other debts, claims and indebtedness, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, however evidenced, created, incurred, acquired or owing and however arising, whether under written or oral agreement, operation of law, or otherwise, to the extent the foregoing would be classified as a liability on a Person’s balance sheet in accordance with GAAP.

Loan Documents ” means, collectively, this Agreement, the Notes, the Individual Guaranties, the Loan Party Guaranty, the Security Documents, the Capital Contribution Agreement, the Owner/Affiliate Subordination Agreements, the Little Harbor Subordination Agreement, each Rate Management Agreement between Borrower and Lender or any Affiliate of Lender, the Letter of Credit Documents, and every other document or agreement executed by any Person evidencing, governing, guarantying or securing any of the Obligations, and “ Loan Document ” means any one of the Loan Documents, and as now in effect or as at any time after the date of this Agreement amended, modified, supplemented, restated, or otherwise changed and any substitute or replacement agreements, instruments, or documents accepted by Lender or, as applicable, an Affiliate of Lender.

Loan Party ” and “ Loan Parties ” mean, respectively, each of Borrower; Parent; TCC; Health Letter, Inc., a Michigan corporation (“ Health Letter ”); Health Med,   Inc., a Michigan corporation (“ Health Med ”); ISI Brands Inc., a Michigan corporation (“ ISI Brands ”); Med Letter, Inc., a Michigan corporation (“ Med Letter ”); Natural2U LLC, a Michigan limited liability company (“ Natural2U ”); Natural Pet Nutrition, L.L.C., a Delaware limited liability company (“ Natural Pet Nutrition ”); PE Group, LLC, a Delaware limited liability company (“ PE Group ”); Planet Earth Ventures, LLC, a Michigan limited liability company (“ Planet Earth ”); REBUS, LLC, a Delaware limited liability company (“ Rebus ”); 701 Corporation, a Michigan corporation (“ 701 Corporation ”); and TGI Organic, LLC, a Michigan limited liability company (“ TGI Organic ”), and, collectively, Borrower, Parent, TCC, Health Letter, Health Med, ISI Brands, Med Letter, Natural2U, Natural Pet Nutrition, PE Group, Planet Earth, Rebus, 701 Corporation, and TGI Organic. Without limiting the generality of the foregoing and for the avoidance of doubt, the Joint Ventures are not Loan Parties.

 
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Loan Party Guaranty ” means each of, and collectively, (a) the Guaranty dated as of January 7, 2008 made by the Non-Borrower Loan Parties (other than TCC) in favor of Lender and Lender’s Affiliates with respect to all of the Obligations and (b) the TCC Guaranty.

Loan Party Security Agreement ” means each of, and collectively, (a) the Security Agreement dated as of the date of this Agreement between the Non-Borrower Loan Parties (other than TCC) and Lender and (b) the TCC Security Agreement.

Refinance ” means, in respect of any Funded Indebtedness, the Owner/Affiliate Subordinated Debt, and the Little Harbor Subordinated Debt, to refinance, extend, renew, defease, amend, modify, supplement, restructure, replace, refund or repay (in full), or to issue other Indebtedness in exchange or replacement for, such Indebtedness in whole or in part.  “ Refinanced ” and “ Refinancing ” shall have correlative meanings.
 
Refinancing Debt ” means, as to any Funded Indebtedness, the Owner/Affiliate Subordinated Debt, and the Little Harbor Subordinated Debt, the Refinance of such Indebtedness, provided that the following conditions (together with any other conditions set forth in any other Loan Documents) are satisfied:
 
(a)           the weighted average life to maturity of such Refinancing Debt shall be greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced;
 
(b)           the principal amount of such Refinancing Debt shall be less than or equal to the sum of the principal amount then outstanding of, plus accrued and unpaid interest on and financing fees related to, the Indebtedness being Refinanced;
 
(c)           the respective obligor or obligors shall be the same on the Refinancing Debt as on the Indebtedness being Refinanced;
 
(d)           the priority of payment of such Refinancing Debt shall be the same as or lower than the ranking of the Indebtedness being Refinanced, including the execution of a subordination agreement with Lender, on no less favorable terms to Lender, than exists under any subordination agreement that is applicable to the Indebtedness being Refinanced; provided, however , that any Refinancing of the Alticor Note shall be on terms and conditions acceptable to Lender in its discretion;
 

 
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(e)           the security, if any, for the Refinancing Debt shall be the same as that for the Indebtedness being Refinanced (except to the extent that less security is granted to holders of the Refinancing Debt);
 
(f)           the terms of such Refinancing Debt (including covenants, events of default and remedies) are no less favorable, when taken as a whole, to Loan Parties than the terms of this Agreement at the time such Indebtedness is being Refinanced; and
 
(g)           Loan Parties are in compliance with the Financial Covenants, on a pro forma basis, after giving effect to the incurrence of such Refinancing Debt and the scheduled repayment of the Indebtedness being Refinanced.  To determine whether there is pro forma compliance with the Financial Covenants, Parent will, on a pro forma basis, provide a worksheet to Lender at least 10 days before incurring such Refinancing Debt, which (i) restates the Financial Statements received by Lender for the Fiscal Quarter or the Fiscal Year, as applicable, ended most closely before the date such Refinancing Debt is proposed to be incurred as if the proposed Refinancing Debt had been made, and the Indebtedness had been Refinanced, at the beginning of the applicable Test Period and (ii) calculates, as applicable, the Fixed Charge Coverage Ratio under Section 5.10 , and the Senior Funded Indebtedness to EBITDA Ratio under Section 5.11 , in each case taking into account such proposed Refinancing Debt as if the proposed Refinancing Debt had been made, and the Indebtedness had been refinanced, at the beginning of the applicable Test Period.
 
1.3             Section 5.1(a) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(a)           Indebtedness for borrowed money other than: (i) the Obligations; (ii) the Owner/Affiliate Subordinated Debt existing as of the Thirteenth Amendment Effective Date; (iii) the Little Harbor Subordinated Debt existing as of the Thirteenth Amendment Effective Date; (iv) Permitted Purchase Money Indebtedness; (v) such Rate Management Obligations and credit card Obligations owing to Lender or its Affiliates pursuant to such terms and conditions as agreed to by Lender and Borrower; (vi) additional unsecured loans or advances from one or more Owner/Affiliate Subordinated Creditors constituting Owner/Affiliate Subordinated Debt so long as (A) such Indebtedness is subject to an Owner/Affiliate Subordination Agreement, (B) the incurrence of such Indebtedness does not create an Event of Default and (C) the terms and conditions applicable to such Indebtedness (including maturity date, interest rate and amortization) are acceptable to Lender in its discretion; (vii) Indebtedness listed on Schedule 5.1 ; and (viii) other Indebtedness for borrowed money not otherwise authorized by this Section 5.1 that has been specifically approved in writing by Lender;

 
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1.4             Section 5.2(b) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(b)           No Loan Party will: (i) make any payment (including any principal, premium, interest, fee or charge) with respect to (A) any of the Owner/Affiliate Subordinated Debt except to the extent, and in the manner, expressly permitted by the applicable Owner/Affiliate Subordination Agreement or (B) any of the Little Harbor Subordinated Debt except to the extent, and in the manner, expressly permitted by the Little Harbor Subordination Agreement; or (ii) repurchase, redeem, defease, acquire or reacquire for value any of the Owner/Affiliate Subordinated Debt or Little Harbor Subordinated Debt.

1.5             Section 5.2(d) of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(d)           No Loan Party will seek, agree to or permit, directly or indirectly, the amendment, waiver or other change to: (i) any of the terms of payment (including, principal, interest or premium provisions) of or applicable to, or the provisions governing the priority of or security for the payment and performance of the obligations under or applicable to, or acceleration, termination, financial or negative covenant, or default provisions of or applicable to, any of the Owner/Affiliate Subordinated Debt Documents or the Little Harbor Subordinated Debt Documents, (ii) increase the total amount of Indebtedness owing to (A) Little Harbor from that which exists on the Thirteenth Amendment Effective Date unless in compliance with Section 5.1 or (B) any Owner/Affiliate Subordinated Creditor from that which exists on the Thirteenth Amendment Effective Date unless in compliance with Section 5.1 , or (iii) any other material term of or applicable to any of the Owner/Affiliate Subordinated Debt Documents or the Little Harbor Subordinated Debt Documents.  For purposes of this Section 5.2(d) , “material” means any modification, waiver, or amendment of any of the Owner/Affiliate Subordinated Debt Documents or Little Harbor Subordinated Debt Documents which, in the judgment of Lender exercised in good faith, would (1) adversely affect any of Lender’s rights or remedies under the Loan Documents or Lender’s security interest in or other Lien on the Loan Collateral (including the priority of Lender’s interests) or (2) create or result in an Event of Default.

1.6             Sections 6.1(f) and 6.1(w) of the Credit Agreement are hereby amended in their entirety by substituting the following in their respective places:

 
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(f)           (i)  There occurs an Owner/Affiliate Subordinated Debt Default which has not been waived in writing by the Owner/Affiliate Subordinated Creditors except to the extent the remedies thereunder are stayed under the applicable Owner/Affiliate Subordination Agreement; (ii) There occurs a Little Harbor Subordinated Debt Default which has not been waived in writing by Little Harbor except to the extent the remedies thereunder are stayed under the Little Harbor Subordination Agreement; (iii) A Loan Party defaults under the terms of any of the A/P Trade Payable Agreements, and such default gives the applicable A/P Trade Payable Creditor the right to accelerate the Indebtedness which is the subject of such A/P Trade Payable Agreement, and such default is not cured within any applicable cure period, if any, set forth in such A/P Trade Payable Agreement, or if no such cure period is set forth, within 3 Business Days; or (iv) A Loan Party defaults under the terms of any other Indebtedness for borrowed money or lease that, individually or in the aggregate (when added to all other Indebtedness, if any, of any one or more Loan Party then in default), involves Indebtedness for borrowed money or lease payments in excess of $1,000,000 and such default gives any creditor or lessor the right to accelerate the maturity of any such Indebtedness for borrowed money or lease payments and such default is not cured within any applicable cure period; or

           *           *           *           *           *           *           *

(w)           (i) any Owner/Affiliate Subordination Agreement is terminated or ceases, for any reason, to be in full force and effect (other than as agreed in writing by Lender or in accordance with its express terms), (ii) any of the Owner/Affiliate Subordinated Creditors denies in writing its, his or her obligations under the applicable Owner/Affiliate Subordination Agreement or attempts to limit or terminate or revoke its, his or her obligations under the applicable Owner/Affiliate Subordination Agreement, (iii) the Little Harbor Subordination Agreement is terminated or ceases, for any reason, to be in full force and effect (other than as agreed in writing by Lender or in accordance with its express terms), or (iv) Little Harbor denies in writing its obligations under the Little Harbor Subordination Agreement or attempts to limit or terminate or revoke its obligations under the Little Harbor Subordination Agreement.

2.             Consent to TCC Merger and Debt Transfer .   Borrower and Parent have requested that Lender consent to the TCC Merger and the Debt Transfer.  Subject to the terms, and on the conditions, of this Amendment, Lender hereby consents, without representation, warranty or recourse, to the TCC Merger and the Debt Transfer.  The consent provided in this Section 2 , either alone or together with other consents which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (a) obligate Lender to consent to any other event, transaction or occurrence (including, without limitation, any merger involving one or more Loan Parties) of any kind, in each case past, present or future, other than (i) the TCC Merger and the Debt Transfer, in each case specifically consented to by, and subject to the terms of, this Amendment or (ii) in the manner, and to the extent, if any, expressly permitted pursuant to the Loan Documents without Lender’s consent, (b) except as expressly set forth herein or in the other Amendment Documents, constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (c) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by any Loan Party.

 
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3.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

3.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender, in each case in form and substance acceptable to Lender in its sole discretion and, as applicable, duly executed by all parties thereto (other than Lender, as applicable): (a) this Amendment, duly signed by Borrower and Parent; (b) if requested by Lender, evidence that this Amendment and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of each of Borrower and Parent, as applicable; (c) if requested by Lender, evidence that the Reaffirmation of Guaranty and Security (as referenced in Section 3.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Non-Borrower Loan Party (other than TCC); (d) a Guaranty and a Security Agreement, in each case duly executed by TCC in favor of Lender; (e) evidence that the Guaranty and Security Agreement (as referenced in the foregoing clause (d)) and the transactions contemplated thereby were duly authorized by the Board of Directors of TCC; (f) a Subordination Agreement, duly executed by Little Harbor in favor of Lender; and (g) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower's credit facilities with Lender contemplated by this Amendment.

3.2             Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation and Amendment of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower and TCC) to execute the Reaffirmation of Guaranty and Security below, (b) each of the Individual Guarantors (other than Mark A. Fox, as a result of his death, and John Paul DeJoria, as a result of no longer being an Individual Guarantor) to execute the Reaffirmation of Individual Guaranties below, and (c) each of the Contributors to execute the Reaffirmation and Amendment of Capital Contribution Agreement below.

3.3             Reaffirmation of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of David L. Van Andel and William W. Nicholson to execute the Reaffirmation of Subordination below.

3.4             Merger Documents and Debt Transfer Documents .  Lender shall have received, in each case in form and substance acceptable to Lender in its sole discretion, fully executed copies of: (a) the TCC Merger Agreement, (b) the Little Harbor Debt Repayment Agreement and the other Little Harbor Subordinated Debt Documents, and (c) all documents, instruments, and agreements executed and/or delivered by any Loan Party pursuant to, or in connection with, the Debt Transfer.

 
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4.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) adversely affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.
 
5.             Representations .  To induce Lender to accept this Amendment, each of Borrower  and Parent hereby represents and warrants to Lender as follows:

                       5.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”), as applicable, and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

5.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally.

5.3            The Loan Parties’ representations and warranties contained in the Credit Agreement are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, except to the extent any such representation or warranty is stated to relate solely to an earlier date (and except that such representations and warranties shall not be further qualified by materiality where, by their respective terms, they are already qualified by reference to materiality, including a Material Adverse Effect), subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

5.4            After giving effect to the terms of this Amendment, no Event of Default has occurred and is continuing under the Credit Agreement.

5.5            As of the date hereof and immediately after giving effect to the TCC Merger: (a) Schedule I attached hereto and made a part hereof sets forth the Ownership Interests of TCC which are authorized and the number of such Ownership Interests which are outstanding, (b) set forth in such Schedule I is a complete and accurate list of all Persons who are record owners of the Ownership Interests of TCC ( provided that the list of such Persons may list certain management option holders by group so long as, upon Lender’s good faith request, Borrower provides all additional information requested by Lender with respect thereto), and (c) all warrants, subscriptions, options, instruments, agreements and rights (excluding rights under statutes and governmental regulations) under which any Ownership Interests of TCC are or may be redeemed, retired, converted, encumbered, bought, sold or issued are described in such Schedule I .

 
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6.             Thirteenth Amendment Fee; Costs and Expenses; Non-Exit Fee .  As a condition of this Amendment, (a) Borrower will pay to Lender an amendment fee of $25,000 (“ Thirteenth Amendment Fee ”), payable in full on the Signature Date; such Thirteenth Amendment Fee, when paid, will be fully earned and non-refundable under all circumstances; (b) Borrower will pay and reimburse Lender, promptly upon Lender's request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby and in connection herewith, including, without limitation, reasonable attorneys' fees; and (c) in addition to the Thirteenth Amendment Fee, unless the Obligations are paid and satisfied in full and the Credit Agreement is terminated on or before October 31, 2014, Borrower shall pay to Lender a fee, in an aggregate amount equal to $100,000 (the “ Non-Exit Fee ”), payable in full on October 31, 2014.  The Non-Exit Fee shall be (i) fully earned as of the Signature Date, but subject to the condition for payment thereof and (ii) non-refundable under all circumstances following the payment thereof.  Borrower hereby authorizes and directs Lender to withdraw, on the date on which the Non-Exit Fee becomes due and payable in accordance with this Section 6 , the Non-Exit Fee from its loan account at Lender, account number XXXXXX4820.

7.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

8.             Release .  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, " Claims ") against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing's respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, " Lender Parties ") that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party's behalf and, as applicable, on behalf of such Loan Party's officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  " Prior Related Event " means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

 
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9.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party's obligations under this Amendment shall constitute an immediate Event of Default under the Credit Agreement.

10.             Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or amended, or amended and restated, in connection herewith, as applicable, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

11.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to the (a) Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment and (b) Capital Contribution Agreement will be deemed to be references to the Capital Contribution Agreement as amended by the Reaffirmation and Amendment of Capital Contribution Agreement provided herewith.  This Amendment and the other Amendment Documents may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

12.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

13.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

14.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

15.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

 
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16.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

17.             Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) John Paul DeJoria is no longer (i) an “Individual Guarantor”, (ii) an “Owner/Affiliate Subordinated Creditor”, or (iii) a “Contributor”; (b) (i) neither, as a result of his death, Mark A. Fox nor, as a result of no longer being an Individual Guarantor, John Paul DeJoria is executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors pursuant to this Amendment; (ii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation and Amendment of Capital Contribution Agreement required to be executed by the Contributors pursuant to this Amendment; and (iii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors pursuant to this Amendment; (c) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (d) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, the estate of Mark A. Fox or Peter Lusk from his or its respective obligations under any of such Loan Documents, as applicable.

18.             Acknowledgement of Reaffirmation and Amendment of Capital Contribution Agreement .   Borrower and Parent each hereby acknowledges and agrees that the Capital Contribution Agreement is amended pursuant to the Reaffirmation and Amendment of Capital Contribution Agreement provided herewith and the terms and conditions pursuant to which Contributors are required to make Capital Contribution Payments are set forth in the Capital Contribution Agreement, as amended by the Reaffirmation and Amendment of Capital Contribution Agreement provided herewith.

19.             Indemnification .   Without limiting any other provision of this Amendment or any other Loan Document, Borrower and Parent hereby further: (a) reaffirm Section 9.11 of the Credit Agreement and (b) indemnify, defend, save and hold Lender, its Affiliates, and their respective officers, directors, attorneys, and employees harmless of, for, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses (including, without limitation, all accounting fees and reasonable attorneys’ fees) that Lender or any such indemnified party, jointly or severally, incurs arising out of: (i) any Amendment Document, (ii) any transaction contemplated by, consummated in connection with or referred to in, or any matter related to, the Amendment Documents (including, without limitation, the TCC Merger and the Debt Transfer), or (iii) any act taken by Lender under any Amendment Document except in any such case to the extent arising out of the bad faith, willful misconduct or gross negligence of such indemnified party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The provisions of this paragraph shall survive the termination of the Credit Agreement and other Loan Documents.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.


TWINLAB CORPORATION
IDEA SPHERE INC.


By:    /S/ Thomas A. Tolworthy                                                                                     
 Thomas A. Tolworthy, President and CEO


FIFTH THIRD BANK


By:    /S/ Andrew P. Hanson               
 Andrew P. Hanson, Vice President




SIGNATURE PAGE TO
THIRTEENTH AMENDMENT TO CREDIT AGREEMENT
 (Twinlab Corporation)
 
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EXHIBIT 10.5.15
 
EXECUTION VERSION

FOURTEENTH AMENDMENT TO CREDIT AGREEMENT

THIS FOURTEENTH AMENDMENT TO CREDIT AGREEMENT (this “ Amendment ”), is executed as of September 16, 2014 (the “ Signature Date ”), and dated to be effective as of September 16, 2014 (the “ Effective Date ”), by and among TWINLAB CORPORATION , a Delaware corporation (“ Borrower ”), TWINLAB HOLDINGS, INC. , a Michigan corporation formerly known as Idea Sphere Inc. (“ Parent ”), and FIFTH THIRD BANK , an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”), is as follows:

Preliminary Statements

A.            Borrower, Parent and Lender are parties to a Credit Agreement dated as of January 7, 2008, as amended by the First Amendment to Credit Agreement and Amendment to Loan Documents dated as of December 2, 2008, the Second Amendment to Credit Agreement dated to be effective as of January 2, 2009, the Third Amendment to Credit Agreement dated to be effective as of May 8, 2009, the Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of September 8, 2009, the First Amendment to Forbearance and Reaffirmation Agreement and Amendment to Loan Documents dated to be effective as of November 8, 2009, the Fourth Amendment to Credit Agreement dated to be effective as of March 8, 2010, the Fifth Amendment to Credit Agreement dated to be effective as of December 31, 2010, the Sixth Amendment to Credit Agreement dated to be effective as of June 8, 2011, the Seventh Amendment to Credit Agreement dated to be effective as of September 8, 2011, the Eighth Amendment to Credit Agreement dated to be effective as of December 23, 2011, the Ninth Amendment to Credit Agreement dated to be effective as of September 30, 2012, the Tenth Amendment to Credit Agreement dated to be effective as of November 1, 2013, the Eleventh Amendment to Credit Agreement dated to be effective as of January 5, 2014, the Twelfth Amendment to Credit Agreement dated to be effective as of July 7, 2014, and the Thirteenth Amendment to Credit Agreement dated to be effective as of July 31, 2014 (such Credit Agreement, as heretofore amended, being the “ Credit Agreement ”).  Capitalized terms which are used, but not defined, in this Amendment will have the meanings given to them in the Credit Agreement.

B.            The Loan Parties have requested that Lender: (i) consent to the TCHI Merger (as defined below), (ii) consent to the dissolution (collectively, the “ Dissolutions ”) of each of Planet Earth, Health Med, TGI Organic, PE Group, Natural Pet Nutrition, Health Letter, Med Letter, Rebus, Natural2U, and 701 Corporation (collectively, the “ Dissolved Subsidiaries ”), (iii) consent to Parent’s name change from Idea Sphere Inc. to Twinlab Holdings, Inc. (the “ Name Change ”), and (iv) make certain other amendments to the Credit Agreement and certain other Loan Documents, all as more specifically set forth herein.  Lender is willing to consent to such requests and amend the Credit Agreement and the other Loan Documents, as applicable, to reflect such modifications, all on the terms, and subject to the conditions, of this Amendment.


 
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Statement of Agreement

In consideration of the mutual covenants and agreements set forth in this Amendment, and for other good and valuable consideration, Lender, Parent and Borrower hereby agree as follows:

1.   Amendments to the Credit Agreement .

1.1             Section 1.1 of the Credit Agreement is hereby amended by the addition of the following new definitions, in their proper alphabetical orders, to provide in their respective entireties as follows:

Dissolved Subsidiary ” and “ Dissolved Subsidiaries ” means each of, and collectively, (i) Health Letter, Inc., a Michigan corporation (“ Health Letter ”); (ii) Health Med, Inc., a Michigan corporation (“ Health Med ”); (iii) Med Letter, Inc., a Michigan corporation (“ Med Letter ”); (iv) Natural2U LLC, a Michigan limited liability company (“ Natural2U ”); (v) Natural Pet Nutrition, L.L.C., a Delaware limited liability company (“ Natural Pet Nutrition ”); (vi) PE Group, LLC, a Delaware limited liability company (“ PE Group ”); (vii) Planet Earth Ventures, LLC, a Michigan limited liability company (“ Planet Earth ”); (viii) REBUS, LLC, a Delaware limited liability company (“ Rebus ”); (ix) 701 Corporation, a Michigan corporation (“ 701 Corporation ”); and (x) TGI Organic, LLC, a Michigan limited liability company (“ TGI Organic ”).

Fourteenth Amendment ” means the Fourteenth Amendment to Credit Agreement, dated to be effective as of the Fourteenth Amendment Effective Date, among Borrower, Parent and Lender.
 
Fourteenth Amendment Effective Date ” means September 16, 2014.
 
Fourteenth Amendment Signature Date ” means the “Signature Date” as defined in the Fourteenth Amendment.
 
TCHI ” means Twinlab Consolidated Holdings, Inc., a Nevada corporation.
 
TCHI Guaranty ” means the Guaranty dated as of the Fourteenth Amendment Signature Date between TCHI and Lender.
 
TCHI Investment Group ” means each of, and collectively, (a) Thomas Tolworthy and (b) David L. Van Andel, either directly or indirectly through one or both of Little Harbor and Great Harbor.
 
TCHI Merger ” means the merger of TCC and TCHI Merger Sub pursuant to the TCHI Merger Agreement, the result of which TCC shall be the surviving corporation and TCHI shall own 100% of the outstanding Ownership Interests of TCC.
 

 
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TCHI Merger Agreement ” means, collectively, (a) the Agreement and Plan of Merger dated as of September 4, 2014, as amended by that certain First Amendment to Agreement and Plan of Merger dated as of September 16, 2014, and (b) the Certificate of Merger dated as of September 16, 2014, in each case with regard to the TCHI Merger.
 
TCHI Merger Sub ” means TCC MERGER CO, a Delaware corporation.
 
TCHI Security Agreement ” means the Security Agreement dated as of the Fourteenth Amendment Signature Date between TCHI and Lender.
 
