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): October 19, 2020

 

QUEST RESOURCE HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
     
Nevada 001-36451 51-0665952
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     
3481 Plano Parkway, The Colony, Texas 75056
(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (972) 464-0004

 

 
(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 (see General Instruction A.2. below):

 

☐ 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)) 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered
 Common Stock, $0.001 par value QRHC The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

Item 1.01Entry into a Material Definitive Agreement.

As described in Item 2.03 of this Current Report on Form 8-K, Quest Resource Holding Corporation (the “Company”) and certain of its domestic subsidiaries entered into a Credit Agreement, dated as of October 19, 2020, with Monroe Capital Management Advisors, LLC, as administrative agent for the lenders thereto (the “Credit Agreement”). The disclosure contained in Item 2.03 of this Current Report on Form 8-K and the information contained in Exhibit 10.1 filed herewith are hereby incorporated by reference into this Item 1.01.

 

In addition, on October 19, 2020, the Company and certain of its domestic subsidiaries entered into a joinder and first amendment (the “Amendment”) to that certain Loan, Security and Guaranty Agreement, dated as of August 5, 2020, with BBVA USA, as a lender, and as administrative agent, collateral agent, and issuing bank (the “Loan Agreement”), to, among other things, make certain corresponding changes consistent with the Credit Agreement, add certain of the Company’s subsidiaries as additional guarantors, and adjust the maturity date under the Loan Agreement to April 19, 2025.

 

The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the Amendment and is subject to and qualified in its entirety by reference to the full text of the Amendment, which is filed herewith as Exhibit 10.2 and is hereby incorporated by reference into this Item 1.01.

 

In connection with the Loan Agreement and the Credit Agreement, BBVA USA and Monroe Capital Management Advisors, LLC entered into an Intercreditor Agreement (the “Intercreditor Agreement”) setting forth their relative rights with respect to their interests in the collateral under their respective agreements.

 

The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the Intercreditor Agreement and is subject to and qualified in its entirety by reference to the full text of the Intercreditor Agreement, which is filed herewith as Exhibit 10.5 and is hereby incorporated by reference into this Item 1.01.

 

The information set forth below in Item 2.01 of this Current Report on Form 8-K is incorporated into this Item 1.01 by reference.

 

 

 

Item 2.01Completion of Acquisition or Disposition of Assets.

On October 19, 2020, the Company entered into an asset purchase agreement (the “APA”) by and among the Company, Quest Resource Management Group, LLC, a wholly-owned subsidiary of the Company (“Buyer”), Green Remedies Waste and Resources, Inc. (“Seller”) and Alan Allred (the “Shareholder”) and completed the acquisition by Buyer of substantially all of the assets used in the business of the Seller and assumed certain liabilities of the Seller, as set forth in the APA (the “Acquisition”).

 

As consideration for the Acquisition, under the APA, the Seller received a purchase price of (i) $10,869,599 in cash subject to certain adjustments set forth in the APA at the closing of the Acquisition; (ii) a promissory note (the “Note”) in the aggregate principal amount of $2,684,250, payable commencing on January 1, 2021 in quarterly installments through October 1, 2025 and subject to an interest rate of 3.0% per annum; (iii) a payment of $2,684,250 in additional consideration pursuant to a Consideration Agreement (the “Consideration Agreement”) to be paid in either cash or shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), or any combination thereof, at the Company’s option, with the amount of such shares to be determined based on a per share price equal to the volume weighted average price of the Common Stock on the Nasdaq Capital Market (or if the shares are not traded on the Nasdaq Capital Market, the OTC Bulletin Board or the principal trading market of the shares) during the thirty (30) consecutive trading days ending on the trading day prior to each payment date, rounded down to the nearest whole share, and to be paid or issued in two equal installments on each of the first and second anniversaries of the closing date; and (iv) earn-out payments in an aggregate amount not to exceed $2,250,000 over an earn-out period ending on the earlier of (x) December 31, 2022 and (y) the last day of the fiscal quarter during which the Shareholder is terminated by the Buyer upon Disability, Death or Without Cause or the Shareholder terminates his employment for Good Reason (each as defined in the Employment Agreement, as hereinafter defined) (the “Earn-Out End Date”), upon the achievement of certain performance thresholds and subject to the satisfaction of certain conditions as further described in the APA.

 

In connection with the Acquisition, the Shareholder entered into an employment agreement (the “Employment Agreement”) with the Company with an initial term expiring on the Earn-Out End Date.

 

The foregoing summary of the APA, the Note, the Consideration Agreement, the Employment Agreement and the Acquisition does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the APA, the Note, the Consideration Agreement and the Employment Agreement which are filed as Exhibits 2.1, 4.1, 10.3 and 10.4, respectively, to this Current Report on Form 8-K, and are incorporated herein by reference.

 

 

 

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

On October 19, 2020, the Company and certain of its domestic subsidiaries entered into the Credit Agreement. Capitalized terms not otherwise defined herein have the meanings set forth in the Credit Agreement. Among other things, the Credit Agreement provides for the following:

 

1.       A senior secured term loan facility in the principal amount of $11.5 million. The senior secured term loan at the LIBOR Rate for LIBOR Loans plus the Applicable Margin; provided, that if the provision of LIBOR Loans becomes unlawful or unavailable, then interest will be payable at a rate per annum equal to the Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans. The maturity date of the revolving credit facility is October 19, 2025 (the "Maturity Date"). The senior secured term loan will amortize in aggregate annual amounts equal to 1.00% of the original principal amount of the senior secured term loan facility with the balance payable on the Maturity Date. Proceeds of the senior secured term loan were permitted to be used in connection with the Acquisition.

