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

FORM 10-K

☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to _________.
 
Commission file number: 333-60608
 
JANEL CORPORATION
(Exact name of registrant as specified in its charter)

Nevada
 
86-1005291
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
80 Eighth Avenue
New York, New York
 
 10011
(Address of principal executive offices)
 
(Zip Code)
     
Registrant’s telephone number, including area code
 
(212) 373-5895

Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
None
None
None

Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock, $0.001 par value
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Act. Yes ☐ No ☒
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
 
Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☐ Smaller Reporting Company ☒
 
Emerging Growth Company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by checkmark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
 
The aggregate market value of the registrant’s common stock, $0.001 par value (“Common Stock”), held by non-affiliates of the registrant based on the closing sales price of the Common Stock on the Pink tier of the OTC market on March 31, 2021, was $4,345,723.
 
The number of shares of the registrant’s Common Stock outstanding as of December 23, 2021 was 959,707.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
None.


TABLE OF CONTENTS

     
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ITEM 1B
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ITEM 7A
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward – looking statements may generally be identified by the use of the words “may,” “will,” “intends,” “plans,” projects,” “believes,” “should,” “expects,” “predicts,” “anticipates,” “estimates,” and similar expressions or the negative of these terms or other comparable terminology. These statements are necessarily estimates reflecting management’s best judgment based upon current information and involve a number of risks, uncertainties and assumptions. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and readers are advised that various factors, including, but not limited to, those set forth elsewhere in this Report, could affect our financial performance and could cause our actual results for future periods to differ materially from those anticipated or projected. While it is impossible to identify all such factors, such factors include, but are not limited to, the impact of the coronavirus on the worldwide economic conditions and on our businesses, our strategy of expanding our business through acquisitions of other businesses; the risk that we may fail to realize the expected benefits or strategic objectives of any acquisition, or that we spend resources exploring acquisitions that are not consummated; risks associated with litigation, including contingent auto liability and insurance coverage; indemnification claims and other unforeseen claims and liabilities that may arise from an acquisition; economic and other conditions in the markets in which we operate; the risk that we may not have sufficient working capital to continue operations; instability in the financial markets; our dependence on key employees; impacts from climate change, including the increased focus by third-parties on sustainability issues and our ability to comply therewith; competition from parties who sell their businesses to us and from professionals who cease working for us; terrorist attacks and other acts of violence or war; security breaches or cybersecurity attacks; our compliance with applicable privacy, security and data laws; competition faced by our logistics services freight carriers with greater financial resources and from companies that operate in areas in which we plan to expand; our dependence on the availability of cargo space from third parties; recessions and other economic developments that reduce freight volumes; other events affecting the volume of international trade and international operations; risks arising from our logistics services business’ ability to manage staffing needs; competition faced in the freight forwarding, freight brokerage, logistics and supply chain management industry; industry consolidation and our ability to gain sufficient market presence with respect to our logistics services business; risks arising from our ability to comply with governmental permit and licensing requirements or statutory and regulatory requirements; seasonal trends; competition faced by our manufacturing (Indco) business from competitors with greater financial resources; Indco’s dependence on individual purchase orders to generate revenue; any decrease in the availability, increase in the cost or supply shortages, of raw materials used by Indco; Indco’s ability to obtain and retain skilled technical personnel; risks associated with product liability claims due to alleged defects in Indco’s products; risks arising from the environmental, health and safety regulations applicable to Indco; the reliance of our Indco and life sciences businesses on a single location to manufacture their products; the ability of our life sciences business to compete effectively; the ability of our life sciences business to introduce new products in a timely manner; product or other liabilities associated with the manufacture and sale of new products and services; changes in governmental regulations applicable to our life sciences business; the ability of our life sciences business to continually produce products that meet high quality standards such as purity, reproducibility and/or absence of cross-reactivity; the controlling influence exerted by our officers and directors and one of our stockholders; our inability to issue dividends in the foreseeable future; and risks related to ownership of our common stock, including volatility and the lack of a guaranteed continued public trading market for our common stock, the impact of COVID-19 on our operations and financial results; and such other factors that may be identified from time to time in our Securities and Exchange Commission (“SEC”) filings including those set forth under the caption “Risk Factors” in Part 1 Item 1A of this report. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of these risks. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected. You should not place undue reliance on any of our forward-looking statements which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

1
PART I
 
ITEM 1
BUSINESS
 
Our Business
 
Janel Corporation (“Janel,” the “Company” or the “Registrant”) is a holding company with subsidiaries in three business segments: Logistics (previously known as Global Logistics Services), Manufacturing and Life Sciences. In the fourth quarter of 2021, our former Global Logistics Services segment was renamed “Logistics”; this change related to the name only and had no impact on the Company’s previously reported historical financial position, results of operations, cash flow or segment level results. The Company strives to create shareholder value primarily through three strategic priorities: supporting its businesses’ efforts to make investments and to build long-term profits; allocating Janel capital at high risk-adjusted rates of return; and attracting and retaining exceptional talent.
 
Management at the holding company focuses on significant capital allocation decisions, corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
 
Janel was incorporated on August 31, 2000 and is domiciled in the state of Nevada. Its corporate headquarters are located in New York, New York.
 
Janel and its consolidated subsidiaries employed 317 full-time people, as of September 30, 2021, in the United States. None of these employees is covered by a collective bargaining agreement. Janel and its subsidiaries have experienced no work stoppages and consider relations with their employees to be good. Successful execution of our strategy is dependent on attracting, developing and retaining key employees and members of our management team. The skills, experience and industry knowledge of our employees significantly benefit our operations and performance. We continuously evaluate, modify, and enhance our internal processes and technologies to increase employee engagement, productivity, and efficiency opportunities, skills, and resources they need to be successful.

Our Business Segments
 
We have three reportable segments: Logistics, Manufacturing and Life Sciences. The following provides greater detail regarding each of these segments.
 
Logistics
 
The Company’s Logistics segment is comprised of several wholly-owned subsidiaries.  The Company’s Logistics segment is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via air, ocean and land-based carriers, customs brokerage services, warehousing and distribution services, trucking, and other value-added logistics services.  In addition to these revenue streams, the Company earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges.

On September 21, 2021, the Company completed a business combination whereby it acquired all of the membership interests of Expedited Logistics and Freight Services, LLC. (“ELFS”) and related subsidiaries which we include in our Logistics segment.

On December 31, 2020, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc., (“W.R. Zanes”) which we include in our Logistics segment.

On July 23, 2020, the Company acquired all of the outstanding common stock of Atlantic Customs Brokers, Inc., (“ACB”) which we include in our Logistics segment.
 
Manufacturing
 
The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”). Indco is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders.

2
Life Sciences
 
The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies on an original equipment manufacturer (OEM) basis.

On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC. (“ICT”) which we include in our Life Sciences segment.

Logistics
 
The Company’s Logistics segment helps clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include customs entry filing, arrangement of freight forwarding by air, ocean and ground, warehousing, cargo insurance procurement, logistics planning, product repackaging, online shipment tracking and hazardous material warehousing and distribution.
 
Our Logistics segment earns flat fees for certain services, such as customs entry filing. For brokered services, Logistics earns the difference between the rate charged by a service provider and the rate Logistics charges the customer for the provider’s service. Its freight consolidation activities, in addition to on-going volume-based relationships with providers, allows Logistics to command preferred service rates that can be passed on profitably to the customer.
 
As a non-asset-based logistics provider, we own only a minimal amount of equipment. We generally expect to neither own nor operate any material transportation assets and, consequently, arrange for transportation of our customers’ shipments via trucking companies, commercial airlines, air cargo carriers, railroads, ocean carriers and other non-asset based third-party providers. By not owning the transportation equipment used to transport the freight, which results in relatively minimal fixed operating costs, we are able to leverage our network of locations to offer competitive pricing and flexible solutions to our customers. Moreover, our balanced product offering provides us with revenue streams from multiple sources and enables us to retain customers even as they shift across various modes of transportation. We believe our low capital intensity model allows us to provide low-cost solutions to our customers, operate our business with strong cash flow characteristics, and retain significant flexibility in responding to changing industries and economic conditions.

During the fiscal year ended September 30, 2021, Logistics handled approximately 66,000 individual import and export shipments originating or terminating in countries around the world. Approximately 49% of the gross revenue from these activities related to ocean freight, 21% to air freight, 18% to trucking, 11% to custom brokerage trucking and the remainder of 1% to other.

Based upon revenue, our customers are diverse, with the largest individual customer accounting for about 6% of revenues and the top ten customers accounting for 28% of revenues during fiscal 2021.

As of September 30, 2021, our Logistics segment operated out of twenty full-service locations in the United States and maintained a network of independent agent relationships in many trading countries, giving it the ability to provide a global service to its clients.

Each office is responsible for its growth and profitability. Logistics management helps the offices as needed with efforts such as human resources, maintaining a common information technology platform and centralized accounting services. Our growth strategy includes servicing existing customers well and acquiring more of their business, hiring new people who can grow our company and adding new companies or services through acquisitions.

The logistics industry is highly fragmented, with low barriers to entry and intense competition. Our Logistics segment competes against providers ranging in size from “mom-and-pop” businesses to multi-national firms with hundreds of offices worldwide. Many of our Logistics customers utilize more than one logistics provider.

The global forwarding industry requires dealings in currencies other than the U.S. Dollar. As a result, our Logistics segment is exposed
to the inherent risks of international currency markets and governmental interference. Some countries in which the Logistics segment maintains agent relationships have currency control regulations that influence our ability to hedge foreign currency exposure. Logistics tries to manage these exposures by accelerating international currency settlements among those agents.
 
Historically, the quarterly operating results of the Logistics segment have been subject to seasonal trends. The fiscal third and fourth quarters have traditionally been the strongest, and the fiscal second quarter has traditionally been the weakest.  This pattern has been the result of, or influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions and other similar and subtle forces.
 
3
A significant portion of Logistics segment revenues are derived from customers in industries with shipping patterns tied to consumer demand and/or just-in-time production schedules. Many Logistics customers may ship a significant portion of their goods at or near the end of a quarter. Therefore, the timing of revenues is, to a large degree, affected by factors beyond its control, such as shifting consumer demand for retail goods and manufacturing production delays. We cannot accurately forecast many of these factors, nor can we estimate the relative impact of any given factor. Therefore, historical patterns experienced may not continue in the future.
 
Government Regulation
 
Interstate and international transportation of freight is highly regulated. Failure to comply with applicable state and federal regulations, or to maintain required permits or licenses, can result in substantial fines or revocation of operating permits or authorities imposed on both transportation intermediaries and their shipper customers. We cannot give assurance as to the degree or cost of future regulations on our business. Some of the regulations affecting our current and prospective operations are described below.
 
Logistics is a customs broker licensed and permitted by U.S. Customs and Border Protection (“CBP”). All U.S. customs brokers are required to maintain prescribed records and are subject to periodic audits by CBP. Logistics is a registered Ocean Transportation Intermediary (“OTI”) and is licensed as a non-vessel operating common carrier (“NVOCC”) by the Federal Maritime Commission (“FMC”). The FMC has established certain qualifications for shipping agents, including certain surety bonding requirements. We also operate as a Transportation Security Administration (“TSA”) certified Indirect Air Carrier (“IAC”), providing air freight services, subject to commercial standards set forth by the International Air Transport Association (“IATA”) and federal regulations issued by the Transportation Security Administration.
 
Air freight forwarding operations are subject to regulation, as an indirect air cargo carrier, under the Federal Aviation Act as enforced by the Federal Aviation Administration of the U.S. Department of Transportation and the Transportation Security Administration of the Department of Homeland Security. While air freight forwarders are exempted from most of the Federal Aviation Act’s requirements by the Economic Aviation Regulations, the industry is subject to ongoing regulatory and legislative developments that can impact the economics of the industry by requiring changes to operating practices or influencing the demand for, and the costs of, providing services to customers.
 
Surface freight forwarding operations are subject to various state and federal statutes and are regulated by the Federal Motor Carrier Safety Administration of the U.S. Department of Transportation and, to a very limited extent, the Surface Transportation Board. These federal agencies have broad investigatory and regulatory powers, including the power to issue a certificate of authority or license to engage in the business, to approve specified mergers, consolidations and acquisitions, and to regulate the delivery of some types of domestic shipments and operations within particular geographic areas.
 
The Federal Motor Carrier Safety Administration also has the authority to regulate interstate motor carrier operations, including the regulation of certain rates, charges and accounting systems, to require periodic financial reporting, and to regulate insurance, driver qualifications, operation of motor vehicles, parts and accessories for motor vehicle equipment, hours of service of drivers, inspection, repair, maintenance standards and other safety related matters. The federal laws governing interstate motor carriers have both direct and indirect application to the Company. The breadth and scope of the federal regulations may affect our operations and the motor carriers that are used in the provisioning of the transportation services. In certain locations, state or local permits or registrations may also be required to provide or obtain intrastate motor carrier services.

Risk Management and Insurance
 
As a property freight broker, we are not legally liable for loss or damage to our customers’ cargo. In our customer contracts, we may agree to assume cargo liability up to a stated maximum.

We typically do not assume cargo liability above minimum industry standards in our international freight forwarding, ocean transportation or air freight businesses on international or domestic air shipments. With regards to international freight forwarding, ocean transportation and international domestic air freight shipments, we offer our customers the option to purchase shippers’ insurance coverage to insure goods in transit. When we agree to store goods for our customers for longer terms, we provide limited warehouseman’s coverage to our customers and typically contract for warehousing services from companies that provide us the same degree of coverage.

We maintain a broad cargo liability insurance policy to help protect us against catastrophic losses that may not be recovered from the responsible contracted carrier. We also carry various liability insurance policies, including automobile and general liability, with an umbrella policy.
 
4
Manufacturing
 
The Company’s Manufacturing segment is comprised of Indco, Inc. (“Indco”) which is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s headquarters and manufacturing operations are located in a single owned facility in New Albany, Indiana.
 
Indco provides solutions for the mixing needs of customers operating in diverse industries, including chemicals, inks, paints, construction, plastics, adhesives, cosmetics, food and pharmaceuticals. Solutions include standard product configurations, both manufactured and distributed, available for order from Indco’s website and its print catalog, mailed quarterly. In addition, Indco manufactures custom-designed mixing solutions that Indco helps specify, design, machine, assemble and distribute. During the fiscal year ended September 30, 2021, Indco made approximately 4,600 individual shipments to customers. In fiscal 2021, approximately 87% of Indco’s revenue came from manufacturing activity. The remainder of its revenue came from non-manufactured product distribution activity. Indco’s revenue generally is level throughout the year with little seasonality.
 
Indco relies on a variety of providers of raw materials, mechanical components and other services in order to manufacture its products. These providers include national and multi- national suppliers for common industrial components such as motors, gear drives, motor controls and many other standard hardware products. Additionally, regional and local suppliers provide Indco-specific parts such as castings and fabricated metal components. Raw materials, primarily steel bar, plate and shafts, are sourced from domestic steel mills through local distributors. Alternative or substantially similar options are available from suppliers other than those Indco currently employs. While custom cast or fabricated parts are at greater risk for supply interruption, alternative equivalent suppliers are typically available.
 
Our growth strategy within the industrial mixer business is to expand our reputation as a high-quality manufacturer of often customized products to meet specialized mixing needs. Indco’s products are often utilized in mission-critical applications, making our high quality and strong service offering highly valuable to our customers. Our growth strategy includes keeping our direct relationship with the customer relevant through our web presence, introducing new relevant products and expanding our reach into new and existing markets with sales efforts and partners.
 
The industrial mixer manufacturing industry is highly fragmented with low barriers to entry. Indco competes with companies of all sizes based on a combination of pricing, lead-times, service, quality and ability to reach customers through internet presence and catalog circulation.
 
Government regulation directly governing Indco’s industrial mixer product line is minimal. Changing energy efficiency standards, however, as mandated by the Department of Energy, can, over time, affect electric motor manufacturers whose products are used by Indco. Historically, these changes have resulted in only minor changes to our product line.

Indco is subject to U.S. federal, state and local provisions regulating the discharge of materials into the environment or otherwise for the protection of the environment. Although current operations have not been significantly affected by compliance with these environmental laws, the Company cannot predict what impact future environmental regulations may have on Indco. Indco does not anticipate making any material capital expenditures for environmental control purposes during the remainder of the current or succeeding fiscal years.
 
Life Sciences
 
The Company’s wholly-owned Life Sciences segment manufactures and distributes high-quality antibodies monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provide antibody manufacturing for academic and industry research scientists.

Our Life Sciences segment also produces products for life science companies on an original equipment manufacturer (OEM) basis. Through a combined portfolio of approximately 2,000 products and a range of custom services, the Life Sciences segment provides the scientific community with high quality tools to support critical research efforts.
 
Our Life Sciences segment is based in Davis, California on an owned 40-acre facility and two other leased locations in the U.S. Our growth strategy is to place high-quality products in the hands of more researchers to accelerate scientific discovery.
 
5
Our growth strategies include:
 
•
Product innovation: By working with key researchers and scientific organizations, we seek to develop new products to enhance the range of tools available and thereby expand the capabilities of life science researchers.
 
•
Operational improvement: We continue to enhance our operational designs and processes to be more efficient, which supports higher profitability and enables us to devote more resources to investments in growth and innovation.
 
•
Attract and retain exceptional talent: High quality scientists enable our top-quality products and services to be offered which are key to our reputation in the market place.

•
Acquisitions and investments: We intend to grow by acquiring new businesses with high quality reputations that will benefit from our combined innovation and operational strength.
 
•
Customers and distribution methods: We sell our biotechnology products directly to customers, principally direct through our website or distributors. Some of our customers utilize our scientific expertise and production capabilities and purchase our products and re-label them. Our reputation for quality products is critical to our ability to attract new customers for both our products and services.
 
•
Competitors: A number of companies supply protein-related research and diagnostic reagents. Customers choose their products based upon product quality, reputation and price. We believe a number of our products have long-standing reputations and that our portfolio overall is well-regarded, especially amongst the academic, diagnostic and pharmaceutical research community.
 
•
Manufacturing: Our antibodies are produced using a variety of technologies including traditional animal immunization and hybridoma technology as well as recombinant antibody techniques. We are not dependent on key or sole source suppliers for most of our products as we typically have several outside sources for all critical raw materials necessary for the manufacture of our products.
 
The majority of our life science products are shipped within two days of receipt of the customers’ orders. Consequently, we typically do not maintain significant backlog of orders for our Life Sciences segment products.

Our Life Sciences segment is subject to regulation. Antibodies maintains International Organization of Standardization certification for medical devices to support our manufacturing operation. We also comply with regulations related to the United States Department of Agriculture, National Institutes of Health, Office of Laboratory Animal Welfare and the United States Food and Drug Administration. Many of our customers are regulated and must verify our compliance with their standards throughout the supply chain, which requires us to maintain careful records. The failure to comply with these regulations may impair our ability to compete in the marketplace.
 
Additional information with respect to Janel’s businesses
 
Our principal executive offices and corporate headquarters are located at 80 Eighth Avenue, New York, New York 10011, and our telephone number is (212) 373-5895.
 
Janel maintains a website (http://www.janelcorp.com) where certain corporate governance documents and links to its subsidiaries’ websites can be found. Janel’s periodic reports filed with the SEC can be accessed at the SEC’s website (http://www.sec.gov) and indirectly through Janel’s website (http://www.janelcorp.com). The information contained or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K.

 ITEM 1A.
RISK FACTORS
 
The following risk factors should be read carefully in connection with an evaluation of the Company’s business and any forward-looking statements made in this Annual Report on Form 10-K and elsewhere. See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” set forth above. Any of the following risks or others discussed in this Annual Report on Form 10-K or the Company’s other SEC filings could materially adversely affect the Company’s business, operating results and financial condition. An investment in Janel’s common stock is subject to risks inherent to the Company’s business. The material risks and uncertainties that management believes affect Janel are described below. Additional risks and uncertainties that management is not aware of or focused on or that management currently deems immaterial may also impair the Company’s business operations.

6
 Risk Factors Related To The COVID-19 Pandemic
 
The coronavirus pandemic has significantly impacted worldwide economic conditions and has had, and may likely to continue to have, an adverse effect on our business operations, results of operations, cash flows and financial position.

The COVID-19 pandemic continues to have widespread implications and while we see improvements in the broader economy, it is difficult to predict how COVID-19 will impact the overall economy in the future. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it has and will continue to impact our customers, suppliers, employees and other business partners. Many countries have begun the process of vaccinating their residents against COVID-19. However, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may impact the economy as well as our operations in the future. Our results for the fiscal year 2021 showed encouraging recovery as we navigate through this unique environment.
 
While we are seeing positive results despite the current COVID-19 environment, there remains uncertainty regarding how COVID-19 will impact the Company’s results in the future.
 
The effects of the COVID-19 pandemic may last for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 outbreak has subsided. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; our ability to maintain sufficient qualified personnel due to employee illness, quarantine, willingness to return to work, vaccine and/or testing mandates, face-coverings and other safety requirements, general scarcity of employees, or travel and other restrictions; current global supply chain disruptions caused by the COVID-19 pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers’ ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.

Risk Factors Related To Janel’s Growth Strategy
 
Janel’s strategy of expanding its business through acquisitions of other businesses presents special risks.
 
Janel expects to grow its businesses in part by completing acquisitions. Janel will either acquire businesses within its existing segments, or expand its portfolio into new segments. In either case:
 
•
Janel’s financial condition may not be sufficient to support the funding needs of an expansion program;
 
•
Janel may not be able to successfully identify suitable investment opportunities;

•
acquisitions that Janel undertakes may not be successfully consummated or enhance profitability; or
 
•
expansion opportunities may not be available to Janel upon reasonable terms.

There may be a limited number of operating companies available for acquisition that Janel deems to be desirable targets. Additionally, in recent years, the number of special purpose acquisition companies (“SPACs”) that have been formed has increased substantially. Many potential targets for SPACs have already entered into an initial business combination, and there are still SPACs seeking targets for their initial business combination, as well as many SPACs currently in registration with the SEC.

As a result, at times, fewer attractive targets may be available, and it may require more time, more effort and more resources to identify a suitable target and to consummate an acquisition. Janel may compete with entities whose financial resources, technical expertise and managerial capabilities are significantly greater than Janel’s. Therefore, Janel may be at a competitive disadvantage in negotiating and executing possible acquisitions. Even if Janel is successful in a competitive bidding process for an acquisition, this competition may affect the terms of completed transactions, and, as a result, Janel may pay more or receive less favorable terms than it expected for potential acquisitions.
 
7
In addition, even if Janel is able to successfully compete with these entities, it expects future acquisitions to encounter risks similar to those that past acquisitions have encountered, such as:

•
difficulty in assimilating/integrating the operations and personnel of the acquired businesses;
 
•
potential disruption of Janel’s or the target’s ongoing business;
 
•
inability to realize the projected operational and financial benefits from the acquisition or to maximize financial and strategic benefits through the incorporation of acquired personnel and clients;
 
•
difficulty maintaining uniform standards, controls, procedures and policies;
 
•
impairment of relationships with employees and clients resulting from integration of the newly acquired company;
 
•
strain on managerial and operational resources as management tries to oversee larger operations;

•
significantly increased need for working capital to operate the acquired companies;
 
•
exposure to unforeseen liabilities of acquired companies; and

•
need to incur additional indebtedness, issue stock (which may have rights superior to the rights of Janel’s common stock and which may have a dilutive effect on Janel’s stockholders), or use cash in order to complete the acquisition.
 
Furthermore, management’s attention may be diverted by acquisition, investment, transition or integration activities. Janel may be required to dedicate additional management and other resources to newly acquired businesses.

Additionally, should Janel acquire a new line of business in which it has no operating history, the success of such new business cannot be assured. If an acquired entity is not efficiently or completely integrated, then Janel’s business, financial condition and operating results could be materially adversely affected.
 
Janel might fail to realize the expected benefits or strategic objectives of any acquisition it undertakes, or it may spend resources exploring acquisitions that are not consummated.
 
Due to its acquisition strategy, Janel faces a number of risks that could adversely affect Janel’s business, financial condition and operating results. Janel might not achieve its expected return on investment or may lose money. Janel may be adversely impacted by liabilities that it assumes from an acquired business, including from that business’s known and unknown obligations, intellectual property or other assets, terminated employees, current or former clients or other third parties.

In addition, Janel may fail to identify or adequately assess the magnitude of certain liabilities, shortcomings or other circumstances prior to acquiring, investing in or partnering with a company, including potential exposure to regulatory sanctions or liabilities resulting from an acquired business’s previous activities, internal controls and security environment. If any of these circumstances occurs, they could result in unexpected legal or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes or other adverse effects on Janel’s business.
 
Litigation, indemnification claims and other unforeseen claims and liabilities may arise from the acquisition or operation of acquired businesses.
 
Janel may face litigation or other claims as a result of certain terms and conditions of our acquisition agreements, such as earn-out payments or closing net asset adjustments. Alternatively, shareholder litigation may arise as a result of proposed acquisitions. If Janel is unable to complete the number and kind of acquisitions for which it plans, or if Janel is inefficient or unsuccessful at integrating any acquired businesses into its operations, Janel may not be able to achieve its planned rates of growth or improve its market share, profitability or competitive position.

Risk Factors Related To Janel’s Business And Industries
(in thousands except per share data)
 
Economic and other conditions in the markets in which Janel operates can affect demand for services and the Company’s results of operations.
 
Janel’s future operating results are dependent upon the economic environments of the markets in which it operates. Demand for services could be adversely affected by economic conditions in the industries of Janel’s customers.

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Janel expects the demand for its services (and, consequently, results of operations) to continue to be sensitive to domestic and, increasingly, global economic conditions and other factors beyond Janel’s control.

Janel may not have sufficient working capital to continue operations.
 
Janel’s cash needs are currently met by commercial bank credit facilities, cash on hand and cash generated from current operations. Actual short- and long-term working capital needs will depend upon numerous factors, including operating results, the availability of a revolving line of credit, competition, and the cost associated with growing, either internally or through acquisition, none of which can be predicted with certainty. If results of operations and availability under Janel’s bank lines of credit are insufficient to meet cash needs, Janel will be required to obtain additional investment capital or debt funding to continue operations.
 
Our substantial debt obligations could restrict our operations and financial condition. Additionally, our ability to generate cash to make payments on our indebtedness depends on many factors beyond our control.
 
As of September 30, 2021, we had approximately $41,324 of short-term borrowings and long-term debt. We may also incur additional indebtedness in the future.

Our debt service obligations will require us to use a portion of our operating cash flow to pay interest and principal on indebtedness rather than for other corporate purposes, including funding future expansion of our business and ongoing capital expenditures, which could impede our growth. Our substantial indebtedness could have other adverse consequences, including:
 
•
making it more difficult for us to satisfy our financial obligations;

•
increasing our vulnerability to adverse economic, regulatory, and industry conditions, and placing us at a disadvantage compared to our competitors that are less leveraged;

•
limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
 
•
limiting our ability to borrow additional funds for working capital, capital expenditures, acquisitions, and general corporate or other purposes; and
 
•
exposing us to greater interest rate risk, including the risk to variable borrowings of a rate increase and the risk to fixed borrowings of a rate decrease.
 
Our ability to make payments on our indebtedness will depend on our ability to generate cash in the future. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory, and other factors, many of which are beyond our control.
 
Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us in an amount sufficient to enable us to pay our indebtedness when scheduled payments are due or to fund other liquidity needs. In these circumstances, we may need to refinance all or a portion of our indebtedness on or before maturity. Any refinancing of our debt could be at higher interest rates and may require make-whole payments and compliance with more onerous covenants, which could further restrict our business operations. Our ability to refinance our indebtedness or obtain additional financing would depend on, among other things, our financial condition at the time, restriction in the agreements governing our indebtedness, and the condition of the financial markets and the industries in which we operate. As a result, we may not be able to refinance any of our indebtedness on commercially reasonable terms or at all. Without this financing, we may have to seek additional equity or debt financing or restructure our debt, which could harm our long-term business prospects. Our failure to comply with the terms of any existing or future indebtedness could result in an event of default which, if not cured or waived, could result in the acceleration of the payment of all of our debt.
 
Instability in the financial markets may adversely affect our business.
 
Instability in the global financial markets could reduce availability of credit to our business. Although we currently have a revolving credit agreement with Santander Bank, N.A. in place until September 21, 2026 and another with First Merchants Bank in place until July 1, 2025, tightening credit markets could make it more difficult for us to access funds, refinance our existing indebtedness, enter into agreements for new indebtedness, or obtain funding through the issuance of the Company’s securities. In 2017, the U.K.’s Financial Conduct Authority, which regulates LIBOR, announced its intention to phase out LIBOR by the end of 2021. The deadline has been mostly extended and most U.S. dollar-denominated LIBOR maturity tenors will continue to be published under June 30, 2023.

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We may need to renegotiate our revolving credit facility, as well as Indco’s credit agreement with First Merchants Bank. This could have an adverse effect on our financing costs by increasing the cost of our variable rate indebtedness.

Janel’s businesses are dependent upon technically skilled employees.
 
Janel believes that the success of its business is highly dependent on the continuing efforts of certain technically skilled employees, particularly experienced engineers in our Manufacturing segment and scientists in our Life Sciences segment. Only some of our employees are subject to employment agreements. The competition for experienced engineers in the Manufacturing segment and scientists in our Life Sciences business is intense. The loss of the services of technical skilled employees could have a material adverse effect on Janel’s business.

Climate change and increased focus by governmental and non-governmental organizations and customers on sustainability issues, including those related to climate change, may adversely affect our business and financial results.
 
Scientists have concluded that increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods, wildfires and other climatic events. Our Life Sciences business operates out of three locations and our Manufacturing business in a single location.  Increased frequency of extreme weather could cause increased incidence of disruption to the production and distribution of our products at these locations. Increasing natural disasters in connection with climate change could also be a direct threat to our third-party vendors, service providers or other stakeholders, including disruptions on supply chains or information technology or other necessary services for our Company.
 
Federal, state, and local governments, as well as some of our customers, are beginning to respond to climate change issues. This increased focus on sustainability may result in new legislation or regulations and customer requirements that could negatively affect us as we may incur additional costs or be required to make changes to our operations in order to comply with any new regulations or customer requirements. Legislation or regulations that potentially impose restrictions, caps, taxes, or other controls on emissions of greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels such as those used in the Company’s trucks in our Logistics segment, could adversely affect our operations and financial results.
 
More specifically, legislative, or regulatory actions related to climate change could adversely impact the Company by increasing our Logistics business fuel costs and reducing fuel efficiency and could result in the creation of substantial additional capital expenditures and operating costs in the form of taxes, emissions allowances, or required equipment upgrades. Any of these factors could impair our operating efficiency and productivity and result in higher operating costs. In addition, revenues could decrease if we are unable to meet regulatory or customer sustainability requirements. These additional costs, changes in operations, or loss of revenues could have a material adverse effect on our business, financial condition, and results of operations.
 
Increases in shipping costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and factors such as wage rate increases and inflation can have a material adverse effect on our business, financial condition, and operating results.
 
We may experience supply delays and shortages due to a variety of macroeconomic factors, including disruptions on the global supply chain as a result of the ongoing COVID-19 pandemic, especially with respect to goods from China. The ongoing COVID-19 pandemic has resulted in significant disruption to the operations of certain suppliers in China and the related transportation of their goods to the United States that are parts of our global supply chain. We have been able to make alternative delivery arrangements for limited quantities of goods, at increased cost.
 
While we have not yet experienced material shortages in supply as a result of these disruptions and our alternative delivery arrangements, if they were to be prolonged or expanded in scope, there could be resulting supply shortages that could impact our ability to manufacture and to deliver our products to our customers. Accordingly, such supply shortages and delivery limitations could have and material adverse effect on our business, financial condition, results of operations, and cash flows.
 
Furthermore, increases in compensation, wage pressure, and other expenses for our employees, may adversely affect our profitability. These cost increases may be the result of inflationary pressures that could further reduce our sales or profitability. Increases in other operating costs, including changes in energy prices and lease and utility costs, may increase our cost of products sold or selling, general, and administrative expenses. Our competitive price model and pricing pressures in the industry may inhibit our ability to reflect these increased costs in the prices of our products, in which case such increased costs could have a material adverse effect on our business, financial condition, and results of operations.

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Janel may face competition from parties who sell their businesses to Janel and from professionals who cease working for Janel.
 
While we typically enter into non-competition and non-solicitation agreements with parties that sell their businesses to us, one or more of the former owners of an acquired business who cease working for Janel or persons who leave Janel’s employment may compete with Janel or solicit Janel’s employees or clients in the future.

Even if ultimately resolved in Janel’s favor, any litigation associated with enforcing non-competition or non-solicitation agreements could be time consuming, costly and distract management’s focus from Janel’s business. Moreover, states and foreign jurisdictions may interpret restrictions on competition narrowly and in favor of employees.

Therefore, certain restrictions on competition or solicitation may be unenforceable. In addition, Janel may decide not to pursue legal remedies if it determines that the costs or other factors outweigh the benefits of any possible legal recourse or if the likelihood of success does not justify the costs of pursuing a legal remedy. Such persons, because they have worked for Janel or an acquired business, may be able to compete more effectively with Janel and may be more successful in soliciting its employees and clients than unaffiliated third parties.
 
Terrorist attacks and other acts of violence or war may affect any market on which the Company’s shares trade, the markets in which the Company’s subsidiaries operate, and the Company’s business operations and profitability.
 
Terrorist acts or acts of war or armed conflict could negatively affect Janel’s business operations. Any of these acts could result in increased volatility in, or damage to, the United States and worldwide financial markets and economy, and, in particular, could lead to increased regulatory requirements with respect to the security and safety of freight shipments and transportation. Acts of terrorism or armed conflict, and the uncertainty caused by such conflicts, could cause a reduction in demand for Janel’s businesses. In particular, this would have a corresponding negative effect on Janel’s Logistics business.
 
Security breaches or cybersecurity attacks could adversely affect Janel’s ability to operate, could result in personal information being misappropriated, and may cause Janel to be held liable or suffer harm to its reputation.
 
We are dependent on information technology systems and infrastructures to carry out important operational activities and to maintain our business records. In addition, we rely on the systems of third parties. As part of our normal business operations, we connect and store certain personal identifying and confidential information relating to our customers, vendors, employees and suppliers. External and internal risks, such as malware, insecure coding, “Acts of God,” data leakage and human error pose a direct threat to our information technology systems and operations.

Our third parties and we may be subject to cybersecurity attacks and other intentional hacking. Any failure to identify and address such defects or errors or prevent a cyber-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to customers or others, diversion of resources, injury to our reputation and increased service and maintenance costs. Addressing such issues could prove to be impossible or very costly and responding to resulting claims or liability could similarly involve substantial cost.
 
In addition, our insurance coverage and/or indemnification arrangements that we enter into, if any, may not be adequate to cover all of the costs related to cybersecurity attacks or disruptions resulting from such events. We must also rely on the safeguards put in place by customers, suppliers, vendors or other third parties to minimize the impact of cyber threats, other security threats or business disruptions. These third parties may have varying levels of cybersecurity expertise and safeguards. In the event of a breach affecting these third parties, our business and financial results could suffer materially. With respect to our commercial arrangements with these third parties, we have processes designed to require that the third parties and their employees and agents agree to maintain certain standards for the storage, protection and transfer of confidential, personal and proprietary information.

While, to date, we have not had a significant cyber-attack or breach that has had a material impact on our business or results of operations, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a third party’s employee or agent, the breakdown of a third party’s data protection processes or a cyber-attack on a third party’s information network and systems.

Acquired companies will need to be integrated with our information technology systems, which may cause additional training or licensing cost, along with potential delays and disruption. In such event, our revenue, financial results and ability to operate profitably could be negatively impacted. The challenges associated with integration of our acquisitions may increase these risks.

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If we fail to comply with applicable privacy, security and data laws, regulations and standards, our business and reputation could be materially adversely affected.

As disclosed above, we connect and store certain personal identifying and confidential information relating to our customers, vendors, employees and supplier. The collection, maintenance, protection, use, transmission, disclosure and disposal of sensitive personal information are regulated at the federal, state, international and industry levels and requirements are imposed on us by contracts with clients. In some cases, such laws, rules, regulations and contractual requirements also apply to our vendors and require us to obtain written assurances of their compliance with such requirements. International laws, rules and regulations governing the use and disclosure of such information, such as the GDPR, can be more stringent than in the United States, and they vary across jurisdictions. In addition, more jurisdictions are regulating the transfer of data across borders and domestic privacy and data protection laws are generally becoming more onerous.

These laws, rules and contractual requirements are subject to change and the regulatory environment surrounding data security and privacy is increasingly demanding. Compliance with existing or new privacy, security and data laws, regulations and requirements may result in increased operating costs, and may constrain or require us to alter our business model or operations.

Our management information and financial reporting systems are spread across diverse platforms and geographies.

The growth of our business through acquisitions has resulted in our reliance on the accounting, business information, and other computer systems of these acquired entities to capture and transmit information concerning customer orders, carrier payment, payroll, and other critical business data. We continue to make progress towards migrating our various legacy operating and accounting systems to a singular Oracle- based system. As long as an acquired business remains on another information technology system, we face additional manual calculations, training costs, delays, and an increased possibility of inaccuracies in the data we use to manage our business and report our financial results. Any delay in compiling, assessing, and reporting information could adversely impact our business, our ability to timely react to changes in volumes, prices, or other trends, or to take actions to comply with financial covenants, all of which could negatively impact our stock price.

Risks related to our receipt of Paycheck Protection Program funding.
 
In response to the COVID-19 pandemic and the resulting impact on our current and future operations, we applied for a loan under the Paycheck Protection Program (the “PPP”). In April 2020 we were approved for the amount of $2,760, which we received in April 2020 and on July 23, 2020, as part of the ACB acquisition, the Company assumed a PPP loan in the amount of $135.

The PPP loan application required us to certify, among other things, that the current economic uncertainty made the PPP loan request necessary to support our ongoing operations. While we made this certification in good faith, the certification does not contain any objective criteria and is subject to interpretation. In early 2020, the Small Business Administration provided guidance that it would be unlikely that a public company with substantial market value and access to capital markets would be able to make the required certification in good faith, and such company should be prepared to demonstrate to the Small Business Administration, upon request, the basis for its certification. Further, the Secretary of the Treasury and the Small Business Administration Administrator announced that the government will conduct a full audit of all PPP loans of more than $2,000 for which the borrower applies for forgiveness. While we believe we have satisfied all eligibility requirements for the PPP loans, there is a risk that we may be deemed ineligible to have received the PPP loans or in violation of any of the laws or governmental regulations that apply to us in connection with the PPP loans. In such event, we may be required to repay the PPP loans in their entirety and we could be subject to additional penalties. The Company applied for forgiveness during the year and received forgiveness during the current fiscal year.
 
Risk Factors Related To Janel’s Logistics Business
 
Our Logistics business faces aggressive competition from freight carriers with greater financial resources and from companies that operate in areas in which our Logistics business plans to expand in the future.
 
Our Logistics business faces intense competition within the freight industry on a local, regional, national and global basis. Many of our Logistics business competitors have much larger facilities and far greater financial resources. In the freight forwarding industry, our Logistics business competes with a large and diverse group of freight forwarding concerns, commercial air and ocean carriers and a large number of locally established companies in geographic areas where our Logistics business does business or intends to do business in the future.

The loss of customers, agents or employees to competitors could adversely impact our Logistics business’ ability to maintain profitability.

In addition, the transport of freight, both domestically and internationally, is highly competitive and price sensitive, and new competitors emerge annually. Changes in the volume of freight transported, shippers’ preferences as to the timing of deliveries as a means to control shipping costs, economic and political conditions (including as a result of the COVID-19 pandemic), both in the United States and abroad, work stoppages, labor constraints (including as a result of wage inflation), U.S. and foreign laws relating to tariffs, trade restrictions, foreign investments and taxation may all have significant impact on our Logistics business overall business, growth and profitability.
 
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Our Logistics business depends on third-party carriers to transport our customers’ cargo.

Our Logistics business’s ability to serve its customers depends on the availability of air and sea cargo space, including space on passenger and cargo airlines, ocean carriers that service the transportation lanes and trucking companies that our Logistics business uses. Shortages of cargo space are most likely to develop around holidays and in especially heavy transportation lanes. In addition, available cargo space could be reduced as a result of decreases in the number of airlines or ocean carriers serving particular shipment lanes at particular times. Consequently, our ability to provide services for our customers could be adversely impacted by, among other things: shortages in available cargo capacity; changes by carriers and transportation companies in policies and practices such as scheduling, pricing, payment terms and frequency of service, increases in the cost of fuel, taxes and labor, changes in the financial stability or operating capabilities of carriers, and other factors not within our control. Reductions in airfreight or ocean freight capacity could negatively impact our yields. Material interruptions in service or stoppages in transportation, whether caused by strike, work stoppage, lock-out, slowdown or otherwise, could adversely impact our business, results of operations and financial condition.
In addition, any determination that our third-party carriers have violated laws and regulations could seriously damage our reputation and brands, resulting in diminished revenue and profit and increased operating costs.

Higher carrier prices may result in decreased gross profits.

Carriers can be expected to charge higher prices if market conditions warrant, or to cover higher operating expenses. Our gross profit and income from operations may decrease if we are unable to increase our pricing to our customers. Increased demand for truckload services and pending changes in regulations may reduce available capacity and increase carrier pricing.
 
We may be subject to claims arising from transportation of freight by the carriers with which we contract.
 
We use the services of thousands of transportation companies in connection with our transportation operations. From time to time, the drivers employed and engaged by the carriers we contract with are involved in accidents, which may result in death or serious personal injuries.
 
The resulting types and/or amounts of damages may be excluded from or exceed the amount of insurance coverage maintained by the contracted carrier. Although these drivers are not our employees and all of these drivers are employees, owner-operators, or independent contractors working for carriers, from time to time, claims may be asserted against us for their actions, or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage or may not be covered by insurance at all. A material increase in the frequency or severity of accidents, liability claims or workers’ compensation claims, or unfavorable resolutions of claims, could materially and adversely affect our operating results.
 
In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability. Our involvement in the transportation of certain goods, including but not limited to hazardous materials, could also increase our exposure in the event one of our contracted carriers is involved in an accident resulting in injuries or contamination.
 
One or more significant claims or the cost of maintaining our insurance could have an adverse effect on our results of operations.
 
We use the services of transportation companies and their drivers in connection with our transportation operations. From time to time, these drivers are, or may be, involved in accidents which may cause injuries and in which goods carried by them are lost or damaged. Such accidents usually result in equipment damage and, unfortunately, can also result in injuries or death.
 
Although these drivers are work for third-party carriers, from time-to-time claims may be asserted against us for their actions or for our actions in retaining them. Claims against us may exceed the amount of our insurance coverage, or may not be covered by insurance at all. Our involvement in the transportation of certain goods, including, but not limited to, hazardous materials, could also increase our exposure in the event of an accident resulting in injuries or contamination. The resulting types and/or amounts of damages may under any of these circumstances be excluded by or exceed the amount of our insurance coverage or the insurance coverage maintained by the contracted carrier.

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A material increase in the frequency or severity of accidents, claims for lost or damaged goods, liability claims, workers’ compensation claims, or unfavorable resolutions of any such claims could adversely affect our results of operations to the extent claims are not covered by our insurance or such losses exceed our reserves. Significant increases in insurance costs or the inability to purchase insurance as a result of these claims could also reduce our profitability and have an adverse effect on our results of operations.

The timing of the incurrence of these costs could also significantly and adversely impact our operating results compared to prior periods.

Increased insurance premium cost could have an adverse effect on our results of operations.

Insurance carriers may increase premiums for transportation companies generally. We could also experience additional increases in our insurance premiums in the future if our claims experience worsens. If our insurance or claims expense increases and we are unable to offset the increase with desired levels of insurance at reasonable rates, it could have an adverse effect on our results of operations and financial position. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have an adverse effect on our results of operations and financial position.

The motor carriers we contract with are subject to increasingly restrictive laws protecting the environment, including those relating to climate change, which could directly or indirectly have a material adverse effect on our business.

Future and existing environmental regulatory requirements could adversely affect operations and increase operating expenses, which in turn could increase our purchased transportation costs. If we are unable to pass such costs along to our customers, our business could be materially and adversely affected. Even without any new legislation or regulation, increased public concern regarding greenhouse gases emitted by transportation carriers could harm the reputations of companies operating in the transportation logistics industries and shift consumer demand toward more locally sourced products and away from our services.

A determination that owner-operators are employees, rather than independent contractors, could expose us to various liabilities and additional costs.

Federal and state legislation as well as tax and other regulatory authorities may seek to assert that independent contractors in the transportation service industry, such as our owner-operators, are employees rather than independent contractors. For example, on September 18, 2019, the state of California passed Assembly Bill 5 (AB5), which codified a standard test for determining a worker’s status as an employee or independent contractor for purposes of determining employee benefits such as paid vacation, sick leave, meals and rest breaks, and overtime, known as the ABC test. The ABC test is generally thought to lower the threshold for classifying a worker as an employee as opposed to an independent contractor. AB5 was scheduled to go into effect on January 1, 2020; however, a California Federal District judge issued a preliminary injunction enjoining California from enforcing AB5 as to motor carriers. California can appeal the decision to grant the preliminary injunction.

While new in California, versions of the ABC test have existed in a number of other states over the years and have been challenged in various courts as violating the federal government’s exclusive right to regulate motor carriers in interstate commerce. There can be no assurance that these interpretations and tax laws that consider these persons independent contractors will not change, that other federal or state legislation will not be enacted or that various authorities will not successfully assert a position that reclassifies independent contractors to be employees. If our owner-operators are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment, and tort laws, as well as our potential liability for employee benefits.

In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods. Any of the above increased costs would adversely affect our business and operating results.

Recessions and other economic developments that reduce freight volumes could have a material adverse impact on our Logistics business.
 
The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of customers like those serviced by our Logistics business, interest rate fluctuations and other economic factors beyond the control of our Logistics business.
 
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Deterioration in the economic environment subjects our Logistics business to various risks that may have a material impact on its operating results and cause it, and therefore Janel, to not reach its long-term growth goals, as a result of, for example, the following:

•
a reduction in overall freight volumes in the marketplace, reducing our Logistics business’s opportunities for growth;

•
economic difficulties encountered by some of our Logistics business customers, who may, therefore, not be able to pay our Logistics business in a timely manner or at all, or may go out of business;
 
•
economic difficulties encountered by a significant number of our Logistics business’s transportation providers, who may go out of business and, therefore, leave our Logistics business unable to secure sufficient equipment or other transportation services to meet commitments to its customers; and

•
the inability of our Logistics business to appropriately adjust its expenses to changing market demands. In addition, if a downturn in the business cycles of our Logistics business customers causes a reduction in the volume of freight shipped by those customers, its, and therefore Janel’s, operating results could be adversely affected.
 
Other events affecting the volume of international trade and international operations could adversely affect our Logistics international operations.
 
In addition to economic conditions, our Logistics business’s international supply chain services are directly related to, and dependent on, the volume of international trade, particularly trade between the United States and foreign nations. This trade, as well as our Logistics business’s international supply chain services, is influenced by many factors, including:
 
•
economic and political conditions in the United States and abroad;
 
•
major work stoppages;
 
•
exchange controls, currency conversion and fluctuations;
 
•
war, other armed conflicts and terrorism; and
 
•
U.S. and foreign laws relating to tariffs, trade restrictions, foreign investment and taxation.

The foregoing and other events beyond our Logistics business control, such as a failure of various nations to reach or adopt international trade agreements or an increase in bilateral or multilateral trade restrictions, could have a material adverse effect on our Logistics segment.
 
Our Logistics business may be unable to manage its staffing needs, which may have an adverse impact on its costs of doing business.
 
In order to respond to the high variability in our Logistics business model, it may be necessary to adjust staffing levels to changing market demands. In periods of rapid change, it is more difficult to match our Logistics business staffing levels to its business needs. Additionally, there may be labor constraints as a result of COVID-19-related vaccine mandates. In addition, our Logistics business has other primarily variable expenses that are fixed for a period of time, and it may not be able to adequately adjust them in a period of rapid change in market demand.

 Our Logistics business faces competition in the freight forwarding, freight brokerage, logistics and supply chain management industry.
 
The freight forwarding, freight brokerage, logistics and supply chain management industry is intensely competitive and is expected to remain so for the foreseeable future. Our Logistics business faces competition from a number of companies, including many that have significantly greater financial, technical and marketing resources.

Customers increasingly are turning to competitive bidding processes, in which they solicit bids from a number of competitors, including competitors that are larger than our Logistics business. Increased competition may lead to revenue reductions, reduced profit margins or a loss of market share, any one of which could harm our Logistics business. There are many factors that could impair our Logistics business’s profitability, including the following:

•
competition with other transportation services companies, some of which have a broader coverage network, a wider range of services, more fully developed information technology systems and greater capital resources than those of our Logistics business;

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•
reduction by our Logistics business competitors of their rates to gain business, especially during times of declining growth rates in the economy, which reductions may limit our Logistics business’s ability to maintain or increase rates, maintain its operating margins or maintain significant growth in its business;
 
•
shifts in the business of shippers to asset-based trucking companies that also offer brokerage services in order to secure access to those companies’ trucking capacity, particularly in times of tight industry-wide capacity;
 
•
solicitation by shippers of bids from multiple transportation providers for their shipping needs and the resulting depression of freight rates or loss of business to competitors; and
 
•
the use by our Logistics business competitors of cooperative relationships to increase their ability to address shipper needs.

The Logistics industry is consolidating, and if our Logistics business cannot gain sufficient market presence, it may not be able to compete successfully against larger companies in its industry.
 
There currently is a trend within the logistics industry towards consolidation of the niche players into larger companies that are attempting to increase global operations through the acquisition of regional and local freight forwarders, brokers and other freight logistics providers. If our Logistics business cannot gain sufficient market presence or otherwise establish a successful strategy in its industry, it may not be able to compete successfully against larger companies in its industry.
 
Failure to comply with governmental permit and licensing requirements or statutory and regulatory requirements could result in civil and criminal sanctions, fines or revocation of our Logistics business’s operating authorities, and changes in these requirements could adversely affect our Logistics business.
 
Our Logistics business’s operations are subject to various state, local, federal and foreign statutes and regulations prohibiting various activities that in many instances require permits and licenses. Failure to maintain compliance with applicable law and regulations, required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our Logistics business operating authorities.

Moreover, government deregulation efforts, “modernization” of the regulations governing customs clearance and changes in the international trade and tariff environment could require material expenditures or otherwise adversely affect our Logistics business specifically.
 
Our Logistics business is subject to seasonal trends.
 
Historically, our Logistics business’s operating results have been subject to seasonal trends when measured on a quarterly basis. Its second fiscal quarter has traditionally been the weakest, and the third and fourth fiscal quarters have traditionally been the strongest. As a result, its quarterly operating results are likely to continue to fluctuate. This trend is dependent on numerous factors, including the markets in which our Logistics business operates, holiday seasons, consumer demand, climate, economic conditions and numerous other factors. This historical seasonality has also been influenced by the growth and diversification of our Logistics business international network and service offerings. A substantial portion of our Logistics business’s revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand which can sometimes be difficult to predict or are based on just-in-time production schedules. Therefore, our Logistics business’s revenue is, to a large degree, affected by factors that are outside of its control. Our Logistics business historic operating patterns may not continue in future periods as it cannot influence or forecast many of these factors.
 
Risk Factors Related To Janel’s Manufacturing Business

Indco faces aggressive competition from competitors with greater financial resources.
 
Indco is a producer of industrial mixers and mixing equipment for a variety of industries. The industrial mixer manufacturing industry is highly fragmented with low barriers to entry.

This market is addressed by companies ranging in size from large, publicly held concerns with resources greater than those of Indco to small privately-owned entities. New competitors emerge annually, and many aggressively market through electronic media. Our competitors may be more innovative than us, and as a result, Indco may be unable to compete effectively.
 
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Because most of Indco’s contracts are individual purchase orders and not long-term agreements, Indco may not be able to generate a similar amount of revenue in the future.
 
Indco must bid or negotiate each of its contracts separately, and when it completes a contract, there is generally no continuing source of revenue under that contract.

As a result, Indco cannot assure that it will have a continuing stream of revenue from any contract. Indco’s failure to generate new business on an ongoing basis would materially impair its ability to operate profitably.
 
Any decrease in the availability, or increase in the cost, of raw materials could materially affect Indco’s revenue and earnings.
 
The availability of certain critical raw materials is subject to factors that are not within Indco’s control. In some cases, these critical raw materials are purchased from suppliers operating in countries that may be subject to unstable political and economic conditions, or there may be other supply chain issues related to the procurement of such raw materials, including as a result of the COVID-19 pandemic or climate change.

While Indco has historically been able to source its raw materials from an assortment of suppliers, at any given time, Indco may be unable to obtain an adequate supply of critical raw materials on a timely basis, at prices and other terms acceptable to it, or at all. If Indco is unable to obtain adequate and timely deliveries of required raw materials, it may be unable to timely manufacture sufficient quantities of products. This could cause Indco to lose sales, incur additional costs, delay new product introductions or suffer harm to Indco’s reputation.
 
If suppliers increase the price of critical raw materials or are unwilling or unable to meet Indco’s demand, it may not have alternative sources of supply. In addition, costs of certain critical raw materials have been volatile due to factors beyond Indco’s control. Raw material costs are included in Indco’s contracts with customers, but in some cases Indco is exposed to changes in raw material costs from the time purchase orders are placed to when it purchases the raw materials for production. Changes in business conditions could adversely affect Indco’s ability to recover rapid increases in raw material costs and may adversely affect Indco’s, and therefore Janel’s, results of operations.

Failure to obtain and retain skilled technical personnel could adversely affect Indco’s operations.
 
Indco’s production facilities require skilled personnel to operate and provide technical services and support for its business. Competition for the personnel required for Indco’s business intensifies as activity increases. In periods of high utilization, it may become more difficult to find and retain qualified individuals. This could increase Indco’s costs or have other adverse effects on its operations.

If Indco’s customers successfully assert product liability claims against it due to defects in Indco’s products, its operating results may suffer and its reputation may be harmed.
 
Indco faces an inherent risk of exposure to claims in the event that the failure, use or misuse of its products results, or is alleged to result, in bodily injury, property damage or economic loss. While Indco believes that it meets or exceeds existing professional specification standards recognized or required in the industries in which it operates, Indco has been subject to claims in the past, and it may be subject to claims in the future. A successful product liability claims or series of claims against Indco, or a significant warranty claim or series of claims against it, could materially decrease its liquidity, and therefore Janel’s financial condition.
 
The extensive environmental, health and safety regulatory regimes applicable to Indco’s operations create potential exposure to significant liabilities.
 
The nature of Indco’s manufacturing business subjects its operations to numerous and varied federal, state, local and international laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health.
 
Failure to comply with these laws and regulations, or with the permits required for Indco’s operations, could result in fines or civil or criminal sanctions, third-party claims for property damage or personal injury, and investigation and cleanup costs.

Potentially significant expenditures could be required in order to comply with new environmental laws or requirements that may be adopted or imposed in the future.
 
17
Indco has used, and currently uses, certain substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although Indco implements controls and procedures designed to reduce continuing risk of adverse impacts and environmental, health, and safety issues, Indco could incur substantial cleanup costs, fines and civil or criminal sanctions, and third-party property damage or personal injury claims as a result of violations, non-compliance or liabilities under these regulatory regimes.

As a manufacturing business, Indco also must comply with federal and state environmental laws and regulations which relate to the manner in which Indco stores and disposes of materials and the reports that Indco is required to file. Indco cannot ensure that it will not incur additional costs to maintain compliance with environmental laws and regulations or that it will not incur significant penalties for failure to be in compliance.
 
Indco relies on a single location to manufacture its products.
 
Indco’s business operates out of a single location in New Albany, Indiana. Indco employs lean manufacturing techniques and therefore carries little inventory. Indco could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around its facility in Indiana, including an outbreak of an infectious disease such as COVID-19. As a result, Indco may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered, and Indco may suffer damage to its reputation. Indco’s, and therefore Janel’s, financial condition and results of operations could be materially adversely affected were such events to occur.

Risk Factors Related To Janel’s Life Sciences Business
 
It may be difficult for Life Sciences to implement its strategies for revenue growth in light of competitive challenges.
 
Life Sciences faces significant competition across many of its product lines. Competitors include companies ranging from start-up companies, which may be able to more quickly respond to customers’ needs, to large multinational companies, which may have greater financial, marketing, operational, and research and development resources than the Company.

In addition, consolidation trends in the pharmaceutical, biotechnology and diagnostics industries have served to create fewer customer accounts and to concentrate purchasing decisions for some customers. Failure to anticipate and respond to competitors’ actions may impact the future sales and earnings of Life Sciences and therefore Janel.
 
If Life Sciences does not compete effectively, its business may be harmed.

Life Sciences encounters aggressive competition from numerous competitors in many areas of its business. It may not be able to compete effectively with all of these competitors. To remain competitive, Life Sciences must develop new products and periodically enhance its existing products. We anticipate that Life Sciences may also have to adjust the prices of many of its products to stay competitive. In addition, new competitors, technologies or market trends may emerge to threaten or reduce the value of our product lines.
 
If Life Sciences does not introduce new products in a timely manner, it may lose market share and be unable to achieve revenue growth targets.
 
Life Sciences sells many of its products in industries characterized by frequent new product and service introductions and evolving customer needs and industry standards. Many of the businesses competing with Life Sciences in these industries have significant financial and other resources to invest in new technologies, substantial intellectual property portfolios, significant experience in new product development, regulatory expertise, manufacturing capabilities and established distribution channels to deliver products to customers. Failure to innovate and develop new products may impact the future sales and earnings of Life Sciences and therefore Janel.
 
The manufacture and sale of products and services may expose us to product and other liability claims for which we could have substantial liability.
 
Life Sciences faces an inherent business risk of exposure to product and other liability claims if its products, services or product candidates are alleged or found to have caused injury, damage or loss.

While we retain product liability insurance, we may be unable to obtain insurance with adequate levels of coverage for potential liability on acceptable terms or claims of this nature may be excluded from coverage under the terms of any insurance policy that we obtain.

18
If we are unable to obtain such insurance or the amounts of any claims successfully brought against us substantially exceed our coverage, then our business could be adversely impacted.
 
Changes in governmental regulations may reduce demand for our products or increase our expenses.
 
Life Sciences competes in markets in which it or its customers must comply with federal, state, local and foreign regulations, such as environmental, health and safety, and food and drug regulations. We develop, configure and market our products to meet customer needs created by these regulations. Any significant change in these regulations could reduce demand for our products or increase our costs of producing these products.
 
The Life Sciences business operates from three locations, which exposes it to certain risks.
 
Our Life Sciences business operates out of three locations in Davis, California, Aurora, Colorado and Bloomington, Minnesota. Any significant disruption of those operations for any reason, such as strikes or other labor unrest or constraints, including as a result of COVID-19 vaccine mandates, power interruptions, fire, earthquakes, outbreaks of infectious diseases such as COVID-19, or other events beyond our control, could adversely affect our sales and customer relationships and therefore adversely affect our business.

The success of Life Sciences depends on its ability to continually produce products that meet high quality standards such as purity, reproducibility and/or absence of cross- reactivity.
 
Product quality and reputation are key purchasing decision factors for our Life Sciences customers. While our Life Sciences operations have experienced and qualified personnel, long operating histories and substantial production systems and protocols in place, failure on our part to meet our customers’ high-quality product expectations (in particular with respect to product purity, reproducibility and specificity) could adversely impact our business.

Risk Factors Related To Ownership of Janel’s Common Stock
 
Janel’s officers and directors and one of its stockholders have a controlling influence over Janel.
 
Janel’s officers and directors control the vote of approximately 69.7% of the outstanding shares of Janel’s common stock as of September 30, 2021, which includes Janel common stock such persons can acquire through the exercise of vested options granted to them. As a result, Janel’s officers and directors control the election of Janel’s directors and therefore have the ability to control the affairs of Janel. Furthermore, one particular investor in the Company has the right to appoint 50% of the members of Janel’s board of directors.
 
As a result, these officers, directors and stockholders have controlling influence over, among other things, the ability to amend Janel’s certificate of incorporation and bylaws or effect or preclude fundamental corporate transactions involving Janel, including the acceptance or rejection of any proposals relating to a merger of Janel or an acquisition of Janel by another entity. The interests of these officers, directors and stockholders may conflict with those of other stockholders. This concentration of ownership may also delay, deter or prevent a change in control of Janel, and some transactions may be more difficult or impossible without the support of these parties.
 
It is unlikely that Janel will issue dividends on its common stock in the foreseeable future.
 
Janel has never declared nor paid cash dividends on its common stock, and it does not intend to pay dividends in the foreseeable future. The payment of dividends in the future will be at the discretion of Janel’s board of directors.
 
Janel’s stock price is subject to volatility.
 
Janel’s common stock trades on the Pink tier of the OTC market under the symbol “JANL.” The market price of Janel’s common stock has been subject to significant fluctuations. There is an absence of a true market for Janel shares and thus a valid valuation is not readily maintained. This result is caused in part by the concentrated holdings of Janel, which has led to abnormal price volatility. Such fluctuations as well as economic conditions generally may adversely affect the market price of Janel’s common stock.
 
We may issue shares of preferred stock with greater rights than our common stock.
 
Our certificate of incorporation authorizes our board of directors to issue shares of preferred stock and to determine the price and other terms for those shares without the approval of our stockholders.

19
Any such preferred stock we may issue in the future could rank ahead of our common stock with respect to certain rights or obligations, including in terms of dividends, liquidation rights, and voting rights.
 
Janel has no assurance of a continued public trading market.
 
Janel’s common stock is quoted in the over-the-counter market on the Pink tier of the OTC market and, to the extent the market price of our common stock falls below $5.00 per share, may be subject to the low-priced security or so-called “penny stock” rules that impose additional sales practice requirements on broker-dealers who sell such securities. For any transaction involving a penny stock, the rules require, among other things, the delivery, prior to the transaction, of a disclosure schedule required by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in the customer’s account.

These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.
Consequently, to the extent we are subject to the penny stock rules, such rules may affect the ability of broker-dealers to trade our securities. As a result, characterization as a “penny stock” can discourage investor interest in and limit the marketability of our common stock.

Janel incurs significant costs to comply with the laws and regulations affecting public companies which could harm its business and results of operations.
 
Janel is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes- Oxley Act”), and other applicable securities rules and regulations. These rules and regulations have increased and will continue to increase Janel’s legal, accounting and financial compliance costs and have made, and will continue to make, some activities more time-consuming and costly. For example, these rules and regulations could make it more difficult and more costly for Janel to obtain director and officer liability insurance, and it may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage.

These rules and regulations could also make it more difficult for Janel to attract and retain qualified persons to serve on its board of directors or its board committees or as executive officers. Janel’s management and other personnel devote a substantial amount of time to these compliance initiatives. As a result, management’s attention may be diverted from other business concerns, which could harm Janel’s business and operating results.

ITEM 1B.
UNRESOLVED STAFF COMMENTS
 
Not applicable.
 
ITEM 2
PROPERTIES
 
Janel’s executive offices are located in approximately 3,300 square feet of leased space in New York, New York. The lease term ends September 1, 2025.
 
As of September 30, 2021, Logistics leased 6,900 square feet of office space in Garden City, New York. This location serves as the executive offices of the Logistics segment. The lease term ends March 31, 2025.

As of September 30, 2021, Logistics leased twenty office spaces, some of which are on a month-to-month basis, in twelve states located in the United States, Lease terms for these locations expire at various dates through March 31, 2025.
 
As of September 30, 2021, Indco owned an approximately 12,600 square feet manufacturing facility on a 1.2-acre parcel of land in New Albany, Indiana.
 
As of September 30, 2021, Life Sciences owned an approximately 25,000 square feet manufacturing facility on a 40-acre parcel of land in Davis, California.  The Life Sciences segment also leases two other offices in the United States.
 
The Company believes that its owned and leased properties are adequate to meet its occupancy needs in the foreseeable future.
 
20
ITEM 3
LEGAL PROCEEDINGS
 
Janel is occasionally subject to claims and lawsuits which typically arise in the normal course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows. The information otherwise called for by this item is incorporated herein by reference to Note 18, Risks and Uncertainties, in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.
 
ITEM 4
MINE SAFETY DISCLOSURES
 
Not applicable.
PART II
 
ITEM 5
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
(in thousands, except share and per share data)
 
Janel Corporation’s common stock is traded on the Pink tier of the OTC market under the symbol “JANL.”

The following table sets forth the high and low bid prices for the common stock for each full quarterly period during the fiscal years indicated. The prices reflect the high and low bid prices as available through the Pink tier of the OTC market and represent prices between dealers. They do not reflect retailer markups, markdowns or commissions and may not represent actual transactions.

 
Fiscal Quarter
 
Fiscal Year 2021
   
Fiscal Year 2020
 
 
High
   
Low
   
High
   
Low
 
First Quarter, ended December 31,
 
$
8.00
   
$
3.00
   
$
8.57
   
$
5.97
 
                                 
Second Quarter, ended March 31,
 
$
17.50
   
$
4.51
   
$
8.50
   
$
5.97
 
                                 
Third Quarter, ended June 30,
 
$
18.00
   
$
11.00
   
$
8.05
   
$
3.00
 
                                 
Fourth Quarter, ended September 30,
 
$
19.00
   
$
14.00
   
$
10.00
   
$
3.00
 

On September 30, 2021, the Company had 58 holders of its shares of common stock. This amount does not include “street name” holders or beneficial holders of our common stock, whose holders of record are banks, brokers and other financial institutions.
 
The closing price of the common stock on that date was $23.00 per share.
 
Common Stock Dividends
 
We have not declared, and currently do not plan to declare in the foreseeable future, dividends on our common stock.
 
Series B Convertible Preferred Stock (“Series B Stock”)
 
The Company has 31 shares of Series B Stock outstanding as of September 30, 2021.

Series C Cumulative Preferred Stock (“Series C Stock”)
 
In August 2021, the board of directors approved an increase in the number of shares of Series C Stock, from 20,000 shares to 30,000 shares.  On September 30, 2021, the Company sold 1,200 shares of Series C Stock to an accredited investor at a purchase price of $500 per share, or an aggregate of $600,000. The Company has 20,960 shares of Series C Stock outstanding as of September 30, 2021.

21
ITEM 6
RESERVED
 
ITEM 7
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 
Our discussions below in this Item 7 should be read along with Janel’s audited financial statements and related notes thereto as of September 30, 2021 and 2020 and for each of the two years in the period ended September 30, 2021 included in this Annual Report on Form 10-K.
 
INTRODUCTION
 
Janel is a holding company with subsidiaries in three business segments: Logistics (previously known as Global Logistics Services), Manufacturing and Life Sciences. In the fourth quarter of 2021, our former Global Logistics Services segment was renamed “Logistics”; this change related to the name only and had no impact on the Company’s previously reported historical financial position, results of operations, cash flow or segment level results.

The Company strives to create shareholder value primarily through three strategic priorities: supporting its businesses’ efforts to make investments and to build long-term profits; allocating Janel’s capital at higher risk-adjusted rates of return; and attracting and retaining exceptional talent. Management at the holding company level focuses on significant capital allocation decisions and corporate governance. Janel expects to grow through its subsidiaries’ organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
 
COVID-19

We continue to navigate operating the Company in light of the COVID-19 pandemic, which continues to have widespread implications. On the one hand, we have seen improvements in the broader economy, and our results for fiscal 2021 improved significantly compared to the prior fiscal year.  That said, there remains uncertainty regarding how the ongoing nature of the COVID-19 pandemic will impact the overall economy and the Company’s results in particular. While many countries have begun the process of vaccinating their residents against COVID-19, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may hinder any economic recovery as well as our operations in the future.
 
Even after the COVID-19 pandemic subsides, the effects of the COVID-19 pandemic may last for a significant period of time thereafter and may continue to adversely affect our business, results of operations and financial condition. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers’ ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.

Year Ended September 30, 2021 Acquisitions

On September 21, 2021, the Company completed a business combination whereby it acquired all of the membership interests of Expedited Logistics and Freight Services, LLC. (“ELFS”) and related subsidiaries, which we include in our Logistics segment.

On December 31, 2020, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc. (“W.R. Zanes”), which we include in our Logistics segment.

On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC. (“ICT”), which we include in our Life Sciences segment.

Year Ended September 30, 2020 Acquisitions
 
On July 23, 2020, the Company acquired all of the outstanding common stock of Atlantic Customs Brokers, Inc. (“ACB”), which we include in our Logistics segment.

22
Results of Operations – Janel Corporation
 
Our results of operations and period-over-period change are discussed in the following section. The tables and discussion should be read in conjunction with the accompanying Consolidated Financial Statements and the notes thereto appearing in Item 8.
 
Refer to Item 7. “Management Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2020, filed on January 13, 2021, for a comparison of fiscal year 2020 results of operations to the fiscal year 2019 results of operations, which specific discussion is incorporated herein by reference.
 
Our condensed consolidated results of operations are as follows:

Financial Summary
Fiscal years ended September 30,
(in thousands)

   
2021
   
2020
 
Revenues
 
$
146,419
   
$
82,429
 
Forwarding expenses and cost of revenues
   
113,986
     
58,908
 
Gross profit
   
32,433
     
23,521
 
Operating expenses
   
28,482
     
25,245
 
Operating income (loss)
 
$
3,951
   
$
(1,724
)
Net income (loss)
 
$
5,203
   
$
(1,725
)
                 
Adjusted operating income
 
$
5,894
   
$
376
 

Consolidated revenues for the year ended September 30, 2021 were $146,419, or 77.6% higher than fiscal 2020. Revenues increased across all three segments due to a recovery from the impact of the COVID-19 pandemic experienced in the prior fiscal year as well as acquisitions. Operating income for fiscal 2021 was $3,951 compared to an operating loss of ($1,724) for fiscal 2020, an increase of $5,675, as a result of the economic recovery experienced across all of our segments, partially offset by higher spending in the corporate segment.  Adjusted operating income for fiscal 2021 increased to $5,894 versus $376 in the prior fiscal year.

The Company’s net income for the year ended September 30, 2021 totaled $5,203 or $5.26 per diluted share, compared to net loss of approximately ($1,725) or ($1.98) per diluted share for the year ended September 30, 2020. Net income increased as a result of the recovery from the impact of the COVID-19 pandemic in the prior fiscal year and the benefit from the forgiveness of our PPP Loan.

The following table sets forth a reconciliation of operating income to adjusted operating income:

Adjusted Operating Income
Fiscal years ended September 30,
(in thousands)

   
2021
   
2020
 
Income (loss) from operations
 
$
3,951
   
$
(1,724
)
Amortization of intangible assets
   
1,120
     
955
 
Stock-based compensation
   
115
     
269
 
Cost recognized on sale of acquired inventory
   
708
     
876
 
Adjusted operating income
 
$
5,894
   
$
376
 
 
23
BUSINESS PERFORMANCE
 
Results of Operations – Logistics
   
Financial Summary
 
   
Fiscal Years Ended
September 30,
(in thousands)
 
   
2021
   
2020
 
Revenue
 
$
125,863
   
$
68,492
 
Forwarding expense
   
106,139
     
53,397
 
Gross profit
 
$
19,724
   
$
15,095
 
Gross profit margin
   
16.0
%
   
22.0
%
Selling, general and administrative expenses
 
$
16,656
   
$
14,992
 
Income from operations
 
$
3,068
   
$
103
 

Fiscal 2021 compared with fiscal 2020
 
Revenue
 
Total revenue in fiscal 2021 was $125,863 as compared to $68,492 in fiscal 2020, an increase of $57,371 or 83.7%. The increase in revenue was primarily driven by the rise in transportation rates as a result of capacity issues globally as well as an increase in volume as a result of a recovery from the COVID-19 pandemic compared to the prior fiscal year. Three acquisitions accounted for 15% of the growth. Our volume as measured by twenty-foot equivalent units (“TEUs”) grew 30%, metric tons and custom entries grew 1% and 28%, respectively.
 
Gross Profit
 
Gross profit in fiscal 2021 was $19,724, an increase of $4,629, or 30.7%, as compared to $15,095 in fiscal 2020. This increase was mainly the result of a recovery in business compared with the depressed levels in the prior fiscal year which drove organic gross profit growth. Three acquisitions accounted for the balance of the growth. Our gross profit margin declined to 16.0% in fiscal 2021 compared to 22.0% in fiscal 2020 largely due to an increase in transportation rates.
 
Selling, General and Administrative Expenses

Selling, general and administrative expenses from continuing operations in fiscal 2021 were $16,656, as compared to $14,992 in fiscal 2020. The increase of $1,664, or 11.1%, was mainly due to additional expenses from acquired businesses and investment to support business growth. As a percentage of gross revenue, selling, general and administrative expenses were 13.2% and 21.8% for fiscal 2021 and fiscal 2020, respectively.

Income from Operations
 
Operating income increased to $3,068 in fiscal 2021 compared to $103 in fiscal 2020. Income from operations increased as a result of the economic recovery from the COVID-19 pandemic compared to the prior fiscal year and contributions from three acquisitions. Our operating margin as a percentage of gross profit was 15.5% in fiscal 2021 compared to 0.7% in fiscal 2020.

Results of Operations - Manufacturing
Financial Summary
Fiscal years ended September 30,
(in thousands)
 
   
2021
   
2020
 
Revenue
 
$
8,564
   
$
7,319
 
Cost of revenues
 
$
3,983
   
$
3,329
 
Gross profit
 
$
4,581
   
$
3,990
 
Gross profit margin
   
53.5
%
   
54.5
%
Selling, general and administrative expenses
 
$
2,696
   
$
2,505
 
Income from operations
 
$
1,885
   
$
1,485
 
 
24
Fiscal 2021 compared with fiscal 2020
 
Revenue
 
Total revenue was $8,564 in fiscal 2021 compared with $7,319 in fiscal 2020, an increase of 17%. The revenue increase reflected a broad increase across the business relative to the COVID-19 related slowdown in the prior fiscal year.
 
Gross Profit
 
Gross profit was $4,581 and $3,990 for fiscal years 2021 and 2020, respectively. Gross profit margin for the Manufacturing segment during fiscal 2021 was 53.5%, as compared to 54.5%, in fiscal 2020. The year-over-year decrease in gross profit margin was generally due to mix of business.
 
Selling, General and Administrative Expenses
 
Selling, general and administrative expenses for the Manufacturing segment were $2,696 and $2,505 for fiscal years 2021 and 2020, respectively. As a percentage of gross revenue, selling, general and administrative expenses were 31.5% and 34.2% for fiscal 2021 and fiscal 2020, respectively. The decrease in expenses relative to revenue reflected positive operating leverage on higher volumes.

Income from Operations
 
Operating income for fiscal 2021 was $1,885 compared to $1,485 in fiscal 2020, representing a 26.9% increase compared to the prior year.  The increase was due to favorable operating leverage as revenue recovered.

 Results of Operations - Life Sciences


Financial Summary
in thousands
(Fiscal years ended September 30,)

   
2021
   
2020
 
Revenue
 
$
11,992
   
$
6,618
 
Cost of revenues
   
3,156
     
1,306
 
Cost recognized upon sale of acquired inventory
   
708
     
876
 
Gross profit
 
$
8,128
   
$
4,436
 
Gross profit margin
   
67.0
%
   
67.0
%
Selling, general and administrative expenses
 
$
4,469
   
$
3,870
 
Income from operations
 
$
3,659
   
$
566
 

Fiscal 2021 compared with fiscal 2020
 
Revenue
 
Total revenue was $11,992 in fiscal 2021 compared with $6,618 in fiscal 2020. Increase revenue of $5,374 is primarily related to academic research recovery from the impact of the COVID-19 pandemic.  Acquired revenue of $1,290 added the balance of revenue growth.