1.2            The following definitions in Section 1.1 of the Credit Agreement are hereby amended in their respective entireties by substituting the following in their respective places:
 
Change of Control ” means any of the following (or any combination of the following) whether arising from any single transaction or event or any series of transactions or events (whether as the most recent transaction in a series of transactions or otherwise) which, individually or in the aggregate, results in:
 
(a)           a change in the ownership of Parent, such that TCC fails to: (i) own legally and beneficially, free and clear of any Liens (except in favor of Lender), 100%, on a fully diluted basis, of the outstanding Ownership Interests of Parent or (ii) have the power to direct or cause the direction of the management and policies of Parent;

(b)           a change in the ownership of Borrower, such that Parent fails to: (i) own legally and beneficially, free and clear of any Liens (except in favor of Lender), 100%, on a fully diluted basis, of the outstanding Ownership Interests of Borrower or (ii) have the power to direct or cause the direction of the management and policies of Borrower;

(c)           during any period of 24 consecutive months (“ Measurement Period ”), the Approved Directors cease for any reason to constitute at least a majority of the Board of Directors of Parent.  “ Approved Directors ” means individuals, who at the beginning of the Measurement Period constitute the Board of Directors of Parent, together with any new director elected during the Measurement Period whose election by the Board of Directors, or whose nomination for election by Parent’s shareholders, was approved by a vote of at least two thirds (2/3) of the directors then in office;

(d)           (i) the Board of Directors of Borrower ceasing to be composed of individuals who are appointed by Parent, (ii) the Board of Directors of Parent ceasing to be composed of individuals who are appointed by TCC or (iii) the Board of Directors of TCC ceasing to be composed of individuals who are appointed by TCHI;

 
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(e)           Thomas Tolworthy or an Approved Successor (as defined below) ceases, for any reason, to serve as the chief executive officer of Borrower, Parent, TCC, and TCHI actively involved in such Loan Parties’ management.  For purposes of the foregoing, an “ Approved Successor ” is the chief executive officer of Borrower, Parent, TCC and TCHI elected by the Board of Directors of such Loan Parties, respectively, not more than 90 days after Thomas Tolworthy or any Approved Successor ceases to serve as the chief executive officer of such Loan Party and who is reasonably acceptable to Lender;

(f)           a change in the ownership of TCC, such that TCHI fails to: (i) own legally and beneficially, free and clear of any Liens (except in favor of Lender), 100%, on a fully diluted basis, of the outstanding Ownership Interests of TCC or (ii) have the power to direct or cause the direction of the management and policies of TCC;

(g)           the acquisition by any Person or two or more Persons acting in concert (including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), other than the TCHI Investment Group, of (i) 35% or more of the outstanding voting Ownership Interests of TCHI or (ii) the right to elect a majority of the Board of Directors of TCHI;

(h)           a change in the ownership of TCHI, such that the TCHI Investment Group fails to, collectively: (i) own legally and beneficially, on terms acceptable to Lender in its good faith discretion, at least 50.1%, on a fully diluted basis, of the outstanding Ownership Interests of TCHI or (ii) have the power to direct or cause the direction of the management and policies of TCHI; or

(i)           a change in the ownership of TCHI, such that David L. Van Andel (either directly or indirectly through one or both of Little Harbor and Great Harbor) fails to own legally and beneficially, on terms acceptable to Lender in its good faith discretion, at least 15%, on a fully diluted basis, of the outstanding Ownership Interests of TCHI.

Health Letter ” has the meaning given in the definition of “Dissolved Subsidiaries”.

Health Med ” has the meaning given in the definition of “Dissolved Subsidiaries”.

 
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Loan Party ” and “ Loan Parties ” mean, respectively, each of Borrower; Parent; TCC; TCHI; and ISI Brands Inc., a Michigan corporation (“ ISI Brands ”), and, collectively, Borrower, Parent, TCC, TCHI and ISI Brands. Without limiting the generality of the foregoing and for the avoidance of doubt, the Joint Ventures are not Loan Parties.

Loan Party Guaranty ” means each of, and collectively, (a) the Guaranty dated as of January 7, 2008 made by the Non-Borrower Loan Parties (other than TCC and TCHI) in favor of Lender and Lender’s Affiliates with respect to all of the Obligations, (b) the TCC Guaranty and (c) the TCHI Guaranty.

Loan Party Security Agreement ” means each of, and collectively, (a) the Security Agreement dated as of the date of this Agreement between the Non-Borrower Loan Parties (other than TCC and TCHI) and Lender, (b) the TCC Security Agreement and (c) the TCHI Security Agreement.

Med Letter ” has the meaning given in the definition of “Dissolved Subsidiaries”.

Natural Pet Nutrition ” has the meaning given in the definition of “Dissolved Subsidiaries”.

Parent ” means Twinlab Holdings, Inc., a Michigan corporation formerly known as Idea Sphere Inc.

PE Group ” has the meaning given in the definition of “Dissolved Subsidiaries”.

Planet Earth ” has the meaning given in the definition of “Dissolved Subsidiaries”.

TGI Organic ” has the meaning given in the definition of “Dissolved Subsidiaries”.

1.3             Section 4.3 of the Credit Agreement is hereby amended by substituting the following in its entirety for clause (l) and inserting the following new clause (m) at the end thereof:

(l)           Promptly upon the filing thereof and in any event within 10 days after filing therewith, all registration statements and other reports or filings which Loan Parties file with the Securities and Exchange Commission; and

 
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(m)           Such other information (including non-financial information) as Lender may from time to time reasonably request.

1.4             Section 5.6(a)(ii)  of the Credit Agreement is hereby amended in its entirety by substituting the following in its place:

(ii)           [ Intentionally omitted ]; and

2.             Consent to TCHI Merger, Dissolutions and Name Change; Acknowledgment Regarding Inactive Subsidiaries .

2.1             Consent .   Borrower and Parent have requested that Lender consent to the TCHI Merger, the Dissolutions and the Name Change.  Subject to the terms, and on the conditions, of this Amendment, effective on and after August 25, 2014, Lender hereby consents, without representation, warranty or recourse, to the TCHI Merger, the Dissolutions, and the Name Change.  The consents provided in this Section 2.1 , either alone or together with other consents which Lender may give from time to time, shall not, by course of dealing, implication or otherwise: (a) obligate Lender to consent to any other event, transaction or occurrence (including, without limitation, any merger involving one or more Loan Parties) of any kind, in each case past, present or future, other than (i) the TCHI Merger, the Dissolutions and the Name Change, in each case specifically consented to by, and subject to the terms of, this Amendment or (ii) in the manner, and to the extent, if any, expressly permitted pursuant to the Loan Documents without Lender’s consent, (b) except as expressly set forth herein or in the other Amendment Documents (as defined below), constitute or be deemed to be a modification or amendment of the Credit Agreement or any of the other Loan Documents, or (c) reduce, restrict or in any way affect the discretion of Lender in considering any future consent requested by any Loan Party.

2.2             Acknowledgment Regarding Inactive Subsidiaries .  Borrower and Parent have informed Lender that the Luxembourg Sub has been dissolved prior to the Effective Date pursuant to a Permitted Dissolution in accordance with the terms of the Credit Agreement.  Accordingly, Borrower and Parent acknowledge and agree that, except as it respects PE Group (subject to, and as more specifically set forth in, Section 2.3 of this Amendment): (a) there are no longer any “Inactive Subsidiaries” as defined in the Credit Agreement and (b) any references to any Inactive Subsidiaries in the Credit Agreement or any other Loan Document shall be of no further force or effect.

2.3             Acknowledgment Regarding PE Group Dissolution .  Notwithstanding anything to the contrary in this Amendment or any other Amendment Document, Borrower and Parent have informed Lender that PE Group has not been dissolved as of the Effective Date.  Borrower and Parent hereby acknowledge and agree: (a) that PE Group will be dissolved as soon as practicable pursuant to documentation in form and substance consistent, in all material respects, with the documentation delivered to Lender prior to the Effective Date and (b) to deliver to Lender, promptly upon the dissolution of PE Group, executed copies of the documents effecting the dissolution of PE Group.  Nothing in this Amendment shall be construed, by implication or otherwise, at any time prior to the Dissolution of PE Group in accordance with this Amendment, to preclude any right or ability of Lender to require a reaffirmation of any of the Loan Documents by PE Group or any other documentation reasonably required by Lender in connection therewith.

 
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3.             Conditions Precedent .  On or prior to the time and date that Lender executes this Amendment, and as a condition to the effectiveness of this Amendment, each of the following conditions precedent shall have been satisfied in the sole judgment of Lender:

3.1             Other Documents .  With the signing of this Amendment, and as a condition of this Amendment, Borrower will deliver to Lender, in each case in form and substance acceptable to Lender in its sole discretion and, as applicable, duly executed by all parties thereto (other than Lender, as applicable): (a) this Amendment, duly signed by Borrower and Parent; (b) a First Amendment to Pledge Agreement, duly signed by Parent; (c) if requested by Lender, evidence that this Amendment and the transactions contemplated hereby and thereby were duly authorized by the Board of Directors of each of Borrower and Parent, as applicable; (d) if requested by Lender, evidence that the Reaffirmation and Amendment of Guaranty and Security (as referenced in Section 3.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors or Members, as applicable, of each Non-Borrower Loan Party (other than TCC and TCHI); (e) if requested by Lender, evidence that the Reaffirmation of Guaranty and Security (as referenced in Section 3.2 ) and the transactions contemplated thereby were duly authorized by the Board of Directors of TCC; (f) a Guaranty, Security Agreement and Pledge Agreement, in each case duly executed by TCHI in favor of Lender; (g) evidence that the Guaranty, Security Agreement and Pledge Agreement (as referenced in the foregoing clause (f)) and the transactions contemplated thereby were duly authorized by the Board of Directors of TCHI; and (h) all other documents, instruments and agreements deemed necessary or desirable by Lender to effect the amendments to Borrower’s credit facilities with Lender contemplated by this Amendment.

3.2             Reaffirmation and Amendment of Guaranty and Security; Reaffirmation of Guaranty and Security; Reaffirmation of Individual Guaranties; Reaffirmation of Capital Contribution Agreement .  As a condition of this Amendment, Borrower and Parent shall cause (a) each of the Loan Parties (other than Borrower, TCC and TCHI) to execute the Reaffirmation and Amendment of Guaranty and Security below, (b) TCC to execute the Reaffirmation of Guaranty and Security below, (c) each of the Individual Guarantors (other than Mark A. Fox, as a result of his death, and John Paul DeJoria, as a result of no longer being an Individual Guarantor) to execute the Reaffirmation of Individual Guaranties below, and (d) each of the Contributors to execute the Reaffirmation of Capital Contribution Agreement below.

3.3             Reaffirmations of Subordination .  As a condition of this Amendment, Borrower and Parent shall cause each of David L. Van Andel, William W. Nicholson and Little Harbor to execute the applicable Reaffirmation of Subordination below.

3.4             Merger Documents, Dissolution Documents and Name Change Documents .  Lender shall have received, in each case in form and substance acceptable to Lender in its sole discretion, fully executed copies of: (a) the TCHI Merger Agreement; (b) all documents and instruments executed and/or delivered by any Dissolved Subsidary in connection with the Dissolutions (other than PE Group, which will be delivered in accordance with Section 2.3 of this Amendment), including, without limitation, evidence that Rebus has closed any and all accounts at Lender; and (c) all documents and instruments executed and/or delivered by Parent in connection with the Name Change.

 
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4.             Reaffirmation of Security .  Borrower, Parent and Lender hereby expressly intend that this Amendment shall not in any manner (a) constitute the refinancing, refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation of the outstanding balance of the Obligations; or (c) except to the extent of the UCC financing statement terminations filed by Lender with respect to the Dissolved Subsidiaries, adversely affect, replace, impair, or extinguish the creation, attachment, perfection or priority of the Liens on the Loan Collateral granted pursuant to any Security Document evidencing, governing or creating a Lien on the Loan Collateral.  Each of Borrower and Parent ratifies and reaffirms any and all grants of Liens to Lender on the Loan Collateral as security for the Obligations, and each of Borrower and Parent acknowledges and confirms that the grants of the Liens to Lender on the Loan Collateral: (i) represent continuing Liens on all of the Loan Collateral, (ii) secure all of the Obligations, and (iii) represent valid, first and best Liens on all of the Loan Collateral except to the extent of any Permitted Liens.
 
5.             Representations .  To induce Lender to accept this Amendment, each of Borrower and Parent hereby represents and warrants to Lender as follows:

                       5.1            Each of Borrower and Parent has full power and authority to enter into, and to perform its obligations under, this Amendment and the other Loan Documents being executed and/or delivered in connection herewith (collectively, the “ Amendment Documents ”), as applicable, and the execution and delivery of, and the performance of its obligations under and arising out of, the applicable Amendment Documents have been duly authorized by all necessary corporate action.

5.2            Each Amendment Document, as applicable, constitutes the legal, valid and binding obligations of Borrower and Parent, as applicable, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally.

5.3            The Loan Parties’ representations and warranties contained in the Credit Agreement are complete and correct as of the date of this Amendment with the same effect as though such representations and warranties had been made again on and as of the date of this Amendment, except to the extent any such representation or warranty is stated to relate solely to an earlier date (and except that such representations and warranties shall not be further qualified by materiality where, by their respective terms, they are already qualified by reference to materiality, including a Material Adverse Effect), subject to those changes as are not prohibited by, or do not constitute Events of Default under, the Credit Agreement.

5.4            After giving effect to the terms of this Amendment, no Event of Default has occurred and is continuing under the Credit Agreement.

5.5            As of the date hereof and immediately after giving effect to the TCHI Merger: (a) Schedule I attached hereto and made a part hereof sets forth the Ownership Interests of TCHI which are authorized and the number of such Ownership Interests which are outstanding, (b) set forth in such Schedule I is a complete and accurate list of all Persons who are record owners of the Ownership Interests of TCHI ( provided that the list of such Persons may list certain management option holders by group so long as, upon Lender’s good faith request, Borrower provides all additional information requested by Lender with respect thereto), and (c) all warrants, subscriptions, options, instruments, agreements and rights (excluding rights under statutes and governmental regulations) under which any Ownership Interests of TCHI are or may be redeemed, retired, converted, encumbered, bought, sold or issued are described in such Schedule I .

 
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6.             Costs and Expenses; Reaffirmation of Non-Exit Fee .  As a condition of this Amendment, Borrower will pay and reimburse Lender, promptly upon Lender’s request, for the costs and expenses incurred by Lender in connection with this Amendment and the transactions contemplated hereby and in connection herewith, including, without limitation, reasonable attorneys’ fees.  Borrower hereby ratifies and reaffirms to Lender the Non-Exit Fee (as defined in the Thirteenth Amendment).

7.             Entire Agreement .  This Amendment, together with the other Loan Documents, sets forth the entire agreement of the parties with respect to the subject matter of this Amendment and supersedes all previous understandings, written or oral, in respect of this Amendment.

8.             Release .  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, hereby represents and warrants that such Loan Party has no claims, counterclaims, setoffs, actions or causes of action, damages or liabilities of any kind or nature whatsoever, whether in law or in equity, in contract or in tort, whether now accrued or hereafter maturing (collectively, “ Claims ”) against Lender, its direct or indirect parent corporation or any direct or indirect affiliates of such parent corporation, or any of the foregoing’s respective directors, officers, employees, attorneys and legal representatives, or the heirs, administrators, successors or assigns of any of them (collectively, “ Lender Parties ”) that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  Each of Borrower and Parent, on such Loan Party’s behalf and, as applicable, on behalf of such Loan Party’s officers, directors, members, managers, shareholders, administrators, heirs, legal representatives, beneficiaries, affiliates, subsidiaries, successors and assigns, voluntarily releases and forever discharges and indemnifies and holds harmless all Lender Parties from any and all Claims and other third-party claims that may be asserted against the Lender Parties, whether known or unknown, that directly or indirectly arise out of, are based upon or are in any manner connected with any Prior Related Event.  “ Prior Related Event ” means any transaction, event, circumstance, action, failure to act, occurrence of any type or sort, whether known or unknown, which occurred, existed, was taken, was permitted or begun in accordance with, pursuant to or by virtue of (a) any of the terms of this Amendment or any other Loan Document, (b) any actions, transactions, matters or circumstances related hereto or thereto, (c) the conduct of the relationship between any Lender Party and any Loan Party or other Person, or (d) any other actions or inactions by any Lender Party, all on or prior to the Signature Date.

9.             Default .  Any default by Borrower or Parent in the performance of any of such Loan Party’s obligations under this Amendment shall constitute an immediate Event of Default under the Credit Agreement.

 
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10.             Continuing Effect of Credit Agreement; Reaffirmation of Loan Documents .  Except as expressly amended hereby, all of the provisions of the Credit Agreement are ratified and confirmed and remain in full force and effect. The existing Loan Documents, except as amended by this Amendment or amended, or amended and restated, in connection herewith, as applicable, shall remain in full force and effect, and each of them, as applicable, is hereby ratified and confirmed by Borrower, Parent, and Lender.

11.             One Agreement; References; Fax Signature .  The Credit Agreement, as amended by this Amendment, will be construed as one agreement.  All references in any of the Loan Documents to the (a) Credit Agreement will be deemed to be references to the Credit Agreement as amended by this Amendment, (b) the Loan Party Guaranty will be deemed to be references to the Loan Party Guaranty as amended by the Reaffirmation and Amendment of Guaranty and Security provided herewith and (c) the Loan Party Security Agreement will be deemed to be references to the Loan Party Security Agreement as amended by the Reaffirmation and Amendment of Guaranty and Security provided herewith.  This Amendment and the other Amendment Documents may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof or thereof, and, if so signed: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes.

12.             Captions .   The headings to the Sections of this Amendment have been inserted for convenience of reference only and shall in no way modify or restrict any provisions hereof or be used to construe any such provisions.

13.             Counterparts .  This Amendment may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

14.             Governing Law; Severability .  This Amendment shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). If any term of this Amendment is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Amendment and will not invalidate the remaining terms of this Amendment.

15.             Joint Obligations .  The obligations of Borrower and Parent under this Amendment and, as applicable, the other Loan Documents are joint, several and primary.  No Loan Party will be or be deemed to be an accommodation party with respect to any of the Loan Documents.

16.             WAIVER OF JURY TRIAL . BORROWER, PARENT, AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS AMENDMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 
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17.             Acknowledgments Regarding Mark A. Fox, etc.   Borrower, Parent and Lender hereby acknowledge and agree that: (a) John Paul DeJoria is no longer (i) an “Individual Guarantor”, (ii) an “Owner/Affiliate Subordinated Creditor”, or (iii) a “Contributor”; (b) (i) neither, as a result of his death, Mark A. Fox nor, as a result of no longer being an Individual Guarantor, John Paul DeJoria is executing the Reaffirmation of Individual Guaranties required to be executed by the Individual Guarantors pursuant to this Amendment; (ii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Capital Contribution Agreement required to be executed by the Contributors pursuant to this Amendment; and (iii) neither, as a result of his death, Mark A. Fox nor John Paul DeJoria is executing the Reaffirmation of Subordination required to be executed by the Owner Affiliate/Subordinated Creditors pursuant to this Amendment; (c) none of Borrower, Parent, or any other Person is released from his or its obligations under any Loan Document by reason of any of the foregoing; and (d) nothing herein is intended, or shall be construed, to release any of Anthony Robbins, the estate of Mark A. Fox or Peter Lusk from his or its respective obligations under any of such Loan Documents, as applicable.

18.             Indemnification .   Without limiting any other provision of this Amendment or any other Loan Document, Borrower and Parent hereby further: (a) reaffirm Section 9.11 of the Credit Agreement and (b) indemnify, defend, save and hold Lender, its Affiliates, and their respective officers, directors, attorneys, and employees harmless of, for, from and against all claims, demands, liabilities, judgments, losses, damages, costs and expenses (including, without limitation, all accounting fees and reasonable attorneys’ fees) that Lender or any such indemnified party, jointly or severally, incurs arising out of: (i) any Amendment Document, (ii) any transaction contemplated by, consummated in connection with or referred to in, or any matter related to, the Amendment Documents (including, without limitation, the TCHI Merger, the Dissolutions and the Name Change), or (iii) any act taken by Lender under any Amendment Document except in any such case to the extent arising out of the bad faith, willful misconduct or gross negligence of such indemnified party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The provisions of this paragraph shall survive the termination of the Credit Agreement and other Loan Documents.

[ Signature Page Follows ]

 
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           IN WITNESS WHEREOF, Borrower, Parent and Lender have executed this Amendment by their duly authorized officers to be effective as of the Effective Date.


TWINLAB CORPORATION
TWINLAB HOLDINGS, INC.


By:     /S/ Thomas A. Tolworthy                                                                                    
 Thomas A. Tolworthy, President and CEO


FIFTH THIRD BANK


By:    /S/ Andrew P. Hanson            
 Andrew P. Hanson, Vice President




SIGNATURE PAGE TO
FOURTEENTH AMENDMENT TO CREDIT AGREEMENT
 (Twinlab Corporation)
 
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EXHIBIT 10.5.16
 
EXECUTION VERSION
 
A FIFTH THIRD BANCORP BANK

GUARANTY

THIS GUARANTY (this “ Guaranty ”), dated as of September 16, 2014 (the “ Effective Date ”), made by TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (“ Guarantor ”), to, and for the benefit of, FIFTH THIRD BANK, an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation, for itself and as agent for each affiliate of Fifth Third Bancorp (collectively, “ Lender ”), is as follows:

1.            GUARANTY .

1.1            Guaranty .  For value received and in consideration of any loan, advance or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to TWINLAB CORPORATION, a Delaware corporation (“ Borrower ”), Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Lender: (i) the full and prompt payment when due of the principal of, all interest on, and all fees in respect of, all of the Loans and Letter of Credit Obligations and (ii) the full and prompt payment and performance of any and all other Obligations, whether all or any portion of such Loans, Letter of Credit Obligations and other Obligations are now or hereafter existing, direct or indirect, related or unrelated, joint or several, or absolute or contingent, whether or not for the payment of money, and whether arising by reason of an extension of credit, opening of a letter of credit, loan, guarantee, Rate Management Obligation or in any other manner (all of the indebtedness, liabilities and obligations described in the foregoing clauses (i) and (ii) of this Section 1.1 which are outstanding from time to time are collectively referred to as the “ Guaranteed Obligations ”).  Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Lender the full and prompt payment and performance of the Guaranteed Obligations when any of the Guaranteed Obligations are due, including, without limitation, on the occurrence of an Event of Default, by reason of the maturity or acceleration of any of the Guaranteed Obligations, on the occurrence of a default under the terms of this Guaranty, or otherwise, and at any times after the date when due. Notwithstanding anything to the contrary contained in this Guaranty or any other Loan Document to which any Guarantor is a party: (a) the definition of “Guaranteed Obligations” set forth in this Guaranty shall exclude Excluded Swap Obligations in respect of Guarantor; (b) in no event shall the proceeds of any Loan Collateral provided by Guarantor be applied by Lender to any Excluded Swap Obligations in respect of Guarantor; and (c) without limiting any provision set forth in any Loan Document, to the fullest extent permitted by law, Guarantor hereby waives any and all rights to require marshalling of assets by Lender.
 
 
1.2            Capitalized Terms .  Capitalized terms used, but not defined, in this Guaranty, have the meanings attributed to them in the Credit Agreement dated as of January 7, 2008, by and among Borrower, Twinlab Holdings, Inc., a Michigan corporation formerly known as Idea Sphere Inc., and Lender (as the same has been, is contemporaneously herewith, and may be in the future further amended, renewed, consolidated, restated or replaced from time to time, the “ Credit Agreement ”). Guarantor has had an opportunity to review the Credit Agreement and the other Loan Documents and to discuss the same with counsel.


 
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1.3            Security .  This Guaranty and the Guaranteed Obligations are secured by (as the same may be amended, renewed, consolidated, restated or replaced from time to time, collectively, the “ Security Documents ”): (i) the Security Agreement between Guarantor and Lender dated as of even date herewith; and (ii) the Pledge Agreement between Guarantor and Lender dated as of even date herewith.   Lender shall have all of its rights and remedies set forth in the Security Documents.

2.            NATURE OF THE GUARANTY .

2.1            Absolute Obligations .  The obligations of Guarantor under this Guaranty are absolute, unconditional, and will be continuing and remain in full force and effect subject to Sections 2.2 and 2.6 .  This is a continuing guaranty of payment and not of collection.  Guarantor’s obligations under this Guaranty will not be released, discharged, affected, modified or impaired by any event, including, without limitation, any of the following events:

(i)           the compromise, settlement, release, discharge or termination of any or all of the Obligations by operation of law or otherwise, except as may result from the full and prompt performance and payment of the Guaranteed Obligations;
 
 
(ii)           the extension of the time for payment of any of the Obligations, or the waiver, modification or amendment (whether material or otherwise) of any of the Obligations or the acceptance of partial payments of the Guaranteed Obligations;

(iii)           the taking or failure to take any action under the Credit Agreement, any of the other Loan Documents or this Guaranty;

(iv)           the invalidity or unenforceability of any provision of the Credit Agreement, any of the other Loan Documents, or this Guaranty or any other defense Borrower or other guarantor of the Obligations may assert to the payment or performance of the Guaranteed Obligations other than payment and satisfaction in full of all of the Guaranteed Obligations;

(v)           any (a) failure by Lender to take any steps to perfect, maintain, or enforce its Liens on any of the Loan Collateral, (b) subordination of any of the Guaranteed Obligations and any security therefor to any other Indebtedness of Borrower to any Person, or (c) loss, release, substitution of, or other dealings with, any collateral or other security given to Lender with respect to the Guaranteed Obligations;

(vi)           the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment, composition with creditors or readjustment of, or other similar proceedings affecting Borrower, Guarantor or any other guarantor of any or all of the Guaranteed Obligations;

(vii)           any allegation of invalidity or contest of the validity of this Guaranty in any of the proceedings described in clause (vi) of this Section 2.1 ;

 
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(viii)           any act, election or remedy, or other election, occurrence or circumstance of any nature, whether or not under Lender’s control, that may affect or impair any subrogation right of Guarantor or the effectiveness or value thereof;

(ix)           the default or failure of Guarantor to perform fully any of its obligations set forth in this Guaranty;

(x)           Lender’s election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (the “ Bankruptcy Code ”), of the application of Section 1111(b)(2) of the Bankruptcy Code;

(xi)           any borrowing or grant of a security interest by Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code;

(xii)           the disallowance of all or any portion of Lender’s claim(s) for repayment of the Guaranteed Obligations under Section 502 of the Bankruptcy Code; or

(xiii)           any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor other than payment and satisfaction in full of all of the Guaranteed Obligations.

2.2            Revival of Guaranty .  If (i) any demand is made at any time on Lender for the repayment of any amount received by it or as proceeds of any collateral or security which have been applied in payment of any of the Guaranteed Obligations, and (ii) Lender makes any repayment by reason of any judgment, decree or order of any court or administrative body or by reason of any settlement or compromise of such demand, Guarantor will be liable under this Guaranty for all amounts so repaid to the same extent as if such amounts had never been received originally by Lender.  Except as provided in the preceding sentence, Guarantor’s obligations under this Guaranty will terminate when the Guaranteed Obligations have been fully paid, performed and satisfied.

2.3            Waivers By Guarantor .  Guarantor hereby covenants that this Guaranty will not be discharged except by complete performance of the obligations contained in this Guaranty.  Guarantor waives all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of, and reliance on, this Guaranty.  Guarantor further waives all (i) notices of the existence, creation or incurring of new or additional Indebtedness arising either from additional loans extended to Borrower or otherwise, (ii) notices that the principal amount, or any portion thereof (and any interest thereon), of the Loans or any of the other Guaranteed Obligations is due, (iii) notices of any and all proceedings to collect from Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or from anyone else, (iv) to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the Guaranteed Obligations, and (v) defenses based on suretyship or impairment of collateral.