 

2.       A delayed draw term loan facility in the maximum principal amount of $12.5 million. Loans under the delayed draw term loan facility may be requested at any time until October 19, 2021. Pricing and maturity for the outstanding principal amount of the delayed draw term loan shall be the same as for the senior secured term loan. Proceeds of the delayed draw term loan are to be used for Permitted Acquisitions.

 

3.       An accordion term loan facility in the maximum principal amount of $40.0 million. Loans under the accordion loan facility may be requested at any time until the Maturity Date. Each accordion term loan shall be on the same terms as those applicable to the senior secured term loan. Proceeds of accordion term loans are permitted to be used for Permitted Acquisitions.

 

Certain of the Company’s domestic subsidiaries are the borrowers under the Credit Agreement. The Company is the guarantor under the Credit Agreement. As security for the obligations of the borrowers under the Credit Agreement, (i) the borrowers under the Credit Agreement have granted a first priority lien on substantially all of their tangible and intangible personal property, including a pledge of the capital stock and membership interests, as applicable, of certain of the Company’s direct and indirect subsidiaries, and (ii) the guarantors under the Credit Agreement have granted a first priority lien on the capital stock and membership interests, as applicable, of the Company’s direct and indirect domestic subsidiaries.

 

The Credit Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio and a senior net leverage ratio. In addition, the Credit Agreement contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matter customarily restricted in such agreements. The Credit Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the Credit Agreement to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the Credit Agreement may be accelerated and become immediately due and payable.

 

The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the Loan Agreement and is subject to and qualified in its entirety by reference to the full text of the Credit Agreement, which is filed herewith as Exhibit 10.1 and is hereby incorporated by reference into this Item 2.03.

 

 

 

Item 3.02Unregistered Sales of Equity Securities.

As part of the financing described under Item 2.03 of this Current Report on Form 8-K, the Company granted a warrant to purchase 500,000 shares exercisable immediately and will issue a warrant to purchase 350,000 shares at the earlier of October 19, 2021 or certain other events (the “Warrants”). Both Warrants have an exercise price of $1.50 per share and an expiration date of March 19, 2028. The Warrants are redeemable by the Company under certain conditions. In connection with the Warrants, the Company also executed a side letter which provides that the Warrant holder will receive minimum net proceeds if the sale of all the warrant shares occurs at the later of two years from the issuance date of the Warrants or the exercise date of the Warrants.

 

The Warrants and the right to receive Common Stock pursuant to the Consideration Agreement described under Item 2.01 of this Current Report on Form 8-K were issued pursuant to the exemption contained in Section 4(2) of the Securities Act of 1933, as amended.

 

The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the Warrants and the letter agreement and is subject to and qualified in its entirety by reference to the full text of the Warrants, the forms of which are filed herewith as Exhibit 4.1 and 4.2, and the full text of the letter agreement, filed herewith as Exhibit 10.6, and are hereby incorporated by reference into this Item 3.02.

 

Item 8.01Other Events.

On October 20, 2020, the Company issued a press release relating to the signing of the APA and the closing of the Acquisition. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.1, and is incorporated by reference herein.

 

The closing of the Acquisition was one of the two transactions for which the Company disclosed it had entered into a letter of intent in its Prospectus filed under Rule 424B5 on August 5, 2020 (the “Prospectus”). The other letter of intent referred to in the Prospectus has been terminated. The Company's strategy continues to include identifying and evaluating strategic acquisitions.

  

Item 9.01Financial Statements and Exhibits.
(a)Financial Statements of Business Acquired.

 

The Company intends to file the financial statements of the Seller required by Item 9.01(a) as part of an amendment to this Current Report on Form 8-K no later than 71 calendar days after the required filing date for Item 2.01 of this Current Report on Form 8-K.

 

(b)Pro Forma Financial Information.

 

The Company intends to file the financial statements of the Seller required by Item 9.01(b) as part of an amendment to this Current Report on Form 8-K no later than 71 calendar days after the required filing date for Item 2.01 of this Current Report on Form 8-K.

 

(d)Exhibits.

 

 

 

Exhibit No. Description
2.1* Asset Purchase Agreement, dated as of October 19, 2020, by and among Quest Resource Holding Corporation, Quest Resource Management Group, LLC, Green Remedies Waste and Recycling, Inc. and Alan Allred.
4.1 Promissory Note, dated as of October 19, 2020, by Quest Resource Holding Corporation in favor of Green Remedies Waste and Recycling, Inc.
4.2* Form of Warrant to Purchase an Aggregate of 500,000 Shares.
4.3* Form of Warrant to Purchase an Aggregate of 350,000 Shares.
10.1* Credit Agreement, dated as of October 19, 2020, by and among Quest Resource Holding Corporation, Quest Resource Management Group, LLC and each of its Affiliates that are or many from time to time become parties thereto, the financial institutions that are or may from time to time become parties thereto, and Monroe Capital Management Advisors, LLC, as administrative agent for the lenders.
10.2* Joinder and First Amendment to Loan, Security and Guaranty Agreement, dated as of October 19, 2020, by and among BBVA USA, Quest Resource Management Group, LLC, Landfill Diversion Innovations, L.L.C., Quest Resource Holding Corporation, Quest Sustainability Services, Inc., Youchange, Inc., Quest Vertigent Corporation, Quest Vertigent One, LLC, and Global Alerts, LLC.  
10.3 Consideration Agreement, dated as of October 19, 2020, by and between Quest Resource Holding Corporation, Green Remedies Waste and Recycling, Inc. and Alan Allred.
10.4 Employment Agreement, dated as of October 19, 2020, by and between Quest Resource Management Group, LLC and Alan Allred.
10.5* Intercreditor Agreement, dated as of October 19, 2020, by and between BBVA, USA and Monroe Capital Management Advisors, LLC.
10.6* Letter Agreement, dated as of October 19, 2020, between Quest Resource Holding Corporation and the holders of the Warrants.
99.1 Press Release, dated October 20, 2020.

