UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  _____________________________

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 28, 2015 (January 22, 2015)

 

                                                             TWINLAB CONSOLIDATED HOLDINGS, INC.                                                             

(Exact name of registrant as specified in its charter)

 

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

 

632 Broadway, Suite 201, New York, NY   10012
(Address of principal executive offices)   (Zip Code)

  

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

 

 

 

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

 

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

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 
 

 

Item 1.01 Entry into a Material Definitive Agreement.

  

MidCap Financial Trust

 

On January 22, 2015, Twinlab Consolidated Holdings, Inc. (the “Company”) and its direct and indirect wholly owned subsidiaries, Twinlab Consolidation Corporation (“TCC”), Twinlab Holdings, Inc. (“THI”), Twinlab Corporation (“Twinlab”), ISI Brands Inc. (“ISI Brands”), TCC CM Subco I, Inc. (“Subco I”) and TCC CM Subco II, Inc. (“Subco 2” and with the Company, TCC, THI, Twinlab and ISI Brands collectively, the “Twinlab Companies”), entered into a Credit and Security Agreement (the “Credit Agreement”) with MidCap Financial Trust (“MidCap”). The Credit Agreement expires on January 22, 2018 (the “Expiration Date”).

 

Pursuant to the Credit Agreement, MidCap made available to the Twinlab Companies a $15,000,000 revolving credit facility (the “Facility”). The Twinlab Companies have the right to request an increase in the Facility of up to an additional $5,000,000 such that the total Facility may be as much as $20,000,000.

 

Availability of funds pursuant to the Facility is, subject to certain adjustments, based on (1) a percentage of the Twinlab Companies’ Eligible Accounts (as defined in the Credit Agreement) plus (2) the lesser of (x) a percentage of the Twinlab Companies’ net Orderly Liquidation Value of the Eligible Inventory (as defined in the Credit Agreement) or (y) a percentage of the Twinlab Companies’ Eligible Inventory (as defined in the Credit Agreement) minus (3) certain reserves and/or adjustments provided for by the Credit Agreement.

 

The Twinlab Companies executed a revolving loan note (the “Revolving Loan Note”) to evidence borrowings under the Facility. Interest on amounts borrowed under the Facility is charged at the LIBOR Rate (as defined in the Credit Agreement) plus five (5%) percent. In the event of certain circumstances, the interest rate will be based on the “prime rate” as announced by Wells Fargo plus five (5%) percent.

 

The Twinlab Companies are also required under the Credit Agreement to pay MidCap (i) an unused line fee of 0.042% per month; (ii) a collateral management fee of 0.10% per month; (iii) an origination fee of $150,000 (in the event of an increase in the Facility, an additional origination fee of one (1%) percent of the increase is also payable); (iv) a fee for early termination ranging from two (2%) percent to one (1%) percent of MidCap’s commitment in the event MidCap’s funding obligations under the Credit Agreement terminate prior to the Expiration Date; and (v) audit and inspection fees.

 

The Credit Agreement contains terms and conditions customary for a transaction of this nature, including, without limitation, (i) furnishing of reports and financial information; (ii) restrictions on incurring certain debt and contingent obligations; (iii) restrictions on certain liens; (iv) restrictions on making certain distributions; (v) restrictions on entering into certain restrictive agreements; (vi) restrictions on payments and modifications of Subordinated Debt (as defined in the Credit Agreement); (vii) restrictions on (a) certain consolidations, mergers or asset sales and (b) a change in control; (viii) restrictions on certain asset acquisitions and investments; (ix) requiring the Twinlab Companies to conduct certain lines of business; and (x) restrictions on certain sale and leaseback transactions.

 

The Credit Agreement requires that the Twinlab Companies meet (i) a minimum Adjusted EBITDA (as defined in the Credit Agreement) ; (ii) a Fixed Charge Coverage Ratio (as defined in the Credit Agreement); and (iii) a Total Funded Debt (as defined in the Credit Agreement) to Adjusted EBITDA ratio at certain times as set forth in the Credit Agreement.

 

2
 

 

The Credit Agreement provides that the Twinlab Companies use the proceeds of revolving loans made under the Facility solely for (a) transaction fees in connection with the Credit Agreement, the JL Purchase Agreement and related agreements (as defined and discussed below in this Item 1.01), the Penta NWPA and related agreements (as defined and discussed below in this Item 1.01) and the refinancing of the Bank (as defined in Item 1.02 of this Report) debt, (b) for working capital and/or (c) Permitted Acquisitions (as defined in the Credit Agreement).

 

The Twinlab Companies granted MidCap a first priority security interest in all of the Twinlab Companies’ existing and future accounts receivable, inventory, general intangibles and all other tangible and intangible assets (other than equipment in which it has a second priority lien and real property and improvements and fixtures thereon) of the Twinlab Companies’ business. Pursuant to separate Pledge Agreements, dated as of January 22, 2015 (collectively, the “MidCap Pledge Agreements”), each of the Company, TCC and THI pledged the shares owned by the Company, TCC and THI, respectively, in each of their respective direct subsidiaries as security for the obligations under the Credit Agreement.

 

In connection with the entry into the Credit Agreement, the Company issued MidCap Funding X Trust (“MidCap Funding”), an affiliate of MidCap, a warrant, exercisable through January 22, 2018, for an aggregate of 500,000 shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), at a per share exercise price of $0.76 (the “MidCap Warrant”). The number of shares issuable upon exercise of the MidCap Warrant is subject to adjustment on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’s assets or property. In addition, the Company is required to give additional anti-dilution protection under the MidCap Warrant in the event the Company issues a security exercisable for or convertible into shares of Common Stock and such security contains anti-dilution protection.

 

The Company and MidCap Funding have entered into a Registration Rights Agreement, dated as of January 22, 2015 (the “Registration Rights Agreement”) granting MidCap Funding certain registration rights, commencing October 1, 2015, for the shares of Common Stock issuable on exercise of the MidCap Warrant.

 

On January 23, 2015, MidCap informed the Twinlab Companies that MidCap had assigned all of its rights, powers, privileges and duties as “Agent” under the Credit Agreement, the Revolving Loan Note, the Security Documents (as defined in the Credit Agreement), and the MidCap Pledge Agreements, as well as all of its right, title and interest in and to the loans made under the Facility to MidCap Funding. 

 

The foregoing descriptions of the (i) Credit Agreement; (ii) Revolving Loan Note; (iii) MidCap Pledge Agreements; (iv) MidCap Warrant and (v) Registration Rights Agreement are qualified in their entirety by reference to the full text of such documents, which documents are exhibits to this Report.

 

JL-BBNC Mezz Utah, LLC

 

On January 22, 2015, the Twinlab Companies entered into a Note and Warrant Purchase Agreement (the “JL Purchase Agreement”) with JL-BBNC Mezz Utah, LLC (“JL”).

 

Pursuant to the JL Purchase Agreement, JL purchased from the Twinlab Companies (i) a secured note in the amount of $5,000,000 (the “Note”) and (ii) two warrants exercisable for an aggregate of 2,329,400 shares of Common Stock (the “JL Warrants”).

 

The Note matures on February 13, 2020 (the “Maturity Date”). Payments of principal are due on a quarterly basis commencing March 1, 2017 in installments of (i) $250,000 per quarter for the first eight quarters, (ii) $350,000 per quarter for the next four quarters and (iii) a final payment of the balance due on the Maturity Date. The Note bears interest at a rate of twelve percent (12%) per year (“Interest”). Interest is payable monthly, commencing on February 2, 2015. Following an Event of Default (as defined in the JL Purchase Agreement) and after the Maturity Date, the rate of interest will be increased to eighteen percent (18%) per year. Amounts outstanding under the Note may be prepaid, in whole or in part at any time, with prepayment fees ranging from three percent (3%) to one percent (1%) depending on when the prepayment is made. No prepayment fee is due for prepayments made after January 22, 2018.

 

3
 

 

The Twinlab Companies were required to pay certain fees and expenses in connection with the sale of the Note and Warrants, including (i) legal fees incurred by JL in connection with the JL Purchase Agreement and the transactions contemplated by such Agreement and (ii) a fee of $75,000.

 

The JL Purchase Agreement provides that the Twinlab Companies shall use the proceeds of the Note to (a) pay a portion of the consideration for the acquisition of substantially all the assets of either one or both of two (2) manufacturers of nutritional products (as described as “Target No. 1” and “Target No. 2” in the Company’s Report on Form 8-K, filed with the Securities and Exchange Commission on September 22, 2014 under the caption “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION – OVERVIEW AND OUTLOOK – Recent Developments – Purchase of Option Agreement ”), (b) pay costs relating to the closing of the transactions contemplated by the JL Purchase Agreement and the closing of the Target No. 1 acquisition and the Target No. 2 acquisition, or (c) for working capital and general corporate purposes.

 

Pursuant to the JL Purchase Agreement, the Twinlab Companies granted JL a security interest (the “Security Interest”) in and lien on their assets as security for the obligations under the JL Purchase Agreement. The Security Interest is evidenced by a (i) Security Agreement, dated as of January 22, 2015, by and among the Twinlab Companies and JL (the “Security Agreement”) and (ii) a Trust Deed, dated January 22, 2015, by Twinlab in favor of JL (the “Trust Deed”) covering real property owned by Twinlab in American Fork, Utah.

 

In addition, pursuant to separate Pledge Agreements, dated as of January 22, 2015 (collectively, the “JL Pledge Agreements”), each of the Company, TCC and THI pledged the shares owned by the Company, TCC and THI, respectively, in each of their respective direct subsidiaries as security for the obligations under the JL Purchase Agreement.

 

The JL Purchase Agreement contains terms and conditions customary for a transaction of this nature including, without limitation, (i) furnishing of reports and financial information; (ii) obtaining key-person life insurance on the life of the chief executive officer and/or president of the Twinlab Companies; (iii) observer status at meetings of the Board of Directors of the Company until the Note is paid in full; (iv) meeting certain financial tests at certain times as to Minimum Adjusted EBITDA, Fixed Charge Coverage Ratio and Total Funded Debt to Adjusted EBITDA Ratio, all as defined in the JL Purchase Agreement; (v) restrictions on certain mergers, consolidations, asset sales and acquisitions; (vi) restrictions on the making of capital expenditures in any fiscal year in excess of $2,500,000; (vii) restrictions on the making of certain dividends and purchase, redemption or retirement of Equity Interests (as defined in the JL Purchase Agreement); (viii) restrictions on incurring certain indebtedness and (ix) restrictions on certain asset dispositions.

 

Pursuant to the JL Warrants, JL has the right to acquire an aggregate of 2,329,400 shares of Common Stock, subject to certain adjustments, at an aggregate purchase price of $0.01, at any time prior to February 13, 2020.

 

In addition to adjustments on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’s assets or property, the number of shares of Common Stock issuable pursuant to the JL Warrants shall be increased in the event the Company’s and its Subsidiaries’ (as defined in the JL Warrants) audited Adjusted EBITDA (as defined in the JL Warrants) for the fiscal year ending December 31, 2018 does not equal or exceed $19,250,000.

 

4
 

 

The Company has granted JL certain registration rights, commencing October 1, 2015, for the shares of Common Stock issuable on exercise of the JL Warrants.

 

The foregoing descriptions of the (i) JL Purchase Agreement; (ii) Note; (iii) JL Warrants; (iv) Security Agreement, (v) Trust Deed and (vi) JL Pledge Agreements are qualified in their entirety by reference to the full text of such documents, which documents are exhibits to this Report.

 

Penta Mezzanine SBIC Fund I, L.P.

 

As previously reported in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 18, 2014, the Company, TCC, THI, ISI Brands and Twinlab entered into a Note and Warrant Purchase Agreement, dated as of November 13, 2014 (the “Penta NWPA”), with Penta Mezzanine SBIC Fund I, L.P. (“Penta”) along with certain related agreements.

 

On January 22, 2015, the Twinlab Companies and Penta executed a First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder (the “First Amendment”). Pursuant to the First Amendment, the parties agreed (i) that each of Subco I and Subco II be joined as a party to, and be bound by, (x) the Penta NWPA and (y) the Security Agreement, dated as of November 13, 2014, by and among the Company, TCC, THI, ISI Brands and Twinlab; (ii) to amend and restate the Note executed by the Company, TCC, THI, ISI Brands and Twinlab on November 13, 2014 (the “Penta Note”) to add each of Subco I and Subco II as borrowers under the Penta Note (as so amended and restated, the “Restated Note”); and (iii) to amend the Penta NWPA to reflect the entry by the Twinlab Companies into the (x) JL Purchase Agreement and related agreements and (y) the Credit Agreement and to include the debt owed to each of JL and MidCap in certain of the covenants set forth in the Penta NWPA including, without limitation, covenants dealing with (1) indebtedness; (2) entering into or modifying certain agreements; and (3) payments on subordinated debt.

 

Pursuant to the First Amendment, Penta consented to the entry by the Twinlab Companies into the (i) Credit Agreement and (ii) JL Purchase Agreement.

 

The First Amendment also provided that the Company issue Penta a warrant, exercisable through November 13, 2019, for an aggregate of 869,618 shares of Common Stock at a per share exercise price of $1.00 (the “First Amendment Warrant”). The number of shares issuable upon exercise of the First Amendment Warrant is subject to adjustment on terms and conditions customary for a transaction of this nature in the event of (i) reorganization, recapitalization, stock split-up, combination of shares, mergers, consolidations and (ii) sale of all or substantially all of the Company’s assets or property.

 

The Company has granted Penta certain registration rights, commencing October 1, 2015, for the shares of Common Stock issuable on exercise of the First Amendment Warrant.

 

Finally, pursuant to separate Pledge Agreements, dated as of January 22, 2015 (collectively, the “Penta Pledge Agreements”), each of the Company, TCC and THI pledged the shares owned by the Company, TCC and THI, respectively, in each of their respective direct subsidiaries as security for the obligations under the (i) Penta NWPA and (ii) Restated Note.

 

5
 

 

The foregoing descriptions of the (i) First Amendment; (ii) Restated Note; (iii) First Amendment Warrant and (iv) Penta Pledge Agreements are qualified in their entirety by reference to the full text of such documents, which documents are exhibits to this Report.

 

Item 1.02 Termination of a Material Definitive Agreement.

 

On January 22, 2015, the Credit Agreement, dated as of January 7, 2008, among Twinlab, THI and Fifth Third Bank (the “Bank”), as amended (the “Fifth Third Credit Agreement”), was terminated by the payment of $9,517,092.43 to the Bank by MidCap (the “MidCap Payment”). The MidCap Payment repaid in full all of the outstanding indebtedness, liabilities and obligations of Twinlab under the Credit Agreement except for the Continuing Liabilities (as defined in the Payoff Letter, dated January 16, 2015, from the Bank to Twinlab, the Company, TCC, ISI Brands, THI, David L. Van Andel, William W. Nicholson and MidCap (the “Payoff Letter”)).

 

Pursuant to the Payoff Letter, all of the Bank’s security interests in, and other liens on, all real and personal property assets previously provided to the Bank as collateral were terminated, except with respect to Items, Payment Orders and the Fifth Third Deposit Accounts (as defined in the Payoff Letter).

 

The foregoing description of the Payoff Letter is qualified in its entirety by reference to the full text of such document, which document is an exhibit to this Report.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

(a) The information set forth in Item 1.01 above is hereby incorporated by reference in answer to Item 2.03(a).
   
Item 9.01 Financial Statements and Exhibits.
   
(d)                Exhibits.
   
Exhibit 10.23 Credit and Security Agreement, dated as of January 22, 2015, by and among Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., Twinlab Corporation, ISI Brands Inc., TCC CM Subco I, Inc. and TCC CM Subco II, Inc. and MidCap Financial Trust.
   
Exhibit 10.24 Revolving Loan Note, dated January 22, 2015, by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. to the order of MidCap Financial Trust.
   
Exhibit 10.25 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and MidCap Financial Trust.
   
Exhibit 10.26 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidation Corporation and MidCap Financial Trust.
   
Exhibit 10.27 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Holdings, Inc. and MidCap Financial Trust.

 

6
 

 

Exhibit 10.28 Warrant 2015-1, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to MidCap Funding X Trust.
   
Exhibit 10.29 Registration Rights Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and MidCap Funding X Trust.
   
Exhibit 10.30 Note and Warrant Purchase Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.31 Note, dated as of January 22, 2015, made by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. payable to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.32 Warrant 2015-2, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.33 Warrant 2015-3, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.34 Security Agreement, dated as of January 22, 2015, made by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. in favor of JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.35 Trust Deed, dated January 22, 2015, among Twinlab Corporation, as Trustor, Ryan B. Hancey, as Trustee, and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.36 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.37 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidation Corporation and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.38 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Holdings, Inc. and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.39 First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder, dated as of January 22, 2015 by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.40 Amended and Restated Note, dated as of January 22, 2015, by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. in favor of Penta Mezzanine SBIC Fund I, L.P.

 

7
 

 

Exhibit 10.41 Warrant W-3, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.42 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.43 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidation Corporation and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.44 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Holdings, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.45 Letter, dated January 16, 2015, from Fifth Third Bank to Twinlab Corporation, Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, ISI Brands Inc., Twinlab Holdings, Inc., David L. Van Andel, William W. Nicholson and MidCap Financial Trust.

 

8
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Date: January 28, 2015 TWINLAB CONSOLIDATED HOLDINGS, INC.  
       
  By: /s/ Thomas A. Tolworthy  
    Thomas A. Tolworthy  
    President and Chief Executive Officer  

 

9
 

 

EXHIBIT INDEX

 

Exhibit No. Description
   
Exhibit 10.23 Credit and Security Agreement, dated as of January 22, 2015, by and among Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., Twinlab Corporation, ISI Brands Inc., TCC CM Subco I, Inc. and TCC CM Subco II, Inc. and MidCap Financial Trust.
   
Exhibit 10.24 Revolving Loan Note, dated January 22, 2015, by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. to the order of MidCap Financial Trust.
   
Exhibit 10.25 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and MidCap Financial Trust.
   
Exhibit 10.26 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidation Corporation and MidCap Financial Trust.
   
Exhibit 10.27 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Holdings, Inc. and MidCap Financial Trust.
   
Exhibit 10.28 Warrant 2015-1, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to MidCap Funding X Trust.
   
Exhibit 10.29 Registration Rights Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and MidCap Funding X Trust.
   
Exhibit 10.30 Note and Warrant Purchase Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.31 Note, dated as of January 22, 2015, made by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. payable to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.32 Warrant 2015-2, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.33 Warrant 2015-3, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.34 Security Agreement, dated as of January 22, 2015, made by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc. and TCC CM Subco II, Inc. in favor of JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.35 Trust Deed, dated January 22, 2015, among Twinlab Corporation, as Trustor, Ryan B. Hancey, as Trustee, and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.36 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and JL-BBNC Mezz Utah, LLC.

 

10
 

 

Exhibit 10.37 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidation Corporation and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.38 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Holdings, Inc. and JL-BBNC Mezz Utah, LLC.
   
Exhibit 10.39 First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder, dated as of January 22, 2015 by and between Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.40 Amended and Restated Note, dated as of January 22, 2015, by Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc. in favor of Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.41 Warrant W-3, dated January 22, 2015, issued by Twinlab Consolidated Holdings, Inc. to Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.42 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.43 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Consolidation Corporation and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.44 Pledge Agreement, dated as of January 22, 2015, by and between Twinlab Holdings, Inc. and Penta Mezzanine SBIC Fund I, L.P.
   
Exhibit 10.45 Letter, dated January 16, 2015, from Fifth Third Bank to Twinlab Corporation, Twinlab Consolidated Holdings, Inc., Twinlab Consolidation Corporation, ISI Brands Inc., Twinlab Holdings, Inc., David L. Van Andel, William W. Nicholson and MidCap Financial Trust.
   

 

11

 

Exhibit  10.23

 

CREDIT AND SECURITY AGREEMENT

 

dated as of January 22, 2015

 

by and among

 

TWINLAB CONSOLIDATED HOLDINGS, INC., TWINLAB CONSOLIDATION CORPORATION, TWINLAB HOLDINGS, INC., TWINLAB CORPORATION, ISI BRANDS INC., TCC CM SUBCO I, INC. and TCC CM SUBCO II, INC.

 

each as Borrower, and collectively as Borrowers,

 

and

 

MIDCAP FINANCIAL TRUST,

 

as Administrative Agent and as a Lender,

 

and

 

THE ADDITIONAL LENDERS

 

FROM TIME TO TIME PARTY HERETO

 

 

 

 

 
 

 

CREDIT AND SECURITY AGREEMENT

 

THIS CREDIT AND SECURITY AGREEMENT (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “ Agreement ”) is dated as of January 22, 2015 by and among TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (“ Parent ” or “ TCHI ”), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (“ TCC ”), TWINLAB HOLDINGS, INC., a Michigan corporation (“ Twinlab Holdings ”), ISI BRANDS INC., a Michigan corporation (“ ISI Brands ”), TWINLAB CORPORATION, a Delaware corporation (“ Twinlab Corporation ”) TCC CM SUBCO I, INC., a Delaware corporation (“ Subco I ”), and TCC CM SUBCO II, INC., a Delaware corporation (“ Subco II ”; together with Parent, TCC, Twinlab Holdings, ISI Brands, Subco I and any additional borrower that may hereafter be added to this Agreement (each individually as a “ Borrower ”, and collectively as “ Borrowers ”), MIDCAP FINANCIAL TRUST , a Delaware statutory trust, individually as a Lender, and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender.

 

RECITALS

 

Borrowers have requested that Lenders make available to Borrowers the financing facilities as described herein. Lenders are willing to extend such credit to Borrowers under the terms and conditions herein set forth.

 

AGREEMENT

 

NOW, THEREFORE , in consideration of the premises and the agreements, provisions and covenants herein contained, Borrowers, Lenders and Agent agree as follows:

 

Article 1 - DEFINITIONS

 

Section 1.1            Certain Defined Terms . The following terms have the following meanings:

 

Acceleration Event ” means the occurrence of an Event of Default (a) in respect of which Agent has declared all or any portion of the Obligations to be immediately due and payable pursuant to Section 10.2, (b) pursuant to Section 10.1(a), and in respect of which Agent has suspended or terminated the Revolving Loan Commitment pursuant to Section 10.2, and/or (c) pursuant to either Section 10.1(e) and/or Section 10.1(f).

 

Account Debtor ” means “account debtor”, as defined in Article 9 of the UCC, and any other obligor in respect of an Account.

 

Accounts ” means, collectively, (a) any right to payment of a monetary obligation, whether or not earned by performance, and (b) without duplication, any “account” (as defined in the UCC), any accounts receivable (whether in the form of payments for services rendered or goods sold, rents, license fees or otherwise), any “health-care-insurance receivables” (as defined in the UCC), any “payment intangibles” (as defined in the UCC) and all other rights to payment and/or reimbursement of every kind and description, whether or not earned by performance.

 

 
 

 

Additional Tranche ” means an additional amount of Revolving Loan Commitment equal to $5,000,000 (it being acknowledged that multiple Additional Tranches are permitted pursuant to Section 2.1(c) in minimum amounts of $1,000,000 each for a total of up to $5,000,000).

 

Agent ” means MCF, in its capacity as administrative agent for itself and for Lenders hereunder, as such capacity is established in, and subject to the provisions of, Article 11, and the successors and assigns of MCF in such capacity.

 

Affiliate ” means, with respect to any Person, (a) any Person that directly or indirectly controls such Person, (b) any Person which is controlled by or is under common control with such controlling Person, and (c) each of such Person’s (other than, with respect to any Lender, any Lender’s) officers or directors (or Persons functioning in substantially similar roles) and the spouses, parents, descendants and siblings of such officers, directors or other Persons. As used in this definition, the term “control” of a Person means the possession, directly or indirectly, of the power to vote ten percent (10%) or more of any class of voting securities of such Person or to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Affiliated Financing Documents ” means any credit, loan, letter of credit or related documents which are, both by express reference to this Agreement and by the terms of this Agreement, cross-defaulted with the Financing Documents, and for which a Credit Party hereunder is liable or contingently liable for payment or as security for which a Credit Party hereunder has pledged, assigned or subjected any assets to Agent, a Lender or an Affiliate of Agent or a Lender.

 

Affiliated Obligations ” means all “Obligations”, as such term is defined in the Affiliated Financing Documents.

 

Anti-Terrorism Laws ” means any Laws relating to terrorism or money laundering, including, without limitation, Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws administered by OFAC.

 

Applicable Margin ” means with respect to Revolving Loans and all other Obligations five percent (5%).

 

Asset Disposition ” means any sale, lease, license, transfer, assignment or other consensual disposition by any Credit Party of any asset.

 

Bankruptcy Code ” means Title 11 of the United States Code entitled “Bankruptcy”, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto.

 

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Base LIBOR Rate ” means, for each Interest Period, the rate per annum, determined by Agent in accordance with its customary procedures, and utilizing such electronic or other quotation sources as it considers appropriate (rounded upwards, if necessary, to the next 1/100%), to be the rate at which Dollar deposits (for delivery on the first day of such Interest Period or, if such day is not a Business Day on the preceding Business Day) in the amount of $1,000,000 are offered to major banks in the London interbank market on or about 11:00 a.m. (Eastern time) two (2) Business Days prior to the commencement of such Interest Period, for a term comparable to such Interest Period, which determination shall be conclusive in the absence of manifest error.

 

Base Rate ” means the per annum rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate,” with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate; provided, however, that Agent may, upon prior written notice to Borrower, choose a reasonably comparable index or source to use as the basis for the Base Rate.

 

Blocked Person ” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list or is named as a “listed person” or “listed entity” on other lists made under any Anti-Terrorism Law.

 

Borrower ” and “ Borrowers ” mean the entity(ies) described in the first paragraph of this Agreement and each of their successors and permitted assigns.

 

Borrower Facilities ” means the collective reference to each location of the Borrowers at which any Regulated Product is manufactured, distributed, packaged, labeled or held by or on behalf of a Borrower.

 

Borrower Representative ” means TCC, in its capacity as Borrower Representative pursuant to the provisions of Section 2.9, or any successor Borrower Representative selected by Borrowers and approved by Agent.

 

Borrowing Base ” means:

 

(a)          the product of (i) eighty-five percent (85%) multiplied by (ii) the aggregate Eligible Accounts; provided that if dilution of the Borrowers’ Accounts exceeds five percent (5%), such advance rate shall be reduced by one (1) percentage point for each whole or partial percentage point by which dilution exceeds five percent (5%); plus

 

(b)          the lesser of (i) eighty percent (80%) multiplied by the net Orderly Liquidation Value of the Eligible Inventory, or (ii) sixty percent (60%) multiplied by the value of the Eligible Inventory, valued at the lower of first-in-first-out cost or market cost, and after factoring in all rebates, discounts and other incentives or rewards associated with the purchase of the applicable Inventory, all as determined separately for each category of Inventory set forth in the most recent Inventory appraisal obtained by Agent (by way of example and not limitation, such categories on the Closing Date are raw materials, Semi-Finished Goods and finished goods); minus

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(c)          the amount of any reserves and/or adjustments provided for in Section 2.1(b)(i);

 

provided, however , that in no event shall the Eligible Inventory component of the Borrowing Base described in clause (b) above comprise more than sixty-six and seven-tenths of one percent (66.7%) of the entire Borrowing Base.

 

Borrowing Base Certificate ” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit C hereto.

 

Business Day ” means any day except a Saturday, Sunday or other day on which either the New York Stock Exchange is closed, or on which commercial banks in Washington, DC and New York City are authorized by law to close.

 

Capital Expenditures” means any expenditure that would be classified as a capital expenditure on a statement of cash flow of Borrowers prepared in accordance with GAAP.

 

Capital Lease ” means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

 

CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.A. § 9601 et seq ., as the same may be amended from time to time.

 

“Change in Control ” means any of the following events: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership, directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of or control over, voting stock of any Borrower (or other securities convertible into such voting stock) representing 40% or more of the combined voting power of all voting stock of any Borrower or (b) Parent ceases to own, directly or indirectly, 100% of the capital stock of any of its Subsidiaries. As used herein, “beneficial ownership” shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934.

 

Closing Date ” means the date of this Agreement.

 

Code ” means the Internal Revenue Code of 1986, as amended from time to time.

 

Collateral ” means all property, now existing or hereafter acquired, mortgaged or pledged to, or purported to be subjected to a Lien in favor of, Agent, for the benefit of Agent and Lenders, pursuant to this Agreement and the Security Documents, including, without limitation, all of the property described in Schedule 9.1 hereto.

 

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Commitment Annex ” means Annex A to this Agreement.

 

Commitment Expiry Date ” means the date that is three (3) years following the Closing Date.

 

Compliance Certificate ” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit B hereto.

 

Consolidated Subsidiary ” means, at any date, any Subsidiary the accounts of which would be consolidated with those of “parent” Borrower (or any other Person, as the context may require hereunder) in its consolidated financial statements if such statements were prepared as of such date.

 

Contingent Obligation ” means, with respect to any Person, any direct or indirect liability of such Person: (a) with respect to any Debt of another Person (a “ Third Party Obligation ”) if the purpose or intent of such Person incurring such liability, or the effect thereof, is to provide assurance to the obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto; (b) with respect to any undrawn portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any drawing; (c) under any Swap Contract, to the extent not yet due and payable; (d) to make take-or-pay or similar payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for any obligations of another Person pursuant to any Guarantee or pursuant to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of any Contingent Obligation shall be equal to the amount of the obligation so Guaranteed or otherwise supported or, if not a fixed and determinable amount, the maximum amount so Guaranteed or otherwise supported.

 

Controlled Group ” means all members of any group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control which, together with any Borrower, are treated as a single employer under Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA.

 

Credit Exposure ” means, at any time, any portion of the Revolving Loan Commitment and of any other Obligations that remains outstanding; provided, however, that no Credit Exposure shall be deemed to exist solely due to the existence of contingent indemnification liability, absent the assertion of a claim, or the known existence of a claim reasonably likely to be asserted, with respect thereto.

 

Credit Party ” means any Guarantor under a Guarantee of the Obligations or any part thereof, any Borrower and any other Person (other than Agent, a Lender or a participant of a Lender), whether now existing or hereafter acquired or formed, that becomes obligated as a borrower, guarantor, surety, indemnitor, pledgor, assignor or other obligor under any Financing Document; and “ Credit Parties ” means all such Persons, collectively.

 

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Debt ” as to any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures ,notes ,or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by Liens on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices) , (f) all obligations of such Person owing under hedge agreements (which amount shall be calculated based on the amount that would be payable by such Person if the hedge agreement were terminated on the date of determination), (g) any Prohibited Preferred Stock of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness described in clause (d) above shall be the lower of the amount of the obligation and the fair market value of the assets of such Person securing such obligation.

 

Default ” means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default.

 

Deposit Account ” means a “deposit account” (as defined in Article 9 of the UCC), an investment account, or other account in which funds are held or invested for credit to or for the benefit of any Borrower.

 

Deposit Account Control Agreement ” means an agreement, in form and substance satisfactory to Agent, among Agent, any Borrower and each financial institution in which such Borrower maintains a Deposit Account, which agreement provides that (a) such financial institution shall comply with instructions originated by Agent directing disposition of the funds in such Deposit Account without further consent by the applicable Borrower, and (b) such financial institution shall agree that it shall have no Lien on, or right of setoff or recoupment against, such Deposit Account or the contents thereof, other than in respect of usual and customary service fees and returned items for which Agent has been given value, in each such case expressly consented to by Agent, and containing such other terms and conditions as Agent may require, including as to any such agreement pertaining to any Lockbox Account, providing that such financial institution shall wire, or otherwise transfer, in immediately available funds, on a daily basis to the Payment Account all funds received or deposited into such Lockbox or Lockbox Account.

 

Dietary Supplement ” has the meaning set forth in Section 201(ff) of the FD&C Act, 21 U.S.C. Section 321(ff).

 

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Distribution ” means as to any Person (a) any dividend or other distribution (whether in cash, securities or other property) on any equity interest in such Person (except those payable solely in its equity interests of the same class), (b) any payment by such Person on account of (i) the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or acquisition of any equity interests in such Person or any claim respecting the purchase or sale of any equity interest in such Person (except in connection with the Warrant), or (ii) any option, warrant or other right to acquire any equity interests in such Person (excluding, however the Warrant), (c) any management fees, salaries or other fees or compensation to any Person holding three percent (3%) or more of an equity interest in a Borrower or a Subsidiary of a Borrower (other than reasonable (i) payments of salaries to individuals for services rendered in the Ordinary Course of Business, (ii) directors fees not exceeding $250,000 in the aggregate in any Fiscal Year, (iii) advances not exceeding $250,000 in the aggregate outstanding at any time, and (iv) reimbursements to employees or directors for out-of-pocket expenses incurred in the performance of their duties not exceeding $250,000 in the aggregate in any Fiscal Year incurred in the Ordinary Course of Business), an Affiliate of a Borrower or an Affiliate of any Subsidiary of a Borrower, (d) any lease or rental payments to an Affiliate or Subsidiary of a Borrower, or (e) except for payments under the Essex Lease, repayments of or debt service on loans or other indebtedness held by any Person holding an equity interest in a Borrower or a Subsidiary of a Borrower, an Affiliate of a Borrower or an Affiliate of any Subsidiary of a Borrower unless permitted under and made pursuant to a Subordination Agreement applicable to such loans or other indebtedness.

 

Dollars ” or “ $ ” means the lawful currency of the United States of America.

 

Drug ” has the meaning set forth in Section 201(g) of the FD&C Act, 21 U.S.C. Section 321(g).

 

Eligible Account ” means, subject to the criteria below, an account receivable of a Borrower arising from the sale of goods or the performance of services, which was generated in the Ordinary Course of Business, which was generated originally in the name of a Borrower or acquired pursuant to a Permitted Acquisition (provided that the Agent has conducted appropriate due diligence on such acquired accounts receivable) (but, for the avoidance of doubt, not acquired via assignment or other than by a Permitted Acquisition), and which Agent, in its good faith credit judgment and discretion, deems to be an Eligible Account. The net amount of an Eligible Account at any time shall be the face amount of such Eligible Account as originally billed minus all cash collections and other proceeds of such Account received from or on behalf of the Account Debtor thereunder as of such date and any and all returns, rebates, discounts (which may, at Agent’s option, be calculated on shortest terms), credits, allowances or excise taxes of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable in connection with such Accounts at such time. Without limiting the generality of the foregoing, no Account shall be an Eligible Account if:

 

(a)          the Account remains unpaid (i) ninety (90) days past the claim or invoice date, or (ii) only if the Account is due from an the Account Debtor that has its principal place of business or executive office outside the United States and Canada, but the Account has met the requirements of clause (p) below (including, without limitation, the credit insurance or letter of credit requirement), one hundred twenty (120) days past the claim or invoice date;

 

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(b)          the Account is subject to any defense, set-off, recoupment, counterclaim, deduction, discount, credit, chargeback, freight claim, allowance, or adjustment of any kind (but only to the extent of such defense, set-off, recoupment, counterclaim, deduction, discount, credit, chargeback, freight claim, allowance, or adjustment), or the applicable Borrower is not able to bring suit or otherwise enforce its remedies against the Account Debtor through judicial process;

 

(c)          if the Account arises from the sale of goods, any part of any goods the sale of which has given rise to the Account has been returned, rejected, lost, or damaged (but only to the extent that such goods have been so returned, rejected, lost or damaged);

 

(d)          if the Account arises from the sale of goods, the sale was not an absolute, bona fide sale, or the sale was made on consignment or on approval or on a sale-or-return or bill-and-hold or progress billing basis, or the sale was made subject to any other repurchase or return agreement, or the goods have not been shipped to the Account Debtor or its designee or the sale was not made in compliance with applicable Laws;

 

(e)          if the Account arises from the performance of services, the services have not actually been performed or the services were undertaken in violation of any Law or the Account represents a progress billing for which services have not been fully and completely rendered;

 

(f)          the Account is subject to a Lien other than a Permitted Lien, or Agent does not have a first priority, perfected Lien on such Account;

 

(g)          the Account is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment, unless such Chattel Paper or Instrument has been delivered to Agent;

 

(h)          the Account Debtor is an Affiliate or Subsidiary of a Credit Party, or if the Account Debtor holds any Debt of a Credit Party;

 

(i)           more than fifty percent (50%) of the aggregate balance of all Accounts owing from the Account Debtor obligated on the Account are ineligible under subclause (a) above (in which case all Accounts from such Account Debtor shall be ineligible);

 

(j)           without limiting the provisions of clause (i) above, fifty percent (50%) or more of the aggregate unpaid Accounts from the Account Debtor obligated on the Account are not deemed Eligible Accounts under this Agreement for any reason;

 

(k)          (i) the total unpaid Accounts of the Account Debtor (other than Wal-Mart Stores, Inc. and its Affiliates) obligated on the Account exceed twenty-five percent (25%) of the net amount of all Eligible Accounts owing from all Account Debtors (but only the amount of the Accounts of such Account Debtor exceeding such twenty-five percent (25%) limitation shall be considered ineligible) and (ii) the total unpaid Accounts of Wal-Mart Stores, Inc. and its Affiliates exceed thirty-five percent (35%) of the net amount of all Eligible Accounts owing from all Account Debtors (but only the amount of the Accounts of Wal-Mart Stores, Inc. and its affiliates exceeding such thirty-five percent (35%) limitation shall be considered ineligible);

 

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(l)           any covenant, representation or warranty contained in the Financing Documents with respect to such Account has been breached in any respect;

 

(m)         the Account is unbilled or has not been invoiced to the Account Debtor in accordance with the procedures and requirements of the applicable Account Debtor;

 

(n)          the Account is an obligation of a Governmental Account Debtor, unless Agent has agreed to the contrary in writing and Agent has received from the Account Debtor the acknowledgement of Agent’s notice of assignment of such obligation pursuant to this Agreement;

 

(o)          the Account is an obligation of an Account Debtor that has suspended business, made a general assignment for the benefit of creditors, is unable to pay its debts as they become due or as to which a petition has been filed (voluntary or involuntary) under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or the Account is an Account as to which any facts, events or occurrences exist which could reasonably be expected to impair the validity, enforceability or collectability of such Account or reduce the amount payable or delay payment thereunder;

 

(p)          the Account Debtor has its principal place of business or executive office outside the United States and Canada, unless the Account is payable in United States Dollars and is supported by a letter of credit (delivered to and directly drawable by Lender) or credit insurance that is assigned and endorsed to the Lender, all of the foregoing in all respects acceptable to the Lender and provided that the aggregate amount of such Accounts dependent on such letters of credit and credit insurance shall be excluded from Eligible Accounts to the extent they exceed 15% of all Eligible Accounts;

 

(q)          the Account is payable in a currency other than United States dollars;

 

(r)           the Account Debtor is an individual;

 

(s)          the Borrower owning such Account has not signed and delivered to Agent notices, in the form requested by Agent, directing the Account Debtors to make payment to the applicable Lockbox Account;

 

(t)           the Account includes late charges or finance charges (but only such portion of the Account shall be ineligible);

 

(u)          the Account arises out of the sale of any Inventory upon which any other Person holds, claims or asserts a Lien, other than a Permitted Lien that is the subject of a Subordination Agreement; or

 

(v)          the Account or Account Debtor fails to meet such other specifications and requirements which may from time to time be established by Agent in its good faith credit judgment and discretion.

 

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Eligible Inventory ” means Inventory consisting solely of raw materials, Semi-Finished Goods and finished goods owned by a Borrower and acquired and dispensed by such Borrower in the Ordinary Course of Business that Agent, in its good faith credit judgment and discretion, deems to be Eligible Inventory. Without limiting the generality of the foregoing, no Inventory shall be Eligible Inventory if:

 

(a)          such Inventory is not owned by a Borrower free and clear of all Liens and rights of any other Person (including the rights of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with respect to that Inventory) and other than a Permitted Lien that is the subject of a Subordination Agreement;

 

(b)          such Inventory is placed on consignment or is in transit;

 

(c)          such Inventory is covered by a negotiable document of title, unless such document has been delivered to Agent with all necessary endorsements, free and clear of all Liens except those in favor of Agent and other than a Permitted Lien that is the subject of a Subordination Agreement;

 

(d)          such Inventory is obsolete, unsalable, shopworn, seconds, damaged, unfit for sale, unfit for further processing, is of substandard quality or is not of good and merchantable quality, free from any defects;

 

(e)          such Inventory consists of marketing materials, display items or packing or shipping materials, manufacturing supplies or Work-In-Process;

 

(f)          such Inventory is not subject to a first priority Lien in favor of Agent;

 

(g)          such Inventory consists of goods that can be transported or sold only with licenses that are not readily available or of any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or similar term, by any environmental law or any Governmental Authority applicable to Borrowers or their business, operations or assets;

 

(h)          such Inventory is not covered by casualty insurance acceptable to Agent;

 

(i)          any covenant, representation or warranty contained in the Financing Documents with respect to such Inventory has been breached in any material respect;

 

(j)          such Inventory is located (i) outside of the continental United States or (ii) on premises where the aggregate amount of all Inventory (valued at cost) of Borrowers located thereon is less than $10,000;

 

(k)          such Inventory is located on premises with respect to which Agent has not received a landlord, warehouseman, bailee or mortgagee letter acceptable in form and substance to Agent;

 

(l)          such Inventory consists of (i) discontinued items, (ii) slow-moving items held in inventory, or (iii) used items held for resale;

 

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(m)          such Inventory does not consist of raw materials, Semi-Finished Goods or finished goods;

 

(n)          such Inventory does not meet all applicable standards imposed by any Governmental Authority, including with respect to its production, acquisition or importation (as the case may be);

 

(o)          such Inventory has an expiration date within the next six (6) months;

 

(p)          such Inventory consists of products for which Borrowers have a greater than twelve (12) month supply on hand, based on historical sales or reasonably projected sales;

 

(q)          such Inventory is held for rental or lease by or on behalf of Borrowers;

 

(r)          such Inventory is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third parties, which agreement restricts the ability of Agent or any Lender to sell or otherwise dispose of such Inventory, except to the extent any such third party has agreed in writing in form and substance satisfactory to Agent, that Agent or Lender may so sell or dispose, provided, that with respect to the licensors and licenses described on Schedule 3.9 for which there is not such an agreement on the Closing Date, such Account may nonetheless be included in Eligible Accounts, provided the applicable Borrower shall be using continuous and diligent efforts to obtain such an agreement, the third party has not declined to enter into any such agreement, and such agreement is obtained no later than ninety (90) days after the Closing Date;

 

(s)          any Inventory which does not meet the applicable specifications of a Borrower’s customers for such Inventory or the requirements of applicable Regulated Product Laws;

 

(t)           any Inventory that (A) is the subject of a Regulated Product Compliance Action or, if the same materially impairs the saleability of such Inventory, a Regulated Product Compliance Notice or (B) has been acquired, manufactured, labeled, stored, advertised, distributed or held in violation of applicable Law; or

 

(u)          such Inventory fails to meet such other specifications and requirements which may from time to time be established by Agent in its good faith credit judgment.

 

Agent and Borrowers agree that Inventory shall be subject to periodic appraisal by Agent and that valuation of Inventory shall be subject to adjustment pursuant to the results of such appraisal; provided, however , that while no Event of Default exists and is continuing, the Borrowers will only have to pay the costs of two inventory appraisals per year. Notwithstanding the foregoing, the valuation of Inventory shall be subject to any legal limitations on sale and transfer of such Inventory.

 

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Environmental Laws ” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards, policies and other governmental directives or requirements, as well as common law, pertaining to the environment, natural resources, pollution, health (including any environmental clean-up statutes and all regulations adopted by any local, state, federal or other Governmental Authority, and any statute, ordinance, code, order, decree, law rule or regulation all of which pertain to or impose liability or standards of conduct concerning medical waste or medical products, equipment or supplies), safety or clean-up that apply to any Borrower and relate to Hazardous Materials, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq. ), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et seq. ), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq. ), the Hazardous Materials Transportation Act (49 U.S.C. § 5101 et seq. ), the Clean Air Act (42 U.S.C. § 7401 et seq. ), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. § 136 et seq. ), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq. ), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq. ), the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. § 4851 et seq. ), any analogous state or local laws, any amendments thereto, and the regulations promulgated pursuant to said laws, together with all amendments from time to time to any of the foregoing and judicial interpretations thereof.

 

Environmental Liens ” means all Liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of any Borrower or any other Person.

 

Equity Interest ” shall mean the interest of (i) a shareholder in a corporation, (ii) a partner (whether general or limited) in a partnership (whether general, limited or limited liability), (iii) a member in a limited liability company, or (iv) any other Person having any other form of equity security or ownership interest in any Person.

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as the same may be amended, modified or supplemented from time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.

 

ERISA Plan ” means any “employee benefit plan”, as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Plan), which any Borrower maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the Code or Title IV of ERISA, to which any Borrower or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five (5) years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

Essex Lease ” means that certain Commercial Lease Agreement, dated as of August 21, 2014, between Twinlab Corporation and Essex Capital Corporation, and a new sale/leaseback agreement to be entered into between one or more of the Borrowers and Essex Capital Corporation, in substantially the same form as such Commercial Lease Agreement and for which Essex Capital Corporation has agreed shall be subject to an Agreement Regarding Equipment and Lease in substantially the same form as the Agreement Regarding Equipment and Lease effective as of the Closing Date among Essex Capital Corporation, the Agent and Twinlab Corporation or, otherwise in form and substance reasonably satisfactory to the Agent, the principal components of such lease agreements together in an aggregate principal amount not to exceed $5,800,000.

 

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Event of Default ” has the meaning set forth in Section 10.1.

 

FD&C Act ” means the Federal Food, Drug, and Cosmetic Act, as amended.

 

Financing Documents ” means this Agreement, any Notes, the Security Documents, any separate fee letter, any subordination or intercreditor agreement pursuant to which any Debt and/or any Liens securing such Debt is subordinated to all or any portion of the Obligations and all other documents, instruments and agreements related to the Obligations and heretofore executed, executed concurrently herewith or executed at any time and from time to time hereafter, as any or all of the same may be amended, supplemented, restated or otherwise modified from time to time.

 

Fiscal Year ” means the fiscal year of the Borrowers ending December 31 of each year.

 

Food ” means has the meaning set forth in Section 201(f) of the FD&C Act, 21 U.S.C. Section 321(f).

 

GAAP ” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the United States accounting profession), which are applicable to the circumstances as of the date of determination.

 

General Intangible ” means any “general intangible” as defined in Article 9 of the UCC, and any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas or other minerals before extraction, but including payment intangibles and software.

 

Governmental Account Debtor ” means any Account Debtor that is a Governmental Authority.

 

Governmental Authority ” means any nation or government, any state, local or other political subdivision thereof, and any agency, department or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation or other Person owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing, whether domestic or foreign.

 

Guarantee ” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided , however , that the term Guarantee shall not include endorsements for collection or deposit in the Ordinary Course of Business. The term “ Guarantee ” used as a verb has a corresponding meaning.

 

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Guarantor ” means any Credit Party that has executed or delivered, or shall in the future execute or deliver, any Guarantee of any portion of the Obligations.

 

Hazardous Materials ” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which is prohibited by any Environmental Laws; toxic mold, any substance that requires special handling; and any other material or substance now or in the future defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant” or other words of similar import within the meaning of any Environmental Law, including: (a) any “hazardous substance” defined as such in (or for purposes of) CERCLA, or any so-called “superfund” or “superlien” Law, including the judicial interpretation thereof; (b) any “pollutant or contaminant” as defined in 42 U.S.C.A. § 9601(33); (c) any material now defined as “hazardous waste” pursuant to 40 C.F.R. Part 260; (d) any petroleum or petroleum by-products, including crude oil or any fraction thereof; (e) natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel; (f) any “hazardous chemical” as defined pursuant to 29 C.F.R. Part 1910; (g) any toxic or harmful substances, wastes, materials, pollutants or contaminants (including, without limitation, asbestos, polychlorinated biphenyls (“ PCB’s ”), flammable explosives, radioactive materials, infectious substances, materials containing lead-based paint or raw materials which include hazardous constituents); and (h) any other toxic substance or contaminant that is subject to any Environmental Laws or other past or present requirement of any Governmental Authority.

 

Hazardous Materials Contamination ” means contamination (whether now existing or hereafter occurring) of the improvements, buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Materials, or any derivatives thereof, or on or of any other property as a result of Hazardous Materials, or any derivatives thereof, generated on, emanating from or disposed of in connection with the relevant property.

 

Instrument ” means “instrument”, as defined in Article 9 of the UCC.

 

Intellectual Property ” means, with respect to any Person, all patents, patent applications and like protections, including improvements divisions, continuation, renewals, reissues, extensions and continuations in part of the same, trademarks, trade names, trade styles, trade dress, service marks, logos and other business identifiers and, to the extent permitted under applicable law, any applications therefor, whether registered or not, and the goodwill of the business of such Person connected with and symbolized thereby, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative works, whether published or unpublished, technology, know-how and processes, operating manuals, trade secrets, computer hardware and software, rights to unpatented inventions and all applications and licenses therefor, used in or necessary for the conduct of business by such Person and all claims for damages by way of any past, present or future infringement of any of the foregoing.

 

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Interest Period ” means any period commencing on the first day of a calendar month and ending on the last day of such calendar month.

 

Inventory ” means “inventory” as defined in Article 9 of the UCC.

 

Investment ” means any investment in any Person, whether by means of acquiring (whether for cash, property, services, securities or otherwise), making or holding Debt, securities, capital contributions, loans, time deposits, advances, Guarantees or otherwise.

 

Laws ” means any and all federal, state, provincial, territorial, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, codes, injunctions, permits, governmental agreements and governmental restrictions, whether now or hereafter in effect, which are applicable to any Credit Party in any particular circumstance. “ Laws ” includes, without limitation, Environmental Laws.

 

Lender ” means each of (a) MCF, in its capacity as a lender hereunder, (b) each other Person party hereto in its capacity as a lender hereunder, (c) each other Person that becomes a party hereto as Lender pursuant to Section 11.17, and (d) the respective successors of all of the foregoing, and “ Lenders ” means all of the foregoing.

 

LIBOR Rate ” means, for each Loan, a per annum rate of interest equal to the greater of (a)  1 % and (b) the rate determined by Agent (rounded upwards, if necessary, to the next 1/100th%) by dividing (i) the Base LIBOR Rate for the Interest Period, by (ii) the sum of one minus the daily average during such Interest Period of the aggregate maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the Board of Governors of the Federal Reserve System (or any successor thereto) for “Eurocurrency Liabilities” (as defined therein).

 

Lien ” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of such asset. For the purposes of this Agreement and the other Financing Documents, any Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

 

Litigation ” means any action, suit or proceeding before any court, mediator, arbitrator or Governmental Authority.

 

Little Harbor Debt ” means the “Subordinated Debt” (as that term is defined in the Subordination Agreement (Little Harbor).

 

Loan Account ” has the meaning set forth in Section 2.6(b).

 

Loan(s) ” means the Revolving Loans.

 

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Lockbox ” has the meaning set forth in Section 2.11.

 

Lockbox Account ” means an account or accounts maintained at the Lockbox Bank into which collections of Accounts are paid, which account or accounts shall be, if requested by Agent, opened in the name of Agent (or a nominee of Agent).

 

Lockbox Bank ” has the meaning set forth in Section 2.11.

 

Material Adverse Effect ” means with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, (a) a material adverse change in, or a material adverse effect upon, any of (i) the condition (financial or otherwise), operations, business, properties or prospects of any of the Credit Parties, (ii) the rights and remedies of Agent or Lenders under the Financing Documents, or the ability of any Credit Party to perform its obligations under the Financing Documents, (iii) the legality, validity or enforceability of the Financing Documents, (iv) the existence, perfection or priority of any security interest granted in any Financing Document affecting Collateral, or (v) the aggregate value in excess of $250,000 with respect to any Collateral; or (b) the imposition of a fine against any Credit Party in excess of $250,000.00, or the creation of any liability not incurred in the Ordinary Course of Business of any Credit Party to any Governmental Authority in excess of $250,000.00.

 

Material Contracts ” has the meaning set forth in Section 3.17.

 

Maximum Lawful Rate ” has the meaning set forth in Section 2.7.

 

MCF ” means MidCap Financial Trust, and its successors and assigns.

 

Monthly Compliance Certificate ” has the meaning set forth in Section 4.1 (Financial Statements and Other Reports).

 

Multiemployer Plan ” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Borrower or any other member of the Controlled Group (or any Person who in the last five years was a member of the Controlled Group) is making or accruing an obligation to make contributions or has within the preceding five plan years (as determined on the applicable date of determination) made contributions.

 

Notes ” has the meaning set forth in Section 2.3.

 

Notice of Borrowing ” means a notice of a Responsible Officer of Borrower Representative, appropriately completed and substantially in the form of Exhibit D hereto.

 

Obligations ” means all obligations, liabilities and indebtedness (monetary (including, without limitation, the payment of interest and other amounts arising after the commencement of any case with respect to any Credit Party under the Bankruptcy Code or any similar statute which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case) or otherwise) of each Credit Party under this Agreement or any other Financing Document, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.

 

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OFAC ” means the U.S. Department of Treasury Office of Foreign Assets Control.

 

OFAC Lists ” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

 

Operative Documents ” means the Financing Documents, Subordinated Debt Documents, and any documents effecting any purchase or sale or other transaction that is closing contemporaneously with the closing of the financing under this Agreement including, without limitation, those related to the Warrant.

 

Ordinary Course of Business ” means, in respect of any transaction involving any Credit Party, (a) the ordinary course of business of such Credit Party, as conducted by such Credit Party in accordance with past practices or (b) with respect to a business that is the subject of a Permitted Acquisition, the ordinary course of such business in accordance with past practices prior to the Permitted Acquisition.

 

Orderly Liquidation Value ” means the net amount (after all costs of sale), expressed in terms of money, which Agent, in its good faith discretion, estimates can be realized from a sale, as of a specific date, given a reasonable period to find a purchaser(s), with the seller being compelled to sell on an as-is/where-is basis.

 

Organizational Documents ” means, with respect to any Person other than a natural person, the documents by which such Person was organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Person (such as by-laws, a partnership agreement or an operating, limited liability company or members agreement), including any and all shareholder agreements or voting agreements relating to the capital stock or other equity interests of such Person.

 

Payment Account ” means the account specified on the signature pages hereof into which all payments by or on behalf of each Borrower to Agent under the Financing Documents shall be made, or such other account as Agent shall from time to time specify by notice to Borrower Representative.

 

PBGC ” means the Pension Benefit Guaranty Corporation and any Person succeeding to any or all of its functions under ERISA.

 

Pension Plan ” means any ERISA Plan that is subject to Section 412 of the Code or Title IV of ERISA.

 

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Penta Debt ” means the “Subordinated Debt” (as that term is defined in the Subordination Agreement (Penta).

 

Permits ” means all governmental licenses, authorizations, provider numbers, supplier numbers, registrations, permits, drug or device authorizations and approvals, certificates, franchises, qualifications, accreditations, consents and approvals of a Credit Party required under all applicable Laws and required for such Credit Party in order to carry on its business as now conducted.

 

Permitted Acquisitions ” means the collective reference to the Target 1 Acquisition, the Target 2 Acquisition, and such other acquisitions as the Lenders may approve in their discretion from time to time.

 

Permitted Asset Dispositions ” means the following Asset Dispositions, provided, however, that at the time of such Asset Disposition, no Default or Event of Default exists or would result from such Asset Disposition: (a) dispositions of Inventory in the Ordinary Course of Business and not pursuant to any bulk sale, (b) dispositions of furniture, fixtures and equipment in the Ordinary Course of Business that the applicable Borrower or Subsidiary determines in good faith is no longer used or useful in the business of such Borrower and its Subsidiaries, and (c) dispositions approved by Agent.

 

Permitted Contest ” means, with respect to any tax obligation or other obligation allegedly or potentially owing from any Borrower or its Subsidiary to any governmental tax authority or other third party, a contest maintained in good faith by appropriate proceedings promptly instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made on the books and records and financial statements of the applicable Credit Party(ies); provided , however , that (a) compliance with the obligation that is the subject of such contest is effectively stayed during such challenge; (b) Borrowers’ and its Subsidiaries’ title to, and its right to use, the Collateral is not adversely affected thereby and Agent’s Lien and priority on the Collateral are not adversely affected, altered or impaired thereby; (c) Borrowers have given prior written notice to Agent of a Borrower’s or its Subsidiary’s intent to so contest the obligation; (d) the Collateral or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrowers or its Subsidiaries; (e) Borrowers have given Agent notice of the commencement of such contest and upon request by Agent, from time to time, notice of the status of such contest by Borrowers and/or confirmation of the continuing satisfaction of this definition; and (f) upon a final determination of such contest, Borrowers and its Subsidiaries shall promptly comply with the requirements thereof.

 

Permitted Contingent Obligations ” means (a) Contingent Obligations arising in respect of the Debt under the Financing Documents; (b) Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business; (c) Contingent Obligations outstanding on the date of this Agreement and set forth on Schedule 5.1 (but not including any refinancings, extensions, increases or amendments to the indebtedness underlying such Contingent Obligations other than extensions of the maturity thereof without any other change in terms); (d) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds and other similar obligations not to exceed $250,000 in the aggregate at any time outstanding; (e) Contingent Obligations arising under indemnity agreements with title insurers to cause such title insurers to issue to Agent mortgagee title insurance policies; (f) Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions of personal property assets permitted under Section 5.6; and (g) other Contingent Obligations not permitted by clauses (a) through (h) above, not to exceed $250,000 in the aggregate at any time outstanding.

 

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Permitted Debt ” means: (a) Borrowers’ and its Subsidiaries’ Debt to Agent and each Lender under this Agreement and the other Financing Documents; (b) Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business; (c) purchase money Debt with respect to equipment, Debt listed on Schedule 5.1, and such other Debt (other than the Essex Lease) not to exceed $3,000,000 at any time (whether in the form of a loan or a Capital Lease) used solely to acquire equipment used in the Ordinary Course of Business and secured only by such equipment; (d) Debt existing on the date of this Agreement and described on Schedule 5.1 and any Refinancing Debt; (e) Debt in the form of insurance premiums financed through the applicable insurance company; (f) trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business; (g) Subordinated Debt, and (h) the Essex Lease.

 

Permitted Distributions ” means the following Distributions: (a) dividends by any Subsidiary of any Borrower to such parent Borrower; (b) dividends payable solely in common stock; (c) repurchases of stock of former employees, directors or consultants pursuant to stock purchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided, however, that such repurchase does not exceed $250,000 in the aggregate per fiscal year; (d) dividends or distributions paid to a Borrower’s shareholder(s) or member(s) solely to the extent and at the times necessary for such shareholder(s) or member(s) to pay its or their respective federal (and, if applicable, state) income taxes arising from such shareholder(s)’ or member(s)’ respective allocable shares of such Borrower’s income that are taxable directly to such shareholder(s) or member(s), provided, however , that no Event of Default shall exist, and no act, event or condition shall have occurred or exist which with notice or the lapse of time, or both, would constitute an Event of Default.

 

Permitted Investments ” means: (a) Investments shown on Schedule 5.7 and existing on the Closing Date; (b) cash and cash equivalents; (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the Ordinary Course of Business; (d) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the Ordinary Course of Business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrowers or their Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers’ Board of Directors (or other governing body), but the aggregate of all such loans outstanding may not exceed $50,000 at any time; (e) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the Ordinary Course of Business; (f) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the Ordinary Course of Business, provided, however , that this subpart (f) shall not apply to Investments of Borrowers in any Subsidiary; (g) Investments consisting of deposit accounts in which Agent has received a Deposit Account Control Agreement; (h) Investments by any Borrower in any other Borrower made in compliance with Section 4.11(c); (i) Permitted Acquisitions; and (j) other Investments in an amount not exceeding $250,000 in the aggregate.

 

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Permitted Liens ” means: (a) deposits or pledges of cash to secure obligations under workmen’s compensation, social security or similar laws, or under unemployment insurance (but excluding Liens arising under ERISA or, with respect to any Pension Plan or Multiemployer Plan, the Code) pertaining to a Borrower’s or its Subsidiary’s employees, if any; (b) deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money or the deferred purchase price of property or services), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business; (c) carrier’s, warehousemen’s, mechanic’s, workmen’s, materialmen’s or other like Liens on Collateral, arising in the Ordinary Course of Business with respect to obligations which are not due, or which are being contested pursuant to a Permitted Contest; (d) Liens on Collateral, other than Accounts, for taxes or other governmental charges not at the time delinquent or thereafter payable without penalty or the subject of a Permitted Contest; (e) attachments, appeal bonds, judgments and other similar Liens on Collateral other than Accounts, for sums not exceeding $250,000 in the aggregate arising in connection with court proceedings; provided , however , that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest; (f) [reserved]; (g) Liens and encumbrances in favor of Agent under the Financing Documents; (h) Liens on Collateral, other than the Liens permitted by the terms of the Subordination Agreement (JL-BBNC) and the Subordination Agreement (Penta) and other than Collateral which is part of the Borrowing Base, existing on the date hereof and set forth on Schedule 5.2 and Refinancing Debt with respect thereto that is secured only by the applicable Collateral existing on the date hereof and set forth on Schedule 5.2 ; and (i) any Lien on any equipment securing Debt permitted under subpart (c) or (h) of the definition of Permitted Debt, provided , however , that such Lien attaches concurrently with or within twenty (20) days after the acquisition thereof; and (i) Subordinated Debt Liens that are all times in compliance with the terms of the applicable Subordination Agreement . For the avoidance of doubt, notwithstanding the fact that the subordinated creditor under a Subordination Agreement may have filed a financing statement or other applicable security instrument before the Agent, for purposes of this Agreement, shall be deemed to have a “first priority” Lien on Collateral to the extent that the Subordination Agreement so provides but only so long as the subordinated creditor and the Borrowers take all steps required by the Subordination Agreement to provide the Agent with a filing that is first of record.

 

Permitted Modifications ” means (a) such amendments or other modifications to a Borrower’s or Subsidiary’s Organizational Documents as are required under this Agreement or by applicable Law and fully disclosed to Agent within thirty (30) days after such amendments or modifications have become effective, and (b) such amendments or modifications to a Borrower’s or Subsidiary’s Organizational Documents (other than those involving a change in the name of a Borrower or Subsidiary or involving a reorganization of a Borrower or Subsidiary under the laws of a different jurisdiction) that would not adversely affect the rights and interests of the Agent or Lenders and fully disclosed to Agent within thirty (30) days after such amendments or modifications have become effective.

 

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Person ” means any natural person, corporation, limited liability company, professional association, limited partnership, general partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization, whether or not a legal entity, and any Governmental Authority.

 

Pro Rata Share ” means (a)  with respect to a Lender’s obligation to make Revolving Loans, such Lender’s right to receive the unused line fee described in Section 2.2(b), the Revolving Loan Commitment Percentage of such Lender, (b) with respect to a Lender’s right to receive payments of principal and interest with respect to Revolving Loans, such Lender’s Revolving Loan Exposure with respect thereto; and (c) for all other purposes (including, without limitation, the indemnification obligations arising under Section 11.6) with respect to any Lender, the percentage obtained by dividing (i) the sum of the Revolving Loan Commitment Amount of such Lender (or, in the event the Revolving Loan Commitment shall have been terminated, such Lender’s then existing Revolving Loan Outstandings), by (ii) the sum of the Revolving Loan Commitment (or, in the event the Revolving Loan Commitment shall have been terminated, the then existing Revolving Loan Outstandings) of all Lenders.

 

Prohibited Preferred Stock ” means any preferred Equity Interest that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of preferred Equity Interest of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 1 year after the Termination Date, or, on or before the date that is less than 1 year after the Termination Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of preferred Equity Interest of the same class and series or of shares of common stock).

 

Refinancing Debt ” means refinancings, renewals, or extensions of Debt so long as:

 

(a)          such refinancings, renewals, or extensions do not result in an increase in the principal amount of the Debt so refinanced, renewed, or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in connection therewith and by the amount of unfunded commitments with respect thereto,

 

(b)          such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity (measured as of the refinancing, renewal, or extension) of the Debt so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected to be materially adverse to the interests of Lender,

 

(c)          if the Debt that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension must include subordination terms and conditions that are at least as favorable to the Lender as those that were applicable to the refinanced, renewed, or extended Debt, and

 

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(d)          the Debt that is refinanced, renewed, or extended is not recourse to any Person that is liable on account of the Obligations other than those Persons which were obligated with respect to the Debt that was refinanced, renewed, or extended.

 

Regulated Product ” means the collective reference to each and any Dietary Supplement, Drug and Food.

 

Regulated Product Compliance Action ” means any recall, withdrawal, order to stop selling or to remove from sale, seizure, the commencement of civil or criminal legal proceeding, or other material enforcement action taken by a Governmental Authority with respect to a Borrower in connection with an actual, alleged or perceived violation of a Regulated Product Law.

 

Regulated Product Compliance Notice ” means a written notice, warning letter, observation, claim or demand communication (in writing, electronically or otherwise), including, without limitation, observations noted by the FDA on Form FDA-483, by a Governmental Authority to or with respect to a Borrower in connection with an actual, alleged or perceived violation of a Regulated Product Law.

 

Regulated Product Laws ” means the collective reference to any all Laws related to the manufacturing, packaging, labeling, advertising, disposing or holding of Regulated Products including, without limitation, the FD&C Act, the Dietary Supplement Health and Education Act of 1994, the Laws of any state, the Federal Trade Commission or other Governmental Authority regulating the manufacturing, packaging, labeling, advertising, disposing or holding of Dietary Supplements, and related rules, regulations and guidelines, including, without limitation, the FDA’s Dietary Supplement Current Good Manufacturing Practices.

 

Required Lenders ” means at any time Lenders holding (a) sixty-six and two thirds percent (66 2/3%) or more of the Revolving Loan Commitment, or (b) if the Revolving Loan Commitment has been terminated, sixty-six and two thirds percent (66 2/3%) or more of the then aggregate outstanding principal balance of the Loans.

 

Responsible Officer ” means any of the Chief Executive Officer, Chief Financial Officer or any other officer of the applicable Borrower acceptable to Agent.

 

Revolving Lender ” means each Lender having a Revolving Loan Commitment Amount in excess of $0 (or, in the event the Revolving Loan Commitment shall have been terminated at any time, each Lender at such time having Revolving Loan Outstandings in excess of $0).

 

Revolving Loan Availability ” means, at any time, the Revolving Loan Limit minus the Revolving Loan Outstandings.

 

Revolving Loan Commitment ” means, as of any date of determination, the aggregate Revolving Loan Commitment Amounts of all Lenders as of such date.

 

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Revolving Loan Commitment Amount ” means, as to any Lender, the dollar amount set forth opposite such Lender’s name on the Commitment Annex under the column “Revolving Loan Commitment Amount” (if such Lender’s name is not so set forth thereon, then the dollar amount on the Commitment Annex for the Revolving Loan Commitment Amount for such Lender shall be deemed to be $0), as such amount may be adjusted from time to time (a) by any amounts assigned (with respect to such Lender’s portion of Revolving Loans outstanding and its commitment to make Revolving Loans) pursuant to the terms of any and all effective assignment agreements to which such Lender is a party, and (b) any Additional Tranche(s) activated by Borrowers. For the avoidance of doubt, the aggregate Revolving Loan Commitment Amount of all Lenders on the Closing Date shall be $15,000,000 and if the Additional Tranche is fully activated by Borrowers pursuant to the terms of the Agreement such amount shall increase to $20,000,000.

 

Revolving Loan Commitment Percentage ” means, as to any Lender, (a) on the Closing Date, the percentage set forth opposite such Lender’s name on the Commitment Annex under the column “Revolving Loan Commitment Percentage” (if such Lender’s name is not so set forth thereon, then, on the Closing Date, such percentage for such Lender shall be deemed to be zero), and (b) on any date following the Closing Date, the percentage equal to the Revolving Loan Commitment Amount of such Lender on such date divided by the Revolving Loan Commitment on such date.

 

Revolving Loan Exposure ” means, with respect to any Lender on any date of determination, the percentage equal to the amount of such Lender’s Revolving Loan Outstandings on such date divided by the aggregate Revolving Loan Outstandings of all Lenders on such date.

 

Revolving Loan Limit ” means, at any time, the lesser of (a) the Revolving Loan Commitment and (b) the Borrowing Base.

 

Revolving Loan Outstandings ” means, at any time of calculation, (a)  the then existing aggregate outstanding principal amount of Revolving Loans, and (b) when used with reference to any single Lender, the then existing outstanding principal amount of Revolving Loans advanced by such Lender.

 

Revolving Loans ” has the meaning set forth in Section 2.1(b).

 

SEC ” means the United States Securities and Exchange Commission.

 

Securities Account ” means a “securities account” (as defined in Article 9 of the UCC), an investment account, or other account in which investment property or securities are held or invested for credit to or for the benefit of any Borrower.

 

Securities Account Control Agreement ” means an agreement, in form and substance satisfactory to Agent, among Agent, any applicable Borrower and each securities intermediary in which such Borrower maintains a Securities Account pursuant to which Agent shall obtain “control” (as defined in Article 9 of the UCC) over such Securities Account.

 

Security Document ” means this Agreement and any other agreement, document or instrument executed concurrently herewith or at any time hereafter pursuant to which one or more Credit Parties or any other Person either (a) Guarantees payment or performance of all or any portion of the Obligations, and/or (b) provides, as security for all or any portion of the Obligations, a Lien on any of its assets in favor of Agent for its own benefit and the benefit of the Lenders, as any or all of the same may be amended, supplemented, restated or otherwise modified from time to time.

 

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Semi-Finished Goods ” means bulk tablets, capsules, soft gels and other completed items of Inventory that have been completely manufactured and are awaiting only bottling and other packaging before being classified by Borrower as finished goods on its books.

 

Solvent ” means, with respect to any Person, that such Person (a) owns and will own assets the fair saleable value of which are (i) greater than the total amount of its liabilities (including Contingent Obligations), and (ii) greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it; (b) has capital that is not unreasonably small in relation to its business as presently conducted or after giving effect to any contemplated transaction; and (c) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due. For purposes of this definition, the amount of any Contingent Obligation at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such Contingent Obligation meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

 

Subordinated Debt ” means any Debt of Borrowers incurred pursuant to the terms of the Subordinated Debt Documents and with the prior written consent of Agent. On the date of this Agreement, the only Subordinated Debt is the Debt subject to the Subordination Agreement (JL-BBNC), the Subordination Agreement (Little Harbor) and the Subordination Agreement (Penta).

 

Subordinated Debt Documents ” means any documents evidencing and/or securing Debt governed by a Subordination Agreement, all of which documents must be in form and substance acceptable to Agent in its sole discretion.

 

Subordinated Debt Liens ” means those Liens to which the Agent has given its express, prior written consent and that are in favor of a subordinated creditor that has agreed in a Subordination Agreement are subordinated in priority to the Liens of the Agent and the Lenders.

 

Subordination Agreement ” means any agreement between Agent and another creditor of Borrowers, as the same may be amended, supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, pursuant to which the Debt owing from any Borrower(s) and/or the Liens securing such Debt granted by any Borrower(s) to such creditor are subordinated in any way to the Obligations and the Liens created under the Security Documents, the terms and provisions of such Subordination Agreements to have been agreed to by and be acceptable to Agent in the exercise of its sole discretion. On the date of this Agreement, the Subordination Agreement (JL-BBNC), the Subordination Agreement (Little Harbor) and the Subordination Agreement (Penta) are the only Subordination Agreements.

 

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Subordination Agreement (JL-BBNC) ” means that certain Subordination Agreement dated as of the Closing Date by and between JL-BBNC Mezz Utah, LLC, an Alaska limited liability company as “Subordinated Creditor” (as defined therein), and the Agent as administrative agent for all “Senior Lenders” (as defined therein), as the same may be amended, restated, modified, substituted, extended and renewed from time to time.

 

Subordination Agreement (Little Harbor) ” means that certain Subordination Agreement dated as of the Closing Date by and between Little Harbor, LLC, a Nevada limited liability company as “Subordinated Creditor” (as defined therein), and the Agent as administrative agent for all “Senior Lenders” (as defined therein), as the same may be amended, restated, modified, substituted, extended and renewed from time to time.

 

Subordination Agreement (Penta) ” means that certain Subordination Agreement dated as of the Closing Date by and between Penta Mezzanine SBIC Fund I, L.P., a Delaware limited partnership as a “Subordinated Creditor” (as defined therein), and the Agent as administrative agent for all “Senior Lenders” (as defined therein), as the same may be amended, restated, modified, substituted, extended and renewed from time to time.

 

Subsidiary ” means, with respect to any Person, (a) any corporation of which an aggregate of 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, capital 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 legally or beneficially by such Person or one or more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of more than fifty percent (50%) of such capital stock whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a Subsidiary of a Borrower.

 

Swap Contract ” means any “swap agreement”, as defined in Section 101 of the Bankruptcy Code, that is obtained by Borrower to provide protection against fluctuations in interest or currency exchange rates, but only if Agent provides its prior written consent to the entry into such “swap agreement”.

 

“Target 1” means Target No. 1 as defined on page 39 of the Parent’s 8-K dated September 16, 2014.

 

“Target 2” means Target No. 2 as defined on page 40 of the Parent’s 8-K filed on September 16, 2014.

 

“Target 1 Acquisition” means consummation of the acquisition contemplated by the Option Agreement between Target 1 and TCC, dated September 2, 2014, described on page 39 of the Parent’s 8-K dated September 16, 2014 and previously provided to the Agent.

 

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“Target 2 Acquisition” means consummation of the acquisition contemplated by the Amended and Restated Option Agreement between Target 2 and TCC, dated December 20, 2014, previously provided to the Agent.

 

Taxes ” has the meaning set forth in Section 2.8.

 

Termination Date ” means the earlier to occur of (a) the Commitment Expiry Date, (b) any date on which Agent accelerates the maturity of the Loans pursuant to Section 10.2, or (c) the termination date stated in any notice of termination of this Agreement provided by Borrowers in accordance with Section 2.12.

 

UCC ” means the Uniform Commercial Code of the State of Maryland or of any other state the laws of which are required to be applied in connection with the perfection of security interests in any Collateral.

 

United States ” means the United States of America.

 

Warrant ” means those certain warrants to purchase equity interests representing Five Hundred Thousand (500,000) shares of the common stock of the Parent.

 

Work-In-Process ” means Inventory that is not raw materials or Semi-Finished Goods or that is not a product that is finished and approved by a Borrower in accordance with applicable Laws in such Borrower’s normal business practices for release and delivery to customers upon completion of testing in Ordinary Course of Business.

 

Section 1.2           Accounting Terms and Determinations . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder (including, without limitation, 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 applied on a basis consistent (except unaudited financial statements shall be subject to normal year-end adjustments and the absence of footnote disclosures) with the most recent audited consolidated financial statements of each Borrower and its Consolidated Subsidiaries delivered to Agent and each of the Lenders on or prior to the Closing Date. If at any time any change in GAAP would affect the computation of any financial ratio or financial requirement set forth in any Financing Document, and either Borrowers or the Required Lenders shall so request, the Agent, the Lenders and Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided , however , that until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrowers shall provide to the Agent and the Lenders financial statements and other documents required under this Agreement 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 (or any other Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of any Credit Party or any Subsidiary of any Credit Party at “fair value”, as defined therein.

 

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Section 1.3          Other Definitional and Interpretive Provisions . 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”. 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. References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations. All amounts used for purposes of financial calculations required to be made herein shall be without duplication. References to any statute or act, without additional reference, shall be deemed to refer to federal statutes and acts of the United States. References to any agreement, instrument or document shall include all schedules, exhibits, annexes and other attachments thereto. As used in this Agreement, the meaning of the term “material” or the phrase “in all material respects” is intended to refer to an act, omission, violation or condition which reflects or could reasonably be expected to result in a Material Adverse Effect. References to capitalized terms that are not defined herein, but are defined in the UCC, shall have the meanings given them in the UCC. All references herein to times of day shall be references to daylight or standard time, as applicable.

 

Section 1.4           Time is of the Essence . Time is of the essence in Borrower’s and each other Credit Party’s performance under this Agreement and all other Financing Documents.

 

Article 2 - LOANS

 

Section 2.1            Loans.

 

(a)          [Reserved]

 

(b)          Revolving Loans.

 

(i)           Revolving Loans and Borrowings . On the terms and subject to the conditions set forth herein, each Lender severally agrees to make loans to Borrowers from time to time as set forth herein (each a “ Revolving Loan ”, and collectively, “ Revolving Loans ”) equal to such Lender’s Revolving Loan Commitment Percentage of Revolving Loans requested by Borrowers hereunder, provided , however , that after giving effect thereto, the Revolving Loan Outstandings shall not exceed the Revolving Loan Limit. Borrowers shall deliver to Agent a Notice of Borrowing with respect to each proposed borrowing of a Revolving Loan, such Notice of Borrowing to be delivered before 1:00 p.m. (Eastern time) one (1) Business Day prior to the date of such proposed borrowing. Each Borrower and each Revolving Lender hereby authorizes Agent to make Revolving Loans on behalf of Revolving Lenders, at any time in its sole discretion, to pay principal owing in respect of the Loans and interest, fees, expenses and other charges payable by any Credit Party from time to time arising under this Agreement or any other Financing Document. The Borrowing Base shall be determined by Agent based on the most recent Borrowing Base Certificate delivered to Agent in accordance with this Agreement and such other information as may be available to Agent. Without limiting any other rights and remedies of Agent hereunder or under the other Financing Documents, the Revolving Loans shall be subject to Agent’s continuing right to withhold from the Borrowing Base reserves, and to increase and decrease such reserves from time to time, if and to the extent that in Agent’s good faith credit judgment and discretion, such reserves are necessary.

 

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(ii)         Mandatory Revolving Loan Repayments and Prepayments.

 

(A)         The Revolving Loan Commitment shall terminate on the Termination Date. On such Termination Date, there shall become due, and Borrowers shall pay, the entire outstanding principal amount of each Revolving Loan, together with accrued and unpaid Obligations pertaining thereto incurred to, but excluding the Termination Date; provided, however, that such payment is made not later than 12:00 Noon (Eastern time) on the Termination Date.

 

(B)         If at any time the Revolving Loan Outstandings exceed the Revolving Loan Limit, then, on the next succeeding Business Day, Borrowers shall repay the Revolving Loans in an aggregate amount equal to such excess.

 

(C)         Principal payable on account of Revolving Loans shall be payable by Borrowers to Agent (I) immediately upon the receipt by any Borrower or Agent of any payments on or proceeds from any of the Accounts, to the extent of such payments or proceeds, as further described in Section 2.11 below, and (II) in full on the Termination Date.

 

(iii)         Optional Prepayments and Reborrowings . Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.

 

(iv)        LIBOR Rate.

 

(A)         Except as provided in subsection (C) below, Revolving Loans shall accrue interest at the LIBOR Rate plus the Applicable Margin.

 

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(B)         The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such 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 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 of the Federal Reserve System (or any successor), which additional or increased costs would increase the cost of funding loans bearing interest based upon the LIBOR Rate; provided, however, that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued. In any such event, the affected Lender shall give Borrowers and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Borrowers may, by notice to such affected Lender (I) require such Lender to furnish to Borrowers a statement setting forth the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (II) repay the Loans bearing interest based upon the LIBOR Rate with respect to which such adjustment is made.

 

(C)         In the event that any change in market conditions or any law, regulation, treaty, or directive, or any change therein or in the interpretation of application thereof, shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain Loans bearing interest based upon the LIBOR Rate or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrowers and Agent promptly shall transmit the notice to each other Lender and (I) in the case of any outstanding Loans of such Lender bearing interest based upon the LIBOR Rate, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such Loans, and interest upon such Lender’s Loans thereafter shall accrue interest at Base Rate plus the Applicable Margin, and (II)  such Loans shall continue to accrue interest at Base Rate plus the Applicable Margin until such Lender determines that it would no longer be unlawful or impractical to maintain such Loans at the LIBOR Rate.

 

(D)         Anything to the contrary contained herein notwithstanding, neither Agent nor any Lender is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues based on the LIBOR Rate.

 

(v)         Restriction on Termination. Notwithstanding any prepayment of the Revolving Loan Outstandings or any other termination of Lenders’ Credit Exposure under this Agreement, Agents and Lenders shall have no obligation to release any of the Collateral securing the Obligations under this Agreement while any portion of the Affiliated Obligations shall remain outstanding.

 

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(c)           Additional Tranches . After the Closing Date, so long as no Default or Event of Default exists and subject to the terms of this Agreement, with the prior written consent of Agent and all Lenders in their sole discretion, the Revolving Loan Commitment may be increased by an aggregate amount not greater than $5,000,000 upon the written request of Borrower Representative (which such request shall state the aggregate amount of the Additional Tranche requested and shall be made at least thirty (30) days prior to the proposed effective date of such Additional Tranche) to Agent to activate an Additional Tranche; provided, however, that Agent and Lenders shall have no obligation to consent to any requested activation of an Additional Tranche and the written consent of Agent and all Lenders shall be required in order to activate an Additional Tranche. Upon activating an Additional Tranche, each Lender’s Commitment shall increase by a proportionate amount so as to maintain the same Pro Rata Percentage of the Revolving Loan Commitment as such Lender held immediately prior to such activation. In the event Agent and all Lenders do not consent to the activation of a requested Additional Tranche within thirty (30) days after receiving a written request from Borrower Representative, then the Revolving Loan Commitment shall not be increased. In the event Agent and all Lenders do not consent to the activation of a requested Additional Tranche within forty-five (45) days after receiving a written request from Borrower Representative, then the Revolving Loan Commitment shall not be increased and Borrowers may promptly terminate this Agreement without paying the fee required under Section 2.2(f) for early termination.

 

Section 2.2            Interest, Interest Calculations and Certain Fees.

 

(a)           Interest . From and following the Closing Date, except as expressly set forth in this Agreement, Loans and the other Obligations shall bear interest at the sum of the LIBOR Rate plus the Applicable Margin. Interest on the Loans shall be paid in arrears on the first (1st) day of each month and on the maturity of such Loans, whether by acceleration or otherwise. Interest on all other Obligations shall be payable upon demand. For purposes of calculating interest, all funds transferred to the Payment Account for application to any Revolving Loans shall be subject to a five (5) Business Day clearance period and all interest accruing on such funds during such clearance period shall accrue for the benefit of Agent, and not for the benefit of the Lenders.

 

(b)           Unused Line Fee . From and following the Closing Date, Borrowers shall pay Agent, for the benefit of all Lenders committed to make Revolving Loans, in accordance with their respective Pro Rata Shares, a fee in an amount equal to (i) (A) the Revolving Loan Commitment minus (B) the average daily balance of the sum of the Revolving Loan Outstandings during the preceding month, multiplied by (ii)          0.042 % per month. Such fee is to be paid monthly in arrears on the first day of each month.

 

(c)          [Reserved].

 

(d)           Collateral Management Fee . From and following the Closing Date, Borrowers shall pay Agent, for its own account and not for the benefit of any other Lenders, a fee in an amount equal to the product obtained by multiplying (i)  the average end-of-day principal balance of Revolving Loans outstanding during the immediately preceding month, by (ii) one-tenth of one percent (0.10%) per month. For purposes of calculating the average end-of-day principal balance of Revolving Loans, all funds paid into the Payment Account (or which were required to be paid into the Payment Account hereunder) or otherwise received by Agent for the account of Borrowers shall be subject to a five (5) Business Day clearance period. The collateral management fee shall be due and payable monthly in arrears on the first day of each month and be deemed fully earned when due and payable and, once paid, shall be non-refundable.

 

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(e)           Origination Fee . Contemporaneous with Borrowers’ execution of this Agreement, Borrowers shall pay Agent, for the benefit of all Lenders committed to make Revolving Loans on the Closing Date, in accordance with their respective Pro Rata Shares, a fee in an amount equal to (i) the Revolving Loan Commitment, multiplied by (ii) one percent (1%). In addition, contemporaneous with the effectiveness of any Additional Tranche, Borrowers shall pay Agent, for the benefit of all Lenders committed to make Revolving Loans with respect to the Additional Tranche on the effective date of the Additional Tranche, in accordance with their respective Pro Rata Shares, a fee in an amount equal to (i) the Additional Tranche, multiplied by (ii) one percent (1%). For the avoidance of doubt, upon the occurrence of an Event of Default any unpaid balance of such fees shall, at the discretion of the Administrative Agent, be immediately due and payable.

 

(f)           Deferred Revolving Loan Origination Fee . If Lenders’ funding obligations in respect of the Revolving Loan Commitment under this Agreement terminate for any reason (whether by voluntary termination by Borrowers, by reason of the occurrence of an Event of Default or otherwise) prior to the Commitment Expiry Date, Borrowers shall pay to Agent, for the benefit of all Lenders committed to make Revolving Loans on the Closing Date, a fee as compensation for the costs of such Lenders being prepared to make funds available to Borrowers under this Agreement, equal to an amount determined by multiplying the Revolving Loan Commitment by the following applicable percentage amount: 2.0% for the first and second year following the Closing Date and 1.0% thereafter. All fees payable pursuant to this paragraph shall be deemed fully earned and non-refundable as of the Closing Date.

 

(g)          [Reserved]

 

(h)          [Reserved]

 

(i)           Audit Fees . Except as otherwise limited by the express terms of this Agreement, Borrowers shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable fees and expenses in connection with audits and inspections of Borrowers’ books and records, audits, valuations or appraisals of the Collateral, audits of Borrowers’ compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on the first Business Day of the month following the date of issuance by Agent of a written request for payment thereof to Borrowers.

 

(j)           Wire Fees . Borrowers shall pay to Agent, for its own account and not for the account of any other Lenders, on written demand, fees for incoming and outgoing wires made for the account of Borrowers, such fees to be based on Agent’s then current wire fee schedule (available upon written request of the Borrowers).

 

(k)           Late Charges . If payments of principal (other than a final installment of principal upon the Termination Date), interest due on the Obligations, or any other amounts due hereunder or under the other Financing Documents are not timely made and remain overdue for a period of five (5) days, Borrowers, without notice or demand by Agent, promptly shall pay to Agent, for its own account and not for the benefit of any other Lenders, as additional compensation to Agent in administering the Obligations, an amount equal to five percent (5.0%) of each delinquent payment.

 

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(l)           Computation of Interest and Related Fees . All interest and fees under each Financing Document shall be calculated on the basis of a 360-day year for the actual number of days elapsed. The date of funding of a Loan shall be included in the calculation of interest. The date of payment of a Loan shall be excluded from the calculation of interest. If a Loan is repaid on the same day that it is made, one (1) day’s interest shall be charged.

 

(m)           Automated Clearing House Payments . If Agent so elects, monthly payments of principal, interest, fees, expenses or any other amounts due and owing from Borrower to Agent hereunder shall be paid to Agent by Automated Clearing House debit of immediately available funds from the financial institution account designated by Borrower Representative in the Automated Clearing House debit authorization executed by Borrowers or Borrower Representative in connection with this Agreement, and shall be effective upon receipt. Borrowers shall execute any and all forms and documentation necessary from time to time to effectuate such automatic debiting. In no event shall any such payments be refunded to Borrowers.

 

Section 2.3            Notes . The portion of the Loans made by each Lender shall be evidenced, if so requested by such Lender, by one or more promissory notes executed by Borrowers on a joint and several basis (each, a “ Note ”) in an original principal amount equal to such Lender’s Revolving Loan Commitment Amount. Upon activation of an Additional Tranche in accordance with Section 2.1(c) hereof, Borrowers shall deliver to each Lender to whom Borrowers previously delivered a Note, a restated Note evidencing such Lender’s Revolving Loan Commitment Amount.

 

Section 2.4            [Reserved]

 

Section 2.5            [Reserved]

 

Section 2.6            General Provisions Regarding Payment; Loan Account.

 

(a)          All payments to be made by each Borrower under any Financing Document, including payments of principal and interest made hereunder and pursuant to any other Financing Document, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to and due and payable on the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension (it also being understood and agreed that, for purposes of calculating financial covenants and computations contained herein and determining compliance therewith, if payment is made, in full, on any such extended due date, such payment shall be deemed to have been paid on the original due date without giving effect to any extension thereto). Any payments received in the Payment Account before 12:00 Noon (Eastern time) on any date shall be deemed received by Agent on such date, and any payments received in the Payment Account at or after 12:00 Noon (Eastern time) on any date shall be deemed received by Agent on the next succeeding Business Day.

 

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(b)          Agent shall maintain a loan account (the “ Loan Account ”) on its books to record Loans and other extensions of credit made by the Lenders hereunder or under any other Financing Document, and all payments thereon made by each Borrower. All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time. The balance in the Loan Account, as recorded in Agent’s books and records at any time shall be conclusive and binding evidence of the amounts due and owing to Agent by each Borrower absent manifest error; provided , however , that any failure to so record or any error in so recording shall not limit or otherwise affect any Borrower’s duty to pay all amounts owing hereunder or under any other Financing Document. Agent shall endeavor to provide Borrowers with a monthly statement regarding the Loan Account (but neither Agent nor any Lender shall have any liability if Agent shall fail to provide any such statement). Unless any Borrower notifies Agent of any objection to any such statement (specifically describing the basis for such objection) within ninety (90) days after the date of receipt thereof, it shall be deemed final, binding and conclusive upon Borrowers in all respects as to all matters reflected therein.

 

Section 2.7           Maximum Interest . In no event shall the interest charged with respect to the Loans or any other Obligations of any Borrower under any Financing Document exceed the maximum amount permitted under the laws of the State of Maryland or of any other applicable jurisdiction. Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable hereunder or under any Note or other Financing Document (the “ Stated Rate ”) would exceed the highest rate of interest 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 payable shall be equal to the Maximum Lawful Rate; provided , however , that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, each Borrower shall, to the extent permitted by law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate payable. Thereafter, the interest rate 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 received by any Lender exceed the amount which it could lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior sentence, any Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction of the principal balance of the Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then outstanding, such excess or part thereof remaining shall be paid to Borrowers. 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.