Gross Profit
 
Gross profit was $8,128 and $4,436 for fiscal years 2021 and 2020, respectively. Gross profit margin of 67.0% remained flat between fiscal 2021 and the prior fiscal year.  The gross profit margin was impacted by the amortization of non-cash acquired inventory expenses of $708 and $876 for fiscal 2021 and 2020, respectively.

Selling, General and Administrative Expenses
 
Selling, general and administrative expenses for the Life Sciences segment were $4,469 and $3,870 for fiscal years 2021 and 2020, respectively.

25
The year-over-year increase was largely due to acquired businesses. As a percentage of gross revenue, selling, general and administrative expenses were 37.3% and 58.5% for fiscal 2021 and fiscal 2020, respectively.

Income from Operations
 
The Life Sciences business earned $3,659 and $566 in income from operations for fiscal 2021 and 2020, respectively. The increase in operating income reflected positive operating leverage from the increase in revenue as a result of the recovery from the impact of the COVID-19-related shut downs experienced in the prior fiscal year and, to a lesser extent, contribution from acquisitions. The difference in operating margin of 30.5% in fiscal 2021 compared with 8.6% in fiscal 2020 was largely due to favorable leverage from the business recovery as research labs reopened during fiscal 2021.

Results of Operations – Corporate and Other
 
Below is a reconciliation of income from operations segments to net (loss) available to common stockholders:
   
Years Ended September 30,
 
   
2021
   
2020
 
   
(In thousands)
 
Total income from operating segments
 
$
8,612
   
$
2,154
 
Administrative expenses
   
(3,493
)
   
(2,724
)
Amortization expense
   
(1,120
)
   
(955
)
Stock-based compensation
   
(48
)
   
(199
)
Total Corporate expenses
   
(4,661
)
   
(3,878
)
Interest expense
   
(589
)
   
(521
)
Change in fair value of mandatorily redeemable non-controlling interest
   
(93
)
   
15
 
Gain on Paycheck Protection Program (PPP) loan forgiveness
   
2,895
     
-
 
Net income (loss) before taxes
   
6,164
     
(2,230
)
Income tax (expense) benefit
   
(961
)
   
505
 
Net income (loss)
   
5,203
     
(1,725
)
Preferred stock dividends
   
(766
)
   
(675
)
Net income (loss) Available to Common Stockholders
 
$
4,437
   
$
(2,400
)

Total Corporate Expenses
 
Corporate expenses increased by $783 to $4,661, or 20.2%, in fiscal 2021 as compared to fiscal 2020. The increase was due primarily to higher accounting related professional expense, increased merger and acquisition expenses and increases in amortization of intangible expenses partially offset by lower stock-based compensation. We incur merger and acquisition deal-related expenses and intangible amortization at the corporate level rather than at the segment level.

Interest Expense
 
Interest expense for the consolidated company increased $68, or 13.1%, to $589 in fiscal 2021 from $521 in fiscal 2020. The increase was primarily due to higher average debt balances to support our acquisition efforts and higher working capital within Logistics to support business growth partially offset by lower interest rates.
 
Income Tax Expense
 
On a consolidated basis, the Company recorded an income tax expense of $961 in fiscal 2021, as compared to an income tax benefit of $505 in fiscal 2020. The increase in expense was primarily due to an increase in pretax income and the estimated deductible expense related to the expected loan forgiveness amount under the Paycheck Protection Program (“PPP”) loan received in the third quarter. In 2016, a deferred tax asset was established to reflect a net operating loss carryforward, which the Company has begun using, and expects to continue to use, through ongoing profitability.

Preferred Stock Dividends
 
Preferred stock dividends include the Company’s Series C Stock and dividends accrued but not paid. For the year ended September 30, 2021 and 2020, preferred stock dividends were $766 and $675, respectively.

26
The increase of $91, or 13.5%, was the result of a higher number of shares of Series C Stock outstanding and an increase in dividend rate as of January 1, 2021 to 8%.

Dividends accrued but not paid on the Company’s Series C Stock were $2,427 and $1,661 as of September 30, 2021 and 2020, respectively.
 
Net income (loss) Available to Common Shareholders
 
Net income (loss) available to common shareholders was $4,437 or $4.48 per diluted share for fiscal 2021 and ($2,400) or ($2.75) per diluted share for fiscal 2020. The increase in net income was primarily due higher revenues, partially offset by higher selling, general and administrative expenses across our businesses in both periods and an increase in the dividend rate with respect to the Series C Stock as of January 1, 2021 to 8%.

LIQUIDITY AND CAPITAL RESOURCES
 
General
 
Our ability to satisfy liquidity requirements, including satisfying debt obligations and fund working capital, day-to-day operating expenses and capital expenditures, depends upon future performance, which is subject to general economic conditions, competition and other factors, some of which are beyond Janel’s control. Our Logistics segment depends on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors.
 
As a customs broker, our Logistics segment makes significant cash advances for a select group of our credit-worthy customers. These cash advances are for customer obligations such as the payment of duties and taxes to customs authorities primarily in the United States. Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a “pass through” and are not recorded as a component of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. These “pass through” billings can influence our traditional credit collection metrics. For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures and has historically experienced relatively insignificant collection problems.
 
The COVID-19 pandemic has negatively impacted our liquidity and cash flows. As discussed in greater detail in note 9 to the consolidated financial statements, on April 19, 2020, we entered into a loan agreement with Santander and executed a U.S. Small Business Administration  note pursuant to which we borrowed $2,726 from Santander pursuant to the PPP under The Coronavirus Aid, Relief and Economic Security Act, Section 7(a)(36) of the Small Business Act in order to be able to continue to cover our payroll costs, group health care benefits, mortgage payments, rent and utilities. The duration and magnitude of the pandemic is not reasonably estimable at this point, and if the pandemic persists, our liquidity and capital resources could be further negatively impacted. During fiscal 2021, the Company applied for and received forgiveness for its PPP Loan.
 
Subsidiaries depend on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors. Generally, we do not make significant capital expenditures.

Janel’s cash flow performance for the 2021 fiscal year may not necessarily be indicative of future cash flow performance.

As of September 30, 2021, and compared with the prior fiscal year, the Company’s cash and cash equivalents increased by $2,885, or 86%, to $6,234 from $3,349 as of September 30, 2020.  During the fiscal year ended September 30, 2021, Janel’s net working capital deficiency (current assets less current liabilities) increased by $4,412, from ($10,372) at September 30, 2020 to ($14,784) at September 30, 2021.
 
Cash flows from continuing operating activities
 
Net cash used in continuing operating activities for fiscal years 2021 and 2020 was $201 and $554, respectively. The decrease in cash used in operations for the year ended September, 2021 was driven principally by higher profits, partially offset by PPP loan forgiveness, timing of cash collections for accounts receivables and cash payments on accounts payables for the year ended September 30, 2021.
 
27
Cash flows from investing activities
 
Net cash used in investing activities, mainly for the acquisition of subsidiaries, was $16,108 for fiscal 2021 and $1,544 for fiscal 2020. The fiscal 2021 amount was associated with two Logistics and one Life Sciences acquisition, and the fiscal 2020 amount was associated with one Logistics and two Life Sciences acquisitions. The Company also used $234 for the acquisition of property and equipment for the year ended September 30, 2021 compared to $1,297 for the year ended September 30, 2020.

Cash flows from financing activities
 
Net cash provided by financing activities was $19,194 for fiscal 2021 and $3,284 for fiscal 2020. Net cash provided by financing activities in fiscal 2021 primarily included proceeds from an increase in our line of credit which financed our acquisition of ELFS and proceeds from the sale of Series C Preferred, partially offset by repayments on our term loan and notes payables to related party.  Net cash provided by financing activities in fiscal 2020 primarily included proceeds from our PPP loan, deferred payments for the ACB acquisition and proceeds from stock option exercises, proceeds from sale of Series C Preferred, offset by repurchase of Series C Preferred.
 
Credit Facilities
 
Logistics

Santander Bank Facility
 
On October 17, 2017, the Janel Group subsidiaries (collectively the “Janel Group Borrowers”), with the Company as a guarantor, entered into a Loan and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) with respect to a revolving line of credit facility (the “Santander Facility”). As amended in March 2018, November 2018, March 2020, July 2020 and December 2020, the Santander Facility provided that the Janel Group Borrowers can borrow up to $17,000 limited to 85% of the Janel Group Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Santander Loan Agreement. Interest accrued on the Santander Facility at an annual rate equal to, at the Janel Group Borrowers’ option, prime plus 0.50%, or LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points. The Janel Group Borrowers’ obligations under the Santander Facility were secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contained customary terms and covenants. The Santander Facility was set to mature on October 17, 2022, unless earlier terminated or renewed. As a result of its terms, the Santander Facility is classified as a current liability on the consolidated balance sheet.
 
On September 21, 2021, Janel Group, ELFS and ELFS Brokerage, LLC, each wholly-owned subsidiaries of the Company, jointly and severally, individually and collectively as borrowers (collectively with Janel, the “Borrowers”), the Company and Expedited Logistics and Freight services, LLC, an Oklahoma limited liability company, as loan party obligors, and Santander Bank, N.A., as lender, entered into an Amended and Restated Loan and Security Agreement (as amended and restated, the “Loan Agreement”) that amended and restated the Santander Loan Agreement.

The Loan Agreement provides for, among other things, the following modifications to the Santander Loan Agreement: (1) ELFS and ELFS Brokerage, LLC were added as borrowers; (2) the maximum revolving facility amount available was increased from $17.0 million to $30.0 million (limited to 85% of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Loan Agreement); (3) the maturity date was extended from October 12, 2022 to September 21, 2026; (4) interest accrues at an annual rate equal to LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points at close, with a potential LIBOR floor reduction to 25 basis points upon certain conditions; and (5) the Company was provided the option of making Series C preferred payments or distributions if specified conditions are met.
 
At September 30, 2021, outstanding borrowings under the Santander Facility were $29,637, representing 98.8% of the $30,000 available thereunder, and interest was accruing at an effective interest rate of 3.00%.
 
At September 30, 2020, outstanding borrowings under the Santander Facility were $8,447, representing 49.7% of the $17,000 available thereunder, and interest was accruing at an effective interest rate of 2.40%.

The Company was in compliance with the covenants defined in the Santander Loan Agreement at both September 30, 2021 and September 30, 2020.
 
28
Working Capital Requirements
 
Through September 30, 2021, the Logistics segments cash needs were met by the Santander Facility and cash on hand. As of September 30, 2021, the Logistics segment had, subject to collateral availability, $181 available for future borrowings under its $30,000 Santander Facility and $4,177 in cash.
 
The Company believes that its current financial resources will be sufficient to finance the operations and obligations (current and long-term liabilities) of the Logistics segment for the short- and long-term. However, the actual working capital needs of the Logistics segment will depend upon numerous factors, including operating results, the costs associated with growing the Logistics segment, either organically or through acquisitions, competition and availability under the Loan Agreement, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, the operations of the Logistics segment will be materially negatively impacted.
 
Manufacturing
 
First Merchants Bank Credit Facility
 
On March 21, 2016, as amended in August 2019 and July 2020, Indco executed a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan, a $1,000 (limited to the borrowing base and reserves) revolving loan and a $680 mortgage loan (together, the “First Merchant Facility”).  Interest accrues on the term loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total funded debt to EBITDA ratio is less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1).

Interest accrues on the revolving loan at an annual rate equal to the one-month LIBOR plus 2.75%. Interest accrues on the mortgage loan at an annual rate of 4.19%. Indco’s obligations under the First Merchants Bank Facility are secured by all of Indco’s real property and other assets and are guaranteed by Janel. Additionally, Janel’s guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares. The term loan and revolving loan portions of the First Merchants Facility will expire on August 30, 2024, and the mortgage loan will mature on July 1, 2025 (subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended.

As of September 30, 2021, there were no outstanding borrowings under the revolving loan, $2,713 of borrowings under the term loan, and $655 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.83% and 4.19%, respectively.
 
As of September 30, 2020, there were no outstanding borrowings under the revolving loan, $4,349 of borrowings under the term loan, and $676 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 3.66% and 4.19%, respectively.

Indco was in compliance with the covenants defined in the First Merchants Credit Agreement at both September 30, 2021 and September 30, 2020.

Working Capital Requirements
 
Manufacturing’s cash needs are currently met by the term loan and revolving credit facility under the First Merchants Credit Agreement and cash on hand. As of September 30, 2021, Manufacturing had $1,000 available under its $1,000 revolving facility subject to collateral availability and $910 in cash. The Company believes that the current financial resources will be sufficient to finance Manufacturing operations and obligations (current and long-term liabilities) for the long and short term. However, actual working capital needs will depend upon numerous factors, including operating results, the cost associated with growing Manufacturing either organically or through acquisitions, competition and availability under the revolving credit facility, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, Manufacturing’s operations will be materially negatively impacted.
 
29
Life Sciences
 
First Northern Bank of Dixon
 
On June 21, 2018, Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company (by succession), entered into a Business Loan Agreement (the “First Northern Loan Agreement”), subsequently amended November 2019 and October 2, 2020, with First Northern Bank of Dixon (“First Northern”), with respect to a $2,235 term loan (the “First Northern Term Loan”) which bears interest at an annual rate of 4.00% and matures on November 14, 2029. In addition, Antibodies has a $500 revolving credit facility with First Northern which currently bears interest at the annual rate of 4.0%, and matures on October 5, 2021 (the “First Northern Revolving Loan”). Antibodies also entered into two separate business loan agreements with First Northern: a $125 term loan in connection with a potential expansion of solar generation capacity on the Antibodies property (“First Northern Solar Loan”) bearing interest at the annual rate of 4.43% (subject to adjustment in five years) and maturing on November 14, 2029; and a $60 term loan in connection with a potential expansion of generator capacity on the Antibodies property (“Generator Loan”) bearing interest at the annual rate of 4.25% and maturing on November 5, 2025. There were no outstanding borrowings under the Generator Loan as September 30, 2021 and 2020.

As of September 30, 2021, the total amount outstanding under the First Northern Term Loan was $2,139, of which $2,084 is included in long-term debt and $55 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.
 
As of September 30, 2021, the total amount outstanding under the First Northern Solar Loan was $105, of which $101 is included in long-term debt and $4 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.

As of September 30, 2020, the total amount outstanding under the First Northern Term Loan was $2,192, of which $2,139 is included in long-term debt and $53 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.
 
As of September 30, 2020, the total amount outstanding under the First Northern Solar Loan was $81, of which $76 is included in long-term debt and $5 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.

The Company was in compliance with the covenants defined in the First Northern Loan Agreement at September 30, 2021 and September 30, 2020.
 
Working Capital Requirements
 
Life Sciences cash needs are currently met by the First Northern Loan Agreement and cash on hand of $994. The Company believes that the current financial resources will be sufficient to finance Life Sciences operations and obligations (current and long-term liabilities) for the long and short term. However, actual working capital needs will depend upon numerous factors, including operating results, the cost associated with growing Life Sciences either organically or through acquisitions, competition and availability under the revolving credit facility, none of which can be predicted with certainty. If cash flow and available credit are not sufficient to fund working capital, Life Sciences operations will be materially negatively impacted.
 
CURRENT OUTLOOK
 
The results of operations in the Logistics, Manufacturing and Life Sciences segments are affected by the general economic cycle, particularly as it influences global trade levels and specifically the import and export activities of our Logistics segment’s various current and prospective customers. The effects of the COVID-19 pandemic may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 pandemic has subsided. Historically, the Company’s annual results of operations have been subject to seasonal trends which have been the result of, or influenced by, numerous factors including climate, national holidays, consumer demand, economic conditions, the growth and diversification of the segment’s international network and service offerings, and other similar and subtle forces.

The Company cannot accurately forecast many of these factors, nor can it estimate accurately the relative influence of any particular factor and, as a result, there can be no assurance that historical patterns, if any, will continue in future periods.
 
The Company’s subsidiaries are implementing business strategies to grow revenue and profitability for fiscal 2022 and beyond. Our Logistics strategy calls for additional branch offices, introduction of new revenue streams for existing locations, sales force expansion, additional acquisitions, and a continued focus on implementing lean methodologies to contain operating expenses.
 
30
Our Manufacturing and Life Sciences segments expect to introduce new product lines and wider distribution and promotion of their products with internet sales efforts. In addition to supporting its subsidiaries’ growth plans, the Company may seek to grow Janel by entering new business segments through acquisition.

Certain elements of the Company’s profitability and growth strategy, including proposals for acquisition and accelerating revenue growth, are contingent upon the availability of adequate financing on terms acceptable to the Company.
 
Without adequate equity and/or debt financing, the implementation of significant aspects of the Company’s strategic growth plan may be deferred beyond the originally anticipated timing, and the Company’s operations may be materially negatively impacted.
 
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
Our accounting policies are described in Note 1 – Summary of Significant Accounting Policies, included herein includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.  Our financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”), which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.
 
Business Combinations and Related Acquired Intangible Assets and Goodwill. We record all tangible and intangible assets acquired and liabilities assumed in a business combination at fair value as of the acquisition date in accordance with Accounting Standards Codification (“ASC”) 805 Business Combinations. Acquisition date fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as measured on the acquisition date. The valuations are based on information that existed as of the acquisition date. During the measurement period, which shall not exceed one year from the acquisition date, we may adjust provisional amounts recorded for assets acquired and liabilities assumed to reflect new information that we have subsequently obtained regarding facts and circumstances that existed as of the acquisition date. Such fair value assessments require judgments and estimates, which may cause final amounts to differ materially from original estimates.

As part of acquisitions of businesses, we acquired certain identifiable intangible assets, which are valued as of the acquisition date using a discounted cash flow (“DCF”) model. Key assumptions in the DCF model include (i) future revenues, (ii) earnings before interest, taxes depreciation and amortization (“EBITDA”) and (iii) the weighted average cost of capital discount rate. Estimated future revenues include assumptions about our ability to renew contracts in a competitive bidding process. A decrease in revenues or gross and EBITDA margins may adversely affect the value of identifiable intangible assets. The discount rate focuses on rates of return for equity and debt and is calculated using public information from selected guideline companies. The magnitude of the discount rate reflects the perceived risk of an investment. A change in the estimated risk of the acquired company cash flows would change the discount rate, which in turn could significantly affect the valuation of acquired identifiable intangible assets.

The excess amount of the aggregated purchase consideration paid over the fair value of the net of assets acquired and liabilities assumed is recorded as goodwill. Goodwill is evaluated for impairment annually or more frequently if an event occurs or circumstances change, such as material deterioration in performance that would indicate an impairment may exist. During the fourth quarter of 2021, we changed the date of our annual impairment test of goodwill and indefinite-lived intangible assets from September 30 to July 1. When evaluating goodwill for impairment, we may first perform a qualitative assessment (“step zero” of the impairment test) to determine whether it is more likely than not that a reporting unit is impaired. If we decide not to perform a qualitative assessment, or if we determine that it is more likely than not the carrying amount of a reporting unit exceeds its the fair value, then we perform a quantitative assessment (“step one” of the impairment test) and calculate the estimated fair value of the reporting unit. If the carrying amount of the reporting unit exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount to its estimated fair value. The decision to perform a qualitative impairment assessment in a given year is influenced by a number of factors, including the significance of the excess of the reporting units’ estimated fair value over carrying amount at the last quantitative assessment date, the amount of time in between quantitative fair value assessments, and the date of our acquisitions.

No indicators of impairment were identified from the date of our annual impairment test through September 30, 2021.

A qualitative assessment is performed for intangibles and long-lived assets to determine if there are any indicators that the carrying amount might not be recovered. A quantitative analysis may be performed in order to test the intangibles and long-lived assets for impairment. If a quantitative analysis is necessary, an income approach, specifically a relief from royalty method, is used to estimate the fair value of the intangibles and long-lived assets. Principal factors used in the relief from royalty method that require judgment are projected net sales, discount rates, royalty rates and terminal growth assumptions.

31
The estimated fair value of each intangible and long-lived assets is compared to its carrying amount to determine if impairment exists. If the carrying amount of a intangibles and long-lived assets exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount of the intangibles and long-lived assets.  No indicators of impairment of our intangibles and long-lived assets were identified from the date of our annual impairment test through September 30, 2021.
 
RECENT ACCOUNTING STANDARDS
 
The recent accounting standards is discussed in Note 1 to the consolidated financial statements contained in this report.

NON-GAAP FINANCIAL MEASURES

While we prepare our financial statements in accordance with U.S. GAAP, we also utilize and present certain financial measures, in particular adjusted operating income, which is not based on or included in U.S. GAAP (we refer to these as “non-GAAP financial measures”).

Organic Growth
 
Our non-GAAP financial measure of organic growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months. The organic growth presentation provides useful period-to-period comparison of revenue results as it excludes revenue from acquisitions that would not be included in the comparable prior period.

Adjusted Operating Income
 
As a result of our acquisition strategy, our net income includes material non-cash charges relating to the amortization of customer-related intangible assets in the ordinary course of business as well as other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets such as customer relationships. Because these charges are not indicative of our operations, we believe that adjusted operating income is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business that is more representative of the actual results of our operations.
 
Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and cost recognized on the sale of acquired inventory valuation) is used by management as a supplemental performance measure to assess our business’s ability to generate cash and economic returns.
 
Adjusted operating income is a non-GAAP measure of income and does not include the effects of preferred stock dividends, interest and taxes.

We believe that organic growth and adjusted operating income provide useful information in understanding and evaluating our operating results in the same manner as management. However, organic growth and adjusted operating income are not financial measures calculated in accordance with U.S. GAAP and should not be considered as a substitute for total revenue, operating income or any other operating performance measures calculated in accordance with U.S. GAAP. Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that users of the financial statements may find significant.

In addition, although other companies in our industry may report measures titled organic growth, adjusted operating income or similar measures, such non-GAAP financial measures may be calculated differently from how we calculate our non-GAAP financial measures, which reduces their overall usefulness as comparative measures. Because of these limitations, you should consider organic growth and adjusted operating income alongside other financial performance measures, including total revenue, operating income and our other financial results presented in accordance with U.S. GAAP.

 ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
Consistent with the rules applicable to “smaller reporting companies”, we have omitted the information required by Item 7A.
 
32
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this Item 8 are included in the Company’s Consolidated Financial Statements and set forth in the pages indicated in Item 15(a) of this Annual Report and are incorporated herein by reference.

ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

ITEM 9A.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Janel maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”) and is accumulated and communicated to management, including its Chief Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2021, and based on their evaluation, has concluded that our disclosure controls and procedures were effective.

For purposes of conducting its 2021 evaluation of the effectiveness of the Company’s internal control over financial reporting, management has excluded the acquisition of ELFS, completed on September 21, 2021, which constitutes 14 percent of total assets and 1 percent of income before income taxes of the Company, as of and for the year ended September 30, 2021. Refer to Note 2 – Acquisitions in Part II, Item 8 of this report for further discussion of the acquisition and its impact on the Company’s Consolidated Financial Statements.”

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our Chief Executive Officer and Principal Financial Officer and effected by our 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 U.S. GAAP 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 U.S. GAAP, and that the Company’s receipts and expenditures 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or   that the degree of compliance with policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we have performed an evaluation of the effectiveness of our internal control over financial reporting under the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Commission. Based on this assessment, management, including our Chief Executive Officer and Principal Financial Officer, has concluded that our internal control over financial reporting was effective as of September 30, 2021.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuers that are neither “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

33
Changes in Internal Control Over Financial Reporting

Other than the remediation efforts described below, there was no change in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Remedial Actions

As previously reported, in connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020 and thereafter, we previously identified a number of material weaknesses involving our Life Sciences and Logistics segments as well as our corporate office, as described below. As part of our remediation actions we engaged an external consultant to assist in the development and execution of a plan to remediate the material weaknesses related to our Life Sciences and Logistics segments and our Corporate office. This process included review of our controls and implementation of new controls addressing the underlying causes of the material weaknesses.

In connection with the preparation of the Company’s Annual Report on Form 10-K for fiscal year 2020, management identified certain material weaknesses as of September 30, 2020. In particular, the Company had inadequate controls over the following:

Revenue

•
order entry, invoicing, collections and timeliness of revenue recognition in accordance with ASC Topic 606, Revenue from Contracts with Customers – Principal Agent Consideration (“ASC Topic 606”) (Life Sciences)

•
review of sales orders including pricing, and revenue cut off procedures (Life Sciences)

•
assessment of gross versus net revenue recognition criteria in accordance with ASC Topic 606 (Logistics)
Financial Close Process

•
month-end closing activities (i.e. journal entry review, account reconciliations, closing checklists, budget to actual analysis, review of financial package, inventory account analysis, etc.) (Life Sciences)
Inventory

•
inventory management and valuation of inventory (Life Sciences)

•
inventory valuation controls, inventory counts and reconciliation to general ledger (Life Sciences)
General IT Controls

•
accounting manager’s administrative access to financial accounting software and banking portal, roles and responsibilities around significant processes including financial close without independent review or back-up results in segregation of duties issue (Life Sciences)

•
certain information technology general controls, including segregation of duties, user access, change management, data back-ups and review of SOC 1 and 2 reports from critical vendors, some of which could have a direct impact on the Company’s financial reporting (Life Sciences)

•
prevention and timely detection of funds transfers to an unauthorized account (Logistics)

•
segregation of duties between Principal Financial Officer and corporate accountant regarding administrative access to financial accounting software and banking portal and the financial close process (Corporate).

With respect to the material weaknesses described above we designed and implemented the specific remediation initiatives described below:

•
We designed and implemented certain revenue general controls that enhanced the processes associated with sales order entry and review of pricing, invoicing, collections, revenue cut-off procedures, and to ensure timeliness of revenue recognition in accordance with ASC Topic 606.

•
We implemented formal processes, policies and procedures supporting our financial close process, including (i) frequency of balance sheet reconciliations, (ii) review of accounting memorandums, and (iii) reviewing journal entries in a timely manner.  Additionally, we have increased the amount of formal documentation supporting journal entry reviews, balance sheet reconciliations, and other month end close activities.

•
Several valuation and analyses controls were implemented to improve the effectiveness and efficiency over the management of inventory and the inventory valuation process.

•
We designed and implemented certain IT general controls that address risks associated with user access and security, focused training for control owners to help sustain effective control operations, and implemented controls relating to segregation of duties to strengthen user access controls and security.  These changes were made in operational controls as well as access to banking portals.

34

•
We made certain personnel changes within our accounting organization and implemented enhanced processes and procedures related to the review of principal-agent considerations around revenue recognition in accordance with ASC Topic 606, including the addition of accounting personnel with technical accounting expertise who will review transactions and the engagement of an additional third-party service provider to supplement the aforementioned team, as needed.

•
We implemented a formal review of charge codes in fiscal 2021;

•
updated company policies and controls with respect to the prevention and timely detection of funds transfers to unauthorized accounts including multifactor authentication, implemented a new payment processing validation procedure, updated internal firewall protocols related to e-mails and conducted updated training on finance-related internal controls policies.

As a result of our remediation efforts, we determined that the material weaknesses at our Corporate office have been remediated as of September 30, 2021.

ITEM 9B.
OTHER INFORMATION

None.

ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III

ITEM 10
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The executive officers and directors of the Company are as follows:

Name
 
Age
 
Position
Dominique Schulte
 
48
 
Board Chair, President and Chief Executive Officer
Brendan J. Killackey
 
47
 
Director, Chief Information Officer
Gerard van Kesteren
 
72
 
Director, Chair of Audit Committee
John J. Gonzalez, II
 
71
 
Director, Senior Advisor for Mergers and Acquisitions and Chair of Compensation Committee
Gregory J. Melsen
 
69
 
Director, Chair of Nominating and Corporate Governance Committee
Karen Miller Ryan
 
57
 
Director
Vincent A. Verde
 
59
 
Principal Financial Officer, Treasurer and Secretary

Dominique Schulte has served as a Director of Janel since November 2015 and as Board Chair since May 8, 2018. Since October 1, 2018, Ms. Schulte has served as the Company’s President and Chief Executive Officer. Ms. Schulte practiced law at Simpson Thacher & Bartlett LLP in New York, from 1999 through 2009, where she specialized in corporate and securities law and oversaw a number of successful securities transactions. Ms. Schulte is the managing member of Oaxaca Group, LLC (“Oaxaca”), which is the Company’s largest individual shareholder. Ms. Schulte is well-qualified to serve as a member of the Company’s board of directors based on her extensive experience in the practice of corporate and securities law.

35
Brendan J. Killackey was elected to the Company’s board of directors in September 2014 and served as Chief Executive Officer from February 2015 through September 2018. Since October 1, 2018, Mr. Killackey has served as the Company’s Chief Information Officer. Mr. Killackey previously owned Progressive Technology Partners, LLC, a technology consultancy firm, which he founded in 2001. Given Janel’s and its subsidiaries’ reliance on technology, Mr. Killackey’s background and experience are valuable to the Company, and, therefore, he is well-qualified to serve as a member of the Company’s board of directors.

Gerard van Kesteren has served as a Director of Janel since November 2015. From 1999 until 2014, Mr. van Kesteren served as the Chief Financial Officer of Kuehne + Nagel Group, an international freight forwarder and leading global provider of innovative and fully integrated supply chain solutions. Mr. van Kesteren has served as a director of Gategroup Holding AG since April 2015. Mr. van Kesteren is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in the freight forwarding and logistics industry. Mr. van Kesteren serves as the chair of the Audit Committee.

John J. Gonzalez, II has served as a Director of Janel since June 2016. Prior to that, he was a Senior Managing Director of Janel Group, following the August 2014 purchase by the Company of Alpha International and President Container Lines (“Alpha/PCL”), which he co-founded in 1979. Mr. Gonzalez has been involved in the transportation business since 1969. Mr. Gonzalez is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in the freight forwarding and logistics industry. Mr. Gonzalez serves as chair of the Compensation Committee.

Gregory J. Melsen has served as a Director of Janel since January 2018. Prior to that, he was Chief Financial Officer and Vice President of Human Resources for Healthsense, Inc., a leading provider of passive remote monitors for seniors from 2014 to 2015; and was Vice President-Finance, Treasurer and Chief Financial Officer of Techne Corporation (now Bio-Techne Corporation), a holding company for biotechnology and clinic diagnostic brands.

He also served as Interim Chief Executive Officer of Techne Corporation from December 2012 through March 2013. Mr. Melsen has over 40 years of business experience, primarily in the accounting and finance areas. He has served as Chief Financial Officer at a number of companies and has 19 years of public accounting experience, including nine years as partner at Deloitte. Mr. Melsen is well-qualified to serve as a member of the Company’s board of directors based on his extensive experience in accounting and finance. Mr. Melsen serves as Chair of the Nominating and Governance Committee.

Karen Miller Ryan, also known professionally as Karen Padgett, has served as a Director of Janel since October 2021.  Prior to that, she served as Vice President of Global Marketing and Vice President of the Antibody Business Unit of Bio-Techne, a public global life science business from 2014 until 2019.  From 1996 until 2014, Ms. Miller Ryan was the founder and Chief Executive Officer of Novus Biologicals, a private research reagent company, which she successfully grew until its sale to Bio-Techne.  Ms. Miller Ryan is well qualified to serve as a member of the Company’s board of directors based on her extensive life science and executive leadership experience.

Mr. Vincent A. Verde is Principal Financial Officer, Treasurer and Secretary of the Company and has served in such capacities since May 2018. From February 2018 to May 2018, Mr. Verde served as Controller of the Company. From January 2018 to February 2018, Mr. Verde served as a consultant for the Company. Prior to joining the Company, from December 2016 to February 2017, Mr. Verde served as a consultant for Xylem Inc., a publicly traded manufacturer and servicer of engineered solutions. Mr. Verde served from November 2014 to November 2016 as Subsidiary Controller for Teledyne Bolt, Inc., a developer, manufacturer and distributor of marine seismic data acquisition equipment and underwater remotely operated robotic vehicles and subsidiary of Teledyne Technologies Inc. (“Teledyne”). From January 2012 to November 2014, Mr. Verde served as Vice President and Corporate Controller for Bolt Technology Corporation, a then-publicly traded manufacturer and distributor of geophysical equipment and industrial clutches, which was acquired by Teledyne in November 2014. Mr. Verde has 17 years of public accounting experience, including eight years as Audit manager at Deloitte.

Directors hold office for a one-year term until they are re-elected or their successors have been duly elected and qualified. The executive officers are elected by the board of directors on an annual basis and serve under the direction of the Board. Executive officers devote all of their business time to the Company’s affairs.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10% of its Class A common stock to file reports of ownership and changes in ownership with the Commission and to furnish the Company with copies of all such reports they file.

36
Based on the Company’s review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that none of its directors, executive officers or persons who beneficially own more than 10% of the Company’s Class A common stock failed to comply with Section 16(a) reporting requirements during the fiscal year ended September 30, 2021, except for Mr. van Kesteren and Mr. Gonzalez, each of whom had one late Form 4 filing reporting one transaction.

Board of Directors

During the fiscal year ended September 30, 2021, the board of directors met seventeen times. No incumbent directors attended fewer than 75% of the aggregate of the total number of meetings of the board of directors of the Company and the total number of meetings held by all board committees in which that director served.

Committees.

The Company’s board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee operates under a charter that has been approved by the Company’s board of directors and is available on its website located at www.janelcorp.com.

Audit Committee.

The Company’s audit committee (“Audit Committee”) oversees its corporate accounting and financial reporting process. The Audit Committee consists of Mr. van Kesteren as the chair, Mr. Gonzalez, Mr. Melsen and Ms. Miller Ryan. The Audit Committee met five times during fiscal 2021. The Audit Committee has the following responsibilities, among others, as set forth in the audit committee charter:


•
reviewing and assessing the effectiveness of external auditors, their independence from Janel and any additional assignments they may be given, as well as reviewing their appointment, termination, and remuneration;


•
reviewing and assessing the scope and plan of the audit, the examination process, audit results and reports, as well as whether auditor recommendations have been implemented by management;


•
recommending the approval of the annual internal audit concept and report, including the responses of management thereto;


•
assessing management’s established risk assessment and any proposed measures to reduce risk;


•
assessing the Company’s efforts and policies of compliance with relevant laws and regulations;


•
reviewing, in tandem with external auditors, as well as the Chief Executive Officer and the Principal Financial Officer, whether accounting principles and the financial control mechanisms of Janel and its subsidiaries are appropriate in view of Janel’s size and complexity; and


•
reviewing annual and interim statutory and consolidated financial statements intended for publication and recommending such financial statements to the board of directors.

The Company’s board of directors designated Gerard van Kesteren as an audit committee financial expert considering his experience as Chief Financial Officer of Kuehne + Nagel Group. In addition, the Company’s board of directors has determined that Mr. Melsen’s extensive experience as a partner with Deloitte and his experience as Chief Financial Officer of Healthsense, Inc. and Techne Corporation qualifies him as an audit committee financial expert. The board of directors of the Company has determined that Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan meet the definition of independent directors under the Company’s criteria. The board of directors of the Company has determined that Ms. Miller Ryan and Mr. Melsen are independent based on the Company’s independence criteria for audit committee membership which is based on the Nasdaq rules regarding audit committee independence. Furthermore, the board of directors of the Company has determined that Mr. van Kesteren is not “independent” based on the Company’s independence criteria for audit committee membership, as he received an annual $20,000 consulting fee during the fiscal year 2021 for services rendered to the Company’s Logistics segment. The board of directors of the Company has also determined that Mr. Gonzalez is not “independent” based on the Company’s independence criteria for audit committee membership, as he received an annual $90,000 consulting fee and cost of health insurance of $19,000 during the fiscal year 2021 for services rendered to the Company’s Logistics segment.

37
Compensation Committee

The Company’s compensation committee (the “Compensation Committee”) formulates, reviews and recommends compensation policies that are consistent with Janel’s established compensation philosophy and that will enable it to attract and retain high-quality leadership.

The Compensation Committee met four times during fiscal 2021. The Compensation Committee has the following responsibilities, among others, as set forth in the Compensation Committee’s charter:


•
reviewing and approving the Company’s general compensation philosophy and objectives;


•
reviewing and approving the corporate goals and individual objectives relevant to the compensation of the Company’s Chief Executive Officer and evaluating the performance of the Chief Executive Officer considering these objectives;


•
approving base salary amounts, incentive and bonus compensation amounts and individual stock and/or option grants and awards for the Chief Executive Officer and, based on the recommendation of the Chief Executive Officer, all corporate officers at or above the Vice President level;


•
reviewing all forms of compensation for the Company’s senior management, including the form and amount of current salary, deferred salary, cash and non-cash benefits, and all compensation plans;


•
reviewing the Company’s severance or similar termination payments and administering the Company’s stock option and other incentive compensation plans and programs;


•
amending or modifying, where appropriate, the provisions of any compensation or benefit plan that does not require stockholder approval;


•
preparing and approving reports to stockholders on compensation matters which are required by the SEC and other government bodies;


•
performing an annual performance appraisal for members of the Company’s senior management designated by the board of directors;


•
establishing levels of director compensation to include marketplace reviews of retainers, meeting fees, stock plans and other similar components of compensation; and


•
annually reviewing succession plans for key positions within the Company.

The Company’s Compensation Committee consists of Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan. Mr. Gonzalez serves as the chair of the Compensation Committee. The Company’s board of directors has determined that Messrs. Gonzalez, Melsen and van Kesteren, and Ms. Miller Ryan are independent members of the Compensation Committee.

Nominating and Corporate Governance Committee

The Company’s nominating and corporate governance committee (the “Nominating and Corporate Governance Committee”) is responsible for developing and implementing policies and procedures that are intended to assure that Janel’s board of directors and the boards of directors (or equivalent) of its subsidiaries will be appropriately constituted and organized to meet its fiduciary obligations to the Company and its stockholders on an ongoing basis. The Nominating and Corporate Governance Committee met four times during fiscal 2021. Among other matters, the Nominating and Corporate Governance Committee is responsible for the following, as set forth in the Nominating and Corporate Governance Committee’s charter:


•
making recommendations to Janel’s board of directors regarding matters and practices concerning the board, its committees and individual directors, as well as matters and practices of the boards, committees and individual directors of each of Janel’s subsidiaries;


•
periodically evaluating the size, composition and governance structure of Janel’s board of directors and its committees and the boards and committees of Janel’s subsidiaries and determining the future requirements of each such body;

38

•
periodically making recommendations concerning the qualifications, criteria, compensation and retirement age of members of Janel’s board of directors and the boards of its subsidiaries, which recommendations, upon approval by Janel’s board of directors, shall be incorporated in Janel’s Corporate Governance Guidelines;


•
recommending nominees for election to Janel’s board of directors and the boards of its subsidiaries and establishing and administering a board evaluation process; and


•
reviewing timely nominations by stockholders for the election of individuals to Janel’s board of directors, and ensure that such stockholders are advised of any action taken by the board of directors with respect thereto.

The Company’s Nominating and Corporate Governance Committee consists of the Company’s full board of directors. Mr. Melsen serves as the chair of the Nominating and Corporate Governance Committee.

Independence of Directors

The Company is not currently subject to listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, is not at this time required to (and does not) have a board of directors comprised of a majority of independent directors. Pursuant to Item 407(a) of Regulation S-K, however, Janel must disclose each director that is independent under the independence standards of either the New York Stock Exchange or Nasdaq, as selected by Janel. The Company has elected to use the independence standards prescribed under Nasdaq Rule 5605(2), which defines an “independent director” as a person who does not have any relationship with the Company which, in the opinion of the Company’s board of directors would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Based on the applicable criteria, the Company’s board of directors has determined that Mr. Killackey is not independent, as he is an employee of the Company. Ms. Schulte is not independent by virtue of the fact that she is an Executive Officer of the Company.

The board of directors has determined that Messrs. Gonzalez, Melsen and van Kesteren and Ms. Miller Ryan are independent directors.

Director Compensation

During the Company’s fiscal year ended September 30, 2021, Mr. Killackey, the Company’s Chief Information Officer, did not receive any additional compensation for serving as a director. Ms. Schulte waived any board compensation during fiscal year 2021. The following table summarizes the compensation paid to the other directors for their services during the Company’s fiscal year ended September 30, 2021 (actual dollar amounts):

Name
 
Fees
Earned or
Paid in
Cash(1)
   
Option
Awards(2)
   
All Other
Compensation
   
Total
 
Gerard van Kesteren
 
$
40,000
   
$
18,043
   
$
20,000
(3)
 
$
78,043
 
John J. Gonzalez
 
$
40,000
   
$
18,043
   
$
109,000
(4)
 
$
167,043
 
Gregory J. Melsen
 
$
40,000
   
$
18,043
   
$
—
   
$
58,043
 

(1)
Compensation is paid on a monthly basis.
(2)
The aggregate number of options outstanding as of September 30, 2021 for each director was as follows: Gerard van Kesteren – 4,998, John J. Gonzalez II – 47,500, and Gregory J. Melsen – 9,375.
(3)
Represents compensation paid to Mr. van Kesteren in connection with his consulting agreement.
(4)
Represents compensation paid to Mr. Gonzalez in connection with his consulting agreement.

Pursuant to the Company’s non-employee director compensation policy, for the fiscal year 2021 non-employee directors received a retainer at an annual rate of $30,000, payable on a monthly basis, and 2,500 options, pursuant to the Amended and Restated Janel Corporation 2017 Equity Incentive Plan or such other equity plan that the Company may adopt from time to time.

Committee chairs receive an additional retainer at an annual rate of $10,000. According to the non-employee director compensation policy, non-employee directors will be reimbursed for their reasonable travel and other expenses incurred to attend board of directors or board committee meetings.

39
Employment Arrangements
(actual dollar amounts)

On February 26, 2017, the Company entered into an agreement with Mr. Gonzalez to serve as a Director and Senior Advisor for mergers and acquisitions for the Company, effective October 1, 2017. The original term of the agreement ended on September 30, 2021, and thereafter will renew automatically for an additional two-year term unless either party provides notice that it does not wish to renew. Under the terms of the agreement, during fiscal year 2021 the Company paid Mr. Gonzalez an annual retainer pursuant to non-employee director compensation policy of $40,000 for his service as a director and chair of the Compensation Committee, an annual consulting fee of $90,000 and the cost of health insurance of $19,000.  This agreement was renewed and for fiscal 2022 the Company pays Mr. Gonzalez an annual retainer of $50,000 for his service as a director and chair of the Compensation Committee, an annual consulting fee of $90,000 and the cost of health insurance of $19,000.

Code of Business Conduct and Ethics

The Company has adopted a code of business conduct and ethics, including a whistleblower policy that applies to all of its employees, including executive officers and directors. The code of business conduct and ethics, including our whistleblower policy is available on the Company’s website at www.janelcorp.com. The Company intends to disclose, if required, any future amendments to, or waivers from, the code of business conduct and ethics within four business days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC.

Corporate Governance Guidelines

The Company’s board of directors has adopted corporate governance guidelines that serve as a flexible framework within which its board of directors and its committees operate. These guidelines cover a number of areas, including the size and composition of the board of directors, director selection criteria and qualifications, the agenda for board meetings, board member access to management and independent advisors, director compensation, director orientation and continuing education and annual board and committee self-evaluations. A copy of the corporate governance guidelines is available on the Company’s website at www.janelcorp.com.

Communications with the Board

Any stockholder desiring to contact the board, or any specific director(s), may send written communications to: Board of Directors (Attention: (Name(s) of director(s), as applicable)), c/o the Company’s Secretary, 80 Eighth Avenue, New York, New York 10011. Any proper communication so received will be processed by the Secretary. If it is unclear from the communication received whether it was intended or appropriate for the board, the Secretary will (subject to any applicable regulatory requirements) use his or her judgment to determine whether such communication should be conveyed to the board or, as appropriate, to the member(s) of the board named in the communication.

Leadership Structure and Risk Oversight

While the board believes that there are various structures which can provide successful leadership to the Company, the Company’s executive functions are carried out by Ms. Schulte, the Company’s President and Chief Executive Officer, who also serves as chair of the Company’s board of directors and, together with the other directors, brings experience, oversight and expertise to the management of the Company.

The board believes that, due to the small size of the Company, this leadership structure best serves the Company and its stockholders. Management is responsible for the day-to-day management of risks the Company faces, while the board has collective responsibility for the oversight of risk management. In its risk oversight role, the board has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, management discusses with the board the risks facing the Company and its strategy for managing them.

ITEM 11
EXECUTIVE COMPENSATION

Introduction
(actual dollar amounts)

The following table provides summary information concerning compensation paid or accrued by us to our Chief Executive Officer and President, our Chief Information Officer and our Principal Financial Officer, Treasurer and Secretary. We refer to these individuals collectively as the “named executive officers”.

40
Summary Compensation Table

The following table sets forth information regarding the total compensation paid or earned by the named executive officers as compensation for their services in all capacities during the fiscal years ended September 30, 2021 and 2020 (actual dollar amounts):

Name and Principal Position
Year
 
Base
Salary ($)
   
Bonus ($)
   
All Other
Comp. ($)
   
Total ($)
 
Dominique Schulte, Chief Executive Officer and President
2021
   
50,000
     
—
     
16,478
(1)

   
66,478
 

2020
   
37,311
     
—
     
9,625
       
46,936
 
                                     
Brendan J. Killackey, Chief Information Officer
2021
   
160,000
     
44,000
     
11,659
(2)

   
215,659
 
 
2020
   
155,000
     
20,000
     
11,362
       
186,362
 
Vincent A. Verde, Principal Financial Officer,
                                   
Treasurer and Secretary
2021
   
215,000
     
25,000
     
27,438
(3)

   
267,438
 
 
2020
   
200,000
     
30,000
     
15,168
       
245,168
 


(1)
Amounts reported under all other compensation for the fiscal year ended September 30, 2021 include $15,860 of medical insurance premiums and $618 of retirement contributions paid for the fiscal year ended 2021.

(2)
Includes $5,865 of medical insurance premiums and $5,794 of 401(k) contributions paid on behalf of Mr. Killackey for the fiscal year ended 2021. Mr. Killackey was elected to the Company’s board of directors in September 2014 and served as Chief Executive Officer from February 2015 through September 2018. Effective October 1, 2018, Mr. Killackey was appointed as the Company’s Chief Information Officer.

(3)
Amounts reported under all other compensation for the fiscal year ended September 30, 2021 include $17,948 of medical insurance premiums and $9,490 of 401(k) contributions paid on behalf of Mr. Verde for the fiscal year ended 2021.

Long-Term Incentive Plan Awards

While the Company has adopted the Amended and Restated 2017 Equity Incentive Plan, pursuant to which certain stock awards may be granted to the Company’s directors, officers, employees and consultants, our current intent is to utilize this plan only to make annual equity awards to the Company’s non-employee directors.

Savings and Stock Option Plans

401(k) and Profit-Sharing Plan
 (actual dollar amounts)

The Company maintains a qualified retirement plan, commonly referred to as a 401(k) plan covering substantially all full-time employees under each segment.

The Janel Corporation 401(k) Plan allows for employee salary deferrals including Roth 401(k) deferrals, employer matching contributions, employer profit sharing contributions and employee rollovers. The Janel Corporation 401(k) Plan provides for participant contributions of up to 50% of annual compensation (not to exceed the IRS limit), as defined by the plan. The Company contributes an amount equal to 50% of the participant’s first 6% of contributions.

The combined expenses charged to operations for contributions made to the plans for the benefit of the employees for the fiscal years ended September 30, 2021 and 2020 were approximately $288,000 and $196,000 respectively.

The administrative expense charged to operations for the fiscal years ended September 30, 2021 and 2020 aggregated approximately $59,000 and $57,000, respectively.

Equity Plans

On October 30, 2013, the board of directors adopted Janel’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries.  The exercise price and other terms of any nonqualified option granted under the 2013 Option Plan is determined by the Compensation Committee of the board of directors.

41
On May 12, 2017, the board of directors adopted the Company’s 2017 Plan pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to up to 100,000 shares of the Company’s common stock could be granted to directors, officers, employees of and consultants to the Company.

On May 8, 2018, the board of directors of the Company adopted the Amended 2017 Plan. The provisions and terms of the Amended 2017 Plan were the same as those in the 2017 Plan, except that the Amended 2017 Plan removed the ability of the Company to award incentive stock options and removed the requirement for stockholder approval of the 2017 Plan.

On September 21, 2021, the board of directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended and Restated Plan”), which amended and restated the prior Amended 2017 Plan and pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights of the Company’s Common Stock, par value $.001 per share (“Common Stock”), may be granted to employees, directors and consultants to the Company and its subsidiaries. The provisions and terms of the Amended and Restated Plan are substantially the same as those in the Amended 2017 Plan except that the Amended and Restated Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended and Restated Plan from 100,000 to 200,000 shares of Common Stock of the Company and adopted certain other non-substantive amendments.  Participants and all terms of any grant under the Amended and Restated Plan are in the discretion of the Company’s Compensation Committee.

Outstanding Equity Awards at September 30, 2021

None of our named executive officers had any outstanding stock awards at September 30, 2021.

ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following tables set forth information concerning beneficial ownership of shares of common stock outstanding as of September 30, 2021. For purposes of calculating beneficial ownership, Rule 13d-3 of the Exchange Act requires inclusion of shares of common stock that may be acquired within sixty days of the stated date. Unless otherwise indicated in the footnotes to a table, beneficial ownership of shares represents sole voting and investment power with respect to those shares.

Certain Beneficial Owners

The following table reflects the names and addresses of the only persons or entities known to the Company to be the beneficial owners of 5% or more of the outstanding shares of the Company’s common stock as of September 30, 2021.

Name and address of Beneficial Owner (1)
 
Shares
Beneficially
Owned
   
Percent
of Class
 
Oaxaca Group L.L.C. (3)
   
447,647
     
47.5
%
John J. Gonzalez, II (2)
   
105,001
     
10.6
%
John Eidinger
   
90,499
     
9.6
%
Brendan J. Killackey
   
56,000
     
5.8
%

(1)
The address of each person and entity included in this table is 80 Eighth Avenue, New York, NY 10011
(2)
Includes 45,001 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(3)
These shares are held by Oaxaca Group L.L.C. Ms. Dominique Schulte is the sole member of Oaxaca Group L.L.C. and, therefore, shares beneficial ownership of the shares.

Management

The following table sets forth information with respect to the beneficial ownership of the shares of common stock as of September 30, 2021 by each “named executive officer”, each current director and each nominee for election as a director and all directors and executive officers of the Company as a group. An asterisk (*) indicates ownership of less than 1%.

42
Name of Beneficial Owner
 
Shares
Beneficially
Owned
   
Percent
of Class
 
Dominique Schulte(1)
   
447,647
     
47.5
%
John J. Gonzalez, II(2)
   
105,001
     
10.6
%
Brendan J. Killackey(4)
   
56,000
     
5.8
%
Gerard van Kesteren(3)
   
45,388
     
4.8
%
Gregory J. Melsen(5)
   
6,876
     
1.0
%
Vincent A. Verde
   
—
     
—
 
Total
   
660,912
     
69.7
%

(1)
These shares are held by Oaxaca Group L.L.C. Ms. Schulte is the sole member of Oaxaca Group L.L.C. and, therefore, shares beneficial ownership of the shares.
(2)
Includes 45,001 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(3)
Includes 2,499 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(4)
Includes 13,000 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.
(5)
Includes 6,876 shares of common stock issuable upon the exercise of stock options that may be exercised within 60 days of September 30, 2021.

Equity Compensation Plan Information

The following table provides information, as of September 30, 2021, with respect to all compensation arrangements maintained by the Company under which shares of common stock may be issued:
   
Column A
   
Column B
   
Column C
 
Plan Category: Equity Compensation plans not approved by security holders:
 
Number of
securities
to be issued,
upon
exercise
of
outstanding
options,
warrants
and rights
   
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and rights
   
Number of
securities
remaining
available
for future
issuance
under equity
compensation
plans
 
2013 Stock Option Plan (1)
   
37,121
   
$
6.13
     
33,379
 
Amended and Restated 2017 Equity Incentive Plan (2)
   
21,873
   
$
8.69
     
103,823
 
John Joseph Gonzalez, II – Options
   
40,000
   
$
4.25
     
—
 
Total
   
98,994
   
$
5.93
     
137,202
 

(1)
On October 30, 2013, the board of directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries. The exercise price and other terms of any nonqualified option granted under the 2013 Option Plan is determined by the Compensation Committee (the “Committee”) of the board of directors or, if the board does not create the Committee, by the board which shall function as the Committee.

(2)
On May 12, 2017, the board of directors adopted the Company’s 2017 Plan pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to up to 100,000 shares of the Company’s common stock could be granted to directors, officers, employees of and consultants to the Company. On May 8, 2018, the board of directors of Janel adopted the Amended 2017 Plan. The provisions and terms of the Amended 2017 Plan were the same as those in the 2017 Plan, except that the Amended 2017 Plan removed the ability of Janel to award incentive stock options and removed the requirement for stockholder approval of the 2017 Plan.  On September 21, 2021, the board of directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan.

43
The provisions and terms of the Amended and Restated 2017 Janel Corporation Equity Incentive Plan are substantially the same as those in the Amended 2017 Plan except that the Amended and Restated 2017 Janel Corporation Equity Incentive Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended Plan from 100,000 to 200,000 shares of Common Stock of the Company.

ITEM 13
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Related Party Transactions

We are not aware of any transactions since October 1, 2020 or any proposed transactions in which the Company was a party where the amount involved exceeded the lesser of 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years and $120,000, and in which a director, executive officer, holder of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest.

ITEM 14
PRINCIPAL ACCOUNTING FEES AND SERVICES

The firm of Prager Metis CPAs, LLC served as the Company’s sole independent public accountants for the fiscal years ended September 30, 2021 and 2020.

Audit Fees

Audit fees include fees paid and accrued by the Company to the Auditors in connection with the annual audit of the Company’s consolidated financial statements, and review of the Company’s interim financial statements.

Audit fees also include fees for services performed by the Auditors that are closely related to the audit and in many cases could only be provided by the Auditors. Such services include consents related to SEC and other regulatory filings.

The aggregate fees billed to the Company by the Auditors, as applicable, for audit services rendered to the Company totaled $292,500 for the year ended September 30, 2021 and $280,770 for the year ended September 30, 2020.

Audit Related Fees

Audit related services include agreed upon procedures. The aggregate fees billed and accrued to the Company by Prager Metis CPAs, LLC for audit related fees rendered to the Company for the fiscal years ended September 30, 2021 and 2020 totaled $41,500 and $12,000, respectively.

Tax Fees

Tax fees include corporate tax compliance, counsel and advisory services. The aggregate fees billed to the Company by the Auditors, as applicable, for the tax related services rendered to the Company for the fiscal years ended September 30, 2021 and 2020 totaled $48,741 and $20,875, respectively.

All Other Fees

The Auditors did not bill other fees to the Company for fiscal years ended September 30, 2021 and 2020.

Approval of Independent Auditor Services and Fees

The Audit Committee reviews all fees charged by the Company’s independent auditors and actively monitors the relationship between audit and non-audit services provided. The Audit Committee must pre-approve all audit and non-audit services provided by the Company’s independent auditors and fees charged.

PART IV

ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)
Documents filed as part of this report

44
(1)
Financial Statements.

The Consolidated Financial Statements filed as part of this report are listed on the Table of Contents to Consolidated Financial Statements.

All other schedules are omitted because they are not applicable, are not required, or because the required information is included in the consolidated financial statements or notes thereto.

(b)
Exhibits

Exhibit
No.
 
Description
2.1
 
Agreement and Plan of Merger, dated May 8, 2018, by and among Antibodies Incorporated, AB HoldCo, Inc., AB Merger Sub, Inc., Richard Krogsrud, as Representative of the Stockholders, and the Rollover Stockholders signatory thereto (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed May 11, 2018)
3.1
 
Articles of Incorporation of Wine Systems Design, Inc. (predecessor name) (incorporated by reference to Exhibit 3A to Wine Systems Design, Inc. (predecessor name) Registration Statement on Form SB-2 filed May 10, 2001)
3.2
 
Amended and Restated By-Laws of Janel Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed November 1, 2013)
3.3
 
Certificate of Designations of Series B Convertible Stock (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed October 22, 2007)
3.4
 
Certificate of Designations of Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 29, 2014)
3.5
 
Certificate of Change filed Pursuant to NRS 78.209 for Registrant (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed April 21, 2015)
3.6
 
Certificate of Amendment to Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed April 21, 2015)
3.7
 
Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed March 25, 2016)
3.8
 
Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017)
3.9
 
Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K/A filed October 17, 2017)
4.1
 
Description of Registrant’s Securities (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020)
† 10.1
 
Janel World Trade, Ltd. 2013 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 1, 2013)
 
Loan and Security Agreement dated March 27, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 2, 2014)
 
First Amendment to the Loan and Security Agreement, dated September 10, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 16, 2014)
 
Second Amendment to the Loan and Security Agreement, dated September 25, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 30, 2014)
 
Third Amendment to the Loan and Security Agreement, dated October 9, 2014 between Janel World Trade, Ltd. and its subsidiaries, and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 15, 2014)

45
Exhibit
No.
 
Description
 
Fourth Amendment to the Loan and Security Agreement and Demand Secured Promissory Note, dated August 18, 2015, by and among Janel Corporation (formerly, Janel World Trade, Ltd.), Janel Group, Inc. (formerly, the Janel Group of New York), The Janel Group of Illinois, The Janel Group of Georgia, The Janel Group of Los Angeles, Janel Ferrara Logistics, LLC, Alpha International, LP, PCL Transport, LLC and Presidential Financial Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed August 20, 2015)
 
Amended and Restated Demand Secured Promissory Note made by Janel Corporation (and its subsidiaries) in favor of Presidential Financial Corporation, dated August 18, 2015 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed August 20, 2015)
 
Credit Agreement, effective as of February 29, 2016, by and between Indco, Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed March 25, 2016)
 
Term Loan Promissory Note, effective as of February 29, 2016, made by Indco, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed March 25, 2016)
 
Revolving Loan Promissory Note, effective as of February 29, 2016, made by Indco, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed March 25, 2016)
 
Security Agreement, effective as of February 29, 2016, made by Indco and the Company, Inc. for the benefit of First Merchants Bank (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed March 25, 2016)
 
Continuing Guaranty Agreement, effective as of February 29, 2016, made by Janel Corporation for the benefit of First Merchants Bank (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed March 25, 2016)
 
Agreement of Lease dated January 2, 2015 between 303 Merrick LLC and The Janel Group of New York, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2014)
† 10.14
 
Janel Corporation 2017 Amended and Restated Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 11, 2018)
† 10.15
 
Restricted Stock Award Agreement between Janel Corporation and Gerard van Kesteren dated May 12, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 5, 2017)
 
Loan and Security Agreement, effective as of October 17, 2017, by and between Janel Corporation, Janel Group, Inc., PCL Transport, LLC, Janel Alpha GP, LLC, W.J. Byrnes & Co., Liberty International, Inc., and The Janel Group of Georgia, Inc., and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 17, 2017)
 
Revolving Credit Note, effective as of October 17, 2017 payable to Santander Bank, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 17, 2017)
 
First Amendment to the Loan and Security Agreement, dated March 21, 2018, by and among Janel Group, Inc., PCL Transport, LLC, Janel Alpha GP, LLC, W.J. Byrnes & Co., Inc., Liberty International, Inc., The Janel Group Georgia, Inc., Aves Labs, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report in Form 8-K filed March 23, 2018)
 
Limited Waiver, Joiner and Second Amendment, dated November 20, 2018, to the Loan and Security Agreement, by and among Janel Group, Inc., The Janel Group of Georgia, Inc., Aves Labs, Inc., Honor Worldwide Logistics LLC, HWL Brokerage LLC, Global Trading Resources, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 to Company’s Current Report on Form 8-K filed November 26, 2018)
 
Redemption Agreement, dated September 24, 2018, among the Company and the holders of all of the issued and outstanding shares of the Company’s Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 28, 2018)
 
Business Loan Agreement, dated June 14, 2018, by and between AB Merger Sub, Inc. and First Northern Bank of Dixon (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Promissory Note, dated June 14, 2018, made by AB Merger Sub, Inc. payable to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Deed of Trust, dated June 14, 2018, by Antibodies Incorporated, as Trustor (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Commercial Guaranty, dated June 14, 2018, from Janel Corporation (as Guarantor) to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Commercial Guaranty, dated June 14, 2018, from AB HoldCo, Inc. (as Guarantor) to First Northern Bank of Dixon (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed June 27, 2018)

46
Exhibit
No.
 
Description
 
Note Purchase Agreement, dated June 22, 2018, by and between AB HoldCo, Inc. and Richard Krogsrud (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Note Purchase Agreement, dated June 22, 2018, by and between AB HoldCo, Inc. and the Michael L. Smith and Ardyce F. Smith 1994 Revocable Trust (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Subordinated Promissory Note, dated June 22, 2018, made by AB HoldCo, Inc. payable to Richard Krogsrud (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Subordinated Promissory Note, dated June 22, 2018, made by AB HoldCo, Inc. payable to the Michael L. Smith and Ardyce F. Smith 1994 Revocable Trust (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed June 27, 2018)
 
Amendment No. 1 to Credit Agreement, effective as of August 30, 2019, by and between Indco, Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 6, 2019)
 
Term Loan Promissory Note, effective as of August 30, 2019, made by Indco, Inc. payable to First Merchants Bank (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 6, 2019).
 
Revolving Loan Promissory Note, effective as of August 30, 2019 made by Indco, Inc. payable to First Merchant Bank (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on September 6, 2019).
 
Pledge Agreement, effective as of August 30, 2019, by Janel Corporation to First Merchant Bank (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on September 6, 2019)
† 10.34
 
Consulting Agreement, dated February 26, 2017, between Janel Corporation and John J. Gonzalez, II (incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K for the year ended September 30, 2018 filed on July 26, 2019).
† 10.35
 
Consulting Agreement, dated September 28, 2016, between Janel Corporation and Gerard van Kesteren (incorporated by reference to Exhibit 10.31 of the Company’s Form 10-K for the year ended September 30, 2018 filed on July 26, 2019)
 
Purchase and Sale Agreement dated February 4, 2020 by and between 4040 Earnings Way, LLC, and Indco, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 4, 2020, as amended by the Company’s Current Report on Form 8-K/A filed March 6, 2020)
 
Third Amendment to Loan and Security Agreement dated March 4, 2020 by and between Santander Bank, N.A., Janel Group, Inc., Honor Worldwide Logistics LLC and Janel Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 4, 2020, as amended by the Company’s Current Report on Form 8-K/A filed March 6, 2020)
 
Loan Agreement dated April 19, 2020, by and between Janel Corporation and Santander Bank, N.A., together with the U.S. Small Business Administration Note dated April 19, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020)
 
Amendment No. 2 to Credit Agreement effective as of July 1, 2020, by and between Indco Inc. and First Merchants Bank (incorporated by reference to Exhibit 10.39 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020)
 
Consent, Joinder and Fourth Amendment to the Loan and Security Agreement dated as of July 22, 2020 by and among Janel Group, Inc., Atlantic Customs Brokers, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.40 of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020)

Consent, Joinder and Fifth Amendment to the Loan and Security Agreement dated as of December 4, 2020 by and among Janel Group, Inc., Atlantic Customs Brokers, Inc., Janel Corporation and Santander Bank, N.A. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2020)
 
Subscription Agreement for sale of Series C Preferred Stock dated as of September 29, 2020 between Janel Corporation and Oaxaca Group LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 2, 2020)
 
Membership Interest Purchase Agreement, by and between Janel Group, Inc., Expedited Logistics and Freight Services, LLC and the principal members of ELFS dated September 21, 2021 (filed herewith) *

47
Exhibit
No.
 
Description
 
Amended and Restated Loan and Security Agreement, by and among Santander Bank, N.A., as lender, and Janel Group, Inc., Expedited Logistics and Freight Services, LLC, a Texas limited liability company, and ELFS Brokerage, LLC (collectively as borrowers) and Janel Corporation and Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, as loan party obligors dated September 21, 2021 (filed herewith)
 
Amended and Restated 2017 Janel Corporation Equity Incentive Plan dated September 21, 2021 (filed herewith)
 
Amendment to Certificate of Designation After Issuance of Class or Series pursuant to NRS 78.1955 for Series C Cumulative Preferred Stock (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 5, 2021)
 
Subscription Agreement for sale of Series C Preferred Stock dated as of September 30, 2021 between Janel Corporation and Oaxaca Group LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 5, 2021)
 
Letter from Crowe LLP to the Securities and Exchange Commission, dated February 22, 2019 (incorporated by reference to Exhibit 16.1 to the Company’s Current Report on Form 8-K filed on February 22, 2019).
21
 
Subsidiaries of the Registrant (filed herewith)
 
Consent of Prager Metis CPAs, LLC (filed herewith)
 
Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer (filed herewith)
 
Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer (filed herewith)
 
Section 1350 Certification of Principal Executive Officer (furnished herewith)
 
Section 1350 Certification of Principal Financial Officer (furnished herewith)
101
 
Interactive data files providing financial information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2021 and September 30, 2020, (ii) Consolidated Statements of Operations for the years ended September 30, 2021 and 2020, (iii) Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2021 and 2020, (iv) Consolidated Statements of Cash Flows for the years ended September 30, 2021 and 2020, and (v) Notes to Consolidated Financial Statements (filed herewith)
104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101) (filed herewith)

†
Represents management contract, compensatory plan or arrangement in which directors and/or executive officers are entitled to participate.

*
Schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Registration S-K. The Registrant hereby agrees to furnish a copy of any omitted schedules to the Commission upon request

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

ITEM 16
FORM 10-K SUMMARY

None.

48
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Janel Corporation has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 
JANEL CORPORATION
(Registrant)
     
Date: December 23, 2021
By:
/s/ Dominique Schulte
 
Dominique Schulte
     
 
Director, Board Chair, President and Chief Executive Officer
(Principal Executive Officer)
     
Date: December 23, 2021
By:
/s/ Vincent A. Verde
 
Vincent A. Verde
     
 
Principal Financial Officer, Treasurer and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature
 
Title
 
Date
         
/s/John J. Gonzalez, II
 
Director
 
December 23, 2021
John J. Gonzalez, II
       
         
/s/Brendan J. Killackey
 
Director
 
December 23, 2021
Brendan J. Killackey
       
         
/s/Gregory J. Melsen
 
Director
 
December 23, 2021
Gregory J. Melsen
       
         
/s/Karen Miller Ryan
 
Director
 
December 23, 2021
Karen Miller Ryan
       
   
   
/s/Gerard van Kesteren
 
Director
 
December 23, 2021
Gerard van Kesteren        

49


F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Stockholders and the Board of
Directors of Janel Corporation and Subsidiaries
 
Opinion on the Financial Statements
 
We have audited the accompanying consolidated balance sheets of Janel Corporation and Subsidiaries (the “Company”) as of September 30, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years ended September 30, 2021 and 2020, and the related notes to the consolidated financial statements (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2021 and 2020, and the results of its operations, stockholders’ equity and its cash flows for the years ended September 30, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
 
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters
 
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to an account or disclosure that is material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of the acquisition-date fair values of customer relationship intangible asset

Critical Audit Matter Description

As discussed in Notes 2 to the consolidated financial statements, on September 21, 2021, the Company completed the acquisition of all of the membership interests of Expedited Logistics and Freight Services, LLC (“ELFS”) and ELFS Brokerage LLC, a wholly-owned subsidiary of ELFS.  As a result of the transaction, the Company acquired customer relationships representing those relationships that cause customers to do business with an entity on an ongoing basis.  The acquisition-date fair value for the customer relationships asset is included in intangibles acquired of $10 million.
 
We identified the evaluation of the acquisition-date fair value of the customer relationship intangible asset as a critical audit matter. A high degree of subjective auditor judgment was involved in evaluating certain inputs to the multi-period excess earnings method used to determine the fair value of the customer relationships intangible asset.  The key inputs used in the multi-period excess earnings method included attrition rates, discount rates, and forecasted revenue growth and EBITDA. There was limited observable market information and the calculated fair value of the customer relationships intangible asset was sensitive to possible changes in these key inputs.

How the Critical Audit Matter Was Addressed in the Audit
 
The primary procedures we performed to address this critical audit matter included the following. In connection with our assessment of the inputs used in the valuation, we compared attrition rates, forecasted revenue growth rates and EBITDA as a percentage of revenue to historical actual results and performing sensitivity analyses to assess the impact of changes to the forecasted revenue growth rates. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

 
•
Evaluating the selected discount rates by comparing them against discount rate ranges that were independently developed using publicly available market data;
 
•
Assessing the forecasted revenue growth rates and EBITDA as a percentage of revenue by comparing them against revenue growth rates and EBITDA as a percentage of revenue of publicly available market data for comparable companies;
 
•
Reviewing the mathematical accuracy of the calculations of goodwill and trademark impairment used by management.
 
/s/ Prager Metis CPAs, LLC
 
We have served as the Company’s auditor since 2019
Basking Ridge, New Jersey
December 23, 2021

F-2
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 
   
September 30,
 
   
2021
   
2020
 
ASSETS
           
Current Assets:
           
Cash
 
$
6,234
   
$
3,349
 
Accounts receivable, net of allowance for doubtful accounts
   
52,312
     
20,245
 
Inventory, net
   
3,227
     
3,666
 
Prepaid expenses and other current assets
   
3,002
     
433
 
Total current assets
   
64,775
     
27,693
 
Property and Equipment, net
   
4,977
     
4,977
 
Other Assets:
               
Intangible assets, net
   
24,173
     
13,333
 
Goodwill
   
18,486
     
14,146
 
Operating lease right of use asset
   
2,936
     
2,621
 
Security deposits and other long-term assets
   
577
     
265
 
Total other assets
   
46,172
     
30,365
 
Total assets
 
$
115,924
   
$
63,035
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current Liabilities:
               
Line of credit
 
$
29,637
   
$
8,447
 
Accounts payable - trade
   
37,243
     
20,769
 
Accrued expenses and other current liabilities
   
6,311
     
3,007
 
Dividends payable
   
2,427
     
1,661
 
Current portion of earnout
    1,054
      —
 
Current portion of Paycheck Protection Program (PPP) loan
   
—
     
1,913
 
Current portion of deferred acquisition payments
   
188
     
178
 
Current portion of subordinated promissory note – related party
   
550
     
504
 
Current portion of long-term debt
   
868
     
866
 
Current portion of operating lease liabilities
   
1,281
     
720
 
Total current liabilities
   
79,559
     
38,065
 
Other Liabilities:
               
Long-term debt
   
4,744
     
6,432
 
Long-term portion of earnout
    2,546
      —
 
Long-term portion of Paycheck Protection Program (PPP) loan
   
—
     
960
 
Subordinated promissory notes – related party
   
5,525
     
39
 
Long-term portion of deferred acquisition payments
   
183
     
372
 
Mandatorily redeemable non-controlling interest
   
783
     
604
 
Deferred income taxes
   
2,299
     
1,569
 
Long-term operating lease liabilities
   
1,751
     
1,924
 
Other liabilities
   
415
     
388
 
Total other liabilities
   
18,246
     
12,288
 
Total liabilities
   
97,805
     
50,353
 
Stockholders’ Equity:
               
Preferred Stock, $0.001 par value; 100,000 shares authorized
               
Series B 5,700 shares authorized, and 31 shares issued and outstanding as of September 30, 2021 and 2020, respectively
    —
     
—
 
Series C 30,000 shares authorized, and 20,960 and 19,760 shares issued and outstanding at September 30, 2021 and September 30, 2020, respectively, liquidation value of $12,907 and $11,541 at September 30, 2021 and September 30, 2020, respectively
   
—
     
—
 
Common stock, $0.001 par value; 4,500,000 shares authorized, 962,207 issued and 942,207 outstanding as of September 30, 2021 and 918,652 issued and 898,652 outstanding as of September 30, 2020, respectively
   
1
     
1
 
Paid-in capital
   
14,838
     
14,604
 
Common treasury stock, at cost, 20,000 shares
   
(240
)
   
(240
)
Accumulated earnings (deficit)
   
3,520
     
(1,683
)
Total stockholders’ equity
   
18,119
     
12,682
 
Total liabilities and stockholders’ equity
 
$
115,924
   
$
63,035
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F-3
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)

   
Year Ended September 30,
 
   
2021
   
2020
 
Revenue
 
$
146,419
   
$
82,429
 
Forwarding expenses and cost of revenues
   
113,986
     
58,908
 
Gross profit
   
32,433
     
23,521
 
Cost and Expenses:
               
Selling, general and administrative
   
27,362
     
24,290
 
Amortization of intangible assets
   
1,120
     
955
 
Total Costs and Expenses
   
28,482
     
25,245
 
Income (loss) from operations
   
3,951
     
(1,724
)
Other Items:
               
Interest expense
   
(589
)
   
(521
)
Gain on Paycheck Protection Program (PPP) loan forgiveness
    2,895
         
Change in fair value of mandatorily redeemable non-controlling interest
   
(93
)
   
15
 
Income (Loss) Before Income Taxes
   
6,164
     
(2,230
)
Income tax (expense) benefit
   
(961
)
   
505
 
Net Income (Loss)
   
5,203
     
(1,725
)
Preferred stock dividends
   
(766
)
   
(675
)
Net Income (Loss) Available to Common Stockholders
 
$
4,437
   
$
(2,400
)
Net Income (Loss) per share
               
Basic
 
$
5.54
   
$
(1.98
)
Diluted
 
$
5.26
   
$
(1.98
)
Net income (loss) per share attributable to common stockholders:
               
Basic
 
$
4.73
   
$
(2.75
)
Diluted
 
$
4.48
   
$
(2.75
)
Weighted average number of shares outstanding:
               
Basic
   
938,478
     
872,122
 
Diluted
   
989,488
     
872,122
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F-4
 JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share and per share data)

   
PREFERRED
STOCK
   
COMMON
STOCK
   
PAID-IN CAPITAL
   
COMMON
TREASURY
STOCK
   
ACCUMULATED
EARNING
(DEFICIT)
   
TOTAL
EQUITY
 
   
Shares
    $
   
Shares
    $
    $
   
Shares
    $
    $
    $
 
Balance - September 30, 2019
   
20,631
   
$
—
     
863,812
   
$
1
   
$
15,075
     
20,000
   
$
(240
)
 
$
42
   
$
14,878
 
Net (Loss)
   
—
     
—
     
—
     
—
     
—
     
—
     
—
     
(1,725
)
   
(1,725
)
Dividends to preferred stockholders
   
—
     
—
     
—
     
—
     
(675
)
   
—
     
—
     
—
     
(675
)
Preferred C shares purchased
    (890 )     —
      —
      —
      (445 )     —
      —
      —
      (445 )
Preferred C shares sold
    650       —       —       —       325       —
      —
      —
      325
 
Preferred B shares converted
   
(600
)
   
—
     
6,000
     
—
     
—
     
—
     
—
     
—
     
—
 
Restricted stock issued
   
—
     
—
     
15,000
     
—
     
—
     
—
     
—
     
—
     
—
 
Vested restricted stock unissued.
   