 

* The schedules and exhibits to this Exhibit have been omitted. The Company agrees to furnish a copy of the omitted schedules and exhibits to the Securities and Exchange Commission on a supplemental basis upon its request.

 

 

 

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.

 

 

  QUEST RESOURCE HOLDING CORPORATION  
     
         
Dated: October 20, 2020 By:  /s/ Laurie L. Latham  
    Name:   Laurie L. Latham  
    Title:  Senior Vice President and Chief Financial Officer  

 

 

 

 

 

ASSET PURCHASE AGREEMENT

 

by and among

 

QUEST RESOURCE MANAGEMENT GROUP, LLC,

 

GREEN REMEDIES WASTE AND RECYCLYING, inc.,

 

ALAN ALLRED

 

and

 

QUEST RESOURCE HOLDING CORPORATION

 

 

 

Dated as of October 19, 2020

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

ARTICLE I     PURCHASE AND SALE; CLOSING 4
Section 1.1. Purchase and Sale of the Purchased Assets 4
Section 1.2. Excluded Assets 4
Section 1.3. Assumed Liabilities 5
Section 1.4. Excluded Liabilities 5
Section 1.5. The Closing 5
Section 1.6. Purchase Price 5
Section 1.7. Working Capital Adjustment 6
Section 1.8. Allocation of Purchase Price 8
Section 1.9. Earn-Out Payment 9
Section 1.10. Non-Assignable Assets 11
Section 1.11. Deliveries by Seller and the Shareholder 11
Section 1.12. Deliveries by Buyer 12
Section 1.13. Buyer’s Obligations to Close 13
Section 1.14. Seller’s Obligations to Close 14
     
ARTICLE II     REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER 14
Section 2.1. Organization, Standing and Power 14
Section 2.2. Authority 15
Section 2.3. Title to Purchased Assets 15
Section 2.4. Noncontravention; Governmental Approval 15
Section 2.5. Capital Structure 16
Section 2.6. Financial Statements; Liabilities 16
Section 2.7. Indebtedness 17
Section 2.8. Absence of Certain Changes or Events 17
Section 2.9. Litigation 19
Section 2.10. Contracts 19
Section 2.11. Compliance with Laws; Permits 21
Section 2.12. Properties 22
Section 2.13. Intellectual Property 24
Section 2.14. Tax Matters 26
Section 2.15. ERISA Compliance 28
Section 2.16. Labor and Employment Matters 30
Section 2.17. Environmental Matters 31
Section 2.18. Customers and Suppliers 33
Section 2.19. Bank Accounts, Letters of Credit and Powers of Attorney 33
Section 2.20. Affiliate Transactions 33
Section 2.21. Insurance 34
Section 2.22. Accounts Receivable 34
Section 2.23. Products and Services 35
Section 2.24. Guaranties 35
Section 2.25. Absence of Restrictions on Business Activities 35

 

i

 

Section 2.26. Brokers and Other Advisors 35
Section 2.27. Fixed Assets 36
Section 2.28. Affiliates 36
Section 2.29. Disclosure 36
     
ARTICLE III     REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE SHAREHOLDER 37
Section 3.1. Authority 37
Section 3.2. Noncontravention; Governmental Approval 37
Section 3.3. Brokers and Other Advisors 38
Section 3.4. Investor Status. 38
     
ARTICLE IV REPRESENTATIONS AND WARRANTIES WITH RESPECT TO BUYER 39
Section 4.1. Organization, Standing and Power 39
Section 4.2. Authority 39
Section 4.3. Noncontravention; Governmental Approval 39
Section 4.4. Brokers and Other Advisors 40
Section 4.5. Parent Common Stock. 40
     
ARTICLE V     COVENANTS 40
Section 5.1. Subsequent Actions 40
Section 5.2. Public Announcements 41
Section 5.3. FIRPTA Certificate 41
Section 5.4. Taxes 41
Section 5.5. Non-Competition; Non-Solicitation; Non-Interference 41
Section 5.6. Transferred Employees 43
Section 5.7. Financing Efforts. 43
Section 5.8. Regulatory and Other Authorizations; Notices and Consents 44
Section 5.9. Reserved 44
Section 5.10. Reserved 44
Section 5.11. Reserved 44
Section 5.12. Reserved 44
Section 5.13. Name Change 44
Section 5.14. Reserved 44
Section 5.15. Post-Closing Cooperation 45
Section 5.16. Parent Guarantee 45
     
ARTICLE VI     INDEMNIFICATION 45
Section 6.1. Escrow Fund 45
Section 6.2. Survival 45
Section 6.3. Indemnification by Seller and the Shareholder 46
Section 6.4. Indemnification by Buyer 47
Section 6.5. Escrow Period; Release of Escrow Fund 47
Section 6.6. Claims Upon the Escrow Fund 48
Section 6.7. Notification of Claims 48
Section 6.8. Additional Indemnification Provisions 49