 

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Section 2.8            Taxes; Capital Adequacy.

 

(a)          All payments of principal and interest on the Loans and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp, documentary, payroll, employment, property or franchise taxes and other taxes, fees, duties, levies, assessments, withholdings or other charges of any nature whatsoever (including interest and penalties thereon) imposed by any taxing authority, excluding taxes imposed on or measured by Agent’s or any Lender’s net income by the jurisdictions under which Agent or such Lender is organized or conducts business (other than solely as the result of entering into any of the Financing Documents or taking any action thereunder) (all non-excluded items being called “ Taxes ”). If any withholding or deduction from any payment to be made by any Borrower hereunder is required in respect of any Taxes pursuant to any applicable Law, then Borrowers will: (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to Agent an official receipt or other documentation satisfactory to Agent evidencing such payment to such authority; and (iii) pay to Agent for the account of Agent and Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by Agent and each Lender will equal the full amount Agent and such Lender would have received had no such withholding or deduction been required. If any Taxes are directly asserted against Agent or any Lender with respect to any payment received by Agent or such Lender hereunder, Agent or such Lender may pay such Taxes and Borrowers will promptly pay such additional amounts (including any penalty, interest or expense) as is necessary in order that the net amount received by such Person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such Person would have received had such Taxes not been asserted so long as such amounts have accrued on or after the day which is two hundred seventy (270) days prior to the date on which Agent or such Lender first made written demand therefor.

 

(b)          If any Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to Agent, for the account of Agent and the respective Lenders, the required receipts or other required documentary evidence, Borrowers shall indemnify Agent and Lenders for any incremental Taxes, interest or penalties that may become payable by Agent or any Lender as a result of any such failure.

 

(c)          Each Lender that (i) is organized under the laws of a jurisdiction other than the United States, and (ii)(A) is a party hereto on the Closing Date or (B) purports to become an assignee of an interest as a Lender under this Agreement after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) (each such Lender a “ Foreign Lender ”) shall execute and deliver to each of Borrowers and Agent one or more (as Borrowers or Agent may reasonably request) United States Internal Revenue Service Forms W-8ECI, W-8BEN, W-8IMY (as applicable) and other applicable forms, certificates or documents prescribed by the United States Internal Revenue Service or reasonably requested by Agent certifying as to such Lender’s entitlement to a complete exemption from withholding or deduction of Taxes. Borrowers shall not be required to pay additional amounts to any Lender pursuant to this Section 2.8 with respect to United States withholding and income Taxes to the extent that the obligation to pay such additional amounts would not have arisen but for the failure of such Lender to comply with this paragraph other than as a result of a change in law.

 

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(d)          If any Lender shall determine in its commercially reasonable judgment that the adoption or taking effect of, or any change in, any applicable Law regarding capital adequacy, in each instance, after the Closing Date, or any change after the Closing Date in the interpretation, administration or application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or application thereof, or the compliance by any Lender or any Person controlling such Lender with any request, guideline or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency adopted or otherwise taking effect after the Closing Date, has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could have achieved but for such adoption, taking effect, change, interpretation, administration, application or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) then from time to time, upon written demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrowers shall promptly pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is two hundred seventy (270) days prior to the date on which such Lender first made demand therefor; provided, however, that notwithstanding anything in this Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued.

 

(e)          If any Lender requires compensation under Section 2.8(d), or requires any Borrower to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8(a), then, upon the written request of Borrower Representative, such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder (subject to the terms of this Agreement) to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or materially reduce amounts payable pursuant to any such subsection, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender (as determined in its sole discretion). Borrowers hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

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Section 2.9            Appointment of Borrower Representative . Each Borrower hereby designates Borrower Representative as its representative and agent on its behalf for the purposes of issuing Notices of Borrowing and Borrowing Base Certificates, and giving instructions with respect to the disbursement of the proceeds of the Loans (provided, however, that disbursements to Borrowers may only be made to Twinlab Corporation and other Borrowers that are in the line of business described in Section 5.11 (Conduct of Business)), giving and receiving all other notices and consents hereunder or under any of the other Financing Documents and taking all other actions (including in respect of compliance with covenants) on behalf of any Borrower or Borrowers under the Financing Documents. Borrower Representative hereby accepts such appointment. Notwithstanding anything to the contrary contained in this Agreement, no Borrower other than Borrower Representative shall be entitled to take any of the foregoing actions. The proceeds of each Loan made hereunder shall be advanced to or at the direction of Borrower Representative as set forth above and if not used by the applicable Borrower Representative in its business (for the purposes provided in this Agreement) shall be deemed to be immediately advanced by Borrower Representative to the appropriate other Borrower hereunder as an intercompany loan (collectively, “ Intercompany Loans ”). All collections of each Borrower in respect of Accounts and other proceeds of Collateral of such Borrower received by Agent and applied to the Obligations shall also be deemed to be repayments of the Intercompany Loans owing by such Borrower to Borrower Representative. Borrowers shall maintain accurate books and records with respect to all Intercompany Loans and all repayments thereof. Agent and each Lender may regard any notice or other communication pursuant to any Financing Document from Borrower Representative as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Borrower or all Borrowers hereunder to Borrower Representative on behalf of such Borrower or all Borrowers. Each Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by such Borrower and shall be binding upon and enforceable against such Borrower to the same extent as if the same had been made directly by such Borrower.

 

Section 2.10          Joint and Several Liability; Rights of Contribution; Subordination and Subrogation.

 

(a)          Borrowers are defined collectively to include all Persons named as one of the Borrowers herein; provided , however , that any references herein to “any Borrower”, “each Borrower” or similar references, shall be construed as a reference to each individual Person named as one of the Borrowers herein. Each Person so named shall be jointly and severally liable for all of the obligations of Borrowers under this Agreement. Each Borrower, individually, expressly understands, agrees and acknowledges, that the credit facilities would not be made available on the terms herein in the absence of the collective credit of all of the Persons named as the Borrowers herein, the joint and several liability of all such Persons, and the cross-collateralization of the collateral of all such Persons. Accordingly, each Borrower individually acknowledges that the benefit to each of the Persons named as one of the Borrowers as a whole constitutes reasonably equivalent value, regardless of the amount of the credit facilities actually borrowed by, advanced to, or the amount of collateral provided by, any individual Borrower. In addition, each entity named as one of the Borrowers herein hereby acknowledges and agrees that all of the representations, warranties, covenants, obligations, conditions, agreements and other terms contained in this Agreement shall be applicable to and shall be binding upon and measured and enforceable individually against each Person named as one of the Borrowers herein as well as all such Persons when taken together. By way of illustration, but without limiting the generality of the foregoing, the terms of Section 10.1 of this Agreement are to be applied to each individual Person named as one of the Borrowers herein (as well as to all such Persons taken as a whole), such that the occurrence of any of the events described in Section 10.1 of this Agreement as to any Person named as one of the Borrowers herein shall constitute an Event of Default even if such event has not occurred as to any other Persons named as the Borrowers or as to all such Persons taken as a whole.

 

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(b)          Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the liability of each Borrower for the Obligations and the Liens granted by Borrowers to secure the Obligations, not constitute a Fraudulent Conveyance (as defined below). Consequently, Agent, Lenders and each Borrower agree that if the liability of a Borrower for the Obligations, or any Liens granted by such Borrower securing the Obligations would, but for the application of this sentence, constitute a Fraudulent Conveyance, the liability of such Borrower and the Liens securing such liability shall be valid and enforceable only to the maximum extent that would not cause such liability or such Lien to constitute a Fraudulent Conveyance, and the liability of such Borrower and this Agreement shall automatically be deemed to have been amended accordingly. For purposes hereof, the term “ Fraudulent Conveyance ” means a fraudulent conveyance under Section 548 of Chapter 11 of Title II of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the applicable provisions of any fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time.

 

(c)          Agent is hereby authorized, without notice or demand (except as otherwise specifically required under this Agreement) and without affecting the liability of any Borrower hereunder, at any time and from time to time, to (i) renew, extend or otherwise increase the time for payment of the Obligations; (ii) with the written agreement of any Borrower, change the terms relating to the Obligations or otherwise modify, amend or change the terms of any Note or other agreement, document or instrument now or hereafter executed by any Borrower and delivered to Agent for any Lender; (iii) accept partial payments of the Obligations; (iv) take and hold any Collateral for the payment of the Obligations or for the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such Collateral; (v) apply any such Collateral and direct the order or manner of sale thereof as Agent, in its sole discretion, may determine; and (vi) settle, release, compromise, collect or otherwise liquidate the Obligations and any Collateral therefor in any manner, all guarantor and surety defenses being hereby waived by each Borrower. Without limitations of the foregoing, with respect to the Obligations, each Borrower hereby makes and adopts each of the agreements and waivers set forth in each Guarantee, the same being incorporated hereby by reference. Except as specifically provided in this Agreement or any of the other Financing Documents, Agent shall have the exclusive right to determine the time and manner of application of any payments or credits, whether received from any Borrower or any other source, and such determination shall be binding on all Borrowers. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of the Obligations that Agent shall determine, in its sole discretion, without affecting the validity or enforceability of the Obligations of the other Borrower.

 

(d)          Each Borrower hereby agrees that, except as hereinafter provided, its obligations hereunder shall be unconditional, irrespective of (i) the absence of any attempt to collect the Obligations from any obligor or other action to enforce the same; (ii) the waiver or consent by Agent with respect to any provision of any instrument evidencing the Obligations, or any part thereof, or any other agreement heretofore, now or hereafter executed by a Borrower and delivered to Agent; (iii) failure by Agent to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the Obligations; (iv) the institution of any proceeding under the Bankruptcy Code, or any similar proceeding, by or against a Borrower or Agent’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code; (v) any borrowing or grant of a security interest by a Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Agent’s claim(s) for repayment of any of the Obligations; or (vii) any other circumstance other than payment in full of the Obligations which might otherwise constitute a legal or equitable discharge or defense of a guarantor or surety.

 

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(e)          The Borrowers hereby agree, as between themselves, that to the extent that Agent, on behalf of Lenders, shall have received from any Borrower any Recovery Amount (as defined below), then the paying Borrower shall have a right of contribution against each other Borrower in an amount equal to such other Borrower’s contributive share of such Recovery Amount; provided, however, that in the event any Borrower suffers a Deficiency Amount (as defined below), then the Borrower suffering the Deficiency Amount shall be entitled to seek and receive contribution from and against the other Borrowers in an amount equal to the Deficiency Amount; and provided, further, that in no event shall the aggregate amounts so reimbursed by reason of the contribution of any Borrower equal or exceed an amount that would, if paid, constitute or result in Fraudulent Conveyance. Until all Obligations have been paid and satisfied in full, no payment made by or for the account of a Borrower including, without limitation, (i) a payment made by such Borrower on behalf of the liabilities of any other Borrower, or (ii) a payment made by any other Guarantor under any Guarantee, shall entitle such Borrower, by subrogation or otherwise, to any payment from such other Borrower or from or out of such other Borrower’s property. The right of each Borrower to receive any contribution under this Section 2.10(e) or by subrogation or otherwise from any other Borrower shall be subordinate in right of payment to the Obligations and such Borrower shall not exercise any right or remedy against such other Borrower or any property of such other Borrower by reason of any performance of such Borrower of its joint and several obligations hereunder, until the Obligations have been indefeasibly paid and satisfied in full, and no Borrower shall exercise any right or remedy with respect to this Section 2.10(e) until the Obligations have been indefeasibly paid and satisfied in full. As used in this Section 2.10(e), the term “ Recovery Amount ” means the amount of proceeds received by or credited to Agent from the exercise of any remedy of the Lenders under this Agreement or the other Financing Documents, including, without limitation, the sale of any Collateral. As used in this Section 2.10(e), the term “ Deficiency Amount ” means any amount that is less than the entire amount a Borrower is entitled to receive by way of contribution or subrogation from, but that has not been paid by, the other Borrowers in respect of any Recovery Amount attributable to the Borrower entitled to contribution, until the Deficiency Amount has been reduced to $0 through contributions and reimbursements made under the terms of this Section 2.10(e) or otherwise.

 

Section 2.11         Collections and Lockbox Account.

 

(a)          Borrowers shall maintain a lockbox (the “ Lockbox ”) with a United States depository institution designated from time to time by Agent (the “ Lockbox Bank ”), subject to the provisions of this Agreement, and shall execute with the Lockbox Bank a Deposit Account Control Agreement and such other agreements related to such Lockbox as Agent may require. Borrowers shall ensure that all collections of Accounts (other than Accounts for which the Account Debtor is a Governmental Account Debtor) are paid directly from Account Debtors (i) into the Lockbox for deposit into the Lockbox Account and/or (ii) directly into the Lockbox Account; provided, however , unless Agent shall otherwise direct by written notice to Borrowers, Borrowers shall be permitted to cause Account Debtors who are individuals to pay Accounts directly to Borrowers, which Borrowers shall then administer and apply in the manner required below. All funds deposited into a Lockbox Account shall be transferred into the Payment Account by the close of each Business Day.

 

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(b)           [ Reserved ]

 

(c)          Notwithstanding anything in any lockbox agreement or Deposit Account Control Agreement to the contrary, Borrowers agree that they shall be liable for any fees and charges in effect from time to time and charged by the Lockbox Bank in connection with the Lockbox, the Lockbox Account, and that Agent shall have no liability therefor. Borrowers hereby indemnify and agree to hold Agent harmless from any and all liabilities, claims, losses and demands whatsoever, including reasonable attorneys’ fees and expenses, arising from or relating to actions of Agent or the Lockbox Bank pursuant to this Section or any lockbox agreement or Deposit Account Control Agreement or similar agreement, except to the extent of such losses arising solely from Agent’s gross negligence or willful misconduct.

 

(d)          Agent shall apply, on a daily basis, all funds transferred into the Payment Account pursuant to this Section to reduce the outstanding Revolving Loans as of the date of transfer if made before noon (Eastern time) on a Business Day, or otherwise on the next Business Day (for the avoidance of doubt, it being understood that the five (5) day clearance periods referenced in Section 2.2(a) and (d) shall not apply to funds transferred to the Payment Account for such reduction to the Revolving Loans). If as the result of collections of Accounts pursuant to the terms and conditions of this Section, a credit balance exists with respect to the Loan Account, such credit balance shall not accrue interest in favor of Borrowers, but Agent shall transfer such funds on the next Business Day into an account designated by Borrower Representative for so long as no Event of Default exists.

 

(e)          To the extent that any collections of Accounts or proceeds of other Collateral are not sent directly to the Lockbox or Lockbox Account but are received by any Borrower, such collections shall be held in trust for the benefit of Agent pursuant to an express trust created hereby and immediately remitted, in the form received, to applicable Lockbox or Lockbox Account. No such funds received by any Borrower shall be commingled with other funds of the Borrowers. If any funds received by any Borrower are commingled with other funds of the Borrowers, or are required to be deposited to a Lockbox or Lockbox Account and are not so deposited within two (2) Business Days, then Borrowers shall pay to Agent, for its own account and not for the account of any other Lenders, a compliance fee equal to $500 for each day that any such conditions exist.

 

(f)          Borrowers acknowledge and agree that compliance with the terms of this Section is essential, and that Agent and Lenders will suffer immediate and irreparable injury and have no adequate remedy at law, if any Borrower, through acts or omissions, causes or permits Account Debtors to send payments other than to the Lockbox or Lockbox Accounts or if any Borrower fails to promptly deposit collections of Accounts or proceeds of other Collateral in the Lockbox Account as herein required. Accordingly, in addition to all other rights and remedies of Agent and Lenders hereunder, Agent shall have the right to seek specific performance of the Borrowers’ obligations under this Section, and any other equitable relief as Agent may deem necessary or appropriate, and Borrowers waive any requirement for the posting of a bond in connection with such equitable relief.

 

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(g)          Borrowers shall not, and Borrowers shall not suffer or permit any Credit Party to, (i) withdraw any amounts from any Lockbox Account, (ii) change the procedures or sweep instructions under the agreements governing any Lockbox Accounts, or (iii) send to or deposit in any Lockbox Account any funds other than payments made with respect to and proceeds of Accounts or other Collateral. Borrowers shall, and shall cause each Credit Party to, cooperate with Agent in the identification and reconciliation on a daily basis of all amounts received in or required to be deposited into the Lockbox Accounts. If more than ten percent (10%) of the collections of Accounts received by Borrowers during any given fifteen (15) day period is not identified or reconciled to the reasonable satisfaction of Agent within ten (10) Business Days of receipt, Agent shall not be obligated to make further advances under this Agreement until such amount is identified or is reconciled to the reasonable satisfaction of Agent, as the case may be. In addition, if any such amount cannot be identified or reconciled to the reasonable satisfaction of Agent, Agent may utilize its own staff or, if it deems necessary, engage an outside auditor, in either case at Borrowers’ expense (which in the case of Agent’s own staff shall be in accordance with Agent’s then prevailing customary charges ( plus expenses)), to make such examination and report as may be necessary to identify and reconcile such amount.

 

(h)          If any Borrower breaches its obligation to direct payments of the proceeds of the Collateral to the Lockbox Account, Agent, as the irrevocably made, constituted and appointed true and lawful attorney for Borrowers, may, by the signature or other act of any of Agent’s officers (without requiring any of them to do so), direct any Account Debtor to pay proceeds of the Collateral to Borrowers by directing payment to the Lockbox Account.

 

Section 2.12          Termination; Restriction on Termination.

 

(a)           Termination by Lenders . In addition to the rights set forth in Section 10.2, Agent may, and at the direction of Required Lenders shall, terminate this Agreement without notice upon or after the occurrence and during the continuance of an Event of Default.

 

(b)           Termination by Borrowers . Upon at least ten (10) Business Days’ prior written notice to Agent and Lenders, Borrowers may, at its option, terminate this Agreement; provided, however, that no such termination shall be effective until Borrowers have complied with Section 2.2(f). Any notice of termination given by Borrowers shall be irrevocable unless all Lenders otherwise agree in writing and no Lender shall have any obligation to make any Loans on or after the termination date stated in such notice. Borrowers may elect to terminate this Agreement in its entirety only. No section of this Agreement or type of Loan available hereunder may be terminated singly.

 

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(c)           Effectiveness of Termination . All of the Obligations shall be immediately due and payable upon the Termination Date. All undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Financing Documents shall survive any such termination and Agent shall retain its Liens in the Collateral and Agent and each Lender shall retain all of its rights and remedies under the Financing Documents notwithstanding such termination until all Obligations and Affiliated Obligations have been discharged or paid, in full, in immediately available funds, including, without limitation, all Obligations under Section 2.2(h) and the terms of any fee letter resulting from such termination. Notwithstanding the foregoing or the payment in full of the Obligations, Agent shall not be required to terminate its Liens in the Collateral unless, with respect to any loss or damage Agent may incur as a result of dishonored checks or other items of payment received by Agent from Borrower or any Account Debtor and applied to the Obligations, Agent shall, at its option, (i) have received a written agreement satisfactory to Agent, executed by Borrowers and by any Person whose loans or other advances to Borrowers are used in whole or in part to satisfy the Obligations, indemnifying Agent and each Lender from any such loss or damage or (ii) have retained cash Collateral or other Collateral for such period of time as Agent, in its discretion, may deem necessary to protect Agent and each Lender from any such loss or damage.

 

Article 3 - REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders to enter into this Agreement and to make the Loans and other credit accommodations contemplated hereby, each Borrower hereby represents and warrants to Agent and each Lender that:

 

Section 3.1            Existence and Power . Each Credit Party is an entity as specified on Schedule 3.1 , is duly organized, validly existing and in good standing under the laws of the jurisdiction specified on Schedule 3.1 and no other jurisdiction, has the same legal name as it appears in such Credit Party’s Organizational Documents and an organizational identification number (if any), in each case as specified on Schedule 3.1 , and has all powers and all Permits necessary or desirable in the operation of its business as presently conducted or as proposed to be conducted, except where the failure to have such Permits could not reasonably be expected to have a Material Adverse Effect. Each Credit Party is qualified to do business as a foreign entity in each jurisdiction in which it is required to be so qualified, which jurisdictions as of the Closing Date are specified on Schedule 3.1 , except where the failure to be so qualified could not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.1 , no Credit Party (a) has had, over the five (5) year period preceding the Closing Date, any name other than its current name, or (b) was incorporated or organized under the laws of any jurisdiction other than its current jurisdiction of incorporation or organization.

 

Section 3.2           Organization and Governmental Authorization; No Contravention . The execution, delivery and performance by each Credit Party of the Operative Documents to which it is a party are within its powers, have been duly authorized by all necessary action pursuant to its Organizational Documents, require no further action by or in respect of, or filing with, any Governmental Authority and do not violate, conflict with or cause a breach or a default under (a) any Law applicable to any Credit Party or any of the Organizational Documents of any Credit Party, or (b) any agreement or instrument binding upon it, except for such violations, conflicts, breaches or defaults as could not, with respect to this clause (b), reasonably be expected to have a Material Adverse Effect.

 

Section 3.3           Binding Effect . Each of the Operative Documents to which any Credit Party is a party constitutes a valid and binding agreement or instrument of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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Section 3.4            Capitalization . The authorized equity securities of each of the Credit Parties as of the Closing Date are as set forth on Schedule 3.4 . All issued and outstanding equity securities of each of the Credit Parties are duly authorized and validly issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of Agent and/or Lenders and Permitted Liens that are the subject of a Subordination Agreement, and such equity securities were issued in compliance with all applicable Laws. The identity of the holders of the equity securities of each of the Credit Parties and the percentage of their fully-diluted ownership of the equity securities of each of the Credit Parties as of the Closing Date is set forth on Schedule 3.4 . No shares of the capital stock or other equity securities of any Credit Party, other than those described above, are issued and outstanding as of the Closing Date. Except as set forth on Schedule 3.4 , as of the Closing Date there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar agreements or understandings for the purchase or acquisition from any Credit Party of any equity securities of any such entity.

 

Section 3.5            Financial Information . All information delivered to Agent and pertaining to the financial condition of any Credit Party fairly presents the financial position of such Credit Party as of such date in conformity with GAAP (and as to unaudited financial statements, subject to normal year-end adjustments and the absence of footnote disclosures). Since September 30, 2014, there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of any Credit Party.

 

Section 3.6            Litigation . Except as set forth on Schedule 3.6 as of the Closing Date, and except as hereafter disclosed to Agent in writing, there is no Litigation pending against, or to such Borrower’s knowledge threatened against or affecting, any Credit Party or, to such Borrower’s knowledge, any party to any Operative Document other than a Credit Party, that involves in each case a claim in excess of Two Hundred Fifty Thousand Dollars ($250,000). There is no Litigation pending in which an adverse decision could reasonably be expected to have a Material Adverse Effect or which in any manner draws into question the validity of any of the Operative Documents.

 

Section 3.7            Ownership of Property . Each Borrower and each of its Subsidiaries is the lawful owner of, has good and marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties and other assets (real or personal, tangible, intangible or mixed) purported or reported to be owned or leased (as the case may be) by such Person.

 

Section 3.8            No Default . No Event of Default, or to such Borrower’s knowledge, Default, has occurred and is continuing. No Credit Party is in breach or default under or with respect to any contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default could reasonably be expected to have a Material Adverse Effect.

 

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Section 3.9            Labor Matters . As of the Closing Date, there are no strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party. Hours worked and payments made to the employees of the Credit Parties have not been in violation of the Fair Labor Standards Act or any other applicable Law dealing with such matters. All payments due from the Credit Parties, or for which any claim may be made against any of them, on account of wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on their books, as the case may be. The consummation of the transactions contemplated by the Financing Documents will not give rise to a right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which it is a party or by which it is bound.

 

Section 3.10         Regulated Entities . No Credit Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” all within the meaning of the Investment Company Act of 1940.

 

Section 3.11         Margin Regulations . None of the proceeds from the Loans have been or will be used, directly or indirectly, for the purpose of purchasing or carrying any “margin stock” (as defined in Regulation U of the Federal Reserve Board), for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any “margin stock” or for any other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation T, U or X of the Federal Reserve Board.

 

Section 3.12          Compliance With Laws; Anti-Terrorism Laws.

 

(a)          Each Credit Party is in compliance with the requirements of all applicable Laws, except for such Laws the noncompliance with which could not reasonably be expected to have a Material Adverse Effect.

 

(b)          Except as set forth on Schedule 3.12, (i) each of the Borrower Facilities are registered with the FDA and the Borrowers are in material compliance with all applicable Regulated Product Laws, including, without limitation the FDA’s Dietary Supplement Current Good Manufacturing Practices requirements, and applicable State Law, (ii) as of the Closing Date, except as set forth on Schedule 3.12, there are no pending Regulated Product Compliance Notices still pending against Borrower and (iii) the results of the last inspection by the FDA and applicable State authorities of Borrower’s Facilities are set forth on Schedule 3.12 .

 

(c)          None of the Credit Parties and, to the knowledge of the Credit Parties, none of their Affiliates (i) is in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, (iii) is a Blocked Person, or is controlled by a Blocked Person, (iv) is acting or will act for or on behalf of a Blocked Person, (v) is associated with, or will become associated with, a Blocked Person or (vi) is providing, or will provide, material, financial or technical support or other services to or in support of acts of terrorism of a Blocked Person. No Credit Party nor, to the knowledge of any Credit Party, any of its Affiliates or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (A) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (B) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

 

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Section 3.13          Taxes . All federal, state and local tax returns, reports and statements required to be filed by or on behalf of each Credit Party have been filed with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and statements are required to be filed and, except to the extent subject to a Permitted Contest, all Taxes (including real property Taxes) and other charges shown to be due and payable in respect thereof have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof. Except to the extent subject to a Permitted Contest, all state and local sales and use Taxes required to be paid by each Credit Party have been paid. All federal and state returns have been filed by each Credit Party for all periods for which returns were due with respect to employee income tax withholding, social security and unemployment taxes, and, except to the extent subject to a Permitted Contest, the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made.

 

Section 3.14          Compliance with ERISA.

 

(a)          Each ERISA Plan (and the related trusts and funding agreements) complies in form and in operation with (to the extent compliance also includes complying with IRS procedures under the Employee Plan Compliance Resolution System or other voluntary remedial correction program), has been administered in compliance with, and the terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all material respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and the United States Internal Revenue Service has issued a favorable determination letter with respect to each such ERISA Plan which may be relied on currently. No Credit Party has incurred liability for any material excise tax under any of Sections 4971 through 5000 of the Code.

 

(b)          Except as could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Borrower and each Subsidiary is in compliance with the applicable provisions of ERISA and the provision of the Code relating to ERISA Plans and the regulations and published interpretations therein. During the thirty-six (36) month period prior to the Closing Date or the making of any Loan (i) no steps have been taken to terminate any Pension Plan, and (ii) no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code and no event has occurred that would give rise to a Lien under Section 4068. No condition exists or event or transaction has occurred with respect to any Pension Plan which could result in the incurrence by any Credit Party of any material liability, fine or penalty. No Credit Party has incurred liability to the PBGC (other than for current premiums) with respect to any employee Pension Plan. All contributions (if any) have been made on a timely basis to any Multiemployer Plan that are required to be made by any Credit Party or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable Law; no Credit Party nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability from any such plan, and no condition has occurred which, if continued, could result in a withdrawal or partial withdrawal from any such plan, and no Credit Party nor any member of the Controlled Group has received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code, that any such plan is or may be terminated, or that any such plan is or may become insolvent.

 

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Section 3.15         Consummation of Operative Documents; Brokers . Except for fees payable to Agent and/or Lenders, no broker, finder or other intermediary has brought about the obtaining, making or closing of the transactions contemplated by the Operative Documents, and no Credit Party has or will have any obligation to any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.

 

Section 3.16       Related Transactions . All transactions contemplated by the Operative Documents to be consummated on or prior to the date hereof have been so consummated (including, without limitation, the disbursement and transfer of all funds in connection therewith) in all material respects pursuant to the provisions of the applicable Operative Documents, true and complete copies of which have been delivered to Agent, and in compliance with all applicable Law, except for such Laws the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.

 

Section 3.17         Material Contracts . Except for the Operative Documents and the other agreements set forth on Schedule 3.17 (collectively with the Operative Documents, the “ Material Contracts ”) as of the Closing Date or as of the date of each Monthly Compliance Certificate, there are no (a) employment agreements covering the management of any Credit Party, (b) collective bargaining agreements or other similar labor agreements covering any employees of any Credit Party, (c) agreements for managerial, consulting or similar services to which any Credit Party is a party or by which it is bound, (d) agreements regarding any Credit Party, its assets or operations or any investment therein to which any of its equity holders is a party or by which it is bound, (e) real estate leases, Intellectual Property licenses or other lease or license agreements to which any Credit Party is a party, either as lessor or lessee, or as licensor or licensee (other than licenses arising from the purchase of “off the shelf” products), (f) customer, distribution, marketing or supply agreements to which any Credit Party is a party, in each case with respect to the preceding clauses (a) through (f) requiring payment of more than $250,000 in any year, (g) partnership agreements to which any Credit Party is a general partner or joint venture agreements to which any Credit Party is a party, (h) third party billing arrangements to which any Credit Party is a party, or (i) any other agreements or instruments to which any Credit Party is a party, and the breach, nonperformance or cancellation of which, or the failure of which to renew, could reasonably be expected to have a Material Adverse Effect. Schedule 3.17 sets forth, with respect to each real estate lease agreement to which any Borrower is a party (as a lessee) as of the Closing Date, the address of the subject property and the annual rental (or, where applicable, a general description of the method of computing the annual rental). The consummation of the transactions contemplated by the Financing Documents will not give rise to a right of termination in favor of any party to any Material Contract (other than any Credit Party), except for such Material Contracts the noncompliance with which would not reasonably be expected to have a Material Adverse Effect.

 

Section 3.18         Compliance with Environmental Requirements; No Hazardous Materials. Except in each case as set forth on Schedule 3.18:

 

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(a)          no notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to such Borrower’s knowledge, threatened by any Governmental Authority or other Person with respect to any (i) alleged violation by any Credit Party of any Environmental Law, (ii) alleged failure by any Credit Party to have any Permits required in connection with the conduct of its business or to comply with the terms and conditions thereof, (iii) any generation, treatment, storage, recycling, transportation or disposal of any Hazardous Materials, or (iv) release of Hazardous Materials; and

 

(b)          no property now owned or leased by any Credit Party and, to the knowledge of each Borrower, no such property previously owned or leased by any Credit Party, to which any Credit Party has, directly or indirectly, transported or arranged for the transportation of any Hazardous Materials, is listed or, to such Borrower’s knowledge, proposed for listing, on the National Priorities List promulgated pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list or is the subject of federal, state or local enforcement actions or, to the knowledge of such Borrower, other investigations which may lead to claims against any Credit Party for clean-up costs, remedial work, damage to natural resources or personal injury claims, including, without limitation, claims under CERCLA.

 

For purposes of this Section 3.18, each Credit Party shall be deemed to include any business or business entity (including a corporation) that is, in whole or in part, a predecessor of such Credit Party.

 

Section 3.19         Intellectual Property . Each Credit Party owns, is licensed to use or otherwise has the right to use, all Intellectual Property that is material to the condition (financial or other), business or operations of such Credit Party. All Intellectual Property existing as of the Closing Date which is issued, registered or pending with any United States or foreign Governmental Authority (including, without limitation, any and all applications for the registration of any Intellectual Property with any such United States or foreign Governmental Authority) and all licenses under which any Borrower is the licensee of any such registered Intellectual Property (or any such application for the registration of Intellectual Property) owned by another Person are set forth on Schedule 3.19 (as supplemented as and when required by a Monthly Compliance Certificate). Such Schedule 3.19 indicates in each case whether such registered Intellectual Property (or application therefor) is owned or licensed by such Credit Party, and in the case of any such licensed registered Intellectual Property (or application therefor), lists the name and address of the licensor and the name and date of the agreement pursuant to which such item of Intellectual Property is licensed and whether or not such license is an exclusive license and indicates whether there are any purported restrictions in such license on the ability to such Credit Party to grant a security interest in and/or to transfer any of its rights as a licensee under such license. Except as indicated on Schedule 3.19 , the applicable Credit Party is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each such registered Intellectual Property (or application therefor) purported to be owned by such Credit Party, free and clear of any Liens (other than the Liens permitted by the terms of the Subordination Agreement (JL-BBNC) and the Subordination Agreement (Penta)) and/or licenses in favor of third parties or agreements or covenants not to sue such third parties for infringement. All registered Intellectual Property of each Credit Party is duly and properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. No Credit Party is party to, nor bound by, any material license or other agreement with respect to which any Credit Party is the licensee that prohibits or otherwise restricts such Credit Party from granting a security interest in such Borrower’s interest in such license or agreement or other property. To such Borrower’s knowledge, each Credit Party conducts its business without infringement or claim of infringement of any Intellectual Property rights of others and there is no infringement or claim of infringement by others of any Intellectual Property rights of any Credit Party, which infringement or claim of infringement could reasonably be expected to have a Material Adverse Effect.

 

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Section 3.20         Solvency . After giving effect to the Loan advance and the liabilities and obligations of each Borrower under the Operative Documents, each Borrower and each additional Credit Party is Solvent.

 

Section 3.21         Full Disclosure . None of the written information (financial or otherwise) furnished by or on behalf of any Credit Party to Agent or any Lender in connection with the consummation of the transactions contemplated by the Operative Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which such statements were made. All financial projections delivered to Agent and the Lenders by Borrowers (or their agents) have been prepared on the basis of the assumptions stated therein. Such projections represent each Borrower’s best estimate of such Borrower’s future financial performance and such assumptions are believed by such Borrower to be fair and reasonable in light of current business conditions; provided , however , that Borrowers can give no assurance that such projections will be attained.

 

Section 3.22         Interest Rate . The rate of interest paid under the Notes and the method and manner of the calculation thereof do not violate any usury or other law or applicable Laws, any of the Organizational Documents, or any of the Operative Documents.

 

Section 3.23         Subsidiaries . Borrowers do not own any stock, partnership interests, limited liability company interests or other equity securities or Subsidiaries except for Permitted Investments.

 

Section 3.24         Representations and Warranties Incorporated from Operative Documents . As of the Closing Date, each of the representations and warranties made in the Operative Documents by each of the parties thereto is true and correct in all material respects, and such representations and warranties are hereby incorporated herein by reference with the same effect as though set forth in their entirety herein, as qualified therein, except to the extent that such representation or warranty relates to a specific date, in which case such representation and warranty shall be true as of such earlier date.

 

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Article 4 - AFFIRMATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 4.1           Financial Statements and Other Reports . The Borrower Representative will deliver to Agent: (a) for each Borrower as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet, cash flow and income statement (including year-to-date results) covering Borrowers’ and its Consolidated Subsidiaries’ consolidated operations during the period, prepared under GAAP, consistently applied (except unaudited financial statements shall be subject to normal year-end adjustments and the absence of footnote disclosures), setting forth in comparative form the corresponding figures as at the end of the corresponding month of the previous fiscal year and the projected figures for such period based upon the projections required hereunder, all in reasonable detail, certified by a Responsible Officer and in a form acceptable to Agent; (b) together with the financial reporting package described in (a) above, evidence of payment and satisfaction of all payroll, withholding and similar taxes due and owing by all Borrowers with respect to the payroll period(s) occurring during such month; (c) for the Borrowers, as soon as available, but no later than one hundred twenty (120) days after the last day of the Borrowers’ fiscal year, audited consolidated and consolidating financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Agent in its reasonable discretion; (d) within five (5) days of delivery or filing thereof, copies of all statements, reports and notices made available to Borrowers’ security holders or to any holders of Subordinated Debt and copies of all reports and other filings made by any Borrower with any stock exchange on which any securities of any Borrower are traded and/or the SEC; (e) a prompt written report of any legal actions pending or threatened against any Borrower or any of its Subsidiaries that could reasonably be expected to result in damages or costs to any Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand Dollars ($250,000) or more; (f) prompt written notice of an event that materially and adversely affects the value of any Intellectual Property; and (g) budgets, sales projections, operating plans and other financial information and information, reports or statements regarding the Borrowers, their business and the Collateral as Agent may from time to time reasonably request. Each Borrower will, within thirty (30) days after the last day of each month, deliver to Agent with the monthly financial statements described in clause (a) above, a duly completed Compliance Certificate (each, a “ Monthly Compliance Certificate ”) signed by a Responsible Officer (i) setting forth calculations showing compliance with the financial covenants set forth in this Agreement and (ii) identifying and attaching complete copies of all Material Contracts and Intellectual Property not previously disclosed in the Schedules to this Agreement or in a preceding Monthly Compliance Certificate (provided, however, by so disclosing, Borrowers shall not cure any Event of Default for failure to disclose such information sooner). Promptly upon their becoming available, Borrowers shall deliver to Agent copies of all Swap Contracts. Upon the reasonable request of the Agent, the Borrowers shall denote the ten (10) largest Account Debtors, such Account Debtor’s credit rating(s), if any, as rated by A.M. Best Company, Standard & Poor’s Corporation, Moody’s Investors Service, Inc., FITCH, Inc. or other applicable rating agent.

 

Section 4.2            Payment and Performance of Obligations . Each Borrower (a) will pay and discharge, and cause each Subsidiary to pay and discharge, on a timely basis as and when due, all of their respective obligations and liabilities, except for such obligations and/or liabilities (i) that may be the subject of a Permitted Contest, and (ii) the nonpayment or nondischarge of which could not reasonably be expected to have a Material Adverse Effect or result in a Lien against any Collateral, except for Permitted Liens, (b) without limiting anything contained in the foregoing clause (a), pay all amounts due and owing in respect of Taxes (including without limitation, payroll and withholdings tax liabilities) on a timely basis as and when due, and in any case prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for nonpayment thereof, (c) will maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves for the accrual of all of their respective obligations and liabilities, and (d) will not breach or permit any Subsidiary to breach, or permit to exist any default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets are bound, except for such breaches or defaults which could not reasonably be expected to have a Material Adverse Effect.

 

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Section 4.3            Maintenance of Existence . Each Borrower will preserve, renew and keep in full force and effect and in good standing, and will cause each Subsidiary to preserve, renew and keep in full force and effect and in good standing, their respective existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business.

 

Section 4.4            Maintenance of Property; Insurance .

 

(a)          Each Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. If all or any part of the Collateral useful or necessary in its business, or upon which any Borrowing Base is calculated, becomes damaged or destroyed, each Borrower will, and will cause each Subsidiary to, promptly and completely repair and/or restore the affected Collateral in a good and workmanlike manner, regardless of whether Agent agrees to disburse insurance proceeds or other sums to pay costs of the work of repair or reconstruction.

 

(b)          Upon completion of any Permitted Contest, Borrowers shall, and will cause each Subsidiary to, promptly pay the amount due, if any, and deliver to Agent proof of the completion of the contest and payment of the amount due, if any, following which Agent shall return the security, if any, deposited with Agent pursuant to the definition of Permitted Contest.

 

(c)          Each Borrower will maintain (i) casualty insurance on all real and personal property on an all risks basis (including the perils of flood, windstorm and quake), covering the repair and replacement cost of all such property and coverage, business interruption and rent loss coverages with extended period of indemnity (for the period required by Agent from time to time) and indemnity for extra expense, in each case without application of coinsurance and with agreed amount endorsements, (ii) general and professional liability insurance (including products/completed operations liability coverage), and (iii) such other insurance coverage in such amounts and with respect to such risks as Agent may reasonably request from time to time, pursuant to the Insurance Requirements attached hereto as Schedule 4.4 ; provided , however , that, in no event shall such insurance be in amounts or with coverage less than, or with carriers with qualifications inferior to, any of the insurance or carriers in existence as of the Closing Date (or required to be in existence after the Closing Date under a Financing Document). All such insurance shall be provided by insurers having an A.M. Best policyholders rating reasonably acceptable to Agent.

 

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(d)          On or prior to the Closing Date, and at all times thereafter, each Borrower will cause Agent to be named as an additional insured, assignee and lender loss payee, as applicable, on each insurance policy required to be maintained pursuant to this Section 4.4 pursuant to endorsements in form and substance acceptable to Agent. Borrowers shall deliver to Agent and the Lenders (i) on the Closing Date, a certificate from Borrowers’ insurance broker dated such date showing the amount of coverage as of such date, and that such policies will include effective waivers (whether under the terms of any such policy or otherwise) by the insurer of all claims for insurance premiums against all loss payees and additional insureds and all rights of subrogation against all loss payees and additional insureds, and that if all or any part of such policy is canceled, terminated or expires, the insurer will forthwith give notice thereof to each additional insured, assignee and loss payee and that no cancellation, reduction in amount or material change in coverage thereof shall be effective until at least thirty (30) days after receipt by each additional insured, assignee and loss payee of written notice thereof, (ii) on an annual basis, and upon the request of any Lender through Agent from time to time full information as to the insurance carried, (iii) within five (5) days of receipt of notice from any insurer, a copy of any notice of cancellation, nonrenewal or material change in coverage from that existing on the date of this Agreement, (iv) forthwith, notice of any cancellation or nonrenewal of coverage by any Borrower, and (v) at least 30 days prior to expiration of any policy of insurance, evidence of renewal of such insurance upon the terms and conditions herein required or such shorter period as may be acceptable to Agent.

 

(e)          In the event any Borrower fails to provide Agent with evidence of the insurance coverage required by this Agreement, Agent may purchase insurance at Borrowers’ expense to protect Agent’s interests in the Collateral. This insurance may, but need not, protect such Borrower’s interests. The coverage purchased by Agent may not pay any claim made by such Borrower or any claim that is made against such Borrower in connection with the Collateral. Such Borrower may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that such Borrower has obtained insurance as required by this Agreement. If Agent purchases insurance for the Collateral, Borrowers will be responsible for the costs of that insurance to the fullest extent provided by law, including interest and other charges imposed by Agent in connection with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance may be more than the cost of insurance such Borrower is able to obtain on its own.

 

Section 4.5           Compliance with Laws and Material Contracts . Each Borrower will comply, and cause each Subsidiary to comply, in all material respects with the requirements of all applicable Regulated Product Laws. Each Borrower will comply, and cause each Subsidiary to comply, in all material respects with the requirements of all other Laws and Material Contracts, except to the extent that failure to so comply could not reasonably be expected to (a) have a Material Adverse Effect, or (b) result in any Lien upon either (i) a material portion of the assets of any such Person in favor of any Governmental Authority, or (ii) any Collateral which is part of the Borrowing Base.

 

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Section 4.6           Inspection of Property, Books and Records . Each Borrower will keep, and will cause each Subsidiary to keep, proper books of record substantially in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, at the sole cost of the applicable Borrower or any applicable Subsidiary (subject to the applicable limitations of Section 4.14 (Borrowing Base Collateral Administration)), representatives of Agent and of any Lender to visit and inspect any of their respective properties, to examine and make abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective operations and the Collateral, to verify the amount and age of the Accounts, the identity and credit of the respective Account Debtors, to review the billing practices of Borrowers and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants as often as may reasonably be desired. In the absence of a Default or an Event of Default, Agent or any Lender exercising any rights pursuant to this Section 4.6 shall give the applicable Borrower or any applicable Subsidiary commercially reasonable prior notice of such exercise. No notice shall be required during the existence and continuance of any Default or Event of Default or any time during which Agent reasonably believes a Default or an Event of Default exists.

 

Section 4.7           Use of Proceeds . Borrowers shall use the proceeds of Revolving Loans solely for (a) on the Closing Date, transaction fees incurred in connection with the Operative Documents and the refinancing of all Fifth Third Bank Debt, (b) for working capital needs of Borrowers and their Subsidiaries (including, without limitation, payment of Debt), and/or (c) Permitted Acquisitions. No portion of the proceeds of the Loans will be used for family, personal, agricultural or household use.

 

Section 4.8           Estoppel Certificates . After written request by Agent, Borrowers, within fifteen (15) days and at their expense, will furnish Agent with a statement, duly acknowledged and certified, setting forth (a) the amount of the original principal amount of the Notes, and the unpaid principal amount of the Notes, (b) the rate of interest of the Notes, (c) the date payments of interest and/or principal were last paid, (d) any offsets or defenses to the payment of the Obligations, and if any are alleged, the nature thereof, (e) that the Notes and this Agreement have not been modified or if modified, giving particulars of such modification, and (f) that there has occurred and is then continuing no Default or Event of Default or if such Default or Event of Default exists, the nature thereof, the period of time it has existed, and the action being taken to remedy such Default or Event of Default. After written request by Agent, Borrowers, within fifteen (15) days and at their expense, will furnish Agent with a certificate, signed by a Responsible Officer of Borrowers, updating all of the representations and warranties contained in this Agreement and the other Financing Documents and certifying that all of the representations and warranties contained in this Agreement and the other Financing Documents, as updated pursuant to such certificate, are true, accurate and complete as of the date of such certificate.

 

Section 4.9           Notices of Litigation and Defaults . Borrowers will give prompt written notice to Agent (a) of any litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party which would reasonably be expected to have a Material Adverse Effect with respect to Borrowers or any other Credit Party or which in any manner calls into question the validity or enforceability of any Financing Document, (b) upon any Borrower becoming aware of the existence of any Default or Event of Default, (c) if any Credit Party is in breach or default under or with respect to any Material Contract, or if any Credit Party is in breach or default under or with respect to any other contract, agreement, lease or other instrument to which it is a party or by which its property is bound or affected, which breach or default in each case or in the aggregate could reasonably be expected to have a Material Adverse Effect, (d) of any strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party, (e) if there is any infringement or claim of infringement by any other Person with respect to any Intellectual Property rights of any Credit Party that could reasonably be expected to have a Material Adverse Effect, or if there is any claim by any other Person that any Credit Party in the conduct of its business is infringing on the Intellectual Property Rights of others, (f) of all returns, recoveries, disputes and claims that involve more than $250,000, and (g) promptly upon receipt by a Borrower, a copy of each Regulated Product Compliance Notices with respect to any Borrower or of any of Borrower Facilities. Borrowers represent and warrant that Schedule 4.9 sets forth a complete list of all matters existing as of the Closing Date for which notice could be required under this Section and all litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party as of the Closing Date.

 

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Section 4.10         Hazardous Materials; Remediation.

 

(a)          If any release or disposal of Hazardous Materials in violation of Environmental Laws shall occur or shall have occurred on any real property or any other assets of any Borrower or any other Credit Party, such Borrower will cause, or direct the applicable Credit Party to cause, the prompt containment and removal of such Hazardous Materials and the remediation of such real property or other assets as is necessary to comply with all Environmental Laws and to preserve the value of such real property or other assets. Without limiting the generality of the foregoing, each Borrower shall, and shall cause each other Credit Party to, comply with each Environmental Law requiring the performance at any real property by any Borrower or any other Credit Party of activities in response to the release or threatened release of a Hazardous Material.

 

(b)          Borrowers will provide Agent within thirty (30) days after written demand therefor with a bond, letter of credit or similar financial assurance evidencing to the reasonable satisfaction of Agent that sufficient funds are available to pay the cost of removing, treating and disposing of any Hazardous Materials, on property for which a Borrower is responsible, in violation of Environmental Laws or Hazardous Materials Contamination and discharging any assessment which may be established on any property as a result thereof, such demand to be made, if at all, upon Agent’s reasonable business determination that the failure to remove, treat or dispose of any Hazardous Materials or Hazardous Materials Contamination, or the failure to discharge any such assessment could reasonably be expected to have a Material Adverse Effect.

 

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Section 4.11          Further Assurances .

 

(a)          Each Borrower will, and will cause each Subsidiary to, at its own cost and expense, promptly and duly take, execute, acknowledge and deliver all such further acts, documents and assurances as may from time to time be necessary or as Agent or the Required Lenders may from time to time reasonably request in order to carry out the intent and purposes of the Financing Documents and the transactions contemplated thereby, including all such actions to (i) establish, create, preserve, protect and perfect a first priority Lien (subject only to Permitted Liens) in favor of Agent for itself and for the benefit of the Lenders on the Collateral (including Collateral acquired after the date hereof), and (ii) unless Agent shall agree otherwise in writing, cause all Subsidiaries of Borrowers to be jointly and severally obligated with the other Borrowers under all covenants and obligations under this Agreement, including the obligation to repay the Obligations. Except as provided in the immediately following sentence, Borrowers shall, at the time of the delivery of any Compliance Certificate disclosing the acquisition by an Credit Party of any registered Intellectual Property or application for the registration of Intellectual Property, deliver to Agent a duly completed and executed supplement to the applicable Credit Party’s Patent Security Agreement or Trademark Security Agreement in the form of the respective Exhibit thereto, and (y) at the request of Agent, following the disclosure by Borrowers on any Compliance Certificate of the acquisition by any Credit Party of any rights under a license as a licensee with respect to any registered Intellectual Property or application for the registration of any Intellectual Property owned by another Person, Borrowers shall execute any documents requested by Agent to establish, create, preserve, protect and perfect a first priority lien in favor of Agent, to the extent legally possible, in such Borrower’s rights under such license and shall use their commercially reasonable best efforts to obtain the written consent of the licensor which such license to the granting in favor of Agent of a Lien on such Borrower’s rights as licensee under such license. Without limiting the generality of the foregoing, with respect to Intellectual Property that is registered and is described in a supplement to Schedule 3.19 as and when required by a Monthly Compliance Certificate and in which Intellectual Property the Agent has a perfected security interest by virtue of the filing of a financing statement, the Borrowers shall be required to deliver such duly completed and executed supplement to the applicable Credit Party’s Patent Security Agreements and/or Trademark Security Agreements in the second week of July and the second week of January of each year, except to the extent the Agent from time to time notifies the Borrowers that the Agent requires such documents sooner.

 

(b)          Upon receipt of an affidavit of an officer of Agent or a Lender and customary indemnifications reasonably acceptable to the Borrower Representative as to the loss, theft, destruction or mutilation of any Note or any other Financing Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other applicable Financing Document, Borrowers will issue, in lieu thereof, a replacement Note or other applicable Financing Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Financing Document in the same principal amount thereof and otherwise of like tenor.

 

(c)          Upon the formation or acquisition of a new Subsidiary, Borrowers shall (i) pledge, have pledged or cause or have caused to be pledged to the Agent pursuant to a pledge agreement in form and substance satisfactory to the Agent, all of the outstanding shares of equity interests or other equity interests of such new Subsidiary owned directly or indirectly by any Borrower, along with undated stock or equivalent powers for such certificates, executed in blank; (ii) unless Agent shall agree otherwise in writing, cause the new Subsidiary to take such other actions (including entering into or joining any Security Documents) as are necessary or advisable in the reasonable opinion of the Agent in order to grant the Agent, acting on behalf of the Lenders, a first priority Lien on all real and personal property of such Subsidiary in existence as of such date and in all after acquired property, which first priority Liens are required to be granted pursuant to this Agreement; (iii) unless Agent shall agree otherwise in writing, cause such new Subsidiary to either (at the election of Agent) become a Borrower hereunder with joint and several liability for all obligations of Borrowers hereunder and under the other Financing Documents pursuant to a joinder agreement or other similar agreement in form and substance satisfactory to Agent or to become a Guarantor of the obligations of Borrowers hereunder and under the other Financing Documents pursuant to a guaranty and suretyship agreement in form and substance satisfactory to Agent; and (iv) cause the new Subsidiary to deliver certified copies of such Subsidiary’s certificate or articles of incorporation, together with good standing certificates, by-laws (or other operating agreement or governing documents), resolutions of the Board of Directors or other governing body, approving and authorize the execution and delivery of the Security Documents, incumbency certificates and to execute and/or deliver such other documents and legal opinions or to take such other actions as may be requested by the Agent, in each case, in form and substance satisfactory to the Agent.

 

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(d)          Upon the request of Agent, Borrowers shall obtain a landlord’s agreement or mortgagee agreement, as applicable, from the lessor of each leased property or mortgagee of owned property with respect to any business location where any portion of the Collateral included in or proposed to be included in the Borrowing Base, or the records relating to such Collateral and/or software and equipment relating to such records or Collateral, is stored or located, which agreement or letter shall be reasonably satisfactory in form and substance to Agent. Borrowers shall timely and fully pay and perform its obligations under all leases and other agreements with respect to each leased location where any Collateral, or any records related thereto, is or may be located.

 

Section 4.12          [Reserved]

 

Section 4.13          Power of Attorney . Each of the officers of Agent is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrowers (without requiring any of them to act as such) with full power of substitution to do the following: (a) endorse the name of Borrowers upon any and all checks, drafts, money orders, and other instruments for the payment of money that are payable to Borrowers and constitute collections on Borrowers’ Accounts or other Collateral; (b) so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, execute in the name of Borrowers any schedules, assignments, instruments, documents, and statements that Borrowers are obligated to give Agent under this Agreement; (c) after the occurrence and during the continuance of an Event of Default, take any action Borrowers are required to take under this Agreement; (d) so long as Agent has provided not less than three (3) Business Days’ prior written notice to Borrower to perform the same and Borrower has failed to take such action, do such other and further acts and deeds in the name of Borrowers that Agent may deem necessary or desirable to enforce any Account or other Collateral or perfect Agent’s security interest or Lien in any Collateral; and (e) after the occurrence and during the continuance of an Event of Default, do such other and further acts and deeds in the name of Borrowers that Agent may deem necessary or desirable to enforce its rights with regard to any Account or other Collateral. This power of attorney shall be irrevocable and coupled with an interest.

 

Section 4.14          Borrowing Base Collateral Administration .

 

(a)          All data and other information relating to Accounts or other intangible Collateral shall at all times be kept by Borrowers, at their respective principal offices and shall not be moved from such locations without (i) providing prior written notice to Agent, and (ii) obtaining the prior written consent of Agent, which consent shall not be unreasonably withheld.

 

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(b)          Borrowers shall provide prompt written notice to each Person who either is currently an Account Debtor or becomes an Account Debtor at any time following the date of this Agreement that directs each Account Debtor to make payments into the Lockbox, and hereby authorizes Agent, upon Borrowers’ failure to send such notices within ten (10) days after the date of this Agreement (or ten (10) days after the Person becomes an Account Debtor), to send any and all similar notices to such Person. Agent reserves the right to notify Account Debtors that Agent has been granted a Lien upon all Accounts.

 

(c)          Borrowers will conduct a physical count of the Inventory at least twice per year, at such other times as Agent reasonably requests and at any time that Agent requests during the continuance of an Event of Default and Borrowers shall provide to Agent a written accounting of such physical count in form and substance satisfactory to Agent. Each Borrower will use commercially reasonable efforts to at all times keep its Inventory in good and marketable condition. In addition to the foregoing, from time to time, Agent may require Borrowers to obtain and deliver to Agent appraisal reports in form and substance and from appraisers reasonably satisfactory to Agent stating the then current fair market values of all or any portion of Inventory owned by each Borrower or any Subsidiaries. So long as no Event of Default exists, Borrower shall only be liable for the costs of two appraisals under this Section per fiscal year.

 

(d)          In addition to the foregoing, from time to time, Agent may require Borrowers to obtain and deliver to Agent appraisal reports, at the Borrower’s expense, in form and substance and from appraisers reasonably satisfactory to Agent stating the then current fair market values of all or any portion Intellectual Property and furniture, fixtures and equipment owned by each Borrower or any Subsidiaries. So long as no Event of Default exists, Borrower shall only be liable for the costs of two appraisals under this Section per fiscal year.

 

Section 4.15          Maintenance of Management.

 

(a)          Borrower will cause its business to be continuously managed by its present chief executive officer or such other individual serving in such capacity as shall be reasonably satisfactory to Agent. Borrowers will notify Agent promptly in writing of any change in its board of directors or executive officers.

 

(b)          Borrowers will use commercially reasonable efforts to at all times keep its FF&E in good repair and physical condition, normal wear and tear excepted.

 

Article 5 - NEGATIVE COVENANTS

 

Each Borrower agrees that, so long as any Credit Exposure exists:

 

Section 5.1            Debt; Contingent Obligations . No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise become or remain directly or indirectly liable with respect to, any Debt, except for Permitted Debt. No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist any Contingent Obligations, except for Permitted Contingent Obligations.

 

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Section 5.2            Liens . No Borrower will, or will permit any Subsidiary to, directly or indirectly, create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except for Permitted Liens.

 

Section 5.3            Distributions . No Borrower will, or will permit any Subsidiary to, directly or indirectly, declare, order, pay, make or set apart any sum for any Distribution, except for Permitted Distributions.

 

Section 5.4            Restrictive Agreements . Except as expressly set forth in the Subordinated Debt Documents provided to the Agent before the Closing Date with respect to the Subordinated Debt under the Subordination Agreement (JL-BBNC) and the Subordination Agreement (Penta), no Borrower will, or will permit any Subsidiary to, directly or indirectly (a) enter into or assume any agreement (other than the Financing Documents and any agreements for purchase money debt permitted under clause (c) of the definition of Permitted Debt) prohibiting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or (b) create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind (except as provided by the Financing Documents) on the ability of any Subsidiary to: (i) pay or make Distributions to any Borrower or any Subsidiary; (ii) pay any Debt owed to any Borrower or any Subsidiary; (iii) make loans or advances to any Borrower or any Subsidiary; or (iv) transfer any of its property or assets to any Borrower or any Subsidiary.

 

Section 5.5            Payments and Modifications of Subordinated Debt . No Borrower will, or will permit any Subsidiary to, directly or indirectly (a) declare, pay, make or set aside any amount for payment in respect of any Subordinated Debt, except for payments made in full compliance with and expressly permitted under the applicable Subordination Agreement, (b) amend or otherwise modify the terms of any Subordinated Debt, except for amendments or modifications made in full compliance with the Subordination Agreement, (c) declare, pay, make or set aside any amount for payment in respect of any Debt hereinafter incurred that, by its terms, or by separate agreement, is subordinated to the Obligations, except for payments made in full compliance with and expressly permitted under the subordination provisions applicable thereto, or (d) amend or otherwise modify the terms of any such Debt if the effect of such amendment or modification is to (i) increase the interest rate or fees on, or change the manner or timing of payment of, such Debt, (ii) accelerate or shorten the dates upon which payments of principal or interest are due on, or the principal amount of, such Debt, (iii) change in a manner adverse to any Credit Party or Agent any event of default or add or make more restrictive any covenant with respect to such Debt, (iv) change the prepayment provisions of such Debt or any of the defined terms related thereto, (v) change the subordination provisions thereof (or the subordination terms of any guaranty thereof), or (vi) change or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights on the holder of such Debt in a manner adverse to Borrowers, any Subsidiaries, Agents or Lenders. Borrowers shall, prior to entering into any such amendment or modification, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy thereof.

 

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Section 5.6            Consolidations, Mergers and Sales of Assets; Change in Control . No Borrower will, or will permit any Subsidiary to, directly or indirectly (a) consolidate or merge or amalgamate with or into any other Person (except that any Solvent Borrower may consolidate or merge with any other Borrower), or (b) consummate any Asset Dispositions other than Permitted Asset Dispositions. No Borrower will suffer or permit to occur any Change in Control with respect to itself, any Subsidiary or any Guarantor.

 

Section 5.7            Purchase of Assets, Investments . No Borrower will, or will permit any Subsidiary to, directly or indirectly (a) acquire or enter into any agreement to acquire any assets other than in the Ordinary Course of Business or as permitted under clause (h) or clause (i) of the definition of Permitted Investments; (b) engage or enter into any agreement to engage in any joint venture or partnership with any other Person; or (c) acquire or own or enter into any agreement to acquire or own any Investment in any Person other than Permitted Investments.

 

Section 5.8            Transactions with Affiliates . Except as otherwise disclosed on Schedule 5.8 , no Borrower will, or will permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of any Borrower except for transactions that are disclosed to Agent in advance of being entered into and which contain terms that are no less favorable to the applicable Borrower or any Subsidiary, as the case may be, than those which might be obtained from a third party not an Affiliate of any Credit Party.

 

Section 5.9            Modification of Organizational Documents . No Borrower will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Organizational Documents of such Person, except for Permitted Modifications.

 

Section 5.10          Modification of Certain Agreements . No Borrower will, or will permit any Subsidiary to, directly or indirectly, amend or otherwise modify any Material Contract, which amendment or modification in any case: (a) is contrary to the terms of this Agreement or any other Financing Document; (b) could reasonably be expected to be adverse to the rights, interests or privileges of the Agent or the Lenders or their ability to enforce the same; (c) results in the imposition or expansion in any material respect of any obligation of or restriction or burden on any Borrower or any Subsidiary, other than amendments or modifications in the Ordinary Course of Business to contracts with such Person’s customers (subject to the provisions of Section 5.16) or suppliers; or (d) reduces in any material respect any rights or benefits of any Borrower or any Subsidiaries, other than amendments or modifications in the Ordinary Course of Business to contracts with such Person’s customers (subject to the provisions of Section 5.16). Each Borrower shall, prior to entering into any amendment or other modification of any of the foregoing documents, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy of amendments or other modifications to such documents, and such Borrower agrees not to take, nor permit any of its Subsidiaries to take, any such action with respect to any such documents without obtaining such approval from Agent.

 

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Section 5.11          Conduct of Business . No Borrower will, or will permit any Subsidiary to, directly or indirectly, engage in any line of business other than (a) the manufacturing, packaging, labeling, advertising, disposing or holding of Regulated Products (other than Drugs that require a prescription), (b) those other businesses engaged in on the Closing Date and described on Schedule 5.11 and businesses reasonably related thereto, and (c) the businesses of Permitted Acquisitions disclosed in writing to the Agent prior to the closing thereof and acceptable to the Agent. No Borrower will, or will permit any Subsidiary to, engage in any business related to the manufacturing, packaging, labeling, advertising, disposing or holding of Drugs that require a prescription or, other than in the Ordinary Course of Business, change its normal billing payment and reimbursement policies and procedures with respect to its Accounts (including, without limitation, the amount and timing of finance charges, fees and write-offs).

 

Section 5.12          Lease Payments . No Borrower will, or will permit any Subsidiary to, directly or indirectly, incur or assume (whether pursuant to a Guarantee or otherwise) any liability for rental payments under operating leases except in the Ordinary Course of Business.

 

Section 5.13          Limitation on Sale and Leaseback Transactions . Except for the Essex Lease, no Borrower will, or will permit any Subsidiary to, directly or indirectly, enter into any arrangement with any Person whereby, in a substantially contemporaneous transaction, any Borrower or any Subsidiaries sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back the right to use such asset.

 

Section 5.14          Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts . No Borrower will, or will permit any Subsidiary to, directly or indirectly, establish any new Deposit Account or Securities Account without prior written notice to Agent, and unless Agent, such Borrower or such Subsidiary and the bank, financial institution or securities intermediary at which the account is to be opened enter into a Deposit Account Control Agreement or Securities Account Control Agreement prior to or concurrently with the establishment of such Deposit Account or Securities Account. Borrowers represent and warrant that Schedule 5.14 lists all of the Deposit Accounts and Securities Accounts of each Borrower as of the Closing Date. The provisions of this Section requiring Deposit Account Control Agreements shall not apply to Deposit Accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrowers’ employees and identified to Agent by Borrowers as such; provided, however, that at all times that any Obligations or Affiliated Obligations remain outstanding, Borrower shall maintain one or more separate Deposit Accounts to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any monies allocated for such purposes with funds in any other Deposit Account.

 

Section 5.15          Compliance with Anti-Terrorism Laws . Agent hereby notifies Borrowers that pursuant to the requirements of Anti-Terrorism Laws, and Agent’s policies and practices, Agent is required to obtain, verify and record certain information and documentation that identifies Borrowers and its principals, which information includes the name and address of each Borrower and its principals and such other information that will allow Agent to identify such party in accordance with Anti-Terrorism Laws. No Borrower will, or will permit any Subsidiary to, directly or indirectly, knowingly enter into any Material Contracts with any Blocked Person or any Person listed on the OFAC Lists. Each Borrower shall immediately notify Agent if such Borrower has knowledge that any Borrower, any additional Credit Party or any of their respective Affiliates or agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is or becomes a Blocked Person or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. No Borrower will, or will permit any Subsidiary to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

 

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Section 5.16          Agreements Regarding Receivables . No Borrower may backdate, postdate or redate any of its invoices. No Borrower may make any sales on extended dating or credit terms beyond that which is customary in Borrower’s industry, consented to in advance by Agent, or in the Ordinary Course of Business. In addition to the Borrowing Base Certificate to be delivered in accordance with this Agreement, Borrower Representative shall promptly notify Agent upon any Borrower’s learning thereof, in the event any Eligible Account becomes ineligible for any reason, other than the aging of such Account, and of the reasons for such ineligibility. Borrower Representative shall also promptly notify Agent of all material disputes and claims with respect to any of Borrower’s Accounts, and Borrower will settle or adjust such material disputes and claims at no expense to Agent; provided, however, that no Borrower may, without Agent’s consent, (a) grant any discount, credit or allowance in respect of its Accounts (i) which is outside the ordinary course of business, and (ii) which discount, credit or allowance exceeds an amount equal to $100,000 in the aggregate with respect to any individual Account; or (b) grant any extension, compromise or settlement to any customer or account debtor with respect to any then Eligible Account. Nothing permitted by this Section 5.16, however, may be construed to alter in any the criteria set forth in the definitions of Eligible Accounts and Eligible Inventory provided in Section 1.1.

 

Article 6 - FINANCIAL COVENANTS

 

Section 6.1            Additional Defined Terms . The following additional definitions are hereby appended to Section 1.1 of this Agreement:

 

Acquisition ” means (a) the purchase or other acquisition by a Person of all or substantially all of the assets of (or any division or business line of) any other Person, or (b) the purchase or other acquisition (whether by means of a merger, consolidation, or otherwise) by a Person of all or substantially all of the Equity Interests of any other Person.

 

Adjusted EBITDA ” means EBITDA plus any expenses relating to Acquisitions through the end of Fiscal Year 2015, plus severance payments and other costs relating to permanent headcount reductions, all as determined by GAAP.

 

EBITDA ” shall mean Net Income, minus extraordinary gains, interest income, non-operating income, non-cash income and income tax benefits and decreases in any change in LIFO or any other inventory reserves, plus non-cash extraordinary losses (including non-cash expenses with respect to stock option and stock based employee compensation programs), Interest Expense, income taxes, depreciation and amortization and increases in any change in LIFO reserves for such period, in each case, determined on a consolidated basis in accordance with GAAP.

 

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Fixed Charge Coverage Ratio ” means, with respect to the Borrowers and their Subsidiaries for any period, the ratio of (i) Adjusted EBITDA for such period, plus (a) cash received during such period for Equity Interests so long as such cash is used as working capital and such cash is not received more than two times in any trailing-twelve-months period, minus (b) Non-Financed Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, minus (c) cash taxes paid during such period, to the extent greater than zero, and minus (d) Permitted Distributions under clause (d) of the definition of that term, to (ii) Fixed Charges for such period.

 

Fixed Charges ” means, with respect to any fiscal period and with respect to the Borrowers and their Subsidiaries determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) cash Interest Expense paid during such period (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense), (b) principal payments paid in cash in respect of Debt paid during such period, including cash payments with respect to Capital Leases, but excluding principal payments made on the Revolving Loans, and (c) all Permitted Distributions (other than Permitted Distributions under clause (d) of the definition of that term) and other distributions paid in cash during such period.

 

Interest Expense ” means, for any period, the aggregate of the interest expense of Borrowers and their Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

 

Non-Financed Capital Expenditures” means Capital Expenditures not financed by the seller of the capital asset or by a third party lender.

 

Net Income “shall mean the consolidated net income (or loss) of the Borrowers and their Subsidiaries for the period in question, after giving effect to deduction for provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accordance with GAAP; provided, however, that for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (a) one-time extraordinary income items, as determined in accordance with GAAP, and (b) any Net Income attributable to any Subsidiary to the extent that any Borrower (or any Subsidiary through which such Borrower owns the subject Subsidiary) is prohibited (bylaw, contract minority ownership rights or otherwise) from receiving a distribution of such Net Income from such Subsidiary.

 

Total Funded Debt ” shall mean, at any date of determination, all Debt of the Borrowers and their Subsidiaries for borrowed money, purchase money Debt, installment sale obligations, Capital Lease obligations, Contingent Obligations of the Borrowers and their Subsidiaries, and all other obligations evidenced by notes or bonds, all of the foregoing as determined on a consolidated basis in accordance with GAAP.

 

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Section 6.2            Minimum Adjusted EBITDA . Commencing with the fiscal quarter ending March 31, 2015 and until such time as all Obligations are paid, satisfied and discharged in full, the Borrowers shall not, as of the end of any measurement period set forth below, permit the Adjusted EBITDA for such measurement period to be less than the amount set forth in the table below opposite such measurement period; provided that (i) commencing with the first fiscal quarter ending 6 months after the earlier of the consummation of the Target 1 Acquisition or the Target 2 Acquisition, compliance shall no longer be required with respect to the financial covenant in this Section 6.2 and (ii) if neither the Target 1 Acquisition nor the Target 2 Acquisition have been consummated on or prior to June 30, 2015, the Agent shall have the right to require the Borrowers to continue to comply with the financial covenant in this Section 6.2 for such future periods and at such covenant levels as the Agent may reasonably require.

 

Measurement Period   Minimum Adjusted EBITDA  
January 1, 2015 to March 31, 2015   $ -2,500,000  
January 1, 2015 to June 30, 2015   $ -1,750,000  
July 1, 2015 to September 30, 2015   $ 2,000,000  
July 1, 2015 to December 31, 2015   $ 4,500,000  

 

Section 6.3            Fixed Charge Coverage Ratio . Commencing 6 months after the earlier of the consummation of the Target 1 Acquisition or Target 2 Acquisition (but in no event earlier than September 30, 2015) and until such time as all Obligations are paid, satisfied and discharged in full, the Borrowers shall not, as of the end of any month, permit the Fixed Charge Coverage Ratio for the period of trailing twelve months most recently ended on or prior to such date to be less than 1.15x. Notwithstanding the foregoing, it is hereby agreed that (i) the applicable measurement period for the month ending September 30, 2015 shall be from July 1, 2015 to September 30, 2015 (trailing three Months or T3M), (ii) the applicable measurement period for the month ending October 31, 2015 will be T4M, (iii) the applicable measurement period for the month ending November 30, 2015 will be T5M, and (iv) the applicable measurement periods shall so continue until T12M is achieved.

 

Section 6.4            Total Funded Debt to Adjusted EBITDA Ratio . Commencing with the fiscal quarter ending March 31, 2016 and until such time as all Obligations are paid, satisfied and discharged in full, the Companies shall not, as of the end of any fiscal quarter, permit the applicable ratio set forth in the table below to exceed the amount set forth therein:

 

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If as of the end of any fiscal quarter: Both the Target 1 Acquisition and the Target 2 Acquisition have been consummated

(x) the Target 1 Acquisition and the Target 2 Acquisition have not been consummated or (y) only Target 2 Acquisition has been consummated

 

Applicable Ratio: (A) Total Funded Debt (calculated without giving effect to any Indebtedness that is subordinate both to the Obligations and to the Penta Debt) to (B) Adjusted EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date to exceed 4.0x

(A) Total Funded Debt (calculated without giving effect to the Little Harbor Debt) to (B) Adjusted EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date to exceed 4.0x

 

  

For the purposes of this Section 6.4, Adjusted EBITDA (1) for the measurement period ending on March 31, 2016, shall equal the Adjusted EBITDA for the fiscal quarter ending March 31, 2016 multiplied by 4, (2) for the measurement period ending on June 30, 2016, shall equal the sum of Adjusted EBITDA for the fiscal quarters ending March 31, 2016 and June 30, 2016, multiplied by 2 and (3) for the measurement period ending on September 30, 2016, shall equal the sum of the Adjusted EBITDA for the fiscal quarters ending March 31, 2016, June 30, 2016 and September 30, 2016, multiplied by 4 and divided by 3.

 

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Section 6.5            Evidence of Compliance . Borrowers shall furnish to Agent, together with the financial reporting required of Borrowers in Section 4.1 hereof, a Compliance Certificate as evidence of Borrowers’ compliance with the covenants in this Article and evidence that no Event of Default specified in this Article has occurred. The Compliance Certificate shall include, without limitation, (a) a statement and report, on a form approved by Agent, detailing Borrowers’ calculations, and (b) if requested by Agent, back-up documentation (including, without limitation, invoices, receipts and other evidence of costs incurred during such quarter as Agent shall reasonably require) evidencing the propriety of the calculations.

 

Article 7 - CONDITIONS

 

Section 7.1            Conditions to Closing . The obligation of each Lender to make the initial Loans on the Closing Date shall be subject to the receipt by Agent of each agreement, document and instrument set forth on the closing checklist prepared by Agent or its counsel, each in form and substance satisfactory to Agent, and such other closing deliverables reasonably requested by Agent and Lenders, and to the satisfaction of the following conditions precedent, each to the satisfaction of Agent and Lenders and their respective counsel in their sole discretion:

 

(a)          evidence of the consummation of the transactions (other than the funding of the Loan and the closing of any acquisition for which the proceeds of the Loan are purchase money) contemplated by the Operative Documents including, without limitation, the funding of any and all investments contemplated by the Operative Documents and the Subordinated Debt Documents;

 

(b)          the payment of all fees, expenses and other amounts due and payable under each Financing Document;

 

(c)          since September 30, 2014, the absence of any material adverse change in any aspect of the business, operations, properties, prospects or condition (financial or otherwise) of any Credit Party or any seller of any assets or business to be purchased by any Borrower contemporaneous with the Closing Date, or any event or condition which could reasonably be expected to result in such a material adverse change;

 

(d)          the receipt of the initial Borrowing Base Certificate, prepared as of the Closing Date; and

 

(e)          the Borrowers shall close a transaction with JL-BBNC Mezz Utah, LLC for a loan of no less than $5,000,000 that is subordinated pursuant to the Subordination Agreement (JL-BBNC).

 

Each Lender, by delivering its signature page to this Agreement, shall be deemed to have acknowledged receipt of, and consented to and approved, each Financing Document, each additional Operative Document and each other document, agreement and/or instrument required to be approved by Agent, Required Lenders or Lenders, as applicable, on the Closing Date.

 

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Section 7.2            Conditions to Each Loan . The obligation of the Lenders to make a Loan or an advance in respect of any Loan, is subject to the satisfaction of the following additional conditions:

 

(a)          in the case of any borrowing of a Revolving Loan, receipt by Agent of a Notice of Borrowing (or telephonic notice if permitted by this Agreement) and updated Borrowing Base Certificate;

 

(b)          the fact that, immediately after such borrowing and after application of the proceeds thereof or after such issuance, the Revolving Loan Outstandings will not exceed the Revolving Loan Limit;

 

(c)          the fact that, immediately before and after such advance or issuance, no Default or Event of Default shall have occurred and be continuing;

 

(d)          the fact that the representations and warranties of each Credit Party contained in the Financing Documents shall be true, correct and complete on and as of the date of such borrowing or issuance, except to the extent that any such representation or warranty relates to a specific date in which case such representation or warranty shall be true and correct as of such earlier date; and

 

(e)          the fact that no adverse change in the condition (financial or otherwise), properties, business, prospects, or operations of Borrowers or any other Credit Party shall have occurred and be continuing with respect to Borrowers or any Credit Party since the date of this Agreement.

 

Each giving of a Notice of Borrowing hereunder and each acceptance by any Borrower of the proceeds of any Loan made hereunder shall be deemed to be (y) a representation and warranty by each Borrower on the date of such notice or acceptance as to the facts specified in this Section, and (z) a restatement by each Borrower that each and every one of the representations made by it in any of the Financing Documents is true and correct as of such date (except to the extent that such representations and warranties expressly relate solely to an earlier date).

 

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Section 7.3            Searches . Before the Closing Date, and thereafter (as and when determined by Agent in its good faith discretion), Agent shall have the right to perform, all at Borrowers’ expense, the searches described in clauses (a), (b), and (c) below against Borrowers and any other Credit Party, the results of which are to be consistent with Borrowers’ representations and warranties under this Agreement and the satisfactory results of which shall be a condition precedent to all advances of Loan proceeds: (a) UCC searches with the Secretary of State of the jurisdiction in which the applicable Person is organized; (b) judgment, pending litigation, federal tax lien, personal property tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a) above; and (c) searches of applicable corporate, limited liability company, partnership and related records to confirm the continued existence, organization and good standing of the applicable Person and the exact legal name under which such Person is organized.

 

Section 7.4            Post Closing Requirements . Borrowers shall complete each of the post closing obligations and/or provide to Agent each of the documents, instruments, agreements and information listed on Schedule 7.4 attached hereto on or before the date set forth for each such item thereon, each of which shall be completed or provided in form and substance satisfactory to Agent.

 

Article 8 - [RESERVED]

 

Article 9 - SECURITY AGREEMENT

 

Section 9.1            Generally . As security for the payment and performance of the Obligations, and for the payment and performance of all obligations under the Affiliated Financing Documents (if any) and without limiting any other grant of a Lien and security interest in any Security Document, Borrowers hereby assign and grant to Agent, for the benefit of itself and Lenders, a continuing first (except with respect to equipment covered by the Essex Lease) priority Lien on and security interest in, upon, and to the personal property set forth on Schedule 9.1 attached hereto and made a part hereof. In addition, Agent agrees that its Liens on the Borrowers’ titled motor vehicles need not be perfected unless the Agent so requests after the Closing Date.

 

Section 9.2            Representations and Warranties and Covenants Relating to Collateral.

 

(a)           Schedule 9.2 sets forth (i) each chief executive office and principal place of business of each Borrower and each of their respective Subsidiaries, and (ii) all of the addresses (including all warehouses) at which any of the Collateral is located and/or books and records of Borrowers regarding any of the Collateral are kept, which such Schedule 9.2 indicates in each case which Borrower(s) have Collateral and/or books and records located at such address, and, in the case of any such address not owned by one or more of the Borrowers(s), indicates the nature of such location (e.g., leased business location operated by Borrower(s), third party warehouse, consignment location, processor location, etc.) and the name and address of the third party owning and/or operating such location.

 

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(b)          Without limiting the generality of Section 3.2, except as indicated on Schedule 3.19 with respect to any rights of any Borrower as a licensee under any license of Intellectual Property owned by another Person, and except for the filing of financing statements under the UCC, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or consent of any other Person is required for (i) the grant by each Borrower to Agent of the security interests and Liens in the Collateral provided for under this Agreement and the other Security Documents (if any), or (ii) the exercise by Agent of its rights and remedies with respect to the Collateral provided for under this Agreement and the other Security Documents or under any applicable Law, including the UCC and neither any such grant of Liens in favor of Agent or exercise of rights by Agent shall violate or cause a default under any agreement between any Borrower and any other Person relating to any such collateral, including any license to which a Borrower is a party, whether as licensor or licensee, with respect to any Intellectual Property, whether owned by such Borrower or any other Person.

 

(c)          As of the Closing Date, no Borrower has any ownership interest in any Chattel Paper (as defined in Article 9 of the UCC), letter of credit rights, commercial tort claims, Instruments, documents or investment property (other than equity interests in any Subsidiaries of such Borrower disclosed on Schedule 3.4 and investments disclosed on Schedule 5.7 ) and Borrowers shall give notice to Agent promptly (but in any event not later than the delivery by Borrowers of the next Compliance Certificate required pursuant to Section 4.1 above) upon the acquisition by any Borrower of any such Chattel Paper, letter of credit rights, commercial tort claims, Instruments, documents, investment property. No Person other than Agent, any Lender (if applicable), or (if consented to by Agent) a lender holding Subordinated Debt, has “control” (as defined in Article 9 of the UCC) over any Deposit Account, investment property (including Securities Accounts and commodities account), letter of credit rights or electronic chattel paper in which any Borrower has any interest (except for such control arising by operation of law in favor of any bank or securities intermediary or commodities intermediary with whom any Deposit Account, Securities Account or commodities account of Borrowers is maintained).

 

(d)          Borrowers shall not, and shall not permit any Credit Party to, take any of the following actions or make any of the following changes unless Borrowers have given at least thirty (30) days prior written notice to Agent of Borrowers’ intention to take any such action (which such written notice shall include an updated version of any Schedule impacted by such change) and have executed any and all documents, instruments and agreements and taken any other actions which Agent may request after receiving such written notice in order to protect and preserve the Liens, rights and remedies of Agent with respect to the Collateral: (i) change the legal name or organizational identification number of any Borrower as it appears in official filings in the jurisdiction of its organization, (ii) change the jurisdiction of incorporation or formation of any Borrower or Credit Party or allow any Borrower or Credit Party to designate any jurisdiction as an additional jurisdiction of incorporation for such Borrower or Credit Party, or change the type of entity that it is, or (iii) change its chief executive office, principal place of business, or the location of its records concerning the Collateral or move any Collateral to or place any Collateral on any location that is not then listed on the Schedules and/or establish any business location at any location that is not then listed on the Schedules.

 

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(e)          Borrowers shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any Account Debtor, or allow any credit or discount thereon (other than adjustments, settlements, compromises, credits and discounts in the Ordinary Course of Business agreed to by Borrowers prior to the existence of a Default or Event of Default) without the prior written consent of Agent. Without limiting the generality of this Agreement or any other provisions of any of the Financing Documents relating to the rights of Agent after the occurrence and during the continuance of an Event of Default, Agent shall have the right at any time after the occurrence and during the continuance of an Event of Default to: (i) exercise the rights of Borrowers with respect to the obligation of any Account Debtor to make payment or otherwise render performance to Borrowers and with respect to any property that secures the obligations of any Account Debtor or any other Person obligated on the Collateral, and (ii) adjust, settle or compromise the amount or payment of such Accounts.

 

(f)           Without limiting the generality of Sections 9.2(c) and 9.2(e):

 

(i)          Borrowers shall deliver to Agent all tangible Chattel Paper and all Instruments and documents owned by any Borrower and constituting part of the Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrowers shall provide Agent with “control” (as defined in Article 9 of the UCC) of all electronic Chattel Paper owned by any Borrower and constituting part of the Collateral by having Agent identified as the assignee on the records pertaining to the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the UCC. Borrowers also shall deliver to Agent all security agreements securing any such Chattel Paper and securing any such Instruments. Borrowers will mark conspicuously all such Chattel Paper and all such Instruments and documents with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper and such instruments and documents are subject to the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents. Borrowers shall comply with all the provisions of Section 5.14 with respect to the Deposit Accounts and Securities Accounts of Borrowers.

 

(ii)         Borrowers shall deliver to Agent all letters of credit on which any Borrower is the beneficiary and which give rise to letter of credit rights owned by such Borrower which constitute part of the Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Borrowers shall take any and all actions as may be necessary or desirable, or that Agent may request, from time to time, to cause Agent to obtain exclusive “control” (as defined in Article 9 of the UCC) of any such letter of credit rights in a manner acceptable to Agent.

 

(iii)        Borrowers shall promptly advise Agent upon any Borrower becoming aware that it has any interests in any commercial tort claim that constitutes part of the Collateral, which such notice shall include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with respect to such commercial tort claims, and Borrowers shall, with respect to any such commercial tort claim, execute and deliver to Agent such documents as Agent shall request to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to any such commercial tort claim.

 

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(iv)        Except for Accounts and Inventory in an aggregate amount of $50,000, no Accounts or Inventory or other Collateral shall at any time be in the possession or control of any warehouse, consignee, bailee or any of Borrowers’ agents or processors without prior written notice to Agent and the receipt by Agent, if Agent has so requested, of warehouse receipts, consignment agreements or bailee lien waivers (as applicable) satisfactory to Agent prior to the commencement of such possession or control. Borrower has notified Agent that Inventory is currently located at the locations set forth on Schedule 9.2 . Borrowers shall, upon the request of Agent, notify any such warehouse, consignee, bailee, agent or processor of the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents, instruct such Person to hold all such Collateral for Agent’s account subject to Agent’s instructions and shall obtain an acknowledgement from such Person that such Person holds the Collateral for Agent’s benefit.

 

(v)         Borrowers shall cause all equipment and other tangible Personal Property other than Inventory to be maintained and preserved in the same condition, repair and in working order as when new, ordinary wear and tear excepted, and shall promptly make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable to such end. Upon request of Agent, Borrowers shall promptly deliver to Agent any and all certificates of title, applications for title or similar evidence of ownership of all such tangible Personal Property and shall cause Agent to be named as lienholder on any such certificate of title or other evidence of ownership. Borrowers shall not permit any such tangible Personal Property to become fixtures to real estate unless such real estate is subject to a Lien in favor of Agent.

 

(vi)        Each Borrower hereby authorizes Agent to file without the signature of such Borrower one or more UCC financing statements relating to liens on personal property relating to all or any part of the Collateral, which financing statements may list Agent as the “secured party” and such Borrower as the “debtor” and which describe and indicate the collateral covered thereby as all or any part of the Collateral under the Financing Documents (including an indication of the collateral covered by any such financing statement as “all assets” of such Borrower now owned or hereafter acquired), in such jurisdictions as Agent from time to time determines are appropriate, and to file without the signature of such Borrower any continuations of or corrective amendments to any such financing statements, in any such case in order for Agent to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to the Collateral. Each Borrower also ratifies its authorization for Agent to have filed in any jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof.

 

(vii)       As of the Closing Date, no Borrower holds, and after the Closing Date Borrowers shall promptly notify Agent in writing upon creation or acquisition by any Borrower of, any Collateral which constitutes a claim against any Governmental Authority, including, without limitation, the federal government of the United States or any instrumentality or agency thereof, the assignment of which claim is restricted by any applicable Law, including, without limitation, the federal Assignment of Claims Act and any other comparable Law. Upon the request of Agent, Borrowers shall take such steps as may be necessary or desirable, or that Agent may request, to comply with any such applicable Law.

 

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(viii)      Borrowers shall furnish to Agent from time to time any statements and schedules further identifying or describing the Collateral and any other information, reports or evidence concerning the Collateral as Agent may reasonably request from time to time.

 

Article 10 - EVENTS OF DEFAULT

 

Section 10.1         Events of Default . For purposes of the Financing Documents, the occurrence of any of the following conditions and/or events, whether voluntary or involuntary, by operation of law or otherwise, shall constitute an “ Event of Default ”:

 

(a)          (i) any Borrower shall fail to pay when due any principal, interest, premium or fee under any Financing Document or any other amount payable under any Financing Document, (ii) there shall occur any default in the performance of or compliance with any of the following sections of this Agreement: Section 2.11, Section 4.2(b), Section 4.4(c), Section 4.6 and Article 5, or (iii) there shall occur any default in the performance of or compliance with Section 4.1 and/or Article 6 of this Agreement and Borrower Representative has received written notice from Agent or Required Lenders of such default;

 

(b)          any Credit Party defaults in the performance of or compliance with any term contained in this Agreement or in any other Financing Document (other than occurrences described in other provisions of this Section 10.1 for which a different grace or cure period is specified or for which no grace or cure period is specified and thereby constitute immediate Events of Default) and such default is not remedied by the Credit Party or waived by Agent within fifteen (15) Business Days after the earlier of (i) receipt by Borrower Representative of notice from Agent or Required Lenders of such default, or (ii) actual knowledge of any Borrower or any other Credit Party of such default;

 

(c)          any representation, warranty, certification or statement made by any Credit Party or any other Person in any Financing Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document is incorrect in any respect (or in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made (or deemed made);

 

(d)          (i) failure of any Credit Party to pay when due or within any applicable grace period any principal, interest or other amount on Debt (other than the Loans) or in respect of any Swap Contract, or the occurrence of any breach, default, condition or event with respect to any Debt (other than the Loans) or in respect of any Swap Contract, if the effect of such failure or occurrence is to cause or to permit the holder or holders of any such Debt, or the counterparty under any such Swap Contract, to cause, Debt or other liabilities having an individual principal amount in excess of $250,000 (or any amount, solely with respect to Swap Contracts) or having an aggregate principal amount in excess of $250,000 (or any amount, solely with respect to Swap Contracts) to become or be declared due prior to its stated maturity, or (ii) the occurrence of any breach or default under any terms or provisions of any Subordinated Debt Document or under any agreement subordinating the Subordinated Debt to all or any portion of the Obligations or the occurrence of any event requiring the prepayment of any Subordinated Debt;

 

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(e)          any Credit Party or any Subsidiary of a Borrower shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;

 

(f)          an involuntary case or other proceeding shall be commenced against any Credit Party or any Subsidiary of a Borrower seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) days; or an order for relief shall be entered against any Credit Party or any Subsidiary of a Borrower under applicable federal bankruptcy, insolvency or other similar law in respect of (i) bankruptcy, liquidation, winding-up, dissolution or suspension of general operations, (ii) composition, rescheduling, reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of the debts or obligations, or (iii) possession, foreclosure, seizure or retention, sale or other disposition of, or other proceedings to enforce security over, all or any substantial part of the assets of such Credit Party or Subsidiary;

 

(g)          (i) institution of any steps by any Person to terminate a Pension Plan if as a result of such termination any Credit Party or any member of the Controlled Group could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan, in excess of $250,000, (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code or an event occurs that could reasonably be expected to give rise to a Lien under Section 4068 of ERISA, or (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding withdrawal liability that any Credit Party or any member of the Controlled Group have incurred on the date of such withdrawal) exceeds $250,000;

 

(h)          one or more judgments or orders for the payment of money (not paid or fully covered by insurance maintained in accordance with the requirements of this Agreement and as to which the relevant insurance company has acknowledged coverage) aggregating in excess of $250,000 shall be rendered against any or all Credit Parties and either (i) enforcement proceedings shall have been commenced by any creditor upon any such judgments or orders, or (ii) there shall be any period of twenty (20) consecutive days during which a stay of enforcement of any such judgments or orders, by reason of a pending appeal, bond or otherwise, shall not be in effect;

 

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(i)           any Lien created by any of the Security Documents shall at any time fail to constitute a valid and perfected Lien on all of the Collateral purported to be encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or any Credit Party shall so assert;

 

(j)          the institution by any Governmental Authority of criminal proceedings against any Credit Party;

 

(k)          a default or event of default occurs under any Guarantee of any portion of the Obligations;

 

(l)           any Borrower makes any payment on account of any Debt that has been subordinated to any of the Obligations, other than payments specifically permitted by the terms of such subordination;

 

(m)          if any Borrower is or becomes an entity whose equity is registered with the SEC, and/or is publicly traded on and/or registered with a public securities exchange, such Borrower’s equity fails to remain registered with the SEC, and/or such equity fails to remain publicly traded on and registered with a public securities exchange;

 

(n)          the occurrence of any fact, event or circumstance that could reasonably be expected to result in a Material Adverse Effect, if such default shall have continued unremedied for a period of ten (10) days after written notice from Agent;

 

(o)          [Reserved]; or

 

(p)          there shall occur any default or event of default under the Affiliated Financing Documents.