—
     
—
     
—
     
—
     
(147
)
   
—
     
—
     
—
     
(147
)
Stock based compensation
   
—
     
—
     
—
     
—
     
199
     
—
     
—
     
—
     
199
 
Stock option exercise
   
—
     
—
     
33,840
     
—
     
272
     
—
     
—
     
—
     
272
 
Balance - September 30, 2020
   
19,791
   
$
—
     
918,652
   
$
1
   
$
14,604
     
20,000
   
$
(240
)
 
$
(1,683
)
 
$
12,682
 
Net Income
   
—
     
—
     
—
     
—
     
—
     
—
     
—
     
5,203
     
5,203
 
Dividends to preferred stockholders
   
—
     
—
     
—
     
—
     
(766
)
   
—
     
—
     
—
     
(766
)
Preferred C shares sold
   
1,200
     
—
     
—
     
—
     
600
     
—
     
—
     
—
     
600
 
Issuance of restricted stock issued
   
—
     
—
     
35,000
     
—
     
305
     
—
     
—
     
—
     
305
 
Stock based compensation
   
—
     
—
     
—
     
—
     
48
     
—
     
—
     
—
     
48
 
Stock option exercise
   
—
     
—
     
8,555
     
—
     
47
     
—
     
—
     
—
     
47
 
Balance - September 30, 2021
   
20,991
   
$
—
     
962,207
   
$
1
   
$
14,838
     
20,000
   
$
(240
)
 
$
3,520
   
$
18,119
 

The accompanying notes are an integral part of these consolidated financial statements.

F-5
JANEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
   
Year Ended
September 30,
 
   
2021
   
2020
 
Cash Flows From Operating Activities:
           
Net income (loss)
 
$
5,203
   
$
(1,725
)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
               
Provision for uncollectible accounts, net of recoveries
   
70
     
133
 
Depreciation and amortization
   
371
     
274
 
Deferred income tax
   
730
     
(610
)
Amortization of intangible assets
   
1,120
     
955
 
Cost recognized on the sale of acquired inventory
   
708
     
876
 
Amortization of loan costs
   
9
     
9
 
Stock based compensation
   
115
     
269
 
Change in fair value of mandatorily redeemable noncontrolling interest
   
179
     
(15
)
Paycheck Protection Program (PPP) loan forgiveness
    (2,895 )     —  
Changes in operating assets and liabilities, net of effects of acquisitions:
               
Accounts receivable
   
(20,698
)
   
2,494
 
Inventory
   
(43
)
   
(171
)
Prepaid expenses and other current assets
   
(1,475
)
   
99
 
Security deposits and other long-term assets
   
14
     
(31
)
Accounts payable and accrued expenses
   
16,292
     
(3,188
)
Other liabilities
   
99
     
77
 
Net cash used in operating activities
   
(201
)
   
(554
)
Cash Flows From Investing Activities:
               
Acquisition of property and equipment, net of disposals
   
(234
)
   
(1,297
)
Acquisitions
   
(15,874
)
   
(247
)
Net cash used in investing activities
   
(16,108
)
   
(1,544
)
Cash Flows From Financing Activities:
               
Dividends paid to preferred stockholders
   
—
     
(55
)
Repayments of (borrowings under) term loan
   
(1,673
)
   
6
 
Proceeds from Paycheck Protection Program (PPP) loan
   
—
     
2,726
 
Proceeds from stock option exercise
   
46
     
272
 
Line of credit, borrowing (repayment), net
   
21,191
     
55
 
Repurchase of Series C Preferred Stock
   
—
     
(445
)
Restricted Stock Issued
    305
      —
 
Proceeds from sale of Series C Preferred Stock
   
600
     
325
 
Repayment of subordinated promissory notes
   
(1,275
)
   
(150
)
Deferred acquisition payments
   
—
     
550
 
Net cash provided by financing activities
   
19,194
     
3,284
 
Net increase in cash
   
2,885
     
1,186
 
Cash at beginning of the period
   
3,349
     
2,163
 
Cash at end of period
 
$
6,234
   
$
3,349
 
Supplemental Disclosure of Cash Flow Information:
               
Cash paid during the period for:
               
Interest
 
$
418
   
$
511
 
Income taxes
 
$
82
   
$
115
 
Non-cash investing activities:
               
Contingent earn-out acquisition
 
$
3,600
   
$
—
 
Subordinated Promissory notes of ELFS
  $
4,837
    $
—
 
Subordinated Promissory notes of ICT
  $
1,791       —  
PPP loan assumed
  $
—     $
135  
Deferred payment on acquisition
 
$
—
   
$
550
 
Non-cash financing activities:
               
Dividends declared to preferred stockholders
 
$
766
   
$
675
 
Vested restricted stock unissued
 
$
—
   
$
147
 

The accompanying notes are an integral part of these consolidated financial statements.
 
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands except share and per share data)
 
1
SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
 
Business description
 
Janel is a holding company with subsidiaries in three business segments: Logistics (previously known as Global Logistics Services), Manufacturing and Life Sciences. In the fourth quarter of 2021, our former Global Logistics Services segment was renamed “Logistics”; this change related to the name only and had no impact on the Company’s previously reported historical financial position, results of operations, cash flow or segment level results. Management at the holding company focuses on significant capital allocation decisions and corporate governance and supporting Janel’s subsidiaries where appropriate. Janel expects to grow organically and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
 
Logistics
 
The Company’s Logistics segment is comprised of several wholly-owned subsidiaries.  The Company’s Logistics business is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via air-, ocean- and land-based carriers, customs brokerage services, warehousing and distribution services, trucking, and other value-added logistics services.  In addition to these revenue streams are accessorial revenue to the core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges.

On September 21, 2021, the Company completed a business combination whereby it acquired all of the membership interests of Expedited Logistics and Freight Services, LLC. (“ELFS”) and related subsidiaries, which we include in our Logistics segment.

On December 31, 2020, the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities of W.R. Zanes & Co. of LA., Inc. (“W.R. Zanes”), which we include in our Logistics segment.

On July 23, 2020, the Company acquired all of the outstanding common stock of Atlantic Customs Brokers, Inc. (“ACB”), which we include in our Logistics segment.
 
Manufacturing

The Company’s manufacturing segment is comprised of Indco, Inc. (“Indco”), a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco’s customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders.

Life Sciences

The Company’s Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company’s Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences business also produces products for other life science companies on an original equipment manufacturer (“OEM”) basis.

On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC. (“ICT”), which we include in our Life Sciences segment.

Basis of consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as Indco, of which Janel owns 90.68%, with a non-controlling interest held by existing Indco management. The Indco non-controlling interest is mandatorily redeemable and is recorded as a liability. All intercompany transactions and balances have been eliminated in consolidation.
 
F-7
Uses of estimates in the preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements, as well as the reported amounts of revenues and expenses during the reporting period. The most critical estimates made by the Company are those relating to accounts receivables valuation, the useful lives of long-term assets, accrual of cost related to ancillary services the Company provides, accrual of tax expense on an interim basis and potential impairment of goodwill and intangible assets with indefinite lives, long-lived assets impairment.

Cash

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250. The Company’s accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.

Accounts receivable and allowance for doubtful accounts receivable

Accounts receivable are recorded at the contractual amount. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical collection experience, the age of the accounts receivable balances, credit quality of the Company’s customers, any specific customer collection issues that have been identified, current economic conditions, and other factors that may affect the customers’ ability to pay. The Company writes off accounts receivable balances that have aged significantly once all collection efforts have been exhausted and the receivables are no longer deemed collectible from the customer. The allowance for doubtful accounts as of September 30, 2021 and September 30, 2020 was $812 and $496, respectively.

Inventory

Inventory is valued at the lower of cost (using the first-in, first-out method) or net realizable value. The Company maintains an inventory valuation reserve to provide for slow moving and obsolete inventory, inventory not meeting quality control standards and inventory subject to expiration for its Life Science business. The products of the Life Science business require the initial manufacture of multiple batches to determine if quality standards can consistently be met. In addition, the Company will produce larger batches of established products than current sales requirements due to economies of scale. The manufacturing process for these products, therefore, has and will continue to produce quantities in excess of forecasted usage. The Company values acquired manufactured antibody inventory based on a three-year forecast. Inventory quantities in excess of the forecast are not valued due to uncertainty over salability.

Property and equipment and depreciation policy
 
Property and equipment are recorded at cost. Property and equipment acquired in business combinations are initially recorded at fair value. Depreciation is provided for in amounts sufficient to amortize the costs of the related assets over their estimated useful lives on the straight-line and accelerated methods for both financial reporting and income tax purposes. Maintenance and repairs are recorded as expenses when incurred.


Goodwill

The Company records as goodwill the excess of purchase price over the fair value of the tangible and identifiable intangible assets acquired in a business combination. Under current authoritative guidance, goodwill is not amortized but is tested for impairment annually as well as when an event or change in circumstance indicates impairment may have occurred. Goodwill is tested for impairment by comparing the fair value of the Company’s individual reporting units to their carrying amount to determine if there is potential goodwill impairment. If the fair value of the reporting unit is less than the carrying value, an impairment loss is recorded to the extent that the implied fair value of the goodwill of the reporting unit is less than its carrying value. If there is a material change in economic conditions, or other circumstances influencing the estimate of future cash flows or significantly affecting the fair value of our reporting units, the Company could be required to recognize impairment charges in the future.

During the fourth quarter of 2021, we changed the date of our annual impairment test of goodwill and indefinite-lived intangible assets from September 30 to July 1. The change in the impairment test date will lessen resource constraints that exist in connection with the Company’s year-end close and financial reporting process and provide for additional time to complete the required impairment testing. This change does not represent a material change to our method of applying an accounting principle, and therefore does not delay, accelerate or avoid an impairment charge.
F-8
We have determined that it is impracticable to objectively determine projected cash flows and related valuation estimates that would have been used as of each July 1 of prior reporting periods without the use of hindsight. As such, the change in annual impairment test date has been prospectively applied beginning July 1, 2021.

The fair value of our reporting units were in excess of carrying value and goodwill was not deemed to be impaired as of September 30, 2021 and 2020.

Intangibles and long-lived assets

Long-lived assets, including fixed assets and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In reviewing for impairment, the carrying value of such assets is compared to the estimated undiscounted future cash flows expected from the use of the assets and their eventual disposition.

If such cash flows are not sufficient to support the asset’s recorded value, an impairment charge is recognized to reduce the carrying value of the long-lived asset to its estimated fair value.

The determination of future cash flows, as well as the estimated fair value of long-lived assets, involves significant estimates on the part of management. If there is a material change in economic conditions, or other circumstances influencing the estimate of future cash flows or fair value, the Company could be required to recognize impairment charges in the future.

The Company concluded that the fair value of intangibles and long-lived assets were not deemed to be impaired as of September 30, 2021 and 2021.
 
Business segment information

The Company operates in three reportable segments: Logistics, Manufacturing and Life Sciences. The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance.

Revenue and revenue recognition

Logistics

Revenue Recognition

Revenue is recognized upon transfer of control of promised services to customers. With respect to its Logistics segment, the Company has determined that in general each shipment transaction or service order constitutes a separate contract with the customer. When the Company provides multiple services to a customer, different contracts may be present for different services.

The Company typically satisfies its performance obligations as services are rendered at a point in time. A typical shipment would include services rendered at origin, such as pick-up and delivery to port, freight services from origin to destination port and destination services, such as customs clearance and final delivery. The Company measures the performance of its obligations as services are completed at a point in time during the life of a shipment, including services at origin, freight and destination. The Company fulfills nearly all of its performance obligations within a one to two-month period.

The Company evaluates whether amounts billed to customers should be reported as gross or net revenue. Generally, revenue is recorded on a gross basis when the Company is acting as principal and is primarily responsible for fulfilling the promise to provide the services, when it has discretion in setting the prices for the services to the customers, and the Company has the ability to direct the use of the services provided by the third party. Revenue is recognized on a net basis when the Company is acting as agent and we do not have latitude in carrier selection or establish rates with the carrier.

In the Logistics segment, the Company disaggregates its revenues by its five primary service categories: ocean freight, air freight, custom brokerage and trucking and other. A summary of the Company’s revenues disaggregated by major service lines for the fiscal year ended September 30, 2021 and 2020 was as follows:
 
F-9
Service Type
 
Year Ended
September 30,
2021
   
Year Ended
September 30,
2020
 
Ocean freight
 
$
61,436
   
$
26,740
 
Air freight
    26,970       16,630  
Trucking
   
22,198
     
14,757
 
Customs brokerage
   
14,424
     
10,274
 
Other
   
835
     
91
 
Total
 
$
125,863
   
$
68,492
 

Manufacturing
 
Revenues from Indco are derived from the engineering, manufacture and delivery of specialty mixing equipment and accessories. Indco receives customer product orders via phone call, email, internet, or fax. The pricing of each standard product sold is listed in Indco’s print and web-based catalog. Customer specific products are priced by quote. A sales order acknowledgement is sent to every customer for every order to confirm pricing and the specifications of the products ordered. The revenue is recognized at a point in time when the product is shipped to the customer.
 
Life Sciences
 
Revenues from the Life Sciences segment are derived from the sale of high-quality monoclonal and polyclonal antibodies, diagnostic reagents and diagnostic kits and other immunoreagents for biomedical research and antibody manufacturing. Revenues are recognized when products are shipped and risk of loss is transferred to the carrier(s) used.
 
Income (loss) per common share
 
Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted average number of common shares outstanding, excluding unvested restricted stock, during the period. Diluted net income (loss) per share reflects the additional dilution from potential issuances of common stock, such as stock issuable pursuant to the exercise of stock options or warrants or the vesting of restricted stock units. The treasury stock method is used to calculate the potential dilutive effect of these common stock equivalents. Potentially dilutive shares are excluded from the computation of diluted net income (loss) per share when their effect is anti-dilutive.
 
Stock-based compensation to employees
 
Equity classified share-based awards
 
The Company recognizes compensation expense for stock-based payments granted based on the grant-date fair value estimated in accordance with ASC Topic 718, “Compensation- Stock Compensation.” For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price of our common stock for restricted shares; the expense is recognized over the service period for awards expected to vest.
 
Stock-based compensation to non-employees
 
Liability classified share-based awards
 
The Company maintains other share unit compensation grants for shares of Indco, which vest over a period of up to three years following their grant. The shares contain certain put features where the Company is either required or expects to settle vested awards on a cash basis.
 
These awards are classified as liability awards, measured at fair value at the date of grant and re-measured at fair value at each reporting date up to and including the settlement date. The determination of the fair value of the share units under these plans is described in note 11. The fair value of the awards is expensed over the respective vesting period of the individual awards with recognition of a corresponding liability. Changes in fair value after vesting are recognized through compensation expense. Compensation expense reflects estimates of the number of instruments expected to vest. The impact of forfeitures and fair value revisions, if any, are recognized in earnings such that the cumulative expense reflects the revisions, with a corresponding adjustment to the settlement liability. Liability-classified share unit liabilities due within 12 months of the reporting date are presented in trade and other payables while settlements due beyond 12 months of the reporting date are presented in non-current liabilities.
 
F-10
Non-employee share-based awards
 
The Company grants restricted stock awards, restricted stock units and stock options to certain directors, officers and employees. The Company accounts for share-based compensation as equity awards such that compensation cost is measured at the grant date based on the fair value of the award and is expensed ratably over the vesting period. The fair value of restricted stock is the market price as of the grant date, and the fair value of each stock option grant is estimated as of the grant date using the Black-Scholes option pricing model. Determining the fair value of share-based awards at the grant date requires judgment about, among other things, stock volatility, the expected life of the award, and other inputs. The Company accounts for forfeitures as they occur.

The Company issues new shares of common stock to satisfy exercises and vesting of awards granted under its stock plans. Share-based compensation expense is reflected in the consolidated statements of operations as part of selling general and administrative expenses.
 
Mandatorily Redeemable Non-Controlling Interests
 
The non-controlling interests that are reflected as mandatorily redeemable non-controlling interests in the consolidated financial statements consist of non-controlling interests related to the Indco acquisition whose owners have certain redemption rights that allow them to require the Company to purchase the non-controlling interests of those owners upon certain events outside the control of the Company, including upon the death of the holders. The Company is required to purchase 20% per year of the 8.35% mandatorily redeemable non-controlling interest at the option of the holders beginning on the third anniversary of the date of the Indco acquisition, which was March 21, 2019. As of September 30, 2021, the holders had not exercised their redemption rights.
 
On November 30, 2020, a minority owner of Indco exercised 7,000 options to purchase Indco’s common stock at an exercise price of $6.48 for an aggregate purchase price of $45. Indco issued a related party promissory note in the amount of $45, which bears interest at 1% per annum; both interest and principal are payable on the maturity date of December 31, 2023. This note is included in security deposits and other long-term assets. The fair value of the 7,000 shares of Indco’s common stock was recorded as an increase in mandatorily redeemable non-controlling interest. As a result of the exercise of 7,000 options to purchase Indco’s stock, the mandatorily redeemable non-controlling interest percentage was 9.32% as of September 30, 2021.

On the date the Company acquires the controlling interest in a business combination, the fair value of the non-controlling interest is recorded in the long-term liabilities section of the consolidated balance sheet under the caption “Mandatorily redeemable non-controlling interest.” The mandatorily redeemable non-controlling interest is adjusted each reporting period, if required, to its then current redemption value, based on the predetermined formula defined in the respective agreement. The Company reflects any adjustment in the redemption value and any earnings attributable to the mandatorily redeemable non-controlling interest in its consolidated statements of operations by recording the adjustments and earnings to other income and expense in the caption “change in fair value of mandatorily redeemable non-controlling interest.”

Income taxes
 
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
 
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. The benefit of tax positions taken or expected to be taken in the Company’s income tax returns are recognized in the consolidated financial statements if such positions are more likely than not of being sustained.
 
Leases

The Company determines if an arrangement is a lease at inception. Assets and obligations related to operating leases are included in operating lease right-of-use (“ROU”) assets; current portion of operating lease liability; and operating lease liability, net of current portion in our consolidated balance sheets. Assets and obligations related to finance leases are included in property, technology, and equipment, net; current portion of finance lease liability; and finance lease liability, net of current portion in our consolidated balance sheets.

F-11
ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used in determining the present value of lease payments. We use the implicit rate when readily determinable. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The Company’s agreements with lease and non-lease components are all each accounted for as a single lease component.

For leases with an initial term of twelve months or less, the Company elected the exemption from recording right of use assets and lease liabilities for all leases that qualify and records rent expense on a straight-line basis over the lease term. Expenses for these short-term leases for the fiscal year ended September 30, 2021 amounted to $240.

Contingent Earnout Liabilities

The Company accounts for contingent consideration relating to business combinations as a contingent earnout liability and a decrease (increase) to goodwill at the date of the acquisition and continually remeasures the asset or liability at each balance sheet date by recording changes in the fair value through change in fair value of contingent consideration in the consolidated statements of operations. The ultimate settlement of contingent earnout liabilities relating to business combinations may be for amounts that are materially different from the amounts initially recorded and may cause volatility in the Company’s results of operations.

Recent accounting pronouncements
 
Recently issued accounting pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) and subsequent amendments to the initial guidance: ASU 2021-01, which provides temporary optional expedients and exceptions to the current guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The amendments are effective as of March 12, 2020 and apply to contract modifications made before December 31, 2022. As of September 30, 2021, the Company had not utilized any of the expedients discussed within this ASU; however, it continues to assess its agreements to determine if LIBOR is included and if the expedients would be utilized through the allowed period of December 31, 2022.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. This standard will be effective for us in the first quarter of fiscal year 2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that the new standard will have on our financial position, results of operations and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which replaces the incurred loss methodology previously employed to measure credit losses for most financial assets and requires the use of a forward-looking expected loss model. Current accounting delays the recognition of credit losses until it is probable a loss has been incurred, while the update will require financial assets to be measured at amortized costs less a reserve and equal to the net amount expected to be collected. This standard will be effective for us in the first quarter of fiscal 2023. Early adoption of the new standard is permitted; however, we have not elected to early adopt the standard. The new standard is required to be applied using a cumulative-effect transition method. We are currently evaluating the effect that the new standard will have on our financial position, results of operations and
related disclosures.
 
2
ACQUISITIONS
 
2021 Acquisitions

F-12
Logistics


On September 21, 2021, the Company completed the acquisition of all of the membership interests of Expedited Logistics and Freight Services, LLC (“ELFS”) and ELFS Brokerage LLC, a wholly-owned subsidiary of ELFS.  The purchase price for the membership interests was $19,000, subject to certain closing adjustments as set forth in the related purchase agreement.  Further earnout payments in an amount not anticipated to exceed $4,500 will be due to the former members of ELFS based on the operating profit earned by ELFS.  The transaction closed on September 21, 2021, upon which the former members of ELFS were paid $13,000 in cash and were issued an aggregate amount of $6,000 in subordinated promissory notes.  The preliminary fair value of the consideration transferred of $21,437 was valued as of the date of the acquisition as follows: cash - $13,000; earnout payments - $3,600; and subordinated promissory notes - $4,837 (net of working capital adjustment of $1,163).  Certain closing adjustments to the purchase price were made, primarily related to calculations of net working capital (as described in the purchase agreement) versus the working capital target (as described in the purchase agreement). Specifically, net working capital was determined to be less than the working capital target by an amount of $1,163, resulting in a reduction in the purchase price and a reduction in the subordinated promissory notes of $1,163.



As part of the purchase agreement, at closing the ending cash balance of ELFS in the amount of $1,322 will remain on deposit with the Company for up to ninety days and returned to the members as described in the Purchase Agreement; this amount is included in cash and accrued liabilities.



This ELFS acquisition was funded with cash provided by normal operations, borrowings under the Amended Loan Agreement dated September 21, 2021, as well as subordinated promissory notes issued to the Members. This acquisition was completed to expand our product offerings in our Logistics segment. ELFS results for the period from the acquisition through September 30, 2021 are included in the results of operations for the twelve months ended September 30, 2021. This includes revenues, forwarding expense, selling, general and administrative expense, and net income from operations of ELFS, which amounted to $2,867, $2,257, $573, and $37, respectively.



ELFS provides a variety of logistic services, which include domestic and international freight shipping and forwarding and hazardous material warehousing and distribution. The Company is headquartered in Houston, Texas and also has other offices in Texas, Louisiana, Colorado, and Oklahoma and has dedicated agents, who work in specific areas to assist in logistics, in the following locations: Texas, Louisiana, North Dakota, and Oklahoma.



Purchase price allocation



In accordance with the acquisition method of accounting, the Company allocated the consideration paid for ELFS to the net tangible and identifiable intangible assets based on their estimated fair values. The Company preliminary valuation of assets acquired and liabilities assumed, and, the fair value amounts noted are in the table below. The final determination of the fair value of certain assets and liabilities will be completed as soon as the necessary information is available but no later than one year from the acquisition date. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets (in thousands).


   
Fair Value
 
Accounts receivable
  $
10,689
 
Prepaid expenses and other current assets
   
2,252
 
Property & equipment, net
   
59
 
Security deposits and other long-term assets
   
322
 
Operating lease right of use asset
   
901
 
Goodwill
   
2,531
 
Intangible assets
   
10,000
 
Accounts payable
   
(2,399
)
Current portion of operating lease liabilities
   
(445
)
Accrued expenses and other current liabilities
   
(2,017
)
Long-term operating lease liabilities
   
(456
)
Total Consideration Paid
 
$
21,437
 


F-13

The following table summarizes, on an unaudited pro forma basis, the condensed combined results of operations of the Logistics Segment for the years ended September 30, 2021 and 2020 assuming the acquisition of ELFS was made on October 1, 2019 (in thousands).

   
Fiscal years ended
September 30,
 
   
2021
   
2020
 
Revenue
 
$
199,017
   
$
137,526
 
Forwarding expense
   
158,859
     
102,553
 
Gross profit
   
40,158
     
34,973
 
Selling, general and administrative expenses
   
34,011
     
32,144
 
Income from operations
 
$
6,147
   
$
2,829
 



The foregoing unaudited pro forma results are for informational purposes only and are not necessarily indicative of the actual results of operations that might have occurred had the acquisition occurred on October 1, 2019, nor are they necessarily indicative of future results. The pro forma financial information includes the impact of purchase accounting and other nonrecurring items directly attributable to the acquisition, which include:

 
•
Amortization expense of acquired intangibles
 
•
Adjustments to interest expense to remove historical ELFS interest costs and reflect Janel’s current debt profile
 
•
The related tax impact of the above referenced adjustments

The pro forma results do not include any cost savings or operational synergies that may be generated or realized due to the acquisition of ELFS.

On December 31, 2020, through the Company’s Logistics segment, which is comprised of several wholly-owned subsidiaries completed a business combination whereby it acquired substantially all of the assets and certain liabilities of a logistics services provider with two U.S. locations. The aggregate purchase price for this acquisition was $1,282. At closing, $1,182 was paid in cash and $100 was placed in escrow for a period of twelve months for the purpose of securing the indemnification obligations of former stockholders. The Company recorded an aggregate of $304 in goodwill and $531 in other identifiable intangibles. The acquisition was funded with cash provided by normal operations, funds available under the Santander Credit Facility along with a note to the former owner. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s consolidated results of operations, individually or in aggregate. This acquisition was completed to expand our product offerings in our Logistics segment.

Life Sciences

On December 4, 2020, the Company completed a business combination whereby it acquired all of the membership interests of ImmunoChemistry Technologies, LLC (“ICT”) for an aggregate purchase price of $3,419, net of $105 cash received. At closing, $1,628 was paid in cash and a subordinated promissory note in the amount of $1,850 was issued to the former owner. The Company recorded the present value of $1,760 for the subordinated promissory note. The Company recorded an aggregate of $1,438 in goodwill and $1,430 in other identifiable intangibles. Subsequent to closing, the Company recorded an additional $30 purchase price adjustment related to an I.R.S Code Section 338(h)(10) election that was made in connection with the ICT acquisition. The ICT acquisition will be treated as an asset purchase for income tax purposes, which will allow for the tax deduction of ICT’s goodwill. The acquisition was funded with cash provided by normal operations along with a note to the former owner. The results of operations of the acquired businesses are included in Janel’s condensed consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisition did not have a significant impact on Janel’s condensed consolidated results of operations, individually or in aggregate. ICT is a developer and manufacturer of cell viability assay kits, ELISA buffers and fluorescent reagents for use in research and diagnostics. ICT was founded in 1994 and is headquartered in Bloomington, Minnesota. The acquisition of ICT was completed to expand our product offerings in our Life Sciences segment.

2020 Acquisition

Logistics
 
Effective July 23, 2020, the Company acquired all of the outstanding common stock of a logistics services provider with two U.S. locations for $132, net of $853 cash received. At closing the former stockholder was paid $300 in cash and $194, $193 and $193 was or is due to the stockholder as deferred acquisition payments on the first, second and third anniversary of the closing date and the Company assumed $135 in the form of a Paycheck Protection Program (PPP) loan. The Company recorded an aggregate of $506 in goodwill and $690 in other identifiable intangibles. This acquisition was funded with cash provided by normal operations along with a deferred acquisition payment due to the former stockholder. The results of operations of the acquired businesses are included in the Janel’s consolidated results of operations since the date of the acquisition. Supplemental pro forma information has not been provided as the acquisitions did not have a significant impact on Janel’s consolidated results of operations individually or in aggregate.

F-14
3
PROPERTY AND EQUIPMENT
 
A summary of property and equipment and the estimated lives used in the computation of depreciation and amortization is as follows (in thousands):
 
   
September 30,
2021
 
September 30,
2020
 
Life
Building and improvements
 
$
3,065
 
$
3,096
 
12-30 years
Land and improvements
   
1,286
   
1,235
 
Indefinite
Furniture and Fixture
   
298
   
282
 
3-7 years
Computer Equipment
   
684
   
385
 
3-5 years
Machinery & Equipment
   
1,253
   
1,288
 
3-15 years
Leasehold Improvements
   
109
   
115
 
3-5 years
     
6,695
   
6,401
   
Less Accumulated Depreciation
   
(1,718
)
 
(1,424
)
 
   
$
4,977
  $
4,977
   
 
On February 4, 2020, Indco entered into a Purchase and Sale Agreement to acquire the land and building which serves as the Indco office and manufacturing facility in New Albany, Indiana for a total purchase price of $884. This transaction closed on July 1, 2020.
 
Depreciation expense for the fiscal year ended September 30, 2021 and 2020 was $371 and $274, respectively.
 
4
INVENTORY
 
Inventories consisted of the following (in thousands):
 
   
Year End September 30,
 
   
2021
   
2020
 
Finished goods
 
$
919
   
$
1,246
 
Work-in-process
   
968
     
1,406
 
Raw materials
   
1,365
     
1,039
 
Gross inventory
   
3,252
     
3,691
 
Less – reserve for inventory valuation
   
(25
)
   
(25
)
Inventory net
 
$
3,227
   
$
3,666
 

5
INTANGIBLE ASSETS
 
A summary of intangible assets and the estimated useful lives used in the computation of amortization is as follows (in thousands):
 
   
September 30,
2021
   
September 30,
2020
 
Life
Customer relationships
 
$
23,482
   
$
14,392
 
15-24 Years
Trademarks/names
   
4,490
     
1,820
 
  1-20 Years
Trademarks/names
   
521
     
451
 
    Indefinite
Other
   
1,149
     
1,018
 
  2-22 Years
     
29,642
     
17,681
   
Less: Accumulated Amortization
   
(5,469
)
   
(4,348
)
 
   
$
24,173
   
$
13,333
   

F-15
The composition of the intangible assets balance at September 30, 2021 and 2020 is as follows (in thousands):


 
September 30,
2021
   
September 30,
2020
 
Logistics
 
$
18,174
   
$
7,643
 
Manufacturing
   
7,700
     
7,700
 
Life Sciences
   
3,768
     
2,338
 
     
29,642
     
17,681
 
Less: Accumulated Amortization
   
(5,469
)
   
(4,348
)
   
$
24,173
   
$
13,333
 

Amortization expense of intangible assets for the year ended September 30, 2021 and 2020 was $1,120 and $955, respectively.
 
The future amortization of these intangible assets is expected to be as follows (in thousands):
 
Fiscal Year 2021
 
$
1,809
 
Fiscal Year 2022
   
1,799
 
Fiscal Year 2023
   
1,773
 
Fiscal Year 2024
   
1,771
 
Fiscal Year 2025
   
1,771
 
Thereafter
   
15,250
 

 
$
24,173
 

6
GOODWILL
 
The Company’s goodwill carrying amounts relate to the acquisitions in the Logistics, Manufacturing and Life Sciences businesses.
 
The composition of the goodwill balance at September 30, 2021 and 2020 is as follows (in thousands):
 
   
September 30,
2021
   
September 30,
2020
 
Logistics
 
$
9,063
   
$
6,161
 
Manufacturing
   
5,046
     
5,046
 
Life Sciences
   
4,377
     
2,939
 
Total
 
$
18,486
   
$
14,146
 

7
NOTES PAYABLE - BANKS
 
(A)
Santander Bank Facility
 
On October 17, 2017, the Janel Group subsidiaries (collectively the “Janel Group Borrowers”), with the Company as a guarantor, entered into a Loan and Security Agreement (the “Santander Loan Agreement”) with Santander Bank, N.A. (“Santander”) with respect to a revolving line of credit facility (the “Santander Facility”). As amended in March 2018, November 2018, March 2020, July 2020 and December 2020, the Santander Facility provided that the Janel Group Borrowers can borrow up to $17,000 limited to 85% of the Janel Group Borrowers’ aggregate outstanding eligible accounts receivable, subject to adjustment as set forth in the Santander Loan Agreement. Interest accrued on the Santander Facility at an annual rate equal to, at the Janel Group Borrowers’ option, prime plus 0.50%, or LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points. The Janel Group Borrowers’ obligations under the Santander Facility are secured by all of the assets of the Janel Group Borrowers, while the Santander Loan Agreement contains customary terms and covenants. As a result of its terms, the Santander Facility is classified as a current liability on the consolidated balance sheet.

On September 21. 2021, Janel Group, ELFS and ELFS Brokerage, LLC, each, wholly-owned subsidiaries of the Company, jointly and severally, individually and collectively as borrowers (collectively with Janel, the “Borrowers”), the Company and Expedited Logistics and Freight services, LLC, an Oklahoma limited liability company, as loan party obligors, and Santander Bank, N.A., as lender, entered into an Amended and Restated Loan and Security Agreement (as amended and restated, the “Loan Agreement”) that amended and restated the existing Santander Loan Agreement.

F-16
The Loan Agreement provides for, among other things, the following modifications to the existing Santander Loan Agreement: (1) ELFS and ELFS Brokerage, LLC were added as borrowers; (2) the maximum revolving facility amount available was increased from $17.0 million to $30.0 million (limited to 85% of the borrowers’ eligible accounts receivable borrowing base and reserves, subject to adjustments set forth in the Loan Agreement); (3) the maturity date was extended from October 12, 2022 to September 21, 2026; (4) interest accrues at an annual rate equal to LIBOR (30, 60 or 90 day) plus 2.25% subject to a LIBOR floor of 75 basis points at close, with a potential LIBOR floor reduction to 25 basis points upon certain conditions; and (5) the Company was provided the option of making Series C preferred payments or distributions if specified conditions are met.

At September 30, 2021, outstanding borrowings under the Santander Facility were $29,637, representing 98.8% of the $30,000 available thereunder, and interest was accruing at an effective interest rate of 3.00%.
 
At September 30, 2020, outstanding borrowings under the Santander Facility were $8,447, representing 49.7% of the $17,000 available thereunder, and interest was accruing at an effective interest rate of 2.40%.

The Company was in compliance with the covenants defined in the Santander Loan Agreement at both September 30, 2021 and September 30, 2020.
 
(B)
First Merchants Bank Credit Facility
 
On March 21, 2016, as amended in August 2019 and July 2020, Indco executed a Credit Agreement (the “First Merchants Credit Agreement”) with First Merchants Bank with respect to a $5,500 term loan, a $1,000 (limited to the borrowing base and reserves) revolving loan and a $680 mortgage loan (together, the “First Merchant Facility”). Interest accrues on the term loan at an annual rate equal to the one-month LIBOR plus either 2.75% (if Indco’s total funded debt to EBITDA ratio is less than 2:1), or 3.5% (if Indco’s total funded debt to EBITDA ratio is greater than or equal to 2:1). Interest accrues on the revolving loan at an annual rate equal to the one-month LIBOR plus 2.75%. Interest accrues on the mortgage loan at an annual rate of 4.19%. Indco’s obligations under the First Merchants Bank Facility are secured by all of Indco’s real property and other assets, and are guaranteed by Janel. Additionally, Janel’s guarantee of Indco’s obligations is secured by a pledge of Janel’s Indco shares.

The term loan and revolving loan portions of the First Merchants Facility will expire on August 30, 2024, and the mortgage loan will mature on July 1, 2025 (subject to earlier termination as provided in the First Merchants Credit Agreement), unless renewed or extended.
 
As of September 30, 2021, there were no outstanding borrowings under the revolving loan, $2,713 of borrowings under the term loan, and $655 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 2.83% and 4.19%, respectively.

 As of September 30, 2020, there were no outstanding borrowings under the revolving loan, $4,349 of borrowings under the term loan, and $676 of borrowing under the mortgage loan with interest accruing on the term loan and mortgage loan at an effective interest rate of 3.66% and 4.19%, respectively.

Indco was in compliance with the covenants defined in the First Merchants Credit Agreement at both September 30, 2021 and September 30, 2020 (in thousands).
 

 
September 30,
2021
   
September 30,
2020
 
Total Debt*
 
$
3,368
   
$
5,025
 
Less Current Portion
   
(809
)
   
(808
)
Long Term Portion
 
$
2,559
   
$
4,217
 

*
Note: Term Loan is due in monthly installments of $65 plus monthly interest, at LIBOR plus 2.75% to 3.5% per annum, mortgage loan is due in monthly installments of $4, including interest at 4.19%. The credit facilities are collateralized by all of Indco’s assets and guaranteed by Janel.
 
F-17
These obligations mature as follows (in thousands):
 
Fiscal Year 2022
 
$
809
 
Fiscal Year 2023
   
810
 
Fiscal Year 2024
   
810
 
Fiscal Year 2025
   
382
 
Fiscal Year 2026
   
27
 
Thereafter
   
530
 
   
$
3,368
 

(C)
First Northern Bank of Dixon
 
On June 21, 2018, as amended November 2019 and October 2, 2020, Antibodies Incorporated (“Antibodies”), a wholly-owned subsidiary of the Company (by succession), entered into a Business Loan Agreement (the “First Northern Loan Agreement”) with First Northern Bank of Dixon (“First Northern”), with respect to a $2,235 term loan (the “First Northern Term Loan”) which bears interest at an annual rate of 4.00% and matures on November 14, 2029. In addition, Antibodies has a $500 revolving credit facility with First Northern which currently bears interest at the annual rate of 4.0% and matures on October 5, 2021 (the “First Northern Revolving Loan”).

Antibodies also entered into two separate business loan agreements with First Northern: a $125 term loan in connection with a potential expansion of solar generation capacity on the Antibodies property. (“First Northern Solar Loan”) bearing interest at the annual rate of 4.43% (subject to adjustment in five years) and maturing on November 14, 2029; and a $60 term loan in connection with a potential expansion of generator capacity on the Antibodies property (“Generator Loan”) bearing interest at the annual rate of  4.25% and maturing on November 5, 2025. There were no outstanding borrowings under the Generator Loan as September 30, 2021 and 2020.
 

As of September 30, 2021, the total amount outstanding under the First Northern Term Loan was $2,139, of which $2,084 is included in long-term debt and $55 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.



As of September 30, 2021, the total amount outstanding under the First Northern Solar Loan was $105, of which $101 is included in long-term debt and $4 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.


As of September 30, 2020, the total amount outstanding under the First Northern Term Loan was $2,192, of which $2,139 is included in long-term debt and $53 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.18%.
 
As of September 30, 2020, the total amount outstanding under the First Northern Solar Loan was $81, of which $76 is included in long-term debt and $5 is included in current portion of long-term debt, with interest accruing at an effective interest rate of 4.43%.
 
   
September 30,
2021
   
September 30,
2020
 
    (in thousands)
 
Total Debt*
 
$
2,244
   
$
2,273
 
Less Current Portion
   
(59
)
   
(58
)
Long Term Portion
 
$
2,185
   
$
2,215
 

*
Long term debt is due in monthly installments of $12 plus monthly interest, at 4.18%per annum. The note is collateralized by real property owned by Antibodies and guaranteed by Janel.
 
These obligations mature as follows (in thousands):
 
Fiscal Year 2022
 
$
59
 
Fiscal Year 2023
   
64
 
Fiscal Year 2024
   
66
 
Fiscal Year 2025
   
69
 
Fiscal Year 2026
   
70
 
Thereafter
   
1,916
 
   
$
2,244
 
 
The Company was in compliance with the covenants defined in the First Northern Loan Agreement at September 30, 2021 and September 30, 2020.

F-18
8.
SUBORDINATED PROMISSORY NOTES – RELATED PARTY

Antibodies is the obligor on two 4% subordinated promissory notes (together, the “AB HoldCo Subordinated Promissory Notes”) payable to certain former shareholders of Antibodies.  Both of the AB HoldCo Subordinated Promissory Notes are guaranteed by the Company, are unsecured and are subordinate to the terms of the Company’s debt to any federal or state bank or other institutional lender.

Interest on the AB HoldCo Subordinated Promissory Notes is payable in arrears on the last business day of each calendar quarter, the full outstanding principal balance and accrued, unpaid interest is due on June 22, 2021 and may be prepaid, in whole or in part, without premium or penalty. As of June 30, 2021, the AB HoldCo Subordinated Promissory Notes had been repaid. As of September 30, 2020, the amount outstanding on the two AB HoldCo Subordinated Promissory Notes was $344, which is included in the current portion of subordinated promissory notes.

Janel Group is the obligor on a 6.75% subordinated promissory note (the “Honor Subordinated Promissory Note”) with a former owner of Honor Worldwide Logistics LLC, now a direct wholly-owned subsidiary of Janel Group and an indirect wholly-owned subsidiary of the Company (“Honor”). The Honor Subordinated Promissory Note is guaranteed by the Company.

The Honor Subordinated Promissory Note is subordinate to and junior in right of payment for principal, interest, premiums and other amounts payable to the Santander Bank Facility and the First Merchants Bank Credit Facility. The Honor Subordinated Promissory Note is payable in twelve equal consecutive quarterly installments of principal and interest of $42 each, on the last day of January, April, July and October beginning in January 2019. The outstanding principal and accrued and unpaid interest are payable on November 20, 2021 and may be repaid, in whole or in part, without premium or penalty.  As of September 30, 2021, the Honor Subordinated Promissory Note had been repaid. As of September 30, 2020, the total amount outstanding under the Honor Subordinated Promissory Note was $199, of which $160 is included in the current portion of subordinated promissory notes and $39 is included in long-term portion of subordinated promissory notes.

Aves is the obligor on a 0.5% subordinated promissory note in the amount of $1,850 issued to the former owner of ICT (the “ICT Subordinated Promissory Note”).  The ICT Subordinated Promissory Note is payable in sixteen scheduled quarterly installments of principal and interest beginning March 4, 2021, matures on March 21, 2025, and may be prepaid, in whole or in part, without premium or penalty.  The ICT Subordinated Promissory Note is guaranteed by the Company and is secured by the membership interests in ICT. The ICT Subordinated Promissory Note is subordinate to and junior in right of payment for principal interest premiums and other amounts payable to the Santander Bank Facility, First Merchants Bank Credit Facility and the First Northern Bank of Dixon. As of September 30, 2021, the amount outstanding under the ICT Subordinated Promissory Note was $1,237, of which $550 is included in the current portion of subordinated promissory notes and $687 is included in the long-term portion of subordinated promissory notes.

Janel Group is the obligor on four 4% subordinated promissory notes of totaling $6,000 (together, the “ELFS Subordinated Promissory Notes”) payable to certain former shareholders of ELFS.  All of the ELFS Subordinated Promissory Notes are guaranteed by the Company and are subordinate to and junior in right of payment for principal, interest, premiums and other amounts payable to the Santander Bank Facility and the First Merchants Bank Credit Facility. The ELFS Subordinated Promissory Notes are payable in twelve equal consecutive quarterly installments of principal together with accrued interest.  Beginning October 15, 2021 and on the same day of the next eight consecutive calendar quarters, thereafter payment of accrued interest and unpaid interest is due to the former shareholders.  Beginning October 15, 2023 and on the same day of the next twelve consecutive calendar quarters, thereafter payment of principal together with accrued interest and unpaid interest is due to the former shareholders.  As described in Note 2. The ELFS Subordinated Promissory Notes totaling $6,000 were recorded net of working capital adjustment of $1,163.

   
September 30,
2021
   
September 30,
2020
 
   
(in thousands)
 
Total subordinated promissory notes
 
$
6,075
   
$
543
 
Less current portion of subordinated promissory notes
   
(550
)
   
(504
)
Long term portion of subordinated promissory notes
 
$
5,525
   
$
39
 

F-19
These obligations mature as follows (in thousands):

Fiscal Year 2022
 
$
550
 
Fiscal Year 2023
   
395
 
Fiscal Year 2024
   
1,869
 
Fiscal Year 2025
   
1,648
 
Fiscal Year 2026
   
1,613
 
Thereafter
   
—
 
   
$
6,075
 

9.
SBA PAYCHECK PROTECTION PROGRAM LOANS
 
On April 19, 2020, the Company received a loan (the “Company PPP Loan”) in the aggregate amount of $2,726 from Santander, pursuant to the Paycheck Protection Program (the “PPP”) offered by the Small Business Administration (“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), Section 7(a)(36) of the Small Business Act, which was enacted March 27, 2020, as amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The Company PPP Loan matures on April 19, 2022 and bears interest at a rate of 1.00% per annum. Under the original terms, all principal and interest payments are deferred for six months from the date of the note.  The Paycheck Protection Flexibility Act of 2020 P.L. 116-142, extended the deferral period for loan payments to either (1) the date that the SBA remits the borrower’s loan forgiveness amount to the lender or (2) if the borrower does not apply for loan forgiveness, ten months after the end of the borrower’s loan forgiveness covered period.


To the extent the Company PPP Loan is not forgiven, principal and interest payments in the amount of $153 are due monthly commencing on September 1, 2021. The Company may prepay the note at any time prior to maturity without penalty. The Company may only use funds from the Company PPP Loan for purposes specified in the CARES Act and related PPP rules, which include payroll costs, costs used to continue group health care benefits, rent, utilities and certain mortgage payments (“qualifying expenses”). The loan and accrued interest are forgivable after eight weeks (or an extended 24-week covered period) as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.



On July 23, 2020, the Company assumed a PPP Loan in connection with an acquisition in the amount of $135 (the “Acquisition PPP Loan”).  The terms of the Acquisition PPP Loan were the same as the terms of the Company PPP Loan. In February 2021, the Company was informed that the Acquisition PPP Loan had been forgiven by the SBA.

In February 2021, the Company applied for forgiveness of the Company PPP Loan in accordance with the terms of the CARES Act and on July 22, 2021, the Company received notification from Santander that the SBA had granted full forgiveness of the Company’s PPP Loan on July 20, 2021 in the amount of $2,726 and interest payable in the amount of $34.

In accounting for the forgiveness of the Acquisition PPP Loan and Company PPP Loan, the Company is guided by ASC 470 Debt, and ASC 450-30 Gain contingency. Accordingly, the Company derecognized both the Acquisition PPP Loan and Company PPP Loan and recorded $2,895 as a Gain on Paycheck Protection Program loan forgiveness.



As of September 30, 2020, the amount outstanding, including accrued interest, under the Acquisition PPP Loan and Company PPP Loan was $135 and $2,738, respectively, of which $960 is included in long-term debt and $1,913 is included in current portion of long-term debt.
 
10.
STOCKHOLDERS’ EQUITY
 
Janel is authorized to issue 4,500,000 shares of common stock, par value $0.001. In addition, the Company is authorized to issue 100,000 shares of preferred stock, par value $0.001. The preferred stock is issuable in series with such voting rights, if any, designations, powers, preferences and other rights and such qualifications, limitations and restrictions as may be determined by the Company’s board of directors or a duly authorized committee thereof, without stockholder approval. The board of directors may fix the number of shares constituting each series and increase or decrease the number of shares of any series.

(A)
Preferred Stock
 
Series B Convertible Preferred Stock
 
Shares of the Company’s Series B Convertible Preferred Stock (the “Series B Stock”) are convertible into shares of the Company’s $0.001 par value common stock at any time on a one- share (of Series B Stock) for ten-shares (of common stock) basis. 

F-20
On April 23, 2020, a holder of Series B Stock converted 300 shares of Series B Stock into 3,000 shares of the Company’s Common Stock. On September 25, 2020, a holder of Series B Stock converted 300 shares of Series B Stock into 3,000 shares of the Company’s Common Stock. The Company has 31 shares of Series B Stock outstanding as of September 30, 2021.
 
Series C Cumulative Preferred Stock
 
Shares of the Company’s Series C Cumulative Preferred Stock (the “Series C Stock”) were initially entitled to receive annual dividends at a rate of 7% per annum of the original issuance price of $10, when and if declared by the Company’s board of directors, with such rate to increase by 2% annually beginning on the third anniversary of issuance of such Series C Stock to a maximum rate of 13%. By the filing of the Certificate of Amendment on October 17, 2017, the annual dividend rate decreased to 5% per annum of the original issuance price, when and if declared by the Company’s board of directors, and increased by 1% beginning on January 1, 2019. Such rate is to increase on each January 1 thereafter for four years to a maximum rate of 9%. The dividend rate of the Series C Stock as of September 30, 2021 and 2020 was 8% and 7%. In the event of liquidation, holders of Series C Stock shall be paid an amount equal to the original issuance price, plus any accrued but unpaid dividends thereon. Shares of Series C Stock may be redeemed by the Company at any time upon notice and payment of the original issuance price, plus any accrued but unpaid dividends thereon. The liquidation value of Series C Stock was $12,907 and $11,541 as of September 30, 2021 and September 30, 2020, respectively.

On September 30, 2021, the Company sold 1,200 shares of Series C Stock to an accredited investor at a purchase price of $500 per share, or an aggregate of $600.
 
On September 13, 2020, the Company purchased 890 shares of the Series C Stock from an accredited investor at a purchase price of $500 per share, or an aggregate of $445. On September 29, 2020, the Company sold 650 shares of the Series C Stock to an accredited investor at a purchase price of $500 per share, or an aggregate of $325. Such shares issued on September 30, 2021 and September 29, 2020, were sold in private placements in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 and Regulation D promulgated thereunder.

In August 2021, the Board of Directors approved an increase in the number of shares of Series C Stock, from 20,000 shares to 30,000 shares.
 
For the fiscal year ended September 30, 2020 the Company paid cash dividends of $55 to a holder of Series C Stock.  For the fiscal year ended September 30, 2021 and 2020, the Company declared dividends on Series C Stock of $766 and $675, respectively. At September 30, 2021 and 2020, the Company had accrued dividends of $2,427 and $1,661, respectively.
 
(B)
Equity Incentive Plan
 
On May 12, 2017, the Company adopted the 2017 Equity Incentive Plan (the “2017 Plan”) pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to shares of the Company’s common stock may be granted to directors, officers, employees of and consultants to the Company. On September 21, 2021, the Board of Directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended Plan”) pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights of the Company’s Common Stock, par value $0.001 per share (“Common Stock”), may be granted to employees, directors and consultants to the Company and its subsidiaries.

The Amended Plan increases the number of shares of Common Stock that may be issued pursuant to the Amended Plan from 100,000 to 200,000 shares of Common Stock of the Company and adopts certain other non-substantive amendments.

Participants and all terms of any grant under the Amended Plan are in the discretion of the Company’s Compensation Committee.
 
11.
STOCK-BASED COMPENSATION

On October 30, 2013, the board of directors of the Company adopted the Company’s 2013 Non-Qualified Stock Option Plan (the “2013 Option Plan”) providing for options to purchase up to 100,000 shares of common stock for issuance to directors, officers, employees of and consultants to the Company and its subsidiaries.
 
On May 12, 2017, the board of directors adopted the Company’s 2017 Plan pursuant to which (i) incentive stock options, (ii) non-statutory stock options, (iii) restricted stock awards and (iv) stock appreciation rights with respect to up to 100,000 shares of the Company’s common stock could be granted to directors, officers, employees of and consultants to the Company.
 
F-21
On May 8, 2018, the board of directors of Janel adopted the Amended 2017 Plan. The provisions and terms of the Amended 2017 Plan were the same as those in the 2017 Plan, except that the Amended 2017 Plan removed the ability of Janel to award incentive stock options and removes the requirement for stockholder approval of the 2017 Plan.

On September 21, 2021, the board of directors of the Company adopted the Amended and Restated 2017 Janel Corporation Equity Incentive Plan (the “Amended Plan”) pursuant to which non-statutory stock options, restricted stock awards and stock appreciation rights of the Company’s Common Stock, par value $0.001 per share (“Common Stock”), may be granted to employees, directors and consultants to the Company and its subsidiaries. The Amended Plan increased the number of shares of Common Stock that may be issued pursuant to the Amended Plan from 100,000 to 200,000 shares of Common Stock of the Company and adopts certain other non-substantive amendments.
 
Total stock-based compensation for the fiscal year ended September 30, 2021 and 2020 amounted to $115 and $269, respectively, and was included in selling, general and administrative expense in the Company’s statements of operations.

(A)
Stock Options
 
The Company uses the Black-Scholes option pricing model to estimate the fair value of our share-based awards. In applying this model, we use the following assumptions:
 
•
Risk-free interest rate - We determine the risk-free interest rate by using a weighted average assumption equivalent to the expected term based on the U.S. Treasury constant maturity rate.
 
•
Expected term - We estimate the expected term of our options on the average of the vesting date and term of the option.
 
•
Expected volatility - We estimate expected volatility using daily historical trading data of a peer group.
 
•
Dividend yield - We have never paid dividends on our common stock and currently have no plans to do so; therefore, no dividend yield is applied.
 
The fair values of our employee option awards were estimated using the assumptions below, which yielded the following weighted average grant date fair values for the periods presented:
 
   
2021
   
2020
 
Risk-free interest rate
   
0.46
%
   
1.59
%
Expected option term in years
   
5.5-6.5
     
5.5 - 6.5
 
Expected volatility
   
100.3%-105.4
%
   
101.2%-101.7
%
Dividend yield
    — %    
—
%
Weighted average grant date fair value
 
$
6.90 - $7.19
   
$
6.97 - $7.33
 

Option for Employees
 
   
Number of
Options
   
Weighted
Average
Exercise Price
   
Weighted
Average
Remaining
Contractual
Term (in years)
   
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2020
   
93,996
   
$
5.76
     
5.2
   
$
304.99
 
Granted
   
7,500
   
$
9.00
     
9.5
   
$
—
 
Exercised
   
(2,502
)
 
$
8.58
     
—
   
$
—
 
Outstanding balance at September 30, 2021
   
98,994
   
$
5.93
     
4.5
   
$
1,689.38
 
Exercisable at September 30, 2021
   
83,998
   
$
5.42
     
3.8
   
$
1,476.31
 

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of the Company’s common stock at September 30, 2021 of $23 per share and the exercise price of the stock options that had strike prices below such closing price.
 
As of September 30, 2021, there was approximately $27 of total unrecognized compensation expense related to the unvested employee stock options which is expected to be recognized over a weighted average period of two years.
 
F-22
Options for Non-Employees
 
There were no non-employee options awarded during the fiscal years ended September 30, 2021 and 2020, respectively.
 

 
Number of
Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term (in years)
   
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2020
   
6,053
   
$
4.13
     
6.0
   
$
29.48
 
Exercised
   
(6,053
)
 
$
4.13
     
—
   
$
—
 
Outstanding balance at September 30, 2021
   
—
   
$
—
     
—
   
$
—
 
Exercisable at September 30, 2021
   
—
   
$
—
     
—
   
$
—
 

The aggregate intrinsic value in the above table was calculated as the difference between the closing price of our common stock at September 30, 2021, of $23 per share and the exercise price of the stock options that had strike prices below such closing price. As of September 30, 2021, there was no unrecognized compensation expense related to the unvested stock options.
 
Liability classified share-based awards
 
During the fiscal year ended September 30, 2021, 6,948 options were granted and 7,000 options were exercised with respect to Indco’s common stock. The Company uses the Black-Scholes option pricing model to estimate the fair value of Indco’s share-based awards. In applying this model, the Company used the following assumptions:
 
   
2021
   
2020
 
Risk-free interest rate
   
0.46
%
   
1.59
%
Expected option term in years
   
5.5-6.5
     
5.5 - 6.5
 
Expected volatility
   
103.0%-105.4
%
   
101.2%-101.7
%
Dividend yield
   
—
%
   
—
%
Grant date fair value
 
$
9.66 - $10.00
   
$
8.59 - $9.03
 

   
Number of
Options
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Term
(in years)
   
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding balance at September 30, 2020
   
39,013
   
$
9.24
     
6.81
   
$
85.45
 
Granted
   
6,948
   
$
12.29
     
9.50
   
$
—
 
Exercised     (7,000 )   $
6.48       —       —  
Outstanding balance at September 30, 2021
   
38,961
   
$
10.28
     
6.62
   
$
78.16
 
Exercisable at September 30, 2021
   
25,153
   
$
9.42
     
5.68
   
$
72.25
 

The aggregate intrinsic value in the above table was calculated as the difference between the valuation price of Indco’s common stock at September 30, 2021 of $12.29 per share and the exercise price of the stock options that had strike prices below such closing price.
 
The liability classified awards were measured at fair value at each reporting date until the final measurement date, which was the date of completion of services required to earn the option. The accrued compensation cost related to these options was approximately $361 and $334 as of September 30, 2021 and September 30, 2020, respectively, and is included in other liabilities in the condensed consolidated financial statement.The compensation cost related to these options was approximately $67 and $70 for the fiscal years ended September 30, 2021 and September 30, 2020, respectively, and is included in other liabilities in the consolidated financial statement.The cost associated with the options issued on each grant date is being recognized ratably over the period of service required to earn each tranche of options.
 
Upon vesting, the options continue to be accounted for as a liability in accordance with ASC 480-10-25-8 and are measured in accordance with ASC 480-10-35 at every reporting period until the options are settled.
 
F-23
Changes in the fair value of the vested options are recognized in earnings in the consolidated financial statements.

The options are classified as liabilities, and the underlying shares of Indco’s common stock also contain put options which result in their classification as a mandatorily redeemable security. While their redemption does not occur on a fixed date, there is an unconditional obligation for the Company to repurchase the shares upon death, which is certain to occur at some point in time.
 
As of September 30, 2021, there was approximately $34 of total unrecognized compensation expense related to the unvested Indco stock options. This expense is expected to be recognized over a weighted average period of  two years.
 
(B)
Restricted Stock
 
During the fiscal year ended September 30, 2021, there were no shares of restricted stock granted. Under the Amended 2017 Plan, each grant of restricted stock vests over a three-year period and the cost to the recipient is zero. Restricted stock compensation expense, which is a non-cash item, is being recognized in the Company’s financial statements over the vesting period of each restricted stock grant.

As of September 30, 2021, there was no unrecognized compensation cost related to non-employee unvested restricted stock.

As of September 30, 2021, the Company had issued 35,000 shares of vested restricted stock.
 
As of September 30, 2020, included in accrued expenses and other current liabilities was $306 which represents 35,000 shares of restricted stock that vested but were not issued.
 
12.
INCOME PER COMMON SHARE
 
The following table provides a reconciliation of the basic and diluted income (loss) per share (“EPS”) computations for the fiscal years ended September 30, 2021 and 2020 (in thousands, except share and per share data):
 
   
Year Ended September 30,
 
   
2021
   
2020
 
Income (Loss):
           
Net income (loss)
 
$
5,203
   
$
(1,725
)
Preferred stock dividends
   
(766
)
   
(675
)
Net income (loss) available to common stockholders
 
$
4,437
   
$
(2,400
)
                 
Common Shares:
               
Basic - weighted average common shares
   
938,478
     
872,122
 
Effect of dilutive securities:
               
Stock options
   
50,700
     
—
 
Convertible preferred stock
   
310
     
—
 
Diluted - weighted average common stock
   
989,488
     
872,122
 
Income (Loss) per Common Share:
               
Basic -
               
Net income (loss)
 
$
5.54
   
$
(1.98
)
Preferred stock dividends
   
(0.81
)
   
(0.77
)
Non-controlling interest dividends
   
—
     
—
 
Net income (loss) attributable to common stockholders
 
$
4.73
   
$
(2.75
)
Diluted -
               
Net income (loss)
 
$
5.26
   
$
(1.98
)
Preferred stock dividends
   
(0.78
)
   
(0.77
)
Net income (loss) available to common stockholders
 
$
4.48
   
$
(2.75
)

The computation for the diluted number of shares excludes unvested restricted stock, unexercised stock options and unexercised warrants that are anti-dilutive. There were 48,293 anti-dilutive shares for the fiscal years ended September 30, 2021 and no anti-dilutive shares for the fiscal years ended September 30, 2020.
 
F-24
Potentially diluted securities as of September 30, 2021 and 2020 are as follows:
 
   
September 30,
 
   
2021
   
2020
 
Employee stock options (Note 11)
   
98,994
     
93,996
 
Non-employee stock options (Note 11)
   
—
     
6,053
 
Convertible preferred stock
   
310
     
310
 
     
99,304
     
100,359
 

13.
INCOME TAXES

The reconciliation of income tax computed at the Federal statutory rate to the (benefit) provision for income taxes from continuing operations is as follows (in thousands):
 
   
2021
   
2020
 
Federal taxes at statutory rates
 
$
1,295
   
$
(468
)
Permanent differences
   
(600
)
   
13
 
State and local taxes, net of Federal benefit
   
199
     
(65
)
Other
   
67
     
15
 
Total  
$
961
   
$
(505
)

 The provisions (benefit) of income taxes are summarized as follows (in thousands):
 
   
Year Ended September 30,
 
   
2021
   
2020
 
Current
 
$
232
   
$
68
 
Deferred
   
729
     
(573
)
Total
 
$
961
   
$
(505
)

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):
 
   
2021
   
2020
 
Deferred tax assets - net operating loss carryforwards
 
$
508
   
$
1,218
 
Lease liability
   
850
     
684
 
Other
   
(16
)
   
71
 
Stock based compensation
   
360
     
339
 
Total deferred tax assets
   
1,702
     
2,312
 
Valuation allowance
   
—
     
—
 
Total deferred tax assets net of valuation allowance
   
1,702
     
2,312
 
Deferred tax liabilities - depreciation and amortization
   
3,124
     
3,151
 
Prepaid expenses
   
52
     
52
 
Right of use asset
   
825
     
678
 
Total deferred tax liabilities
   
4,001
     
3,881
 
Net deferred tax liability
 
$
(2,299
)
 
$
(1,569
)
 
In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon the historical and anticipated future income, management has determined that the deferred tax assets meet the more-likely-than-not threshold for realizability. Accordingly, a no valuation allowance has been recorded against the Company’s deferred tax assets as of September 30, 2021.
 
The Company has net operating loss carryforwards for income tax purposes that expire as follows (in thousands):
 
2033
 
$
2,080
 
2034
   
1,043
 

 
$
3,123
 

F-25
The Company has federal net operating loss of $2,080 and state net operating loss carryforwards of approximately $1,043 as of September 30, 2021. If unused, the net operating loss carryforwards will begin to expire 2033 and 2024 for federal and state purposes, respectively.
 
The Company will recognize interest and penalties related to uncertain tax positions as a component of income tax expense.
 
As of September 30, 2021, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statement of operations. In October 2021, the Company received notification from the Internal Revenue Service that the Internal Revenue Service audit for the 2018 tax year was completed with no changes to our reported tax for the 2018 tax year. Income tax returns for tax years from 2014 through 2019 remain subject to examination by the taxing jurisdictions. The net operating loss carryforwards remain subject to review until utilized.
 
14.
PROFIT SHARING AND 401(K) PLANS

The Company maintains a qualified retirement plan commonly referred to as a 401(k) Plan covering substantially all full-time employees under each segment.
 
The Janel Corporation 401(k) allows for employee salary deferrals including Roth 401(k) deferrals, employer matching contributions, employer profit sharing contributions and employee rollovers. The Janel Corporation 401(k) plan provides for participant contributions of up to 50% of annual compensation (not to exceed the IRS limit), as defined by the plan. The Company contributes an amount equal to 50% of the participant’s first 6% of contributions.
 
The combined expenses charged to operations for contributions made to the plans for the benefit of the employees for the years ended September 30, 2021 and 2020 were $288 and $196, respectively.
 
The administrative expense charged to operations for the years ended September 30, 2021 and 2020 aggregated $59 and $57, respectively.
 
15.
BUSINESS SEGMENT INFORMATION

As discussed above in note 1, the Company operates in three reportable segments: Logistics (previously known as Global Logistics Services), Manufacturing and Life Sciences. In the fourth quarter of 2021, our former Global Logistics Services segment was renamed “Logistics”; this change was in name only and had no impact on the Company’s previously reported historical financial position, results of operations, cash flow or segment level results.

The Company’s Chief Executive Officer regularly reviews financial information at the reporting segment level in order to make decisions about resources to be allocated to the segments and to assess their performance.
 
The following tables presents selected financial information about the Company’s reportable segments and Corporate for the purpose of reconciling to the consolidated totals for the fiscal years ended September 30, 2021 and 2020:
 
For the year ended September 30, 2021 (in thousands)
 
Consolidated
   
Logistics
   
Manufacturing
   
Life
Sciences
   
Corporate
 
Revenues
 
$
146,419
   
$
125,863
   
$
8,564
   
$
11,992
   
$
—
 
Forwarding expenses and cost of revenues
   
113,986
     
106,139
     
3,983
     
3,864
     
—
 
Gross margin
   
32,433
     
19,724
     
4,581
     
8,128
     
—
 
Selling, general and administrative
   
27,362
     
16,656
     
2,696
     
4,469
     
3,541
 
Amortization of intangible assets
   
1,120
     
—
     
—
     
—
     
1,120
 
Income (loss) from operations
   
3,951
   
3,068
     
1,885
     
3,659
     
(4,661
)
Interest expense
   
589
     
294
     
156
     
117
     
22
 
Identifiable assets
   
115,924
     
59,026
     
3,905
     
9,344
     
43,649
 
Capital expenditures
 
$
234
   
$
20
   
$
40
   
$
174
   
$
—
 

F-26
For the year ended September 30, 2020 (in thousands)
 
Consolidated
   
Logistics
   
Manufacturing
   
Life
Sciences
   
Corporate
 
Revenues
 
$
82,429
   
$
68,492
   
$
7,319
   
$
6,618
   
$
—
 
Forwarding expenses and cost of revenues
   
58,908
     
53,397
     
3,329
     
2,182
     
—
 
Gross margin
   
23,521
     
15,095
     
3,990
     
4,436
     
—
 
Selling, general and administrative
   
24,290
     
14,992
     
2,505
     
3,870
     
2,923
 
Amortization of intangible assets
   
955
     
—
     
—
     
—
     
955
 
(loss) Income from operations
   
(1,724
)
   
103
     
1,485
     
566
     
(3,878
)
Interest expense
   
521
     
177
     
236
     
103
     
5
 
Identifiable assets
   
63,035
     
20,378
     
3,313
     
10,725
     
28,619
 
Capital expenditures
 
$
1,297
   
$
106
   
$
917
   
$
274
   
$
—
 

Goodwill and intangible assets are recorded at the Corporate level and are included in identifiable assets.

16.
LEASES

The Company has operating leases for office and warehouse space in all districts where it conducts business. As of September, 2021, the remaining terms of the Company’s operating leases were between one and 60 months and certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include the minimum lease payments that the Company is obligated to make under the non-cancelable initial terms of the leases as the renewal terms are at the Company’s option and the Company is not reasonably certain to exercise those renewal options at lease commencement.
 
The components of lease cost for the years ended September 30, 2021 and 2020 are as follows:


  2021    
2020
 
Operating lease cost
 
$
789
    $ 725  
Short-term lease cost
   
240
      141  
Total lease cost
 
$
1,029
    $ 866  

Rent expense for the year ended September 30, 2021 and 2020 was $1,029 and $866, respectively.

Operating lease right of use assets, current portion of operating lease liabilities and long-term operating lease liabilities reported in the consolidated balance sheets for operating leases as of September 30, 2021 were $2,936, $1,281 and $1,751, respectively.

Operating lease right of use assets, current portion of operating lease liabilities and long-term operating lease liabilities reported in the consolidated balance sheets for operating leases as of September 30, 2020 were $2,621, $720 and $1,924, respectively.
 
During the twelve months ended September 30, 2021, and 2020, the Company entered into new operating leases and recorded an additional $1,075 and $ 2,103, respectively in operating lease right of use assets and corresponding lease liabilities.
 
As of September 30, 2021 and 2020, the weighted-average remaining lease term and the weighted-average discount rate related to the Company’s operating leases were 2.9 years and 3.89% and 4.2 years and  4.6%, respectively.
 
Cash paid for amounts included in the measurement of operating lease obligations were $785 and $872 for the twelve months ended September 30, 2021 and 2020.

F-27
Future minimum lease payments under non-cancelable operating leases as of September 30, 2021 are as follows (in thousands):

    
Year End
September 30,
2021
 
2022
  $
1,283
 
2023
   
949
 
2024
   
618
 
2025
   
365
 
Thereafter
   
—
 
Total undiscounted Loan payments
   
3,215
 
Less Imputed Interest
   
(183
)
Total lease Obligation
 
$
3,032
 


17
FAIR VALUE MEASUREMENTS

Topic 820 established a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy under Topic 820 are described below:

Level 1:
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2:
Inputs to the valuation methodology are quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

Level 3:
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Recurring Fair Value Measurements

The following table presents the Company’s liabilities that are measured at fair value on a recurring basis based on the three-level valuation hierarchy (in thousands):

 
 
September 30,
 
   
2021
   
2020
 
Level 3
           
Contingent earnout liabilities
 
$
3,600
   
$
—
 
Level 3 Liabilities
 
$
3,600
   
$
—
 

This liability relates to the estimated fair value of earnout payments to former ELFS owners for the earnout period ending September 30, 2021. The current and non-current portions of the fair value of the contingent earnout liability at September 30, 2021 are $1,054 and $2,546, respectively.

Refer to Note 2 to Consolidated Financial Statements for ELFS acquisition information. The following table sets forth a summary of the changes in the fair value of the Company’s contingent earnout liabilities, which are measured at fair value on a recurring basis utilizing Level 3 assumptions in their valuation (in thousands):

F-28
 
 
September 30,
 
   
2021
   
2020
 
Balance at beginning of year
 
$
—
    $ —  
Fair value of contingent consideration recorded in connection with business combinations
   
3,600
     
—
 
Change in fair value of contingent consideration
   
—
     
—
 
Balance at end of year
 
$
3,600
    $
—  

18
COMMITMENTS AND CONTINGENCIES
 
(A)
Employment Agreements
 
The Company has various employment agreements, including employment agreements with the previous owners of ELFS, Honor and PhosphoSolutions.
 
19.
RISK AND UNCERTAINTIES

(A)
Currency Risks
 
The nature of Janel’s operations requires it to deal with currencies other than the U.S. Dollar. As a result, the Company is exposed to the inherent risks of international currency markets and governmental interference. A number of countries where Janel maintains offices or agent relationships have currency control regulations. The Company attempts to compensate for these exposures by accelerating international currency settlements among those agents.
 
(B)
Concentration of Credit Risk
 
The Company’s assets that are exposed to concentrations of credit risk consist primarily of cash and receivables from customers. The Company places its cash with financial institutions that have high credit ratings. The receivables from clients are spread over many customers. The Company maintains an allowance for uncollectible accounts receivable based on expected collectability and performs ongoing credit evaluations of its customers’ financial condition. We have continued to experience heightened customer credit risk as a result of the negative impact to customers’ financial condition, employment levels and consumer confidence arising from economic disruptions related to the COVID-19 pandemic, and expect that our risk in this area will remain high as long as the disruptions persist.
 
(C)
Legal Proceedings
 
Janel is occasionally subject to claims and lawsuits which typically arise in the normal course of business. While the outcome of these claims cannot be predicted with certainty, management does not believe that the outcome of any of these legal matters will have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows.
 
(D)
Concentration of Customers
 
No customer accounts for 10% or more of consolidated sales for the years ended September 30, 2021 and 2020. No customer accounted for 10% or more of consolidated accounts receivable at September 30, 2021 and 2020.
 
(E)
COVID-19
 
We continue to navigate operating the Company in light of the COVID-19 pandemic, which continues to have widespread implications. On the one hand, we have seen improvements in the broader economy, and our results for fiscal 2021 improved significantly compared to the prior fiscal year.  That said, there remains uncertainty regarding how the ongoing nature of the COVID-19 pandemic will impact the overall economy and the Company’s results in particular. While many countries have begun the process of vaccinating their residents against COVID-19, the large scale and challenging logistics of distributing the vaccines, as well as uncertainty over the efficacy of the vaccines against new variants of the virus, may hinder any economic recovery as well as our operations in the future.

F-29
Even after the COVID-19 pandemic subsides, the effects of the COVID-19 pandemic may last for a significant period of time thereafter and may continue to adversely affect our business, results of operations and financial condition. The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the duration and scope of the pandemic; governmental, business, and individuals’ actions in response to the pandemic; and the impact on economic activity including the possibility of recession or financial market instability. These factors may adversely impact consumer, business, and government spending as well as customers’ ability to pay for our services on an ongoing basis. This uncertainty also affects management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including receivables and forward-looking guidance.

(F)
Auto Insurance
 
In the ordinary course of our Logistics business, we are a defendant in several legal proceedings arising out of the conduct of our Logistics business. These proceedings include third party claims for property damage or bodily injury incurred in connection with our services. Although there can be no assurance as to the ultimate disposition of these proceedings, we do not believe, based upon the information available at this time, that these property damage or bodily injury claims, in the aggregate, will have a material impact on our consolidated financial statements. Within our Logistics segment, ELFS, maintains auto liability for commercial trucking claims of up to $6,000 per occurrence, and general liability with of up to $6,000 per occurrence. 

20.
SUBSEQUENT EVENTS


The Company, through its wholly owned subsidiary ELFS entered into a lease for its corporate offices commencing in October 2021 and ending in September 2028 for a new corporate headquarters.  Future minimum lease payments under this operating lease as of November 2021 are as follows (in thousands):


   
Fiscal Year End
September 30,
 
2022
 
$
514
 
2023
   
581
 
2024
   
593
 
2025
   
605
 
2026
   
617
 
Thereafter
   
1,325
 
Total lease obligation
   
4,235
 

F-30
EXHIBIT 4.1

DESCRIPTION OF REGISTRANT’S SECURITIES

As of September 30, 2021, Janel Corporation (the “Company”) had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: common stock, par value $0.001 per shares.

Common Stock

Janel Corporation (the “Company”) is authorized to issue up to 4,500,000 shares of common stock, par value $0.001 per share, of which 962,207 shares were issued and 942,207 outstanding as of September 30, 2021. The holders of common stock are entitled to one vote for each share held of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares of common stock can elect all of the directors. The Company’s principal officers and directors, Dominique Schulte, John J. Gonzalez II, Gerard van Kesteren, Brendan J. Killackey, Gregory J. Melsen and Vincent A. Verde, collectively own 68.8% of the issued and outstanding common stock and therefore can elect all of the directors. The holders of common stock are entitled to receive dividends when and if declared by the board of directors of the Company out of funds legally available therefore. In the event of liquidation, dissolution or winding up of the company, the owners of common stock are entitled to share all assets remaining available for distribution after the payment of liabilities and after provision has been made for each class stock, if any, having a preference over the common stock as such. The common stock has no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to the common stock.

Preferred Stock

The board of directors of the Company is authorized to issue up to 100,000 shares of preferred stock, par value $0.001 per share, in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including the dividend rights, dividend rate, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, liquidations preferences and the number of shares constituting any series or the designations of such series, without any further vote or action by the stockholders. It is possible for the board of directors to issue shares of such preferred stock in a manner which would make acquisition of control of the company, other than as approved by the board of directors of the Company, exceedingly difficult.

Series B Convertible Preferred Stock

As of September 30, 2021, the Company had outstanding 31 shares of Series B Convertible Preferred Stock, each of which is convertible into ten shares of the Company’s common stock at any time. The holders of the Series B Convertible Preferred Stock have no voting rights or powers to vote upon the election of directors, except the holders shall have voting rights and powers to vote upon any matter regarding the Series B Convertible Preferred Stock rights and preferences. The conversion price shall be subject to adjustment upon the happening of certain events such as stock splits of its common stock, combinations, certain dividends and distributions and reclassification, merger, consolidation or sale of assets. The Series B Convertible Preferred Stock does not carry any dividend rights. In connection with any organic change, the holders of Series B Convertible Preferred Stock will have the right to acquire and receive in lieu or in addition to the shares of common stock receivable upon conversion of the preferred stock, such shares of stock, securities or assets that would have been issued in connection with such organic change with respect to or in exchange for the number of shares of common stock that would have been receivable upon the conversion of the holder’s preferred shares into common stock prior to such organic change. In the event of liquidation, dissolution or winding up of the Company, the holders of the Series B Convertible Preferred Stock are entitled to share all assets remaining available for distribution after the payment of liabilities on a pari passu basis with the holders of the common stock of the Company.

Series C Cumulative Preferred Stock

As of September 30, 2021, the Company had outstanding 20,960 shares of Series C Cumulative Preferred Stock.