 

ii

 

Section 6.9. Tax Treatment of Indemnity Payments 50
Section 6.10. Right of Setoff 50
     
ARTICLE VII     GENERAL PROVISIONS 50
Section 7.1. Fees and Expenses 50
Section 7.2. Amendments 50
Section 7.3. Waiver 50
Section 7.4. Notices 50
Section 7.5. Interpretation 52
Section 7.6. Counterparts 52
Section 7.7. Entire Agreement; Third-Party Beneficiaries 52
Section 7.8. GOVERNING LAW 52
Section 7.9. Assignment 53
Section 7.10. Specific Enforcement; Consent to Jurisdiction 53
Section 7.11. Waiver of Jury Trial 53
Section 7.12. Severability 54
Section 7.13. Effect of Investigation 54
Section 7.14. Definitions 54

 

EXHIBITS:
 
Exhibit A -   Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit B -   Form of Escrow Agreement
Exhibit C -   Form of Employment Agreement
Exhibit D -   Form of Consideration Agreement
Exhibit E -   Form of Lease
Exhibit F -   Form of Promissory Note

 

 

iii

 

ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of October 19, 2020, is entered into by and among Quest Resource Management Group, LLC, a Delaware limited liability company (the “Buyer”), Green Remedies Waste and Recycling, Inc., a North Carolina corporation (the “Seller” or the “Company”), Alan Allred (the “Shareholder”), and Quest Resource Holding Corporation, a Nevada corporation (“Parent”). Buyer, Seller, the Shareholder and Parent are referred to herein collectively as the “Parties” and individually as a “Party.”

 

RECITALS:

 

A.       Seller is engaged in the business of providing solid waste management services on a brokerage and/or contract services basis for the commercial and community/multifamily housing markets in the United States of America (the “Business”);

 

B.       Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, the Business and substantially all of the assets of Seller used in or relating to the Business or otherwise, and Seller desires to transfer to Buyer, and Buyer desires to assume from Seller, certain limited liabilities of Seller as hereinafter specified; and

 

C.       The Shareholder, who is the sole registered and beneficial owner of all of the issued and outstanding shares (the “Shares”) of common stock, par value $0.0001 per share, of Seller, desires that the foregoing be effected.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I

 

PURCHASE AND SALE; CLOSING

 

Section 1.1.          Purchase and Sale of the Purchased Assets. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall sell, transfer, convey, assign and deliver to Buyer or causes to be sold, transferred, conveyed and delivered to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of all Liens, subject to Permitted Encumbrances, all of Seller’s right, title and interest in, to and under all of the assets and properties of Seller, or otherwise used in the Business and owned by Seller of every kind, character and description, tangible or intangible, real, personal or mixed, and wherever located (other than the Excluded Assets), including but not limited to those listed on Section 1.1 of the Seller Disclosure Schedule (collectively, the “Purchased Assets”).

 

Section 1.2.          Excluded Assets. The Purchased Assets to be purchased and sold hereunder, and the term “Purchased Assets” as used herein, shall not include the specified assets of Seller listed on Section 1.2 of the Seller Disclosure Schedule (collectively, the “Excluded Assets”).

 

4

 

Section 1.3.          Assumed Liabilities. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Buyer shall assume and agree to pay, perform and discharge when due (a) all liabilities and obligations of Seller under the Assumed Contracts to the extent such liabilities and obligations are to be performed after the Closing and do not arise out of or relate to a breach of any Assumed Contract or this Agreement; provided, that Buyer shall not assume any liability or obligation arising out of or relating to any occurrence, event or other condition existing or happening on or prior to the Closing Date, and (b) only such liabilities listed on Section 1.3 of the Seller Disclosure Schedule (collectively, the “Assumed Liabilities”).

 

Section 1.4.          Excluded Liabilities. Other than the Assumed Liabilities, Seller shall retain, and shall be responsible for paying, performing and discharging when due, and Buyer shall not assume or have any responsibility for, any and all liabilities and obligations of Seller of any nature whatsoever, whether past, current or future, whether accrued, contingent, known or unknown, including but not limited to the liabilities listed on Section 1.4 of the Seller Disclosure Schedule (collectively, the “Excluded Liabilities”).

 

Section 1.5.          The Closing. Consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place on the earliest practicable date after which all conditions to the obligations of the Parties set forth in Section 1.13 and Section 1.14 have been satisfied or waived by the party entitled to waive same (other than those conditions which, by their terms, are to be satisfied or waived at the Closing, but subject to the satisfaction or waiver of such conditions), or on such other date as the Seller and Buyer may mutually agree upon in writing on the date hereof (the “Closing Date”). The Closing shall occur electronically, with the Parties exchanging all signature pages to the documents specified herein via email delivery and with the originals to follow by overnight delivery. The Closing shall be deemed to have become effective as of 12:01 a.m., local time, on the Closing Date.

 

Section 1.6.          Purchase Price.