 

Notwithstanding the foregoing, if a Credit Party fails to comply with any same provision of this Agreement two (2) times in any twelve (12) month period and Agent has given to Borrower Representative in connection with each such failure any notice to which Borrowers would be entitled under this Section before such failure could become an Event of Default, then all subsequent failures by a Credit Party to comply with such provision of this Agreement shall effect an immediate Event of Default (without the expiration of any applicable cure period) with respect to all subsequent failures by a Credit Party to comply with such provision of this Agreement, and Agent thereupon may exercise any remedy set forth in this Article 10 without affording Borrowers any opportunity to cure such Event of Default.

 

All cure periods provided for in this Section 10.1 shall run concurrently with any cure period provided for in any applicable Financing Documents under which the default occurred.

 

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Section 10.2         Acceleration and Suspension or Termination of Revolving Loan Commitment . Upon the occurrence and during the continuance of an Event of Default, Agent may, and shall if requested by Required Lenders, (a) by notice to Borrower Representative suspend or terminate the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto, in whole or in part (and, if in part, each Lender’s Revolving Loan Commitment shall be reduced in accordance with its Pro Rata Share), and/or (b) by notice to Borrower Representative declare all or any portion of the Obligations to be, and the Obligations shall thereupon become, immediately due and payable, with accrued interest thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same; provided , however , that in the case of any of the Events of Default specified in Section 10.1(e) or 10.1(f) above, without any notice to any Borrower or any other act by Agent or the Lenders, the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto shall thereupon immediately and automatically terminate and all of the Obligations shall become immediately and automatically due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same.

 

Section 10.3         UCC Remedies.

 

(a)          Upon the occurrence of and during the continuance of an Event of Default under this Agreement or the other Financing Documents, Agent, in addition to all other rights, options, and remedies granted to Agent under this Agreement or at law or in equity, may exercise, either directly or through one or more assignees or designees, all rights and remedies granted to it under all Financing Documents and under the UCC in effect in the applicable jurisdiction(s) and under any other applicable law; including, without limitation:

 

(i)          the right to take possession of, send notices regarding, and collect directly the Collateral, with or without judicial process;

 

(ii)         the right to (by its own means or with judicial assistance) enter any of Borrowers’ premises and take possession of the Collateral, or render it unusable, or to render it usable or saleable, or dispose of the Collateral on such premises in compliance with subsection (iii) below and to take possession of Borrowers’ original books and records, to obtain access to Borrowers’ data processing equipment, computer hardware and software relating to the Collateral and to use all of the foregoing and the information contained therein in any manner Agent deems appropriate, without any liability for rent, storage, utilities, or other sums, and Borrowers shall not resist or interfere with such action (if Borrowers’ books and records are prepared or maintained by an accounting service, contractor or other third party agent, Borrowers hereby irrevocably authorize such service, contractor or other agent, upon notice by Agent to such Person that an Event of Default has occurred and is continuing, to deliver to Agent or its designees such books and records, and to follow Agent’s instructions with respect to further services to be rendered);

 

(iii)        the right to require Borrowers at Borrowers’ expense to assemble all or any part of the Collateral and make it available to Agent at any place designated by Lender;

 

(iv)        the right to notify postal authorities to change the address for delivery of Borrowers’ mail to an address designated by Agent and to receive and open all mail addressed to any Borrower; and/or

 

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(v)         the right to enforce Borrowers’ rights against Account Debtors and other obligors, including, without limitation, (i) the right to collect Accounts directly in Agent’s own name (as agent for Lenders) and to charge the collection costs and expenses, including attorneys’ fees, to Borrowers, and (ii) the right, in the name of Agent or any designee of Agent or Borrowers, to verify the validity, amount or any other matter relating to any Accounts by mail, telephone, telegraph or otherwise, including, without limitation, verification of Borrowers’ compliance with applicable Laws. Borrowers shall cooperate fully with Agent in an effort to facilitate and promptly conclude such verification process. Such verification may include contacts between Agent and applicable federal, state and local regulatory authorities that are Account Debtors, all of which contacts Borrowers hereby irrevocably authorize.

 

(b)          Each Borrower agrees that a notice received by it at least ten (10) days before the time of any intended public sale, or the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Agent without prior notice to Borrowers. At any sale or disposition of Collateral, Agent may (to the extent permitted by applicable law) purchase all or any part of the Collateral, free from any right of redemption by Borrowers, which right is hereby waived and released to the full extent permitted by applicable law. Each Borrower covenants and agrees not to interfere with or impose any obstacle to Agent’s exercise of its rights and remedies with respect to the Collateral. Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. Agent may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. Agent may sell the Collateral without giving any warranties as to the Collateral. Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. If Agent sells any of the Collateral upon credit, Borrowers will be credited only with payments actually made by the purchaser, received by Agent and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Agent may resell the Collateral and Borrowers shall be credited with the proceeds of the sale. Borrowers shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all Obligations.

 

(c)          Without restricting the generality of the foregoing and for the purposes aforesaid, each Borrower hereby appoints and constitutes Agent its lawful attorney-in-fact with full power of substitution in the Collateral, upon the occurrence and during the continuance of an Event of Default, to (i) use unadvanced funds remaining under this Agreement or which may be reserved, escrowed or set aside for any purposes hereunder at any time, or to advance funds in excess of the face amount of the Notes, (ii) pay, settle or compromise all existing bills and claims, which may be Liens or security interests, or to avoid such bills and claims becoming Liens against the Collateral, (iii) execute all applications and certificates in the name of such Borrower and to prosecute and defend all actions or proceedings in connection with the Collateral, and (iv) do any and every act which such Borrower is required to take under the terms of this Agreement or the other Financing Documents; it being understood and agreed that this power of attorney in this subsection (c) shall be a power coupled with an interest and cannot be revoked.

 

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(d)          Agent and each Lender is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers’ labels, mask works, rights of use of any name, any other Intellectual Property and advertising matter, and any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Agent’s exercise of its rights under this Article, Borrowers’ rights under all licenses (whether as licensor or licensee) and all franchise agreements inure to Agent’s and each Lender’s benefit.

 

Section 10.4         [Reserved]

 

Section 10.5         Default Rate of Interest . At the election of Agent or Required Lenders, after the occurrence of an Event of Default and for so long as it continues, the Loans and other Obligations shall bear interest at rates that are four percent (4.0%) per annum in excess of the rates otherwise payable under this Agreement; provided, however , that in the case of any Event of Default specified in Section 10.1(e) or 10.1(f) above, such default rates shall apply immediately and automatically without the need for any election or action of any kind on the part of Agent or any Lender.

 

Section 10.6         Setoff Rights . During the continuance of any Event of Default, each Lender is hereby authorized by each Borrower at any time or from time to time, with reasonably prompt subsequent notice to such Borrower (any prior or contemporaneous notice being hereby expressly waived) to set off and to appropriate and to apply any and all (a) balances held by such Lender or any of such Lender’s Affiliates at any of its offices for the account of such Borrower or any of its Subsidiaries (regardless of whether such balances are then due to such Borrower or its Subsidiaries), and (b) other property at any time held or owing by such Lender to or for the credit or for the account of such Borrower or any of its Subsidiaries, against and on account of any of the Obligations; except that no Lender shall exercise any such right without the prior written consent of Agent. Any Lender exercising a right to set off shall purchase for cash (and the other Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set off with each other Lender in accordance with their respective Pro Rata Share of the Obligations. Each Borrower agrees, to the fullest extent permitted by law, that any Lender and any of such Lender’s Affiliates may exercise its right to set off with respect to the Obligations as provided in this Section 10.6.

 

Section 10.7         Application of Proceeds.

 

(a)          Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, each Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Agent from or on behalf of such Borrower or any Guarantor of all or any part of the Obligations, and, as between Borrowers on the one hand and Agent and Lenders on the other, Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Agent may deem advisable notwithstanding any previous application by Agent.

 

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(b)          Following the occurrence and continuance of an Event of Default, but absent the occurrence and continuance of an Acceleration Event, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral received by Agent, in such order as Agent may from time to time elect.

 

(c)          Notwithstanding anything to the contrary contained in this Agreement, if an Acceleration Event shall have occurred, and so long as it continues, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral received by Agent, in the following order: first , to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to Agent with respect to this Agreement, the other Financing Documents or the Collateral; second , to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing to any Lender with respect to this Agreement, the other Financing Documents or the Collateral; third , to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts); fourth , to the principal amount of the Obligations outstanding; fifth to any other indebtedness or obligations of Borrowers owing to Agent or any Lender under the Financing Documents; and sixth , to the Obligations owing to any Eligible Swap Counterparty in respect of any Swap Contracts. Any balance remaining shall be delivered to Borrowers or to whomever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (y) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (z) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its Pro Rata Share of amounts available to be applied pursuant thereto for such category.

 

Section 10.8         Waivers.

 

(a)          Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Borrower waives: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment, maturity, release, compromise, settlement, extension or renewal of any or all Financing Documents, the Notes or any other notes, commercial paper, accounts, contracts, documents, Instruments, Chattel Paper and Guarantees at any time held by Lenders on which any Borrower may in any way be liable, and hereby ratifies and confirms whatever Lenders may do in this regard; (ii) all rights to notice and a hearing prior to Agent’s or any Lender’s taking possession or control of, or to Agent’s or any Lender’s replevy, attachment or levy upon, any Collateral or any bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of its remedies; and (iii) the benefit of all valuation, appraisal and exemption Laws. Each Borrower acknowledges that it has been advised by counsel of its choices and decisions with respect to this Agreement, the other Financing Documents and the transactions evidenced hereby and thereby.

 

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(b)          Each Borrower for itself and all its successors and assigns, (i) agrees that its liability shall not be in any manner affected by any indulgence, extension of time, renewal, waiver, or modification granted or consented to by Lender; (ii) consents to any indulgences and all extensions of time, renewals, waivers, or modifications that may be granted by Agent or any Lender with respect to the payment or other provisions of the Financing Documents, and to any substitution, exchange or release of the Collateral, or any part thereof, with or without substitution, and agrees to the addition or release of any Borrower, endorsers, guarantors, or sureties, or whether primarily or secondarily liable, without notice to any other Borrower and without affecting its liability hereunder; (iii) agrees that its liability shall be unconditional and without regard to the liability of any other Borrower, Agent or any Lender for any tax on the indebtedness; and (iv) to the fullest extent permitted by law, expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a result contrary to or in conflict with the foregoing.

 

(c)           To the extent that Agent or any Lender may have acquiesced in any noncompliance with any requirements or conditions precedent to the closing of the Loans or to any subsequent disbursement of Loan proceeds, such acquiescence shall not be deemed to constitute a waiver by Agent or any Lender of such requirements with respect to any future disbursements of Loan proceeds and Agent may at any time after such acquiescence require Borrowers to comply with all such requirements. Any forbearance by Agent or Lender in exercising any right or remedy under any of the Financing Documents, or otherwise afforded by applicable law, including any failure to accelerate the maturity date of the Loans, shall not be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of the Notes or as a reinstatement of the Loans or a waiver of such right of acceleration or the right to insist upon strict compliance of the terms of the Financing Documents. Agent’s or any Lender’s acceptance of payment of any sum secured by any of the Financing Documents after the due date of such payment shall not be a waiver of Agent’s and such Lender’s right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other Liens or charges by Agent as the result of an Event of Default shall not be a waiver of Agent’s right to accelerate the maturity of the Loans, nor shall Agent’s receipt of any condemnation awards, insurance proceeds, or damages under this Agreement operate to cure or waive any Credit Party’s default in payment of sums secured by any of the Financing Documents.

 

(d)          Without limiting the generality of anything contained in this Agreement or the other Financing Documents, each Borrower agrees that if an Event of Default is continuing (i) Agent and Lenders shall not be subject to any “one action” or “election of remedies” law or rule, and (ii) all Liens and other rights, remedies or privileges provided to Agent or Lenders shall remain in full force and effect until Agent or Lenders have exhausted all remedies against the Collateral and any other properties owned by Borrowers and the Financing Documents and other security instruments or agreements securing the Loans have been foreclosed, sold and/or otherwise realized upon in satisfaction of Borrowers’ obligations under the Financing Documents.

 

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(e)          Nothing contained herein or in any other Financing Document shall be construed as requiring Agent or any Lender to resort to any part of the Collateral for the satisfaction of any of Borrowers’ obligations under the Financing Documents in preference or priority to any other Collateral, and Agent may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion in respect of Borrowers’ obligations under the Financing Documents. In addition, Agent shall have the right from time to time to partially foreclose upon any Collateral in any manner and for any amounts secured by the Financing Documents then due and payable as determined by Agent in its sole discretion, including, without limitation, the following circumstances: (i) in the event any Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and/or interest, Agent may foreclose upon all or any part of the Collateral to recover such delinquent payments, or (ii) in the event Agent elects to accelerate less than the entire outstanding principal balance of the Loans, Agent may foreclose all or any part of the Collateral to recover so much of the principal balance of the Loans as Lender may accelerate and such other sums secured by one or more of the Financing Documents as Agent may elect. Notwithstanding one or more partial foreclosures, any unforeclosed Collateral shall remain subject to the Financing Documents to secure payment of sums secured by the Financing Documents and not previously recovered.

 

(f)           To the fullest extent permitted by law, each Borrower, for itself and its successors and assigns, waives in the event of foreclosure of any or all of the Collateral any equitable right otherwise available to any Credit Party which would require the separate sale of any of the Collateral or require Agent or Lenders to exhaust their remedies against any part of the Collateral before proceeding against any other part of the Collateral; and further in the event of such foreclosure each Borrower does hereby expressly consent to and authorize, at the option of Agent, the foreclosure and sale either separately or together of each part of the Collateral.

 

Section 10.9         Injunctive Relief . The parties acknowledge and agree that, in the event of a breach or threatened repudiation of any Credit Party’s obligations under any Financing Documents, Agent and Lenders may have no adequate remedy in money damages and, accordingly, shall be entitled to an injunction (including, without limitation, a temporary restraining order, preliminary injunction, writ of attachment, or order compelling an audit) against such breach or threatened breach, including, without limitation, maintaining any cash management and collection procedure described herein. However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedies in the event of a breach or threatened repudiation of any provision of this Agreement. Each Credit Party waives, to the fullest extent permitted by law, the requirement of the posting of any bond in connection with such injunctive relief. By joining in the Financing Documents as a Credit Party, each Credit Party specifically joins in this Section as if this Section were a part of each Financing Document executed by such Credit Party.

 

Section 10.10       Marshalling; Payments Set Aside . Neither Agent nor any Lender shall be under any obligation to marshal any assets in payment of any or all of the Obligations. To the extent that Borrower makes any payment or Agent enforces its Liens or Agent or any Lender exercises its right of set-off, and such payment or the proceeds of such enforcement or set-off is subsequently invalidated, declared to be fraudulent or preferential, set aside, or required to be repaid by anyone, then to the extent of such recovery, the Obligations or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or set-off had not occurred.

 

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Section 10.11       Enforcement by Agent . Notwithstanding anything to the contrary contained in this Agreement or in any other Financing Document, the authority to enforce rights and remedies hereunder and under the other Financing Documents against the Credit Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Article 10 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (c) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Financing Documents, (b) any Lender from exercising setoff rights in accordance with Section 10.6 (Setoff Rights), or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Credit Party under the Bankruptcy Code or any similar statute; and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Financing Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Article 10 (Remedies) and (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

 

Article 11 - AGENT

 

Section 11.1         Appointment and Authorization . Each Lender hereby irrevocably appoints and authorizes Agent to enter into each of the Financing Documents to which it is a party (other than this Agreement) on its behalf and to take such actions as Agent on its behalf and to exercise such powers under the Financing Documents as are delegated to Agent by the terms thereof, together with all such powers as are reasonably incidental thereto. Subject to the terms of Section 11.16 and to the terms of the other Financing Documents, Agent is authorized and empowered to amend, modify, or waive any provisions of this Agreement or the other Financing Documents on behalf of Lenders. The provisions of this Article 11 are solely for the benefit of Agent and Lenders and neither any Borrower nor any other Credit Party shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for any Borrower or any other Credit Party. Agent may perform any of its duties hereunder, or under the Financing Documents, by or through its agents or employees.

 

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Section 11.2         Agent and Affiliates . Agent shall have the same rights and powers under the Financing Documents as any other Lender and may exercise or refrain from exercising the same as though it were not Agent, and Agent and its Affiliates may lend money to, invest in and generally engage in any kind of business with each Credit Party or Affiliate of any Credit Party as if it were not Agent hereunder.

 

Section 11.3         Action by Agent . The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Financing Documents is intended to or shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Financing Documents except as expressly set forth herein or therein.

 

Section 11.4         Consultation with Experts . Agent may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.

 

Section 11.5         Liability of Agent . Neither Agent nor any of its directors, officers, agents or employees shall be liable to any Lender for any action taken or not taken by it in connection with the Financing Documents, except that Agent shall be liable with respect to its specific duties set forth hereunder but only to the extent of its own gross negligence or willful misconduct in the discharge thereof as determined by a final non-appealable judgment of a court of competent jurisdiction. Neither Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (a) any statement, warranty or representation made in connection with any Financing Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements specified in any Financing Document; (c) the satisfaction of any condition specified in any Financing Document; (d) the validity, effectiveness, sufficiency or genuineness of any Financing Document, any Lien purported to be created or perfected thereby or any other instrument or writing furnished in connection therewith; (e) the existence or non-existence of any Default or Event of Default; or (f) the financial condition of any Credit Party. Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, facsimile or electronic transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Agent shall not be liable for any apportionment or distribution of payments made by it in good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them).

 

Section 11.6          Indemnification . Each Lender shall, in accordance with its Pro Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers) upon demand against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from Agent’s gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction) that Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by Agent hereunder or thereunder. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired, Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against even if so directed by Required Lenders until such additional indemnity is furnished.

 

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Section 11.7         Right to Request and Act on Instructions . Agent may at any time request instructions from Lenders with respect to any actions or approvals which by the terms of this Agreement or of any of the Financing Documents Agent is permitted or desires to take or to grant, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Financing Documents until it shall have received such instructions from Required Lenders or all or such other portion of the Lenders as shall be prescribed by this Agreement. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting under this Agreement or any of the other Financing Documents in accordance with the instructions of Required Lenders (or all or such other portion of the Lenders as shall be prescribed by this Agreement) and, notwithstanding the instructions of Required Lenders (or such other applicable portion of the Lenders), Agent shall have no obligation to take any action if it believes, in good faith, that such action would violate applicable Law or exposes Agent to any liability for which it has not received satisfactory indemnification in accordance with the provisions of Section 11.6.

 

Section 11.8         Credit Decision . Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Financing Documents.

 

Section 11.9         Collateral Matters . Lenders irrevocably authorize Agent, at its option and in its discretion, to (a) release any Lien granted to or held by Agent under any Security Document (i) upon termination of the Loan Commitment and payment in full of all Obligations ; or (ii) constituting property sold or disposed of as part of or in connection with any disposition permitted under any Financing Document (it being understood and agreed that Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the sale or other disposition of property being made in full compliance with the provisions of the Financing Documents); and (b) subordinate any Lien granted to or held by Agent under any Security Document to a Permitted Lien that is allowed to have priority over the Liens granted to or held by Agent pursuant to the definition of “Permitted Liens”. Upon request by Agent at any time, Lenders will confirm Agent’s authority to release and/or subordinate particular types or items of Collateral pursuant to this Section 11.9.

 

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Section 11.10       Agency for Perfection . Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting Agent’s security interest in assets which, in accordance with the Uniform Commercial Code in any applicable jurisdiction, can be perfected by possession or control. Should any Lender (other than Agent) obtain possession or control of any such assets, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor, shall deliver such assets to Agent or in accordance with Agent’s instructions or transfer control to Agent in accordance with Agent’s instructions. Each Lender agrees that it will not have any right individually to enforce or seek to enforce any Security Document or to realize upon any Collateral for the Loan unless instructed to do so by Agent (or consented to by Agent), it being understood and agreed that such rights and remedies may be exercised only by Agent.

 

Section 11.11       Notice of Default . Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless Agent shall have received written notice from a Lender or a Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. Agent will notify each Lender of its receipt of any such notice. Agent shall take such action with respect to such Default or Event of Default as may be requested by Required Lenders (or all or such other portion of the Lenders as shall be prescribed by this Agreement) in accordance with the terms hereof. Unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interests of Lenders.

 

Section 11.12       Assignment by Agent; Resignation of Agent; Successor Agent.

 

(a)          Agent may at any time assign its rights, powers, privileges and duties hereunder to (i) another Lender, or (ii) any Person to whom Agent, in its capacity as a Lender, has assigned (or will assign, in conjunction with such assignment of agency rights hereunder) 50% or more of its Loan, in each case without the consent of the Lenders or Borrowers. Following any such assignment, Agent shall give notice to the Lenders and Borrowers. An assignment by Agent pursuant to this subsection (a) shall not be deemed a resignation by Agent for purposes of subsection (b) below.

 

(b)          Without limiting the rights of Agent to designate an assignee pursuant to subsection (a) above, Agent may at any time give notice of its resignation to the Lenders and Borrowers. Upon receipt of any such notice of resignation, Required Lenders shall have the right to appoint a successor Agent. If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment within ten (10) Business Days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders, appoint a successor Agent; provided, however, that if Agent shall notify Borrowers and the Lenders that no Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice from Agent that no Person has accepted such appointment and, from and following delivery of such notice, (i) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Financing Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Agent shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Agent as provided for above in this paragraph; provided, however , that while there is no Agent, the Required Lenders may act on behalf of all Lenders under the Financing Documents to the same extent that the Agent could do so.

 

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(c)          Upon (i) an assignment permitted by subsection (a) above, or (ii) the acceptance of a successor’s appointment as Agent pursuant to subsection (b) above, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder and under the other Financing Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by Borrowers to a successor Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrowers and such successor. After the retiring Agent’s resignation hereunder and under the other Financing Documents, the provisions of this Article and Section 11.12 shall continue in effect for the benefit of such retiring Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting or was continuing to act as Agent.

 

Section 11.13       Payment and Sharing of Payment.

 

(a)          Revolving Loan Advances, Payments and Settlements; Interest and Fee Payments.

 

(i)          Agent shall have the right, on behalf of Revolving Lenders to disburse funds to Borrowers for all Revolving Loans requested or deemed requested by Borrowers pursuant to the terms of this Agreement. Agent shall be conclusively entitled to assume, for purposes of the preceding sentence, that each Revolving Lender, other than any Non-Funding Lenders, will fund its Pro Rata Share of all Revolving Loans requested by Borrowers. Each Revolving Lender shall reimburse Agent on demand, in accordance with the provisions of the immediately following paragraph, for all funds disbursed on its behalf by Agent pursuant to the first sentence of this clause (i), or if Agent so requests, each Revolving Lender will remit to Agent its Pro Rata Share of any Revolving Loan before Agent disburses the same to a Borrower. If Agent elects to require that each Revolving Lender make funds available to Agent, prior to a disbursement by Agent to a Borrower, Agent shall advise each Revolving Lender by telephone, facsimile or e-mail of the amount of such Revolving Lender’s Pro Rata Share of the Revolving Loan requested by such Borrower no later than noon (Eastern time) on the date of funding of such Revolving Loan, and each such Revolving Lender shall pay Agent on such date such Revolving Lender’s Pro Rata Share of such requested Revolving Loan, in same day funds, by wire transfer to the Payment Account, or such other account as may be identified by Agent to Revolving Lenders from time to time. If any Lender fails to pay the amount of its Pro Rata Share of any funds advanced by Agent pursuant to the first sentence of this clause (i) within one (1) Business Day after Agent’s demand, Agent shall promptly notify Borrower Representative, and Borrowers shall immediately repay such amount to Agent. Any repayment required by Borrowers pursuant to this Section 11.13 shall be accompanied by accrued interest thereon from and including the date such amount is made available to a Borrower to but excluding the date of payment at the rate of interest then applicable to Revolving Loans. Nothing in this Section 11.13 or elsewhere in this Agreement or the other Financing Documents shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights that Agent or any Borrower may have against any Lender as a result of any default by such Lender hereunder.

 

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(ii)         On a Business Day of each week as selected from time to time by Agent, or more frequently (including daily), if Agent so elects (each such day being a “ Settlement Date ”), Agent will advise each Revolving Lender by telephone, facsimile or e-mail of the amount of each such Revolving Lender’s percentage interest of the Revolving Loan balance as of the close of business of the Business Day immediately preceding the Settlement Date. In the event that payments are necessary to adjust the amount of such Revolving Lender’s actual percentage interest of the Revolving Loans to such Lender’s required percentage interest of the Revolving Loan balance as of any Settlement Date, the Revolving Lender from which such payment is due shall pay Agent, without setoff or discount, to the Payment Account before 1:00 p.m. (Eastern time) on the Business Day following the Settlement Date the full amount necessary to make such adjustment. Any obligation arising pursuant to the immediately preceding sentence shall be absolute and unconditional and shall not be affected by any circumstance whatsoever. In the event settlement shall not have occurred by the date and time specified in the second preceding sentence, interest shall accrue on the unsettled amount at the rate of interest then applicable to Revolving Loans.

 

(iii)        On each Settlement Date, Agent shall advise each Revolving Lender by telephone, facsimile or e-mail of the amount of such Revolving Lender’s percentage interest of principal, interest and fees paid for the benefit of Revolving Lenders with respect to each applicable Revolving Loan, to the extent of such Revolving Lender’s Revolving Loan Exposure with respect thereto, and shall make payment to such Revolving Lender before 1:00 p.m. (Eastern time) on the Business Day following the Settlement Date of such amounts in accordance with wire instructions delivered by such Revolving Lender to Agent, as the same may be modified from time to time by written notice to Agent; provided, however, that, in the case such Revolving Lender is a Defaulted Lender, Agent shall be entitled to set off the funding short-fall against that Defaulted Lender’s respective share of all payments received from any Borrower.

 

(iv)        On the Closing Date, Agent, on behalf of Lenders, may elect to advance to Borrowers the full amount of the initial Loans to be made on the Closing Date prior to receiving funds from Lenders, in reliance upon each Lender’s commitment to make its Pro Rata Share of such Loans to Borrowers in a timely manner on such date. If Agent elects to advance the initial Loans to Borrower in such manner, Agent shall be entitled to receive all interest that accrues on the Closing Date on each Lender’s Pro Rata Share of such Loans unless Agent receives such Lender’s Pro Rata Share of such Loans before 3:00 p.m. (Eastern time) on the Closing Date.

 

(v)         It is understood that for purposes of advances to Borrowers made pursuant to this Section 11.13, Agent will be using the funds of Agent, and pending settlement, (A) all funds transferred from the Payment Account to the outstanding Revolving Loans shall be applied first to advances made by Agent to Borrowers pursuant to this Section 11.13, and (B) all interest accruing on such advances shall be payable to Agent.

 

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(vi)        The provisions of this Section 11.13(a) shall be deemed to be binding upon Agent and Lenders notwithstanding the occurrence of any Default or Event of Default, or any insolvency or bankruptcy proceeding pertaining to any Borrower or any other Credit Party.

 

(b)          Return of Payments.

 

(i)          If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has been or will be received by Agent from a Borrower and such related payment is not received by Agent, then Agent will be entitled to recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind, together with interest accruing on a daily basis at the Federal Funds Rate.

 

(ii)         If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any Borrower or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Financing Document, Agent will not be required to distribute any portion thereof to any Lender. In addition, each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at such rate, if any, as Agent is required to pay to any Borrower or such other Person, without setoff, counterclaim or deduction of any kind.

 

(c)           Defaulted Lenders . The failure of any Defaulted Lender to make any payment required by it hereunder shall not relieve any other Lender of its obligations to make payment, but neither any other Lender nor Agent shall be responsible for the failure of any Defaulted Lender to make any payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Defaulted Lender shall not have any voting or consent rights under or with respect to any Financing Document or constitute a “Lender” (or be included in the calculation of “Required Lenders” hereunder) for any voting or consent rights under or with respect to any Financing Document.

 

(d)           Sharing of Payments . If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Section 2.8(d)) in excess of its Pro Rata Share of payments entitled pursuant to the other provisions of this Section 11.13, such Lender shall purchase from the other Lenders such participations in extensions of credit made by such other Lenders (without recourse, representation or warranty) as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter required to be returned or otherwise recovered from such purchasing Lender, such portion of such purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such return or recovery, without interest. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this clause (d) may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 10.6) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation). If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this clause (d) applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this clause (d) to share in the benefits of any recovery on such secured claim.

 

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Section 11.14       Right to Perform, Preserve and Protect . If any Credit Party fails to perform any obligation hereunder or under any other Financing Document, Agent itself may, but shall not be obligated to, cause such obligation to be performed at Borrowers’ expense. Agent is further authorized by Borrowers and the Lenders to make expenditures from time to time which Agent, in its reasonable business judgment, deems necessary or desirable to (a) preserve or protect the business conducted by Borrowers, the Collateral, or any portion thereof, and/or (b) enhance the likelihood of, or maximize the amount of, repayment of the Loan and other Obligations. Each Borrower hereby agrees to reimburse Agent on demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this Section 11.14. Each Lender hereby agrees to indemnify Agent upon demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this Section 11.14, in accordance with the provisions of Section 11.6.

 

Section 11.15       [Reserved].

 

Section 11.16       Amendments and Waivers.

 

(a)          No provision of this Agreement or any other Financing Document may be materially amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by Borrowers, the Required Lenders and any other Lender to the extent required under Section 11.16(b) .

 

(b)          In addition to the required signatures under Section 11.16(a), no provision of this Agreement or any other Financing Document may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by the following Persons:

 

(i)          if any amendment, waiver or other modification would increase a Lender’s funding obligations in respect of any Loan, by such Lender; and/or

 

(ii)         if the rights or duties of Agent are affected thereby, by Agent;

 

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provided, however , that, in each of (i) and (ii) above, no such amendment, waiver or other modification shall, unless signed or otherwise approved in writing by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Loan; (B) postpone the date fixed for, or waive, any payment (other than any mandatory prepayment pursuant to Section 2.1(b)(ii)) of principal of any Loan, or of interest on any Loan (other than default interest) or any fees provided for hereunder (other than late charges) or postpone the date of termination of any commitment of any Lender hereunder; (C) change the definition of the term Required Lenders or the percentage of Lenders which shall be required for Lenders to take any action hereunder; (D) release all or substantially all of the Collateral, authorize any Borrower to sell or otherwise dispose of all or substantially all of the Collateral or release any Guarantor of all or any portion of the Obligations or its Guarantee obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be provided in this Agreement or the other Financing Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 11.16(b) or the definitions of the terms used in this Section 11.16(b) insofar as the definitions affect the substance of this Section 11.16(b); (F) consent to the assignment, delegation or other transfer by any Credit Party of any of its rights and obligations under any Financing Document or release any Borrower of its payment obligations under any Financing Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; or (G) amend any of the provisions of Section 10.7 or amend any of the definitions Pro Rata Share, Revolving Loan Commitment, , Revolving Loan Commitment Amount, , Revolving Loan Commitment Percentage, or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F) and (G) of the preceding sentence.

 

Section 11.17       Assignments and Participations.

 

(a)          Assignments.

 

(i)          Any Lender may at any time assign to one or more Eligible Assignees all or any portion of such Lender’s Loan together with all related obligations of such Lender hereunder. Except as Agent may otherwise agree, the amount of any such assignment (determined as of the date of the applicable Assignment Agreement or, if a “Trade Date” is specified in such Assignment Agreement, as of such Trade Date) shall be in a minimum aggregate amount equal to $ 1,000,000 or, if less, the assignor’s entire interests in the outstanding Loan; provided, however, that, in connection with simultaneous assignments to two or more related Approved Funds, such Approved Funds shall be treated as one assignee for purposes of determining compliance with the minimum assignment size referred to above. Borrowers and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned to an Eligible Assignee until Agent shall have received and accepted an effective Assignment Agreement executed, delivered and fully completed by the applicable parties thereto and a processing fee of $3,500 to be paid by the assigning Lender; provided, however, that only one processing fee shall be payable in connection with simultaneous assignments to two or more related Approved Funds.

 

(ii)         From and after the date on which the conditions described above have been met, (A) such Eligible Assignee shall be deemed automatically to have become a party hereto and, to the extent of the interests assigned to such Eligible Assignee pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (B) the assigning Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, shall be released from its rights and obligations hereunder (other than those that survive termination pursuant to Section 12.1). Upon the request of the Eligible Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, each Borrower shall execute and deliver to Agent for delivery to the Eligible Assignee (and, as applicable, the assigning Lender) Notes in the aggregate principal amount of the Eligible Assignee’s Loan (and, as applicable, Notes in the principal amount of that portion of the principal amount of the Loan retained by the assigning Lender). Upon receipt by the assigning Lender of such Note, the assigning Lender shall return to Borrower Representative any prior Note held by it.

 

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(iii)        Agent, acting solely for this purpose as an agent of Borrower, shall maintain at its offices located in Bethesda, Maryland a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and addresses of each Lender, and the commitments of, and principal amount of the Loan owing to, such Lender pursuant to the terms hereof. The entries in such register shall be conclusive, and Borrower, Agent and Lenders may treat each Person whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. Such register shall be available for inspection by Borrower and any Lender, at any reasonable time upon reasonable prior notice to Agent.

 

(iv)        Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(v)         Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, Agent has the right, but not the obligation, to effectuate assignments of Loan via an electronic settlement system acceptable to Agent as designated in writing from time to time to the Lenders by Agent (the “ Settlement Service ”). At any time when the Agent elects, in its sole discretion, to implement such Settlement Service, each such assignment shall be effected by the assigning Lender and proposed assignee pursuant to the procedures then in effect under the Settlement Service, which procedures shall be consistent with the other provisions of this Section 11.17(a). Each assigning Lender and proposed Eligible Assignee shall comply with the requirements of the Settlement Service in connection with effecting any assignment of Loan pursuant to the Settlement Service. With the prior written approval of Agent, Agent’s approval of such Eligible Assignee shall be deemed to have been automatically granted with respect to any transfer effected through the Settlement Service. Assignments and assumptions of the Loan shall be effected by the provisions otherwise set forth herein until Agent notifies Lenders of the Settlement Service as set forth herein.

 

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(b)           Participations . Any Lender may at any time, without the consent of, or notice to, any Borrower or Agent, sell to one or more Persons (other than any Borrower or any Borrower’s Affiliates) participating interests in its Loan, commitments or other interests hereunder (any such Person, a “ Participant ”). In the event of a sale by a Lender of a participating interest to a Participant, (i) such Lender’s obligations hereunder shall remain unchanged for all purposes, (ii) Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations hereunder, and (iii) all amounts payable by each Borrower shall be determined as if such Lender had not sold such participation and shall be paid directly to such Lender. Each Borrower agrees that if amounts outstanding under this Agreement 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 to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement; provided, however , that such right of set-off shall be subject to the obligation of each Participant to share with Lenders, and Lenders agree to share with each Participant, as provided in Section 11.5.

 

(c)           Replacement of Lenders . Within thirty (30) days after: (i) receipt by Agent of notice and demand from any Lender for payment of additional costs as provided in Section 2.8(d), which demand shall not have been revoked, (ii) any Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8(a), (iii) any Lender is a Defaulted Lender, and the circumstances causing such status shall not have been cured or waived; or (iv) any failure by any Lender to consent to a requested amendment, waiver or modification to any Financing Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender, or each Lender affected thereby, is required with respect thereto (each relevant Lender in the foregoing clauses (i) through (iv) being an “ Affected Lender ”) each of Borrower Representative and Agent may, at its option, notify such Affected Lender and, in the case of Borrowers’ election, the Agent, of such Person’s intention to obtain, at Borrowers’ expense, a replacement Lender (“ Replacement Lender ”) for such Lender, which Replacement Lender shall be an Eligible Assignee and, in the event the Replacement Lender is to replace an Affected Lender described in the preceding clause (iv), such Replacement Lender consents to the requested amendment, waiver or modification making the replaced Lender an Affected Lender. In the event Borrowers or Agent, as applicable, obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender shall sell, at par, and assign all of its Loan and funding commitments hereunder to such Replacement Lender in accordance with the procedures set forth in Section 11.17(a); provided, however, that (A) Borrowers shall have reimbursed such Lender for its increased costs and additional payments for which it is entitled to reimbursement under Section 2.8(a) or Section 2.8(d), as applicable, of this Agreement through the date of such sale and assignment, and (B) Borrowers shall pay to Agent the $3,500 processing fee in respect of such assignment. In the event that a replaced Lender does not execute an Assignment Agreement pursuant to Section 11.17(a) within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to this Section 11.17(c) and presentation to such replaced Lender of an Assignment Agreement evidencing an assignment pursuant to this Section 11.17(c), such replaced Lender shall be deemed to have consented to the terms of such Assignment Agreement, and any such Assignment Agreement executed by Agent, the Replacement Lender and, to the extent required pursuant to Section 11.17(a), Borrowers, shall be effective for purposes of this Section 11.17(c) and Section 11.17(a). Upon any such assignment and payment, such replaced Lender shall no longer constitute a “ Lender ” for purposes hereof, other than with respect to such rights and obligations that survive termination as set forth in Section 12.1.

 

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(d)          Credit Party Assignments. No Credit Party may assign, delegate or otherwise transfer any of its rights or other obligations hereunder or under any other Financing Document without the prior written consent of Agent and each Lender.

 

Section 11.18       Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist.

 

So long as Agent has not waived the conditions to the funding of Revolving Loans set forth in Section 7.2, any Lender may deliver a notice to Agent stating that such Lender shall cease making Revolving Loans due to the non-satisfaction of one or more conditions to funding Loans set forth in Section 7.2, and specifying any such non-satisfied conditions. Any Lender delivering any such notice shall become a non-funding Lender (a “ Non-Funding Lender ”) for purposes of this Agreement commencing on the Business Day following receipt by Agent of such notice, and shall cease to be a Non-Funding Lender on the date on which such Lender has either revoked the effectiveness of such notice or acknowledged in writing to each of Agent the satisfaction of the condition(s) specified in such notice, or Required Lenders waive the conditions to the funding of such Loans giving rise to such notice by Non-Funding Lender. Each Non-Funding Lender shall remain a Lender for purposes of this Agreement to the extent that such Non-Funding Lender has Revolving Loans Outstanding in excess of $0; provided, however, that during any period of time that any Non-Funding Lender exists, and notwithstanding any provision to the contrary set forth herein, the following provisions shall apply:

 

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(a)          For purposes of determining the Pro Rata Share of each Revolving Lender under clause (c) of the definition of such term, each Non-Funding Lender shall be deemed to have a Revolving Loan Commitment Amount as in effect immediately before such Lender became a Non-Funding Lender.

 

(b)          Except as provided in clause (a) above, the Revolving Loan Commitment Amount of each Non-Funding Lender shall be deemed to be $0.

 

(c)          The Revolving Loan Commitment at any date of determination during such period shall be deemed to be equal to the sum of (i) the aggregate Revolving Loan Commitment Amounts of all Lenders, other than the Non-Funding Lenders as of such date plus (ii) the aggregate Revolving Loan Outstandings of all Non-Funding Lenders as of such date.

 

(d)          Agent shall have no right to make or disburse Revolving Loans for the account of any Non-Funding Lender pursuant to Section 2.1(b)(i) to pay interest, fees, expenses and other charges of any Credit Party.

 

(e)          To the extent that Agent applies proceeds of Collateral or other payments received by Agent to repayment of Revolving Loans pursuant to Section 10.7, such payments and proceeds shall be applied first in respect of Revolving Loans made at the time any Non-Funding Lenders exist, and second in respect of all other outstanding Revolving Loans.

 

Section 11.19      Buy-Out Upon Refinancing . MCF shall have the right to purchase from the other Lenders all of their respective interests in the Loan at par in connection with any refinancing of the Loan upon one or more new economic terms, but which refinancing is structured as an amendment and restatement of the Loan rather than a payoff of the Loan.

 

Section 11.20       Definitions . As used in this Article 11, the following terms have the following meanings:

 

Approved Fund ” means any (a) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the Ordinary Course of Business, or (b) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (a) and that, with respect to each of the preceding clauses (a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender, or (iii) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

 

Assignment Agreement ” means an assignment agreement in form and substance acceptable to Agent.

 

Defaulted Lender ” means, so long as such failure shall remain in existence and uncured, any Lender which shall have failed to make any Loan or other credit accommodation, disbursement, settlement or reimbursement required pursuant to the terms of any Financing Document.

 

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Eligible Assignee ” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, and (d) any other Person (other than a natural person) approved by Agent; provided, however , that notwithstanding the foregoing, (x) ” Eligible Assignee ” shall not include any Borrower or any of a Borrower’s Affiliates, and (y) no proposed assignee intending to assume all or any portion of the Revolving Loan Commitment shall be an Eligible Assignee unless such proposed assignee either already holds a portion of such Revolving Loan Commitment, or has been approved as an Eligible Assignee by Agent.

 

Federal Funds Rate ” means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided, however , that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Agent on such day on such transactions as determined by Agent.

 

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Section 11.21       Authority to Execute . Without implying any limitation on the other provisions of this Agreement, the Lenders hereby authorize the Agent to enter into the Subordination Agreements, including, but not limited to, the Subordination Agreement (JL-BBNC), the Subordination Agreement (Little Harbor) and the Subordination Agreement (Penta).

 

Article 12 - MISCELLANEOUS

 

Section 12.1         Survival . All agreements, representations and warranties made herein and in every other Financing Document shall survive the execution and delivery of this Agreement and the other Financing Documents and the other Operative Documents. The provisions of Section 2.9 and Articles 11 and 12 shall survive the payment of the Obligations (both with respect to any Lender and all Lenders collectively) and any termination of this Agreement and any judgment with respect to any Obligations, including any final foreclosure judgment with respect to any Security Document, and no unpaid or unperformed, current or future, Obligations will merge into any such judgment.

 

Section 12.2         No Waivers . No failure or delay by Agent or any Lender in exercising any right, power or privilege under any Financing Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein and therein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Any reference in any Financing Document to the “continuing” nature of any Event of Default shall not be construed as establishing or otherwise indicating that any Borrower or any other Credit Party has the independent right to cure any such Event of Default, but is rather presented merely for convenience should such Event of Default be waived in accordance with the terms of the applicable Financing Documents.

 

Section 12.3         Notices.

 

(a)          All notices, requests and other communications to any party hereunder shall be in writing and shall be given to such party at its address or e-mail address set forth on the signature pages hereof (or, in the case of any such Lender who becomes a Lender after the date hereof, in an assignment agreement or in a notice delivered to Borrower Representative and Agent by the assignee Lender forthwith upon such assignment) or at such other address e-mail address as such party may hereafter specify for the purpose by notice to Agent and Borrower Representative; provided, however, that notices, requests or other communications shall be permitted by electronic means only in accordance with the provisions of Section 12.3(b) and (c). Each such notice, request or other communication shall be effective (i) if given by email, when such notice is transmitted to the email address and is followed by copy of such notice sent on the same day by prepaid overnight courier, or (ii) if given by mail, prepaid overnight courier or any other means, when received or when receipt is refused at the applicable address specified by this Section 12.3(a).

 

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(b)          Notices and other communications to the parties hereto may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved from time to time by Agent, provided, however, that the foregoing shall not apply to notices sent directly to any Lender if such Lender has notified the Agent that it is incapable of receiving notices by electronic communication. The Agent or Borrower Representative may, in their discretion, agree to accept notices and other communications to them hereunder by electronic communications pursuant to procedures approved by it, provided , however , that approval of such procedures may be limited to particular notices or communications.

 

(c)          Unless the Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor, provided, however, that if any such notice or other communication is not sent or posted during normal business hours, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day.

 

Section 12.4         Severability . In case any provision of or obligation under this Agreement or any other Financing Document shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 12.5        Headings . Headings and captions used in the Financing Documents (including the Exhibits, Schedules and Annexes hereto and thereto) are included for convenience of reference only and shall not be given any substantive effect.

 

Section 12.6         Confidentiality .

 

(a)          [Reserved].

 

(b)          The Agent and each Lender acknowledge that US securities laws prohibit any Person who has received from an issuer any material, non-public information from purchasing or selling securities of such issuer or from communicating such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities. As a result of the Borrowers’ providing certain of the financial information required by this Agreement to the Agent and the Lenders, the Agent and the Lenders may be in possession of material, non-public information pertaining to the Borrowers. Accordingly, the Agent and each Lender agree not to (i) communicate any of such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell any of the Parent’s securities and (ii) purchase or sell any of the Parent’s Securities unless and until such information has been publicly disclosed by the Parent.

 

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(c)          In addition to the obligation set forth in Section 12.6(b), Agent and each Lender shall hold all non-public information regarding the Credit Parties and their respective businesses identified as such by Borrowers and obtained by Agent or any Lender pursuant to the requirements hereof in accordance with such Person’s customary procedures for handling information of such nature, except that disclosure of such information may be made (i) to their respective agents, employees, Subsidiaries, Affiliates, attorneys, auditors, professional consultants, rating agencies, insurance industry associations and portfolio management services, provided , however , that any such Persons are bound by obligations of confidentiality, (ii) to prospective transferees or purchasers of any interest in the Loans, the Agent or a Lender , provided , however , that any such Persons are bound by obligations of confidentiality, (iii) as required by Law, subpoena, judicial order or similar order and in connection with any litigation, (iv) as may be required in connection with the examination, audit or similar investigation of such Person, and (v) to a Person that is a trustee, investment advisor, collateral manager, servicer, noteholder or secured party in a Securitization (as hereinafter defined) in connection with the administration, servicing and reporting on the assets serving as collateral for such Securitization. For the purposes of this Section, “ Securitization ” shall mean (A) the pledge of the Loans as collateral security for loans to a Lender, or (B) a public or private offering by a Lender or any of its Affiliates or their respective successors and assigns, of securities which represent an interest in, or which are collateralized, in whole or in part, by the Loans. Confidential information shall not include information that either: (y) is in the public domain, or becomes part of the public domain after disclosure to such Person through no fault of such Person, or (z) is disclosed to such Person by a Person other than a Credit Party, provided , however , Agent does not have actual knowledge that such Person is prohibited from disclosing such information. The obligations of Agent and Lenders under this Section 12.6 shall supersede and replace the obligations of Agent and Lenders under any confidentiality agreement in respect of this financing executed and delivered by Agent or any Lender prior to the date hereof.

 

Section 12.7         Waiver of Consequential and Other Damages . To the fullest extent permitted by applicable law, no Borrower shall assert, and each Borrower hereby waives, any claim against any Indemnitee (as defined below), on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of this Agreement, any other Financing Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.

 

Section 12.8         GOVERNING LAW; SUBMISSION TO JURISDICTION.

 

(a)          THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL DISPUTES AND OTHER MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

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(b)          EACH BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF MONTGOMERY, STATE OF MARYLAND AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS TO THE EXTENT PERMITTED BY LAW. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

(c)          Each Borrower, Agent and each Lender agree that each Loan (including those made on the Closing Date) shall be deemed to be made in, and the transactions contemplated hereunder and in any other Financing Document shall be deemed to have been performed in, the State of Maryland.

 

Section 12.9         WAIVER OF JURY TRIAL . EACH BORROWER, AGENT AND EACH OF THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH BORROWER, AGENT AND EACH LENDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH BORROWER, AGENT AND EACH LENDER WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

Section 12.10       Publication; Advertisement.

 

(a)           Publication . No Credit Party will directly or indirectly publish, disclose or otherwise use in any public disclosure, advertising material, promotional material, press release or interview, any reference to the name, logo or any trademark of MCF or any of its Affiliates or any reference to this Agreement or the financing evidenced hereby, in any case except (i) as required by Law, subpoena or judicial or similar order, in which case the applicable Credit Party shall give Agent prior written notice of such publication or other disclosure, or (ii) with MCF’s prior written consent.

 

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(b)           Advertisement . After public disclosure by the Borrower pursuant to all US securities laws, if required, each Lender and each Credit Party hereby authorizes MCF to publish the name of such Lender and Credit Party, the existence of the financing arrangements referenced under this Agreement, the primary purpose and/or structure of those arrangements, the amount of credit extended under each facility, the title and role of each party to this Agreement, and the total amount of the financing evidenced hereby in any “tombstone”, comparable advertisement or press release which MCF elects to submit for publication. In addition, each Lender and each Credit Party agrees that MCF may provide lending industry trade organizations with information necessary and customary for inclusion in league table measurements after the Closing Date. With respect to any of the foregoing, MCF shall provide Borrowers with an opportunity to review and confer with MCF regarding the contents of any such tombstone, advertisement or information, as applicable, prior to its submission for publication and, following such review period, MCF may, from time to time, publish such information in any media form desired by MCF, until such time that Borrowers shall have requested MCF cease any such further publication. Notwithstanding anything to the contrary in this Section 12.10(b), the provisions of this Section 12.10 are subject to the provisions of Section 12.6.

 

Section 12.11       Counterparts; Integration . This Agreement and the other Financing Documents may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page shall bind the parties hereto. This Agreement and the other Financing Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior agreements and understandings, oral or written, relating to the subject matter hereof.

 

Section 12.12       No Strict Construction . The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

Section 12.13      Lender Approvals . Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of Agent or Lenders with respect to any matter that is the subject of this Agreement, the other Financing Documents may be granted or withheld by Agent and Lenders in their sole and absolute discretion and credit judgment.

 

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Section 12.14       Expenses; Indemnity

  

(a)          Borrowers hereby agree to promptly pay (i) all reasonable costs and expenses of Agent (including, without limitation, the reasonable fees, costs and expenses of counsel to, and independent appraisers and consultants retained by Agent) in connection with the examination, review, due diligence investigation, documentation, negotiation, closing and syndication of the transactions contemplated by the Financing Documents, in connection with the performance by Agent of its rights and remedies under the Financing Documents and in connection with the continued administration of the Financing Documents including (A) any amendments, modifications, consents and waivers to and/or under any and all Financing Documents, and (B) any periodic public record searches conducted by or at the request of Agent (including, without limitation, title investigations, UCC searches, fixture filing searches, judgment, pending litigation and tax lien searches and searches of applicable corporate, limited liability, partnership and related records concerning the continued existence, organization and good standing of certain Persons); (ii) without limitation of the preceding clause (i), all reasonable costs and expenses of Agent in connection with the creation, perfection and maintenance of Liens pursuant to the Financing Documents; (iii) without limitation of the preceding clause (i), all reasonable costs and expenses of Agent in connection with (A) protecting, storing, insuring, handling, maintaining or selling any Collateral, (B) any litigation, dispute, suit or proceeding relating to any Financing Document (except that Borrower shall have no obligation under this clause respect to any liability resulting from the gross negligence or willful misconduct of Agent and/or Lenders, as determined by a final non-appealable judgment of a court of competent jurisdiction), and (C) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all of the Financing Documents; (iv) without limitation of the preceding clause (i), all reasonable costs and expenses of Agent in connection with Agent’s reservation of funds in anticipation of the funding of the initial Loans to be made hereunder; and (v) all reasonable costs and expenses incurred by Lenders in connection with any litigation, dispute, suit or proceeding relating to any Financing Document and in connection with any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all Financing Documents, whether or not Agent or Lenders are a party thereto (except that Borrower shall have no obligation under this clause respect to any liability resulting from the gross negligence or willful misconduct of Agent and/or Lenders, as determined by a final non-appealable judgment of a court of competent jurisdiction). If Agent or any Lender uses in-house counsel for any of these purposes, Borrowers further agree that the Obligations include reasonable charges for such work commensurate with the fees that would otherwise be charged by outside legal counsel selected by Agent or such Lender for the work performed.

 

(b)          Each Borrower hereby agrees to indemnify, pay and hold harmless Agent and Lenders and the officers, directors, employees, trustees, agents, investment advisors, collateral agents, servicers, and counsel of Agent and Lenders (collectively called the “ Indemnitees ”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitee) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of a Credit Party, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Agent or Lenders) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such Indemnitee as a result of or in connection with the transactions contemplated hereby or by the other Operative Documents (including (i)(A) as a direct or indirect result of the presence on or under, or escape, seepage, leakage, spillage, discharge, emission or release from, any property now or previously owned, leased or operated by Borrower, any Subsidiary or any other Person of any Hazardous Materials, (B) arising out of or relating to the offsite disposal of any materials generated or present on any such property, or (C) arising out of or resulting from the environmental condition of any such property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned wholly or in part by any condition, accident or event caused by any act or omission of Borrower or any Subsidiary, and (ii) proposed and actual extensions of credit under this Agreement) and the use or intended use of the proceeds of the Loans, except that Borrower shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such Indemnitee, as determined by a final non-appealable judgment of a court of competent jurisdiction. To the extent that the undertaking set forth in the immediately preceding sentence may be unenforceable, Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them.

 

97
 

 

(c)          Notwithstanding any contrary provision in this Agreement, the obligations of Borrowers under this Section 12.14 shall survive the payment in full of the Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE RESPONSIBLE OR LIABLE TO THE BORROWERS OR TO ANY OTHER PARTY TO ANY FINANCING DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.

 

Section 12.15       [R eserved ] .

 

Section 12.16      Reinstatement . This Agreement shall remain in full force and effect and continue to be effective should any petition or other proceeding be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an assignment for the benefit of any creditor or creditors or should an interim receiver, receiver, receiver and manager or trustee be appointed for all or any significant part of any Credit Party’s assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Obligations, whether as a fraudulent preference reviewable transaction or otherwise, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

 

Section 12.17      Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of Borrowers and Agent and each Lender and their respective successors and permitted assigns.

 

Section 12.18      USA PATRIOT Act Notification . Agent (for itself and not on behalf of any Lender) and each Lender hereby notifies Borrowers that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record certain information and documentation that identifies Borrowers, which information includes the name and address of Borrower and such other information that will allow Agent or such Lender, as applicable, to identify Borrowers in accordance with the USA PATRIOT Act.

 

98
 

 

[ SIGNATURES APPEAR ON FOLLOWING PAGE(S) ]

 

99
 

 

( Signature Page to Credit and Security Agreement )

 

IN WITNESS WHEREOF , intending to be legally bound, and intending that this Agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

BORROWER REPRESENTATIVE:   TWINLAB CONSOLIDATION CORPORATION
     
    By: /s/ Thomas A. Tolworthy                          (Seal)
    Name: Thomas A. Tolworthy
    Title:   Chief Executive Officer and President
     
    Address :
    632 Broadway, Suite 201,
    New York, NY  10012
    Attn:  Chief Executive Officer and President
    E-Mail:  ttolworthy@twinlab.com
    Phone:  (212) 651-8500
     
OTHER BORROWERS:    
     
TWINLAB CONSOLIDATED HOLDINGS, INC.   TWINLAB HOLDINGS, INC.
     
By: /s/ Thomas A. Tolworthy                                       (Seal)   By: /s/ Thomas A. Tolworthy                           (Seal)
Name:  Thomas A. Tolworthy   Name:  Thomas A. Tolworthy
Title:  Chief Executive Officer and President   Title:  Chief Executive Officer and President
     
TWINLAB CORPORATION   ISI BRANDS INC.
     
By: /s/ Thomas A. Tolworthy                                       (Seal)   /s/ Thomas A. Tolworthy                                  (Seal)
Name:  Thomas A. Tolworthy   Name:  Thomas A. Tolworthy
Title:  Chief Executive Officer and President   Title:  Chief Executive Officer and President
     
TCC CM SUBCO I, INC.   TCC CM SUBCO II, INC.
     
By: /s/ Thomas A. Tolworthy                                       (Seal)   By: /s/ Thomas A. Tolworthy                           (Seal)
Name:  Thomas A. Tolworthy   Name:  Thomas A. Tolworthy
Title:  Chief Executive Officer and President   Title:  Chief Executive Officer and President

 

 
 

 

( Signature Page to Credit and Security Agreement )

 

LENDER: MIDCAP FINANCIAL TRUST ,
  a Delaware statutory trust
       
  By:   Apollo Capital Management, L.P.,
      its investment manager
       
  By:   Apollo Capital Management GP, LLC,
      its general partner
       
    By: /s/ Maurice Amsellem
    Name:  Maurice Amsellem
    Title:    Authorized Signatory
       
  Midcap Financial Trust
  c/o MidCap Financial Services, LLC , as servicer
  7255 Woodmont Avenue, Suite 200
  Bethesda, MD  20814
  Attn:  Portfolio Mgt. – Twin Labs Loan
  Facsimile:  301-941-1450

 

Payment Account Information:

 

Bank Name and Address:

Wells Fargo Bank

R3076-03E

1753 Pinnacle Drive

McLean, VA 22102

 

ABA/ Routing Number:

121000248

 

Swift Code:

WFBIUS6S

 

Account Name and Address:

MIDCAP FUNDING X TRUST- Collections

7255 Woodmont Avenue

Suite 200

Bethesda, MD 20814

 

Account Number:

 

 
 

 

ANNEXES, EXHIBITS AND SCHEDULES

 

ANNEXES  
   
Annex A Commitment Annex
   
EXHIBITS  
   
Exhibit A [Reserved]
Exhibit B Form of Compliance Certificate
Exhibit C Borrowing Base Certificate
Exhibit D Form of Notice of Borrowing
   
SCHEDULES  
   
Schedule 3.1 Existence, Organizational ID Numbers, Foreign Qualification, Prior Names
Schedule 3.4 Capitalization
Schedule 3.6 Litigation
Schedule 3.12 Regulatory Matters
Schedule 3.17 Material Contracts
Schedule 3.18 Environmental Compliance
Schedule 3.19 Intellectual Property
Schedule 4.4 Insurance
Schedule 4.9 Litigation, Governmental Proceedings and Other Notice Events
Schedule 5.1 Debt; Contingent Obligations
Schedule 5.2 Liens
Schedule 5.7 Permitted Investments
Schedule 5.8 Affiliate Transactions
Schedule 5.11 Business Description
Schedule 5.14 Deposit Accounts and Securities Accounts
Schedule 7.4 Post-Closing Obligations
Schedule 9.1 Collateral
Schedule 9.2 Location of Collateral

 

 
 

 

Annex A to Credit Agreement (Commitment Annex)

 

Lender   Revolving Loan
Commitment
Amount
    Revolving Loan
Commitment
Percentage
 
MidCap Financial Trust   $ 15,000,000       100 %
TOTALS   $ 15,000,000       100 %

 

 
 

 

Exhibit A to Credit Agreement (Reserved)

 

 
 

 

Exhibit B to Credit Agreement (FORM OF Compliance Certificate)

 

COMPLIANCE CERTIFICATE

 

This Compliance Certificate is given by _____________________, a Responsible Officer of TWINLAB CONSOLIDATION CORPORATION________________ (the “ Borrower Representative ”), pursuant to that certain Credit and Security Agreement dated as of January _, 2015 among the Borrower Representative, TWINLAB CONSOLIDATION CORPORATION, TWINLAB HOLDINGS, INC., TWINLAB CORPORATION, ISI BRANDS INC., TCC CM SUBCO I, INC. and TCC CM SUBCO II, INC. and any additional Borrower that may hereafter be added thereto (collectively, “ Borrowers ”), MidCap Funding X Trust (as successor by assignment from MidCap Financial Trust), individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby certifies to Agent and Lenders that:

 

(a)          the financial statements delivered with this certificate in accordance with Section 4.1 of the Credit Agreement fairly present in all material respects the results of operations and financial condition of Borrowers and their Consolidated Subsidiaries as of the dates and the accounting period covered by such financial statements;

 

(b)          I have reviewed the terms of the Credit Agreement and have made, or caused to be made under my supervision, a review in reasonable detail of the transactions and conditions of Borrowers and their Consolidated Subsidiaries during the accounting period covered by such financial statements and such review has not disclosed the existence during or at the end of such accounting period, and I have no knowledge of the existence as of the date hereof, of any condition or event that constitutes a Default or an Event of Default, except as set forth in Schedule 1 hereto, which includes a description of the nature and period of existence of such Default or an Event of Default and what action Borrowers have taken, are undertaking and propose to take with respect thereto;

 

(c)          except as noted on Schedule 2 attached hereto, the Credit Agreement contains a complete and accurate list of all business locations of Borrowers and Guarantors and all names under which Borrowers and Guarantors currently conduct business; Schedule 2 specifically notes any changes in the names under which any Borrower or Guarantor conduct business;

 

(d)          except as noted on Schedule 3 attached hereto, the undersigned has no knowledge of (i) any federal or state tax liens having been filed against any Borrower, Guarantor or any Collateral or (ii) any failure of any Borrower or Guarantors to make required payments of withholding or other tax obligations of any Borrower or Guarantors during the accounting period to which the attached statements pertain or any subsequent period.

 

Exhibit B – Page 1
 

 

(e)          Schedule 5.14 to the Credit Agreement contains a complete and accurate statement of all deposit accounts and investment accounts maintained by Borrowers and Guarantors;

 

(f)          except as noted on Schedule 4 attached hereto and Schedule 3.6 to the Credit Agreement, the undersigned has no knowledge of any current, pending or threatened: (i) litigation against any Borrower or Guarantor; (ii)         inquiries, investigations or proceedings concerning the business affairs, practices, licensing or reimbursement entitlements of any Borrower or Guarantor; or (iii) any default by any Borrower or Guarantor under any Material Contract to which it is a party.

 

(g)          except as noted on Schedule 5 attached hereto, no Borrower or Guarantor has acquired, by purchase, by the approval or granting of any application for registration (whether or not such application was previously disclosed to Agent by Borrowers) or otherwise, any Intellectual Property that is registered with any United States or foreign Governmental Authority, or has filed with any such United States or foreign Governmental Authority, any new application for the registration of any Intellectual Property, or acquired rights under a license as a licensee with respect to any such registered Intellectual Property (or any such application for the registration of Intellectual Property) owned by another Person, that has not previously been reported to Agent on Schedule 3.17 to the Credit Agreement or any Schedule 5 to any previous Compliance Certificate delivered by the Company to Agent.

 

(j)           except as noted on Schedule 6 attached hereto, no Borrower or Guarantor has acquired, by purchase or otherwise, any Chattel Paper, Letter of Credit Rights, Instruments, Documents or Investment Property that has not previously been reported to Agent on any Schedule 6 to any previous Compliance Certificate delivered by Borrower Representative to Agent.

 

(k)          except as noted on Schedule 7 attached hereto, no Borrower or Guarantor is aware of any commercial tort claim that has not previously been reported to Agent on any Schedule 7 to any previous Compliance Certificate delivered by Borrower Representative to Agent.

 

(l)           Borrowers and Guarantors (if any) are in compliance with the covenants contained in Article 6 of the Credit Agreement, and in any Guarantee constituting a part of the Financing Documents, as demonstrated by the calculation of such covenants below, except as set forth below; in determining such compliance, the following calculations have been made: [See attached worksheets]. Such calculations and the certifications contained therein are true, correct and complete.

 

Exhibit B – Page 2
 

 

The foregoing certifications and computations are made as of ________________, 201__ (end of month) and as of _____________, 201__.

 

  Sincerely,
   
  TWINLAB CONSOLIDATION CORPORATION
     
  By:  
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Exhibit B – Page 3
 

 

Adjusted EBITDA Worksheet (Attachment to Compliance Certificate)

 

EBITDA for the applicable period is calculated as follows, in each case, determined on a consolidated basis in accordance with GAAP:  
   
Net Income for the period of the Borrowers, being the consolidated net income (or loss) of the Borrowers and their Subsidiaries for the period in question, after giving effect to deduction for provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accordance with GAAP; provided, however, that for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (a) one-time extraordinary income items, as determined in accordance with GAAP, and (b) any Net Income attributable to any Subsidiary to the extent that any Borrower (or any Subsidiary through which such Borrower owns the subject Subsidiary) is prohibited (bylaw, contract minority ownership rights or otherwise) from receiving a distribution of such Net Income from such Subsidiary: $___________
   
Minus : Any extraordinary gains, interest income, non-operating income, non-cash income and income tax benefits and decreases in any change in LIFO or any other inventory reserves for the period $___________
   
Plus :    non-cash extraordinary losses (including non-cash expenses with respect to stock option and stock based employee compensation programs), Interest Expense, income taxes, depreciation and amortization and increases in any change in LIFO reserves for the period $___________
   
EBITDA for the Defined Period: $____ _______
   

Plus : any expenses relating to Acquisitions through the end of Fiscal Year 2015, plus severance payments and other costs relating to permanent headcount reductions, all as determined by GAAP 

$___________
   
Adjusted EBITDA for the Defined Period $ ___________

 

Exhibit B – Page 4
 

 

Fixed Charge Coverage Ratio Worksheet (Attachment to Compliance Certificate)

  

Fixed Charge Coverage Ratio for the applicable period is calculated as the ratio of: 

 
   
Adjusted EBITDA for the period (calculated pursuant to the Adjusted EBITDA Worksheet) $___________
   
Plus :        cash received during such period for Equity Interests so long as such cash is used as working capital and such cash is not received more than two times in any trailing-twelve-months period $___________
   
Minus:      Capital Expenditures not financed by the seller of the capital asset or by a third party lender made (to the extent not already incurred in a prior period) or incurred during such period $___________
   
Minus:     cash taxes paid during such period, to the extent greater than zero $___________
   
Minus:     Permitted Distributions under clause (d) of the definition of that term $___________
   
Total for the period: $ ___________
   
To  
   
Fixed Charges for the applicable period, which is calculated with respect to the Borrowers and their Subsidiaries determined on a consolidated basis in accordance with GAAP, the sum, without duplication, as follows:  
   
Cash Interest Expense paid during such period (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense), $___________
   
Plus :         principal payments paid in cash in respect of Debt paid during such period, including cash payments with respect to Capital Leases, but excluding principal payments made on the Revolving Loans $___________
   
Plus :         all Permitted Distributions (other than Permitted Distributions under clause (d) of the definition of that term) and other distributions paid in cash during such period $___________
   
Fixed Charges for the applicable period: $___________
   
Ratio: ___________

 

Exhibit B – Page 5
 

 

Total Funded Debt to Adjusted EBITDA Ratio Worksheet (Attachment to Compliance Certificate)

 

Total Funded Debt is calculated

 

as all Debt of the Borrowers and their Subsidiaries for borrowed money, purchase money Debt, installment sale obligations, Capital Lease obligations, Contingent Obligations of the Borrowers and their Subsidiaries, and all other obligations evidenced by notes or bonds, all of the foregoing as determined on a consolidated basis in accordance with GAAP 

  $____________

 

Total Funded Debt to Adjusted EBITDA Ratio for the applicable period is calculated as follows:

 

If both the Target 1 Acquisition and the Target 2 Acquisition have been consummated:

 

(A) Total Funded Debt (calculated without giving effect to any Indebtedness that is subordinate both to the Obligations and to the Penta Debt)   $____________
     
To    
     
(B) Adjusted EBITDA (calculated pursuant to the Adjusted EBITDA Worksheet) for the period of four consecutive fiscal quarters most recently ended on or prior to such date   $____________
     
Ratio:   _____________
     

If (x) the Target 1 Acquisition and the Target 2 Acquisition have not been consummated or (y) only Target 2 Acquisition has been consummated:

 

(A) Total Funded Debt (calculated without giving effect to the Little Harbor Debt)   $____________
     
To    
     
(B) Adjusted EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date   $____________
     
Ratio:   _____________

 

Exhibit B – Page 6
 

 

Covenant Compliance:    
     
Minimum Adjusted EBIDTA   $____________
     
Minimum Fixed Charge Coverage Ratio for the period   ___ to 1.0
     
Minimum Total Funded Debt to Adjusted EBITDA Ratio   ___ to 1.0
     
In Compliance   Yes/No

 

Exhibit B – Page 7
 

 

Exhibit C to Credit Agreement (CLOSING DATE Borrowing Base Certificate)

 

 
 

 

Exhibit D to Credit Agreement (FORM OF Notice of Borrowing)

 

NOTICE OF BORROWING

 

This Notice of Borrowing is given by _____________________, a Responsible Officer of TWINLAB CONSOLIDATION CORPORATION (the “ Borrower Representative ”), pursuant to that certain Credit and Security Agreement dated as of January _, 2015 among the Borrower Representative, TWINLAB CONSOLIDATION CORPORATION, TWINLAB HOLDINGS, INC., TWINLAB CORPORATION, ISI BRANDS INC., TCC CM SUBCO I, INC. and TCC CM SUBCO II, INC. and any additional Borrower that may hereafter be added thereto (collectively, “ Borrowers ”), MidCap Funding X Trust (as successor by assignment from MidCap Financial Trust), individually as a Lender and as Agent, and the financial institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer hereby gives notice to Agent of Borrower Representative’s request to borrow $_______________ of Revolving Loans on ________________, 201__. Attached is a Borrowing Base Certificate complying in all respects with the Credit Agreement and confirming that, after giving effect to the requested advance, the Revolving Loan Outstandings will not exceed the Revolving Loan Limit.

 

The undersigned officer hereby certifies that, both before and after giving effect to the request above (a) each of the conditions precedent set forth in Section 7.2 have been satisfied, (b) all of the representations and warranties contained in the Credit Agreement and the other Financing Documents are true, correct and complete as of the date hereof, except to the extent such representation or warranty relates to a specific date, in which case such representation or warranty is true, correct and complete as of such earlier date, and (c) no Default or Event of Default has occurred and is continuing on the date hereof.

 

IN WITNESS WHEREOF , the undersigned officer has executed and delivered this Notice of Borrowing this ____ day of ___________, 201__.

 

  Sincerely,
   
  TWINLAB CONSOLIDATION CORPORATION
     
  By:  
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

 
 

 

Schedule 3.1 – Existence, Organizational ID Numbers, Foreign Qualification, Prior Names;

 

Borrower   Prior Names   Type of Entity /
State of
Formation
  States
Qualified
  State Org. ID
Number
  Federal Tax
ID Number
  Place of Business /
Address
                         

 

 
 

 

Schedule 7.4 – Post Closing Requirements

 

Borrowers shall satisfy and complete each of the following obligations, or provide Agent each of the items listed below, as applicable, on or before the date indicated below, all to the satisfaction of Agent in its sole and absolute discretion:

 

1.             Within 30 days of the Closing Date, Borrowers shall deliver to Agent replacement stock certificates for Twinlab Corporation and ISI Brands Inc. issued in the name of Twinlab Holdings, Inc.

 

2.            Within 45 days of the Closing Date, Borrowers shall deliver to Agent an Additional Insured and Lender’s Loss Payable endorsements and/or declaration pages acceptable to the Lender, such insurances to be in compliance with Section 4.4 of the Financing Agreement.

 

3.            Within 14 days of the Closing Date, Borrowers shall either close the deposit account at Fifth Third Bank ending in [          ] or shall cause that deposit account to be the subject to a deposit account control agreement in substantially the form of the Deposit Account Control Agreement (Account Restricted After Notice) in effect on or about the Closing Date among the Agent, Fifth Third Bank and Twinlab Corporation. During that period, the Borrowers agree that the amounts in that deposit account shall not exceed $10,000.

 

Borrower’s failure to complete and satisfy any of the above obligations on or before the date indicated above, or Borrower’s failure to deliver any of the above listed items on or before the date indicated above, shall constitute an immediate an automatic Event of Default.

 

 
 

 

Schedule 9.1 – Collateral

 

The Collateral consists of all of Borrower’s assets (excluding the real property, and the improvements and fixtures located thereon, designated on the tax map of the Office of the Assessor of Utah County, Utah as all of Lot 1, Plat "M" Utah Valley Business Park, including a Vacation of Lot 37 & a portion of Lot 36, Plat "J", Amended Utah Valley Business Park, according to the official Plat thereof, recorded August 14, 2014 as Entry No. 56927:2014 (map filing #14337) in the Utah County Recorder's Office ) , including without limitation, all of Borrower’s right, title and interest in and to the following, whether now owned or hereafter created, acquired or arising:

 

(a) all goods, Accounts (including health-care insurance receivables), equipment (as defined in the UCC), Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims (as defined in the UCC), documents(as defined in the UCC), instruments (as defined in the UCC, including any promissory notes), chattel paper (as defined in the UCC, whether tangible or electronic), cash, money, deposit accounts(as defined in the UCC), securities accounts (as defined in the UCC), fixtures (as defined in the UCC), letter of credit rights (as defined in the UCC), letters of credit (as defined in the UCC, whether or not the letter of credit is evidenced by a writing), securities (as defined in the UCC), and all other investment property(as defined in the UCC), supporting obligations (as defined in the UCC), and financial assets (as defined in the UCC), whether now owned or hereafter acquired, wherever located;

 

(b) all of Borrowers’ books and records evidencing or relating to any of the foregoing; and

 

(c) any and rights, remedies, Guarantees, and security interests in respect of the foregoing, all rights of enforcement and collection, and all rights under the Financing Documents in respect of the foregoing, all information and data compiled or derived by any Borrower or to which any Borrower is entitled in respect of or related to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

 
 

 

TABLE OF CONTENTS

 

    Page
     
Article 1 - DEFINITIONS 1
     
  Section 1.1 Certain Defined Terms 1
       
  Section 1.2 Accounting Terms and Determinations 26
       
  Section 1.3 Other Definitional and Interpretive Provisions 27
       
  Section 1.4 Time is of the Essence 27
       
Article 2 - LOANS 27
       
  Section 2.1 Loans 27
       
  Section 2.2 Interest, Interest Calculations and Certain Fees 30
       
  Section 2.3 Notes 32
       
  Section 2.4 [Reserved] 32
       
  Section 2.5 [Reserved] 32
       
  Section 2.6 General Provisions Regarding Payment; Loan Account 32
       
  Section 2.7 Maximum Interest 33
       
  Section 2.8 Taxes; Capital Adequacy 34
       
  Section 2.9 Appointment of Borrower Representative 36
       
  Section 2.10 Joint and Several Liability; Rights of Contribution; Subordination and Subrogation 36
       
  Section 2.11 Collections and Lockbox Account 38
       
  Section 2.12 Termination; Restriction on Termination 40
       
Article 3 - REPRESENTATIONS AND WARRANTIES 41
       
  Section 3.1 Existence and Power 41
       
  Section 3.2 Organization and Governmental Authorization; No Contravention 41
       
  Section 3.3 Binding Effect 41
       
  Section 3.4 Capitalization 42
       
  Section 3.5 Financial Information 42
       
  Section 3.6 Litigation 42
       
  Section 3.7 Ownership of Property 42
       
  Section 3.8 No Default 42
       
  Section 3.9 Labor Matters 43

 

i
 

 

TABLE OF CONTENTS

(continued)

 

      Page
       
  Section 3.10 Regulated Entities 43
       
  Section 3.11 Margin Regulations 43
       
  Section 3.12 Compliance With Laws; Anti-Terrorism Laws 43
       
  Section 3.13 Taxes 44
       
  Section 3.14 Compliance with ERISA 44
       
  Section 3.15 Consummation of Operative Documents; Brokers 45
       
  Section 3.16 Related Transactions 45
       
  Section 3.17 Material Contracts 45
       
  Section 3.18 Compliance with Environmental Requirements; No Hazardous Materials 45
       
  Section 3.19 Intellectual Property 46
       
  Section 3.20 Solvency 47
       
  Section 3.21 Full Disclosure 47
       
  Section 3.22 Interest Rate 47
       
  Section 3.23 Subsidiaries 47
       
  Section 3.24 Representations and Warranties Incorporated from Operative Documents 47
       
Article 4 - AFFIRMATIVE COVENANTS 48
       
  Section 4.1 Financial Statements and Other Reports 48
       
  Section 4.2 Payment and Performance of Obligations 48
       
  Section 4.3 Maintenance of Existence 49
       
  Section 4.4 Maintenance of Property; Insurance 49
       
  Section 4.5 Compliance with Laws and Material Contracts 50
       
  Section 4.6 Inspection of Property, Books and Records 51
       
  Section 4.7 Use of Proceeds 51
       
  Section 4.8 Estoppel Certificates 51
       
  Section 4.9 Notices of Litigation and Defaults 51
       
  Section 4.10 Hazardous Materials; Remediation 52
       
  Section 4.11 Further Assurances 53
       
  Section 4.12 [Reserved] 54

 

ii
 

 

TABLE OF CONTENTS

(continued)

 

      Page
       
  Section 4.13 Power of Attorney 54
       
  Section 4.14 Borrowing Base Collateral Administration 54
       
  Section 4.15 Maintenance of Management 55
       
Article 5 - NEGATIVE COVENANTS 55
       
  Section 5.1 Debt; Contingent Obligations 55
       
  Section 5.2 Liens 56
       
  Section 5.3 Distributions 56
       
  Section 5.4 Restrictive Agreements 56
       
  Section 5.5 Payments and Modifications of Subordinated Debt 56
       
  Section 5.6 Consolidations, Mergers and Sales of Assets; Change in Control 57
       
  Section 5.7 Purchase of Assets, Investments 57
       
  Section 5.8 Transactions with Affiliates 57
       
  Section 5.9 Modification of Organizational Documents 57
       
  Section 5.10 Modification of Certain Agreements 57
       
  Section 5.11 Conduct of Business 58
       
  Section 5.12 Lease Payments 58
       
  Section 5.13 Limitation on Sale and Leaseback Transactions 58
       
  Section 5.14 Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts 58
       
  Section 5.15 Compliance with Anti-Terrorism Laws 58
       
  Section 5.16 Agreements Regarding Receivables 59
       
Article 6 - FINANCIAL COVENANTS 59
       
  Section 6.1 Additional Defined Terms 59
       
  Section 6.2 Minimum Adjusted EBITDA 61
       
  Section 6.3 Fixed Charge Coverage Ratio 61
       
  Section 6.4 Total Funded Debt to Adjusted EBITDA Ratio 61
       
  Section 6.5 Evidence of Compliance 63
       
Article 7 - CONDITIONS 63
       
  Section 7.1 Conditions to Closing 63

 

iii
 

 

TABLE OF CONTENTS

(continued)

 

      Page
       
  Section 7.2 Conditions to Each Loan 64
       
  Section 7.3 Searches 65
       
  Section 7.4 Post Closing Requirements 65
       
Article 8 - [RESERVED] 65
     
Article 9 - SECURITY AGREEMENT 65
       
  Section 9.1 Generally 65
       
  Section 9.2 Representations and Warranties and Covenants Relating to Collateral 65
       
Article 10 - EVENTS OF DEFAULT 69
       
  Section 10.1 Events of Default 69
       
  Section 10.2 Acceleration and Suspension or Termination of Revolving Loan Commitment 72
       
  Section 10.3 UCC Remedies 72
       
  Section 10.4 [Reserved] 74
       
  Section 10.5 Default Rate of Interest 74
       
  Section 10.6 Setoff Rights 74
       
  Section 10.7 Application of Proceeds 74
       
  Section 10.8 Waivers 75
       
  Section 10.9 Injunctive Relief 77
       
  Section 10.10 Marshalling; Payments Set Aside 77
       
  Section 10.11 Enforcement by Agent 78
       
Article 11 - AGENT 78
       
  Section 11.1 Appointment and Authorization 78
       
  Section 11.2 Agent and Affiliates 79
       
  Section 11.3 Action by Agent 79
       
  Section 11.4 Consultation with Experts 79
       
  Section 11.5 Liability of Agent 79
       
  Section 11.6 Indemnification 79
       
  Section 11.7 Right to Request and Act on Instructions 80
       
  Section 11.8 Credit Decision 80

 

iv
 

 

TABLE OF CONTENTS

(continued)

 

      Page
       
  Section 11.9 Collateral Matters 80
       
  Section 11.10 Agency for Perfection 81
       
  Section 11.11 Notice of Default 81
       
  Section 11.12 Assignment by Agent; Resignation of Agent; Successor Agent 81
       
  Section 11.13 Payment and Sharing of Payment 82
       
  Section 11.14 Right to Perform, Preserve and Protect 85
       
  Section 11.15 [Reserved] 85
       
  Section 11.16 Amendments and Waivers 85
       
  Section 11.17 Assignments and Participations 86
       
  Section 11.18 Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist 89
       
  Section 11.19 Buy-Out Upon Refinancing 90
       
  Section 11.20 Definitions 90
       
  Section 11.21 Authority to Execute 92
       
Article 12 - MISCELLANEOUS 92
       
  Section 12.1 Survival 92
       
  Section 12.2 No Waivers 92
       
  Section 12.3 Notices 92
       
  Section 12.4 Severability 93
       
  Section 12.5 Headings 93
       
  Section 12.6 Confidentiality 93
       
  Section 12.7 Waiver of Consequential and Other Damages 94
       
  Section 12.8 GOVERNING LAW; SUBMISSION TO JURISDICTION 94
       
  Section 12.9 WAIVER OF JURY TRIAL 95
       
  Section 12.10 Publication; Advertisement 95
       
  Section 12.11 Counterparts; Integration 96
       
  Section 12.12 No Strict Construction 96
       
  Section 12.13 Lender Approvals 96
       
  Section 12.14 Expenses; Indemnity 97
       
  Section 12.15 [Reserved] 98

 

v
 

 

TABLE OF CONTENTS

(continued)

 

      Page
       
  Section 12.16 Reinstatement 98
       
  Section 12.17 Successors and Assigns 98
       
  Section 12.18 USA PATRIOT Act Notification 98

 

vi

 

Exhibit 10.24

 

REVOLVING LOAN NOTE

 

$15,000,000.00 Bethesda, Maryland
January 22, 2015

 

FOR VALUE RECEIVED, each of TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, and TCC CM SUBCO II, INC., a Delaware corporation (individually, each a “ Borrower ” and collectively, the “ Borrowers ”), hereby jointly and severally unconditionally promises to pay to the order of MIDCAP FINANCIAL TRUST, a Delaware statutory trust (together with its successors and assigns, “Lender”) at the office of Agent (as defined herein) at 7255 Woodmont Avenue, Suite 200, Bethesda, MD 20814, or at such other place as Agent may from time to time designate in writing, in lawful money of the United States of America and in immediately available funds, in the principal sum of Fifteen Million and No/100 Dollars ($15,000,000.00), or, if less, the aggregate unpaid principal amount of all Revolving Loans made or deemed made by Lender to Borrowers under the terms of that certain Credit and Security Agreement dated as of January 22, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), by and among Borrowers, such other borrowers that may become “Borrowers” under the Credit Agreement, various financial institutions as are, or may from time to time become, parties thereto as lenders (including without limitation, Lender) and MidCap Financial Trust, individually as a Lender, and as administrative agent (in such capacity and together with its successors and assigns, “ Agent ”). All capitalized terms used herein (which are not otherwise specifically defined herein) shall be used in this Revolving Loan Note (this “ Note ”) as defined in the Credit Agreement.

 

1.       The outstanding principal balance of the Revolving Loans evidenced by this Note shall be payable in full on the Termination Date, or on such earlier date as provided for in the Credit Agreement.

 

2.       This Note is issued in accordance with the provisions of the Credit Agreement and is entitled to the benefits and security of the Credit Agreement and the other Financing Documents, and reference is hereby made to the Credit Agreement for a statement of the terms and conditions under which the Revolving Loans evidenced hereby were made and are required to be repaid.

 

3.       Each Borrower promises to pay interest from the date hereof until payment in full hereof on the unpaid principal balance of the Revolving Loans evidenced hereby at the per annum rate or rates set forth in the Credit Agreement. Interest on the unpaid principal balance of the Revolving Loans evidenced hereby shall be payable on the dates and in the manner set forth in the Credit Agreement. Interest as aforesaid shall be calculated in accordance with the terms of the Credit Agreement.

 

 
 

 

4.       Upon the occurrence and during the continuance of an Event of Default, Agent may, and shall if requested by Required Lenders, (a) by notice to Borrower Representative suspend or terminate the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto, in whole or in part (and, if in part, each Lender’s Revolving Loan Commitment shall be reduced in accordance with its Pro Rata Share), and/or (b) by notice to Borrower Representative declare all or any portion of the Obligations, including the Revolving Loans evidenced by this Note, to be, and the Obligations shall thereupon become, immediately due and payable, with accrued interest thereon, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same; provided , however , that in the case of any of the Events of Default specified in Section 10.1(e) or 10.1(f) of the Credit Agreement, without any notice to any Borrower or any other act by Agent or the Lenders, the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto shall thereupon immediately and automatically terminate and all of the Obligations, including the Revolving Loans evidenced by this Note, shall become immediately and automatically due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and Borrowers will pay the same.

 

5.       Payments received in respect of the Revolving Loans shall be applied as provided in the Credit Agreement.

 

6.       Presentment, demand, protest and notice of presentment, demand, nonpayment and protest are each hereby waived by Borrowers.

 

7.       No waiver by Agent or any Lender of any one or more defaults by the undersigned in the performance of any of its obligations under this Note shall operate or be construed as a waiver of any future default or defaults, whether of a like or different nature, or as a waiver of any obligation of Borrowers to any other lender under the Credit Agreement.

 

8.       No provision of this Note may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by Borrowers, the Required Lenders and any other lender under the Credit Agreement to the extent required under Section 11.16 of the Credit Agreement.

 

9.       THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

10.     Whenever possible each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but in case any provision of or obligation under this Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

11.     Whenever in this Note reference is made to Agent, Lender or Borrowers, such reference shall be deemed to include, as applicable, a reference to their respective successors and assigns. The provisions of this Note shall be binding upon each Borrower and its successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

 

2
 

 

12.     In addition to and without limitation of any of the foregoing, this Note shall be deemed to be a Financing Document and shall otherwise be subject to all of the general terms and conditions contained in Article 12 of the Credit Agreement, mutatis mutandis .

 

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

3
 

 

IN WITNESS WHEREOF, intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, the undersigned have executed this Note under seal as of the day and year first hereinabove set forth.

 

BORROWERS: TWINLAB CONSOLIDATED HOLDINGS, INC.
   
  By: /s/ Thomas A. Tolworthy                            (Seal)
  Name:   Thomas A. Tolworthy
  Title:     Chief Executive Officer and President
   

TWINLAB CONSOLIDATION

CORPORATION

TWINLAB HOLDINGS, INC.
   
By: /s/ Thomas A. Tolworthy                            (Seal) By: /s/ Thomas A. Tolworthy                            (Seal)
Name:   Thomas A. Tolworthy Name:   Thomas A. Tolworthy

Title:     Chief Executive Officer and President 

Title:     Chief Executive Officer and President 

   
TWINLAB CORPORATION ISI BRANDS INC.
   
By: /s/ Thomas A. Tolworthy                            (Seal) By: /s/ Thomas A. Tolworthy                            (Seal)
Name:   Thomas A. Tolworthy Name:   Thomas A. Tolworthy

Title:     Chief Executive Officer and President

Title:     Chief Executive Officer and President 

   
TCC CM SUBCO I, INC. TCC CM SUBCO II, INC.
   
By: /s/ Thomas A. Tolworthy                            (Seal) By: /s/ Thomas A. Tolworthy                            (Seal)
Name:   Thomas A. Tolworthy Name:   Thomas A. Tolworthy

Title:     Chief Executive Officer and President 

Title:     Chief Executive Officer and President 

 

 

 

Exhibit 10.25

 

PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation (“ Pledgor ”), and MIDCAP FINANCIAL TRUST , a Delaware statutory trust, as agent (in such capacity, together with its successors and assigns, “ Agent ”) for itself and the other Lenders (as defined herein).

 

RECITALS

 

A.            The term “ Borrowers ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Borrowers” under the Credit Agreement (as defined herein); the term “ Borrower ”, as used herein, shall mean individually each entity that is one of the Borrowers; and the term “ Company ” as used herein shall mean Twinlab Consolidation Corporation, a Delaware corporation.

 

B.            Pursuant to that certain Credit and Security Agreement dated as of even date herewith among Borrowers, the financial institutions from time to time parties thereto, as lenders (collectively, the “ Lenders ”), and Agent (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ Credit Agreement ”), Agent and Lenders have agreed to make available to Borrowers a revolving loan facility in the maximum principal amount of $15,000,000. Borrowers have executed and delivered one or more promissory notes evidencing the indebtedness incurred by Borrowers under the Credit Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the Credit Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            The terms and provisions of the Credit Agreement and Notes are hereby incorporated by reference in this Agreement. This Agreement, the Notes, the Credit Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The terms “ Obligations ” and “ Loans ,” as used herein, shall have the meanings given to such terms in the Credit Agreement.

 

E.            In connection with Agent and the Lenders entering into the Credit Agreement and agreeing to make the credit accommodations under the Credit Agreement and as security for all of the Obligations, Agent is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.            Pledgor is a shareholder of in Company and, as such, will continue to derive substantial benefit by reason of Lenders making the Loans.