Holders of Series C Cumulative Preferred Stock do not have the right to vote on actions taken by stockholders of the Company, except that the vote of the holders of a majority of the then-outstanding Series C Cumulative Preferred Stock is required (a) to adopt amendments to the Company’s Amended and Restated Articles of Incorporation or bylaws which amendments would adversely affect the Series C Cumulative Preferred Stock or (b) to effect a liquidation, dissolution or winding up of the Company. In the event of liquidation, Series C Holders shall be paid an amount equal to the Original Issuance Price, plus any accrued but unpaid dividends thereon. Shares of Series C Cumulative Preferred Stock may be redeemed by the Company at any time upon notice and payment of the Original Issuance Price, plus any accrued but unpaid dividends thereon (“Redemption Price”).

The holders of the Series C Cumulative Preferred Stock shall be entitled to receive, out of funds legally available therefor, annual dividends when, as and if declared by the Board, at the rates heretofore set forth from time to time in the Certificate of Designation for the Series C Cumulative Preferred Stock, and commencing on October 17, 2017, at the annual rate of five percent (5.0%) with a one percent (1%) increase on each January 1st beginning January 1, 2019 and on each January 1 thereafter for four years, such that: (a) as of January 1, 2019 the annual dividend shall be at the rate of six percent (6.0%), (b) as of January 1, 2020 the annual dividend shall be at the rate of seven percent (7.0%), (c) as of January 1, 2021 the annual dividend shall be at the rate of eight percent (8.0%) and (d) as of January 1, 2022, and for every year thereafter, the annual dividend shall be at the rate of nine percent (9.0%). Such dividends are (i) prior and in preference to any declaration or payment of any dividend or other distribution on Common Stock (other than a dividend payable in shares of Common Stock) or on any other class or series of capital stock ranking junior to the Series C Cumulative Preferred Stock with respect to dividends, (ii) pari passu with any other shares of Preferred Stock entitled to participate pari passu with the Series C Cumulative Preferred Stock with respect to dividends and (iii) subject to the rights of any series of Preferred Stock that ranks, with respect to dividends, senior to the Series C Cumulative Preferred Stock. Such dividends shall accrue on each share of Series C Cumulative Preferred Stock on a daily basis from the Original Issuance Date whether or not earned or declared and whether or not there shall be net assets or profits of the corporation legally available for the payment of such dividends. Such dividends shall be cumulative, so that if such dividends with respect to any previous or current dividend period at the rate provided for herein have not been paid on all shares of Series C Cumulative Preferred Stock at the time outstanding, the deficiency shall be fully paid on such shares before any distribution shall be paid on, or declared and set apart for, Common Stock or any other class or series of capital stock ranking junior to the Series C Cumulative Preferred Stock with respect to dividends.

Anti-Takeover Effects of the Company’s Articles of Incorporation and By-Laws

None

Transfer Agent

The Company’s transfer agent for shares of its Common Stock is Broadridge Corporate Issuer Solutions.

Market for the Company’s Common Stock

The Company’s common stock is traded on the Pink tier of the OTC market under the symbol “JANL.”


Exhibit 10.43

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS MEMBERSHIP PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of the 21st day of September, 2021 by and between JANEL GROUP, INC., a New York corporation (“Janel”), EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC, a Texas limited liability company (“ELFS”), DAVID W. FLAKE, RANDALL L. COCKRELL, STEVEN R. LALUMANDIER, and FREDERICK J. LALUMANDIER (each a “Seller” and, collectively, “Sellers”).

EXPLANATORY STATEMENT

Janel and ELFS are each engaged in the [non-asset-based transportation logistics industry].  Seller owns and desires to sell, and Janel desires to purchase, 100% of the issued and outstanding membership interests of ELFS and ELFS Brokerage LLC, a Texas limited liability company (collectively, the “Interests”) on the terms and conditions hereinafter set forth.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound agree as follows:

1.            Definitions; Rules of Construction.

1.1.          For purposes of this Agreement, the terms set forth below shall have the following meanings:

Affiliate – As used in this Agreement, an “affiliate” of a person or entity is a person or entity controlling, controlled by or under common control with such person or entity.

Assumed Obligations – As defined in Section 2.3.

Authorizations – As defined in Section 6.18.

Base Balance Sheet – The balance sheet of ELFS as of May 31, 2021 attached hereto as Exhibit A.

Business Day – Any day other than a Saturday, a Sunday or a day on which banks in Houston, Texas are authorized or obligated by law or executive order to close.

Cash and Cash Equivalents – means the cash and cash equivalents (including marketable securities, short-term investments, refunds or rebates related to insurance policy terminations or audits, and uncollected checks issued to ELFS and funds in transit to ELFS as of the Closing Date, but excluding any uncollected checks issued by ELFS and funds in transit from ELFS) of either of ELFS.

1
Cash Cushion – As defined in Section 3.4.1(b).

Company Business –  The business heretofore operated by ELFS and/or ELFS Brokerage.

Closing  –  The closing of the transactions contemplated by this Agreement.

Closing Cash Deposit – As defined in Section 3.4.1.

Closing Cash Payment – As defined in Section 3.1.2.

Closing Date  – The date on which the Closing takes place, in accordance with Section 4.1.

Closing Working Capital –  An amount equal to the accounts receivable of ELFS minus the accounts payable of ELFS (excluding any Retained Obligations), in each case as of the Closing Date, as finally determined in accordance with Section 3.3.

Closing Working Capital Statement –  As defined in Section 3.3.2.

Code – The Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder.

Company Assets – All of the assets of ELFS and/or ELFS Brokerage (whether real estate interests or personal property), with the exception of the Excluded Assets, ELFS’s customer lists and information for the past five years and related current and historical business records created or maintained by ELFS relating to active and inactive customers and businesses for the preceding five years and any prospective customers (including, in all instances, pricing information charged by ELFS and internal costing and vendor information as to transportation services); all of ELFS’s accounts receivable; all of ELFS’s security deposits; all equipment, vehicles, parts, tools, computers, computer equipment and computer software, and other assets; all associated computerized information relating to such business and customers; all information relating to current, historical, and planned marketing and sales of services; all interest in any names used by ELFS or its predecessors in the past five years, and all Intellectual Property utilized in connection therewith; all Intellectual Property owned or licensed by ELFS and used in the Company Business; all local, 800 and international telephone and telefax numbers utilized by ELFS in connection with its businesses; all goodwill; all prepaid rents, utility bills, license fees and other pre-paid expenses; the leasehold interests in the Facilities covered by the Facility Leases; all furniture, fixtures and equipment used in or held for use in the Facilities covered by the Facility Leases or in connection therewith (subject to dispositions or replacements prior to Closing in the ordinary course of business); all rights of ELFS from and after the Closing Date under vendor, customer and sales representative contracts of ELFS in connection with its business; all transferable governmental licenses or authorizations with respect to the conduct of the Company Business; all other transferable licenses pursuant to which any assets used in the Company Business are used; all prepaid rents, utility bills, license fees and other prepaid expenses of ELFS; and all other tangible and intangible assets of ELFS.

2
Company Business –  The non-asset-based transportation logistics business operated by ELFS as of the date hereof.

Contracts – As defined in Section 6.18.

Data Room – means the Firmex electronic documentation site established by ELFS counsel on behalf of ELFS.

Employment Agreement – The Employment Agreement in substantially the form attached hereto as Exhibit D to be executed by each Key Employee.

ERISA – The Employee Retirement Income Security Act of 1974, as amended, and the regulations issued thereunder.

Estimated Closing Working Capital – As defined in Section 3.2.1.

Estimated Closing Working Capital Statement –  As defined in Section 3.3.1.

Estimated Purchase Price Adjustment – As defined in Section 3.3.1.

Excluded Assets – The items listed on Schedule 1.1(b), including all Cash and Cash Equivalents, the security deposit for ELFS current leased premises in Houston, Texas (the “Houston Security Deposit”) and any equity interests, assets or liabilities relating to, arising from, or in connection with ELFS Management, Inc., a Texas corporation.

Facilities – The leased office, warehouse, and terminal space and other real property occupied by ELFS as part of the Company Business, as more specifically set forth on Schedule 6.14.

Facility Leases – The current leases entered into by ELFS with respect to the Facilities.

Financial Statements – As defined in Section 6.11.

Forgiveness Period – means the period from the Closing through [April 16, 2022].

Fraud – means fraud, gross negligence or willful misconduct of any of Sellers or or any other act or omission of Sellers with the intent to deceive and mislead, or of inducing reliance on behalf of Janel in connection with this Agreement.

Fundamental Representations – The representations and warranties set forth in Sections 6.1, 6.2, 6.3, 6.6, 6.7, 6.9(a), 6.17, 6.24, 6.25 and 6.26.

3
Funds Flow Statement – A statement detailing the flow of funds to be paid by Janel in accordance with Section 3.1 specifying the name of each payee, the amount to be received by such payee, and the wire or other payment instructions for each payee, such statement to be executed by Sellers and delivered to Janel at least two (2) days prior to the Closing.

GAAP – means United States generally accepted accounting principles in effect from time to time, as modified by the Financial Reporting Framework for Small and Medium Entities.

Governmental Authority – means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

Indebtedness – all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services (other than trade payables and other current liabilities incurred in the ordinary course of business), (c) long or short-term obligations evidenced by notes, bonds, debentures or other similar instruments; (d) obligations under any interest rate, currency swap or other hedging agreement or arrangement; (e) reimbursement obligations under any letter of credit, banker’s acceptance or similar credit transactions to the extent drawn or funded; (f) guarantees made by the Company on behalf of any third party in respect to obligations of the kind referred to in the foregoing clauses (a) through (e); and (g) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as a result of the prepayment of any of the obligations referred to in the foregoing clauses (a) through (f), provided the Insurance Premiums Notes shall not be deemed Indebtedness.

Indebtedness Amount – As defined in Section 3.1.1.

Indemnified Party – means a Party making a claim for indemnification under Section 12 below.

Independent Accountant – Shall mean Moss Adams LLP1

Insurance Premium Notes – shall mean the notes set forth on Schedule 6.13, items 7 and 8 and any money due thereunder.

Insurance Refunds – As defined in Section 3.4.2.

1 Note to Seller: Does ELFS have a specific independent accountant in mind? This remains subject to Janel approval.

4
Intellectual Property – All (i) patents and patent applications, (ii) registered trade names, trade dress, logos, slogans, Internet domain names, Controlled Pages (e.g. social media accounts), registered and unregistered trademarks and service marks and related registrations and applications for registration, and all goodwill symbolized thereby, (iii) registered copyrights in both published and unpublished works, including without limitation all compilations, databases and computer programs, manuals and other documentation and all copyright registrations and applications, (iv) rights under applicable United States state trade secret laws as are applicable to know-how and confidential information, and (v) computer software (including, without limitation, source code, executable code, data, databases, and documentation).

Interests – As defined in the Explanatory Statement.

Janel – As defined in the introductory paragraph of this Agreement.

Key Employees – Shall mean Frederick J. Lalumandier, David W. Flake and Randall L. Cockrell.

Knowledge – including the phrase “knowledge of ELFS”, “knowledge of Seller” or anything similar, means the actual knowledge of David W. Flake, Randall L. Cockrell and Frederick J. Lalumandier, or the knowledge that such individual would have obtained if he would have conducted reasonable inquiry of the employees that report directly to such individual.

LC Deposits – As defined in Section 3.4.1(a).

Material Adverse Effect – A material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations, taken as a whole, of ELFS or the Company Business; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (A) general economic or political conditions; (B) conditions generally affecting the industries in which the Company operates; (C) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (D) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (E) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with the written consent of or at the written request of Janel; (F) any changes in applicable laws or accounting rules or the enforcement, implementation or interpretation thereof; (G) the announcement, pendency or completion of the transactions contemplated by this Agreement; (H) any natural or man-made disaster or acts of God, acts of war, sabotage, terrorism, national emergency, cyberattacks or escalation thereof; or (I) any failure by ELFS to meet any internal projections, forecasts or revenue or earnings predictions; or (J) any COVID-19 related measures, including any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive or guidelines, in each case promulgated by any Governmental Authority, including the CDC and the WHO, in each case, in connection with or in response to COVID-19, including the CARES Act and the Families First Corona Virus Response Act.

Notes – As defined in Section 3.1.3.

5
Objection Statement – As defined in Section 3.2.2.

Operating Profit – means the Income from Operations for the relevant period calculated in the same manner as the Income from Operations reported on the audited Combined Statements of Income and Changes in Members’ Equity for the year ended December 31, 2020 is calculated, subject to adjustments as set forth in Section 3.2.2(b).

Pass-Through Tax Return – Any income tax return filed by, or with respect to, the Company on which the Company is treated as a partnership within the meaning of Subchapter K of the Code (or any corresponding provisions of state or local tax law) and with respect to which any taxable income or loss shown on a tax return is required to be reflected in the income tax return of its members.

Permitted Liens – (a) liens for Taxes, assessments or other governmental charges or levies that are not yet due or payable or that are being contested in good faith; (b) statutory liens of landlords and for which appropriate reserves have been established; (c) liens of carriers, warehousemen, mechanics, materialmen, repairmen and other liens imposed by law for amounts not yet due or that are being contested in good faith; (d) liens incurred or deposits in connection with workers’ compensation, unemployment insurance or other types of social security and similar legislation; (e) liens resulting from any facts or circumstances relating to Janel or its Affiliates; (f) minor defects, irregularities in title, easements, rights of way, zoning, building, development and land use restrictions to the extent that such matters described in this clause (g) do not materially interfere with the present use or occupancy of the relevant Facility; and (h)  (i) purchase money liens and liens securing rental payments under capital lease arrangements; (j) liens of lessors and licensors arising under lease agreements or license arrangements; (k) other liens arising in the ordinary course of business and not incurred in connection with the borrowing of money; (l) prior to the Closing, liens securing Indebtedness to be paid off at the Closing; and (m)  other liens that either individually or in the aggregate do not have a Material Adverse Effect.

Post-Closing Adjustment – As defined in Section 3.3.2.

PPP – means the Paycheck Protection Program, authorized by Section 1106 of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) and administered by the Small Business Administration

PPP Loan – The loan, evidenced by that certain promissory note dated April 16, 2020, in the principal amount of $2,011,300 from the PPP Lender to ELFS which was issued under the PPP.

Purchase Price – As defined in Section 3.1.

Restricted Period – As defined in Section 11.1.

Retained Obligations – As defined in Section 2.2.

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Securities Act – The Securities Act of 1933, as amended.

Withheld Amounts – As defined in Section 12.5.

1.2          The Explanatory Statement is hereby incorporated into this Agreement and made a part hereof.

1.3.          The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

1.4.       Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, to the singular include the plural, to the part include the whole, and to the male gender shall also pertain to the female and neuter genders and vice versa.  The term “including” is not limiting, and the term “or” has the inclusive meaning represented by the phrase “and/or”.  The words “hereof,” “herein,” “hereby,”, “hereto”, “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement.  Section, Schedule, Exhibit and clause references are to this Agreement unless otherwise specified.

2.            Purchase of Interests; Retention of Liabilities.

2.1.        On the terms and subject to the conditions set forth in this Agreement, each Seller hereby agrees to sell, transfer and assign to Janel, and Janel hereby agrees to purchase from Sellers, on the Closing Date, all of the right, title and interest of Sellers in and to the Interests, as more particularly set forth on Schedule 2.1.  Janel, at its option, may designate one or more direct or indirect subsidiaries or Affiliates of Janel to purchase the Interests, provided that such subsidiaries or Affiliates also execute this Agreement.

2.2.       Prior to the Closing, ELFS shall assign and Sellers or their designees, other than ELFS, will assume the obligations of ELFS listed on Schedule 2.2 (the “Retained Obligations”).

2.3.       Subject in all respects to Section 2.2 above, at the Closing, Janel will assume (a) liabilities for trade payables and accrued expenses incurred by ELFS in the ordinary course of business, (b) liabilities pursuant to the Facility Leases, in either case as of and after the Closing Date, and (c) any other liabilities other than Indebtedness of ELFS as of the Closing Date or Retained Obligations (collectively, the “Assumed Obligations”).

3.            Consideration.

3.1.        The consideration (the “Purchase Price”) for all of the Interests shall be Nineteen Million and No/100 Dollars ($19,000,000), plus the Earn-Out in accordance with Section 3.2, and subject to adjustment pursuant to Section 3.3, which shall be paid by Janel at the Closing in accordance with the Funds Flow Statement, as follows:

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3.1.1.     An amount sufficient to repay all Indebtedness of ELFS (but expressly excluding the Insurance Premium Notes) as of the Closing Date (the “Indebtedness Amount”) to the holders of such Indebtedness on behalf of ELFS.

3.1.2.       An amount (the “Closing Cash Payment”) to Sellers in the aggregate equal to (i) Thirteen Million and No/100 Dollars ($13,000,000), minus, (ii) the Indebtedness Amount.

3.1.3.       Delivery of a promissory note to each Seller, each substantially in the form attached hereto as Exhibit B, in (i) the respective principal amounts set forth on Schedule 2.1, which in the aggregate shall equal Six Million and No/100 Dollars ($6,000,000), and, (ii) plus or minus (as applicable) the Estimated Purchase Price Adjustment (the “Notes”).

3.2.        Earn-Out.

3.2.1.     Subordination of Earn-Out.   The obligations of Janel to pay any Earn-Out are subject to the Subordination Agreement dated as of the date hereof by and among the Sellers and Santander Bank, N.A. (“Santander Bank”).

3.2.1.        Following the Closing, each of the Sellers shall be entitled to receive their pro-rata share of an earn-out payment in accordance with this Section 3.2.  The amount of the earn-out payments (each an  “Earn-Out Payment” and collectively the “Earn-Out Payments”) shall be equal one third (1/3) of all Operating Profit earned by ELFS after the Closing with respect to the four (4) twelve (12) month periods following the Closing Date, meaning the respective periods commencing on October 1, 2021 – September 30, 2022; September 1, 2022 – August 31, 2023; October 1, 2023 – September 30, 2024; and October 1, 2024 – September 30, 2025 (each an “Earn-Out Year” and collectively the “Earn-Out Years”).

3.2.2.      During the duration of the Earn-Out Years, Janel shall cause distinct accounting records to be maintained for the business of ELFS regardless of whether such business continues to operate as a subsidiary of Janel or is liquidated and thereafter operates as a division of Janel. The business of ELFS existing on the Closing Date shall thereafter be deemed to include any property added thereto in the normal course of business, in substitution for assets of ELFS which are disposed of, and additional or new products developed by ELFS in connection with its business as in existence on the Closing Date. Except as hereinafter provided, Janel hereby covenants and agrees that during the period of time when Sellers are eligible to earn the Earn-Out Payments:
 
(a)          At the Closing, Seller Representative shall be entitled to serve as a member of the Board of Managers of ELFS to the extent Janel elects to continue the limited liability company existence of ELFS, subject to the terms and conditions of the operating agreement of ELFS, as the same may be amended from time to time.

(b)          For purposes of calculating the Earn-Out Payments, no general overhead allocation shall be made to ELFS, but Janel shall be entitled to charge ELFS for direct services performed for ELFS or purchased for it in the following areas:

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(1)        Advertising.  ELFS will be charged for all direct costs associated with advertising directly related to the business of ELFS, such as the actual cost of advertising space in publications and third party agency charges directly relating to such advertisements. ELFS will not be charged for (i) general Janel corporate advertising, (ii) any time devoted by Janel employees to advertising activities on behalf of ELFS or (iii) any indirect costs associated with such advertising.

(2)        Audit Fees.  Direct charges for the work performed by Janel’s independent public accountants in preparing the audit of ELFS will be passed on to ELFS on an annual basis. ELFS will not be charged for any other portion of Janel’s annual audit, or for any time devoted by Janel employees in preparing ELFS’s audit. The audit plan and related fees shall be reviewed with Sellers prior to the commencement of the audit.

(3)         Benefit Plans.  In the event Janel makes any changes to the current ELFS employee benefit plans, including moving employees to Janel benefit plans, the cost of such plans for purposes of the definition of Operating Profit shall be equal to the amount paid for such benefits plans by ELFS as of the Closing, plus a reasonable increase as agreed to by Janel and the Seller’s Representative.

(4)         Corporate Services.  Services involving facilities, contract administration, print shop, travel agencies and volume purchase agreements will be available to ELFS in accordance with Janel policy and will be charged only to the extent of direct costs incurred. There will be no charge for the time of Janel employees in providing such services.

(5)       Corporate Participation.  ELFS shall bear all costs incurred directly by its managers in connection with compliance by ELFS with all reasonable reporting requirements and attendance by its management at management meetings.

(6)        Legal Services.  ELFS will be required to utilize legal services in accordance with Janel policy and will be charged for such services on an hourly basis.

(7)         Management Bonuses. ELFS will be charged for all bonuses paid to ELFS employees.

(8)        Tag and Consulting Fees.  All fees charged to Janel by its outside auditors relating consulting fees incurred on ELFS’s behalf and at their request will be charged to ELFS.

(9)        Insurance.  ELFS will be charged for direct costs associated with including ELFS as an additional insured on Janel’s property and casualty insurance policies.

(10)       ELFS CFO.  ELFS will be charged for the compensation and payroll costs for a chief financial officer for ELFS, other than $50,000 of such costs which shall not be charged to ELFS.

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(11)       Reference herein to the providing of time of Janel employees to ELFS without charge shall be interpreted to mean reasonable amounts of time at reasonable points in time consistent with the other duties of such employees and shall in no case involve the full time permanent services of any employee.

(c)         Except in connection with a merger with or into, or acquisition by, Janel or an Affiliate of Janel, Janel will not, without the consent of Sellers, sell, abandon or terminate the business of ELFS.

(d)         All transactions between ELFS and other divisions or subsidiaries of Janel involving custom work or personal services provided by either party to the other shall be provided by such party on a basis no less favorable than such party charges to its most favored customers.

(e)          Janel shall provide ELFS working capital to be used by ELFS to develop or continue its business as conducted immediately prior to the Closing.

(f)          Within the constraints imposed by Janel company policy, Sellers shall be entitled to make all day to day decisions including, but not limited to, those relating to (i) the hiring, termination and  compensation of employees, (ii) product development, (iii) markets to be served, (iv) price adjustments and (v) facility requirements. It is understood and agreed, however, that all such decisions are subject to review by the Janel manager to whom Sellers report, and that after consultation with Sellers, if such Janel manager disagrees with such decisions, the decision of such Janel manager shall be final with respect to all such areas.

Subject only to the foregoing, Janel may maintain and manage the business, personnel and operations of ELFS as it would any other division or subsidiary. Janel will consult with Sellers on all matters which could have a material adverse effect on Sellers’ ability to earn the Earn-Out Payments, and shall not implement or make any decision on any matter which could have such a material adverse effect on Sellers’ ability to earn the Earn-Out Payments, and shall not implement or make any decision on any matter which could have such a material adverse effect on Sellers’ ability to earn the Earn-Out Payments, in either case without making appropriate adjustments to the calculation of Operating Profit.

3.2.3.       Not later than 120 days following the end of each Earn-Out Year, Janel shall cause to be prepared and delivered to Seller Representative a calculation of the Earn-Out for such Earn-Out Year, together with documentation supporting such calculation (the “Earn-Out Statement”), and shall pay the Sellers the Earn-Out due (if any) for such Earn-Out Year within three (3) Business Days of delivery of such Earn-Out Statement.

3.2.4.        Review and Dispute Procedures.

3.2.4.1.    Janel shall give Seller and other appropriate representatives of Seller such access during normal business hours to the books, records and personnel of Janel relating to ELFS Business as Seller shall reasonably request in order to evaluate the Earn-Out Statements.

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3.2.4.2.    If Seller Representative objects to any of the Earn-Out Statements, Seller Representative must deliver to Janel a notice of objection (an “Objection Notice”) with respect to such within thirty (30) Business Days following Janel’s delivery of the Earn-Out Statements (the “Objection Period”).

3.2.4.3.    If no Objection Notice is delivered to Janel within such Objection Period or if Seller Representative delivers to Janel a notice of acceptance of such calculations, the Earn-Out Statements shall be final and binding, and any Earn-Out Payment shall be paid by Janel to Seller in accordance with Section 3.2.3.

3.2.4.4.    If an Objection Notice is timely given, Janel and Seller Representative shall attempt in good faith to resolve the objection which must include an in-person meeting with Seller Representative and Janel representatives on hand to resolve the objection. If Janel and Seller Representative are unable to reach agreement within twenty (20) Business Days after an Objection Notice has been given, the parties shall submit their final calculations of the items in dispute to an Independent Accountant as soon as practical following the end of such twenty (20) Business Days period, but in any event within forty-five (45) Business Days after the applicable Objection Notice has been received by Janel (which time period may be extended for an additional period by the Independent Accountant not to exceed an additional forty-five (45) Business Days at the request only of Seller Representative).  The Independent Accountant will be directed to review such final calculations and, within fifteen (15) days thereafter, make a selection as to which of the final calculations presented to it is, in the aggregate, more accurate and to provide a written report that sets forth the Independent Accountant’s determination of the Earn-Out Statements. The resolution of the dispute by the Independent Accountant will be final and binding on the parties hereto and any Earn-Out Payments shall be paid by Janel to Seller in accordance with Section 3.2.3. The fees and expenses of the Independent Accountant shall be paid by the party whose proposed calculation is not selected by the Independent Accountant.

3.2.5.       Tax Treatment.  Any payment of the Earn-Out Payments shall be treated as an adjustment to the Purchase Price under this Agreement for tax purposes.

3.3.          Purchase Price Adjustment for Closing Working Capital.

3.3.1.      At least three Business Days before the Closing Date, ELFS shall prepare and deliver to Janel a statement setting forth its good faith estimate of Closing Working Capital (the “Estimated Closing Working Capital”), which statement shall contain: (1) an estimated balance sheet of ELFS as of the Closing Date (without giving effect to the transactions contemplated herein) prepared using the same accounting methods, practices, principles, policies and procedures that were used in the preparation of the Financial Statements, and (2) a calculation of Estimated Closing Working Capital (the “Estimated Closing Working Capital Statement”). The parties agree that the target Closing Working Capital is $9,000,000 and that the Purchase Price will be adjusted based on the Estimated Closing Working Capital and Post-Closing Adjustment, as follows.  To the extent that the Estimated Closing Working Capital is lower than $8,000,000 or greater than $10,000,000 (the “Working Capital Range”), the Purchase Price shall be decreased or increased, respectively, by the amount of such deficiency or excess, as the case may be (the “Estimated Purchase Price Adjustment”).  An adjustment to the Purchase Price will only be made to the extent that the Estimated Closing Working Capital is an amount that is lower than $8,000,000 or greater than $10,000,000.

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3.3.2.      Within 60 days after the Closing Date, Janel shall prepare and deliver to Sellers a statement setting forth its calculation of Closing Working Capital, (the “Closing Working Capital Statement”). The difference between the Closing Working Capital and the Estimated Closing Working Capital shall be the “Post-Closing Adjustment”; provided, however, if the Closing Working Capital is within the Working Capital Range no adjustment to the Purchase Price shall be made hereunder. After receipt of the Closing Working Capital Statement, Seller shall have 30 days to review the Closing Working Capital Statement. On or prior to the last day of such review period, Seller may object to the Closing Working Capital Statement by delivering to Janel a single written statement signed by Seller setting forth in reasonable detail each disputed item or amount and the basis for Seller’s disagreement therewith (the “Objection Statement”). If Seller fails to deliver the Objection Statement before the expiration of the review period, the Closing Working Capital Statement shall be deemed to have been accepted by Seller. If Seller delivers the Objection Statement before the expiration of the review period, Janel and Seller shall negotiate in good faith to resolve such objections within 30 days after the delivery of the Objection Statement.

3.3.3.      Resolution of Disputes.  If Sellers and Janel fail to reach an agreement with respect to the Objection Statement within the time set forth above, then any amounts remaining in dispute shall be submitted for resolution to an Independent Accountant who, acting as experts and not arbitrators, shall resolve the disputed amounts only and make any adjustments to the Post-Closing Adjustment, as the case may be, and the Closing Working Capital Statement. The Independent Accountant shall only decide the specific items under dispute by the parties and their decision must be within the range of values assigned to each such item in the Closing Working Capital Statement and the Objection Statement, respectively.  The Independent Accountant shall make a determination within 30 days (or such other time as the parties hereto shall agree in writing) after their engagement, and this determination shall be conclusive and binding upon the parties hereto. The fees and expenses of the Independent Accountant shall be paid by Sellers and Janel, based upon the percentage that the amount actually contested but not awarded to Sellers or Janel, respectively, bears to the aggregate amount actually contested by Sellers and Janel.

3.3.4.      Payments of Post-Closing Adjustment. To the extent the Estimated Closing Working Capital is greater than the Working Capital Range, then the Purchase Price shall be decreased by the Post-Closing Adjustment and vice versa. Such reduction or increase in the Purchase Price, as the case may be, shall be proportionately deducted from or added to, as the case may be, the first principal payment due under the Notes.  The final Closing Working Capital Statement and the Post-Closing Adjustment shall supersede and override the Estimated Closing Working Capital Statement and the Estimated Purchase Price Adjustment.

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3.4.        Post-Closing Cash.

3.4.1.      Comerica Bank.  The Sellers agree that as of the Closing, the aggregate amount of $1,500,000 (the “Closing Cash Deposit”) will remain on deposit in one or more of ELFS’s Comerica Bank accounts.  The Closing Cash Deposit will remain an Excluded Asset for all purposes of this Agreement, but Sellers hereby grant to Janel the right to use the Closing Cash Deposit following the Closing, as follows:


(a)
$842,800 (the “LC Deposits”) as cash securing the letters of credit issued by Comerica Bank described in Section 6.13 of the Disclosure Schedule (the “Existing Letters of Credit”); and


(b)
$657,200 (the “Cash Cushion”) to be used by ELFS following the Closing as needed for operations.

The LC Deposits shall be remitted and paid to the Seller Representative on behalf of the Sellers when and as replacement letters of credit are issued by Santander Bank for the credit of Janel to replace the Comerica Bank letters of credit, but, in any event, no later than 90 days following the Closing Date and shall not be subject to any subordination by Sellers to Santander Bank.  The Cash Cushion shall be remitted and paid to the Seller Representative on behalf of the Sellers within 30 days following the Closing Date, subject to the subordination by Sellers to Santander Bank of Janel’s obligations to Sellers.

3.4.2.      Insurance Premium Refunds.  The parties acknowledge that portions of certain insurance premiums paid by ELFS prior to the Closing and certain insurance rebates related to audits will be refunded to ELFS following the Closing (the “Insurance Refunds”).  The parties agree that the Insurance Refunds are Excluded Assets for all purposes of this Agreement, shall be remitted to the Seller Representative on behalf of the Sellers within two business days following availability of the funds to ELFS and shall not be subject to any subordination by Sellers to Santander Bank.

4.            Closing.

4.1.        The Closing shall take place on the date of this Agreement (the “Closing Date”) at such place as shall be agreed upon by the parties hereto, time being of the essence.

4.2.         At the Closing (i) each Seller will assign and transfer to Janel all of such Seller’s right, title and interest in and to the Interests free and clear of all liens, security interests, claims or encumbrances, by delivery of a duly executed Assignment of Interests in the form of Exhibit C hereto, and (ii) the parties shall deliver the certificates (if any) and other contracts, documents and instruments required to be delivered by them, respectively, as set forth in Sections 9 and 10.

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5.            Representations and Warranties of Janel.

Janel represents and warrants to ELFS and Sellers as follows:

5.1.        Janel Existence and Good Standing.  Janel: (i) is a corporation duly organized, validly existing, and in good standing under the laws of New York; (ii) has the corporate power and authority to own, lease, and operate its properties and carry on its business as now being conducted by it; and (iii) is, or has filed for qualification to be, duly licensed, qualified and authorized to do business as a foreign corporation in, and in good standing in, each jurisdiction in which failure to be so licensed, qualified, authorized, or in good standing will have a material adverse effect on the business or properties (owned, leased, or operated) of such entity, and is not aware of any reason for which any such filing for qualification will not be effective without cost above customary filing fees and expenses.

5.2.       Power and Authority; Authorization. Janel has full power and authority to enter into, execute and deliver this Agreement, and to perform its obligations hereunder. The execution, delivery, and performance of this Agreement by Janel have been duly authorized and approved by the Board of Directors of Janel, subject to all contingencies set forth herein. This Agreement has been, and each of the Exhibits hereto and other documents required hereunder (if applicable) will be, on the Closing Date, duly executed and delivered by or on behalf of Janel and are the legal, valid, and binding obligations of Janel in accordance with their respective terms, subject (as to the enforcement of remedies) to laws of general application relating to bankruptcy, insolvency and the relief of debtors and (as to the availability of equitable remedies) to the discretion of the equity tribunal having jurisdiction.

5.3.         No Violations. The execution, delivery, and performance of this Agreement by Janel will not violate (with or without the giving of notice or the lapse of time, or both) any organizational document of Janel, or require any registration, qualification, consent, approval, or filing under (except as set forth on Schedule 5.4), any law, ordinance or regulation binding on Janel and will not conflict with, require any consent or approval under, result in the breach of any provision of, constitute a default under, result in the acceleration of the performance of its obligations under, cause or allow for the termination of the certificate of incorporation, bylaws, any stockholder agreements, any debt instrument, mortgage, deed of trust, license, permit, franchise, lease, contract, or other instrument or agreement to which Janel is a party, or any judgment, order, writ or decree of any court, arbitrator or governmental agency by which Janel or any of its assets or properties is bound except as would not have a Material Adverse Effect on the transactions contemplated herein.  Neither Janel nor any of its assets or properties is subject to or bound or affected by any constituent instrument provision, debt instrument, mortgage, deed of trust, license, permit, franchise, lease, contract, other instrument or agreement, judgment, order, writ, decree, injunction, law, statute, ordinance or regulation, or any other restriction of any kind or character, which would prevent Janel from entering into, or performing its obligations under, this Agreement, except for such instruments the violation(s) of which can be cured at an aggregate immaterial cost or expense to Janel and, with or without being cured, will not prevent Janel from consummating the transaction contemplated herein.

5.4.        Approvals Required.  Except as set forth on Schedule 5.4, no approval, authorization, consent, clearance, order or other action of, or filing with, any person, firm or corporation, or any court, administrative agency or other governmental authority, or any governmental or non-governmental trade group, is required by Janel in connection with the execution and delivery by Janel of this Agreement, the Notes or the performance by Janel of the transactions described herein.

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5.5.        Investment Intent.  The Interests are being acquired solely for the account of Janel and not with a view to, or for resale in connection with, a distribution of all or any part thereof.  Janel has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Interests.  Neither Janel nor any Affiliate of Janel has made any commitment to sell, transfer or assign, and each such person has no presently arranged plan or intention to sell, transfer, or assign any of the Interests.  Janel acknowledges that the Interests are not registered pursuant to the Securities Act or any state securities laws.

5.6.        Litigation. There is no pending action, or order or proceeding with any governmental entity or agency or to the actual knowledge of Janel, threatened against Janel (or any of its governing Persons or Affiliates) that could prevent, cause any material delay, or materially impair Janel’s ability to perform its obligations under this Agreement.

5.7.       Janel’s Reliance. Janel acknowledges that it has had and its representatives have been permitted access to the books and records, facilities, equipment, tax returns, contracts, insurance policies (or summaries thereof) and other properties and assets of ELFS that Janel and its representatives have desired or requested to see or review, and that Janel and its representatives have had a full opportunity to meet with the officers, management and employees of ELFS to discuss ELFS, its business, and its collective operations. In connection with Janel’s investigation, Janel acknowledges, represents and warrants that it may have received from the Sellers or ELFS certain projections, forward-looking statements and other forecasts and certain business plan information. Janel acknowledges that there are uncertainties inherent in attempting to make such estimates, projections, and other forecasts and plans, that Janel is familiar with such uncertainties, that Janel is taking full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts and plans so furnished to it (including the reasonableness of the assumptions underlying such estimates, projections, forecasts or plans), and that Janel shall not have or make any claim against any Person with respect thereto.  Janel acknowledges that, except for the representations and warranties contained in this Agreement and the Ancillary Transaction Documents, none of ELFS, or any Seller hereby makes any other express or implied representation or warranty hereunder with respect to ELFS or the transaction.  Janel acknowledges that none of the Sellers or any other person has made any representation or warranty, expressed or implied, as to the accuracy or completeness of any information regarding ELFS and the Company Business, in each case except as expressly set forth in this Agreement and the Ancillary Transaction Documents, and all other representations and warranties are expressly disclaimed by Sellers. Notwithstanding anything to the contrary in this Agreement, nothing in this Section 5.7 shall limit, or shall be construed or deemed to limit in any way whatsoever, any right or remedy of any person against any other person in the event of Fraud.

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5.8.       Financial Ability; Solvency. Janel has sufficient immediately available funds to pay the amount of the Closing Cash Payment and all other amounts payable pursuant to this Agreement and the Notes, to consummate all of the transactions contemplated hereby, and to satisfy all other costs and expenses arising in connection herewith. Immediately prior to and immediately after the consummation of the transactions contemplated by this Agreement, the assets of Janel (including following the Closing, ELFS) will exceed the liabilities of Janel.

6.            Representations and Warranties of ELFS and Sellers.

ELFS and the Sellers jointly and severally, except with respect to Sections 6.3 and 6.6 and any other subsection where the context is clear that such representation is only as to a particular Seller (in which case solely, just the applicable Seller(s)) represent and warrant to Janel as follows:

6.1.       Existence and Good Standing.  Each of ELFS and ELFS Brokerage: (i) is a limited liability company duly organized, validly existing, and in good standing under the laws of Texas; (ii) has the power and authority to own, lease, and operate its properties and carry on its business as now being conducted by it; and (iii) is duly licensed, qualified and authorized to do business as a foreign entity in, and in good standing in, each jurisdiction in which failure to be so licensed, qualified, authorized, or in good standing will have a Material Adverse Effect on the business or properties (owned, leased, or operated) of ELFS or ELFS Brokerage.

6.2.        Capitalization.  The membership interests of ELFS and ELFS Brokerage consist only of the Interests as more particularly set forth on Schedule 2.1. All of the Interests have been duly authorized, are validly issued, fully paid and non-assessable, and are owned of record and beneficially by Sellers as shown on Schedule 2.1, free and clear of all liens and encumbrances  except as set forth on Schedule 6.3. All of the Interests were issued in material compliance with applicable laws. None of the Interests were issued in violation of any agreement, arrangement or commitment to which Seller or ELFS is a party or is subject to or in violation of any preemptive or similar rights of any Person.

6.3.        Title to Interests; Options.  Sellers each have lawful, record and beneficial ownership to the Interests, free and clear of any lien, claim or encumbrance  except as set forth on Schedule 6.3.  Except as set forth on Schedule 6.3, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, convertible securities, commitments, agreements, or understandings of any character obligating ELFS, ELFS Brokerage or any member or other equity owner of ELFS or ELFS Brokerage to issue any Interests, or any other interest in, ELFS or ELFS Brokerage. Without limiting the foregoing, ELFS and/or ELFS Brokerage does not have outstanding or authorized any interest appreciation, phantom stock, profit participation or similar rights and there are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Interests, except as set forth on Schedule 6.3 and except for rights granted to Janel under this Agreement.

6.4.        Subsidiaries; ELFS Brokerage.  Other than as set forth on Schedule 2.1, ELFS and ELFS Brokerage do not have any subsidiaries and neither ELFS nor ELFS Brokerage owns, directly or indirectly, any interest in, or control any, corporation, partnership, joint venture or other business association. Notwithstanding anything in this Agreement to the contrary, the representations and warranties set forth in this Agreement with respect to ELFS shall be deemed to apply mutatis mutandis to ELFS Brokerage and all subsidiaries of ELFS or ELFS Brokerage.

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6.5.        No Restrictions.  Without limiting the generality of other representations and warranties contained herein, ELFS has maintained its own records with respect to its customers containing the name, address, contact information, customer requirements, and shipping rates with respect to each of ELFS’s customers over the past five years, except as set forth on Schedule 6.5.  Neither ELFS nor any Seller has any Knowledge of any restrictive covenants or non-solicit restrictions applicable to ELFS with respect to any current customers of ELFS.

6.6.         Power and Authority; Authorization.  Each Seller and ELFS has full power and authority to enter into, execute and deliver this Agreement, and to perform each of its obligations hereunder. The execution, delivery, and performance of this Agreement by ELFS have been duly authorized and approved by the Managers of ELFS. This Agreement has been, and each of the Exhibits hereto and other documents required hereunder (if applicable) will be, on the Closing Date, duly executed and delivered by or on behalf of ELFS and Seller, and are the legal, valid, and binding obligations of ELFS and Seller in accordance with their respective terms, subject (as to the enforcement of remedies) to laws of general application relating to bankruptcy, insolvency and the relief of debtors and (as to the availability of equitable remedies) to the discretion of the equity tribunal having jurisdiction.

6.7.        No Violations.  Except as set forth on Schedule 6.7, and except where no Material Adverse Effect would occur, the execution, delivery, and performance of this Agreement by ELFS and Sellers (i) will not violate (with or without the giving of notice or the lapse of time, or both) any organizational document of ELFS, or require any registration, qualification, consent, approval, or filing under any law, ordinance or regulation binding on ELFS or any Seller, and (ii) will not:

(a)          conflict with, require any consent or approval under, result in the breach of any provision of, constitute a default under, result in the acceleration of the performance of its obligations under, cause or allow for the termination of, or

(b)          result in the creation of any claim, lien, charge, or encumbrance (except for Permitted Liens) upon, any Interests or other equity interests in ELFS or any of its properties, assets, or businesses, pursuant to the certificate of incorporation, bylaws, any stockholder agreements, any debt instrument, mortgage, deed of trust, trust agreement, license, permit, franchise, lease, contract, or other instrument or agreement to which ELFS or any Seller is a party, or any judgment, order, writ or decree of any court, arbitrator or governmental agency by which ELFS or any Seller or any of their respective assets or properties is bound. Except as set forth on Schedule 6.7, neither ELFS nor any Seller nor any of their respective assets or properties is subject to or bound or affected by any constituent instrument provision, debt instrument, mortgage, deed of trust, trust agreement, license, permit, franchise, lease, contract, other instrument or agreement, judgment, order, writ, decree, injunction, law, statute, ordinance or regulation, or any other restriction of any kind or character, which would prevent ELFS or any Seller from entering into, or performing its obligations under, this Agreement, except for such instruments the violation(s) of which can be cured at an aggregate immaterial cost or expense to ELFS or Seller (as the case may be) and, with or without being cured, will not prevent ELFS or any Seller (as the case may be) from continuing its business in the ordinary course.  Without limiting the generality of the foregoing, ELFS and Sellers represent and warrant to Janel that neither ELFS nor any Seller is bound by any non-competition, franchise, service, or other agreement which would prohibit or restrict ELFS or any Seller from entering into this Agreement or performing any of their respective obligations under this Agreement, any Employment Agreement or any other instrument contemplated by this Agreement, except as set forth on Schedule 6.7.

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6.8.       Approvals Required.  Except as set forth on Schedule 6.8, no approval, authorization, consent, order or other action of, or filing with, any person, firm or corporation, any court, administrative agency or other governmental regulatory authority, or any governmental or non-governmental trade group, is required by ELFS or any Seller in connection with the execution and delivery by ELFS or Sellers of this Agreement or any Employment Agreement, or the performance by ELFS or Sellers of the transactions described herein or therein and for the operation of the Company Business by Janel following the Closing.

6.9.        Title to Assets and Related Matters.

(a) Except for the liens listed on Schedule 6.9, on the date hereof, ELFS has, and on the Closing Date will have, good title to all assets used in the Company Business of any kind or character, free and clear of any material liens or encumbrances (except for Permitted Encumbrances), and all such assets are reflected on the Base Balance Sheet (subject to dispositions or replacements prior to Closing in the ordinary course of business).

(b) Except for matters that may arise in the ordinary course of business, ELFS’s material assets are in good operating condition and repair, reasonable wear and tear and normal obsolescence excepted.  With the exception of the Excluded Assets, the Company Assets constitute all of the assets used in the Company Business of any kind or character as heretofore conducted. To the knowledge of ELFS, there does not exist any condition or agreement that materially interferes with the use of the Company Assets in the conduct of the Company Business in the ordinary course.  ELFS has no interest in real property other than as lessee pursuant to the Facility Leases.

6.10.      Intellectual Property.  Schedule 6.10 contains a true and complete list and brief description of all Intellectual Property required or used in the Company Business, other than licenses to use “off-the-shelf” commercial software included with the equipment that constitute part of the Company Assets (none of which licenses are material).  Except as listed on such Schedule and such licenses to use “off-the-shelf” commercial software, no license, trademark, trade name, service mark, or copyright is required to conduct the Company Business.  There are no pending or, to the knowledge of ELFS, threatened proceedings asserting that the use of any licensed Intellectual Property by ELFS infringes upon or misappropriates any Intellectual Property rights of any person, except as set forth on such Schedule.  Neither ELFS nor the Seller has received any written notice or allegation of invalidity, infringement, or misappropriation from any person or governmental authority with respect to any Intellectual Property rights, except as set forth on such Schedule.  The Company Business, as currently conducted, does not infringe the Intellectual Property rights of a third party, except as set forth on such Schedule.

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6.11.       Financial Statements.  The combined balance sheets, combined statements of operations and changes to Members’ equity and combined statements of cash flows of ELFS for the 12-month periods ending December 31, 2018, 2019 and 2020 (collectively the “Financial Statements”); the Base Balance Sheet and income statement for the three month period ended May 31, 2021 (collectively, the “Interim Financial Statements”) are attached as Schedule 6.11. The Financial Statements and Interim Financial Statements are prepared from the books and records of ELFS and fairly and accurately in all material respects present ELFS’s financial position as at the dates set forth therein and the results of its operations for the periods reflected therein, except that the Interim Financial Statements are subject to normal year-end adjustments, lack footnotes and other presentation items. All Financial Statements are audited and have been prepared in accordance with GAAP other than as expressly detailed on Schedule 6.11 and on a basis consistent with that of prior periods; unaudited Interim Financial Statements do not contain all footnotes and schedules required in audited financial statements.  ELFS has always used the fiscal year ending December 31 as its fiscal year.

6.12.        Accounts Receivable.  Except as set forth on Schedule 6.12, the accounts receivable reflected on the Base Balance Sheet and the accounts receivable arising after the date thereof (a) have arisen from bona fide transactions entered into by ELFS involving the sale of goods or the rendering of services in the ordinary course of business consistent with past practice; (b) constitute only valid, undisputed claims of ELFS not subject to claims of set-off or other defenses or counterclaims other than normal cash discounts accrued in the ordinary course of business consistent with past practice. The reserve for bad debts shown on the Base Balance Sheet or, with respect to accounts receivable arising after the date thereof, on the accounting records of ELFS have been determined in accordance with GAAP, subject to normal year-end adjustments and the absence of disclosures normally made in footnotes.

6.13.       Undisclosed Liabilities.  Except (a) as disclosed in the Financial Statements as of the dates referred to in such Financial Statements, (b) liabilities arising under this Agreement, (c) the Assumed Obligations, (d) the Retained Obligations, (e) as set forth on Schedule 6.13 and (g) liabilities or obligations incurred since May 31, 2021 in the ordinary course which, individually or in the aggregate, are not material to ELFS, ELFS has no liabilities or obligations of any kind, whether accrued, absolute, contingent or otherwise, and since the date of the last such financial statement, ELFS has incurred no such liability or obligation other than in the ordinary course of business and in amounts consistent with historic business operations.

6.14.      Facilities.

(i)          Facilities.  ELFS does not own (nor, at any time in the three (3) years prior to the Closing, did own) any real property. Schedule 6.14 contains a complete and accurate list and description of real property leased by ELFS (the “Facilities”).

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(ii)          Facility Leases.  All Facility Leases are valid, binding and enforceable in accordance with their terms and are in full force and effect.  Except as set forth in Schedule 6.14, no event exists which (whether with or without notice, lapse of time or both) would constitute a default thereunder on the part of ELFS which would terminate or cause a material liability under any Facility Leases; and, to ELFS’ knowledge, there exists no occurrence of any event which (whether with or without notice or lapse of time or both) would constitute a default thereunder by any other party.  ELFS has delivered true and correct copies of the Facility Leases to Janel prior to the date hereof.

(iii)       Actions; Proceedings.  To the knowledge of ELFS, there are no pending condemnation proceedings, administrative proceedings or other actions against ELFS with respect to any of the Facilities or Facility Leases, or any pending or threatened condemnation proceedings, administrative proceedings or other actions with respect to any of the Facilities or Facility Leases.

(iv)        Leases or Other Agreements.  Except as set forth on Schedule 6.14, ELFS has not entered into any subleases, licenses, occupancy agreements, options, rights, concessions or other agreements or arrangements written or oral, with respect to the areas of Facilities leased by ELFS, except as set forth on Schedule 6.14.

(v)          Use of Facility Leases.  With respect to each Facility Lease, ELFS enjoys peaceful and undisturbed possession of all leased Facilities, subject to the rights of the fee owners and the terms of the Facility Leases, and ELFS has performed all material obligations required to be performed by it under the Facility Leases though the date hereof.

(vi)        Certificate of Occupancy.  ELFS has received all required approvals of governmental authorities (including permits and a certificate of occupancy or other similar certificates permitting lawful occupancy by ELFS of the Facilities) required in connection with ELFS’s use of the Facilities, except as set forth on Schedule 6.14

(vii)        Utilities.  All of the Facilities are supplied with utilities and other services necessary for the operation of the Facilities as currently operated, and, to the knowledge of ELFS, there is no condition which would result in the termination of any such utility services.

(viii) Improvements, Fixtures and Equipment.  None of the leasehold improvements is subject to any commitment or other arrangement for their sale or use by an affiliate of ELFS, or any third party that would materially interfere with the use thereof.

6.15.       Customer Accounts.  All business of ELFS has been and continues to be conducted through ELFS.  The top fifty (50) customer accounts are set forth on Schedule 6.15 (the “Key Customer Accounts”).  Except as set forth on Schedule 6.15, ELFS has not received any oral or written notice that any customer has ceased or intends to cease after the Closing to use its services or to otherwise terminate or materially reduce its relationship with ELFS.

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6.16.      Material Adverse Change.  Except as set forth in Schedule 6.16 or as otherwise reflected herein, since May 31, 2021 through the Closing Date, the business of ELFS has been operated in the ordinary course and there has not been:

(i)          Any   actual or, to the knowledge of ELFS, threatened Material Adverse Effect in the business, condition (financial or otherwise), results of operations, prospects, properties, assets, liabilities, earnings, net worth, or prospects thereof, except for the general effects of present economic conditions or conditions affecting the freight forwarding industry generally;

(ii)          Any material damage, destruction or casualty loss (whether or not covered by insurance) affecting ELFS, the Company Assets, or its properties or business;

(iii)         Any increase in, or commitment to increase, the wage, salary, commissions, bonus, employee benefit rate or other compensation payable or to become payable to any of ELFS’s employees other than in the usual course of business consistent with past practices, provided, however, that this paragraph shall not restrict or limit ELFS in any way from hiring additional personnel who are required for its operations in the usual course of business consistent with past practices;

(iv)          Any material lien or encumbrance placed on any of the Company Assets, other than  Permitted Liens;

(v)          Any sale, assignment, transfer, lease, disposition of, or agreement to sell, assign, transfer, lease, or dispose of, any of the Company Assets, except as may be disclosed in the Disclosure Schedules and for dispositions of personal property in the ordinary course of business and excepting such rights as are granted to Janel under this Agreement;

(vi)         Any acquisition or lease by ELFS of any assets or property of any other party, except as may be disclosed in the Disclosure Schedules, for supplies in the ordinary course of business and acquisitions of personal property in the ordinary course of business;

(vii)       Any collective bargaining agreement or commitment by ELFS or any liability incurred by ELFS to any labor organization or other material change in employee relations;

(viii)        Any capital expenditure by ELFS in excess of $100,000 or outside the ordinary course of business;

(ix)          Any change by ELFS in the nature of its business or its methods, principles or practices of accounting;

(x)          Any Indebtedness incurred by ELFS in an aggregate principal amount exceeding $100,000 (net of any amounts discharged during such period), or (b) any voluntary purchase, cancellation, prepayment or complete or partial discharge in advance of a scheduled payment date with respect to, or waiver of any right of ELFS under, any Indebtedness of or owing to ELFS with respect to the conduct of the Company Business;

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(xi)         Any declaration or payment of any distribution in respect of the equity interests in ELFS, or other payment to the equity owners of ELFS in their capacity as such;

(xii)         Any entering into, any material amendment, modification, termination (partial or complete) or granting of a waiver under or giving any consent with respect to (a) any Contract which is required (or had it been in effect on the date hereof would have been required) to be disclosed pursuant to Section 6.18, or (b) any Authorization included on Schedule 6.18;

(xiii)        To ELFS’s knowledge, any other events or conditions of any character specifically related to the business or operations of ELFS that may reasonably be expected to have a Material Adverse Effect on ELFS or its business or financial condition, except for the general effects of present economic conditions; or

(xiv)        Any agreements or commitments to do any of the foregoing.

6.17.      Tax Matters.

(i)           ELFS and Sellers have filed (or caused to be filed) all federal, state, local and foreign tax or related returns and reports due or required to be filed with respect to ELFS’s business and earnings, which such reports accurately reflect in all material respects the amount of taxes due.

(ii)          ELFS and Sellers have paid all taxes or assessments that have become due with respect to ELFS’s business and earnings, other than taxes or charges being contested in good faith or not yet finally determined.

(iii)         Complete and correct copies of the income tax returns of ELFS, together with attached schedules, for the three taxable years ended 2018 through 2020, as filed with all federal and state taxing authorities, signed by an officer of ELFS, were supplied to Janel prior to the date hereof. All information reported on such returns is true, accurate, and complete in all material respects.

(iv)          There are no tax liens or governmental claims with respect to any properties owned by ELFS.

(v)           No Seller is a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.

(vi)          No Seller is a party to a Contract, arrangement or plan that has resulted or could result in its making of a payment that: (i) is not deductible under, or would otherwise constitute a “parachute payment” within the meaning of, Section 280G of the Code (or any similar provision of state, local or foreign Law); or (ii) is or may be subject to the imposition of an excise Tax under Section 4999 of the Code.

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6.1       Contracts and Authorizations.  Schedule 6.18 contains a true and complete list of all written or oral contracts, agreements, mortgages, obligations, understandings, arrangements, restrictions, and other instruments (collectively, the “Contracts”), with a brief description of any oral Contracts, to which ELFS is a party or by which ELFS or its assets may be bound involving (a) annualized costs to ELFS of $50,000 or more, (b) aggregate payments by or to ELFS of $50,000 over the term of any such agreement or arrangement (without regard to the amount of annualized payments or costs), or (c) material restrictions or limitations of any kind whatsoever on ELFS’s current or future business or operations, including without limitation non-compete restrictions, non-solicitation restrictions, geographical restrictions or most favored nation pricing.  Schedule 6.18 also contains a true and complete list of all material governmental licenses, permits, authorizations and material non-governmental licenses, franchises and agency arrangements necessary to operate the Company Business as heretofore operated (collectively, the “Authorizations”).  True and correct copies of all Contracts have been made available to Janel. Except as disclosed on such Schedule, each such Contract and Authorization is valid, binding in full force and effect, subject (as to the enforcement of remedies) to laws of general application relating to bankruptcy, insolvency and the relief of debtors and (as to the availability of equitable remedies) to the discretion of the equity tribunal having jurisdiction.  ELFS has not received any written claim of a material default by ELFS under any of the Contracts or Authorizations set forth in such Schedule.  To ELFS knowledge, (A) no event has occurred which would constitute (whether with or without notice, lapse of time or both) a material default by ELFS under any Contracts or Authorizations and (B) to the actual knowledge of Sellers’, there is no material default by the other parties to such Contracts.

6.19.       Compliance; Governmental Authorizations.  Except as set forth in Schedule 6.19, ELFS has, during the last three (3) years, been in material compliance with (i) all U.S. and foreign federal, state, local or foreign laws, ordinances, regulations and orders applicable to its business, including without limitation, federal and state aviation, shipping, and trucking laws; (ii) ELFS has all federal, state, local and foreign governmental licenses and permits necessary for the conduct of its business; and (iii) such licenses and permits are in full force and effect.  ELFS has no knowledge of any violations of any such licenses or permits.  No proceedings are pending or, to ELFS knowledge, threatened to revoke or limit the use of such licenses or permits.

6.20.        Litigation.  Except as set forth in Schedule 6.20, and except for claims of vendors the accounts of which are included in the payables included in the Base Balance Sheet latest dated Financial Statements, there are no actions, suits, claims, investigations or legal, administrative or arbitration proceedings pending against ELFS or any of its assets or business, whether at law or in equity, or before or by any federal, state, municipal, local, foreign or other governmental department, commission, board, bureau, agency or instrumentality, nor does ELFS know of a threat of any such action, suit, claim, investigation or proceeding.

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6.21.       Insurance.  Attached hereto as Schedule 6.21 is a list of all insurance policies of ELFS, and the Sellers have made available to Janel accurate and complete copies of all such insurance policies.  Except as set forth on Schedule 6.21, all of ELFS’s insurable properties and assets are insured, and have been consistently insured for the prior five years, for ELFS’s benefit, and the benefit of ELFS’s customers, where applicable under such policies of fire, casualty, and other insurance as are customarily obtained to cover comparable properties and assets by businesses in the region in which such properties and assets are located, in amounts, scope and coverage which are adequate and reasonable in light of existing conditions.  Each insurance policy relating to the insurance referred to in this Section is valid and enforceable.  ELFS has not failed to give any notice or to present any material claim under any insurance policy in a due and timely fashion, nor has it permitted a lapse in any of its insurance policies at any time during the prior five years.  Schedule 6.21 also contains a list of all claims filed by ELFS within the five years preceding the date hereof.

6.22.       Bankruptcy.  Neither ELFS nor any Seller has any knowledge or expectation that any petition for relief will be filed by ELFS or any Seller, or any case commenced against ELFS or any Seller under the Bankruptcy Code or any similar federal or state statute. Neither ELFS nor any Seller has applied for or consented to the appointment of, or taking of possession by, a receiver, custodian, trustee or liquidator of itself or any of their respective properties or made a general assignment for the benefit of creditors.

6.23.        Employees.  Neither ELFS nor any of its employees is subject to any collective bargaining agreement, no petition for certification or union election is pending with respect to the employees of ELFS, and no union or collective bargaining representative has sought, to the knowledge of ELFS, such certification or recognition with respect to the employees of ELFS at any time during the past three years.  Except as set forth on Schedule 6.23, ELFS has not entered into any written or oral employment agreement or become obligated under any other document, policy or practice that currently gives to any person a right to employment or compensation.  All of ELFS’s employees can be terminated at will.  ELFS is neither in breach of, nor has taken any action which would constitute a breach of, any oral or written agreements or understandings respecting its current employees.  All obligations of ELFS, whether arising by operation of law, by contract, by past custom or practice or otherwise, for salaries, vacation, holiday pay, bonuses and other forms of compensation that are due and payable to its officers, directors or employees as of the date hereof (including all required taxes, insurance and withholding thereon) have been paid as of the date hereof, except such accrued paid time off as set forth on Schedule 6.23.

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6.24.      Employee Benefit Plans.  Schedule 6.24 sets forth a list of (i) any employee benefit plan (as defined in Section 3(3) of ERISA) and (ii) any employment contract, written or unwritten, for which ELFS is a party, contributor or sponsor.  All such employee benefit plans and employment contracts are hereinafter collectively referred to as “Employee Benefit Plans”.  Each Employee Benefit Plan is, and has at all times been, administered and operated in material compliance with its terms, the Code, ERISA, and all other federal, state and local laws (and all rules and regulations thereunder) (if applicable).  ELFS has performed, in all material respects, all obligations required to be performed by it under any law or by the terms of each Employee Benefit Plan, and all contributions or payments deducted by ELFS for tax purposes were properly deductible in the year for which such deductions were claimed.  The assets of ELFS are not subject to any liens under ERISA or the Code, and no event has occurred, and no condition exists, which could subject ELFS or its assets to a future liability or lien on account of any Controlled Group Benefit Plan.  A Controlled Group Benefit Plan means any Employee Benefit Plan which ELFS or any affiliated entity, within the meaning of Section 414(b), (c), (m) or (o) of the Code (an “ERISA Affiliate”), now maintains, or within the last six (6) years maintained or to which any ERISA Affiliate contributed within the last six (6) years.  There are no actions, investigations or claims of any kind (other than routine benefit claims made in the ordinary course), pending or, to ELFS’ knowledge, threatened, with respect to any Employee Benefit Plan.  There have been no audits or investigations of any Employee Benefit Plan by any governmental agency except as set forth on Schedule 6.24. Except as set forth on Schedule 6.24, ELFS and all ERISA Affiliates have complied with, in all material respects, any applicable continuation of coverage requirements including as required under ERISA Sections 601-608 and the regulations thereunder and under applicable state law.

6.25.       Severance Obligations.  ELFS does not have any obligation to past employees for any severance payments or benefits, and except as set forth on Schedule 6.25, ELFS does not have any obligation for any severance payments or benefits to any person presently employed by ELFS whose employment is terminated after the date hereof, except such accrued paid time off as set forth on Section 6.25.  Except as set forth on Schedule 6.25, the closing of the transactions contemplated by this Agreement will not (i) entitle any current or former employee of ELFS or of any affiliate to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (ii) accelerate the time of payment or vesting or increase the amount of compensation due any such employee.

6.26.      Environmental.  Except as set forth on Schedule 6.26, ELFS is currently and has, been in material compliance with all applicable environmental laws and has not, and Sellers have not, received from any person, entity or governmental agency any: (i) notice or claim relating to breach or noncompliance with any environmental law; or (ii) written request for information pursuant to environmental law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements.

6.27.     Business Relationships.  Except as disclosed in Schedule 6.16, neither ELFS nor any Seller has received oral or written notice that any supplier, vendor or customer has ceased, or intends to cease, or materially reduce its relationship with ELFS.  To the knowledge of ELFS, there is no occurrence which, with or without the giving of notice or the lapse of time or both, would constitute a default under any agreement or arrangement with any such party or would adversely affect ELFS’s relationship with any such party so as to have a Material Adverse Effect on the business, operations, or condition (financial or otherwise) of ELFS.

6.28.      Books and Records.  ELFS has made available to Janel and its representatives all of ELFS’s tax, accounting, corporate and financial books and records, whether in written, electronic or other form.  All such books and records are substantially complete and correct, have been maintained on a current basis, and materially reflect ELFS’s financial condition and results of operations. Without limiting the foregoing, ELFS has provided to Janel copies of all auditors’ reports, letters to management regarding accounting practices and systems of internal controls, and all responses to such letters from management.

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6.29.        Information Technology.  All computer and other information technology systems of ELFS are in good working condition and are sufficient for the operation of the Company Business as currently conducted and as proposed to be conducted. To the knowledge of ELFS, in the past three (3) years, there has been no malfunction, failure, continued substandard performance, denial-of-service, or other cyber incident, including any cyberattack, that has resulted or is reasonably likely to result in disruption or damage to ELFS or the Company Business. ELFS has taken all commercially reasonable steps to safeguard the confidentiality, availability, security, and integrity of its computer and other information technology systems, including implementing and maintaining appropriate backup, disaster recovery, and software and hardware support arrangements.

6.30.        Pandemic-Relief Debt.  Neither Sellers, nor ELFS nor any subsidiary of the foregoing or Affiliate that is treated as a single employer with ELFS under Section 2301(d) of the CARES Act has applied for or received any Pandemic-Relief Debt or other funds, Tax credit (including an ERC) or deferral (including deferred payment of employment taxes), grant, advance, or similar relief or assistance under the paycheck protection program (“PPP”), the Public Health and Social Services Emergency Fund (“PRF”) or otherwise pursuant to the CARES Act, the Families First Coronavirus Response Act, the Economic Injury Disaster Loan Program, the Main Street Lending program, the Paycheck Protection Program and Health Care Enhancement Act, the Coronavirus Preparedness and Response Supplemental Appropriations Act, IRS Notice 2020-65, or any other program related to the COVID-19 pandemic administered or promulgated by a Governmental Entity (collectively, “COVID Relief Acts”). ELFS and Sellers have complied in all respects with the terms and conditions of any Pandemic-Relief Debt and all applicable COVID Relief Acts, including all attestation and reporting requirements thereunder.

6.31.        Affiliate Transactions.  Except as set forth on Schedule 6.31, there are no arrangements or Contracts (other than related to employment matters in the ordinary course of business or as listed on Schedule 6.23), between ELFS and any respective family member of the Sellers or Affiliate of any of the foregoing.  No manager, officer, director, equity holder of any of ELFS or any Affiliate of ELFS owns directly or indirectly on an individual or joint basis any interest (other than passive investments in publicly traded securities) in, or serves as an officer or director of, any supplier or other organization which has a material business relationship with ELFS, except as set forth on Schedule 6.31.

6.32.        Exclusivity of Representations. The representations and warranties made by each Seller and ELFS in this Agreement, or in any Exhibit, Schedule or certificate delivered pursuant to this Agreement, are the exclusive representations and warranties made by Sellers and ELFS with respect to ELFS’ business, assets, liabilities, and the Interests. Except for any representations and warranties set forth in this Agreement, or in any Exhibit, Schedule or certificate delivered pursuant to this Agreement, Sellers and ELFS expressly disclaim any other representations or warranties of any kind or nature, express or implied, as to assets, liabilities, operations, the title, condition, value or quality of assets, the Interests, and any other matter concerning Sellers, ELFS, and the transactions contemplated under the Closing.

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7.            Covenants of Janel.

Janel covenants and agrees as follows:

7.1.         It will maintain all negotiations and other information with respect to the transactions contemplated herein in confidence and, except as required by law, will not make any announcement thereof or disclose such negotiations to any other party other than its professional advisors and lenders.  If it is required by law to make any such disclosure, it will first advise ELFS of the content of the proposed disclosure, and the time and place that the disclosure will be made.  Janel and Sellers will cooperate on appropriate publicity materials with respect to the transactions contemplated hereby.  Nothing herein shall restrict Janel’s right to make a public announcement that the transactions contemplated herein have closed, or to include appropriate information in applicable regulatory filings.  This covenant shall survive the Closing.

7.2.         At the Closing, Janel will engage the Key Employees pursuant to the terms of the Employment Agreement.

7.3          Immediately after the Closing, Janel shall use its best efforts to cause Santander Bank to issue replacement letters of credit for the Existing Letters of Credit.

7.4         Release.  Effective upon the Closing, ELFS hereby irrevocably releases, acquits and forever discharges each Seller and their respective present, former and future Affiliates, attorneys, agents, representatives, trustees, and each of their respective heirs, executors, administrators, successors and assigns, of and from any and all manner of action or actions, cause or causes of action, demands, rights, damages, debts, dues, sums of money, accounts, reckonings, costs, expenses, responsibilities, covenants, contracts, controversies, liabilities, agreements and claims whatsoever, whether known or unknown, of every name and nature, both in law and in equity, which such that ELFS or their respective successors or assigns ever had, now has, or which it or its heirs, executors, administrators, successors or assigns hereafter may have or shall have against Sellers or any other Person referred to above arising out of any matters, causes, acts, conduct, claims, circumstances or events occurring or failing to occur or conditions existing on or prior to the Closing Date in connection with the Sellers being a member, manager or officer of ELFS except for claims based solely upon breaches of the express provisions this Agreement or agreements signed and delivered in connection herewith to which such Sellers and Janel are parties.

7.5         Release from Sellers Guarantees.  Janel will cause Sellers to be fully and irrevocably released, at or prior to the Closing Date, from the guarantees of obligations or other liabilities of or relating to ELFS set forth on Schedule 7.5 of the Disclosure Schedules (collectively, the “Sellers Guarantees”) and if required by a beneficiary of any Sellers Guarantee, Janel will provide (or cause to be provided) substitute arrangements of Janel or their Affiliates, including by providing (or causing to be provided) letters of credit or similar support; provided, that in the event Janel does not cause Sellers to be so released at or prior to the Closing Date, Janel shall (i) indemnify Sellers in respect of all continuing obligations and liabilities and any Losses incurred by any Seller pursuant to such guarantees and (ii) continue to use its commercially reasonable efforts to terminate or cause Janel or one of its Affiliates to be substituted in all respects for Sellers or replace (or cause to be replaced) such Sellers Guarantee. In the event that any written Sellers Guarantees for operational matters, similar to the Seller Guarantees listed on Schedule 7.5 (and not for Indebtedness) but not disclosed in Schedule 7.5 of the Disclosure Schedules are discovered following the Closing Date, such Sellers shall provide Janel with notice thereof and Janel shall use its commercially reasonable efforts to cause any Seller to be removed from such Sellers Guarantees to which Janel acknowledges and agrees, including Janel providing a replacement guaranty to the applicable third party(s) thereof.  No Seller shall be required to make any payment or incur any out-of-pocket costs to obtain the foregoing terminations, substitutions or replacements of any Sellers Guarantees and Janel shall bear all such costs.

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7.6.        Employee/Benefit Plans.

7.6.1.       Janel shall and shall cause ELFS to provide each Employee who remains employed immediately after the Closing (“ELFS Continuing Employee”) with: (i) base salary or hourly wages which are no less than the base salary or hourly wages provided by ELFS immediately prior to the Closing; (ii) target bonus opportunities (including equity-based (or simulated equity) compensation), if any, which are no less than the target bonus opportunities (including equity-based (or simulated equity) compensation) provided by ELFS immediately prior to the Closing; (iii) retirement and welfare benefits that are no less favorable in the aggregate than those provided by ELFS immediately prior to the Closing; and (iv) severance benefits that are no less favorable than the practice, plan or policy in effect for such ELFS Continuing Employee immediately prior to the Closing.

7.6.2.     With respect to any employee benefit plan maintained by Janel and its Affiliates (collectively, “Janel Benefit Plans”) in which any ELFS Continuing Employees will participate effective as of the Closing, Janel shall, or shall cause ELFS to, recognize all service of ELFS Continuing Employees with ELFS or any of its Subsidiaries, as the case may be as if such service was with Janel, for vesting and eligibility purposes in any Janel Benefit Plan in which such ELFS Continuing Employees may be eligible to participate after the Closing Date; provided, however, such service shall not be recognized to the extent that (x) such recognition would result in a duplication of benefits or (y) such service was not recognized under the corresponding ELFS Employee Benefit Plan.

7.6.3.      This Section 7.3 shall be binding upon and inure solely to the benefit of each of the parties to this Agreement, and nothing in this Section 7.3, express or implied, shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 7.3. Nothing contained herein, express or implied, shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement. The parties hereby acknowledge and agree that the terms set forth in this Section 7.3 shall not create any right in any Employee or any other Person to any continued employment with ELFS, Janel or any of their respective Affiliates or compensation or benefits of any nature or kind whatsoever.
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7.6.4.     Janel shall be responsible for any obligation with respect to the Continuing Employees under the Worker Adjustment Retraining and Notification Act of 1988 and any applicable state or local equivalent arising after the Closing Date (collectively, “WARN”). The Sellers shall be responsible for any such obligation arising on or before the Closing Date. The Parties agree to cooperate in good faith to determine whether any notification may be required under WARN as a result of the transactions contemplated under the Closing. Following the Closing Date, Janel shall not take any action (or refrain from any action, including with respect to any employees or ELFS Continuing Employees) that will cause the Sellers or ELFS to have any obligations under WARN.

7.6.5.       The parties intend that ELFS 401(k) Plan shall continue in effect under its current terms following the Closing.

7.7         Director, Officer and Manager Indemnification and Insurance.

7.7.1.       Janel agrees that all rights to indemnification, advancement of expenses and exculpation by ELFS now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, an officer, manager, member, or Representative of ELFS, as provided in the company agreement of ELFS (or a similar governing document of its Subsidiaries), in each case as in effect on the date of this Agreement, or pursuant to any other agreements in effect on the date hereof and disclosed in Schedule 7.7.1, shall survive the Closing Date and shall continue in full force and effect in accordance with their respective terms.

7.7.2.       ELFS shall, and Janel shall cause ELFS to, (i) maintain in effect for a period of six (6) years after the Closing Date, if available, the current policies of directors’ and officers’ liability insurance maintained by ELFS immediately prior to the Closing Date (provided that ELFS may substitute policies therefor, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors, managers and officers of ELFS when compared to the insurance maintained by ELFS as of the date hereof), or (ii) obtain as of the Closing Date “tail” insurance policies with a claims period of six (6) years from the Closing Date with at least the same coverage and amounts, and containing terms and conditions that are not less advantageous to the directors, managers and officers of ELFS, in each case with respect to claims arising out of or relating to events which occurred on or prior to the Closing Date (including in connection with the transactions contemplated by this Agreement).

7.7.3.       The obligations of Janel and ELFS under this Section 7.4 shall not be terminated or modified in such a manner as to adversely affect any director, manager or officer to whom this Section 7.4 applies without the consent of such affected director or officer.

7.7.4.       In the event Janel, ELFS or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, or in either such case, proper provision shall be made so that the successors and assigns of Janel or ELFS, as the case may be, shall assume all of the obligations set forth in this Section 7.7.

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7.8.        Privileged Matters.

7.8.1.       The Parties acknowledge that ELFS has been represented by Selman Munson & Lerner, P.C. in connection with this Agreement and the transactions contemplated hereby and that such legal counsel has received confidential information pertaining to ELFS, its Subsidiaries, and the Sellers in connection with such representation. The Parties hereby agree that, as to all communications subject to attorney-client privilege among such legal counsel and ELFS, solely to the extent such communications relate to the transactions contemplated under this Agreement, this Agreement and any ancillary transaction documents, the attorney-client privilege and the expectation of client confidence belongs to the Sellers with respect to any dispute that arises between or among the Parties with respect to the foregoing and shall not pass to or be claimed by Janel, ELFS or its Subsidiaries (following the Closing). Notwithstanding the foregoing, in the event that any dispute arises between Janel and/or ELFS and any person other than any Seller (except in connection with a third-party Claim (as defined below) for which an indemnifying Person is controlling the defense), ELFS may assert or waive the attorney-client privilege to prevent disclosure of confidential communications by such legal counsel to such third party.

7.8.2.      Notwithstanding that the Sellers and ELFS have been represented by Selman, Munson & Lerner, P.C. (the “Firm”) in the preparation, negotiation and execution of this Agreement and the ancillary transaction documents, ELFS agrees that after the Closing, the Firm may represent the Sellers and/or their affiliates in matters related to this Agreement and ancillary transaction documents, including without limitation in respect of any indemnification claims pursuant to this Agreement and/or the transaction documents, disputes relating to any purchase price adjustments or the Earn-Out, if any. ELFS hereby acknowledges that, on behalf of itself and its affiliates, it has had an opportunity to ask for and has obtained information relevant to such representation, including disclosure of the reasonably foreseeable adverse consequences of such representation, and it hereby waives any conflict arising out of such future representation.

8.            Covenants of ELFS and Sellers.

ELFS and Sellers each covenants and agrees, jointly and severally, as follows:

8.1.         Confidentiality; Publicity.  From and after the Closing, Sellers shall, and shall cause its Affiliates to, hold in confidence any and all information, whether written or oral, concerning ELFS, except to the extent that Sellers can demonstrate that such information (a) is generally available to and known by the public through no fault of Sellers or any of its Affiliates; or (b) is lawfully acquired by Sellers from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If it is required by law to make any such disclosure, it will first advise Janel of the content of the proposed disclosure, and the time and place that the disclosure will be made.  Janel and Sellers will cooperate on appropriate publicity materials with respect to the transactions contemplated hereby.  This covenant shall survive the Closing.