 

(a)               Upon the terms and subject to the conditions set forth in this Agreement, in consideration of the sale by Seller of the Business and Purchased Assets to Buyer, in addition to the assumption of the Assumed Liabilities, the purchase price to be paid by Buyer at the Closing shall be an amount equal to (i) $10,869,599 in cash (the “Cash Payment”), plus or minus (ii) the Preliminary Working Capital Adjustment set forth in Section 1.6(b), plus (iii) a promissory note in the aggregate principal amount of $2,684,250 and in the form attached hereto as Exhibit F (the “Note”), in each case to be paid in accordance with Section 1.6(c) (the “Initial Purchase Price”). The Initial Purchase Price shall be subject to adjustment pursuant to Section 1.7 plus (iv) $2,684,250 in additional consideration to be paid in either cash or shares of Parent Common Stock or any combination thereof (it being understood that the number of shares to be issued shall be determined in accordance with the Consideration Agreement in the form attached hereto as Exhibit D (the “Consideration Agreement”)), at Parent’s option (the “Additional Consideration”) plus (v) the Earn-Out Payment, if and when payable pursuant to Section 1.9 (as so adjusted, the “Purchase Price”).

 

5

 

(b)               On or prior to the Closing, the Seller shall have delivered to the Buyer a written statement (the “Purchase Price Closing Settlement Statement”), setting forth (i) the Seller’s good faith estimate, based upon its most recently available month end internal financial statements prior to the Closing, of the amount of the Closing Working Capital (the “Preliminary Working Capital”) and the amount by which the Preliminary Working Capital exceeds or is less than the Target Working Capital (such difference, the “Preliminary Working Capital Adjustment”), (ii) the aggregate amount of Seller’s Indebtedness as of the Closing Date (which shall be the same as the amount thereof specified in the payoff letters described in Section 1.11(g)), together with a listing of the individual accounts, their payees and amounts due to each in respect thereof, (iii) the aggregate amount of Seller Transaction Expenses unpaid as of the Closing Date, together with a listing of the individual accounts, their payees and amounts due to each in respect thereof, and (iv) based on the foregoing, the amount to be paid to Seller by Buyer at the Closing.

 

(c)               At the Closing, the Buyer will pay the Initial Purchase Price as follows:

 

(i)                 Buyer shall pay, or cause to be paid, by wire transfer of immediately available funds, an amount equal to (A) the Escrow Fund to such account provided by the Escrow Agent to Buyer and Seller no later than three (3) days prior to the Closing Date; (B) Seller’s Indebtedness, if any, in such amounts and to such accounts as set forth on the Purchase Price Closing Settlement Statement; (C) the unpaid Seller Transaction Expenses, if any, in such amounts and to such accounts as set forth on the Purchase Price Closing Settlement Statement; and (D) after payment of (A), (B) and (C) above, the balance of the Cash Payment will be paid to the Seller in the amount and to such account set forth on the Purchase Price Closing Settlement Statement; and

 

(ii)              Buyer shall deliver to Seller the Note duly executed in favor of Seller.

 

Section 1.7.          Working Capital Adjustment. The Purchase Price shall be adjusted after the Closing in accordance with the following procedures:

 

(a)               Within ninety (90) days following the Closing Date, Buyer shall prepare and deliver to Seller a statement (the “Initial Statement”) calculating and setting forth the actual Working Capital as of the Closing Date (the amount calculated and set forth on such Initial Statement, the “Initial Working Capital”), which statement shall be in substantially the same format as set forth in Section 1.7(a) of the Seller Disclosure Schedule and include a worksheet setting forth in reasonable detail how such amount was calculated. The Initial Statement, the Target Working Capital and the Initial Working Capital shall be prepared in accordance with GAAP, consistent with, but subject to, the methodologies and non-GAAP treatment as set forth on Section 1.7(a) of the Seller Disclosure Schedule.

 

(b)               During the thirty (30) days immediately following Seller’s receipt of the Initial Statement (the “Purchase Price Adjustment Review Period”), Seller shall be permitted to review Buyer’s working papers and any working papers of Buyer’s independent accountants relating to the preparation of the Initial Statement and the calculation of the Initial Working Capital, as well as all of the books, records and other relevant information relating to the Initial Working Capital with respect to the period up to and including the Business Day immediately prior to the Closing Date, and Buyer shall make reasonably available to Seller the individuals responsible for and knowledgeable about the information used in, and the preparation or calculation of, the Initial Statement and the Initial Working Capital; provided, however, that the independent accountants of Buyer shall not be obligated to make any working papers available to Seller unless and until Seller has signed a customary confidentiality and hold harmless agreement relating to such access to working papers in form and substance reasonably acceptable to such independent accountants.

 

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(c)               Seller shall notify Buyer in writing (the “Adjustment Notice”) prior to the expiration of the Purchase Price Adjustment Review Period if Seller disagrees with the Initial Statement or the Initial Working Capital. The Adjustment Notice shall set forth in reasonable detail the basis for such disagreement, the amounts involved and Seller’s determination of the amount of the Initial Working Capital. Any items not disputed in the Adjustment Notice shall be deemed to have been accepted by Seller. If no Adjustment Notice is received by Buyer on or prior to the expiration date of the Purchase Price Adjustment Review Period, then the Initial Statement and the Initial Working Capital set forth in the Initial Statement shall be deemed to have been accepted by Seller and shall become final and binding upon Seller and Buyer in accordance with the last sentence of Section 1.7(e).

 

(d)               During the thirty (30) days immediately following the delivery of an Adjustment Notice (the “Purchase Price Adjustment Consultation Period”), Seller and Buyer shall seek in good faith to resolve any disagreement that they may have with respect to the matters specified in the Adjustment Notice.