 
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2.4            Application of Proceeds by Lender .  Lender will have the exclusive right to determine, in its sole discretion, the order and method of the application of payments from and credits to, if any, Guarantor, Borrower or from any other Person on account of the Guaranteed Obligations or of any other liability of Guarantor to Lender.

2.5            Responsibility of Guarantor . Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Borrower and any and all indorsers and other guarantors of any instrument or document evidencing all or any part of the Guaranteed Obligations and of all other circumstances bearing on the risk of nonpayment of the Guaranteed Obligations or any part thereof that diligent inquiry would reveal.  Lender will have no duty to advise Guarantor of information known to Lender regarding such condition or any such circumstances.

2.6            Termination of Guaranty . Except as provided in Section 2.2 , Guarantor’s obligations under this Guaranty for the Guaranteed Obligations will terminate upon the payment and performance in full of the Guaranteed Obligations.

2.7            Taxes .  All payments to be made hereunder by Guarantor shall be made without setoff, counterclaim or other defense.  All such payments shall be made free and clear of and without deduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority (collectively, “ Taxes ”) excluding Taxes imposed on or measured by Lender’s gross or net income, franchise taxes, branch profits taxes, taxes on doing business or taxes measured by or imposed upon the overall capital or net worth of Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed by the jurisdiction under the laws of which Lender, applicable lending office, branch or affiliate is organized or is located, or any nation within which such jurisdiction is located or any political subdivision thereof.  If any Taxes are imposed and required to be withheld from any amount payable by Guarantor hereunder, Guarantor shall be obligated to (a) pay such additional amount so that Lender will receive a net amount (after giving effect to the payment of such additional amount and to the deduction of all Taxes) equal to the amount due hereunder, (b) pay such Taxes to the appropriate taxing authority for the account of Lender, and (c) as promptly as possible thereafter, send Lender a certified copy of any original official receipt showing payment thereof, together with such additional documentary evidence as Lender may from time to time require in its discretion exercised in good faith.  If Guarantor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to Lender the required receipts or other required documentary evidence, Guarantor shall be obligated to indemnify Lender for any incremental Taxes, interest or penalties that may become payable by Lender as a result of such failure.  The obligations of Guarantor under this Section 2.7 shall survive the repayment of the Guaranteed Obligations and the termination of the Credit Agreement.

3.            REPRESENTATIONS AND WARRANTIES; COVENANTS .

3.1            Representations and Warranties .  To induce Lender to extend the Guaranteed Obligations, and for other good and valuable consideration, Guarantor hereby represents and warrants to Lender that: (i) this Guaranty is the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms; (ii) the execution, delivery, and such performance of this Guaranty does not and will not, by the lapse of time, by the giving of notice, or the satisfaction of any other condition, violate or contravene any authority having the force of law or any agreement, instrument or other document to which Guarantor is a party or by which Guarantor or any of its properties is or may be bound; (iii) the execution and delivery of this Guaranty by Guarantor does not:  (a) require any consent or approval of any Person, (b) violate, or constitute a default under, any rule or provision of Guarantor’s articles, certificates, regulations, bylaws, operating agreement, any resolution of its members, managers, or directors, as applicable, or other agreement, document or instrument to which Guarantor is a party or by which Guarantor or any of Guarantor’s properties is or may be bound or affected, (c) violate, or constitute a default under, any law, requirement, rule, regulation, ordinance or restriction of any governmental instrumentality or agency   applicable to Guarantor or by which Guarantor’s properties are bound or affected, or (d) result in the creation or imposition of any Lien on any of the property of Guarantor except in favor of Lender; (iv) there is no action or proceeding pending before any court or governmental authority which materially, adversely affects the condition (financial or otherwise) of Guarantor or any of its properties; (v) Guarantor is, and so long as this Guaranty remains in effect, will be, a holding entity whose sole business will be the holding of the outstanding Ownership Interests of Twinlab Consolidation Corporation, a Delaware corporation; and (vi) Guarantor does not have any Indebtedness except to the extent, and in the manner, expressly permitted by Lender pursuant to the Loan Documents.

 
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3.2            Incorporation of Credit Agreement .  Guarantor will observe, perform and fulfill, and will be bound by, each provision in the Credit Agreement applicable to Guarantor (including, without limitation, those which Borrower has agreed to cause Guarantor to observe, perform and fulfill) (the “ Incorporated Provisions ”), with the effect that Lender will have the benefit of each of the Incorporated Provisions (including affirmative and negative covenants, representations and warranties, delivery of financial statements and other notices and information).  The Incorporated Provisions are hereby incorporated by reference and made a part of this Guaranty to the same extent as if the Incorporated Provisions were set forth herein.  Notwithstanding anything to the contrary in this Section 3.2 , neither Guarantor nor any successor or assignee of Guarantor, by operation of law or otherwise, is a party to the Credit Agreement or any of the other Loan Documents (other than this Guaranty and the applicable Security Documents), and Guarantor will not have (i) any right in or to enforcement of the Credit Agreement or any of such other Loan Documents as against Borrower or Lender, (ii) any claim of damage if Borrower or Lender defaults under the Credit Agreement or any of such other Loan Documents, or (iii) any right to object or consent to any amendment, modification, or supplement to, or any restatement or replacement of, the Credit Agreement or any of such other Loan Documents undertaken by Borrower and Lender.

3.3            Security Documents .  Guarantor will perform, observe and comply with all of the terms and conditions of the applicable Security Documents.

4.            EXPENSES .  Guarantor will pay all of the costs, expenses and fees, including, without limitation, all reasonable attorneys’ fees, incurred by Lender in enforcing or attempting to enforce this Guaranty, whether the same is enforced by suit or otherwise, and all amounts recoverable by law, including, without limitation, interest on any unpaid amounts due under this Guaranty.

5.            DEFAULT; SUBORDINATION; MAXIMUM LIABILITY .

5.1            Payment of Guaranteed Obligations .  At any time after all or any portion of the Guaranteed Obligations are due and payable, whether on maturity, after the acceleration of any of the Guaranteed Obligations, on the occurrence of an Event of Default, on the occurrence of any default under this Guaranty, or otherwise:  (i) Guarantor will, on the demand of Lender, immediately deposit with Lender in U.S. dollars the total amount of the Guaranteed Obligations due and payable (whether due and payable as a result of maturity, acceleration, or otherwise), and (ii) Lender will have the right: (a) to proceed directly against Guarantor under this Guaranty without first exhausting any other remedy it may have and without resorting to any security or guaranty held by Lender, (b) to compromise, settle, release, discharge or terminate any of the obligations of any other guarantor(s) of the Guaranteed Obligations as Lender, in its discretion, determines without thereby in any way affecting, limiting or diminishing its rights thereafter to enforce the obligations of Guarantor under this Guaranty, (c) to sell, collect, or otherwise dispose of and to apply the proceeds of any collateral or other security given to Lender with respect to the Guaranteed Obligations in satisfaction of the Guaranteed Obligations in such order and method of application as may be elected by Lender in its discretion exercised in good faith, and (d) to exercise all of Lender’s other powers, rights and remedies under this Guaranty, the Security Documents, the other Loan Documents and under applicable law.  Lender will not have any obligation to marshal any assets in favor of Guarantor or against or in payment of any or all of the Guaranteed Obligations.

 
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5.2            Subordination .  Until the Guaranteed Obligations have been fully paid, performed and satisfied: (i) any and all claims of Guarantor against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or against any of their respective properties are, by the signing of this Guaranty by Guarantor, made subordinate and subject in right of payment and performance to the prior payment and performance to Lender in full of all of the Guaranteed Obligations; and (ii) Guarantor will not exercise any right to enforce any remedy which Guarantor now has or may in the future have against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations.

5.3            Maximum Liability .  The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Guarantor’s liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Guarantor or Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being Guarantor’s “ Maximum Liability ”).  This Section with respect to the Maximum Liability of Guarantor is intended solely to preserve the rights of Lender to the maximum extent not subject to avoidance under applicable law, and neither Guarantor nor any other Person or entity shall have any right or claim under this Section with respect to such Maximum Liability, except to the extent necessary so that the obligations of Guarantor hereunder shall not be rendered voidable under applicable law. Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Liability of Guarantor without impairing this Guaranty or affecting the rights and remedies of Lender hereunder, provided that, nothing in this sentence shall be construed to increase Guarantor’s obligations hereunder beyond its Maximum Liability.

6.            GENERAL .

6.1            Cumulative Remedies .  The remedies provided in this Guaranty and the other Loan Documents are cumulative and not exclusive of any remedies provided by law.  Exercise of one or more remedy(ies) by Lender does not require that all or any other remedy(ies) be exercised and does not preclude later exercise of the same remedy.  If there is any conflict, ambiguity, or inconsistency, in Lender’s judgment, between the terms of this Guaranty and any of the other Loan Documents, then the applicable terms and provisions, in Lender’s judgment, providing Lender with the greater rights, remedies, powers, privileges, or benefits will control.

6.2            Waivers and Amendments in Writing .  Failure by Lender to exercise any right, remedy or option under this Guaranty or in any other Loan Documents or delay by Lender in exercising the same shall not operate as a waiver by Lender of its right to exercise any such right, remedy or option.  No waiver by Lender shall be effective unless it is in writing and then only to the extent specifically stated.  This Guaranty cannot be amended, modified, changed or terminated orally.

 
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6.3            Entire Agreement; Counterparts; Fax Signatures .  This Guaranty and the other Loan Documents to which Guarantor is a party constitute the entire agreement between the parties with respect to the subject matter of this Guaranty, and supersede all prior written and oral agreements and understandings.  Any request from time to time by Guarantor for Lender’s consent under any provision in this Guaranty must be in writing, and any consent to be provided by Lender under this Guaranty from time to time must be in writing in order to be binding on Lender; however , Lender will have no obligation to provide any consent requested by Guarantor, and Lender may, for any reason in its discretion exercised in good faith, elect to withhold the requested consent.  Two or more duplicate originals of this Guaranty may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.  Any documents delivered by, or on behalf of, Guarantor by facsimile transmission or other electronic delivery of an image file reflecting the execution hereof: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes of the Loan Documents.

6.4            Headings; Construction .  Section headings in this Guaranty are included for convenience of reference only and shall not relate to the interpretation or construction of this Guaranty.  Any and all references in this Guaranty to any other document or documents will be references to that other document or documents as they may, from time to time, be modified, amended, renewed, consolidated, extended or replaced.

6.5            Separate Instrument .  This Guaranty constitutes a separate instrument, enforceable in accordance with its terms, and neither this Guaranty nor the obligations of Guarantor under this Guaranty will, under any circumstance or in any legal proceeding, be deemed to have merged into any other agreement or obligation of Guarantor.

6.6            Severability .  If any term of this Guaranty is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, that invalid term will be considered excluded from this Guaranty and will not invalidate the remaining terms of this Guaranty.

6.7            OHIO LAW .  THIS GUARANTY HAS BEEN DELIVERED AT AND ACCEPTED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN HAMILTON COUNTY, OHIO.  THIS GUARANTY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO (WITHOUT REFERENCE TO OHIO CONFLICTS OF LAW PRINCIPLES).

 
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6.8            CHOICE OF FORUM .  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY AND TO EXTEND CREDIT TO BORROWER, GUARANTOR AND LENDER AGREE that the state and federal courts in Hamilton County, Ohio have non-exclusive jurisdiction over all matters arising out of this Guaranty and the other Loan Documents to which Guarantor is a party, including, but not limited to, ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF THE GUARANTEED OBLIGATIONS AND THE EXERCISE OF ALL OF LENDER’S RIGHTS AGAINST GUARANTOR WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY OF GUARANTOR, INCLUDING, WITHOUT LIMITATION, ANY DISPOSITIONS OF ANY OF THE LOAN COLLATERAL.  LENDER AND GUARANTOR EACH CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION OVER THEIR RESPECTIVE PERSONS BY ANY COURT SITUATED IN HAMILTON COUNTY, OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, AND EACH CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO GUARANTOR AND LENDER AT THEIR RESPECTIVE ADDRESSES AS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A PARTY MAY FROM TIME TO TIME DESIGNATE FOR ITSELF BY NOTICE TO THE OTHER PARTY) OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO.  GUARANTOR WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION COMMENCED IN HAMILTON COUNTY, OHIO, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED UNDER THIS GUARANTY IN HAMILTON COUNTY, OHIO, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

6.9            Successors and Assigns .  This Guaranty will inure to the benefit of Lender, its successors and assigns and be binding on the successors and assigns of Guarantor.

6.10            Notices .  Any notice required, permitted or contemplated hereunder shall be in writing and addressed to the party to be notified at the address set forth below or at such other address as each party may designate for itself from time to time by notice hereunder, and shall be deemed validly given:  (i) three days following deposit in the U.S. certified mails (return receipt requested), with proper postage prepaid, or (ii) the next Business Day after such notice was delivered to a regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement satisfactory with such carrier made for the payment thereof, or (iii) upon receipt of notice given by telecopy (fax), mailgram, telegram, telex or personal delivery:

To Guarantor:                                       3133 Orchard Vista Drive SE
                                                                  Grand Rapids, Michigan 49546
Attn: Thomas Tolworthy, President
Richard H. Neuwirth, General Counsel
Fax: (212) 505-5413

 
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To Lender:                                             Fifth Third Bank
38 Fountain Square Plaza
MD 10908F
Cincinnati, Ohio 45263
Attention:  Structured Finance Group
Fax Number:  (513) 534-8400

and

Fifth Third Bank
111 Lyons Street N.W.
MD  RMOB2C
Grand Rapids, Michigan  49503
Attention:  Andrew P. Hanson

6.11            Separate Action .  Each default in payment of any amount due under this Guaranty will, at Lender’s sole option, give rise to a separate cause of action under this Guaranty, and separate suits, at Lender’s sole option, may be brought under this Guaranty as each cause of action arises.

6.12            Survival and Continuation of Representations and Warranties . All of Guarantor’s representations and warranties contained in this Guaranty shall:  (i) survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related hereto, (ii) be deemed to be made as of each and every day of the term of this Guaranty, and (iii) remain true until the Guaranteed Obligations are fully performed, paid and satisfied, subject to any changes to such representations and warranties that (a) are not prohibited hereby, (b) do not constitute defaults hereunder, or (c) have been consented to by Lender in writing.

6.13            Equitable Relief .  Guarantor recognizes that, in the event that Guarantor fails to perform, observe or discharge any of its obligations or liabilities under this Guaranty, any remedy at law may prove to be inadequate relief to Lender; therefore , Guarantor agrees that Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

6.14            WAIVER OF JURY TRIAL .  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ENTER INTO THIS GUARANTY AND EXTEND CREDIT TO BORROWER, GUARANTOR AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS GUARANTY.
 
 
6.15            Indemnity .  Guarantor shall indemnify, defend, save and hold Lender, its affiliates, and their respective officers, directors, attorneys, and employees harmless of, from and against all claims, demands, liabilities, judgments, losses, damages, taxes, costs and expenses, joint or several (including all accounting fees and reasonable attorneys’ fees), that Lender or any such indemnified party may incur arising out of this Guaranty or any act taken by Lender hereunder ( including any arising out of the comparative, contributory or sole negligence of any of Lender or any such indemnified party ) except to the extent of the willful misconduct or gross negligence of such indemnified party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The provisions of this Section 6.15 shall survive the termination of this Guaranty.

[ Signature Page Follows ]


 
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Guarantor has signed this Guaranty as of the Effective Date.

TWINLAB CONSOLIDATED HOLDINGS, INC.


By:     /S/ Thomas A. Tolworthy                                                                  
Name: Thomas A. Tolworthy
                                 Title: President

 

 
Accepted as of the Effective Date.

FIFTH THIRD BANK
 
 
By:   /s/ Andrew P. Hanson                                                                       
       Andrew P. Hanson, Vice President







SIGNATURE PAGE TO
GUARANTY
 
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EXHIBIT 10.5.16
 
EXECUTION VERSION
A FIFTH THIRD BANCORP BANK

GUARANTY

THIS GUARANTY (this “ Guaranty ”), dated as of January 7, 2008 (the “ Effective Date ”), made by IDEA SPHERE INC. , a Michigan corporation (“ Idea Sphere ”), REBUS, LLC , a Delaware limited liability company (“ Rebus ”), NATURAL2U LLC , a Michigan limited liability company (“ Natural2U ”), 701 CORPORATION , a Michigan corporation (“ 701 Corporation ”), ISI BRANDS INC. , a Michigan corporation (“ ISI Brands ”), PLANET EARTH VENTURES, LLC , a Michigan limited liability company (“ Planet Earth ”), HEALTH MED, INC. , a Michigan corporation (“ Health Med ”), HEALTH LETTER, INC. , a Michigan corporation (“ Health Letter ”), MED LETTER, INC. , a Michigan corporation (“ Med Letter ”), TGI ORGANIC, LLC , a Michigan limited liability company (“ TGI Organic ”), PE GROUP, LLC , a Delaware limited liability company (“ PE Group ”), and NATURAL PET NUTRITION, L.L.C. , a Delaware limited liability company (“ Natural Pet Nutrition ”) (Idea Sphere, Rebus, Natural2U, 701 Corporation, ISI Brands, Planet Earth, Health Med, Health Letter, Med Letter, TGI Organic, PE Group, and Natural Pet Nutrition are each a “ Guarantor ” and sometimes, collectively, “ Guarantors ”), to, and for the benefit of, FIFTH THIRD BANK , a Michigan banking corporation, for itself and as agent for each affiliate of Fifth Third Bancorp (collectively, “ Lender ”), is as follows:

1.            GUARANTY .

1.1            Guaranty .  For value received and in consideration of any loan, advance or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to TWINLAB CORPORATION, a Delaware corporation (“ Borrower ”), Guarantors hereby absolutely, irrevocably and unconditionally, and jointly and severally, guarantee to Lender: (i) the full and prompt payment when due of the principal of, all interest on, and all fees in respect of, all of the Loans and Letter of Credit Obligations and (ii) the full and prompt payment and performance of any and all other Obligations, whether all or any portion of such Loans, Letter of Credit Obligations and other Obligations are now or hereafter existing, direct or indirect, related or unrelated, joint or several, or absolute or contingent, whether or not for the payment of money, and whether arising by reason of an extension of credit, opening of a letter of credit, loan, guarantee, Rate Management Obligation or in any other manner (all of the indebtedness, liabilities and obligations described in the foregoing clauses (i) and (ii) of this Section 1.1 which are outstanding from time to time are collectively referred to as the “ Guaranteed Obligations ”).  Guarantors hereby absolutely, irrevocably and unconditionally, and jointly and severally, guarantee to Lender the full and prompt payment and performance of the Guaranteed Obligations when any of the Guaranteed Obligations are due, including, without limitation, on the occurrence of an Event of Default, by reason of the maturity or acceleration of any of the Guaranteed Obligations, on the occurrence of a default under the terms of this Guaranty, or otherwise, and at any times after the date when due.
 
 
1.2            Capitalized Terms .  Capitalized terms used, but not defined, in this Guaranty, have the meanings attributed to them in the Credit Agreement by and among Borrower, Idea Sphere and Lender dated as of even date herewith (as the same may be amended, renewed, consolidated, restated or replaced from time to time, the “ Credit Agreement ”). Guarantors have had an opportunity to review the Credit Agreement and the other Loan Documents and to discuss the same with counsel.

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1.3            Security .  This Guaranty and the Guaranteed Obligations are secured by (as the same may be amended, renewed, consolidated, restated or replaced from time to time, collectively, the “ Security Documents ”): (i) the Security Agreement among Guarantors and Lender dated as of even date herewith; (ii) as it respects ISI Brands, the Trademark Security Agreement between ISI Brands and Lender dated as of even date herewith and the Patent Assignment and Security Agreement between ISI Brands and Lender dated as of even date herewith; and (iii) as it respects Idea Sphere, the Pledge Agreement between Idea Sphere and Lender dated as of even date herewith.  Lender shall have all of its rights and remedies set forth in the Security Documents.

2.            NATURE OF THE GUARANTY .

2.1            Absolute Obligations .  The obligations of Guarantors under this Guaranty are absolute, unconditional, and will be continuing and remain in full force and effect subject to Sections 2.2 and 2.6 .  This is a continuing guaranty of payment and not of collection.  Guarantors’ obligations under this Guaranty will not be released, discharged, affected, modified or impaired by any event, including, without limitation, any of the following events:

(i)           the compromise, settlement, release, discharge or termination of any or all of the Obligations by operation of law or otherwise, except as may result from the full and prompt performance and payment of the Guaranteed Obligations;
 
 
(ii)           the extension of the time for payment of any of the Obligations, or the waiver, modification or amendment (whether material or otherwise) of any of the Obligations or the acceptance of partial payments of the Guaranteed Obligations;

(iii)           the taking or failure to take any action under the Credit Agreement, any of the other Loan Documents or this Guaranty;

(iv)           the invalidity or unenforceability of any provision of the Credit Agreement, any of the other Loan Documents, or this Guaranty or any other defense Borrower or other guarantor of the Obligations may assert to the payment or performance of the Guaranteed Obligations other than payment and satisfaction in full of all of the Guaranteed Obligations;

(v)           any (a) failure by Lender to take any steps to perfect, maintain, or enforce its Liens on any of the Loan Collateral, (b) subordination of any of the Guaranteed Obligations and any security therefor to any other Indebtedness of Borrower to any Person, or (c) loss, release, substitution of, or other dealings with, any collateral or other security given to Lender with respect to the Guaranteed Obligations;

(vi)           the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment, composition with creditors or readjustment of, or other similar proceedings affecting Borrower, any Guarantor or any other guarantor of any or all of the Guaranteed Obligations;

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(vii)           any allegation of invalidity or contest of the validity of this Guaranty in any of the proceedings described in clause (vi) of this Section 2.1 ;

(viii)           any act, election or remedy, or other election, occurrence or circumstance of any nature, whether or not under Lender’s control, that may affect or impair any subrogation right of any Guarantor or the effectiveness or value thereof;

(ix)           the default or failure of any Guarantor to perform fully any of its obligations set forth in this Guaranty;

(x)           Lender’s election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (the “ Bankruptcy Code ”), of the application of Section 1111(b)(2) of the Bankruptcy Code;

(xi)           any borrowing or grant of a security interest by Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code;

(xii)           the disallowance of all or any portion of Lender’s claim(s) for repayment of the Guaranteed Obligations under Section 502 of the Bankruptcy Code; or

(xiii)           any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor other than payment and satisfaction in full of all of the Guaranteed Obligations.

2.2            Revival of Guaranty .  If (i) any demand is made at any time on Lender for the repayment of any amount received by it or as proceeds of any collateral or security which have been applied in payment of any of the Guaranteed Obligations, and (ii) Lender makes any repayment by reason of any judgment, decree or order of any court or administrative body or by reason of any settlement or compromise of such demand, Guarantors will be liable under this Guaranty for all amounts so repaid to the same extent as if such amounts had never been received originally by Lender.  Except as provided in the preceding sentence, Guarantors’ obligations under this Guaranty will terminate when the Guaranteed Obligations have been fully paid, performed and satisfied.

2.3            Waivers By Guarantors .  Each Guarantor hereby covenants that this Guaranty will not be discharged except by complete performance of the obligations contained in this Guaranty.  Each Guarantor waives all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of, and reliance on, this Guaranty.  Each Guarantor further waives all (i) notices of the existence, creation or incurring of new or additional Indebtedness arising either from additional loans extended to Borrower or otherwise, (ii) notices that the principal amount, or any portion thereof (and any interest thereon), of the Loans or any of the other Guaranteed Obligations is due, (iii) notices of any and all proceedings to collect from Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or from anyone else, (iv) to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the Guaranteed Obligations, and (v) defenses based on suretyship or impairment of collateral.

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2.4            Application of Proceeds by Lender .  Lender will have the exclusive right to determine, in its sole discretion, the order and method of the application of payments from and credits to, if any, Guarantors, Borrower or from any other Person on account of the Guaranteed Obligations or of any other liability of Guarantors to Lender.

2.5            Responsibility of Guarantors .  Each Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Borrower and any and all indorsers and other guarantors of any instrument or document evidencing all or any part of the Guaranteed Obligations and of all other circumstances bearing on the risk of nonpayment of the Guaranteed Obligations or any part thereof that diligent inquiry would reveal.  Lender will have no duty to advise Guarantors of information known to Lender regarding such condition or any such circumstances.

2.6            Termination of Guaranty . Except as provided in Section 2.2 , Guarantors’ obligations under this Guaranty for the Guaranteed Obligations will terminate upon the payment and performance in full of the Guaranteed Obligations.

2.7            Taxes .  All payments to be made hereunder by Guarantors shall be made without setoff, counterclaim or other defense.  All such payments shall be made free and clear of and without deduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority (collectively, “ Taxes ”) excluding Taxes imposed on or measured by Lender’s gross or net income, franchise taxes, branch profits taxes, taxes on doing business or taxes measured by or imposed upon the overall capital or net worth of Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed by the jurisdiction under the laws of which Lender, applicable lending office, branch or affiliate is organized or is located, or any nation within which such jurisdiction is located or any political subdivision thereof.  If any Taxes are imposed and required to be withheld from any amount payable by Guarantors hereunder, Guarantors shall be obligated to (a) pay such additional amount so that Lender will receive a net amount (after giving effect to the payment of such additional amount and to the deduction of all Taxes) equal to the amount due hereunder, (b) pay such Taxes to the appropriate taxing authority for the account of Lender, and (c) as promptly as possible thereafter, send Lender a certified copy of any original official receipt showing payment thereof, together with such additional documentary evidence as Lender may from time to time require in its discretion exercised in good faith.  If Guarantors fail to pay any Taxes when due to the appropriate taxing authority or fails to remit to Lender the required receipts or other required documentary evidence, Guarantors shall be obligated to indemnify Lender for any incremental Taxes, interest or penalties that may become payable by Lender as a result of such failure.  The obligations of Guarantors under this Section 2.7 shall survive the repayment of the Guaranteed Obligations and the termination of the Credit Agreement.