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8.2.        Tax Covenants.

8.2.1.      Without the prior written consent of Janel, Sellers (and, prior to the Closing, ELFS) shall not, to the extent it may affect, or relate to, ELFS, make, change or rescind any tax election, amend any tax return or take any position on any tax return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the tax liability or reducing any tax asset of Janel or ELFS in respect of any post-Closing tax period. All transfer, documentary, sales, use, stamp, registration, value added and other such taxes and fees (including any penalties and interest) incurred in connection with this Agreement (“Transfer Taxes”) shall be borne and paid one-half by Janel and one-half by Sellers when due.  Each party shall indemnify, defend and hold harmless the other parties  from the payment of its share of all such Transfer Taxes. The party responsible under applicable law for filing any tax return with respect to Transfer Taxes shall prepare and file such tax returns and other documentation with respect to any such Transfer Taxes and, if required by applicable law, the other party and the Company will join in the execution of any such tax returns and other documentation. The party responsible for preparing and filing any tax returns for Transfer Taxes pursuant to this Section 8.2.1 shall provide the other parties with copies of each such tax return or other document at least fifteen (15) days prior to the applicable due date and the other party shall, within such fifteen (15) day period, pay their applicable share of such Transfer Taxes. Agreement shall be borne and paid by Sellers when due. Sellers shall, at his own expense, timely file any tax return or other document with respect to such taxes or fees (and Janel shall cooperate with respect thereto as necessary).  Sellers agree that Janel is to have no liability for any tax resulting from any action of Sellers, ELFS, or any Affiliates, and each agrees to jointly and severally indemnify and hold harmless Janel (and, after the Closing Date, ELFS) against any such tax or reduction of any tax asset.

8.2.2.     Tax Returns.  The Sellers shall prepare and timely file, or shall cause to be prepared and timely filed, any Pass-Through Tax Returns of the Company for taxable periods ending on or before the Closing Date and required to be filed after the Closing Date (taking into account any applicable extensions), including, without limitation, the Company’s final partnership tax return, and the Sellers shall pay, or cause to be paid, all taxes dues with respect to any such Pass-Through Tax Returns, which shall be determined based on the closing of the books as of the close of business on the Closing Date. For any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of (a) any taxes based on or measured by income or receipts of the Company Business for the pre-Closing tax period shall be determined based on an interim closing of the books as of the close of business on the Closing Date, and (b) any other taxes of the Company for the pre-Closing tax period shall be deemed to be the amount of such tax for the entire taxable period multiplied by a fraction, the numerator of which is the number of days in the taxable period ending on the Closing Date and the denominator of which is the number of days in such Straddle Period; provided also, that (x) exemptions, allowances and deductions that are calculated on an annual basis (including depreciation and amortization deductions) shall be allocated between the period ending on (and including) the Closing Date and period beginning after the Closing Date in proportion to the number of days in each period to which such exemption, allowance or deduction is applicable and (y) tax items in Pass-Through Tax Returns shall be allocated using the closing-of-the books method in accordance with the Code.

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8.2.3.      Purchase Price Allocation.  The purchase price as determined for U.S. federal income tax purposes and applicable state income tax purposes shall be allocated for such Tax purposes among the Company’s assets as set forth in Schedule 8.2.3 (the “Allocation”). The parties acknowledge and agree that the Allocation is consistent with Sections 755 and 1060 of the Code and the Treasury Regulations promulgated thereunder, based on the relative fair market value of such assets. The parties shall file all tax returns in a manner consistent with the Allocation, and neither the Purchaser nor Janel will take any position inconsistent with the Allocation for any Tax purpose or in any Tax contest, unless required to do so by applicable law or a “determination” within the meaning of Section 1313(a)(1) of the Code; provided, however, that nothing in this Agreement shall prevent a party from settling any proposed deficiency or adjustment by any Taxing body or other governmental or regulatory authority based upon or arising out of such Allocation, and neither Janel nor the Seller shall be required to litigate before any court any proposed deficiency or adjustment by any Taxing body or other governmental or regulatory authority challenging such Allocation; and provided, further, that the parties acknowledge and agree, that Sellers will classify and report the transaction in accordance with Section 741 of the Code, pursuant to Revenue Ruling 99-6. The parties shall make appropriate adjustments to the Allocation to reflect any adjustments to the Purchase Price made under this Agreement.2

8.2.4.      Cooperation. Janel and Sellers shall use commercially reasonable efforts to cooperate fully, and Janel shall cause ELFS to do the same, as and to the extent reasonably requested by the other party, in connection with the preparation and filing of tax returns pursuant to this Agreement and any audit, litigation or other proceeding (each a “Tax Proceeding”) with respect to taxes. Such cooperation shall include access to, the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such tax return or Tax Proceeding, and the making available of employees on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The requesting party shall reimburse the party providing such cooperation for any reasonable out-of-pocket costs and expenses incurred in connection with such cooperation. Sellers will, and Janel will cause the Company to, retain all books and records with respect to tax matters pertinent to the Company relating to any taxable period beginning before the Closing Date until the latest of (i) seven (7) years after the Closing Date, and (ii) until any audits of each Seller’s and the Company’s tax returns relating to such periods that are ongoing at the end of such seven year period are completed. Janel and Sellers further agree, upon request, to use commercially reasonable efforts to obtain any certificate or other document from any governmental or regulatory authority or any other person or entity as may be necessary to mitigate, reduce or eliminate any tax that could be imposed (including with respect to the transactions contemplated hereby).  The requesting party shall reimburse the party providing such cooperation for any reasonable out-of-pocket costs and expenses incurred in connection with such efforts.

2 Note to Seller: no 338(h)(10) election is being made. No adjustment or reimbursement will be made solely due to allocation of basis based on an assumption of taxation entirely as long term capital gains.

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8.3.        Upon ELFS receipt of the Houston Security Deposit from the landlord, ELFS shall promptly pay and distribute to the Sellers the full amount of the returned Houston Security Deposit.

9.            Closing Deliveries to Janel.

9.1.          On the Closing Date, Janel shall have received the following:

(i)           The Key Employees shall have entered into the Employment Agreements.

(ii)          A certificate from the Secretary of State (or similar office) of ELFS’s respective jurisdictions of organization, dated at or about the Closing Date, to the effect that ELFS is in good standing under the laws of said jurisdiction.

(iii)         An incumbency certificate for ELFS signed by all of the officers thereof dated at or about the Closing Date.

(iv)         Resignation letters of all of the directors and officers of ELFS, effective as of the Closing.

(v)          Copies of ELFS’s respective organizational documents, as amended to date, each certified by at or about the Closing Date, and all corporate records of ELFS.

(vi)        Resolutions of Sellers and Managers of ELFS authorizing the transactions contemplated under this Agreement, certified by the Secretary of ELFS, dated at or about the Closing Date.

(vii)        The duly executed Assignments of Interests.

(viii)      An estoppel certificate and consent to assignment from the lessor under each of the Facility Leases in form and substance reasonably satisfactory to Janel.

(ix)         All other instruments, documents and certificates as are required to be delivered by or on behalf of ELFS or Sellers pursuant to the provisions of this Agreement or that may be reasonably requested in furtherance of the provisions of this Agreement.

10.          Closing Deliveries to Sellers.

10.1.        Janel shall have delivered to ELFS all of the exhibits and schedules required herein to be delivered by Janel, and copies of the documents referred to therein, each duly executed, if required, and such exhibits, schedules and documents shall have been reasonably acceptable to ELFS.

10.2.        Janel shall have entered into the Employment Agreement.

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10.3.       Sellers shall have received all other instruments, documents and certificates as are required to be delivered by or on behalf of Janel pursuant to the provisions of this Agreement or that may be reasonably requested in furtherance of the provisions of this Agreement.

11.          Restriction on Competition and Solicitation.

ELFS and Sellers acknowledge that the services of ELFS and the business of the customer accounts of ELFS are an integral part of the benefits which Janel is purchasing pursuant to the terms of this Agreement.  Accordingly, each Seller agrees as follows:

11.1.      For the period from the Closing Date until five (5) years thereafter (the “Restricted Period”), each Seller covenants that he shall not, directly or indirectly (including through an Affiliate), engage in or assist others in engaging in, invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing, or control of, lend its name or any similar name to, or lend credit to, any business whose services or activities compete in whole or in part with the Company Business anywhere within the United States; provided, however, that a Seller may, in the aggregate, directly or indirectly (including through an Affiliate) purchase or otherwise acquire up to (but not more than) one percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934.

11.2.      At any time during the Restricted Period, no Seller will, directly or indirectly (including through an Affiliate or on the behalf of any third party), solicit Company Business from any person or entity who is or was a customer or material vendor or supplier of ELFS or Janel at any time during the 12-month period prior to the Closing or encourage or induce any such customer, vendor or supplier to terminate or reduce its business relationship with ELFS or Janel.

11.3.       At any time during the Restricted Period, no Seller will, directly or indirectly, (including through an Affiliate or on the behalf of any third party), solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise, any person who is or was an employee of ELFS within the 12-month period prior to Closing or in any manner encourage, induce or attempt to induce any employee of ELFS to terminate his or her employment with ELFS, as the case may be.

11.4.       In the event of breach by a Seller of the terms of this Section 11, Janel shall be released from all further payment obligations to Seller. Without limiting the foregoing, Janel shall also be entitled to institute legal proceedings to obtain damages for such breach, or to enforce the specific performance of this Agreement and to enjoin such breaching party from any further violation of this Section and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided at law. Each Seller acknowledges that the remedies at law for any breach by any of them of the provisions of this Section may be inadequate and Janel shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

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11.5.      The covenants contained in this Section 11 and each provision hereof are severable and distinct covenants and provisions. In the event the undertakings set forth in this Section shall be determined by any court of competent jurisdiction to be unenforceable by reason of extending for too great a period of time or by reason of being too extensive in any other respect, each such agreement shall be interpreted to extend over the maximum period of time for which it may be enforceable and to the maximum extent in all other respects as to which it may be enforceable and enforced as so interpreted, all as determined by such court in such action.

11.6.       Each Seller acknowledges that the restrictions contained in this Section 11 are reasonable and necessary to protect the legitimate interests of Janel and constitute a material inducement to Janel to enter into this Agreement and consummate the transactions contemplated by this Agreement.

12.          Indemnification.

12.1.       Indemnification by Janel.  Janel hereby agrees to indemnify and hold harmless from and against any and all from and against any and all Losses (as hereinafter defined), to the extent such Losses arise out of, result from, or are in connection with: (i) any breach by Janel of any representation or warranty set forth in Section 5, or (ii) any failure by Janel to perform or comply with any of its covenants or obligations under this Agreement.

12.2.        Indemnification by Seller.  Each Seller hereby agrees to indemnify and hold harmless Janel and ELFS (after the Closing) and each of their shareholders, directors, officers, agents and employees, from and against any and all Losses, to the extent such Losses arise out of, result from, or are in connection with: (i) any breach by ELFS or any Seller of any representation or warranty set forth in Section 6, (ii) any failure by ELFS or any Seller to perform or comply with any of its covenants or obligations under this Agreement, and (iii) any and all Indebtedness and liabilities of ELFS arising prior to the Closing Date other than the Assumed Obligations, including without limitation the Retained Obligations.

12.3.        For purposes of this Agreement, “Losses” shall mean the aggregate of any and all payments for claims, liabilities, suits, actions, demands, charges, damages, losses, costs, or expenses (including reasonable attorneys’ fees, expert witness fees and court costs) of every kind and nature incurred by the indemnified party, net of all reserves with respect to such item, tax benefits, insurance proceeds and any indemnity, contribution or other similar payment from third parties.  Tax benefits will be considered to be realized for purposes of this Section in the year in which an indemnity payment occurs, taking into account the present value of any such tax benefits, and the amount of tax benefits shall be determined by assuming the person entitled to be indemnified is in the maximum applicable foreign, federal, state and local income tax bracket.

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12.4.       If any claim is made, or any suit or proceeding is instituted by a third-party, which, if valid or prosecuted successfully would entitle a party to indemnification under this Section (a “Claim”), the indemnified party shall promptly give notice thereof to the others in writing.  At the election of the indemnifying party, the indemnifying party shall, at its own cost and expense, assume the defense of such Claim or participate either directly or through their counsel with the indemnified party in the resolution, by litigation or otherwise, of any Claim. The indemnified party agrees to cooperate (and to cause parties within its control to cooperate) with the indemnifying party in determining the validity of any Claim or assertion of any Losses including giving (and causing parties within its control to give) the indemnifying party full access to information within its possession.  The indemnified party agrees that it will not (and will cause parties within its control not to) settle any Claim without the prior written consent of the indemnifying party and to exercise its best efforts to avoid or minimize the Losses resulting from any Claim.

12.5.      Limitations.

12.5.1.   Deductible.  No indemnifying party hereunder will have any liability under Section 12.2(i) for breaches of representations or warranties unless the aggregate Losses for which the indemnifying party would, but for this provision, be liable under Section 12.2(i) exceeds $500,000.00 (the “Deductible”). If aggregate Losses exceed the Deductible for claims under Section 12.2(i), the indemnifying party’s indemnification obligations shall apply to all such Losses in excess of the Deductible; provided, however, that notwithstanding anything herein to the contrary the Deductible does not apply to claims for indemnification for breaches of the Fundamental Representations or claims in respect of Fraud.

12.5.2.     Sellers’ Cap.  Sellers’ liability under Section 12.2(i) above for any Losses to the extent arising from a breach of a representation or warranty shall not exceed an amount equal to $1,500,000.00 (the “Cap”), provided, however, in the case of Losses related to Fundamental Representations or Fraud, the aggregate liability to Sellers shall not exceed the Purchase Price. 

12.5.3.     Individual Seller’s Cap.  Each Seller’s individual liability, to the extent arising from Losses related to a breach of a Fundamental Representation or Fraud relating only to such Seller, and not ELFS, shall not exceed such Seller’s pro rata portion of the Purchase Price as set forth on Schedule 2.1. 

12.5.4.     Janel’s Cap.  Janel’s liability under Section 12.1 shall not exceed, in the aggregate, an amount equal to the Cap.

12.5.5.    Payments by an Indemnifying Party pursuant to Section 12.1 or Section 12.2 in respect of any Loss shall be limited to the amount of any liability or damage that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received by the Indemnified Party (or the Company) in respect of any such claim. The Indemnified Party shall use its commercially reasonable efforts to recover under insurance policies or indemnity, contribution or other similar agreements for any Losses prior to seeking indemnification under this Agreement.

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12.5.6.    Payments by an Indemnifying Party pursuant to Section 6.01 or Section 6.03 in respect of any Loss shall be reduced by an amount equal to any Tax benefit realized as a result of such Loss by the Indemnified Party.

12.5.7.     Each Indemnified Party shall take, and cause its Affiliates to take, commercially reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.

12.6        Sources of Indemnification.  The Parties agree that the amount of any Losses payable in respect of claims pursuant to Section 12.2(i) (other than Fundamental Representations or Fraud) (“Seller Representation Breach Claims”) shall be satisfied up to the amount of the Cap (but only to the extent such Losses exceed the Deductible), solely through recovery by an offset against any amounts owed under the Note to such Seller. Any amounts owing in respect of claims under Section 12.2 (in each case other than as set forth in immediately preceding sentence) shall be paid for by such Seller, first at the sole discretion of Janel, by either (A) an offset against any amounts owed under the Note to such Seller, (B) an offset against any amounts owed by Janel to the Seller pursuant to the Earn-Out Payments, or (C) by seeking recovery from the Seller directly.

12.7.        Knowledge of Janel. Janel acknowledges that it has had the opportunity to conduct due diligence and investigation with respect to this transaction. Janel further acknowledges that, to the extent Janel, or any of Janel’s advisors, agents, consultants or representatives, by reason of such due diligence and investigation, whether or not undertaken, knew or should have known that any representation and warranty made herein by Sellers is or might be inaccurate or untrue, this constitutes a release and waiver of any and all actions, claims, suits, damages or rights to indemnify, at law or in equity, against Sellers by Janel arising out of breach of that representation and warranty. Nothing herein shall be deemed to limit or waive Janel’s rights against such Sellers arising out of any other representation and warranty made herein by the Sellers.

12.8.      Exclusive Remedy. Except for (a) disputes under Section 3.2 or Section 3.3, which such disputes will be resolved in accordance with the dispute mechanisms set forth in such section, (b) claims for Fraud, (c) actions seeking equitable relief pursuant to Sections 11, Janel, ELFS and the Sellers acknowledge and agree that, from and after the Closing, the Parties’ sole and exclusive remedy for any breach or failure to be true and correct, or alleged breach or failure to be true and correct, of any representation or warranty or breach of any covenant or obligation arising under or based upon this Agreement, the Closing and the transactions contemplated hereby (whether based on contract, tort, strict liability, other applicable Law or otherwise), shall be indemnification in accordance with this Section 12.

13.          No Brokerage.

None of the parties hereto has incurred any obligation or liability, contingent or otherwise, for brokerage fees, finder’s fees, agent’s commissions, or the like in connection with this Agreement or the transactions contemplated hereby.  Each party hereto agrees to indemnify and hold the other parties hereto harmless against and in respect of any such obligation or liability based on agreements, arrangements, or understandings claimed to have been made by such party with any third party.

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14.          Nature of Representations and Warranties.

All of the parties hereto are executing and carrying out the provisions of this Agreement in reliance on the representations, warranties, covenants and agreements contained in this Agreement or at the closing of the transactions contemplated hereunder, and any investigation that they made or might have made will not affect or reduce the other representations, warranties, covenants, agreements contained herein.

15.          Notices and Payments.

All notices, writings and other communications required or permitted to be given pursuant to this Agreement shall be in writing, and if such notices are hand‑delivered, faxed or e-mailed, return fax or e-mail acknowledgement requested, to the address set forth below, they shall be deemed to have been received on the Business Day so delivered or transmitted; if such notices are transmitted by overnight courier to the address set forth below, they shall be deemed to have been received on the Business Day following the date on which so transmitted, provided that any notice, writing or other communication received after 5:00 p.m., Eastern Time, shall be deemed to have been received on the next Business Day:

 
Janel:
Janel Group, Inc.
   
233 7th Street, Suite 100
   
Garden City, New York 11530
   
Attention: Bill Lally
   
Fax (401) 727-1874
     
 
and
 
   
Janel Corporation
   
80 Eighth Avenue,
   
New York, New York 10011
   
Attention: Vincent Verde, Corporate Controller
   
vverde@janelcorp.com
     
 
With a copy to:
Hillel Tendler, Esquire
   
Neuberger, Quinn, Gielen, Rubin & Gibber, P.A.
   
One South Street, 27th Floor
   
Baltimore, Maryland  21202
   
Fax (410) 951-6038
   
ht@nqgrg.com
     
 
Seller Representative:
Randall L. Cockrell
   
3323 N. Cotswold Manor
   
Kingwood, Texas 77339
   
rgcockrell@suddenlink.net

38
 
With a copy to:
Jack A. Selman
   
Selman, Munson & Lerner, P.C.
   
9821 Katy Freeway, Suite 875
   
Houston, Texas 77024
   
jselman@selmanmunson.com

All notices hereunder shall be delivered to the above addresses.  Any party may change its address for notice or payment purposes by giving notice the other parties as hereinabove provided.

16.          Expenses.

Each party hereto shall be responsible for and bear all of its own costs and expenses (including the expenses of its representatives) incurred at any time in connection with negotiation, due diligence and closing the transaction described herein.

17.          Survival.

Except as otherwise provided herein, the representations and warranties contained herein shall survive the execution, and delivery of this Agreement and the closing of the transactions contemplated hereby, and shall continue for a period of 24 months following the Closing Date, except for breaches of the Fundamental Representations, which shall survive until the expiration of all applicable statutes of limitation with respect thereto. All covenants and agreements of the parties contained herein shall survive the Closing indefinitely or for the period explicitly specified therein. Notwithstanding the foregoing, any claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.

18.          [Intentionally Omitted.]

19.          [Intentionally Omitted.]

20.          Effect of Waiver.

The failure of any party at any time or times to require performance of any provision of this Agreement will in no manner affect the right to enforce the same.  The waiver by any party of any breach of any provision of this Agreement will not be construed to be a waiver by any such party of any succeeding breach of that provision or a waiver by such party of any breach of any other provision.
39
21.          Severability.

The invalidity, illegality or unenforceability of any provision or provisions of this Agreement will not affect any other provision of this Agreement, which will remain in full force and effect, nor will the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision.  In the event that any one or more of the provisions contained in this Agreement or any portion thereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been contained herein.

22.          Governing Law.

This Agreement shall be governed by and construed in accordance with, the laws of the state of New York without regard to conflict of law principles.

23.          Arbitration.

Any dispute, claim or controversy arising out of or relating to this Agreement, or the transaction documents, or the breach termination, enforcement or validity thereof, including the determination of the scope and applicability of this agreement to arbitrate shall be determined by arbitration in Houston, Texas. The arbitration shall be administered by the American Arbitration Association (“AAA”) pursuant to its applicable Commercial Arbitration Rules. The parties shall agree on a single arbitrator experienced in commercial transactions, provided that if the parties fail to agree on an arbitrator within ten (10) days following the commencement of the dispute, one arbitrator shall be appointed under the AAA Commercial Arbitration Rules applicable to the proceeding. The arbitrator shall state in writing the reasons for his or her award and the legal and factual conclusions underlying the award. The award of the arbitrator shall be final, and judgment upon the award may be entered in any state or federal court located in Texas. The costs of such arbitration proceeding shall be borne by the party that does not prevail in the arbitration, or if a determination of the prevailing party is not made by the arbitrator, such costs shall be borne equally by the parties to such arbitration. The parties agree that all of the negotiations and arbitration proceedings relating to such disputes and all testimony, transcripts and other documents relating to such arbitration shall be treated as confidential and will not be disclosed or otherwise divulged to any other person except as necessary in connection with such negotiations and arbitration proceedings. Notwithstanding anything to the contrary in this Section, the parties shall have the right to seek temporary, preliminary and permanent equitable relief including, without limitation, injunctive relief and specific performance, to prevent any breach or threatened breach of this Agreement in accordance with the AAA Commercial Arbitration Rules.

40
24.          Enforcement.

The parties hereto acknowledge and agree that any party’s remedy at law for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and such breach or threatened breach shall be per se deemed as causing irreparable harm to such party.  Therefore, in the event of such breach or threatened breach, the parties hereto agree that, in addition to any available remedy at law, including but not limited to  monetary damages, an aggrieved party shall be entitled to obtain, and the offending party agrees not to oppose the aggrieved party’s request for, equitable relief in the form of specific enforcement, temporary restraining order, temporary or permanent injunction, or any other equitable remedy that may then be available to the aggrieved party.

25.          Binding Agreement; Assignment.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Except as provided otherwise in this Agreement, Janel, at its option, may designate one or more other direct or indirect subsidiaries or affiliates of Janel to purchase the Interests.  Except as set forth herein, this Agreement shall not be assignable by any party hereto except as provided herein or with the prior written consent of the other parties.

26.          Entire Agreement; Modification.

This Agreement (including the exhibits and schedules hereto) and the other Transaction Documents constitute the full and entire understanding and agreement between the Parties with respect to the subject matter hereof, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, whether written, oral or implied, with respect to such subject matter. The Parties have voluntarily agreed to define their rights, liabilities and obligations respecting the sale and purchase of ELFS exclusively in contract pursuant to the express terms and provisions of this Agreement and the other Transaction Documents, and expressly disclaim that they are owed any duties or are entitled to any remedies not expressly set forth in this Agreement or the other Transaction Documents. Furthermore, the Parties hereby acknowledge that this Agreement and the Transaction Documents embody the justifiable expectations of sophisticated parties derived from arm’s-length negotiations. The Parties specifically acknowledge that no party has any special relationship with another party that would justify any expectation beyond that of an ordinary Janel and an ordinary Sellers in an arm’s-length transaction. The preamble and recitals to this Agreement are incorporated herein by reference.

27.          Further Assurances.

Each of the parties hereto agrees to execute, acknowledge, seal and deliver, after the date hereof and after the Closing, such further assurances, instruments and documents and to take such further actions as the other may reasonably request in order to fulfill the intent of this Agreement and the transactions contemplated hereby.

28.          Facsimile Signature and Counterparts.

This Agreement may be executed by electronic or facsimile signatures which shall have the full force and effect of original signatures.  This Agreement may be executed in counterparts, all of which taken together shall constitute one instrument.

41
29.       Guarantee.  Janel Corp. hereby unconditionally and irrevocably guarantees to Sellers punctual observance and performance by Janel and its Affiliates of all of the obligations of Janel and its Affiliates set forth in this Agreement and any other documents required hereunder, the Purchase Price and all other amounts to be paid hereunder and undertakes to Sellers that (i) whenever Janel or any of its Affiliates does not pay any amount when due under this Agreement, Janel Corp. shall immediately on first demand pay that amount as if it was the principal obligor and (ii) whenever Janel or any of its Affiliates fails to perform any other obligations under this Agreement, Janel Corp. shall immediately on demand perform (or procure performance of) and satisfy (or procure the satisfaction of) that obligation, so that the same benefits are conferred on Sellers as it would have received if such obligation had been performed and satisfied by Janel or its applicable Affiliate. The guarantee under this Section 29 is a continuing guarantee and will extend to the ultimate balance of sums payable by Janel or its Affiliates under this Agreement, regardless of any intermediate payment or discharge. Janel Corp. hereby waives diligence, presentment, demand of performance, filing of any claim, any right to require any proceeding first against any Affiliate of Janel or the Company Business, as applicable, protest, notice and all demands whatsoever in connection with the performance of its obligations set forth in this Section 29.

30.         Except to the extent such person is a party to this Agreement and/or the ancillary transaction documents, and then only to the extent set forth herein or therein, no past, present or future director, officer, employee, incorporator, organizer, manager, member, partner, stockholder, Affiliate, agent, attorney or representative of Janel, ELFS or the Sellers or any of their respective Affiliates shall have any liability (whether in contract or in tort) for any obligations or liabilities of Janel, ELFS, or the Sellers arising under, in connection with or related to this Agreement, the ancillary transaction documents, the transaction or for any claim based on, in respect of, or by reason of, the sale, contribution and purchase of the Interests or other matters contemplated herein, including, without limitation, any alleged non-disclosure or misrepresentations made by any such persons.

31.        Sellers’ Representative.  Each Seller acknowledges, ratifies and agrees to the appointment of Randall L. Cockrell as the representative of such Seller (the “Sellers’ Representative”) in connection with the acquisition of the Company by Janel pursuant to the terms of this Agreement.  The Sellers’ Representative will act as agent and attorney-in-fact on behalf of each Seller with full power of substitution to act in the name, place and stead of the Sellers with respect to, as applicable, the transfer of the Interests owned by the holders thereof to Janel in accordance with the terms and provisions of this Agreement, and to act on behalf of each Seller in any litigation or arbitration involving this Agreement, do or refrain from doing all such further acts and things, and execute all such documents as the Sellers’ Representative shall deem necessary or appropriate in connection with the transactions contemplated by this Agreement, including, without limitation, the power:

(i)           to act for the Sellers with regard to matters pertaining to indemnification referred to in this Agreement, including the power to compromise any claim on behalf of Sellers and to transact matters of litigation;
42
(ii)         to execute and deliver any certificate, instrument and/or agreement that the Sellers’ Representative deems necessary or appropriate in connection with the consummation of the transactions contemplated by this Agreement including with respect to the Purchase Price Adjustment in Section 3.3 and the Earn-Out Consideration in Section 3.2;

(iii)         to receive funds under this Agreement and give receipts for such funds, it being understood that any such funds received by the Sellers’ Representative under this Agreement on behalf of Sellers shall be distributed by the Sellers’ Representative to the other Sellers in accordance with their respective pre-closing ownership percentages as if such funds were distributed directly to such Sellers;

(iv)        to do or refrain from doing any further act or deed on behalf of the Sellers that the Sellers’ Representative deems necessary or appropriate in his sole discretion relating to the subject matter of this Agreement as fully and completely as the Sellers could do if personally present;

(v)           to receive service of process in connection with any claims under this Agreement; and

(vi)          to exercise any powers or otherwise act on behalf of the Sellers as explicitly provided for in this Agreement.

The Sellers’ Representative shall not be responsible to any Seller for any loss or damages any Seller may suffer by the performance of his duties under this Agreement, other than loss or damage arising from willful violation of the law or gross negligence in the performance of his duties under this Agreement.  The Sellers shall, to the fullest extent permitted by Law, indemnify and hold harmless the Sellers’ Representative against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses (including without limitation reasonable attorneys’ fees, costs and expenses) (“Sellers’ Representative Losses”) incurred by or asserted against the Sellers’ Representative from and after the date hereof, relating to or arising from or in connection with any claim, demand, suit, action or proceeding by any person arising from or in connection with the negotiation, preparation, execution, performance or failure of performance of the Sellers’ Representative’s duties as contemplated by this Agreement or any transactions contemplated herein.  The obligations set forth in this Section 31 shall survive the resignation or removal of the Sellers’ Representative.  The Sellers, according to their respective Pre-Closing Ownership Percentages, shall reimburse the Sellers’ Representative for his reasonable expenses incurred on behalf of the Sellers hereunder.

32.          Third-Party Beneficiaries. This Agreement and other transaction documents are not intended to confer upon any Person other than the parties hereto any rights, benefits, remedies, obligations or liabilities here under.

43
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

 
JANEL:
 
JANEL GROUP, INC.

 
By:
/s/
 
 
Name:
Dominique Schulte
 
Title:
Vice President

 
ELFS:
 
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC

 
By:
/s/
 
   
Frederick J. Lalumandier, President

 
SELLERS:
   
 
/s/
 
 
David W. Flake
   
 
/s/
 
 
Randall L. Cockrell,

 
/s/
 
 
Steven R. Lalumandier

 
/s/
 
 
Frederick J. Lalumandier

 
PARENT GUARANTOR:
 
JANEL CORPORATION  with respect to Section 29

 
By:
/s/
 
 
Name:
Dominique Schulte
 
Title:
President and Chief Executive Officer

44
MEMBERSHIP INTEREST PURCHASE AGREEMENT
INDEX OF SCHEDULES AND EXHIBITS

The following schedules (collectively, the “Schedules”) correspond with the Schedules referenced in the Membership Interest Purchase Agreement (the “Purchase Agreement”).  Capitalized terms not otherwise defined in the Schedules shall have the meanings given to them in the Purchase Agreement.

The Schedules to the Purchase Agreement are part of the representations, warranties and other agreements made by ELFS and Seller in the Purchase Agreement and are intended to qualify such representations, warranties and agreements referenced in each Schedule to the extent provided in the Purchase Agreement. Any information included in the Schedules or in any individual Schedule shall be deemed to be disclosed in any other Schedule so long as such disclosure is in sufficient detail to enable a reasonable person to identify the other section or subsection of such other Schedule to which such information is responsive.

The information in the Schedules is not to be construed as an admission that any such information is material to ELFS or the Seller (as the case may be), or any of their respective businesses or operations, except to the extent specifically provided in the Purchase Agreement. Nothing in these Schedules shall constitute an admission of any liability or obligation of ELFS or the Seller to any third party, nor an admission to any third party against ELFS’s or the Seller’s interests.

Schedule
   
1.1(b)
-
Excluded Assets
2.1
-
Sellers
2.2
-
Retained Obligations
5.4
-
Janel Approvals
6.3
-
Liens
6.5
-
Restrictions
6.8
-
ELFS Approvals
6.9
-
Exceptions to Condition of Company Assets
6.10
-
ELFS’s Licenses and Marks
6.12
-
Accounts Receivable
6.13
-
Letter of Credit Liabilities
6.14
-
Facilities
6.15
-
Key Customer Accounts
6.16
-
Material Adverse Changes to ELFS
6.18
-
ELFS Contracts and Authorizations
6.19
-
Compliance; Governmental Authoorizations
6.20
-
ELFS Litigation
6.21
-
Insurance Policies
6.23
-
Agreements with Employees
6.24
-
Employee Benefit Plans
6.25
-
Severance Obligations
6.31
-
Affiliate Transactions
7.5
-
Seller Guarantees
7.7.1
-
Director and Officer Indemnification and Insurance
8.2.3
-
Purchase Price Allocation

Exhibit
   
A
-
Base Balance Sheet
B
-
Note
C
-
Assignment of Interests
D
-
Employment Agreement


Exhibit 10.44

EXECUTION VERSION

AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT

Dated as of  September 21, 2021

among

SANTANDER BANK, N.A.,
as Lender,

JANEL GROUP, INC.,
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC,
a Texas limited liability company, and
ELFS BROKERAGE, LLC,
Jointly and Severally, Individually and Collectively,
as Borrower,

and

JANEL CORPORATION, and
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC,
an Oklahoma limited liability company,
as Loan Party Obligors

1.
 
LOANS AND LETTERS OF CREDIT.
1
 
1.1
 
Amount of Loans / Letters of Credit
1
 
1.2
 
Reserves
2
 
1.3
 
Protective Advances
2
 
1.4
 
Notice of Borrowing; Manner of Revolving Loan Borrowing
2
 
1.5
 
Other Provisions Applicable to Letters of Credit
3
 
1.6
 
Conditions of Making the Loans and Issuing Letters of Credit
3
 
1.7
 
Repayments.
4
 
1.8
 
PREPAYMENTS / VOLUNTARY TERMINATION
4
 
1.9
 
Obligations Unconditional
5
 
1.10
 
Reversal of Payments
6
 
1.11
 
Administrative Borrower
6
 
1.12
 
Divisions.
7
2.
 
INTEREST AND FEES; LOAN ACCOUNT.
7
 
2.1
 
Interest
7
 
2.2
 
Fees
7
 
2.3
 
Payment of Interest
7
 
2.4
 
Computation of Interest and Fees
7
 
2.5
 
Loan Account; Monthly Accountings
7
 
2.6
 
LIBOR Option
7
 
2.7
 
Capital Requirements
11
 
2.8
 
Further Obligations; Maximum Lawful Rate
12
 
2.9
 
Base Rate Related Election.
12
3.
 
SECURITY INTEREST GRANT / POSSESSORY COLLATERAL / FURTHER ASSURANCES.
13
 
3.1
 
Grant of Security Interest
13
 
3.2
 
Possessory Collateral
13
 
3.3
 
Further Assurances
13
 
3.4
 
UCC Financing Statements
14
4.
 
CERTAIN PROVISIONS REGARDING ACCOUNTS, INVENTORY, COLLECTIONS, APPLICATIONS OF PAYMENTS, INSPECTION RIGHTS, AND APPRAISALS.
14
 
4.1
 
Lock Boxes and Blocked Accounts
14

 
4.2
 
Application of Payments
15
 
4.3
 
Notification; Verification
16
 
4.4
 
Power of Attorney
17
 
4.5
 
Disputes
18
 
4.6
 
Invoices
18
 
4.7
 
Access to Collateral, Books and Records
18
5.
 
REPRESENTATIONS, WARRANTIES AND COVENANTS.
18
 
5.1
 
Existence and Authority
19
 
5.2
 
Names; Trade Names and Styles
19
 
5.3
 
Title to Collateral; Third Party Locations; Permitted Liens
20
 
5.4
 
Accounts and Chattel Paper
20
 
5.5
 
Electronic Chattel Paper
20
 
5.6
 
Capitalization; Investment Property.
20
 
5.7
 
Commercial Tort Claims
22
 
5.8
 
State of Organization; Location of Collateral
22
 
5.9
 
Financial Statements and Reports; Solvency.
23
 
5.10
 
Tax Returns and Payments; Pension Contributions
23
 
5.11
 
Compliance with Laws; Intellectual Property; Licenses; ELFS Acquisition.
24
 
5.12
 
Litigation
26
 
5.13
 
Use of Proceeds
26
 
5.14
 
Insurance.
26
 
5.15
 
Financial, Collateral and Other Reporting / Notices
27
 
5.16
 
Litigation Cooperation
29
 
5.17
 
Maintenance of Collateral, Etc. 29
29
 
5.18
 
Material Contracts
29
 
5.19
 
No Default
30
 
5.20
 
No Material Adverse Change
30
 
5.21
 
Full Disclosure
30
 
5.22
 
Sensitive Payments
30
 
5.23
 
Parent
30
 
5.24
 
Patriot Act
31
 
5.25
 
OFAC
31

ii
 
5.26
 
Government Regulation
31
 
5.27
 
Negative Covenants
31
 
5.28
 
Financial Covenant
33
6.

RELEASE, LIMITATION OF LIABILITY AND INDEMNITY.
33
 
6.1
 
Release
33
 
6.2
 
Limitation of Liability
34
 
6.3
 
Indemnity
34
7.
 
EVENTS OF DEFAULT AND REMEDIES.
34
 
7.1
 
Events of Default
34
 
7.2
 
Remedies with Respect to Lending Commitments/Acceleration/Etc.
37
 
7.3
 
Remedies with Respect to Collateral
37
 
7.4
 
Curative Equity
42
8.
 
LOAN GUARANTY.
44
 
8.1
 
Guaranty
44
 
8.2
 
Guaranty of Payment
44
 
8.3
 
No Discharge or Diminishment of Loan Guaranty.
44
 
8.4
 
Defenses Waived
45
 
8.5
 
Rights of Subrogation
45
 
8.6
 
Reinstatement; Stay of Acceleration
45
 
8.7
 
Information
45
 
8.8
 
Termination
46
 
8.9
 
Maximum Liability
46
 
8.10
 
Contribution
46
 
8.11
 
LIABILITY CUMULATIVE
47
 
8.12
 
Subordination
47
9.
 
PAYMENTS FREE OF TAXES; OBLIGATION TO WITHHOLD; PAYMENTS ON ACCOUNT OF TAXES.
48
10.

GENERAL PROVISIONS.
50
 
10.1
 
Notices.
50
 
10.2
 
Severability
52
 
10.3
 
Integration
52
 
10.4
 
Waivers
53
 
10.5
 
Amendment
53

iii
 
10.6
 
Time of Essence
53
 
10.7
 
Expenses, Fee and Costs Reimbursement
53
 
10.8
 
Benefit of Agreement; Assignability
54
 
10.9
 
Recordation of Assignment
54
 
10.10
 
Participations
55
 
10.12
 
USA PATRIOT Act Notification
55
 
10.13
 
Confidentiality and Publicity
56
 
10.14
 
Counterparts; Fax/Email Signatures
57
 
10.15
 
GOVERNING LAW
57
 
10.16
 
CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
57
 
10.17
 
SUPPLEMENTAL AGREEMENTS.
57

Disclosure Schedule
Schedule A
Description of Certain Terms
Schedule B
Definitions
Schedule C
Post-Closing Obligations
Schedule D
Fees
Schedule E
Reporting
Schedule F
Financial Covenant
Schedule G
Additional Conditions Precedent
Schedule H
Acquisition Seller Financing as of the Closing Date
Schedule  I
Representations and Warranties Regarding ELFS Acquisition
Exhibit A
Form of Notice of Borrowing
Exhibit B
LIBOR Notice
Exhibit C
Closing Checklist
Exhibit D
Authorized Accounts Form
Exhibit E
Form of Account Debtor Notification
Exhibit F
Form of Compliance Certificate

iv
Amended and Restated Loan and Security Agreement

This Amended and Restated Loan and Security Agreement (as it may be amended, restated or otherwise modified from time to time, this “Agreement”) is entered into as of September 21, 2021, among (1) SANTANDER BANK, N.A., a national banking association (“Lender”), (2) JANEL GROUP, INC., a New York corporation (“Janel”), EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC, a Texas limited liability company (“ELFS”) and ELFS BROKERAGE, LLC, a Texas limited liability company (“ELFS Brokerage”, and together with Janel and ELFS, individually and collectively, and jointly and severally referred to herein as “Borrower”), (3) JANEL CORPORATION, a Nevada corporation (“Parent”), and EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC, an Oklahoma limited liability company, and a wholly-owned Subsidiary of ELFS (“ELFS OK”, and together with Parent, individually and collectively, and jointly and severally referred to herein as Loan Party Obligors (as defined herein). The Schedules and Exhibits to this Agreement are an integral part of this Agreement and are incorporated herein by reference. Terms used, but not defined elsewhere, in this Agreement are defined in Schedule B.
 
R E C I T A L S:
 
WHEREAS, the Loan Party Obligors (other than ELFS and ELFS Brokerage) and Lender are party to that certain Loan and Security Agreement dated as of October 17, 2017 (as amended and in effect, the “Existing Loan Agreement”);
 
WHEREAS, Janel, Parent, ELFS, and ELFS Brokerage and Lender desire and agree to amend and restate the Existing Loan Agreement in its entirety by this Agreement to, among other things, join ELFS and ELFS Brokerage each as a Borrower thereunder and to amend certain terms of the Existing Loan Agreement, without constituting a novation, upon the terms and subject to the conditions set forth herein; and
 
WHEREAS, Loan Party Obligors have requested that Lender continue to provide a credit facility to Borrower to finance their mutual and collective business enterprise.  Lender is willing to provide the credit facility on the terms and conditions set forth in this Agreement.
 
NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties agree that the Existing Loan Agreement is hereby amended and restated as follows:
  
1.
LOANS AND LETTERS OF CREDIT.
 
1.1       Amount of Loans / Letters of Credit. Revolving Loans and Letters of Credit. Subject to the terms and conditions contained in this Agreement, including Sections 1.3 and 1.6, Lender will, from time to time prior to the Maturity Date, at Borrower’s request, (i) make revolving loans to Borrower (“Revolving Loan”), and (ii) make letters of credit (“Letters of Credit”) available to Borrower; provided, that after giving effect to each such Revolving Loan and each such Letter of Credit, (A) the outstanding balance of all Revolving Loans and the Letter of Credit Balance will not exceed the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base, and (B) none of the other Loan Limits for Revolving Loans will be exceeded. The Revolving Loans made by Lender shall be evidenced by a Revolving Credit Note, duly executed on behalf of the Borrower, dated the Closing Date, payable to Lender in an aggregate principal amount equal to the Maximum Revolving Facility Amount.
 
1.2         Reserves. Lender may, with prior written notice to Borrower, from time to time establish and revise reserves against the Borrowing Base in such amounts and of such types as Lender deems appropriate in its Permitted Discretion (“Reserves”). In no event shall the establishment of a Reserve in respect of a particular actual or contingent liability obligate Lender to make advances to pay such liability or otherwise obligate Lender with respect thereto.  So long as no Event of Default exists, Lender shall not establish a Reserve for outstandings for credit cards issued by the Lender to any Loan Party.
 
1.3         Protective Advances. Any contrary provision of this Agreement or any other Loan Document notwithstanding, at any time (A) after the occurrence and during the continuance of a Default or an Event of Default, or (B) that any of the other applicable conditions precedent set forth in Section 1.1 and/or Section 1.6 or otherwise are not satisfied, Lender hereby is authorized by Borrower, from time to time, in Lender’s sole Permitted Discretion, to make Revolving Loans to, or for the benefit of, Borrower, that Lender in its sole Permitted Discretion deems necessary or desirable (1) to preserve or protect the Collateral or any portion thereof, or (2) to enhance the likelihood of repayment of the Obligations (the Revolving Loans described in this Section 1.3 shall be referred to as “Protective Advances”). Any contrary provision of this Agreement or any other Loan Document notwithstanding, Lender may direct the proceeds of any Protective Advance to Borrower or to such other Person as Lender determines in its sole Permitted Discretion. All Protective Advances shall be payable immediately upon demand.
 
1.4         Notice of Borrowing; Manner of Revolving Loan Borrowing. Borrower shall request each Revolving Loan by submitting such request in writing or via an Approved Electronic Communication, a Notice of Borrowing substantially in the form of Exhibit A hereto) (each such request a “Notice of Borrowing”) and executed by Administrative Borrower (as defined in Section 1.11). Subject to the terms and conditions of this Agreement, including Sections 1.1 and 1.6, Lender shall, except as provided in Section 1.3, deliver the amount of the Revolving Loan requested in the Notice of Borrowing for credit to the operating account of the Administrative Borrower which is maintained with the Lender: (i) with respect to a request for a Base Rate Loan, (x) on the same day if the Notice of Borrowing is received by Lender on or before 2:00 p.m. Eastern Time on a Business Day, (y) on the immediately following Business Day if the Notice of Borrowing is received by Lender after 2:00 p.m. Eastern Time on a Business Day or (z) if such notice is received by Lender on any day that is not a Business Day; and (ii) with respect to a LIBOR Rate Loan, on or before 2:00 p.m. Eastern Time on the date specified in the applicable LIBOR Notice.  Lender shall charge to the Revolving Loan Lender’s usual and customary fees for the wire transfer of any Loan, if applicable.
 
2
1.5         Other Provisions Applicable to Letters of Credit. Lender shall, on terms and conditions set forth in this Agreement (including the terms and conditions set forth in Section 1.1 and Section 1.6), issue Letters of Credit for the benefit of the Borrower; provided, that after giving effect to the issuance of each Letter of Credit, the Letter of Credit Balance will not exceed the Letter of Credit Limit. Borrower agrees to execute all documentation required by Lender in respect of the issuance of a Letter of Credit. Borrower hereby unconditionally and irrevocably agrees to reimburse Lender for each disbursement made by Lender under any Letter of Credit honoring any demand for payment made thereunder, in each case on the date that such payment or disbursement is made. Borrower’s reimbursement obligations hereunder shall be irrevocable and unconditional under all circumstances, including (i) any lack of validity or enforceability of any Letter of Credit, this Agreement or any other Loan Document, (ii) the existence of any claim, set-off, defense or other right which any Loan Party Obligor may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), Lender, or any other Person, whether in connection with any Letter of Credit, this Agreement, any other Loan Document, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between any Loan Party Obligor and the beneficiary named in any Letter of Credit), (iii) any lack of validity, sufficiency or genuineness of any document which Lender has determined complies on its face with the terms of the applicable Letter of Credit, even if such document should later prove to have been forged, fraudulent, invalid or insufficient in any respect or any statement therein shall have been untrue or inaccurate in any respect, or (iv) the surrender or impairment of any security for the performance or observance of any of the terms hereof. Any and all amounts paid by Lender in respect of a Letter of Credit will, at the election of Lender and any contrary provision of this Agreement or other Loan Document notwithstanding, be deemed to be a Base Rate Loan and bear interest at the rate then applicable to Base Rate Loans.
 
1.6         Conditions of Making the Loans and Issuing Letters of Credit. Lender’s obligation to make any Loan or issue any Letter of Credit under this Agreement is subject to the following conditions precedent (as well as any other conditions set forth in this Agreement or any other Loan Document), all of which must be satisfied in a manner acceptable to Lender (and as applicable, pursuant to documentation which in each case is in form and substance acceptable to Lender) as of each day that such Loan is made or such Letter of Credit is issued, as applicable:
 
(a)          Loans and Letters of Credit Made and/or Issued on the Closing Date: With respect to Loans made, or Letters of Credit issued, on the Closing Date, (i) each applicable Loan Party Obligor shall have duly executed and/or delivered, or, as applicable, shall have caused such other applicable Persons to have duly executed and or delivered, to Lender such agreements, instruments, documents, proxies and certificates as Lender may require, and including such other agreements, instruments, documents and/or certificates listed on the closing checklist attached hereto as Exhibit C; (ii) Lender shall have completed its business and legal due diligence pertaining to the Loan Party Obligors and their respective businesses and assets (including, without limitation, a field exam prior to the Closing Date), with results thereof satisfactory to Lender in its sole discretion; (iii) Borrower shall have paid to Lender all fees due on the Closing Date, and shall have paid or reimbursed Lender for all of Lender’s costs, charges and expenses incurred through the Closing Date (and in connection herewith, Borrower hereby irrevocably authorizes Lender to charge such fees, costs, charges and expenses as Base Rate Loans); and (iv) those other conditions set forth Schedule G shall have been completed to the satisfaction of the  Lender.
 
(b)        All Loans and Letters of Credit: With respect to Loans made or Letters of Credit issued on the Closing Date or at any time thereafter, in addition to the conditions specified in clause (a) above as applicable, (i) Borrower shall have provided to Lender such information as Lender may reasonably require in order to determine the Borrowing Base (including the items set forth in Section 5.15(a)), as of such borrowing or issue date, after giving effect to such Loans or Letters of Credit, as applicable; (ii) each applicable Loan Party Obligor shall have duly executed and/or delivered, or, as applicable, shall have caused such other applicable Persons to have duly executed and or delivered, to Lender such further agreements, instruments, documents, proxies and certificates as Lender may reasonably require in connection therewith; (iii) each of the representations and warranties set forth in this Agreement and in the other Loan Documents shall be true and correct in all material respects (without duplication of any materiality qualifiers already set forth therein) as of the date such Loan is made or such Letter of Credit is issued (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct as of such earlier date), both before and after giving effect thereto; and (iv) no Default or Event of Default shall be in existence, both before and after giving effect thereto.
 
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(c)           Post-Closing Obligations.  The obligation of Lender to continue to make Loans or issue Letters of Credit after the Closing Date, in addition to the other conditions set forth in this Section 1.6, is subject to the fulfillment by the Loan Party Obligors, on or before the date applicable thereto, of each of the conditions subsequent set forth on Schedule C (the failure by the Loan Party Obligors to so fulfill any such subsequent condition shall constitute an Event of Default).
 
1.7          Repayments.
 
(a)          Revolving Loans/Letters of Credit. If at any time (a) the sum of the outstanding balance of all Revolving Loans and the Letter of Credit Balance exceeds the lesser of (i) the Maximum Revolving Facility Amount and (ii) the Borrowing Base, or (b) any of the Loan Limits for Revolving Loans or Letters of Credit are exceeded, then in each case, Borrower will immediately pay to Lender such amounts (or, with respect to the Letter of Credit Balance, provide cash collateral to Lender in the manner set forth in clause (c) below) as shall cause Borrower to eliminate such excess.
 
(b)          Maturity Date Payments/Cash Collateral. All remaining outstanding monetary Obligations (including all accrued and unpaid fees described on Schedule D) shall be payable in full on the Maturity Date or, if earlier, the earlier of the date of any acceleration pursuant to Section 7.2 and the Termination Date. Without limiting the generality of the foregoing, if, on the Maturity Date, there are any outstanding Letters of Credit, then on such date Borrower shall provide to Lender cash collateral in an amount equal to 105% of the Letter of Credit Balance to secure all of the Obligations (including estimated attorneys’ fees and other expenses) relating to said Letters of Credit or such greater percentage or amount as Lender reasonably deems appropriate, pursuant to a cash pledge agreement in form and substance satisfactory to Lender.
 
1.8        Prepayments / Voluntary Termination. Borrower may, on at least fifteen (15) days’ prior written notice received by Lender, permanently terminate the Loan facilities by repaying all of the outstanding monetary Obligations, including all principal, interest and fees with respect to the Revolving Loans and any term loan. If, on the date of a voluntary termination pursuant to this Section 1.8, there are any outstanding Letters of Credit, then on such date, and as a condition precedent to such termination, Borrower shall provide to Lender cash collateral in an amount equal to 105% of the Letter of Credit Balance to secure all of the Obligations (including estimated attorneys’ fees and other expenses) relating to said Letters of Credit or such greater percentage or amount as Lender reasonably deems appropriate, pursuant to a cash pledge agreement in form and substance satisfactory to Lender. From and after such date of termination, Lender shall have no obligation whatsoever to extend any additional Loans or Letters of Credit.
 
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1.9          Obligations Unconditional.
 
(a)         The payment and performance of all Obligations shall constitute the absolute and unconditional obligations of each Loan Party Obligor, and shall be independent of any defense or rights of set-off, recoupment or counterclaim which any Loan Party Obligor or any other Person might otherwise have against Lender or any other Person. All payments required (other than by Lender) by this Agreement or the other Loan Documents shall be made in Dollars (unless payment in a different currency is expressly provided otherwise in the applicable Loan Document) and paid free of any deductions or withholdings for any taxes or other amounts and without abatement, diminution or set-off. If any Loan Party Obligor is required by applicable law to make such a deduction or withholding from a payment under this Agreement or under any other Loan Document, such Loan Party Obligor shall pay to Lender such additional amount as is necessary to ensure that, after the making of such deduction or withholding, Lender receives (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. Each Loan Party Obligor shall (i) pay the full amount of any deduction or withholding which it is required to make by law to the relevant authority within the payment period set by applicable law, and (ii) promptly after any such payment, deliver to Lender an original (or certified copy) official receipt issued by the relevant authority in respect of the amount withheld or deducted or, if the relevant authority does not issue such official receipts, such other evidence of payment of the amount withheld or deducted as is reasonably acceptable to Lender.
 
(b)          If, at any time and from time to time after the Closing Date (or at any time before or after the Closing Date with respect to (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines or directives thereunder or issued in connection therewith, or (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case for purposes of this clause (y) pursuant to Basel III, regardless of the date enacted, adopted or issued), (i) any change in any existing law, regulation, treaty or directive or in the interpretation or application thereof, (ii) any new law, regulation, treaty or directive enacted or application thereof, or (iii) compliance by Lender with any request or directive (whether or not having the force of law) from any Governmental Authority, central bank or comparable agency (A) subjects Lender to any tax, levy, impost, deduction, assessment, charge or withholding of any kind whatsoever with respect to any Loan Document, or changes the basis of taxation of payments to Lender of any amount payable thereunder (except, in each case, for Excluded Taxes), or (B) imposes on Lender any other condition or increased cost in connection with the transactions contemplated thereby or participations therein, and the result of any of the foregoing is to increase the cost to Lender of making or continuing any Loan or Letter of Credit or to reduce any amount receivable hereunder or under any other Loan Document, then, in any such case (each, a “Change of Law”), Borrower shall promptly pay to Lender, when notified to do so by Lender, any additional amounts necessary to compensate Lender, on an after-tax basis, for such additional cost or reduced amount as determined by Lender. Each such notice of additional amounts payable pursuant to this Section 1.9(b) submitted by Lender to Borrower shall, absent manifest error, be final, conclusive and binding for all purposes.
 
(c)          This Section 1.9 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans until the expiration of the statute of limitations with respect thereto.

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1.10        Reversal of Payments. To the extent that any payment or payments made to or received by Lender pursuant to this Agreement or any other Loan Document are subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid to any trustee, receiver or other Person under any state, federal or other bankruptcy or other such applicable law, then, to the extent thereof, such amounts (and all Liens, rights and remedies therefor) shall be revived as Obligations (secured by all such Liens) and continue in full force and effect under this Agreement and under the other Loan Documents as if such payment or payments had not been received by Lender. This Section 1.10 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans until the expiration of the statute of limitations with respect thereto.
 
1.11       Administrative Borrower. Each of ELFS and ELFS Brokerage hereby irrevocably appoints Janel as the borrowing agent and attorney-in-fact for itself and each other Borrower (the “Administrative Borrower”), which appointment shall remain in full force and effect unless and until Lender shall have received prior written notice signed by Borrower that such appointment has been revoked and that another Person has been appointed Administrative Borrower. Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (a) to provide Lender with all notices with respect to Loans, Letters of Credit and other extensions of credit obtained for the benefit of Borrower and all other notices and instructions under this Agreement, (b) to accept the proceeds of any Loans for disbursement to the applicable Borrower, and (c) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Loans, Letters of Credit and other extensions of credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement. It is understood that the handling of the loan account and Collateral in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrower in order to utilize the collective borrowing powers of Borrower in the most efficient and economical manner and at their request, and that Lender shall not incur liability to Borrower as a result hereof. Borrower expects to derive benefit, directly or indirectly, from the handling of the loan account and the Collateral in a combined fashion since the successful operation of Borrower is dependent on the continued successful performance of the integrated group. To induce Lender to do so, and in consideration thereof, Borrower hereby jointly and severally agrees to indemnify Lender and hold Lender harmless against any and all liability, expense, loss or claim of damage or injury, made against Lender by Borrower or by any third party whosoever, arising from or incurred by reason of (a) the handling of the loan account and Collateral of Borrower as herein provided, or (b) Lender’s relying on any instructions of the Administrative Borrower (it being acknowledged and agreed that the Lender shall have no obligation to confirm that the proceeds of any Revolving Loan have been delivered to the applicable Borrower).
 
1.12      Divisions. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its equity interests at such time.
 
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2.
INTEREST AND FEES; LOAN ACCOUNT.
 
2.1          Interest. All monetary Obligations shall bear interest as follows:  (a) if the relevant Obligation is a Base Rate Loan, at a per annum rate equal to the applicable rate therefor set forth in Section 3 of Schedule A; (b) if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the applicable rate therefor set forth in Section 3 of Schedule A; and (c) otherwise, at a per annum rate equal to the rate applicable to Base Rate Loans, provided, that automatically after the occurrence and during the continuation of an Event of Default, all Loans and other monetary Obligations shall bear interest at a rate per annum equal to three (3) percentage points in excess of the rate otherwise applicable thereto (the “Default Rate”).
 
2.2         Fees. Borrower shall pay Lender the fees set forth on Schedule D hereto on the dates set forth therein, which fees are in addition to all fees and other sums payable by Borrower or any other Person to Lender under this Agreement or under any other Loan Document, and, in each case are not refundable once paid.
 
2.3         Payment of Interest. Except as provided to the contrary in Section 2.6 and for interest accruing at the Default Rate, which shall be due on demand, interest shall be due and payable, in arrears, on the first day of each month at any time that Obligations are outstanding.
 
2.4        Computation of Interest and Fees. All interest and fees shall be calculated daily on the outstanding monetary Obligations based on the actual number of days elapsed in a year of 360 days

2.5         Loan Account; Monthly Accountings. Lender shall maintain a loan account for Borrower reflecting all outstanding Loans and the Letter of Credit Balance, along with interest accrued thereon and such other items reflected therein (the “Loan Account”), and shall provide Borrower with a monthly accounting reflecting the activity in the Loan Account. Each accounting shall be deemed correct, accurate and binding on Borrower (except for reverses and reapplications of payments made and corrections of errors discovered by Lender), unless Borrower notifies Lender in writing to the contrary within thirty days after such account is rendered, describing the nature of any alleged errors or omissions. However, Lender’s failure to maintain the Loan Account or to provide any such accounting shall not affect the legality or binding nature of any of the Obligations. Interest, fees and other monetary Obligations due and owing under this Agreement (including fees and other amounts paid by Lender to issuers of Letters of Credit) may, in Lender’s discretion, be charged to the Loan Account, and any contrary provision of this Agreement or other Loan Document notwithstanding, will thereafter be deemed to be Base Rate Loans and will bear interest at the rate per annum applicable thereto.
 
2.6          LIBOR Option
 .
(a)           In lieu of having interest charged at the rate based upon the Base Rate, Borrower shall have the option (the “LIBOR Option”) to have interest on all or a portion of the Revolving Loans be charged at a rate of interest based upon the LIBOR Rate.  Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto, (ii) the occurrence of an Event of Default in consequence of which Lender has elected to accelerate the maturity of all or any portion of the Obligations, or (iii) the Termination Date.  On the last day of each applicable Interest Period, unless Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans.  At any time that an Event of Default has occurred and is continuing, Borrower no longer shall have the option to request that Revolving Loans bear interest at a rate based upon the LIBOR Rate and Lender shall have the right to convert the interest rate on all outstanding LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.
 
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(b)         (i)         Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Lender prior to 2:00 p.m. Eastern Time at least three Business Days prior to the commencement of the proposed Interest Period (the “LIBOR Deadline”).  Notice of Borrower’s election of the LIBOR Option for a permitted portion of the Revolving Loans and an Interest Period pursuant to this Section shall be made by delivery to Lender of a Notice of Borrowing (in the case of a new Revolving Loan that is to be a LIBOR Rate Loan) or LIBOR Notice (in the case of a conversion to, or continuation of, a LIBOR Rate Loan) executed by Administrative Borrower received by Lender in writing or via an Approved Electronic Communication before the LIBOR Deadline, or by telephonic notice received by Lender before the LIBOR Deadline (to be confirmed by delivery to Lender of a LIBOR Notice received by Lender prior to 3:00 p.m. on the same day).
 
(ii)        Each LIBOR Notice and Notice of Borrowing with respect to a new Revolving Loan that is to be a LIBOR Rate Loan shall be irrevocable and binding on Borrower.  In connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and hold Lender harmless against any loss, cost, or expense incurred by Lender as a result of (A) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (B) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (C) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice or Notice of Borrowing delivered pursuant hereto (such losses, costs, and expenses, collectively, “Funding Losses”).  Funding Losses shall be deemed to equal the amount determined by Lender to be the excess, if any, of (1) the amount of interest that would have accrued on the principal amount of such LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have been applicable thereto, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert, or continue, for the period that would have been the Interest Period therefor), minus (2) the amount of interest that would accrue on such principal amount for such period at the interest rate which Lender would be offered were it to be offered, at the commencement of such period, Dollar deposits of a comparable amount and period in the London interbank market.  A certificate of Lender delivered to Borrower setting forth any amount or amounts that Lender is entitled to receive pursuant to this Section 2.6 shall be conclusive absent manifest error.
 
(iii)        Borrower shall have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrower only may exercise the LIBOR Option for LIBOR Rate Loans of at least $250,000 and integral multiples of $50,000 in excess thereof.
 
(c)          Borrower may prepay LIBOR Rate Loans at any time; provided, that in the event that LIBOR Rate Loans are prepaid on any date that is not the last day of the Interest Period applicable thereto for any reason, including early termination of the term of this Agreement or acceleration of all or any portion of the Obligations pursuant to the terms hereof, Borrower shall indemnify, defend, and hold Lender and its Participants harmless against any and all Funding Losses in accordance with clause (b)(ii) above.
 
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(d)           (i)           The LIBOR Rate may be adjusted by Lender on a prospective basis to take into account any additional or increased costs to Lender of maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including any Change in Law (including any changes in tax laws (except changes of general applicability in corporate income tax laws) and changes in the reserve requirements imposed by the Board of Governors), which additional or increased costs would increase the cost of funding or maintaining loans bearing interest at the LIBOR Rate.  In any such event, Lender shall give Borrower notice of such a determination and adjustment not less than ten days prior to the effective date thereof and, upon its receipt of the notice from Lender, Borrower may, by notice to Lender (x) require Lender to furnish to Borrower a statement setting forth in reasonable detail the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (y) repay the LIBOR Rate Loans of Lender with respect to which such adjustment is made (together with any amounts due under Section 2.6(b)(ii)).
 
(ii)         Subject to clause (g) below, in the event that any change in market conditions or any Change in Law shall, at any time after the date hereof, in the reasonable opinion of Lender, make it unlawful or impractical for Lender to fund or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, Lender shall give notice of such changed circumstances to Borrower and (x) in the case of any LIBOR Rate Loans that are outstanding, the date specified in Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (y) Borrower shall not be entitled to elect the LIBOR Option until Lender determines that it would no longer be unlawful or impractical to do so.
 
(e)         Anything to the contrary contained herein notwithstanding, neither Lender nor any of its Participants is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate.  The provisions of this Section shall apply as if Lender or its Participants had match funded any Obligation as to which interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the amount of the LIBOR Rate Loans.
 
(f)           If the Lender determines (which determination shall be conclusive absent manifest error), from time to time, that (A) adequate and reasonable means do not exist for ascertaining the LIBOR Rate and the Daily One Month LIBOR, including, without limitation, because the Reuters Screen LIBOR01 page (or any successor page) is not available or published on a current basis and such circumstances are unlikely to be temporary; or (B) the administrator of the Reuters Screen LIBOR01 page (or any successor page) or a public statement has been made identifying a specific date after which the LIBOR Rate, the Daily One Month LIBOR or the Reuters Screen LIBOR01 page (or any successor page) shall no longer be made available or used for determining the interest rates for loans, then the Lender may, in the exercise of its good faith discretion, designate in writing a substitute index, and modify the spread above or below such newly designated index (which designation and modification shall be conclusive absent manifest error), in order to equate the effective interest rate of the Loans to the LIBOR Rate and the Daily One Month LIBOR based interest rate in effect immediately prior to such designation taking effect, and such substitute index and spread shall take effect (a) for any fixed rate LIBOR Rate tranche then in effect, at the end of such LIBOR Rate tranche and (b) for any Daily One Month LIBOR Rate Loan, on the date set forth in such designation which is at least five (5) Business Days after the date of such designation, and shall thereafter be treated as LIBOR Rate and the Daily One Month LIBOR, respectively, or all purposes of the Loan Documents.  Notwithstanding the foregoing, if the interest rate for any Interest Period or the Daily One Month LIBOR determined pursuant to the foregoing provisions is less than the Floor, then the LIBOR Rate for such interest period and the Daily One Month LIBOR shall be the Floor.
 
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(g)           Benchmark Replacement Setting. Notwithstanding anything to the contrary herein or in any other Loan Document:
 
(i)        Replacing USD LIBOR. On March 5, 2021 the Financial Conduct Authority (“FCA”), the regulatory supervisor of USD LIBOR’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-week, 1-month, 2-month, 3-month, 6-month and 12- month USD LIBOR tenor settings. On the earlier of (i) the date that all Available Tenors of USD LIBOR have either  permanently or indefinitely  ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (ii) the Early Opt-in Effective Date, if the then-current Benchmark is USD LIBOR, then the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document.   All interest payments will be payable on a monthly or quarterly basis as determined by the Lender as part of the Benchmark Replacement Conforming Changes.
 
(ii)        Replacing Future Benchmarks. Upon the occurrence of a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. on the tenth (10th) Business Day after the date notice of such Benchmark Replacement is provided to the Borrower without any amendment to this Agreement or any other Loan Document, or further action or consent of the Borrower.  At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Loans to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Lender that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Loans.  During the period referenced in the foregoing sentence, if any component of  Base Rate is based upon the Benchmark, such component of Base Rate based upon the Benchmark will not be used in any determination of Base Rate.
 
(iii)       Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement, the Lender will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
 
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(iv)        Notices; Standards for Decisions and Determinations. The Lender will promptly notify Borrower of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by Lender pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section.
 
(v)      Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including USD LIBOR), then the Lender may remove any tenor of such Benchmark that is unavailable or non-representative for the Benchmark (including Benchmark Replacement) settings and (ii) the Lender may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings.
 
(vi)      Limitation of Liability. The Lender does not warrant and is not responsible for, and shall not have any liability with respect to, (i) the administration, submission or any other matter related to the interest rate under the Loan Documents or with respect to any alternative or successor rate thereto, or replacement rate thereof (including, without limitation, (ii) any such alternative, successor or replacement rate which is based on Daily Compounded SOFR or otherwise, (iii), whether a Benchmark Transition Event occurs, or an Early Opt-in Election is effected, or (iv) the implementation of any Benchmark Replacement Conforming Changes, including without limitation, in any case, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence as, the prior interest rate in effect under the Loan Documents (including, USD LIBOR) or have the same volume or liquidity as did such prior interest rate prior to its discontinuance, unavailability or a determination of its non-representativeness.  The Borrower (A) acknowledges it has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate in connection with the matters contemplated by this Amendment and (B) waives any and all claims or causes of action against the Lender in connection with the transition from USD LIBOR or any applicable interest rate under the Loan Documents to any alternative or successor rate thereto, or replacement rate thereof.
 
2.7          Capital Requirements
 .
(a)           If, after the date hereof, Lender determines that (i) any Change in Law regarding capital or reserve requirements for banks or bank holding companies, or (ii) compliance by Lender, or its parent bank holding company, with any guideline, request or directive of any Governmental Authority regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Lender’s or such holding company’s capital as a consequence of Lender’s commitments hereunder to a level below that which Lender, or such holding company, could have achieved but for such Change in Law or compliance (taking into consideration Lender’s or such holding company’s then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by Lender to be material, then Lender may notify Borrower thereof.  Following receipt of such notice, Borrower agrees to pay Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 90 days after presentation by Lender of a statement in the amount and setting forth in reasonable detail Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error).  In determining such amount, Lender may use any reasonable averaging and attribution methods.
 
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2.8        Further Obligations; Maximum Lawful Rate. Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable or other amounts hereunder or under any other Loan Document (the “Stated Rate”) would exceed the highest rate of interest or other amount permitted under any applicable law to be charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest and other amounts payable shall be equal to the Maximum Lawful Rate; provided, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, Borrower shall, to the extent permitted by applicable law, continue to pay interest and such other amounts at the Maximum Lawful Rate until such time as the total interest and other such amounts received is equal to the total interest and other such amounts which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable or such other amounts payable. Thereafter, the interest rate and such other amounts payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful Rate, in which event this provision shall again apply. In no event shall the total interest or other such amounts received by Lender exceed the amount which it could lawfully have received had the interest and other such amounts been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, Lender has received interest or other such amounts hereunder in excess of the Maximum Lawful Rate, such excess amounts shall be applied to the reduction of the principal balance of the Loans or to other Obligations (other than interest) payable hereunder, and if no such principal or other Obligations are then outstanding, such excess or part thereof remaining shall be paid to Borrower. In computing interest payable with reference to the Maximum Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.
 
2.9         Base Rate Related Election.  For purposes of Section 2.1 and Base Rate Loans, Borrower shall have the option (the “Base Rate Option”) to utilize either clause (i) or clause (ii) of the definition of Base Rate. Unless the Base Rate Option is exercised, clause (ii) of such  definition  shall  apply.   Once exercised, the applicable clause in the definition of Base Rate shall continue to apply until the Base Rate Option is next exercised.  The Base Rate Option only may be exercised by Borrower once per calendar quarter, and the exercise of such option shall be effective on the Business Day Lender has received from Borrower a written notice evidencing its election of either of the foregoing options.
 
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3.
SECURITY INTEREST GRANT / POSSESSORY COLLATERAL / FURTHER ASSURANCES.
 
3.1          Grant of Security Interest. To secure the full payment and performance of all of the Obligations, each Loan Party Obligor hereby assigns to Lender and grants to Lender (and each of Janel and Parent hereby ratifies and confirms the grant pursuant to the Existing Agreement) a continuing security interest in all property of each Loan Party Obligor, whether tangible or intangible, real or personal, now or hereafter owned, existing, acquired or arising and wherever now or hereafter located, and whether or not eligible for lending purposes, including: (i) all Accounts (whether or not Eligible Accounts) and all Goods whose sale, lease or other disposition by any Loan Party Obligor has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, any Loan Party Obligor; (ii) all Chattel Paper (including Electronic Chattel Paper), Instruments, Documents, and General Intangibles (including all patents, patent applications, trademarks, trademark applications, trade names, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses, software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contracts rights, payment intangibles, security interests, security deposits and rights to indemnification); (iii) all Inventory; (iv) all Goods (other than Inventory), including Equipment, Farm Products, Health-Care-Insurance Receivables, vehicles, and Fixtures; (v) all Investment Property, including all rights, privileges, authority, and powers of each Loan Party Obligor as an owner or as a holder of Pledged Equity, including all economic rights, all control rights, authority and powers, and all status rights of each Loan Party Obligor as a member, equity holder or shareholder, as applicable, of each Issuer; (vi) all Deposit Accounts, bank accounts, deposits and cash; (vii) all Letter-of-Credit Rights; (viii) all Commercial Tort Claims; (ix) all Supporting Obligations; (x) any other property of any Loan Party Obligor now or hereafter in the possession, custody or control of Lender or any agent or any parent, Affiliate or Subsidiary of Lender or any Participant with Lender in the Loans, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise); and (xi) all additions and accessions to, substitutions for, and replacements, products and Proceeds of the foregoing property, including proceeds of all insurance policies insuring the foregoing property, and all of each Loan Party Obligor’s books and records relating to any of the foregoing and to any Loan Party Obligor’s business.  For avoidance of doubt, the foregoing shall not include Excluded Collateral.
 
3.2          Possessory Collateral. Promptly, but in any event no later than five (5) Business Days after any Loan Party Obligor’s receipt of any portion of the Collateral evidenced by an agreement, Instrument or Document, including any Tangible Chattel Paper and any Investment Property consisting of certificated securities, such Loan Party Obligor shall deliver the original thereof to Lender together with an appropriate endorsement or other specific evidence of assignment thereof to Lender (in form and substance reasonably acceptable to Lender). If an endorsement or assignment of any such items shall not be made for any reason, Lender is hereby irrevocably authorized, as attorney and agent-in-fact (coupled with an interest) for each Loan Party Obligor, to endorse or assign the same on such Loan Party Obligor’s behalf.
 
3.3       Further Assurances. Each Loan Party Obligor shall, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver (or cause such other applicable Person to take, execute, acknowledge and deliver) all such further acts, documents, agreements and instruments as may from time to time be necessary or desirable as determined by Lender or as Lender may from time to time reasonably require in order to (a) carry out the intent and purposes of the Loan Documents and the transactions contemplated thereby, (b) establish, create, preserve, protect and perfect a first priority Lien (subject only to Permitted Liens) in favor of Lender in all real and personal property (wherever located) from time to time owned by the Loan Party Obligors and in all capital stock and other equity interests from time to time issued by the Loan Party Obligors (other than Parent), (c) cause Parent and each Subsidiary of Parent (other than INDCO and its Subsidiaries) which is not a CFC to guarantee all of the Obligations, all pursuant to documentation that is in form and substance reasonably satisfactory to Lender, and (d) facilitate the collection of the Collateral. Without limiting the foregoing, each Loan Party Obligor shall, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver (or cause such other applicable Person to take, execute, acknowledge and deliver) to Lender all promissory notes, security agreements, agreements with landlords, mortgagees and processors and other bailees, subordination and intercreditor agreements and other agreements, instruments and documents, in each case in form and substance reasonably acceptable to Lender, as Lender may request from time to time to perfect, protect, and maintain Lender’s security interests in the Collateral, including the required priority thereof, and to fully carry out the transactions contemplated by the Loan Documents.

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3.4         UCC Financing Statements . Each Loan Party Obligor authorizes Lender to file, transmit, or communicate, as applicable, from time to time, Uniform Commercial Code financing statements, along with amendments and modifications thereto, in all filing offices selected by Lender, listing such Loan Party Obligor as the debtor and Lender as the secured party, and describing the collateral covered thereby in such manner as Lender may elect, including using descriptions such as “all personal property of debtor” or “all assets of debtor” or words of similar effect, in each case without such Loan Party Obligor’s signature. Each Loan Party Obligor also hereby ratifies its authorization for Lender to have filed in any filing office any financing statements filed prior to the date hereof.
 
4.
CERTAIN PROVISIONS REGARDING ACCOUNTS, INVENTORY, COLLECTIONS, APPLICATIONS OF PAYMENTS, INSPECTION RIGHTS, AND APPRAISALS.
 