 

(e)               If, at the end of the Purchase Price Adjustment Consultation Period, Seller and Buyer have been unable to resolve all disagreements that they may have with respect to the matters specified in the Adjustment Notice, then Seller and Buyer shall submit all matters that remain in dispute with respect to the Adjustment Notice (along with a copy of the Initial Statement marked to indicate those line items that are in dispute) to a regional or national firm of independent accountants mutually acceptable to Seller and Buyer (the “Independent Accountant”). Within thirty (30) days after the submission of such matters to the Independent Accountant, or as soon as practicable thereafter, the Independent Accountant, acting as an expert and not as an arbitrator, will make a final determination, binding on Seller and Buyer, in accordance with this Section 1.7(e), of the appropriate amount of each of the line items in the Initial Statement as to which Seller and Buyer disagree as specified in the Adjustment Notice. With respect to each disputed line item, such determination, if not in accordance with the position of either Seller or Buyer, shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Seller in the Adjustment Notice or Buyer in the Initial Statement with respect to such disputed line item. For the avoidance of doubt, the Independent Accountant shall not review any line items or make any determination with respect to any matter other than those matters in the Adjustment Notice that remain in dispute. The statement of the Working Capital as of the Closing and the determination of the Working Capital set forth therein that are final and binding on Seller and Buyer, as determined either through agreement of Seller and Buyer (deemed or otherwise) pursuant to Section 1.7(a) or (c) or through the determination of the Independent Accountant pursuant to this Section 1.7(e), are referred to herein as the “Final Statement” and the “Final Working Capital”, respectively. The date on which the Final Working Capital is finally determined in accordance with this Section 1.7(e) is hereinafter referred to as the “Determination Date.”

 

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(f)                The cost of the Independent Accountant’s review and determination shall be shared equally by Seller and Buyer. Seller and Buyer shall each bear the fees of their respective counsel, auditors and other representatives incurred in connection with the determination and review of the Initial Statement. During the review by the Independent Accountant, Buyer and Seller shall each make available to the Independent Accountant such individuals and such information, books, records and work papers, as may be reasonably required by the Independent Accountant to fulfill its obligations under Section 1.7(e); provided, however, that the independent accountants of Seller or Buyer shall not be obligated to make any working papers available to the Independent Accountant unless and until the Independent Accountant has signed a customary confidentiality and hold harmless agreement relating to such access to working papers in form and substance reasonably acceptable to such independent accountants.

 

(g)               As used herein, the “Final Working Capital Adjustment” may be a positive or negative amount, and shall be equal to the Final Working Capital minus the Target Working Capital. Upon the determination of the Final Working Capital Adjustment on the Determination Date, the Initial Purchase Price shall be recomputed using the Final Working Capital Adjustment instead of the Preliminary Working Capital Adjustment. If such recomputation results in an increase of the Initial Purchase Price, the Buyer shall pay to the Seller an amount in cash equal to such increase within five (5) Business Days after the Determination Date. If such recomputation results in a decrease of the Initial Purchase Price, then Buyer shall be entitled to receive from the Escrow Fund an amount in cash equal to such decrease within five (5) Business Days after the Determination Date.

 

Section 1.8.          Allocation of Purchase Price.

 

(a)               Buyer shall prepare an allocation (the “Allocation Schedule”) of the Purchase Price (and all other capitalized costs) among the Purchased Assets in accordance with Section 1060 and the Treasury Regulations thereunder (and any similar provision of state, local, or non-U.S. law, as appropriate), which Allocation Schedule shall be binding upon Seller. Based upon the terms hereof and the Seller Disclosure Schedule, a preliminary Allocation Schedule prepared by Buyer is included herein as Schedule A. Buyer shall deliver such Allocation Schedule to Seller within sixty (60) days after the Closing Date. Buyer and Seller shall report, act, and file Company Tax Returns (including, but not limited to IRS Form 8594) in all respects and for all purposes consistent with such Allocation Schedule prepared by Buyer. Seller shall timely and properly prepare, execute, file and deliver all such documents, forms and other information as Buyer may reasonably request to prepare such Allocation Schedule. Neither Buyer nor Seller shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with such Allocation Schedule unless required to do so by applicable law.

 

(b)               If Seller provides a notice of objections (the “Notice of Objections”) to Buyer within fifteen (15) Business Days of receipt of the Allocation Schedule, Seller and Buyer shall negotiate in good faith to resolve the objections raised by Seller in the Notice of Objections. If Buyer and Seller fail to resolve the objections raised by Seller within thirty (30) days after receipt of the Notice of Objections, then the dispute shall be resolved by the Independent Accountant. Buyer, on the one hand, and Seller, on the other hand, shall share equally the fees and expenses of the Independent Accountant for this purpose. The Parties shall report the Tax consequences of the transactions contemplated by this Agreement in a manner consistent with the Allocation Schedule, as originally provided by Buyer (if Seller does not provide a timely Notice of Objections), as agreed to by Buyer and Sellers, or as determined by the Independent Accountant, as the case may be (in each case, the “Final Allocation Schedule”), and shall not take any action or position that is inconsistent therewith. The Parties shall update the Final Allocation Schedule to reflect any further adjustments to the Purchase Price in a manner consistent with the principles used to create the Final Allocation Schedule, and the Parties shall report the Tax consequences of the transactions contemplated by this Agreement in a manner consistent with the Final Allocation Schedule, as revised, and shall not take any action or position that is inconsistent therewith.

 

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Section 1.9.          Earn-Out Payment.