 

AGREEMENT

 

NOW, THEREFORE , to induce Agent and the Lenders to enter into the Credit Agreement and to make the Loans, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Agent hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

 

1.           Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Agent, for the benefit of itself and the Lenders, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Company now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Company, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Company, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Company, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Company, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Company, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Company (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of the Agent deliver to Agent a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.           Application of Proceeds . Pledgor hereby authorizes and directs the Company, following written notice to do so by Agent after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Agent of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Agent shall be applied to the Obligations in such order and manner of application as Agent may from time to time determine in its sole discretion.

 

3.           Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Agent, for its benefit and the benefit of the Lenders, shall be paid immediately to Agent and shall be retained by Agent as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Agent, promptly, and in any case within one (1) business day, send a written notice to Company instructing Company, and shall cause Company, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Agent notifies Pledgor that such Event of Default has ceased to exist) directly to Agent. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

2
 

 

4.           Representations and Warranties of Pledgor . Pledgor hereby warrants to Agent as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Company as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Company in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Agent;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Liens (as defined in the Credit Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Liens (as defined in the Credit Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.           Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Agent’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Agent may in good faith direct;

 

(c)           To cause Company to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Agent immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Agent one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Agent, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Agent as part of the Collateral.

 

(e)           To deliver immediately to Agent any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Agent one or more Transfer Powers, which such Transfer Powers shall be held by Agent as part of the Collateral;

 

(f)           To execute and deliver to Agent such financing statements as Agent may request with respect to the Ownership Interests, and to take such other steps as Agent may from time to time reasonably request to perfect Agent’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Liens (as defined in the Credit Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Company, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Agent in the Collateral or dilute the Ownership Interests pledged to Agent under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Agent, for its benefit and the benefit of the Lenders, and except for other Permitted Liens (as defined in the Credit Agreement);

 

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(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Agent, for its benefit and the benefit of the Lenders, pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Agent, for its benefit and the benefit of the Lenders, all of such additional Ownership Interests. Prior to the delivery thereof to Agent, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Agent, for its benefit and the benefit of the Lenders;

 

(k)           That Pledgor consents to the admission of Agent (and its assigns or designee) as a member, partner or stockholder of Company upon Agent’s acquisition of any of the Ownership Interests; and

 

6.           Rights of Agent . Agent may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Agent records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Company and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Agent’s interest in the Collateral. Pledgor agrees that Agent may at any time take such steps as Agent deems reasonably necessary to protect Agent’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Agent may at any time or from time to time pursuant to the Credit Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the Credit Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the Credit Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the Credit Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Agent at any time against the Obligations in any order as Agent may determine pursuant to the terms of the Credit Agreement; all of the foregoing in such manner and upon such terms as Agent may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Agent’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the Credit Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Borrower.

 

7.           Events of Default . The occurrence of any “Event of Default,” as defined in the Credit Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.           Rights of Agent Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the Credit Agreement), Agent may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

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(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Agent to demand payment of any portion of the Obligations that is payable upon demand);

 

(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Agent may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Agent may deem necessary or proper to protect Agent’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Company or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Agent, shall use its best efforts to secure, and cooperate with the efforts of Agent to secure (if not already secured by Agent), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC; and upon any such sale of the Collateral, Agent may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Agent in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Agent to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Agent either at law or in equity.

 

Agent shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Agent in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Agent as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Agent may deem appropriate in the exercise of the rights and powers granted to Agent in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Agent harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Agent from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Agent’s gross negligence or willful misconduct).

 

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9.           Performance by Agent . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Agent, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Agent may consider necessary or appropriate for such purpose. All sums paid or advanced by Agent in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Agent on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Agent shall not in any way be responsible for the performance or discharge of, and Agent does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Agent and hold Agent harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Agent to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Agent’s own gross negligence or willful misconduct. Agent shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Agent and the Lenders to extend any credit to Borrower under the Financing Documents, this Agreement shall terminate and Agent shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Agent’s rights under this Agreement, Agent may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Agent to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Agent or Agent’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Agent in favor of any other person.

 

14.          Preservation of Collateral . Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Agent takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Agent to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

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15.          Private Sale . Pledgor recognizes that Agent may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Agent has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Agent of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Agent thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Agent shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

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(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the Credit Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Agent as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Agent of any one or more of such rights, powers or remedies shall not preclude the later exercise by Agent of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Agent) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Agent or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Agent may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Agent in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Agent or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

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(m)           No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Agent’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Agent, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN MARYLAND AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE AGENT FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY MARYLAND STATE OR UNITED STATES COURT SITTING IN THE STATE OF MARYLAND MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. AGENT IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF AGENT (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT AGENT WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR: TWINLAB CONSOLIDATED HOLDINGS, INC.
   
  By: /s/ Thomas A. Tolworthy                                    (SEAL)
  Name:  Thomas A. Tolworthy
  Title:    Chief Executive Officer and President
   
  Pledgor Contact Information:
   
  Twinlab Consolidated Holdings, Inc.
  632 Broadway, Suite 201
  New York, NY  10012
  Attention:  Thomas A. Tolworthy, Chief Executive Officer and President

 

 
 

 

AGENT: MIDCAP FINANCIAL TRUST ,
  a Delaware statutory trust
   
  By:          Apollo Capital Management, L.P.,
                  its investment manager
   
  By:          Apollo Capital Management GP, LLC,
                  its general partner
   
  By: /s/ Maurice Amsellem                                (SEAL)
  Name:  Maurice Amsellem
  Title:    Authorized Signatory

 

 
 

 

SCHEDULE I

PLEDGED INTERESTS

 

Name of Pledgor: Twinlab Consolidated Holdings, Inc.
   
Company Name: Twinlab Consolidation Corporation
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE5407822
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 1
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

PLEDGOR INFORMATION

 

Name of Pledgor: Twinlab Consolidated Holdings, Inc.
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Nevada
   
Organizational ID No. of Pledgor: NV20131625629
   
Tax ID No. of Pledgor: [  ]

 

 
 

 

SCHEDULE III

 

STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated:______________________________ PLEDGOR :
   
  [NAME OF PLEDGOR]
   
  By: _________________________        _ (SEAL)
  Name:______________________________
  Its: ______________________________

 

*To Remain Blank - Not Completed at Closing

 

 
 

 

SCHEDULE IV

 

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and MidCap Financial Trust, as Agent (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Company owned by Pledgor not included in the Pledged Collateral at the discretion of Agent may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

  PLEDGOR :
   
  [NAME OF PLEDGOR]
   
  By:__________________________   (SEAL)
  Name : _________________________
  Its:_________________________

 

 
 

 

SCHEDULE IV- continued

 

Name and     Class of   Certificate   Number of
Address of Pledgor   Company   Equity Interest   Number(s)   Shares
                 
                 

 

    Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                 

 

 

 

 

 

Exhibit 10.26

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB CONSOLIDATION CORPORATION , a Delaware corporation (“ Pledgor ”), and MIDCAP FINANCIAL TRUST , a Delaware statutory trust, as agent (in such capacity, together with its successors and assigns, “ Agent ”) for itself and the other Lenders (as defined herein).

 

RECITALS

 

A.            The term “ Borrowers ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Borrowers” under the Credit Agreement (as defined herein); the term “ Borrower ”, as used herein, shall mean individually each entity that is one of the Borrowers; and the term “ Company ” as used herein shall mean, collectively, each of Twinlab Holdings, Inc., a Michigan corporation, TCC CM Subco I, Inc., a Delaware corporation, and TCC CM Subco II, Inc., a Delaware corporation.

 

B.            Pursuant to that certain Credit and Security Agreement dated as of even date herewith among Borrowers, the financial institutions from time to time parties thereto, as lenders (collectively, the “ Lenders ”), and Agent (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ Credit Agreement ”), Agent and Lenders have agreed to make available to Borrowers a revolving loan facility in the maximum principal amount of $15,000,000. Borrowers have executed and delivered one or more promissory notes evidencing the indebtedness incurred by Borrowers under the Credit Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the Credit Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            The terms and provisions of the Credit Agreement and Notes are hereby incorporated by reference in this Agreement. This Agreement, the Notes, the Credit Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The terms “ Obligations ” and “ Loans ,” as used herein, shall have the meanings given to such terms in the Credit Agreement.

 

E.            In connection with Agent and the Lenders entering into the Credit Agreement and agreeing to make the credit accommodations under the Credit Agreement and as security for all of the Obligations, Agent is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.            Pledgor is a shareholder of in Company and, as such, will continue to derive substantial benefit by reason of Lenders making the Loans.

 

AGREEMENT

 

NOW, THEREFORE , to induce Agent and the Lenders to enter into the Credit Agreement and to make the Loans, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Agent hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

 

1.           Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Agent, for the benefit of itself and the Lenders, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Company now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Company, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Company, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Company, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Company, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Company, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Company (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of the Agent deliver to Agent a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.           Application of Proceeds . Pledgor hereby authorizes and directs the Company, following written notice to do so by Agent after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Agent of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Agent shall be applied to the Obligations in such order and manner of application as Agent may from time to time determine in its sole discretion.

 

3.           Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Agent, for its benefit and the benefit of the Lenders, shall be paid immediately to Agent and shall be retained by Agent as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Agent, promptly, and in any case within one (1) business day, send a written notice to Company instructing Company, and shall cause Company, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Agent notifies Pledgor that such Event of Default has ceased to exist) directly to Agent. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.           Representations and Warranties of Pledgor . Pledgor hereby warrants to Agent as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Company as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Company in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Agent;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Liens (as defined in the Credit Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Liens (as defined in the Credit Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.           Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Agent’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Agent may in good faith direct;

 

(c)           To cause Company to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Agent immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Agent one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Agent, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Agent as part of the Collateral.

 

(e)           To deliver immediately to Agent any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Agent one or more Transfer Powers, which such Transfer Powers shall be held by Agent as part of the Collateral;

 

(f)           To execute and deliver to Agent such financing statements as Agent may request with respect to the Ownership Interests, and to take such other steps as Agent may from time to time reasonably request to perfect Agent’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Liens (as defined in the Credit Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Company, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Agent in the Collateral or dilute the Ownership Interests pledged to Agent under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Agent, for its benefit and the benefit of the Lenders, and except for other Permitted Liens (as defined in the Credit Agreement);

 

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(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Agent, for its benefit and the benefit of the Lenders, pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Agent, for its benefit and the benefit of the Lenders, all of such additional Ownership Interests. Prior to the delivery thereof to Agent, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Agent, for its benefit and the benefit of the Lenders;

 

(k)           That Pledgor consents to the admission of Agent (and its assigns or designee) as a member, partner or stockholder of Company upon Agent’s acquisition of any of the Ownership Interests; and

 

6.           Rights of Agent . Agent may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Agent records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Company and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Agent’s interest in the Collateral. Pledgor agrees that Agent may at any time take such steps as Agent deems reasonably necessary to protect Agent’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Agent may at any time or from time to time pursuant to the Credit Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the Credit Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the Credit Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the Credit Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Agent at any time against the Obligations in any order as Agent may determine pursuant to the terms of the Credit Agreement; all of the foregoing in such manner and upon such terms as Agent may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Agent’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the Credit Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Borrower.

 

7.           Events of Default . The occurrence of any “Event of Default,” as defined in the Credit Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.           Rights of Agent Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the Credit Agreement), Agent may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

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(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Agent to demand payment of any portion of the Obligations that is payable upon demand);

 

(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Agent may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Agent may deem necessary or proper to protect Agent’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Company or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Agent, shall use its best efforts to secure, and cooperate with the efforts of Agent to secure (if not already secured by Agent), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC; and upon any such sale of the Collateral, Agent may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Agent in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Agent to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Agent either at law or in equity.

 

Agent shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Agent in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Agent as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Agent may deem appropriate in the exercise of the rights and powers granted to Agent in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Agent harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Agent from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Agent’s gross negligence or willful misconduct).

 

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9.           Performance by Agent . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Agent, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Agent may consider necessary or appropriate for such purpose. All sums paid or advanced by Agent in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Agent on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Agent shall not in any way be responsible for the performance or discharge of, and Agent does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Agent and hold Agent harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Agent to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Agent’s own gross negligence or willful misconduct. Agent shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Agent and the Lenders to extend any credit to Borrower under the Financing Documents, this Agreement shall terminate and Agent shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Agent’s rights under this Agreement, Agent may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Agent to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Agent or Agent’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Agent in favor of any other person.

 

14.          Preservation of Collateral . Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Agent takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Agent to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

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15.          Private Sale . Pledgor recognizes that Agent may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Agent has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Agent of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Agent thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Agent shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

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(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the Credit Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Agent as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Agent of any one or more of such rights, powers or remedies shall not preclude the later exercise by Agent of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Agent) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Agent or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Agent may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Agent in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Agent or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

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(m)           No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Agent’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Agent, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN MARYLAND AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE AGENT FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY MARYLAND STATE OR UNITED STATES COURT SITTING IN THE STATE OF MARYLAND MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. AGENT IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF AGENT (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT AGENT WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

[Signature Pages Follow]

 

10
 

 

IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR: TWINLAB CONSOLIDATION CORPORATION.
   
  By: /s/ Thomas A. Tolworthy                         (SEAL)
  Name:   Thomas A. Tolworthy
  Title:    Chief Executive Officer and President
   
  Pledgor Contact Information:
   
  Twinlab Consolidation Corporation
  632 Broadway, Suite 201
  New York, NY 10012
  Attention: Thomas A. Tolworthy, Chief
  Executive Officer and President

 

 
 

 

AGENT:

MIDCAP FINANCIAL TRUST ,

  a Delaware statutory trust

 

  By: Apollo Capital Management, L.P.,
    its investment manager
     
  By: Apollo Capital Management GP, LLC,
    its general partner

 

  By: /s/ Maurice Amsellem                           (SEAL)
  Name:   Maurice Amsellem
  Title:    Authorized Signatory

 

 
 

 

SCHEDULE I

Pledged Interests

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Company Name: Twinlab Holdings, Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Michigan
   
Organizational ID No. of Company: MI03048C
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Company Name: TCC CM Subco I, Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE5661868
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Company Name: TCC CM Subco II, Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE5661869
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Delaware
   
Organizational ID No. of Pledgor: DE5407822
   
Tax ID No. of Pledgor: [  ]

 

 
 

 

SCHEDULE III


STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated:     PLEDGOR :
       
      [NAME OF PLEDGOR]

 

  By: _______________________________ _ (SEAL)

  Name:    
  Its:    

 

*To Remain Blank - Not Completed at Closing

 

 
 

 

SCHEDULE IV

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and MidCap Financial Trust, as Agent (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Company owned by Pledgor not included in the Pledged Collateral at the discretion of Agent may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

  PLEDGOR :
   
  [NAME OF PLEDGOR]

 

  By: _______________________________ _ (SEAL)

  Name:    
  Its:    

 

 
 

 

SCHEDULE IV- continued

 


Name and
Address of Pledgor
  Company   Class of
Equity Interest
  Certificate
Number(s)
  Number of
Shares
                 
                 

 

    Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                 

 

 

 

 

 

 

 

 

 

Exhibit 10.27

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB HOLDINGS, INC. , a Michigan corporation (“ Pledgor ”), and MIDCAP FINANCIAL TRUST , a Delaware statutory trust, as agent (in such capacity, together with its successors and assigns, “ Agent ”) for itself and the other Lenders (as defined herein).

 

RECITALS

 

A.            The term “ Borrowers ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Borrowers” under the Credit Agreement (as defined herein); the term “ Borrower ”, as used herein, shall mean individually each entity that is one of the Borrowers; and the term “ Company ” as used herein shall mean, collectively, each of Twinlab Corporation, a Delaware corporation, and ISI Brands Inc., a Michigan corporation.

 

B.            Pursuant to that certain Credit and Security Agreement dated as of even date herewith among Borrowers, the financial institutions from time to time parties thereto, as lenders (collectively, the “ Lenders ”), and Agent (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ Credit Agreement ”), Agent and Lenders have agreed to make available to Borrowers a revolving loan facility in the maximum principal amount of $15,000,000. Borrowers have executed and delivered one or more promissory notes evidencing the indebtedness incurred by Borrowers under the Credit Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the Credit Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            The terms and provisions of the Credit Agreement and Notes are hereby incorporated by reference in this Agreement. This Agreement, the Notes, the Credit Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The terms “ Obligations ” and “ Loans ,” as used herein, shall have the meanings given to such terms in the Credit Agreement.

 

E.             In connection with Agent and the Lenders entering into the Credit Agreement and agreeing to make the credit accommodations under the Credit Agreement and as security for all of the Obligations, Agent is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.             Pledgor is a shareholder of in Company and, as such, will continue to derive substantial benefit by reason of Lenders making the Loans.

 

AGREEMENT

 

NOW, THEREFORE , to induce Agent and the Lenders to enter into the Credit Agreement and to make the Loans, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Agent hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

 

1.           Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Agent, for the benefit of itself and the Lenders, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Company now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Company, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Company, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Company, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Company, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Company, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Company (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of the Agent deliver to Agent a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.           Application of Proceeds . Pledgor hereby authorizes and directs the Company, following written notice to do so by Agent after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Agent of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Agent shall be applied to the Obligations in such order and manner of application as Agent may from time to time determine in its sole discretion.

 

3.           Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Agent, for its benefit and the benefit of the Lenders, shall be paid immediately to Agent and shall be retained by Agent as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Agent, promptly, and in any case within one (1) business day, send a written notice to Company instructing Company, and shall cause Company, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Agent notifies Pledgor that such Event of Default has ceased to exist) directly to Agent. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.           Representations and Warranties of Pledgor . Pledgor hereby warrants to Agent as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Company as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Company in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Agent;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Liens (as defined in the Credit Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Liens (as defined in the Credit Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.           Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Agent’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Agent may in good faith direct;

 

(c)           To cause Company to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Agent immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Agent one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Agent, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Agent as part of the Collateral.

 

(e)           To deliver immediately to Agent any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Agent one or more Transfer Powers, which such Transfer Powers shall be held by Agent as part of the Collateral;

 

(f)           To execute and deliver to Agent such financing statements as Agent may request with respect to the Ownership Interests, and to take such other steps as Agent may from time to time reasonably request to perfect Agent’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Liens (as defined in the Credit Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Company, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Agent in the Collateral or dilute the Ownership Interests pledged to Agent under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Agent, for its benefit and the benefit of the Lenders, and except for other Permitted Liens (as defined in the Credit Agreement);

 

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(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Agent, for its benefit and the benefit of the Lenders, pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Agent a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Agent, for its benefit and the benefit of the Lenders, all of such additional Ownership Interests. Prior to the delivery thereof to Agent, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Agent, for its benefit and the benefit of the Lenders;

 

(k)           That Pledgor consents to the admission of Agent (and its assigns or designee) as a member, partner or stockholder of Company upon Agent’s acquisition of any of the Ownership Interests; and

 

6.           Rights of Agent . Agent may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Agent records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Company and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Agent’s interest in the Collateral. Pledgor agrees that Agent may at any time take such steps as Agent deems reasonably necessary to protect Agent’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Agent may at any time or from time to time pursuant to the Credit Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the Credit Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the Credit Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the Credit Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Agent at any time against the Obligations in any order as Agent may determine pursuant to the terms of the Credit Agreement; all of the foregoing in such manner and upon such terms as Agent may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Agent’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the Credit Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Borrower.

 

7.           Events of Default . The occurrence of any “Event of Default,” as defined in the Credit Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.           Rights of Agent Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the Credit Agreement), Agent may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

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(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Agent to demand payment of any portion of the Obligations that is payable upon demand);

 

(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Agent may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Agent may deem necessary or proper to protect Agent’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Company or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Agent, shall use its best efforts to secure, and cooperate with the efforts of Agent to secure (if not already secured by Agent), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC; and upon any such sale of the Collateral, Agent may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Agent in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Agent to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Agent either at law or in equity.

 

Agent shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Agent in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Agent as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Agent may deem appropriate in the exercise of the rights and powers granted to Agent in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Agent harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Agent from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Agent’s gross negligence or willful misconduct).

 

6
 

 

9.           Performance by Agent . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Agent, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Agent may consider necessary or appropriate for such purpose. All sums paid or advanced by Agent in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Agent on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Agent shall not in any way be responsible for the performance or discharge of, and Agent does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Agent and hold Agent harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Agent to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Agent’s own gross negligence or willful misconduct. Agent shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Agent and the Lenders to extend any credit to Borrower under the Financing Documents, this Agreement shall terminate and Agent shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Agent’s rights under this Agreement, Agent may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Agent to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Agent or Agent’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Agent in favor of any other person.

 

14.          Preservation of Collateral . Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Agent takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Agent to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

7
 

 

15.          Private Sale . Pledgor recognizes that Agent may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Agent has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Agent of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Agent thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Agent shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

8
 

 

(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the Credit Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Agent as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Agent of any one or more of such rights, powers or remedies shall not preclude the later exercise by Agent of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Agent) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Agent or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Agent may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Agent in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Agent or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

9
 

 

(m)           No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Agent’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Agent, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN MARYLAND AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE AGENT FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY MARYLAND STATE OR UNITED STATES COURT SITTING IN THE STATE OF MARYLAND MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. AGENT IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF AGENT (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT AGENT WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

  

[Signature Pages Follow]

 

10
 

 

IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.   

 

PLEDGOR: TWINLAB HOLDINGS, INC.

 

  By: /s/ Thomas A. Tolworthy (SEAL)
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  Pledgor Contact Information:
   
  Twinlab Holdings, Inc.
  632 Broadway, Suite 201
  New York, NY 10012
  Attention: Thomas A. Tolworthy, Chief Executive Officer and President

 

 

 
 

 

AGENT: MIDCAP FINANCIAL TRUST ,
  a Delaware statutory trust

 

  By: Apollo Capital Management, L.P.,
    its investment manager
     
  By: Apollo Capital Management GP, LLC,
    its general partner

 

  By: /s/ Maurice Amsellem (SEAL)
  Name: Maurice Amsellem
  Title: Authorized Signatory

 

 
 

 

SCHEDULE I

 

Pledged Interests

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Company Name: Twinlab Corporation
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE3698995
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: [ 2]
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

  

 Name of Pledgor: Twinlab Holdings, Inc.
   
Company Name: ISI Brands Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Michigan
   
Organizational ID No. of Company: MI23407C
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: [ 1]
   
Number of Units: 1000
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

 

Pledgor Information

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Michigan
   
Organizational ID No. of Pledgor: MI03048C
   
Tax ID No. of Pledgor: [  ]

 

 

 
 

 

SCHEDULE III

 

STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

  

Dated:     PLEDGOR:
       
      [NAME OF PLEDGOR]
       
      By: ( SEAL)
      Name:  
      Its:  

 

*To Remain Blank - Not Completed at Closing

 

 
 

 

SCHEDULE IV

 

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and MidCap Financial Trust, as Agent (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Company owned by Pledgor not included in the Pledged Collateral at the discretion of Agent may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

    PLEDGOR:
       
      [NAME OF PLEDGOR]
       
      By: ( SEAL)
      Name:  
      Its:  

 

 
 

 

SCHEDULE IV- continued

 

Name and     Class of   Certificate   Number of
Address of Pledgor   Company   Equity Interest   Number(s)   Shares
                 
                 

 

    Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                 

   

 

  

  

 

 

Exhibit 10.28

 

WARRANT

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE " ACT "), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL.

 

Warrant Certificate No.: 2015-1

 

Original Issue Date: January 22, 2015

 

FOR VALUE RECEIVED, Twinlab Consolidated Holdings, Inc., a Nevada corporation (the " Company "), hereby certifies that MidCap Funding X Trust, a Delaware statutory trust, with an address at c/o MidCap Financial Services, LLC, as servicer, 7255 Woodmont Avenue, Suite 200, Bethesda, Maryland 20814, or its registered assigns (the " Holder ") is entitled to purchase from the Company up to 500,000 duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a purchase price per share of $.76 (the " Exercise Price "), all subject to the terms, conditions and adjustments set forth below in this Warrant. Certain capitalized terms used herein are defined in Section 1 hereof.

 

This Warrant has been issued in connection with the transactions contemplated by the Credit and Security Agreement, dated as of January 22, 2015, by and among the Company, Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TCC CM Subco II, Inc., as borrowers, MidCap Financial Trust, a Delaware statutory trust, as agent (including its successor and assigns), and the financial institutions from time to time party thereto as lenders (the “Credit Agreement”).

 

 
 

 

1.           Definitions . As used in this Warrant, the following terms have the respective meanings set forth below:

 

Aggregate Exercise Price " means an amount equal to the product of (a) the number of Warrant Shares in respect of which this Warrant is then being exercised pursuant to Section 3 hereof, multiplied by (b) the Exercise Price.

 

" Board " means the board of directors of the Company.

 

" Business Day " means any day, except a Saturday, Sunday or legal holiday, on which banking institutions in the city of New York are authorized or obligated by law or executive order to close.

 

" Common Stock " means the common stock, par value $.001 per share, of the Company, and any capital stock of the Company into which such Common Stock shall have been converted, exchanged or reclassified following the date hereof.

 

" Company " has the meaning set forth in the preamble.

 

" Convertible Securities " means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

 

" Credit Agreement " has the meaning set forth in the Preamble.

 

" Exercise Agreement " has the meaning set forth in Section 3(a)(i) .

 

" Exercise Date " means, for any given exercise of this Warrant, the date on which the conditions to such exercise as set forth in Section 3 shall have been satisfied at or prior to 5:00 p.m., New York, New York time, on a Business Day, including, without limitation, the receipt by the Company of the Exercise Agreement, the Warrant and the Aggregate Exercise Price.

 

" Exercise Period " has the meaning set forth in Section 2 .

 

" Exercise Price " has the meaning set forth in the preamble.

 

" Fair Market Value " means, as of any particular date: (a) the volume weighted average of the closing sales prices of the Common Stock for such day on all domestic securities exchanges on which the Common Stock may at the time be listed; (b) if there have been no sales of the Common Stock on any such exchange on any such day, the average of the highest bid and lowest asked prices for the Common Stock on all such exchanges at the end of such day; (c) if on any such day the Common Stock is not listed on a domestic securities exchange, the closing sales price of the Common Stock as quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association for such day; or (d) if there have been no sales of the Common Stock on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association on such day, the average of the highest bid and lowest asked prices for the Common Stock quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association at the end of such day; in each case, averaged over twenty (20) consecutive Business Days ending on the Business Day immediately prior to the day as of which "Fair Market Value" is being determined; provided , that if the Common Stock is listed on any domestic securities exchange, the term "Business Day" as used in this sentence means Business Days on which such exchange is open for trading. If at any time the Common Stock is not listed on any domestic securities exchange or quoted on the OTC Bulletin Board, the Pink OTC Markets or similar quotation system or association, the "Fair Market Value" of the Common Stock shall be the fair market value per share as determined in good faith by the Board.

 

2
 

 

" Holder " has the meaning set forth in the preamble.

 

" Options " means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

" Original Issue Date " means the date on which the Warrant was issued by the Company in connection with the Credit Agreement.

 

" Nasdaq " means The NASDAQ Stock Market LLC.

 

" OTC Bulletin Board " means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

 

" Person " means any individual, sole proprietorship, partnership, limited liability company, corporation, joint venture, trust, incorporated organization or government or department or agency thereof.

 

" Pink OTC Markets " means the OTC Markets Group Inc. electronic inter-dealer quotation system, including OTCQX, OTCQB and OTC Pink.

 

" Warrant " means this Warrant and all warrants issued upon division or combination of, or in substitution for, this Warrant.

 

" Warrant Shares " means the shares of Common Stock or other capital stock of the Company then purchasable upon exercise of this Warrant in accordance with the terms of this Warrant.

 

2.           Term of Warrant . Subject to the terms and conditions hereof, at any time or from time to time after the date hereof and prior to 5:00 p.m., New York, New York time, on the third anniversary of the date hereof or, if such day is not a Business Day, on the next preceding Business Day (the " Exercise Period "), the Holder of this Warrant may exercise this Warrant for all or any part of the Warrant Shares purchasable hereunder (subject to adjustment as provided herein).

 

3
 

 

3.           Exercise of Warrant .

 

(a)           Exercise Procedure . This Warrant may be exercised from time to time on any Business Day during the Exercise Period, for all or any part of the unexercised Warrant Shares, upon:

 

(i)          Surrender of this Warrant to the Company at its then principal executive offices (or an indemnification undertaking with respect to this Warrant in the case of its loss, theft or destruction), together with an Exercise Agreement in the form attached hereto as Exhibit A (each, an " Exercise Agreement "), duly completed (including specifying the number of Warrant Shares to be purchased) and executed; and

 

(ii)         Payment to the Company of the Aggregate Exercise Price in accordance with Section 3(b) .

 

(b)           Payment of the Aggregate Exercise Price .

 

(i)          Payment of the Aggregate Exercise Price shall be made by delivery to the Company of a certified or official bank check payable to the order of the Company or by wire transfer of immediately available funds to an account designated in writing by the Company, in the amount of such Aggregate Exercise Price.

 

(ii)         The Holder shall have the right to pay all or a portion of the Aggregate Exercise Price by making a cashless exercise, in which case the portion of the Aggregate Exercise Price to be so paid shall be paid by reducing the number of Warrant Shares otherwise issuable pursuant to the Exercise Agreement by a number determined by multiplying that number of Warrant Shares by a fraction, (i) the numerator of which is the Aggregate Exercise Price to be so paid and (ii) the denominator of which is the Fair Market Value as of the date of the exercise.

 

(c)           Delivery of Stock Certificates . Upon receipt by the Company of the Exercise Agreement, surrender of this Warrant and payment of the Aggregate Exercise Price (in accordance with Section 3(a) hereof), the Company shall, as promptly as practicable, and in any event within five (5) Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share, as provided in Section 3(d) hereof. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Agreement and shall be registered in the name of the Holder or, subject to compliance with Section 5 below, such other Person's name as shall be designated in the Exercise Agreement. This Warrant shall be deemed to have been exercised and such certificate or certificates of Warrant Shares shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares for all purposes, as of the Exercise Date.

 

4
 

  

(d)           Fractional Shares . The Company shall not be required to issue a fractional Warrant Share upon exercise of any Warrant. As to any fraction of a Warrant Share that the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay to such Holder an amount in cash (by delivery of a certified or official bank check or by wire transfer of immediately available funds) equal to the product of (i) such fraction multiplied by (ii) the Fair Market Value of one Warrant Share on the Exercise Date.

 

(e)           Delivery of New Warrant . Unless the purchase rights represented by this Warrant shall have expired or shall have been fully exercised, the Company shall, at the time of delivery of the certificate or certificates representing the Warrant Shares being issued in accordance with Section 3(c) hereof, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unexpired and unexercised Warrant Shares called for by this Warrant. Such new Warrant shall in all other respects be identical to this Warrant.

 

(f)           Valid Issuance of Warrant and Warrant Shares; Payment of Taxes . With respect to the exercise of this Warrant, the Company hereby represents, covenants and agrees:

 

(i)          This Warrant is, and any Warrant issued in substitution for or replacement of this Warrant shall be, upon issuance, duly authorized and validly issued.

 

(ii)         All Warrant Shares issuable upon the exercise of this Warrant pursuant to the terms hereof shall be, upon issuance, and the Company shall take all such actions as may be necessary or appropriate in order that such Warrant Shares are, validly issued, fully paid and non-assessable, issued without violation of any preemptive or similar rights of any stockholder of the Company and free and clear of all taxes, liens and charges.

 

(iii)        The Company shall take all such actions as may be necessary to ensure that all such Warrant Shares are issued without violation by the Company of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares may be listed at the time of such exercise (except for official notice of issuance which shall be immediately delivered by the Company upon each such issuance).

 

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(iv)        The Company shall use its best efforts to cause the Warrant Shares, immediately upon such exercise, to be listed on any domestic securities exchange upon which shares of Common Stock or other securities constituting Warrant Shares are listed at the time of such exercise.

 

(v)         The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issuance or delivery of Warrant Shares upon exercise of this Warrant; provided , that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery shall be made unless and until the Person requesting such issuance has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid.

 

(g)           Reservation of Shares . During the Exercise Period, the Company shall at all times reserve and keep available out of its authorized but unissued Common Stock or other securities constituting Warrant Shares, solely for the purpose of issuance upon the exercise of this Warrant, the maximum number of Warrant Shares issuable upon the exercise of this Warrant, and the par value per Warrant Share shall at all times be less than or equal to the applicable Exercise Price. The Company shall not increase the par value of any Warrant Shares receivable upon the exercise of this Warrant above the Exercise Price then in effect, and shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.

 

4.           Adjustment to Number of Warrant Shares . In order to prevent dilution of the purchase rights granted under this Warrant, the number of Warrant Shares issuable upon exercise of this Warrant shall be subject to adjustment from time to time as provided in this Section 4 (in each case, after taking into consideration any prior adjustments pursuant to this Section 4 ).

 

(a)           Adjustment to Number of Warrant Shares Upon Dividend, Subdivision or Combination of Common Stock . If the Company shall, at any time or from time to time after the Original Issue Date, (i) pay a dividend or make any other distribution upon the Common Stock or any other capital stock of the Company payable in shares of Common Stock or in Options or Convertible Securities, or (ii) subdivide (by any stock split, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the number of Warrant Shares issuable upon exercise of this Warrant and the Exercise Price in effect immediately prior to any such dividend, distribution or subdivision shall be proportionately adjusted. If the Company at any time combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the number of Warrant Shares issuable upon exercise of this Warrant and the Exercise Price in effect immediately prior to such combination shall be proportionately adjusted. Any adjustment under this Section 4(a) shall become effective at the close of business on the date the dividend, subdivision or combination becomes effective.

 

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(b)           Adjustment to Number of Warrant Shares Upon Reorganization, Reclassification, Consolidation or Merger . In the event of any (i) capital reorganization of the Company, (ii) reclassification of the stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value or as a result of a stock dividend or subdivision, split-up or combination of shares), (iii) consolidation or merger of the Company with or into another Person, (iv) sale or lease of all or substantially all of the Company's assets to another Person or (v) other similar transaction (other than any such transaction covered by Section 4(a) ), in each case which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, this Warrant shall, immediately after such reorganization, reclassification, consolidation, merger, sale or similar transaction, remain outstanding and shall thereafter, in lieu of or in addition to (as the case may be) the number of Warrant Shares then exercisable under this Warrant, be exercisable for the kind and number of shares of stock or other securities or assets of the Company or of the successor Person resulting from such transaction to which the Holder would have been entitled upon such reorganization, reclassification, consolidation, merger, sale or similar transaction if the Holder had exercised this Warrant in full immediately prior to the time of such reorganization, reclassification, consolidation, merger, sale or similar transaction and acquired the applicable number of Warrant Shares then issuable hereunder as a result of such exercise (without taking into account any limitations or restrictions on the exercisability of this Warrant); and, in such case, appropriate adjustment (in form and substance reasonably satisfactory to the Holder) shall be made with respect to the Holder's rights under this Warrant to insure that the provisions of this Section 4 hereof shall thereafter be applicable, as nearly as possible, to this Warrant in relation to any shares of stock, securities or assets thereafter acquirable upon exercise of this Warrant. The provisions of this Section 4(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect any such reorganization, reclassification, consolidation, merger, sale or similar transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting from such reorganization, reclassification, consolidation, merger, sale or similar transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant, the obligation to deliver to the Holder such shares of stock, securities or assets which, in accordance with the foregoing provisions, such Holder shall be entitled to receive upon exercise of this Warrant. Notwithstanding anything to the contrary contained herein, with respect to any corporate event or other transaction contemplated by the provisions of this Section 4(b) , the Holder shall have the right to elect prior to the consummation of such event or transaction, to give effect to the exercise rights contained in Section 2 instead of giving effect to the provisions contained in this Section 4(b) with respect to this Warrant.

 

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(c)           Certain Events . If any event of the type contemplated by the provisions of this Section 4 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features) occurs, then the Board shall, in its good faith judgment, make an appropriate adjustment in the number of Warrant Shares issuable upon exercise of this Warrant so as to protect the rights of the Holder in a manner consistent with the provisions of this Section 4 ; provided , that no such adjustment pursuant to this Section 4(c) shall decrease the number of Warrant Shares issuable as otherwise determined pursuant to this Section 4 .

 

(d)           Certificate as to Adjustment .

 

(i)          As promptly as reasonably practicable following any adjustment of the number of Warrant Shares pursuant to the provisions of this Section 4 , but in any event not later than five (5) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer setting forth in reasonable detail such adjustment and the facts upon which it is based and certifying the calculation thereof.

 

(ii)         As promptly as reasonably practicable following the receipt by the Company of a written request by the Holder, but in any event not later than five (5) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the number of Warrant Shares or the amount, if any, of other shares of stock, securities or assets then issuable upon exercise of the Warrant.

 

(e)           Notices . In the event:

 

(i)          that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon exercise of the Warrant) for the purpose of entitling or enabling them to receive any dividend or other distribution, to vote at a meeting (or by written consent), to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

 

(ii)         of any capital reorganization of the Company, any reclassification of the Common Stock of the Company, any consolidation or merger of the Company with or into another Person, or sale or lease of all or substantially all of the Company's assets to another Person; or

 

(iii)        of the voluntary or involuntary dissolution, liquidation or winding-up of the Company;

 

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then, and in each such case, the Company shall send or cause to be sent to the Holder at least ten (10) days prior to the applicable record date or the applicable expected effective date, as the case may be, for the event, a written notice specifying, as the case may be, (A) the record date for such dividend, distribution, meeting or consent or other right or action, and a description of such dividend, distribution or other right or action to be taken at such meeting or by written consent, or (B) the effective date on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up is proposed to take place, and the date, if any is to be fixed, as of which the books of the Company shall close or a record shall be taken with respect to which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon exercise of the Warrant) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Warrant and the Warrant Shares.

 

(f)          If the Company issues a security exercisable for or convertible into shares of Common Stock after January 22, 2015, and such security provides for anti-dilution protection, the shares of Common Stock issuable hereunder and the Exercise Price shall be subject to adjustment as if this Warrant included the same anti-dilution protection as the first issued security.

 

5.           Transfer of Warrant . Subject to the transfer conditions referred to in the legend endorsed hereon, this Warrant and all rights hereunder are transferable, in whole or in part, by the Holder without charge to the Holder, upon surrender of this Warrant to the Company at its then principal executive offices with a properly completed and duly executed Assignment in the form attached hereto as Exhibit B , together with funds sufficient to pay any transfer taxes described in Section 3(f)(v) in connection with the making of such transfer. Upon such compliance, surrender and delivery and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant, if any, not so assigned and this Warrant shall promptly be cancelled.

 

6.           Holder Not Deemed a Stockholder; Limitations on Liability . Except as otherwise specifically provided herein, prior to the issuance to the Holder of the Warrant Shares to which the Holder is then entitled to receive upon the due exercise of this Warrant, the Holder shall not be entitled to vote or receive dividends or be deemed the holder of shares of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company

 

9
 

 

7.           Replacement on Loss; Division and Combination .

 

(a)           Replacement of Warrant on Loss . Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and upon delivery of an indemnity reasonably satisfactory to it (it being understood that a written indemnification agreement or affidavit of loss of the Holder shall be a sufficient indemnity) and, in case of mutilation, upon surrender of such Warrant for cancellation to the Company, the Company at its own expense shall execute and deliver to the Holder, in lieu hereof, a new Warrant of like tenor and exercisable for an equivalent number of Warrant Shares as the Warrant so lost, stolen, destroyed or mutilated; provided , that, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation.

 

(b)           Division and Combination of Warrant . Subject to compliance with the applicable provisions of this Warrant as to any transfer or other assignment which may be involved in such division or combination, this Warrant may be divided or, following any such division of this Warrant, subsequently combined with other Warrants, upon the surrender of this Warrant or Warrants to the Company at its then principal executive offices, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the respective Holders or their agents or attorneys. Subject to compliance with the applicable provisions of this Warrant as to any transfer or assignment which may be involved in such division or combination, the Company shall at its own expense execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants so surrendered in accordance with such notice. Such new Warrant or Warrants shall be of like tenor to the surrendered Warrant or Warrants and shall be exercisable in the aggregate for an equivalent number of Warrant Shares as the Warrant or Warrants so surrendered in accordance with such notice.

 

8.           No Impairment . The Company shall not, by amendment of its Certificate of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but shall at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the Holder in order to protect the exercise rights of the Holder against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

 

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9.           Compliance with the Securities Act .

 

(a)           Agreement to Comply with the Securities Act; Legend . The Holder, by acceptance of this Warrant, agrees to comply in all respects with the provisions of this Section 9 and the restrictive legend requirements set forth on the face of this Warrant and further agrees that such Holder shall not offer, sell or otherwise dispose of this Warrant or any Warrant Shares to be issued upon exercise hereof except under circumstances that will not result in a violation of the Securities Act of 1933, as amended (the " Securities Act "). This Warrant and all Warrant Shares issued upon exercise of this Warrant (unless registered under the Securities Act) shall be stamped or imprinted with a legend in substantially the following form:

 

"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR QUALIFIED UNDER ANY STATE OR FOREIGN SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR ASSIGNED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SHARES IS EFFECTIVE UNDER THE ACT AND IS QUALIFIED UNDER APPLICABLE STATE AND FOREIGN LAW OR (II) THE TRANSACTION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS UNDER THE ACT AND THE QUALIFICATION REQUIREMENTS UNDER APPLICABLE STATE AND FOREIGN LAW AND, IF THE CORPORATION REQUESTS, AN OPINION SATISFACTORY TO THE CORPORATION TO SUCH EFFECT HAS BEEN RENDERED BY COUNSEL."

 

In addition, if the Holder is an Affiliate (as defined in the Credit Agreement) of the Company, certificates evidencing the Warrant Shares issued to the Holder shall bear a customary “affiliates” legend.

 

(b)           Representations of the Holder . In connection with the issuance of this Warrant, the Holder specifically represents, as of the date hereof, to the Company by acceptance of this Warrant as follows:

 

(i)          The Holder is an "accredited investor" as defined in Rule 501 of Regulation D promulgated under the Securities Act. The Holder is acquiring this Warrant and the Warrant Shares to be issued upon exercise hereof for investment for its own account and not with a view towards, or for resale in connection with, the public sale or distribution of this Warrant or the Warrant Shares, except pursuant to sales registered or exempted under the Securities Act.

 

(ii)         The Holder understands and acknowledges that this Warrant and the Warrant Shares to be issued upon exercise hereof are "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that, under such laws and applicable regulations, such securities may be resold without registration under the Securities Act only in certain limited circumstances. In addition, the Holder represents that it is familiar with Rule 144 under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

 

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(iii)        The Holder acknowledges that it can bear the economic and financial risk of its investment for an indefinite period, and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Shares. The Holder has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Warrant and the business, properties, prospects and financial condition of the Company.

 

10.          Warrant Register . The Company shall keep and properly maintain at its principal executive offices books for the registration of the Warrant and any transfers thereof. The Company may deem and treat the Person in whose name the Warrant is registered on such register as the Holder thereof for all purposes, and the Company shall not be affected by any notice to the contrary, except any assignment, division, combination or other transfer of the Warrant effected in accordance with the provisions of this Warrant.

 

11.          Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11 ).

 

If to the Company:   Twinlab Consolidated Holdings, Inc.
    632 Broadway, Suite 201
    New York, New York 10012
    Facsimile: (212) 260-1853
    E-mail: RNeuwirth@twinlab.com
    Attention: General Counsel
     
with a copy to (which shall not constitute notice to the Company):   Wilk Auslander LLP
  1515 Broadway
  New York, New York 10036
    Facsimile: (212) 752-6380
    E-mail: jfrank@wilkauslander.com
    Attention: Joel I. Frank

 

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If to the Holder:   MidCap Funding X Trust
    c/o MidCap Financial Services, LLC, as servicer
    7255 Woodmont Avenue, Suite 200
    Bethesda, Maryland 20814
    Attn: Portfolio Mgt. – Twin Labs Loan
    Facsimile: (301) 941-1450
     
with a copy to (which shall not constitute notice to the Holder):   Miles & Stockbridge P.C.
  100 Light Street
    Baltimore, Maryland 21202
    Facsimile: (410) 500-5051
    E-mail: frunge@milesstockbridge.com
    Attention: Frederick W. Runge, Jr.

 

12.          Cumulative Remedies . Except to the extent expressly provided in Section 6 to the contrary, the rights and remedies provided in this Warrant are cumulative and are not exclusive of, and are in addition to and not in substitution for, any other rights or remedies available at law, in equity or otherwise.

 

13.          Equitable Relief . Each of the Company and the Holder acknowledges that a breach or threatened breach by such party of any of its obligations under this Warrant would give rise to irreparable harm to the other party hereto for which monetary damages would not be an adequate remedy and hereby agrees that in the event of a breach or a threatened breach by such party of any such obligations, the other party hereto 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 restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction.

 

14.          Entire Agreement . This Warrant, together with the Credit Agreement, constitutes the sole and entire agreement of the parties to this Warrant with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Warrant and the Credit Agreement, the statements in the body of this Warrant shall control.

 

15.          Successor and Assigns . This Warrant and the rights evidenced hereby shall be binding upon and shall inure to the benefit of the parties hereto and the successors of the Company and the successors and permitted assigns of the Holder. Such successors and/or permitted assigns of the Holder shall be deemed to be a Holder for all purposes hereunder.

 

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16.          No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

17.          Headings . The headings in this Warrant are for reference only and shall not affect the interpretation of this Warrant.

 

18.          Amendment and Modification; Waiver . Except as otherwise provided herein, this Warrant may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by the Company or the Holder of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Warrant shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

19.          Severability . If any term or provision of this Warrant is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Warrant or invalidate or render unenforceable such term or provision in any other jurisdiction.

 

20.          Governing Law . This Warrant shall be governed by and construed in accordance with the internal laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Nevada.

 

21.          Submission to Jurisdiction . Any legal suit, action or proceeding arising out of or based upon this Warrant or the transactions contemplated hereby may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in the city of New York and County of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by certified or registered mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

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22.          Waiver of Jury Trial . Each party acknowledges and agrees that any controversy which may arise under this Warrant is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Warrant or the transactions contemplated hereby.

 

23.          Counterparts . This Warrant may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Warrant delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Warrant.

 

24.          No Strict Construction . This Warrant shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Company has duly executed this Warrant on the Original Issue Date.

 

  TWINLAB CONSOLIDATION CORPORATION
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title:   President & CEO

 

ACCEPTED AND AGREED TO AS OF THE ORIGINAL ISSUE DATE:

 

MIDCAP FUNDING X TRUST ,

a Delaware statutory trust

 

By: Apollo Capital Management, L.P.,
  its investment manager
   
By: Apollo Capital Management GP, LLC,
  its general partner

 

  By: /s/ Maurice Amsellem  
  Name: Maurice Amsellem
  Title:     Authorized Signatory

 

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EXHIBIT A

 

EXERCISE AGREEMENT

 

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

1.           The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock (“ Warrant Shares ”) of Twinlab Consolidated Holdings, Inc., a Nevada corporation (the “ Company ”), evidenced by Warrant No. 1 (the “ Warrant ”). Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

 

(i)          Payment of Exercise Price. The Holder has paid to the Company the aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

 

(ii)         Delivery of Warrant Shares.  The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant Shares in accordance with the terms of the Warrant.  Delivery shall be made to Holder, or for its benefit, to the following address:

 

Date: _______________ __, ______

 

Name of Registered Holder

 

________________________________

 

 
 

 

EXHIBIT B

 

ASSIGNMENT OF WARRANT

 

(To be executed by the registered holder if such holder desires to transfer the Warrant)

 

FOR VALUE RECEIVED _________________________________________________

hereby sells, assigns and transfers unto

 

   
(Please print name and address of transferee)  

 

this Warrant as to [________] Warrant Shares (as defined in the Warrant), together with all right, title and interest therein, and hereby irrevocably constitutes and appoints the Secretary of Twinlab Consolidated Holdings, Inc. (the “Company”) Attorney, to transfer the within Warrant on the books of the Company, with full power of substitution.

 

Dated:

 

  Signature:    
   
  (Signature must confirm in all respects to name of holder as specified on the face of the Warrant.)

     
  (Insert Social Security or Other Identifying Number of Assignee).  

 

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Exhibit 10.29

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”), is made and entered into as of January 22, 2015, by and between Twinlab Consolidated Holdings, Inc., a Nevada corporation (the “ Company ”), and MidCap Funding X Trust, a Delaware statutory trust (the “ Investor ”).

 

WHEREAS, the Company has issued to the Investor a Warrant, dated as of January 22, 2015, pursuant to which the Investor can purchase up to an aggregate of 500,000 shares (the “Warrant”) of Common Stock (as defined below) of the Company; and

 

WHEREAS, in connection with the consummation of the transactions contemplated by the Warrant, and pursuant to the terms of the Warrant, the parties desire to enter into this Agreement in order to grant certain registration rights to the Investor as set forth below.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual and dependent covenants hereinafter set forth, the parties agree as follows:

 

1.           Defined Terms . As used in this Agreement, the following terms shall have the following meanings:

 

Affiliate ” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

Agreement ” has the meaning set forth in the preamble.

 

Board ” means the board of directors of the Company (and any successor governing body of the Company or any successor of the Company).

 

Commission ” means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time.

 

Common Stock ” means the common stock, par value $0.001 per share, of the Company and any other common equity securities issued by the Company, and any other shares of stock issued or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation or other corporate reorganization).

 

 
 

 

Company ” has the meaning set forth in the preamble and includes the Company's successors by merger, acquisition, reorganization or otherwise.

 

Credit Agreement ” means the Credit and Security Agreement, dated as of January 22, 2015, by and among the Company, Twinlab Consolidation Corporation, Twinlab Holdings, Inc., ISI Brands Inc., Twinlab Corporation, TCC CM Subco I, Inc., TLC CM Subco II, Inc., as borrowers, MidCap Financial Trust, a Delaware statutory trust, as agent (including its successor and assigns), and the financial institutions from time to time party thereto as lenders.

 

Demand Registration ” has the meaning set forth in Section 2(a) .

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

 

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.

 

Investor ” has the meaning set forth in the preamble.

 

Person ” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

Prospectus ” means the prospectus or prospectuses included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses.

 

Registrable Securities ” means (a) any shares of Common Stock held by the Investor or issuable upon conversion, exercise or exchange of the Warrant owned by the Investor at any time, and (b) any shares of Common Stock issued or issuable with respect to any shares described in subsection (a) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization (it being understood that for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (i) a Registration Statement covering such securities has been declared effective by the Commission and such securities have been disposed of pursuant to such effective Registration Statement, (ii) such securities are sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) such securities are otherwise transferred and such securities may be resold without subsequent registration under the Securities Act, or (iv) such securities shall have ceased to be outstanding.

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Registration Statement ” means any registration statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement.

 

Rule 144 ” means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto (such as Rule 144A).

 

Securities Act ” means the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, which shall be in effect from time to time.

 

Selling Expenses ” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any holder of Registrable Securities.

 

Warrant has the meaning set forth in the recitals.

 

2.           Demand Registration .

 

(a)          The Company shall use commercially reasonable efforts to qualify and remain qualified to register securities under the Securities Act pursuant to a Registration Statement on Form S-3 or any successor form thereto. Beginning October 1, 2015, if the Company shall have qualified for the use of a Registration Statement on Form S-3, the holder of Registrable Securities shall have the right to request an initial registration of its Registrable Securities on Form S-3 or any similar short-form registration and, at least six months after the effectiveness of such initial registration, one additional registration of its Registrable Securities on Form S-3 or any similar short-form registration (each a “ Demand Registration ”). A request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered. The Company shall cause a Registration Statement on Form S-3 (or any successor form) to be filed within twenty (20) days after the date on which the request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter.

 

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(b)          The Company may postpone for up to ninety (90) days the filing or effectiveness of a Registration Statement for a Demand Registration if the Company's Board determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate organization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act.

 

(c)          If the holder of the Registrable Securities requesting a Demand Registration elects to distribute the Registrable Securities covered by its request in an underwritten offering, it shall so advise the Company as a part of their request made pursuant to Section 2(a) . The holder of the Registrable Securities requesting the Demand Registration shall select the investment banking firm or firms to act as the managing underwriter or underwriters in connection with such offering; provided , that such selection shall be subject to the consent of the Company, which consent shall not be unreasonably withheld or delayed.

 

(d)          Nothing contained in this Agreement shall prevent the Company from filing a registration statement (i) solely for the Company’s account including without limitation, a registration statement relating to any employee benefit plan filed on Form S-8 or similar form or, with respect to any corporate reorganization or other transaction under Rule 145 of the Securities Act, a registration statement on Form S-4 or similar form, or any registration statement relating to the registration of securities issued to raise financing for the Company and/or (ii) pursuant to contractual registration rights granted to other parties.

 

3.           Lock-up Agreement . Each holder of Registrable Securities agrees that in connection with any public offering of the Company's Common Stock or other equity securities, and upon the request of the managing underwriter in such offering, such holder shall not, without the prior written consent of such managing underwriter, during the thirty (30) days prior to the effective date of such registration and ending on the date specified by such managing underwriter (such period not to exceed ninety (90) days in the case of any registration) (a) offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, hedge the beneficial ownership of or otherwise dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into, exercisable for or exchangeable for shares of Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired), or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing provisions of this Section 3 shall not apply to sales of Registrable Securities to be included in such offering pursuant to Section 2(a) and shall be applicable to the holder of Registrable Securities only if all officers and directors of the Company and all stockholders owning more than ten (10%) percent of the Company's outstanding Common Stock are subject to the same restrictions. Each holder of Registrable Securities agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. Notwithstanding anything to the contrary contained in this Section 3 , each holder of Registrable Securities shall be released, pro rata, from any lock-up agreement entered into pursuant to this Section 3 in the event and to the extent that the managing underwriter or the Company permit any discretionary waiver or termination of the restrictions of any lock-up agreement pertaining to any officer, director or holder of greater than ten (10%) percent of the outstanding Common Stock.

 

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4.           Registration Procedures . If and whenever the holders of Registrable Securities request that any Registrable Securities be registered pursuant to the provisions of this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto the Company shall as soon as reasonably practicable:

 

(a)          subject to Section 2(a) prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective;

 

(b)          prepare and file with the Commission such amendments, post-effective amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of not less than ninety (90) days, or if earlier, until all of such Registrable Securities have been disposed of and to comply with the provisions of the Securities Act with respect to the disposition of such Registrable Securities in accordance with the intended methods of disposition set forth in such Registration Statement;

 

(c)          within a reasonable time before filing such Registration Statement, Prospectus or amendments or supplements thereto, furnish to counsel selected by the holder of such Registrable Securities copies of such documents proposed to be filed, which documents shall be subject to the review, comment and approval of such counsel;

 

(d)          notify the selling holder of Registrable Securities, promptly after the Company receives notice thereof, of the time when such Registration Statement has been declared effective or a supplement to any Prospectus forming a part of such Registration Statement has been filed;

 

(e)          furnish to the selling holder of Registrable Securities such number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and any supplement thereto (in each case including all exhibits and documents incorporated by reference therein) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; provided , that the Company shall have no such obligation to deliver the Prospectus or Prospectuses that are available on the Commission’s EDGAR system.

 

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(f)          use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as the selling holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such holders to consummate the disposition in such jurisdictions of the Registrable Securities owned by such holder; provided , that the Company shall not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for this Section 4(f) ;

 

(g)          notify the selling holder of such Registrable Securities, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of such holder, the Company shall prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

 

(h)          make available for inspection by the selling holder of Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by such holder or underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “ Records ”), and cause the Company's officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement;

 

(i)          provide a transfer agent and registrar (which may be the same entity) for all such Registrable Securities not later than the effective date of such registration;

 

(j)          use its reasonable best efforts to cause such Registrable Securities to be listed on each securities exchange on which the Common Stock is then listed;

 

(k)          in connection with an underwritten offering, enter into such customary agreements (including underwriting and lock-up agreements in customary form) and take all such other customary actions as the holders of such Registrable Securities or the managing underwriter of such offering reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, making appropriate officers of the Company available to participate in “road show” and other customary marketing activities (including one-on-one meetings with prospective purchasers of the Registrable Securities);

 

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(l)          otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission and make available to its stockholders an earnings statement (in a form that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder) no later than thirty (30) days after the end of the 12-month period beginning with the first day of the Company's first full fiscal quarter after the effective date of such Registration Statement, which earnings statement shall cover said 12-month period, and which requirement will be deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act;

 

(m)          furnish to the selling holder of Registrable Securities and each underwriter, if any, with (i) a legal opinion of the Company's outside counsel, dated the effective date of such Registration Statement (and, if such registration includes an underwritten public offering, dated the date of the closing under the underwriting agreement), in form and substance as is customarily given in opinions of the Company's counsel to underwriters in underwritten public offerings; and (ii) a “comfort” letter signed by the Company's independent certified public accountants in form and substance as is customarily given in accountants' letters to underwriters in underwritten public offerings;

 

(n)          without limiting Section 4(f) above, use its reasonable best efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the holder of such Registrable Securities to consummate the disposition of such Registrable Securities in accordance with its intended method of distribution thereof;

 

(o)          notify the holder of Registrable Securities promptly of any request by the Commission for the amending or supplementing of such Registration Statement or Prospectus or for additional information;

 

(p)          advise the holder of Registrable Securities, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceeding for such purpose and promptly use its reasonable best efforts to prevent the issuance of any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued;

 

(q)          permit any holder of Registrable Securities which holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such Registration Statement and to require the insertion therein of language, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included; and

 

(r)          otherwise use its reasonable best efforts to take all other steps necessary to effect the registration of such Registrable Securities contemplated hereby.

 

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5.           Expenses . All expenses (other than Selling Expenses) incurred by the Company in complying with its obligations pursuant to this Agreement and in connection with the registration and disposition of Registrable Securities, including, without limitation, all registration and filing fees, underwriting expenses (other than fees, commissions or discounts), expenses of any audits incident to or required by any such registration, fees and expenses of complying with securities and “blue sky” laws, printing expenses and fees and expenses of the Company’s counsel and accountants shall be borne by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to this Agreement shall be borne and paid by the holder of such Registrable Securities.

 

6.           Indemnification .

 

(a)          The Company shall indemnify and hold harmless, to the fullest extent permitted by law, the holder of Registrable Securities, such holder's officers, directors, managers, members, partners, stockholders and Affiliates, each underwriter, broker or any other Person acting on behalf of such holder of Registrable Securities and each other Person, if any, who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against all losses, claims, actions, damages, liabilities and expenses, joint or several, to which any of the foregoing Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, actions, damages, liabilities or expenses arise out of or are based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities laws or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance; and shall reimburse such Persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, action, damage or liability, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the Registration Statement, Prospectus, free-writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendments or supplements thereto (if the same was required by applicable law to be so delivered) after the Company has furnished such holder with a sufficient number of copies of the same prior to any written confirmation of the sale of Registrable Securities.

 

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(b)          In connection with any registration in which a holder of Registrable Securities is participating, such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus and, to the extent permitted by law, shall indemnify and hold harmless, the Company, each director of the Company, each officer of the Company who shall sign such Registration Statement, each underwriter, broker or other Person acting on behalf of the holders of Registrable Securities and each Person who controls any of the foregoing Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any losses, claims, actions, damages, liabilities or expenses resulting from any untrue or alleged untrue statement of material fact contained in the Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 promulgated under the Securities Act) or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided , that the obligation to indemnify (i) shall not apply to amounts paid in settlement of any claim or proceeding if such settlement is effective without the consent of such holder, which consent shall not be unreasonably withheld, and (ii) shall be limited to the net proceeds (after underwriting fees, commissions or discounts) actually received by such holder from the sale of Registrable Securities pursuant to such Registration Statement.

 

(c)          Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in this Section 6 , such indemnified party shall, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action. The failure of any indemnified party to notify an indemnifying party of any such action shall not (unless such failure shall have a material adverse effect on the indemnifying party) relieve the indemnifying party from any liability in respect of such action that it may have to such indemnified party hereunder. In case any such action is brought against an indemnified party, the indemnifying party shall be entitled to participate in and to assume the defense of the claims in any such action that are subject or potentially subject to indemnification hereunder, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after written notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; provided , that if (i) any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity provided hereunder, or (ii) such action seeks an injunction or equitable relief against any indemnified party or involves actual or alleged criminal activity, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party without such indemnified party's prior written consent (but, without such consent, shall have the right to participate therein with counsel of its choice) and such indemnifying party shall reimburse such indemnified party and any Person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity provided hereunder. If the indemnifying party is not entitled to, or elects not to, assume the defense of a claim, it shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. In such instance, the conflicting indemnified parties shall have a right to retain one separate counsel, chosen by the holder of the Registrable Securities included in the registration, at the expense of the indemnifying party.

 

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(d)          If the indemnification provided for hereunder is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations; provided , that the maximum amount of liability in respect of such contribution shall be limited, in the case of the holder of Registrable Securities, to an amount equal to the net proceeds (after underwriting fees, commissions or discounts) actually received by such seller from the sale of Registrable Securities effected pursuant to such registration. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant hereto were determined by pro rata allocation or by any other method or allocation which does not take account of the equitable considerations referred to herein. No Person guilty or liable of fraudulent misrepresentation shall be entitled to contribution from any Person.

 

7.           Participation in Underwritten Registrations . No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

 

8.           Rule 144 Compliance . With a view to making available to the holder of Registrable Securities the benefits of Rule 144 under the Securities Act and any other rule or regulation of the Commission that may at any time permit a holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3 (or any successor form), the Company shall:

 

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(a)          make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times after the Registration Date;

 

(b)          use reasonable best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act, at any time after the Company has become subject to such reporting requirements; and

 

(c)          furnish to the holder so long as the holder owns Registrable Securities, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed or furnished by the Company as such holder may reasonably request in connection with the sale of Registrable Securities without registration.

 

9.            Preservation of Rights . The Company shall not enter into any agreement, take any action, or permit any change to occur, with respect to its securities that violates or subordinates the rights expressly granted to the holders of Registrable Securities in this Agreement.

 

10.          Termination . This Agreement shall terminate and be of no further force or effect when there shall no longer be any Registrable Securities outstanding; provided , that the provisions of Section 5 and Section 6 shall survive any such termination.

 

11.          Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the fifth day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the addresses indicated below (or at such other address for a party as shall be specified in a notice given in accordance with this Section 11 ).

 

If to the Company:

Twinlab Consolidated Holdings, Inc.

632 Broadway, Suite 201

New York, NY 10012

E-mail: RNeuwirth@twinlab.com

Facsimile: (212) 260-1853

Attention: General Counsel

 

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with a copy to (which shall not constitute notice to the Company):

Wilk Auslander LLP

1515 Broadway

New York, NY 10036

E-mail: jfrank@wilkauslander.com
Facsimile: (212) 752-6380

Attention: Joel I. Frank, Esq.

 

If to the Investor:

 

MidCap Funding X Trust

c/o MidCap Financial Services, LLC, as servicer

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attention: Portfolio Mgt. – Twin Labs Loan

Facsimile: (301) 941-1450

 

with a copy to (which shall not constitute notice to the Investor):

 

Miles & Stockbridge P.C.

100 Light Street

Baltimore, Maryland 21202

E-mail: frunge@milesstockbridge.com

Facsimile: (410) 500-5051

Attention: Frederick W. Runge, Jr.

 

12.          Entire Agreement . This Agreement, together with the Warrant, the Credit Agreement and any related exhibits and schedules thereto, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings and agreements, both written and oral, with respect to such subject matter. Notwithstanding the foregoing, in the event of any conflict between the terms and provisions of this Agreement and those of the Warrant, the terms and conditions of this Agreement shall control.

 

13.          Successor and Assigns . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Investor may assign its rights hereunder to any purchaser or transferee of Registrable Securities; provided , that such purchaser or transferee shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as an Investor whereupon such purchaser or transferee shall have the benefits of, and shall be subject to the restrictions contained in, this Agreement as if such purchaser or transferee was originally included in the definition of an Investor herein and had originally been a party hereto.

 

14.          No Third-Party Beneficiaries . This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.

 

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15.          Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

16.          Amendment, Modification and Waiver . The provisions of this Agreement may only be amended, modified, supplemented or waived with the prior written consent of the Company and the holder of the Registrable Securities. No waiver by any party or parties shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

17.          Severability . If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

18.          Remedies . The holder of Registrable Securities, in addition to being entitled to exercise all rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights under this Agreement. The Company acknowledges that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and the Company hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

19.          Governing Law; Submission to Jurisdiction . This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction). Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States or the courts of the State of New York in each case located in the city of New York and County of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Service of process, summons, notice or other document by mail to such party's address set forth herein shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or any proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

 

13
 

 

20.          Waiver of Jury Trial . Each party acknowledges and agrees that any controversy which may arise under this Agreement is likely to involve complicated and difficult issues and, therefore, each such party irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any legal action arising out of or relating to this Agreement or the transactions contemplated hereby. Each party to this Agreement certifies and acknowledges that (a) no representative of any other party has represented, expressly or otherwise, that such other party would not seek to enforce the foregoing waiver in the event of a legal action, (b) such party has considered the implications of this waiver, (c) such party makes this waiver voluntarily, and (d) such party has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 20 .

 

21.          Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

14
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above.

 

  TWINLAB CONSOLIDATED HOLDINGS, INC.
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: President and Chief Executive Officer

 

  MIDCAP FUNDING X TRUST,
  a Delaware statutory trust

 

  By: Apollo Capital Management, L.P.,
    its investment manager
     
  By: Apollo Capital Management GP, LLC,
    its general partner

 

  By: /s/ Maurice Amsellem
  Name: Maurice Amsellem
  Title: Authorized Signatory

 

15

 

Exhibit 10.30

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (JL-BBNC) DATED AS OF JANUARY 22, 2015 IN FAVOR OF MIDCAP FINANCIAL TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH SUBORDINATION AGREEMENT (JL-BBNC) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (JL-BBNC) DATED AS OF JANUARY 22, 2015 IN FAVOR OF PENTA MEZZANINE SBIC FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP, AS THE SENIOR LENDER, WHICH SUBORDINATION AGREEMENT (JL-BBNC) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

by and between

 

TWINLAB CONSOLIDATED HOLDINGS, INC., TWINLAB CONSOLIDATION CORPORATION, TWINLAB HOLDINGS, INC., ISI BRANDS INC., TWINLAB CORPORATION, TCC CM SUBCO I, INC., TCC CM SUBCO II, INC., and

 

JL-BBNC MEZZ UTAH, LLC

 

for

 

$5,000,000 Principal Amount

 

of

 

Secured Notes Due 2020

 

and

 

Warrant to Purchase Equity Interests

 

 

Dated: January 22, 2015

 

 
 

 

TABLE OF CONTENTS

 

    Page
     
Article 1.        Definitions 1
     
Article 2.        Purchase and Sale of Securities 16
     
Section 2.1 Purchase and Sale of Securities 16
     
Section 2.2 Registration of Notes 18
     
Section 2.3 Delivery Expenses 18
     
Section 2.4 Issue Taxes 18
     
Section 2.5 General Provisions Regarding Payments 18
     
Section 2.6 Use of Proceeds 19
     
Section 2.7 Margin Regulations 19
     
Section 2.8 Maximum Interest 19
     
Article 3.        Collateral: General Terms 20
     
Section 3.1 Security Interest Created; Obligations Secured 20
     
Section 3.2 Financing Statements 20
     
Article 4.        Representations and Warranties 20
     
Section 4.1 Companies’ Representations and Warranties 20
     
Section 4.2 Purchaser’s Representations and Warranties 30
     
Article 5.        Affirmative Covenants 31
     
Section 5.1 Reports 31
     
Section 5.2 Payment of Taxes and Claims; Tax Consolidation; Filing of Tax Returns 36
     
5.4 Further Assurances 37
     
Section 5.5 Reservation of Equity Interests 37
     
Section 5.6 No Impairment 37
     
Section 5.7 Observation Rights. 37
     
Section 5.8 Good Standing; Regular Course of Business 37
     
Section 5.9 Maintenance of Property Insurance 38
     
Section 5.10 Compliance with Statutes, etc 39
     
Section 5.11 Violations 39
     
Section 5.12 Financial Covenants 40

 

ii
 

 

Section 5.13 Performance of Transaction Documents 41
     
Section 5.14 Maintenance of Books and Records; Inspection Rights 41
     
Section 5.15 Audit 42
     
Section 5.16 Keyman Litigation Proceeds. 42
     
Section 5.17 Post-Closing Obligations. 42
     
Article 6.        Negative Covenants 43
     
Section 6.1 Restrictions on Fundamental Changes; Mergers; Consolidations; Asset Sales and Acquisitions; New Subsidiaries 43
     
Section 6.2 Creation of Liens 43
     
Section 6.3 Investments 43
     
Section 6.4 Loans 43
     
Section 6.5 Capital Expenditures 44
     
Section 6.6 Dividends/Junior Payments 44
     
Section 6.7 Indebtedness 44
     
Section 6.8 Nature of Business; Name Change 44
     
Section 6.9 Transactions with Affiliates 45
     
Section 6.10 Fiscal Year 45
     
Section 6.11 Entering Into or Modification of Certain Agreements 45
     
Section 6.12 Inconsistent Agreements 45
     
Section 6.13 Reserved 45
     
Section 6.14 Stay, Extension and Usury Laws 45
     
Section 6.15 Purchaser’s Consent 46
     
Section 6.16 Disposition of Assets 46
     
Article 7.        Conditions Precedent 46
     
Section 7.1 Transaction Documents 46
     
Section 7.2 Filings, Registrations and Recordings 47
     
Section 7.3 Corporate Proceedings of Companies 47
     
Section 7.4 Incumbency Certificates of Companies 47
     
Section 7.5 Organization Documents 47
     
Section 7.6 Good Standing Certificates 47
     
Section 7.7 Legal Opinion 48
     
Section 7.8 No Litigation 48

 

iii
 

 

Section 7.9 Fees 48
     
Section 7.10 Financial Statements 48
     
Section 7.11 Insurance 48
     
Section 7.12 [Reserved] 49
     
Section 7.13 Consents 49
     
Section 7.14 Existing Indebtedness 49
     
Section 7.15 Solvency Certificate 49
     
Section 7.16 Officer’s Certificate 49
     
Section 7.17 No Prohibition 49
     
Article 8.        PREPAYMENT 50
     
Section 8.1 The Companies’ Right to Prepay 50
     
Article 9.        General Indemnity 50
     
Section 9.1 Indemnity Obligations 50
     
Section 9.2 Settlement; Survival 51
     
Article 10.        Actions by Purchaser; Lost Note 51
     
Section 10.1 Actions by Purchaser 51
     
Section 10.2 Lost Note 52
     
Article 11.        Events of Default and Remedies 52
     
Section 11.1 Events of Default 52
     
Section 11.2 Remedies 57
     
Section 11.3 Retention of Collateral 58
     
Article 12.        Miscellaneous 59
     
Section 12.1 Amendments and Waivers 59
     
Section 12.2 Transfers 59
     
Section 12.3 Notices 60
     
Section 12.4 Independent of Covenants 60
     
Section 12.5 Survival of Representations, Warranties and Agreements 61
     
Section 12.6 Failure or Indulgence Not Waiver; Remedies Cumulative 61
     
Section 12.7 Severability 61
     
Section 12.8 Headings 61
     
Section 12.9 Governing Law; Submission to Jurisdiction; Service of Process 62

 

iv
 

 

Section 12.10 Successors and Assigns 62
     
Section 12.11 Waiver of Jury Trial 62
     
Section 12.12 Facsimile; Counterparts; Effectiveness 63
     
Section 12.13 Entire Agreement 63
     
Section 12.14 Waivers of Provisions 63
     
Section 12.15 Termination and Release 64
     
Section 12.16 Guaranty; Joint and Several 64
     
Section 12.17 Purchaser as Subordinated Lender 64
     
Article 13.        DEFINITIONS 1

 

Schedules:

 

3.1 Premises and Leases
4.1(a) Financial Information
4.1(e) Litigation
4.1(f) Benefit Plans
4.1(i) Real Property
4.1(l) Federal Tax Identification Number
4.1(o) Patents, Trademarks, Copyrights and Licenses
4.1(q) Indebtedness
4.1(r) Defaults
4.1(u) Owners of Equity Interests
4.1(aa) Trade Names
5.17 Post-Closing Obligations
6.2 Existing Liens
6.3 Investments

 

Exhibits:

 

2.1(a)(i) Form of Secured Note
2.1(a)(ii) Form of Warrant
2.1(b) Company’s Wire Transfer Instruction
5.1 Form of Compliance Certificate
7.16 Form of Certificate re: Sections 7.15 and 7.16

  

v
 

 

NOTE AND WARRANT PURCHASE AGREEMENT

 

This NOTE AND WARRANT PURCHASE AGREEMENT (this " Agreement "), dated as of January 22, 2015 (the " Effective Date ") is made by and between JL-BBNC MEZZ UTAH, LLC , an Alaska limited liability company (the " Purchaser "), TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (" Parent "), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (" TCC "), TWINLAB HOLDINGS, INC., a Michigan corporation (" Twinlab Holdings "), ISI BRANDS INC., a Michigan corporation (" ISI Brands "), TWINLAB CORPORATION, a Delaware corporation (" Twinlab Corporation "”), TCC CM SUBCO I, INC., a Delaware corporation ( "Subco I" ), and TCC CM SUBCO II, INC., a Delaware corporation (" Subco II "; together with Parent, TCC, Twinlab Holdings, ISI Brands, Twinlab Corporation and Subco I, the " Companies "; and each individually, a " Company ").

 

RECITALS

 

WHEREAS, the Companies desire that the Purchaser purchase up to $5,000,000 principal amount of the Secured Note in accordance with the terms and conditions set forth below; and

 

WHEREAS, the Parent desires to grant the Purchaser the Warrant for the acquisition of 2,329,400 shares of common stock of the Parent.

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

Article 1.       Definitions

 

" Acquisition " means (a) the purchase or other acquisition by a Person of all or substantially all of the assets of (or any division or business line of) any other Person, or (b) the purchase or other acquisition (whether by means of a merger, consolidation, or otherwise) by a Person of all or substantially all of the Equity Interests of any other Person.

 

" Adjusted EBITDA " means EBITDA plus any expenses relating to Acquisitions in the Fiscal Year ending December 31, 2015, plus severance payments and other costs relating to permanent headcount reductions, all as determined by GAAP.

 

" Affiliate " or " Affiliated " means, as applied to (i) any Person, directly or indirectly, in which such Person holds, beneficially or of record, ten percent (10%) or more of the equity of voting securities; (ii) any Person that holds, of record or beneficially, ten percent (10%) or more of the equity or voting securities of such Person; (iii) any director, officer, partner or individual holding a similar position in respect of such Person; (iv) as to any natural Person, any Person related by blood, marriage or adoption and any Person owned by such Persons, including any spouse, parent, grandparent, aunt, uncle, child, grandchild, sibling, cousin or in-law of such Person; or (v) any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

 

 
 

 

" Agreement " has the meaning set forth in the opening paragraph.

 

" Anti-Money Laundering Laws " means all applicable laws, regulations and government guidance on the prevention and detection of money laundering, including, without limitation, 18 U.S.C. §§ 1956 and 1957, and the BSA.

 

" Applicable Regulations " has the meaning set forth in Section 4.1(h).

 

" Bankruptcy Code " means Title 11 of the United States Code, 11 U.S.C. § 101 et seq ., as amended.

 

" BSA " means the Bank Secrecy Act (31 U.S.C. §§ 5311 et seq .), and its implementing regulations, Title 31 Part 103 of the U.S. Code of Federal Regulations.

 

" Business Day " means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

 

" Capital Expenditures " means, as applied to any Person for any period, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the balance sheet of such Person and its Subsidiaries) by such Person and its Subsidiaries during that period that, in conformity with GAAP, are included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of such Person and its Subsidiaries.

 

" Capital Lease " means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

 

" CERCLA " shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq .

 

" Change in Control " means, at any time, that:

 

(a)          the Parent shall cease to (i) own, directly or indirectly, 100% of the Equity Interests of TCC; (ii) own, directly or indirectly, and be able to vote or direct the voting of, the voting securities of TCC representing 100% of the combined ordinary voting power (as opposed to such power only by reason of the happening of a contingency) of all Equity Interests of TCC, and (iii) control and cause the direction of the management and policies of TCC by contract or otherwise;

 

(b)          TCC shall cease to (i) own, directly or indirectly, 100% of the Equity Interests of each other Company (other than Parent); (ii) own, directly or indirectly, and be able to vote or direct the voting of, the voting securities of each other Company (other than Parent) representing 100% of the combined ordinary voting power (as opposed to such power only by reason of the happening of a contingency) of all Equity Interests of such Companies, and (iii) control and cause the direction of the management and policies of each other Company (other than Parent) by contract or otherwise;

 

2
 

 

(c)          the closing of any merger, combination, joint venture, consolidation, reorganization, recapitalization or similar business transaction directly or indirectly involving any Company in which current owners of Equity Interest in such Company are not the holder, directly or indirectly, of a majority of the ordinary voting equity securities of the surviving Person in such transaction immediately after such closing;

 

(d)          the closing of any sale or transfer by any Company of all or substantially all of its assets to an acquiring Person in which the current owners of Equity Interest in such Company are not the holder of a majority of the ordinary voting equity securities of the acquiring Person immediately after such closing;

 

(e)          the closing of any sale by the holders of the Equity Interests in any Company of an amount of the Equity Interests in such Company that equals or exceeds a majority of the Equity Interests in such Company immediately prior to such closing to a Person in which the holders of the Equity Interests in the Company immediately prior to such closing are not the holders of a majority of the ordinary voting equity securities of such Person immediately after such closing; or

 

(f)          any Person or any two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of the Equity Interests of any Company (or other securities convertible into such Equity Interests) representing more than 35% (on a Fully-Diluted Basis) or more of the combined voting power of all equity securities of such Company entitled to vote; provided, however, that there shall be no Change in Control as a result of a Permitted Acquisition under subsection (c) of the definition thereof.

 

" Closing " has the meaning set forth in Section 2.1(b).

 

" Collateral " has the meaning set forth in the Security Agreement and the Mortgage.

 

" Companies " has the meaning set forth in the opening paragraph.

 

" Company Materials " has the meaning set forth in Section 5.1.

 

" Contingent Obligation " or " Contingent Obligations " means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the primary purpose or intent thereof by the Person incurring such obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under any Interest Rate Agreement. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the Ordinary Course of Business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise acquire such obligation or any security thereof, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement describe under subclauses (x) or (y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited.

 

3
 

 

" Controlled Group " shall mean, at any time, the Companies and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with the Companies, are treated as a single employer under Section 414 of the IRC.

 

" Cure Period " has the meaning set forth in Section 11.1(e)(i).

 

" Default " shall mean any event which is, or after notice or passage of time would be, an Event of Default.

 

" Default Rate " has the meaning set forth in the Notes.

 

" EBITDA " shall mean Net Income, minus extraordinary gains, interest income, non-operating income, non-cash income and income tax benefits and decreases in any change in LIFO or any other inventory reserves, plus non-cash extraordinary losses (including non-cash expenses with respect to stock option and stock based employee compensation programs), Interest Expense, income taxes, depreciation and amortization and increases in any change in LIFO reserves for such period, in each case, determined on a consolidated basis in accordance with GAAP.

 

" Effective Date " has the meaning set forth in the recitals.

 

" Environmental Claim " means any accusation, allegation, notice of violation, claim, demand, abatement order or other order or direction (conditional or otherwise) by any Governmental Authority or any Person for any damage, including personal injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damages, damage to the environment, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, in each case relating to, resulting from or in connection with Hazardous Materials and relating to any Company, any of its respective Subsidiaries or any Premises or assets of any Company.

 

4
 

 

" Environmental Laws " means all statutes, ordinances, orders, rules or regulations relating to (i) environmental matters, including those relating to fines, injunctions, penalties, damages, contribution, cost recovery compensation, losses or injuries resulting from the Release or threatened Release of Hazardous Materials, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, or the protection of human, plant or animal health or welfare from injury as a result of exposure to Hazardous Materials or loss of ecological resources, in any manner applicable to the Corporation or any of its predecessors or any of its respective properties, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq .), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq .), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq .), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq .), the Clean Air Act (42 U.S.C. § 7401 et seq .), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq .), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. §136 et seq .), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq .) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq .), each as amended or supplemented, and any analogous future or present local, state and Federal statutes and regulations promulgated pursuant thereto, each as in effect as of the date of determination.

 

" Equipment " shall have the meaning set forth in the Uniform Commercial Code in effect from time to time in the relevant jurisdiction.

 

" Equity Interest " shall mean the interest of (i) a shareholder in a corporation, (ii) a partner (whether general or limited) in a partnership (whether general, limited or limited liability), (iii) a member in a limited liability company, or (iv) any other Person having any other form of equity security or ownership interest in any Person.

 

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

 

" ERISA Event " means (i) a Reportable Event within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Benefit Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation) which could reasonably be expected to result in the termination of such Pension Benefit Plan or in a material liability of any Company; (ii) the failure to meet the minimum funding standard of Section 412 of the IRC with respect to any Pension Benefit Plan (whether or not waived in accordance with Section 412(d) of the IRC) or the failure to make by its due date a required installment under Section 412(m) of the IRC with respect to any Pension Benefit Plan or the failure to make any required contribution to a Multiemployer Plan, where the missed contribution or installment is of a material amount or could result in the imposition of a lien under ERISA or the IRC; (iii) the provision by the administrator of any Pension Benefit Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by any Company from any Pension Benefit Plan with two or more contributing sponsors or the termination of any such Pension Benefit Plan resulting in material liability pursuant to Sections 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Benefit Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Benefit Plan; (vi) the imposition of material liability on any Company pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal by any Company in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential material liability therefor, or the receipt by any Company of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on any Company of material fines, penalties, taxes or related charges under Chapter 43 of the IRC or under Section 409 or 502(c), (i) or (1) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against any Company in connection with any such Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Benefit Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the IRC) to qualify under Section 401(a) of the IRC, or the failure of any trust forming part of any Pension Benefit Plan to qualify for exemption from taxation under Section 501(a) of the IRC; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the IRC or pursuant to ERISA with respect to any Pension Benefit Plan. For purposes of clauses (i), (ii), (iv), (vi), (vii), (viii) and (ix) of this definition, a material liability, amount, fine or claim is an amount in excess of $25,000.00 in the aggregate.

 

5
 

 

" Essex Debt " means Indebtedness pursuant to that certain Commercial Lease Agreement, dated as of August 21, 2014, between Twinlab Corporation and Essex Capital Corporation, and a lease agreement to be entered into between one or more of the Companies and Essex Capital Corporation, together in an aggregate principal amount not to exceed $5,800,000.

 

" Event of Default " has the meaning set forth in Section 11.1.

 

" Exchange Act " means the Securities Exchange Act of 1934, as amended.

 

" Financial Information " has the meaning set forth in Section 4.1(a).

 

" Financial Statements " has the meaning set forth in Section 7.10.

 

" Fiscal Year " means the fiscal year of the Companies, ending December 31 of each year.

 

" Fixed Charge Coverage Ratio " means, with respect to the Companies and their Subsidiaries for any period, the ratio of (i) Adjusted EBITDA for such period, plus (a) cash received during such period for Equity Interests so long as such cash is used as working capital and such cash is not received more than two times in any trailing-twelve-month period of determination, minus (b) Non-Financed Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, minus (c) cash taxes paid during such period, to the extent greater than zero, and minus (d) all Junior Payments consisting of Tax Distributions to (ii) Fixed Charges for such period.

 

" Fixed Charges " means, with respect to any fiscal period and with respect to the Companies and their Subsidiaries determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) cash Interest Expense paid during such period (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense), (b) principal payments paid in cash in respect of Indebtedness paid during such period, including cash payments with respect to Capital Leases, but excluding principal payments made with respect to the First Priority Senior Lender, and (c) all Junior Payments (other than Tax Distributions) and other distributions paid in cash during such period.

 

6
 

 

" First Priority Senior Lender " means a holder of Permitted Senior Debt with a first-priority lien on all the assets of the Companies and all successors and assigns. On the Effective Date, the First Priority Senior Lender shall be MidCap Financial Trust.

 

" Fully-Diluted Basis " means, as applied to the calculation of the number of Equity Interests outstanding at any time, after giving effect to (a) all Equity Interests outstanding at the time of determination, (b) all Equity Interests issuable upon the exercise of any option, warrant or similar right to purchase Equity Interests granted and outstanding at the time of determination and (c) all Equity Interests issuable upon the conversion or exchange of any issued and outstanding security convertible into or exchangeable for Equity Interests. Such calculation will not be made in accordance with the "treasury method."

 

" GAAP " shall mean generally accepted accounting principles in the United States as of the relevant date in question, consistently applied.

 

" Governmental Authority " has the meaning set forth in Section 4.1(e).

 

" Guaranty " shall mean, collectively, (i) the guaranties by each Company of the Obligations of each other Company hereunder as set forth in Section 12.17 and (ii) each guaranty agreement delivered at any time by a Guarantor in favor of the Purchaser.

 

" Guarantor " shall mean (i) each Company with respect to the Obligations of each other Company hereunder and (ii) each Person that becomes a guarantor on or after the Effective Date.

 

" Hazardous Substance " shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act (49 U.S.C. Sections 1801 et seq .), RCRA, or any other applicable Environmental Law and in the regulations adopted pursuant thereto.

 

" Hazardous Wastes " shall mean all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable federal and state laws now in force or hereafter enacted relating to hazardous waste disposal.

 

" Holder " shall mean the Purchaser (so long as it holds any Notes).

 

" Indebtedness " as to any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (f) all obligations of such Person owing under hedge agreements (which amount shall be calculated based on the amount that would be payable by such Person if the hedge agreement were terminated on the date of determination), (g) any Prohibited Preferred Stock of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness described in clause (d) above shall be the lower of the amount of the obligation and the fair market value of the assets of such Person securing such obligation.

 

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" Indemnified Party " has the meaning set forth in Section 9.

 

" Insolvency Proceeding " shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.

 

" Intellectual Property " has the meaning set forth in Section 4.1(o).

 

" Interest Expense " means, for any period, the aggregate of the interest expense of Companies and their Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

 

" Interest Rate Agreement " means, with respect to any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in interest rates.

 

" Inventory " shall have the meaning set forth in the Uniform Commercial Code in effect from time to time in the relevant jurisdiction.

 

" IRC " shall mean the Internal Revenue Code of 1986, as amended.

 

" Junior Payment " has the meaning given to such term in Section 6.6.

 

" Leases " has the meaning set forth in Section 4.1(i).

 

" Lessors " has the meaning set forth in Section 4.1(i).

 

" Lien " shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim, encumbrance or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset or property of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC or comparable law of any jurisdiction.

 

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" Litigation " has the meaning set forth in Section 5.1(b).

 

" Little Harbor Debt " means Indebtedness pursuant to that certain Debt Repayment Agreement, dated as of July 31, 2014, between Twinlab Holdings and Little Harbor LLC, a Nevada limited liability company.

 

" Little Harbor Subordination Agreement " means that certain subordination agreement to be entered into between Little Harbor LLC, a Nevada limited liability company, and the Purchaser, in form and substance reasonably satisfactory to the Purchaser, and all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereof, as applicable.

 

" Losses " has the meaning set forth in Section 9.

 

" Material Adverse Effect " shall mean any event, act, omission, condition or circumstance which has or would reasonably be expected to have a material adverse effect on (a) the business, operations, properties, assets or condition, financial or otherwise, of any Company or the Companies and their Subsidiaries, taken as a whole, (b) the ability of any Company or any Subsidiary to perform any of its obligations under any of the Transaction Documents, or (c) the validity or enforceability of, or the Purchaser’s rights and remedies under, any of the Transaction Documents, other than due to the acts or omissions of the Purchaser or one of its Affiliates.

 

" Maturity Date " means February 13, 2020.

 

" Mortgage " means that certain trust deed to be executed by Twinlab Corporation and delivered to Purchaser at Closing, and recorded in the appropriate real estate records, creating a first priority lien in favor Purchaser on the Mortgaged Property, as amended from time to time.

 

" Mortgaged Property " means the real property and improvements located thereon designated on the tax map of the Office of the Assessor of Utah County, Utah as Lot 1, Plat "M", Utah Valley Business Park Subdivision, American Fork, Utah, according to the official plat thereof on file and of record in the Office of the Utah County Recorder.

 

" Multiemployer Plan " shall mean a " multiemployer plan " as defined in Sections 3(37) and 4001(a)(3) of ERISA.

 

" Net Income " shall mean the consolidated net income (or loss) of the Companies and their Subsidiaries for the period in question, after giving effect to deduction of or provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accordance with GAAP; provided, however, that for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (a) one-time extraordinary income items, as determined in accordance with GAAP, and (b) any Net Income attributable to any Subsidiary to the extent that any Company (or any Subsidiary through which such Company owns the subject Subsidiary) is prohibited (by law, contract minority ownership rights or otherwise) from receiving a distribution of such Net Income from such Subsidiary.

 

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" Non-Financed Capital Expenditures " means Capital Expenditures not financed by the seller of the capital asset, by a third party lender (other than by means of an advance under the Permitted Senior Debt) or by Purchaser.

 

" Note Register " has the meaning set forth in Section 2.2.

 

" Notes " shall mean the Secured Note issued under this Agreement as described in Section 2(a)(i), and all replacements, renewals and any other note or notes of like tenor hereafter issued by the Companies in substitution or exchange for any thereof.