4.1        Lock Boxes and Blocked Accounts. Each Loan Party Obligor hereby represents and warrants that all Deposit Accounts and all other depository and other accounts maintained by each Loan Party Obligor as of the Closing Date are described in Section 3 of the Disclosure Schedule, which description includes for each such account the name of the Loan Party Obligor maintaining such account, the name of the financial institution at which such account is maintained, the account number, and the purpose of such account. Subject to the provisions of this Section 4.1, as of the Closing Date, each Borrower will maintain their primary domestic commercial checking accounts with the Lender, including, without limitation, the Administrative Borrower’s operating account, and after the Closing Date, no Loan Party Obligor shall open any new Deposit Accounts or any other depositary or other accounts without the prior written consent of Lender and without updating Section 3 of the Disclosure Schedule to reflect such Deposit Accounts or other accounts, as applicable. No Deposit Accounts or other accounts of any Loan Party Obligor shall at any time constitute Restricted Accounts other than accounts expressly indicated on Section 3 of the Disclosure Schedule as being Restricted Accounts (and each Loan Party Obligor hereby represents, warrants and covenants that each such account shall at all times meet the requirements set forth in the definition of Restricted Account to qualify as a Restricted Account). Each Loan Party Obligor will, at its expense, establish (and revise from time to time as Lender may reasonably require) procedures acceptable to Lender, in Lender’s Permitted Discretion, for the collection of checks, wire transfers and all other proceeds of all of such Loan Party Obligor’s Accounts and other Collateral (“Collections”), which shall include (i) directing all Account Debtors to send all Account proceeds directly to a post office box designated by Lender either in the name of such Loan Party Obligor (but as to which Lender has exclusive access) or, at Lender’s option, in the name of Lender (a “Lock Box”), (ii) depositing all Collections received by such Loan Party Obligor into one or more bank accounts maintained in the name of such Loan Party Obligor (but as to which Lender has exclusive access) or, at Lender’s option, in the name of Lender (each, a “Blocked Account”), under an arrangement reasonably acceptable to Lender with Santander Bank, N.A. or another depository bank reasonably acceptable to Lender, pursuant to which all funds deposited into each Blocked Account are to be transferred to Lender in such manner, and with such frequency, as Lender shall specify, or (iii) a combination of the foregoing. Each Loan Party Obligor agrees to execute, and to cause its depository banks and other account holders to execute, such Lock Box and Blocked Account control agreements and other documentation as Lender shall reasonably require from time to time in connection with the foregoing, all in form and substance reasonably acceptable to Lender, and in any event such arrangements and documents must be in place on the Closing Date with respect to accounts in existence on the Closing Date, or prior to any such account being opened with respect to any such account opened after such date, in each case excluding Restricted Accounts. To the extent not previously delivered to Lender pursuant to the Existing Loan Agreement, prior to the Closing Date, Borrower shall deliver to Lender a complete and executed Authorized Accounts form regarding Borrower’s operating account(s) into which the proceeds of Loans are to be paid in the form of Exhibit D annexed hereto.
 
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Notwithstanding anything in this Agreement to the contrary, the Loan Party Obligors may, until December 21, 2021 (the “Designated Deposit Accounts Expiration Date”), maintain the Designated Deposit Accounts with the current depository institutions as follows:
 
(a)           The aggregate outstanding principal balance of the Designated Deposit Account#_ x7325 shall be limited to the Comerica Cash Collateral. At such time as the Comerica Letters of Credit are returned to Comerica, and Comerica releases its Lien on the Comerica Cash Collateral, Loan Party Obligors shall immediately notify Lender of such release, and Loan Party Obligors shall remit the balance of the Comerica Cash Collateral to the ELFS Sellers in accordance with the ELFS Purchase Agreement;
 
(b)           The aggregate outstanding principal balance of the Designated Deposit Account #s x4090 and x2282, each held at Comerica, shall be limited to the ELFS Cash Cushion Amount and shall be repaid to the ELFS Sellers in accordance with the provisions of Section 5.27(n); and
 
(c)           The aggregate outstanding principal balance of the Designated Deposit Accounts # x8912 and x7778, each held at Wells Fargo Bank, N.A., shall not at any time exceed $750,000, and the Loan Party Obligors shall, at Lender’s request, provide the Lender with written evidence to confirm the same.
 
Not later than the Designated Deposit Accounts Expiration Date, the Loan Party Obligors shall provide Lender with evidence that such Designated Deposit Accounts have been closed, and any and all remaining funds have been transferred to one or more bank accounts subject to a Blocked Account control agreement in favor of Lender.  Further, prior to the Designated Deposit Accounts Expiration Date, each Loan Party Obligor agrees to execute, and to cause its depository banks and other account holders to execute, such Lock Box and Blocked Account control agreements and other documentation regarding the Designated Deposit Accounts # x8912 and x7778 as Lender shall reasonably require from time to time in connection with the foregoing, all in form and substance reasonably acceptable to Lender.
 
4.2          Application of Payments. All amounts paid to or received by Lender in respect of the monetary Obligations, from whatever source (whether from Borrower or any other Loan Party Obligor pursuant to such other Loan Party Obligor’s guaranty of the Obligations, any realization upon any Collateral, or otherwise), shall, unless otherwise directed by Borrower with respect to any particular payment (unless an Event of Default shall then be continuing, in which event Lender may disregard Borrower’s direction), be applied by Lender to the Obligations in such order as Lender may elect, and absent such election shall be applied as follows:
 
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(i)          FIRST, to reimburse Lender for all out-of-pocket costs and expenses, and all indemnified losses, incurred by Lender which are reimbursable to Lender in accordance with this Agreement or any of the other Loan Documents,
 
(ii)         SECOND, to any accrued but unpaid interest on any Protective Advances,
 
(iii)        THIRD, to the outstanding principal of any Protective Advances,
 
(iv)        FOURTH, to any accrued but unpaid fees owing to Lender under this Agreement and/or any other Loan Document,
 
(v)         FIFTH, to any unpaid accrued interest on the Obligations,
 
(vi)       SIXTH, to the outstanding principal of the Revolving Loans, and, to the extent required by Lender, to cash collateralize the Letter of Credit Balance as provided for herein, and
 
(vii)      SEVENTH, to the payment of any other outstanding Obligations; and after payment in full in cash of all of the outstanding monetary Obligations, any further amounts paid to or received by Lender in respect of the Obligations (so long as no monetary Obligations are outstanding) shall be paid over to Borrower or such other Person(s) as may be legally entitled thereto. For purposes of determining the Borrowing Base, such amounts will be credited to the Loan Account and the Collateral balances to which they relate upon Lender’s receipt of an advice or other confirmation that such items have been received by Lender, in each case subject to final payment and collection.
 
4.3         Notification; Verification. Lender or its designee may, from time to time, (a) (1) so long as no Default or Event of Default has occurred, solely in connection with each field examination, and (2) after a Default or Event of Default has occurred: (i) verify directly with the Account Debtors of the Loan Party Obligors (or by any manner and through any medium Lender considers advisable) the validity, amount and other matters relating to the Accounts and Chattel Paper of the Loan Party Obligors, by means of mail, telephone or otherwise, either in the name of the applicable Loan Party Obligor or Lender or such other name as Lender may choose, and (ii) notify Account Debtors of the Loan Party Obligors that Lender has a security interest in the Accounts of the Loan Party Obligors; and (b) after the occurrence of a Default or Event of Default, (i) direct such Account Debtors to make payment thereof directly to Lender, each such notification to be sent on the letterhead of such Loan Party Obligor and substantially in the form of Exhibit E annexed hereto, and (ii) demand, collect or enforce payment of any Accounts and Chattel Paper (but without any duty to do so). Each Loan Party Obligor hereby authorizes Account Debtors to make payments directly to Lender and to rely on notice from Lender without further inquiry. Lender may on behalf of each Loan Party Obligor endorse all items of payment received by Lender that are payable to such Loan Party Obligor for the purposes described above.
 
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4.4          Power of Attorney. Each Loan Party Obligor hereby grants to Lender an irrevocable power of attorney, coupled with an interest, authorizing and permitting Lender (acting through any of its officers, employees, attorneys or agents), at any time (whether or not a Default or Event of Default has occurred and is continuing and with or without notice to such Loan Party Obligor, except, in each case, as expressly provided below), at Lender’s option, but without obligation, and at each Loan Party Obligor’s expense, to do any or all of the following, in such Loan Party Obligor’s name or otherwise: (i) upon any Loan Party Obligor’s failure to do so, execute on behalf of such Loan Party Obligor any documents that Lender may, in its sole discretion, deem advisable in order to perfect, protect and maintain Lender’s security interests, and priority thereof, in the Collateral or to fully consummate all the transactions contemplated by this Agreement and the other Loan Documents (including such financing statements and continuation financing statements, and amendments or other modifications thereto, as Lender shall deem necessary or appropriate); (ii) after the occurrence of a Default or Event of Default, in connection with the exercise by Lender of any remedies hereunder or under any other Loan Document in connection with an Event of Default, execute on behalf of such Loan Party Obligor any document exercising, transferring or assigning any option to purchase, sell or otherwise dispose of or lease (as lessor or lessee) any real or personal property which is part of the Collateral or in which Lender has an interest; (iii) after the occurrence of a Default or Event of Default, execute on behalf of such Loan Party Obligor any invoices relating to any Accounts, any draft against any Account Debtor, any proof of claim in bankruptcy, any notice of Lien or claim, and any assignment or satisfaction of mechanic’s, materialman’s or other Lien; (iv) after the occurrence of a Default or Event of Default, execute on behalf of such Loan Party Obligor any notice to any Account Debtor; (v) receive and otherwise take control in any manner of any cash or non-cash items of payment or Proceeds of Collateral; (vi) except pursuant to any Lock Box arrangement, after the occurrence of a Default or Event of Default, endorse such Loan Party Obligor’s name on all checks and other forms of remittances received by Lender; (vii) pay, contest or settle any Lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (viii) after the occurrence of a Default or Event of Default, grant extensions of time to pay, compromise claims relating to, and settle Accounts, Chattel Paper and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (ix) pay any sums required on account of such Loan Party Obligor’s taxes or to secure the release of any Liens therefor; (x) with notice to Borrower prior to the occurrence of a Default or Event of Default, but without notice to Borrower after the occurrence of a Default or Event of Default, pay any amounts necessary to obtain, or maintain in effect, any of the insurance described in Section 5.14; (xi) settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (xii) instruct any third party having custody or control of any Collateral or books or records belonging to, or relating to, such Loan Party Obligor to give Lender the same rights of access and other rights with respect thereto as Lender has under this Agreement or any other Loan Document; (xiii) after the occurrence of a Default or Event of Default, change the address for delivery of such Loan Party Obligor’s mail and receive and open all mail addressed to such Loan Party Obligor; (xiv) after the occurrence of a Default or Event of Default, vote any right or interest with respect to any Investment Property; (xv) endorse or assign to Lender on such Loan Party Obligor’s behalf any portion of the Collateral evidenced by an agreement, Instrument or Document if an endorsement or assignment of any such items is not made by such Loan Party Obligor pursuant to Section 3.2; and (xvi) after the occurrence of a Default or Event of Default, instruct any Account Debtor to make all payments due to any Loan Party Obligor directly to Lender. Any and all sums paid, and any and all costs, expenses, liabilities, obligations and reasonable attorneys’ fees incurred, by Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Each Loan Party Obligor agrees that Lender’s rights under the foregoing power of attorney and/or any of Lender’s other rights under this Agreement or the other Loan Documents shall not be construed to indicate that Lender is in control of the business, management or properties of such Loan Party Obligor.
 
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4.5        Disputes . Each Loan Party Obligor shall promptly notify Lender of each dispute or claim relating to its Accounts and Chattel Paper involving an amount in excess of $10,000. Each Loan Party Obligor agrees that it will not, without Lender’s prior written consent, compromise or settle any of its Accounts or Chattel Paper for less than the full amount thereof, grant any extension of time for payment of any of its Accounts or Chattel Paper, release (in whole or in part) any Account Debtor or other Person liable for the payment of any of its Accounts or Chattel Paper or grant any credits, discounts, allowances, deductions, return authorizations or the like with respect to any of its Accounts or Chattel Paper; except (unless otherwise directed by Lender during the existence of a Default or an Event of Default) such Loan Party Obligor may take any of such actions in the ordinary course of its business consistent with past practices, provided that Borrower promptly reports the same to Lender.
 
4.6         Invoices . At Lender’s request, after the occurrence of a Default or Event of Default, each Loan Party Obligor will cause all invoices and statements which it sends to Account Debtors or other third parties to be marked, in a manner satisfactory to Lender in its Permitted Discretion, to reflect payment instructions, and upon the occurrence and during the continuation of an Event of Default, Lender’s security interest therein.
 
4.7          Access to Collateral, Books and Records . At reasonable times, Lender and its representatives or agents shall have the right to inspect the Collateral, and the right to inspect, audit, examine and copy each Loan Party Obligor’s books and records. Each Loan Party Obligor agrees to give Lender access to any or all of such Loan Party Obligor’s, and each of its Subsidiaries’, premises to enable Lender to conduct such inspections, audits and examinations (including field examinations). Such inspections, audits and examinations shall be at Borrower’s expense and the charge therefor shall be Lender’s then current standard charge plus out-of-pocket expenses.  Absent the existence of an Event of Default, no more than two (2) such inspections, audits and examinations shall occur.  Lender may, at Borrower’s expense, use each Loan Party Obligor’s personnel, computer and other equipment, programs, printed output and computer readable media, supplies and premises for the collection, sale or other disposition of Collateral to the extent Lender, in its sole discretion, deems appropriate during the existence of an Event of Default. Each Loan Party Obligor hereby irrevocably authorizes all accountants and third parties to disclose and deliver to Lender, at Borrower’s expense, all financial information, books and records, work papers, management reports and other information in their possession regarding the Loan Party Obligors.
 
5.
REPRESENTATIONS, WARRANTIES AND COVENANTS.
 
To induce Lender to enter into this Agreement, each Loan Party Obligor represents, warrants and covenants as follows (it being understood and agreed that (a) each such representation and warranty (i) will be made as of the date hereof and be deemed remade as of each date on which any Loan is made or Letter of Credit is issued (except to the extent any such representation or warranty expressly relates only to any earlier and/or specified date, in which case such representation or warranty will be made as of such earlier and/or specified date), and (ii) shall not be affected by any knowledge of, or any investigation by, Lender, and (b) each such covenant shall continuously apply with respect to all times commencing on the date hereof and continuing until the Termination Date):
 
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5.1          Existence and Authority. Each Loan Party Obligor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization (which jurisdiction is identified in Section 1(a) of the Disclosure Schedule) and is qualified to do business in each jurisdiction in which the operation of its business requires that it be qualified (which each such jurisdiction is identified in Section 1(a) of the Disclosure Schedule), except where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect. Each Loan Party Obligor has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. For avoidance of doubt, the business of ELFS OK is limited to owning licenses in order for ELFS and ELFS Brokerage to operate in the State of Oklahoma. The execution, delivery and performance by each Loan Party Obligor of this Agreement and all of the other Loan Documents to which such Loan Party Obligor is a party have been duly and validly authorized, do not violate such Loan Party Obligor’s Organic Documents, or any law or any agreement or instrument or any court order which is binding upon any Loan Party or its property, do not constitute grounds for acceleration of any Indebtedness or obligation under any agreement or instrument which is binding upon any Loan Party or its property, and do not require the consent of any Person. No Loan Party is required to obtain any government approval, consent, or authorization from, or to file any declaration or statement with, any Governmental Authority in connection with or as a condition to the execution, delivery or performance of any of the Loan Documents except where the failure to obtain such approval, consent or authorization could not reasonably be expected to have a Material Adverse Effect. This Agreement and each of the other Loan Documents have been duly executed and delivered by, and are enforceable against, each of the Loan Party Obligors who have signed them, in accordance with their respective terms, subject to the effects of bankruptcy, insolvency or laws related to creditor’s rights. Section 1(f) of the Disclosure Schedule sets forth the ownership of Borrower and its Subsidiaries, and as of the Closing Date, the Parent.
 
5.2         Names; Trade Names and Styles . The name of each Loan Party Obligor set forth on Section 1(b) of the Disclosure Schedule is its correct and complete legal name as of the date hereof, and no Loan Party Obligor has used any other name at any time in the past five years, or at any time will use any other name, in any tax filing made in any jurisdiction. Listed in Section 1(b) of the Disclosure Schedule are all prior names used by each Loan Party Obligor at any time in the past five years and all of the present and prior trade names used by any Loan Party Obligor at any time in the past five years. Borrower shall give Lender at least thirty days’ prior written notice (and will deliver an updated Section 1 (b) of the Disclosure Schedule to reflect the same) before it or any other Loan Party Obligor changes its legal name or does business under any other name.
 
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5.3         Title to Collateral; Third Party Locations; Permitted Liens. Each Loan Party Obligor has, and at all times will continue to have, good and, if applicable, marketable title to all of the Collateral. The Collateral now is, and at all times will remain, free and clear of any and all Liens, except for Permitted Liens. Lender now has, and will at all times continue to have, a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens, and each Loan Party Obligor will at all times defend Lender and the Collateral against all claims of others. None of the Collateral which is Equipment is, or will at any time, be affixed to any real property in such a manner, or with such intent, as to become a fixture. Except for leases or subleases as to which Borrower has delivered to Lender a landlord’s waiver in form and substance satisfactory to Lender, no Loan Party Obligor is or will be a lessee or sublessee under any real property lease or sublease where Collateral is located. Except for warehouses as to which Borrower has delivered to Lender a warehouseman’s waiver in form and substance satisfactory to Lender, no Loan Party Obligor is or will at any time be a bailor of any Goods with an aggregate value in excess of $25,000 at any warehouse or otherwise. Prior to causing or permitting any Collateral with an aggregate value in excess of $25,000 to at any time be located upon premises in which any third party (including any landlord, warehouseman, or otherwise) has an interest, Borrower shall notify Lender and the applicable Loan Party Obligor shall cause each such third party to execute and deliver to Lender, in form and substance reasonably acceptable to Lender, such waivers, collateral access agreements, and subordinations as Lender shall specify, so as to, among other things, ensure that Lender’s rights in the Collateral are, and will at all times continue to be, superior to the rights of any such third party and that Lender has access to such Collateral. Each applicable Loan Party Obligor will keep at all times in full force and effect, and will comply at all times with all the terms of, any lease of real property where any of the Collateral now or in the future may be located.
 
5.4         Accounts and Chattel Paper . As of each date reported by Borrower, all Accounts which Borrower has then reported to Lender as then being Eligible Accounts comply in all respects with the criteria for eligibility set forth in the definition of Eligible Accounts. All such Accounts and Chattel Paper are genuine and in all respects what they purport to be, arise out of a completed, bona fide and unconditional and non-contingent sale and delivery of goods or rendition of services by Borrower in the ordinary course of its business and in accordance with the terms and conditions of all purchase orders, contracts or other documents relating thereto, each Account Debtor thereunder had the capacity to contract at the time any contract or other document giving rise to such Accounts and Chattel Paper were executed, and the transactions giving rise to such Accounts and Chattel Paper comply with all applicable laws and governmental rules and regulations.
 
5.5         Electronic Chattel Paper. To the extent that any Loan Party Obligor obtains or maintains any Electronic Chattel Paper, such Loan Party Obligor shall at all times create, store and assign the record or records comprising the Electronic Chattel Paper in such a manner that (i) a single authoritative copy of the record or records exists which is unique, identifiable and except as otherwise provided below, unalterable, (ii) the authoritative copy identifies Lender as the assignee of the record or records, (iii) the authoritative copy is communicated to and maintained by Lender or its designated custodian, (iv) copies or revisions that add or change an identified assignee of the authoritative copy can only be made with the participation of Lender, (v) each copy of the authoritative copy and any copy of a copy is readily identifiable as a copy that is not the authoritative copy and (vi) any revision of the authoritative copy is readily identifiable as an authorized or unauthorized revision.
 
5.6          Capitalization; Investment Property.
 
(a)           No Loan Party Obligor, directly or indirectly, owns, or shall at any time own, any capital stock or other equity interests of any other Person except (i) as set forth in Sections 1(f) and 1(g) of the Disclosure Schedule, which such Sections of the Disclosure Schedule list all Investment Property owned by each Loan Party Obligor, and (ii) as permitted by Section 5.27(a).
 
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(b)           None of the Pledged Equity has been issued or otherwise transferred in violation of the Securities Act, or other applicable laws of any jurisdiction to which such issuance or transfer may be subject.
 
(c)           The Pledged Equity pledged by each Loan Party Obligor hereunder constitutes all of the issued and outstanding equity interests of each Issuer owned by such Loan Party Obligor.
 
(d)        All of the Pledged Equity has been duly and validly issued and is fully paid and non-assessable, in each case, to the extent applicable, and the holders thereof are not entitled to any preemptive, first refusal, or other similar rights. There are no outstanding options, warrants or similar agreements, documents, or instruments with respect to any of the Pledged Equity.
 
(e)         Each Loan Party Obligor has caused each Issuer to amend or to otherwise modify its Organic Documents, books, records, and related agreements, documents, and instruments, as applicable, to reflect the rights and interests of Lender hereunder, and to the extent required to enable and empower Lender to exercise and enforce its rights and remedies hereunder in respect of the Pledged Equity and other Investment Property.
 
(f)          Each Loan Party Obligor will take any and all actions reasonably required or requested by Lender, from time to time, to (i) cause Lender to obtain exclusive control of any Investment Property in a manner acceptable to Lender and (ii) obtain from any Issuers and such other Persons as Lender shall specify, for the benefit of Lender, written confirmation of Lender’s exclusive control over such Investment Property and take such other actions as Lender may reasonably request to perfect Lender’s security interest in any Investment Property. For purposes of this Section 5.6, Lender shall have exclusive control of Investment Property if (A) pursuant to Section 3.2, such Investment Property consists of certificated securities and the applicable Loan Party Obligor delivers such certificated securities to Lender (with all appropriate endorsements), (B) such Investment Property consists of uncertificated securities and either (x) the applicable Loan Party Obligor delivers such uncertificated securities to Lender or (y) the Issuer thereof agrees, pursuant to documentation in form and substance satisfactory to Lender, that it will comply with instructions originated by Lender without further consent by the applicable Loan Party Obligor, and (C) such Investment Property consists of security entitlements and either (x) Lender becomes the entitlement holder thereof or (y) the appropriate securities intermediary agrees, pursuant to documentation in form and substance satisfactory to Lender, that it will comply with entitlement orders originated by Lender without further consent by the applicable Loan Party Obligor. Each Loan Party Obligor that is a limited liability company or a partnership hereby represents and warrants that it has not, and at no time will, elect pursuant to the provisions of Section 8-103 of the UCC to provide that its equity interests are securities governed by Article 8 of the UCC.
 
(g)           No Loan Party owns, or has any present intention of acquiring, any “margin security” or any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System (herein called “margin security” and “margin stock”). None of the proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry, any margin security or margin stock or for any other purpose which might constitute the transactions contemplated hereby a “purpose credit” within the meaning of said Regulations T, U or X, or cause this Agreement to violate any other regulation of the Board of Governors of the Federal Reserve System or the Exchange Act, or any rules or regulations promulgated under such statutes.
 
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(h)           No Loan Party Obligor shall vote to enable, or take any other action to cause or to permit, any Issuer to issue any equity interests of any nature, or to issue any other securities or interests convertible into or granting the right to purchase or exchange for any equity interests of any nature of any Issuer.
 
(i)          No Loan Party Obligor shall take, or fail to take, any action that would in any manner impair the value or the enforceability of Lender’s Lien on any of such Loan Party Obligor’s Investment Property, or any of Lender’s rights or remedies under this Agreement or any other Loan Document with respect to any such Investment Property.
 
(j)            In the case of any Loan Party Obligor which is an Issuer, such Issuer agrees that the terms of Section 7.3(g)(iii) of this Agreement shall apply to such Loan Party Obligor with respect to all actions that may be required of it pursuant to such Section 7.3(g)(iii) regarding the Investment Property issued by it.
 
5.7         Commercial Tort Claims. No Loan Party Obligor, as of the date hereof, has any Commercial Tort Claims pending other than those listed in Section 2 of the Disclosure Schedule, and each Loan Party Obligor shall promptly (but in any case no later than five Business Days thereafter) notify Lender in writing upon incurring or otherwise obtaining a Commercial Tort Claim after the date hereof against any third party in excess of $100,000. Such notice shall constitute such Loan Party Obligor’s authorization to amend such Section 2 to add such Commercial Tort Claim and shall automatically be deemed to amend such Section 2 to include such Commercial Tort Claim.
 
5.8          State of Organization; Location of Collateral. Sections 1(c) and 1(d) of the Disclosure Schedule set forth (i) each place of business of each Loan Party Obligor (including its chief executive office), (ii) all locations where all Inventory, Equipment (other than Equipment out for repair and vehicles) and other Collateral with an aggregate value in excess of $25,000 owned by each Loan Party Obligor is kept, and (iii) whether each such Collateral location or place of business (including each Loan Party Obligor’s chief executive office) is owned by a Loan Party or leased (and if leased, specifies the complete name and notice address of each lessor). No Collateral with an aggregate value in excess of $25,000 (other than Accounts owing by foreign Account Debtors) is located outside the United States or in the possession of any lessor, bailee, warehouseman or consignee, except as expressly indicated in Sections 1(c) and 1(d) of the Disclosure Schedule. Each Loan Party Obligor will give Lender at least thirty days’ prior written notice before changing its state of organization, opening any additional place of business where any Collateral is located, changing its chief executive office or the location of its books and records, or moving any of the Collateral to a location other than one of the locations set forth in Sections 1(c) and 1(d) of the Disclosure Schedule, and will execute and deliver all financing statements, landlord waivers, collateral access agreements, mortgages, and all other agreements, instruments and documents which Lender shall require in connection therewith prior to making such change, all in form and substance reasonably satisfactory to Lender. Without the prior written consent of Lender, no Loan Party Obligor will at any time (x) change its state of organization or (y) allow any Collateral with an aggregate value in excess of $25,000 (other than Accounts owing by foreign Account Debtors) to be located outside of the continental United States.
 
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5.9          Financial Statements and Reports; Solvency.
 
(a)           All financial statements delivered to Lender by or on behalf of any Loan Party Obligor have been, and at all times will be, prepared in conformity with GAAP and completely and in all material respects fairly reflect the financial condition of the Loan Party Obligor covered thereby, at the times and for the periods therein stated.
 
(b)       As of the Closing Date (after giving effect to the Loans and Letters of Credit to be made or issued on such date, and the consummation of the transactions contemplated hereby), and as of each other day that any Loan or Letter of Credit is made or issued (after giving effect thereof), (i) the fair saleable value of all of the assets and properties of each Loan Party Obligor, individually, exceeds the aggregate liabilities and Indebtedness of each such Loan Party Obligor (including contingent liabilities), (ii) each Loan Party Obligor, individually, is solvent and able to pay its debts as they come due, (iii) each Loan Party Obligor, individually, has sufficient capital together with the Revolving Loan and Letters of Credit, to carry on its business as now conducted and as proposed to be conducted, (iv) no Loan Party is contemplating either the liquidation of all or any substantial portion of its assets or property, or the filing of any petition under any state, federal, or other bankruptcy or insolvency law, and (v) no Loan Party Obligor has knowledge of any Person contemplating the filing of any such petition against any Loan Party Obligor.
 
5.10      Tax Returns and Payments; Pension Contributions. Each Loan Party Obligor has timely filed all tax returns and reports required by applicable law, has timely paid all applicable federal and state income Taxes and other material Taxes, assessments, deposits and contributions owing by such Loan Party Obligor and will timely pay all such items in the future as they became due and payable. Each Loan Party Obligor may, however, defer payment of any contested taxes; provided, that such Loan Party Obligor (i) in good faith contests its obligation to pay such Taxes by appropriate proceedings promptly and diligently instituted and conducted; (ii) notifies Lender in writing of the commencement of, and any material development in, the proceedings; (iii) posts bonds or takes any other steps required to keep the contested taxes from becoming a Lien upon any of the Collateral; (iv) maintains adequate reserves therefor in conformity with GAAP. No Loan Party Obligor has received written notice from any tax authority of any claims or adjustments proposed for any prior tax years that could result in additional material Taxes becoming due and payable by any Loan Party, nor does any Loan Party Obligor have knowledge of any such proposed claims or adjustments based upon contact with a Tax authority. Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other applicable laws. Each Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter or opinion letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the Internal Revenue Service. To the knowledge of each Loan Party Obligor, nothing has occurred that would prevent or cause the loss of such tax-qualified status. There are no pending or, to the knowledge of any Loan Party Obligor, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to result in liabilities individually or in the aggregate in excess of $10,000.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in liabilities of any Loan Party individually or in the aggregate on any Loan Party in excess of $10,000. No ERISA Event has occurred, and no Loan Party is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan, in each case that could reasonably be expected to result in liabilities individually or in the aggregate in excess of $10,000. Each Loan Party Obligor and each ERISA Affiliate has met all applicable requirements under the Pension Funding Rules in respect of each Pension Plan, and no waiver of the minimum funding standards under the Pension Funding Rules has been applied for or obtained, in each case except as could not reasonably be expected to result in liabilities individually or in the aggregate to the Loan Party Obligors in excess of $10,000. As of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and no Loan Party Obligor knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of the most recent valuation date.  No Loan Party Obligor nor any ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid, except as could not reasonably be expected to result in liabilities individually or in the aggregate to the Loan Obligors in excess of $10,000. No Loan Party Obligor nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA except as could not reasonably be expected to result in liabilities individually or in the aggregate to the Loan Parties in excess of $10,000. No Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan except as could not reasonably be expected to result in liabilities individually or in the aggregate to the Loan Party Obligors in excess of $10,000.
 
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5.11        Compliance with Laws; Intellectual Property; Licenses; ELFS Acquisition.
 
(a)        Each Loan Party Obligor has complied, and will continue at all times to comply, with all provisions of all applicable laws and regulations, including those relating to the ownership of real or personal property, the conduct and licensing of each Loan Party Obligor’s business, the payment and withholding of Taxes, ERISA and other employee matters, and safety and environmental matters, except to the extent the non-compliance therewith could not reasonably be expected to have a Material Adverse Effect.
 
(b)           No Loan Party Obligor has received written notice of default or violation, nor is any Loan Party Obligor in default or violation, with respect to any judgment, order, writ, injunction, decree, demand or assessment issued by any court or any federal, state, local, municipal or other Governmental Authority relating to any aspect of any Loan Party Obligor’s business, affairs, properties or assets. No Loan Party Obligor has received written notice of or been charged with, or is, to the knowledge of any Loan Party Obligor, under investigation with respect to, any violation in any material respect of any provision of any applicable law.
 
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(c)         No Loan Party Obligor owns any registered Intellectual Property as of the date hereof, except as set forth in Section 4 of the Disclosure Schedule. Except as set forth in Section 4 of the Disclosure Schedule, none of the Intellectual Property owned by any Loan Party Obligor is the subject of any licensing or franchise agreement pursuant to which such Loan Party Obligor is the licensor or franchisor. Each Loan Party Obligor shall promptly (but in any event within thirty (30) days thereafter) notify Lender in writing of any additional registered Intellectual Property rights acquired or arising after the date hereof and shall submit to Lender a supplement to Section 4 of the Disclosure Schedule to reflect such additional rights (provided that such Loan Party Obligor’s failure to do so shall not impair Lender’s security interest therein). Each Loan Party Obligor shall execute a separate security agreement granting Lender a security interest in such Intellectual Property (whether owned on the date hereof or thereafter), in form and substance reasonably acceptable to Lender and suitable for registering such security interest in such Intellectual Property with the United States Patent and Trademark Office or United States Copyright Office, as applicable (provided that such Loan Party Obligor’s failure to do so shall not impair Lender’s security interest therein). Each Loan Party Obligor owns or has, and will at all times continue to own or have, the valid right to use all material patents, trademarks, copyrights, software, computer programs, equipment designs, network designs, equipment configurations, technology and other Intellectual Property used, marketed and sold in such Loan Party Obligor’s business, and each Loan Party Obligor is in compliance, and will continue at all times to comply, in all material respects with all material licenses, user agreements and other such agreements regarding the use of Intellectual Property. As of the date hereof, no Loan Party Obligor has any knowledge that, or has received any notice claiming that, any of such Intellectual Property infringes upon or violates the rights of any other Person.
 
(d)         Each Loan Party Obligor (i) has each Federal Maritime Commission (“FMC”) license that is required to operate its business as currently being operated, and has undertaken each registration, publishes each tariff and has in place each bond required by the FMC with respect to its business operations, (ii) is in full compliance with all applicable requirements of the United States Shipping Act of 1984, as amended, FMC regulations and other United States laws and regulations applicable to it with respect to water, air, rail, motor, and other transportation, freight forwarding, warehousing, cargo receipt and handling and logistics, except where non-compliance could not reasonably be expected to have a Material Adverse Effect, and (iii) except to the extent any non-compliance could not reasonably be expected to have a Material Adverse Effect, is in compliance with all applicable foreign laws and regulations with respect to water, air, rail, motor, and other transportation, freight forwarding, warehousing, cargo receipt and handling and logistics.
 
(e)         Without limiting subparagraph (d) above, each Loan Party Obligor has, and will continue at all times to have, all international, federal, state, local and other licenses and permits required to be maintained in connection with such Loan Party Obligor’s business operations, including, without limitation, those required by the United States Department of Transportation, International Air Transportation Association, United States Department of Homeland Security and Border Service, and United States Customs and Border Protection, except where the failure to maintain any such license or permit could not reasonably be expected to have a Material Adverse Effect, and all such licenses and permits are valid and in full force and effect. Each Loan Party Obligor has, and will continue at all times to have, complied with the requirements of such licenses and permits in all material respects, and has received no written notice of any pending or threatened proceedings for the suspension, termination, revocation or limitation thereof. No Loan Party Obligor is aware of any facts or conditions that could reasonably be expected to cause or permit any of such licenses or permits to be voided, revoked or withdrawn.  Each Loan Party Obligor (i) maintains all surety bonds required by all applicable international, federal, state and local laws and (ii) is compliant with the Customs-Trade Partnership Against Terrorism.
 
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(f)          In addition to the representations, warranties and covenants set forth above, the Loan Party Obligors make the representations, warranties and covenants set forth in Schedule I with respect to the ELFS Acquisition.
 
5.12       Litigation. Section 1(e) of the Disclosure Schedule discloses all claims, proceedings, litigation or investigations pending or (to each Loan Party Obligor’s knowledge) threatened against any Loan Party Obligor as of the date hereof. Other than as disclosed in Section 1(e) of the Disclosure Schedule, there is no claim, suit, litigation, proceeding or investigation pending or (to each Loan Party Obligor’s knowledge) threatened by or against or affecting any Loan Party in any court or before any Governmental Authority (or any basis therefor known to any Loan Party Obligor) which may result, either separately or in the aggregate, in liability in excess of $150,000 for the Loan Party Obligors, in any Material Adverse Effect, or in any material impairment in the ability of any Loan Party Obligor to carry on its business in substantially the same manner as it is now being conducted.
 
5.13       Use of Proceeds. All proceeds of all Loans and Letters of Credit shall be used by Borrower solely (i) with respect to Loans made on the Closing Date, to pay in full the Indebtedness (and any related interest, fees and expenses) owing to Presidential Finance, (ii) to pay the fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby, (iii) for Borrower’s working capital purposes, and (iv) for such other purposes not prohibited by this Agreement or applicable law. All proceeds of all Loans and Letters of Credit will be used solely for lawful business purposes.
 
5.14        Insurance.
 
(a)           Each Loan Party will at all times carry property, liability and other insurance (including credit insurance to any foreign Accounts), with insurers reasonably acceptable to Lender, in such form and amounts, and with such deductibles and other provisions, as Lender shall require in its Permitted Discretion, and Borrower will provide Lender with evidence satisfactory to Lender that such insurance is, at all times, in full force and effect. A true and complete listing of such insurance as of the Closing Date, including issuers, coverages and deductibles, is set forth in Section 5 of the Disclosure Schedule. Each property insurance policy and credit insurance policy shall name Lender as lender loss payee and shall contain a lender’s loss payable endorsement in form reasonably acceptable to Lender, any liability insurance policy shall name Lender as an additional insured, and each business interruption insurance policy shall be collaterally assigned to Lender, all in form and substance satisfactory to Lender. All policies of insurance shall provide that they may not be cancelled or changed without at least thirty days’ prior written notice to Lender, and shall otherwise be in form and substance satisfactory to Lender. Borrower shall advise Lender promptly of any policy cancellation, non-renewal, reduction, or material amendment with respect to any insurance policies maintained by any Loan Party or any receipt by any Loan Party of any notice from any insurance carrier regarding any intended or threatened cancellation, non-renewal, reduction or material amendment of any of such policies, and Borrower shall promptly deliver to Lender copies of all notices and related documentation received by any Loan Party in connection with the same.

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(b)        Borrower shall deliver to Lender, no later than fifteen (15) days prior to the expiration of any then current insurance policies, insurance certificates evidencing renewal of all such insurance policies required by this Section 5.14. Borrower shall deliver to Lender, upon Lender’s request, certificates evidencing such insurance coverage in such form as Lender shall specify. If any Loan Party fails to provide Lender with a certificate of insurance or other evidence of the continuing insurance coverage required by this Agreement within five (5) days of Lender’s written request, Lender may purchase insurance required by this Agreement at Borrower’s expense. This insurance may, but need not, protect any Loan Party’s interests.
 
5.15       Financial, Collateral and Other Reporting / Notices. Each Loan Party Obligor has kept and will at all times keep adequate records and books of account with respect to its business activities and the Collateral in which proper entries are made in accordance with GAAP reflecting all its financial transactions. Each Loan Party Obligor will cause to be prepared and furnished to Lender, in each case in a form and in such detail as is reasonably acceptable to Lender, the following items (the items to be provided under this Section 5.15 shall be delivered to Lender in writing or, if requested by Lender, by an Approved Electronic Communication).
 
(a)          Borrowing Base / Collateral Reports / Disclosure Schedules / Other Items.  The items described on Schedule E hereto by the respective dates set forth therein;
 
(b)         Annual Financial Statements. Not later than one hundred twenty (120) days after the close of each Fiscal Year, unqualified, audited financial statements of Parent and its Subsidiaries on a consolidated basis as of the end of such year, and separate financial statements for (i) the Borrowers and their Subsidiaries, and (ii) INDCO and its Subsidiaries, in all instances including balance sheet, income statement, statement of cash flow, results of their respective operations during such year, together with comparative figures for the immediately preceding Fiscal Year and the corresponding figures from the budget for the Fiscal Year covered by such financial statements. Such annual audited consolidated financial statements of Parent will include management discussion and analysis of such results, and will be certified by a firm of independent certified public accountants selected by Borrower but reasonably acceptable to Lender, together with a copy of any management letter issued in connection therewith. Concurrently with the delivery of such financial statements, Borrower shall deliver to Lender a Compliance Certificate, indicating whether (i) Borrower is in compliance with each of the covenants specified in Section 5.28, and setting forth a detailed calculation of such covenants, and (ii) any Default or Event of Default is then in existence;
 
(c)           Monthly Financial Statements. Not later than forty-five (45) days after the end of each month hereafter, including the last month of each Fiscal Year, unaudited interim financial statements of each Borrower and its subsidiaries as of the end of such month and of the portion of such Fiscal Year then elapsed, including balance sheet, income statement, statement of cash flow, and the results of their respective operations during such month and the then-elapsed portion of the Fiscal Year, and comparative figures for the same periods in the immediately preceding Fiscal Year and the corresponding figures from the budget for the Fiscal Year covered by such financial statements, in each case, on a consolidated and consolidating basis, certified by the principal financial officer of Administrative Borrower as prepared in accordance with GAAP and fairly presenting the consolidated financial position and results of operations (including management discussion and analysis of such results) of each Loan Party Obligor for such month and period, subject only to changes from ordinary course year-end audit adjustments and except that such statements need not contain footnotes. Concurrently with the delivery of such financial statements, Borrower shall deliver to Lender a Compliance Certificate, indicating (i) whether any Default or Event of Default is then in existence, and (ii) if such month end is also a quarter end, Borrower is in compliance with each of the covenant specified in Section 5.28, and setting forth a detailed calculation of such covenant;

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(d)         Quarterly Financial Statements.  Not later than forty-five (45) days after the end of each fiscal quarter, (i) Parent’s Quarterly Report on Form 10-Q as filed with the United States Securities Exchange Commission, together with a  comparison of same to (A) the Parent’s Quarterly Report on Form 10-Q filed for the same quarter in the prior year, and (B) the Parent’s Quarterly Report on Form 10-Q filed for the prior quarter, together with a management discussion analysis thereof, and (ii) a “spreadsheet” in the form previously delivered to the Lender prior to the Closing Date which contains the consolidating financial statements of (A) the Borrower, including all corporate expenses, and (B) INDCO and its Subsidiaries, in both cases reconciled to such Form 10-Q.
 
(e)         Projections, Etc. Not later than fifteen days prior to the end of each Fiscal Year, monthly business projections for the following Fiscal Year for the Loan Party Obligors on a consolidated basis, which projections shall include for each such period Borrowing Base projections, profit and loss projections, balance sheet projections, income statement projections and cash flow projections;
 
(f)          Shareholder Reports, Etc. Promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports which each Loan Party Obligor has made available to its shareholders and copies of any regular, periodic and special reports or registration statements which any Loan Party Obligor files with the Securities and Exchange Commission or any Governmental Authority which may be substituted therefor, or any national securities exchange;
 
(g)         ERISA Reports. Copies of any annual report to be filed pursuant to the requirements of ERISA in connection with each plan subject thereto promptly upon request by Lender and in addition, each Loan Party Obligor shall promptly notify Lender upon having knowledge of any ERISA Event;
 
(h)          Tax Returns. Each federal and state income tax return filed by any Loan Party Obligor or Other Obligor promptly (but in no event later than ten days following the filing of such return), together with such supporting documentation as is supplied to the applicable tax authority with such return and proof of payment of any amounts owing with respect to such return; and
 
(i)           Notification of Certain Changes. Borrower will promptly (and in no case later than the earlier of (i) five Business Days after the occurrence of any of the following and (ii) such other date that such information is required to be delivered pursuant to this Agreement or any other Loan Document) notify Lender in writing of: (i) the occurrence of any Default or Event of Default, (ii) the occurrence of any event that has had, or may have, a Material Adverse Effect, (iii) any change in any Loan Party Obligor’s President, Chief Executive Officer or Chief Financial Officer, (iv) any investigation, action, suit, proceeding or claim (or any material development with respect to any existing investigation, action, suit, proceeding or claim) relating to any Loan Party, any officer or director of a Loan Party Obligor, the Collateral or which may result in an adverse impact upon any Loan Party Obligor’s business, assets or financial condition, (v) any material loss or damage to the Collateral, (vi) any event or the existence of any circumstance that has resulted in, or could reasonably be expected to result in, any material adverse change in the business or financial affairs of any Loan Party Obligor, any Default, or any Event of Default, or which would make any representation or warranty previously made by any Loan Party Obligor to Lender untrue in any material respect or constitute a material breach if such representation or warranty was then being made, (vii) any actual or alleged breaches of any Material Contract or termination or threat to terminate any Material Contract or any material amendment to or modification of a Material Contract, or the execution of any new Material Contract by any Loan Party Obligor, and (viii) any change in any Loan Party Obligor’s certified accountant. In the event of each such notice under this Section 5.15(i), Borrower shall give notice to Lender of the action or actions that each Loan Party Obligor has taken, is taking, or proposes to take with respect to the event or events giving rise to such notice obligation.

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(j)           Other Information. Promptly upon request, such other data and information (financial and otherwise) as Lender, from time to time, may reasonably request, bearing upon or related to the Collateral or each Loan Party Obligor’s and each Other Obligor’s business or financial condition or results of operations.
 
5.16      Litigation Cooperation. Should any third-party suit, regulatory action, or any other judicial, administrative, or similar proceeding be instituted by or against Lender with respect to any Collateral or in any manner relating to any Loan Party Obligor, this Agreement, any other Loan Document or the transactions contemplated hereby, each Loan Party Obligor shall, without expense to Lender, make available each Loan Party Obligor, such Loan Party Obligor’s officers, employees and agents, and any Loan Party Obligor’s books and records, without charge, to the extent that Lender may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.
 
5.17       Maintenance of Collateral, Etc. Each Loan Party Obligor will maintain all of the Collateral in good working condition, ordinary wear and tear excepted, and no Loan Party Obligor will use the Collateral for any unlawful purpose.
 
5.18       Material Contracts. Except as expressly disclosed in Section 1(h) of the Disclosure Schedule, no Loan Party Obligor is (a) a party to any contract which if breached could reasonably be expected to have a Material Adverse Effect or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (x) any contract to which it is a party or by which any of its assets or properties is bound, which default, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or result in liabilities in excess of $300,000 or (y) any Material Contract. Except for the contracts and other agreements listed in Section 1(h) of the Disclosure Schedule, no Loan Party Obligor is party, as of the Closing Date, to any (i) employment agreements covering the executive management of any Loan Party Obligor, (ii) collective bargaining agreements or other labor agreements covering any employees of any Loan Party Obligor, (iii) agreements for managerial, consulting or similar services to which any Loan Party Obligor is a party or by which it is bound, (iv) agreements regarding any Loan Party Obligor, its assets or operations or any investment therein to which any of its equity holders is a party, (v) patent licenses, trademark licenses, copyright licenses or other lease or license agreements to which any Loan Party Obligor is a party, either as lessor or lessee, or as licensor or licensee, (vi) distribution, marketing or supply agreements to which any Loan Party Obligor is a party, (vii) customer agreements to which any Loan Party Obligor is a party (in each case with respect to any contract of the type described in the preceding clauses (i), (iii), (iv), (v), (vi) and (vii) requiring payments of more than $100,000 in the aggregate in any Fiscal Year), (viii) partnership agreements to which any Loan Party Obligor is a partner, limited liability company agreements to which any Loan Party is a member or manager, or joint venture agreements to which any Loan Party Obligor is a party, or (ix) real estate leases (each such contract and agreement described in the preceding clauses (i) to (ix), a “Material Contract”).
 
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5.19        No Default. No Default or Event of Default has occurred and is continuing.
 
5.20        No Material Adverse Change. As of the date hereof, since June 30, 2017, and as of any date thereafter, since the date of the last delivery of Borrower’s annual financial statements, there has been no material adverse change in the financial condition, business, prospects, operations, or properties of any Loan Party Obligor or any Other Obligor.
 
5.21       Full Disclosure. No report, notice, certificate, information or other statement delivered or made (including, in electronic form) by or on behalf of any Loan Party, any Other Obligor or any of their respective Affiliates to Lender in connection with this Agreement or any other Loan Document contains or will at any time contain any untrue statement of a material fact, or omits or will at any time omit to state any material fact necessary to make any statements contained herein or therein not misleading. Except for matters of a general economic or political nature which do not affect any Loan Party or any Other Obligor uniquely, there is no fact presently known to any Loan Party Obligor, which has not been disclosed to Lender, which has had or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
5.22       Sensitive Payments. No Loan Party (a) has made or will at any time make any contributions, payments or gifts to or for the private use of any governmental official, employee or agent where either the payment or the purpose of such contribution, payment or gift is illegal under the applicable laws of the United States or the jurisdiction in which made or any other applicable jurisdiction, (b) has established or maintained or will at any time establish or maintain any unrecorded fund or asset for any purpose or made any false or artificial entries on its books, (c) has made or will at any time make any payments to any Person with the intention that any part of such payment was to be used for any purpose other than that described in the documents supporting the payment, or (d) has engaged in or will at any time engage in any “trading with the enemy” or other transactions violating any rules or regulations of the Office of Foreign Assets Control or any similar applicable laws, rules or regulations.
 
5.23        Parent. Parent does not and shall not at any time (i) engage in any business activities other than serving as a passive holding company for Borrower, INDCO, Aves and any other Person which Parent may acquire after the Closing Date (provided that such acquisition is not consummated directly or indirectly with proceeds of the Revolving Loans), (ii) have any material assets other than the outstanding equity interests owned by it of Borrower, INDCO, Aves and any other Person which Parent may acquire after the Closing Date (provided that such acquisition is not consummated directly or indirectly with proceeds of the Revolving Loans), (iii) have any Subsidiaries other than Borrower, INDCO, Aves or and any other Person which Parent may acquire as a Subsidiary after the Closing Date (provided that such acquisition is not consummated directly or indirectly with proceeds of the Revolving Loans), or (iv) have any material liabilities other than the Obligations except as approved by Lender.

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5.24       Patriot Act. To the extent applicable, each Loan Party is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”).  No part of the proceeds of the Loans will be used by any Loan Party Obligor or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
 
5.25      OFAC.  No Loan Party is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC.  No Loan Party (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with, Sanctioned Persons or Sanctioned Entities.  No proceeds of any Loan will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.
 
5.26       Government Regulation. No Loan Party is subject to regulation under the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.  No Loan Party is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.
 
5.27        Negative Covenants. No Loan Party Obligor shall, and no Loan Party Obligor shall permit any Loan Party Obligor to, without Lender’s prior written consent:
 
(a)           Except with respect to a Permitted Acquisition, merge or consolidate with another Person, form any new Subsidiary, or acquire any interest in any Person; provided, however, that (i) a Loan Party Obligor (other than Parent) may merge with another Loan Party Obligor, (ii) new Subsidiaries of a Loan Party Obligor may be formed so long as such Subsidiary is joined as a Loan Party Obligor hereunder, provided that with respect to a Subsidiary formed by the Parent, such Subsidiary shall be joined as Loan Party Obligor if such Subsidiary was formed or acquired by the Parent directly or indirectly with the proceeds of the Revolving Loans, and (iii) so long as the investment limits in subpart (e) below are with respect to joint ventures complied with, a Loan Party Obligor  may create a CFC via joint venture, which such Subsidiary will not have to join as a Loan Party Obligor hereunder;
 
(b)          acquire any assets, except in connection with a Permitted Acquisition, except in the ordinary course of business and as otherwise expressly permitted by this Agreement;
 
(c)           enter into any transaction outside the ordinary course of business;
 
(d)          except for Permitted Dispositions, sell, transfer, return, or dispose of any Collateral or other assets;
 
(e)           make any loans to or investments in any Affiliate or other Person in the form of money or other assets, provided, that:
 
(i)          Borrower may make loans and investments in its wholly-owned domestic Subsidiaries that are Loan Party Obligors;

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(ii)       Parent may make investments in (A) Borrower, (B) INDCO, (C) Aves, and (D) those loans or investments permitted by subclauses (i), (ii), or (iii) of Section 5.23 above; provided that such loans or investments as to (B), (C) and (D) are not funded directly or indirectly with the proceeds of any Revolving Loan;
 
(iii)        Reserved; and
 
(iv)        Reserved.
 
(f)           incur any Indebtedness other than (i) the Obligations, (ii) Permitted Indebtedness, (iii) Acquisition Seller Financing, and (iv) other Indebtedness which is unsecured and does not exceed $500,000 in the aggregate at any one time;
 
(g)          create, incur, assume or suffer to exist any Lien or other encumbrance of any nature whatsoever, other than in favor of Lender to secure the Obligations, on any of its assets whether now or hereafter owned, other than Permitted Liens;
 
(h)          guaranty or otherwise become liable with respect to the obligations (other than the Obligations) of another Person other than (i) the Obligations, (ii) endorsements or instruments or other payment items for deposits, and (iii) as to Parent only, Parent may guaranty or otherwise become liable for the foregoing (A) as to INDCO, (B) pursuant to the Antibodies Guaranty, (C) pursuant to the Aves Guaranty, and (D) pursuant to the ELFS Guaranty.
 
(i)             pay or declare any dividends or distributions on any Loan Party’s stock or other equity interest except for Permitted Dividends;
 
(j)             redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Loan Party’s (other than Parent’s) capital stock or other equity interests;
 
(k)            make any change in any Loan Party’s (other than Parent’s) capital structure;
 
(l)            dissolve or elect to dissolve;
 
(m)         engage, directly or indirectly, in a business other than the business which is being conducted on the date hereof (and any business substantially similar, related, or incidental thereto) (except as to Parent as to which the foregoing shall not apply), wind up its business operations or cease substantially all, or any material portion, of its normal business operations, or suffer any material disruption, interruption or discontinuance of a material portion of its normal business operations;
 
(n)         pay any  principal or other amount on any Indebtedness that is contractually subordinated to Lender in violation of the applicable subordination or intercreditor agreement; provided however, for avoidance of doubt, the Loan Party Obligors may repay at any time (i) the Indebtedness owed to Ruth Werra which is described in Section 6 of the Disclosure Schedule, and the Loan Party Obligors shall promptly notify the Lender when such payment is made, (ii) to the ELFS Sellers, the ELFS Insurance Premium Refund, and (iii) to the ELFS Sellers, so long as no Event of Default exists or would result therefrom, the ELFS Cash Cushion Amount not later than 30 days after the Closing Date;
 
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(o)        enter into any transaction with an Affiliate other than on arms-length terms disclosed to Lender in writing and transactions expressly permitted under this Agreement;
 
(p)         change its state of organization or enter into any transaction which has the effect of changing its state of organization except as provided for in Section 5.8;
 
(q)         agree, consent, permit or otherwise undertake to amend or otherwise modify any of the terms or provisions of (i) any Loan Party Obligor’s Organic Documents, (ii) the Aves Guaranty, (iii) the ELFS Notes, or (iv) the ELFS Acquisition Documentation, except, in each instance, for such amendments or other modifications required by applicable law or that are not adverse to Lender, and then, only to the extent such amendments or other modifications are fully disclosed in writing to Lender no less than five (5) Business Days prior to being effectuated.
 
(r)         enter into or assume any agreement prohibiting the creation or assumption of any Lien to secure the Obligations upon its properties or assets, whether now owned or hereafter acquired;
 
(s)           create or otherwise cause or suffer to exist or become effective any encumbrance or restriction (other than any Loan Document) of any kind on the ability of any such Person to pay or make any dividends or distributions to Borrower, to pay any of the Obligations, to make loans or advances or to transfer any of its property or assets to Borrower;
 
(t)        make any payment on account of (i) the Atlantic Deferred Purchase Price Payments, the ELFS Notes, or the ELFS Earn-Out Payments, unless, in each instance, the Restricted Payment Conditions are satisfied, and/or (ii) the Aves Guaranty in violation of the Aves Subordination Agreement; or
 
(u)         with respect to any Carrier Contract or Customer Contract, (i) allow payments to third-party carriers to be directly contingent or dependent upon the receipt (or likelihood of receipt) by a Loan Party Obligor of payment from a customer, whether through business practice (including performance of Carrier Contracts) or by written or verbal agreement; (ii) in the ordinary course of business (A) segregate from its general funds any monies collected with respect to Customer Contracts or otherwise in respect of its logistics business, (B) permit any customer or Customer Contract to designate such monies be held in trust or otherwise for the benefit of any third-party carrier or (C) make payments to any third-party carrier other than from its general funds; (iii) hold or be required to hold any portion of amounts collected in connection with Customer Contracts or otherwise in respect of its logistics business in trust for, or have any express fiduciary relationship or fiduciary duty to, any third-party carrier; or (iv) expressly consent to or agree in writing to permit any third-party carrier to seek payment from, or to have contractual recourse to any customer.
 
5.28       Financial Covenant. Each Loan Party Obligor shall at all times comply with the Financial Covenant described on Schedule F.
 
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6.
RELEASE, LIMITATION OF LIABILITY AND INDEMNITY.
 
6.1          Release. Borrower and each other Loan Party Obligor, on behalf of itself and its successors, assigns, heirs, and other legal representatives, hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Lender and any and all Participants, their successors and assigns, their Affiliates, their respective directors, officers, employees, attorneys and agents and any other Person affiliated with or representing Lender (the “Released Parties”) of and from any and all liability, including all actual or potential claims, demands or causes of action of any kind, nature or description whatsoever, whether arising in law or equity or under contract or tort or under any state or federal law or otherwise which Borrower or any other Loan Party Obligor or any of their successors, assigns, or other legal representatives has had, now has or has made claim to have against any of the Released Parties for or by reason of any act, omission, matter, cause or thing whatsoever, including any liability arising from acts or omissions pertaining to the transactions contemplated by this Agreement and the other Loan Documents, whether based on errors of judgment or mistake of law or fact, from the beginning of time to and including the date hereof, whether such claims, demands and causes of action are matured or known or unknown. Notwithstanding any provision in this Agreement to the contrary, this Section 6.1 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans. Such release is made on the date hereof and remade upon each request for a Loan or Letter of Credit by Borrower.
 
6.2        Limitation of Liability. In no circumstance will any of the Released Parties be liable for lost profits or other special, punitive, or consequential damages. Notwithstanding any provision in this Agreement to the contrary, this Section 6.2 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans.
 
6.3          Indemnity. Each Loan Party Obligor hereby agrees to indemnify the Released Parties and hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including attorneys’ fees), of every nature, character and description, which the Released Parties may sustain or incur based upon or arising out of any of the transactions contemplated by this Agreement or any other Loan Document or any of the Obligations, including any transactions or occurrences relating to the issuance of any Letter of Credit, any Collateral relating thereto, any drafts thereunder and any errors or omissions relating thereto (including any loss or claim due to any action or inaction taken by the issuer of any Letter of Credit or Lender) (and for this purpose any charges to Lender by any issuer of Letters of Credit shall be conclusive as to their appropriateness and may be charged to the Loan Account), or any other matter, cause or thing whatsoever occurred, done, omitted or suffered to be done by Lender relating to any Loan Party or the Obligations (except any such amounts sustained or incurred as the result of the gross negligence or willful misconduct of such Released Parties, as finally determined by a court of competent jurisdiction). Notwithstanding any provision in this Agreement to the contrary, this Section 6.3 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans.
 
7.
EVENTS OF DEFAULT AND REMEDIES.
 
7.1          Events of Default. The occurrence of any of the following events shall constitute an “Event of Default”:
 
(a)        if any warranty, representation, statement, report or certificate made or delivered to Lender by or on behalf of any Loan Party Obligor or any Other Obligor is untrue or misleading in any material respect or, to the extent already qualified by materiality, in any respect;
 
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(b)         if any Loan Party Obligor or any Other Obligor fails to pay to Lender, (i) when due, any principal or interest payment required under this Agreement or any other Loan Document, or (ii) within three (3) Business Days when due, any other monetary Obligation;
 
(c)           if any Loan Party or any Other Obligor breaches any covenant or obligation contained in:
 
(i)         Sections 4.1, 4.6, 4.7, 5.3, 5.4, 5.5, 5.6, 5.8, 5.9, 5.10, 5.11, 5.13, 5.14, 5.15, 5.21, 5.22, 5.23, 5.24, 5.25, 5.27, 5.28, 8.1, 8.5, 8.12, 9, 10.7 or 10.13 of this Agreement; or
 
(ii)        any other Section of this Agreement or any other Loan Document (to the extent such breach is not otherwise embodied in any other provision of this Section 7.1 for which a different cure period is specified or which constitutes an immediate Event of Default under this Agreement or the other Loan Documents), which is not cured to Lender’s satisfaction within seven (7) days after the earlier to occur of (A) the date upon which any officer or director of any Loan Party Obligor knew of such breach, or (B) the date upon which written notice thereof is given to Borrower by Lender, provided that such cure period shall not apply in the case of any breach which is not capable of being cured within such seven day period;
 
(d)         if one or more judgments aggregating in excess of $250,000 is obtained against any Loan Party Obligor or any Other Obligor (except to the extent fully covered (other than to the extent of customary deductibles) by insurance pursuant to which the insurer has not denied coverage) which remains unstayed for more than ten days or is enforced;
 
(e)          any default with respect to any Indebtedness in excess of $100,000 (other than the Obligations) of any Loan Party Obligor or any Other Obligor if (i) such default shall consist of the failure to pay such Indebtedness when due, whether by acceleration or otherwise, or (ii) the effect of such default is to permit the holder, with or without notice or lapse of time or both, to accelerate the maturity of any such Indebtedness or to cause such Indebtedness to become due prior to the stated maturity thereof;
 
(f)           the dissolution, death, termination of existence, insolvency or business failure or suspension or cessation of business as usual of any Loan Party Obligor or any Other Obligor which is an entity (or of any general partner of any Loan Party or any Other Obligor if it is a partnership);
 
(g)         if any Loan Party Obligor or any Other Obligor shall apply for or consent to the appointment of a receiver, trustee, custodian or liquidator of it or any of its properties, admit in writing its inability to pay its debts as they mature, make a general assignment for the benefit of creditors, be adjudicated as bankrupt or insolvent or be the subject of an order for relief under Title 11 of the United States Code or under any bankruptcy or insolvency law of a foreign jurisdiction, or file a voluntary petition in bankruptcy, or a petition or an answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law, or take or permit to be taken any action in furtherance of or for the purpose of effecting any of the foregoing;
 
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(h)        the commencement of an involuntary case or other proceeding against any Loan Party Obligor or any Other Obligor seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar applicable law or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, which is not discharged or dismissed within sixty days, or if an order for relief is entered against any Loan Party Obligor or any Other Obligor under any bankruptcy, insolvency or other similar applicable law as now or hereafter in effect;
 
(i)          the actual or attempted revocation or termination of, or limitation or denial of liability under, any guaranty of any of the Obligations;
 
(j)         if any Loan Party Obligor or Other Obligor makes any payment on account of any Indebtedness or obligation which has been contractually subordinated to the Obligations other than payments which are not prohibited by the applicable subordination provisions pertaining thereto, or if any Person who has subordinated such Indebtedness or obligations attempts to limit or terminate any applicable subordination provisions pertaining thereto;
 
(k)        if there is any actual indictment of any Loan Party Obligor, any Loan Party Obligor’s officers, any Other Obligor or any Other Obligor’s officers under any criminal statute or commencement of criminal proceedings against any such Person;
 
(l)            if a Change of Control shall occur;
 
(m)          the occurrence of a Material Adverse Effect;
 
(n)          if any Lien purported to be created by any Loan Document shall cease to be a valid perfected first priority Lien (subject only to any priority accorded by law to Permitted Liens) on any Accounts or, with respect to other Collateral, a material portion thereof, or any Loan Party Obligor or any Other Obligor shall assert in writing that any Lien purported to be created by any Loan Document is not a valid perfected first priority Lien (subject only to any priority accorded by law to Permitted Liens) on the assets or properties purported to be covered thereby;
 
(o)          if any of the Loan Documents shall cease to be in full force and effect (other than as a result of the discharge thereof in accordance with the terms thereof or by written agreement of all parties thereto) or any Loan Party Obligor shall deny the enforceability of any provision thereof;
 
(p)          if  (A) the outstanding balance of all Revolving Loans and the Letter of Credit Balance exceeds, at any time, the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base, or (B) any of the Loan Limits for Revolving Loans are, at any time, exceeded; or
 
(q)        (i) an ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party or any Subsidiary under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $100,000, (ii) the existence of any Lien under Section 430(k) or Section 6321 of the Code or Section 303(k) or Section 4068 of ERISA on any assets of a Loan Party, or (iii) a Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $10,000.

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7.2         Remedies with Respect to Lending Commitments/Acceleration/Etc. Upon the occurrence of an Event of Default, Lender may, in Lender’s sole discretion, (i) terminate all or any portion of its obligations to lend to or extend credit to Borrower under this Agreement or any other Loan Document, without prior notice to any Loan Party Obligor, (ii) demand payment in full of all or any portion of the Obligations (whether or not payable on demand prior to such Event of Default), or (iii) take any and all other and further actions and avail itself of any and all rights and remedies available to Lender under this Agreement, any other Loan Document, under law or in equity. Notwithstanding the foregoing sentence, upon the occurrence of any Event of Default described in Section 7.1(g) or Section 7.1(h), without notice, demand or other action by Lender all of the Obligations shall immediately become due and payable whether or not payable on demand prior to such Event of Default.
 
7.3          Remedies with Respect to Collateral .Without limiting any rights or remedies Lender may have pursuant to this Agreement, the other Loan Documents, under applicable law or otherwise, upon the occurrence and during the continuation of an Event of Default:
 
(a)          Any and All Remedies.  Lender may take any and all actions and avail itself of any and all rights and remedies available to Lender under this Agreement, any other Loan Document, under law or in equity (including all rights of a secured creditor under the UCC), and the rights and remedies herein and therein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law or otherwise.
 
(b)        Collections; Modifications of Terms. Lender may but shall be under no obligation to (i) notify all appropriate parties that the Collateral, or any part thereof, has been assigned to Lender; (ii) demand, sue for, collect and give receipts for and take all necessary or desirable steps to collect any Collateral or Proceeds in its or any Loan Party Obligor’s name, and apply any such collections against the Obligations as Lender may elect; (iii) take control of any Collateral and any cash and non-cash Proceeds of any Collateral; (iv) enforce, compromise, extend, renew, settle or discharge any rights or benefits of each Loan Party Obligor with respect to or in and to any Collateral, or deal with the Collateral as Lender may deem advisable; and (v) make any compromises, exchanges, substitutions or surrenders of Collateral as Lender deems necessary or proper in its reasonable discretion, including extending the time of payment, permitting payment in installments, or otherwise modifying the terms or rights relating to any of the Collateral, all of which may be effected without notice to, consent of, or any other action of any Loan Party Obligor and without otherwise discharging or affecting the Obligations, the Collateral or the security interests granted to Lender under this Agreement or any other Loan Document.
 
(c)         Insurance.  Lender may file proofs of loss and claim with respect to any of the Collateral with the appropriate insurer, and may endorse in its own and each Loan Party Obligor’s name any checks or drafts constituting Proceeds of insurance. Any Proceeds of insurance received by Lender may be applied by Lender against payment of all or any portion of the Obligations as Lender may elect in its reasonable discretion.
 
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(d)         Possession and Assembly of Collateral. Lender may take possession of the Collateral and, without removal, render each Loan Party Obligor’s Equipment unusable. Upon Lender’s request, each Loan Party Obligor shall assemble the Collateral and make it available to Lender at a place or places to be designated by Lender.
 
(e)          Set-off. Lender may and without any notice to, consent of or any other action by any Loan Party Obligor (such notice, consent or other action being expressly waived), set-off or apply (i) any and all deposits (general or special, time or demand, provisional or final) at any time held by or for the account of Lender or any Affiliate of Lender, and (ii) any Indebtedness at any time owing by Lender or any Affiliate of Lender or any Participant in the Loans to or for the credit or the account of any Loan Party Obligor, to the repayment of the Obligations irrespective of whether any demand for payment of the Obligations has been made.
 
(f)            Disposition of Collateral.
 
(i)         Lender may, without demand, advertising or notice, all of which each Loan Party Obligor hereby waives (except as the same may be required by the UCC or other applicable law and is not waivable under the UCC or such other applicable law), at any time or times in one or more public or private sales or other dispositions, for cash, on credit or otherwise, at such prices and upon such terms as determined by Lender (provided such price and terms are commercially reasonable within the meaning of the UCC to the extent such sale or other disposition is subject to the UCC requirements that such sale or other disposition must be commercially reasonable), (A) sell, lease, license or otherwise dispose of any and all Collateral, or (B) deliver and grant options to a third party to purchase, lease, license or otherwise dispose of any and all Collateral. Lender may sell, lease, license or otherwise dispose of any Collateral in its then-present condition or following any preparation or processing deemed necessary by Lender in its reasonable discretion.  To the extent permitted by applicable law, Lender may be the purchaser at any such public or private sale or other disposition of Collateral, and in such case Lender may make payment of all or any portion of the purchase price therefor by the application of all or any portion of the Obligations due to Lender to the purchase price payable in connection with such sale or disposition. Lender may, if it deems it reasonable, postpone or adjourn any public sale of any Collateral from time to time by an announcement at the time and place of the sale to be so postponed or adjourned without being required to give a new notice of sale or disposition, provided, however, that Lender shall provide the applicable Loan Party Obligor with written notice of the time and place of such postponed or adjourned sale. Each Loan Party Obligor hereby acknowledges and agrees that Lender’s compliance with any requirements of applicable law in connection with a sale, lease, license or other disposition of Collateral will not be considered to adversely affect the commercial reasonableness of any sale, lease, license or other disposition of such Collateral.
 
(ii)        Each Loan Party Obligor shall remain liable for all amounts of the Obligations remaining unpaid as a result of any deficiency of the Proceeds of the sale, lease, license or other disposition of Collateral after such Proceeds are applied to the Obligations as provided in this Agreement.
 
(iii)       Lender may sell, lease, license or otherwise dispose of the Collateral without giving any warranties and may specifically disclaim any and all warranties, including warranties of title, possession, merchantability and fitness for a particular purpose. Each Loan Party Obligor hereby acknowledges and agrees that Lender’s disclaimer of any and all warranties in connection with a sale, lease, license or other disposition of Collateral will not be considered to adversely affect the commercial reasonableness of any such disposition of the Collateral. If Lender sells, leases, licenses or otherwise disposes of any of the Collateral on credit, Borrower will be credited only with payments actually made in cash by the recipient of such Collateral and received by Lender and applied to the Obligations. If any Person fails to pay for Collateral acquired pursuant this Section 7.3(f) on credit, Lender may re-offer the Collateral for sale, lease, license or other disposition.
 
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(g)           Investment Property; Voting and Other Rights; Irrevocable Proxy.
 
(i)          All rights of each Loan Party Obligor to exercise any of the voting and other consensual rights which it would otherwise be entitled to exercise in accordance with the terms hereof with respect to any Investment Property, and to receive any dividends, payments, and other distributions which it would otherwise be authorized to receive and retain in accordance with the terms hereof with respect to any Investment Property, shall immediately, at the election of Lender (without requiring any notice) cease, and all such rights shall thereupon become vested solely in Lender, and Lender (personally or through an agent) shall thereupon be solely authorized and empowered, without notice, to (a) transfer and register in its name, or in the name of its nominee, the whole or any part of the Investment Property, it being acknowledged by each Loan Party Obligor that any such transfer and registration may be effected by Lender through its irrevocable appointment as attorney-in-fact pursuant to Section 7.3(g)(ii) and Section 4.4 of this Agreement, (b) exchange certificates and/or instruments representing or evidencing Investment Property for certificates and/or instruments of smaller or larger denominations, (c) exercise the voting and all other rights as a holder with respect to all or any portion of the Investment Property (including all economic rights, all control rights, authority and powers, and all status rights of each Loan Party Obligor as a member or as a shareholder (as applicable) of the Issuer), (d) collect and receive all dividends and other payments and distributions made thereon, (e) notify the parties obligated on any Investment Property to make payment to Lender of any amounts due or to become due thereunder, (f) endorse instruments in the name of each Loan Party Obligor to allow collection of any Investment Property, (g) enforce collection of any of the Investment Property by suit or otherwise, and surrender, release, or exchange all or any part thereof, or compromise or renew for any period (whether or not longer than the original period) any liabilities of any nature of any Person with respect thereto, (h) consummate any sales of Investment Property or exercise any other rights as set forth in Section 7.3(f) hereof, (i) otherwise act with respect to the Investment Property as though Lender was the outright owner thereof, and (j) exercise any other rights or remedies Lender may have under the other Loan Documents, the UCC, other applicable law, or otherwise.
 
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(ii)       EACH LOAN PARTY OBLIGOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS LENDER AS ITS PROXY AND ATTORNEY-IN-FACT FOR SUCH LOAN PARTY OBLIGOR WITH RESPECT TO ALL OF EACH SUCH LOAN PARTY OBLIGOR’S INVESTMENT PROPERTY WITH THE RIGHT, DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, WITHOUT NOTICE, TO TAKE ANY OF THE FOLLOWING ACTIONS: (A) TRANSFER AND REGISTER IN LENDER’S NAME, OR IN THE NAME OF ITS NOMINEE, THE WHOLE OR ANY PART OF THE INVESTMENT PROPERTY, (B) VOTE THE PLEDGED EQUITY, WITH FULL POWER OF SUBSTITUTION TO DO SO, (C) RECEIVE AND COLLECT ANY DIVIDEND OR ANY OTHER PAYMENT OR DISTRIBUTION IN RESPECT OF, OR IN EXCHANGE FOR, THE INVESTMENT PROPERTY OR ANY PORTION THEREOF, TO GIVE FULL DISCHARGE FOR THE SAME AND TO INDORSE ANY INSTRUMENT MADE PAYABLE TO ANY LOAN PARTY OBLIGOR FOR THE SAME, (D) EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES, AND REMEDIES (INCLUDING ALL ECONOMIC RIGHT’S, ALL CONTROL RIGHTS, AUTHORITY AND POWERS, AND ALL STATUS RIGHTS OF EACH LOAN PARTY OBLIGOR AS A MEMBER OR AS A SHAREHOLDER (AS APPLICABLE) OF THE ISSUER) TO WHICH A HOLDER OF THE PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING, WITH RESPECT TO THE PLEDGED EQUITY, GIVING OR WITHHOLDING WRITTEN CONSENTS OF MEMBERS OR SHAREHOLDERS, CALLING SPECIAL MEETINGS OF MEMBERS OR SHAREHOLDERS, AND VOTING AT SUCH MEETINGS), AND (E) TAKE ANY ACTION AND TO EXECUTE ANY INSTRUMENT WHICH LENDER MAY DEEM NECESSARY OR ADVISABLE TO ACCOMPLISH THE PURPOSES OF THIS AGREEMENT. THE APPOINTMENT OF LENDER AS PROXY AND ATTORNEY-IN-FACT IS COUPLED WITH AN INTEREST AND SHALL BE VALID AND IRREVOCABLE   UNTIL (X) ALL OF THE OBLIGATIONS HAVE BEEN INDEFEASIBLY PAID IN FULL IN CASH IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND (Y) LENDER HAS NO FURTHER OBLIGATIONS UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (IT BEING UNDERSTOOD AND AGREED THAT SUCH OBLIGATIONS WILL BE AUTOMATICALLY REINSTATED IF AT ANY TIME PAYMENT, IN WHOLE OR IN PART, OF ANY OF THE OBLIGATIONS IS RESCINDED OR MUST OTHERWISE BE RESTORED OR RETURNED BY LENDER FOR ANY REASON WHATSOEVER, INCLUDING AS A PREFERENCE, FRAUDULENT CONVEYANCE, OR OTHERWISE UNDER ANY BANKRUPTCY, INSOLVENCY, OR SIMILAR LAW, ALL AS THOUGH SUCH PAYMENT HAD NOT BEEN MADE; IT BEING FURTHER UNDERSTOOD THAT IN THE EVENT PAYMENT OF ALL OR ANY PART OF THE OBLIGATIONS IS RESCINDED OR MUST BE RESTORED OR RETURNED, ALL REASONABLE OUT-OF-POCKET COSTS AND EXPENSES (INCLUDING ALL REASONABLE ATTORNEYS’ FEES AND DISBURSEMENTS) INCURRED BY LENDER IN DEFENDING AND ENFORCING SUCH REINSTATEMENT SHALL HEREBY BE DEEMED TO BE INCLUDED AS A PART OF THE OBLIGATIONS). SUCH APPOINTMENT OF LENDER AS PROXY AND AS ATTORNEY-IN-FACT SHALL BE VALID AND IRREVOCABLE AS PROVIDED HEREIN NOTWITHSTANDING ANY LIMITATIONS TO THE CONTRARY SET FORTH IN ANY ORGANIC DOCUMENTS OF ANY LOAN PARTY OBLIGOR, ANY ISSUER, OR OTHERWISE.
 
(iii)        In order to further effect the foregoing transfer of rights in favor of Lender, during the continuance of an Event of Default, each Loan Party Obligor hereby authorizes and instructs each Issuer of Investment Property pledged by such Loan Party Obligor to comply with any instruction received by such Issuer from Lender without any other or further instruction from such Loan Party Obligor, and each Loan Party Obligor acknowledges and agrees that each Issuer shall be fully protected in so complying, and to pay any dividends, distributions, or other payments with respect to any of the Investment Property directly to Lender.
 
(iv)       Upon exercise of the proxy set forth herein, all prior proxies given by any Loan Party Obligor with respect to any of the Pledged Equity or other Investment Property, as applicable (other than to Lender), are hereby revoked, and no subsequent proxies (other than to Lender) will be given with respect to any of the Pledged Equity or any of the other Investment Property, as applicable, unless Lender otherwise subsequently agrees in writing. Lender, as proxy, will be empowered and may exercise the irrevocable proxy to vote the Pledged Equity and the other Investment Property at any and all times during the existence of an Event of Default, including at any meeting of shareholders or members, as the case may be, however called, and at any adjournment thereof, or in any action by written consent, and may waive any notice otherwise required in connection therewith. To the fullest extent permitted by applicable law, Lender shall have no agency, fiduciary, or other implied duties to any Loan Party Obligor, any Issuer, any Loan Party, or any other Person when acting in its capacity as such proxy or attorney-in-fact. Each Loan Party Obligor hereby waives and releases any claims that it may otherwise have against Lender with respect to any breach, or alleged breach, of any such agency, fiduciary, or other duty.
 