 

(a)               Seller shall be entitled to receive a payment (the “Earn-Out Payment”), payable in cash following the Earn-Out End Date, to be determined and paid in accordance with this Section 1.9 and the principles and requirements of Section 1.9 (a) of the Seller Disclosure Schedule. The Earn-Out Payment shall be $650,000, in the event the organic CAGR in Adjusted Gross Profit from the twelve (12) month period ended on December 31, 2019 through the Earn-Out Date (the “Earn-Out Period”) attributed to the Acquired Business and any Additional Assets is at least ten percent (10%)(the “Earn-Out Threshold”), as illustrated in Section 1.9(a) of the Seller Disclosure Schedule. The Earn-Out Payment shall increase in accordance with Section 1.9(a) of the Seller Disclosure Schedule, to the extent the organic CAGR in Adjusted Gross Profit attributed to the Acquired Business and any Additional Assets exceeds the Earn-Out Threshold but is fifteen percent (15%) or less, and shall subsequently increase thereafter in accordance with Section 1.9(a) of the Seller Disclosure Schedule, to the extent the organic CAGR in Adjusted Gross Profit attributed to the Acquired Business and any Additional Assets exceeds fifteen percent (15%) but is twenty percent (20%) or less; provided, that the Earn-Out Payment shall in no event exceed $2,250,000 (the “Maximum Earnout”); and provided, further that the Shareholder remains employed by the Buyer through the Earn-Out End Date pursuant to the terms of the Employment Agreement (the “Employment Condition”). Notwithstanding anything set forth herein to the contrary, if the Shareholder is terminated by Buyer upon Disability, Death or Without Cause or if Shareholder terminates his employment for Good Reason (each as defined in the Employment Agreement) during the Initial Term (as defined in the Employment Agreement), then the Employment Condition shall be disregarded and Shareholder shall be entitled to receive a pro-rated Earn-Out Payment, if any, earned in accordance with the provisions of this Section 1.9; it being understood that any Earn-Out Payment shall be determined based on unaudited numbers to the extent any year-end audit is not complete at the time of calculation. The Buyer and Parent shall use commercially reasonable and good faith efforts to achieve the Maximum Earnout for the benefit of Buyer and Seller. In the event of the occurrence of a change in the ownership or control of the Business following the Closing Date but prior to the Earn-Out End Date, the Buyer shall use commercially reasonable and good faith efforts to achieve the Earn-Out Payment (to the maximum extent thereof). Buyer agrees (i) to act in good faith at all times during the Earn-Out Period; (ii) to not fail to take any action that would be required by reasonable, skillful, prudent, and diligent business persons engaged in the independent operation of a business similar to the Business of Seller; and (iii) to allocate adequate resources to the achievement of the Earn-Out Threshold.

 

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(b)               As promptly as practicable following the expiration of each calendar quarter commencing with the fourth fiscal quarter of 2020 and continuing through the Earn-Out End Date (but not later than ninety (90) days therefrom for the quarterly reports and, with respect to the fourth fiscal quarter of a calendar year, not later than the earlier of (x) ninety (90) days therefrom or (y) ten (10) days following the completion of Buyer’s year-end audit), Buyer shall prepare and deliver to Seller a preliminary report (the “Preliminary Earn-Out Statement”) which shall include Buyer’s calculation of the organic CAGR in Adjusted Gross Profit attributable to the Acquired Business and any Additional Assets for and including the period then ending.

 

(c)               Promptly following receipt of the Preliminary Earn-Out Statement, Seller may review the same and, within thirty (30) days after the date of such receipt, may deliver to Buyer a certificate setting forth any objections to the Preliminary Earn-Out Statement, together with a summary of the reasons therefore and calculations which, in its view, are necessary to eliminate such objections (an “Earn-Out Objection Notice”). If Seller does not so object within such 30-day period, the Preliminary Earn-Out Statement shall be final and binding as the Earn-Out Statement for the Earn-Out Period for purposes of this Agreement.

 

(d)               During the thirty (30) days immediately following the delivery of an Earn-Out Objection Notice (the “Earn-Out Objection Consultation Period”), Seller and Buyer shall seek in good faith to resolve any disagreement that they may have with respect to the matters specified in the Earn-Out Objection Notice.

 

(e)               If, at the end of the Earn-Out Objection Consultation Period, Seller and Buyer have been unable to resolve all disagreements that they may have with respect to the matters specified in the Earn-Out Objection Notice, then Seller and Buyer shall submit all matters that remain in dispute with respect to the Earn-Out Objection Notice (along with a copy of the Preliminary Earn-Out Statement marked to indicate those line items that are in dispute) to the Independent Accountant. Within thirty (30) days after the submission of such matters to the Independent Accountant, or as soon as practicable thereafter, the Independent Accountant, acting as an expert and not as an arbitrator, will make a final determination, binding on Seller and Buyer, in accordance with this Section 1.9(e), of the appropriate amount of each of the line items in the Preliminary Earn-Out Statement as to which Seller and Buyer disagree as specified in the Earn-Out Objection Notice. With respect to each disputed line item, such determination, if not in accordance with the position of either Seller or Buyer, shall not be in excess of the higher, nor less than the lower, of the amounts advocated by Seller in the Earn-Out Objection Notice or Buyer in the Preliminary Earn-Out Statement with respect to such disputed line item. For the avoidance of doubt, the Independent Accountant shall not review any line items or make any determination with respect to any matter other than those matters in the Earn-Out Objection Notice that remain in dispute. The determination of the organic CAGR in Adjusted Gross Profit attributable to the Acquired Business and any Additional Assets for the Earn-Out Period set forth therein that is final and binding on Seller and Buyer, as determined either through agreement of Seller and Buyer (deemed or otherwise) pursuant to Section 1.9(c) or (d) or through the determination of the Independent Accountant pursuant to this Section 1.9(e), are referred to herein as the “Earn-Out Statement”.