3.            REPRESENTATIONS AND WARRANTIES; COVENANTS .

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3.1            Representations and Warranties .  To induce Lender to extend the Guaranteed Obligations, and for other good and valuable consideration, each Guarantor hereby represents and warrants to Lender that: (i) this Guaranty is the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms; (ii) the execution, delivery, and such performance of this Guaranty does not and will not, by the lapse of time, by the giving of notice, or the satisfaction of any other condition, violate or contravene any authority having the force of law or any agreement, instrument or other document to which such Guarantor is a party or by which such Guarantor or any of its properties is or may be bound; (iii) the execution and delivery of this Guaranty by such Guarantor does not:  (a) require any consent or approval of any Person, (b) violate, or constitute a default under, any rule or provision of such Guarantor’s articles, certificates, regulations, bylaws, operating agreement, any resolution of its members, managers, or directors, as applicable, or other agreement, document or instrument to which such Guarantor is a party or by which any Guarantor or any of any Guarantor’s properties is or may be bound or affected, (c) violate, or constitute a default under, any law, requirement, rule, regulation, ordinance or restriction of any governmental instrumentality or agency   applicable to such Guarantor or by which such Guarantor’s properties are bound or affected, or (d) result in the creation or imposition of any Lien on any of the property of such Guarantor except in favor of Lender; (iv) there is no action or proceeding pending before any court or governmental authority which materially, adversely affects the condition (financial or otherwise) of such Guarantor or any of its properties; (v) Idea Sphere is, and so long as this Guaranty remains in effect, will be, a holding entity whose sole business will be the holding of the Ownership Interests of Borrower, the other Guarantors, and certain other Affiliates of Borrower; and (vi) Guarantors do not have any Indebtedness except to the extent, and in the manner, expressly permitted by Lender pursuant to the Loan Documents.

3.2            Incorporation of Credit Agreement .  Guarantors will observe, perform and fulfill, and will be bound by, each provision in the Credit Agreement applicable to Guarantors (including, without limitation, those which Borrower has agreed to cause Guarantors to observe, perform and fulfill) (the “ Incorporated Provisions ”), with the effect that Lender will have the benefit of each of the Incorporated Provisions (including affirmative and negative covenants, representations and warranties, delivery of financial statements and other notices and information).  The Incorporated Provisions are hereby incorporated by reference and made a part of this Guaranty to the same extent as if the Incorporated Provisions were set forth herein.  Notwithstanding anything to the contrary in this Section 3.2 , no Guarantor nor any successor or assignee of any Guarantor, by operation of law or otherwise, is a party to the Credit Agreement or any of the other Loan Documents (other than this Guaranty and the applicable Security Documents), and no Guarantor will have (i) any right in or to enforcement of the Credit Agreement or any of such other Loan Documents as against Borrower or Lender, (ii) any claim of damage if Borrower or Lender defaults under the Credit Agreement or any of such other Loan Documents, or (iii) any right to object or consent to any amendment, modification, or supplement to, or any restatement or replacement of, the Credit Agreement or any of such other Loan Documents undertaken by Borrower and Lender.

3.3            Security Documents .  Guarantors will perform, observe and comply with all of the terms and conditions of the applicable Security Documents.

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4.            EXPENSES .  Guarantors will pay all of the costs, expenses and fees, including, without limitation, all reasonable attorneys’ fees, incurred by Lender in enforcing or attempting to enforce this Guaranty, whether the same is enforced by suit or otherwise, and all amounts recoverable by law, including, without limitation, interest on any unpaid amounts due under this Guaranty.

5.            DEFAULT; SUBORDINATION; MAXIMUM LIABILITY .

5.1            Payment of Guaranteed Obligations .  At any time after all or any portion of the Guaranteed Obligations are due and payable, whether on maturity, after the acceleration of any of the Guaranteed Obligations, on the occurrence of an Event of Default, on the occurrence of any default under this Guaranty, or otherwise:  (i) Guarantors will, on the demand of Lender, immediately deposit with Lender in U.S. dollars the total amount of the Guaranteed Obligations due and payable (whether due and payable as a result of maturity, acceleration, or otherwise), and (ii) Lender will have the right: (a) to proceed directly against any Guarantor under this Guaranty without first exhausting any other remedy it may have and without resorting to any security or guaranty held by Lender, (b) to compromise, settle, release, discharge or terminate any of the obligations of any other guarantor(s) of the Guaranteed Obligations as Lender, in its discretion, determines without thereby in any way affecting, limiting or diminishing its rights thereafter to enforce the obligations of any Guarantor under this Guaranty, (c) to sell, collect, or otherwise dispose of and to apply the proceeds of any collateral or other security given to Lender with respect to the Guaranteed Obligations in satisfaction of the Guaranteed Obligations in such order and method of application as may be elected by Lender in its discretion exercised in good faith, and (d) to exercise all of Lender’s other powers, rights and remedies under this Guaranty, the Security Documents, the other Loan Documents and under applicable law.  Lender will not have any obligation to marshal any assets in favor of any Guarantor or against or in payment of any or all of the Guaranteed Obligations.

5.2            Subordination .  Until the Guaranteed Obligations have been fully paid, performed and satisfied: (i) any and all claims of any Guarantor against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or against any of their respective properties are, by the signing of this Guaranty by such Guarantor, made subordinate and subject in right of payment and performance to the prior payment and performance to Lender in full of all of the Guaranteed Obligations; and (ii) Guarantors will not exercise any right to enforce any remedy which any Guarantor now has or may in the future have against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations.

5.3            Maximum Liability .  The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of such Guarantor’s liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Guarantors or Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the relevant Guarantor’s “ Maximum Liability ”).  This Section with respect to the Maximum Liability of each Guarantor is intended solely to preserve the rights of Lender to the maximum extent not subject to avoidance under applicable law, and no Guarantor nor any other Person or entity shall have any right or claim under this Section with respect to such Maximum Liability, except to the extent necessary so that the obligations of any Guarantor hereunder shall not be rendered voidable under applicable law. Each Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Liability of each Guarantor without impairing this Guaranty or affecting the rights and remedies of Lender hereunder, provided that, nothing in this sentence shall be construed to increase any Guarantor’s obligations hereunder beyond its Maximum Liability.

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6.            GENERAL .

6.1            Cumulative Remedies .  The remedies provided in this Guaranty and the other Loan Documents are cumulative and not exclusive of any remedies provided by law.  Exercise of one or more remedy(ies) by Lender does not require that all or any other remedy(ies) be exercised and does not preclude later exercise of the same remedy.  If there is any conflict, ambiguity, or inconsistency, in Lender’s judgment, between the terms of this Guaranty and any of the other Loan Documents, then the applicable terms and provisions, in Lender’s judgment, providing Lender with the greater rights, remedies, powers, privileges, or benefits will control.

6.2            Waivers and Amendments in Writing .  Failure by Lender to exercise any right, remedy or option under this Guaranty or in any other Loan Documents or delay by Lender in exercising the same shall not operate as a waiver by Lender of its right to exercise any such right, remedy or option.  No waiver by Lender shall be effective unless it is in writing and then only to the extent specifically stated.  This Guaranty cannot be amended, modified, changed or terminated orally.

6.3            Entire Agreement; Counterparts; Fax Signatures .  This Guaranty and the other Loan Documents to which any Guarantor is a party constitute the entire agreement between the parties with respect to the subject matter of this Guaranty, and supersede all prior written and oral agreements and understandings.  Any request from time to time by any Guarantor for Lender’s consent under any provision in this Guaranty must be in writing, and any consent to be provided by Lender under this Guaranty from time to time must be in writing in order to be binding on Lender; however , Lender will have no obligation to provide any consent requested by any Guarantor, and Lender may, for any reason in its discretion exercised in good faith, elect to withhold the requested consent.  Two or more duplicate originals of this Guaranty may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.  Any documents delivered by, or on behalf of, any Guarantor by facsimile transmission or other electronic delivery of an image file reflecting the execution hereof: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes of the Loan Documents.

6.4            Headings; Construction .  Section headings in this Guaranty are included for convenience of reference only and shall not relate to the interpretation or construction of this Guaranty.  Any and all references in this Guaranty to any other document or documents will be references to that other document or documents as they may, from time to time, be modified, amended, renewed, consolidated, extended or replaced.

6.5            Separate Instrument .  This Guaranty constitutes a separate instrument, enforceable in accordance with its terms, and neither this Guaranty nor the obligations of any Guarantor under this Guaranty will, under any circumstance or in any legal proceeding, be deemed to have merged into any other agreement or obligation of such Guarantor.

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6.6            Severability .  If any term of this Guaranty is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, that invalid term will be considered excluded from this Guaranty and will not invalidate the remaining terms of this Guaranty.

6.7            OHIO LAW .  THIS GUARANTY HAS BEEN DELIVERED AT AND ACCEPTED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN HAMILTON COUNTY, OHIO.  THIS GUARANTY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO (WITHOUT REFERENCE TO OHIO CONFLICTS OF LAW PRINCIPLES).

6.8            CHOICE OF FORUM .  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY AND TO EXTEND CREDIT TO BORROWER, GUARANTORS AND LENDER AGREE that the state and federal courts in Hamilton County, Ohio have non-exclusive jurisdiction over all matters arising out of this Guaranty and the other Loan Documents to which any Guarantor is a party, including, but not limited to, ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF THE GUARANTEED OBLIGATIONS AND THE EXERCISE OF ALL OF LENDER’S RIGHTS AGAINST GUARANTORS WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY OF GUARANTORS, INCLUDING, WITHOUT LIMITATION, ANY DISPOSITIONS OF ANY OF THE LOAN COLLATERAL.  LENDER AND GUARANTORS EACH CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION OVER THEIR RESPECTIVE PERSONS BY ANY COURT SITUATED IN HAMILTON COUNTY, OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, AND EACH CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO GUARANTORS AND LENDER AT THEIR RESPECTIVE ADDRESSES AS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A PARTY MAY FROM TIME TO TIME DESIGNATE FOR ITSELF BY NOTICE TO THE OTHER PARTY) OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO.  EACH GUARANTOR WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION COMMENCED IN HAMILTON COUNTY, OHIO, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED UNDER THIS GUARANTY IN HAMILTON COUNTY, OHIO, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

6.9            Successors and Assigns .  This Guaranty will inure to the benefit of Lender, its successors and assigns and be binding on the successors and assigns of Guarantors.

6.10            Notices .  Any notice required, permitted or contemplated hereunder shall be in writing and addressed to the party to be notified at the address set forth below or at such other address as each party may designate for itself from time to time by notice hereunder, and shall be deemed validly given:  (i) three days following deposit in the U.S. certified mails (return receipt requested), with proper postage prepaid, or (ii) the next Business Day after such notice was delivered to a regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement satisfactory with such carrier made for the payment thereof, or (iii) upon receipt of notice given by telecopy (fax), mailgram, telegram, telex or personal delivery:

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To Guarantors:                                                      3133 Orchard Vista Drive SE
                                                                  Grand Rapids, Michigan 49546
Attn: Mark A. Fox, President
Richard H. Neuwirth, General Counsel
Fax: (212) 505-5413

To Lender:                                             Fifth Third Bank
38 Fountain Square Plaza
MD 10AT63
Cincinnati, Ohio 45263
Attn: Structured Finance Group
Fax: (513) 534-8400

6.11            Separate Action .  Each default in payment of any amount due under this Guaranty will, at Lender’s sole option, give rise to a separate cause of action under this Guaranty, and separate suits, at Lender’s sole option, may be brought under this Guaranty as each cause of action arises.

6.12            Survival and Continuation of Representations and Warranties . All of Guarantors’ representations and warranties contained in this Guaranty shall:  (i) survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related hereto, (ii) be deemed to be made as of each and every day of the term of this Guaranty, and (iii) remain true until the Guaranteed Obligations are fully performed, paid and satisfied, subject to any changes to such representations and warranties that (a) are not prohibited hereby, (b) do not constitute defaults hereunder, or (c) have been consented to by Lender in writing.

6.13            Equitable Relief .  Each Guarantor recognizes that, in the event that any Guarantor fails to perform, observe or discharge any of its obligations or liabilities under this Guaranty, any remedy at law may prove to be inadequate relief to Lender; therefore , each Guarantor agrees that Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

6.14            WAIVER OF JURY TRIAL .  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ENTER INTO THIS GUARANTY AND EXTEND CREDIT TO BORROWER, GUARANTORS AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS GUARANTY.

6.15            Joint Obligations .  All of the obligations of Guarantors hereunder are joint, several and primary.

6.16            Indemnity .  Guarantors shall indemnify, defend, save and hold Lender, its affiliates, and their respective officers, directors, attorneys, and employees harmless of, from and against all claims, demands, liabilities, judgments, losses, damages, taxes, costs and expenses, joint or several (including all accounting fees and reasonable attorneys’ fees), that Lender or any such indemnified party may incur arising out of this Guaranty or any act taken by Lender hereunder ( including any arising out of the comparative, contributory or sole negligence of any of Lender or any such indemnified party ) except to the extent of the willful misconduct or gross negligence of such indemnified party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The provisions of this Section 6.16 shall survive the termination of this Guaranty.

[ Signature Page Follows ]


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Guarantors have signed this Guaranty as of the Effective Date.

IDEA SPHERE INC.
701 CORPORATION
ISI BRANDS INC.
HEALTH MED, INC.
HEALTH LETTER, INC.
MED LETTER, INC.

By:   /S/ Mark A. Fox                                                                              
       Mark A. Fox, President and
       Chief Operating Officer


REBUS, LLC
NATURAL PET NUTRITION, L.L.C.
PE GROUP, LLC

By:   /S/ Mark A. Fox                                                                               
       Mark A. Fox, Manager


NATURAL2U LLC
PLANET EARTH VENTURES, LLC
 
                                 
                                                                                                       /S/ William W. Nicholson            
                                By:  William W. Nicholson, Manager


TGI ORGANIC, LLC

By:  Idea Sphere Inc., its sole Member

       By:   /S/ Mark A. Fox                                                                                      
              Mark A. Fox, President and
              Chief Operating Officer

Accepted as of the Effective Date.

FIFTH THIRD BANK
 
 
By:  /S/ Andrew P. Hanson                                                                        
      Andrew P. Hanson, Vice President

 Cincinnati 672554.5
 

SIGNATURE PAGE TO
GUARANTY
(Idea Sphere Inc., et al.)
 
11

 
 
 
STATE OF ___________________ )
) ss
COUNTY OF ___________________ )
 
The foregoing instrument was acknowledged before me this ____ day of January __, 2008, by Mark A. Fox, President and Chief Operating Officer of each of Idea Sphere Inc., a Michigan corporation, 701 Corporation, a Michigan corporation, ISI Brands Inc., a Michigan corporation, Health Med, Inc., a Michigan corporation, Health Letter, Inc., a Michigan corporation, and Med Letter, Inc., a Michigan corporation, on behalf of each such corporation.

My Commission Expires:                                                                

 

 
  NOTARY PUBLIC
 
[Notary Seal]
 





STATE OF ___________________ )
) ss
COUNTY OF ___________________ )

The foregoing instrument was acknowledged before me this ____ day of January __, 2008, by Mark A. Fox, Manager of each of REBUS, LLC, a Delaware limited liability company, Natural Pet Nutrition, L.L.C., a Delaware limited liability company, and PE Group, LLC, a Delaware limited liability company, on behalf of each such limited liability company.

My Commission Expires:                                                                

 

 
  NOTARY PUBLIC
 
[Notary Seal]
 

Acknowledgment Page 1 of 2 to
GUARANTY
( Idea Sphere Inc., et al. )
 
12

 



STATE OF      __________________  )
  )  ss
COUNTY OF   __________________  )

The foregoing instrument was acknowledged before me this ____ day of January, 2008, by William W. Nicholson, Manager of each of Natural2U LLC, a Michigan limited liability company, and Planet Earth Ventures, LLC, a Michigan limited liability company, on behalf of each such limited liability company.

My Commission Expires:                                                                

 

 
  NOTARY PUBLIC
 
[Notary Seal]
 

 

 

 
STATE OF     ___________________  )
   )  ss
COUNTY OF  ___________________  )

The foregoing instrument was acknowledged before me this ____ day of January __, 2008, by Mark A. Fox, President and Chief Operating Officer of Idea Sphere Inc., as sole Member of TGI Organic, LLC, a Michigan limited liability company, on behalf of such limited liability company.

My Commission Expires:                                                                

 

 
  NOTARY PUBLIC
 
[Notary Seal]
 


ACKNOWLEDGMENT PAGE 2 OF 2 TO
GUARANTY
(Idea Sphere Inc., et al.)
 
13
 





EXHIBIT 10.5.18
 
EXECUTION VERSION
 
A FIFTH THIRD BANCORP BANK

GUARANTY

THIS GUARANTY (this “ Guaranty ”), dated as of August 7, 2014 (the “ Effective Date ”), made by TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (“ Guarantor ”), to, and for the benefit of, FIFTH THIRD BANK, an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation, for itself and as agent for each affiliate of Fifth Third Bancorp (collectively, “ Lender ”), is as follows:

1.            GUARANTY .

1.1            Guaranty .  For value received and in consideration of any loan, advance or financial accommodation of any kind whatsoever heretofore, now or hereafter made, given or granted to TWINLAB CORPORATION, a Delaware corporation (“ Borrower ”), Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Lender: (i) the full and prompt payment when due of the principal of, all interest on, and all fees in respect of, all of the Loans and Letter of Credit Obligations and (ii) the full and prompt payment and performance of any and all other Obligations, whether all or any portion of such Loans, Letter of Credit Obligations and other Obligations are now or hereafter existing, direct or indirect, related or unrelated, joint or several, or absolute or contingent, whether or not for the payment of money, and whether arising by reason of an extension of credit, opening of a letter of credit, loan, guarantee, Rate Management Obligation or in any other manner (all of the indebtedness, liabilities and obligations described in the foregoing clauses (i) and (ii) of this Section 1.1 which are outstanding from time to time are collectively referred to as the “ Guaranteed Obligations ”).  Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Lender the full and prompt payment and performance of the Guaranteed Obligations when any of the Guaranteed Obligations are due, including, without limitation, on the occurrence of an Event of Default, by reason of the maturity or acceleration of any of the Guaranteed Obligations, on the occurrence of a default under the terms of this Guaranty, or otherwise, and at any times after the date when due. Notwithstanding anything to the contrary contained in this Guaranty or any other Loan Document to which any Guarantor is a party: (a) the definition of “Guaranteed Obligations” set forth in this Guaranty shall exclude Excluded Swap Obligations in respect of Guarantor; (b) in no event shall the proceeds of any Loan Collateral provided by Guarantor be applied by Lender to any Excluded Swap Obligations in respect of Guarantor; and (c) without limiting any provision set forth in any Loan Document, to the fullest extent permitted by law, Guarantor hereby waives any and all rights to require marshalling of assets by Lender.
 
 
1.2            Capitalized Terms .  Capitalized terms used, but not defined, in this Guaranty, have the meanings attributed to them in the Credit Agreement dated as of January 7, 2008, by and among Borrower, Idea Sphere Inc., a Michigan corporation (“ Parent ”),  and Lender (as the same has been, is contemporaneously herewith, and may be in the future further amended, renewed, consolidated, restated or replaced from time to time, the “ Credit Agreement ”). Guarantor has had an opportunity to review the Credit Agreement and the other Loan Documents and to discuss the same with counsel.


 
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1.3            Security .  This Guaranty and the Guaranteed Obligations are secured by (as the same may be amended, renewed, consolidated, restated or replaced from time to time, collectively, the “ Security Documents ”): (i) the Security Agreement between Guarantor and Lender dated as of even date herewith; and (ii) the Pledge Agreement between Guarantor and Lender dated as of even date herewith.   Lender shall have all of its rights and remedies set forth in the Security Documents.

2.            NATURE OF THE GUARANTY .

2.1            Absolute Obligations .  The obligations of Guarantor under this Guaranty are absolute, unconditional, and will be continuing and remain in full force and effect subject to Sections 2.2 and 2.6 .  This is a continuing guaranty of payment and not of collection.  Guarantor’s obligations under this Guaranty will not be released, discharged, affected, modified or impaired by any event, including, without limitation, any of the following events:

(i)           the compromise, settlement, release, discharge or termination of any or all of the Obligations by operation of law or otherwise, except as may result from the full and prompt performance and payment of the Guaranteed Obligations;
 
 
(ii)           the extension of the time for payment of any of the Obligations, or the waiver, modification or amendment (whether material or otherwise) of any of the Obligations or the acceptance of partial payments of the Guaranteed Obligations;

(iii)           the taking or failure to take any action under the Credit Agreement, any of the other Loan Documents or this Guaranty;

(iv)           the invalidity or unenforceability of any provision of the Credit Agreement, any of the other Loan Documents, or this Guaranty or any other defense Borrower or other guarantor of the Obligations may assert to the payment or performance of the Guaranteed Obligations other than payment and satisfaction in full of all of the Guaranteed Obligations;

(v)           any (a) failure by Lender to take any steps to perfect, maintain, or enforce its Liens on any of the Loan Collateral, (b) subordination of any of the Guaranteed Obligations and any security therefor to any other Indebtedness of Borrower to any Person, or (c) loss, release, substitution of, or other dealings with, any collateral or other security given to Lender with respect to the Guaranteed Obligations;

(vi)           the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all of the assets, marshaling of assets and liabilities, receivership, insolvency, bankruptcy, assignment, composition with creditors or readjustment of, or other similar proceedings affecting Borrower, Guarantor or any other guarantor of any or all of the Guaranteed Obligations;

(vii)           any allegation of invalidity or contest of the validity of this Guaranty in any of the proceedings described in clause (vi) of this Section 2.1 ;

 
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(viii)           any act, election or remedy, or other election, occurrence or circumstance of any nature, whether or not under Lender’s control, that may affect or impair any subrogation right of Guarantor or the effectiveness or value thereof;

(ix)           the default or failure of Guarantor to perform fully any of its obligations set forth in this Guaranty;

(x)           Lender’s election, in any proceeding instituted under Chapter 11 of Title 11 of the United States Code (the “ Bankruptcy Code ”), of the application of Section 1111(b)(2) of the Bankruptcy Code;

(xi)           any borrowing or grant of a security interest by Borrower, as debtor-in-possession, under Section 364 of the Bankruptcy Code;

(xii)           the disallowance of all or any portion of Lender’s claim(s) for repayment of the Guaranteed Obligations under Section 502 of the Bankruptcy Code; or

(xiii)           any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor other than payment and satisfaction in full of all of the Guaranteed Obligations.

2.2            Revival of Guaranty .  If (i) any demand is made at any time on Lender for the repayment of any amount received by it or as proceeds of any collateral or security which have been applied in payment of any of the Guaranteed Obligations, and (ii) Lender makes any repayment by reason of any judgment, decree or order of any court or administrative body or by reason of any settlement or compromise of such demand, Guarantor will be liable under this Guaranty for all amounts so repaid to the same extent as if such amounts had never been received originally by Lender.  Except as provided in the preceding sentence, Guarantor’s obligations under this Guaranty will terminate when the Guaranteed Obligations have been fully paid, performed and satisfied.

2.3            Waivers By Guarantor .  Guarantor hereby covenants that this Guaranty will not be discharged except by complete performance of the obligations contained in this Guaranty.  Guarantor waives all setoffs and counterclaims and all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of, and reliance on, this Guaranty.  Guarantor further waives all (i) notices of the existence, creation or incurring of new or additional Indebtedness arising either from additional loans extended to Borrower or otherwise, (ii) notices that the principal amount, or any portion thereof (and any interest thereon), of the Loans or any of the other Guaranteed Obligations is due, (iii) notices of any and all proceedings to collect from Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or from anyone else, (iv) to the extent permitted by law, notices of exchange, sale, surrender or other handling of any security or collateral given to Lender to secure payment of all or any part of the Guaranteed Obligations, and (v) defenses based on suretyship or impairment of collateral.

 
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2.4            Application of Proceeds by Lender .  Lender will have the exclusive right to determine, in its sole discretion, the order and method of the application of payments from and credits to, if any, Guarantor, Borrower or from any other Person on account of the Guaranteed Obligations or of any other liability of Guarantor to Lender.

2.5            Responsibility of Guarantor . Guarantor hereby assumes responsibility for keeping itself informed of the financial condition of Borrower and any and all indorsers and other guarantors of any instrument or document evidencing all or any part of the Guaranteed Obligations and of all other circumstances bearing on the risk of nonpayment of the Guaranteed Obligations or any part thereof that diligent inquiry would reveal.  Lender will have no duty to advise Guarantor of information known to Lender regarding such condition or any such circumstances.

2.6            Termination of Guaranty . Except as provided in Section 2.2 , Guarantor’s obligations under this Guaranty for the Guaranteed Obligations will terminate upon the payment and performance in full of the Guaranteed Obligations.

2.7            Taxes .  All payments to be made hereunder by Guarantor shall be made without setoff, counterclaim or other defense.  All such payments shall be made free and clear of and without deduction for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any governmental authority (collectively, “ Taxes ”) excluding Taxes imposed on or measured by Lender’s gross or net income, franchise taxes, branch profits taxes, taxes on doing business or taxes measured by or imposed upon the overall capital or net worth of Lender or its applicable lending office, or any branch or affiliate thereof, in each case imposed by the jurisdiction under the laws of which Lender, applicable lending office, branch or affiliate is organized or is located, or any nation within which such jurisdiction is located or any political subdivision thereof.  If any Taxes are imposed and required to be withheld from any amount payable by Guarantor hereunder, Guarantor shall be obligated to (a) pay such additional amount so that Lender will receive a net amount (after giving effect to the payment of such additional amount and to the deduction of all Taxes) equal to the amount due hereunder, (b) pay such Taxes to the appropriate taxing authority for the account of Lender, and (c) as promptly as possible thereafter, send Lender a certified copy of any original official receipt showing payment thereof, together with such additional documentary evidence as Lender may from time to time require in its discretion exercised in good faith.  If Guarantor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to Lender the required receipts or other required documentary evidence, Guarantor shall be obligated to indemnify Lender for any incremental Taxes, interest or penalties that may become payable by Lender as a result of such failure.  The obligations of Guarantor under this Section 2.7 shall survive the repayment of the Guaranteed Obligations and the termination of the Credit Agreement.