 

" Obligations " shall mean and include any and all loans, advances, debts, liabilities, obligations, covenants, agreements and duties owing by any Company to the Purchaser under or pursuant to the Transaction Documents, of every kind or nature, present or future (including any interest accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Company or any of its Subsidiaries, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether or not evidenced by any note, guaranty or other instrument, whether or not for the payment of money, whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise, including, but not limited to, any and all of such Company’s Indebtedness, liabilities and/or obligations under this Agreement, other Transaction Documents and any amendments, extensions, renewals or increases, Contingent Obligations of such Company and all reasonable costs and expenses of the Purchaser incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations and/or agreements of such Company to the Purchaser to perform acts or refrain from taking any action. For avoidance of doubt, the Obligations shall not include any obligation, covenant, agreement and duty owing by any Company to the Purchaser under the Warrant or the Equity Interests.

 

" OFAC Laws and Regulations " means Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations (Title 31 Part 595 of the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), and the Cuban Assets Control Regulations (Title 31 Part 515 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws, ordinances, regulations, policies, lists (including, without limitation, the Specially Designated Nationals and Blocked Persons List) and any other requirements of any Governmental Authority (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter supplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of the foregoing, or under similar laws, ordinances, regulations, policies or requirements of other states or localities.

 

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" Operating Lease " means, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) under which the Person is the lessee and that is not a Capital Lease.

 

" Ordinary Course of Business " shall mean the ordinary course of the Companies’ business as conducted at Closing and from time to time thereafter materially consistent with past practice.

 

" PBGC " shall mean the Pension Benefit Guaranty Corporation.

 

" Pension Benefit Plan " shall mean at any time any employee pension benefit plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the IRC and either (i) is maintained by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.

 

" Penta " means Penta Mezzanine SBIC Fund I, L.P.

 

" Penta Debt " means Indebtedness pursuant to that certain Note and Warrant Purchase Agreement, as amended, dated November 13, 2014, among the Companies and Penta, and the Notes and Warrant as defined therein.

 

" Permitted Acquisition " means any of the following:

 

(a)          the Target 1 Acquisition so long as no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the Target 1 Acquisition;

 

(b)          the Target 2 Acquisition so long as no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the Target 2 Acquisition;

 

(c)          any Acquisition between Companies in which a Company is the surviving entity; or

 

(d)          any other Acquisition so long as no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Acquisition, the proposed Acquisition is consensual and the Purchaser shall have consented in writing (such consent not to be unreasonably withheld or delayed) to such Acquisition.

 

" Permitted Dispositions " means any of the following:

 

(a)          sales, abandonment, or other dispositions of Equipment that is substantially worn, damaged, or obsolete in the Ordinary Course of Business;

 

(b)          sales of Inventory in the Ordinary Course of Business;

 

(c)          the granting of Permitted Encumbrances;

 

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(e)          surrender of contractual rights in the Ordinary Course of Business or (ii) the settlement, release or surrender of any contract, tort or other litigation claims in the Ordinary Course of Business; and

 

(f)          any sale of the real property designated on the tax map of the Office of the Assessor of Miami County, Indiana as Tax Parcel No. 022-16410-00 and having an address at 51 Strawtown Pike, Peru, Indiana.

 

" Permitted Encumbrances " means the following types of Liens (other than any such Lien imposed pursuant to the IRC or by ERISA):

 

(i)          Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by Section 5.2;

 

(ii)         statutory Liens of landlords, Liens of carriers, warehousemen, mechanics and materialmen and other Liens imposed by law incurred in the Ordinary Course of Business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made therefor;

 

(iii)        Liens incurred or deposits made in the Ordinary Course of Business in connection with workers compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

 

(iv)        leases or subleases granted to others not interfering in any material respect with the Ordinary Course of Business of the Company or any of its Subsidiaries;

 

(v)         easements, rights-of-way, restrictions (including zoning restrictions), minor defects, encroachments or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the Ordinary Course of Business of any Company or any of its Subsidiaries;

 

(vi)        any (A) interest or title of a lessor or sublessor under any Operating Lease or Capital Lease not prohibited by this Agreement, (B) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to, or (C) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding subclause (B);

 

(vii)       Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

 

(viii)      Liens securing the Obligations;

 

(ix)         Liens for purchase money security interests for equipment purchased in the Ordinary Course of Business or Liens relating to Indebtedness permitted under Section 6.7(e);

 

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(x)          Liens existing on the Effective Date and set forth or described on Schedule 6.2 hereof; provided , however , that to qualify as a Permitted Encumbrance, any such Lien described on Schedule 6.2 shall only secure the Indebtedness that it secures on the Effective Date;

 

(xi)         Liens (i) in favor of collecting banks arising under the applicable UCC on items in the course of collection, (ii) in favor of a banking or other depositary institution arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary to the banking industry, (iii) in favor of a financial institution arising as a matter of law encumbering financial assets on deposit in securities accounts (including the right of set-off) and which are within the general parameters customary to the securities industry and (iv) that are contractual rights of set-off relating to the establishment of depository and cash management relations with banks not given in connection with the issuance of Indebtedness for borrowed money and which are within the general parameters customary to the banking industry;

 

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

 

(xiii)       Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any Subsidiary of the Company in the Ordinary Course of Business;

 

(xiv)      Liens on insurance policies and the proceeds thereof (whether accrued or not) and rights or claims against an insured to secure liabilities for premiums to insurance carriers; and

 

(xv)       Liens securing Permitted Senior Debt.

 

" Person " shall mean any individual, corporation, partnership, limited liability company, trust, unincorporated organization, or any other form of entity.

 

" Permitted Senior Debt " means Indebtedness that is senior or superior or pari passu in right of payment (to any extent) to the Notes (or any guaranty of the Notes) in an aggregate principal amount outstanding at any time equal to or less than $35,000,000, including the Penta Debt, and is otherwise on terms and conditions reasonably satisfactory to Purchaser.

 

" Plan " shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for employees of any Company or any member of the Controlled Group or any such Plan to which any Company or any member of the Controlled Group is required to contribute on behalf of any of its employees.

 

" Premises " has the meaning set forth in Schedule 3.1 .

 

" Prepayment Penalty " has the meaning set forth in the Notes.

 

" Prohibited Preferred Stock " means any preferred Equity Interest that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of preferred Equity Interest of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 1 year after the Maturity Date, or, on or before the date that is less than 1 year after the Maturity Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of preferred Equity Interest of the same class and series or of shares of common stock).

 

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" Purchaser " has the meaning set forth in the opening paragraph.

 

" RCRA " shall mean the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq .

 

" Refinancing Indebtedness" shall mean refinancings, renewals, or extensions of Indebtedness so long as such refinancings, renewals, or extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed, or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in connection therewith and by the amount of unfunded commitments with respect thereto.

 

" Releases " has the meaning set forth in Section 4.1(n)(iii).

 

" Reportable Event " shall mean a reportable event described in Section 4043(b) of ERISA or the regulations promulgated thereunder.

 

" Restricted Payment " has the meaning given to such term in Section 6.6.

 

" Secured Note " has the meaning given to such term in Section 2.1(a)(i).

 

" Securities " shall mean the Notes and the Warrant.

 

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

 

" Security Agreement " shall mean each and every grant of a security interest, pledge or lien on any property for the purpose of securing payment of the Obligations or performance by the Security Agreement issued under this Agreement, and all replacements, renewals and any other note or notes of like tenor hereafter issued by the Company in substitution or exchange for any thereof.

 

" Senior Lender " means a holder of Permitted Senior Debt and all successors and assigns. On the Effective Date, the Senior Lenders shall be MidCap Financial Trust, , as Agent, and all Senior Lenders (as that term is defined in the Subordination Agreement described in the caption to this Agreement) and Penta.

 

" Senior Loan Documents" means any credit agreement, loan agreement, note agreement other primary debt agreement, note, guaranty, security agreement, mortgage and any other instrument or agreement relating to the Permitted Senior Debt entered into, now or in the future, by any Company and a Senior Lender or given by any Company to a Senior Lender, and all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereof, as applicable.

 

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" Solvent " means, with respect to any Person, that as of the date of determination both (a) (i) the then fair saleable value of the property of such Person is (A) greater than the total amount of liabilities (including contingent liabilities) of such Person and (B) not less than the amount that will be required to pay the probable liabilities of such Person’s then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales, reasonably available to such Person; (ii) such Person’s capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (b) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

" Subordination Agreement " shall refer to, individually and collectively, as applicable, that certain Subordination Agreement, dated as of the date hereof, between Purchaser and MidCap Financial Trust, as Agent for all Senior Lenders, and that certain Subordination Agreement, dated as of the date hereof, between Purchaser and Penta, any other subordination or intercreditor agreement with respect to any Permitted Senior Debt which is in form and substance reasonably satisfactory to Purchaser, and/or all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereof, as applicable.

 

" Subsidiary " shall mean a corporation or other entity any of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.

 

" Target 1 " means Target No. 1 as defined on page 39 of the Parent’s 8-K dated September 16, 2014.

 

" Target 2 " means Target No. 2 as defined on page 40 of the Parent’s 8-K filed on September 16, 2014.

 

" Target 1 Acquisition " means consummation of the acquisition contemplated by the Option Agreement between Target 1 and TCC, dated September 2, 2014, described on page 39 of the Parent’s 8-K dated September 16, 2014 and previously provided to the Purchaser.

 

" Target 2 Acquisition " means consummation of the acquisition contemplated by the Amended and Restated Option Agreement between Target 2 and TCC, dated December 20, 2014, and previously provided to the Purchaser.

 

"Tax Distributions" shall mean distributions to equity holders of any Company for the purpose of paying required State and Federal income taxes on profits generated by such Company.

 

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" Total Funded Debt " shall mean, at any date of determination, all Indebtedness of the Companies and their Subsidiaries for borrowed money, purchase money Indebtedness, installment sale obligations, Capital Lease obligations, Contingent Obligations of the Companies and their Subsidiaries, and all other obligations evidenced by notes or bonds, all of the foregoing as determined on a consolidated basis in accordance with GAAP.

 

" Transaction Documents " shall mean this Agreement, the Notes, the Security Agreement, the Guaranty and all agreements, documents, certificates and instruments delivered in connection with any of the foregoing; provided, however, that "Transaction Documents" shall not include the Warrant.

 

" UCC " has the meaning set forth in Section 3.2.

 

" Utah Lease " shall mean that certain Lease, dated February 6, 2013, between Twinlab and Utah Lab LLC, relating to the Companies’ facility located at 600 E. Quality Dr., American Fork, UT 84003.

 

" Warrant " means the Warrant(s) to be issued by the Parent to the Purchaser at the Closing as set forth in Section 2.1(a)(ii).

 

Article 2.        Purchase and Sale of Securities

 

Section 2.1            Purchase and Sale of Securities .

 

(a)                                                   Purchase and Sale . The Purchaser hereby agrees, subject to the terms and conditions of this Agreement, to purchase from the Companies, and the Companies hereby agree to sell to the Purchaser, at the Closing the following Securities:

 

(i)                                         The Secured Note in the stated principal amount of Five Million Dollars ($5,000,000) (the " Secured Note ") . The Secured Note shall be substantially in the form attached hereto as Exhibit 2.1(a)(i) and shall include such notations, legends or endorsements set forth therefor or required by law. The Secured Note shall be dated the date of its issuance. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Agreement and, to the extent applicable, the Company and the Purchaser, by their execution and delivery of this Agreement, expressly agree to such terms and provisions and to be bound thereby; and

 

(ii)                                       The Warrant . The Warrant shall be substantially in the form attached hereto as Exhibit 2.1(a)(ii)(A) and shall be exercisable into the Equity Interest of the Company as provided therein. One or more warrants in the aggregate amount of 2,329,400 shares of common stock of the Parent will be issued to the Purchaser in connection with the purchase of the Secured Note (the " Warrant "). The Parent and the Purchaser, by their execution and delivery of this Agreement, expressly agree to the terms and provisions of the Warrant and to be bound thereby.

 

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(b)                                                  Closing . The purchase and sale of the Secured Note and the Warrant shall take place on the Effective Date at a closing (the " Closing ") at a mutually agreed upon location on the date of this Agreement. At the Closing, the Companies will deliver to the Purchaser the Secured Note and the Parent will deliver to the Purchaser the Warrant, dated as of the Effective Date, to be purchased by the Purchaser in accordance with Section 2.1(a) (in such permitted denomination or denominations and registered in the Purchaser’s name or the name of such nominee or nominees as the Purchaser may reasonably request) as the total consideration for the Secured Note and the Warrant. The purchase price of Five Million Dollars ($5,000,000) (less certain fees and expenses as set forth in Section 2.1(d)(i) below) shall be paid by Purchaser to the Companies on the Effective Date, which shall be paid by wire transfer to the bank account of the Companies as set forth on Exhibit 2.1(b).

 

(c)                                                  [Intentionally Deleted] .

 

(d)                                                 Other Fees and Expenses .

 

(i)                                       The Purchaser shall be entitled to deduct such amounts from the purchase price for the Securities all reasonable fees and expenses relating to this Agreement, the Warrant and the other Transaction Documents, including: (A) the Purchaser’s out-of-pocket expenses incurred in connection with the transactions contemplated by this Agreement, the Warrant and the other Transaction Documents, including expenses and all costs incurred in connection with the Mortgage and such Purchaser’s review of the Companies’ financial records and the Companies’ business and operations; (B) the reasonable fees, expenses and other charges of the Purchaser’s counsel; and (C) a fee to Purchaser of Seventy-Five Thousand Dollars ($75,000) less any deposit previously paid by the Companies.

 

(ii)                                       Thereafter, upon demand by the Purchaser, the Companies shall pay (A) any out-of-pocket fees and expenses (including the reasonable fees and expenses of counsel) in connection with any registration or qualification of the Securities required in connection with the offer and sale of the Securities pursuant to this Agreement under the securities or "blue sky" laws of any jurisdiction requiring such registration or qualification or in connection with obtaining any exemptions from such requirements; and (B) the Purchaser’s expenses (including the fees and expenses of counsel) relating to any amendment, supplement or modification of, or any waiver, consent, enforcement or preservation of rights under, this Agreement, the Note or any other Transaction Document, or any other documents contemplated hereby or thereby, including any refinancing or restructuring of the Obligations in the nature of a "work-out" or pursuant to bankruptcy or insolvency proceedings, or in any litigation or other Proceeding.

 

(e)                                                  Issue Price . The Companies and the Purchaser agree that for purposes of Section 1271 et seq . of the IRC, the aggregate issue price of the Secured Note is 100% of its principal amount and the price of the Warrant is the price set forth in the agreement relating to the issuance thereof, and that this agreement is intended to constitute agreement as to the issue price for all federal and other income tax purposes.

 

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Section 2.2            Registration of Notes .

 

The Parent shall cause to be kept at its principal office a register for the registration and transfer of the Notes (the " Note Register "). The name and address of the Holders of the Notes and the names and addresses of the transferee or transferees of the Notes (if the Notes are transferred) shall be registered in the Note Register. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement and the Companies shall not be affected by any notice to the contrary, until due presentment of such Note for registration of transfer so provided in this Section 2.2. Payment of or on account of the principal, premium, if any, and interest on, or any other amount in respect of, any registered Notes shall be made to or upon the written order of such registered holder.

 

Section 2.3            Delivery Expenses .

 

If a Holder surrenders any Note to the Companies for any reason, the Companies agrees to pay the cost of delivering to the Holder’s home office the surrendered Note and each Note issued in substitution or replacement for the surrendered Note.

 

Section 2.4            Issue Taxes .

 

The Companies agree to pay all taxes, including the documentary stamp taxes, (other than taxes in the nature of income, franchise or gift taxes) in connection with the issuance, sale, delivery or transfer by the Companies to the Purchaser of the Secured Note and the Warrant and the execution and delivery of the agreements and instruments contemplated hereby and any modification of any of the Notes, agreements and instruments and will hold the Purchaser harmless without limitation as to time against any and all liabilities with respect to any and all such taxes. The obligations of the Companies under this Section 2.4 shall survive the payment or prepayment of the Notes, the exercise of the Warrant and the termination of this Agreement.

 

Section 2.5            General Provisions Regarding Payments .

 

(a)                                           Manner and Time of Payment . All payments by the Companies of principal, premium, if any, interest and other amounts hereunder shall be made in U.S. dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered the Holder’s account not later than 4:00 p.m. (New York time) on the date due unless such day is not a Business Day, in which case the Companies shall make such payments on the next succeeding Business Day, and interest shall accrue on the aggregate amount of such payments until such amount is paid and payment of such accrued interest shall be made concurrently with the payment of such amount. Funds received by the Holder after 4:00 p.m. (New York time) on the date due shall be deemed to have been paid by the Companies on the next succeeding Business Day and interest shall accrue on such amount paid until such next succeeding Business Day.

 

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(b)                                           Application of Payments to Principal and Interest . All payments in respect of the principal amount of the Notes shall include payment of accrued interest on the principal amount being paid, and all such payments shall be applied to the payment of interest before application to principal; provided, however, that from and after the occurrence of an Event of Default, in addition to such payments of principal and interest, all payments hereunder shall include fees, costs and expenses due to the Purchaser hereunder, and the Purchaser may apply all payments made hereunder to such Obligations, including all fees, costs and expenses, and in such order, as it may elect in its sole discretion.

 

The Companies shall repay the outstanding principal amount of each Note with interest thereon in the manner and in accordance with the terms and conditions of such Note and the other Transaction Documents.

 

Section 2.6            Use of Proceeds .

 

The Companies shall use the proceeds of the Note to (a) pay a portion of the consideration for the Target 2 Acquisition and/or the Target 1 Acquisition, (b) pay costs relating to the Closing, the Target 2 Acquisition and/or the Target 1 Acquisition or (c) for working capital and general corporate purposes.

 

Section 2.7            Margin Regulations .

 

No portion of the proceeds of any Securities under this Agreement shall be used by the Companies in any manner that would reasonably be expected to cause the issuance and sale of the Securities or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such issuance and sale and such use of proceeds.

 

Section 2.8            Maximum Interest .

 

At no time shall the Companies be obligated or required to pay interest on the principal balance due hereunder at a rate which could subject the Purchaser to either civil or criminal liability as a result of being in excess of the maximum interest rate which the Companies are permitted by applicable law to contract or agree to pay. If by the terms of the Notes, this Agreement and/or the other Transaction Documents, the Company is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of such maximum rate, the applicable interest rate or the Default Rate or other payments pursuant to the Transaction Documents deemed to be interest, as the case may be, shall be deemed to be immediately reduced to such maximum rate and all previous payments in excess of the maximum rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to the Purchaser on account of the Obligations, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the applicable Note until payment in full so that the rate or amount of interest on account of the Obligations does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Obligations for so long as the Obligations are outstanding.

 

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Article 3.           Collateral: General Terms

 

Section 3.1            Security Interest Created; Obligations Secured .

 

To secure the prompt payment and performance to the Purchaser of the Obligations, in addition to the Mortgage, the Companies hereby assign, pledge and grant to the Purchaser a continuing security interest in and Lien on the Collateral subject only to Permitted Encumbrances. The Companies (other than Parent) shall cause each present or future owner of any Equity Interest of any Company to assign, pledge and grant to the Purchaser a continuing security interest in and Lien on their Equity Interest in such Company and to execute deliver a security agreement covering such Equity Interests in form and content satisfactory to the Purchaser.

 

Section 3.2            Financing Statements .

 

The Companies authorize the Purchaser to file financing statements with respect to the security interest of the Purchaser, continuation statements with respect thereto, and any amendments to such financing statements. The Companies agrees that, notwithstanding any provision in the Uniform Commercial Code in the applicable jurisdiction (the " UCC ") to the contrary, the Companies shall not file a termination statement of any financing statement filed by the Purchaser in connection with any security interest granted under this Agreement without Purchaser’s written consent.

 

Article 4.           Representations and Warranties

 

Section 4.1            Companies’ Representations and Warranties .

 

Each Company represents and warrants to the Purchaser as of the Effective Date as follows:

 

(a)           Financial Information . All financial statements and other information concerning the Companies and their Subsidiaries delivered to Purchaser by the Companies and their Subsidiaries in connection with the transaction described in this Agreement (collectively, the " Financial Information ") are true, correct and complete in all material respects; there have been no restatements of or adjustments to the Financial Information since the date such Financial Information was prepared or delivered to the Purchaser, and the Companies and their Subsidiaries understand that the Purchaser is relying upon the Financial Information and the Companies and their Subsidiaries represent that such reliance is reasonable. All financial statements of the Companies and their Subsidiaries included in the Financial Information were prepared in accordance with customary accounting practices applied on a consistent basis during the periods involved, and fairly present as of the date of such financial statements the financial condition of each individual or entity to which they pertain. No change has occurred with respect to the financial condition of any of the Companies, the Companies’ Subsidiaries or the Collateral as reflected in the Financial Information which has not been disclosed in writing to the Purchaser or has had, or could reasonably be expected to result in a Material Adverse Effect. Attached as Schedule 4.1(a) is a true and correct copy of: (i) Twinlab Holdings’ and its Subsidiaries’ consolidated income statement for the Fiscal Year ending December 31, 2013, and (ii) a copy of the unaudited consolidated balance sheet of TCC and its Subsidiaries as of August 31, 2014 and the related consolidated statements of income and retained earnings and the related statements of cash flows of the Companies and its Subsidiaries for the period from January 1, 2014 through August 31, 2014.

 

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(b)           Formation and Qualification . Each of the Companies and their Subsidiaries are duly organized or formed, validly existing and in good standing under the laws of its state of incorporation or formation. Each of the Companies and their Subsidiaries are qualified as a foreign corporation to do business in the state(s) where the failure to be qualified would reasonably be expected to result in a Material Adverse Effect. No Company is a "foreign corporation," "foreign partnership," "foreign trust," "foreign estate" or "foreign person" (as those terms are defined by the IRC, as amended).

 

(c)           Authority . All necessary action has been taken to authorize the execution, delivery and performance by each Company of this Agreement, the other Transaction Documents and the Warrant. The person(s) who have executed this Agreement on behalf of each Company are duly authorized so to do. Upon execution by each Company, this Agreement, the other Transaction Documents and the Warrant shall constitute the legal, valid and binding obligations of such Company enforceable against such Company in accordance with their respective terms, except (a) as the same may be limited by bankruptcy, insolvency, reorganization moratorium or similar laws now or hereafter in effect relating to creditors rights generally and (b) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

(d)           Solvency . Each Company is and shall at all times remain Solvent.

 

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(e)           Litigation . Except as set forth in Schedule 4.1(e) , there are no suits, actions, proceedings or investigations pending, or to its actual knowledge, threatened against or involving a Company or any of its Subsidiaries, the Collateral or the Premises (as defined on Schedule 3.1 hereto) before any arbitrator or any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Collateral or any of the Companies or the Companies’ Subsidiaries (" Governmental Authority "), except for such suits, actions, proceedings or investigations which, individually or in the aggregate, have not had, and could not reasonably be expected to result in, a Material Adverse Effect.

 

(f)           Employee Benefit Plan . Other than as set forth on Schedule 4.1(f) hereto, the Companies and their Subsidiaries have no Plans and have never had any Plans.

 

(g)           No Conflict . No Company is, and the authorization, execution, delivery and performance of this Agreement, the other Transaction Documents and the Warrant will not result, in any breach or default under any other document, instrument or agreement to which a Company or any of its Subsidiaries is a party or to which a Company or any of its Subsidiaries, the Premises, the Collateral or any of the property of a Company or any of its Subsidiaries is subject or bound, except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. The authorization, execution, delivery and performance of this Agreement, the other Transaction Documents and the Warrant will not violate any applicable law, statute, regulation, rule, ordinance, code, rule or order. The Collateral is not subject to any right of first refusal, right of first offer or option to purchase or lease granted to a third party. Without limiting the above, the Senior Lenders have approved and authorized the Companies to consummate the transactions contemplated herein pursuant to the terms hereof.

 

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(h)           Location and Condition of Collateral . The Collateral is in compliance with all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders and approvals of each Governmental Authority having jurisdiction over the Collateral, and all policies or rules of common law, in each case, as amended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to any Company or any of its Subsidiaries (collectively, the " Applicable Regulations "), except for such noncompliance which has not had, and could not reasonably be expected to result in, a Material Adverse Effect. All required licenses and permits, both governmental and private, to use and operate the Collateral and to use and operate each of the Premises are in full force and effect, except for such licenses and permits the failure of which to obtain has not had, and could not reasonably be expected to result in, a Material Adverse Effect. Except for Collateral having an aggregate value of $200,000 or less, the Collateral is located at the Premises and is in good and efficient order, condition and repair and well-maintained, ordinary wear and tear excepted, and is fully operational. The Companies own the Collateral, free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever except for Permitted Encumbrances. The Collateral consists in part of all the inventory, equipment (to the extent owned and not leased by a Company), machinery (to the extent owned and not leased by a Company), furniture, appliances, trade fixtures, and goods required to be maintained by the Companies and necessary for the proper and prudent operation of the business of the Companies. Purchaser shall have a perfected lien upon and continuing security interest in the Collateral pursuant to this Agreement, the Security Agreement and the UCC-1 Financing Statements filed by Purchaser with respect to the security interest created by this Agreement and the Security Agreement subject only to Permitted Encumbrances.

 

(i)           Leases . The Companies have delivered to Purchaser a true, correct and complete copy of each lease, together with all amendments thereto, with respect to each of the Premises set forth on Schedule 3.1 (the " Leases "). The Leases are the only agreements between the lessors (" Lessors ") and Companies and their Subsidiaries with respect to the Premises. The Leases are in full force and effect. Except in favor of Senior Lender, no Company nor any of its Subsidiaries has assigned, transferred, mortgaged, hypothecated or otherwise encumbered any of its rights or interests in the Leases. Neither the Companies nor any of their Subsidiaries nor, to each Company’s actual knowledge, Lessors are currently in default (beyond applicable grace and cure periods) of any of their obligations under the Leases. To each Company’s actual knowledge, no event has occurred and no condition exists that, with the giving of notice or the lapse of time or both, would constitute a default by a Company, any of its Subsidiaries, or Lessors under the Leases. No Company nor any of its Subsidiaries owns any real property except as set forth in Schedule 4.1(i) .

 

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(j)           Patriot Act . As of the Effective Date and as of the date of execution of any of the Transaction Documents: (i) none of the Companies, Guarantor, any individual or entity owning directly or indirectly any interest in the Companies or any of their Subsidiaries, is an individual or entity whose property or interests are subject to being blocked under any of the OFAC Laws and Regulations or is otherwise in violation of any of the OFAC Laws and Regulations; (ii) the Companies and their Subsidiaries have taken all reasonable measures, in accordance with all applicable Anti-Money Laundering Laws, with respect to each holder of a direct or indirect interest in any Company or any of its Subsidiaries, to assure that funds invested by such holders in any Company or any of its Subsidiaries are derived from legal sources; (iii) to each Company’s knowledge after making due inquiry, neither any Company nor any of its Subsidiaries nor any holder of a direct or indirect interest in any Company or any of its Subsidiaries (A) is under investigation by any Governmental Authority for, or has been charged with, or convicted of, any violation of any Anti-Money Laundering Laws, or drug trafficking, terrorist-related activities or other money laundering predicated crimes or a violation of the BSA, (B) has been assessed civil penalties under these or related laws, or (C) has had any of its funds seized or forfeited in an action under these or related laws; and (iv) the Companies and their Subsidiaries have taken reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, to ensure that each Company and each of the Companies’ Subsidiaries are and shall be in compliance with all (A) Anti-Money Laundering Laws and (B) OFAC Laws and Regulations.

 

(k)           Survival of Representations and Warranties . All representations and warranties of each Company and each of its Subsidiaries contained in this Agreement, the other Transaction Documents and the Warrant shall be true at the time of such Company’s execution of this Agreement, the other Transaction Documents and the Warrant, and shall survive the execution, delivery and acceptance thereof by the parties thereto and the closing of the transactions described therein or related thereto.

 

(l)           Tax Returns . Each Company’s and each of its Subsidiaries’ federal tax identification number is set forth on Schedule 4.1(l) . Each Company and each of its Subsidiaries has filed (or is on extension granted by the applicable taxing authority with respect to file) all federal, state and local tax returns and other reports required by law to file and has paid all taxes, assessments, fees and other governmental charges that are due and payable and that no tax liens exist. Federal, state and local income tax returns of each Company and each of its Subsidiaries have been filed with the appropriate taxing authority or closed by applicable statute and satisfied for all Fiscal Years prior to and including the Fiscal Year ending 2013. The provision for taxes, if applicable, on the books of the Companies and their Subsidiaries is adequate for all years not closed by applicable statutes, and for its current Fiscal Year, and no Company nor any of its Subsidiaries has knowledge of any deficiency or additional assessment in connection therewith not provided for on its books. No Company nor any of its Subsidiaries has been the subject of any tax audit nor has it been notified of any upcoming tax audits except as set forth on Schedule 4.1(l) .

 

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(m)           Corporate Name . Except as disclosed in the Parent’s Securities and Exchange Commission filings, no Company nor any of its Subsidiaries has been known by any other corporate name and does not sell Inventory under any other name except as disclosed on Schedule 4.1(aa) nor has Company nor any of its Subsidiaries been the surviving corporation of a merger or consolidation or acquired all or substantially all of the assets of any Person.

 

(n)           O.S.H.A. and Environmental Compliance .

 

(i)          Each Company and each of its Subsidiaries has duly complied in all material respects with, and its facilities, business, assets, property, leaseholds and Equipment are in compliance in all material respects with, the provisions of the Federal Occupational Safety and Health Act and all Environmental Laws; there are no outstanding citations, notices or orders of non-compliance issued to any Company or any of its Subsidiaries or relating to their business, assets, property, leaseholds or Equipment under any such laws, rules or regulations.

 

(ii)         Each Company and each of its Subsidiaries has been issued all required federal, state and local licenses, certificates or permits relating to all applicable Environmental Laws.

 

(iii)        There are no visible signs of releases, spills, discharges, leaks or disposal (collectively referred to as " Releases ") of Hazardous Substances at, upon, under or within any real property owned or leased by any Company or any of its Subsidiaries except Releases handled in accordance with all applicable government regulations; to each Company’s actual knowledge, there are no underground storage tanks or polychlorinated biphenyls on any real property leased by any Company or any of its Subsidiaries; to each Company’s actual knowledge, no real property owned or leased by any Company or any of its Subsidiaries has ever been used as a treatment, storage or disposal facility of Hazardous Waste; and to each Company’s actual knowledge, no Hazardous Substances are present on any Premises leased by any Company or any of its Subsidiaries, excepting such quantities as are handled in accordance with all applicable manufacturer’s instructions and governmental regulations and in proper storage containers and as are necessary for the operation of the commercial business of such Company, any of its Subsidiaries or of its tenants.

 

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(o)           Patents, Trademarks, Copyrights and Licenses . All patents, patent applications, trademarks, trademark applications, service marks, service mark applications, copyrights, copyright applications, design rights, tradenames, assumed names, trade secrets and licenses owned or utilized by any Company (the " Intellectual Property ") are set forth on Schedule 4.1(o) . To each Company’s knowledge, all such Intellectual Property is valid and has been duly registered or filed with all appropriate Governmental Authorities and constitutes all of the intellectual property rights which are necessary for the operation of its business. To each Company’s actual knowledge, there is no objection to or pending challenge to the validity of any such Intellectual Property and no Company is aware of any grounds for any challenge.

 

(p)           Licenses and Permits . Each Company and each of its Subsidiaries (i) is in compliance with and (ii) has procured and is now in possession of, all material licenses or permits required by any applicable law or regulation for the operation of its business in each jurisdiction wherein it is now conducting business and where the failure to procure such licenses or permits would have a Material Adverse Effect on such Company or any of its Subsidiaries.

 

(q)           Default of Indebtedness . All Indebtedness of the Companies and their Subsidiaries existing on the Effective Date is set forth on Schedule 4.1(q) . No Company nor any of its Subsidiaries is in default in the payment of the principal of or interest on any Indebtedness or under any instrument or agreement under or subject to which any Indebtedness has been issued and no event has occurred under the provisions of any such instrument or agreement which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an event of default thereunder.

 

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(r)           No Default . Except for past due payments owed on trade payables incurred in the ordinary course of business or as otherwise set forth on Schedule 4.1(r), no Company nor any of its Subsidiaries is in default in the payment or performance of any of its contractual obligations and no Event of Default is existing and no event has occurred which with or without the lapse of time or the giving of notice, or both, constitutes or would constitute an Event of Default.

 

(s)           No Burdensome Restrictions . No Company nor any of its Subsidiaries is party to any contract or agreement the performance of which would have a Material Adverse Effect on such Company or any of its Subsidiaries. No Company nor any of its Subsidiaries has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien which is not a Permitted Encumbrance.

 

(t)           No Labor Disputes . No Company nor any of its Subsidiaries is involved in any labor dispute; there are no strikes or walkouts or union organization of any Company’s or any of its Subsidiaries’ employees threatened or in existence and no labor contract is scheduled to expire prior to the Maturity Date.

 

(u)           Authorized Capital . The authorized Equity Interests of Parent consist of (i) 5,000,000,000 shares of common stock, of which 220,000,000 common shares are issued and outstanding as of the date hereof and (ii) 500,000,000 shares of preferred stock, of which no preferred shares are issued and outstanding. All outstanding Equity Interests are duly and validly issued, fully paid and nonassessable and are owned beneficially and of record by the Persons specified in Schedule 4.1(u) . The issuance and sale of such Equity Interests, upon such issuance and sale, (A) has either been registered or qualified under applicable Federal and state securities laws or (B) is exempt therefrom. There are no outstanding subscriptions, options, warrants, rights (including registration rights and preemptive rights) or any other agreements or commitments of any nature relating to any Equity Interests of the Company, except as disclosed in Schedule 4.1(u) . The Purchaser has been furnished a true and complete copy of each certificate, agreement and document disclosed in Schedule 4.1(u) . The Equity Interest into which the Warrant is exercisable on the Effective Date is equal to 2,329,400 shares of common stock of the Parent as specified in Schedule 4.1(u) .

 

(v)          Swaps . No Company nor any of its Subsidiaries is a party to, nor will it be a party to, any swap agreement whereby the Company has agreed or will agree to swap interest rates or currencies unless same provides that damages upon termination following an event of default thereunder are payable on an unlimited "two way basis" without regard to fault on the part of either party.

 

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(w)           Conflicting Agreements . Except as provided in the Senior Loan Documents, no provision of any mortgage, indenture, contract, agreement, judgment, decree or order binding on a Company or any of its Subsidiaries or affecting the Collateral conflicts with, or requires any third party consent which has not already been obtained to, or would in any way prevent the execution, delivery or performance of, the terms of this Agreement, the other Transaction Documents or the Warrant.

 

(x)            [Reserved] .

 

(y)           Business and Property of Company . On the Effective Date, each Company and each of its Subsidiaries owns or leases all the property and possesses all of the rights and consents necessary for the conduct of the business of such Company and its Subsidiaries.

 

(z)            Compliance with Laws . Neither the Companies nor any of the Companies’ Subsidiaries is in violation of any applicable law in any respect which would reasonably be expected to have a Material Adverse Effect on the Companies or any of their Subsidiaries, nor is any Company or any of such Company’s Subsidiaries in violation of any order of any Governmental Authority or arbitration board or other tribunal.

 

(aa)          Trade Names . All trade names or styles under which a Company or any of its Subsidiaries sells Inventory or Equipment, creates Receivables or conducts a portion of its business, or to which instruments in payment of Receivables are made payable, are listed in Schedule 4.1(aa) .

 

(bb)          Not a Regulated Entity . Neither the Companies nor any of its Subsidiaries is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, nor is it controlled by such a company; (ii) a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935 or (iii) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any public utilities code or any other Applicable law regarding its authority to incur the Indebtedness arising under any Transaction Document.

 

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(cc)          Certain Fees . No brokers or finders fee or commission will be payable with respect to this Agreement, any other Transaction Documents, the Warrant or any of the transactions contemplated hereby.

 

(dd)          Private Offering . Based upon the representations and warranties for the Purchaser set forth in Section 4.2 hereof, at Closing, the sale of the Securities hereunder shall be exempt from the registration and prospectus delivery requirements of the Securities Act. In the case of each offer or sale of the Securities, no form of general solicitation or general advertising was used by any Company or its respective representatives, including advertisements, articles, notices or other communication published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Except as disclosed in the Parent’s Securities and Exchange Commission filings or otherwise disclosed to the Purchaser in writing, no securities have been issued and sold by any Company within the six-month period immediately prior to the Effective Date. Each Company agrees that neither it, nor anyone acting on its behalf, will offer or sell the Securities, or any portion of them, if such offer or sale would bring the issuance and sale of the Securities to the Purchaser hereunder within the provisions of Section 5 of the Securities Act nor offer any similar securities for issuance or sale to, or solicit any offer to acquire any of the same from, or otherwise approach or negotiate with respect thereto with, anyone if the sale of the Securities and any such securities could be integrated as a single offering for the purposes of the Securities Act, including Regulation D thereunder.

 

(ee)          Disclosure . No representation or warranty made by any Company or any of its Subsidiaries in this Agreement, in any other Transaction Document, in the Warrant or in any financial statement, report, certificate or any other document furnished in connection herewith contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to any Company or any of its Subsidiaries which reasonably should be known to such Company or any of its Subsidiary which such Company has not disclosed to the Purchaser in writing which would reasonably be expected to have a Material Adverse Effect on such Company or any of its Subsidiaries.

 

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Section 4.2            Purchaser’s Representations and Warranties .

 

The Purchaser represents and warrants to the Companies as of the Effective Date as follows:

 

(a)           Purchase for Own Account . The Purchaser is purchasing the Securities to be purchased by it solely for its own account, for investment purposes, and not as nominee or agent for any other Person and not with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States of America or any state thereof, without prejudice, however, to its right at all times to sell or otherwise dispose of all or any part of said Securities pursuant to a registration statement under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act, and subject, nevertheless, to the disposition of its property being at all times within its control.

 

(b)           Accredited Investor . The Purchaser (i) is knowledgeable, sophisticated and experienced in business and financial matters; (ii) previously invested in securities similar to the Securities and it acknowledges that the Securities have not been registered under the Securities Act and understands that the Securities must be held indefinitely unless they are subsequently registered under the Securities Act or such sale is permitted pursuant to an available exemption from such registration requirement; (iii) is able to bear the economic risk of its investment in the Securities and is presently able to afford the complete loss of such investment; and (iv) is an "accredited investor" as defined in Regulation D promulgated under the Securities Act.

 

(c)           Authorization, etc . The Purchaser has full power and authority, as the case may be, to enter into this Agreement and to carry out the transactions contemplated hereby. This Agreement is a valid and binding agreement of the Purchaser, enforceable against it in accordance with its terms except (a) as the same may be limited by bankruptcy, insolvency, reorganization moratorium or similar laws now or hereafter in effect relating to creditors rights generally and (b) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

(d)           No Conflict . The execution, delivery and performance of this Agreement, the Warrant, and the related Transaction Documents by Purchaser does not conflict with or result in a default under any other agreement, document or instrument to which Purchaser is a party.

 

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Article 5.           Affirmative Covenants

 

Each Company covenants and agrees that, until payment in full of all the Obligations, unless the Purchaser shall otherwise give prior written consent, it shall perform, or cause the performance of, all covenants in this Section 5.

 

Section 5.1            Reports .

 

Each Company will deliver to the Purchaser:

 

(a)           Events of Default, etc . Promptly upon any officer, director (other than any director designated by the Purchaser) or employee of such Company obtaining actual knowledge (i) that any Person has given any written notice to such Company or any of its Subsidiaries or taken any other material action with respect to a claimed default or event or condition of the type referred to in Section 11.1, (ii) of any condition or event that constitutes a default or event of default with respect to or under the Indebtedness, or having actual knowledge that any holder of Indebtedness has given any written notice or taken any other material action with respect to a claimed default or event of default, with respect to any portion of such Indebtedness, or (iii) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an officer’s certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Default, Event of Default, event or condition, and what action such Company has taken, is taking and proposes to take with respect thereto;

 

(b)           Litigation or Other Proceedings . Promptly, but in no event later than three (3) Business Days after, upon any officer, director (other than any director designated by the Purchaser) or employee of such Company obtaining actual knowledge of (A) the institution of any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting such Company, any of its Subsidiaries or any property of the Company (collectively, " Litigation ") not previously disclosed in writing by the Company and its Subsidiaries to the Purchaser or (B) any material development in any Insolvency Proceeding that, in the case of subclause (A) or (B):

 

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(i)          if adversely determined, has a reasonable possibility of exceeding $250,000.00 in damages; or

 

(ii)         seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby;

 

written notice thereof describing material details of such matters together with such other information as may be reasonably available to such Company to enable Purchaser and their counsel to evaluate such matters; and (ii) within twenty (20) days after the end of each fiscal quarter of such Company, a schedule of all Litigation involving an alleged liability of, or claims against or affecting, such Company equal to or greater than $250,000.00, and promptly after written request by the Purchaser such other information as may be reasonably requested by the Purchaser to enable the Purchaser and its counsel to evaluate any of such Litigation;

 

(c)           ERISA Events . Promptly upon obtaining actual knowledge of the occurrence of or forthcoming occurrence of an ERISA Event, a written notice specifying the nature thereof, what action such Company has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;

 

(d)           ERISA Notices . With reasonable promptness, copies of (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by such Company or any of its Subsidiaries with the Internal Revenue Service with respect to each Pension Benefit Plan; (ii) all written notices received by such Company or any of its Subsidiaries from a Multiemployer Plan sponsor concerning an ERISA Event; and (c) such other documents or governmental reports or filings relating to any Employee Benefit Plan maintained or contributed to by such Company or any of its Subsidiaries as the Purchaser shall reasonably request;

 

(e)           Financial Plans . As soon as available and in any event no later than 30 days before the beginning of each Fiscal Year, a plan and financial forecast for such Fiscal Year, including (i) forecasted balance sheets and forecasted statements of income and cash flows of such Company for each such Fiscal Year and an explanation of all of the assumptions on which such forecasts are based, (ii) forecasted statements of income and cash flows of such Company for each month of each such Fiscal Year, together with an explanation of all of the assumptions on which such forecasts are based, and (iii) such other information and projections as the Purchaser may reasonably request in writing;

 

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(f)           Environmental Audits and Reports of Events . As soon as practicable following receipt thereof, copies of all environmental audits and reports, whether prepared by personnel of such Company, any of its Subsidiaries or by independent consultants, with respect to a significant environmental matter at any Premises, or which relate to an Environmental Claim which would reasonably be expected to result in a Material Adverse Effect. Each Company will also promptly advise the Purchaser in writing and in reasonable detail of (i) such Company’s actual knowledge of (a) any Release of any Hazardous Substance required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws or (b) any Environmental Claims that have a reasonable possibility of giving rise to a Material Adverse Effect, (iii) any remedial action taken by such Company or any other Person in response to (x) any Hazardous Substance on, under or about any Premises, the existence of which has a reasonable possibility of resulting in an Environmental Claim having a Material Adverse Effect or (y) any Environmental Claim that is reasonably likely to have a Material Adverse Effect, (iv) such Company’s or any of its Subsidiaries’ discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Premises that is reasonably likely to cause such Premises or any part thereof to be subject to any restrictions on the ownership occupancy, transferability or use thereof under any Environmental Laws which would have a Material Adverse Effect and (v) any request for information from any governmental agency that suggests such agency is investigating whether such Company or any of its Subsidiaries may be potentially responsible for a Release of Hazardous Substance;

 

(g)           Monthly Financial Statements . Within 30 days (or 60 days in the case of the twelfth month of the Fiscal Year) after the close of each monthly accounting period in each Fiscal Year of the Companies, (i) the unaudited consolidated balance sheets of the Companies and their consolidated Subsidiaries as of the end of such monthly period, (ii) the related unaudited consolidated statements of income and retained earnings and consolidated statements of cash flows for such monthly period and for the elapsed portion of the Fiscal Year ended with the last day of such monthly period, in each case setting forth comparative figures for the related periods in the prior Fiscal Year, and (iii) statement and reconciliation of all cash of the Companies and their Subsidiaries; all of such items (i), (ii) and (iii) of this Section shall be certified by the chief financial officer of Parent, subject to normal year-end audit adjustments and the absence of footnotes;

 

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(h)           Annual Financial Statements . Within 120 days after the close of each Fiscal Year of the Companies, the consolidated balance sheets of the Companies and their consolidated Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income and retained earnings and consolidated statements of cash flows for such Fiscal Year, in each case setting forth comparative figures for the preceding Fiscal Year and audited by independent certified public accountants of recognized national or regional standing reasonably acceptable to the Purchaser, in each case together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of the Companies, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such an Event of Default has occurred and is continuing, a statement as to the nature thereof;

 

(i)           Compliance Certificates .

 

(i)          Concurrently with the financial statements furnished pursuant to subsections (g) and (h) of this Section 5.1, an officer’s certificate signed by an authorized officer of Parent which Compliance Certificate shall be substantially in the form of Exhibit 5.1(i) attached hereto, certifying such financial statements, each Company’s and each of its Subsidiaries’ compliance with the terms of the Transaction Documents, certifying that no Event of Default has occurred under the Transaction Documents, and setting forth computations in reasonable detail showing whether or not as at the end of such fiscal period there existed any breach or violation of any of the provisions of Section 5.12;

 

(ii)         With regard to any Permitted Senior Debt, all borrowing base certificates, borrowing base reports and compliance certificates delivered to any holders of Permitted Senior Debt.

 

(j)           Management Letters . Promptly after such Company’s receipt thereof, a copy of any "management letter," schedule of adjusting journal entries, schedule of waived journal entries, governance communication letters and any internal control communication received by such Company or any of its Subsidiaries from its certified public accountants;

 

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(k)           Filings with Governmental Agencies . Within thirty (30) days of filing thereof, copies of all tax returns and other related tax documents filed by such Company with federal, state or local governmental agencies;

 

(l)           Aging Reports . Furnish to the Purchaser within thirty (30) days after the end of each month, aging summary reports of all of such Company’s accounts receivable, aged by invoice date; and

 

(m)           Other Information : With reasonable promptness, (i) such other material information and data with respect to such Company or any of its Subsidiaries, as from time to time may be reasonably requested in writing by the Purchaser, and (ii) a copy of all material reports and other documents delivered from time to time to the Senior Lender.

 

The Purchaser acknowledges that US securities laws prohibit any Person who has received from an issuer any material, non-public information from purchasing or selling securities of such issuer or from communicating such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell such securities. As a result of the Companies’ providing certain of the financial information required by this Section 5.1 to the Purchaser, the Purchaser will be in possession of material, non-public information pertaining to the Companies. Accordingly, the Purchaser agrees not to (i) communicate any of such information to any other Person under circumstances in which it is reasonably foreseeable that such Person is likely to purchase or sell any of the Parent’s securities and (ii) purchase or sell any of the Parent’s Securities unless and until such information has been publicly disclosed by the Parent. Notwithstanding anything in this Section 5.1 or any other provision in the Transaction Documents to the contrary, the Companies and their Subsidiaries shall not be required to deliver to the Purchaser and/or any of Purchaser’s Affiliates, originals or copies of any documents, instruments, notices, communications or other information under or in connection with this Agreement or any other Transaction Document (collectively, the " Company Materials ") as specifically requested from time to time in writing by the Purchaser and/or any of the Purchaser’s Affiliates with respect to a specific document, instrument, notice or other written communication at the time of receipt of such request and then only in accordance with such specific request. The Companies hereby agree that if either they, any parent company or any Subsidiary of the Companies has publicly traded equity or debt securities in the United States, they shall (and shall cause such parent company or Subsidiary, as the case may be, to) (i) identify in writing, and (ii) to the extent reasonably practicable, clearly and conspicuously mark such Company Materials that contain only information that is publicly available or that is not material for purposes of United States federal and state securities laws as "PUBLIC". The Companies agree that by identifying such Company Materials as "PUBLIC" or publicly filing such Company Materials with the Securities and Exchange Commission, then the Purchaser and/or its Affiliates shall be entitled to treat such Company Materials as not containing any material, non-public information for purposes of United States federal and state securities laws.

 

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Section 5.2            Payment of Taxes and Claims; Tax Consolidation; Filing of Tax Returns .

 

Each Company and its Subsidiaries will pay, (a) all taxes, assessments and other governmental and quasi-governmental charges and/or fees imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and (b) all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided , that no such charge or claim need be paid if being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, no penalty or fine is accruing thereon, and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. No Company will file or consent to the filing of any consolidated income tax return with any Person other than its wholly-owned Subsidiaries or as otherwise required by law. Each Company and its Subsidiaries shall file, or cause to be filed, all tax returns (federal, state, local and foreign) required to be filed.

 

Section 5.3            Key Person Insurance , Disability Insurance .

 

The Companies shall obtain and deliver to the Purchaser by February 15, 2015, and shall thereafter at all times when the Obligations are outstanding maintain and timely pay for, key-person life insurance on the life of Thomas Tolworthy (or any successors to Thomas Tolworthy as chief executive officer and/or president of the Companies) having a death benefit in the amount equal to the then outstanding principal amount of the Note, payable to the benefit of the Purchaser, with such insurance companies as shall be satisfactory to the Purchaser, such insurance policy to provide that it cannot be cancelled or terminated without thirty (30) days prior written notice to the Purchaser. The Companies shall deliver to the Purchaser, in form and substance satisfactory to the Purchaser, certified copies of such insurance policies, together with loss payable endorsements naming the Purchaser as loss payee.

 

In addition, the Companies shall deliver to Purchaser by February 15, 2015, and shall thereafter at all times when the Obligations are outstanding maintain and timely pay for, a disability policy in favor of Purchaser relating to Thomas Tolworthy (or any successors to Thomas Tolworthy as chief executive officer and/or president of the Companies) in the amount of the then outstanding principal amount of the Note and in form and content reasonably acceptable to Purchaser. The Companies shall deliver to the Purchaser, in form and substance satisfactory to the Purchaser, certified copies of such insurance policies.

 

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5.4            Further Assurances .

 

At any time or from time to time upon the request of the Purchaser, each Company will, at its expense, promptly and duly execute, acknowledge and deliver such further agreements, documents and instruments and do or cause to be done such other acts and things as (i) the Purchaser may reasonably request in order to effect fully the purposes of the Transaction Documents and to provide for payment of the Obligations in accordance with the terms of this Agreement, the Notes and the other Transaction Documents and (ii) as may be necessary or proper to evidence, perfect, maintain and enforce the security interests and the priority thereof in the Collateral.

 

Section 5.5            Reservation of Equity Interests .

 

The Parent shall have reserved, and shall at all times keep reserved, out of its authorized Equity Interests, a number of unissued Equity Interests sufficient to allow the Parent to satisfy the terms of the Warrant at all times as if the Warrant were exercised, free of any preemptive rights, Liens, claims or encumbrances of any kind or nature whatsoever.

 

Section 5.6            No Impairment .

 

No Company nor any of its Subsidiaries shall, by amendment of its Articles of Incorporation, bylaws, any agreements among or between any of the holders of any Equity Interests of such Company or any of its Subsidiaries or through any consolidation, merger, reorganization, recapitalization, business combination or other similar arrangement, joint venture, transfer of assets, dissolution, issue or sale of securities or any other action of any kind, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or the Transaction Documents.

 

Section 5.7            Observation Rights.

 

Until the Secured Note is paid in full, the Purchaser will be notified of time and place of meetings of the board of directors of Parent not less than seven (7) days in advance and may have a representative attend all such board meetings. The Companies shall pay the reasonable costs and expenses incurred by such representative in traveling to and attending such meetings.

 

Section 5.8            Good Standing; Regular Course of Business .

 

Each Company agrees to, and shall cause each of its Subsidiaries to, maintain its existence and its good standing in its jurisdiction of organization and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect on the financial condition, operations or business of such Company or any of its Subsidiaries. Each Company and its Subsidiaries agrees that on and after the Effective Date it will carry on its business diligently and in the ordinary course and substantially in the same manner as heretofore carried on and will use commercially reasonable efforts to preserve its present business organization intact.

 

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Section 5.9            Maintenance of Property Insurance .

 

The Companies have delivered to the Purchaser a certificate from their insurance broker which sets forth a true and complete listing of all insurance maintained by the Companies and their Subsidiaries as of Closing, with the amounts insured at Closing set forth therein. Such insurance shall be in such amounts and against such risks as is customarily maintained in similar businesses operating in the same vicinity with Purchaser named as an additional loss payee.

 

Each Company will, and will cause each of its Subsidiaries to:

 

(i)          keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted,

 

(ii)         acquire and maintain at its sole cost and expense throughout the term of this Agreement commercial general liability insurance on all its property underwritten by an insurance company with a Best’s rating of at least A-/XII and licensed to do business in the applicable state in at least such amounts with such deductibles and against at least such risks as are consistent and in accordance with industry practice, including (without limitation) personal injury and bodily injury, product liability, products/completed operations, and business interruption insurance, and

 

(iii)        maintain a bond or insurance in such amounts as is customary in the case of companies engaged in businesses similar to such Company insuring against larceny, embezzlement or other criminal misappropriation of insured’s officers and employees who may either singly or jointly with others at any time have access to the assets or funds of such Company or any of its Subsidiaries either directly or through authority to draw upon such funds or to direct generally the disposition of such assets.

 

Each Company shall cooperate with the Purchaser in obtaining for the Purchaser the benefits of any insurance proceeds lawfully or equitably payable in connection with such Company, its Subsidiaries or any of their assets subject to the provisions of the Permitted Senior Debt; provided, so long as no Event of Default exists and subject to the provisions of the Permitted Senior Debt, such Company shall have the right to use such proceeds to repair or replace the assets damaged by such casualty. Each Company shall not permit any such material item of Collateral to become a fixture to real estate or an accession to other personal property, without the prior written consent of the Purchaser. Each Company shall not permit any such material item of Collateral to be operated or maintained in violation of any applicable law, statute, rule or regulation. With respect to items of leased equipment (to the extent the Purchaser has any security interest in any residual Company’s interest in such equipment under the lease), each Company shall keep, maintain, repair, replace and operate such leased equipment in accordance with the terms of the applicable lease.

 

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Prior to the Effective Date, certificates of insurance issued by the Companies’ insurance company evidencing the insurance required as set forth above shall have been provided to the Purchaser by the Companies. Each certificate provided at any time in accordance with this section shall set forth, minimally, that the Purchaser is an additional insured party, the amount of insurance, the additional insured endorsement (whether as part of the certificate or as a separate document), the policy number, the date or expiration, an endorsement that the Purchaser shall receive thirty (30) days (or 15 days in the case of non-payment of premium) written notice prior to termination, reduction or modification of the coverage. The certificates shall bear an inked or stamped signature. Certificates shall be furnished to the Purchaser upon renewal of insurance or upon request by the Purchaser. In the event a Company does not at any time provide its certificate of insurance as required herein, the Purchaser shall have the right to procure such coverage and charge the expense incurred to such Company. In the event a Company’s insurance is canceled and replacement insurance is not obtained prior to the effective date of such cancellation, the Purchaser shall have the right to procure such coverage and charge the expenses incurred to such Company. Upon request, each Company shall furnish a copy of the insurance policy to the Purchaser.

 

Section 5.10          Compliance with Statutes, etc .

 

Each Company will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable statutes, regulations, rules and orders of, and all applicable restrictions imposed by, all governmental and quasi-governmental bodies, domestic or foreign, in respect of the conduct of its business and operations and the ownership of its property (including, without limitation, applicable statutes, regulations, orders and restrictions relating to (i) environmental standards and controls and (ii) the Anti-Money Laundering Laws, the OFAC Laws and Regulations ). Notwithstanding the foregoing, each Company will, and will cause each of its Subsidiaries to endeavor to substantially comply with applicable laws, regulations, and regulatory oversight from the Food and Drug Administration ("FDA"), The Federal Trade Commission ("FTC") and the United States Department of Agriculture ("USDA").

 

Section 5.11          Violations .

 

Promptly notify Purchaser in writing of any violation of any law, statute, regulation or ordinance, as to which such Company or any of its Subsidiaries have been notified or otherwise have knowledge of, of any Governmental Authority, or of any agency thereof, applicable to such Company or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect on such Company or any of its Subsidiaries.

 

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Section 5.12          Financial Covenants .

 

(a)           Minimum Adjusted EBITDA . Commencing with the fiscal quarter ending March 31, 2015 and until such time as all Obligations are paid, satisfied and discharged in full, the Companies shall not, as of the end of any measurement period set forth below, permit the Adjusted EBITDA for such measurement period to be less than the amount set forth in the table below opposite such measurement period; provided that (i) commencing with the first fiscal quarter ending 6 months after the earlier of the consummation of the Target 1 Acquisition or the Target 2 Acquisition, compliance shall no longer be required with respect to the financial covenant in this clause (a) and (ii) if neither the Target 1 Acquisition nor the Target 2 Acquisition have been consummated on or prior to June 30, 2015, the Purchaser shall have the right to require the Companies to continue to comply with the financial covenant in this clause (a) for such future periods and at such covenant levels as the Purchaser may reasonably require.

 

Measurement Period

 

Minimum Adjusted EBITDA

January 1, 2015 to March 31, 2015

 

-$2,500,000

January 1, 2015 to June 30, 2015

 

-$1,750,000

July 1, 2015 to September 30, 2015

 

$2,000,000

July 1, 2015 to December 31, 2015

 

$4,500,000

 

(b)           Fixed Charge Coverage Ratio . Commencing with the first fiscal quarter ending 6 months after earlier of the consummation of the Target 1 Acquisition or Target 2 Acquisition and until such time as all Obligations are paid, satisfied and discharged in full, the Companies shall not, as of the end of any fiscal quarter, permit the Fixed Charge Coverage Ratio for the period of four consecutive fiscal quarters most recently ended on or prior to such date to be less than 1.15x. Notwithstanding the foregoing, it is hereby agreed that (i) the applicable measurement period for the fiscal quarter ending September 30, 2015 shall be from July 1, 2015 to September 30, 2015, (ii) the applicable measurement period for the fiscal quarter ending December 31, 2015 shall be from July 1, 2015 to December 31, 2015 and (iii) the applicable measurement period for the fiscal quarter ending March 31, 2016 shall be from July 1, 2015 to March 31, 2016.

 

(c)           Total Funded Debt to Adjusted EBITDA Ratio . Commencing with the fiscal quarter ending March 31, 2016 and until such time as all Obligations are paid, satisfied and discharged in full, the Companies shall not, as of the end of any fiscal quarter, permit the applicable ratio set forth in the table below to exceed the amount set forth therein:

 

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If as of the end of any fiscal quarter:

Both the Target 1 Acquisition and the Target 2 Acquisition have been consummated (x) the Target 1 Acquisition and the Target 2 Acquisition have not been consummated or (y) only Target 2 Acquisition has been consummated
Applicable ratio: (A) Total Funded Debt (calculated without giving effect to any Indebtedness that is subordinate to the Penta Debt) to (B) Adjusted EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date to exceed 4.0x (A) Total Funded Debt (calculated without giving effect to the Little Harbor Debt) to (B) Adjusted EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date to exceed 4.0x

 

For the purposes of this clause (c), Adjusted EBITDA (1) for the measurement period ending on March 31, 2016, shall equal the Adjusted EBITDA for the fiscal quarter ending March 31, 2016 multiplied by 4, (2) for the measurement period ending on June 30, 2016, shall equal the sum of Adjusted EBITDA for the fiscal quarters ending March 31, 2016 and June 30, 2016, multiplied by 2 and (3) for the measurement period ending on September 30, 2016, shall equal the sum of the Adjusted EBITDA for the fiscal quarters ending March 31, 2016, June 30, 2016 and September 30, 2016, multiplied by 4 and divided by 3.

 

Section 5.13          Performance of Transaction Documents .

 

Each Company shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all reasonable costs, fees and expenses required to be paid by it under this Agreement, the Notes and all other Transaction Documents, subject to any applicable cure periods provided therein.

 

Section 5.14          Maintenance of Books and Records; Inspection Rights .

 

Each Company and its Subsidiaries shall maintain, or cause to be maintained, at the expense of such Company, in accordance with GAAP, a comprehensive system of internal controls over financial reporting, office records, books and accounts (which books, records and accounts shall be and remain the property of the Company and its Subsidiaries) in which shall be entered fully and accurately each and every financial transaction with respect to such Company and its Subsidiaries and their operations and business. Each Company shall maintain the books, records and accounts in a safe manner and separate from any records not related to such Company, its operations and business. Upon three (3) days written notice, the Purchaser shall have the right to inspect and copy during normal business hours any and all of each Company’s books and records. The right to examination provided by this Section 5.14 shall include the right to make copies of the books of accounts and other books, documents and records of each Company for any purpose, including, without limitation, conducting an evaluation of each Company’s internal controls over financial reporting.

 

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Section 5.15          Audit .

 

The Purchaser shall have the right upon reasonable advance written notice during normal business hours to audit the financial information provided by each Company pursuant to the terms of this Agreement in accordance with the then customary audit policies and procedures of the Purchaser. Unless an Event of Default then exists, the Purchaser shall not perform more than one (1) such audit per calendar year. The Purchaser shall pay for the costs of its auditors, provided that if (a) such audit shall have been commenced when an Event of Default exists or (b) such audit reveals a material discrepancy from the information previously provided to the Purchaser, the Companies shall pay the cost and expenses of such audit not to exceed $50,000.00 in the aggregate.

 

Section 5.16          Keyman Litigation Proceeds .

 

Subject to the Subordination Agreements, in the event that any Company recovers any proceeds from any claims or actions initiated by such Company against Thomas Tolworthy asserting breach of the duty of loyalty, breach of the duty of care, or embezzlement, such Company shall pay over the net proceeds to the Purchaser for application against the Obligations. For purposes of this Section 5.16, "net proceeds" shall include any payments received in settlement of such claims or actions, but shall be net of any costs incurred in asserting and/or prosecuting the claims or actions, including attorney fees. The obligations of this Section 5.16, shall in no way obligate any Company to assert or commence any action against Thomas Tolworthy and shall not apply to any derivative actions.

 

Section 5.17          Post-Closing Obligations .

 

Each Company agrees to deliver or to cause to be delivered to the Purchaser, in form and substance reasonably satisfactory to the Purchaser, the items described on Schedule 5.17 on or before the dates specified with respect to such items, or such later dates as may be agreed to by the Purchaser, in its sole discretion.

 

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Article 6.           Negative Covenants

 

Subject to Section 6.15 below, each Company and its Subsidiaries shall not, until satisfaction in full of the Obligations and termination of this Agreement or unless a prior written consent of the Purchaser is obtained (which consent may be withheld by the Purchaser in its sole and absolute discretion):

 

Section 6.1            Restrictions on Fundamental Changes; Mergers; Consolidations; Asset Sales and Acquisitions; New Subsidiaries .

 

(a)          Other than Permitted Acquisitions, (i) enter into any merger, consolidation, recapitalization, joint venture, business combination or other reorganization or similar transaction with or into any other Person, (ii) file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings, (iii) file or solicit the filing of an involuntary bankruptcy petition against any Company, any of its Subsidiaries or the Guarantor, (iv) liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), (v) acquire all or a material portion of the assets or Equity Interests of any Person, or (vi) permit any other Person to consolidate or combine with or merge with it.

 

(b)          Other than Permitted Dispositions, sell, convey, lease, sublease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or fixed assets, whether now owned or hereafter acquired.

 

(c)          Create or acquire any Subsidiaries other than pursuant to the Target 1 Acquisition and the Target 2 Acquisition or any other Permitted Acquisition.

 

Section 6.2            Creation of Liens.

 

Create or suffer to exist any Lien or transfer upon or against any of its property or assets now owned or hereafter acquired, except Permitted Encumbrances.

 

Section 6.3            Investments .

 

Without the Purchaser’s prior written consent, purchase or acquire any obligations or Equity Interests of, or any other interest in, any Person, other than those Equity Interests and investments listed on Schedule 6.3 or other than pursuant to any Permitted Acquisition.

 

Section 6.4            Loans .

 

Make advances, loans or extensions of credit to any Person, except for (i) advances to employees of the Company for travel or other reasonable expenses in the Ordinary Course of Business in an aggregate principal amount at any time outstanding not to exceed $50,000, (ii) investments in customers acquired in connection with accounts in the ordinary course of business (iii) prepaid expenses in the ordinary course of business, (iv) advances made in connection with purchases of goods or services in the ordinary course of business, (v) advances, loans or extensions of credit from one Company to another; or (vi) loans or extensions of credit to customers, vendors or other strategic business partners in an aggregate principal amount at any time outstanding not to exceed $100,000.

 

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Section 6.5            Capital Expenditures .

 

Contract for, purchase or make any Capital Expenditures or commitment for Capital Expenditures in the aggregate in any fiscal year in excess of $2,500,000.

 

Section 6.6            Dividends/Junior Payments .

 

Each Company may declare, pay or make any dividend or distribution on or with respect to any of the Equity Interests of such Company, including Tax Distributions, or apply any of its funds, property or assets to the purchase, redemption or other retirement of any Equity Interests (each of the foregoing, a "Junior Payment") at any time that no more than $5,000,000 of principal remains outstanding under the Notes so long as, (i) immediately after making any such dividend, distribution or application, the Companies shall be in pro forma compliance with all of the financial covenants set forth in Section 5.12 and (ii) no Event of Default shall exist. Notwithstanding the foregoing, each Company may pay Tax Distributions without prior approval from Purchaser provided that (a) such Company has retained sufficient cash to fund adequate operating reserves; and (b) such Company has given Purchaser not less than ten (10) days prior notice of intended distributions; and (c) no Event of Default exists and such payment shall not cause such Company to be in default of its financial covenants and such Company has provided a compliance certificate to so demonstrate. Any distribution not referenced herein would be subject to Purchaser’s prior written consent.

 

Section 6.7            Indebtedness .

 

Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of (a) the Indebtedness to Purchaser, (b) Permitted Senior Debt, (c) the Essex Debt, (d) the Little Harbor Debt, (e) Indebtedness, incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof, (f) the Utah Lease, and (g) Refinancing Indebtedness with respect to any of the foregoing; provided that any Refinancing Indebtedness that (i) is a renewal or extension of Permitted Senior Debt is renewed or extended in accordance with Section 15 of the Subordination Agreement or (ii) is a refinancing of Permitted Senior Debt is on terms reasonably satisfactory to the Purchaser.

 

Section 6.8            Nature of Business; Name Change .

 

(i) Materially change the nature of the business in which it is presently engaged, (ii) except as specifically permitted in this Agreement, purchase or invest, directly or indirectly, in any material assets or property not useful in, necessary for or to be used in its business as presently conducted or reasonably related to the conduct of such business activities, or (iii) change the name or jurisdiction of incorporation or organization of any Company or any of its Subsidiaries.

 

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Section 6.9            Transactions with Affiliates .

 

Directly or indirectly, purchase, acquire or lease any property from, or sell, transfer or lease any property to, or make any type of loan or credit extension to, or enter into any agreement or arrangement (oral or written) of any type or otherwise deal with, any Affiliate, except (i) transactions disclosed in writing to the Purchaser or (ii) transactions on an arm’s length basis on terms no less favorable than terms which would have been obtainable from a Person other than an Affiliate or (iii) so long as it has been approved by such Company’s Board of Directors, the payment of reasonable compensation, severance, or employee benefit arrangements to employees, officers, and directors of such Company.

 

Section 6.10          Fiscal Year .

 

Change its Fiscal Year.

 

Section 6.11          Entering Into or Modification of Certain Agreements .

 

The Companies and their Subsidiaries shall not amend, restate, supplement or otherwise modify (or permit or consent to any amendment, restatement, supplement or modification of) the terms of (i) its articles or certificate of incorporation, bylaws, any agreement between or among any of the holders of any Company’s or any of its Subsidiaries’ Equity Interests, any other organizational document, in each case which would be materially adverse to the Purchaser and (ii) any of the Transaction Documents, the documents and/or instruments evidencing the Permitted Senior Debt (unless permitted under the Subordination Agreement), the documents and/or instruments evidencing the Little Harbor Debt (unless permitted under the Little Harbor Subordination Agreement) or any of the leases for the Premises, in each case which would result in a Material Adverse Effect.

 

Section 6.12          Inconsistent Agreements .

 

Each Company and its Subsidiaries shall not enter into an agreement or arrangement which is or will be inconsistent with the obligations of such Company and its Subsidiaries under this Agreement, the Notes or any other Transaction Document, to the extent that it adversely affects, in any material manner, the rights of the Purchaser.

 

Section 6.13          Reserved .

 

Section 6.14          Stay, Extension and Usury Laws .

 

Each Company covenants and agrees (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit of or advantage of, and will use commercially reasonable efforts to resist any attempts to claim or take the benefit of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which would affect the covenants or the performance of its obligations or agreements under this Agreement or the Notes, and each Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Purchaser, but will suffer and permit the execution of every such power as though no such law has been enacted.

 

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Section 6.15          Purchaser’s Consent .

 

In the event any Company desires to engage in any act, event or transaction requiring the consent of the Purchaser, such Company shall notify the Purchaser in writing of all information available to such Company or its Affiliates relating to such act, event or transaction, in sufficient detail to permit the Purchaser to evaluate whether to provide its consent. The Purchaser shall have twenty (20) Business Days from receipt of the written notice from such Company to determine whether to consent to such act, event or transaction. If the Purchaser fails to notify such Company in writing during the twenty (20) Business Day period that it is withholding its consent, then consent shall be deemed given by the Purchaser, and such Company shall be free to engage in such act, event or transaction without requiring any further action from the Purchaser. If the Purchaser provides written notice to such Company that it is withholding its consent to such act, event or transaction, then the representatives of the Purchaser and such Company shall meet and confer to seek to reach an amicable resolution to the matter. If, after twenty (20) Business Days following the receipt of the written notice from the Purchaser that it has not consented to such act, event or transaction, such Company and the Purchaser are unable to reach an amicable resolution, then such Company shall have the right to proceed with such act, event or transaction but only so long as, prior to consummating such act, event or transaction, all Obligations are paid, satisfied and discharged in full.

 

Section 6.16          Disposition of Assets .

 

Other than Permitted Dispositions, allow the sale, conveyance, lease, sublease, transfer or other disposition of, in one transaction or a series of transactions, all or substantially all of any Company’s or any of its Subsidiaries’ business, property or assets, whether now owned or hereafter acquired or merger or consolidation of such Company or any of its Subsidiaries not consented to by Purchaser.

 

Article 7.           Conditions Precedent

 

Section 7.1            Transaction Documents .

 

The Purchaser shall have received from the Companies executed originals of this Agreement, the Secured Note (duly executed in accordance with Section 2.1 and drawn to the order of the Purchaser), the Warrant and the other Transaction Documents and documents and instruments to be delivered in connection therewith.

 

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Section 7.2            Filings, Registrations and Recordings .

 

Each document (including any UCC financing statement) required by this Agreement, or any other Transaction Document or under applicable law or reasonably requested by the Purchaser to be filed, registered or recorded in order to create, in favor of the Purchaser, a perfected security interest in or Lien upon the Collateral shall have been properly filed, registered or recorded in each jurisdiction in which the filing, registration or recordation thereof is so required or requested, and the Purchaser shall have received an acknowledgment copy, or other evidence satisfactory to it, of each such filing, registration or recordation and satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto.

 

Section 7.3            Corporate Proceedings of Companies .

 

The Purchaser shall have received a copy of the resolutions in form and substance reasonably satisfactory to the Purchaser, of the managers or board of directors, as applicable, of each Company authorizing (i) the execution, delivery and performance of this Agreement, the Secured Note, the Warrant, any related agreements, and each of the other Transaction Documents and (ii) the granting by each Company of the security interest in and Liens upon the Collateral, in each case certified by the officer of each Company as of the Effective Date; and, such certificate shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded as of the date of such certificate.

 

Section 7.4            Incumbency Certificates of Companies .

 

The Purchaser shall have received a certificate of the officer of each Company, dated the Effective Date, as to the incumbency and signature of the officers of such Company executing this Agreement, the Warrant, the other Transaction Documents, any certificate or other documents to be delivered by it pursuant hereto, together with evidence of the incumbency of such officer.

 

Section 7.5            Organization Documents .

 

The Purchaser shall have received a copy of all organization documents of each Company, and all amendments thereto, certified by the applicable Secretary of State of the jurisdiction of organization and the officer of such Company and the written certification of the officer of such Company that no amendment or modification to the organization documents of such Company has become effective since the date on which the organization documents of such Company were last delivered to the Purchaser, and copies of all agreements of the holders of Equity Interests in such Company certified as accurate and complete by the officer of such Company.

 

Section 7.6            Good Standing Certificates .

 

The Purchaser shall have received good standing certificates for each Company, issued by the applicable Secretary of State of the jurisdiction of organization and each jurisdiction where the conduct of such Company’s business activities or the ownership of its properties necessitates qualification.

 

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Section 7.7            Legal Opinion .

 

The Purchaser shall have received favorable written legal opinions of each Company’s counsel in form and substance satisfactory to the Purchaser, and each Company hereby authorizes and directs such counsel to deliver such opinions to the Purchaser.

 

Section 7.8            No Litigation .

 

No litigation, investigation or proceeding before or by any arbitrator or Governmental Authority shall be continuing or threatened against any Company, any of the Companies’ Subsidiaries or against any officers or directors of any Company (A) in connection with any of the Transaction Documents or any of the transactions contemplated thereby and which, in the Purchaser’s sole and absolute discretion, is deemed material or (B) which could, in the Purchaser’s sole and absolute discretion, have a Material Adverse Effect; and no injunction, writ, restraining order or other order of any nature materially adverse to any Company or the conduct of its business or inconsistent with the due consummation of the transactions contemplated hereby shall have been issued by any Governmental Authority.

 

Section 7.9            Fees .

 

The Purchaser shall have received all fees and expenses payable to it on or prior to the Effective Date pursuant to Section 2 hereof.

 

Section 7.10          Financial Statements .

 

The Purchaser shall have received the following financial statements and information (the " Financial Statements "): (i) Twinlab Holdings’ and its Subsidiaries’ consolidated income statement for the Fiscal Year ending December 31, 2013, which income statement will be satisfactory to the Purchaser, and (ii) a copy of the unaudited consolidated balance sheet of TCC and its Subsidiaries as of August 31, 2014 and the related consolidated statements of income and retained earnings and the related statements of cash flows of the Companies and its Subsidiaries for the period from January 1, 2014 through August 31, 2014. Since August 31, 2014, no Material Adverse Effect shall have occurred with respect to the Companies in the sole and absolute discretion of the Purchaser.

 

Section 7.11          Insurance .

 

The Purchaser shall have received in form and substance satisfactory to the Purchaser, (i) certified copies of the Companies’ casualty insurance policies, together with loss payable endorsements naming the Purchaser as loss payee, and (ii) subject to Section 5.17, certified copies of the Companies’ liability insurance policies, together with endorsements naming the Purchaser as a co insured.

 

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Section 7.12          [Reserved] .

 

Section 7.13          Consents .

 

The Purchaser shall have received any and all consents necessary to permit the effectuation of the transactions contemplated by any of the Transaction Documents and the Warrant. The Purchaser shall have received such third party consents and waivers of such third parties as might assert claims with respect to the Collateral, as the Purchaser and its counsel shall deem necessary.

 

Section 7.14          Existing Indebtedness .

 

The Purchaser shall have received, in form and substance reasonably satisfactory to it, a schedule detailing the outstanding Permitted Senior Debt, the Essex Debt and the Little Harbor Debt, with copies of any documentation evidencing such Permitted Senior Debt, Essex Debt and Little Harbor Debt.

 

Section 7.15          Solvency Certificate .

 

The Purchaser shall have received an officer’s Certificate of each Company, dated as of the Effective Date, certifying that each Company is Solvent after giving effect to the consummation of the transactions contemplated hereby, such certificate to be in form and substance to the reasonable satisfaction of the Purchaser.

 

Section 7.16          Officer’s Certificate .

 

The Company shall have delivered to the Purchaser a Certificate of each Company, substantially in the form of Exhibit 7.16 , to the effect that (i) the representations and warranties in Section 4 of this Agreement are true, correct and complete on and as of the Effective Date, (ii) none of the Transaction Documents or the Warrant contain any untrue statement of a material fact or omit a material fact necessary to make the statements therein not misleading, (iii) each Company shall have performed all agreements and satisfied all conditions which this Agreement, the other Transaction Documents and the Warrant provide shall be performed or satisfied by it on or before the Effective Date except as otherwise disclosed to and agreed to in writing by the Company and the Purchaser, and (iv) no Default or Event of Default shall have occurred and be continuing.

 

Section 7.17          No Prohibition .

 

On the Effective Date, the Purchaser’s purchase of the Securities shall not be prohibited by any applicable law or governmental regulation and shall not subject it to any penalty or, in the Purchaser’s reasonable judgment, other onerous conditions under or pursuant to any applicable law or governmental regulation. The offering, issuance, and sale of the Securities shall have complied with all applicable requirements of federal and state securities laws, and the Purchaser shall have received evidence of such compliance in form and substance satisfactory to the Purchaser.

 

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Article 8.           PREPAYMENT

 

Section 8.1            The Companies’ Right to Prepay .

 

The Companies may prepay the outstanding amounts of the Notes in whole or in part at any time subject to the Prepayment Penalty.

 

Article 9.           General Indemnity

 

Section 9.1            Indemnity Obligations .

 

(a)          Except as provided in subsection (b) of this Section 9.1, each Company shall, without limitation as to time, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Purchaser and each partner, member, manager, director, officer, shareholder, beneficial owner, any partner, member, manager, director, officer, shareholder, trustee, beneficial owner, partner, member of any shareholder, beneficial owner, partner or member of the Purchaser, and all employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any of the foregoing (each, an " Indemnified Party " and, collectively, the " Indemnified Parties ") for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement and damages of whatever kind or nature (including, without limitation, reasonable attorneys’ fees, court costs and other costs of defense) (collectively, " Losses ") incurred by it or them and arising out of or in connection with this Agreement, the Securities, or any other Transaction Document, or the transactions contemplated hereby or thereby, or caused by, incurred or resulting from any Company’s or any of its Subsidiaries’ operations of or relating in any manner to the business of any Company or any of its Subsidiaries, the Collateral or the Premises, or from any breach of, default under, or failure to perform, any representation, warranty, covenant, agreement or any other term or provision of this Agreement by any Company or any of its Subsidiaries, the holders of any Company’s or any of its Subsidiaries’ Equity Interests, the Company’s or any of its Subsidiaries’ directors, officers, employees, agents or other persons. Without limiting the generality of the foregoing, this indemnity shall extend to any Losses arising from (a) any accident, injury to or death of any person or loss of or damage to property occurring in connection with any Company or any of its Subsidiaries, their business or operations, the Collateral or the Premises or any portion thereof, (b) any use, non-use or condition in, on or about, or possession, alteration, repair, operation, maintenance or management of, the Collateral or the Premises or any portion thereof or the sidewalks, curbs, parking areas, streets or ways adjoining the Premises, (c) any representation or warranty made herein by any Company or any of its Subsidiaries in any certificate delivered in connection herewith or in any other agreement to which any Company is a party or pursuant thereto being false or misleading in any material respect as of the date such representation or warranty was made, (d) performance of any labor or services or the furnishing of any materials or other property in respect to any Company or any of its Subsidiaries, their business or operations, the Collateral or the Premises or any portion thereof, (e) any taxes, assessments or other charges which any Company or any of its Subsidiaries is required to pay under Section 5.2, (f) any lien, encumbrance or claim arising on or against the Collateral or the Premises or any portion thereof under any applicable regulation or otherwise which any Company or any of its Subsidiaries is obligated hereunder to remove and discharge, or the failure to comply with any applicable regulation, (g) the claims of any licensees, tenants or other occupants of all or any portion of the Collateral or the Premises or any Person acting through or under any Company or any of its Subsidiaries or otherwise acting under or as a consequence of this Agreement or any sublease, (h) any act or omission of any Company or any of its Subsidiaries or their respective agents, contractors, licensees, subtenants or invitees, (i) any disclosures of information, financial or otherwise, obtained from any credit reporting agency with respect to any Company, any Guarantor, any Affiliate of the Company, or any operator or lessee of the Premises; (j) any Environmental Laws or similar laws by reason of any Company’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials, including Hazardous Substances and Hazardous Waste, or other Toxic Substances, (k) any taxes (excluding taxes imposed upon or measured solely by the net income of the Purchaser, but including any intangibles taxes, stamp tax, recording tax or franchise tax) which shall be payable by the Purchaser or any Company on account of the execution or delivery of this Agreement, or the execution, delivery, issuance or recording of the Securities or any of the other Transaction Documents, or the creation or repayment of any of the Obligations hereunder, by reason of any applicable law now or hereafter in effect.

 

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(b)          Notwithstanding anything to the contrary in Section 9.1(a) above, no Company shall be obligated to protect, defend, indemnify, release or hold harmless any Indemnified Party from any Losses arising from an Indemnified Party’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction.

 

Section 9.2            Settlement; Survival .

 

Each Company agrees that it will not, without the Indemnified Party’s prior written consent (such consent not to be unreasonably withheld) settle or compromise any pending or threatened claim, action or suit in respect of which indemnification or contribution may be sought hereunder unless the foregoing contains an unconditional release of the Indemnified Parties from all liability and obligation arising therefrom. It is expressly understood and agreed that each Company’s obligations under this Section shall survive the expiration or earlier termination of this Agreement for any reason.

 

Article 10.          Actions by Purchaser; Lost Note

 

Section 10.1          Actions by Purchaser .

 

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The Company agrees that the Purchaser may, at its option, and without any obligation to do so, upon a prior written notice to the Companies, pay, perform, and discharge any and all amounts, costs, expenses and liabilities that are the responsibility of any Company under the Transaction Documents if such Company fails to timely pay, perform or discharge the same, and all amounts expended by the Purchaser in so doing or in respect of or in connection with the Collateral shall become part of the obligations secured by the Transaction Documents and shall be immediately due and payable by the Companies to the Purchaser upon demand therefor and shall bear interest at the Default Rate (as defined in the Notes). Each Company agrees that the Transaction Documents shall remain in full effect, without waiver or surrender of any of the Purchaser’s rights thereunder, notwithstanding the occurrence of any one or more of the following: (i) extension of the time of payment of the whole or any part of the Notes; (ii) any change in the terms and conditions of the Notes; (iii) substitution of any other evidence of indebtedness for the Notes; (iv) acceptance by the Purchaser of any collateral or security of any kind for the payment of the Notes; (v) surrender, release, exchange or alteration of any Collateral, collateral or other security, either in whole or in part; or (vi) release, settlement, discharge, compromise, change or amendment, in whole or in part, of any claim of the Purchaser against any Company or of any claim against any Guarantor or other party secondarily or additionally liable for the payment of the Notes, other than payment in full of the Obligations.

 

Section 10.2          Lost Note .

 

Each Company shall, if a Note is mutilated, destroyed, lost or stolen (a " Lost Note "), promptly deliver to the Purchaser, upon receipt from the Purchaser of an affidavit stipulating that the Lost Note has been mutilated, destroyed, lost or stolen and customary and reasonable indemnification with respect thereto, in substitution therefor, a new Security containing the same terms and conditions as the Lost Note with a notation thereon of the unpaid principal and accrued and unpaid interest.

 

Article 11.          Events of Default and Remedies

 

Section 11.1          Events of Default .

 

Each of the following conditions, occurrences or events described in this Section 11.1 shall constitute an " Event of Default ":

 

(a)           Failure to Make Payments When Due .

 

(i)          Any Company shall fail to pay any principal or premium, if any, of the Notes within five (5) Business Days of when due under this Agreement or any other Transaction Documents, whether at stated maturity, by acceleration, by notice of optional redemption or prepayment, by mandatory redemption or prepayment or otherwise; or

 

(ii)         Any Company shall fail to pay any interest on the Notes or any other amount (other than an amount referred to in the preceding clause (a)) within five (5) Business Days of when due under this Agreement or any other Transaction Document.

 

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(b)           Default in Other Agreements .

 

(i)          (A) There shall have occurred one or more defaults by any Company or any of its Subsidiaries in the payment of the principal of (or premium, if any, on) any Indebtedness (excluding Indebtedness evidenced by the Notes) aggregating $200,000 or more when the same becomes due and payable at its final maturity and beyond the end of any grace period provided therefor or (B) Indebtedness (excluding the Notes) of any Company or any of its Subsidiaries aggregating $200,000 or more shall have been accelerated or otherwise declared due and payable prior to its maturity, or shall have been required to be prepaid or repurchased (other than by regularly scheduled required prepayments or repayments in respect of asset sales, excess cash flow, or new financings), including any demand for cash collateralization or payment under guaranties, if any, in an amount aggregating $200,000 or more of any letter or letters of credit prior to their maturity.

 

(ii)         (A) Any Person entitled to take the actions described in this Section 11.1(b)(ii), after the occurrence of an event of default under any agreement or instrument evidencing any Indebtedness (other than Permitted Senior Debt) or Contingent Obligations of any Company or any of its Subsidiaries in excess of $200,000 in the aggregate, shall commence proceedings, or take any action (including by way of set-off) to retain in satisfaction of any Indebtedness, or to collect on, seize or dispose of, any assets of any Company or any of its Subsidiaries that have been pledged to or for the benefit of such Person to secure such Indebtedness (including funds on deposit or held pursuant to lock-box and other similar arrangements), pursuant to the terms of an agreement or instrument evidencing any such Indebtedness or in accordance with applicable law or (B) a holder of Permitted Senior Debt shall have accelerated such Indebtedness.

 

(c)           Breach of Covenants . Any Company or any of its Subsidiaries shall fail to perform or comply with any term, provision, condition, covenant or agreement contained in Section 5 or Section 6 hereof and such failure shall continue uncured until the expiration of the Cure Period (as defined in Section 11.1(e)(i) below) provided no Cure Period is applicable for failure to perform or comply with Section 5.17 or the Financial Covenants set forth in paragraph 5.12.

 

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(d)           Breach of Representation or Warranty . Any representation, warranty or certification (i) made by any Company or any of its Subsidiaries in any Transaction Document, or (ii) made by any Company or any of its Subsidiaries in any statement or certificate at any time given by any Company in writing pursuant hereto or in any Transaction Document or in connection herewith or therewith, shall be false in any material respect on the date as of which it was made.

 

(e)           Other Defaults Under Transaction Documents .

 

(i)          Any Company or any of its Subsidiaries shall fail to perform or comply with any term or provision (other than those referred to in Sections 11.1(a), 11.1(c) and 11.1(d)) contained in this Agreement or any of the other Transaction Document and such failure shall continue uncured (1) until the expiration of the applicable notice and cure period (if any) set forth in this Agreement or the applicable Transaction Document or (2) if there is no applicable notice and cure period set forth in this Agreement or the applicable Transaction Document, for a period of thirty (30) days after the earlier to occur of (x) the receipt of notice from the Purchaser to cure such default or (y) the date on which such default first becomes known to the Company (either such period described in clause (1) or (2), the " Cure Period "); provided that in no event shall a Cure Period apply in the case of any failure to observe any term, provision, condition, covenant or agreement which is not capable of being completely cured within the relevant time period designated for such Cure Period.

 

(ii)         Any Company or any of its Subsidiaries shall fail to perform or comply with any term or provision the Articles of Incorporation, the bylaws of such Company or such Subsidiary, any agreement between or among any of the holders of such Company’s or such Subsidiary’s Equity Interests, any other organizational document of such Company or such Subsidiary or any of the leases for the Premises and any such failure or compliance results in a Material Adverse Effect.

 

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(f)           Involuntary Bankruptcy; Appointment of Receiver, etc .

 

(i)          A court having jurisdiction in the premises shall enter a decree or order for relief in respect of any Company or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or

 

(ii)         an involuntary case shall be commenced against any Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over any Company or any of its Subsidiaries, or over all or a substantial part of their property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or custodian of any Company or any of its Subsidiaries for all or a substantial part of their property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of any Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged.

 

(g)           Voluntary Bankruptcy; Appointment of Receiver, etc .

 

(i)          Any Company or any of its Subsidiaries shall have an order for relief entered with respect to it or shall commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or any Company or any of its Subsidiaries shall make any assignment for the benefit of creditors; or

 

(ii)         Any Company or any of its Subsidiaries shall be unable, or shall fail generally, to pay its debts as such debts become due; or the Board of Directors of any Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) of this Section 11(g) or this clause (ii).

 

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(h)           Guaranty . The Guaranty or any provision thereof shall cease to be in full force or effect, or any Guarantor shall deny or disaffirm its obligations under the Guaranty or shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Guaranty.

 

(i)           Judgments and Attachments . Any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of $250,000.00 or (ii) in the aggregate at any time an amount in excess of $500,000.00 (in either case not adequately and fully covered by insurance as to which a Solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against any Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60) days (or in any event later than five (5) days prior to the date of any proposed sale thereunder).

 

(j)           Dissolution . Any order, judgment or decree shall be entered against any Company or any of its Subsidiaries decreeing the dissolution or split up of such Company or such Subsidiary and such order shall remain undischarged or unstayed for a period in excess of thirty (30) days.

 

(k)           Employee Benefit Plans .

 

(i)          There shall occur one or more ERISA Events which individually or in the aggregate results in, or would reasonably be expected to result in, liability of any Company or any of its Subsidiaries in excess of $50,000 during the term of this Agreement; or

 

(ii)         there shall exist, as of any valuation date for a Pension Benefit Plan maintained or contributed to by any Company or any of its Subsidiaries, an excess of the actuarial present value (determined on the basis of reasonable assumptions employed by the independent actuary for such Pension Plan for purposes of Section 412 of the IRC or Section 302 of ERISA) of benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over the fair market value of the assets of such Pension Plan, individually or in the aggregate for all Pension Benefit Plans maintained or contributed to by any Company or any of its Subsidiaries (excluding for purposes of such computation any Pension Benefit Plans with respect to which assets exceed benefit liabilities), which exceeds $50,000.00.