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(v)        Any transfer to Lender or its nominee, or registration in the name of Lender or its nominee, of the whole or any part of the Investment Property shall be made solely for purposes of effectuating voting or other consensual rights with respect to the Investment Property in accordance with the terms of this Agreement and is not intended to effectuate any transfer of ownership of any of the Investment Property. Notwithstanding the delivery by Lender of any instruction to any Issuer or any exercise by Lender of an irrevocable proxy or otherwise, Lender shall not be deemed the owner of, or assume any obligations or any liabilities whatsoever of the owner or holder of, any Investment Property unless and until Lender expressly accepts such obligations in a duly authorized and executed writing and agrees in writing to become bound by the applicable Organic Documents or otherwise becomes the owner thereof under applicable law (including through a sale as described in Section 7.3(f) hereof). The execution and delivery of this Agreement shall not subject Lender to, or transfer or pass to Lender, or in any way affect or modify, the liability of any Loan Party Obligor under the Organic Documents of any Issuer or any related agreements, documents, or instruments or otherwise. In no event shall the execution and delivery of this Agreement by Lender, or the exercise by Lender of any rights hereunder or assigned hereby, constitute an assumption of any liability or obligation whatsoever of any Loan Party Obligor to, under, or in connection with any of the Organic Documents of any Issuer or any related agreements, documents, or instruments or otherwise.
 
(h)           Election of Remedies. Lender shall have the right in Lender’s sole discretion to determine which rights, security, Liens or remedies Lender may at any time pursue, foreclose upon, relinquish, subordinate, modify or take any other action with respect to, without in any way impairing, modifying or affecting any of Lender’s other rights, security, Liens or remedies with respect to such Property, or any of Lender’s rights or remedies under this Agreement or any other Loan Document.
 
(i)         Lender’s Obligations.  Each Loan Party Obligor agrees that Lender shall not have any obligation to preserve rights to any Collateral against prior parties or to marshal any Collateral of any kind for the benefit of any other creditor of any Loan Party Obligor or any other Person. Lender shall not be responsible to any Loan Party Obligor or any other Person for loss or damage resulting from Lender’s failure to enforce its Liens or collect any Collateral or Proceeds or any monies due or to become due under the Obligations or any other liability or obligation of any Loan Party Obligor to Lender.
 
(j)         Waiver of Rights by Loan Party Obligors. Except as otherwise expressly provided for in this Agreement or by non-waivable applicable law, each Loan Party Obligor waives: (a) presentment, demand and protest and notice of presentment, dishonor, notice of intent to accelerate, notice of acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which any Loan Party Obligor may in any way be liable, and hereby ratifies and confirms whatever Lender may do in this regard, (b) to the extent permitted by applicable law, all rights to notice and a hearing prior to Lender’s taking possession or control of, or to Lender’s replevy, attachment or levy upon, the Collateral or any bond or security which might be required by any court prior to allowing Lender to exercise any of its remedies and (c) the benefit of all valuation, appraisal, marshalling and exemption laws.
 
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7.4          Curative Equity
 
(a)           Subject to the limitations set forth in clauses (d) and (e) below, Loan Party Obligors may cure (and shall be deemed to have cured) an Event of Default pursuant to Section 7.1(c)(i) arising out of a breach of the financial covenants set forth in Schedule F (the “Specified Financial Covenants”) if they receive the cash proceeds of an investment of Curative Equity on or before the date that is ten (10) Business Days after the date that is the earlier to occur of (i) the date on which the Compliance Certificate is delivered to Lender in respect of the Covenant Compliance Period with respect to which any such breach occurred (the “Specified Covenant Compliance Period”), and (ii) the date on which the Compliance Certificate is required to be delivered to Lender pursuant to Section 5.15(c) in respect of the Specified Covenant Compliance Period (such earlier date, the “Financial Statement Delivery Date”); provided, that Loan Party Obligors’ right to so cure an Event of Default shall be contingent on their timely delivery of such Compliance Certificate and financial statements for the Specified Covenant Compliance Period as required under Section 5.15.
 
(b)          In connection with a cure of an Event of Default under this 7.4, on or before the Financial Statement Delivery Date for the Specified Covenant Compliance Period, Loan Party Obligors shall deliver to Lender a certification of the principal financial officer of Administrative Borrower which contains, or Loan Party Obligors shall include in the Compliance Certificate for the Specified Covenant Compliance Period:  (i) an indication that Loan Party Obligors will receive proceeds of Curative Equity for the Specified Covenant Compliance Period and a statement setting forth the anticipated amount of such proceeds, (ii) a calculation of the financial results or prospective financial results of Loan Party Obligors for the Specified Covenant Compliance Period (including for such purposes the proceeds of the Curative Equity (broken out separately) as deemed EBITDA as if received on such date), which shall confirm that on a pro forma basis after taking into account the receipt of the Curative Equity proceeds, Loan Party Obligors would have been or will be in compliance with the Specified Financial Covenants for the Specified Covenant Compliance Period, and (iii) a certification that any amount of the cash proceeds of the Curative Equity in excess of the amount that is sufficient to cause Loan Party Obligors to be in compliance with the Specified Financial Covenants for the Specified Covenant Compliance Period shall not be included in the calculation of EBITDA for any fiscal quarter.
 
(c)          Loan Party Obligors shall promptly notify Lender of its receipt of any proceeds of Curative Equity (and shall immediately apply the full amount of the cash proceeds of the equity investment made by Parent to the payment of the Obligations in the manner specified in Section 4.2).
 
(d)         Any investment of Curative Equity shall be in immediately available funds and shall be in an amount that is sufficient to cause Loan Party Obligors to be in compliance with the Specified Financial Covenants for the Specified Covenant Compliance Period, calculated for such purpose as if such amount of Curative Equity were additional EBITDA as at such date, and such amount shall not be included in the calculation of EBITDA in any subsequent Covenant Compliance Period.
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(e)          Notwithstanding anything to the contrary contained herein, regardless of whether an investment of Curative Equity is made prior to the applicable Financial Statement Delivery Date, Loan Party Obligors’ rights under this Section 7.4 may (i) be exercised not more than three (3) times during the term of this Agreement, (ii) not be exercised more than one (1) time in any twelve (12) fiscal month period, and (iii) not be exercised if the amount of the proposed investment of Curative Equity exceeds the $2,000,000.  Regardless of whether an investment of Curative Equity is made prior to the applicable Financial Statement Delivery Date, any amount of Curative Equity that is in excess of the amount sufficient to cause Loan Party Obligors to be in compliance with all of the Specified Financial Covenants as at such date shall not constitute Curative Equity (but shall be required to be used to prepay the Obligations in accordance with Section 4.2).
 
(f)           If Loan Party Obligors have (i) delivered a certification or a Compliance Certificate conforming to the requirements of Section 7.4(b), and (ii) received proceeds of an investment of Curative Equity in immediately available funds on or before the deadline set forth in Section 7.4(a) and in an amount that is sufficient to cause Loan Party Obligors to be in compliance with the Specified Financial Covenants for the Specified Covenant Compliance Period, any Event of Default that occurs or has occurred and is continuing as a result of a breach of the Specified Financial Covenants for the Specified Covenant Compliance Period shall be deemed cured with no further action required by the Lender.  Prior to satisfaction of the foregoing requirements of this Section 7.4(f), any Event of Default that occurs or has occurred as a result of a breach of the Specified Financial Covenants shall be deemed to be continuing and, as a result, the Lender shall have no obligation to make additional Loans or otherwise extend additional credit hereunder.  In the event Loan Party Obligors do not cure all financial covenant violations as provided in this Section 7.4, the existing Event of Default shall continue unless waived in writing by the Lender in accordance herewith.
 
(g)         To the extent that Curative Equity is received and included in the calculation of the Specified Financial Covenants as deemed EBITDA for any fiscal quarter pursuant to this Section 7.4, such Curative Equity shall be deemed to be EBITDA for purposes of determining compliance with the Specified Financial Covenants for subsequent periods that include such fiscal quarter.  Curative Equity shall be disregarded for purposes of determining EBITDA for any pricing, financial covenant based conditions or any baskets with respect to the covenants contained in this Agreement.  In addition, notwithstanding any mandatory prepayment of Obligations pursuant to Section 4.2 (which, for avoidance of doubt, as of the Closing Date, there are none), any Obligations so prepaid shall be deemed to remain outstanding for purposes of determining pro forma or actual compliance with the Specified Financial Covenants or for determining any pricing, financial covenant based conditions or baskets with respect to the covenants contained in this Agreement, in each case in the Specified Covenant Compliance Period or subsequent periods that include such fiscal quarter.
 
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8.
LOAN GUARANTY.
 
8.1          Guaranty. Each Loan Party Obligor hereby agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to Lender, the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the Obligations and all costs and expenses, including all court costs and attorneys’ and paralegals’ fees (including allocated costs of in-house counsel and paralegals) and expenses paid or incurred by Lender in endeavoring to collect all or any part of the Obligations from, or in prosecuting any action against, Borrower, any Loan Party Obligor or any Other Obligor of all or any part of the Obligations (and such costs and expenses paid or incurred shall be deemed to be included in the Obligations). Each Loan Party Obligor further agrees that the Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal. All terms of this Loan Guaranty apply to and may be enforced by or on behalf of any branch or Affiliate of Lender that extended any portion of the Obligations.
 
8.2        Guaranty of Payment. This Loan Guaranty is a guaranty of payment and not of collection. Each Loan Party Obligor waives any right to require Lender to sue or otherwise take action against Borrower, any other Loan Party Obligor, any Other Obligor, or any other Person obligated for all or any part of the Obligations, or otherwise to enforce its payment against any Collateral securing all or any part of the Obligations.
 
8.3          No Discharge or Diminishment of Loan Guaranty.
 
(a)         Except as otherwise expressly provided for herein, the obligations of each Loan Party Obligor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of all of the Obligations), including: (i) any claim of waiver, release, extension, renewal, settlement, surrender, alteration, or compromise of any of the Obligations, by operation of law or otherwise; (ii) any change in the existence, structure or ownership of Borrower or any Obligor; (iii) any insolvency, bankruptcy, reorganization or other similar proceeding affecting Borrower or any Obligor, or their assets or any resulting release or discharge of any obligation of Borrower or any Obligor; or (iv) the existence of any claim, setoff or other rights which any Loan Party Obligor may have at any time against Borrower, any Obligor, Lender, or any other Person, whether in connection herewith or in any unrelated transactions.
 
(b)        The obligations of each Loan Party Obligor hereunder are not subject to any defense or setoff, counterclaim, recoupment, or termination whatsoever by reason of the invalidity, illegality, or unenforceability of any of the Obligations or otherwise, or any provision of applicable law or regulation purporting to prohibit payment by Borrower or any Obligor, of the Obligations or any part thereof.
 
(c)           Further, the obligations of any Loan Party Obligor hereunder are not discharged or impaired or otherwise affected by: (i) the failure of Lender to assert any claim or demand or to enforce any remedy with respect to all or any part of the Obligations; (ii) any waiver or modification of or supplement to any provision of any agreement relating to the Obligations; (iii) any release, non-perfection, or invalidity of any indirect or direct security for all or any part of the Obligations or all or any part of any obligations of any Obligor; (iv) any action or failure to act by Lender with respect to any Collateral; or (v) any default, failure or delay, willful or otherwise, in the payment or performance of any of the Obligations, or any other circumstance, act, omission or delay that might in any manner or to any extent vary the risk of such Loan Party Obligor or that would otherwise operate as a discharge of any Loan Party Obligor as a matter of law or equity (other than the indefeasible payment in full in cash of all of the Obligations).
 
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8.4          Defenses Waived . To the fullest extent permitted by applicable law, each Loan Party Obligor hereby waives any defense based on or arising out of any defense of any Loan Party Obligor or the unenforceability of all or any part of the Obligations from any cause, or the cessation from any cause of the liability of any Loan Party Obligor, other than the payment in full in cash of all of the Obligations. Without limiting the generality of the foregoing, each Loan Party Obligor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against Borrower, any Obligor, any other Person or any Collateral.  Each Loan Party Obligor confirms that it is not a surety under any state law and shall not raise any such law as a defense to its obligations hereunder. Lender may, at its election, foreclose on any Collateral held by it by one or more judicial or nonjudicial sales, accept an assignment of any such Collateral in lieu of foreclosure or otherwise act or fail to act with respect to any Collateral, compromise or adjust any part of the Obligations, make any other accommodation with Borrower or any Obligor or exercise any other right or remedy available to it against Borrower, any Obligor or any Collateral, without affecting or impairing in any way the liability of any Loan Party Obligor under this Loan Guaranty except to the extent the Obligations have been fully and indefeasibly paid in cash. To the fullest extent permitted by applicable law, each Loan Party Obligor waives any defense arising out of any such election even though that election may operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Loan Party Obligor against Borrower or any Obligor or any security.
 
8.5        Rights of Subrogation . No Loan Party Obligor will assert any right, claim or cause of action, including any claim of subrogation, contribution or indemnification that it has against Borrower or any Obligor, or any Collateral, until the Termination Date.
 
8.6        Reinstatement; Stay of Acceleration. If at any time any payment of any portion of the Obligations is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, or reorganization of Borrower or any other Person, or otherwise, each Loan Party Obligor’s obligations under this Loan Guaranty with respect to that payment shall be reinstated at such time as though the payment had not been made and whether or not Lender is in possession of this Loan Guaranty. If acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of Borrower, all such amounts otherwise subject to acceleration under the terms of any agreement relating to the Obligations shall nonetheless be payable by the Loan Party Obligors forthwith on demand by Lender. This Section 8.6 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans.
 
8.7          Information . Each Loan Party Obligor assumes all responsibility for being and keeping itself informed of Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that each Loan Party Obligor assumes and incurs under this Loan Guaranty, and agrees that Lender shall not have any duty to advise any Loan Party Obligor of information known to it regarding those circumstances or risks.
 
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8.8         Termination . To the maximum extent permitted by law, each Loan Party Obligor hereby waives any right to revoke this Guaranty as to future Obligations. If such a revocation is effective notwithstanding the foregoing waiver, each Loan Party Obligor acknowledges and agrees that (a) no such revocation shall be effective until written notice thereof has been received by Lender, (b) no such revocation shall apply to any Obligations in existence on the date of receipt by Lender of such written notice (including any subsequent continuation, extension, or renewal thereof, or change in the interest rate, payment terms, or other terms and conditions thereof), (c) no such revocation shall apply to any Obligations made or created after such date to the extent made or created pursuant to a legally binding commitment of Lender, (d) no payment by Borrower, any other Loan Party Obligor, or from any other source, prior to the date of Lender’s receipt of written notice of such revocation, shall reduce the maximum obligation of any Loan Party Obligor hereunder, and (e) any payment, by Borrower or from any source other than a Loan Party Obligor which has made such a revocation, made subsequent to the date of such revocation, shall first be applied to that portion of the Obligations as to which the revocation is effective and which are not, therefore, guarantied hereunder, and to the extent so applied shall not reduce the maximum obligation of any Loan Party Obligor hereunder.
 
8.9         Maximum Liability . The provisions of this Loan 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 Loan Party Obligor under this Loan Guaranty would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of such Loan Party Obligor’s liability under this Loan Guaranty, then, notwithstanding any other provision of this Loan Guaranty to the contrary, the amount of such liability shall, without any further action by the Loan Party Obligors 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 Loan Party Obligor’s “Maximum Liability”). This Section 8.9 with respect to the Maximum Liability of each Loan Party Obligor is intended solely to preserve the rights of Lender to the maximum extent not subject to avoidance under applicable law, and no Loan Party Obligor nor any other Person shall have any right or claim under this Section 8.9 with respect to such Maximum Liability, except to the extent necessary so that the obligations of any Loan Party Obligor hereunder shall not be rendered voidable under applicable law. Each Loan Party Obligor agrees that the Obligations may at any time and from time to time exceed the Maximum Liability of each Loan Party Obligor without impairing this Loan Guaranty or affecting the rights and remedies of Lender hereunder, provided that nothing in this sentence shall be construed to increase any Loan Party Obligor’s obligations hereunder beyond its Maximum Liability.
 
8.10        Contribution.
 
(a)          To the extent that any Loan Party Obligor shall make a payment under this Loan Guaranty of all or any of the Obligations (other than Loans made to that Loan Party Obligor, if applicable, for which it is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments then previously or concurrently made by any other Loan Party Obligor, exceeds the amount that such Loan Party Obligor would otherwise have paid if each Loan Party Obligor had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Loan “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each Loan Party Obligor as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of all Lender’s lending commitments, such Loan Party Obligor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each Loan Party Obligor Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.
 
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(b)          As of any date of determination, the “Allocable Amount” of any Loan Party Obligor shall be equal to the maximum amount of the claim that could then be recovered from such Loan Party Obligor under this Loan Guaranty without rendering such claim voidable or avoidable under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.
 
(c)         This Loan Guaranty is intended only to define the relative rights of Loan Party Obligors and nothing set forth in this Loan Guaranty is intended to or shall impair the obligations of Loan Party Obligors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including this Loan Guaranty.  Nothing contained in this Loan Guaranty shall limit the liability of any Loan Party Obligor to pay the Loans made directly or indirectly to that Loan Party Obligor, if applicable, and accrued interest, fees and expenses with respect thereto for which such Loan Party Obligor shall be primarily liable.
 
8.11       Liability Cumulative . The liability of each Loan Party Obligor under this Section 8 is in addition to and shall be cumulative with all liabilities of each Loan Party Obligor to Lender under this Agreement and the other Loan Documents to which such Loan Party Obligor is a party or in respect of any obligations or liabilities of the other Loan Party Obligors, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.
 
8.12        Subordination . Each of the Persons composing Loan Party Obligors hereby agrees that, after the occurrence and during the continuance of any Default or Event of Default, the payment of any amounts due with respect to the Indebtedness or other liabilities owing by any Loan Party Obligor to any other Loan Party Obligor is hereby subordinated to the prior payment in full in cash of the Obligations and the termination of all of Lender’s lending commitments under this Agreement.  Each Loan Party Obligor hereby agrees that after the occurrence and during the continuance of any Default or Event of Default, such Loan Party Obligor will not demand, sue for or otherwise attempt to collect any indebtedness or any such liability of any other Loan Party Obligor owing to such Loan Party Obligor until the Obligations shall have been paid in full in cash and the termination of all of Lender’s lending commitments under this Agreement.  If, notwithstanding the foregoing sentence, such Loan Party Obligor shall collect, enforce or receive any amounts in respect of such indebtedness or liabilities, such amounts shall be collected, enforced and received by such Loan Party Obligor as trustee for Lender, and such Loan Party Obligor shall deliver any such amounts to Lender for application to the Obligations in accordance with Section 4.2.
 
9.
PAYMENTS FREE OF TAXES; OBLIGATION TO WITHHOLD; PAYMENTS ON ACCOUNT OF TAXES.
 
(a)          Any and all payments by or on account of any obligation of the Loan Party Obligors hereunder or under any other Loan Document shall to the extent permitted by applicable laws be made free and clear of and without reduction or withholding for any Taxes. If, however, applicable laws require the Loan Party Obligors to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such laws as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.
 
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(b)          If any Loan Party Obligor shall be required by applicable law to withhold or deduct any Taxes from any payment, then (A) such Loan Party Obligor shall withhold or make such deductions as are required based upon the information and documentation it has received pursuant to subsection (e) below, (B) such Loan Party Obligor shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the applicable law, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the Loan Party Obligors shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) Lender or other Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made. Upon request by Lender or other Recipient, Borrower shall deliver to Lender or such other Recipient, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment of Taxes, a copy of any return required by applicable law to report such payment or other evidence of such payment reasonably satisfactory to Lender or such other Recipient, as the case may be.
 
(c)          Without limiting the provisions of subsections (a) and (b) above, the Loan Party Obligors shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.
 
(d)          Without limiting the provisions of subsections (a) through (c) above, each Loan Party Obligor shall, and does hereby, on a joint and several basis, indemnify Lender and each other Recipient (and their respective directors, officers, employees, affiliates and agents) and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes and Other Taxes (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 9) paid or incurred by Lender or any other Recipient on account of, or in connection with any Loan Document or a breach by a Loan Party Obligor thereof, and any penalties, interest and related expenses and losses arising therefrom or with respect thereto (including the reasonable fees, charges and disbursements of any counsel or other tax advisor for Lender or any other Recipient (or their respective directors, officers, employees, affiliates, and agents)), whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of any such payment or liability delivered to Borrower shall be conclusive absent manifest error. Notwithstanding any provision in this Agreement to the contrary, this Section 9 shall remain operative even after the Termination Date and shall survive the payment in full of all of the Loans.
 
(e)           Lender shall deliver to Borrower and each Participant shall deliver to the applicable Lender granting the participation, at the time or times prescribed by applicable laws, such properly completed and executed documentation prescribed by applicable laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit Borrower or Lender granting a participation, as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) Lender’s or Participant’s entitlement to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Recipient by the Loan Party Obligors pursuant to this Agreement or otherwise to establish such Recipient’s status for withholding tax purposes in the applicable jurisdiction; provided each Recipient shall only be required to deliver such documentation as it may legally provide.
 
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Without limiting the generality of the foregoing, if a Borrower is resident for tax purposes in the United States:
 
(i)          if Lender (or any Participant) is a “United States person” within the meaning of Section 7701(a)(30) of the Code, it shall deliver to Borrower (or Lender if it has granted a participation to such Participant) an executed original of Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable law or reasonably requested by Borrower (or Lender if it has granted a participation to such Participant) as will enable Borrower (or Lender if it has granted a participation to such Participant) as the case may be, to determine whether or not Lender (or such Participant) is subject to backup withholding or information reporting requirements under the Code; or
 
(ii)          if Lender (or any Participant) is not a “United States person” within the meaning of Section 770(a)(30) of the Code (a “Non-U.S. Recipient”), it  shall deliver to Borrower (and Lender in case the Non-U.S. Recipient is a Participant) on or prior to the date on which such Non-U.S. Person becomes a party to this Agreement or a Participant (and from time to time thereafter upon the reasonable request of Borrower or Lender granting the participation but only if such Non-U.S. Recipient is legally entitled to do so), whichever of the following is applicable: (I) executed originals of Internal Revenue Service Form W-8BEN-E or successor form claiming eligibility for benefits of an income tax treaty to which the United States is a party; (II) executed originals of Internal Revenue Service Form W-8ECI; (III) executed originals of Internal Revenue Service Form W-8IMY and all required supporting documentation; (IV) each Non-U.S. Recipient claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code shall provide (x) a certificate to the effect that such Non-U.S. Recipient is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) executed originals of Internal Revenue Service Form W-8BEN; and/or (V) executed originals of any other form prescribed by applicable law (including FATCA) as a basis for claiming exemption from or a reduction in United States Federal withholding tax together with such supplementary documentation as may be prescribed by applicable law to permit Borrower or Lender granting a participation to determine the withholding or deduction required to be made. Each Non-U.S. Recipient shall promptly notify Borrower (or any Lender granting a participation if the Non-U.S. Recipient is a Participant) of any change in circumstances which would modify or render invalid any claimed exemption or reduction.
 
(f)         If a payment made to Lender or other Recipient under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if Lender or such other Recipient were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Lender or such other Recipient shall deliver to Borrower at the time or times prescribed by law and at such time or times reasonably requested by Borrower such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrower as may be necessary for Borrower to comply with its obligations under FATCA and to determine that Lender has complied with Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.
 
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(g)          If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 9 (including by the payment of additional amounts pursuant to this Section 9), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 9 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
 
10.
GENERAL PROVISIONS.
 
10.1        Notices.
 
(a)           Notice by Approved Electronic Communications.
 
Lender and each of its Affiliates are authorized to transmit, post or otherwise make or communicate, in its sole discretion (but shall not be required to do so), by Approved Electronic Communications in connection with this Agreement or any other Loan Document and the transactions contemplated therein. Lender is hereby authorized to establish procedures to provide access to and to make available or deliver, or to accept, notices, documents and similar items by posting to an electronic platform designated by Lender. All uses of Approved Electronic Communications shall be governed by and subject to, in addition to the terms of this Agreement, the separate terms, conditions and privacy policy posted or referenced in such system (or such terms, conditions and privacy policy as may be updated from time to time, including on such system, such updates not to materially degrade the rights of users under such terms, conditions, and privacy policy) and any related contractual obligations executed by Lender and Loan Party Obligors in connection with the use of such system. None of Lender or any of its Affiliates or related Persons warrants the availability of any electronic platform, and Lender and such Affiliates disclaim all liability for downtime therein. No warranty of any kind is made by Lender or any of its Affiliates or related Persons in connection with any electronic platform with respect to (i) the merchantability of such platform, (ii) the platform’s fitness for a particular purpose, (iii) non-infringement of third-party rights due to the functions or performance of the platform or its use, (iv) the freedom of the platform from viruses or other code defects, or (v) the availability of the platform. Each of Borrower and each other Loan Party Obligor executing this Agreement agrees that Lender has no responsibility for maintaining or providing any client-side equipment, software, services or any testing required in connection with any Approved Electronic Communication or otherwise required for any Approved Electronic Communication.
 
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No Approved Electronic Communications shall be denied legal effect merely because it is made electronically. Approved Electronic Communications that are not readily capable of bearing either a signature or a reproduction of a signature may be signed, and shall be deemed signed, by attaching to, or logically associating with such Approved Electronic Communication, an E-Signature, upon which Lender and the Loan Party Obligors may rely and assume the authenticity thereof. Each Approved Electronic Communication containing a signature, a reproduction of a signature or an E-Signature shall, for all intents and purposes, have the same effect and weight as a signed paper original. Each E-Signature shall be deemed sufficient to satisfy any requirement for a “signature” and each Approved Electronic Communication shall be deemed sufficient to satisfy any requirement for a “writing,” in each case including pursuant to this Agreement, any other Loan Document, the Uniform Commercial Code, the Federal Electronic Signatures in Global and National Commerce Act (“ESIGN”), State enactments of the Uniform Electronic Transactions Act (and equivalents) and any substantive or procedural law governing such subject matter. Each party or beneficiary hereto agrees not to contest the validity or enforceability of an Approved Electronic Communication or E-Signature under the provisions of any applicable law requiring certain documents to be in writing or signed, provided that nothing herein shall limit such party’s or beneficiary’s right to contest whether an Approved Electronic Communication or E-Signature has been altered after transmission.
 
(b)           All Other Notices.
 
All notices, requests, demands and other communications under or in respect of this Agreement or any transactions hereunder, other than those approved for or required to be delivered by Approved Electronic Communications (including pursuant to Section 10.1(a)), shall be in writing and shall be personally delivered or mailed (by prepaid registered or certified mail, return receipt requested), sent by prepaid recognized overnight courier service, or sent by email to the applicable party at its address or email address indicated below,
 
If to Lender:
 
Santander Bank, N.A.
Mail Code:
75 State Street
Boston, MA 02109
Attention: Mr. Benjamin Martinez
Email: Benjamin.martinez@Santander.us
 
with a copy to (provided such copy shall not constitute notice hereunder):
 
Riemer & Braunstein LLP
100 Cambridge Street, 22nd Floor
Boston, Massachusetts 02114
Attention:  Kevin Murtagh, Esquire
Email: Kmurtagh@Riemerlaw.com
 
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If to Administrative Borrower:

Janel Group, Inc.
80 Eighth Avenue
New York, New York  10011
Attention: Mr. Vincent A.Verde
Email: vverde@janelcorp.com

with a copy to (provided such copy shall not constitute notice hereunder):

Neuberger Quinn Gielen Rubin Gibber P.A.
One South Street, 27th Floor
Baltimore, Maryland 21202
Attention: Hillel Tender, Esquire
Email: HT@NQGRG.com

or, as to each party, at such other address as shall be designated by such party in a written notice to the other party delivered as aforesaid. All such notices, requests, demands and other communications shall be deemed given (a) when personally delivered, (b) three Business Days after being deposited in the mails with postage prepaid (by registered or certified mail, return receipt requested), (c) one Business Day after being delivered to the overnight courier service, if prepaid and sent overnight delivery, addressed as aforesaid and with all charges prepaid or billed to the account of the sender, or (d) when sent by email transmission to an email address designated by such addressee and the sender receives a confirmation of transmission.
 
10.2       Severability . If any provision of this Agreement or any other Loan Document is held invalid or unenforceable, either in its entirety or by virtue of its scope or application to given circumstances, such provision shall thereupon be deemed modified only to the extent necessary to render same valid, or not applicable to given circumstances, or excised from this Agreement or such other Loan Document, as the situation may require, and this Agreement and the other Loan Documents shall be construed and enforced as if such provision had been included herein as so modified in scope or application, or had not been included herein or therein, as the case may be.
 
10.3      Integration. This Agreement and the other Loan Documents represent the final, entire and complete agreement between each Loan Party Obligor and thereto and Lender and supersede all prior and contemporaneous negotiations, oral representations and agreements, all of which are merged and integrated into this Agreement. THERE ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES THAT ARE NOT SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
 
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10.4       Waivers. The failure of Lender at any time or times to require any Loan Party Obligor to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of Lender later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of Lender or its agents or employees, but only by a specific written waiver signed by an authorized officer of Lender and delivered to Borrower. Once an Event of Default shall have occurred, it shall be deemed to continue to exist and not be cured or waived unless specifically waived in writing by an authorized officer of Lender and delivered to Borrower. Each Loan Party Obligor waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, Instrument, Account, General Intangible, Document, Chattel Paper, Investment Property or guaranty at any time held by Lender on which such Loan Party Obligor is or may in any way be liable, and notice of any action taken by Lender, unless expressly required by this Agreement, and notice of acceptance hereof.
 
10.5       Amendment. This Agreement may not be amended or modified except in a writing executed by Borrower, the other Loan Party Obligors party hereto (to the extent such amendment is directly adverse to such Loan Party Obligor), and Lender.
 
10.6       Time of Essence . Time is of the essence in the performance by each Loan Party Obligor of each and every obligation under this Agreement and the other Loan Documents.
 
10.7       Expenses, Fee and Costs Reimbursement. Borrower hereby agrees to promptly pay: (i) all reasonable out of pocket costs and expenses of Lender (including the out of pocket fees, costs and expenses of legal counsel to, and appraisers, accountants, consultants and other professionals and advisors retained by or on behalf of Lender) in connection with: (A) all loan proposals and commitments pertaining to the transactions contemplated hereby (whether or not such transactions are consummated), (B) the examination, review, due diligence investigation, documentation, negotiation, and closing of the transactions contemplated by the Loan Documents (whether or not such transactions are consummated), (C) the creation, perfection and maintenance of Liens pursuant to the Loan Documents, (D) the performance by Lender of its rights and remedies under the Loan Documents, including enforcing or defending the Loan Documents, irrespective of whether suit is brought, or in taking any action in respect of Collateral, (E) the administration of the Loans (including usual and customary fees for wire transfers and other transfers or payments received by Lender on account of any of the Obligations) and Loan Documents, (F) any amendments, modifications, consents and waivers to or under any and all Loan Documents (whether or not such amendments, modifications, consents or waivers are consummated), (G) any periodic public record searches conducted by or at the request of Lender (including title investigations and public records searches), pending litigation and tax lien searches and searches of applicable corporate, limited liability company, partnership and related records concerning the continued existence, organization and good standing of certain Persons, (H) audits, inspections and examination (including field examinations) up to the amount of any limitation in this Agreement, (I) protecting, storing, insuring, handling, maintaining, auditing, examining, valuing or selling any Collateral, (J) any litigation, dispute, suit or proceeding relating to any Loan Document, and (K) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all of the Loan Documents (it being agreed that such costs and expenses may include the costs and expenses of workout consultants, investment bankers, financial consultants, appraisers, valuation firms and other professionals and advisors retained by or on behalf of Lender); and (ii) without limitation of the preceding clause (i), all out of pocket costs and expenses of Lender in connection with Lender’s reservation of funds in anticipation of the funding of the initial Loans to be made hereunder. Any fees, costs and expenses owing by Borrower or other Loan Party Obligor hereunder shall be due and payable within three days after written demand therefor.
 
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10.8      Benefit of Agreement; Assignability. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower, each other Loan Party Obligor and Lender; provided that, neither Borrower nor any other Loan Party Obligor may assign or transfer any of its rights under this Agreement without the prior written consent of Lender, and any prohibited assignment shall be void. No consent by Lender to any assignment shall release any Loan Party Obligor from its liability for any of the Obligations. Lender shall have the right to assign all or any of its rights and obligations under the Loan Documents to one or more other Persons, and each Loan Party Obligor agrees to execute all agreements, instruments and documents requested by Lender in connection with each such assignments. Notwithstanding any provision of this Agreement or any other Loan Document to the contrary, Lender may at any time pledge or grant a security interest in all or any portion of its rights under this Agreement and the other Loan Documents to secure obligations of Lender, including any pledge or grant to secure obligations to a Federal Reserve Bank.
 
10.9       Recordation of Assignment. In respect of any assignment of all or any portion of Lender’s interest in this Agreement and any other Loan Document at any time and from time to time, the following provisions shall be applicable:
 
(a)           Borrower, or any agent appointed by Borrower, shall maintain a register (the “Register”) in which there shall be recorded the name and address of each Person holding any Loans or any commitment to lend hereunder, and the principal amount and stated interest payable to such Person hereunder or committed by such Person under such Person’s lending commitment. Borrower hereby irrevocably appoints Lender (or any assignee of Lender) as Borrower’s non-fiduciary agent for the purpose of maintaining the Register.
 
(b)         In connection with any negotiation, transfer or assignment as aforesaid, the transferor/assignor shall deliver to Lender (or such assignee then maintaining the Register) an assignment and assumption agreement executed by the transferor/assignor and the transferee/assignee, setting forth the specifics of the subject transaction, including the amount and nature of the Obligations or lending commitments being transferred or assigned (and being assumed, as applicable), and the proposed effective date of such transfer or assignment and the related assumption (if applicable).
 
(c)         Subject to receipt of any required tax forms reasonably required by Lender, such Person shall record the subject transfer, assignment and assumption in the Register. Anything contained in this Agreement or other Loan Document to the contrary notwithstanding, no negotiation, transfer or assignment shall be effective until it is recorded in the Register pursuant to this Section 10.9(c). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower and each Lender shall treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement and the other Loan Documents. The Register shall be available for inspection by Borrower and each Lender at any reasonable time and from time to time upon reasonable prior notice.
 
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10.10     Participations. Anything in this Agreement or any other Loan Document to the contrary notwithstanding, Lender may), at any time and from time to time, without in any manner affecting or impairing the validity of any Obligations, sell to one or more Persons participating interests in its Loans, commitments or other interests hereunder or under any other Loan Document (any such Person, a “Participant”). In the event of a sale by Lender of a participating interest to a Participant, (a) such Lender’s obligations hereunder and under the other Loan Documents shall remain unchanged for all purposes, (b) Borrower and Lender shall continue to deal solely and directly with each other in connection with Lender’s rights and obligations hereunder and under the other Loan Documents, and (c) all amounts payable by Borrower shall be determined as if Lender had not sold such participation and shall be paid directly to Lender, provided, however, a Participant shall be entitled to the benefits of Section 9 as if it were a Lender if Borrower is notified of the Participation and the Participant complies with Section 9(e). Borrower agrees that if amounts outstanding under this Agreement or any other Loan Document are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts owing under this Agreement and the other Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided that such right of set-off shall not be exercised without the prior written consent of Lender and shall be subject to the obligation of each Participant to share with Lender its share thereof. Borrower also agrees that each Participant shall be entitled to the benefits of Section 10.9 as if it were Lender. Notwithstanding the granting of any such participating interests: (i) Borrower shall look solely to Lender for all purposes of this Agreement, the Loan Documents and the transactions contemplated hereby, (ii) Borrower shall at all times have the right to rely upon any amendments, waivers or consents signed by Lender as being binding upon all of the Participants, and (iii) all communications in respect of this Agreement and such transactions shall remain solely between Borrower and Lender (exclusive of Participants) hereunder. Lender granting a participation hereunder shall maintain, as a non-fiduciary agent of Borrower, a register as to the participations granted and transferred under this Section containing the same information specified in Section 10.9 on the Register as if the each Participant were a Lender to the extent required to cause the Loans to be in registered form for the purposes of Sections 163(F), 165(J), 871, 881, and 4701 of the Code.
 
10.11     Headings; Construction. Section and subsection headings are used in this Agreement only for convenience and do not affect the meanings of the provisions that they precede.
 
10.12     USA PATRIOT Act Notification. Lender hereby notifies the Loan Party Obligors that, pursuant to the requirements of the Patriot Act, it may be required to obtain, verify and record certain information and documentation that identifies such Person, which information may include the name and address of each such Person and such other information that will allow Lender to identify such Persons in accordance with the Patriot Act.
 
10.13     Confidentiality and Publicity
 
(a)          Loan Party Obligors agree to submit to Lender, and Lender reserves the right to review and approve, all materials that Loan Obligor Parties or any of their Affiliates prepares and which are intended for public disclosure or disclosure to a third party not otherwise permitted under the immediately preceding sentence, that contain Lender’s name or describe or refer to any Loan Document, any of the terms thereof or any of the transactions contemplated thereby.  Loan Obligor Parties shall not, and shall not permit any of their respective Affiliates to, use Lenders’ name (or the name of any of Lenders’ Affiliates) in connection with any of its business operations, including advertising, marketing or press releases or such other similar purposes, without Lender’s prior written consent, not to be unreasonably withheld, conditioned or delayed.
 
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(b)         Lender shall exercise commercially reasonable efforts to maintain in confidence, in accordance with its customary procedures for handling confidential information, all Confidential Information, provided, that Lender and its Affiliates shall have the right to disclose Confidential Information to the following Persons (and with respect to Persons covered under clauses (i), (ii), (iii), (iv), (v) and (vi), if it directs such Persons not to disclose such Confidential Information as required under this Agreement):
 
(i)          such Person’s Affiliates;
 
(ii)         such Person’s or such Person’s Affiliates’ lenders, funding or financing sources and rating agencies;
 
(iii)       such Person’s or such Person’s Affiliates’ directors, officers, trustees, partners, members, managers, employees, agents, advisors, representatives, attorneys, equity owners, professional consultants and portfolio management services;
 
(iv)        any successor or assign of any Lender;
 
(v)        any Person to whom any Lender offers to sell, assign or transfer any Loan or any part thereof or any interest or participation therein;
 
(vi)        any Person that provides statistical analysis and/or information services to Lender or its Affiliates;
 
(vii)       any Person (A) to the extent required by applicable law, (B) in response to any subpoena or other legal process or informal investigative demand, (C) in connection with any litigation, or (D) in connection with the actual or potential exercise or enforcement of any right or remedy under any Loan Document; and
 
(viii)      any Person to the extent required by any subordination or intercreditor agreement relating to the Obligations.
 
(c)          Notwithstanding any provision of any Loan Document, Borrower and each other Loan Party Obligors consent to the publication by Lender of a tombstone, press releases or similar advertising material relating to the financing transactions contemplated by this Agreement, and Lender reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements.
 
(d)       The obligations of Lender and its Affiliates under this Section 10.13 shall supersede and replace any other confidentiality obligations agreed to by Lender or its Affiliates.
 
10.14     Counterparts; Fax/Email Signatures. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same agreement. This Agreement may be executed by signatures delivered by facsimile or electronic mail, each of which shall be fully binding on the signing party.
 
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10.15  GOVERNING LAW. THIS AGREEMENT, ALONG WITH ALL OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED OTHERWISE IN SUCH OTHER LOAN DOCUMENT), SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR CONNECTED TO OR WITH THIS AGREEMENT AND ALL SUCH OTHER LOAN DOCUMENTS WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAW).
 
10.16     CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.  THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH ANY LOAN PARTY OBLIGOR IS A PARTY SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, PROVIDED, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH LOAN PARTY OBLIGOR AND LENDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 10.16.  TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH LOAN PARTY OBLIGOR AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
 
10.17     SUPPLEMENTAL AGREEMENTS.
 
(a)         References to Loan Agreement.  Each Loan Party Obligor hereby acknowledges and agrees that any and all references to the “Loan Agreement” or “Agreement” set forth in any one or more of the Existing Loan Agreement, or the other Loan Documents and any documents, instruments or agreements executed in connection therewith or related thereto shall be deemed to refer to the Existing Loan Agreement, as amended and restated hereby, and as the same may be further amended and/or restated from time to time.
 
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(b)          References in Loan Documents.  Each Loan Party Obligor hereby acknowledges and agrees that any and all references contained in the Existing Loan Agreement to any of the other Loan Documents or any other documents, instruments or agreements executed in connection therewith or related thereto shall be deemed to refer to such documents, instruments and agreements as the same have been and may hereafter be amended and/or restated from time to time.
 
(c)           Representations and Warranties. Each Loan Party Obligor hereby repeats and restates all of the representations, warranties, and covenants set forth in the Existing Loan Agreement and certifies that all such representations, warranties, and covenants are true and accurate as of the date hereof.
 
(d)          Additional Representations and Warranties.  As an inducement to Lender to enter into this Agreement, each Loan Party Obligor represents and warrants to Lender that as of the date hereof:
 
(i)         The Existing Loan Agreement, as amended and restated hereby, is and remains in full force and effect and evidences the valid and binding obligation of each Loan Party Obligor enforceable in accordance with its terms;
 
(ii)         The Existing Loan Agreement, as amended and restated hereby, and all of the terms thereof are hereby ratified, confirmed and approved; and
 
(iii)       There exist no defenses, set-offs or counterclaims which would reduce or diminish any Loan Party Obligor’s liability to Lender under the Existing Loan Agreement, as amended and restated hereby.
 
(e)           No Novation.
 
(i)          The parties hereto acknowledge and agree that (i) this Agreement and the other Loan Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation of the Obligations under the Existing Loan Agreement or the other Loan Documents as in effect prior to the Closing Date, (ii) the Obligations under the Existing Loan Agreement and such other Loan Documents are in all respects continuing, in each case as amended and restated hereby and which are in all respects hereinafter subject to the terms herein, and for avoidance of doubt, all Letters of Credit issued pursuant to the Existing Loan  Agreement shall be deemed to be issued hereunder, and (iii) the Liens and security interests as granted under the applicable Loan Documents securing payment of such Obligations are in all respects continuing and in full force and effect pursuant to the terms therein and are reaffirmed hereby.  The Loan Party Obligors are each absolutely and unconditionally indebted under the Existing Loan Agreement and the other Loan Documents (in each case as amended and restated by this Agreement) and that all Obligations (as defined therein) constitute Obligations hereunder pursuant to the terms herein, and none of them have any offsets, defenses, or counterclaims under the Existing Loan Agreement or the other Loan Documents immediately prior to the Closing Date, and, to the extent that any such offsets, defenses or counterclaims exist or may have existed immediately prior to the Closing Date, the Loan Party Obligors each hereby WAIVES and RELEASES the same.
 
(ii)        The parties hereto acknowledge and agree that this Agreement is an amendment and restatement limited as written and, except as expressly provided herein or in any other Loan Document, is not a consent to any other amendment, restatement or waiver or other modification, whether or not similar and, except as expressly provided herein or in any other Loan Document, all terms and conditions of the Loan Documents remain in full force and effect unless otherwise specifically amended hereby or by any other Loan Document.
       
[Signature page follows]
 
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date first set forth above.
 
 
Borrowers:
   
 
JANEL GROUP, INC., a New York corporation
     
 
By:
/s/
 
 
Name:
Dominique Schulte
 
Title:
Vice President
     
 
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC, a Texas limited liability company
     
 
By:
/s/
 
 
Name:
Dominique Schulte
 
Title:
Vice President
     
 
ELFS BROKERAGE, LLC, a Texas limited liability company
     
 
By:
/s/
 
 
Name:
Dominique Schulte
 
Title:
Vice President
     
 
Loan Party Obligors:
     
 
JANEL CORPORATION, a Nevada corporation
     
 
By:
/s/
 
 
Name:
Dominique Schulte
 
Title:
President
     
 
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC, an Oklahoma limited liability company
     
 
By:
/s/
 
 
Name:
 
 
Title:
 
     
 
Lender:
 
 
SANTANDER BANK, N.A.
     
 
By:
/s/
 
 
Name:
Jennifer Baydian
 
Title:
Senior Vice President

Signature Page to Amended and Restated Loan and Security Agreement

Schedule A
 
Description of Certain Terms
   
 
1.           Loan Limits for Revolving Loans and Letters of Credit:
   
 
a)    Maximum Revolving Facility Amount:
 
$30,000,000
 
(b)    Accounts Advance Rate:
 
85%
 
(c)    Foreign Accounts Sublimit:
 
$4,500,000
 
(d)    Letter of Credit Limit:
 
$3,000,000
 
2.             Interest Rates:
   
 
(a)    Base Rate Loans:
 
Base Rate (for avoidance of doubt, the applicable margin is found in the definition of “Base Rate”).
 
(b)   LIBOR Rate Loans:
 
LIBOR Rate plus LIBOR Rate Margin
 
3.             Maximum Days re Eligible Accounts:
   
 
(a)    Maximum days:
 
More than ninety (90) days from invoice date and sixty (60) days from due date
       
 
4.             Maturity Date:
 
September 21, 2026

Schedule A-1
Schedule B
 
Definitions
 
Unless otherwise defined herein, the following terms are used herein as defined in the UCC: Account, Account Debtor, Certificated Security, Chattel Paper, Commercial Tort Claim, Deposit Account, Document, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Health-Care-Insurance Receivable, Instrument, Inventory, Letter-of-Credit Right, Proceeds, Supporting Obligations and Tangible Chattel Paper.
 
As used in this Agreement, the following terms have the following meanings:
 
“Accounts Advance Rate” means the percentage set forth in Section 1(b) of Schedule A.
 
“Acquisition Seller Financing” means any unsecured Indebtedness incurred in connection with an acquisition made by Parent, or any wholly-owned Subsidiary of Parent, and subordinated on terms and conditions satisfactory to the Lender; provided, however, that the aggregate outstanding principal amount of such Indebtedness shall not exceed $6,386,000.00 at any time.  For the avoidance of doubt, the aggregate amount of Acquisition Seller Financing (after giving effect to the ELFS Notes) as of the Closing Date is $6,386,000.00, as more particularly described on Schedule H to this Agreement.
 
“Advance Rates” means the Accounts Advance Rate.
 
“Affiliate” means, with respect to any Person, any other Person in control of, controlled by, or under common control with the first Person, and any other Person who has a substantial interest, direct or indirect, in the first Person or any of its Affiliates, including any officer or director of the first Person or any of its Affiliates. For the purpose of this definition, a “substantial interest” shall mean the direct or indirect legal or beneficial ownership of more than ten (10%) percent of any class of equity or similar interest.
 
“Agent” means a third-party domestic or foreign, non-vessel operating common carrier or freight forwarder with whom a Loan Party Obligor contracts to perform certain services for such Loan Party related to the delivery of freight.
 
“Agreement” and “this Agreement” has the meaning set forth in the preamble to this Agreement.
 
“Allocable Amount” has the meaning set forth in Section 8.10.
 
“Antibodies” means Antibodies Incorporated, a California corporation, successor by merger with AB Merger Sub, Inc., a California corporation.  Antibodies is a wholly owned Subsidiary of Parent.
   
Schedule B-1
“Antibodies Guaranty” means, collectively, (i) that certain Commercial Guaranty dated as of November 1, 2019 pursuant to which Parent has guaranteed Indebtedness (as defined therein) of Antibodies to First Northern Bank of Dixon as evidenced by that certain Promissory Note of the same date in the principal amount of $500,000, (ii) that certain Commercial Guaranty dated as of November 18, 2019 pursuant to which Parent has guaranteed Indebtedness (as defined therein) of Antibodies to First Northern Bank of Dixon as evidenced by that certain Promissory Note of the same date in the principal amount of $2,235,000, (iii) that certain Commercial Guaranty dated as of November 18, 2019 pursuant to which Parent has guaranteed Indebtedness (as defined therein) of Antibodies to First Northern Bank of Dixon as evidenced by that certain Promissory Note of the same date in the principal amount of $125,400, and (iv) that certain Commercial Guaranty dated as of June 19, 2020 pursuant to which Parent has guaranteed Indebtedness (as defined therein) of Antibodies to First Northern Bank of Dixon as evidenced by that certain Promissory Note of the same date in the principal amount of $60,000; provided, however, that the aggregate outstanding principal amount of such guaranteed indebtedness shall not exceed $2,920,400 at any time.
 
“Approved Electronic Communication” means each notice, demand, communication, information, document and other material transmitted, posted or otherwise made or communicated by e-mail, facsimile, or electronic service, whether owned, operated or hosted by Lender, any of its Affiliates or any other Person, that any party is obligated to, or otherwise chooses to, provide to Lender pursuant to this Agreement or any other Loan Document, including any financial statement, financial and other report, notice, request, certificate and other information or material; provided that Approved Electronic Communications shall not include any notice, demand, communication, information, document or other material that Lender specifically instructs a Person to deliver in physical form.
 
“Atlantic” means Atlantic Customs Brokers, Inc., a Connecticut corporation, which corporation, prior to the Closing Date merged in and to Janel, with Janel being the surviving corporation.
 
“Atlantic Acquisition” means the acquisition by the Janel of the Atlantic Shares in accordance with the provisions of this Agreement and the Atlantic Acquisition Documentation.
 
“Atlantic Acquisition Documentation” means that certain Stock Purchase Agreement dated as of July 22, 2020 by and among the Janel, as purchaser and Peter Schlesinger as “Seller” together with any other documents executed and delivered in connection therewith.
 
“Atlantic Deferred Purchase Price Payment” means any of the scheduled payments in connection with the Atlantic Acquisition required to be made in accordance with the provisions of Section 3.1.3, 3.1.4, and 3.1.5 of the Stock Purchase Agreement referred to in the definition of Atlantic Acquisition Documents.
 
“Atlantic Shares” has the same meaning as the term “Shares” as defined in the Atlantic Acquisition Documentation.
 
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.

Schedule B-2
“Aves” means Aves Labs, Inc., an Oregon corporation.
 
“Aves Acquisition” means the acquisition by the Parent of the Aves Shares in accordance with the provisions of this Agreement and the Aves Acquisition Documentation.
 
“Aves Acquisition Documentation” means that certain Stock Purchase Agreement dated as of February 28, 2018 by and among the Parent, as “Purchaser” and each of Fazilah Adam and Gary Ciment, collectively, as “Sellers” together with any other documents executed and delivered in connection therewith.
 
“Aves Guaranty” means that certain Guaranty dated December 4, 2020, pursuant to which Parent shall guaranty the obligations of Aves to Sally Ann Hed Dahlquist pursuant to a promissory note of same date in the original principal amount of $1,850,000.
 
“Aves Shares” means the terms “Shares” as defined in the Aves Acquisition Documentation.
 
“Aves Subordination Agreement” means that certain Subordination Agreement dated December 4, 2020 by and between the Lender and Sally Ann Hed Dahlquist, and acknowledged by Parent.
 
“Bankruptcy Code” means the United States Bankruptcy Code (11 U.S.C. § 101 et seq.).
 
“Base Rate” means, for any date of determination, the rate of interest equal to, pursuant to Section 2.9 hereof, either (i) per annum from time to time published in the money rates section of the Wall Street Journal as the “prime rate” then in effect plus the Base Rate Margin ( provided that, if such rate of interest becomes unavailable for any reason, the “Base Rate” for purposes of this clause (i) means the rate of interest per annum announced by Santander Bank, N.A. from time to time as its “prime rate” (such rate is a reference rate only and Santander bank, N.A. may make loans or other extensions of credit at, above or below it), and (ii) the Daily One Month LIBOR plus the LIBOR Rate Margin. Any change in the “prime rate” shall take effect at the opening of business on the effective date of the relevant change.
 
“Base Rate Loan” means, as of any date of determination, the portion of the Revolving Loans outstanding as of such date that bears interest at a rate determined by reference to the Base Rate.
 
“Base Rate Margin” means .50%.
 
“Base Rate Option” has the meaning set forth in Section 2.9.
 
“BBC Reduction Trigger Event” means, as of any date of determination, (i) no Default or Event of Default then exists, and (ii) Excess Availability is greater than $3,000,000; provided however, a BBC Reduction Trigger Event shall cease to exist if (i) a Default or Event of Default shall occur, or (ii) average Excess Availability shall be less than $3,000,000 for a period of twenty (20) consecutive Business Days.
 
Schedule B-3
“Benchmark” means, initially, USD LIBOR; provided that, if a replacement of the Benchmark has occurred pursuant to this Section 2.6(g) titled “Benchmark Replacement Setting”, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
 
“Benchmark Replacement” means, for any Available Tenor:
 
(1)         For purposes of clause (i) of the Section 2.6(g) titled “Benchmark Replacement Setting”, the sum of: (i) Daily Compounded SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of USD LIBOR with a SOFR-based rate having approximately the same length as the interest payment period specified in clause (i) of the Section 2.6(g); and
 
(2)          For purposes of clause (ii) of the Section 2.6(g) titled “Benchmark Replacement Setting”, the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Lender  as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing  market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated or bilateral credit facilities at such time;
 
provided that, if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, if any, the Benchmark Replacement will be deemed to be the Floor, if any, for the purposes hereof and of the other Loan Documents.
 
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including, without limitation, changes to the definitions, as and if applicable, of “Base Rate,” “Business Day” and “Interest Period,”  the timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Lender decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Lender in a manner substantially consistent with market practice (or, if the Lender decides that adoption of any portion of such market practice is not administratively feasible or if the Lender determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Lender decides is reasonably necessary in  connection with the administration of this Agreement and the other Loan Documents).
 
Schedule B-4
“Benchmark Transition Event” means, with respect to any then-current Benchmark other than USD LIBOR, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, (a) at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer  be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
 
“Blocked Account” has the meaning set forth in Section 4.1.
 
“Borrower” has the meaning set forth in the preamble to this Agreement.
 
“Borrowing Base” means (i) the aggregate amount of Eligible Accounts in respect of which clause (vii)(1) of the definition of Eligible Account applies, multiplied by the Accounts Advance Rate plus (ii) Eligible Accounts in respect of which clause (vii)(2) of the definition of Eligible Account applies, multiplied by the Accounts Advance Rate (but in no event to exceed the Foreign Accounts Sublimit) minus (iii) the Letter of Credit Balance minus (iv) all Reserves which Lender has established pursuant to Section 1.2.
 
“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the state of New York, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in United States dollar deposits in the London interbank market.
 
“Capital Expenditures” means as to any Person, all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of such Person, but excluding expenditures made in connection with the acquisition, replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with cash awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced.
 
“Capitalized Lease” means any lease which is or should be capitalized on the balance sheet of the lessee thereunder in accordance with GAAP.
 
“Carrier Contracts” means (i) any contract or agreement of any Loan Party Obligor, or (ii) the general conduct of the Loan Party Obligors’ business (pursuant to general terms and conditions, documents of title or otherwise), with third-party carriers to provide carriage or transportation services by truck, rail, air or other means of physical carriage in connection with Customer Contracts.
 
“Cash Taxes” means, for the applicable period, for the Loan Parries on a consolidated basis, the aggregate of all income taxes of such Persons as determined in accordance with GAAP, to the extent the same are paid in cash.
 
Schedule B-5
“CFC” means a controlled foreign corporation (as such term is defined in the Code).
 
“Change of Control” means that:
 
(a)         any Person or two or more Persons acting in concert, shall have acquired beneficial ownership, directly or indirectly, of equity interests of Parent (or other securities convertible into such equity interests) representing 30% or more of the combined voting power of all equity interests of Parent entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Parent,
 
(b)         any Person or two or more Persons acting in concert, shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Parent or control over the Equity Interests of such Person entitled to vote for members of the Board of Directors of Parent on a fully-diluted basis (and taking into account all such Equity Interests that such Person or group has the right to acquire pursuant to any option right) representing 30% or more of the combined voting power of such Equity Interests,
 
(c)        during any period of 24 consecutive months commencing on or after the Closing Date, the occurrence of a change in the composition of the Board of Directors of Parent such that a majority of the members of such Board of Directors are not Continuing Directors, or
 
(d)         Parent fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party.
 
“Change of Law” has the meaning set forth in Section 1.9.
 
“Closing Date” means September 21, 2021.
 
“CMLTD” means, as of any date of calculation, the scheduled payments of long term Indebtedness (excluding that portion of the Obligations consisting of Revolving Loans), as determined in accordance with GAAP.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Collateral” means all property and interests in property in or upon which a security interest, mortgage, pledge or other Lien is granted pursuant to this Agreement or the other Loan Documents, including all of the property of each Loan Party Obligor described in Section 3.1, other than Excluded Collateral.
 
“Collections” has the meaning set forth in Section 4.1.
 
“Comerica” means Comerica Bank.
 
“Comerica Cash Collateral” means cash in the amount of $840,000 maintained in Designated Deposit Account # x7325 as collateral for the Comerica Letters of Credit.
 
Schedule B-6
“Comerica Letters of Credit” means the letters of credit issued by Comerica for the account of ELFS and ELFS Brokerage and outstanding as of the Closing Date and described in Section  6 of the Disclosure Schedule.
 
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time.
 
“Compliance Certificate” means a compliance certificate substantially in the form of Exhibit F hereto to be signed by the Chief Financial Officer or President of Borrower.
 
“Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of Parent on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was approved, appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors.
 
“Covenant Compliance Period” means the most recently ended quarter in any Fiscal Year.
 
“Confidential Information” means all non-written information designated as confidential and all written information, in each case, received from any Loan Party Obligor, or any of their Affiliates and their employees, officers, directors or advisors relating to the Loan Party Obligors or their operations, other than any such information that becomes generally available to the public or becomes available to Lender from a source other than any Loan Party Obligor or any of their Affiliates and their employees, officers, directors or advisors and that is not known to such recipient to be subject to confidentiality obligations.
 
“Curative Equity” means the net amount of common equity contributions made by equity holders of the Parent in immediately available funds and which is designated “Curative Equity” by Borrowers under Section 7.4 of this Agreement at the time it is contributed.  For the avoidance of doubt, the forgiveness of antecedent debt (whether Indebtedness, trade payables, or otherwise) shall not constitute Curative Equity.
 
“Customer Contracts” means all Material Contracts with customers of a Loan Party Obligor related to providing shipping or similar services to customers, whether acting as a logistics service provider, broker, arranger, freight forwarder or similar capacity, and whether as a stand-alone service or as part of broader service arrangements or logistics support or other circumstances, in which carriage or transportation is or may be provided by any third party carrier.
 
““Daily One Month LIBOR” means, for any date of determination, the rate per annum for United States dollar deposits with a maturity of one (1) month as reported on Reuters Screen LIBOR01 (or any successor page) at approximately 11:00 am London time on such date of determination or, if such day is not a London business day, then on the immediately preceding London business day.  When interest or any fee hereunder is determined in relation to Daily One Month LIBOR, each change in such interest rate or fee shall become effective each Business Day that Lender determines that Daily One Month LIBOR has changed. Notwithstanding the foregoing, if the interest rate determined pursuant to the foregoing provisions is less than the Floor, then the Daily One Month LIBOR shall be the Floor.
 
Schedule B-7
“Daily Compounded SOFR” means, for any day, SOFR, with interest accruing on a compounded daily basis, with the methodology and conventions for this rate (which will include compounding in arrears with a lookback) being established by the Lender in accordance with (i) a methodology and the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “Daily Compounded SOFR”
 
“Debt Service Coverage Ratio” means, for the applicable period, for the Loan Parties and their Subsidiaries on a consolidated basis, the ratio of (i) EBITDA minus Cash Taxes minus distributions and dividends paid minus unfinanced Capital Expenditures minus earn-out payments paid (in each instance, to the extent not previously deducted from the calculation of EBITDA) to (ii) CMLTD plus Interest Expense paid.
 
“Debt Service Coverage Ratio (Borrower Group)” means, means, for the applicable period, for the Borrower and its Subsidiaries on a consolidated basis, the ratio of (i) EBITDA minus Cash Taxes minus distributions and dividends paid minus unfinanced Capital Expenditures minus earn-out payments paid (in each instance, to the extent not previously deducted from the calculation of EBITDA) to (ii) CMLTD plus Interest Expense paid.
 
“Default” means any event which with notice or passage of time, or both, would constitute an Event of Default.
 
“Default Rate” has the meaning set forth in Section 2.1.
 
“Designated Deposit Accounts” means the following deposit accounts maintained by ELFS and ending with the following numbers and identified in Section 3 of the Disclosure Schedule: x4090, x2282, and x7325 (each at Comerica), and x7778 and x8912 (each at Wells Fargo Bank, N.A.).
 
“Dividend Payment Conditions” means, at the date of determination with respect to any specified payment contemplated by Section 5.27(i), that (a) no Default or Event of Default shall exist immediately before and after giving effect to such payment, (b) the Loan Party Obligors shall be in compliance with the financial covenants set forth in Section 5.28 both before and after (calculated on a pro forma basis after giving to such transaction), (c) both before, and after giving effect to such payment on a pro forma basis, Excess Availability is not be less than $1,000,000, (d) Borrower shall have provided Lender with evidence, reasonably satisfactory to Lender, that that all accounts payable are being paid in the ordinary course of Borrower’s business,  and (e) prior to making such payment, Administrative Borrower shall certify to the Lender in writing that the foregoing conditions have and will be satisfied after the making of such payment.
 
“Dollars” or “$”means United States Dollars, lawful currency for the payment of public and private debts.
 
“E-Signature” means the process of attaching to or logically associating with an Approved Electronic Communication an electronic symbol, encryption, digital signature or process (including the name or an abbreviation of the name of the party transmitting the Approved Electronic Communication) with the intent to sign, authenticate or accept such Approved Electronic Communication.
 
Schedule B-8
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to Borrower.
 
“Early Opt-in Election” means the occurrence of:
 
(1) a determination by the Lender that at least five currently outstanding U.S. dollar-denominated syndicated or bilateral credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such credit facilities are identified in the notice to the Borrower described in clause (2) below and are publicly available for review), and
 
(2) the election by the Lender to trigger a fallback from USD LIBOR and the provision by the Lender of written notice of such election to the Borrower.
 
“EBITDA” means, for the applicable period, as applicable pursuant to this Agreement, (1) the Parent and its Subsidiaries on a consolidated basis, and (2) the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) Net Income plus (b) Interest Expense deducted in the calculation of such Net Income plus (c) taxes on income, whether paid, payable or accrued, deducted in the calculation of such Net Income plus (d) depreciation expense deducted in the calculation of such Net Income plus (e) amortization expense deducted in the calculation of such Net Income plus (f) to the extent not capitalized, closing costs and expenses incurred in connection with this Agreement plus (g) stock based compensation expense that is non-cash deducted in the calculation of such Net Income; plus (g) the M&A Addback in an amount not to exceed $500,000 on a trailing four (4) quarter basis.
 
“ELFS” means Expedited Logistics and Freight Services, LLC, a Texas limited liability company.
 
“ELFS Acquisition” means the acquisition by the Janel of the ELFS Interests in accordance with the provisions of this Agreement and the ELFS Acquisition Documentation.
 
“ELFS Acquisition Documentation” means the ELFS Purchase Agreement together with any other documents executed and delivered in connection therewith.
 
“ELFS Brokerage” means ELFS Brokerage, LLC, a Texas limited liability company.
 
“ELFS Cash Cushion Amount” means for the 30 day period commencing as of the Closing Date, the amount of $660,000 which shall be deposited on the Closing Date into Designated Deposit Accounts # x4090 and x2282, maintained at Comerica, the proceeds of which shall be used by the Loan Party to fund working capital needs of ELFS and ELFS Brokerage as contemplated by the ELFS Purchase Agreement.
 
“ELFS Earn-Out Payment” has the same meaning as the term “Earn-Out Payment” as defined in the ELFS Purchase Agreement.
 
Schedule B-9
“ELFS Guaranty” means the guaranty by Parent of the obligations of ELFS and ELFS Brokerage pursuant to the ELFS Notes and the ELFS Purchase Agreement.
 
“ELFS Insurance Premium Refund” means any refunds on insurance premiums attributable to insurance premiums paid by ELFS or ELFS Brokerage prior to the Closing Date, as evidenced by documentation reasonably acceptable to the Lender.
 
“ELFS Interests” has the same meaning as the term “Interests” as defined in the ELFS Purchase Agreement.
 
“ELFS Notes” has the same meaning as the term “Notes” as defined in the ELFS Purchase Agreement.
 
“ELFS OK” means Expedited Logistics and Freight Services, LLC, an Oklahoma limited liability company, and a wholly-owned Subsidiary of ELFS.
 
“ELFS Purchase Agreement” means that certain Membership Interest Purchase Agreement dated September 21, 2021 by and among, Janel, Parent, ELFS, and each of the ELFS Sellers, and as in effect as of the Closing Date.
 
“ELFS Sellers” means each of (i) David W. Flake, (ii) Randall L. Cockrell, (iii) Steven R. Lalumandier, and (iv) Frederick J. Lalumandier.
 
“Eligible Account” means, at any time of determination, an Account owned by Borrower which satisfies the general criteria set forth below and which is otherwise acceptable to Lender in its Permitted Discretion (provided that, Lender may, in its Permitted Discretion, change the general criteria for acceptability of Eligible Accounts and shall notify Borrower of such change promptly thereafter). An Account shall be deemed to meet the current general criteria if:
 
(i)            neither the Account Debtor nor any of its Affiliates is an Affiliate, creditor or supplier of any Loan Party or an Agent;
 
(ii)           it does not remain unpaid more than the number of days after the original invoice date set forth in Section 4(a) of Schedule A;
 
(iii)          the Account Debtor or its Affiliates are not past due the applicable dates referenced in clause (ii) above on more than 40% of all of the Accounts owing to Borrower by such Account Debtor or its Affiliates;
 
(iv)        all Accounts owing by the Account Debtor or its Affiliates do not represent more than 25% of all otherwise Eligible Accounts (provided that Accounts which are deemed to be ineligible solely by reason of this clause (iv) shall be considered Eligible Accounts to the extent of the amount thereof which does not exceed 25% of all otherwise Eligible Accounts);
 
(v)          no covenant, representation or warranty contained in this Agreement or any other Loan Document with respect to such Account (including any of the representations set forth in Section 5.4) has been breached;
 
Schedule B-10
(vi)         the Account is not subject to any contra relationship, counterclaim, dispute or set-off, but such account shall only be ineligible to the extent of such contra relationship, counterclaim, dispute or set-off;
 
(vii)        the Account Debtor’s chief executive office or principal place of business is located (1) in the United States or (2) outside of the United States and such Account is insured pursuant to credit insurance or supported by a letter of credit, in each case, in form, substance and issued by a party satisfactory to Lender (a “Foreign Account”);
 
(viii)      it is absolutely owing to Borrower and does not arise from a sale on a bill-and-hold, guarantied sale, sale-or-return, sale-on-approval, consignment, retainage or any other repurchase or return basis or consist of progress billings;
 
(ix)           Lender shall have verified the Account in a manner satisfactory to Lender;
 
(x)          the Account Debtor is not the United States or any state or political subdivision (or any department, agency or instrumentality thereof), unless Borrower has complied with the Assignment of Claims Act of 1940 (31 U.S.C. 3727) or other applicable similar state or local law in a manner satisfactory to Lender;
 
(xi)          it is at all times subject to Lender’s duly perfected, first priority security interest and to no other Lien that is not a Permitted Lien, and the goods giving rise to such Account (A) were not, at the time of sale, subject to any Lien except Permitted Liens and (B) have been sold by Borrower to the Account Debtor in the ordinary course of Borrower’s business and delivered to and accepted by the Account Debtor, or the services giving rise to such Account have been performed by Borrower and accepted by the Account Debtor in the ordinary course of Borrower’s business;
 
(xii)          the Account is not evidenced by Chattel Paper or an Instrument of any kind and has not been reduced to judgment;
 
(xiii)       the Account Debtor’s total indebtedness to Borrower does not exceed the amount of any credit limit established by Borrower or Lender and the Account Debtor is otherwise deemed to be creditworthy by Lender (provided that, Accounts which are deemed to be ineligible solely by reason of this clause (xiii), shall be considered Eligible Accounts to the extent the amount of such Accounts does not exceed the lower of such credit limits);
 
(xiv)        there are no facts or circumstances existing, or which could reasonably be anticipated to occur, which might result in any adverse change in the Account Debtor’s financial condition or impair or delay the collectability of all or any portion of such Account;
 
(xv)         Lender has been furnished with all documents and other information pertaining to such Account which Lender has requested, or which Borrower is obligated to deliver to Lender, pursuant to this Agreement;
 
(xvi)        Borrower has not made an agreement with the Account Debtor to extend the time of payment thereof beyond the time periods set forth in clause (ii) above;
 
Schedule B-11
(xvii)       Borrower has not posted a surety or other bond in respect of the contract under which such Account arose;
 
(xviii)     the Account Debtor is not subject to any proceeding seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar applicable law;
 
(xix)        the Account does not constitute a Net Agent Account; and
 
(xx)          it has not been deemed ineligible by Lender in its Permitted Discretion.
 
“ERISA” means the Employee Retirement Income Security Act of 1974 and all rules, regulations and orders promulgated thereunder.
 
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with a Loan Party Obligor within the meaning of section 414(b) or (c) of the Code (and sections 414(m) and (o) of the Code for purposes of provisions relating to section 412 of the Code and section 302 of ERISA).
 
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by a Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate or the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; or (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon a Loan Party or any ERISA Affiliate.
 
“Eurocurrency Reserve Requirement” means, for any day as applied to a Loan bearing interest at the LIBOR Rate, the aggregate (without duplication) of the rates (expressed as a decimal rounded upward to the nearest 1/100th of 1%) as determined by Lender of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System of the United States or other Governmental Authority, or any successor thereto, having jurisdiction with respect thereto) prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board) maintained by a member bank of the Federal Reserve System
 
“Event of Default” has the meaning set forth in Section 7.1.

Schedule B-12
“Excess Availability” means the amount, as determined by Lender, calculated at any date, equal to the difference of (A) the lesser of (x) the Maximum Revolving Facility Amount and (y) the Borrowing Base minus (B) the outstanding balance of all Revolving Loans and the Letter of Credit Balance, provided that, if any of the Loan Limits for Revolving Loans is exceeded as of the date of calculation, then Excess Availability shall be zero.
 
“Excluded Collateral” means:
 
(a)          any rights or interest in any contract, agreement, lease, permit, license, or license agreement to which any Loan Party Obligor is a party, if under the terms of such contract, agreement, lease, permit, license, or license agreement, or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of such contract, agreement, lease, permit, license, or license agreement and such prohibition or restriction has not been waived or the consent of the other party to such contract, agreement, lease, permit, license, or license agreement has not been obtained (provided that, (i) the foregoing exclusions of this clause (a) shall in no way be construed (A) to apply to the extent that any described prohibition or restriction is ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the UCC or other applicable law, or (B) to apply to the extent that any consent or waiver has been obtained that would permit Lender’s security interest or lien to attach notwithstanding the prohibition or restriction on the pledge of such contract, agreement, lease, permit, license, or license agreement and (ii) the foregoing exclusions of this clause (a) shall in no way be construed to limit, impair, or otherwise affect any of Lender’s continuing security interests in and liens upon any rights or interests of any Loan Party Obligor in or to (1) monies due or to become due under or in connection with any described contract, agreement, lease, permit, license, license agreement, or equity interests (including, without limitation, any Accounts) or (2) any proceeds from the sale, license, lease, or other dispositions of any such contract, agreement, lease, permit, license, license agreement, or equity interests);
 
(b)        any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark applications under applicable federal law; provided that, upon submission and acceptance by the United States Patent and Trademark Office of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use trademark application shall be considered Collateral;
 
(c)           any right, title, and interest of Parent in the equity interests of INDCO;
 
(d)           any assets of INDCO and its Subsidiaries;
 
(e)         voting equity interests of any CFC, solely to the extent that such equity interests represent more than 65% of the outstanding voting equity interests of such CFC;
 
(f)            deposit accounts identified in Section 3 of the Disclosure Schedule as payroll accounts;
 
(g)           the  ELFS Insurance Premium Refund;
 
(h)           the ELFS Cash Cushion Amount; and
 
Schedule B-13
(i)            the Comerica Cash Collateral.
 
“Excluded Swap Obligations” means, with respect to any Loan Party, any guarantee of any Swap Obligations if, and only to the extent that and for so long as, all or a portion of the guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guarantee 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 Loan Party Obligor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guarantee of such Loan Party or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
 
“Excluded Taxes” means any of the following Taxes imposed on or with respect to Lender or other Recipient or required to be withheld or deducted from a payment to Lender or other Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of Lender, its lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or Taxes imposed as a result of a present connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document or sold or assigned an interest in any Loan or Loan Document); (b) in the case of a Non-U.S. Recipient (as defined in Section 9(e)), U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Non-U.S. Recipient with respect to an applicable interest in a Loan or commitment pursuant to a law in effect on the date on which Non-U.S. Recipient becomes a party to this Agreement or acquires a participation, except in each case to the extent that, pursuant to Section 9 amounts with respect to such Taxes were payable either to such Non-U.S. Recipient assignor (or Lender granting such participation) immediately before such assignment or grant of participation; (c) United States federal withholding Taxes that would not have been imposed but for such Recipient’s failure to comply with Section 9(e) (except where the failure to comply with Section 9(e) was the result of a change in law, ruling, regulation, treaty, directive, or interpretation thereof by a Governmental Authority after the date the Recipient became a party to this Agreement or a Participant); and (d) any U.S. federal withholding Taxes imposed pursuant to FATCA.
 
“Existing Loan Agreement” is defined in the Recitals hereto.
 
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.
 
“Federal Reserve” means the Federal Reserve Bank of New York.
 
Schedule B-14
“First Merchants” means First Merchants Bank.
 
“First Merchants Subordination Agreement” means that certain subordination agreement dated as of the Closing Date by and among Parent, Lender and First Merchants.
 
“Fiscal Year” means the fiscal year of Borrower which ends on September 30 of each year.
 
“Floor” means 0.75%; provided that if the LIBOR Floor Reduction Conditions have been satisfied, Floor shall mean 0.25%.
 
“FMC” has the meaning set forth in Section 5.11.
 
“Funding Losses” has the meaning set forth in Section 2.6.
 
“GAAP” means generally accepted accounting principles in the United States, consistently applied.
 
“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).
 
“Guaranty,” “Guaranteed” or to “Guarantee”, as applied to any Indebtedness, liability or other obligation, means (i) a guaranty, directly or indirectly, in any manner, including by way of endorsement (other than endorsements of negotiable instruments for collection in the ordinary course of business), of any part or all of such Indebtedness, liability or obligation, and (ii) an agreement, contingent or otherwise, and whether or not constituting a guaranty, assuring, or intended to assure, the payment or performance (or payment of damages in the event of non-performance) of any part or all of such Indebtedness, liability or obligation by any means (including, the purchase of securities or obligations, the purchase or sale of property or services, or the supplying of funds).
 
“Guarantor Payment” has the meaning set forth in Section 8.10.
 
“INDCO” means Indco Acquisition Corp., Inc., a Tennessee corporation.
 