3.            REPRESENTATIONS AND WARRANTIES; COVENANTS .

 
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3.1            Representations and Warranties .  To induce Lender to extend the Guaranteed Obligations, and for other good and valuable consideration, Guarantor hereby represents and warrants to Lender that: (i) this Guaranty is the legal, valid and binding obligation of Guarantor, enforceable in accordance with its terms; (ii) the execution, delivery, and such performance of this Guaranty does not and will not, by the lapse of time, by the giving of notice, or the satisfaction of any other condition, violate or contravene any authority having the force of law or any agreement, instrument or other document to which Guarantor is a party or by which Guarantor or any of its properties is or may be bound; (iii) the execution and delivery of this Guaranty by Guarantor does not:  (a) require any consent or approval of any Person, (b) violate, or constitute a default under, any rule or provision of Guarantor’s articles, certificates, regulations, bylaws, operating agreement, any resolution of its members, managers, or directors, as applicable, or other agreement, document or instrument to which Guarantor is a party or by which Guarantor or any of Guarantor’s properties is or may be bound or affected, (c) violate, or constitute a default under, any law, requirement, rule, regulation, ordinance or restriction of any governmental instrumentality or agency   applicable to Guarantor or by which Guarantor’s properties are bound or affected, or (d) result in the creation or imposition of any Lien on any of the property of Guarantor except in favor of Lender; (iv) there is no action or proceeding pending before any court or governmental authority which materially, adversely affects the condition (financial or otherwise) of Guarantor or any of its properties; (v) Guarantor is, and so long as this Guaranty remains in effect, will be, a holding entity whose sole business will be the holding of the outstanding Ownership Interests of Parent; and (vi) Guarantor does not have any Indebtedness except to the extent, and in the manner, expressly permitted by Lender pursuant to the Loan Documents.

3.2            Incorporation of Credit Agreement .  Guarantor will observe, perform and fulfill, and will be bound by, each provision in the Credit Agreement applicable to Guarantor (including, without limitation, those which Borrower has agreed to cause Guarantor to observe, perform and fulfill) (the “ Incorporated Provisions ”), with the effect that Lender will have the benefit of each of the Incorporated Provisions (including affirmative and negative covenants, representations and warranties, delivery of financial statements and other notices and information).  The Incorporated Provisions are hereby incorporated by reference and made a part of this Guaranty to the same extent as if the Incorporated Provisions were set forth herein.  Notwithstanding anything to the contrary in this Section 3.2 , neither Guarantor nor any successor or assignee of Guarantor, by operation of law or otherwise, is a party to the Credit Agreement or any of the other Loan Documents (other than this Guaranty and the applicable Security Documents), and Guarantor will not have (i) any right in or to enforcement of the Credit Agreement or any of such other Loan Documents as against Borrower or Lender, (ii) any claim of damage if Borrower or Lender defaults under the Credit Agreement or any of such other Loan Documents, or (iii) any right to object or consent to any amendment, modification, or supplement to, or any restatement or replacement of, the Credit Agreement or any of such other Loan Documents undertaken by Borrower and Lender.

3.3            Security Documents .  Guarantor will perform, observe and comply with all of the terms and conditions of the applicable Security Documents.

 
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4.            EXPENSES .  Guarantor will pay all of the costs, expenses and fees, including, without limitation, all reasonable attorneys’ fees, incurred by Lender in enforcing or attempting to enforce this Guaranty, whether the same is enforced by suit or otherwise, and all amounts recoverable by law, including, without limitation, interest on any unpaid amounts due under this Guaranty.

5.            DEFAULT; SUBORDINATION; MAXIMUM LIABILITY .

5.1            Payment of Guaranteed Obligations .  At any time after all or any portion of the Guaranteed Obligations are due and payable, whether on maturity, after the acceleration of any of the Guaranteed Obligations, on the occurrence of an Event of Default, on the occurrence of any default under this Guaranty, or otherwise:  (i) Guarantor will, on the demand of Lender, immediately deposit with Lender in U.S. dollars the total amount of the Guaranteed Obligations due and payable (whether due and payable as a result of maturity, acceleration, or otherwise), and (ii) Lender will have the right: (a) to proceed directly against Guarantor under this Guaranty without first exhausting any other remedy it may have and without resorting to any security or guaranty held by Lender, (b) to compromise, settle, release, discharge or terminate any of the obligations of any other guarantor(s) of the Guaranteed Obligations as Lender, in its discretion, determines without thereby in any way affecting, limiting or diminishing its rights thereafter to enforce the obligations of Guarantor under this Guaranty, (c) to sell, collect, or otherwise dispose of and to apply the proceeds of any collateral or other security given to Lender with respect to the Guaranteed Obligations in satisfaction of the Guaranteed Obligations in such order and method of application as may be elected by Lender in its discretion exercised in good faith, and (d) to exercise all of Lender’s other powers, rights and remedies under this Guaranty, the Security Documents, the other Loan Documents and under applicable law.  Lender will not have any obligation to marshal any assets in favor of Guarantor or against or in payment of any or all of the Guaranteed Obligations.

5.2            Subordination .  Until the Guaranteed Obligations have been fully paid, performed and satisfied: (i) any and all claims of Guarantor against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations, or against any of their respective properties are, by the signing of this Guaranty by Guarantor, made subordinate and subject in right of payment and performance to the prior payment and performance to Lender in full of all of the Guaranteed Obligations; and (ii) Guarantor will not exercise any right to enforce any remedy which Guarantor now has or may in the future have against Borrower, any indorser or any other guarantor of all or any part of the Guaranteed Obligations.

5.3            Maximum Liability .  The provisions of this Guaranty are severable, and in any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Guarantor under this Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Guarantor’s liability under this Guaranty, then, notwithstanding any other provision of this Guaranty to the contrary, the amount of such liability shall, without any further action by the Guarantor or Lender, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being Guarantor’s “ Maximum Liability ”).  This Section with respect to the Maximum Liability of Guarantor is intended solely to preserve the rights of Lender to the maximum extent not subject to avoidance under applicable law, and neither Guarantor nor any other Person or entity shall have any right or claim under this Section with respect to such Maximum Liability, except to the extent necessary so that the obligations of Guarantor hereunder shall not be rendered voidable under applicable law. Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the Maximum Liability of Guarantor without impairing this Guaranty or affecting the rights and remedies of Lender hereunder, provided that, nothing in this sentence shall be construed to increase Guarantor’s obligations hereunder beyond its Maximum Liability.

 
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6.            GENERAL .

6.1            Cumulative Remedies .  The remedies provided in this Guaranty and the other Loan Documents are cumulative and not exclusive of any remedies provided by law.  Exercise of one or more remedy(ies) by Lender does not require that all or any other remedy(ies) be exercised and does not preclude later exercise of the same remedy.  If there is any conflict, ambiguity, or inconsistency, in Lender’s judgment, between the terms of this Guaranty and any of the other Loan Documents, then the applicable terms and provisions, in Lender’s judgment, providing Lender with the greater rights, remedies, powers, privileges, or benefits will control.

6.2            Waivers and Amendments in Writing .  Failure by Lender to exercise any right, remedy or option under this Guaranty or in any other Loan Documents or delay by Lender in exercising the same shall not operate as a waiver by Lender of its right to exercise any such right, remedy or option.  No waiver by Lender shall be effective unless it is in writing and then only to the extent specifically stated.  This Guaranty cannot be amended, modified, changed or terminated orally.

6.3            Entire Agreement; Counterparts; Fax Signatures .  This Guaranty and the other Loan Documents to which Guarantor is a party constitute the entire agreement between the parties with respect to the subject matter of this Guaranty, and supersede all prior written and oral agreements and understandings.  Any request from time to time by Guarantor for Lender’s consent under any provision in this Guaranty must be in writing, and any consent to be provided by Lender under this Guaranty from time to time must be in writing in order to be binding on Lender; however , Lender will have no obligation to provide any consent requested by Guarantor, and Lender may, for any reason in its discretion exercised in good faith, elect to withhold the requested consent.  Two or more duplicate originals of this Guaranty may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.  Any documents delivered by, or on behalf of, Guarantor by facsimile transmission or other electronic delivery of an image file reflecting the execution hereof: (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes of the Loan Documents.

6.4            Headings; Construction .  Section headings in this Guaranty are included for convenience of reference only and shall not relate to the interpretation or construction of this Guaranty.  Any and all references in this Guaranty to any other document or documents will be references to that other document or documents as they may, from time to time, be modified, amended, renewed, consolidated, extended or replaced.

6.5            Separate Instrument .  This Guaranty constitutes a separate instrument, enforceable in accordance with its terms, and neither this Guaranty nor the obligations of Guarantor under this Guaranty will, under any circumstance or in any legal proceeding, be deemed to have merged into any other agreement or obligation of Guarantor.

6.6            Severability .  If any term of this Guaranty is found invalid under Ohio law or laws of mandatory application by a court of competent jurisdiction, that invalid term will be considered excluded from this Guaranty and will not invalidate the remaining terms of this Guaranty.

 
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6.7            OHIO LAW .  THIS GUARANTY HAS BEEN DELIVERED AT AND ACCEPTED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN HAMILTON COUNTY, OHIO.  THIS GUARANTY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO (WITHOUT REFERENCE TO OHIO CONFLICTS OF LAW PRINCIPLES).

6.8            CHOICE OF FORUM .  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ACCEPT THIS GUARANTY AND TO EXTEND CREDIT TO BORROWER, GUARANTOR AND LENDER AGREE that the state and federal courts in Hamilton County, Ohio have non-exclusive jurisdiction over all matters arising out of this Guaranty and the other Loan Documents to which Guarantor is a party, including, but not limited to, ACTIONS RELATED TO THE REPAYMENT AND COLLECTION OF THE GUARANTEED OBLIGATIONS AND THE EXERCISE OF ALL OF LENDER’S RIGHTS AGAINST GUARANTOR WITH RESPECT THERETO AND ANY SECURITY OR PROPERTY OF GUARANTOR, INCLUDING, WITHOUT LIMITATION, ANY DISPOSITIONS OF ANY OF THE LOAN COLLATERAL.  LENDER AND GUARANTOR EACH CONSENT TO AND SUBMIT TO THE EXERCISE OF JURISDICTION OVER THEIR RESPECTIVE PERSONS BY ANY COURT SITUATED IN HAMILTON COUNTY, OHIO HAVING JURISDICTION OVER THE SUBJECT MATTER, AND EACH CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL DIRECTED TO GUARANTOR AND LENDER AT THEIR RESPECTIVE ADDRESSES AS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS A PARTY MAY FROM TIME TO TIME DESIGNATE FOR ITSELF BY NOTICE TO THE OTHER PARTY) OR AS OTHERWISE PROVIDED UNDER THE LAWS OF THE STATE OF OHIO.  GUARANTOR WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION COMMENCED IN HAMILTON COUNTY, OHIO, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED UNDER THIS GUARANTY IN HAMILTON COUNTY, OHIO, AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.

6.9            Successors and Assigns .  This Guaranty will inure to the benefit of Lender, its successors and assigns and be binding on the successors and assigns of Guarantor.

6.10            Notices .  Any notice required, permitted or contemplated hereunder shall be in writing and addressed to the party to be notified at the address set forth below or at such other address as each party may designate for itself from time to time by notice hereunder, and shall be deemed validly given:  (i) three days following deposit in the U.S. certified mails (return receipt requested), with proper postage prepaid, or (ii) the next Business Day after such notice was delivered to a regularly scheduled overnight delivery carrier with delivery fees either prepaid or an arrangement satisfactory with such carrier made for the payment thereof, or (iii) upon receipt of notice given by telecopy (fax), mailgram, telegram, telex or personal delivery:

To Guarantor:                                        3133 Orchard Vista Drive SE
                                                                  Grand Rapids, Michigan 49546
Attn: Mark A. Fox, President
         Richard H. Neuwirth, General Counsel
Fax: (212) 505-5413

 
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To Lender:                                             Fifth Third Bank
38 Fountain Square Plaza
MD 10908F
Cincinnati, Ohio 45263
Attention:  Structured Finance Group
Fax Number:  (513) 534-8400

and

Fifth Third Bank
111 Lyons Street N.W.
MD  RMOB2C
Grand Rapids, Michigan  49503
Attention:  Andrew P. Hanson

6.11            Separate Action .  Each default in payment of any amount due under this Guaranty will, at Lender’s sole option, give rise to a separate cause of action under this Guaranty, and separate suits, at Lender’s sole option, may be brought under this Guaranty as each cause of action arises.

6.12            Survival and Continuation of Representations and Warranties . All of Guarantor’s representations and warranties contained in this Guaranty shall:  (i) survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related hereto, (ii) be deemed to be made as of each and every day of the term of this Guaranty, and (iii) remain true until the Guaranteed Obligations are fully performed, paid and satisfied, subject to any changes to such representations and warranties that (a) are not prohibited hereby, (b) do not constitute defaults hereunder, or (c) have been consented to by Lender in writing.

6.13            Equitable Relief .  Guarantor recognizes that, in the event that Guarantor fails to perform, observe or discharge any of its obligations or liabilities under this Guaranty, any remedy at law may prove to be inadequate relief to Lender; therefore , Guarantor agrees that Lender, if Lender so requests, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

6.14            WAIVER OF JURY TRIAL .  AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ENTER INTO THIS GUARANTY AND EXTEND CREDIT TO BORROWER, GUARANTOR AND LENDER EACH WAIVE TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR ARISING OUT OF THIS GUARANTY.
 
 
6.15            Indemnity .  Guarantor shall indemnify, defend, save and hold Lender, its affiliates, and their respective officers, directors, attorneys, and employees harmless of, from and against all claims, demands, liabilities, judgments, losses, damages, taxes, costs and expenses, joint or several (including all accounting fees and reasonable attorneys’ fees), that Lender or any such indemnified party may incur arising out of this Guaranty or any act taken by Lender hereunder ( including any arising out of the comparative, contributory or sole negligence of any of Lender or any such indemnified party ) except to the extent of the willful misconduct or gross negligence of such indemnified party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.  The provisions of this Section 6.15 shall survive the termination of this Guaranty.

[ Signature Page Follows ]


 
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Guarantor has signed this Guaranty as of the Effective Date.

TWINLAB CONSOLIDATION CORPORATION


By:   /S/ Richard Neuwirth                                                                               
Name:    Richard H. Neuwirth, General Counsel
Accepted as of the Effective Date.

FIFTH THIRD BANK
 
 
By:   /s/ Andrew P. Hanson                                                                          
       Andrew P. Hanson, Vice President
 







SIGNATURE PAGE TO
GUARANTY
 
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EXHIBIT 10.6
 
 
TWINLAB CONSOLIDATION CORPORATION
 
2013 STOCK INCENTIVE PLAN
 
1.   Purposes of the Plan .  The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.
 
2.   Definitions .  The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement.  In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2.
 
(a)   Administrator ” means the Board or any of the Committees appointed to administer the Plan.
 
(b)   Applicable Laws ” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.
 
(c)   Assumed ” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.
 
(d)   Award ” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or other right or benefit under the Plan.
 
(e)   Award Agreement ” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.
 
(f)   Board ” means the Board of Directors of the Company.
 
(g)   Code ” means the Internal Revenue Code of 1986, as amended.
 
(h)   Committee ” means any committee composed of members of the Board appointed by the Board to administer the Plan.
 
(i)   Common Stock ” means the common stock of the Company.
 
(j)   Company ” means Twinlab Consolidation Corporation, a Delaware corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.
 

 
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(k)   Consultant ” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.
 
(l)   Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated.  In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws.  A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity.  Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant, or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (in each case, except as otherwise provided in the Award Agreement).  An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.  For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three (3) months and one (1) day following the expiration of such three (3) month period.
 
(m)   Corporate Transaction ” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:
 
(i)   a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;
 
(ii)   the sale, transfer or other disposition of all or substantially all of the assets of the Company;
 
(iii)   the complete liquidation or dissolution of the Company;
 
(iv)   any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or
 

 
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(v)   acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding (1) any bona fide financing transaction consummated primarily for capital raising purposes and (2) any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.
 
(n)   Covered Employee ” means an Employee who is a “covered employee” under Section 162(m)(3) of the Code.
 
(o)   Director ” means a member of the Board or the board of directors of any Related Entity.
 
(p)   Disability ” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy.  If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days.  A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.
 
(q)   Dividend Equivalent Right ” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.
 
(r)   Employee ” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance.  The payment of a director’s fee by the Company or a Related Entity shall not be sufficient to constitute “employment” by the Company.
 
(s)   Exchange Act ” means the Securities Exchange Act of 1934, as amended.
 
(t)   Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:
 
(i)   If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market of The NASDAQ Stock Market LLC, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
 

 
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(ii)   If the Common Stock is regularly quoted on an automated quotation system (including the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or
 
(iii)   In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.
 
(u)   Grantee ” means an Employee, Director or Consultant who receives an Award under the Plan.
 
(v)   Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.
 
(w)   Non-Qualified Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.
 
(x)   Officer ” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
 
(y)   Option ” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.
 
(z)   Parent ” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.
 
(aa)   Performance-Based Compensation ” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.
 
(bb)   Plan ” means this 2013 Stock Incentive Plan.
 
(cc)   Registration Date ” means the first to occur of (i) the closing of the first sale to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, of (A) the Common Stock or (B) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Common Stock; and (ii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended, on or prior to the date of consummation of such Corporate Transaction.
 

 
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(dd)   Related Entity ” means any Parent or Subsidiary of the Company.
 
(ee)   Replaced ” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award.  The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.
 
(ff)   Restricted Stock ” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.
 
(gg)   Restricted Stock Units ” means an Award which may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and which may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.
 
(hh)   Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.
 
(ii)   SAR ” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.
 
(jj)   Share ” means a share of the Common Stock.
 
(kk)   Subsidiary ” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.
 
3.   Stock Subject to the Plan .
 
(a)   Subject to the provisions of Section  10 below, the maximum aggregate number of Shares which may be issued pursuant to all Awards (including Incentive Stock Options) is 20,000,000 Shares.  The Shares may be authorized, but unissued, or reacquired Common Stock.
 
(b)   Any Shares covered by an Award (or portion of an Award) which is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares which may be issued under the Plan.  Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited or repurchased by the Company, such Shares shall become available for future grant under the Plan.  To the extent not prohibited by the listing requirements of The NASDAQ Stock Market LLC (or other established stock exchange or national market system on which the Common Stock is traded) and Applicable Law, any Shares covered by an Award which are surrendered (i) in payment of the Award exercise or purchase price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(vi)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares which may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.
 

 
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4.   Administration of the Plan .
 
(a)   Plan Administrator .
 
(i)   Administration with Respect to Directors and Officers .  Prior to the Registration Date, with respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws.  On or after the Registration Date, with respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3.  Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.
 
(ii)   Administration With Respect to Consultants and Other Employees .  With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws.  Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.
 
(iii)   Administration With Respect to Covered Employees .  Notwithstanding the foregoing, as of and after the date that the exemption for the Plan under Section 162(m) of the Code expires, as set forth in Section 18 below, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) which is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation.  In the case of such Awards granted to Covered Employees, references to the “Administrator” or to a “Committee” shall be deemed to be references to such Committee or subcommittee.
 
(iv)   Officer Authorization to Grant Awards .  The Board may authorize one or more Officers to grant Awards subject to such limitations as the Board determines from time to time.
 
(b)   Multiple Administrative Bodies .  The Plan may be administered by different bodies with respect to Directors, Officers, Consultants, and Employees who are neither Directors nor Officers.
 
(c)   Powers of the Administrator .  Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:
 

 
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(i)   to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;
 
(ii)   to determine whether and to what extent Awards are granted hereunder;
 
(iii)   to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;
 
(iv)   to approve forms of Award Agreements for use under the Plan;
 
(v)   to determine the terms and conditions of any Award granted hereunder;
 
(vi)   to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions and to afford Grantees favorable treatment under such rules or laws; provided, however, that no Award shall be granted under any such additional terms, conditions, rules or procedures with terms or conditions which are inconsistent with the provisions of the Plan;
 
(vii)   to amend the terms of any outstanding Award granted under the Plan, provided that any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided, however, that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee. Notwithstanding the foregoing, (A) the reduction or increase of the exercise price of any Option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan and (B) canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or for cash, in each case, shall not be subject to stockholder approval;
 
(viii)   to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the   Plan; and
 
(ix)   to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.
 
The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board.  Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.
 

 
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(d)   Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within thirty (30) days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.
 
5.   Eligibility .  Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants.  Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company.  An Employee, Director or Consultant who has been granted an Award may, if otherwise eligible, be granted additional Awards.  Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.
 
6.   Terms and Conditions of Awards .
 
(a)   Types of Awards . The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares, (ii) cash or (iii) an Option, a SAR, or similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions.  Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two (2) or more of them in any combination or alternative.
 
(b)   Designation of Award .  Each Award shall be designated in the Award Agreement.  In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option.  However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded.  The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options which become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company).  For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option.  In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
 

 
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(c)   Conditions of Award .  Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria.  The performance criteria established by the Administrator may be based on any one of, or combination of, increase in share price, earnings per share, total stockholder return, return on equity, return on assets, return on investment, net operating income, cash flow, revenue, economic value added, personal management objectives, or other measure of performance selected by the Administrator.  Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement.  In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the performance criteria applicable to the Award intended to be Performance-Based compensation.  Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect to an Award intended to be Performance-Based compensation.
 
(d)   Acquisitions and Other Transactions .  The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.
 
(e)   Deferral of Award Payment .  The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award.  The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.
 
(f)   Separate Programs .  The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.
 
(g)   Individual Option and SAR Limit .  Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be 10,000,000 Shares.  In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options and SARs for up to an additional 5,000,000 Shares which shall not count against the limit set forth in the previous sentence.  The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10, below.  To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee.  For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.
 

 
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(h)   Individual Limit for Restricted Stock and Restricted Stock Units .  Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, for awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be 5,000,000 Shares.  The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section  10 , below.
 
(i)   Early Exercise .  The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award.  Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.
 
(j)   Term of Award .  The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Incentive Stock Option shall be no more than ten (10) years from the date of grant thereof.  However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement.  Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.
 
(k)   Transferability of Awards .  Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee.  Non-Qualified Stock Options and other Awards shall be transferable (i) by will or by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator.  Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.
 
(l)   Time of Granting Awards .  The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.
 
(m)   Award Exchange Programs .  The Administrator may establish one or more programs under the Plan to permit selected Grantees to exchange an Award under the Plan for one or more other types of Awards under the Plan on such terms and conditions as determined by the Administrator from time to time.
 

 
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7.   Award Exercise or Purchase Price, Consideration and Taxes .
 
(a)   Exercise or Purchase Price .  The exercise or purchase price, if any, for an Award shall be as follows:
 
(i)   In the case of an Incentive Stock Option:
 
(A)   granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or
 
(B)   granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
 
(ii)   In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
 
(iii)   In the case of SARs, the base appreciation amount shall not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
 
(iv)   In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
 
(v)   In the case of other Awards, such price as is determined by the Administrator.
 
(vi)   Notwithstanding the foregoing provisions of this Section  7 (a) , in the case of an Award issued pursuant to Section  6(d) , above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.
 
(b)   Consideration .  Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment, shall be determined by the Administrator.  In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by the Delaware General Corporation Law:
 
(i)   cash;
 

 
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(ii)   check;
 
(iii)   delivery of Grantee’s promissory note with such recourse, interest, security, and redemption provisions as the Administrator determines as appropriate (but only to the extent that the acceptance or terms of the promissory note would not violate an Applicable Law);
 
(iv)   surrender of Shares held for the requisite period, if any, necessary to avoid a charge to the Company’s earnings for financial reporting purposes, or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require which have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;
 
(v)   with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;
 
(vi)   with respect to Options, payment through a “net exercise” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to (i) the number of Shares as to which the Option is being exercised, multiplied by (ii) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or
 
(vii)   any combination of the foregoing methods of payment.
 
The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(c)(iv), or by other means, grant Awards which do not permit all of the foregoing forms of consideration to be used in payment for the Shares or which otherwise restrict one or more forms of consideration.
 
(c)   Taxes .  No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares.  Upon exercise or vesting of an Award the Company shall withhold or collect from Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).
 

 
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8.   Exercise of Award .
 
(a)   Procedure for Exercise; Rights as a Stockholder
 
(i)   Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.
 
(ii)   An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b)(v).
 
(b)   Exercise of Award Following Termination of Continuous Service .
 
(i)   An Award may not be exercised after the termination date of such Award set forth in the Award Agreement and may be exercised following the termination of a Grantee’s Continuous Service only to the extent provided in the Award Agreement.
 
(ii)   Where the Award Agreement permits a Grantee to exercise an Award following the termination of the Grantee’s Continuous Service for a specified period, the Award shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Award, whichever occurs first.
 
(iii)   Any Award designated as an Incentive Stock Option to the extent not exercised within the time permitted by law for the exercise of Incentive Stock Options following the termination of a Grantee’s Continuous Service shall convert automatically to a Non-Qualified Stock Option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the Award Agreement.
 
9.   Conditions Upon Issuance of Shares .
 
(a)   If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance.  The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.
 
(b)   As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.
 

 
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10.   Adjustments Upon Changes in Capitalization .  Subject to any required action by the stockholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Award, and the number of Shares which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any calendar year, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares, (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, or (iii)  any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided, however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.”  In the event of any distribution of cash or other assets to stockholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “adjustments”).  Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards.  In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.
 
11.   Corporate Transactions .
 
(a)   Termination of Award to Extent Not Assumed in Corporate Transaction .  Subject to Section 11(b) below, effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate.  However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.
 
(b)   Acceleration of Award Upon Corporate Transaction .  Except as provided otherwise in an individual Award Agreement, in the event of a Corporate Transaction, for the portion of each Award that is neither Assumed nor Replaced, such portion of the Award shall automatically become fully vested and exercisable and be released from any repurchase or forfeiture rights (other than repurchase rights exercisable at Fair Market Value) for all of the Shares (or other consideration) at the time represented by such portion of the Award, immediately prior to the specified effective date of such Corporate Transaction, provided that the Grantee’s Continuous Service has not terminated prior to such date.
 
(c)   Effect of Acceleration on Incentive Stock Options .  Any Incentive Stock Option accelerated under this Section  11 in connection with a Corporate Transaction shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.
 

 
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12.   Effective Date and Term of Plan .  The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company.  It shall continue in effect for a term of ten (10) years unless sooner terminated.  Subject to Section  17 below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.
 
13.   Amendment, Suspension or Termination of the Plan .
 
(a)   The Board may at any time amend, suspend or terminate the Plan. To the extent necessary to comply with Applicable Laws, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required.
 