 

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(l)           Change in Control . A Change in Control shall have occurred.

 

(m)           Material Adverse Effect . There shall occur any condition or event that has a Material Adverse Effect.

 

Section 11.2          Remedies .

 

(a)          Upon the occurrence and during the continuance of an Event of Default, subject to the limitations set forth in Section 11.1, Purchaser shall have the right to exercise all rights and remedies under the Mortgage, and subject to the terms of the Subordination Agreement, the Purchaser shall have all rights and remedies of a secured party in, to and against the Collateral granted by the UCC and otherwise available at law or in equity, including, without limitation: (i) the right to declare any or all payments due under the Notes, the other Transaction Documents, and all other documents evidencing the Obligations immediately due and payable without any presentment, demand, protest or notice of any kind, except as otherwise expressly provided herein, and each Company hereby waives notice of intent to accelerate the Obligations and notice of acceleration; (ii) the right to recover all fees and expenses (including reasonable attorney fees) in connection with the collection or enforcement of the Obligations, which fees and expenses shall constitute additional Obligations of the Companies hereunder; (iii) the right to act as, and each Company hereby constitutes and appoints the Purchaser as, such Company’s true, lawful and irrevocable attorney-in-fact (which appointment shall be deemed coupled with an interest) to demand, receive and enforce payments and to give receipts, releases, satisfaction for and to sue for moneys payable to such Company or any of its Subsidiaries under or with respect to any of the Collateral, and actions taken pursuant to this appointment may be taken either in the name of such Company or in the name of the Purchaser with the same force and effect as if this appointment had not been made; (iv) the right to take immediate and exclusive possession of the Collateral, or any part thereof, and for that purpose, with or without judicial process and notice to any Company, enter (if this can be done without breach of the peace) upon any premises on which the Collateral or any part thereof may be situated and remove the same there from ( provided that if the Collateral is affixed to real estate, such removal shall be subject to the conditions stated in the UCC); (v) the right to hold, maintain, preserve and prepare the Collateral for sale, until disposed of; (vi) the right to require each Company to assemble and package the Collateral and make it available to the Purchaser for its possession at a place to be designated by the Purchaser which is reasonably convenient to the Purchaser; and (vii) the right to sell, lease, hold or otherwise dispose of all or any part of the Collateral.

 

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The Purchaser shall be entitled to receive on demand, as additional Obligations hereunder, interest accruing at the Default Rate on all amounts not paid when due under the Notes or this Agreement until the date of actual payment. The Purchaser shall have no duty to mitigate any loss to any Company occasioned by enforcement of any remedy hereunder and shall have no duty of any kind to any subordinated creditor of any Company. Neither the acceptance of this Agreement nor its enforcement shall prejudice or in any manner affect the Purchaser’s right to realize upon or enforce any other security now or hereafter held by the Purchaser, it being agreed that the Purchaser shall be entitled to enforce this Agreement and any other security now or hereafter held by Purchaser in such order and manner as it may in its absolute discretion determine. No remedy herein conferred upon or reserved to the Purchaser is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Transaction Documents to the Purchaser, or to which the Purchaser may be otherwise entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Purchaser.

 

(b)          Should the Purchaser exercise the rights and remedies specified in the preceding subsection (a), any proceeds received thereby shall be first applied to pay the reasonable costs and expenses, including reasonable attorneys’ fees, incurred by the Purchaser as a result of the Event of Default. The remainder of any proceeds, after payment of the Purchaser’s costs and expenses, shall be applied to the satisfaction of the Obligations and any excess paid over to the Companies.

 

Section 11.3          Retention of Collateral .

 

Until an Event of Default shall occur, the Companies may retain possession of the Collateral and may use it in any lawful manner not inconsistent with this Agreement, with the provisions of any policies of insurance thereon or the other Transaction Documents.

 

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Article 12.          Miscellaneous

 

Section 12.1          Amendments and Waivers .

 

No amendment, restatement, modification, termination or waiver of any provision of this Agreement or the Notes, or consent to any departure by the Company therefrom, shall in any event be effective without the written concurrence of the Purchaser. Executed or true and complete copies of any amendment, restatement, modification, termination or waiver effected pursuant to the provisions of this Section 12.1 shall be delivered by the Companies to the Purchaser of the Notes forthwith following the date on which the same shall have been executed.

 

Section 12.2          Transfers .

 

The Purchaser shall be permitted to transfer the Notes or any portion thereof (and the rights relating thereto under this Agreement and the other Transaction Documents) to any Person; provided that : (i) such transfer is made in connection with any of the following: any change of control of the Purchaser or its general partner; any liquidation, winding-up or dissolution of the Purchaser or any of its partners or principals (or suffer any liquidation or dissolution); Purchaser’s merger, consolidation, recapitalization, joint venture, business combination or other reorganization or similar transaction with or into any other Person; Purchaser’s filing of any bankruptcy or insolvency petition or otherwise instituting insolvency proceedings, filing or soliciting the filing of an involuntary bankruptcy petition against the Purchaser or any of its partners or principals; any sale, transfer or any other disposition of, in one transaction or a series of transactions, all or any part of Purchaser’s business or assets, whether now owned or hereafter acquired; any acquisition of any portion of the business, property or assets of, or any Equity Interests of, any Person; (ii) such transfer is made pursuant to a registration statement under the Securities Act (it being acknowledged that, the Companies shall not be obligated to assist in any manner in any such registration) or pursuant to an exemption from the registration requirements of the Securities Act; (iii) the applicable transferee is an "accredited investor" as defined in Regulation D promulgated under the Securities Act; and (iv) such transferee (A) represents to the Companies in writing that it is acquiring the Notes solely for its own account and not as nominee or agent for any other Person and not with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States of America or any state thereof, without prejudice, however, to its right at all times to sell or otherwise dispose of all or any part of the Notes pursuant to a registration statement under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act, and subject, nevertheless, to the disposition of its property being at all times within its control.

 

Within three (3) Business Days after its receipt of notice that a transfer is being made pursuant to this Section 12.2, but not prior to the effective date of such transfer, the Companies shall deliver to the applicable transferee a new Note evidencing the aggregate principal amount transferred and, if the Purchaser making such transfer is retaining an interest in the Note, a replacement Note in the aggregate principal amount being retained by the Purchaser (such Note to be in exchange for, but not in payment of the Note then held by the Purchaser). Each such Note shall be dated the date of the predecessor Note. The Purchaser making such transfer shall mark the predecessor Note "exchanged" and deliver it to the Companies.

 

59
 

 

Section 12.3          Notices .

 

Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and shall be made by electronic mail, personal service, facsimile or reputable courier service:

 

(a)          If to any Purchaser or subsequent Holder, to JL-BBNC Mezz Utah, LLC, 701 West 8th Avenue, Suite 1200, Anchorage, Alaska 99501, Attention: Joshua D. Hodes, Facsimile: (907) 276-8433, e-mail: joshh@lbblawyers.com, or such other address as shall be designated in a written notice delivered to the Companies, with copies to JL-BBNC Mezz Utah, LLC, 701 West 8th Avenue, Suite 1200, Anchorage, Alaska 99501, Attention: Joshua D. Hodes, Facsimile: (907) 276-8433, e-mail: joshh@lbblawyers.com.

 

(b)          If to the Companies, to Twinlab Consolidation Corporation, 600 East Quality Drive, American Fork, UT 84003, Attention: Mark Jaggi, Chief Financial Officer, Facsimile: (801) 772-2903, e-mail: mjaggi@twinlab.com, and to Twinlab Consolidation Corporation, 632 Broadway, Suite 201, New York, NY 10012, Attention: Richard Neuwirth, Chief Legal Officer, Facsimile: (212) 260-1853, e-mail: Rneuwirth@twinlab.com or such other address as shall be designated in a written notice delivered to the other parties hereto, with copies to Varnum LLP, Bridgewater Place, P.O. Box 352, Grand Rapids, MI 49501, Attention: Mary Kay Shaver, Facsimile: (616) 336-7000, e-mail: mkshaver@varnumlaw.com

 

Unless otherwise specifically provided herein, any notice or other communication shall be deemed to have been given when delivered in person or by courier service, upon receipt of electronic mail or upon receipt of facsimile.

 

Section 12.4          Independent of Covenants .

 

All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.

 

60
 

 

Section 12.5          Survival of Representations, Warranties and Agreements .

 

(a)          All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the issuance and sale of the Securities hereunder.

 

(b)          Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of the Company set forth in Section 2.5, and Section 9, shall survive the payment of the Notes, the exercise of the Warrant, and the termination of this Agreement.

 

Section 12.6          Failure or Indulgence Not Waiver; Remedies Cumulative .

 

No failure or delay on the part of the Purchaser in the exercise of any power, right or privilege hereunder or under any other Transaction Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Transaction Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

Section 12.7          Severability .

 

In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 12.8          Headings .

 

Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect.

 

61
 

 

Section 12.9          Governing Law; Submission to Jurisdiction; Service of Process .

 

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND PRINCIPLES. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT PERMITTED BY LAW AND TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT. EACH COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.

 

Section 12.10          Successors and Assigns

 

This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of the Purchaser.

 

Section 12.11          Waiver of Jury Trial

 

EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR TO ANY OTHER DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

62
 

 

Section 12.12          Facsimile; Counterparts; Effectiveness .

 

A facsimile, telecopy or other reproduction of this Agreement may be executed by the parties (in counterparts or otherwise) and shall be considered valid, binding and effective for all purposes. At the request of any party, the parties hereto agree to execute an original of this Agreement as well as any facsimile, telecopy or other reproduction. This Agreement and any amendments, restatements, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution and delivery of a counterpart hereof by each of the parties hereto.

 

Section 12.13          Entire Agreement .

 

This Agreement, together with the Securities, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, together with the Securities, supersedes all prior agreements and understandings between the parties with respect to such subject matter.

 

Section 12.14          Waivers of Provisions .

 

All amendments of this Agreement and all waivers and suspensions by Purchaser of any provision of this Agreement or of the Transaction Documents and all waivers and suspensions by Purchaser of any default or Event of Default hereunder shall be effective only if (i) in writing and signed by a duly authorized representative of Purchaser. The Purchaser may charge out-of-pocket expenses incurred by Purchaser in administration of this Agreement or in evaluation of the proposed waiver, amendment or suspension, as well as additional facility fees and administrative fees that may be required by Purchaser in connection with the Companies’ request. The fees may include additional compensation to Purchaser for the extension of the credit facilities represented by this Agreement. Any such amendment, waiver, or suspension may be granted only in the sole discretion of Purchaser.

 

63
 

 

Section 12.15          Termination and Release .

 

The Obligations of each Company hereunder (other than those that survive by their terms) shall terminate when all the Obligations (other than any obligations with respect to the Warrant) have been fully and indefeasibly paid and performed. Upon payment in full of the Obligations (other than any obligations with respect to the Warrant), the Purchaser shall release all Liens. Upon a Permitted Disposition, Purchaser agrees to release its any Lien any property which is subject to such Permitted Disposition so long as to the extent requested by Purchaser, Purchaser receives releases from the Companies each in form and substance acceptable to the Purchaser.

 

Section 12.16          Guaranty; Joint and Several .

 

To induce the Purchaser to purchase the Notes and to make credit available to or for the benefit of the Companies, each Company hereby, jointly and severally, absolutely, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, the full and punctual payment when due, whether at stated maturity or earlier, by reason of acceleration, mandatory prepayment or otherwise in accordance with any Transaction Document, of all the Obligations of each other Company whether existing on the date hereof or hereinafter incurred or created. This Guaranty by each Company hereunder constitutes a guaranty of payment and not of collection. The Companies and Guarantors agree that the Obligations of the Companies and Guarantors hereunder and under the other Transaction Documents are joint and several.

 

Section 12.17          Purchaser as Subordinated Lender .

 

Purchaser acknowledges that it is a mezzanine lender subject to the priority liens of the Senior Lenders and agrees, notwithstanding anything to contrary in this Agreement or any other Transaction Document, that the terms of, and obligations of the Companies under, the Transaction Documents are subject to the terms of the Subordination Agreement, except with respect to Purchaser’s exercising of its rights and remedies under the Mortgage.

 

[Signature pages follow.]

 

64
 

 

  PURCHASER:
     
  JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company
     
  By:    /s/ Jonathan B. Rubini
  Name: Jonathan B. Rubini
  Title: Managing Member

 

Signature Page to JL-BBNC Note and Warrant Purchase Agreement

 

65
 

 

  COMPANIES:
     
  TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB HOLDINGS, INC., a Michigan corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  ISI BRANDS INC., a Michigan corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CORPORATION, a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page to JL-BBNC Note and Warrant Purchase Agreement

 

66
 

 

 

TCC CM SUBCO I, INC., a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TCC CM SUBCO II, INC., a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page to JL-BBNC Note and Warrant Purchase Agreement

 

67

 

Exhibit 10.31

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (JL-BBNC) DATED AS OF JANUARY 22, 2015 IN FAVOR OF MIDCAP FINANCIAL TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH SUBORDINATION AGREEMENT (JL-BBNC) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (JL-BBNC) DATED AS OF JANUARY 22, 2015 IN FAVOR OF PENTA MEZZANINE SBIC FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP, AS THE SENIOR LENDER, WHICH SUBORDINATION AGREEMENT (JL-BBNC) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER THE ACT, THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS. IN ADDITION, THIS NOTE IS SUBJECT TO THE LIMITATIONS ON TRANSFER SET FORTH IN THE NOTE AND WARRANT PURCHASE AGREEMENT, DATED AS OF JANUARY 22, 2015, BY AND AMONG BORROWER AND LENDER NAMED THEREIN. A COPY OF THE NOTE AND WARRANT PURCHASE AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF BORROWER AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO BORROWER.

 

NOTE

 

$5,000,000 Dated as of January 22, 2015

 

FOR VALUE RECEIVED, TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (" Parent "), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (" TCC "), TWINLAB HOLDINGS, INC., a Michigan corporation (" Twinlab Holdings "), ISI BRANDS INC., a Michigan corporation (" ISI Brands "), TWINLAB CORPORATION, a Delaware corporation (" Twinlab Corporation "), TCC CM SUBCO I, INC., a Delaware corporation (" Subco I "), and TCC CM SUBCO II, INC., a Delaware corporation (" Subco II "; together with Parent, TCC, Twinlab Holdings, ISI Brands, Twinlab Corporation and Subco I, the " Borrower "), pursuant to this secured note (this " Note "), hereby JOINTLY AND SEVERALLY promise to pay to JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company (" Lender "), at such place as Lender may designate from time to time in writing, in lawful money of the United States of America, the principal amount of Five Million Dollars ($5,000,000), or such lesser amount as shall equal the outstanding principal balance of the loan (the " Loan "), made to Borrower by Lender pursuant to the Note and Warrant Purchase Agreement, dated as of the date hereof, by and between Borrower and Lender (the " Agreement "), and to pay all other amounts due with respect to the Loan on the dates and in the amounts set forth in the Agreement and this Note. Capitalized terms not defined herein shall have the meaning set forth in the Agreement.

 

 
 

 

1.           Payment of Principal . Principal shall be payable in installments of: (i) Two Hundred Fifty Thousand Dollars ($250,000.00) on the first business day of March, June, September, and December, commencing on March 1, 2017 and ending on December 1, 2018; (ii) Three Hundred Fifty Thousand Dollars ($350,000.00) on the first business day of March, June, September, and December, commencing on March 1, 2019 and ending on December 1, 2019; and (iii) a final payment of the balance due on February 13, 2020 (the " Maturity Date "). Unless due and payable prior thereto (whether by acceleration or otherwise), the entire principal amount of the Loan evidenced hereby, together with any accrued and unpaid interest, and any and all unpaid costs, fees and expenses accrued, shall be due and payable on the Maturity Date. The Note will be payable both as to principal and interest by Federal funds wire transfer to Lender as instructed by Lender.

 

2.           Payments of Interest .

 

(a)          All amounts outstanding from time to time hereunder shall bear interest until such amounts are paid, at a rate of twelve percent (12%) per annum. Borrower shall pay the Interest monthly on the last day of each calendar month unless such date is a day which is not a Business Day, in which case Borrower shall pay the Interest on such principal amount on the next succeeding Business Day (each an " Interest Payment Date "). Interest on the Note will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from the date of disbursement by Purchaser to the Companies or to such other person as otherwise directed by the Companies. Notwithstanding anything herein to the contrary, the interest rate applied to this Note shall at no time exceed the maximum rate permitted by applicable law, whether now or hereafter in effect. Interest will be computed on the basis of a 360-day year based on actual days elapsed.

 

(b)          Following any Event of Default (including before or after any judgment is entered) and after the Maturity Date, the principal balance outstanding hereunder, together with all such other amounts outstanding hereunder, shall bear interest (including post-petition interest in any proceeding under the Bankruptcy Code) at a rate of eighteen percent (18%) per annum (the " Default Rate "), and such Default Rate interest shall be due and payable upon demand. Interest will be computed on the basis of a 360-day year based on actual days elapsed.

 

3.           Prepayments . The Borrower may redeem the outstanding principal balance of the Note in whole or in part at any time in accordance with Section 8.1 of the Agreement; however, the Borrower shall pay to Lender a fee (the " Prepayment Penalty ") equal to: (i) three percent (3%) of the principal amount being redeemed (other than scheduled principal payments) if such redemption occurs prior to the first anniversary of the Effective Date, (ii) two percent (2%) of the principal amount being redeemed (other than scheduled principal payments) if such redemption occurs on or after the first anniversary of the Effective Date but before the second anniversary of the Effective Date; and (iii) one percent (1%) of the principal amount being redeemed (other than scheduled principal payments) if such redemption occurs on or after the second anniversary of the Effective Date but before the third anniversary of the Effective Date and (iv) zero percent (0%) of the principal amount being redeemed if such redemption occurs on or after the third anniversary of the Effective Date.

 

- 2 -
 

 

4.           Lender's Rights and Remedies . Upon the occurrence of an Event of Default, Lender shall not have any further obligation to advance money or extend credit to or for the benefit of Borrower and may exercise all rights and remedies as set forth in the Agreement, including without limitation, the Mortgage, or otherwise provided by law.

 

5.           Remedies Cumulative, Etc.

 

(a)          No right or remedy conferred upon or reserved to Lender hereunder or now or hereafter existing at law or in equity is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and concurrent, and in addition to every other such right or remedy, and may be pursued singly, concurrently, successively or otherwise, at the sole discretion of Lender, and shall not be exhausted by any one exercise thereof but may be exercised as often as occasion therefor shall occur.

 

(b)          Borrower hereby waives presentment, demand, notice of nonpayment, protest, notice of protest, notice of dishonor and any and all other notices in connection with any default in the payment of, or any enforcement of the payment of, all amounts due under this Note. To the extent permitted by law, Borrower waives the right to any stay of execution and the benefit of all exemption laws now or hereafter in effect.

 

(c)           Costs and Expenses . Following the occurrence of any Event of Default, Borrower shall pay upon demand all costs and expenses (including reasonable attorneys' fees and expenses) incurred by Lender in the exercise of any of its rights, remedies or powers under this Note and any amount thereof not paid promptly following demand therefor shall be added to the principal sum hereunder and shall bear interest at the Default Rate from the date of such demand until paid in full.

 

6.           Notices . All notices required to be given to any of the parties hereunder shall be given in the manner specified in Section 12.3 of the Agreement.

 

7.           Successors and Assigns . This Note inures to the benefit of Lender and binds Borrower, and their respective successors and assigns, and the words "Borrower" and "Lender" whenever occurring herein shall be deemed and construed to include such respective successors and assigns; provided , however , (i) neither this Note nor any rights hereunder may be assigned by Borrower without Lender's prior written consent, which consent may be granted or withheld in Lender's sole discretion and (ii) Lender shall be permitted to transfer the Note or any portion thereof (and the rights relating thereto under the Agreement and the other Transaction Documents) to any Person so long as Lender complies with Section 12.2 of the Agreement.

 

8.           Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of New York. Borrower agrees that any action or proceeding against it to enforce the Note may be commenced in state or federal court in New York County in the State of New York, and Borrower waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confer personal jurisdiction if served by registered or certified mail in accordance with the notice provisions set forth herein.

 

- 3 -
 

 

9.           Entire Agreement; Construction; Amendments and Waivers .

 

(a)           Entire Agreement . This Note and each of the related Transaction Documents, taken together, constitute and contain the entire agreement between Borrower and Lender with respect to the subject matter hereof and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, with respect to such subject matter. Borrower acknowledges that it is not relying on any representation or agreement made by Lender or any employee, attorney or agent thereof, other than the specific agreements set forth in this Note and Transaction Documents.

 

(b)           Construction . This Note is the result of negotiations between and has been reviewed by each of Borrower and Lender as of the date hereof and their respective counsel; accordingly, this Note shall be deemed to be the product of the parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lender. Borrower and Lender agree that they intend the literal words of this Note and the related loan documents and that no parol evidence shall be necessary or appropriate to establish Borrower's or Lender's actual intentions.

 

(c)           Amendments and Waivers . Any and all amendments, modifications, discharges or waivers of, or consents to any departures from any provision of this Note or of any of the related loan documents shall not be effective without the written consent of Lender and Borrower. Any waiver or consent with respect to any provision of such loan documents shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, waiver or consent affected in accordance with this Section shall be binding upon Lender and on Borrower. Any forbearance, failure or delay by Lender in the exercise of any right, power or remedy hereunder shall not be deemed to be a waiver of any such right, power or remedy and any single or partial exercise of any right, power or remedy, shall not preclude the further exercise thereof. Every right, power and remedy of Lender shall continue in full force and effect until such right, power or remedy is specifically waived by an instrument in writing executed by Lender.

 

10.          Reliance by Lender . All covenants, agreements, representations and warranties made herein by Borrower shall be deemed to be material to and to have been relied upon by Lender, notwithstanding any investigation by Lender.

 

11.          No Set-Offs by Borrower . All sums payable by Borrower pursuant to this Note or any of the related loan documents shall be payable without notice or demand and shall be payable in United States Dollars without set-off or reduction of any manner whatsoever.

 

12.          Survival . All covenants, representations and warranties made in this Note shall continue in full force and effect so long as any obligations hereunder or commitment to fund remain outstanding. The obligations of Borrower to indemnify Lender with respect to the expenses, damages, losses, costs and liabilities described in Section 11 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Lender have run.

 

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13.          WAIVER OF TRIAL BY JURY . AS A MATERIAL INDUCEMENT TO THE EXECUTION OF THIS NOTE, EACH OF THE PARTIES HERETO AGREES THAT IN THE EVENT ANY DISPUTE OR LITIGATION ARISING OUT OF THE TERMS AND PROVISIONS OF THIS NOTE, THE AGREEMENT OR OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP BETWEEN THE PARTIES HERETO, THEN NO PARTY SHALL SEEK A JURY TRIAL IN SUCH PROCEEDING, IT BEING EXPRESSLY AGREED AND STIPULATED BY THE PARTIES HERETO THAT ANY DISPUTES ARE BETTER RESOLVED BY A JUDGE.

 

[Signature is on next page.]

 

- 5 -
 

 

IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written.

 

  TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB HOLDINGS, INC., a Michigan corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  ISI BRANDS INC., a Michigan corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TWINLAB CORPORATION, a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page for JL-BBNC Note

 

- 6 -
 

 

  TCC CM SUBCO I, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
     
  TCC CM SUBCO II, INC.
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page for JL-BBNC Note

 

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Exhibit 10.32

 

THIS WARRANT AND THE EQUITY INTERESTS THAT MAY BE PURCHASED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED, OR OFFERED FOR SALE OR TRANSFER, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION THEREUNDER OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.

 

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

No. 2015-2 January 22, 2015
  (the  "Effective Date")

 

Warrant

 

This Warrant (the " Warrant ") certifies that, for value received, JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company , and its permitted transferees, successors and assigns (the " Holder "), is entitled to purchase from TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (the " Company "), 1,164,700 shares of common stock of the Company (subject to any adjustments pursuant to Section 3.3) issuable upon the full exercise of this Warrant at the purchase price of $0.01 in the aggregate (the " Exercise Price "), at any time prior to 5:00 P.M. on February 13, 2020 (the " Expiration Date ").

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1 Definitions . As used in this Warrant, the following terms shall have the following meanings:

 

" Adjusted EBITDA " shall mean EBITDA plus any expenses relating to Acquisitions through the end of the first Fiscal Year following the Effective Date, plus severance payments and other costs relating to permanent headcount reductions, all as determined by GAAP.

 

" Applicable Law " means all provisions of laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any Governmental Authority applicable to the Person in question or any of its assets or property, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or by which any of its assets or properties are bound.

 

" Assignment Form " shall mean the assignment form attached as Annex 2 hereto.

 

" Acquisition " means (a) the purchase or other acquisition by a Person of all or substantially all of the assets of (or any division or business line of) any other Person, or (b) the purchase or other acquisition (whether by means of a merger, consolidation, or otherwise) by a Person of all or substantially all of the Equity Interests of any other Person.

 

 
 

  

" Affiliate " or " Affiliated " means, as applied to (i) any Person, directly or indirectly, in which such Person holds, beneficially or of record, ten percent (10%) or more of the equity of voting securities; (ii) any Person that holds, of record or beneficially, ten percent (10%) or more of the equity or voting securities of such Person; (iii) any director, officer, partner or individual holding a similar position in respect of such Person; (iv) as to any natural Person, any Person related by blood, marriage or adoption and any Person owned by such Persons, including any spouse, parent, grandparent, aunt, uncle, child, grandchild, sibling, cousin or in-law of such Person; or (v) any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

 

" Business Day " means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

 

" Capital Lease " means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

 

" Conversion Ratio " shall have the meaning given to such term in Section 3.3.3(a) hereof.

 

" Company " shall have the meaning set forth in the Preamble.

 

" Current Holder’s Equity Interest " means 1,164,700 shares of common stock of the Company issuable upon the full exercise of this Warrant, minus any Equity Interest previously issued pursuant to the exercise of this Warrant.

 

" Delivery Date " shall have the meaning given to such term in Section 3.2 .

 

" EBITDA " shall mean Net Income, minus extraordinary gains, interest income, non-operating income, non-cash income and income tax benefits and decreases in any change in LIFO or any other inventory reserves, plus non-cash extraordinary losses (including non-cash expenses with respect to stock option and stock based employee compensation programs), Interest Expense (including expenses relating to the warrant relating to the Penta Debt), income taxes, depreciation and amortization and increases in any change in LIFO reserves for such period, in each case, determined on a consolidated basis in accordance with GAAP.

 

" Equity Interest " shall mean the interest of (i) a shareholder in a corporation, (ii) a partner (whether general or limited) in a partnership (whether general, limited or limited liability), (iii) a member in a limited liability company, or (iv) any other Person having any other form of equity security or ownership interest in any Person.

 

" Exchange Act " shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

 

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" Exchange Form " shall mean the exchange form attached as Annex 3 hereto.

 

" Executive Officer " shall mean, with respect to the Company, its Chief Executive Officer, President, Chief Financial Officer or Chief Operating Officer.

 

" Exercise Form " shall mean the exercise form attached as Annex 1 hereto.

 

" Exercise Price " shall have the meaning set forth in the Preamble.

 

" Expiration Date " shall have the meaning set forth in the Preamble.

 

" Fiscal Year " means the fiscal year of the Company, ending December 31 of each year.

 

" GAAP " shall mean generally accepted accounting principles in the United States as of the relevant date in question, consistently applied.

 

" Governmental Authority " means any arbitrator or any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Company.

 

" Holder " shall have the meaning set forth in the Preamble.

 

" Holder's Equity Interest " shall have the meaning given to such term in Section 3.3 .

 

" Indebtedness " as to any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (f) all obligations of such Person owing under hedge agreements (which amount shall be calculated based on the amount that would be payable by such Person if the hedge agreement were terminated on the date of determination), (g) any Prohibited Preferred Stock of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness described in clause (d) above shall be the lower of the amount of the obligation and the fair market value of the assets of such Person securing such obligation.

 

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" Interest Expense " means, for any period, the aggregate of the interest expense of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

 

" Lien " shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim, encumbrance or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset or property of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC or comparable law of any jurisdiction.

 

" Maturity Date " means February 13, 2020.

 

" Net Income " shall mean the consolidated net income (or loss) of the Company and its Subsidiaries for the period in question, after giving effect to deduction of or provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accordance with GAAP; provided, however, that for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (a) one-time extraordinary income items, as determined in accordance with GAAP, and (b) any Net Income attributable to any Subsidiary to the extent that the Company (or any Subsidiary through which such Company owns the subject Subsidiary) is prohibited (by law, contract minority ownership rights or otherwise) from receiving a distribution of such Net Income from such Subsidiary.

 

" Organizational Documents " shall mean, with respect to any Person, each instrument or other document that (a) defines the existence of such Person, including its articles or certificate of incorporation, formation or organization, as filed or recorded with an applicable Governmental Authority or (ii) governs the internal affairs of such Person, including its by-laws or its operating, partnership or limited liability company agreement, in each case as amended, supplemented or restated.

 

" Penta " means Penta Mezzanine SBIC Fund I, L.P.

 

" Penta Debt " means Indebtedness pursuant to that certain Note and Warrant Purchase Agreement, as amended, dated November 13, 2014, among the Company, its Subsidiaries, and Penta, and the Notes and Warrant as defined therein.

 

" Person " shall mean any individual, corporation, partnership, limited liability company, trust, unincorporated organization, or any other form of entity.

 

" Prohibited Preferred Stock " means any preferred Equity Interest that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of preferred Equity Interest of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 1 year after the Maturity Date, or, on or before the date that is less than 1 year after the Maturity Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of preferred Equity Interest of the same class and series or of shares of common stock).

 

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" Qualified Assignment " shall mean any of the following: (a) an assignment to a transferee acquiring at least 25% of the Equity Interests subject to the Warrant (subject to adjustment for stock splits, stock dividends, recapitalizations and similar events); or (b) an assignment to an Affiliate of the Holder.

 

" Rights Agreement " shall have the meaning given to such term in Section 4.1 .

 

" Securities Act " shall mean the Securities Act of 1933, as amended from time to time, and any successor statute.

 

" Subsidiary " shall mean a corporation or other entity any of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.

 

" Target EBITDA " shall have the meaning given to such term in Section 3.3.3(a) hereof.

 

" Taxes " means all taxes, charges, fees, levies or other assessments, however denominated and whether imposed by a taxing authority within or without the United States, including all net income, gross income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, custom duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority whether arising before, on or after the date hereof.

 

" Warrant " or " Warrants " shall mean this Warrant.

 

" Warrant Register " shall have the meaning given to such term in Section 2.1.

 

SECTION 1.2 Interpretation . Unless the context of this Warrant clearly requires otherwise, the masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so requires. Accounting terms used but not otherwise defined herein have the meanings given to them under GAAP. The terms "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "hereof," "herein," "hereunder," and similar terms in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant. References to "Articles", "Sections," "Subsections," "Exhibits," "Preamble," "Annexes," and "Schedules" are to articles, sections, subsections, exhibits, preamble, annexes and schedules, respectively, of this Warrant, unless otherwise specifically provided. References to "days" and "months" refer to calendar days and calendar months unless otherwise expressly designated (i.e., business days or particular 30-day periods). The captions contained herein are for convenience only and shall not control or affect the meaning or construction of any provision of this Warrant. The term "dollars" or "$" means United States Dollars.

 

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ARTICLE II

FORM; EXCHANGE FOR WARRANTS; TRANSFER; TAXES

 

SECTION 2.1 Warrant Register . Each Warrant issued, exchanged or transferred shall be registered in a warrant register (the " Warrant Register "). The Warrant Register shall set forth the number of each Warrant, the name and address of the holder thereof, and the Current Holder’s Equity Interest for which the Warrant is then exercisable. The Warrant Register will be maintained by the Company and will be available for inspection by the Holder at the principal office of the Company or such other location as the Company may designate to the Holder in the manner set forth in Section 5.1 hereof. The Company shall be entitled to treat the Holder as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person.

 

SECTION 2.2 Exchange of Warrants for Warrants .

 

(a)     The Holder may exchange this Warrant for another Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being so exchanged. In order to effect an exchange permitted by this Section 2.2 , the Holder shall deliver to the Company such Warrant accompanied by an Exchange Form in the form attached hereto as Annex 3 signed by the Holder thereof specifying the number and denominations of Warrants to be issued in such exchange and the names in which such Warrants are to be issued. Within ten (10) Business Days of receipt of such a request, the Company shall issue, register and deliver to the Holder thereof each Warrant to be issued in such exchange.

 

(b)     Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Holder, including indemnification reasonably acceptable to the Company) of the ownership and the loss, theft, destruction or mutilation of any Warrant or, in the case of any such mutilation, upon surrender of such Warrant, the Company shall (at its expense) execute and deliver in lieu of such Warrant a new Warrant of like kind and tenor representing the same rights represented by and dated the date of such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by any Person.

 

(c)     The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to an exchange of a Warrant pursuant to this Section 2.2 ; provided, however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of any Warrant in a name other than that of the Holder of the Warrant being exchanged.

 

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SECTION 2.3 Transfer of Warrant .

 

(a)     Subject to Section 2.3(c) hereof, each Warrant and the rights thereunder may be transferred by the Holder thereof, in whole or in part, by delivering to the Company such Warrant accompanied by a properly completed Assignment Form in the form of Annex 2 . Within ten (10) Business Days of receipt of such Assignment Form the Company shall issue, register and deliver to the new Holder, subject to Section 2.3(c ) hereof a new Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being transferred. In all cases of transfer by an attorney, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Company. In case of a transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the Company in its discretion.

 

(b)     Each Warrant issued in accordance with this Section 2.3 shall bear the restrictive legend set forth on the face of this Warrant, unless the Holder or transferee thereof supplies to the Company an opinion of counsel, reasonably satisfactory to the Company, that the restrictions described in such legend are no longer applicable to such Warrant.

 

(c)     The transfer of Warrants and any Equity Interest purchased thereunder shall be permitted, so long as such transfer is pursuant to a transaction that complies with, or is exempt from, the provisions of the Securities Act, and the Company may require an opinion of counsel in form and substance reasonably satisfactory to it to such effect prior to effecting any transfer of Warrants or any Equity Interest purchased thereunder.

 

ARTICLE III

EXERCISE OF WARRANT; EXCHANGE FOR EQUITY INTEREST

 

SECTION 3.1 Exercise of Warrants . On any Business Day before the Expiration Date, the Holder may exercise this Warrant, in whole or in part, by delivering to the Company this Warrant accompanied by a properly completed Exercise Form in the form of Annex 1 and a check in an aggregate amount equal to the applicable Exercise Price.

 

SECTION 3.2 Issuance of Equity Interest .

 

(a)     The Company represents and warrants that the authorized Equity Interest of the Company consists solely of (i) 5,000,000,000 shares of common stock, par value $0.001 per share, of which only 220,000,000 common shares have been issued as of the date hereof and (ii) 500,000,000 shares of preferred stock, of which no preferred shares have been issued as of the date hereof. The shares of common stock of the Company issued and outstanding as of the date hereof are duly authorized, validly issued, fully paid and non-assessable. The delivery to the Holder of certificates representing the Equity Interest that the Holder purchases pursuant to the exercise of this Warrant shall grant to the Holder good and valid title to the Equity Interest represented by such certificate, free and clear of any and all liens, pledges, security interests, charges or encumbrances of any kind or nature or any option, warrant or trust having the practical effect of any of the foregoing.

 

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(b)     Immediately upon the exercise of this Warrant in accordance with Section 3.1 , the Company (the " Delivery Date ") shall issue the Equity Interest that the Holder has purchased pursuant to such exercise, deliver to the Holder the certificates representing such Equity Interest and reflect the issuance of such Equity Interest, which Equity Interest shall be duly authorized, validly issued, outstanding, fully paid and non-assessable, in the Company’s shareholder records (maintained by the Company or its duly appointed transfer agent), whereupon the Holder shall be deemed for all purposes, effective as of the Delivery Date, to be a holder of record and beneficial owner of the Equity Interest that it has purchased pursuant to such exercise.

 

(c)      If a Holder shall exercise this Warrant for less than all of the Equity Interest which could be purchased or received hereunder, the Company shall issue to the Holder, within five (5) Business Days of the Delivery Date, a new Warrant of like kind and tenor to this Warrant evidencing the right to purchase the remaining Equity Interest represented by the Warrant. This Warrant shall be cancelled upon surrender thereof pursuant to Section 3.1 .

 

(d)     The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to the initial issuance of any Equity Interest upon the exercise or exchange of this Warrant or any successor Warrant; provided , however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of a successor to this Warrant in a name other than that of the Holder of the Warrant being exercised or exchanged.

 

(e)     Except as set forth in any document that is un-redacted and publicly filed with the U.S. Securities and Exchange Commission, neither the Company nor its Subsidiaries has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise and whether due or to become due) which are not fully reflected or reserved against on the balance sheet as of June 30, 2014 in accordance with GAAP, except for liabilities and obligations incurred in the ordinary course of business and consistent with past practice since the date thereof.

 

SECTION 3.3 Adjustment of Holder’s Equity Interest . The Equity Interest issuable upon exercise of this Warrant (such Equity Interest is referred to herein as the " Holder's Equity Interest ") shall be subject to adjustment from time to time in accordance with this Section 3.3 .

 

SECTION 3.3.1 Issuance of Additional Equity Interest; Capital Reorganization or Capital Reclassifications . If, at any time after the date hereof, the Equity Interests of the Company shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation (including, without limitation, any subdivision or combination of Equity Interest), then in each case the Company shall cause effective provision to be made so that this Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of equity securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of this Warrant would have been entitled upon such event and any such provision shall include adjustments in respect of such securities or other property that shall be equivalent to the adjustments provided for in this Warrant with respect to such Warrant.

 

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SECTION 3.3.2 Consolidations and Mergers; Dissolution .

 

(a)     If, at any time after the date hereof, the Company shall consolidate with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then the Company shall cause effective provision to be made so that each Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of shares of stock, membership or other equity interests, other securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of such Warrant would have been entitled upon such event. The Company shall not consolidate or merge unless, prior to consummation, the successor corporation (if other than the Company) assumes the obligations of this paragraph by written instrument executed and mailed to the Holder at the Holder’s address set forth in Section 5.1. A sale or lease of all or substantially all the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities is a consolidation or merger for the foregoing purposes.

 

(b)     In case a voluntary or involuntary dissolution, liquidation, or winding up of the Company (other than in connection with a consolidation or merger covered by subsection (a) above) is at any time proposed, the Company shall give at least 30 days’ prior written notice to the Holder. Such notice shall contain: (1) the date on which the transaction is to take place; (2) the record date (which shall be at least 30 days after the giving of the notice) as of which the Holder will be entitled to receive distributions as a result of the transaction; (3) a brief description of the transaction; (4) a brief description of the distributions to be made to the Holder as a result of the transaction and (5) an estimate of the fair value of the distributions. On the date of the transaction, if it actually occurs, this Warrant and all rights hereunder shall terminate.

 

SECTION 3.3.3 Adjustments to the Current Holder’s Equity Interest . Subject to the terms of this Section 3.3.3, the Current Holder’s Equity Interest (and the Warrant) shall be subject to increase (but not decrease) pursuant to the following:

 

(a)     if the Company’s and its Subsidiaries’ audited Adjusted EBITDA for the Fiscal Year ending December 31, 2018 does not equal or exceed $19,250,000 (the " Target EBITDA "), the Current Holder’s Equity Interest applicable to the Warrant shall increase (but not decrease) by a percentage equal to the ratio (the " Conversion Ratio ") of (i)(a) the Target EBITDA, minus (b) the audited Adjusted EBITDA of the Company and its Subsidiaries for such Fiscal Year to (ii) the audited Adjusted EBITDA of the Company and its Subsidiaries for such Fiscal Year, provided, however, that in no event will an adjustment pursuant to this paragraph 3.3.3(a) result in the Current Holder's Equity Interest (and the Warrant) exceeding three and one-half (3.5) times the amount same would have been were it not for the adjustment under this paragraph 3.3.3(a).

 

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(b)     Solely for the purposes of illustration, an example of the calculations described in this Section 3.3.3 is set forth on Schedule 3.3.3 attached hereto.

 

SECTION 3.3.4 Notice; Calculations; Etc . Whenever the Equity Interest issuable hereunder shall be adjusted as provided in this Section 3.3 , the Company shall provide to the Holder a statement, signed by an Executive Officer, describing in detail the facts requiring such adjustment and setting forth a calculation of the Equity Interest applicable to each Warrant after giving effect to such adjustment. All calculations under this Section 3.3 shall be made to the nearest one hundredth of a cent or to the nearest one-tenth of a unit, as the case may be.

 

ARTICLE IV

CERTAIN OTHER RIGHTS

 

SECTION 4.1 Registration Rights.

 

(a)     At any time at which this Warrant or the Equity Interest underlying the same remains outstanding, upon the request of the Holder, the Company will enter into a registration rights agreement with Holder (the " Rights Agreement "). Such Rights Agreement shall provide that beginning October 1, 2015, if the Company is eligible for the use of a registration statement on Form S-3, then the Holder shall have the right to request an initial registration and thereafter on a quarterly basis after such initial registration shall have been declared effective by the U.S. Securities and Exchange Commission, registration of its Equity Interests on Form S-3 or any similar short-form registration (each, a " Demand Registration "). The Rights Agreement will provide that each request for a Demand Registration shall specify the approximate number of Equity Interests requested to be registered and that the Company shall cause a registration statement on Form S-3 (or any successor form) to be filed within twenty (20) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Rights Agreement will provide that the Company may postpone for up to ninety (90) days the filing or effectiveness of a registration statement for a Demand Registration if the Company determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act. The Rights Agreement shall contain such other terms and conditions applicable to the Holder no less favorable to the Holder than registration rights made available to any other holder of any Equity Interest or other equity security of the Company.

 

(b)     The rights to cause the Company to register Equity Interests pursuant hereto may be assigned (but only with all related obligations) by the Holder in a Qualified Assignment; provided, that, (i) the Company is, upon or within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the securities with respect to which such registration rights are being assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Warrant, (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by transferee or assignee is restricted under the Securities Act, and (iv) such assignment shall be effective only if immediately following such transfer such Equity Interests continue to be Equity Interests of the Company.

 

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ARTICLE V

MISCELLANEOUS

 

SECTION 5.1 Notices . Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and shall be made by electronic mail, personal service, facsimile or reputable courier service:

 

(a) If to the Company, to:

 

TWINLAB CONSOLIDATED CORPORATION

600 East Quality Drive

American Fork, UT 84003

Attention: Mark Jaggi, Chief Financial Officer

Facsimile: (801) 763-0789

e-mail: MJaggi@twinlab.com

 

and

 

TWINLAB CONSOLIDATED CORPORATION

632 Broadway, Suite 201

New York, NY 10012

Attention: Richard Neuwirth, Chief Legal Officer

Facsimile: (212) 260-1853

e-mail: MJaggi@twinlab.com

with a copy to: RNeuwirth@twinlab.com

 

with a copy to:

 

VARNUM LLP

Bridgewater Place, P.O. Box 352

Grand Rapids, MI 49501

Attention: Mary Kay Shaver

Facsimile: (616) 336-7000

e-mail: mkshaver@varnumlaw.com

 

(b) If to the Holder, to:

 

JL-BBNC MEZZ UTAH, LLC

P.O. Box 202845

Anchorage, AK 99520-2845

Attention: Jonathan B. Rubini

Facsimile: (907) 279-8066

 

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e-mail: jrubini@jlproperties.com

 

with a copy to:

 

LANDYE BENNETT BLUMSTEIN LLP

701 West 8th Avenue, Suite 1200

Anchorage, Alaska 99501

Attention: Joshua D. Hodes, Esq.

e-mail: joshh@lbblawyers.com

 

Unless otherwise specifically provided herein, any notice or other communication shall be deemed to have been given when delivered in person or by courier service, upon receipt of electronic mail or upon receipt of facsimile.

 

SECTION 5.2 No Voting Rights: Limitations of Liability . This Warrant shall not entitle the holder thereof to any voting rights or, except as otherwise provided or referenced herein, other rights of an equity owner of the Company. No provision hereof, in the absence of affirmative action by the Holder to purchase its Equity Interest, and no enumeration herein of the rights or privileges of the Holder shall give rise to any liability of the Holder for the Exercise Price of the Equity Interest acquirable by exercise hereunder or as a stockholder of the Company.

 

SECTION 5.3 Amendments and Waivers . Any provision of this Warrant may be amended or waived, but only pursuant to a written agreement signed by the Company and the Holder; provided , however , that, notwithstanding the foregoing, this Warrant will automatically be amended, without any further action required by the Company and the Holder under this Section 5.3, if the Current Holder’s Equity Interest is adjusted pursuant to Section 3.3.3.

 

SECTION 5.4 Severability . If any provision of this Warrant shall be held to be invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any way affect or render invalid or unenforceable any other provision of this Agreement, and such provision shall be deemed to be restated to reflect the parties' original intentions as nearly as possible in accordance with Applicable Law(s).

 

SECTION 5.5 Specific Performance . The Holder shall have the right to specific performance by the Company of the provisions of this Warrant, in addition to any other remedies it may have at law or in equity. The Company hereby irrevocably waives, to the extent that it may do so under Applicable Law, any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against the Company for specific performance of this Warrant by the Holder.

 

SECTION 5.6 Binding Effect . This Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and assigns.

 

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SECTION 5.7 Counterparts . This Warrant may be executed in several counterparts, and/or by the execution of counterpart signature pages that may be attached to one or more counterparts of this Warrant, and all so executed shall constitute one agreement binding on all of the parties hereto, notwithstanding that all of the parties hereto are not signatory to the original or the same counterpart. In addition, any counterpart signature page may be executed by any party wherever such party is located, and may be delivered by telephone facsimile or by electronic mail in PDF format, and any such transmitted signature pages may be attached to one or more counterparts of this Warrant, and such faxed or sent by electronic mail signature(s) shall have the same force and effect, and be as binding, as if original signatures had been executed and delivered in person.

 

SECTION 5.8 Entire Agreement . This Warrant, together with the other documents and instruments entered into by the parties thereto in connection therewith, constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.

 

SECTION 5.9 Governing law . THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND PRINCIPLES. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.

 

SECTION 5.10 Expenses . The Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all reasonable fees, expenses and costs relating hereto, including, but not limited to, (i) the cost of reproducing this Warrant, (ii) the fees and disbursements of counsel to the Holder in preparing this Warrant, (iii) all transfer, stamp, documentary or other similar Taxes, assessments or charges levied by any governmental or revenue authority in respect hereof or any other document referred to herein, (iv) fees and expenses (including, without limitation, reasonable attorneys' fees) incurred in respect of the enforcement by the Holder of the rights granted to the Holder under this Warrant, and (v) the expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents requested by the Company pursuant to the provisions hereof, whether or not any such amendments, waivers or consents are executed.

 

13
 

  

SECTION 5.11 Attorneys' Fees . In any action or proceeding brought by a party to enforce any provision of this Warrant, the prevailing party shall be entitled to recover the reasonable costs and expenses incurred by it or him in connection therewith (including reasonable attorneys’ and paralegals’ fees and costs incurred before and at any trial or arbitration and at all appellate levels), as well as all other relief granted or awarded in such action or other proceeding.

 

SECTION 5.12 Filings . The Company shall, at its own expense, promptly execute and deliver, or cause to be executed and delivered, to the Holder all applications, certificates, instruments and all other documents and papers that the Holder may reasonably request in connection with the obtaining of any consent, approval, qualification, or authorization of any Federal, provincial, state or local government (or any agency or commission thereof) necessary or appropriate in connection with, or for the effective exercise of, the Warrant (and/or any successor Warrant(s) hereto).

 

SECTION 5.13 Other Transactions . Nothing contained herein shall preclude the Holder from engaging in any transaction, in addition to those contemplated by this Warrant with the Company or any of its Affiliates in which the Company or such Affiliate is not restricted hereby from engaging with any other Person.

 

SECTION 5.14 Waiver of Jury Trial . THE HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE HOLDER OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER ENTERING INTO THIS WARRANT.

 

SECTION 5.15 Headings . Section titles and captions contained in this Warrant are inserted only as a matter of convenience and for reference. The titles and captions in no way define, limit, extend or describe the scope of this Warrant or the intent of any provision hereof.

 

SECTION 5.16 No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

[Remainder of page intentionally left blank; signatures on following page]

 

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IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly executed and delivered by an authorized officer, all as of the date and year first above written.

 

 

TWINLAB CONSOLIDATED HOLDINGS, INC.,

a Nevada corporation

     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page To JL-BBNC Warrant 2015-2

 

15
 

  

ACKNOWLEDGED AND AGREED:  
   
JL-BBNC MEZZ UTAH, LLC,  
An Alaska limited liability company  
   
By: /s/ Jonathan B. Rubini  
Name: Jonathan B. Rubini  
Title: Managing Member  

 

Signature Page To JL-BBNC Warrant 2015-2

 

16
 

 

ANNEX 1

 

ELECTION TO EXERCISE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exercise This Warrant)

 

The undersigned hereby irrevocably elects to exercise the right covered by this Warrant to purchase ____________________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, according to the conditions hereof and herewith makes payment in full of the Exercise Price with respect to such Equity Interest.

 

   
  Signature  
     
     
     
     
  Address  

 

Dated: _____________________

 

 
 

 

ANNEX 2

 

ASSIGNMENT FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Assign This Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________ this Warrant and all rights evidenced thereby and does irrevocably constitute and appoint ___________________, attorney, to transfer the said Warrant on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated: _____________________

 

 
 

 

ANNEX 3

 

EXCHANGE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exchange and Assign This Warrant)

 

The undersigned hereby irrevocably elects to exchange this Warrant to purchase ________________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, for ___________ Warrants to purchase the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, set forth below to the Persons named and hereby sells, assigns and transfers unto such Persons that portion of this Warrant represented by such new Warrants and all rights evidenced thereby and does irrevocably constitute and appoint ____________________, attorney, to exchange and transfer this Warrant as aforesaid on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

Equity Interest   Assignee
     
     
     
     
     
     
    Signature

 

   
   
  Address

 

FOR USE BY THE COMPANY ONLY:

 

This Warrant No. __ cancelled (or transferred or exchanged) this ________ day of _____________, ____________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, issued therefor in the name of ____ ___________ Warrant No. ___ for ________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, in the name of _________________________.

 

Dated: _____________________

 

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Schedule 3.3.3

 

Calculations for Adjustment of Current Holder’s Equity Interest

 

Section 3.3.3(a):

 

If the audited Adjusted EBITDA of the Company and its Subsidiaries for the Fiscal Year ending December 31, 2018 equals $15,000,000, the Current Holder’s Equity Interest is increased by a percentage equal to:

 

($19,250,000 - $15,000,000) / $15,000,000 = 0.28333333

 

Therefore, the Current Holder’s Equity Interest equals 1,164,700 shares * 1.28333333 = 1,494,698 shares; provided, however, that the Current Holder’s Equity Interest would not exceed three and one-half (3.5) times 1,164,700 shares, for a total number of shares of 4,076,450.

 

 

 

 

 

Exhibit 10.33

 

THIS WARRANT AND THE EQUITY INTERESTS THAT MAY BE PURCHASED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED, OR OFFERED FOR SALE OR TRANSFER, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION THEREUNDER OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.

 

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

No. 2015-3 January 22, 2015
  (the  "Effective Date")

 

Warrant

 

This Warrant (the " Warrant ") certifies that, for value received, JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company , and its permitted transferees, successors and assigns (the " Holder "), is entitled to purchase from TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (the " Company "), 1,164,700 shares of common stock of the Company (subject to any adjustments pursuant to Section 3.3) issuable upon the full exercise of this Warrant at the purchase price of $0.01 in the aggregate (the " Exercise Price "), at any time prior to 5:00 P.M. on February 13, 2020 (the " Expiration Date ").

 

ARTICLE I""

DEFINITIONS

 

SECTION 1.1 Definitions . As used in this Warrant, the following terms shall have the following meanings:

 

" Adjusted EBITDA " shall mean EBITDA plus any expenses relating to Acquisitions through the end of the first Fiscal Year following the Effective Date, plus severance payments and other costs relating to permanent headcount reductions, all as determined by GAAP.

 

" Applicable Law " means all provisions of laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any Governmental Authority applicable to the Person in question or any of its assets or property, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or by which any of its assets or properties are bound.

 

" Assignment Form " shall mean the assignment form attached as Annex 2 hereto.

 

" Acquisition " means (a) the purchase or other acquisition by a Person of all or substantially all of the assets of (or any division or business line of) any other Person, or (b) the purchase or other acquisition (whether by means of a merger, consolidation, or otherwise) by a Person of all or substantially all of the Equity Interests of any other Person.

 

 
 

  

" Affiliate " or " Affiliated " means, as applied to (i) any Person, directly or indirectly, in which such Person holds, beneficially or of record, ten percent (10%) or more of the equity of voting securities; (ii) any Person that holds, of record or beneficially, ten percent (10%) or more of the equity or voting securities of such Person; (iii) any director, officer, partner or individual holding a similar position in respect of such Person; (iv) as to any natural Person, any Person related by blood, marriage or adoption and any Person owned by such Persons, including any spouse, parent, grandparent, aunt, uncle, child, grandchild, sibling, cousin or in-law of such Person; or (v) any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

 

" Business Day " means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close.

 

" Capital Lease " means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.

 

" Conversion Ratio " shall have the meaning given to such term in Section 3.3.3(a) hereof.

 

" Company " shall have the meaning set forth in the Preamble.

 

" Current Holder’s Equity Interest " means 1,164,700 shares of common stock of the Company issuable upon the full exercise of this Warrant, minus any Equity Interest previously issued pursuant to the exercise of this Warrant.

 

" Delivery Date " shall have the meaning given to such term in Section 3.2 .

 

" EBITDA " shall mean Net Income, minus extraordinary gains, interest income, non-operating income, non-cash income and income tax benefits and decreases in any change in LIFO or any other inventory reserves, plus non-cash extraordinary losses (including non-cash expenses with respect to stock option and stock based employee compensation programs), Interest Expense (including expenses relating to the warrant relating to the Penta Debt), income taxes, depreciation and amortization and increases in any change in LIFO reserves for such period, in each case, determined on a consolidated basis in accordance with GAAP.

 

" Equity Interest " shall mean the interest of (i) a shareholder in a corporation, (ii) a partner (whether general or limited) in a partnership (whether general, limited or limited liability), (iii) a member in a limited liability company, or (iv) any other Person having any other form of equity security or ownership interest in any Person.

 

" Exchange Act " shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

 

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" Exchange Form " shall mean the exchange form attached as Annex 3 hereto.

 

" Executive Officer " shall mean, with respect to the Company, its Chief Executive Officer, President, Chief Financial Officer or Chief Operating Officer.

 

" Exercise Form " shall mean the exercise form attached as Annex 1 hereto.

 

" Exercise Price " shall have the meaning set forth in the Preamble.

 

" Expiration Date " shall have the meaning set forth in the Preamble.

 

" Fiscal Year " means the fiscal year of the Company, ending December 31 of each year.

 

" GAAP " shall mean generally accepted accounting principles in the United States as of the relevant date in question, consistently applied.

 

" Governmental Authority " means any arbitrator or any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Company.

 

" Holder " shall have the meaning set forth in the Preamble.

 

" Holder's Equity Interest " shall have the meaning given to such term in Section 3.3 .

 

" Indebtedness " as to any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices), (f) all obligations of such Person owing under hedge agreements (which amount shall be calculated based on the amount that would be payable by such Person if the hedge agreement were terminated on the date of determination), (g) any Prohibited Preferred Stock of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness described in clause (d) above shall be the lower of the amount of the obligation and the fair market value of the assets of such Person securing such obligation.

 

3
 

  

" Interest Expense " means, for any period, the aggregate of the interest expense of the Company and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

 

" Lien " shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, security interest, lien (whether statutory or otherwise), charge, claim, encumbrance or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset or property of any kind or nature whatsoever, including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the UCC or comparable law of any jurisdiction.

 

" Maturity Date " means February 13, 2020.

 

" Net Income " shall mean the consolidated net income (or loss) of the Company and its Subsidiaries for the period in question, after giving effect to deduction of or provision for all operating expenses, all taxes and reserves (including reserves for deferred taxes) and all other proper deductions, all determined in accordance with GAAP; provided, however, that for purposes of calculating Net Income, there shall be excluded and no effect shall be given to (a) one-time extraordinary income items, as determined in accordance with GAAP, and (b) any Net Income attributable to any Subsidiary to the extent that the Company (or any Subsidiary through which such Company owns the subject Subsidiary) is prohibited (by law, contract minority ownership rights or otherwise) from receiving a distribution of such Net Income from such Subsidiary.

 

" Organizational Documents " shall mean, with respect to any Person, each instrument or other document that (a) defines the existence of such Person, including its articles or certificate of incorporation, formation or organization, as filed or recorded with an applicable Governmental Authority or (ii) governs the internal affairs of such Person, including its by-laws or its operating, partnership or limited liability company agreement, in each case as amended, supplemented or restated.

 

" Penta " means Penta Mezzanine SBIC Fund I, L.P.

 

" Penta Debt " means Indebtedness pursuant to that certain Note and Warrant Purchase Agreement, as amended, dated November 13, 2014, among the Company, its Subsidiaries, and Penta, and the Notes and Warrant as defined therein.

 

" Person " shall mean any individual, corporation, partnership, limited liability company, trust, unincorporated organization, or any other form of entity.

 

" Prohibited Preferred Stock " means any preferred Equity Interest that by its terms is mandatorily redeemable or subject to any other payment obligation (including any obligation to pay dividends, other than dividends of shares of preferred Equity Interest of the same class and series payable in kind or dividends of shares of common stock) on or before a date that is less than 1 year after the Maturity Date, or, on or before the date that is less than 1 year after the Maturity Date, is redeemable at the option of the holder thereof for cash or assets or securities (other than distributions in kind of shares of preferred Equity Interest of the same class and series or of shares of common stock).

 

4
 

  

" Qualified Assignment " shall mean any of the following: (a) an assignment to a transferee acquiring at least 25% of the Equity Interests subject to the Warrant (subject to adjustment for stock splits, stock dividends, recapitalizations and similar events); or (b) an assignment to an Affiliate of the Holder.

 

" Rights Agreement " shall have the meaning given to such term in Section 4.1 .

 

" Securities Act " shall mean the Securities Act of 1933, as amended from time to time, and any successor statute.

 

" Subsidiary " shall mean a corporation or other entity any of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person.

 

" Target EBITDA " shall have the meaning given to such term in Section 3.3.3(a) hereof.

 

" Taxes " means all taxes, charges, fees, levies or other assessments, however denominated and whether imposed by a taxing authority within or without the United States, including all net income, gross income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, custom duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority whether arising before, on or after the date hereof.

 

" Warrant " or " Warrants " shall mean this Warrant.

 

" Warrant Register " shall have the meaning given to such term in Section 2.1.

 

SECTION 1.2 Interpretation . Unless the context of this Warrant clearly requires otherwise, the masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so requires. Accounting terms used but not otherwise defined herein have the meanings given to them under GAAP. The terms "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." The words "hereof," "herein," "hereunder," and similar terms in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant. References to "Articles", "Sections," "Subsections," "Exhibits," "Preamble," "Annexes," and "Schedules" are to articles, sections, subsections, exhibits, preamble, annexes and schedules, respectively, of this Warrant, unless otherwise specifically provided. References to "days" and "months" refer to calendar days and calendar months unless otherwise expressly designated (i.e., business days or particular 30-day periods). The captions contained herein are for convenience only and shall not control or affect the meaning or construction of any provision of this Warrant. The term "dollars" or "$" means United States Dollars.

 

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ARTICLE II

FORM; EXCHANGE FOR WARRANTS; TRANSFER; TAXES

 

SECTION 2.1   Warrant Register . Each Warrant issued, exchanged or transferred shall be registered in a warrant register (the " Warrant Register "). The Warrant Register shall set forth the number of each Warrant, the name and address of the holder thereof, and the Current Holder’s Equity Interest for which the Warrant is then exercisable. The Warrant Register will be maintained by the Company and will be available for inspection by the Holder at the principal office of the Company or such other location as the Company may designate to the Holder in the manner set forth in Section 5.1 hereof. The Company shall be entitled to treat the Holder as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person.

 

SECTION 2.2   Exchange of Warrants for Warrants .

 

(a)    The Holder may exchange this Warrant for another Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being so exchanged. In order to effect an exchange permitted by this Section 2.2 , the Holder shall deliver to the Company such Warrant accompanied by an Exchange Form in the form attached hereto as Annex 3 signed by the Holder thereof specifying the number and denominations of Warrants to be issued in such exchange and the names in which such Warrants are to be issued. Within ten (10) Business Days of receipt of such a request, the Company shall issue, register and deliver to the Holder thereof each Warrant to be issued in such exchange.

 

(b)    Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Holder, including indemnification reasonably acceptable to the Company) of the ownership and the loss, theft, destruction or mutilation of any Warrant or, in the case of any such mutilation, upon surrender of such Warrant, the Company shall (at its expense) execute and deliver in lieu of such Warrant a new Warrant of like kind and tenor representing the same rights represented by and dated the date of such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by any Person.

 

(c)    The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to an exchange of a Warrant pursuant to this Section 2.2 ; provided, however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of any Warrant in a name other than that of the Holder of the Warrant being exchanged.

 

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SECTION 2.3   Transfer of Warrant .

 

(a)     Subject to Section 2.3(c) hereof, each Warrant and the rights thereunder may be transferred by the Holder thereof, in whole or in part, by delivering to the Company such Warrant accompanied by a properly completed Assignment Form in the form of Annex 2 . Within ten (10) Business Days of receipt of such Assignment Form the Company shall issue, register and deliver to the new Holder, subject to Section 2.3(c ) hereof a new Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being transferred. In all cases of transfer by an attorney, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Company. In case of a transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the Company in its discretion.

 

(b)    Each Warrant issued in accordance with this Section 2.3 shall bear the restrictive legend set forth on the face of this Warrant, unless the Holder or transferee thereof supplies to the Company an opinion of counsel, reasonably satisfactory to the Company, that the restrictions described in such legend are no longer applicable to such Warrant.

 

(c)    The transfer of Warrants and any Equity Interest purchased thereunder shall be permitted, so long as such transfer is pursuant to a transaction that complies with, or is exempt from, the provisions of the Securities Act, and the Company may require an opinion of counsel in form and substance reasonably satisfactory to it to such effect prior to effecting any transfer of Warrants or any Equity Interest purchased thereunder.

 

ARTICLE III

EXERCISE OF WARRANT; EXCHANGE FOR EQUITY INTEREST

 

SECTION 3.1   Exercise of Warrants . On any Business Day before the Expiration Date, the Holder may exercise this Warrant, in whole or in part, by delivering to the Company this Warrant accompanied by a properly completed Exercise Form in the form of Annex 1 and a check in an aggregate amount equal to the applicable Exercise Price.

 

SECTION 3.2   Issuance of Equity Interest .

 

(a)     The Company represents and warrants that the authorized Equity Interest of the Company consists solely of (i) 5,000,000,000 shares of common stock, par value $0.001 per share, of which only 220,000,000 common shares have been issued as of the date hereof and (ii) 500,000,000 shares of preferred stock, of which no preferred shares have been issued as of the date hereof. The shares of common stock of the Company issued and outstanding as of the date hereof are duly authorized, validly issued, fully paid and non-assessable. The delivery to the Holder of certificates representing the Equity Interest that the Holder purchases pursuant to the exercise of this Warrant shall grant to the Holder good and valid title to the Equity Interest represented by such certificate, free and clear of any and all liens, pledges, security interests, charges or encumbrances of any kind or nature or any option, warrant or trust having the practical effect of any of the foregoing.

 

7
 

  

(b)    Immediately upon the exercise of this Warrant in accordance with Section 3.1 , the Company (the " Delivery Date ") shall issue the Equity Interest that the Holder has purchased pursuant to such exercise, deliver to the Holder the certificates representing such Equity Interest and reflect the issuance of such Equity Interest, which Equity Interest shall be duly authorized, validly issued, outstanding, fully paid and non-assessable, in the Company’s shareholder records (maintained by the Company or its duly appointed transfer agent), whereupon the Holder shall be deemed for all purposes, effective as of the Delivery Date, to be a holder of record and beneficial owner of the Equity Interest that it has purchased pursuant to such exercise.

 

(c)    If a Holder shall exercise this Warrant for less than all of the Equity Interest which could be purchased or received hereunder, the Company shall issue to the Holder, within five (5) Business Days of the Delivery Date, a new Warrant of like kind and tenor to this Warrant evidencing the right to purchase the remaining Equity Interest represented by the Warrant. This Warrant shall be cancelled upon surrender thereof pursuant to Section 3.1 .

 

(d)    The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to the initial issuance of any Equity Interest upon the exercise or exchange of this Warrant or any successor Warrant; provided , however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of a successor to this Warrant in a name other than that of the Holder of the Warrant being exercised or exchanged.

 

(e)    Except as set forth in any document that is un-redacted and publicly filed with the U.S. Securities and Exchange Commission, neither the Company nor its Subsidiaries has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise and whether due or to become due) which are not fully reflected or reserved against on the balance sheet as of June 30, 2014 in accordance with GAAP, except for liabilities and obligations incurred in the ordinary course of business and consistent with past practice since the date thereof.

 

SECTION 3.3   Adjustment of Holder’s Equity Interest . The Equity Interest issuable upon exercise of this Warrant (such Equity Interest is referred to herein as the " Holder's Equity Interest ") shall be subject to adjustment from time to time in accordance with this Section 3.3 .

 

SECTION 3.3.1   Issuance of Additional Equity Interest; Capital Reorganization or Capital Reclassifications . If, at any time after the date hereof, the Equity Interests of the Company shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation (including, without limitation, any subdivision or combination of Equity Interest), then in each case the Company shall cause effective provision to be made so that this Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of equity securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of this Warrant would have been entitled upon such event and any such provision shall include adjustments in respect of such securities or other property that shall be equivalent to the adjustments provided for in this Warrant with respect to such Warrant.

 

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SECTION 3.3.2   Consolidations and Mergers; Dissolution .

 

(a)    If, at any time after the date hereof, the Company shall consolidate with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then the Company shall cause effective provision to be made so that each Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of shares of stock, membership or other equity interests, other securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of such Warrant would have been entitled upon such event. The Company shall not consolidate or merge unless, prior to consummation, the successor corporation (if other than the Company) assumes the obligations of this paragraph by written instrument executed and mailed to the Holder at the Holder’s address set forth in Section 5.1. A sale or lease of all or substantially all the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities is a consolidation or merger for the foregoing purposes.

 

(b)    In case a voluntary or involuntary dissolution, liquidation, or winding up of the Company (other than in connection with a consolidation or merger covered by subsection (a) above) is at any time proposed, the Company shall give at least 30 days’ prior written notice to the Holder. Such notice shall contain: (1) the date on which the transaction is to take place; (2) the record date (which shall be at least 30 days after the giving of the notice) as of which the Holder will be entitled to receive distributions as a result of the transaction; (3) a brief description of the transaction; (4) a brief description of the distributions to be made to the Holder as a result of the transaction and (5) an estimate of the fair value of the distributions. On the date of the transaction, if it actually occurs, this Warrant and all rights hereunder shall terminate.

 

SECTION 3.3.3   Adjustments to the Current Holder’s Equity Interest . Subject to the terms of this Section 3.3.3, the Current Holder’s Equity Interest (and the Warrant) shall be subject to increase (but not decrease) pursuant to the following:

 

(a)    if the Company’s and its Subsidiaries’ audited Adjusted EBITDA for the Fiscal Year ending December 31, 2018 does not equal or exceed $19,250,000 (the " Target EBITDA "), the Current Holder’s Equity Interest applicable to the Warrant shall increase (but not decrease) by a percentage equal to the ratio (the " Conversion Ratio ") of (i)(a) the Target EBITDA, minus (b) the audited Adjusted EBITDA of the Company and its Subsidiaries for such Fiscal Year to (ii) the audited Adjusted EBITDA of the Company and its Subsidiaries for such Fiscal Year, provided, however, that in no event will an adjustment pursuant to this paragraph 3.3.3(a) result in the Current Holder's Equity Interest (and the Warrant) exceeding three and one-half (3.5) times the amount same would have been were it not for the adjustment under this paragraph 3.3.3(a).

 

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(b)    Solely for the purposes of illustration, an example of the calculations described in this Section 3.3.3 is set forth on Schedule 3.3.3 attached hereto.

 

SECTION 3.3.4   Notice; Calculations; Etc . Whenever the Equity Interest issuable hereunder shall be adjusted as provided in this Section 3.3 , the Company shall provide to the Holder a statement, signed by an Executive Officer, describing in detail the facts requiring such adjustment and setting forth a calculation of the Equity Interest applicable to each Warrant after giving effect to such adjustment. All calculations under this Section 3.3 shall be made to the nearest one hundredth of a cent or to the nearest one-tenth of a unit, as the case may be.

 

ARTICLE IV

CERTAIN OTHER RIGHTS

 

SECTION 4.1   Registration Rights.

 

(a)     At any time at which this Warrant or the Equity Interest underlying the same remains outstanding, upon the request of the Holder, the Company will enter into a registration rights agreement with Holder (the " Rights Agreement "). Such Rights Agreement shall provide that beginning October 1, 2015, if the Company is eligible for the use of a registration statement on Form S-3, then the Holder shall have the right to request an initial registration and thereafter on a quarterly basis after such initial registration shall have been declared effective by the U.S. Securities and Exchange Commission, registration of its Equity Interests on Form S-3 or any similar short-form registration (each, a " Demand Registration "). The Rights Agreement will provide that each request for a Demand Registration shall specify the approximate number of Equity Interests requested to be registered and that the Company shall cause a registration statement on Form S-3 (or any successor form) to be filed within twenty (20) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Rights Agreement will provide that the Company may postpone for up to ninety (90) days the filing or effectiveness of a registration statement for a Demand Registration if the Company determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act. The Rights Agreement shall contain such other terms and conditions applicable to the Holder no less favorable to the Holder than registration rights made available to any other holder of any Equity Interest or other equity security of the Company.

 

(b)     The rights to cause the Company to register Equity Interests pursuant hereto may be assigned (but only with all related obligations) by the Holder in a Qualified Assignment; provided, that, (i) the Company is, upon or within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the securities with respect to which such registration rights are being assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Warrant, (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by transferee or assignee is restricted under the Securities Act, and (iv) such assignment shall be effective only if immediately following such transfer such Equity Interests continue to be Equity Interests of the Company.

 

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ARTICLE V

MISCELLANEOUS

 

SECTION 5.1   Notices . Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and shall be made by electronic mail, personal service, facsimile or reputable courier service:

 

(a) If to the Company, to:

 

TWINLAB CONSOLIDATED CORPORATION

600 East Quality Drive

American Fork, UT 84003

Attention: Mark Jaggi, Chief Financial Officer

Facsimile: (801) 763-0789

e-mail: MJaggi@twinlab.com

 

and

 

TWINLAB CONSOLIDATED CORPORATION

632 Broadway, Suite 201

New York, NY 10012

Attention: Richard Neuwirth, Chief Legal Officer

Facsimile: (212) 260-1853

e-mail: MJaggi@twinlab.com

with a copy to: RNeuwirth@twinlab.com

 

with a copy to:

 

VARNUM LLP

Bridgewater Place, P.O. Box 352

Grand Rapids, MI 49501

Attention: Mary Kay Shaver

Facsimile: (616) 336-7000

e-mail: mkshaver@varnumlaw.com

 

(b) If to the Holder, to:

 

JL-BBNC MEZZ UTAH, LLC

P.O. Box 202845

Anchorage, AK 99520-2845

Attention: Jonathan B. Rubini

Facsimile: (907) 279-8066

 

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e-mail: jrubini@jlproperties.com

 

with a copy to:

 

LANDYE BENNETT BLUMSTEIN LLP

701 West 8th Avenue, Suite 1200

Anchorage, Alaska 99501

Attention: Joshua D. Hodes, Esq.

e-mail: joshh@lbblawyers.com

 

Unless otherwise specifically provided herein, any notice or other communication shall be deemed to have been given when delivered in person or by courier service, upon receipt of electronic mail or upon receipt of facsimile.

 

SECTION 5.2   No Voting Rights: Limitations of Liability . This Warrant shall not entitle the holder thereof to any voting rights or, except as otherwise provided or referenced herein, other rights of an equity owner of the Company. No provision hereof, in the absence of affirmative action by the Holder to purchase its Equity Interest, and no enumeration herein of the rights or privileges of the Holder shall give rise to any liability of the Holder for the Exercise Price of the Equity Interest acquirable by exercise hereunder or as a stockholder of the Company.

 

SECTION 5.3   Amendments and Waivers . Any provision of this Warrant may be amended or waived, but only pursuant to a written agreement signed by the Company and the Holder; provided , however , that, notwithstanding the foregoing, this Warrant will automatically be amended, without any further action required by the Company and the Holder under this Section 5.3, if the Current Holder’s Equity Interest is adjusted pursuant to Section 3.3.3.

 

SECTION 5.4   Severability . If any provision of this Warrant shall be held to be invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any way affect or render invalid or unenforceable any other provision of this Agreement, and such provision shall be deemed to be restated to reflect the parties' original intentions as nearly as possible in accordance with Applicable Law(s).

 

SECTION 5.5   Specific Performance . The Holder shall have the right to specific performance by the Company of the provisions of this Warrant, in addition to any other remedies it may have at law or in equity. The Company hereby irrevocably waives, to the extent that it may do so under Applicable Law, any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against the Company for specific performance of this Warrant by the Holder.

 

SECTION 5.6   Binding Effect . This Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and assigns.

 

SECTION 5.7   Counterparts . This Warrant may be executed in several counterparts, and/or by the execution of counterpart signature pages that may be attached to one or more counterparts of this Warrant, and all so executed shall constitute one agreement binding on all of the parties hereto, notwithstanding that all of the parties hereto are not signatory to the original or the same counterpart. In addition, any counterpart signature page may be executed by any party wherever such party is located, and may be delivered by telephone facsimile or by electronic mail in PDF format, and any such transmitted signature pages may be attached to one or more counterparts of this Warrant, and such faxed or sent by electronic mail signature(s) shall have the same force and effect, and be as binding, as if original signatures had been executed and delivered in person.

 

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SECTION 5.8   Entire Agreement . This Warrant, together with the other documents and instruments entered into by the parties thereto in connection therewith, constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.

 

SECTION 5.9   Governing law . THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND PRINCIPLES. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.

 

SECTION 5.10   Expenses . The Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all reasonable fees, expenses and costs relating hereto, including, but not limited to, (i) the cost of reproducing this Warrant, (ii) the fees and disbursements of counsel to the Holder in preparing this Warrant, (iii) all transfer, stamp, documentary or other similar Taxes, assessments or charges levied by any governmental or revenue authority in respect hereof or any other document referred to herein, (iv) fees and expenses (including, without limitation, reasonable attorneys' fees) incurred in respect of the enforcement by the Holder of the rights granted to the Holder under this Warrant, and (v) the expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents requested by the Company pursuant to the provisions hereof, whether or not any such amendments, waivers or consents are executed.

 

SECTION 5.11   Attorneys' Fees . In any action or proceeding brought by a party to enforce any provision of this Warrant, the prevailing party shall be entitled to recover the reasonable costs and expenses incurred by it or him in connection therewith (including reasonable attorneys’ and paralegals’ fees and costs incurred before and at any trial or arbitration and at all appellate levels), as well as all other relief granted or awarded in such action or other proceeding.

 

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SECTION 5.12   Filings . The Company shall, at its own expense, promptly execute and deliver, or cause to be executed and delivered, to the Holder all applications, certificates, instruments and all other documents and papers that the Holder may reasonably request in connection with the obtaining of any consent, approval, qualification, or authorization of any Federal, provincial, state or local government (or any agency or commission thereof) necessary or appropriate in connection with, or for the effective exercise of, the Warrant (and/or any successor Warrant(s) hereto).

 

SECTION 5.13   Other Transactions . Nothing contained herein shall preclude the Holder from engaging in any transaction, in addition to those contemplated by this Warrant with the Company or any of its Affiliates in which the Company or such Affiliate is not restricted hereby from engaging with any other Person.

 

SECTION 5.14   Waiver of Jury Trial . THE HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE HOLDER OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER ENTERING INTO THIS WARRANT.

 

SECTION 5.15   Headings . Section titles and captions contained in this Warrant are inserted only as a matter of convenience and for reference. The titles and captions in no way define, limit, extend or describe the scope of this Warrant or the intent of any provision hereof.

 

SECTION 5.16   No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

[Remainder of page intentionally left blank; signatures on following page]

 

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IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly executed and delivered by an authorized officer, all as of the date and year first above written.

 

  TWINLAB CONSOLIDATED HOLDINGS, INC.,
  a Nevada corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page To JL-BBNC Warrant 2015-3

 

15
 

   

ACKNOWLEDGED AND AGREED:  
   
JL-BBNC MEZZ UTAH, LLC,  
An Alaska limited liability company  
     
By: /s/ Jonathan B. Rubini  
Name: Jonathan B. Rubini  
Title: Managing Member  

 

Signature Page To JL-BBNC Warrant 2015-3

 

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ANNEX 1

 

ELECTION TO EXERCISE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exercise This Warrant)

 

The undersigned hereby irrevocably elects to exercise the right covered by this Warrant to purchase ____________________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, according to the conditions hereof and herewith makes payment in full of the Exercise Price with respect to such Equity Interest.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated: _____________________

 

 
 

ANNEX 2

 

ASSIGNMENT FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Assign This Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________ this Warrant and all rights evidenced thereby and does irrevocably constitute and appoint ___________________, attorney, to transfer the said Warrant on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated: _____________________

 

 
 

ANNEX 3

 

EXCHANGE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exchange and Assign This Warrant)

 

The undersigned hereby irrevocably elects to exchange this Warrant to purchase ________________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, for ___________ Warrants to purchase the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, set forth below to the Persons named and hereby sells, assigns and transfers unto such Persons that portion of this Warrant represented by such new Warrants and all rights evidenced thereby and does irrevocably constitute and appoint ____________________, attorney, to exchange and transfer this Warrant as aforesaid on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

Equity Interest   Assignee
     
     
     
     
     
     
    Signature

 

   
   
  Address

 

FOR USE BY THE COMPANY ONLY:

 

This Warrant No. __ cancelled (or transferred or exchanged) this ________ day of _____________, ____________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, issued therefor in the name of ____ ___________ Warrant No. ___ for ________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, in the name of _________________________.

 

 

Dated: ___________________

 

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Schedule 3.3.3

 

Calculations for Adjustment of Current Holder’s Equity Interest

 

Section 3.3.3(a):

 

If the audited Adjusted EBITDA of the Company and its Subsidiaries for the Fiscal Year ending December 31, 2018 equals $15,000,000, the Current Holder’s Equity Interest is increased by a percentage equal to:

 

($19,250,000 - $15,000,000) / $15,000,000 = 0.28333333

 

Therefore, the Current Holder’s Equity Interest equals 1,164,700 shares * 1.28333333 = 1,494,698 shares; provided, however, that the Current Holder’s Equity Interest would not exceed three and one-half (3.5) times 1,164,700 shares, for a total number of shares of 4,076,450.

 

 

 

Exhibit 10.34

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (JL-BBNC) DATED AS OF JANUARY 22, 2015 IN FAVOR OF MIDCAP FINANCIAL TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH SUBORDINATION AGREEMENT (JL-BBNC) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (JL-BBNC) DATED AS OF JANUARY 22, 2015 IN FAVOR OF PENTA MEZZANINE SBIC FUND I, L.P., A DELAWARE LIMITED PARTNERSHIP, AS THE SENIOR LENDER, WHICH SUBORDINATION AGREEMENT (JL-BBNC) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

SECURITY AGREEMENT

 

1. THE SECURITY. Each of the undersigned, Twinlab Consolidated Holdings, Inc. , a Nevada corporation (“ Parent ”), Twinlab Consolidation Corporation , a Delaware corporation (“ TCC ”), Twinlab Holdings, Inc ., a Michigan corporation (“ Twinlab Holdings ”), ISI Brands Inc ., a Michigan corporation (“ ISI Brands ”), and Twinlab Corporation , a Delaware corporation (“ Twinlab Corporation ”) TCC CM SUBCO I, INC., a Delaware corporation ("Subco I"), and TCC CM SUBCO II, INC., a Delaware corporation ("Subco II"; together with Parent, TCC, Twinlab Holdings, ISI Brands, Twinlab Corporation and Subco I, the “ Companies ”; and each individually, a “ Company ”) hereby assigns and grants to JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company (the “ Purchaser ”) a security interest in the following described property now owned or hereafter acquired by such Company (“ Collateral ”):

 

(a) All accounts, contract rights, chattel paper, instruments, deposit accounts, letter of credit rights, payment intangibles and general intangibles, including all amounts due to such Company from a factor; and all returned or repossessed goods which, on sale or lease, resulted in an account or chattel paper.

 

(b) All inventory, including all materials, work in process and finished goods.

 

(c) All machinery, furniture, fixtures and other equipment of every type now owned or hereafter acquired by such Company.

 

(d) All instruments, notes, chattel paper, documents, certificates of deposit, securities and investment property of every type. The Collateral shall include all liens, security agreements, leases and other contracts securing or otherwise relating to the foregoing.

 

(e) All general intangibles, including, but not limited to, (i) all patents, and all unpatented or unpatentable inventions; (ii) all trademarks, service marks, and trade names; (iii) all copyrights and literary rights; (iv) all computer software programs; (v) all mask works of semiconductor chip products; (vi) all trade secrets, proprietary information, customer lists, manufacturing, engineering and production plans, drawings, specifications, processes and systems. The Collateral shall include all good will connected with or symbolized by any of such general intangibles; all contract rights, documents, applications, licenses, materials and other matters related to such general intangibles; all tangible property embodying or incorporating any such general intangibles; and all chattel paper and instruments relating to such general intangibles.

 

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(f) All negotiable and nonnegotiable documents of title covering any Collateral.

 

(g) All accessions, attachments and other additions to the Collateral, and all tools, parts and equipment used in connection with the Collateral.

 

(h) All substitutes or replacements for any Collateral, all cash or non-cash proceeds, product, rents and profits of any Collateral, all income, benefits and property receivable on account of the Collateral, all rights under warranties and insurance contracts, letters of credit, guaranties or other supporting obligations covering the Collateral, and any causes of action relating to the Collateral, and all proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the Collateral and sums due from a third party which has damaged or destroyed the Collateral or from that party’s insurer, whether due to judgment, settlement or other process.

 

(i) All books, data and records pertaining to any Collateral, whether in the form of a writing, photograph, microfilm or electronic media, including but not limited to any computer-readable memory and any computer hardware or software necessary to process such memory (“ Books and Records ”).

 

Notwithstanding anything to the contrary in this Agreement or any other Transaction Document (as defined in the Note Purchase Agreement), the Purchaser’s security interest in and lien on the Collateral shall be subordinated to the lien of the Senior Lender (as defined in the Note Purchase Agreement) and subject to the terms of the Subordination Agreement (as defined in the Note Purchase Agreement).

 

2. THE INDEBTEDNESS. The Collateral secures and will secure all Indebtedness of the Companies to the Purchaser. Each party obligated under any Indebtedness is referred to in this Agreement as a “ Debtor .” “ Indebtedness ” means all debts, obligations or liabilities now or hereafter existing, absolute or contingent of the Debtor or any one or more of them to the Purchaser, whether voluntary or involuntary, whether due or not due, or whether incurred directly or indirectly or acquired by the Purchaser by assignment or otherwise, including but not limited to debts, obligations or liabilities arising under that certain Note and Warrant Purchase Agreement, dated as of the date hereof, by and between the Companies and the Purchaser (the “ Note Purchase Agreement ”).

 

3. COMPANIES’ COVENANTS. Each Company represents, covenants and warrants that unless compliance is waived by the Purchaser in writing:

 

(a) Such Company will properly preserve the Collateral; defend the Collateral against any adverse claims and demands other than Permitted Encumbrances (as defined in the Note Purchase Agreement); and keep accurate Books and Records.

 

(b) Such Company's chief executive office is located, in the state specified on the signature page hereof. In addition, such Company (if not an individual or other unregistered entity), is incorporated in or organized under the laws of the state specified on such signature page. Such Company shall give the Purchaser at least thirty (30) days’ notice before changing its residence or its chief executive office or state of incorporation or organization. Such Company will notify the Purchaser in writing prior to any change in the location of any Collateral, including the Books and Records.

 

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(c) Such Company will notify the Purchaser in writing prior to any change in such Company's name, identity or business structure.

 

(d) Unless otherwise agreed, such Company will keep the Collateral free of all liens, claims, security interests and encumbrances of any kind or nature except the security interest of the Purchaser and Permitted Encumbrances.

 

(e) Such Company will promptly notify the Purchaser in writing of any event which materially affects the value of the Collateral, the ability of such Company to dispose of the Collateral, or the rights and remedies of the Purchaser in relation thereto, including, but not limited to, the levy of any legal process against any Collateral.

 

(f) Such Company shall pay all costs necessary to preserve, defend, enforce and collect the Collateral, including but not limited to taxes, assessments, insurance premiums, repairs, rent, storage costs and expenses of sales, and any costs to perfect the Purchaser’s security interest (collectively, the “ Collateral Costs ”). Without waiving any Company's default for failure to make any such payment, the Purchaser at its option may pay any such Collateral Costs, and discharge encumbrances (other than Permitted Encumbrances) on the Collateral, and such Collateral Costs payments shall be a part of the Indebtedness and bear interest at the rate set out in the documents evidencing such Indebtedness. Each Company agrees to reimburse the Purchaser on demand for any Collateral Costs so incurred.

 

(g) Until the Purchaser exercises its rights to make collection, such Company will diligently collect all Collateral.

 

(h) If any Collateral is or becomes the subject of any registration certificate, certificate of deposit or negotiable document of title, including any warehouse receipt or bill of lading, such Company shall immediately deliver such document to the Purchaser or the Senior Lender, as bailee for the benefit of the Purchaser for purposes of perfection in accordance with Section 31 of the Subordination Agreement, together with any necessary endorsements.

 

(i) Such Company will not sell, lease, agree to sell or lease, or otherwise dispose of any Collateral except Permitted Dispositions (as defined in the Note Purchase Agreement) without the prior written consent of the Purchaser.

 

(j) Such Company will maintain and keep in force all risk insurance covering the Collateral against fire, theft, liability and extended coverages (including without limitation windstorm coverage and hurricane coverage as applicable), to the extent that any Collateral is of a type which can be so insured. Such insurance shall be in form, amounts, coverages and basis reasonably acceptable to the Purchaser, shall require losses to be paid on a replacement cost basis, shall be issued by insurance companies reasonably acceptable to the Purchaser and include a loss payable endorsement in favor of the Purchaser in a form reasonably acceptable to the Purchaser. Upon the request of the Purchaser, such Company will deliver to the Purchaser a copy of each insurance policy, or, if permitted by the Purchaser, a certificate of insurance listing all insurance in force.

 

(k) Such Company will not attach any Collateral to any real property or fixture in a manner which might cause such Collateral to become a part thereof unless such Company first obtains the written consent of any owner, holder of any lien on the real property or fixture, or other person having an interest in such property to the removal by the Purchaser of the Collateral from such real property or fixture. Such written consent shall be in form and substance reasonably acceptable to the Purchaser and shall provide that the Purchaser has no liability to such owner, holder of any lien, or any other person.

 

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(l) To the extent material to the conduct of its business, such Company will, at its expense, diligently prosecute all patent, trademark or service mark or copyright applications pending on or after the date hereof, will maintain in effect all issued patents and will renew all trademark and service mark registrations, including payment of any and all maintenance and renewal fees relating thereto, except for such patents, service marks and trademarks that are being sold, donated or abandoned by such Company in its reasonable business judgment. Such Company also will promptly make application on any patentable but unpatented inventions, registerable but unregistered trademarks and service marks, and copyrightable but uncopyrighted works to the extent material to the conduct of its business as determined in its reasonable business judgment. To the extent material to the conduct of its business as determined in its reasonable business judgment, such Company will at its expense protect and defend all rights in the Collateral against any material claims and demands of all persons other than Senior Lender and the Purchaser and will, at its expense, enforce all rights in the Collateral against any and all infringers of the Collateral where such infringement would materially impair the value or use of the Collateral to such Company or the Purchaser. Such Company will not license or transfer any of the Collateral, except for such licenses as are customary in the ordinary course of such Company's business, or except with the Purchaser's prior written consent.

 

4. ADDITIONAL OPTIONAL REQUIREMENTS. Each Company agrees that the Purchaser may at its option at any time, whether or not any Company is in default:

 

(a) Require such Company to deliver to the Purchaser (i) copies of or extracts from the Books and Records, and (ii) information on any contracts or other matters affecting the Collateral.

 

(b) Examine the Collateral, including the Books and Records, and make copies of or extracts from the Books and Records, and for such purposes enter at any reasonable time upon the property where any Collateral or any Books and Records are located.

 

(c) Subject to the terms of the Subordination Agreement, require such Company to deliver to the Purchaser or the Senior Lender, as bailee for the benefit of the Purchaser for purposes of perfection in accordance with Section 31 of the Subordination Agreement, any instruments, chattel paper or letters of credit which are part of the Collateral, and to assign to the Purchaser the proceeds of any such letters of credit.

 

(d) Subject to the terms of the Subordination Agreement, notify any account debtors, any buyers of the Collateral, or any other persons of the Purchaser's interest in the Collateral.