Schedule B-15
“Indebtedness” means (without duplication), with respect to any Person, (i) all obligations or liabilities, contingent or otherwise, for borrowed money, (ii) all obligations represented by promissory notes, bonds, debentures or the like, or on which interest charges are customarily paid, (iii) all liabilities secured by any Lien on property owned or acquired, whether or not such liability shall have been assumed, (iv) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (v) all obligations of such Person issued or assumed as the deferred purchase price of property or services (excluding trade payables which are not ninety days past the invoice date incurred in the ordinary course of business, but including the maximum potential amount payable under any earn-out or similar obligations), (vi) all Capitalized Leases of such Person, (vii) all obligations (contingent or otherwise) of such Person as an account party or applicant in respect of letters of credit and/or bankers’ acceptances, or in respect of financial or other hedging obligations, (viii) all equity interests issued by such Person subject to repurchase or redemption at any time on or prior to the final scheduled Maturity Date, other than voluntary repurchases or redemptions that are at the sole option of such Person, (ix) all principal outstanding under any synthetic lease, off-balance sheet loan or similar financing product, and (x) all Guarantees, endorsements (other than for collection in the ordinary course of business) and other contingent obligations in respect of the obligations of others.
 
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party Obligor under any Loan Document and (b) to the extent not otherwise described in clause (a), Other Taxes.
 
“Intellectual Property” means the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks and trademark licenses, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.
 
“Interest Expense” means, for the applicable period, as applicable pursuant to this Agreement, (1) the Parent and its Subsidiaries on a consolidated basis, and (2) the Borrower and its Subsidiaries on a consolidated basis, total interest expense (including interest attributable to Capitalized Leases in accordance with GAAP) and fees with respect to outstanding Indebtedness.
 
“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan), which shall be a Business Day, and ending 1, 2 or 3 months thereafter, provided, however, that (a) if any Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended (subject to clauses (c)-(e) below) to the next succeeding Business Day, (b) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (c) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (d) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2 or 3 months after the date on which the Interest Period began, as applicable, and (e) Borrower may not elect an Interest Period which will end after the Maturity Date.
 
“Investment Property” means the collective reference to (a) all “investment property” as such term is defined in Section 9-102 of the UCC, (b) all “financial assets” as such term is defined in Section 8-102(a)(9) of the UCC, and (c) whether or not constituting “investment property” as so defined, all Pledged Equity.
 
Schedule B-16
“ISDA” means the International Swaps and Derivatives Association, Inc. or any successor thereto.
 
“ISDA Swap Definitions” means the 2006 ISDA Definitions published by ISDA, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by ISDA.
 
“Issuers” means the collective reference to each issuer of Investment Property.
 
“Lender” has the meaning set forth in the preamble to this Agreement.
 
“Letters of Credit” has the meaning set forth in Section 1.1(a).
 
“Letter of Credit Balance” means the sum of (i) the aggregate undrawn face amount of all outstanding Letters of Credit and (ii) all interest, fees and costs due or, in Lender’s estimation, likely to become due in connection therewith.
 
“Letter of Credit Limit” means the amount set forth in Section 1(e) of Schedule A.
 
“LIBOR Deadline” has the meaning specified therefor in Section 2.6.
 
“LIBOR Floor Reduction Conditions” means, as of September 21, 2022, the following conditions have been satisfied, as confirmed  by the Lender: (i) no Default or Event of Default shall then exist; and (ii) each of (x) Minimum Debt Service Coverage Ratio, and (y) Minimum Debt Service Coverage Ratio (Borrower Group) is greater than 1.5 :1.0 for the four (4) quarter period ending June 30, 2022.
 
“LIBOR Notice” means a written notice in the form of Exhibit B.
 
“LIBOR Option” has the meaning specified therefor in Section 2.6.
 
“LIBOR Rate” means (a) the rate per annum as reported on Reuters Screen LIBOR01 page (or any successor page) two Business Days prior to the commencement of the requested Interest Period, for a term, and in an amount, comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrower in accordance with this Agreement (and, if any such rate is below the Floor, the LIBOR Rate shall be deemed to be the Floor), which determination shall be made by Lender and shall be conclusive in the absence of manifest error, divided by (b) 1.00 minus the Eurocurrency Reserve Requirement then in effect.
 
“LIBOR Rate Loan” means, as of any date of determination, the portion of the Revolving Loans outstanding as of such date that bears interest at a rate estimated by reference to the LIBOR Rate.
 
“LIBOR Rate Margin” means 2.25%.
 
Schedule B-17
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement in the nature of a security interest of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.
 
“Loan Account” has the meaning set forth in Section 2.4.
 
“Loan Documents” means, collectively, this Agreement and all notes, guaranties, security agreements, mortgages, certificates, landlord’s agreements, First Merchants Subordination Agreement, and any other subordination agreement, Lock Box and Blocked Account agreements and all other agreements, documents and instruments now or hereafter executed or delivered by Borrower, any Loan Party, or any Other Obligor in connection with, or to evidence the transactions contemplated by, this Agreement.
 
“Loan Guaranty” means Section 8 of this Agreement.
 
“Loan Limits” means, collectively, the Loan Limits for Revolving Loans and Letters of Credit set forth in Section 1 of Schedule A and all other limits on the amount of Loans and Letters of Credit set forth in this Agreement.
 
“Loan Party” means, individually, Parent, Borrower, or any Subsidiary; and “Loan Parties” means, collectively, Parent, Borrower and all Subsidiaries; provided however, excluding INDCO and its Subsidiaries, Aves, and Antibodies, and their respective Subsidiaries, each of which are wholly-owned Subsidiaries of Parent.
 
“Loan Party Obligor” means, individually, Borrower or any Obligor that is a Loan Party and party to this Agreement; and “Loan Party Obligors” means, collectively, Borrower and each Obligor that is a Loan Party and party to this Agreement.
 
“Loans” means, collectively, the Revolving Loans and any term loan.
 
“Lock Box” has the meaning set forth in Section 4.1.
 
“”M&A Addback” means, for any period of calculation, the fees and expenses actually incurred and paid by (i) Loan Parties and their Subsidiaries, and (ii) Borrower and its Subsidiaries, respectively, in connection with acquisitions of assets or equity interests of any Person; provided that the foregoing shall specifically exclude any earn-out payments paid by any Loan Party Obligor during such period. Upon the Lender’s request, Loan Parties shall provide the Lender with reasonable documentation to evidence the foregoing.
 
“Material Adverse Effect” means any event, act, omission, condition or circumstance which, individually or in the aggregate, has or could reasonably be expected to have a material adverse effect on (a) the business, operations, properties, assets or condition, financial or otherwise, of the Loan Party Obligors, taken as a whole, (b) the ability of the Loan Party Obligors, taken as a whole, to perform any of their obligations under any of the Loan Documents, or (c) the validity or enforceability of, or Lender’s rights and remedies under, any of the Loan Documents.
 
Schedule B-18
“Material Contract” means has the meaning set forth in Section 5.18.
 
“Maturity Date” means the date set forth in Section 6 of Schedule A, as such date may be accelerated in accordance with the terms of this Agreement.
 
“Maximum Lawful Rate” has the meaning set forth in Section 2.5.
 
“Maximum Liability” has the meaning set forth in Section 8.9.
 
“Maximum Revolving Facility Amount” means the amount set forth in Section 1(a) of Schedule A.
 
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which a Loan Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
 
“Net Agent Account” means an account owed by a “agent” being a third-party domestic or foreign, non-vessel operating common carrier, a freight forwarder, customs broker, or other service provider with whom a Borrower contracts to perform certain services for such Borrower related to the delivery of freight.
 
“Net Income” means, for the applicable period, as applicable pursuant to this Agreement, (1) the Parent and its Subsidiaries on a consolidated basis, and (2) the Borrower and its Subsidiaries on a consolidated basis, the net income (or loss) of such Persons, for such period, excluding any gains or non-cash losses from dispositions, any extraordinary gains or extraordinary non-cash losses and any gains or non-cash losses from discontinued operations, in each case of such Persons, for such period.
 
“Non-Paying Guarantor” has the meaning set forth in Section 8.10.
 
“Non-U.S. Recipient” has the meaning set forth in Section 9(e)(ii).
 
“Notice of Borrowing” has the meaning set forth in Section 1.4.
 
“Obligations” means all present and future Loans, advances, debts, liabilities, fees, expenses, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower or any Loan Party Obligor to Lender, whether evidenced by this Agreement, any other Loan Document or otherwise, whether arising from extensions of credit, opening of Letters of Credit, credit cards, debit cards, cash management or related services, treasury management, guarantees, indemnities or otherwise, whether direct or indirect, whether absolute or contingent, whether due or to become due, and whether arising before or after the commencement of a proceeding under the Bankruptcy Code or any similar statute, provided that Obligations of any Loan Party Obligor shall not include (i) any Excluded Swap Obligations of such Loan Party Obligor, and (ii) any of the foregoing obligations which are acquired by assignment or any participation by Lender in any Loan Party Obligor’s indebtedness to others and unrelated to the Obligations under the Loan Documents.
 
Schedule B-19
“Obligor” means any guarantor, endorser, acceptor, surety or other Person liable on, or with respect to, any of the Obligations or who is the owner of any property which is security for any of the Obligations, other than Borrower. For avoidance of doubt, Parent and ELFS OK are Obligors.
 
“OFAC” means the Office of Foreign Assets Control of the U.S. Department of the Treasury.
 
“Organic Documents” means, with respect to any Person, the certificate of incorporation, articles of incorporation, certificate of formation, certificate of limited partnership, by-laws, operating agreement, limited liability company agreement, limited partnership agreement or other similar governance document of such Person.
 
“Other Obligor” means any Obligor other than any Loan Party Obligor.
 
“Other Taxes” means all present or future stamp, court or documentary, property, excise, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document.
 
“Parent” has the meaning set forth in the preamble to this Agreement.
 
“Participant” has the meaning set forth in Section 10.10.
 
“Patriot Act” has the meaning set forth in Section 5.24
 
“PBGC” means the Pension Benefit Guaranty Corporation.
 
“Pension Act” means the Pension Protection Act of 2006.
 
“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and Multiemployer Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430,431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA, and any sections of the Code or ERISA related thereto that are enacted after the date of this Agreement.
 
“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by a Loan Party Obligor and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the Pension Funding Rules.
 
Schedule B-20
“Permitted Acquisition” means any acquisition (whether by purchase, merger, consolidation or otherwise) or series of related acquisitions by Borrower of all or substantially all the assets of, or all the equity interests in, a Person or division or line of business of a Person if, at the time of and immediately after giving effect thereto, (a) no Default or Event of Default then exists or would arise from the consummation of such acquisition, (b) the business acquired in connection with such acquisition is (i) located in the United States or Canada, (ii) organized under the laws of any state of the United States or the District of Columbia or any province of Canada, and (iii) not engaged, directly or indirectly, in any line of business other than the businesses in which Borrower is engaged on the date hereof and any business activities that are substantially similar, related, or incidental thereto; (c) the aggregate consideration for all such acquisitions occurring during any Fiscal Year shall not exceed $4,000,000 (except for Fiscal Year 2021, the aggregate consideration for all such acquisitions occurring during such Fiscal Year shall not exceed $19,000,000 in the aggregate); (d) any Person so acquired or any new Subsidiary formed in connection with such acquisition shall promptly become a Loan Party Obligor pursuant to documentation and other requirements reasonably acceptable to Lender, and Lender shall have a first priority security  interest in all of the assets of such Person, and the Lender shall have received such reasonable documentation in connection therewith, including, opinions, certificates and Organic Documents  with respect to such Person; (e) such acquisition shall have been approved by the board of directors of the Person (or similar governing body if such Person is not a corporation) which is the subject of such acquisition and such Person shall not have announced that it will oppose such acquisition or shall not have commenced any action which alleges that such acquisition shall violate applicable law; (f) the legal structure of such acquisition shall be acceptable to Lender in its Permitted Discretion, (g) after giving effect to the acquisition, if the acquisition is an acquisition of the equity interests, a Loan Party shall acquire and own, directly or indirectly, a majority of the equity interests in the Person being acquired and shall control a majority of any voting interests or shall otherwise control the governance of the Person being acquired, (h) the Administrative Borrower shall have furnished the Lender with thirty (30) days’ prior written notice of such intended acquisition and shall have furnished the Lender with a current draft of the acquisition documents (and final copies thereof as and when executed), a summary of any due diligence undertaken by the Loan Party Obligors in connection with such acquisition, appropriate financial statements of the Person which is the subject of such acquisition, pro forma projected financial statements for the twelve (12) month period following such acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by month for the acquired Person, individually, and on a consolidated basis with all Loan Party Obligors), and such other information as the Lender may reasonably require, all of which shall be reasonably satisfactory to the Agent; (i) all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws; and (j) the Restricted Payment Conditions are satisfied.
 
“Permitted Discretion” means a determination made in the exercise of reasonable business judgment (from the perspective of an asset based lender).
 
“Permitted Dispositions” means (a) sales or other dispositions of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (b) so long as no Default or Event of Default shall have occurred and be continuing, other sales or dispositions of Equipment not to exceed $150,000 in the aggregate during any 12 consecutive-month period, (c) sales of Inventory to buyers in the ordinary course of business, and (d) the use or transfer of money or cash equivalents in a manner that is not prohibited by the terms of the Agreement or the other Loan Documents.

Schedule B-21
“Permitted Dividends” means (i) dividends payable solely in capital stock or   other equity interests of such Loan Party and dividends and distributions to Borrower; (ii) dividends or distributions to Parent to permit Parent to pay federal, state and local income taxes then due and owing by Parent; and (iii) in addition to the dividends and distributions permitted by clause (ii) above, (x) dividends or distributions by Borrower to Parent so long as the Dividend Payment Conditions are satisfied, and (y) without duplication of (x), dividends or distributions by Borrower to Parent in order for the Parent to make Specified Preferred Series C Distributions to its Preferred Series C shareholders, in the like amount, so long as the Specified Preferred  Series C Distributions Conditions are satisfied.
 
“Permitted Indebtedness” means: (a) the Obligations; (b) the Indebtedness existing on the date hereof described in Section 6 of the Disclosure Schedule, in each case along with extensions, refinancings, modifications, amendments and restatements thereof, provided that (i) the principal amount thereof is not increased, (ii) if such Indebtedness is subordinated to any or all of the Obligations, the applicable subordination terms shall not be modified without the prior written consent of Lender, and (iii) the terms thereof are not modified to impose more burdensome terms upon any Loan Party; (c) Capitalized Leases and purchase money Indebtedness secured by Permitted Liens in an aggregate amount not exceeding $500,000 at any time outstanding; (d) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; (e) guaranty obligations permitted hereunder; (f) obligations in respect of performance bonds or sureties incurred in the ordinary course of business; and (g) Indebtedness between and among Borrowers not to exceed $4,000,000 in the aggregate any one time.
 
“Permitted Liens” means (a) Liens securing the Obligations; (b) purchase money security interests in specific items of Equipment securing Permitted Indebtedness described under clause (c) of the definition of Permitted Indebtedness; (c) Liens for taxes, fees, assessments, or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such Lien) for which adequate reserves in accordance with GAAP are being maintained, provided the same have no priority over any of Lender’s security interests; (d) Liens of materialmen, mechanics, carriers, or other similar Liens arising in the ordinary course of business and securing obligations which are not delinquent or are being contested in good faith by appropriate proceedings (which proceedings have the effect of preventing the enforcement of such Lien) for which adequate reserves in accordance with GAAP are being maintained; (e) Liens which constitute banker’s Liens, rights of set-off, or similar rights as to deposit accounts or other funds maintained with a bank or other financial institution (but only to the extent such banker’s liens, rights of set-off or other rights are in respect of customary service charges relative to such deposit accounts and other funds, and not in respect of any loans or other extensions of credit by such bank or other financial institution to any Loan Party); (f) cash deposits or pledges to secure the payment of worker’s compensation, unemployment insurance, or other social security benefits or obligations, public or statutory obligations, surety or appeal bonds, bid or performance bonds, or other obligations of a like nature incurred in the ordinary course of business; and (g) Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by the any Lien listed above.
 
“Person” means any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, association, corporation, Governmental Authority, or any other entity.
 
Schedule B-22
“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of any Loan Party or any such plan to which any Loan Party Obligor (or with respect to any plan subject to Section 412 of the Code or Section 302 or Title IV of ERISA, any ERISA Affiliate) is required to contribute on behalf of any of its employees.
 
“Pledged Equity” means the equity interests (other than those of Parent) listed on Sections 1(f) and 1(g) of the Disclosure Schedule, together with any other equity interests, certificates, options, or rights or instruments of any nature whatsoever in respect of the equity interests of any Person that may be issued or granted to, or held by, any Loan Party Obligor while this Agreement is in effect, and including to the extent attributable to, or otherwise related to, such pledged equity interests, all of such Loan Party Obligor’s (i) interests in the profits and losses of each Issuer, (ii) rights and interests to receive distributions of each Issuer’s assets and properties, and (iii) rights and interests, if any, to participate in the management of each Issuer related to such pledged equity interests, provided, however that no more than 65% of the voting equity interests of any CFC shall be deemed to be Pledged Equity.
 
“Protective Advances” has the meaning set forth in Section 1.3.
 
“Recipient” means Lender, Participant, or any other recipient of any payment to be made by or on account of any Obligation of any Loan Party Obligor under this Agreement or any other Loan Document, as applicable.
 
“Register” has the meaning set forth in Section 10.9(a).
 
“Released Parties” has the meaning set forth in Section 6.1.
 
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
 
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.
 
“Reserves” has the meaning set forth in Section 1.2.
 
“Restricted Accounts” means Deposit Accounts (a) established and used (and at all times will be used) solely for the purpose of paying current payroll obligations of Loan Party Obligors (and which do not (and will not at any time) contain any deposits other than those necessary to fund current payroll), in each case in the ordinary course of business, or (b) maintained (and at all times will be maintained) solely in connection with an employee benefit plan, but solely to the extent that all funds on deposit therein are solely held for the benefit of, and owned by, employees (and will continue to be so held and owned) pursuant to such plan.
 
Schedule B-23
“Restricted Payment Conditions” means, with respect to any applicable transaction, (a) no Default or Event of Default shall exist immediately before and after giving effect to such transaction, (b) the Loan Party Obligors shall be in compliance with the financial covenants (calculated on a pro forma basis after giving to such transaction) set forth in Section 5.28, and (c) Excess Availability for each of the thirty (30) days immediately preceding such transaction and for each of the thirty days immediately following such transaction (calculated on a pro forma basis after giving effect to such transaction), is not less than $1,000,000.
 
“Revolving Loans” has the meaning set forth in Section 1.1(a).
 
“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.
 
“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.
 
“Securities Act” means the Securities of Act of 1933, as amended.
 
“SOFR” means a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time).
 
“Specified Financial Covenants” has the meaning set forth in Section 7.4.
 
“Specified Covenant Compliance Period” has the meaning set forth in Section 7.4.
 
“Specified Preferred Series C Distributions” means dividends or distributions on Parent’s Series C Cumulative Preferred Stock in an aggregate amount not to exceed $1,000,000 during any one (1) fiscal year of Parent.
 
“Specified Preferred Series C Distributions Conditions” means, at the date of determination with respect to any Specified Preferred Series C Distributions, that (a) no Default or Event of Default shall exist immediately before and after giving effect to such payment, (b) the Loan Party Obligors shall be in compliance with the financial covenants set forth in Section 5.28 both before and after (calculated on a pro forma basis after giving effect to such transaction), (c) Excess Availability (i) for each of the thirty (30) days immediately preceding the payment of such distribution, and (ii) immediately following such transaction (calculated on a pro forma basis after giving effect to such transaction), is not less than $3,000,000, (d) Borrower shall have provided Lender with evidence, reasonably satisfactory to Lender, that that all accounts payable are being paid in the ordinary course of Borrower’s business,  and (e) prior to making such payment, Administrative Borrower shall certify to the Lender in writing that the foregoing conditions have and will be satisfied after the making of such payment.
 
“Stated Rate” has the meaning set forth in Section 2.5.
 
Schedule B-24
“Subsidiary” means any corporation or other entity of which a Person owns, directly or indirectly, through one or more intermediaries, more than 50% of the capital stock or other equity interest at the time of determination. Unless the context indicates otherwise, references to a Subsidiary shall be deemed to refer to a Subsidiary of Borrower.
 
“Swap Obligation” with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
 
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
 
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
 
“Termination Date” means the date on which all of the Obligations have been paid in full in cash or otherwise satisfies to the satisfaction of Lender and all of Lender’s lending commitments under this Agreement and under each of the other Loan Documents have been terminated.
 
“UCC” means, at any given time, the Uniform Commercial Code as adopted and in effect at such time in the State of New York or such other applicable jurisdiction.
 
“United States” means United States of America.
 
“USD LIBOR” means the London interbank offered rate for U.S. Dollars.
 
Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder (including determinations made pursuant to the exhibits hereto) shall be made, and all financial statements required to be delivered hereunder shall be prepared on a consolidated basis in accordance with GAAP consistently applied. If at any time any change in GAAP would affect the computation of any financial ratio or financial requirement set forth in any Loan Document, and either Borrower or Lender shall so request, Lender and Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP; provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) Borrower shall provide to Lender financial statements and other documents required under this Agreement and the other Loan Documents which include a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (Codification of Accounting Standards 825-10) to value any Indebtedness or other liabilities of any Loan Party at “fair value,” as defined therein.
 
Schedule B-25
Notwithstanding anything to the contrary contained in the paragraph above or the definitions of Capital Expenditures or Capitalized Leases, in the event of a change in GAAP after the Closing Date requiring all leases to be capitalized, only those leases (assuming for purposes of this paragraph that they were in existence on the Closing Date) that would constitute Capitalized Leases on the Closing Date shall be considered Capital Leases (and all other such leases shall constitute operating leases) and all calculations and deliverables under this Agreement or the other Loan Documents shall be made in accordance therewith (other than the financial statements delivered pursuant to this Agreement, provided that all such financial statements delivered to Lender in accordance with the terms of this Agreement after the date of such change in GAAP shall contain a schedule showing the adjustments necessary to reconcile such financial statements with GAAP as in effect immediately prior to such change).
 
References in this Agreement to “Articles,” “Sections,” “Annexes,” “Exhibits” or “Schedules” shall be to Articles. Sections, Annexes, Exhibits or Schedules of or to this Agreement unless otherwise specifically provided. Any term defined herein may be used in the singular or plural. “Include,” “includes” and “including” shall be deemed to be followed by “without limitation,” “or” shall be construed to mean “and/or.”  Except as otherwise specified or limited herein, references to any Person include the successors and assigns of such Person. References “from” or “through” any date mean, unless otherwise specified, “from and including” or “through and including,” respectively. Unless otherwise specified herein, the settlement of all payments and fundings hereunder between or among the parties hereto shall be made in lawful money of the United States and in immediately available funds. Time is of the essence for each performance obligation of the Loan Party Obligors under this Agreement and each Loan Document. All amounts used for purposes of financial calculations required to be made herein shall be without duplication. References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations. References to any agreement, instrument or document (i) shall include all schedules, exhibits, annexes and other attachments thereto and (ii) shall be construed as referring to such agreement, instrument or other document as from time to time amended, amended and restated, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document). The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
 
Schedule B-26
Schedule C
 
Post-Closing Obligations
 
1.              Within  thirty (30) days following the Closing Date (or such later date as Lender may agree in its sole discretion), Borrower shall deliver to Lender, in form and substance reasonably satisfactory to Lender, Blocked Account control agreements duly executed by Borrower and each applicable depository bank with respect to the following Deposit Accounts:  Account Nos. xxx and xxx maintained by ELFS with Wells Fargo Bank, National Association.

2.            Within thirty (30) days following the Closing Date (or such later date as Lender may agree in its sole discretion), Borrower shall deliver to Lender such endorsements with respect to insurance (all of which shall be in form and substance reasonably satisfactory to Lender) evidencing compliance with the provisions of Section 5.14 hereof.

Schedule C-1
Schedule D
 
Fees
 
(a)          Closing Fee. A closing fee equal to $60,000 (the “Closing Fee”), which Closing Fee shall be deemed to be fully earned and payable as of the Closing Date.
 
(b)         Collateral Monitoring Fee.  A monthly collateral monitoring fee of $500 per month until the Termination Date (the “Collateral Monitoring Fee”), which shall be due and payable monthly in arrears on the first day of each month, commencing on September 1, 2021.
 
(c)          Unused Line Fee. An unused line fee (the “Unused Line Fee”) equal to 0.25% per annum of the amount by which the Maximum Revolving Facility Amount, calculated without giving effect to any Reserves or Availability Block, if applied to the Maximum Revolving Facility Amount, exceeds the average daily outstanding principal balance of the Revolving Loans and the Letter of Credit Balance during the immediately preceding month (or part thereof), which each such fee shall be deemed to be fully earned and payable, in arrears, on the first day of each month commencing September 1, 2021, until the Termination Date.
 
(d)          Letter of Credit Fees. A fee equal to the LIBOR Rate Margin times the average daily face amount of each Letter of Credit (the “Letter of Credit Fees”), which (i) each such fee shall be deemed to be fully earned and payable, in arrears, on the first day of each month commencing September 1, 2021, until the Termination Date, (ii) applicable fronting fees, and (iii) all customary charges associated with the issuance, amendment, negotiation, payment, processing, transfer and administration of Letters of Credit, which charges shall be paid as and when incurred.  Upon the occurrence of an Event of Default, the fee payable under this clause (i) shall be increased by 3.0% per annum.

Schedule D-1
Schedule E
 
Provide Lender with each of the documents set forth below at the following times in form satisfactory to Lender:
 
 
Twice per month, on the 5th Business Day after the 15th of each month and last day of each month (as of the 15th day of such month and the prior month end, respectively); provided that if a BBC Reduction Trigger Event has occurred, once per month, on the 5th Business Day of each month.
   
(a) a completed and signed Borrowing Base certificate in the form provided to Borrower by Lender prior to the date hereof,

(b) a roll-forward with supporting details with respect to Borrower’s Accounts (delivered electronically in an acceptable format).

(c) notice of all claims, offsets, or disputes asserted by Account Debtors with respect to Borrower’s Accounts,

(d) a detailed aging, by total, of Borrower’s Accounts, together with a reconciliation and supporting documentation for any reconciling items noted,

 
Monthly, no later than 5th Business Day after the 15th day of each month (as of such 15th day)
   
(e) a summary aging, by vendor, of each Loan Party Obligor’s accounts payable and any book overdraft and an aging, by vendor, of any held checks (delivered electronically in an acceptable format),

(f) a monthly Account roll-forward with respect to Borrower’s Accounts, in a format reasonably acceptable to Lender, tied to the beginning and ending Account balances of Borrower’s general ledger (delivered electronically in an acceptable format),

 
Quarterly, no later than the 5th Business Day after each quarter end (as of such quarter end)

   
(g) a report regarding each Loan Party Obligor’s accrued, but unpaid, ad valorem taxes,

Schedule E-1
 
Annually, on the 15th day of each January (as of the prior Fiscal Year end)
   
(h) a detailed list of each Loan Party Obligor’s customers, with address and contact information,

(i) a detailed list of each Loan Party Obligor’s vendors, with address and contact information,

(j) an updated Disclosure Schedule, true and correct in all material respects as of the date of delivery, accompanied by a certificate executed by an officer of Borrower in a form reasonably acceptable to Lender (it being understood and agreed that no such update shall serve to cure any existing Event of Default, including any Event of Default resulting from any failure to provide any such disclosure to Lender on an earlier date or any breach of any earlier made representation and/or warranty), and


Schedule E-2
Schedule F
 
Financial Covenant
 
Minimum Debt Service Coverage Ratio.  Loan Party Obligors shall not permit the Debt Service Coverage Ratio to be less than 1.1:1.0 for each Covenant Compliance Period, commencing with the fiscal quarter ending September 30, 2021, calculated on an actual trailing four (4) quarter basis, provided, however, for the first, second and third Covenant Compliance Periods after the Closing Date (i.e. September 30, 2021, December 31, 2021, and March 31, 2022), the Debt Service Coverage Ratio shall be calculated on a rolling three (3) month, six (6) month and nine (9) month basis.
 
Minimum Debt Service Coverage Ratio (Borrower Group). Borrower shall not permit the Debt Service Coverage Ratio (Borrower Group) to be less than 1.1:1.0 for each Covenant Compliance Period, commencing with the fiscal quarter ending September 30, 2021, calculated on an actual trailing four (4) quarter basis, provided, however, for the first, second and third Covenant Compliance Periods after the Closing Date (i.e. September 30, 2021, December 31, 2021, and March 31, 2022), the Debt Service Coverage Ratio shall be calculated on a rolling three (3) month, six (6) month and nine (9) month basis.

Schedule F-1
Schedule G
 
Additional Conditions Precedent
  
The closing and initial funding of the initial Revolving Loans will be subject to the following additional conditions precedent:

(i)          Satisfactory evidence that the Borrowers are paying account payables within terms.

(ii)         The Lender shall have received an updated Borrowing Base certificate.

(iii)        Excess Availability shall be no less than $5,000,000 at the time of closing.

(iv)        All documents and instruments required to perfect the Lender’s security  interest in the Collateral shall have been executed, delivered and in form for filing, and the Lender’s Liens on the Collateral shall have been perfected, as contemplated by this Agreement; provided that to the extent a Lien on any Collateral of ELFS and/or ELFS Brokerage (other than assets with respect to which a Lien may be perfected solely by the filing of a financing statement under the Uniform Commercial Code and the delivery of stock certificates) is not or cannot be perfected on the Closing Date after Lender’s use of commercially reasonable efforts to do so or without undue burden or expense, the perfection of such Lien shall not constitute a condition precedent to the initial availability of the this Agreement on the Closing Date, but shall be required to be perfected within 90 days after the Closing Date (subject to extensions by the Lender in its sole reasonable discretion).

(v)         The ELFS Acquisition shall occur contemporaneously with the execution and delivery of this  Agreement and materially in accordance with the provisions of the ELFS Acquisition Documentation.

Schedule G-1
Schedule H
 
Acquisition Seller Financing as of the Closing Date
 
Obligee
Date of Note/Agreement
Outstanding Balance as of Closing Date
Peter Schlesinger
July 23, 2020
$386,000
David W. Flake
September [__], 2021
$1,741,800
Randall L. Cockrell
September [__], 2021
$1,741,800
Steven R. Lalumandier
September [__], 2021
$774,600
Frederick J. Lalumandier
September [__], 2021
$1,741,800
 
Total:
$6,386,000

Schedule H-1
Schedule I
 
Representations, Warranties and Covenants Regarding ELFS Acquisition
 
(i)          Loan Party Obligors have delivered to Lender a complete and correct copy of the ELFS Acquisition Documentation, including all schedules and exhibits thereto.  The execution, delivery and performance of each of the ELFS Acquisition Documentation has been duly authorized by all necessary action on the part of Janel and Parent.  Each ELFS Acquisition Documentation is the legal, valid and binding obligation of Janel and Parent, enforceable against such Person in accordance with its terms, in each case, except (i) as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting generally the enforcement of creditors’ rights and (ii) the availability of the remedy of specific performance or injunctive or other equitable relief is subject to the discretion of the court before which any proceeding therefor may be brought.  Neither Janel nor Parent is in default in the performance or compliance with any provisions thereof.  All representations and warranties made by Janel and Parent in the ELFS Acquisition Documentation and in the certificates delivered in connection therewith are true and correct in all material respects. To the knowledge of Janel and Parent, none of the Seller’s representations or warranties in the ELFS Acquisition Documentation contain any untrue statement of a material fact or omit any fact necessary to make the statements therein not misleading, in any case that could reasonably be expected to result in a Material Adverse Effect.
 
(ii)         No Default or Event of Default exists as of the Closing Date or would arise from the consummation of such ELFS Acquisition;
 
(iii)        The business acquired in connection with such ELFS Acquisition is (A) located in the United States, (B) organized under the laws of any state of the United States or the District of Columbia, and (C) each of ELFS and ELFS Brokerage are engaged in the business of non-asset based transportation logistics;
 
(iv)        After giving effect to the ELFS Acquisition and this  Sixth Amendment, Janel will own, directly or indirectly, 100% of the equity interests of ELFS and ELFS Brokerage shall control all of the voting interests or shall otherwise control the governance of each such Person, will have good title to the assets acquired pursuant to the ELFS Purchase Agreement, free and clear of all Liens other than Permitted Liens, and Lender shall have a first priority Lien in all of the assets of ELFS and ELFS Brokerage, subject to Permitted Liens;

Schedule I-1
(v)         Such ELFS Acquisition has been approved by the board of directors of ELFS and ELFS Brokerage and such board of directors has not announced that it will oppose such ELFS Acquisition or has not commenced any action which alleges that such ELFS Acquisition shall violate applicable law;
 
(vi)        The Loan Party Obligors have furnished the Lender with historic financial statements of ELFS and ELFS Brokerage, pro forma projected financial statements of ELFS and ELFS Brokerage through September 21, 2022, and such other information as the Lender may reasonably require, all of which shall be reasonably satisfactory to the Lender.
 
(vii)       The ELFS Acquisition will be consummated in all material respects, in accordance with all applicable laws and this Agreement and all requisite approvals by Governmental Authorities having jurisdiction over Janel, Parent and ELFS and ELFS Brokerage and, to Janel’s knowledge, the ELFS Sellers, with respect to the ELFS Acquisition, have been obtained (including filings or approvals required under the Hart-Scott-Rodino Antitrust Improvements Act), except for any approval the failure to obtain could not reasonably be expected to be material to the interests of the Lender.
 
(viii)      The ELFS Cash Cushion Amount shall only be used  by EFLS to fund working capital needs and on the Closing Date the full amount of the ELFS Cash Cushion Amount shall be deposited into Designated Deposit Account #s x4090 and x2282, and the Loan Party Obligors shall have provided Lender with evidence of same.

Schedule I-2
Exhibit A
 
FORM OF NOTICE OF BORROWING
 
 
Santander Bank, N.A.
 
75 State Street
 
Boston, MA 02109
 
Attention:  [__________________]
 
Dear [____________]:
 
Please refer to that certain Amended and Restated Loan and Security Agreement, dated as of September 21, 2021, by and among, among others, JANEL GROUP, INC. (“Janel”), EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC (“ELFS”), ELFS BROKERAGE, LLC (“ELFS Brokerage” and together with Janel and ELFS, individually and collectively, jointly and severally, the “Borrower”), JANEL CORPORATION (“Parent”), and SANTANDER BANK, N.A. (the “Lender”) (as the same may be further amended from time to time, the “Loan Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement.  This notice is given pursuant to Section 1.4 and Section 2.6 of the Loan Agreement and constitutes a representation by the undersigned that the conditions specified in Section 1.6 of the Loan Agreement have been satisfied.  Without limiting the foregoing, (i) each of the representations and warranties set forth in the Loan Agreement and in the other Loan Documents is true and correct in all respects as of the date hereof (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct as of such earlier date), both before and after giving effect to the Loans requested hereby, and (ii) no Default or Event of Default is in existence, both before and after giving effect to the Loans requested hereby.
 
Administrative Borrower hereby requests a borrowing under the Loan Agreement as follows:
 
The aggregate amount of the proposed borrowing is [______________].  The requested borrowing date for the proposed borrowing (which is a Business Day) is [__________], [_____].1
 
The proposed borrowing is to be a Base Rate Loan or LIBOR Rate Loan with an Interest Period of 1, 2 or 3 month(s).
 
Administrative Borrower has caused this Notice of Borrowing to be executed and delivered by its officer thereunto duly authorized on [____________].

1 Note:  For a LIBOR Rate Loan, notice needs to be given at least 3 Business Days prior to the commencement of the proposed Interest Period.
 
Schedule A-1
 
Administrative Borrower:
   
 
JANEL GROUP, INC., a New York corporation
   
 
By:
   
 
Name:
 
Title:

Schedule A-2
Exhibit B
 
LIBOR Notice
 
Santander Bank, N.A.
75 State Street
Boston, MA 02109
Attention: [_______________]

Dear [___________]:

Please refer to that certain Amended and Restated Loan and Security Agreement, dated as of September 21, 2021, by and among, among others, JANEL GROUP, INC. (“Janel”), EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC (“ELFS”), ELFS BROKERAGE, LLC (“ELFS Brokerage” and together with Janel and ELFS, individually and collectively, jointly and severally, the “Borrower”), JANEL CORPORATION (“Parent”), and SANTANDER BANK, N.A. (the “Lender”) (as the same may be further amended from time to time, the “Loan Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Loan Agreement.  This notice is given pursuant to Section 2.6 of the Loan Agreement and constitutes a representation by the undersigned that (i) each of the representations and warranties set forth in the Loan Agreement and in the other Loan Documents is true and correct in all respects as of the date hereof (or to the extent any representations or warranties are expressly made solely as of an earlier date, such representations and warranties shall be true and correct as of such earlier date), both before and after giving effect to the Loans requested hereby, and (ii) no Default or Event of Default is in existence, both before and after giving effect to the Loans requested hereby.
 
This LIBOR Notice represents Administrative Borrower’s request to elect the LIBOR Option with respect to outstanding Revolving Loans in the amount of $______________ (the “LIBOR Rate Loan”)[, and is a written confirmation of the telephonic notice of such election given to Lender].
 
The LIBOR Rate Loan will have an Interest Period of 1, 2, or 3 month(s) commencing on _______________.

Exhibit B-1
 
Administrative Borrower:
   
 
JANEL GROUP, INC., a New York corporation
   
 
By:
   
 
Name:
 
Title:
 
Exhibit B-2
Exhibit C
 
CLOSING CHECKLIST
 
[Attached]

Exhibit C-1
Exhibit D
 
SANTANDER BANK, N.A. 
AUTHORIZED ACCOUNTS FORM
 
Borrowers’ Names:          JANEL GROUP, INC., a New York corporation (“Janel”), EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC (“ELFS”), ELFS BROKERAGE, LLC (“ELFS Brokerage” and together with Janel and ELFS, individually and collectively, jointly and severally, the “Borrower”).

Amended and Restated Loan and Security Agreement Date:  September 21, 2021, as amended
 
I, being an authorized signor of the above Borrower, refer to the above Amended and Restated Loan and Security Agreement, between JANEL CORPORATION, a Nevada corporation (“Parent”), the Borrower, and Santander Bank, N.A. (“Lender”) (as the same may be further amended from time to time, the “Loan Agreement”).  This is the Authorized Account Form, referring to authorized operating bank accounts of the Company.  Capitalized terms used but not defined herein shall have the meanings given to them in the Loan Agreement.
 
Being duly authorized by the Borrower, I confirm that the following operating bank accounts of the Company are the accounts into which proceeds of any Loan may be paid:
 
 
Bank
Routing Number
Account Number
 
Account Name
 
Santander Bank, N.A.
     
JANEL GROUP, INC.
 
Santander Bank, N.A.
     
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC
 
Santander Bank, N.A.
     
ELFS BROKERAGE, LLC

JANEL GROUP, INC.
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC
ELFS BROKERAGE, LLC          
 
     
Authorized Signor
   

Name:
   
Title:
   
Date:
   

Exhibit D-1
Exhibit E
 
FORM OF ACCOUNT DEBTOR NOTIFICATION
 
[Borrower Letterhead]
 
[Date]
 
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
 
   
   
   
          
Re: Loan Transaction with Santander Bank, N.A.

Ladies and Gentlemen:

Please be advised that we and certain of our affiliates have entered into certain financing arrangements (along with any other financing agreements that we or any of our affiliates may enter into with Lender in the future, the “Financing Arrangements”) with Santander Bank, N.A. (“Lender”), pursuant to which we have granted to Lender a security interest in, among other things, any and all Accounts and Chattel Paper (as those terms are defined in the Uniform Commercial Code) owing by you to us, whether now existing or hereafter arising.

You are authorized and directed to respond to any inquiries that Lender may direct to you from time to time pertaining to the validity, amount, and other matters relating to such Accounts and Chattel Paper.  In the event that Lender requests that payment for any Accounts and/or Chattel Paper be made directly to Lender, you are hereby authorized and directed to comply with such instructions, without further authorization or instruction from us.

This authorization and directive shall be continuing and irrevocable until all of the Financing Agreements have been terminated and all obligations thereunder by us and our affiliates have indefeasibly been paid in full in cash.

Very truly yours,

JANEL GROUP, INC.
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC
ELFS BROKERAGE, LLC

By:
     
Name:
     
Title:
     

cc: Santander Bank, N.A.
Mail Code:
75 State Street,
Boston, MA 02109
Attention: Mr. Benjamin Martinez
 
Exhibit E-1
Exhibit F
 
FORM OF COMPLIANCE CERTIFICATE
 
[Letterhead of Borrower]
 
To:
Santander Bank, N.A.
Mail Code: 
75 State Street, 
Boston, MA 02109 
Attention: Mr. Benjamin Martinez
 
Re: Compliance Certificate dated _______________
 
Ladies and Gentlemen:
 
Reference is hereby made to that certain Amended and Restated Loan and Security Agreement, dated as of September 21, 2021, by and among, among others, JANEL GROUP, INC. (“Janel”), EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC (“ELFS”), ELFS BROKERAGE, LLC (“ELFS Brokerage” and together with Janel and ELFS, individually and collectively, jointly and severally, the “Borrower”), JANEL CORPORATION (“Parent”), and SANTANDER BANK, N.A. (the “Lender”) (as the same may be further amended from time to time, the “Loan Agreement”).  All capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan Agreement.
 
Pursuant to Section 5.15 of the Loan Agreement, the undersigned __________________ of Borrower hereby certifies (solely in his capacity as an officer of Borrower and not in his individual capacity) that:
 
1.            The financial statements of the Loan Party Obligors for the ___-month period ending ___________ attached hereto have been prepared in accordance with GAAP, and fairly present the financial condition of the Loan Party Obligors for the periods and as of the dates specified herein.
 
2.             As of the date hereof, there does not exist any Default or Event of Default.
 
3.            The Loan Party Obligors are in compliance with the applicable financial covenants contained in Section 5.28 of the Loan Agreement for the periods covered by this Compliance Certificate.  Attached hereto are statements of all relevant facts and computations in reasonable detail sufficient to evidence the Loan Party Obligors’ compliance with such financial covenants, which computations were made in accordance with GAAP.
 
[Signature page follows]

Exhibit F-1
IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this ____ day of __________________, ______.
 
 
Borrower:
   
 
JANEL GROUP, INC., a New York corporation
   
 
By:
   
 
Name:
 
 
Title:
 
     
 
EXPEDITED LOGISTICS AND FREIGHT SERVICES, LLC, a Texas limited liability company
     
 
By:
   
 
Name:
 
 
Title:
 
     
 
ELFS BROKERAGE, LLC, a Texas limited liability company
     
 
By:
   
 
Name:
 
 
Title:
 
     
 
Loan Party Obligors:
     
 
JANEL CORPORATION, a Nevada corporation
     
 
By:
   
 
Name:
 
 
Title:
 

 
Exhibit F-2

Addendum 1-1
Exhibit 10.45
 
Janel Corporation
 
AMENDED AND RESTATED
 
2017 Equity Incentive Plan
 
(As Amended Through September 21, 2021)
 
1.            Purposes.
 
(a)           Eligible Stock Award Recipients.  The persons eligible to receive Stock Awards are Employees, Directors and Consultants.
 
(b)          Available Stock Awards.  The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity to benefit from increases in value of the Common Stock through the granting of the following Stock Awards: (i) Non-statutory Stock Options, (ii) Restricted Stock Awards, and (iii) Stock Appreciation Rights.
 
(c)          General Purpose.  The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards, to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.
 
2.            Definitions.
 
As used in this Plan, the following terms have the following meanings:
 
(a)         “Affiliate” means, at the time of determination, any parent corporation or subsidiary corporation of the Company as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
 
(b)          “Board” means the Board of Directors of the Company.
 
(c)          “Capitalization Adjustment” has the meaning ascribed to that term in Section 11(a).
 
(d)          “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
 
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(i)          any Exchange Act Person other than a Permitted Holder becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control shall not be deemed to occur (A) on account of the acquisition of securities of the Company by any institutional investor, or any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions that are primarily a private financing transaction for the Company or (B) solely because the level of Ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;
 
(ii)         there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction; provided, however, that such transaction will not constitute a Change in Control if more than 50% of the combined voting power of the surviving Entity is held by Permitted Holders;
 
(iii)        individuals who, on the date this Plan is adopted by the Board, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.; or
 
(iv)        there is consummated a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to a Permitted Holder or to an Entity, more than fifty percent (50%) of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the Company immediately prior to such sale, lease, license or other disposition.
 
The term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company.
 
Notwithstanding the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Stock Awards subject to such agreement (it being understood, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply).
 
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(e)           “Code” means the Internal Revenue Code of 1986, as amended.
 
(f)           “Committee” means a committee of one or more members of the Board appointed by the Board in accordance with Section 3(c).
 
(g)          “Common Stock” means the Common Stock of the Company.
 
(h)          “Company” means Janel Corporation, a Nevada corporation.
 
(i)         “Consultant” means any person, including an advisor, (i) engaged by the Company or an Affiliate to render consulting or advisory services and who is compensated for such services or (ii) serving as a member of the Board of Directors of an Affiliate and who is compensated for such services.  However, the term “Consultant” shall not include Directors who are not compensated by the Company for their services as Directors, and the payment of a director’s fee by the Company for services as a Director shall not cause a Director to be considered a “Consultant” for purposes of the Plan.
 
(j)           “Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, shall not terminate a Participant’s Continuous Service.  For example, a change in status from an employee of the Company to a consultant to an Affiliate or to a Director shall not constitute an interruption of Continuous Service.  The Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.  Notwithstanding the foregoing, a leave of absence shall be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy or in the written terms of the Participant’s leave of absence.
 
(k)          “Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
 
(i)           a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the consolidated assets of the Company and its Subsidiaries;
 
(ii)          a sale or other disposition of at least fifty percent (50%) of the outstanding securities of the Company;
 
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(iii)       a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or (iv) a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
 
(l)            “Director” means a member of the Board.
 
(m)          “Disability” means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.
 
(n)          “Employee” means any person employed by the Company or an Affiliate.  Service as a Director or payment of a director’s fee by the Company for such service or for service as a member of the Board of Directors of an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
 
(o)          “Entity” means a corporation, partnership, limited liability company, trust or other entity.
 
(p)          “Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
(q)        “Exchange Act Person” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” shall not include (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an Entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company.
 
(r)          “Fair Market Value” means, as of any date, the value of the Common Stock determined in good faith by the Board and in accordance with Section 409A of the Code and applicable guidance thereunder.
 
(s)          “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
 
(t)          “Listing Date” means the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.
 
(u)          “Non-statutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.
 
(v)          “Officer” means any person designated by the Company as an officer.
 
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(w)          “Option” means a Non-statutory Stock Option granted pursuant to the Plan.
 
(x)         “Option Agreement” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant.  Each Option Agreement shall be subject to the terms and conditions of the Plan; provided, however, that an Option Agreement may contain terms that vary from the terms of the Plan.
 
(y)         “Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
 
(z)          “Own,” “Owned,” “Owner,” “Ownership” A person or Entity shall be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
 
(aa)         “Participant” means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.
 
(bb)        “Permitted Holder” means Oaxaca Group L.L.C., Dominique Schulte or any of their respective Affiliates.
 
(cc)         “Plan” means this Janel Corporation Amended and Restated 2017 Equity Incentive Plan, as amended from time to time.
 
(dd)        “Restricted Stock Award” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 7(a).
 
(ee)        “Securities Act” means the Securities Act of 1933, as amended.
 
(ff)         “Stock Appreciation Right” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 7(b).
 
(gg)       “Stock Award” means any right granted under the Plan, including an Option, a Restricted Stock Award and a Stock Appreciation Right.
 
(hh)       “Stock Award Agreement” means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant.  Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.
 
(ii)         “Subsidiary” means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%).
 
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3.             Administration.
 
(a)        Administration by Board.  The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in Section 3(c).
 
(b)           Powers of Board.  The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
 
(i)           To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; what type or combination of types of Stock Award shall be granted; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive Common Stock pursuant to a Stock Award; and the number of shares of Common Stock with respect to which a Stock Award shall be granted to each such person.
 
(ii)         To construe and interpret the Plan and Stock Awards granted under it, and to establish, interpret, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
 
(iii)         To effect, at any time and from time to time, with the consent of any adversely affected Optionholder, (1) the reduction of the exercise price of any outstanding Option under the Plan, (2) the cancellation of any outstanding Option under the Plan and the grant in substitution therefor of (A) a new Option under the Plan or another equity plan of the Company covering the same or a different number of shares of Common Stock, (B) a Restricted Stock Award (including a stock bonus), (C) a Stock Appreciation Right, (D) cash and/or (E) other valuable consideration (as determined by the Board, in its sole discretion), or (3) any other action that is treated as a repricing under generally accepted accounting principles.
 
(iv)          To amend the Plan or a Stock Award as provided in Section 12.
 
(v)           To terminate or suspend the Plan as provided in Section 13.
 
(vi)        To approve forms of Stock Award Agreements for use under the Plan and to amend the terms of any one or more Stock Awards, including, but not limited to, amendments to provide terms more favorable than previously provided in the Stock Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion; provided however, that, the rights under any Award shall not be materially impaired by any such amendment unless (i) the Company requests the consent of the affected Participant, and (ii) such Participant consents in writing.
 
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(vii)        Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan.
 
(c)           Delegation to Committee.  The Board may delegate administration of the Plan to a Committee or Committees of one (1) or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated.  If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
 
(d)          Effect of Board’s Decision.  All determinations, interpretations and constructions made by the Board in good faith shall not be subject to review by any person and shall be final, binding and conclusive on all persons.
 
4.            Shares Subject to the Plan.
 
(a)          Share Reserve.  Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the Common Stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate 200,000 shares.
 
(b)          Reversion of Shares to the Share Reserve.  If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, or if any shares of Common Stock issued to a Participant pursuant to a Stock Award are forfeited back to or repurchased by the Company, including, but not limited to, any repurchase or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, then the shares of Common Stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan.  If any shares subject to a Stock Award are not delivered to a Participant because such shares are withheld for the payment of taxes, then the number of shares that are not delivered shall revert to and again become available for issuance under the Plan.  If the exercise price of any Stock Award is satisfied by tendering shares of Common Stock held the Participant (either by actual deliver or attestation), then the number of such tendered shares shall revert to and again become available for issuance under the Plan.
 
(c)          Source of Shares.  The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
 
5.            Eligibility.
 
(a)           Eligibility for Specific Stock Awards. Stock Awards may be granted to Employees, Directors and Consultants.
 
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(b)           Consultants.  A Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or the sale of the Company’s securities to such Consultant is not exempt because of the nature of the services that the Consultant is providing to the Company, because the Consultant is not a natural person, or because of some other provision of the law.
 
6.            Option Provisions.
 
Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  All Options granted hereunder shall be Non-statutory Stock Options , and, if certificates are issued, a separate certificate or certificates shall be issued for shares of Common Stock purchased on exercise of the Option.  The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:
 
(a)           Term.  No Option granted shall be exercisable after the expiration of ten (10) years from the date on which it was granted.
 
(b)          Exercise Price of a Stock Option.  The exercise price of each Option shall be not less than one hundred percent (100%) of the Fair Market Value of the Common Stock subject to the Option on the date the Option is granted.  Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Sections 409A of the Code.
 
(c)          Consideration.  The purchase price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) by cash, check, bank draft or money order payable to the Company at the time the Option is exercised or (ii) at the discretion of the Board at the time of the grant of the Option (or subsequently in the case of a Non-statutory Stock Option) (1) by delivery to the Company of other Common Stock, or (2) pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instruction to pay the aggregate exercise price to the Company from the sales proceeds, or (3) in any other form of legal consideration (including, without limitation, net settlement in shares of Common Stock) that may be acceptable to the Board.
 
(d)           Transferability of a Non-statutory Stock Option.  A Non-statutory Stock Option shall be transferable to the extent provided in the Option Agreement.  If the Non-statutory Stock Option does not provide for transferability, then the Non-statutory Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.  Notwithstanding the foregoing, (i) the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option, and (ii) the Board may, in its sole discretion, permit transfer of a Non-statutory Stock Option in a manner consistent with applicable tax and securities laws upon the Optionholder’s request.
 
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(e)         Vesting Generally.  The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal.  The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options may vary.  The provisions of this Section 6(f) are subject to any Option provisions governing the minimum number of shares of Common Stock as to which an Option may be exercised.
 
(f)         Termination of Continuous Service.  Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Company and the Optionholder, in the event that an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
 
(g)        Extension of Termination Date.  An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in Section 6(a) or (ii) the expiration of a period of three (3) months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option would not be in violation of such registration requirements.
 
(h)        Disability of Optionholder.  Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Company and the Optionholder, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period specified in the Option Agreement) or (ii) the expiration of the term of the Option as set forth in the Option Agreement.  If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option shall terminate.
 
(i)         Death of Optionholder.  Except as otherwise provided in the applicable Stock Award Agreement or other agreement between the Company and the Optionholder, in the event that (i) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to Section 6(e) or 6(f), but only within the period ending on the earlier of (1) the date eighteen (18) months following the date of death (or such longer or shorter period specified in the Option Agreement) or (2) the expiration of the term of such Option as set forth in the Option Agreement.  If, after death, the Option is not exercised within the time specified herein, the Option shall terminate.
 
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(j)            Early Exercise.  The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior to the full vesting of the Option.  Any unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Board determines to be appropriate.
 
(k)           Right of First Refusal.  The Option may, but need not, include a provision whereby the Company may elect to exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the shares of Common Stock received upon the exercise of the Option.
 
7.             Provisions of Stock Awards other than Options.

(a)           Restricted Stock Awards.  Each Restricted Stock Award agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of Restricted Stock Award agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award agreements need not be identical; provided, however, that each Restricted Stock Award agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
 
(i)           Purchase Price.  At the time of the grant of a Restricted Stock Award, the Board will determine the price to be paid by the Participant for each share subject to the Restricted Stock Award. To the extent required by applicable law, the price to be paid by the Participant for each share of the Restricted Stock Award will not be less than the par value of a share of Common Stock.  A Restricted Stock Award may be awarded as a stock bonus (i.e., with no cash purchase price to be paid) to the extent permissible under applicable law.
 
(ii)       Consideration.  At the time of the grant of a Restricted Stock Award, the Board will determine the consideration permissible for the payment of the purchase price of the Restricted Stock Award.  The purchase price of Common Stock acquired pursuant to the Restricted Stock Award shall be paid in one of the following ways: (i) in cash at the time of purchase; (ii) by services rendered or to be rendered to the Company; or (iii) in any other form of legal consideration that may be acceptable to the Board.
 
(iii)         Vesting. Shares of Common Stock acquired under a Restricted Stock Award may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
 
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(iv)          Termination of Participant’s Continuous Service. In the event that a Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination under the terms of the Restricted Stock Award agreement.  The Company will not exercise its repurchase option until at least six (6) months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes) have elapsed following the purchase of the restricted stock unless otherwise determined by the Board or provided in the Restricted Stock Award agreement.
 
(v)         Transferability. Rights to purchase or receive shares of Common Stock granted under a Restricted Stock Award shall be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award agreement, as the Board shall determine in its discretion, and so long as Common Stock awarded under the Restricted Stock Award remains subject to the terms of the Restricted Stock Award agreement.
 
(b)           Stock Appreciation Rights.  Each Stock Appreciation Right agreement shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate.  The terms and conditions of Stock Appreciation Right agreements may change from time to time, and the terms and conditions of separate Stock Appreciation Rights agreements need not be identical, but each Stock Appreciation Right agreement shall include (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
 
(i)           Term.  No Stock Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant or such shorter period specified in the Stock Appreciation Right Agreement.
 
(ii)          Strike Price.  Notwithstanding anything in the applicable Stock Award Agreement to the contrary, the strike price of each Stock Appreciation Right shall not be less than the Fair Market Value of the Common Stock equivalents subject to the Stock Appreciation Right on the date of grant.
 
(iii)       Calculation of Appreciation.  Each Stock Appreciation Right will be denominated in share of Common Stock equivalents.  The appreciation distribution payable on the exercise of a Stock Appreciation Right will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the Stock Appreciation Right) of a number of shares of Common Stock equal to the number of share of Common Stock equivalents in which the Participant is vested under such Stock Appreciation Right and with respect to which the Participant is exercising the Stock Appreciation Right on such date, over (B) the strike price that is determined by the Committee pursuant to Section 7(b)(ii).
 
(iv)          Vesting.  At the time of the grant of a Stock Appreciation Right, the Board may impose such restrictions or conditions to the vesting of such Right as it deems appropriate.
 
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(v)        Exercise.  To exercise any outstanding Stock Appreciation Right, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Rights agreement evidencing such Right.
 
(vi)        Payment. The appreciation distribution in respect of a Stock Appreciation Right may be paid in Common Stock, in cash, or any combination of the two, as the Board deems appropriate.
 
(vii)       Termination of Continuous Service.  If a Participant’s Continuous Service terminates for any reason, any unvested Stock Appreciation Rights shall be forfeited and any vested Stock Appreciation Rights shall be automatically redeemed.
 
8.          Covenants of the Company.
 
(a)         Availability of Shares.  During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Stock Awards.
 
(b)          Securities Law Compliance.  A Participant shall not be eligible for the grant of a Stock Award or the subsequent issuance of Common Stock pursuant to the Stock Award if such grant or issuance would be in violation of any applicable securities laws.
 
9.            Use of Proceeds from Stock.
 
Proceeds from the sale of Common Stock pursuant to Stock Awards shall constitute general funds of the Company.
 
10.           Miscellaneous.
 
(a)           Acceleration of Exercisability and Vesting.  The Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.
 
(b)          Stockholder Rights.  No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock Award pursuant to its terms.
 
(c)         No Employment or other Service Rights.  Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
 
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(d)         Investment Assurances.  The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (1) the issuance of the shares of Common Stock upon the exercise or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
 
(e)          Withholding Obligations.  To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under a Stock Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means:  (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Stock Award; provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such other amount as may be necessary to avoid variable award accounting); or (iii) delivering to the Company owned and unencumbered shares of Common Stock; or (iv) by such other method as may be set forth in the Stock Award Agreement.
 
(f)          Electronic Delivery.  Any reference herein to a “written” agreement or document shall include any agreement or document delivered electronically or posted on the Company’s website.
 
(g)         Corporate Action Constituting Grant of Stock Awards.  Corporate action constituting a grant by the Company of a Stock Award to any Participant shall be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Stock Award is communicated to, or actually received or accepted by, the Participant. If the Board determines that the terms of a Stock Award do not reflect the appropriate exercise, strike or purchase price on the appropriate date of grant in accordance with the requirements of the Plan, the terms of the Stock Award shall be automatically corrected to reflect the appropriate price or other terms provided for under the Plan, as determined by the Board, without the need for consent of the Participant; provided, however , that no such correction shall result in a direct or indirect reduction in the exercise price or strike price of the Stock Award.
 
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(h)         Compliance with 409A.  To the extent that the Board determines that any Stock Award granted under the Plan is subject to Section 409A of the Code, the Stock Award Agreement evidencing such Stock Award shall incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code.  To the extent permitted by applicable law, the Plan and Stock Award Agreements shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan was approved by the Board and stockholders of the Company. Notwithstanding anything in the Plan or in any Stock Award Agreement to the contrary, to the extent that any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of the Code would otherwise be payable or distributable under the Plan or any Stock Award Agreement by reason of the occurrence of a Change in Control, or Participant’s Disability or separation from service, such amount or benefit will not be payable or distributable to Participant by reason of such circumstance unless (i) the circumstances giving rise to such Change in Control, Disability or separation from service meet any description or definition of “change in control event,” “disability” or “separation from service”, as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition), or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. This provision does not prohibit the vesting of any amount upon a Change in Control, Disability or separation from service, however defined.  If this provision prevents the payment or distribution of any amount or benefit, such payment or distribution shall be made on the date, if any, on which an event occurs that constitutes a Section 409A-compliant “change in control event” “disability” or “separation from service” as the case may be.  In addition, to the greatest extent permitted by applicable law, the Board may adopt such amendments to the Plan and the applicable Stock Award Agreement (including but not limited to increasing the exercise price of an Award to the extent required for the avoidance of the tax consequences set forth in Section 409A(a)(1)) or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Board determines are necessary or appropriate to (i) exempt the Stock Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Award, or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.
 
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11.           Adjustments upon Changes in Stock.
 
(a)           Capitalization Adjustments.  If any change is made in, or other event occurs with respect to, the Common Stock subject to the Plan or subject to any Stock Award without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company (each a “Capitalization Adjustment”), the Plan will be appropriately adjusted in the class(es) and maximum number of securities subject to the Plan pursuant to Sections 4(a) and 4(b) and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price per share of Common Stock subject to such outstanding Stock Awards.  The Board shall make such adjustments, and its determination shall be final, binding and conclusive.  (The conversion of any convertible securities of the Company shall not be treated as a transaction “without receipt of consideration” by the Company).
 
(b)        Dissolution or Liquidation.  Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, and upon ten (10) days prior written notice, all outstanding Stock Awards shall terminate immediately prior to the completion of such dissolution or liquidation, and shares of Common Stock subject to the Company’s repurchase option may be repurchased by the Company notwithstanding the fact that the holder of such stock in still in Continuous Service, provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
 
(c)          Corporate Transaction.  Except as otherwise stated in the Stock Award Agreement, in the event of a Corporate Transaction, any surviving corporation or acquiring corporation may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (it being understood that similar stock awards include, but are not limited to, awards to acquire the same consideration paid to the stockholders or the Company, as the case may be, pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or such successor’s parent company), if any, in connection with such Corporate Transaction.  A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award.  Except as otherwise stated in the Stock Award Agreement, in the event that any surviving corporation or acquiring corporation does not assume or continue any or all such outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by Participants whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction (“Current Participants”), the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five (5) days prior to the effective time of the Corporate Transaction), the Stock Awards shall terminate if not exercised (if applicable) at or prior to such effective time, and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards held by Participants whose Continuous Service has not terminated shall (contingent upon the effectiveness of the Corporate Transaction) lapse.  With respect to any other Stock Awards outstanding under the Plan that have not been assumed, continued or substituted that are not held by current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated, unless otherwise provided in a written agreement between the Company or any Affiliate and the holder of such Stock Award, and such Stock Awards, upon advance written notice by the Company of at least 10 days to the holders of such Stock Awards,  shall terminate if not exercised (if applicable) prior to the effective time of the Corporate Transaction; provided, however that any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction.
 
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(d)           Change in Control.
 
(i)           Stock Awards May be Assumed.  Except as otherwise stated in the Stock Award Agreement, in the event of a Change in Control, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all Stock Awards outstanding under the Plan or may substitute similar stock awards for Stock Awards outstanding under the Plan (including but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Change in Control), and any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to Stock Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Change in Control. A surviving corporation or acquiring corporation (or its parent) may choose to assume or continue only a portion of a Stock Award or substitute a similar stock award for only a portion of a Stock Award.
 
(ii)          Stock Awards Not Assumed Held by Current Participants.  Except as otherwise stated in the Stock Award Agreement, in the event of a Change in Control in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by Current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Awards may be exercised) shall (contingent upon the effectiveness of the Change in Control) be accelerated in full to a date prior to the effective time of such Change in Control as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five business (5) days prior to the effective time of the Change in Control), and such Stock Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Change in Control, and any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall lapse (contingent upon the effectiveness of the Change in Control).
 
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(iii)        Stock Awards Not Assumed Held by Persons other than Current Participants.  Except as otherwise stated in the Stock Award Agreement, in the event of a Change in Control in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Stock Awards or substitute similar stock awards for such outstanding Stock Awards, then with respect to Stock Awards that have not been assumed, continued or substituted and that are held by persons other than current Participants, the vesting of such Stock Awards (and, if applicable, the time at which such Stock Award may be exercised) shall not be accelerated and such Stock Awards (other than a Stock Award consisting of vested and outstanding shares of Common Stock not subject to the Company’s right of repurchase), upon advance written notice by the Company of at least 10 days to the holders of such Stock Awards, shall terminate if not exercised (if applicable) prior to the effective time of the Change in Control; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Stock Awards shall not terminate and may continue to be exercised notwithstanding the Change in Control.
 
(iv)         Additional Provisions.  A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant.  A Stock Award may vest as to all or any portion of the shares subject to the Stock Award (i) immediately upon the occurrence of a Change in Control, whether or not such Stock Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, and/or (ii) in the event a Participant’s Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control.
 
12.           Amendment of the Plan and Stock Awards.
 
(a)          Amendment of Plan.  The Board at any time, and from time to time, may amend the Plan.
 
(b)          Stockholder Approval.  The Board, in its sole discretion, may submit any other amendment to the Plan for stockholder approval.
 
(c)         No Impairment of Rights.  Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
 
(d)         Amendment of Stock Awards.  The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided, however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
 
13.           Termination or Suspension of the Plan.
 
(a)       Plan Term.  The Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall terminate on September 21, 2031.  No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

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(b)          No Impairment of Rights.  Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted while the Plan is in effect except with the written consent of the Participant.
 
14.           Effective Date of Plan.
 
The Plan shall become effective as determined by the Board.
 
15.           Choice of Law.
 
The law of the State of New York shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of laws rules.
 
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Attachment A
 
Janel Corporation
Amended and Restated 2017 Equity Incentive Plan
Stock Option Agreement
(Non-statutory Stock Option)
 
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Stock Option Agreement, Janel Corporation (the “Company”) has granted you an option under its Amended and Restated 2017 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan.
 
The details of your option are as follows:
 
1.            Vesting.  Subject to the limitations contained herein, your option will vest as provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.
 
2.            Number of Shares and Exercise Price.  The number of shares of Common Stock subject to your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments.
 
3.           Exercise prior to Vesting (“Early Exercise”).  If permitted in your Grant Notice (i.e., the “Exercise Schedule” indicates that “Early Exercise” of your option is permitted) and subject to the provisions of your option, you may elect at any time that is both (i) during the period of your Continuous Service and (ii) during the term of your option, to exercise all or part of your option, including the nonvested portion of your option; provided, however, that:
 
(a)        a partial exercise of your option shall be deemed to cover first vested shares of Common Stock and then the earliest vesting installment of unvested shares of Common Stock;
 
(b)         any shares of Common Stock so purchased from installments that have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;
 
(c)          you shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and
 
4.           Method of Payment.  Payment of the exercise price is due in full upon exercise of all or any part of your option.  You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant Notice.
 
5.            Whole Shares.  You may exercise your option only for whole shares of Common Stock.
 
6.           Securities Law Compliance.  Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act.  The exercise of your option also must comply with other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations.
 
7.            Term.  You may not exercise your option before the commencement or after the expiration of its term.  The term of your option commences on the Date of Grant and expires upon the earliest of the following:
 
(a)           three (3) months after the termination of your Continuous Service for any reason other than your Disability or death, provided that if during any part of such three (3) month period your option is not exercisable solely because of the condition set forth in Section 6, your option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period of three (3) months after the termination of your Continuous Service;
 
(b)           twelve (12) months after the termination of your Continuous Service due to your Disability;
 
(c)          eighteen (18) months after your death if you die either during your Continuous Service or within three (3) months after your Continuous Service terminates;
 
(d)           the Expiration Date indicated in your Grant Notice; or
 
(e)           the day before the tenth (10th) anniversary of the Date of Grant.
 
8.          Exercise.
 
(a)         You may exercise the vested portion of your option (and the unvested portion of your option if your Grant Notice so permits) during its term by delivering a Notice of Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require.
 
(b)          By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (1) the exercise of your option, (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (3) the disposition of shares of Common Stock acquired upon such exercise.
 
(c)          By exercising your option agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto.  In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to your shares of Common Stock until the end of such period.
 
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9.          Transferability.  Your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.  Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise your option.
 
10.          Change In Control.
 
(a)           If a Change in Control occurs and as of the effective time of such Change in Control your Continuous Service terminates due to an involuntary termination (not including death or Disability) without Cause or due to a voluntary termination with Good Reason, then, as of the date of termination of Continuous Service, the vesting and exercisability of your option shall be accelerated in full.
 
(b)        “Cause” means the occurrence of any one or more of the following:  (i) your commission of any crime involving fraud, dishonesty or moral turpitude; (ii) your attempted commission of or participation in a fraud or act of dishonesty against the Company that results in (or might have reasonably resulted in) material harm to the business of the Company; (iii) your intentional, material violation of any contract or agreement between you and the Company or any statutory duty you owe to the Company; or (iv) your conduct that constitutes gross insubordination, incompetence or habitual neglect of duties and that results in (or might have reasonably resulted in) material harm to the business of the Company; provided, however, that the action or conduct described in clauses (iii) and (iv) above will constitute “Cause” only if such action or conduct continues after the Company has provided you with written notice thereof and thirty (30) days to cure the same.
 
(c)          “Good Reason” means that one or more of the following are undertaken by the Company without your express written consent:  (i) the assignment to you of any duties or responsibilities that results in a material diminution in your function as in effect immediately prior to the effective date of the Change in Control; provided, however, that a change in your title or reporting relationships shall not provide the basis for a voluntary termination with Good Reason; (ii) a material reduction by the Company in your annual base salary, as in effect on the effective date of the Change in Control or as increased thereafter; provided, however, that Good Reason shall not be deemed to have occurred in the event of a reduction in your annual base salary that is pursuant to a salary reduction program affecting substantially all of the employees of the Company and that does not adversely affect you to a greater extent than other similarly situated employees; (iii) any failure by the Company to continue in effect any benefit plan or program, including incentive plans or plans with respect to the receipt of securities of the Company, in which you were participating immediately prior to the effective date of the Change in Control (hereinafter referred to as “Benefit Plans”), or the taking of any action by the Company that would adversely affect your participation in or reduce your benefits under the Benefit Plans or deprive you of any fringe benefit that you enjoyed immediately prior to the effective date of the Change in Control; provided, however, that Good Reason shall not be deemed to have occurred if the Company provides for your participation in benefit plans and programs that, taken as a whole, are comparable to the Benefit Plans; (iv) a relocation of your business office to a location more than fifty (50) miles from the location at which you performed your duties as of the effective date of the Change in Control, except for required travel by you on the Company’s business to an extent substantially consistent with your business travel obligations prior to the effective date of the Change in Control; or (v) a material breach by the Company of any provision of the Plan or the Option Agreement or any other material agreement between you and the Company concerning the terms and conditions of your employment.
 
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11.          Option not a Service Contract.  Your option is not an employment or service contract, and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment.  In addition, nothing in your option shall obligate the Company or an Affiliate, their respective stockholders, Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
 
12.           Withholding Obligations.
 
(a)         At the time you exercise your option, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.
 
(b)        Upon your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid variable award accounting).  If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option.  Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
 
(c)        You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied.  Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company shall have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein unless such obligations are satisfied.

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13.          Notices.  Any notices provided for in your option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.
 
14.          Governing Plan Document.  Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan.  In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control.
 
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Attachment B
 
Janel Corporation
Stock Option Grant Notice
(Amended and Restated 2017 Equity Incentive Plan)
 
Janel Corporation (the “Company”), pursuant to its Amended and Restated 2017 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.
 
Optionholder:
 
Date of Grant:
 
Vesting Commencement Date:
 
Number of Shares Subject to Option:
 
Exercise Price (Per Share):
 
Total Exercise Price:
 
Expiration Date:
 

Type of Grant:  ☐  Non-statutory Stock Option
 
Exercise Schedule:  ☐  Same as Vesting Schedule  ☐  Early Exercise Permitted
 
Vesting Schedule:
 
Payment:  By one or a combination of the following items (described in the Stock Option Agreement):
 
☐  By cash or check
 
☐  Pursuant to a Regulation T Program if the Shares are publicly traded
 
☐  By delivery of already-owned shares if the Shares are publicly traded
 
Additional Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Stock Option Agreement and the Plan.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding the acquisition of stock in the Company and supersede all prior oral and written agreements on that subject with the exception of (i) options previously granted and delivered to Optionholder under the Plan, and (ii) the following agreements only:
 
Other Agreements:
 

Janel Corporation
 
Optionholder:
     
By:
       
 
Signature
   
Signature
Title:
   
Date:
 
Date:
       

Attachments:  Stock Option Agreement, Amended and Restated 2017 Equity Incentive Plan and Notice of Exercise

B-2
Attachment C
 
NOTICE OF EXERCISE
 
TO:  Janel Corporation
 
Date of Exercise: _______________
 
Ladies and Gentlemen:
 
This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.
 
Stock option dated:
 
Number of shares as to which option is exercised:
 
Certificates to be issued in name of:
 
Total exercise price:
$
Cash payment delivered herewith:
$
Value of ________ shares of common stock delivered herewith1:
$

By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Amended and Restated 2017 Equity Incentive Plan and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option.
 
I hereby make the following certifications and representations with respect to the number of shares of Common Stock of the Company listed above (the “Shares”), which are being acquired by me for my own account upon exercise of the Option as set forth above:
 
 
Very truly yours,
   
     

1
Shares must meet the public trading requirements set forth in the option.  Shares must be valued in accordance with the terms of the option being exercised, must have been owned for the minimum period required in the option, and must be owned free and clear of any liens, claims, encumbrances or security interests.  Certificates must be endorsed or accompanied by an executed assignment separate from certificate.


Exhibit 23.1
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT

To the Board of Directors and Stockholders of
Janel Corporation and Subsidiaries

We consent to the incorporation by reference in Registration Statement on Form S-8 (No. 333-222791 and 333-253400) of Janel Corporation of our report dated December 23, 2021 with respect to our audit of the consolidated financial statements of Janel Corporation and Subsidiaries appearing in this Annual Report on Form 10-K of Janel Corporation as of and for the years ended September 30, 2021 and 2020.

/s/Prager Metis CPAs, LLC
 
Prager Metis CPAs, LLC Basking Ridge, New Jersey December 23, 2021


EXHIBIT 31.1

CERTIFICATION
PURSUANT TO 17 CFR 240. 13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dominique Schulte, certify that:

1.          I have reviewed this Annual Report on Form 10-K of Janel Corporation (the Registrant) ;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.          The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

  (a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

  (b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

  (c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

  (d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.          The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

  (a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

  (b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: December 23, 2021
/s/ Dominique Schulte
 
Dominique Schulte
 
Board Chair, President and Chief Executive Officer
 
(Principal Executive Officer)


EXHIBIT 31.2

CERTIFICATION
PURSUANT TO 17 CFR 240. 13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Vincent A. Verde, certify that:

1.          I have reviewed this Annual Report on Form 10-K of Janel Corporation (the Registrant) ;

2.          Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.          Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.          The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

  (a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

  (b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

  (c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

  (d)
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.          The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent function):

  (a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

  (b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: December 23, 2021
/s/ Vincent A. Verde
 
Vincent A. Verde
 
Principal Financial Officer, Treasurer and Secretary


EXHIBIT 32.1

CERTIFICATION
PURSUANT TO 18 U.S.C. §1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of Janel Corporation for the fiscal year ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dominique Schulte, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 23, 2021
/s/ Dominique Schulte
 
Dominique Schulte
 
Board Chair, President and Chief Executive Officer
 
(Principal Executive Officer)

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.


EXHIBIT 32.2

CERTIFICATION
PURSUANT TO 18 U.S.C. §1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of Janel Corporation for the fiscal year ended September 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Vincent A. Verde, Principal Financial Officer, Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.          The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.          The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 23, 2021
/s/ Vincent A. Verde
 
Vincent A. Verde
 
Principal Financial Officer, Treasurer and Secretary

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.