(b)   No Award may be granted during any suspension of the Plan or after termination of the Plan.
 
(c)   No suspension or termination of the Plan (including termination of the Plan under Section 12, above) shall adversely affect any rights under Awards already granted to a Grantee.
 
14.   Reservation of Shares .
 
(a)   The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
 
(b)   The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
 
15.   No Effect on Terms of Employment/Consulting Relationship .  The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, and with or without notice.
 
16.   No Effect on Retirement and Other Benefit Plans .  Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation.  The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.
 

 
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17.   Stockholder Approval .  The grant of Incentive Stock Options under the Plan, excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code, shall be subject to approval of the Plan by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted.  Such stockholder approval shall be obtained in the degree and manner required under Applicable Laws.  The Administrator may grant Incentive Stock Options under the Plan prior to approval  by the stockholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable.  In the event that stockholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.
 
18.   Effect of Section 162(m) of the Code .  Section 162(m) of the Code does not apply to the Plan prior to the Registration Date or such earlier time that the Company first becomes subject to the reporting obligations of Section 12 of the Exchange Act.  Following the Registration Date or such earlier time that the Company first becomes subject to the reporting obligations of Section 12 of the Exchange Act, the Plan, and all Awards (except Awards of Restricted Stock that vest over time) issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year.  The exemption is based on Treasury Regulation Section 1.162-27(f), in the form existing on the effective date of the Plan, with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held.  Under such Treasury Regulation, this exemption is available to the Plan for the duration of the period that lasts until the earliest of (i) the expiration of the Plan, (ii) the material modification of the Plan, (iii) the exhaustion of the maximum number of shares of Common Stock available for Awards under the Plan, as set forth in Section  3(a) , (iv) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Company first becomes subject to the reporting obligations of Section 12 of the Exchange Act, or (v) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder.  To the extent that the Administrator determines as of the date of grant of an Award that (i) the Award is intended to qualify as Performance-Based Compensation and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any stockholder approval required under Section 162(m) of the Code has been obtained.
 
19.   Unfunded Obligation .  Grantees shall have the status of general unsecured creditors of the Company.  Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended.  Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.
 

 
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20.   Construction .  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
 
21.   Nonexclusivity of the Plan .  Neither the adoption of the Plan by the Board, the submission of the Plan to the stockholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
 

 
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EXHIBIT 10.7
 
DEBT REPAYMENT AGREEMENT
 
This Debt Repayment Agreement (this “ Agreement ”) is dated as of July 31, 2014 (the "Effective Date"), by and between Idea Sphere Inc., a Michigan corporation, with offices at 632 Broadway, Suite 201, New York, New York 10012 (the “ Company ”), and Little Harbor LLC, a Nevada limited liability company (the “ Creditor ”).
 
Recitals
 
A.            The   Company is indebted to the Creditor in the amount of $90,450,410.88  (the “ Indebtedness ”);
 
B.            The Company and the Creditor have agreed that the Indebtedness shall be satisfied and paid in full by (i) the Company’s issuance to the Creditor of 7,000 shares (the “ Shares ”) of Series B Preferred Stock, no par value, of the Company (the “ Preferred Stock ”); plus (ii) monthly payments set forth on Schedule A through July 25, 2017 or until the trailing ninety (90) day volume weighted average of the closing sales prices of the common stock of Twinlab Consolidated Holdings, Inc. n/k/a as PUBCO ("TCC") on all domestic securities exchanges on which it may at that time be listed equals or exceeds $5.06 per share of such common stock, whichever occurs first.
 
C.            The Company and the Creditor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and such rules and regulations promulgated by the United States Securities and Exchange Commission (the “ Commission ”) under the Securities Act, as may be applicable.
 
Now, Therefore, in consideration   of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Creditor  hereby agree as follows:
 
ARTICLE 1
 

 
DEFINITIONS
 
1.1   Definitions . In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1 :
 
Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 144. With respect to the Creditor, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as the Creditor will be deemed to be an Affiliate of the Creditor.
 
Business Day ” means a day, other than a Saturday or Sunday, on which banks in New York City are open for the general transaction of business.
 
Closing ” means the closing of the transactions contemplated by this Agreement.
 
Closing Date ” means the date of the Closing.
 

 
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Control ” (including the terms “ controlling ”, “ controlled ” by or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
 
Creditor Party has the meaning set forth in Section 4.8(a) .
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
Indemnified Person ” has the meaning set forth in Section 4.8(b) .
 
Lien ” means any material lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right or other restrictions of any kind.
 
New York Courts ” means the state and federal courts sitting in the City of New York, Borough of Manhattan.
 
Person ” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.
 
Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.
 
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
 
Securities Act ” means the Securities Act of 1933, as amended.
 
Stock Certificates ” has the meaning set forth in Section 2.2(a)(ii).
 
ARTICLE 2
 

 
REPAYMENT OF INDEBTEDNESS; ISSUANCE OF SHARES
 
2.1   Closing . The Closing of the transactions contemplated by this Agreement shall take place at the offices of Company Counsel, 1515 Broadway, 43rd Floor, New York, New York on the Closing Date or at such other locations or remotely by facsimile transmission or other electronic means as the parties may mutually agree.
 
2.2   Closing Deliveries .
 
(a)   On or prior to the Closing, the Company shall issue, deliver or cause to be delivered to the Creditor the following:
 
(i)   this Agreement, duly executed by the Company; and
 
(ii)   one or more stock certificates, free and clear of all restrictive and other legends except as provided in Section 4.1(b) hereof, evidencing the Shares to be issued to the Creditor (the “ Stock Certificates ”);
 

 
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(b)   On or prior to the Closing, the Creditor shall deliver or cause to be delivered to the Company the following:
 
(i)   this Agreement, duly executed by the Creditor;
 
(ii)   the original promissory notes evidencing the Indebtedness, marked paid in full or such other evidence of payment in full as the Company shall reasonably request; and
 
(iii)   a fully completed and duly executed Accredited Investor Questionnaire in the form attached hereto as Exhibit A .
 
2.3   Debt Repayment .
 
(a)            As payment in full of the Indebtedness, the Company shall (i) issue the Shares to the Creditor at the Closing, and (ii) pay to the Creditor the amounts set forth in Schedule A hereto, no later than the 25 th day of each month set forth on Schedule A hereto (except with respect to the first payment which shall be due within five (5) days of the Effective Date), provided that such payments shall terminate as of such time (if ever) as the trailing ninety (90) day volume weighted average of the closing sales prices of the common stock of TCC on all domestic securities exchanges on which it may at that time be listed equals or exceeds $5.06 per share of such common stock.
 
(b)            The parties acknowledge and agree that due to the timing of the Effective Date and certain interest and principal payments due on indebtedness owed by Creditor for which the monthly amount set forth on Schedule A will be used to pay, TCC may pay such interest and principal payments and fees, if applicable, on behalf of Creditor and TCC shall receive a credit in the amount of such interest and principal payments and fees, if applicable, paid on behalf of Creditor against TCC's first payment on Schedule A which is due within five (5) days of the Effective Date.
 
ARTICLE 3
 

 
REPRESENTATIONS AND WARRANTIES
 
3.1   Representations and Warranties of the Company . The Company hereby represents and warrants to the Creditor as of the date hereof and the Closing Date:
 
(a)   Authorization; Enforcement; Validity . The execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, and no further corporate action is required by the Company, its Board of Directors or its stockholders in connection therewith. This Agreement has been duly executed by the Company and is the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
 
(b)   No Conflicts . The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the transactions contemplated hereby do not and will not (i) conflict with or violate any provisions of the Company’s certificate of incorporation or bylaws or otherwise result in a violation of the organizational documents of the Company, (ii) 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 the Company or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any contract to which it is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company is subject.
 

 
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Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than (i) filings, if any, required by applicable state securities laws, (ii) the filing of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, if the Company elects to issue the Shares pursuant to Regulation D, and (iii) those that have been made or obtained prior to the date of this Agreement.
 
(c)   Issuance of the Shares . The Shares have been duly authorized and, when issued in accordance with the terms of this Agreement, will be duly and validly issued, fully paid and nonassessable and free and clear of all Liens suffered or permitted by the Company, other than restrictions on transfer provided for in this Agreement or imposed by applicable securities laws, and shall not be subject to preemptive or similar rights. Assuming the accuracy of the representations and warranties of the Creditor in this Agreement, the Shares will be issued in compliance with all applicable federal and state securities laws.
 
(d)   Private Placement . Assuming the accuracy of the Creditor’s representations and warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed by the Creditor in the Accredited Investor Questionnaires delivered pursuant to Section 2.2(b)(iii), no registration under the Securities Act is required for the offer and issuance of the Shares by the Company to the Creditor under this Agreement.
 
(e)   No Directed Selling Efforts or General Solicitation . Neither the Company nor any Person acting on its behalf has conducted any “general solicitation” or “general advertising” (as those terms are used in Regulation D) in connection with the offer or issuance of the Shares.
 
(f)   Investment Company . The Company is not required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
 
3.2   Representations and Warranties of the Creditor . The Creditor hereby represents and warrants to the Company, that as of the date hereof and as of the Closing Date:
 
(a)   Authorization; Enforcement; Validity . The execution and delivery of this Agreement by the Creditor and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary limited liability company action on the part of the Creditor, and no further limited liability company action is required by the Creditor, or its members in connection therewith. This Agreement constitutes the valid and legally binding obligation of the Creditor, enforceable against the Creditor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.
 
(b)   No Conflicts . The execution, delivery and performance by the Creditor of this Agreement and the consummation by the Creditor of the transactions contemplated hereby will not (i) conflict with or violate any provisions of the Creditor’s limited liability company agreement or otherwise result in a violation of the organizational documents of the Creditor, or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Creditor.
 

 
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(c)   Investment Intent . The Creditor understands that the Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and 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 or any applicable state securities laws, provided, however , that by making the representations herein, the Creditor does not agree to hold any of the Shares for any minimum period of time and reserves the right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. The Creditor does not presently have any agreement, plan or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Shares (or any securities which are derivatives thereof) to or through any person or entity; the Creditor is not a registered broker-dealer under Section 15 of the Exchange Act or an entity engaged in a business that would require it to be so registered as a broker-dealer.
 
(d)   Creditor Status . At the time the Creditor was offered the Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act.
 
(e)   General Solicitation . The Creditor is not purchasing the Shares as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general advertisement.
 
(f)   Experience of the Creditor . The Creditor, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Shares, and has so evaluated the merits and risks of such investment. The Creditor is able to bear the economic risk of an investment in the Shares and, at the present time, is able to afford a complete loss of such investment.
 
(g)   Access to Information . The Creditor acknowledges that it has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Shares; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of the Creditor or its representatives or counsel shall modify, amend or affect the Creditor’s right to rely on the truth, accuracy and completeness of the Company’s representations and warranties contained herein. The Creditor has sought such accounting, legal and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Shares.
 
(h)   Brokers and Finders . No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest or claim against or upon the Company or any Creditor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Creditor.
 
(i)   Independent Investment Decision . The Creditor has independently evaluated the merits of its decision to acquire the Shares, and the Creditor confirms that it has not relied on the advice of the Company in making such decision. The Creditor understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to the Creditor in connection with the acquisition of the Shares constitutes legal, tax or investment advice.
 

 
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(j)   Reliance on Exemptions . The Creditor understands that the Shares are being offered and issued to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Creditor’s compliance with, the representations, warranties, agreements, acknowledgements and understandings of the Creditor set forth herein in order to determine the availability of such exemptions and the eligibility of the Creditor to acquire the Shares.
 
(k)   No Governmental Review . The Creditor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares nor have such authorities passed upon or endorsed the merits of the offering of the Shares.
 
(l)   Trading Market . The Creditor acknowledges that the Shares are not registered with the Securities and Exchange Commission or listed on any national securities exchange or other listing medium.
 
The Company and the Creditor acknowledge and agree that neither party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article 3.
 
ARTICLE 4
 

 
OTHER AGREEMENTS OF THE PARTIES
 
4.1   Transfer Restrictions .
 
(a)   Compliance with Laws . Notwithstanding any other provision of this Agreement, the Creditor covenants that the Shares may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state and federal securities laws. In connection with any transfer of the Shares other than (i) pursuant to an effective registration statement, (ii) to the Company, (iii) to an Affiliate of the Creditor, (iv) pursuant to Rule 144 ( provided that the Creditor provides the Company with reasonable assurances (in the form of seller and broker representation letters if required) that the securities may be sold pursuant to such rule) or Rule 144A, (v) pursuant to Rule 144 without the requirement that the Company be in compliance with the current public information requirements of Rule 144 and without other restriction following the applicable holding period or (vi) in connection with a bona fide pledge, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Shares under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of the Creditor under this Agreement.
 
(b)   Legends . Certificates evidencing the Shares shall bear any legend as required by the “Blue Sky” laws of any state and a restrictive legend in substantially the following form until such time as they are not required under Section 4.1(c) (and a stock transfer order may be placed against transfer of the certificates for the Shares):
 

 
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY.
 
In addition, if the Creditor is an Affiliate of the Company, certificates evidencing the Shares issued to the Creditor shall bear a customary “affiliates” legend.
 
(c)   Removal of Legends . Subject to the Company’s right to request an opinion of counsel as set forth in Section 4.1(a) , the legend set forth in Section 4.1(b) above shall be removable and the Company shall issue or cause to be issued a certificate without such legend or any other legend (except for any “affiliates” legend as set forth in Section 4.1(b) ) to the holder of the Shares upon which it is stamped or issue if (i) such Shares are registered for resale under the Securities Act (provided that, if the Creditor is selling pursuant to the effective registration statement registering the Shares for resale, the Creditor agrees to only sell such Shares during such time that such registration statement is effective and not withdrawn or suspended, and only as permitted by such registration statement), (ii) such Shares are sold or transferred in compliance with Rule 144 (if the transferor is not an Affiliate of the Company), including without limitation in compliance with the current public information requirements of Rule 144 if applicable to the Company at the time of such sale or transfer, and the holder and its broker have delivered customary documents reasonably requested by the Company Counsel in connection with such sale or transfer, or (iii) such Shares are eligible for sale under Rule 144 without the requirement that the Company be in compliance with the current public information requirements of Rule 144 and without other restriction and Company Counsel has provided written confirmation of such eligibility. Any fees (with respect to the Company Counsel or otherwise) associated with the removal of such legend shall be borne by the Company. At such time as a legend is no longer required for certain securities, the Company will no later than three (3) Business Days following the delivery by the Creditor to the Company (with concurrent notice and delivery of copies to the Company) of a legended certificate representing such Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, and together with such other customary documents as the Company Counsel shall reasonably request), deliver or cause to be delivered to the transferee of the Creditor or the Creditor, as applicable, a certificate representing such Shares that is free from all restrictive and other legends. The Company may not make any notation on its records that enlarge the restrictions on transfer set forth in this Section 4.1 . Certificates for Shares subject to legend removal hereunder shall be transmitted by the Company to the Creditor.
 
(d)   Acknowledgement . The Creditor hereunder acknowledges its primary responsibilities under the Securities Act and accordingly will not sell or otherwise transfer the Shares or any interest therein without complying with the requirements of the Securities Act.
 
4.2   Securities Laws Filings . The Company agrees to timely make such filings with regard to the transactions contemplated hereby as may be required by applicable securities laws.
 
4.3   Indemnification .
 

 
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(a)   Indemnification of the Creditor . Subject to this Section 4.3 , the Company will indemnify and hold the Creditor and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Creditor (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling Person (each, a “ Creditor Party ”) harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any the Creditor Party may suffer or incur, as a result of or relating to third party claims against the Creditor relating to any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement, provided that such a claim for indemnification relating to any breach of any of the representations or warranties made by the Company in this Agreement is made within one (1) year from the Closing. The Company will not be liable to any Creditor Party under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Creditor Party’s breach of any of the representations, warranties, covenants or agreements made by the Creditor Party in this Agreement.
 
(b)   Conduct of Indemnification Proceedings . Promptly after receipt by any Person (the “ Indemnified Person ”) of notice of any demand, claim or circumstances which would or might give rise to a claim or the commencement of any action, proceeding or investigation in respect of which indemnity may be sought pursuant to Section 4.3(a) , such Indemnified Person shall promptly notify the Company in writing and the Company shall have the right to assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Person and the assumption of the payment of all fees and expenses; provided, however , that the failure of any Indemnified Person so to notify the Company shall not relieve the Company of its obligations hereunder except to the extent that the Company is actually and materially prejudiced by such failure to notify. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless: (i) the Company and the Indemnified Person shall have mutually agreed to the retention of such counsel; (ii) the Company shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Person in such proceeding; or (iii) in the reasonable judgment of counsel to such Indemnified Person and counsel to the Company, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel. The Company shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Indemnified Person, which consent shall not be unreasonably withheld, delayed or conditioned, the Company shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is a party, unless such settlement includes an unconditional release of such Indemnified Person from all liability arising out of such Proceeding.
 

 
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ARTICLE 5
 

 
MISCELLANEOUS
 
5.1   Fees and Expenses . The Company and the Creditor shall each pay the fees and expenses of their respective advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party in connection with the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the sale and issuance of the Shares to the Creditor.
 
5.2   Entire Agreement . This Agreement contains the entire understanding of the parties with respect to the subject matter thereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into this Agreement. At or after the Closing, and without further consideration, the Company and the Creditor  will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under this Agreement.
 
5.3   Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 5:00 p.m., New York City time, on a Business Day, (b) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section on a day that is not a Business Day or later than 5:00 p.m., New York City time, on any Business Day, (c) the Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service with next day delivery specified, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:
 

If to the Company:
Idea Sphere Inc.
632 Broadway, Suite 201
New York, New York 10012
Fascimile: (212) 505-5413
E-mail:  rneuwirth@twinlab.com
Attention: General Counsel


With a copy to:
Wilk Auslander LLP
1515 Broadway
New York, New York, 10036
Telephone No.:   (212) 981-2300
Facsimile No.:   (212) 752-6380
Attention:   Stephen A. Albert
 

 
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If to the Creditor:
David Van Andel
Little Harbor LLC
3133 Orchard Vista Drive, SE
Grand Rapids, Michigan 49546

With a copy to:                                                                     Mark Bugge
3133 Orchard Vista Drive, SE
Grand Rapids, Michigan 49546
Telephone No.:  (616) 942-3267
Facsimile No.:  (616) 808-2721
E-mail:   mark.bugge@vaegr.com

or such other address as may be designated in writing hereafter, in the same manner, by such Person.
 
5.4   Amendments; Waivers; No Additional Consideration . No provision of this Agreement may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Creditor or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
 
5.5   Construction . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
 
5.6   Successors and Assigns . The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by either party without the prior written consent of the other party Creditor  (other than by merger or consolidation or to an entity which acquires the Company, including by way of acquiring all or substantially all of the Company’s assets).
 
5.7   No Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
 
5.8   Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New York Courts. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.   EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 

 
10

 


 
5.9   Survival . The representations and warranties contained herein shall survive the Closing and the delivery of the Shares for a period of one (1) year from the Closing Date. The agreements and covenants contained herein shall survive for the applicable statute of limitations.
 
5.10   Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “ .pdf ” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “ .pdf ” signature page were an original thereof.
 
5.11   Severability . If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor and achieves that same or substantially the same effect or result, and upon so agreeing, shall incorporate such substitute provision in this Agreement.
 
5.12   Replacement of Shares . If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Company for any losses in connection therewith. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
 
5.13   Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Creditor and the Company will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.
 
5.14   Adjustments in Share Numbers and Prices . In the event of any stock split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof, each reference herein to a number of shares or a price per share shall be deemed to be amended to appropriately account for such event.
 
5.15   Legal Counsel . The Creditor acknowledges that: (a) it has read this Agreement; (b) it has been represented in the preparation, negotiation and execution of this Agreement by legal counsel of its own choice or has voluntarily declined to seek such counsel; and (c) it understands the terms and consequences of this Agreement and is fully aware of the legal and binding effect of this Agreement.
 
 
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IN WITNESS WHEREOF , the parties hereto have executed this Debt Repayment Agreement as of the date first indicated above.
 
IDEA SPHERE INC.
 

By:         /S/ Thomas A. Tolworthy                                                                           
Name:  Thomas A. Tolworthy
Title:  President and Chief Executive Officer
 
LITTLE HARBOR LLC
 

By:        /S/ Mark Bugge                                                                                     
Name:  Mark Bugge
Title:    Treasurer
 

 



 
12

 


EXHIBIT A-1
 

 
ACCREDITED INVESTOR QUESTIONNAIRE
 
(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)
 
To:   Idea Sphere Inc. (the “ Corporation ”)
 
The purpose of this Questionnaire is to assure the Corporation that the Creditor will meet applicable suitability requirements for private securities offerings. The information supplied by you will be used in determining whether you meet such criteria, and reliance upon the private offering exemptions from registration is based in part on the information herein supplied.
 
This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any security, and the Corporation may never offer to issue any securities to you. Your answers will be kept strictly confidential, and by completing, signing and returning this Questionnaire you are not making any binding commitment to the Corporation with respect to the Shares or otherwise. However, by signing this Questionnaire, you will be authorizing the Corporation to provide a completed copy of this Questionnaire to such parties as the Corporation deems appropriate in order to ensure that the offer and issuance of the Shares will not result in a violation of the Securities Act or the securities laws of any state and that you otherwise satisfy applicable suitability standards. Please print or type your responses and attach additional sheets of paper if necessary to complete your answers to any item. Capitalized terms not defined herein have the meanings assigned thereto in the Debt Repayment Agreement, dated July __, 2014, between the Corporation and you.
 
PART A.                      BACKGROUND INFORMATION
 
Name of Prospective Investor in the Securities:                                                                                                                                          
 
Social Security or Taxpayer Identification No.                                                                                                                                          
 
If a corporation, partnership, limited liability company, trust or other entity:
 
Business Address:                                                                                                                                          
(Number and Street)
 

(City)                                                                      (State) (Zip Code)
 
Telephone Number:    ( ___ )                                                                                      
 
Facsimile Number:   ( ___ )                                                                                      
 
Name of Contact Person:                                                                                                                                          
 
Email Address of Contact Person:                                                                                                                                          
 
Type of entity and Nature of Business:                                                                                                                                          
 
 
 
13

 

State of formation:                                                                                                                                          
 
Approximate Date of formation:                                                                                                                                          
 
Set forth in the space provided below the (i) state(s), if any, in the United States in which you maintained your principal office during the past two years and the dates during which you maintained your office in each state, and (ii) state(s), if any, in which you pay income taxes:
 

 

 
Were you formed for the purpose of investing in the securities being offered?
 
Yes ___ No ___
 
If an individual:
 
Residence Address:                                                                                                                                          
(Number and Street)
 

(City)                                                                      (State) (Zip Code)
 
Telephone Number:    (___)                                                                            
 
Facsimile Number:   ( ___ )                                                                                      
 
Name of Contact Person:                                                                                                                                          
 
Email Address of Contact Person:                                                                                                                                          
 
Age:  ___________    Citizenship:  _______________    Where registered to vote:  _____________
 
Set forth in the space provided below the state(s), if any, in the United States in which you maintained your residence during the past two years and the dates during which you resided in each state:
 

 

 
Current Occupation (if retired, state most recent occupation):                                                                                                                                          
 
Name of Current Employer:                                                                                                                                          
 
Duration of Current Employment:                                                                                                                                          
 
Are you a director or executive officer of the Corporation?
 
Yes ___ No ___
 

 
14

 


 
Describe any pre-existing personal or business relationship you have with the Company or any of its officers or directors or any other prospective investor in the Securities:
 

 

 
PART B.   ACCREDITED INVESTOR QUESTIONNAIRE
 
In order for the Company to offer and sell the Shares in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each of the below categories that describes you as a potential investor of the Shares of the Company.
 
 
___
(1)
A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
 
 
___
(2)
A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
 
 
___
(3)
An insurance company as defined in Section 2(a)(13) of the Securities Act;
 
 
___
(4)
An investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act;
 
 
___
(5)
A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;
 
 
___
(6)
A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
 
 
___
(7)
An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
 
 
___
(8)
A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
 
 
___
(9)
An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
 
 
___
(10)
An executive officer or director of the Company;
 

 
15

 


 
 
___
(11)
A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000 (for purposes of this calculation, net worth is the excess of total assets at fair market value, including homes (subject to the further description below), automobiles and personal property, over total liability; provided that you should not include your primary residence as an asset, and you should not include as a liability indebtedness that is secured by your primary residence that is not in excess of the fair market value of your primary residence (except that if the amount of such indebtedness outstanding at the time of sale of the Securities exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability));
 
 
___
(12)
A natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person’s spouse in excess of $300,000, in each of those years (in each case including foreign income, tax exempt income and the full amount of capital gains and losses, but excluding any income of other family members and any unrealized capital appreciation), and has a reasonable expectation of reaching the same income level in the current year;
 
 
___
(13)
A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of investing in the Company;
 
 
___
(14)
An entity in which all of the equity owners qualify under any of the above subparagraphs. If the undersigned belongs to this investor category only, list the equity owners of the undersigned, and the investor category which each such equity owner satisfies:
 

 

 
(Continue any of the responses in this Questionnaire on a separate piece of paper, if necessary.)
 