 

5. DEFAULTS. Any one or more of the following shall be a default hereunder:

 

(a) Any Indebtedness is not paid when due, after giving effect to any applicable grace or cure periods.

 

(b) Any Company breaches any term, provision, warranty or representation under this Agreement, and such breach remains uncured after any applicable cure period.

 

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(c) Subject to Section 5.17 of the Note Purchase Agreement, the Purchaser fails to have an enforceable first lien on the Mortgaged Property and (except for the liens of Senior Lenders or any prior liens to which the Purchaser has consented in writing) on or security interest in the Collateral except as a result of Purchaser not taking action, or not requesting a Company to take action, to perfect such lien (unless Purchaser’s failure to take action to perfect such lien is caused in whole or in party by a Company’s failure to take any action or provide any document requested by Purchaser).

 

(d) A default occurs under the Note Purchase Agreement, any Transaction Document or other agreement evidencing the Indebtedness, and such default remains uncured after any applicable cure period.

 

6. PURCHASER'S REMEDIES AFTER DEFAULT. Upon the occurrence and continuation of an event of any default, the Purchaser may do any one or more of the following, to the extent permitted by law and subject to the terms of the Subordination Agreement:

 

(a) Declare any Indebtedness immediately due and payable, without notice or demand.

 

(b) Enforce the security interest given hereunder pursuant to the Uniform Commercial Code and any other applicable law.

 

(c) Enforce the security interest of the Purchaser in any deposit account of any Company maintained with the Purchaser by applying such account to the Indebtedness.

 

(d) Require any Company to obtain the Purchaser's prior written consent to any sale, lease, agreement to sell or lease, or other disposition of any Collateral consisting of inventory.

 

(e) Require any Company to segregate all collections and proceeds of the Collateral so that they are capable of identification and deliver daily such collections and proceeds to the Purchaser in kind.

 

(f) Require any Company to direct all account debtors to forward all payments and proceeds of the Collateral to a post office box under the Purchaser's exclusive control.

 

(g) Require any Company to assemble the Collateral, including the Books and Records, and make them available to the Purchaser at a place designated by the Purchaser.

 

(h) Enter upon the property where any Collateral, including any Books and Records, are located and take possession of such Collateral and such Books and Records, and use such property (including any buildings and facilities) and any of any Company's equipment, if the Purchaser deems such use necessary or advisable in order to take possession of, hold, preserve, process, assemble, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral.

 

(i) Demand and collect any payments on and proceeds of the Collateral. In connection therewith each Company irrevocably authorizes the Purchaser to endorse or sign such Company's name on all checks, drafts, collections, receipts and other documents, and to take possession of and open the mail addressed to such Company and remove therefrom any payments and proceeds of the Collateral.

 

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(j) Grant extensions and compromise or settle claims with respect to the Collateral for less than face value, all without prior notice to any Company.

 

(k) Use or transfer any of any Company's rights and interests in any Intellectual Property now owned or hereafter acquired by such Company, if the Purchaser deems such use or transfer necessary or advisable in order to take possession of, hold, preserve, process, assemble, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral. Each Company agrees that any such use or transfer shall be without any additional consideration to such Company. As used in this paragraph, “ Intellectual Property ” includes, but is not limited to, all trade secrets, computer software, service marks, trademarks, trade names, trade styles, copyrights, patents, applications for any of the foregoing, customer lists, working drawings, instructional manuals, and rights in processes for technical manufacturing, packaging and labeling, in which any Company has any right or interest, whether by ownership, license, contract or otherwise.

 

(l) Have a receiver appointed by any court of competent jurisdiction to take possession of the Collateral. Each Company hereby consents to the appointment of such a receiver and agrees not to oppose any such appointment.

 

(m) Take such measures as the Purchaser may deem necessary or advisable to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral, and each Company hereby irrevocably constitutes and appoints the Purchaser as such Company's attorney-in-fact to perform all acts and execute all documents in connection therewith.

 

(n) Without notice or demand to any Company, set off and apply against any and all of the Indebtedness any and all deposits (general or special, time or demand, provisional or final) and any other indebtedness, at any time held or owing by the Purchaser or any of the Purchaser's agents or affiliates to or for the credit of the account of any Company or any guarantor or endorser of any Company's Indebtedness.

 

(o) Exercise any other remedies available to the Purchaser at law or in equity.

 

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7. WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

8. MISCELLANEOUS.

 

(a) Any waiver, express or implied, of any provision hereunder and any delay or failure by the Purchaser to enforce any provision shall not preclude the Purchaser from enforcing any such provision thereafter.

 

(b) Each Company shall, at the request of the Purchaser, execute such other agreements, documents, instruments, or financing statements in connection with this Agreement as the Purchaser may reasonably deem necessary.

 

(c) All notes, security agreements, subordination agreements and other documents executed by each Company or furnished to the Purchaser in connection with this Agreement must be in form and substance satisfactory to the Purchaser.

 

(d) This Agreement is governed by and shall be interpreted according to federal law and the laws of New York. If state or local law and federal law are inconsistent, or if state or local law is preempted by federal law, federal law governs. If the Purchaser has greater rights or remedies under federal law, this paragraph shall not be deemed to deprive the Purchaser of such rights and remedies as may be available under federal law. Jurisdiction and venue for any action or proceeding to enforce this Agreement shall be the forum appropriate for such action or proceeding against the Debtor, to which jurisdiction each Company irrevocably submits and to which venue each Company waives to the fullest extent permitted by law any defense asserting an inconvenient forum in connection therewith.

 

(e) All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law. Any single or partial exercise of any right or remedy shall not preclude the further exercise thereof or the exercise of any other right or remedy.

 

7
 

 

(f) All terms not defined herein are used as set forth in the Uniform Commercial Code.

 

(g) In the event of any action by the Purchaser to enforce this Agreement or to protect the security interest of the Purchaser in the Collateral, or to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral, each Company agrees to pay immediately the costs and expenses thereof, together with reasonable attorneys' fees and allocated costs for in-house legal services to the extent permitted by law.

 

(h) In the event the Purchaser seeks to take possession of any or all of the Collateral by judicial process, each Company hereby irrevocably waives any bonds and any surety or security relating thereto that may be required by applicable law as an incident to such possession, and waives any demand for possession prior to the commencement of any such suit or action.

 

(i) This Agreement shall constitute a continuing agreement, applying to all future as well as existing transactions, whether or not of the character contemplated at the date of this Agreement, and if all transactions between the Purchaser and the Companies shall be closed at any time, shall be equally applicable to any new transactions thereafter.

 

(j) The Purchaser's rights hereunder shall inure to the benefit of its successors and assigns. In the event of any assignment or transfer by the Purchaser of any of the Indebtedness or the Collateral, the Purchaser thereafter shall be fully discharged from any responsibility with respect to the Collateral so assigned or transferred, but the Purchaser shall retain all rights and powers hereby given with respect to any of the Indebtedness or the Collateral not so assigned or transferred. All representations, warranties and agreements of each Company if more than one are joint and several and all shall be binding upon the personal representatives, heirs, successors and assigns of such Company.

 

(k) Each Company hereby agrees that the obligations of the Companies hereunder are joint and several.

 

9. Final Agreement . BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES THAT: (A) THIS DOCUMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, (B) THIS DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS EXPRESSLY PROVIDES TO THE CONTRARY, (C) THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (D) THIS DOCUMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR UNDERSTANDINGS OF THE PARTIES.

 

[The remainder of this page intentionally left blank.]

 

8
 

 

Dated: As of January __, 2015.

 

  JL-BBNC MEZZ UTAH, LLC, an
Alaska limited liability company
     
  By: /s/ Jonathan B. Rubini
  Name: Jonathan B. Rubini
  Title: Managing Member
   
  Address for Notices:
  P.O. Box 202845
  Anchorage, AK 99520-2845

 

Signature Page to JL-BBNC Security Agreement

 

9
 

  

Address for Notices:   TWINLAB CONSOLIDATED HOLDINGS, INC., a
Nevada corporation
Twinlab Consolidation Corporation    
600 East Quality Drive      
American Fork, UT 84003   By: /s/ Thomas A. Tolworthy
Attention: Mark Jaggi, Chief Financial Officer   Name: Thomas A. Tolworthy
Email: mjaggi@twinlab.com   Title: Chief Executive Officer and President
     
and   TWINLAB CONSOLIDATION CORPORATION, a
Delaware corporation
Twinlab Consolidation Corporation    
632 Broadway, Suite 201      
New York, NY 10012   By: /s/ Thomas A. Tolworthy
Attention: Richard Neuwirth, Chief Legal   Name: Thomas A. Tolworthy
Officer   Title: Chief Executive Officer and President
Facsimile: 212-260-1853    
Email: rneuwirth@twinlab.com   TWINLAB HOLDINGS, INC., a Michigan corporation
     
With a copy to      
    By: /s/ Thomas A. Tolworthy
Varnum LLP   Name: Thomas A. Tolworthy
Bridgewater Place   Title: Chief Executive Officer and President
P.O. Box 352    
Grand Rapids, MI 49501   ISI BRANDS INC., a Michigan corporation
Attention: Mary Kay Shaver    
Facsimile: 616-336-7000      
    By: /s/ Thomas A. Tolworthy
    Name: Thomas A. Tolworthy
    Title: Chief Executive Officer and President
     
    TWINLAB CORPORATION, a Delaware corporation
       
    By: /s/ Thomas A. Tolworthy
    Name: Thomas A. Tolworthy
    Title: Chief Executive Officer and President
     
    TCC CM SUBCO I, INC., a Delaware corporation
       
    By: /s/ Thomas A. Tolworthy
    Name: Thomas A. Tolworthy
    Title: Chief Executive Officer and President

 

Signature Page to JL-BBNC Security Agreement

 

10
 

 

 

  TCC CM SUBCO II, INC., a Delaware corporation
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Signature Page to JL-BBNC Security Agreement

 

11

 

Exhibit 10.35 

 

WHEN RECORDED, MAIL TO:

Ryan B. Hancey

Kesler & Rust

68 S. Main Street, Suite 200

Salt Lake City, Utah 84101 Parcel ID # 57:077:0001
  # 57:035:0042
  # 57:035:0043

 

TRUST DEED

 

THIS TRUST DEED is dated this 22nd day of January, 2015, among TWINLAB CORPORATION, a Delaware corporation, as Trustor, whose address is 600 Quality Drive, American Fork, Utah 84003; Ryan B. Hancey, a member of the Utah State Bar, as Trustee; and JL-BBNC MEZZ UTAH, LLC, an Alaska limited liability company, as Beneficiary.

 

Trustor hereby CONVEYS AND WARRANTS TO TRUSTEE IN TRUST, WITH POWER OF SALE, the following described property situated in Utah County, State of Utah (the “Property”):

 

All of Lot 1, Plat “M” Utah Valley Business Park, including a vacation of Lot 37 and a portion of Lot 36, Plat “J”, Amended Utah Valley Business Park, according to the official plat thereof, recorded August 14, 2014, as Entry No. 56927:2014 (Map Filing #14337) in the Utah County Recorder’s Office.

 

TOGETHER WITH all buildings, fixtures and improvements thereon and all water rights, rights of way, easements, rents, issues, profits, income, tenements, hereditaments, privileges and appurtenances thereunto now or hereafter used or enjoyed with said Property, or any part thereof.

 

For the purpose of securing the following obligations (the “Obligations”) in any order of priority that Beneficiary may choose:

 

(a)          Payment of all obligations at any time owing under a promissory note (the “Note”) bearing even date herewith, payable by Trustor, Twinlab Consolidated Holdings, Inc., a Nevada corporation, Twinlab Consolidated Corporation, a Delaware corporation, and Twinlab Holdings, Inc., a Michigan corporation (together with Trustor, each individually a “Trustor Company,” and collectively, the “Trustor Companies”), as makers in the stated principal amount of Five Million and 00/100 Dollars ($5,000,000.00) to the order of Beneficiary, which Note matures on February 13, 2020; and

 

(b)          Payment and performance of all obligations of Trustor under this Trust Deed; and

 

Trust Deed Page 1
 

 

(c)          Payment and performance of all obligations of the Trustor Companies under a Note and Warrant Purchase Agreement bearing even date herewith between the Trustor Companies and Beneficiary; and

 

(d)          Payment and performance of any obligations of the Trustor Companies under the Security Agreement bearing even date herewith between the Trustor Companies and Beneficiary; and

 

(e)          Payment and performance of any obligations under any other agreement entered into between any Trustor Company and Beneficiary in connection with the Note and Warrant Purchase Agreement described above; and

 

(f)          Payment and performance of all future advances and other obligations that Trustor or any Trustor Company or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Beneficiary, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Deed of Trust; and

 

(g)          Payment and performance of all modifications, amendments, extensions, and renewals, however evidenced, of any of the Obligations.

 

As additional security, Trustor hereby assigns to Beneficiary, during the continuance of these trusts, all rents, issues, royalties, and profits of the Property affected by this trust deed and of any personal property located thereon.

 

Trustor agrees to pay all taxes and assessments on the above Property; to pay all charges and assessments on water or water stock used on or with said Property; not to commit waste; to maintain adequate fire insurance on improvements on said Property; to pay all costs and expenses of collection (including Trustee and attorney fees in event of default in payment pursuant to the settlement agreement secured hereby) and to pay reasonable Trustee fees for any of the services performed by Trustee hereunder; including a reconveyance hereof.

 

[Remainder of Page Left Intentionally Blank]

 

Trust Deed Page 2
 

 

The undersigned Trustor requests that a copy of any notice of default and of any notice of sale hereunder be mailed to the address set forth above.

 

TRUSTOR: TWINLAB CORPORATION
     
  By: /s/ Thomas A. Tolworthy
    Thomas A. Tolworthy
  Its: CEO and President

 

STATE OF               NY                           )
  ) ss.
COUNTY OF       Saratoga                     )

 

On the 17th day of January, 2015, personally appeared before me Thomas A. Tolworthy, who being by me duly sworn did say that he/she is the signer of the foregoing instrument and that he/she executed the same.

 

  /s/ Biswanath Malakar
  NOTARY PUBLIC

 

Trust Deed Page 3

 

 

Exhibit 10.36

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation (“ Pledgor ”), and JL-BBNC MEZZ UTAH, LLC , an Alaska limited liability company (“ Lender ”).

 

RECITALS

 

A.            The term “ Borrowers ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Borrowers” under the NWP Agreement (as defined herein); the term “ Borrower ”, as used herein, shall mean individually each entity that is one of the Borrowers; and the term “ Company ” as used herein shall mean Twinlab Consolidation Corporation, a Delaware corporation.

 

B.            Pursuant to that certain Note and Warrant Purchase Agreement dated as of even date herewith between Borrowers and Lender (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ NWP Agreement ”), Lender has agreed to make available to Borrowers a loan in the maximum principal amount of $5,000,000 (the “Loan”). Borrowers have executed and delivered one or more promissory notes evidencing the indebtedness incurred by Borrowers under the NWP Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the NWP Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            This Agreement, the Notes, the NWP Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The term “ Obligations ” as used herein shall have the meanings given to such term in the NWP Agreement.

 

E.            In connection with the Lender entering into the NWP Agreement and agreeing to make the credit accommodations under the NWP Agreement and as security for all of the Obligations, Lender is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.            Pledgor is a shareholder in Company and, as such, will continue to derive substantial benefit by reason of Lender making the Loan.

 

AGREEMENT

 

NOW, THEREFORE , to induce Lender to enter into the NWP Agreement and to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Lender hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

 

1.           Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Lender, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Company now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Company, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Company, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Company, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Company, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Company, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Company (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of Lender deliver to Lender a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.           Application of Proceeds . Pledgor hereby authorizes and directs the Company, following written notice to do so by Lender after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Lender of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Lender shall be applied to the Obligations in such order and manner of application as Lender may from time to time determine in its sole discretion.

 

3.           Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Lender shall be paid immediately to Lender and shall be retained by Lender as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Lender, promptly, and in any case within one (1) business day, send a written notice to Company instructing Company, and shall cause Company, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Lender notifies Pledgor that such Event of Default has ceased to exist) directly to Lender. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.           Representations and Warranties of Pledgor . Pledgor hereby warrants to Lender as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Company as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Company in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Lender;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Encumbrances (as defined in the NWP Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Encumbrances (as defined in the NWP Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.           Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Lender’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Lender may in good faith direct;

 

(c)           To cause Company to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Lender immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Lender one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Lender, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Lender as part of the Collateral.

 

(e)           To deliver immediately to Lender any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Lender one or more Transfer Powers, which such Transfer Powers shall be held by Lender as part of the Collateral;

 

(f)           To execute and deliver to Lender such financing statements as Lender may request with respect to the Ownership Interests, and to take such other steps as Lender may from time to time reasonably request to perfect Lender’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Encumbrances (as defined in the NWP Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Company, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Lender in the Collateral or dilute the Ownership Interests pledged to Lender under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Lender and except for other Permitted Encumbrances (as defined in the NWP Agreement);

 

(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Lender pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Lender a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Lender, all of such additional Ownership Interests. Prior to the delivery thereof to Lender, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Lender;

 

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(k)           That Pledgor consents to the admission of Lender (and its assigns or designee) as a member, partner or stockholder of Company upon Lender’s acquisition of any of the Ownership Interests; and

 

6.           Rights of Lender . Lender may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Lender records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Company and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Lender’s interest in the Collateral. Pledgor agrees that Lender may at any time take such steps as Lender deems reasonably necessary to protect Lender’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Lender may at any time or from time to time pursuant to the NWP Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the NWP Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the NWP Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the NWP Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Lender at any time against the Obligations in any order as Lender may determine pursuant to the terms of the NWP Agreement; all of the foregoing in such manner and upon such terms as Lender may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Lender’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the NWP Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Borrower.

 

7.           Events of Default . The occurrence of any “Event of Default,” as defined in the NWP Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.           Rights of Lender Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the NWP Agreement), Lender may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Lender to demand payment of any portion of the Obligations that is payable upon demand);

 

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(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Lender may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Lender may deem necessary or proper to protect Lender’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Company or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Lender, shall use its best efforts to secure, and cooperate with the efforts of Lender to secure (if not already secured by Lender), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC; and upon any such sale of the Collateral, Lender may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Lender in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Lender to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Lender either at law or in equity.

 

Lender shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Lender in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Lender as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Lender may deem appropriate in the exercise of the rights and powers granted to Lender in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Lender harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Lender from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Lender’s gross negligence or willful misconduct).

 

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9.           Performance by Lender . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Lender, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Lender may consider necessary or appropriate for such purpose. All sums paid or advanced by Lender in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Lender on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Lender shall not in any way be responsible for the performance or discharge of, and Lender does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Lender and hold Lender harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Lender to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Lender’s own gross negligence or willful misconduct. Lender shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Lender to extend any credit to Borrower under the Financing Documents, this Agreement shall terminate and Lender shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Lender’s rights under this Agreement, Lender may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Lender to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Lender or Lender’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of any other person.

 

14.          Preservation of Collateral . Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Lender takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Lender to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

15.          Private Sale . Pledgor recognizes that Lender may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Lender has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

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16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Lender of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Lender thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Lender shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

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(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the NWP Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Lender as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Lender of any one or more of such rights, powers or remedies shall not preclude the later exercise by Lender of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Lender) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Lender or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Lender may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Lender in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Lender or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

(m)           No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

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(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Lender’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Lender, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY NEW YORK STATE OR UNITED STATES COURT SITTING IN THE STATE OF NEW YORK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

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18.          Notwithstanding anything in this Agreement to the contrary: (i) so long as the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “MidCap Subordination Agreement”) by and between MidCap Financial Trust (“MidCap”) and Lender remains in effect, Pledgor and Company shall be deemed to have complied fully with any and all obligations imposed under this Agreement for the delivery of physical possession of, or the making of payments or remittance of funds to, Lender with respect to any Collateral, any proceeds thereof or payments thereunder, any certificates, stock powers, instruments or other documents evidencing the Collateral or necessary for the perfection of a security interest therein, or any other tangible or intangible personal property (any of the foregoing deliveries, payments or remittances referred to as a “Delivery,” and collectively as “Deliveries”), to the extent that any such Delivery shall have been made to MidCap in its capacity as “Senior Lender” (as defined in the MidCap Subordination Agreement); and (ii) if at any time the MidCap Subordination Agreement has been terminated or is no longer in effect, but the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “Penta Subordination Agreement”) by and between Penta Mezzanine SBIC Fund I, L.P. (“Penta”) and Lender remains in effect, Pledgor and Company shall be deemed to have complied fully with any and all obligations imposed under this Agreement for a Delivery to the extent that any such Delivery shall have been made to Penta in its capacity as “Senior Lender” (as defined in the Penta Subordination Agreement). The Deliveries subject to the provisions of this Section include (without limitation) the deliveries and remittances required pursuant to Section 2, Section 3, Section 5(d) and Section 5(e) of this Agreement; provided, however that the term “Deliveries” shall not be deemed to include the delivery of Pledge Amendments as described in Section 5(j).

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR:   TWINLAB CONSOLIDATED HOLDINGS, INC.
     
    By: /s/ Thomas A. Tolworthy (SEAL)
    Name: Thomas A. Tolworthy  
    Title: Chief Executive Officer and President  
         
      Pledgor Contact Information:  
       
      Twinlab Consolidated Holdings, Inc.  
      632 Broadway, Suite 201  
      New York, NY 10012  
      Attention: Thomas A. Tolworthy, Chief Executive Officer and President  

  

Signature Page to JL-BBNC Mezz Utah, LLC Pledge Agreement

(Twinlab Consolidated Holdings, Inc.)

 

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LENDER:   JL-BBNC MEZZ UTAH, LLC , an Alaska limited liability company
     
    By: /s/ Jonathan B. Rubini (SEAL)
    Name: Jonathan B. Rubini  
    Title: Managing Member  

 

Signature Page to Pledge Agreement between JL-BBNC Mezz Utah, LLC

and Twinlab Consolidated Holdings, Inc.

 

 
 

 

SCHEDULE I

Pledged Interests

 

Name of Pledgor: Twinlab Consolidated Holdings, Inc.
   
Company Name: Twinlab Consolidation Corporation
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE5407822
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 1
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Consolidated Holdings, Inc.
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Nevada
   
Organizational ID No. of Pledgor: NV20131625629
   
Tax ID No. of Pledgor: [  ]

 

 
 

 

SCHEDULE III


STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated:   PLEDGOR :
         
    [NAME OF PLEDGOR]
     
    By:   (SEAL)
    Name:  
    Its:  

 

*To Remain Blank - Not Completed at Closing

 

 
 

 

SCHEDULE IV

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and JL-BBNC Mezz Utah, LLC, as Lender (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Company owned by Pledgor not included in the Pledged Collateral at the discretion of JL-BBNC Mezz Utah, LLC may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

  PLEDGOR :  
       
  [NAME OF PLEDGOR]  
     
  By:   (SEAL)
  Name:  
  Its:  

 

 
 

 

SCHEDULE IV- continued

 

Name and
Address of Pledgor
  Company   Class of
Equity Interest
  Certificate
Number(s)
  Number of
Shares
                 
                 
                 

 

      Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                   
                   
                   

 

    

 

 

 

 

Exhibit 10.37

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB CONSOLIDATION CORPORATION , a Delaware corporation (“ Pledgor ”), and JL-BBNC MEZZ UTAH, LLC , an Alaska limited liability company (“ Lender ”).

 

RECITALS

 

A.            The term “ Borrowers ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Borrowers” under the NWP Agreement (as defined herein); the term “ Borrower ”, as used herein, shall mean individually each entity that is one of the Borrowers; and the term “ Company ” as used herein shall mean, collectively, each of Twinlab Holdings, Inc., a Michigan corporation, TCC CM Subco I, Inc., a Delaware corporation, and TCC CM Subco II, Inc., a Delaware corporation.

 

B.            Pursuant to that certain Note and Warrant Purchase Agreement dated as of even date herewith between Borrowers and Lender (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ NWP Agreement ”), Lender has agreed to make available to Borrowers a loan in the maximum principal amount of $5,000,000 (the “Loan”). Borrowers have executed and delivered one or more promissory notes evidencing the indebtedness incurred by Borrowers under the NWP Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the NWP Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            This Agreement, the Notes, the NWP Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The term “ Obligations ” as used herein shall have the meanings given to such term in the NWP Agreement.

 

E.            In connection with the Lender entering into the NWP Agreement and agreeing to make the credit accommodations under the NWP Agreement and as security for all of the Obligations, Lender is requiring that Pledgor shall have executed and delivered this Agreement.

 

F. Pledgor is a shareholder in Company and, as such, will continue to derive substantial benefit by reason of Lender making the Loan.

 

AGREEMENT

 

NOW, THEREFORE , to induce Lender to enter into the NWP Agreement and to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Lender hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

  

1.           Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Lender, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Company now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Company, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Company, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Company, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Company, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Company, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Company (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of Lender deliver to Lender a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.           Application of Proceeds . Pledgor hereby authorizes and directs the Company, following written notice to do so by Lender after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Lender of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Lender shall be applied to the Obligations in such order and manner of application as Lender may from time to time determine in its sole discretion.

 

3.           Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Lender shall be paid immediately to Lender and shall be retained by Lender as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Lender, promptly, and in any case within one (1) business day, send a written notice to Company instructing Company, and shall cause Company, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Lender notifies Pledgor that such Event of Default has ceased to exist) directly to Lender. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.           Representations and Warranties of Pledgor . Pledgor hereby warrants to Lender as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Company as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Company in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Lender;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Encumbrances (as defined in the NWP Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Encumbrances (as defined in the NWP Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.           Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Lender’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Lender may in good faith direct;

 

(c)           To cause Company to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Lender immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Lender one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Lender, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Lender as part of the Collateral.

 

(e)           To deliver immediately to Lender any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Lender one or more Transfer Powers, which such Transfer Powers shall be held by Lender as part of the Collateral;

 

(f)           To execute and deliver to Lender such financing statements as Lender may request with respect to the Ownership Interests, and to take such other steps as Lender may from time to time reasonably request to perfect Lender’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Encumbrances (as defined in the NWP Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Company, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Lender in the Collateral or dilute the Ownership Interests pledged to Lender under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Lender and except for other Permitted Encumbrances (as defined in the NWP Agreement);

 

(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Lender pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Lender a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Lender, all of such additional Ownership Interests. Prior to the delivery thereof to Lender, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Lender;

 

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(k)           That Pledgor consents to the admission of Lender (and its assigns or designee) as a member, partner or stockholder of Company upon Lender’s acquisition of any of the Ownership Interests; and

 

6.           Rights of Lender . Lender may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Lender records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Company and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Lender’s interest in the Collateral. Pledgor agrees that Lender may at any time take such steps as Lender deems reasonably necessary to protect Lender’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Lender may at any time or from time to time pursuant to the NWP Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the NWP Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the NWP Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the NWP Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Lender at any time against the Obligations in any order as Lender may determine pursuant to the terms of the NWP Agreement; all of the foregoing in such manner and upon such terms as Lender may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Lender’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the NWP Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Borrower.

 

7.           Events of Default . The occurrence of any “Event of Default,” as defined in the NWP Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.           Rights of Lender Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the NWP Agreement), Lender may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Lender to demand payment of any portion of the Obligations that is payable upon demand);

 

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(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Lender may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Lender may deem necessary or proper to protect Lender’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Company or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Lender, shall use its best efforts to secure, and cooperate with the efforts of Lender to secure (if not already secured by Lender), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC; and upon any such sale of the Collateral, Lender may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Lender in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Lender to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Lender either at law or in equity.

 

Lender shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Lender in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Lender as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Lender may deem appropriate in the exercise of the rights and powers granted to Lender in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Lender harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Lender from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Lender’s gross negligence or willful misconduct).

 

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9.           Performance by Lender . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Lender, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Lender may consider necessary or appropriate for such purpose. All sums paid or advanced by Lender in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Lender on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Lender shall not in any way be responsible for the performance or discharge of, and Lender does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Lender and hold Lender harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Lender to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Lender’s own gross negligence or willful misconduct. Lender shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Lender to extend any credit to Borrower under the Financing Documents, this Agreement shall terminate and Lender shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Lender’s rights under this Agreement, Lender may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Lender to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Lender or Lender’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of any other person.

 

14.          Preservation of Collateral . Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Lender takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Lender to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

15.          Private Sale . Pledgor recognizes that Lender may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Lender has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

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16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Lender of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Lender thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Lender shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

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(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the NWP Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Lender as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Lender of any one or more of such rights, powers or remedies shall not preclude the later exercise by Lender of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Lender) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Lender or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Lender may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Lender in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Lender or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

(m)           No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

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(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Lender’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Lender, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY NEW YORK STATE OR UNITED STATES COURT SITTING IN THE STATE OF NEW YORK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

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18.          Notwithstanding anything in this Agreement to the contrary: (i) so long as the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “MidCap Subordination Agreement”) by and between MidCap Financial Trust (“MidCap”) and Lender remains in effect, Pledgor and Company shall be deemed to have complied fully with any and all obligations imposed under this Agreement for the delivery of physical possession of, or the making of payments or remittance of funds to, Lender with respect to any Collateral, any proceeds thereof or payments thereunder, any certificates, stock powers, instruments or other documents evidencing the Collateral or necessary for the perfection of a security interest therein, or any other tangible or intangible personal property (any of the foregoing deliveries, payments or remittances referred to as a “Delivery,” and collectively as “Deliveries”), to the extent that any such Delivery shall have been made to MidCap in its capacity as “Senior Lender” (as defined in the MidCap Subordination Agreement); and (ii) if at any time the MidCap Subordination Agreement has been terminated or is no longer in effect, but the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “Penta Subordination Agreement”) by and between Penta Mezzanine SBIC Fund I, L.P. (“Penta”) and Lender remains in effect, Pledgor and Company shall be deemed to have complied fully with any and all obligations imposed under this Agreement for a Delivery to the extent that any such Delivery shall have been made to Penta in its capacity as “Senior Lender” (as defined in the Penta Subordination Agreement). The Deliveries subject to the provisions of this Section include (without limitation) the deliveries and remittances required pursuant to Section 2, Section 3, Section 5(d) and Section 5(e) of this Agreement; provided, however that the term “Deliveries” shall not be deemed to include the delivery of Pledge Amendments as described in Section 5(j).

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR: TWINLAB CONSOLIDATION
  CORPORATION
   
  By: /s/ Thomas A. Tolworthy (SEAL)
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
   
  Pledgor Contact Information:
   
  Twinlab Consolidation Corporation
  632 Broadway, Suite 201
  New York, NY 10012
  Attention: Thomas A. Tolworthy, Chief
  Executive Officer and President

 

Signature Page to JL-BBNC Mezz Utah, LLC Pledge Agreement

(Twinlab Consolidation Corporation)

 

 
 

 

LENDER: JL-BBNC MEZZ UTAH, LLC , an Alaska limited
 

liability company

   
  By:

/s/ Jonathan B. Rubini

(SEAL)
  Name: Jonathan B. Rubini
  Title: Managing Member

  

Signature Page to Pledge Agreement between JL-BBNC Mezz Utah, LLC

and Twinlab Consolidation Corporation

 

 
 

  

SCHEDULE I

 

Pledged Interests

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Company Name: Twinlab Holdings, Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Michigan
   
Organizational ID No. of Company: MI03048C
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

   

Name of Pledgor: Twinlab Consolidation Corporation
   
Company Name: TCC CM Subco I, Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE5661868
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

   

Name of Pledgor: Twinlab Consolidation Corporation
   
Company Name: TCC CM Subco II, Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE5661869
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

  

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Delaware
   
Organizational ID No. of Pledgor: DE5407822
   
Tax ID No. of Pledgor: [  ]

 

 
 

  

SCHEDULE III

 

STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated:   PLEDGOR :
       
      [NAME OF PLEDGOR]
       
      By: (SEAL)
      Name:  
      Its:  

 

*To Remain Blank - Not Completed at Closing

 

 
 

  

SCHEDULE IV

 

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and JL-BBNC Mezz Utah, LLC, as Lender (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Company owned by Pledgor not included in the Pledged Collateral at the discretion of JL-BBNC Mezz Utah, LLC may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

  PLEDGOR :
       
      [NAME OF PLEDGOR]
       
      By: (SEAL)
      Name:  
      Its:  

  

 
 

  

SCHEDULE IV- continued

  

Name and
Address of Pledgor
  Company   Class of
Equity Interest
  Certificate
Number(s)
  Number of
Shares
 
                   
                   
                   

 

  Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate  
                 
                 
                 

  

 

 

 

Exhibit 10.38

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB HOLDINGS, INC. , a Michigan corporation (“ Pledgor ”), and JL-BBNC MEZZ UTAH, LLC , an Alaska limited liability company (“ Lender ”).

 

RECITALS

 

A.            The term “ Borrowers ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Borrowers” under the NWP Agreement (as defined herein); the term “ Borrower ”, as used herein, shall mean individually each entity that is one of the Borrowers; and the term “ Company ” as used herein shall mean, collectively, each of Twinlab Corporation, a Delaware corporation, and ISI Brands Inc., a Michigan corporation.

 

B.            Pursuant to that certain Note and Warrant Purchase Agreement dated as of even date herewith between Borrowers and Lender (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ NWP Agreement ”), Lender has agreed to make available to Borrowers a loan in the maximum principal amount of $5,000,000 (the “Loan”. Borrowers have executed and delivered one or more promissory notes evidencing the indebtedness incurred by Borrowers under the NWP Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the NWP Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            This Agreement, the Notes, the NWP Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The term “ Obligations ” as used herein shall have the meanings given to such term in the NWP Agreement.

 

E.             In connection with the Lender entering into the NWP Agreement and agreeing to make the credit accommodations under the NWP Agreement and as security for all of the Obligations, Lender is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.              Pledgor is a shareholder in Company and, as such, will continue to derive substantial benefit by reason of Lender making the Loan.

 

AGREEMENT

 

NOW, THEREFORE , to induce Lender to enter into the NWP Agreement and to make the Loan, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Lender hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

  

1.            Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Lender, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Company now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Company, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Company, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Company, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Company, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Company, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Company (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of Lender deliver to Lender a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.             Application of Proceeds . Pledgor hereby authorizes and directs the Company, following written notice to do so by Lender after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Lender of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Lender shall be applied to the Obligations in such order and manner of application as Lender may from time to time determine in its sole discretion.

 

3.              Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Lender shall be paid immediately to Lender and shall be retained by Lender as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Lender, promptly, and in any case within one (1) business day, send a written notice to Company instructing Company, and shall cause Company, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Lender notifies Pledgor that such Event of Default has ceased to exist) directly to Lender. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.              Representations and Warranties of Pledgor . Pledgor hereby warrants to Lender as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Company as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Company in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Lender;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Encumbrances (as defined in the NWP Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Encumbrances (as defined in the NWP Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.             Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Lender’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Lender may in good faith direct;

 

(c)           To cause Company to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Lender immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Lender one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Lender, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Lender as part of the Collateral.

 

(e)           To deliver immediately to Lender any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Lender one or more Transfer Powers, which such Transfer Powers shall be held by Lender as part of the Collateral;

 

(f)           To execute and deliver to Lender such financing statements as Lender may request with respect to the Ownership Interests, and to take such other steps as Lender may from time to time reasonably request to perfect Lender’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Encumbrances (as defined in the NWP Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Company, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Lender in the Collateral or dilute the Ownership Interests pledged to Lender under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Lender and except for other Permitted Encumbrances (as defined in the NWP Agreement);

 

(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Lender pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Lender a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Lender, all of such additional Ownership Interests. Prior to the delivery thereof to Lender, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Lender;

 

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(k)           That Pledgor consents to the admission of Lender (and its assigns or designee) as a member, partner or stockholder of Company upon Lender’s acquisition of any of the Ownership Interests; and

 

6.             Rights of Lender . Lender may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Lender records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Company and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Lender’s interest in the Collateral. Pledgor agrees that Lender may at any time take such steps as Lender deems reasonably necessary to protect Lender’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Lender may at any time or from time to time pursuant to the NWP Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the NWP Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the NWP Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the NWP Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Lender at any time against the Obligations in any order as Lender may determine pursuant to the terms of the NWP Agreement; all of the foregoing in such manner and upon such terms as Lender may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Lender’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the NWP Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Borrower.

 

7.             Events of Default . The occurrence of any “Event of Default,” as defined in the NWP Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.             Rights of Lender Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the NWP Agreement), Lender may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Lender to demand payment of any portion of the Obligations that is payable upon demand);

 

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(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Lender may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Lender may deem necessary or proper to protect Lender’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Company or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Lender, shall use its best efforts to secure, and cooperate with the efforts of Lender to secure (if not already secured by Lender), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC; and upon any such sale of the Collateral, Lender may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Lender in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Lender to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Lender either at law or in equity.

 

Lender shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Lender in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Lender as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Lender may deem appropriate in the exercise of the rights and powers granted to Lender in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Lender harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Lender from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Lender’s gross negligence or willful misconduct).

 

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9.           Performance by Lender . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Lender, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Lender may consider necessary or appropriate for such purpose. All sums paid or advanced by Lender in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Lender on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Lender shall not in any way be responsible for the performance or discharge of, and Lender does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Lender and hold Lender harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Lender to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Lender’s own gross negligence or willful misconduct. Lender shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Lender to extend any credit to Borrower under the Financing Documents, this Agreement shall terminate and Lender shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Lender’s rights under this Agreement, Lender may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Lender to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Lender or Lender’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Lender in favor of any other person.

 

14.          Preservation of Collateral . Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Lender takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Lender to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

15.          Private Sale . Pledgor recognizes that Lender may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Lender has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

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16.           General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Lender of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Lender thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Lender shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

8
 

  

(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the NWP Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Lender as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Lender of any one or more of such rights, powers or remedies shall not preclude the later exercise by Lender of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Lender) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Lender or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Lender may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Lender in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Lender or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

(m)           No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

9
 

  

(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Lender’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Lender, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY NEW YORK STATE OR UNITED STATES COURT SITTING IN THE STATE OF NEW YORK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT LENDER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

10
 

   

18.          Notwithstanding anything in this Agreement to the contrary: (i) so long as the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “MidCap Subordination Agreement”) by and between MidCap Financial Trust (“MidCap”) and Lender remains in effect, Pledgor and Company shall be deemed to have complied fully with any and all obligations imposed under this Agreement for the delivery of physical possession of, or the making of payments or remittance of funds to, Lender with respect to any Collateral, any proceeds thereof or payments thereunder, any certificates, stock powers, instruments or other documents evidencing the Collateral or necessary for the perfection of a security interest therein, or any other tangible or intangible personal property (any of the foregoing deliveries, payments or remittances referred to as a “Delivery,” and collectively as “Deliveries”), to the extent that any such Delivery shall have been made to MidCap in its capacity as “Senior Lender” (as defined in the MidCap Subordination Agreement); and (ii) if at any time the MidCap Subordination Agreement has been terminated or is no longer in effect, but the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “Penta Subordination Agreement”) by and between Penta Mezzanine SBIC Fund I, L.P. (“Penta”) and Lender remains in effect, Pledgor and Company shall be deemed to have complied fully with any and all obligations imposed under this Agreement for a Delivery to the extent that any such Delivery shall have been made to Penta in its capacity as “Senior Lender” (as defined in the Penta Subordination Agreement). The Deliveries subject to the provisions of this Section include (without limitation) the deliveries and remittances required pursuant to Section 2, Section 3, Section 5(d) and Section 5(e) of this Agreement; provided, however that the term “Deliveries” shall not be deemed to include the delivery of Pledge Amendments as described in Section 5(j).

 

[Signature Pages Follow]

 

11
 

 

IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR: TWINLAB HOLDINGS, INC.
 
  By: /s/ Thomas A. Tolworthy (SEAL)
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President
   
  Pledgor Contact Information:
   
  Twinlab Holdings, Inc.
  632 Broadway, Suite 201
  New York, NY 10012
  Attention: Thomas A. Tolworthy, Chief Executive Officer and President

 

Signature Page to JL-BBNC Mezz Utah, LLC Pledge Agreement

(Twinlab Holdings, Inc.)

 
 

 

LENDER: JL-BBNC MEZZ UTAH, LLC , an Alaska limited liability company
   
  By: /s/ Jonathan B. Rubini (SEAL)
  Name: Jonathan B. Rubini
  Title:Managing Member

 

Signature Page to Pledge Agreement between JL-BBNC Mezz Utah, LLC

and Twinlab Holdings, Inc.

 

 
 

 

SCHEDULE I

Pledged Interests

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Company Name: Twinlab Corporation
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Delaware
   
Organizational ID No. of Company: DE3698995
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: [ 2]
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

  

Name of Pledgor: Twinlab Holdings, Inc.
   
Company Name: ISI Brands Inc.
   
Type of Type of Entity of Company: Corporation
   
Jurisdiction of Organization of Company: Michigan
   
Organizational ID No. of Company: MI23407C
   
Tax ID No. of Company: [  ]
   
Class of Interests in Company: Common Stock
   
Equity Interest Certificate No.: [ 1]
   
Number of Units: 1000
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Michigan
   
Organizational ID No. of Pledgor: MI03048C
   
Tax ID No. of Pledgor: [  ]

 

 
 

 

SCHEDULE III


STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated: ____________________________________ PLEDGOR :
 
  [NAME OF PLEDGOR]
   
  By:   (SEAL)
  Name:  
  Its:  

 

*To Remain Blank - Not Completed at Closing

 

 
 

 

SCHEDULE IV

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and JL-BBNC Mezz Utah, LLC , as Lender (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Company owned by Pledgor not included in the Pledged Collateral at the discretion of JL-BBNC Mezz Utah, LLC may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

  PLEDGOR :
   
  [NAME OF PLEDGOR]
   
  By:   (SEAL)
  Name:  
  Its:  

 

 
 

  

SCHEDULE IV- continued

 

Name and
Address of Pledgor
    Company     Class of
Equity Interest
    Certificate
Number(s)
    Number of
Shares
 
                           
                                     
                                     

 

      Initial
Principal Amount
    Issue Date     Maturity Date     Interest Rate  
                           
                                     
                                     

 

   

  

 

 

 

 

 

Exhibit 10.39

 

Execution Version

 

FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT, CONSENT AND JOINDER

 

This FIRST AMENDMENT TO NOTE AND WARRANT AGREEMENT, CONSENT AND JOINDER (this “ Amendment ”), dated as of January 22, 2015, is made by and between TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (“ Parent ”), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (“ TCC ”), TWINLAB HOLDINGS, INC., a Michigan corporation (“ Twinlab Holdings ”), ISI BRANDS INC., a Michigan corporation (“ ISI Brands ”), and TWINLAB CORPORATION, a Delaware corporation (“ Twinlab Corporation ”; together with Parent, TCC, Twinlab Holdings and ISI Brands, the “ Existing Companies ”; and each individually, an “ Existing Company ”), TCC CM SUBCO I, INC., a Delaware corporation (“ Subco I ”), TCC CM SUBCO II, INC., a Delaware corporation (“ Subco II ”; together with Subco I, the “ New Companies ” and each individually, a “ New Company ”; and together with the Existing Companies, the “ Companies ” and each individually, a “ Company ”), and PENTA MEZZANINE SBIC FUND I, L.P., a Delaware limited partnership (the “ Purchaser ”).

 

WHEREAS, the Existing Companies and the Purchaser are parties to a Note and Warrant Purchase Agreement dated as of November 13, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Note Purchase Agreement ”); and

 

WHEREAS, the Existing Companies and the Purchaser are parties to a Security Agreement dated as of November 13, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Security Agreement ”); and

 

WHEREAS, the Existing Companies are parties to an Initial Note dated as of November 13, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “ Note ”); and

 

WHEREAS, each New Company and each Existing Company desires that each New Company be joined as a party to the Note Purchase Agreement and the Security Agreement and in connection therewith, amend and restate the Note to add each New Company as parties thereto;

 

WHEREAS, the Companies have advised the Purchaser that the Companies desire to enter into a Credit and Security Agreement, dated as of the date hereof, by and among the Companies, MidCap Financial Trust, a Delaware statutory trust, as Agent and certain financial institutions or other entities from time to time parties thereto as lenders, pursuant to which the Companies intend to enter into a new revolving credit facility (the “ New Revolver Financing ”), the proceeds of which shall be used to refinance the existing indebtedness (the “ Existing Revolving Debt ”) owing from the Existing Companies to Fifth Third Bank pursuant to that certain Credit Agreement dated as of January 7, 2008, as amended, among Fifth Third Bank and the Existing Companies;

 

WHEREAS, the Companies have advised the Purchaser that the Companies desire to enter into a Note and Warrant Purchase Agreement, dated as of the date hereof, by and among the Companies and JL-BBNC Mezz Utah, LLC, an Alaska limited liability company, pursuant to which the Companies intend to issue notes (the “ Subordinated Financing ”; the Subordinated Financing, together with the New Revolver Financing and the other transactions contemplated by this Amendment are collectively referred to herein as the “ First Amendment Transactions ”), the proceeds of which shall be used to pay a portion of the consideration for certain acquisitions and for working capital and general corporate purposes; and

 

1
 

 

WHEREAS, (a) the Companies have requested that the Purchaser (i) consent to (A) the New Revolver Financing and (B) the Subordinated Financing and (ii) amend certain provisions of the Note Purchase Agreement, and (b) the Purchaser has agreed to do so subject to the terms and conditions set forth herein;

 

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained in this Amendment, and subject to the terms and conditions set forth herein, each party hereto hereby agrees as follows:

 

1.           Capitalized Terms . Capitalized terms used but not defined herein shall have the meanings set forth in the Note Purchase Agreement.

 

2.           Joinder . Each New Company hereby acknowledges, agrees and confirms that, by its execution of this Amendment, such New Company will be deemed to be a “Company” under (i) the Note Purchase Agreement for all purposes of the Note Purchase Agreement and shall have all of the obligations of a Company thereunder as if it had executed the Note Purchase Agreement on the Effective Date and (ii) the Security Agreement for all purposes of the Security Agreement and shall have all of the obligations of a Company thereunder as if it had executed the Security Agreement on the Effective Date. The Companies hereby agree to amend and restate the Note on the First Amendment Date to add each New Company as a “Borrower” thereunder in the form attached as Exhibit A . All references in the Note Purchase Agreement, the Security Agreement and the other Transaction Documents to the term “Company”, “Companies”, “Borrower” or “Borrowers” shall be deemed to include each New Company. Without limiting the generality of the foregoing, each New Company hereby repeats and reaffirms all covenants, agreements, representations and warranties of the Companies contained in the Note Purchase Agreement, the Security Agreement and the other Transaction Documents.

 

3.           Consent to Transactions . Subject to the satisfaction of the conditions precedent set forth herein and in reliance on the representations, warranties and covenants of the Companies set forth herein and in the Note Purchase Agreement, the Purchaser hereby consents to (i) the New Revolver Financing, provided that such financing is consummated pursuant to the Senior Loan Documents and (ii) the Subordinated Financing, provided that such financing is consummated pursuant to the Subordinated Loan Documents (as defined in Section 4.3 below) and the liens securing the Subordinated Financing shall at all times be subject to the JL-BBNC Subordination Agreement (as defined in Section 4.3 below).

 

4.           Amendments to Note Purchase Agreement . Subject to the satisfaction of the conditions precedent set forth herein and in reliance on the representations, warranties and covenants of the Companies set forth herein and in the Note Purchase Agreement, each party hereto hereby agrees that the Note Purchase Agreement be, and it hereby is, amended as follows:

 

4.1.           Amendment to Legend . The legend appearing on the cover page of the Note Purchase Agreement is hereby amended by amending and restating such legend to read as follows:

 

“THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (PENTA) DATED AS OF JANUARY 22, 2015 IN FAVOR OF MIDCAP FINANCIAL TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH SUBORDINATION AGREEMENT (PENTA) (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.”

 

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4.2.           Amendment and Restatement of Existing Defined Terms . Section 1 of the Note Purchase Agreement is hereby amended by amending and restating each of the following defined terms as follows:

 

EBITDA ” shall mean Net Income, minus extraordinary gains, interest income, non-operating income, non-cash income and income tax benefits and decreases in any change in LIFO or any other inventory reserves, plus non-cash extraordinary losses (including non-cash expenses with respect to stock option and stock based employee compensation programs), Interest Expense, income taxes, depreciation and amortization and increases in any change in LIFO reserves for such period, in each case, determined on a consolidated basis in accordance with GAAP.

 

Fixed Charge Coverage Ratio ” means, with respect to the Companies and their Subsidiaries for any period, the ratio of (i) Adjusted EBITDA for such period, plus (a) cash received during such period for Equity Interests so long as such cash is used as working capital and such cash is not received more than two times in any trailing-twelve month period of determination, minus (b) Non-Financed Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, minus (c) cash taxes paid during such period, to the extent greater than zero, and minus (d) all Junior Payments consisting of Tax Distributions, to (ii) Fixed Charges for such period.

 

Senior Lender ” means the holder of Permitted Senior Debt and all successors and assigns. On the First Amendment Date, the Senior Lender shall be MidCap Financial, Trust, a Delaware statutory trust.

 

Subordination Agreement shall mean, that certain Subordination Agreement, dated as of the First Amendment Date, between Purchaser and the Senior Lender as of the First Amendment Date, any other subordination or intercreditor agreement with respect to any Permitted Senior Debt which is in form and substance reasonably satisfactory to Purchaser, and all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereof, as applicable.

 

Target 2 Acquisition ” means consummation of the acquisition contemplated by the Amended and Restated Option Agreement between Target 2 and TCC, dated December 20, 2014, and previously provided to the Purchaser.

 

Warrant ” means the Initial Warrant to be issued by the Parent to the Purchaser at the Closing, the Deferred Warrant issued in connection with the Deferred Draw Note and any other Warrants issued hereunder, including without limitation the First Amendment Warrant.

 

4.3.           Addition of New Defined Terms . Section 1 of the Note Purchase Agreement is hereby amended by inserting the following new defined terms in the appropriate alphabetical order:

 

First Amendment ” means that certain First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder dated as of the First Amendment Date, between the Purchaser and the Companies.

 

First Amendment Date ” means January 22, 2015.

 

First Amendment Warrant ” has the meaning set forth in Section 2.1(f).

 

JL-BBNC Subordination Agreement ” means the Subordination Agreement dated the First Amendment Date between the Purchaser and the Subordinated Lender and acknowledged by the Companies, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

 

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Subordinated Debt ” means Indebtedness pursuant to the Subordinated Loan Agreement.

 

Subordinated Lender ” means JL-BBNC Mezz Utah, LLC, an Alaska limited liability company.

 

Subordinated Loan Agreement ” means that certain Note and Warrant Purchase Agreement dated the First Amendment Date, between the Companies and the Subordinated Lender.

 

Subordinated Loan Documents ” means the Subordinated Loan Agreement and the other “Transaction Documents” (as defined in the Subordinated Loan Agreement).

 

4.4.           Amendment of Defined Terms . The definition of “Permitted Encumbrance” in Section 1 of the Note Purchase Agreement is hereby amended by (i) deleting the text “and” at the end of clause (xiv), (ii) deleting the text “.” and inserting “; and” in lieu thereof at the of clause (xv) and (iii) adding the following new clause (xvi) immediately after clause (xv):

 

“(xvi)      Liens securing the Subordinated Debt in accordance with the JL-BBNC Subordination Agreement.”

 

4.5.           Amendment to Section 2.1 . Section 2.1 of the Note Purchase Agreement is hereby amended by adding the following new paragraph (f) at the end of Section 2.1:

 

“(f)           First Amendment Warrant . A warrant in an amount equal to 869,618 shares of common stock of the Parent will be issued to the Purchaser in connection with the execution of the First Amendment (the “ First Amendment Warrant ”). The First Amendment Warrant shall be substantially in the form attached to the First Amendment as Exhibit B and shall be exercisable into the Equity Interest of the Parent as provided therein.”

 

4.6.           Amendment to Section 6.7 . Section 6.7 of the Note Purchase Agreement is hereby amended by replacing Section 6.7 in its entirety with the following:

 

6.7            Indebtedness .

 

Create, incur, assume or suffer to exist any Indebtedness (exclusive of trade debt) except in respect of (a) the Indebtedness to Purchaser, (b) Permitted Senior Debt, (c) the Essex Debt, (d) the Little Harbor Debt, (e) Indebtedness, incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof, (f) the Utah Lease, (g) the Subordinated Debt and (h) Refinancing Indebtedness with respect to any of the foregoing; provided that any Refinancing Indebtedness that (i) is a renewal or extension of Permitted Senior Debt is renewed or extended in accordance with Section 15 of the Subordination Agreement, (ii) is a refinancing of Permitted Senior Debt is on terms reasonably satisfactory to the Purchaser, (iii) is a renewal or extension of the Subordinated Debt is renewed or extended in accordance with Section 15 of the JL-BBNC Subordination Agreement and (iv) is a refinancing of the Subordinated Debt is on terms reasonably satisfactory to the Purchaser.”

 

4.7.           Amendment to Section 6.11 . Section 6.11 of the Note Purchase Agreement is hereby amended by replacing Section 6.11 in its entirety with the following:

 

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6.11         Entering Into or Modification of Certain Agreements

 

The Companies and their Subsidiaries shall not amend, restate, supplement or otherwise modify (or permit or consent to any amendment, restatement, supplement or modification of) the terms of (i) its articles or certificate of incorporation, bylaws, any agreement between or among any of the holders of any Company’s or any of its Subsidiaries’ Equity Interests, any other organizational document, in each case which would be materially adverse to the Purchaser and (ii) any of the Transaction Documents, the documents and/or instruments evidencing the Permitted Senior Debt (unless permitted under the Subordination Agreement), the documents and/or instruments evidencing the Little Harbor Debt (unless permitted under the Little Harbor Subordination Agreement), the Subordinated Loan Documents (unless permitted under the JL-BBNC Subordination Agreement) or any of the leases for the Premises, in each case which would result in a Material Adverse Effect.”

 

4.8.           Amendment to Section 6 . Section 6 of the Note Purchase Agreement is hereby amended by adding the following new Section 6.17 at the end thereof:

 

6.17          Payments on Subordinated Debt .

 

Make any payment or prepayment of principal of, premium, if any, interest, fees, redemption, exchange, purchase, retirement, defeasance, sinking fund or similar payment in respect of the Subordinated Debt except that the Companies may pay, as and when due and payable, Permitted Payments, as defined in and solely to the extent permitted under the JL-BBNC Subordination Agreement.”

 

4.9.           Amendment to Section 11.1 . Section 11.1 of the Note Purchase Agreement is hereby amended by deleting the text “or shall have commenced enforcement actions with respect thereto” appearing in clause (B) of Section 11.1(b)(ii).

 

4.10.          Amendments to Schedules . The Schedules to the Note Purchase Agreement are hereby deleted in their entirety and replaced by the revised Schedules attached hereto, which revised Schedules shall be deemed to be incorporated into the Note Purchase Agreement as of the date hereof and each reference in the Note Purchase Agreement to any such Schedule shall be deemed to refer to such Schedule attached hereto on and after the date hereof.

 

5.           Representations and Warranties; No Default .

 

5.1.          The Companies hereby represent and warrant that after giving effect to this Amendment and the consummation of the New Revolver Financing and the Subordinated Financing on the date hereof (a) the representations and warranties of the Companies contained in Section 4.1 of the Note Purchase Agreement and the other Transaction Documents are true, correct and complete on and as of the date hereof as if made on such date (and to the extent any representations and warranties shall relate to the Effective Date or another earlier date, such representation and warranties shall be deemed to be amended to relate to the First Amendment Date), and (b) no Default or Event of Default has occurred and is continuing.

 

5.2.          The Purchaser hereby represents and warrants that after giving effect to this Amendment on the date hereof (a) the representations and warranties of the Purchaser contained in Section 4.2 of the Note Purchase Agreement and the other Transaction Documents are true, correct and complete on and as of the date hereof as if made on such date (and to the extent any representations and warranties shall relate to the Effective Date or another earlier date, such representation and warranties shall be deemed to be amended to relate to the First Amendment Date).

 

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6.           Ratification and Confirmation . The Companies hereby ratify and confirm all of the terms and provisions of the Note Purchase Agreement and the other Transaction Documents and agree that all of such terms and provisions, as amended hereby, remain in full force and effect.

 

7.           Condition to Effectiveness . The effectiveness of this Amendment shall be subject to the satisfaction of the following conditions precedent:

 

7.1.           The Purchaser shall have received (i) a fully executed copy of this Amendment, (ii) a fully executed First Amendment Warrant, (iii) a fully executed amended and restated Note and (iv) all other Transaction Documents, agreements, documents, instruments and other items set forth on the closing checklist attached hereto as Exhibit C , in each case in form and substance reasonably satisfactory to the Purchaser.

 

7.2.           The Purchaser shall have received a certificate of a duly authorized officer of each Company, certifying (i) that, the attached copies of all of the organization documents of each Company are true and complete, and in full force and effect, without amendments except as shown; (ii) that, in the case of each Company, an attached copy of resolutions authorizing the execution and delivery of the Amendment and the other Transaction Documents by such Company is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; and (iii) that, in the case of each Company, the title, name and signature of each Person authorized to sign the Transaction Documents on behalf of such Company.

 

7.3.          The Purchaser shall have received certificates of insurance evidencing that each Existing Company is covered under the insurance policies maintained by the Existing Companies, all in compliance with the Transaction Documents.

 

7.4.          The Purchaser shall have received certificates, in form and substance satisfactory to it, from a duly authorized officer of each Company certifying that, on the First Amendment Date after giving effect to the First Amendment Transactions, (i) each Company is Solvent; (ii) no Default or Event of Default exists; (iii) the representations and warranties made by the Companies in the Transaction Documents remain true, correct and complete as of the date hereof (and with respect to any representations and warranties that relate to an earlier date, such representations and warranties shall be deemed to be amended to relate to the First Amendment Date); and (iv) each Company has complied with all agreements and conditions to be satisfied by it under the Transaction Documents.

 

7.5.          No litigation, investigation or proceeding before or by any arbitrator or Governmental Authority shall be continuing or threatened against any Company, any of the Companies’ Subsidiaries or against any officers or directors of any Company (A) in connection with any of the Transaction Documents or any of the transactions contemplated thereby and which, in the Purchaser’s sole and absolute discretion, is deemed material or (B) which could have a Material Adverse Effect; and no injunction, writ, restraining order or other order of any nature materially adverse to any Company or the conduct of its business or inconsistent with the due consummation of the transactions contemplated hereby shall have been issued by any Governmental Authority.

 

7.6.          The Purchaser shall have received evidence satisfactory to it that the Existing Revolving Debt has been repaid in full or will be repaid in full with the proceeds of the New Revolver Financing on the First Amendment Date and all notes, financing statements and Liens associated therewith have been released or otherwise terminated.

 

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7.7.           (i) The Companies shall have entered into the Senior Loan Documents, in each case in form and substance reasonably satisfactory to the Purchaser, and shall have delivered copies of all such documents to the Purchaser, (ii) the Companies shall have entered into the Subordinated Loan Documents, in each case in form and substance reasonably satisfactory to the Purchaser, and shall have delivered copies of all such documents to the Purchaser and (iii) the Companies shall have received evidence of the funding of the Subordinated Debt in the form of a Fed. Reference No. on the First Amendment Date of $5,000,000 less fees, costs and expenses due and payable under the Subordinated Loan Documents.

 

7.8.          The Purchaser shall have received, in form and substance reasonably satisfactory to the Purchaser, a pro forma balance sheet of the Companies as of November 30, 2014, after giving effect to the First Amendment Transactions.

 

7.9.          Since November 13, 2014, no Material Adverse Effect shall have occurred with respect to the Companies.

 

7.10.         On the First Amendment Date, the Purchaser’s purchase of the First Amendment Warrant shall not be prohibited by any applicable law or governmental regulation and shall not subject it to any penalty or, in the Purchaser’s reasonable judgment, other onerous conditions under or pursuant to any applicable law or governmental regulation. The offering, issuance, and sale of the First Amendment Warrant shall have complied with all applicable requirements of federal and state securities laws, and the Purchaser shall have received evidence of such compliance in form and substance satisfactory to the Purchaser.

 

7.11.         The Purchaser shall have received all fees and other amounts due and payable to the Purchaser and its counsel in connection with this Amendment, and to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Companies under the Note Purchase Agreement.

 

7.12.          The Purchaser shall have received such other documents as the Purchaser shall have reasonably requested in connection with this Amendment and the other transactions contemplated hereby, all of which shall be in form and substance reasonably satisfactory to the Purchaser.

 

8.           Insurance for Subco I and Subco II . Within fourteen (14) days of the First Amendment Date, the Companies shall deliver to the Purchaser certificates of insurance evidencing that Subco I and/or Subco II are covered under the insurance policies maintained by the Companies, together with endorsements, in form and substance reasonably acceptable to the Purchaser, (a) naming the Purchaser as an additional insured or lenders loss payee, as appropriate, and (x) providing for at least thirty (30) days’ prior written notice of cancellation (or fifteen (15) days’ prior written notice in the case of nonpayment of premium), all in compliance with the Transaction Documents.

 

9.           Miscellaneous .

 

9.1.          Except as otherwise expressly set forth herein, nothing herein shall be deemed to constitute an amendment, modification or waiver of any of the provisions of the Note Purchase Agreement, the Security Agreement or the other Transaction Documents, all of which remain in full force and effect as of the date hereof and are hereby ratified and confirmed. Each Company hereby acknowledges and agrees that nothing contained herein shall be deemed to entitle any Company to consent to, or a waiver, amendment or modification of, any of the terms, conditions, obligations, covenants or agreements contained in the Transaction Documents in similar or different circumstances.

 

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9.2.          This Amendment may be executed in any number of counterparts, each of which, when executed and delivered, shall be an original, but all counterparts shall together constitute one instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or electronic mail shall be equally effective as delivery of a manually executed counterpart of this Amendment.

 

9.3.          This Amendment shall be governed by the laws of the State of New York without giving effect to any conflict of law principles and shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

 

9.4.           The Companies agree to pay all reasonable expenses, including legal fees and disbursements, incurred by Purchaser in connection with this Amendment and the transactions contemplated hereby.

 

[Signature Pages Follow.]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment which shall be deemed to be a sealed instrument as of the date first above written.

 

  EXISTING COMPANIES
   
  TWINLAB CONSOLIDATED HOLDINGS, INC.
   
  By:   /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TWINLAB HOLDINGS, INC.
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TWINLAB CONSOLIDATION CORPORATION
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TWINLAB CORPORATION
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  ISI BRANDS, INC.
   
  By:   /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

[Signature Page – First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder]  

 

 
 

 

  NEW COMPANIES
   
  TCC CM SUBCO I, INC.
   
  By:   /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TCC CM SUBCO II, INC.
   
  By:   /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

  

[Signature Page – First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder]

 

 
 

 

  PURCHASER:
   
  PENTA MEZZANINE SBIC FUND I, L.P.
   
  By: Penta Mezzanine SBIC Fund I GP, LLC, its General Partner
     
  By:  

/s/ Richard E. Mount

  Name: Richard E. Mount
  Title: Authorized Member

   

[Signature Page – First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder]

 

 

 

Exhibit 10.40

 

THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT (PENTA) DATED AS OF JANUARY 22, 2015 IN FAVOR OF MIDCAP FINANCIAL TRUST, A DELAWARE STATUTORY TRUST, ADMINISTRATIVE AGENT, WHICH SUBORDINATION AGREEMENT (AS AMENDED IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION THEREFROM UNDER THE ACT, THE RULES AND REGULATIONS THEREUNDER AND APPLICABLE STATE LAWS. IN ADDITION, THIS NOTE IS SUBJECT TO THE LIMITATIONS ON TRANSFER SET FORTH IN THE NOTE AND WARRANT PURCHASE AGREEMENT, DATED AS OF NOVEMBER 13, 2014, BY AND AMONG BORROWER AND LENDER NAMED THEREIN, AS AMENDED. A COPY OF THE NOTE AND WARRANT PURCHASE AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF BORROWER AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO BORROWER.

 

AMENDED AND RESTATED NOTE

 

$8,000,000 Dated as of January 22 , 2015

 

FOR VALUE RECEIVED, TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (“ Parent ”), TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation (“ TCC ”), TWINLAB HOLDINGS, INC., a Michigan corporation (“ Twinlab Holdings ”), ISI BRANDS INC., a Michigan corporation (“ ISI Brands ”), TWINLAB CORPORATION, a Delaware corporation (“ Twinlab Corporation ”), TCC CM SUBCO I, INC., a Delaware corporation (“ Subco I ”) and TCC CM SUBCO II, INC., a Delaware corporation (“ Subco II ”; together with Parent, TCC, Twinlab Holdings, ISI Brands, Twinlab Corporation and Subco I, the " Borrower "), pursuant to this Amended and Restated Note (this " Note "), hereby JOINTLY AND SEVERALLY promise to pay to PENTA MEZZANINE SBIC FUND I, L.P., a Delaware limited partnership (" Lender "), at such place as Lender may designate from time to time in writing, in lawful money of the United States of America, the principal amount of Eight Million Dollars ($8,000,000), or such lesser amount as shall equal the outstanding principal balance of the loan (the " Loan "), made to Borrower by Lender pursuant to the Note and Warrant Purchase Agreement, dated as of November 13, 2014, by and between Borrower and Lender (as the same may be amended, restated, supplemented or otherwise modified from time to time, the " Agreement "), and to pay all other amounts due with respect to the Loan on the dates and in the amounts set forth in the Agreement and this Note. Capitalized terms not defined herein shall have the meaning set forth in the Agreement.

 

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1.              Payment of Principal . Principal shall be payable quarterly commencing on November 13, 2017 in installments of (i) $360,000 per quarter for the first four quarters, (ii) $440,000 per quarter for the next four quarters and (iii) $520,000 per quarter for each quarter thereafter. Principal payments shall be due on the last day of each October, January, April and August. Unless due and payable prior thereto (whether by acceleration or otherwise), the entire principal amount of the Loan evidenced hereby, together with any accrued and unpaid interest, and any and all unpaid costs, fees and expenses accrued, shall be due and payable on November 13, 2019 (the " Maturity Date "). The Note will be payable both as to principal and interest by Federal funds wire transfer to Lender as instructed by Lender.

 

2.              Payments of Interest .

 

(a)          All amounts outstanding from time to time hereunder shall bear interest until such amounts are paid, at a rate of twelve percent (12%) per annum. Borrower shall pay the Interest monthly on the last day of each calendar month unless such date is a day which is not a Business Day, in which case Borrower shall pay the Interest on such principal amount on the next succeeding Business Day (each an " Interest Payment Date "). Interest on the Note will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be November 30, 2014. Notwithstanding anything herein to the contrary, the interest rate applied to this Note shall at no time exceed the maximum rate permitted by applicable law, whether now or hereafter in effect. Interest will be computed on the basis of a 360-day year based on actual days elapsed.

 

(b)          Following any Event of Default (including before or after any judgment is entered) and after the Maturity Date, the principal balance outstanding hereunder, together with all such other amounts outstanding hereunder, shall bear interest (including post-petition interest in any proceeding under the Bankruptcy Code) at a rate of eighteen percent (18%) per annum (the " Default Rate "), and such Default Rate interest shall be due and payable upon demand. Interest will be computed on the basis of a 360-day year based on actual days elapsed.

 

3.              Prepayments . The Borrower may redeem the outstanding principal balance of the Note in whole or in part at any time in accordance with Section 8.1 of the Agreement; however, the Borrower shall pay to Lender a fee (the “ Prepayment Penalty ”) equal to: (i) three percent (3%) of the principal amount being redeemed (other than scheduled principal payments) if such redemption occurs prior to the first anniversary of the Effective Date, (ii) two percent (2%) of the principal amount being redeemed (other than scheduled principal payments) if such redemption occurs on or after the first anniversary of the Effective Date but before the second anniversary of the Effective Date; and (iii) one percent (1%) of the principal amount being redeemed (other than scheduled principal payments) if such redemption occurs on or after the second anniversary of the Effective Date but before the third anniversary of the Effective Date and (iv) zero percent (0%) of the principal amount being redeemed if such redemption occurs on or after the third anniversary of the Effective Date.

 

4.              Lender's Rights and Remedies . Upon the occurrence of an Event of Default, Lender shall not have any further obligation to advance money or extend credit to or for the benefit of Borrower and may exercise all rights and remedies as set forth in the Agreement or otherwise provided by law.

 

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5.              Remedies Cumulative, Etc.

 

(a)          No right or remedy conferred upon or reserved to Lender hereunder or now or hereafter existing at law or in equity is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and concurrent, and in addition to every other such right or remedy, and may be pursued singly, concurrently, successively or otherwise, at the sole discretion of Lender, and shall not be exhausted by any one exercise thereof but may be exercised as often as occasion therefor shall occur.

 

(b)          Borrower hereby waives presentment, demand, notice of nonpayment, protest, notice of protest, notice of dishonor and any and all other notices in connection with any default in the payment of, or any enforcement of the payment of, all amounts due under this Note. To the extent permitted by law, Borrower waives the right to any stay of execution and the benefit of all exemption laws now or hereafter in effect.

 

(c)           Costs and Expenses . Following the occurrence of any Event of Default, Borrower shall pay upon demand all costs and expenses (including reasonable attorneys' fees and expenses) incurred by Lender in the exercise of any of its rights, remedies or powers under this Note and any amount thereof not paid promptly following demand therefor shall be added to the principal sum hereunder and shall bear interest at the Default Rate from the date of such demand until paid in full.

 

6.              Notices . All notices required to be given to any of the parties hereunder shall be given in the manner specified in Section 12.3 of the Agreement.

 

7.              Successors and Assigns . This Note inures to the benefit of Lender and binds Borrower, and their respective successors and assigns, and the words "Borrower" and "Lender" whenever occurring herein shall be deemed and construed to include such respective successors and assigns; provided , however , (i) neither this Note nor any rights hereunder may be assigned by Borrower without Lender's prior written consent, which consent may be granted or withheld in Lender's sole discretion and (ii) Lender shall be permitted to transfer the Note or any portion thereof (and the rights relating thereto under the Agreement and the other Transaction Documents) to any Person so long as Lender complies with Section 12.2 of the Agreement.

 

8.              Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of New York. Borrower agrees that any action or proceeding against it to enforce the Note may be commenced in state or federal court in New York County in the State of New York, and Borrower waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confer personal jurisdiction if served by registered or certified mail in accordance with the notice provisions set forth herein.

 

9.              Entire Agreement; Construction; Amendments and Waivers .

 

(a)           Entire Agreement . This Note and each of the related Transaction Documents, taken together, constitute and contain the entire agreement between Borrower and Lender with respect to the subject matter hereof and supersede any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, with respect to such subject matter. Borrower acknowledges that it is not relying on any representation or agreement made by Lender or any employee, attorney or agent thereof, other than the specific agreements set forth in this Note and Transaction Documents.

 

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(b)           Construction . This Note is the result of negotiations between and has been reviewed by each of Borrower and Lender as of the date hereof and their respective counsel; accordingly, this Note shall be deemed to be the product of the parties hereto, and no ambiguity shall be construed in favor of or against Borrower or Lender. Borrower and Lender agree that they intend the literal words of this Note and the related loan documents and that no parol evidence shall be necessary or appropriate to establish Borrower's or Lender's actual intentions.

 

(c)           Amendments and Waivers . Any and all amendments, modifications, discharges or waivers of, or consents to any departures from any provision of this Note or of any of the related loan documents shall not be effective without the written consent of Lender and Borrower. Any waiver or consent with respect to any provision of such loan documents shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or further notice or demand in similar or other circumstances. Any amendment, modification, waiver or consent affected in accordance with this Section shall be binding upon Lender and on Borrower. Any forbearance, failure or delay by Lender in the exercise of any right, power or remedy hereunder shall not be deemed to be a waiver of any such right, power or remedy and any single or partial exercise of any right, power or remedy, shall not preclude the further exercise thereof. Every right, power and remedy of Lender shall continue in full force and effect until such right, power or remedy is specifically waived by an instrument in writing executed by Lender.

 

10.            Reliance by Lender . All covenants, agreements, representations and warranties made herein by Borrower shall be deemed to be material to and to have been relied upon by Lender, notwithstanding any investigation by Lender.

 

11.            No Set-Offs by Borrower . All sums payable by Borrower pursuant to this Note or any of the related loan documents shall be payable without notice or demand and shall be payable in United States Dollars without set-off or reduction of any manner whatsoever.

 

12.            Survival . All covenants, representations and warranties made in this Note shall continue in full force and effect so long as any obligations hereunder or commitment to fund remain outstanding. The obligations of Borrower to indemnify Lender with respect to the expenses, damages, losses, costs and liabilities described in Section 11 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Lender have run.

 

13.            WAIVER OF TRIAL BY JURY . AS A MATERIAL INDUCEMENT TO THE EXECUTION OF THIS NOTE, EACH OF THE PARTIES HERETO AGREES THAT IN THE EVENT ANY DISPUTE OR LITIGATION ARISING OUT OF THE TERMS AND PROVISIONS OF THIS NOTE, THE AGREEMENT OR OTHER TRANSACTION DOCUMENTS OR THE RELATIONSHIP BETWEEN THE PARTIES HERETO, THEN NO PARTY SHALL SEEK A JURY TRIAL IN SUCH PROCEEDING, IT BEING EXPRESSLY AGREED AND STIPULATED BY THE PARTIES HERETO THAT ANY DISPUTES ARE BETTER RESOLVED BY A JUDGE.

 

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14.            Amendment and Restatement . It is expressly understood and agreed by the Borrower that (i) the principal balance of this Note includes certain obligations hitherto evidenced by that certain Initial Note dated as of November 13, 2014, issued by Parent, TCC, Twinlab Holdings, ISI Brands and Twinlab Corporation in favor of Lender in the original principal amount of $8,000,000 (the “ Existing Note ”), which Existing Note is now represented by this Note and which Existing Note has no independent force or effect, and (ii) to the extent any of such obligations are included in the principal balance of this Note, this Note (a) merely evidences such obligations, (b) is given in substitution for, and not in payment of, the Existing Note and (c) is in no way intended, and shall not be deemed or construed, to constitute a novation of the Existing Note.

 

[Signature is on next page.]

 

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IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written.

 

  TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TWINLAB HOLDINGS, INC., a Michigan corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  ISI BRANDS INC., a Michigan corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TWINLAB CORPORATION, a Delaware corporation
     
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Amended and Restated Note

 

 
 

 

  TCC CM SUBCO I, INC., a Delaware corporation
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

  TCC CM SUBCO II, INC., a Delaware corporation
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

Amended and Restated Note

 

 

 

Exhibit 10.41

 

Execution Version

 

THIS WARRANT AND THE EQUITY INTERESTS THAT MAY BE PURCHASED HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED, OR OFFERED FOR SALE OR TRANSFER, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION THEREUNDER OR PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF.

 

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

No. W-3 January 22, 2015

 

Warrant

 

This Warrant (the “ Warrant ”) certifies that, for value received, PENTA MEZZANINE SBIC FUND I, LP, a Delaware limited partnership , and its permitted transferees, successors and assigns (the “ Holder ”), is entitled to purchase from TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation (the “ Company ”), 869,618 shares of common stock of the Company issuable upon the full exercise of this Warrant at the purchase price of $1.00 per share (the “ Exercise Price ”), at any time prior to 5:00 P.M. on November 13, 2019 (the “ Expiration Date ”).

 

This Warrant has been issued pursuant to the Note and Warrant Purchase Agreement, dated as of November 13, 2014, by and among the Company, Twinlab CONSOLIDATION Corporation , a Delaware corporation, Twinlab Holdings, Inc. , a Michigan corporation, ISI Brands Inc. , a Michigan corporation, Twinlab Corporation , a Delaware corporation, and the Holder (as amended by the First Amendment to Note and Warrant Purchase Agreement, Consent and Joinder, dated as of the date hereof, the “ Purchase Agreement ”), and is subject to the terms and conditions, and entitled to the benefits, thereof, including provisions providing certain information and other rights. A copy of the Purchase Agreement is available for inspection at the principal office of the Company and will be furnished without charge to the Holder upon written request to the Company.

 

ARTICLE I

 

DEFINITIONS

 

SECTION 1.1   Definitions . Capitalized terms used but not defined herein shall have the meaning given to them in the Purchase Agreement. As used in this Warrant, the following terms shall have the following meanings:

 

Adjusted EBITDA ” shall mean EBITDA plus any expenses relating to Acquisitions (as defined in the Purchase Agreement) following the Effective Date (as defined in the Purchase Agreement) of the Purchase Agreement, plus severance payments and other costs relating to permanent headcount reductions, all as determined by GAAP.

 

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Applicable Law ” means all provisions of laws, statutes, ordinances, rules, regulations, permits, certificates or orders of any Governmental Authority applicable to the Person in question or any of its assets or property, and all judgments, injunctions, orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party or by which any of its assets or properties are bound.

 

Assignment Form ” shall mean the assignment form attached as Annex 2 hereto.

 

Business Day ” shall have the meaning set forth in the Purchase Agreement.

 

Change in Control ” shall have the meaning set forth in the Purchase Agreement.

 

Current Holder’s Equity Interest ” means 869,618 shares of common stock of the Company issuable upon the full exercise of this Warrant, minus any Equity Interest previously issued pursuant to the exercise of this Warrant.

 

Company ” shall have the meaning set forth in the Preamble.

 

Delivery Date ” shall have the meaning given to such term in Section 3.2 .

 

EBITDA ” shall have the meaning set forth in the Purchase Agreement.

 

Equity Interest ” shall have the meaning set forth in the Purchase Agreement.

 

Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended from time to time, and any successor statute.

 

Exchange Form ” shall mean the exchange form attached as Annex 3 hereto.

 

Executive Officer ” shall mean, with respect to the Company, its Chief Executive Officer, President, Chief Financial Officer or Chief Operating Officer.

 

Exercise Form ” shall mean the exercise form attached as Annex 1 hereto.

 

Exercise Price ” shall have the meaning set forth in the Preamble.

 

Expiration Date ” shall have the meaning set forth in the Preamble.

 

Fiscal Year ” shall have the meaning set forth in the Purchase Agreement.

 

Fully-Diluted Basis ” shall have the meaning set forth in the Purchase Agreement.

 

Governmental Authority ” shall have the meaning set forth in the Purchase Agreement.

 

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Holder ” shall have the meaning set forth in the Preamble.

 

Holder's Equity Interest ” shall have the meaning given to such term in Section 3.3 .

 

Indebtedness ” shall have the meaning set forth in the Purchase Agreement.

 

NASDAQ ” shall mean the NASDAQ Stock Market.

 

Organizational Documents ” shall mean, with respect to any Person, each instrument or other document that (a) defines the existence of such Person, including its articles or certificate of incorporation, formation or organization, as filed or recorded with an applicable Governmental Authority or (ii) governs the internal affairs of such Person, including its by-laws or its operating, partnership or limited liability company agreement, in each case as amended, supplemented or restated.

 

Person ” shall have the meaning set forth in the Purchase Agreement.

 

Purchase Agreement ” shall have the meaning set forth in the Preamble.

 

Qualified Assignment ” shall mean any of the following: (a) an assignment to a transferee acquiring at least 25% of the Equity Interests subject to the Warrant (subject to adjustment for stock splits, stock dividends, recapitalizations and similar events); or (b) an assignment to an Affiliate of the Holder.

 

Rights Agreement ” shall have the meaning given to such term in Section 4.1 .

 

Securities Act ” shall mean the Securities Act of 1933, as amended from time to time, and any successor statute.

 

Taxes ” means all taxes, charges, fees, levies or other assessments, however denominated and whether imposed by a taxing authority within or without the United States, including all net income, gross income, gross receipts, sales, use, ad valorem, goods and services, capital, transfer, franchise, profits, license, withholding, payroll, employment, employer health, excise, estimated, severance, stamp, occupation, property or other taxes, custom duties, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any taxing authority whether arising before, on or after the date hereof.

 

Warrant ” or “ Warrants ” shall mean this Warrant.

 

Warrant Register ” shall have the meaning given to such term in Section 2.1.

 

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SECTION 1.2 Interpretation . Unless the context of this Warrant clearly requires otherwise, the masculine, feminine or neuter gender and the singular or plural number shall be deemed to include the others whenever the context so requires. Accounting terms used but not otherwise defined herein have the meanings given to them under GAAP. The terms “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The words “hereof,” “herein,” “hereunder,” and similar terms in this Warrant refer to this Warrant as a whole and not to any particular provision of this Warrant. References to “Articles”, “Sections,” “Subsections,” “Exhibits,” “Preamble,” “Annexes,” and “Schedules” are to articles, sections, subsections, exhibits, preamble, annexes and schedules, respectively, of this Warrant, unless otherwise specifically provided. References to “days” and “months” refer to calendar days and calendar months unless otherwise expressly designated (i.e., business days or particular 30-day periods). The captions contained herein are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. The term “dollars” or “$” means United States Dollars.

 

ARTICLE II

 

FORM; EXCHANGE FOR WARRANTS; TRANSFER; TAXES

 

SECTION 2.1   Warrant Register . Each Warrant issued, exchanged or transferred pursuant to the Purchase Agreement shall be registered in a warrant register (the “ Warrant Register ”). The Warrant Register shall set forth the number of each Warrant, the name and address of the holder thereof, and the Current Holder’s Equity Interest for which the Warrant is then exercisable. The Warrant Register will be maintained by the Company and will be available for inspection by the Holder at the principal office of the Company or such other location as the Company may designate to the Holder in the manner set forth in Section 5.1 hereof. The Company shall be entitled to treat the Holder as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such Warrant on the part of any other Person.

 

SECTION 2.2   Exchange of Warrants for Warrants .

 

(a)          The Holder may exchange this Warrant for another Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being so exchanged. In order to effect an exchange permitted by this Section 2.2 , the Holder shall deliver to the Company such Warrant accompanied by an Exchange Form in the form attached hereto as Annex 3 signed by the Holder thereof specifying the number and denominations of Warrants to be issued in such exchange and the names in which such Warrants are to be issued. Within ten (10) Business Days of receipt of such a request, the Company shall issue, register and deliver to the Holder thereof each Warrant to be issued in such exchange.

 

(b)          Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the Holder, including indemnification reasonably acceptable to the Company) of the ownership and the loss, theft, destruction or mutilation of any Warrant or, in the case of any such mutilation, upon surrender of such Warrant, the Company shall (at its expense) execute and deliver in lieu of such Warrant a new Warrant of like kind and tenor representing the same rights represented by and dated the date of such lost, stolen, destroyed or mutilated Warrant. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by any Person.

 

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(c)          The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to an exchange of a Warrant pursuant to this Section 2.2 ; provided, however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of any Warrant in a name other than that of the Holder of the Warrant being exchanged.

 

SECTION 2.3   Transfer of Warrant .

 

(a)          Subject to Section 2.3(c) hereof and the Purchase Agreement, each Warrant and the rights thereunder may be transferred by the Holder thereof by delivering to the Company such Warrant accompanied by a properly completed Assignment Form in the form of Annex 2 . Within ten (10) Business Days of receipt of such Assignment Form the Company shall issue, register and deliver to the new Holder, subject to Section 2.3(c ) hereof a new Warrant or Warrants of like kind and tenor representing in the aggregate the right to purchase the same Current Holder’s Equity Interest which could be purchased pursuant to the Warrant being transferred. In all cases of transfer by an attorney, the original power of attorney, duly approved, or a copy thereof, duly certified, shall be deposited and remain with the Company. In case of a transfer by executors, administrators, guardians or other legal representatives, duly authenticated evidence of their authority shall be produced and may be required to be deposited and remain with the Company in its discretion.

 

(b)          Each Warrant issued in accordance with this Section 2.3 shall bear the restrictive legend set forth on the face of this Warrant, unless the Holder or transferee thereof supplies to the Company an opinion of counsel, reasonably satisfactory to the Company, that the restrictions described in such legend are no longer applicable to such Warrant.

 

(c)          The transfer of Warrants and any Equity Interest purchased thereunder shall be permitted, so long as such transfer is pursuant to a transaction that complies with, or is exempt from, the provisions of the Securities Act, and the Company may require an opinion of counsel in form and substance reasonably satisfactory to it to such effect prior to effecting any transfer of Warrants or any Equity Interest purchased thereunder.

 

ARTICLE III

 

EXERCISE OF WARRANT; EXCHANGE FOR EQUITY INTEREST

 

SECTION 3.1   Exercise of Warrants . On any Business Day prior to the Expiration Date, the Holder may exercise this Warrant, in whole or in part, by delivering to the Company this Warrant accompanied by a properly completed Exercise Form in the form of Annex 1 and a check in an aggregate amount equal to the applicable Exercise Price.

 

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SECTION 3.2   Issuance of Equity Interest .

 

(a)          The Company represents and warrants that the authorized Equity Interest of the Company consists solely of (i) 5,000,000,000 shares of common stock, par value $0.001 per share, of which only 220,000,000 common shares have been issued as of the date hereof and (ii) 500,000,000 shares of preferred stock, of which no preferred shares have been issued as of the date hereof. The shares of common stock of the Company issued and outstanding as of the date hereof are duly authorized, validly issued, fully paid and non-assessable. The delivery to the Holder of certificates representing the Equity Interest that the Holder purchases pursuant to the exercise of this Warrant shall grant to the Holder good and valid title to the Equity Interest represented by such certificate, free and clear of any and all liens, pledges, security interests, charges or encumbrances of any kind or nature or any option, warrant or trust having the practical effect of any of the foregoing.

 

(b)          Immediately upon the exercise of this Warrant in accordance with Section 3.1 , the Company (the “ Delivery Date ”) shall issue the Equity Interest that the Holder has purchased pursuant to such exercise, deliver to the Holder the certificates representing such Equity Interest and reflect the issuance of such Equity Interest, which Equity Interest shall be duly authorized, validly issued, outstanding, fully paid and non-assessable, in the Company’s shareholder records (maintained by the Company or its duly appointed transfer agent), whereupon the Holder shall be deemed for all purposes, effective as of the Delivery Date, to be a holder of record and beneficial owner of the Equity Interest that it has purchased pursuant to such exercise.

 

(c)          If a Holder shall exercise this Warrant for less than all of the Equity Interest which could be purchased or received hereunder, the Company shall issue to the Holder, within five (5) Business Days of the Delivery Date, a new Warrant of like kind and tenor to this Warrant evidencing the right to purchase the remaining Equity Interest represented by the Warrant. This Warrant shall be cancelled upon surrender thereof pursuant to Section 3.1 .

 

(d)          The Company shall pay all Taxes (other than any applicable income or similar Taxes payable by a Holder of a Warrant) attributable to the initial issuance of any Equity Interest upon the exercise or exchange of this Warrant or any successor Warrant; provided , however , that the Company shall not be required to pay any Tax which may be payable in respect of any transfer involved in the issuance of a successor to this Warrant in a name other than that of the Holder of the Warrant being exercised or exchanged.

 

(e)          Except as set forth in any document that is un-redacted and publicly filed with the U.S. Securities and Exchange Commission, neither the Company nor its Subsidiaries has any liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise and whether due or to become due) which are not fully reflected or reserved against on the balance sheet as of June 30, 2014 in accordance with GAAP, except for liabilities and obligations incurred in the ordinary course of business and consistent with past practice since the date thereof.

 

SECTION 3.3   Adjustment of Holder’s Equity Interest . The Equity Interest issuable upon exercise of this Warrant (such Equity Interest is referred to herein as the “ Holder's Equity Interest ”) shall be subject to adjustment from time to time in accordance with this Section 3.3 .

 

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SECTION 3.3.1        Issuance of Additional Equity Interest; Capital Reorganization or Capital Reclassifications . If, at any time after the date hereof, the Equity Interests of the Company shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation (including, without limitation, any subdivision or combination of Equity Interest), then in each case the Company shall cause effective provision to be made so that this Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of equity securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of this Warrant would have been entitled upon such event and any such provision shall include adjustments in respect of such securities or other property that shall be equivalent to the adjustments provided for in this Warrant with respect to such Warrant.

 

SECTION 3.3.2       Consolidations and Mergers; Dissolution .

 

(a)         If, at any time after the date hereof, the Company shall consolidate with, merge with or into, or sell all or substantially all of its assets or property to, another Person, then the Company shall cause effective provision to be made so that each Warrant shall, effective as of the effective date of such event retroactive to the record date, if any, of such event, be exercisable or exchangeable for the kind and number of shares of stock, membership or other equity interests, other securities, cash or other property to which a holder of the Equity Interest deliverable upon exercise or exchange of such Warrant would have been entitled upon such event. The Company shall not consolidate or merge unless, prior to consummation, the successor corporation (if other than the Company) assumes the obligations of this paragraph by written instrument executed and mailed to the Holder at the Holder’s address set forth in Section 5.1. A sale or lease of all or substantially all the assets of the Company for a consideration (apart from the assumption of obligations) consisting primarily of securities is a consolidation or merger for the foregoing purposes.

 

(b)          In case a voluntary or involuntary dissolution, liquidation, or winding up of the Company (other than in connection with a consolidation or merger covered by subsection (a) above) is at any time proposed, the Company shall give at least 30 days’ prior written notice to the Holder. Such notice shall contain: (1) the date on which the transaction is to take place; (2) the record date (which shall be at least 30 days after the giving of the notice) as of which the Holder will be entitled to receive distributions as a result of the transaction; (3) a brief description of the transaction; (4) a brief description of the distributions to be made to the Holder as a result of the transaction and (5) an estimate of the fair value of the distributions. On the date of the transaction, if it actually occurs, this Warrant and all rights hereunder shall terminate.

 

SECTION 3.3.3       Notice; Calculations; Etc . Whenever the Equity Interest issuable hereunder shall be adjusted as provided in this Section 3.3 , the Company shall provide to the Holder a statement, signed by an Executive Officer, describing in detail the facts requiring such adjustment and setting forth a calculation of the Equity Interest applicable to each Warrant after giving effect to such adjustment. All calculations under this Section 3.3 shall be made to the nearest one hundredth of a cent or to the nearest one-tenth of a unit, as the case may be.