* * * * *
 

 
16

 

A.           FOR EXECUTION BY AN INDIVIDUAL:
 
Date                                           
 
Print Name:                                                                
 
B.           FOR EXECUTION BY AN ENTITY:
 
Entity Name:                                                                
 
Date                                            By:                                                                
 
Print Name:                                                                
 
Title:                                                                
 

 
C.
ADDITIONAL SIGNATURES (if required by limited liability company, partnership, corporation or trust document):
 
Entity Name:                                                                
 
Date                                            By:                                                                
 
Print Name:                                                                
 
Title:                                                                
 

 
Entity Name:                                                                
 
Date                                            By:                                                                
 
Print Name:                                                                
 
Title:                                                                
 

 
17

 

SCHEDULE A
 
Payment Schedule


Month 1
5-Aug-14
$558,333
   
Month 19
25-Feb-16
$308,333
 
Month 2
25-Aug-14
$508,333
   
Month 20
25-Mar-16
$408,333
 
Month 3
25-Sep-14
$408,333
   
Month 21
25-Apr-16
$408,333
 
Month 4
25-Oct-14
$408,333
   
Month 22
25-May-16
$408,333
 
Month 5
25-Nov-14
$408,333
   
Month 23
25-Jun-16
$408,333
 
Month 6
25-Dec-14
$408,333
   
Month 24
25-Jul-16
$408,333
 $4,869,996
Month 7
25-Jan-15
$408,333
   
Month 25
25-Aug-16
$408,333
 
Month 8
25-Feb-15
$408,333
   
Month 26
25-Sep-16
$408,333
 
Month 9
25-Mar-15
$408,333
   
Month 27
25-Oct-16
$408,333
 
Month 10
25-Apr-15
$408,333
   
Month 28
25-Nov-16
$408,333
 
Month 11
25-May-15
$408,333
   
Month 29
25-Dec-16
$408,333
 
Month 12
25-Jun-15
$188,333
 $4,929,996
 
Month 30
25-Jan-17
$408,333
 
Month 13
25-Jul-15
$608,333
   
Month 31
25-Feb-17
$408,333
 
Month 14
25-Aug-15
$408,333
   
Month 32
25-Mar-17
$408,333
 
Month 15
25-Sep-15
$408,333
   
Month 33
25-Apr-17
$408,333
 
Month 16
25-Nov-15
$308,333
   
Month 34
25-May-17
$408,333
 
Month 17
25-Dec-15
$408,333
   
Month 35
25-Jun-17
$408,333
 
Month 18
25-Jan-16
$378,333
   
Month 36
25-Jul-17
$408,333
 $4,899,996


 
18
 





EXHIBIT 10.8

 
COMMERCIAL LEASE AGREEMENT
LESSOR:                                                                                                                                                         LESSEE:
ESSEX CAPITAL CORPORATION                                                                                                                                                 TWINLAB CORPORATION
1486 EAST VALLEY ROAD                                                                                                                                                   600 E. QUALITY DRIVE
SANTA BARBARA, CA 93108                                                                                                                                            AMERICAN FORK, UT 84003

    EQUIPMENT LOCATION: (If other than Billing Address of Lessee)
 
    EQUIPMENT DESCRIPTION:  As described on Addendum I attached hereto and made a part hereof.

 
 
LEASE TERM:          RENTAL                      SECURITY DEPOSIT:                                                                                                      FEES:

  36    Months                $71,505.45                      $0                                                                                                                                                    Documentation Fee:  $215.00
                    Tax                                                                                                                                                                  Filling Fee:                $  65.00
    Total                                                                                                                                                                                             Other:
First and Last                         Rentals =                       $71,505.45                                                                                                                                      (Less amounts already received) $
 
 
                                                                                                          TOTAL FEES $280.00
CHECK IN THE AMOUNT OF   $71,785.45    MUST ACCOMPANY COMPLETED LEASE.
 
   THIS LEASE IS A NON-CANCELABLE LEASE

     1.  AGREEMENT TO LEASE. Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor, subject to the terms of this Lease Agreement and any schedules or addenda attached hereto, the personal property identified above or in the attached schedules or addenda.  Lessor may insert in this Lease the serial numbers, and other identification data, of the leased equipment when determined by Lessor.  The equipment shall be installed at, and shall not be removed from the equipment location identified above without Lessor’s written consent.  Equipment required to be registered under applicable state vehicle laws shall not be removed from the state of registration without the Lessor’s written consent.  The lease term shall commence upon the date accepted by the authorized signature of Lessor, as evidenced below.  This lease shall have no effect prior to such acceptance.  This Lease is not subject to cancellation for any reason other than Lessor’s failure or inability to acquire the leased equipment.  In that event, both parties shall be released herefrom, and Lessor shall return any advance payments received from Lessee, less actual expenses paid to third parties such as appraisers and title companies, and neither party shall have any liability for consequential or other damages

     2.  STATUS OF PARTIES, WARRANTIES AND DEFENSES.   This is a finance lease (U.C.C. Section 10103 (a.7)).  Lessee has selected the leased equipment manufacturer and supplier.  Lessor has not manufactured or supplied the leased equipment but is acquiring the same or the right to possession and use of the same solely in connection with this Lease, and at the request of Lessee.  Lessee acknowledges that Lessee has received a copy of the contract evidencing Lessor’s purchase of the leased equipment, or a list of the suppliers for a description of such rights.
       
  LESSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED EQUIPMENT.  LESSOR MAKES NO WARRANTY THAT THE LEASED EQUIPMENT WILL BE FIT FOR A PARTICULAR PURPOSE.  LESSOR MAKES NO WARRANTY OF MERCHANTABILITY.
 
        Lessee’s sole remedy in the event of a claimed breach of warranty or other defect in or failure of the leased equipment shall be in accordance with such manufacturer’s or supplier’s warranty.  Lessee covenants not to assert any claim against   Lessor on   account of any alleged defect or failure of the leased equipment, and Lessee may not withhold or fail to pay any installments due to Lessor hereunder.

     3.  PAYMENT.   Lessor acknowledges receipt of the advance payment described above.  Such sum shall be held by Lessor as security for the performance of the terms of this Lease.  Should Lessee commit an anticipatory breach by repudiating this Lease prior to Lessor’s acquisition of the leased equipment, the advanced deposit shall be applied to reduce Lessor’s damages, and if Lessor has not become legally obligated to complete the acquisition of the leased equipment, then such sum shall be retained by Lessor as liquidated damages.  Lessee promises and agrees to pay all rental installments on the date designated by Lessor and to pay such other charges as are herein provided.  Payments shall be payable at the office of Lessor, or to such other person and/or at such other place as Lessor may from time to time designate in writing.  Lessor may apply remittances received to unpaid rental installments and/or charges on a due date basis, remittance received being applied to the oldest unpaid rental installment or charge.

     4.  FINANCIAL AND EQUIPMENT CONDITION.   Lessor may inspect the equipment at any time during business hours upon reasonable notice, and Lessee agrees to keep it in good condition and repair at Lessee’s expense and house the same in suitable shelter, and not to sell or otherwise dispose of the equipment or any accessories attached hereto.  Lessee shall cause the equipment to be maintained and serviced in accordance with the recommendations of the manufacturer.  Lessee agrees to furnish Lessor upon request current financial statements reflecting the Lessee’s financial status during the term of the Lease.

 
1

 



     5.  OWNERSHIP.   No title or right in said equipment shall pass to Lessee except the rights herein expressly granted.  Plates or other markings may be affixed to or placed on said equipment by Lessor or at Lessor’s request, by Lessee at Lessee’s expense, indicating the Lessor is the owner thereof, and Lessee will not remove the same. Upon the termination of the initial lease period, Lessee will immediately crate, insure, and ship the equipment and operating manuals to whatever destination Lessor shall direct, all at Lessee’s expense, in as good condition as received less normal wear and tear, said destination to be confirmed by Lessee prior to shipment, except as otherwise provided in Section 6 hereof.  Lessee agrees to pay Lessor monthly rent at the rate specified for the initial term for any month or part thereof from the end of the initial term until the equipment is shipped by Lessee.  Said equipment shall always remain and be deemed personal property even though attached to realty.  Lessee shall maintain each unit of equipment so that it may be removed from the building in which it is placed without damage to the building.  All replacements, accessories, or capital improvements made to or placed in or upon said equipment shall become component parts thereof and title thereto shall immediately vest in Lessor and shall be included under the terms hereof.  The Lessee agrees that the Lessor is authorized, at its option, to file financing statements or amendments thereto without the signature of the Lessee with respect to any or all of the lease property and, if a signature is required by law, then the Lessee appoints Lessor as Lessee’s attorney-in-fact to execute any such financing statements and further agrees to pay the Lessor a documentation fee to cover the expense of making such filing(s).  Lessee further agrees to itself execute such documents and take such action, as Lessor may reasonably request to protect Lessor and carry out the interest from any owner or encumbrancer of the real property on which the equipment shall be installed or located, waiving any claim of interest in the leased equipment and consenting to its removal upon the expiration or sooner termination of this Lease.

     6.  EXPIRATION OF LEASE; PURCHASE OPTION; BUYOUT OPTION.   At the expiration of the base term stated herein or upon the expiration of any renewal or extension as provided herein, Lessee shall provide at least thirty (30) days prior written notice to Lessor of Lessee’s intent to either (a) purchase the leased equipment pursuant to the purchase option set forth herein, (b) extend the lease for a specified period of time, which shall not be less than one year, at a monthly rental rate determined by the Lessor (in its sole discretion) to be the fair market value rental rate for the leased equipment at such time; or (c) return the leased equipment to the Lessor pursuant to Paragraph 5 above. In the event that notice is not given at least thirty (30) days prior to the expiration of the base term or any renewal or extension then in effect, then this lease shall continue on a month-to month basis, and Lessee shall continue to pay the monthly rent then required hereunder, until Lessee thereafter meets the thirty (30) day prior written notice requirement.
        
Provided that Lessee has complied with all the terms and conditions of this Lease and has paid in full all amounts due under this Lease, including all lease payments and applicable taxes, then Lessee shall have the option to purchase the leased equipment upon the expiration of the base term stated herein or upon the expiration of any renewal or extension as provided herein. Upon the proper exercise of this purchase option, including timely notice under this Paragraph 6, Lessee may purchase all of the leased equipment for an amount equal to fifteen percent (15%) of the leased equipment’s initial purchase price, plus any applicable taxes, provided that Lessor receives payment in full within twenty (20) days after the last day of the applicable term.

     7.  ASSIGNMENT.  Lessor may assign this Lease, and its assignee may further assign this Lease, without notice to or consent of the Lessee.  Any such assignee shall succeed to all rights of the Lessor hereunder, and such assignee’s rights shall be free from all defenses, set-offs of counter-claims of any kind which Lessee may be entitled to assert against Lessor other than for Lessee’s right to use and possession of the equipment.  Lessee hereby waives the right to assert any such defense, set-off or counter-claim against any such assignee, it being understood that no such assignees shall assume the obligations of the Lessor named herein.  By the foregoing waiver, Lessee does not waive the right to any defense, set-off, or counterclaim it may have against Lessor in the event Lessor assigns this Lease pursuant to this provision.
      
   LESSEE SHALL NOT ASSIGN, MORTGAGE OR HYPOTHECATE THIS LEASE OR ANY INTEREST HEREIN, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR AND ANY SUCH TRANSFER OR ASSIGNMENT WITHOUT SUCH CONSENT WILL BE VOID.  TITLE TO THE EQUIPMENT SUBJECT TO THIS LEASE IS RETAINED BY THE LESSOR AND LESSEE COVENANTS THAT IT WILL NOT PLEDGE OR ENCUMBER THE EQUIPMENT IN ANY MATTER WHATSOEVER, NOR PERMIT ANY LIENS, CHARGES, OR ENCUMBRANCES TO ATTACH THERETO.

     8.  INSURANCE.   Lessee assumes the entire risk of loss or damages to the equipment whether or not covered by insurance, and no such loss shall relieve Lessee of its obligations hereunder.  Lessee agrees to keep the equipment insured and to provide proof of insurance to Lessor; to protect all interests of Lessor, at Lessee’s expense, against all risks of loss or damage from any cause whatsoever for not less than the unpaid balance of the lease rentals due hereunder or eighty percent (80%) of the then current value of said equipment, whichever is higher.  Lessor shall be named as a loss payee as its interest may arise under Lessee’s insurance policies and provided with a certificate of insurance evidencing the same.  The proceeds of such insurance whether resulting from loss or damage or return of premium or otherwise, shall be applied toward the replacement or repair of said equipment or the payment of Lessee’s attorney-in-fact to make claim for, receive payment of and execute or endorse all documents, checks or drafts for loss or damage or return premium under any insurance policy issued on said equipment.  If Lessee fails to maintain the insurance required by this paragraph, Lessor may, but it is not obligated to , obtain insurance in such forms and amounts as it deems reasonable to protect its interests and Lessee agrees to reimburse Lessor for all such costs together with interest at the rate provided herein upon demand.

     9.  INDEMNITY.   Lessee shall, at its sole cost and expense, indemnify, hold harmless and defend Lessor and its agents, employees, officers and directors from and against any and all claims, actions, suits, proceedings, costs, expenses, damages and liabilities, including attorney’s fees, arising our of, connected with, resulting from or relating to the equipment or the condition, delivery, leasing, location, maintenance, manufacture, operation, ownership, possession, purchase, repair, repossession, return, sale, selection, service or use thereof, including without limitation  (a)  claims involving latent or other defects (whether or not discoverable by Lessee or Lessor),  (b)  claims for trademark patent or copyright infringement, and  (c)  claims for injury or death to persons or damage to property or loss of business or anticipatory profits, whether resulting from acts or omissions of Lessee or Lessor or otherwise.  Lessee shall give Lessor prompt written notice of any claims or liability covered by this paragraph.  The indemnities under this paragraph shall survive the satisfaction of all other obligations of Lessee herein and the termination of this Lease.

 
2

 

     10.  TAXES AND FEES.   Lessee agrees to use, operate and maintain said equipment in accordance with all laws in all material respects; to pay all licensing and registration fees for said equipment; to keep the same free of levies, liens and encumbrances; to show the equipment as “released equipment” on Lessee’s personal property tax returns; to pay all personal property taxes assessed against equipment, which sum Lessee shall remit to the taxing authority; to pay all other taxes, assessments, fees and penalties which may be levied or assessed on or in respect to said equipment or its use or any interest therein, or rental payments thereon including but not limited to all federal, state and local taxes, however designed, levied or assessed upon the Lessee and Lessor or either of them or said equipment, or upon the sale, ownership, use or operation thereof.  Lessor may pay such taxes and other amounts and may file such returns on behalf of Lessee if Lessee fails to do so as provided herein.  Lessee agrees to reimburse Lessor for reasonable costs incurred in collecting any charges Taxes, assessments or fees for which Lessee is liable hereunder.

     11.  ADVANCES.   All advances made and costs reasonably incurred by Lessor to preserve said equipment or to discharge and pay any taxes, assessments fees, penalties, liens or encumbrances thereon or to insure the equipment shall be added to the unpaid balance of rentals due hereunder and shall be repayable by Lessee to Lessor immediately together with interest thereon at the rate of one and six tenths (1.6%) percent per month until paid.

     12.  DEFAULT.   Lessee shall be in default hereunder upon the occurrence of any of the following events:  (a)  failure of Lessee to pay any rental payment or other amount required hereunder when due;  (b)  failure of Lessee to perform any other obligation hereunder or observe any other term or provision hereunder;  (c)  any representation or warranty made to Lessor by Lessee or by any Guarantor proves to have been false in any material respect when made;  (d)  levy, seizure or attachment or other involuntary transfer of the equipment;  (e)  assignment for benefit of creditors or bulk transfer of assets by, or cessation of business, termination of existence, death or dissolution of, Lessee or any Guarantor.  As used herein, the term “Guarantor” shall include any guarantor of this Lease and any owner of any property given as security for Lessee’s obligations hereunder.
 
         Upon the occurrence of a default hereunder, Lessor may exercise any one or more of the following remedies without demand or notice to Lessee and without terminating or otherwise affecting Lessee’s obligations hereunder:  (i)  declare the entire balance of rent for the remaining tern of this Lease to be immediately due and payable;  (ii)  require Lessee to assemble the equipment and make it available to Lessor at a place designated by Lessor which is reasonable and convenient to both parties;  (iii)  take and hold possession of the equipment from any premise where the same may be located without liability to Lessee for any damage caused thereby;  (iv)  sell or lease the equipment or any part thereof at public or private sale for cash, on credit or otherwise, with or without representations or warranties, and upon such commercially reasonable terms as shall be acceptable to Lessor;  (v)  use and occupy the premises of Lessee for the purpose of taking, holding, reconditioning, displaying, selling or leasing the equipment, without cost to Lessor or liability to Lessee;  (vi)  demand, sue for and recover from Lessee all sums due hereunder.

     13.  DAMAGES.   In the event of any default hereunder, Lessor  may elect to accelerate the obligation of Lessee and, in such event, shall be entitled to recover the sum of  (a)  delinquent lease payments with interest thereon at the legal rate,  (b)  any unamortized brokerage commission,  (c)  the anticipated residual value of the equipment, and  (d) the lease payments become due in the future discounted to present value as of the date of entry of Judgment  at a rate equal to 80% of the New York Prime rate as of that date.  Lessee shall be entitled to credit for net proceeds received by Lessor upon sale or release of the equipment, if any discounted to present value.  Lessee shall also be liable for all costs incurred by Lessor in retaking, protecting and disposing of the equipment, including reasonable legal fees and costs.

     14.  LATE CHARGE.   In the event a rent payment or personal property tax payment is not made when due hereunder the Lessee promises to pay  (1)  a late charge to the Lessor or him assign not later than one month thereafter, in an amount calculated at the rate of five cents per one ($1.00) dollar of each such delayed payment.  The late charge and/or the interest payment set forth in this contract shall apply only when permitted by law and, if not permitted by law, the late charges and/or interest payments shall be calculated at the maximum rate permissible by law.  In the event that a check or other instrument tendered for payment is dishonored, the Lessor shall be entitled to a ten dollar ($10.00) fee.

     15.  OMISSION.   The omission by the Lessor at any time to enforce any default or right reserved to it, or to require performance of any of the terms, convenants or provisions hereof or the Lessee at any time designated, shall not be a waiver of any such default or right to which the Lessor is entitled, nor shall it in any way affect the right of the Lessor to enforce such provisions thereafter.  The Lessor may exercise all remedies simultaneously, pursuant to the terms hereof and say such action shall not operate to release the Lessee until the full arrival of the rentals due and to become due and all other sums to be paid hereunder have been paid.

     16.  BINDING AGREEMENT.   The provisions of this agreement apply to and bind the heirs, executors, administration, successors and assigns of the respective parties hereto.

     17.  GOVERNING LAW, VENUE, and JURY WAIVER.   This Agreement shall be governed and interpreted in accordance with the laws of the state of Lessor’s principal office, and any suit hereon shall be brought in the county of such office.  To the extent permitted by law, the parties waive their right to a jury trial.

     18.  IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT ALL UNDERSTANDINGS AND AGREEMENTS HERETOFORE MADE BETWEEN THE PARTIES HERETO RELATIVE TO THIS LEASE ARE MERGED IN THIS AGREEMENT, WHICH CONTAINS THE ENTIRE AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO, AND NEITHER PARTY RELIES UPON ANY OTHER STATEMENT OR REPRESENTATION, EXCEPT FOR THE CREDIT APPLICATION AND FINANCIAL STATEMENTS OF LESSEE AND ANY GUARANTOR PROVIDED IN CONNECTION HEREWITH.  THIS AGREEMENT MAY NOT BE MODIFIED OR CANCELED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE LESSEE AND A CORPORATE OFFICER OF THE LESSOR.

     19.  This lease is not effective nor accepted until signed by an officer of lessor, which is the last act necessary for the effectiveness of this lease.



 
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LESSEE: TWINLAB CORPORATION

By:_______________________________ Title:_______________________________ Date:__________________

By:_______________________________ Title:_______________________________ Date:__________________

Witness:___________________________

Accepted by LESSOR:   ESSEX CAPITAL CORPORATION

By:_______________________________ Title:_______________________________ Date:__________________


 





 
4

 

Addendum I
Page 1 of 1
 
This equipment schedule is to be attached to and made a part of the Lease Agreement 1 and related documents dated August 22, 2014 by and between below named Lessee(s) and Lessor.

See Schedule A

LESSEE:                      TWINLAB CORPORATION
By:_______________________  Title:_________________  Date:____________

By:_______________________  Title:_________________  Date:____________

LESSOR:                      ESSEX CAPITAL CORPORATION

By:_______________________  Title:_________________  Date:____________

 
5

 

DELIVERY AND ACCEPTANCE CERTIFICATE


Re:  Lease Agreement and related documents dated August 22, 2014 by and between below named Lessee and Lessor
Initial Lease Payment Date August 22, 2014
To: ESSEX CAPITAL CORPORATION, Lessor

All of the items referred to in the above referenced lease have been delivered to and have been received by the undersigned.  All installation or other work necessary prior to the use thereof has been completed.  Said equipment has been examined and/or tested and is in good operation order and condition, and is in all respects satisfactory to the undersigned and is as represented.  Said equipment has been accepted by the undersigned and complies with all terms of the Lease.

In the future, even if the equipment fails to perform as expected or represented, we will continue to honor the above-referenced Lease by continuing to make our periodic payments in the normal course of business, and we will look solely to the seller or manufacturer for the performance of all covenants and warranties.  In addition, we agree to indemnify and hold harmless and defend the Lessor from such nonperformance of all the aforementioned equipment.

We acknowledge the Lessor is neither the manufacturer, distributor, nor seller of all the equipment and has no control, knowledge, or familiarity with the conditioning, capacity, functioning, or other characteristics of the equipment.

NOTICE TO THE LESSEE:  DO NOT SIGN THIS ACCEPTANCE UNTIL THE EQUIPMENT HAS BEEN DELIVERED, ASSEMBLED, INSTALLED AND ACCEPTED BY YOU AS SATISFACTORY IN ALL RESPECTS.  PAYMENT TO THE SUPPLIER WILL  NOT BE MADE UNTIL THIS NOTICE IS SIGNED AND RETURNED TO THE LESSOR.



LESSEE:

By:_____________________________  Title:____________________  Date:_______________

By:_____________________________  Title:____________________  Date:_______________



I hereby authorize _________________________, __________________(title) to verbally verify my/our acceptance of the above referenced equipment in my absence.

 
6

 

SUBJECT:  WITNESSING OF SIGNATURES


ESSEX CAPITAL CORPORATION REQUIRES THAT ALL LESSEE AND GUARANTOR SIGNATURES ON ITS COMMERCIAL LEASE AGREEMENT BE AUTHENTICATED BY AN EMPLOYEE OF EITHER ESSEX CAPITAL CORPORATION OR BY APPROVED BROKERS/LESSORS OR A NOTARY PUBLIC.  NO OTHER WITNESSES ARE ACCEPTABLE.

PLEASE ATTEST THAT YOU WITNESSED THOSE IDENTIFIED BELOW.  BE SURE TO ATTACH PHOTOCOPIES OF EACH SIGNER’S DRIVER’S LICENSE OR OTHER PHOTO IDENTIFICATION, AND BE SURE TO PROVIDE CURRENT ADDRESS AND PHONE NUMBER OF EACH GUANRANTOR.


__________________________________

By:_________________________________

Was witnessed by:____________________________  Date:_____________________

Witness is:  (Circle one)   Lessee employee, Notary Public









 
7

 















SCHEDULE A

 
8

 


20760
Pallet Racking Throughout
20737
HighCube II  4 Bay Vertical Stor
21038
Nuspark Cartoner
20898
Electric Narrow Aisle Turert Truck (30TSP)
20300
1998 AW Bohanan 2000 Encapsulato
20302
1998 AW Bohanan 2000 Encapsulato
20313
1998 AW Bohanan 2000 Encapsulato
20315
1998 AW Bohanan 2000 Encapsulato
20316
1998 AW Bohanan 2000 Encapsulato
20318
1998 AW Bohanan 2000 Encapsulato
20320
1998 AW Bohanan 2000 Encapsulato
20322
1998 AW Bohanan 2000 Encapsulato
20323
1998 AW Bohanan 2000 Encapsulato
20383
DT Stokes 328-2 Tablet Press
20985
Littleford Batch Mixer  w/Mezzanine Superstructure
20325
1995 AW Bohanan/Bosch 2000 Encap
20326
1993 AW Bohanan/Bosch 2000 Encap
20749
AW Bohanan 2000 Encapsulator
21064
FACSMicroCount Detection System BDDS EX-EU
20378
DT Stokes 328-2 Tablet Press
20382
DT Stokes 328 Tablet Press
20385
DT Stokes 328 Tablet Press
21023
2 Ackley Tablet Imprinters
21060
Conveyors & installation
20328
Bosch 1500 Encapsulator
20578
Fitzpatrick Company 1R520 Chilso
21054
E-Z TEC DSP METAL DETECTOR 10 X 8 HI MD
21009
Fette Tablet Press w/Tooling
20751
Bosch 1500 Encapsulator
20897
Stock Picker (SP3250-30)
20896
Stand Up Rider Lift Truck (RC3020-40)
20992
Thomas Engineering 60" Rotary Accela-Coata
20557
Patterson Kelly 75 cu ft. Twin S
20869
Dry Powder Line w/ Bucket Elevat
20949
ETC - 212 TABLET/CAPSULE COUNTER
20802
PDC  Heat Tunnel
21010
Fette Tablet Press, D&B Tooling
21011
Fette Tablet Press, D&B Tooling
20224
DT Merrill 72-16 Slat Counter
20289
DT Merrill 72-16AH Slat Counter

 
9

 


20350
Stokes Merrill 516-1 Tablet Pres
20880
Dual Liquid Lines w/ Descrambler
20990
Ohara 48" Rotary Coater w/Digital Modular Drive
20599
2002 Crown 30TSP Turret Truck
20600
2002 Crown 30TSP Turret Truck
20905
(4) Turret Heads for Model 328 Tablet Presses
20153
Omega 3DERP210 Bottle Orientator
20170
Omega 3DERP210 Bottle Orientator
20553
Patterson Kelly 40 cu.ft. Twin S
20853
Sun SBR-S V91 Packaging Line (4
20917
Lakso Slat Counter High Speed Filling Machine
21030
R322 HIGH SPEED WRAP AROUND LABELER
20596
1998 Crown 30TSP Turret Truck
20598
1999 Crown 30TSP Turret Truck
21058
Steam and Electric Hybrid Shrink Tunnel
21033
VORTEX DOORS
20924
Omega Design Bundle Sealer & Shrink Wrap
20155
DT Lakso 426 Slat Counter
20168
Omega DL27 Over Wrapper
20185
Omega DL27 Over Wrapper
20231
Omega SL-DL-18 Over Wrapper
20277
Merrill 7216ADH Slat Counter w/
20298
Omega SL-DL-18 Over Wrapper
20362
Key International BBC Tablet Pre
21000
Manesty Express Tablet Press
21059
LOMA IQ3+Metal Dectector & Reject w/overhead Guard
20951
Spectrace Mineral Analyzer X-Ray Machine (XRF)
20912
AM-250 Foil Sealers, Foiled& Stalled Bottle Detect
20172
DT Lakso Reformer 450 Slat Count
20180
New Jersey Machine 326 SLWP111-5
20294
New Jersey Machine 326SRWP-999 L


 
10
 





EXHIBIT 10.9
 
TWINLAB CONSOLIDATION CORPORATION

RESTRICTED STOCK PURCHASE AGREEMENT
 
THIS RESTRICTED STOCK PURCHASE AGREEMENT (this “ Agreement ”) is entered into as of November 4, 2013, by and between Twinlab Consolidation Corporation, a Delaware corporation (the “ Company ”), and Thomas Tolworthy (“ Recipient ”).
 