 

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ARTICLE IV

 

CERTAIN OTHER RIGHTS

 

SECTION 4.1   Registration Rights.

 

(a)          At any time at which this Warrant or the Equity Interest underlying the same remains outstanding, upon the request of the Holder, the Company will enter into a registration rights agreement with Holder (the “ Rights Agreement ”). Such Rights Agreement shall provide that beginning October 1, 2015, if the Company is eligible for the use of a registration statement on Form S-3, then the Holder shall have the right to request an initial registration and thereafter on a quarterly basis after such initial registration shall have been declared effective by the U.S. Securities and Exchange Commission, registration of its Equity Interests on Form S-3 or any similar short-form registration (each, a " Demand Registration "). The Rights Agreement will provide that each request for a Demand Registration shall specify the approximate number of Equity Interests requested to be registered and that the Company shall cause a registration statement on Form S-3 (or any successor form) to be filed within twenty (20) days after the date on which the initial request is given and shall use its reasonable best efforts to cause such Registration Statement to be declared effective by the Commission as soon as practicable thereafter. The Rights Agreement will provide that the Company may postpone for up to ninety (90) days the filing or effectiveness of a registration statement for a Demand Registration if the Company determines in its reasonable good faith judgment that such Demand Registration would (i) materially interfere with a significant acquisition, corporate reorganization or other similar transaction involving the Company; (ii) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the Company unable to comply with requirements under the Securities Act or Exchange Act. The Rights Agreement shall contain such other terms and conditions applicable to the Holder no less favorable to the Holder than registration rights made available to any other holder of any Equity Interest or other equity security of the Company.

 

(b)          The rights to cause the Company to register Equity Interests pursuant hereto may be assigned (but only with all related obligations) by the Holder in a Qualified Assignment; provided, that, (i) the Company is, upon or within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the securities with respect to which such registration rights are being assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Warrant, (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by transferee or assignee is restricted under the Securities Act, and (iv) such assignment shall be effective only if immediately following such transfer such Equity Interests continue to be Equity Interests of the Company.

 

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ARTICLE V

 

MISCELLANEOUS

 

SECTION 5.1   Notices . Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and shall be made by electronic mail, personal service, facsimile or reputable courier service:

 

(a) If to the Company, to:
   
  TWINLAB CONSOLIDATED CORPORATION
  600 East Quality Drive
  American Fork, UT 84003
  Attention: Mark Jaggi, Chief Financial Officer
  Facsimile: (801) 763-0789
  e-mail: MJaggi@twinlab.com
   
  and
   
  TWINLAB CONSOLIDATED CORPORATION
  632 Broadway, Suite 201
  New York, NY 10012
  Attention: Richard Neuwirth, Chief Legal Officer
  Facsimile: (212) 260-1853
  e-mail: MJaggi@twinlab.com
  with a copy to: RNeuwirth@twinlab.com
   
  with a copy to:
   
  VARNUM LLP
  Bridgewater Place, P.O. Box 352
  Grand Rapids, MI 49501
  Attention: Mary Kay Shaver
  Facsimile: (616) 336-7000
  e-mail: mkshaver@varnumlaw.com
   
  and
   
  WILK AUSLANDER LLP
  1515 Broadway, 43 rd Floor
  New York, NY 10036
  Attention: Joel I. Frank
  Facsimile: (212) 752-6380
  e-mail: jfrank@wilkauslander.com

 

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(b) If to the Holder, to:
   
  PENTA MEZZANINE SBIC FUND I, L.P.
  20 N. Orange Ave, Suite 804
  Orlando, FL 32801
  Attention: Seth Ellis, Principal
  Facsimile: (407) 641-9286
  e-mail: sellis@floridamezz.com
   
  with a copy to:
   
  KATTEN MUCHIN ROSENMAN LLP
  575 Madison Avenue
  New York, New York 10022
  Attention: Angela Batterson, Esq.
  e-mail: angela.batterson@kattenlaw.com

 

Unless otherwise specifically provided herein, any notice or other communication shall be deemed to have been given when delivered in person or by courier service, upon receipt of electronic mail or upon receipt of facsimile.

 

SECTION 5.2   No Voting Rights: Limitations of Liability . This Warrant shall not entitle the holder thereof to any voting rights or, except as otherwise provided or referenced herein, other rights of an equity owner of the Company. No provision hereof, in the absence of affirmative action by the Holder to purchase its Equity Interest, and no enumeration herein of the rights or privileges of the Holder shall give rise to any liability of the Holder for the Exercise Price of the Equity Interest acquirable by exercise hereunder or as a stockholder of the Company.

 

SECTION 5.3   Amendments and Waivers . Any provision of this Warrant may be amended or waived, but only pursuant to a written agreement signed by the Company and the Holder.

 

SECTION 5.4   Severability . If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any way affect or render invalid or unenforceable any other provision of this Agreement, and such provision shall be deemed to be restated to reflect the parties' original intentions as nearly as possible in accordance with Applicable Law(s).

 

SECTION 5.5   Specific Performance . The Holder shall have the right to specific performance by the Company of the provisions of this Warrant, in addition to any other remedies it may have at law or in equity. The Company hereby irrevocably waives, to the extent that it may do so under Applicable Law, any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against the Company for specific performance of this Warrant by the Holder.

 

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SECTION 5.6   Binding Effect . This Warrant shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and assigns.

 

SECTION 5.7   Counterparts . This Warrant may be executed in several counterparts, and/or by the execution of counterpart signature pages that may be attached to one or more counterparts of this Warrant, and all so executed shall constitute one agreement binding on all of the parties hereto, notwithstanding that all of the parties hereto are not signatory to the original or the same counterpart. In addition, any counterpart signature page may be executed by any party wherever such party is located, and may be delivered by telephone facsimile or by electronic mail in PDF format, and any such transmitted signature pages may be attached to one or more counterparts of this Warrant, and such faxed or sent by electronic mail signature(s) shall have the same force and effect, and be as binding, as if original signatures had been executed and delivered in person.

 

SECTION 5.8   Entire Agreement . This Warrant, together with the other documents and instruments entered into by the parties thereto in connection therewith, constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.

 

SECTION 5.9   Governing law . THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAWS RULES AND PRINCIPLES. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE PURPOSE OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY PARTY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE PARTY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS WARRANT.

 

SECTION 5.10   Expenses . The Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all reasonable fees, expenses and costs relating hereto, including, but not limited to, (i) the cost of reproducing this Warrant, (ii) the fees and disbursements of counsel to the Holder in preparing this Warrant, (iii) all transfer, stamp, documentary or other similar Taxes, assessments or charges levied by any governmental or revenue authority in respect hereof or any other document referred to herein, (iv) fees and expenses (including, without limitation, reasonable attorneys' fees) incurred in respect of the enforcement by the Holder of the rights granted to the Holder under this Warrant, and (v) the expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents requested by the Company pursuant to the provisions hereof, whether or not any such amendments, waivers or consents are executed.

 

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SECTION 5.11   Attorneys' Fees . In any action or proceeding brought by a party to enforce any provision of this Warrant, the prevailing party shall be entitled to recover the reasonable costs and expenses incurred by it or him in connection therewith (including reasonable attorneys’ and paralegals’ fees and costs incurred before and at any trial or arbitration and at all appellate levels), as well as all other relief granted or awarded in such action or other proceeding.

 

SECTION 5.12   Filings . The Company shall, at its own expense, promptly execute and deliver, or cause to be executed and delivered, to the Holder all applications, certificates, instruments and all other documents and papers that the Holder may reasonably request in connection with the obtaining of any consent, approval, qualification, or authorization of any Federal, provincial, state or local government (or any agency or commission thereof) necessary or appropriate in connection with, or for the effective exercise of, the Warrant (and/or any successor Warrant(s) hereto).

 

SECTION 5.13   Other Transactions . Nothing contained herein shall preclude the Holder from engaging in any transaction, in addition to those contemplated by this Warrant with the Company or any of its Affiliates in which the Company or such Affiliate is not restricted hereby from engaging with any other Person.

 

SECTION 5.14   Waiver of Jury Trial . THE HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS WARRANT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE HOLDER OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE HOLDER ENTERING INTO THIS WARRANT.

 

SECTION 5.15   Headings . Section titles and captions contained in this Warrant are inserted only as a matter of convenience and for reference. The titles and captions in no way define, limit, extend or describe the scope of this Warrant or the intent of any provision hereof.

 

SECTION 5.16   No Third-Party Beneficiaries . This Warrant is for the sole benefit of the Company and the Holder and their respective successors and, in the case of the Holder, permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Warrant.

 

[Remainder of page intentionally left blank; signatures on following page]

 

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IN WITNESS WHEREOF, the undersigned has caused this Warrant to be duly executed and delivered by an authorized officer, all as of the date and year first above written.

 

  TWINLAB CONSOLIDATED HOLDINGS, INC.,
a Nevada corporation
   
  By: /s/ Thomas A. Tolworthy
  Name: Thomas A. Tolworthy
  Title: Chief Executive Officer and President

 

ACKNOWLEDGED AND AGREED:    
     
PENTA MEZZANINE SBIC FUND I, L.P.,    
a Delaware limited partnership    
     
By: Penta Mezzanine SBIC Fund I GP, LLC,    
  its General Partner    
     
  By: /s/ Richard E. Mount    
  Name: Richard E. Mount    
  Title: Authorized Member    
     

 

[SIGNATURE PAGE TO WARRANT]

 

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ANNEX 1

 

ELECTION TO EXERCISE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exercise This Warrant)

 

The undersigned hereby irrevocably elects to exercise the right covered by this Warrant to purchase ____________________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, according to the conditions hereof and herewith makes payment in full of the Exercise Price with respect to such Equity Interest.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated:        

 

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ANNEX 2

 

ASSIGNMENT FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Assign This Warrant)

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _____________________________ this Warrant and all rights evidenced thereby and does irrevocably constitute and appoint ___________________, attorney, to transfer the said Warrant on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

     
  Signature  
     
     
     
     
  Address  

 

Dated:        

 

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ANNEX 3

 

EXCHANGE FORM

 

(To Be Executed By the Holder of This Warrant

 

In Order to Exchange and Assign This Warrant)

 

The undersigned hereby irrevocably elects to exchange this Warrant to purchase ________________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, for ___________ Warrants to purchase the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, set forth below to the Persons named and hereby sells, assigns and transfers unto such Persons that portion of this Warrant represented by such new Warrants and all rights evidenced thereby and does irrevocably constitute and appoint ____________________, attorney, to exchange and transfer this Warrant as aforesaid on the books of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation.

 

Equity Interest     Assignee  
           
           
           
           
         
         
      Signature  

 

       
       
    Address  

 

FOR USE BY THE COMPANY ONLY:

 

This Warrant No. __ cancelled (or transferred or exchanged) this ________ day of _____________, ____________ of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, issued therefor in the name of ____ ___________ Warrant No. ___ for ________, of the Equity Interest of TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation, in the name of _________________________.

 

Dated:        

 

 

 

 

Exhibit 10.42

 

Execution Version

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB CONSOLIDATED HOLDINGS, INC. , a Nevada corporation (“ Pledgor ”), and PENTA MEZZANINE SBIC FUND I, L.P. , a Delaware limited partnership (together with its successors and assigns, “ Purchaser ”).

 

RECITALS

 

A.            The term “ Companies ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Companies” under the Note Purchase Agreement (as defined herein); the term “ Company ”, as used herein, shall mean individually each entity that is one of the Companies; and the term “ Issuer ” as used herein shall mean Twinlab Consolidation Corporation, a Delaware corporation.

 

B.            Pursuant to that certain Note and Warrant Purchase Agreement, dated as of November 13, 2014 among Companies and Purchaser (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ Note Purchase Agreement ”), Purchaser has agreed to purchase from Companies up to $10,000,000 of secured promissory notes. Companies have and/or will have executed and delivered one or more such promissory notes evidencing the indebtedness incurred by Companies under the Note Purchase Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the Note Purchase Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            The terms and provisions of the Note Purchase Agreement and Notes are hereby incorporated by reference in this Agreement. This Agreement, the Notes, the Note Purchase Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The term “ Obligations ” as used herein, shall have the meaning given to such term in the Note Purchase Agreement.

 

E.            In connection with Purchaser entering into the Note Purchase Agreement and agreeing to make the credit accommodations under the Note Purchase Agreement and as security for all of the Obligations, Purchaser is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.            Pledgor is a shareholder of Issuer and, as such, will continue to derive substantial benefit by reason of Purchaser purchasing the Notes.

 

AGREEMENT

 

NOW, THEREFORE , to induce Purchaser to enter into the Note Purchase Agreement and to purchase the Notes and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Purchaser hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

 

1.            Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Purchaser, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Issuer now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Issuer, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Issuer, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Issuer, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Issuer, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Issuer, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Issuer (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of the Purchaser deliver to Purchaser a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.            Application of Proceeds . Pledgor hereby authorizes and directs the Issuer, following written notice to do so by Purchaser after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Purchaser of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Purchaser shall be applied to the Obligations in such order and manner of application as Purchaser may from time to time determine in its sole discretion.

 

3.            Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Purchaser, shall be paid immediately to Purchaser and shall be retained by Purchaser as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Purchaser, promptly, and in any case within one (1) business day, send a written notice to Issuer instructing Issuer, and shall cause Issuer, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Purchaser notifies Pledgor that such Event of Default has ceased to exist) directly to Purchaser. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.            Representations and Warranties of Pledgor . Pledgor hereby warrants to Purchaser as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Issuer as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Issuer in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Purchaser ;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.             Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Purchaser’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Purchaser may in good faith direct;

 

(c)           To cause Issuer to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Purchaser immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Purchaser one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Purchaser, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Purchaser as part of the Collateral.

 

(e)           To deliver immediately to Purchaser any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Purchaser one or more Transfer Powers, which such Transfer Powers shall be held by Purchaser as part of the Collateral;

 

(f)           To execute and deliver to Purchaser such financing statements as Purchaser may request with respect to the Ownership Interests, and to take such other steps as Purchaser may from time to time reasonably request to perfect Purchaser’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Issuer, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Purchaser in the Collateral or dilute the Ownership Interests pledged to Purchaser under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Purchaser, except for other Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Purchaser, pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Purchaser a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Purchaser all of such additional Ownership Interests. Prior to the delivery thereof to Purchaser, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Purchaser;

 

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(k)           That Pledgor consents to the admission of Purchaser (and its assigns or designee) as a member, partner or stockholder of Issuer upon Purchaser’s acquisition of any of the Ownership Interests; and

 

6.            Rights of Purchaser . Purchaser may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Purchaser records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Issuer and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Purchaser’s interest in the Collateral. Pledgor agrees that Purhcaser may at any time take such steps as Purchaser deems reasonably necessary to protect Purchaser’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Purchaser may at any time or from time to time pursuant to the Note Purchase Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the Note Purchase Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the Note Purchase Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the Note Purchase Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Purchaser at any time against the Obligations in any order as Purchaser may determine pursuant to the terms of the Note Purchase Agreement; all of the foregoing in such manner and upon such terms as Purchaser may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Purchaser’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the Note Purchase Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Company.

 

7.            Events of Default . The occurrence of any “Event of Default,” as defined in the Note Purchase Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.            Rights of Purchaser Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the Note Purchase Agreement), Purchaser may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Purchaser to demand payment of any portion of the Obligations that is payable upon demand);

 

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(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Purchaser may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Purchaser may deem necessary or proper to protect Purchaser’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Issuer or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Purchaser, shall use its best efforts to secure, and cooperate with the efforts of Purchaser to secure (if not already secured by Purchaser), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC (as defined in the Note Purchase Agreement); and upon any such sale of the Collateral, Purchaser may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Purchaser in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Purchaser to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Purchaser either at law or in equity.

 

Purchaser shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Purchaser in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Purchaser as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Purchaser may deem appropriate in the exercise of the rights and powers granted to Purchaser in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Purchaser harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Purchaser from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Purchaser’s gross negligence or willful misconduct).

 

9.            Performance by Purchaser . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Purchaser, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Purchaser may consider necessary or appropriate for such purpose. All sums paid or advanced by Purchaser in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Purchaser on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

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10.          Indemnification . Purchaser shall not in any way be responsible for the performance or discharge of, and Purchaser does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Purchaser and hold Purchaser harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Purchaser to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Purchaser’s own gross negligence or willful misconduct. Purchaser shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Purchaser to extend any credit to Companies under the Financing Documents, this Agreement shall terminate and Purchaser shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Purchaser’s rights under this Agreement, Purchaser may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Purchaser to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Purchaser or Purchaser’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Purchaser in favor of any other person.

 

14.          Preservation of Collateral . Purchaser shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Purchaser takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Purchaser to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

15.          Private Sale . Pledgor recognizes that Purchaser may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Purchaser has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

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16.           General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Purchaser of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Purchaser thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Purchaser shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

8
 

 

(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the Note Purchase Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Purchaser as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Purchaser of any one or more of such rights, powers or remedies shall not preclude the later exercise by Purchaser of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Purchaser) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Purchaser may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Purchaser or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Purchaser may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Purchaser in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Purchaser or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

(m)          No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

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(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Purchaser’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Purchaser, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO PURCHASER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE PURCHASER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY NEW YORK STATE OR UNITED STATES COURT SITTING IN THE STATE OF NEW YORK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. PURCHASER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PURCHASER (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT PURCHASER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

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18.          Notwithstanding anything in this Agreement to the contrary, so long as the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “Subordination Agreement”) by and between MidCap Financial Trust (“MidCap”) and Purchaser remains in effect, Pledgor and Issuer shall be deemed to have complied fully with any and all obligations imposed under this Agreement for the delivery of physical possession of, or the making of payments or remittance of funds to, Purchaser with respect to any Collateral, any proceeds thereof or payments thereunder, any certificates, stock powers, instruments or other documents evidencing the Collateral or necessary for the perfection of a security interest therein, or any other tangible or intangible personal property (any of the foregoing deliveries, payments or remittances referred to as a “Delivery,” and collectively as “Deliveries”), to the extent that any such Delivery shall have been made to MidCap in its capacity as “Senior Lender” (as defined in the Subordination Agreement). The Deliveries subject to the provisions of this Section include (without limitation) the deliveries and remittances required pursuant to Section 2, Section 3, Section 5(d) and Section 5(e) of this Agreement; provided , however that the term “Deliveries” shall not be deemed to include the delivery of financing statements as described in Section 5(f) or the delivery of Pledge Amendments as described in Section 5(j).

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR:

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

By:  /s/ Thomas A. Tolworthy                     (SEAL)
Name: Thomas A. Tolworthy
Title: Chief Executive Officer and President

 

 

Pledgor Contact Information:

 

Twinlab Consolidated Holdings, Inc.
632 Broadway, Suite 201
New York, NY 10012
Attention: Thomas A. Tolworthy, Chief Executive Officer and President

 

[SIGNATURE PAGE TO PENTA/TWINLAB CONSOLIDATED HOLDINGS PLEDGE AGREEMENT]

 

 
 

 

PURCHASER:

PENTA MEZZANINE SBIC FUND I, L.P. ,

a Delaware limited partnership

 

By:   Penta Mezzanine SBIC Fund I GP, LLC, its General Partner

 

By: /s/ Richard E. Mount                             (SEAL)

Name: Richard E. Mount

Title: Authorized Member

 

[SIGNATURE PAGE TO PENTA/TWINLAB CONSOLIDATED HOLDINGS PLEDGE AGREEMENT]

 

 
 

  

SCHEDULE I

Pledged Interests

 

Name of Pledgor: Twinlab Consolidated Holdings, Inc.
   
Issuer Name: Twinlab Consolidation Corporation
   
Type of Type of Entity of Issuer: Corporation
   
Jurisdiction of Organization of Issuer: Delaware
   
Organizational ID No. of Issuer: DE5407822
   
Tax ID No. of Issuer: [  ]
   
Class of Interests in Issuer: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 1
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Consolidated Holdings, Inc.
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Nevada
   
Organizational ID No. of Pledgor: NV20131625629
   
Tax ID No. of Pledgor: [  ]

 

 
 

  

SCHEDULE III


STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated:______________________________

PLEDGOR :

 

[NAME OF PLEDGOR]

 

By:________________________________(SEAL)

Name:____________________________________

Its: ______________________________________ 

 

*To Remain Blank - Not Completed at Closing

 
 

 

SCHEDULE IV

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and Penta Mezzanine SBIC Fund I. L.P., as Purchaser (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Issuer owned by Pledgor not included in the Pledged Collateral at the discretion of Purchaser may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

 

PLEDGOR :

 

[NAME OF PLEDGOR]

 

By:________________________________(SEAL)

Name:____________________________________

Its: ______________________________________ 

 

 
 

  

SCHEDULE IV- continued

 

Name and
Address of Pledgor

  Issuer   Class of
Equity Interest
  Certificate
Number(s)
  Number of
Shares
                 
                 
                 

  

    Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                 
                 
                 

 

   

 

 

 

 

 

Exhibit 10.43

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB CONSOLIDATION CORPORATION , a Delaware corporation (“ Pledgor ”), and PENTA MEZZANINE SBIC FUND I, L.P. , a Delaware limited partnership (together with its successors and assigns, “ Purchaser ”).

 

RECITALS

 

A.            The term “ Companies ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Companies” under the Note Purchase Agreement (as defined herein); the term “ Company ”, as used herein, shall mean individually each entity that is one of the Companies; and the term “ Issuer ” as used herein shall mean, collectively, each of Twinlab Holdings, Inc., a Michigan corporation, TCC CM Subco I, Inc., a Delaware corporation, and TCC CM Subco II, Inc., a Delaware corporation.

 

B.            Pursuant to that certain Note and Warrant Purchase Agreement, dated November 13, 2014, among Companies and Purchaser (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ Note Purchase Agreement ”), Purchaser has agreed to purchase from Companies up to $10,000,000 of secured promissory notes. Companies have and/or will have executed and delivered one or more such promissory notes evidencing the indebtedness incurred by Companies under the Note Purchase Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the Note Purchase Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            The terms and provisions of the Note Purchase Agreement and Notes are hereby incorporated by reference in this Agreement. This Agreement, the Notes, the Note Purchase Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The term “ Obligations ” as used herein, shall have the meaning given to such term in the Note Purchase Agreement.

 

E.            In connection with Purchaser entering into the Note Purchase Agreement and agreeing to make the credit accommodations under the Note Purchase Agreement and as security for all of the Obligations, Purchaser is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.            Pledgor is a shareholder of Issuer and, as such, will continue to derive substantial benefit by reason of Purchaser purchasing the Notes.

 

AGREEMENT

 

NOW, THEREFORE , to induce Purchaser to enter into the Note Purchase Agreement and to purchase the Notes, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Purchaser hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

  

1.            Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Purchaser, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Issuer now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Issuer, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Issuer, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Issuer, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Issuer, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Issuer, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Issuer (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of the Purchaser deliver to Purchaser a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.            Application of Proceeds . Pledgor hereby authorizes and directs the Issuer, following written notice to do so by Purchaser after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Purchaser of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Purchaser shall be applied to the Obligations in such order and manner of application as Purchaser may from time to time determine in its sole discretion.

 

3.            Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Purchaser, shall be paid immediately to Purchaser and shall be retained by Purchaser as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Purchaser, promptly, and in any case within one (1) business day, send a written notice to Issuer instructing Issuer, and shall cause Issuer, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Purchaser notifies Pledgor that such Event of Default has ceased to exist) directly to Purchaser. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.            Representations and Warranties of Pledgor . Pledgor hereby warrants to Purchaser as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Issuer as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Issuer in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Purchaser ;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.            Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Purchaser’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Purchaser may in good faith direct;

 

(c)           To cause Issuer to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Purchaser immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Purchaser one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Purchaser, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Purchaser as part of the Collateral.

 

(e)           To deliver immediately to Purchaser any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Purchaser one or more Transfer Powers, which such Transfer Powers shall be held by Purchaser as part of the Collateral;

 

(f)           To execute and deliver to Purchaser such financing statements as Purchaser may request with respect to the Ownership Interests, and to take such other steps as Purchaser may from time to time reasonably request to perfect Purchaser’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Issuer, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Purchaser in the Collateral or dilute the Ownership Interests pledged to Purchaser under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Purchaser, except for other Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

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(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Purchaser, pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Purchaser a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Purchaser all of such additional Ownership Interests. Prior to the delivery thereof to Purchaser, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Purchaser;

 

(k)           That Pledgor consents to the admission of Purchaser (and its assigns or designee) as a member, partner or stockholder of Issuer upon Purchaser’s acquisition of any of the Ownership Interests; and

 

6.            Rights of Purchaser . Purchaser may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Purchaser records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Issuer and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Purchaser’s interest in the Collateral. Pledgor agrees that Purhcaser may at any time take such steps as Purchaser deems reasonably necessary to protect Purchaser’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Purchaser may at any time or from time to time pursuant to the Note Purchase Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the Note Purchase Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the Note Purchase Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the Note Purchase Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Purchaser at any time against the Obligations in any order as Purchaser may determine pursuant to the terms of the Note Purchase Agreement; all of the foregoing in such manner and upon such terms as Purchaser may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Purchaser’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the Note Purchase Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Company.

 

7.            Events of Default . The occurrence of any “Event of Default,” as defined in the Note Purchase Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.            Rights of Purchaser Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the Note Purchase Agreement), Purchaser may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

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(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Purchaser to demand payment of any portion of the Obligations that is payable upon demand);

 

(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Purchaser may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Purchaser may deem necessary or proper to protect Purchaser’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Issuer or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Purchaser, shall use its best efforts to secure, and cooperate with the efforts of Purchaser to secure (if not already secured by Purchaser), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC (as defined in the Note Purchase Agreement); and upon any such sale of the Collateral, Purchaser may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Purchaser in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Purchaser to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Purchaser either at law or in equity.

 

Purchaser shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Purchaser in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Purchaser as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Purchaser may deem appropriate in the exercise of the rights and powers granted to Purchaser in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Purchaser harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Purchaser from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Purchaser’s gross negligence or willful misconduct).

 

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9.            Performance by Purchaser . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Purchaser, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Purchaser may consider necessary or appropriate for such purpose. All sums paid or advanced by Purchaser in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Purchaser on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

10.          Indemnification . Purchaser shall not in any way be responsible for the performance or discharge of, and Purchaser does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Purchaser and hold Purchaser harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Purchaser to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Purchaser’s own gross negligence or willful misconduct. Purchaser shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Purchaser to extend any credit to Companies under the Financing Documents, this Agreement shall terminate and Purchaser shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Purchaser’s rights under this Agreement, Purchaser may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Purchaser to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Purchaser or Purchaser’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Purchaser in favor of any other person.

 

14.          Preservation of Collateral . Purchaser shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Purchaser takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Purchaser to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

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15.          Private Sale . Pledgor recognizes that Purchaser may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Purchaser has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Purchaser of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Purchaser thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Purchaser shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

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(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the Note Purchase Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Purchaser as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Purchaser of any one or more of such rights, powers or remedies shall not preclude the later exercise by Purchaser of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Purchaser) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Purchaser may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Purchaser or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Purchaser may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Purchaser in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Purchaser or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

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(m)          No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Purchaser’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Purchaser, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO PURCHASER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE PURCHASER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY NEW YORK STATE OR UNITED STATES COURT SITTING IN THE STATE OF NEW YORK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. PURCHASER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PURCHASER (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT PURCHASER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

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18.          Notwithstanding anything in this Agreement to the contrary, so long as the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “ Subordination Agreement ”) by and between MidCap Financial Trust (“ MidCap ”) and Purchaser remains in effect, Pledgor and Issuer shall be deemed to have complied fully with any and all obligations imposed under this Agreement for the delivery of physical possession of, or the making of payments or remittance of funds to, Purchaser with respect to any Collateral, any proceeds thereof or payments thereunder, any certificates, stock powers, instruments or other documents evidencing the Collateral or necessary for the perfection of a security interest therein, or any other tangible or intangible personal property (any of the foregoing deliveries, payments or remittances referred to as a “ Delivery ,” and collectively as “ Deliveries ”), to the extent that any such Delivery shall have been made to MidCap in its capacity as “Senior Lender” (as defined in the Subordination Agreement). The Deliveries subject to the provisions of this Section include (without limitation) the deliveries and remittances required pursuant to Section 2 , Section 3 , Section 5(d) and Section 5(e) of this Agreement; provided , however that the term “ Deliveries ” shall not be deemed to include the delivery of financing statements as described in Section 5(f) or the delivery of Pledge Amendments as described in Section 5(j) .

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR:

TWINLAB CONSOLIDATION CORPORATION.

 

By:  /s/ Thomas A. Tolworthy                     (SEAL)
Name: Thomas A. Tolworthy
Title: Chief Executive Officer and President

 

 

Pledgor Contact Information:

 

Twinlab Consolidation Corporation
632 Broadway, Suite 201
New York, NY 10012
Attention: Thomas A. Tolworthy, Chief Executive Officer and President

 

[SIGNATURE PAGE TO PENTA/TWINLAB CONSOLIDATION CORPORATION PLEDGE AGREEMENT]

 

 
 

  

PURCHASER:

PENTA MEZZANINE SBIC FUND I, L.P. ,

a Delaware limited partnership

 

By:   Penta Mezzanine SBIC Fund I GP, LLC, its General Partner

 

By: /s/ Richard E. Mount                             (SEAL)

Name: Richard E. Mount

Title: Authorized Member

 

[SIGNATURE PAGE TO PENTA/TWINLAB CONSOLIDATION CORPORATION PLEDGE AGREEMENT]

 

 
 

 

SCHEDULE I

Pledged Interests

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Issuer Name: Twinlab Holdings, Inc.
   
Type of Type of Entity of Issuer: Corporation
   
Jurisdiction of Organization of Issuer: Michigan
   
Organizational ID No. of Issuer: MI03048C
   
Tax ID No. of Issuer: [  ]
   
Class of Interests in Issuer: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

  

Name of Pledgor: Twinlab Consolidation Corporation
   
Issuer Name: TCC CM Subco I, Inc.
   
Type of Type of Entity of Issuer: Corporation
   
Jurisdiction of Organization of Issuer: Delaware
   
Organizational ID No. of Issuer: DE5661868
   
Tax ID No. of Issuer: [  ]
   
Class of Interests in Issuer: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

  

Name of Pledgor: Twinlab Consolidation Corporation
   
Issuer Name: TCC CM Subco II, Inc.
   
Type of Type of Entity of Issuer: Corporation
   
Jurisdiction of Organization of Issuer: Delaware
   
Organizational ID No. of Issuer: DE5661869
   
Tax ID No. of Issuer: [  ]
   
Class of Interests in Issuer: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Consolidation Corporation
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Delaware
   
Organizational ID No. of Pledgor: DE5407822
   
Tax ID No. of Pledgor: [  ]

 

 
 

  

SCHEDULE III


STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

 

Dated:______________________________

PLEDGOR :

 

[NAME OF PLEDGOR]

 

By:________________________________(SEAL)

Name:____________________________________

Its: ______________________________________ 

 

*To Remain Blank - Not Completed at Closing

 

 
 

 

SCHEDULE IV

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and Penta Mezzanine SBIC Fund I, L.P., as Purchaser (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Issuer owned by Pledgor not included in the Pledged Collateral at the discretion of Purchaser may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

 

PLEDGOR :

 

[NAME OF PLEDGOR]

 

By:________________________________(SEAL)

Name:____________________________________

Its: ______________________________________ 

 

 
 

 

SCHEDULE IV- continued

 

 Name and
Address of Pledgor

  Issuer   Class of
Equity Interest
  Certificate
Number(s)
  Number of
Shares
                 
                 
                 

  

    Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                 
                 
                 

 

 

 

 

 

 

 

Exhibit 10.44

 

Execution Version

 

pledge AGREEMENT

 

THIS PLEDGE AGREEMENT (this “ Agreement ”) is made as of January 22, 2015, by and between TWINLAB HOLDINGS, INC. , a Michigan corporation (“ Pledgor ”), and PENTA MEZZANINE SBIC FUND I, L.P. , a Delaware limited partnership (together with its successors and assigns,“ Purchaser ”).

 

RECITALS

 

A.            The term “ Companies ”, as used herein, shall mean collectively all of the following entities: TWINLAB CONSOLIDATED HOLDINGS, INC., a Nevada corporation, TWINLAB CONSOLIDATION CORPORATION, a Delaware corporation, TWINLAB HOLDINGS, INC., a Michigan corporation, ISI BRANDS INC., a Michigan corporation, and TWINLAB CORPORATION, a Delaware corporation, TCC CM SUBCO I, INC., a Delaware corporation, TCC CM SUBCO II, INC., a Delaware corporation, and such other borrowers that may become “Companies” under the Note Purchase Agreement (as defined herein); the term “ Company ”, as used herein, shall mean individually each entity that is one of the Companies; and the term “ Issuer ” as used herein shall mean, collectively, each of Twinlab Corporation, a Delaware corporation, and ISI Brands Inc., a Michigan corporation.

 

B.            Pursuant to that certain Note and Warrant Purchase Agreement, dated as of November 13, 2014, among Companies and Purchaser (as the same may be amended, supplemented, modified, increased, renewed or restated from time to time, the “ Note Purchase Agreement ”), Purchaser has agreed to purchase from Companies up to $10,000,000 of secured promissory notes. Companies have and/or will have executed and delivered one or more such promissory notes evidencing the indebtedness incurred by Companies under the Note Purchase Agreement (as the same may be amended, modified, increased, renewed or restated from time to time, and together with all renewal notes issued in respect thereof, collectively the “ Notes ”). The terms and provisions of the Note Purchase Agreement and Notes are hereby incorporated by reference in this Agreement.

 

C.            The terms and provisions of the Note Purchase Agreement and Notes are hereby incorporated by reference in this Agreement. This Agreement, the Notes, the Note Purchase Agreement and all of the other documents evidencing, securing and/or governing or executed in connection with the Notes, as the same may be amended, modified, increased, renewed or restated from time to time, are herein referred to collectively as the “ Financing Documents ”.

 

D.            The term “ Obligations ” as used herein, shall have the meaning given to such term in the Note Purchase Agreement.

 

E.            In connection with Purchaser entering into the Note Purchase Agreement and agreeing to make the credit accommodations under the Note Purchase Agreement and as security for all of the Obligations, Purchaser is requiring that Pledgor shall have executed and delivered this Agreement.

 

F.            Pledgor is a shareholder of Issuer and, as such, will continue to derive substantial benefit by reason of Purchaser purchasing the Notes.

 

AGREEMENT

 

NOW, THEREFORE , to induce Purchaser to enter into the Note Purchase Agreement and to purchase the Notes, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Pledgor and Purchaser hereby incorporate hereby by this reference the foregoing Recitals and hereby covenant and agree as follows:

 

 
 

 

1.            Grant of Assignment and Security Interest . Pledgor hereby pledges, assigns and grants to Purchaser, as security for the Obligations a security interest in the following property of Pledgor (collectively, the “ Collateral ”), whether now existing or hereafter created or arising:

 

(a)           all of the stock, shares, and other equity ownership interests in Issuer now or hereafter held by Pledgor (collectively, the “ Ownership Interests ”) and all of Pledgor’s rights to participate in the management of Issuer, all rights, privileges, authority and powers of Pledgor as owner or holder of its Ownership Interests in Issuer, all rights, privileges, authority and powers relating to the economic interests of Pledgor as owner or holder or its Ownership Interests in Issuer, including, without limitation, all investment property and general intangibles related thereto, all options and warrants of Pledgor for the purchase of any Ownership Interest in Issuer, all documents and certificates representing or evidencing the Pledgor’s Ownership Interests in Issuer, all whether existing or hereafter arising, and whether arising under any agreement or any bylaws, certificate of formation, articles of incorporation or other governing documents of Issuer (as the same may be amended, modified or restated from time to time) or otherwise, or at law or in equity and all books and records of Pledgor pertaining to any of the foregoing and all options, warrants, distributions, investment property, cash, instruments and other rights and options from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and Pledgor shall promptly from time to time at the written request of the Purchaser deliver to Purchaser a certificate duly executed by Pledgor describing such percentage interests, options or warrants and certifying that the same have been duly pledged hereunder;

 

(b)           all rights to receive cash distributions, profits, losses and capital distributions (including, but not limited to, distributions in kind and liquidating dividends and distributions) and any other rights and property interests related to the Ownership Interests;

 

(c)           all other securities, instruments or property (including cash) paid or distributed in respect of or in exchange for the Ownership Interests, whether or not as part of or by way of spin-off, merger, consolidation, dissolution, reclassification, combination or exchange of stock (or other Ownership Interests), asset sales, or similar rearrangement or reorganization or otherwise; and

 

(d)           all proceeds (both cash and non-cash) of the foregoing, whether now or hereafter arising with respect to the foregoing.

 

2.            Application of Proceeds . Pledgor hereby authorizes and directs the Issuer, following written notice to do so by Purchaser after the occurrence of an Event of Default (as hereinafter defined) under this Agreement, to make direct payment to Purchaser of any amounts due or to become due to Pledgor with respect to the Collateral. Any moneys received by Purchaser shall be applied to the Obligations in such order and manner of application as Purchaser may from time to time determine in its sole discretion.

 

3.            Rights of Pledgor in the Collateral . Until any Event of Default occurs under this Agreement, Pledgor shall be entitled to exercise all voting rights and to receive all dividends and other distributions that may be paid on any Collateral and that are not otherwise prohibited by the Financing Documents. Any cash dividend or distribution payable in respect of the Collateral that is, in whole or in part, a return of capital or that is made in violation of this Agreement or the Financing Documents shall be received by Pledgor in trust for Purchaser, shall be paid immediately to Purchaser and shall be retained by Purchaser as part of the Collateral. Upon the occurrence and during the continuation of an Event of Default, Pledgor shall, at the written direction of Purchaser, promptly, and in any case within one (1) business day, send a written notice to Issuer instructing Issuer, and shall cause Issuer, to remit all cash and other distributions payable with respect to the Ownership Interests (until such time as Purchaser notifies Pledgor that such Event of Default has ceased to exist) directly to Purchaser. Nothing contained in this paragraph shall be deemed to permit the payment of any sum or the making of any distribution which is prohibited by any of the Financing Documents, if any.

 

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4.            Representations and Warranties of Pledgor . Pledgor hereby warrants to Purchaser as follows:

 

(a)           Schedule I and Schedule II are true, correct and complete in all respects;

 

(b)           All of the pledged Ownership Interests of Pledgor (the “ Pledged Interests ”) are in certificated form, and are registered in the name of Pledgor;

 

(c)           The Pledged Interests constitute at least the percentage of all the issued and outstanding Ownership Interests of Issuer as set forth on Schedule I ;

 

(d)           The Pledged Interests listed on Schedule I are the only Ownership Interests of Issuer in which Pledgor has any rights;

 

(e)           All certificates evidencing the Pledged Interests of Pledgor have been delivered to Purchaser ;

 

(f)           Pledgor has good and marketable title to the Collateral. Pledgor is the sole owner of all of the Collateral, free and clear of all security interests, pledges, voting trusts, agreements, liens, claims and encumbrances whatsoever, other than the security interests, assignments and liens granted under this Agreement and other than Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(g)           Pledgor has not heretofore transferred, pledged, assigned or otherwise encumbered any of its rights in or to the Collateral, other than pursuant to Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(h)           Other than a requirement of consent of other members contained in the operating agreements governing the Ownership Interests (which such consent has been obtained), Pledgor is not prohibited under any agreement with any other person or entity, or under any judgment or decree, from the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(i)           No action has been brought or threatened that might prohibit or interfere with the execution and delivery of this Agreement or the performance or discharge of the obligations, duties, covenants, agreements, and liabilities contained in this Agreement;

 

(j)           Pledgor has full power and authority to execute and deliver this Agreement, and the execution and delivery of this Agreement do not conflict with any agreement to which Pledgor is a party or any law, order, ordinance, rule, or regulation to which Pledgor is subject or by which it is bound and do not constitute a default under any agreement or instrument binding upon Pledgor; and

 

(k)           This Agreement has been properly executed and delivered and constitutes the valid and legally binding obligation of Pledgor and is fully enforceable against Pledgor in accordance with its terms, except as the enforceability hereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and by general equitable principles.

 

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5.            Covenants of Pledgor . Pledgor hereby covenants and agrees as follows:

 

(a)           To do or cause to be done all things necessary to preserve and to keep in full force and effect its interests in the Collateral, and to defend, at its sole expense, the title to the Collateral and any part of the Collateral;

 

(b)           To cooperate fully with Purchaser’s efforts to preserve the Collateral and to take such actions to preserve the Collateral as Purchaser may in good faith direct;

 

(c)           To cause Issuer to maintain proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to the Collateral;

 

(d)           To deliver and deposit with the Purchaser immediately upon the execution and delivery of this Agreement in pledge, all of such Pledgor’s certificates, instruments or other documents comprising or evidencing the Ownership Interests or other Collateral, and to execute and deliver to Purchaser one or more transfer powers, substantially in the form of Schedule III attached hereto or otherwise in form and content satisfactory to Purchaser, pursuant to which Pledgor assigns, in blank, all Ownership Interests and other Collateral (the “ Transfer Powers ”), which such Transfer Powers shall be held by Purchaser as part of the Collateral.

 

(e)           To deliver immediately to Purchaser any certificates that may be issued following the date of this Agreement representing the Ownership Interests or other Collateral, and to execute and deliver to Purchaser one or more Transfer Powers, which such Transfer Powers shall be held by Purchaser as part of the Collateral;

 

(f)           To execute and deliver to Purchaser such financing statements as Purchaser may request with respect to the Ownership Interests, and to take such other steps as Purchaser may from time to time reasonably request to perfect Purchaser’s security interest in the Ownership Interests under applicable law;

 

(g)           Not to sell, discount, allow credits or allowances, assign, extend the time for payment on, convey, lease, assign, transfer or otherwise dispose of the Collateral or any part of the Collateral, except for Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(h)           After an Event of Default under the Financing Documents (including but not limited to this Agreement), not to receive any dividend or distribution or other benefit with respect to Issuer, and not to vote, consent, waive or ratify any action taken, that would in any such case violate or be inconsistent with any of the terms and provisions of this Agreement, or any of the Financing Documents or that would materially impair the position or interest of Purchaser in the Collateral or dilute the Ownership Interests pledged to Purchaser under this Agreement;

 

(i)           Not to sell or otherwise dispose of, or create, incur, assume or suffer to exist any lien upon any of the Collateral, other than liens in favor of Purchaser, except for other Permitted Encumbrances (as defined in the Note Purchase Agreement);

 

(j)           That Pledgor will, upon obtaining ownership of any other Ownership Interests otherwise required to be pledged to Purchaser, pursuant to any of the Financing Documents, which Ownership Interests are not already Pledged Interests, within ten (10) Business Days deliver to Purchaser a Pledge Amendment, duly executed by Pledgor, in substantially the form of Schedule IV hereto (a “ Pledge Amendment ”) in respect of any such additional Ownership Interests pursuant to which Pledgor shall pledge to Purchaser all of such additional Ownership Interests. Prior to the delivery thereof to Purchaser, all such additional Ownership Interests shall be held by Pledgor separate and apart from its other property and in express trust for Purchaser;

 

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(k)           That Pledgor consents to the admission of Purchaser (and its assigns or designee) as a member, partner or stockholder of Issuer upon Purchaser’s acquisition of any of the Ownership Interests; and

 

6.            Rights of Purchaser . Purchaser may from time to time and at its option (a) require Pledgor to, and Pledgor shall, periodically deliver to Purchaser records and schedules, which show the status of the Collateral and such other matters which affect the Collateral; (b) verify the Collateral and inspect the books and records of Issuer and make copies of or extracts from the books and records; and (c) notify any prospective buyers or transferees of the Collateral of Purchaser’s interest in the Collateral. Pledgor agrees that Purhcaser may at any time take such steps as Purchaser deems reasonably necessary to protect Purchaser’s interest in and to preserve the Collateral. Pledgor hereby consents and agrees that Purchaser may at any time or from time to time pursuant to the Note Purchase Agreement (a) extend or change the time of payment and/or the manner, place or terms of payment of any and all Obligations, (b) supplement, amend, restate, supersede, or replace the Note Purchase Agreement or any other Financing Documents, (c) renew, extend, modify, increase or decrease loans and extensions of credit under the Note Purchase Agreement, (d) modify the terms and conditions under which loans and extensions of credit may be made under the Note Purchase Agreement, (e) settle, compromise or grant releases for any Obligations and/or any person or persons liable for payment of any Obligations, (f) exchange, release, surrender, sell, subordinate or compromise any collateral of any party now or hereafter securing any of the Obligations and (g) apply any and all payments received from any source by Purchaser at any time against the Obligations in any order as Purchaser may determine pursuant to the terms of the Note Purchase Agreement; all of the foregoing in such manner and upon such terms as Purchaser may determine and without notice to or further consent from Pledgor and without impairing or modifying the terms and conditions of this Agreement which shall remain in full force and effect.

 

This Agreement shall remain in full force and effect and shall not be limited, impaired or otherwise affected in any way by reason of (i) any delay in making demand on Pledgor for or delay in enforcing or failure to enforce, performance or payment of any Obligations, (ii) any failure, neglect or omission on Purchaser’s part to perfect any lien upon, protect, exercise rights against, or realize on, any property of Pledgor or any other party securing the Obligations, (iii) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any person or persons or in any property, (iv) the invalidity or unenforceability of any Obligations or rights in any Collateral under the Note Purchase Agreement, (v) the existence or nonexistence of any defenses which may be available to Pledgor with respect to the Obligations, or (vi) the commencement of any bankruptcy, reorganization; liquidation, dissolution or receivership proceeding or case filed by or against Pledgor or any Company.

 

7.            Events of Default . The occurrence of any “Event of Default,” as defined in the Note Purchase Agreement, shall constitute an event of default (an “Event of Default”) under this Agreement.

 

8.            Rights of Purchaser Following Event of Default . Upon the occurrence of an Event of Default under this Agreement (and in addition to all of its other rights, powers and remedies under this Agreement and the Note Purchase Agreement), Purchaser may, at its option, without notice to Pledgor or any other party, do any one or more of the following:

 

(a)           Declare any unpaid balance of the Obligations to be immediately due and payable (the occurrence or nonoccurrence of an Event of Default shall in no manner impair the ability of Purchaser to demand payment of any portion of the Obligations that is payable upon demand);

 

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(b)           Proceed to perform or discharge any and all of Pledgor’s obligations, duties, responsibilities, or liabilities and exercise any and all of its rights in connection with the Collateral for such period of time as Purchaser may deem appropriate, with or without the bringing of any legal action in or the appointment of any receiver by any court;

 

(c)           Do all other acts which Purchaser may deem necessary or proper to protect Purchaser’s security interest in the Collateral and carry out the terms of this Agreement;

 

(d)           Exercise all voting and management rights of Pledgor as to Issuer or otherwise pertaining to the Collateral, and Pledgor, forthwith upon the request of Purchaser, shall use its best efforts to secure, and cooperate with the efforts of Purchaser to secure (if not already secured by Purchaser), all the benefits of such voting and management rights.

 

(e)           Sell the Collateral in any manner permitted by the UCC (as defined in the Note Purchase Agreement); and upon any such sale of the Collateral, Purchaser may (i) bid for and purchase the Collateral and apply the expenses of such sale (including, without limitation, attorneys’ fees) as a credit against the purchase price, or (ii) apply the proceeds of any sale or sales to other persons or entities, in whatever order Purchaser in its sole discretion may decide, to the expenses of such sale (including, without limitation, attorneys’ fees), to the Obligations, and the remainder, if any, shall be paid to Pledgor or to such other person or entity legally entitled to payment of such remainder; and

 

(f)           Proceed by suit or suits in law or in equity or by any other appropriate proceeding or remedy to enforce the performance of any term, covenant, condition, or agreement contained in this Agreement, and institution of such a suit or suits shall not abrogate the rights of Purchaser to pursue any other remedies granted in this Agreement or to pursue any other remedy available to Purchaser either at law or in equity.

 

Purchaser shall have all of the rights and remedies of a secured party under the UCC and other applicable laws. All costs and expenses, including reasonable attorneys’ fees and expenses, incurred or paid by Purchaser in exercising or protecting any interest, right, power or remedy conferred by this Agreement, shall bear interest at a per annum rate of interest equal to the then highest rate of interest charged on any of the Obligations from the date of payment until repaid in full and shall, along with the interest thereon, constitute and become a part of the Obligations secured by this Agreement.

 

Pledgor hereby constitutes Purchaser as the attorney-in-fact of Pledgor after the occurrence and during the continuance an Event of Default under the Financing Documents (including but not limited to this Agreement) to take such actions and execute such documents as Purchaser may deem appropriate in the exercise of the rights and powers granted to Purchaser in this Agreement, including, but not limited to, filling-in blanks in the Transfer Power to cause a transfer of the Ownership Interests and other Collateral pursuant to a sale of the Collateral. The power of attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment in full of the Obligations. Pledgor shall indemnify and hold Purchaser harmless for all losses, costs, damages, fees, and expenses suffered or incurred in connection with the exercise of this power of attorney and shall release Purchaser from any and all liability arising in connection with the exercise of this power of attorney (other than any such losses, costs, etc. to the extent solely caused by the Purchaser’s gross negligence or willful misconduct).

 

9.            Performance by Purchaser . If Pledgor shall fail to perform, observe or comply with any of the conditions, terms, or covenants contained in this Agreement or any of the other Financing Documents, Purchaser, without notice to or demand upon Pledgor and without waiving or releasing any of the Obligations or any Event of Default, may (but shall be under no obligation to) at any time thereafter perform such conditions, terms or covenants for the account and at the expense of Pledgor, and may enter upon the premises of Pledgor for that purpose and take all such action on the premises as Purchaser may consider necessary or appropriate for such purpose. All sums paid or advanced by Purchaser in connection with the foregoing and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection with the foregoing, together with interest thereon at a per annum rate of interest equal to the then highest rate of interest charged on the principal of any of the Obligations, from the date of payment until repaid in full, shall be paid by Pledgor to Purchaser on demand and shall constitute and become a part of the Obligations secured by this Agreement.

 

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10.          Indemnification . Purchaser shall not in any way be responsible for the performance or discharge of, and Purchaser does not hereby undertake to perform or discharge of, any obligation, duty, responsibility, or liability of Pledgor in connection with the Collateral or otherwise. Pledgor hereby agrees to indemnify Purchaser and hold Purchaser harmless from and against all losses, liabilities, damages, claims, or demands suffered or incurred by reason of this Agreement or by reason of any alleged responsibilities or undertakings on the part of Purchaser to perform or discharge any obligations, duties, responsibilities, or liabilities of Pledgor in connection with the Collateral or otherwise; provided, however , that the foregoing indemnity and agreement to hold harmless shall not apply to losses, liabilities, damages, claims, or demands suffered or incurred by reason of Purchaser’s own gross negligence or willful misconduct. Purchaser shall have no duty to collect any amounts due or to become due in connection with the Collateral or enforce or preserve Pledgor’s rights under this Agreement.

 

11.          Termination . Upon payment in full of the Obligations, and termination of any further obligation of Purchaser to extend any credit to Companies under the Financing Documents, this Agreement shall terminate and Purchaser shall promptly execute appropriate documents to evidence such termination.

 

12.          Release . Without prejudice to any of Purchaser’s rights under this Agreement, Purchaser may take or release other security for the payment or performance of the Obligations, may release any party primarily or secondarily liable for the Obligations, and may apply any other security held by Purchaser to the satisfaction of the Obligations.

 

13.          Pledgor’s Liability Absolute . The liability of Pledgor under this Agreement shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Pledgor or any other person, nor against other securities or liens available to Purchaser or Purchaser’s respective successors, assigns, or agents. Pledgor waives any right to require that resort be had to any security or to any balance of any deposit account or credit on the books of Purchaser in favor of any other person.

 

14.          Preservation of Collateral . Purchaser shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral and in preserving rights under this Agreement if Purchaser takes action for those purposes as Pledgor may reasonably request in writing, provided, however , that failure to comply with any such request shall not, in and of itself, be deemed a failure to exercise reasonable care, and no failure by Purchaser to preserve or protect any rights with respect to the Collateral or to do any act with respect to the preservation of the Collateral not so requested by Pledgor shall be deemed a failure to exercise reasonable care in the custody or preservation of the Collateral.

 

15.          Private Sale . Pledgor recognizes that Purchaser may be unable to effect a public sale of the Collateral by reason of certain provisions contained in the federal Securities Act of 1933, as amended, and applicable state securities laws and, under the circumstances then existing, may reasonably resort to a private sale to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Collateral for their own account for investment and not with a view to the distribution or resale of the Collateral. Pledgor agrees that a private sale so made may be at a price and on other terms less favorable to the seller than if the Collateral were sold at public sale and that Purchaser has no obligation to delay sale of the Collateral for the period of time necessary to permit Pledgor, even if Pledgor would agree to register or qualify the Collateral for public sale under the Securities Act of 1933, as amended, and applicable state securities laws. Pledgor agrees that a private sale made under the foregoing circumstances and otherwise in a commercially reasonable manner shall be deemed to have been made in a commercially reasonable manner under the UCC.

 

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16.          General .

 

(a)           Final Agreement and Amendments . This Agreement, together with the other Financing Documents, constitutes the final and entire agreement and understanding of the parties and any term, condition, covenant or agreement not contained herein or therein is not a part of the agreement and understanding of the parties. Neither this Agreement, nor any term, condition, covenant or agreement hereof may be changed, waived, discharged or terminated except by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

(b)           Waiver . No party hereto shall be deemed to have waived the exercise of any right which it holds hereunder unless such waiver is made expressly and in writing (and, without limiting the generality of the foregoing, no delay or omission by any party hereto in exercising any such right shall be deemed a waiver of its future exercise). No such waiver made in any instance involving the exercise of any such right shall be deemed a waiver as to any other such instance, or any other such right. No single or partial exercise of any power or right shall preclude other or further exercise of the power or right or the exercise of any other power or right. No course of dealing between the parties hereto shall be construed as an amendment to this Agreement or a waiver of any provision of this Agreement. No notice to or demand on Pledgor in any case shall thereby entitle Pledgor to any other or further notice or demand in the same, similar or other circumstances.

 

(c)           Headings . The headings of the Sections, subsections, paragraphs and subparagraphs hereof are provided herein for and only for convenience of reference, and shall not be considered in construing their contents.

 

(d)           Construction . As used herein, all references made (i) in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (ii) in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, and (iii) to any Section, subsection, paragraph or subparagraph shall, unless therein expressly indicated to the contrary, be deemed to have been made to such Section, subsection, paragraph or subparagraph of this Agreement. The Recitals are incorporated herein as a substantive part of this Agreement and the parties hereto acknowledge that such Recitals are true and correct.

 

(e)           Binding Effect . This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns hereunder. In the event of any assignment or transfer by Purchaser of any of the Pledgor’s obligations under the Financing Documents or the collateral therefor, Purchaser thereafter shall be fully discharged from any responsibility with respect to such collateral so assigned or transferred, but Purchaser shall retain all rights and powers given by this Agreement with respect to any of the Pledgor’s obligations under the Financing Documents or collateral not so assigned or transferred. Pledgor shall have no right to assign or delegate its rights or obligations hereunder.

 

(f)           Severability . If any term, provision, covenant or condition of this Agreement or the application of such term, provision, covenant or condition to any party or circumstance shall be found by a court of competent jurisdiction to be, to any extent, invalid or unenforceable, the remainder of this Agreement and the application of such term, provision, covenant, or condition to parties or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, provision, covenant or condition shall be valid and enforced to the fullest extent permitted by law.

 

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(g)           Notices . All notices required or permitted hereunder shall be given and shall become effective as provided in Section 12.3 of the Note Purchase Agreement. All notices to Pledgor shall be addressed in accordance with the information provided on the signature page hereto.

 

(h)           Remedies Cumulative . Each right, power and remedy of Purchaser as provided for in this Agreement, or in any of the other Financing Documents or now or hereafter existing by law, shall be cumulative and concurrent and shall be in addition to every other right, power or remedy provided for in this Agreement, or in any of the other Financing Documents now or hereafter existing by law, and the exercise or beginning of the exercise by Purchaser of any one or more of such rights, powers or remedies shall not preclude the later exercise by Purchaser of any other rights, powers or remedies.

 

(i)           Time of the Essence; Survival; Joint and Several Liability . Time is of the essence of this Agreement and each and every term, covenant and condition contained herein. All covenants, agreements, representations and warranties made in this Agreement or in any of the other Financing Documents shall continue in full force and effect so long as any of the obligations of any party under the Financing Documents (other than Purchaser) remain outstanding. Each person or entity constituting Pledgor shall be jointly and severally liable for all of the obligations of Pledgor under this Agreement.

 

(j)           Further Assurances . Pledgor hereby agrees that at any time and from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that Purchaser may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby, or to enable Purchaser or any of its agents to exercise and enforce its rights and remedies under this Agreement with respect to any portion of such collateral.

 

(k)           Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be considered to be an original, but all of which shall constitute one in the same instrument. As used in this Agreement, the term “this Agreement” shall include all attachments, exhibits, schedules, riders and addenda.

 

(l)           Costs . Pledgor shall be responsible for the payment of any and all reasonable fees, costs and expenses which Purchaser may incur by reason of this Agreement, including, but not limited to, the following: (i) any taxes of any kind related to any property or interests assigned or pledged hereunder; (ii) expenses incurred in filing public notices relating to any property or interests assigned or pledged hereunder; and (iii) any and all costs, expenses and fees (including, without limitation, reasonable attorneys’ fees and expenses and court costs and fees), whether or not litigation is commenced, incurred by Purchaser in protecting, insuring, maintaining, preserving, attaching, perfecting, enforcing, collecting or foreclosing upon any lien, security interest, right or privilege granted to Purchaser or any obligation of Pledgor under this Agreement, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions or proceedings arising out of or related to this Agreement or any property or interests assigned or pledged hereunder.

 

(m)          No Defenses . Pledgor’s obligations under this Agreement shall not be subject to any set-off, counterclaim or defense to payment that Pledgor now has or may have in the future.

 

9
 

 

(n)           Cooperation in Discovery and Litigation . In any litigation, trial, arbitration or other dispute resolution proceeding relating to this Agreement, all directors, officers, employees and agents of Pledgor or of its affiliates shall be deemed to be employees or managing agents of Pledgor for purposes of all applicable law or court rules regarding the production of witnesses by notice for testimony (whether in a deposition, at trial or otherwise). Pledgor agrees that Purchaser’s counsel in any such dispute resolution proceeding may examine any of these individuals as if under cross-examination and that any discovery deposition of any of them may be used in that proceeding as if it were an evidence deposition. Pledgor in any event will use all commercially reasonable efforts to produce in any such dispute resolution proceeding, at the time and in the manner requested by Purchaser, all persons and entities, documents (whether in tangible, electronic or other form) or other things under its control and relating to the dispute in any jurisdiction that recognizes that (or any similar) distinction.

 

(o)           CHOICE OF LAW; CONSENT TO JURISDICTION . THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. WITH RESPECT TO ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”), PLEDGOR HEREBY (A) SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO PURCHASER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL PRECLUDE PURCHASER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. PLEDGOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND FURTHER AGREES AND CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR UNDER APPLICABLE LAW, ALL SERVICE OR PROCESS IN ANY PROCEEDING IN ANY NEW YORK STATE OR UNITED STATES COURT SITTING IN THE STATE OF NEW YORK MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO PLEDGOR AT THE ADDRESS INDICATED HEREIN, AND SERVICE SO MADE SHALL BE COMPLETE UPON RECEIPT; EXCEPT THAT IF PLEDGOR SHALL REFUSE TO ACCEPT DELIVERY, SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO MAILED.

 

17.          WAIVER OF JURY TRIAL . PLEDGOR HEREBY (A) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY PLEDGOR, AND THIS WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. PURCHASER IS HEREBY AUTHORIZED AND REQUESTED TO SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF PLEDGOR’S WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, PLEDGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF PURCHASER (INCLUDING THEIR RESPECTIVE COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO PLEDGOR THAT PURCHASER WILL NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.

 

10
 

  

18.          Notwithstanding anything in this Agreement to the contrary, so long as the Subordination Agreement dated January 22, 2015 (as hereafter amended, modified or restated, the “Subordination Agreement”) by and between MidCap Financial Trust (“MidCap”) and Purchaser remains in effect, Pledgor and Issuer shall be deemed to have complied fully with any and all obligations imposed under this Agreement for the delivery of physical possession of, or the making of payments or remittance of funds to, Purchaser with respect to any Collateral, any proceeds thereof or payments thereunder, any certificates, stock powers, instruments or other documents evidencing the Collateral or necessary for the perfection of a security interest therein, or any other tangible or intangible personal property (any of the foregoing deliveries, payments or remittances referred to as a “Delivery,” and collectively as “Deliveries”), to the extent that any such Delivery shall have been made to MidCap in its capacity as “Senior Lender” (as defined in the Subordination Agreement). The Deliveries subject to the provisions of this Section include (without limitation) the deliveries and remittances required pursuant to Section 2, Section 3, Section 5(d) and Section 5(e) of this Agreement; provided , however that the term “Deliveries” shall not be deemed to include the delivery of financing statements as described in Section 5(f) or the delivery of Pledge Amendments as described in Section 5(j).

 

[Signature Pages Follow]

 

11
 

  

IN WITNESS WHEREOF , intending to be legally bound, and intending that this agreement constitute an agreement executed under seal, each of the parties have caused this Agreement to be executed under seal the day and year first above mentioned.

 

PLEDGOR:

TWINLAB HOLDINGS, INC.

 

By:  /s/ Thomas A. Tolworthy                     (SEAL)
Name: Thomas A. Tolworthy
Title: Chief Executive Officer and President

 

 

Pledgor Contact Information:

 

Twinlab Holdings, Inc.
632 Broadway, Suite 201
New York, NY 10012
Attention: Thomas A. Tolworthy, Chief Executive Officer and President

 

[SIGNATURE PAGE TO PENTA/TWINLAB HOLDINGS PLEDGE AGREEMENT]

 

 
 

 

PURCHASER:

PENTA MEZZANINE SBIC FUND I, L.P. ,

a Delaware limited partnership

 

By:   Penta Mezzanine SBIC Fund I GP, LLC, its General Partner

 

By: /s/ Richard E. Mount                             (SEAL)

Name: Richard E. Mount

Title: Authorized Member

 

[SIGNATURE PAGE TO PENTA/TWINLAB HOLDINGS PLEDGE AGREEMENT]

 

 
 

 

SCHEDULE I

Pledged Interests

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Issuer Name: Twinlab Corporation
   
Type of Type of Entity of Issuer: Corporation
   
Jurisdiction of Organization of Issuer: Delaware
   
Organizational ID No. of Issuer: DE3698995
   
Tax ID No. of Issuer: [  ]
   
Class of Interests in Issuer: Common Stock
   
Equity Interest Certificate No.: 2
   
Number of Units: 100
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Issuer Name: ISI Brands Inc.
   
Type of Type of Entity of Issuer: Corporation
   
Jurisdiction of Organization of Issuer: Michigan
   
Organizational ID No. of Issuer: MI23407C
   
Tax ID No. of Issuer: [  ]
   
Class of Interests in Issuer: Common Stock
   
Equity Interest Certificate No.: 1
   
Number of Units: 1000
   
Percentage of Outstanding Equity Interest: 100%

 

 
 

 

SCHEDULE II

Pledgor Information

 

Name of Pledgor: Twinlab Holdings, Inc.
   
Type of Entity of Pledgor: Corporation
   
Jurisdiction of Organization of Pledgor: Michigan
   
Organizational ID No. of Pledgor: MI03048C
   
Tax ID No. of Pledgor: [  ]

 

 
 

 

SCHEDULE III


STOCK POWER

 

FOR VALUE RECEIVED , the undersigned, _________________________, a __________ corporation (“ Pledgor ”), does hereby sell, assign and transfer to __________________________________* all of its Equity Interests (as hereinafter defined) represented by Certificate No(s). __________* in _____________________, a ______________________ corporation (“ Issuer ”), standing in the name of Pledgor on the books of said Issuer. Pledgor does hereby irrevocably constitute and appoint ________________________________*, as attorney, to transfer the Equity Interest in said Issuer with full power of substitution in the premises. The term “ Equity Interest ” means any security, share, unit, partnership interest, membership interest, ownership interest, equity interest, option, warrant, participation, “equity security” (as such term is defined in Rule 3(a)11 1 of the General Rules and Regulations of the Securities Exchange Act of 1934, as amended, or any similar statute then in effect, promulgated by the Securities and Exchange Commission and any successor thereto) or analogous interest (regardless of how designated) of or in a corporation, partnership, limited partnership, limited liability company, limited liability partnership, business trust or other entity, of whatever nature, type, series or class, whether voting or nonvoting, certificated or uncertificated, common or preferred, and all rights and privileges incident thereto.

  

Dated:______________________________

PLEDGOR :

 

[NAME OF PLEDGOR]

 

By:________________________________(SEAL)

Name:____________________________________

Its: ______________________________________ 

 

*To Remain Blank - Not Completed at Closing

 

[SIGNATURE PAGE TO PENTA/TWINLAB HOLDINGS PLEDGE AGREEMENT]

 

 
 

 

SCHEDULE IV

PLEDGE AMENDMENT

 

This Pledge Amendment, dated ________________, 20___ is delivered pursuant to Section 5(i) of the Pledge Agreement referred to below. All defined terms herein shall have the meanings ascribed thereto or incorporated by reference in the Pledge Agreement. The undersigned hereby certifies that the representations and warranties in Section 4 of the Pledge Agreement are and continue to be true and correct, both as to the Collateral pledged prior to this Pledge Amendment and as to the Collateral pledged pursuant to this Pledge Amendment. The undersigned further agrees that this Pledge Amendment may be attached to that certain Pledge Agreement, dated _________ ____, 201__, between undersigned, as Pledgor, and Penta Mezzanine SBIC Fund I, L.P., as Purchaser (as may be amended, restated, supplemented or otherwise modified from time to time, the “ Pledge Agreement ”), and that the Ownership Interests listed on this Pledge Amendment shall be and become a part of the Pledged Interests and Pledged Collateral referred to in said Pledge Agreement and shall secure all Obligations referred to and in accordance with said Pledge Agreement. Schedule I of the Pledge Agreement shall be deemed amended to include the Ownership Interests listed on this Pledge Amendment. The undersigned acknowledge that any Ownership Interests issued by Issuer owned by Pledgor not included in the Pledged Collateral at the discretion of Purchaser may not otherwise be pledged by Pledgor to any other Person or otherwise used as security for any obligations other than the Obligations.

 

 

PLEDGOR :

 

[NAME OF PLEDGOR]

 

By:________________________________(SEAL)

Name:____________________________________

Its: ______________________________________ 

 

[SIGNATURE PAGE TO PENTA/TWINLAB HOLDINGS PLEDGE AGREEMENT]

 

 
 

  

SCHEDULE IV- continued

 

 Name and
Address of Pledgor

  Issuer   Class of
Equity Interest
  Certificate
Number(s)
  Number of
Shares
                 
                 
                 

  

    Initial
Principal Amount
  Issue Date   Maturity Date   Interest Rate
                 
                 
                 

 

  

 

 

 

 

Exhibit 10.45  

 

 

 

PAYOFF LETTER

 

January 16, 2015

 

Twinlab Corporation

Twinlab Consolidated Holdings, Inc.

632 Broadway, Suite 201

New York, New York 10012

Attn: Thomas A. Tolworthy, President

Richard H. Neuwirth, General Counsel

 

Twinlab Consolidation Corporation

ISI Brands Inc.

Twinlab Holdings, Inc.

3133 Orchard Vista Drive SE

Grand Rapids, Michigan 49546

Attn: Thomas A. Tolworthy, President

Richard H. Neuwirth, General Counsel

 

Mr. David L. Van Andel

3133 Orchard Vista Drive SE

Grand Rapids, MI 49546

 

Mr. William W. Nicholson

121 North Post Oak Lane, #2105

Houston, TX 77024  

 

MidCap Financial Trust

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attn: Account Manager for Twinlab transaction

 

RE: Payoff of Credit Agreement (as heretofore amended, restated, supplemented or otherwise modified, the “ Credit Agreement ”) dated as of January 7, 2008 among TWINLAB CORPORATION, a Delaware corporation (“ Borrower ”), TWINLAB HOLDINGS, INC., a Michigan corporation formerly known as Idea Sphere, Inc. (“ Parent ”), and FIFTH THIRD BANK, an Ohio banking corporation and successor by merger to Fifth Third Bank, a Michigan banking corporation (“ Lender ”). Capitalized terms used, but not defined, herein shall have the meanings given in the Credit Agreement.

 

 
 

 

Twinlab Corporation, et al.

Page 2

 

Ladies and Gentlemen:

 

Borrower and Parent have advised Lender that MidCap Financial Trust, as agent (in such capacity, together with its successors and assigns, “Agent”) for itself and the other New Lenders (as defined herein) (in such capacity and as a new Lender, “ MidCap ”) will provide funds to, among other things, repay in full all of the outstanding indebtedness, liabilities and obligations of Borrower arising out of or under the Credit Agreement and the other Loan Documents (the “ Payoff ”), pursuant to a Credit and Security Agreement to be entered into by and among Borrower, Parent, ISI Brands Inc., a Michigan corporation (“ ISI Brands ”), Twinlab Consolidated Holdings, Inc., a Nevada corporation (“TCHI”), Twinlab Consolidation Corporation, a Delaware corporation (“TCC”), TCC CM Subco I, Inc., a Delaware corporation, TCC CM Subco II, Inc., a Delaware corporation, as borrowers, the financial institutions from time to time parties thereto, as lenders (collectively, “New Lenders”) and MidCap. Each of ISI Brands, TCHI, TCC, Parent (each a “ Corporate Guarantor ”; and, collectively, the “ Corporate Guarantors ”), David L. Van Andel, an individual (“ Van Andel ”), William W. Nicholson, an individual (“ Nicholson ”; and, together with Van Andel, each an “ Individual Obligor ” and, collectively, the “ Individual Obligors ”), Borrower, MidCap and Lender desire to enter into this letter agreement (this “ Letter ”) to set forth, among other things, the terms and conditions on which the Payoff will occur, and they hereby agree as follows intending to be legally bound:

 

1.            Lender hereby certifies to Borrower, Individual Obligors and Corporate Guarantors (collectively, the “ Loan Parties ”) and to MidCap that, as of January 16, 2015 (the “ Quote Date ”), the total amount necessary to pay in full the outstanding Loans to Borrower under the Credit Agreement and all other outstanding indebtedness, liabilities and obligations (collectively with the Loans, the “ Liabilities ”) of Loan Parties to Lender under the Credit Agreement and the other Loan Documents is $9,507,230.53 (the “ Payoff Amount ”), as more particularly set forth on Exhibit A attached hereto and made a part hereof, exclusive of (i) the Continuing Liabilities which are expressly reserved in this Letter and (ii) any indebtedness, liabilities or obligations, if any, of any Individual Obligor to Lender on other accounts, obligations or guarantees, including, but not limited to, deposit accounts, home mortgage loans, installment loans, or credit cards issued to an Individual Obligor personally (“ Personal Obligations ”). Notwithstanding anything to the contrary in this Letter, nothing contained in this Letter releases or alters the obligations of any Individual Obligor with respect to such Individual Obligor’s Personal Obligations. The “ Continuing Liabilities ” mean, collectively, (a) the obligations, indebtedness and liabilities of the Borrower and Parent under (i) this Letter, (ii) the Treasury Management Agreements (as defined below) and any DACA (as defined below), and (iii) Sections 2.3(g) , 4.10 and 9.11 of the Credit Agreement, and other indemnification provisions applicable to Loan Parties in the Loan Documents, which and to the extent, in each case, such provisions expressly survive the payment in full of the Liabilities and termination of the Loan Documents and (b) the obligations, indebtedness and liabilities of the Corporate Guarantors (other than Parent) and the Individual Obligors under this Section 1(a)(iii) above. As used in this Letter, “ Loan Documents ” does not include this Letter, the Treasury Management Agreements, or any DACA.

 

2.           Payment of the Payoff Amount, together with any applicable Per Diem Charges, as defined below (collectively, the “ Total Amount ”), must be made to Lender by 4:00 p.m. (Cincinnati, Ohio time) on the applicable date of payoff consistent with the terms of this Letter (the “ Payoff Date ”) by way of wire transfer in immediately available funds directed as follows:

 

 
 

 

Twinlab Corporation, et al.

Page 3

 

Fifth Third Bank
ABA # 042000314
Account # [  ]
Account Name: Commercial Loan Wire Account
Reference: Twinlab Corporation

Attn:    Andrew P. Hanson, Vice President

Lori Hart, Structured Finance Operations Manager

 

3.           For each day after the Quote Date, additional amounts (collectively, the “ Per Diem Charges ”) shall accrue and be payable in the aggregate per diem amount of $1,643.65, as more particularly set forth on Exhibit B attached hereto and made a part hereof. Should the Total Amount not be received by 4:00 p.m. (Cincinnati, Ohio time) on or before January 31, 2015, a new payoff amount will need to be calculated, and this Letter will be void. Borrower hereby acknowledges and agrees that, on and after the close of business on January 13, 2015, (a) Borrower has no further right or ability to make requests for Revolving Loans, and (b) Lender has no further commitments or other obligations to make any loans, financial accommodations or other extensions of credit or other obligations to Borrower under the Credit Agreement or any of the other Loan Documents.

 

4.           Lender hereby further certifies and confirms to Loan Parties and to MidCap that, upon receipt by Lender as of the Payoff Date of the Total Amount, in immediately available funds in accordance with the terms and conditions of this Letter: (a) no Loan Party will be indebted or obligated to Lender for any reason or amount under the Credit Agreement or the other Loan Documents, except for the Continuing Liabilities, and all Liabilities, except for the Continuing Liabilities, shall be deemed fully paid and satisfied; (b) the Credit Agreement and the other Loan Documents (subject, in each case, to the Continuing Liabilities), and all of Lender’s security interests in, and other liens on, all real and personal property assets of any Loan Party providing collateral for the Liabilities (other than, as applicable, any Items, any Payment Orders, and the Fifth Third Deposit Accounts, each as defined below) will be automatically terminated and released; (c) Lender agrees to promptly, but in any case within 5 Business Days, deliver to MidCap any tangible investment property, instrument, stock power, or other document which is an asset of any Loan Party and which has been physically pledged to Lender as security for the Liabilities and which has not been previously returned to Loan Parties; and (d) Lender agrees to prepare, execute (as applicable) and deliver to MidCap (except as otherwise noted), and Lender hereby authorizes Loan Parties, MidCap, and their designees to prepare and (as applicable) file and record: (i) Uniform Commercial Code financing statement terminations, terminating any and all UCC financing statements naming a Loan Party as debtor and Lender as secured party, (ii) a release of that certain Trust Deed, Assignment of Rents, Security Agreement and Fixture Filing made by Borrower in favor of Lender with respect to that certain real property located in American Fork, Utah County, Utah, (iii) a release of that certain Trademark Security Agreement, as amended, between Lender and ISI Brands (to be delivered to the Borrower), (iv) a release of that certain Patent Security Agreement between Lender and ISI Brands, (v) a release of that certain Request for Beneficiary – Loss Payment Endorsement (on Lender’s letterhead and executed by an authorized officer of Lender and (vi) such other lien release, termination and satisfaction documents as Loan Parties or MidCap may reasonably request or as are necessary in order to evidence the satisfaction of Loan Parties' obligations to Lender pursuant to the Loan Documents and the termination of Lender's interest in all Collateral held with respect thereto or otherwise give public notice of such collateral terminations and releases pursuant to the terms of this Letter; provided, however , that Loan Parties hereby agree that any and all such termination notices, financing statement terminations, mortgage releases, intellectual property releases, and other such documents shall be prepared, delivered, filed and recorded at Loan Parties’ expense.

 

 
 

 

Twinlab Corporation, et al.

Page 4

 

5.           Without limiting any of any Loan Party’s other reaffirmations in this Letter, each Loan Party hereby specifically: (a) ratifies and reaffirms such Loan Party’s obligations under the treasury management documents between Lender and such Loan Party relating to such Loan Party’s Fifth Third Deposit Accounts and Lender’s treasury management services (the “ Treasury Management Agreements ”) and (b) acknowledges and agrees that the Treasury Management Agreements will survive the receipt of the Total Amount and the termination of the Credit Agreement subject to, and in accordance with, their respective terms.

 

6.           Borrower anticipates that it will continue, on and after the Payoff Date, to receive and/or deposit checks, drafts, money orders, and other items and other remittances (collectively, “ Remittances ”) into the Lock Box and the Collection Account. Subject to, and in accordance with, Lender’s standard practice and the terms of this Letter and the Treasury Management Agreements, Lender agrees, for the benefit, and at the expense, of Borrower, to continue to process through the Lock Box and the Collection Account all Remittances received by Lender in the Lock Box or the Collection Account (the “ Post-Payout Services ”); provided that, upon the execution of a deposit account control agreement among Borrower, Lender and MidCap with respect to any one or more of the Fifth Third Deposit Accounts (a “ DACA ”), the Post-Payout Services will additionally be subject to, and in accordance with, such DACA.

 

Loan Parties agree that Lender shall have no liability to any Loan Party or any other Person for any loss or damage that any of them may claim to have suffered or incurred, either directly or indirectly, by reason of the Post-Payout Services unless occasioned by the gross negligence or willful misconduct of Lender. In no event will Lender be liable for any special, indirect, exemplary or consequential damages, including lost profits, even if Lender has been advised of the possibility of such damages. Loan Parties agree that in no event shall Lender be liable for any loss or delay resulting from any act or delay or failure to act caused by circumstances not within Lender’s control, including malfunction of electronic media, interruption of power supply or other utilities, fire, flood, ice, earthquake, explosion or other act of God, strike, lockout or stoppage of labor, industrial sabotage, war, terrorism, insurrection, riot or other civil disturbance, delays in the mail or courier service, delays in public funding, change of law, rule or governmental regulation or interpretation, court order, or the insolvency, unavailability or failure to act or delay in acting of any other bank or payment system, United States mail express or armored courier, governmental agency or any other party necessary to Lender’s performance of the Post-Payout Services.

 

Without limiting any indemnification provided in the Loan Documents, Loan Parties hereby agree to defend and indemnify Lender and hold it harmless from and against any and all claims, actions and proceedings (whether civil, criminal or administrative in nature), and from and against any and all damages, penalties, judgments, liabilities, losses and expenses (including reasonable attorneys’ fees and disbursements) suffered or incurred as the result of any claim, by any Person, arising out of, or otherwise related to, the Post-Payout Services, in each case other than those ultimately determined to be founded on the gross negligence or willful misconduct of Lender as established in a court of law by a judgment that is final and non-appealable.

 

7.           (a) Borrower will reimburse and immediately pay to Lender: (i) the full face amount of all checks, drafts or other instruments payable to Borrower (“ Items ”) for which Lender has given Borrower credit in determining the Total Amount, which are thereafter dishonored or returned to Lender or which remain unpaid for any reason whatsoever, and all reversals or cancellations of payment orders or other electronic funds transfers (“ Payment Orders ”) for which Lender has given Borrower credit in determining the Total Amount, and all reasonable and actual costs and expenses of Lender (including reasonable attorneys’ fees) related to any or all of the foregoing and (ii) all service charges and fees on the Post-Payout Services, Lock Box, Collection Account, Operating Account (as defined below), Controlled Disbursement Account, and other accounts of Borrower with Lender or its affiliates or maintained in connection with the Liabilities for services rendered through the date that such Lock Box, Collection Account, Operating Account, Controlled Disbursement Account, and other accounts are closed (collectively, the “ Operating Fees and Expenses ”).

 

 
 

 

Twinlab Corporation, et al.

Page 5

 

(b)          By MidCap’s agreement and acceptance of this Letter, MidCap agrees to reimburse and pay to Lender, within two Business Days after the date of notification from Lender: (i) the full face amount of all Items for which Lender has given Borrower credit in determining the Total Amount, which are thereafter dishonored or returned to Lender or which remain unpaid for any reason whatsoever, and (ii) all reversals or cancellations of Payment Orders for which Lender has given Borrower credit in determining the Total Amount, in each case under clauses (i) or (ii) above if (A) such amounts are not paid by Borrower within two Business Days of Lender’s demand therefor, (B) Lender requests such reimbursement from MidCap within 60 days after the Payoff Date, and (C) Lender seeks, prior to requesting such reimbursement from MidCap, to offset such amounts against available funds, if any, in any Fifth Third Deposit Account and that are subject to permissible offset by Lender in accordance with this Letter, the Treasury Management Agreements, any DACA, and applicable law.

 

8.           All of Lender’s rights against Borrower are reserved and preserved in and to any Items and Payment Orders received and retained by Lender in connection with the Liabilities and credited to Borrower in connection with the Liabilities and the computation of the Total Amount and in and to any monies due or to become due by reason of such Items, Payment Orders, the proceeds thereof, and all of Lender’s claims thereon. Lender will have the immediate right to charge any account of any Loan Party maintained with Lender (collectively, the “ Fifth Third Deposit Accounts ”) in an amount necessary to satisfy such unpaid Items, Payment Orders, Operating Fees and Expenses, and Overdrafts in accordance with and subject to the terms of the DACAs and the Treasury Management Agreements.

 

9.           Borrower will maintain sufficient collected and available funds in its operating account(s) at Lender (collectively, the “ Operating Account ”) to pay (a) all checks and other items drawn by Borrower on, and all electronic payment orders made by third parties against, the Operating Account as such checks and other items and payment orders (“ Presentments ”) are presented to Lender for payment and (b) all Operating Fees and Expenses. Lender will leave open the Lock Box, the Collection Account, the Controlled Disbursement Account, the Operating Account, and any other Fifth Third Deposit Accounts as Borrower and Lender shall reasonably deem necessary; provided that Lender will have the right to terminate and close the Lock Box, the Collection Account, the Controlled Disbursement Account, the Operating Account, and any other Fifth Third Deposit Account in accordance with the terms and conditions of the Treasury Management Agreements and (with respect to any Fifth Third Deposit Accounts subject to a DACA) such DACA. Upon any such termination and closure by Lender of any of the Lock Box, the Collection Account, the Controlled Disbursement Account, the Operating Account, or any other Fifth Third Deposit Account, the funds therein (in each case, net of any accrued and unpaid Presentments, Operating Fees and Expenses, and any other Continuing Liabilities due and payable to Lender) will be promptly forwarded by Lender to MidCap, or such party designated by MidCap, at the address provided by MidCap in immediately available funds; provided that funds in a Fifth Third Deposit Account that is subject to a DACA at the time of such termination or closure shall be subject to the terms and conditions of such DACA. Borrower further covenants and agrees with Lender that: (i) Borrower will not request or initiate any ACH transfers and/or other electronic transfers (“ Electronic Transfers ”) from any Fifth Third Deposit Account unless there are sufficient collected and available funds at the time of such request to satisfy such Electronic Transfers and (ii) Lender shall have no duty to honor any such requests for Electronic Transfers unless there are sufficient collected and available funds at the time of such request to satisfy such Electronic Transfers. Lender will not be liable for failure to pay any Presentments unless it is drawn against collected and available funds credited to the Operating Account at the time the Presentment is presented for payment. If Lender pays a Presentment (including initiates a wire transfer) that overdraws the Operating Account whether by error, mistake, or otherwise (an “ Overdraft ”), Borrower will immediately pay the amount of such Overdraft to Lender, whether the Overdraft was caused by Borrower or an authorized signer thereof and regardless of whether or not Borrower signed, or requested, the withdrawal that created the Overdraft. For the avoidance of doubt, MidCap is not a party to the foregoing and reserves its rights and remedies under the DACA or applicable laws with respect to the Operating Agreement and other assets of Borrower.

 

 
 

 

Twinlab Corporation, et al.

Page 6

 

10.         Each Loan Party, on behalf of such Loan Party and, as applicable, such Loan Party’s predecessors, successors, successors-in-interest, partners, members, shareholders, managers, directors, officers, heirs, beneficiaries, agents and assigns (each, a “ Releasing Person ” and collectively, the “ Releasing Persons ”): (i) does hereby forever release, remise and discharge Lender and its Affiliates, present and former officers, directors, stockholders, employees, attorneys, agents and other representatives, and the respective predecessors, successors, successors-in-interest, assigns, heirs, and representatives of each of the foregoing (each, a “ Releasee ” and collectively, the “ Releasees ”) from any and all actions, causes of action, counterclaims, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, extents, executions, rights, claims, demands, liabilities, losses, rights to reimbursement, subrogation, indemnification or other payment, costs or expenses, and reasonable attorneys’ fees, whether in law or in equity, of any nature whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, and whether representing a past, present or future obligation of the Releasees, or any of them, that any of the Releasing Persons ever had from the beginning of time, may have or hereafter can, may or shall have against the Releasees, or any of them, which have arisen or accrued prior to or as of the date of this Letter, in each case arising out of: (a) any of the Loan Documents, (b) any of the transactions consummated under any of the Loan Documents, (c) the making of any Loan or the use of the proceeds thereof, (d) the Loan Collateral, or (e) the conduct of the relationship between Lender and Loan Parties (or any one or more of them) (each a “ Claim ” and collectively, “ Claims ”) and (ii) does hereby agree and covenant not to assert or prosecute against any or all of the Releasees any Claims. Notwithstanding the foregoing, nothing in this paragraph shall be construed to constitute a release of or otherwise apply to, or a covenant not to sue in respect of, any Claims for breach of any express obligation of Lender under this Letter, the Treasury Management Agreements, or any DACA, in each case arising after the date of this Letter.

 

11.         Notwithstanding anything to the contrary contained herein, in the event any payment made to, or other amount or value received by, Lender from or for the account of any Loan Party is avoided, rescinded, set aside or must otherwise be returned or repaid by Lender, whether in any bankruptcy, reorganization, insolvency or similar proceeding involving any Loan Party or otherwise, the Liabilities intended to be repaid hereby, and all rights of Lender with respect to such Liabilities, shall be, as determined by applicable law, reinstated (without any further action by any party) and enforceable against each Loan Party and their respective successors or assigns. In such event, each Loan Party shall be and remain liable to Lender for the amount so repaid or recovered to the same extent under the Loan Documents as if such amount had never originally been received by Lender.

 

 
 

 

Twinlab Corporation, et al.

Page 7

 

12.         Lender hereby requests that each of the Loan Parties and MidCap acknowledge its respective receipt and its respective acceptance of and agreement to the terms and conditions set forth that are applicable to it in this Letter by signing a copy of it in the appropriate space indicated below and returning it to Lender. All obligations of Loan Parties under this Letter are joint and several. This Letter may be signed in several counterparts but this Letter shall not become effective unless and until it is so accepted and agreed to by each of the Loan Parties and MidCap and returned to Lender. This Letter may be signed by facsimile signatures or other electronic delivery of an image file reflecting the execution hereof, and if so signed, (i) may be relied on by each party as if the document were a manually signed original and (ii) will be binding on each party for all purposes. As used herein, “including” is used by way of illustration and not by way of limitation, unless the context clearly indicates otherwise. This Letter shall be governed by and construed in accordance with the internal laws of the State of Ohio (without regard to Ohio conflicts of law principles). The parties hereto each waive trial by jury of any matters arising out of, or related to, this Letter or the transactions contemplated hereby.

 

[Signature Page Follows]

 

 
 

 

This Letter is executed to be effective as of the date first written above.

 

Very truly yours,  
     
FIFTH THIRD BANK  
     
By: /s/ Andrew P. Hanson  
  Andrew P. Hanson, Vice President  

 

Acknowledged and Agreed to

as of the date first written above:

 

TWINLAB CORPORATION

TWINLAB HOLDINGS, INC.

ISI BRANDS INC.

TWINLAB CONSOLIDATION CORPORATION

TWINLAB CONSOLIDATED HOLDINGS, INC.

 

By: /s/ Thomas A. Tolworthy  
  Thomas A. Tolworthy, President and CEO  

 

  /s/ WILLIAM W. NICHOLSON  
WILLIAM W. NICHOLSON  
   
  /s/ DAVID L. VAN ANDEL  
DAVID L. VAN ANDEL  

 

SIGNATURE PAGE TO

PAYOFF LETTER

  

 
 

 

MIDCAP FINANCIAL TRUST ,  
a Delaware statutory trust  
     
By: Apollo Capital Management, L.P.,  
  its investment manager  
     
By: Apollo Capital Management GP, LLC,  
  its general partner  
     
By: /s/ Maurice Amsellem  
Name: Maurice Amsellem  
Title: Authorized Signatory  

 

SIGNATURE PAGE TO

PAYOFF LETTER

 

 
 

 

EXHIBIT A

Payoff Amount

 

1. Aggregate outstanding principal balance of the following as of the Quote Date:

  

(i)          Revolving Loans   $ 9,462,966.69  

 

2. Aggregate outstanding interest on the following as of the Quote Date:

  

(i)          Revolving Loans   $ 14,144.91  

 

3. Other:

  

(i)           Attorneys’ Fees   $ 30,000.00  
(ii)          Unused Line Fee   $ 118.93  

 

4. Total Payoff Amount as of the Quote Date:

(sum of all of the above)   $ 9,507,230.53  

 

 
 

 

EXHIBIT B

 

( Per Diem Charges )

 

1. Per Diem Charges:

  

(i)           Interest on Revolving Loans   $ 1,642.88  
(ii)          Unused Line Fee   $ .77  

 

2. Total Per Diem Charges:

(sum of all of the above)   $ 1,643.65