 
W I T N E S S E T H
 
WHEREAS, the Company regards Recipient as a valuable contributor to the Company and has determined that it would be in the best interest of the Company and its stockholders to sell the Stock (as defined below) provided for in this Agreement to Recipient as an incentive for continued service with the Company and increased achievements in the future by Recipient;
 
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties to this Agreement hereby agree as follows:
 
A G R E E M E N T
 
1.   Restricted Stock Purchase .
 
(a)   Contemporaneously with the execution of this Agreement, the Company will issue and sell to Recipient 104,000,000 shares of Common Stock, with a par value of $0.0001 per share, of the Company (the “ Stock ”) for a consideration of $0.0001 per share (the “ Purchase Price ”).  Payment for the Stock in the amount of the Purchase Price multiplied by the number of shares issued hereunder shall be made to the Company upon execution of this Agreement.  Such payment shall be made in the form of a combination of cash, check or wire transfer of immediately available funds.  Stock certificates evidencing the Stock will be retained by the Company, accompanied by blank stock powers executed by Recipient, for the period during which the Stock constitutes Restricted Stock (as defined below) pursuant to the terms of Sections 2, 3 and 4 hereof.
 
(b)   All shares of Stock issued hereunder shall be deemed issued to Recipient as fully paid and nonassessable shares, and Recipient shall have all rights of a stockholder with respect thereto, including the right to vote, receive dividends (including stock dividends), participate in stock splits or other recapitalizations, and exchange such shares in a merger, consolidation or other reorganization.  The term “Stock,” in addition to the shares purchased pursuant to this Agreement, also refers to all securities received in replacement of the Stock, as a stock dividend or as a result of any stock split, recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which Recipient is entitled by reason of Recipient’s ownership of the Stock.
 

 
1

 


 
2.   Restrictions .
 
(a)   No Stock issued to the Recipient hereunder shall be sold, transferred by gift, pledged, hypothecated, or otherwise transferred or disposed of by the Recipient prior to the date when the Recipient shall become vested in such Stock pursuant to Section 3 or 4 hereof, and such Stock shall constitute “Restricted Stock” until such date.  Any attempt to transfer Stock in violation of this Section 2 shall be null and void and shall be disregarded by the Company.
 
(b)   In addition, Restricted Stock shall be subject to a repurchase option in favor of the Company (the “ Repurchase Option ”).  The Repurchase Option shall be subject to the following terms and conditions:
 
(i)   In the event of the voluntary or involuntary termination of Recipient as an employee of the Company for any reason, with or without cause (including death or disability), the Company shall, upon the date of such termination, have an irrevocable, exclusive option for a period of ninety (90) days from such date to repurchase all or any portion of the Restricted Stock from Recipient or any person receiving the Restricted Stock by operation of law or other involuntary transfer, at the Purchase Price for the Restricted Stock.  The Repurchase Option may be assigned by the Company to any third person or entity.

(ii)   The Repurchase Option shall be exercised by written notice by the Company or its assignee to Recipient or his or her executor and, at the Company’s or its assignee’s option, by delivery to the Recipient or his or her executor, with such notice, of (A) a check in the amount of the Purchase Price for the Restricted Stock being repurchased, (B) in the event that Recipient is indebted to the Company or its assignee, by cancellation by the Company or its assignee of an amount of such indebtedness equal to the Purchase Price for the Restricted Stock being repurchased, or (C) by a combination of (A) and (B) so that the combined payment and cancellation of indebtedness equals such Purchase Price.  Upon delivery by the Company or its assignee of such notice and payment of the Purchase Price, the Company or its assignee shall become the legal and beneficial owner of the Restricted Stock being repurchased and all rights and interest therein or related thereto, and the Company shall have the right to transfer to its or its assignee’s own name the number of shares of Restricted Stock being repurchased by the Company or its assignee, without further action by Recipient.
 
(c)   For purposes of facilitating the enforcement of the provisions of this Section 2, Recipient agrees, immediately upon receipt of the certificate(s) for the Stock, to deliver such certificate(s), together with an Assignment Separate from Certificate, in substantially the form of that attached hereto as Exhibit A , executed in blank by Recipient and Recipient’s spouse (if required for transfer) with respect to each such stock certificate, to the Secretary or Assistant Secretary of the Company, or their designee, to hold in escrow for so long as such Stock remains Restricted Stock, with the authority to take all such actions and to effectuate all such transfers and/or releases as may be necessary or appropriate to accomplish the objectives of this Agreement in accordance with the terms hereof.  Recipient hereby acknowledges that the appointment of the Secretary or Assistant Secretary of the Company (or their designee) as the escrow holder hereunder with the stated authorities is a material inducement to the Company to make this Agreement and that such appointment is coupled with an interest and is accordingly irrevocable.  Recipient agrees that such escrow holder shall not be liable to any party hereto (or to any other party) for any actions or omissions unless such escrow holder is grossly negligent relative thereto.  The escrow holder may rely upon any letter, notice or other document executed by any signature purported to be genuine and may resign at any time.

 
2

 


 
 
(d)   Recipient may not sell, assign, pledge, or in any manner transfer any of the Stock or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, except by a transfer which meets the requirements hereinafter set forth in this Section 2(d):
(i)           If Recipient receives from anyone a bona fide offer acceptable to Recipient to purchase any of the Stock, then Recipient shall first give written notice thereof to the Company.  The notice shall name the proposed transferee and state the number of shares to be transferred, the price per share and all other terms and conditions of the offer.
 
(ii)           For fifteen (15) days following receipt of such notice, the Company or its assigns shall have the option to purchase all or any lesser part of the shares specified in the notice at the price and upon the terms set forth in such bona fide offer.  In the event the Company elects to purchase all or any of the shares, it shall give written notice to Recipient of its election and settlement for said shares shall be made as provided below in subparagraph (iii).
 
(iii)           In the event the Company elects to acquire any of the shares of Stock as specified in Recipient’s notice, the Secretary of the Company shall so notify Recipient and settlement thereof shall be made in cash within thirty (30) days after the Secretary of the Company receives Recipient’s notice; provided that if the terms of payment set forth in Recipient’s notice were other than cash against delivery, the Company shall pay for said shares on the same terms and conditions set forth in Recipient’s notice.
 
(iv)           In the event the Company does not elect to acquire all of the shares specified in Recipient’s notice, Recipient may, within the sixty (60) day period following the expiration of the option rights granted to the Company in this Section 2(d), sell to the proposed transferee specified in Recipient’s notice the shares specified in Recipient’s notice which were not acquired by the Company in accordance with the provisions of subparagraph (iii) of this Section 2(d), provided that said sale shall not be on terms and conditions more favorable to the purchaser than those contained in the bona fide offer set forth in Recipient’s notice.  All shares so sold by Recipient shall continue to be subject to the provisions of this Section 2(d) in the same manner as before said transfer.
 
(v)           Recipient’s transfer of any or all shares of Stock held either during Recipient’s lifetime or on death by will or intestacy to Recipient’s immediate family or a trust for the sole benefit of Recipient and/or his or her immediate family shall be exempt from the provisions of subparagraphs (i) through (iv) of this Section 2(d).  “Immediate family” as used herein shall mean spouse, lineal descendent, father, mother, brother, or sister of Recipient.
 
(vi)           The provisions of this Section 2(d) may be waived with respect to any transfer by the Company.
 
(vii)           Any sale or transfer, or purported sale or transfer, of shares of Stock shall be null and void unless the terms, conditions, and provisions of this Section 2(d) are strictly observed and followed.

 
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(viii)           The foregoing right of first refusal contained in this Section 2(d) shall terminate upon the date securities of the Company are first offered to the public pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission under the Securities Act of 1933, as amended.
 
(ix)           The certificates representing the Stock shall bear on their face the following legend so long as the foregoing right of first refusal remains in effect:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL IN FAVOR OF THE COMPANY, PURSUANT TO THE TERMS OF THAT CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE NAMED STOCKHOLDER.  THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH SUCH AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
 
3.   Vesting .  For purposes of this Agreement, the term “vest” shall mean with respect to any share of the Stock that such share is no longer Restricted Stock subject to the restrictions on transfer set forth in Sections 2(a) through 2(c) and that such share is released from the Repurchase Option.  If Recipient would become vested in any fraction of a share of Stock on any date, such fractional share shall not vest and shall remain Restricted Stock until Recipient becomes vested in the entire share.  The shares of Stock subject to this Agreement shall, subject to Recipient’s continued status as an employee of the Company, vest as follows:
 
(a)   one-half (1/2) of the shares of Stock subject to this Agreement shall vest on the date of this Agreement; and
 
(b)   the remaining one-half (1/2) of the shares of Stock subject to this Agreement shall vest in twenty four (24) equal monthly installments commencing on the one (1) month anniversary of the date of this Agreement and continuing monthly thereafter until all Shares have become fully vested.
 
4.   Corporate Transaction .
 
(a)   For purposes of this Agreement, a “Corporate Transaction” shall include any of the following transactions to which the Company is a party:
 
(i)   a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;
 
(ii)   the sale, transfer or other disposition of all or substantially all of the assets of the Company;
 

 
4

 


 
(iii)   the complete liquidation or dissolution of the Company;
 
(iv)   any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or (B) in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Company’s Board of Directors determines shall not be a Corporate Transaction; or
 
(v)   acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding (1) any bona fide financing transaction consummated primarily for capital raising purposes and (2) any such transaction or series of related transactions that the Company’s Board of Directors determines shall not be a Corporate Transaction.
 
(b)   In the event of any Corporate Transaction, the shares of Stock which constitute Restricted Stock, immediately prior to the effective date of such Corporate Transaction, shall, immediately prior to the specified effective date of the Corporate Transaction, vest and thereby be released from the Repurchase Option.
 
(c)   Notwithstanding anything herein to the contrary, this Section 4 shall not in any way affect the right of the Company to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.
 
(d)   In the event that any of the benefits provided for in this Agreement constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (the “ Excise Tax ”), then such benefits shall be either (a) provided in full, or (b) provided as to such lesser extent which would result in no portion of such benefit being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Recipient on an after-tax basis of the greatest amount of benefits notwithstanding that all or some portion of such benefits may be subject to the Excise Tax.  Unless the Company and Recipient otherwise agree in writing, any determination required under this paragraph shall be made by the Company’s independent public accountants (the “ Accountants ”), whose determination shall be conclusive and binding upon all parties.  For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Internal Revenue Code.  The Company and Recipient shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section.  The Company shall bear all costs of the Accountants in connection with any calculations contemplated by this section.
 

 
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5.   Tax Matters .
 
(a)   Recipient hereby represents that he or she understands (a) the contents and requirements of a timely election made pursuant to Section 83(b) of the Internal Revenue Code or similar provision of state law (collectively, an “ 83(b) Election ”), (b) the application of Section 83(b) to the purchase of Stock by Recipient pursuant to this Agreement, (c) the nature of the election to be made by Recipient under Section 83(b) and (d) the effect and requirements of the 83(b) Election under relevant state and local tax laws.  Recipient further represents that he or she intends to file an election pursuant to Section 83(b), the form of which Election is attached hereto as Exhibit B , with the Internal Revenue Service within thirty (30) days following purchase of the Stock hereunder, and a copy of such election with his or her federal tax return for the calendar year in which the date of this Agreement falls.  Recipient covenants to inform the Company of any change in Recipient’s state of residency.  Recipient shall provide the Company with a copy of any timely 83(b) Election.  If Recipient makes a timely 83(b) Election, Recipient shall immediately pay the Company the amount necessary to satisfy any applicable federal, state, and local income and employment tax withholding requirements.  If Recipient does not make a timely 83(b) Election, Recipient shall, either at the time that the restrictions lapse under this Agreement or at the time withholding is otherwise required by any applicable law, pay the Company the amount necessary to satisfy any applicable federal, state, and local income and employment tax withholding requirements.
 
(b)   Recipient acknowledges that in the absence of a public market for the Company’s Common Stock, there is significant difficulty and uncertainty in determining the fair market value of the Stock purchased by Recipient hereunder.  Recipient understands that the Company can give no assurances that the Purchase Price is in fact the fair market value of the Stock and that it is possible that, with the benefit of hindsight, the Internal Revenue Service could successfully assert that the value of the Stock on the date of purchase is greater than the Purchase Price.  If the Internal Revenue Service were to succeed in a tax determination that the Stock had value greater than the Purchase Price, Recipient would be deemed to have received ordinary income on the date of purchase in an amount equal to the additional value.  Except for the Company’s withholding obligations, Recipient assumes sole responsibility for any taxes, interest or penalties arising from such potential income, and the Company would have no obligation to reimburse or otherwise compensate Recipient for the same.  Recipient agrees to reimburse the Company for any payments made by the Company in respect of such withholding obligations attributable to Recipient’s taxes, to amend any tax returns filed by Recipient to reflect any such income and to pay all taxes attributable to such amended returns.  Recipient understands that the Company may derive a benefit from such a tax determination by the Internal Revenue Service by way of an increase in its deduction for compensation paid.
 
6.   Additional Securities .  Any securities received as the result of ownership of Restricted Stock (hereinafter called “ Additional Securities ”), including, without limitation, warrants, options and securities received as a stock dividend or stock split, or as a result of a recapitalization or reorganization, shall be retained by the Company in the same manner and subject to the same conditions as the Restricted Stock with respect to which they were issued.  Recipient shall be entitled to direct the Company to exercise any warrant or option received as Additional Securities upon supplying the funds necessary to do so, in which event the securities so purchased shall constitute Additional Securities, but the Recipient may not direct the Company to sell any such warrant or option.  If Additional Securities consist of a convertible security, Recipient may exercise any conversion right, and any securities so acquired shall be deemed Additional Securities.  Additional Securities shall be subject to the provisions of Sections 2, 3 and 4 above in the same manner as the Restricted Stock.
 

 
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7.   Investment Representations .
 
(a)   This Agreement is made in reliance upon the Recipient’s representation to the Company, which by its acceptance hereof the Recipient hereby confirms, that the shares of Stock to be received by him or her will be acquired for investment for his or her own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that he or she has no present intention of selling, granting participation in, or otherwise distributing the same, but subject nevertheless to any requirement of law that the disposition of his or her property shall at all times be within his or her control.
 
(b)   The Recipient understands that the Stock is not registered under the Securities Act of 1933, as amended (the “ 1933 Act ”), on the basis that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the 1933 Act pursuant to Section 4(a)(2) thereof, and that the Company’s reliance on such exemption is predicated on the Recipient’s representations set forth herein.  The Recipient realizes that the basis for the exemption may not be present if, notwithstanding such representations, the Recipient has in mind merely acquiring shares of the Stock for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise.  The Recipient does not have any such intention.
 
(c)   The Recipient understands that the Stock may not be sold, transferred, or otherwise disposed of without registration under the 1933 Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Stock or an available exemption from registration under the 1933 Act, the Stock must be held indefinitely.  In particular, the Recipient is aware that the Stock may not be sold pursuant to Rule 144 or Rule 701 promulgated under the 1933 Act unless all of the conditions of the applicable Rules are met.  Among the conditions for use of Rule 144 is the availability of current information to the public about the Company.  Such information is not now available, and the Company has no present plans to make such information available.  The Recipient represents that, in the absence of an effective registration statement covering the Stock, it will sell, transfer, or otherwise dispose of the Stock only in a manner consistent with its representations set forth herein and then only in accordance with the provisions of Section 7(d) hereof.
 
(d)   The Recipient agrees that in no event will it make a transfer or disposition of any of the Stock (other than pursuant to an effective registration statement under the 1933 Act), unless and until (i) the Recipient shall have notified the Company of the proposed disposition and shall have furnished the Company with a statement of the circumstances surrounding the disposition, and (ii) if requested by the Company, at the expense of the Recipient or transferee, the Recipient shall have furnished to the Company either (A) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such transfer may be made without registration under the 1933 Act or (B) a “no action” letter from the Securities and Exchange Commission to the effect that the transfer of such securities without registration will not result in a recommendation by the staff of the Securities and Exchange Commission that action be taken with respect thereto.  The Company will not require such a legal opinion or “no action” letter in any transaction in compliance with Rule 144.
 

 
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8.   Legends; Stop Transfer .
 
(a)   All certificates for shares of the Stock shall bear substantially the following legends:
 
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
 
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THAT CERTAIN RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE NAMED STOCKHOLDER.  THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH SUCH AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
 
(b)   In addition, the Company shall make a notation regarding the restrictions on transfer of the Stock in its stockbooks, and shares of the Stock shall be transferred on the books of the Company only if transferred or sold pursuant to an effective registration statement under the 1933 Act covering such shares or pursuant to and in compliance with the provisions of Section 7(d) hereof.
 
9.   NO EFFECT ON TERMS OF EMPLOYMENT .  THIS AGREEMENT SHALL NOT CONFER UPON RECIPIENT ANY RIGHT WITH RESPECT TO CONTINUATION OF RECIPIENT’S EMPLOYMENT WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH THE RIGHT OF RECIPIENT OR THE COMPANY TO TERMINATE RECIPIENT’S EMPLOYMENT WITH THE COMPANY AT ANY TIME FOR ANY REASON WITH OR WITHOUT CAUSE OR CHANGE THE TERMS OF EMPLOYMENT OF RECIPIENT.
 
10.   “Market Stand-Off” Agreement .
 
(a)   Agreement .  Recipient hereby agrees that he or she will not, directly or indirectly, without the prior written consent of the Company and the lead underwriter of any public offering of the Common Stock or other securities of the Company (the “ Lead Underwriter ”), during the period commencing on the date of the final prospectus relating to the initial public offering by the Company and ending on the date specified by the Company and the Lead Underwriter (such period not to exceed one hundred eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock (whether such shares or any such securities are then owned by the Recipient or are thereafter acquired), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; provided, however, that if and to the extent that Rule 2711(f)(4) of the Financial Industry Regulatory Authority, Inc. (“ FINRA ”) would apply to a FINRA member publishing or otherwise distributing a research report, or making a public appearance, concerning the Company, if (1) during the last 17 days of such 180-day period, the Company releases earnings results or announces material news or a material event or (2) prior to the expiration of such 180-day period, the Company announces that it will release earnings results during the 15-day period following the last day of the initial 180-day period, then in each case such 180-day period will be automatically extended until the expiration of the 18-day period beginning on the date of release of the earnings results or the announcement of the material news or material event, as applicable, unless the Lead Underwriter waives, in writing, such extension.  The foregoing provisions of this Section 10 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement.
 

 
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(b)   Underwriters’ Rights .  The underwriters in connection with the initial public offering by the Company are intended third party beneficiaries of this Section 10 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto; further, Recipient hereby agrees to enter into written agreement with such underwriters containing terms substantially equivalent to the terms of this Section 10, and Recipient hereby agrees that such underwriters shall be entitled to require Recipient to enter into such a written agreement.
 
(c)   Stop Transfer Instructions .  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of Recipient (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.
 
(d)   Permitted Transfers .  Notwithstanding the foregoing, Section 10(a) hereof shall not prohibit Recipient from:
 
(i)   transferring any shares of Common Stock or securities convertible into or exchangeable or exercisable for the Company’s Common Stock to the extent such transfer is not otherwise prohibited by this Agreement, either during Recipient’s lifetime or on death by will or intestacy to Recipient’s immediate family or to a trust the beneficiaries of which are exclusively Recipient and/or a member or members of Recipient’s immediate family; provided, however, that prior to any such transfer, each transferee shall execute an agreement pursuant to which each transferee shall agree to receive and hold such securities subject to the provisions of this Section 10.  For the purposes of this paragraph, the term “immediate family” shall mean spouse, lineal descendant, father, mother, brother or sister of the transferor; or
 
(ii)   making a transfer of any Common Stock that was listed on a national stock exchange, actively traded over-the-counter or traded on the NASDAQ Global Market at the time it was acquired by Recipient or was acquired by Recipient pursuant to Rule 144A of the Act, including any shares acquired in any public offering by the Company.
 
(e)   No Amendment Without Consent of Lead Underwriter .  During the period from identification as a Lead Underwriter in connection with any public offering of the Company’s Common Stock until the earlier of (i) the expiration of the market stand-off period specified in Section 10(a) hereof in connection with such offering or (ii) the abandonment of such offering by the Company and the Lead Underwriter, the provisions of this Section 10 may not be amended or waived except with the consent of the Lead Underwriter.
 
11.   Governing Law .  This agreement is to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the parties.
 
12.   Notice .  Any notice required to be given under the terms of this Agreement shall be addressed to the Company in care of its Secretary at the office of the Company at 632 Broadway, Suite 201, New York, NY 10012, and any notice to be given to Recipient shall be addressed to him or her at the address given by Recipient beneath his or her signature to this Agreement, or such other address as either party to this Agreement may hereafter designate in writing to the other.  Any such notice shall be deemed to have been duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, registered or certified and deposited (postage or registration or certification fee prepaid) in a post office or branch post office regularly maintained by the United States.
 

 
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13.   Successors .  This Agreement shall be binding upon and inure to the benefit of any successor or successors of the Company.  Where the context permits, “Recipient” as used in this Agreement shall include Recipient’s executor, administrator or other legal representative or the person or persons to whom Recipient’s rights pass by will or the applicable laws of descent and distribution.
 
14.   Spousal Consent .  Recipient shall cause his or her spouse to execute a Consent of Spouse in substantially the form of that attached hereto as Exhibit C concurrently with the execution of this Agreement or, if later, at the time Recipient becomes married.
 
[ Remainder of Page Left Intentionally Blank ]
 

 
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IN WITNESS WHEREOF, the parties hereto have duly executed this Restricted Stock Purchase Agreement as of the date first above written.
 

 
THE COMPANY:

Twinlab Consolidation Corporation


By:        /S/ Rich Neuwirth                 
Name:  Rich Neuwirth
Title:    Secretary and Chief Legal Officer

Address:        632 Broadway, Suite 201
New York, NY 10012

RECIPIENT:


By:        /S/ Thomas Tolworthy             
Name:  Thomas Tolworthy

Address:        4 Avenue at Port Imperial
Apt. 4205
West New York, New Jersey 07093

 

 
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EXHIBIT A
 

 
ASSIGNMENT SEPARATE FROM CERTIFICATE
 
 
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Purchase Agreement between the undersigned (“ Recipient ”) and Twinlab Consolidation Corporation dated November 4, 2013 (the “ Agreement ”), Recipient hereby sells, assigns and transfers unto _______________ _________________ (_________) shares of Common Stock of Twinlab Consolidation Corporation standing in Recipient’s name on the books of said corporation represented by Certificate No. ____ herewith and does hereby irrevocably constitute and appoint ______________________________ to transfer said stock on the books of the within-named corporation with full power of substitution in the premises.  THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
 

 

 
Dated:  ________________, 20___                                                                By:                                                        
 

 
Instruction:  Please do not fill in any blanks other than the signature line.  The purpose of this assignment is to enable the Company to exercise its repurchase option set forth in the Agreement without requiring additional signatures on the part of Recipient.
 

 
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EXHIBIT B
 

 
ELECTION UNDER SECTION 83(B) OF THE
 
INTERNAL REVENUE CODE OF 1986, AS AMENDED
 
 
The undersigned taxpayer hereby elects, pursuant to the Internal Revenue Code, as amended, to include in gross income for 2013 the amount of any compensation taxable in connection with the taxpayer’s receipt of the property described below:
 
1.   The name, address, taxpayer identification number and taxable year of the undersigned are:
 
TAXPAYER’S NAME:  Thomas Tolworthy
 
TAXPAYER’S SOCIAL SECURITY NO.:   _________________________
 
TAXABLE YEAR:  Calendar Year 2013
 
ADDRESS:                      4 Avenue at Port Imperial, Apt. 4205
West New York, New Jersey 07093
 
2.   The property which is the subject of this election is:  104,000,000 shares of Common Stock (the “ Shares ”) of Twinlab Consolidation Corporation, a Delaware corporation (the “ Company ”).
 
3.   The Shares were transferred to the undersigned on November 4, 2013.
 
4.   The Shares are subject to the following restriction:  Upon a termination of the undersigned’s employment with the Company, the Company has the right to repurchase unvested Shares, which right of repurchase lapses over time.
 
5.   The fair market value of the property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) is:  $0.00004332 per Share x 104,000,000 Shares = $4,504.95.
 
6.   The undersigned contributed $0.0001 per Share x 104,000,000 Shares for the Shares transferred or a total of $10,400.00.  The undersigned has submitted a copy of this statement to the Company.
 
The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned’s receipt of the above-described property.  The undersigned taxpayer is the person performing the services in connection with the transfer of said property.
 
The undersigned will file this election with the Internal Revenue Service office in which he or she files his or her annual income tax return not later than 30 days after the date of transfer of the property.  A copy of the election also will be furnished to the person for whom the services were performed.  Additionally, the undersigned will include a copy of the election with his or her income tax return for the taxable year in which property is transferred.  The undersigned understands that this election will also be effective as an election under applicable state law.
 

 
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The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner of the Internal Revenue Service.
 

 

 
DATED: __________________, 2013                                                                      By: ___________________________________                                                           
 
              Name:  Thomas Tolworthy
 


 

 

 
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EXHIBIT C
 

 
CONSENT OF SPOUSE
 
 
I, _____________________, spouse of Thomas Tolworthy, have read and approved the foregoing Agreement.  In consideration of the right of my spouse to purchase shares of Twinlab Consolidation Corporation as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement insofar as I may have any rights under the community property law or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.
 


Dated:  ____________, 2013                                                                By:                                                                

 
 
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EXHIBIT 21.1
 
Subsidiaries of the Company
 

 
Twinlab Consolidation Corporation, Inc., a Delaware corporation
 
Twinlab Holdings, Inc. (formerly known as Idea Sphere, Inc.), a Michigan corporation
 
ISI Brands, Inc., a Michigan corporation
 
Twinlab Corporation, a Delaware corporation