 

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(f)                Within thirty (30) days of the determination of the final and binding Earn-Out Payment in accordance with this Section 1.9, Buyer shall pay, or cause to be paid, by wire transfer of immediately available funds, the total final and binding Earn-Out Payment amount to the Seller and to such account set forth on the Purchase Price Closing Settlement Statement or such alternative account designated by Seller as delivered in writing to Buyer before executing such wire transfer. To the extent the Buyer is unable to pay the Earn-Out Payment, whether whole or in part, in cash as contemplated by this Section 1.9(f), Parent shall promptly issue the applicable unpaid portion of the Earn-Out Payment to the Seller in shares of Parent Common Stock, with such number of shares of Parent Common Stock to be computed based on a per share price equal to the volume weighted average price of the Parent Common Stock on the Nasdaq Capital Market during the thirty (30) consecutive trading days ending on the trading day prior to the payment date, rounded down to the nearest whole share.

 

Section 1.10.      Non-Assignable Assets. Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign any interest in any instrument, contract, lease or other agreement or arrangement or any claim, right or benefit, if an assignment without the consent of a third party would constitute a breach or violation thereof and would adversely affect Seller’s ability to convey the interest or impair the interest as conveyed to Buyer. Seller shall use best efforts to obtain each of the required consents or waivers of third parties set forth in Section 1.10 of the Seller Disclosure Schedule, in each case in form and substance reasonably satisfactory to Buyer (the “Required Consents”), within ninety (90) days following the Closing. If a Required Consent is not obtained within such 90-day period following the Closing Date, or if an attempted assignment would be ineffective or would affect Seller’s ability to convey the interest unimpaired, then, at Buyer’s request, Seller shall use best efforts to cooperate with Buyer in any reasonable arrangement, including performance by Seller or Buyer, as the case may be, as agent for the other, in order to cause Buyer to receive the benefits of such interest, including but not limited to all revenue, Receivables and other cash flow under such interest, and to accept the burdens and perform the obligations, under any such instrument, contract, lease or other agreement or arrangement or any such claim, right or benefit all as of the Closing; provided, however, that the Parties will continue to use their best efforts after the Closing to obtain the applicable Required Consent. Any transfer or assignment to Buyer by Seller of any interest under any such instrument, contract, lease or other agreement or arrangement or any such claim, right or benefit that requires the consent of a third party shall be made subject to such consent or approval being obtained.

 

Section 1.11.      Deliveries by Seller and the Shareholder. At the Closing, Seller and the Shareholder, as applicable, shall deliver to Buyer:

 

(a)               a duly executed Bill of Sale, Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit A (the “Bill of Sale, Assignment and Assumption Agreement”);

 

(b)               a duly executed Escrow Agreement, substantially in the form attached hereto as Exhibit B (the “Escrow Agreement”), pursuant to which the Escrow Fund will be held in escrow to satisfy certain potential obligations of Seller and will be released to Seller or Buyer when and as provided therein;

 

(c)               a duly executed employment agreement, between Buyer or its Subsidiaries and Alan Allred, in the form attached as Exhibit C (the “Employment Agreement”);

 

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(d)               a duly executed Lease in the form attached as Exhibit E (the “Lease”), dated as of the Closing Date, and, at Buyer’s discretion, a duly executed subordination agreement with the landlord under the Lease, in form and substance reasonably satisfactory to Buyer;

 

(e)               [reserved];

 

(f)                [reserved];

 

(g)               (i) copies of payoff letters, in form and substance reasonably satisfactory to Buyer, with respect to all Indebtedness of Seller, including but not limited to the Indebtedness set forth on Section 1.11(g) of the Seller Disclosure Schedule, which payoff letters shall discharge fully the then outstanding balance, including all accrued and unpaid interest thereon and any other fees, costs and expenses payable to the holders in connection therewith, of such obligations, and (ii) copies of releases, in form and substance reasonably satisfactory to Buyer, of all Liens and other security over Seller’s properties and assets securing all such obligations;

 

(h)               duly executed assignments of all Intellectual Property owned by the Seller, including any and all domain names;

 

(i)                 [reserved];

 

(j)                 a duly executed Consideration Agreement;

 

(k)               a duly executed Consulting Agreement, in a mutually agreed upon form (the “Consulting Agreement”), between the Buyer and Gary Allred;

 

(l)                 all documents containing or relating to know-how to be acquired by Buyer pursuant to this Agreement;

 

(m)             a duly and properly authorized and executed evidence (in form and substance reasonably satisfactory to Buyer) as to the amendment of Seller’s articles of incorporation (the “Organizational Amendment”) changing Seller’s name to another name that does not include any of the following words “Green Remedies Waste and Recycling,” or any variation thereof; and

 

(n)               all such other documents, certificates, instruments of assignment and transfer as are reasonably necessary to consummate the transactions contemplated by this Agreement and the Ancillary Agreements, including but not limited to all such documents effecting the transfer to Buyer of all of Seller’s right, title and interest in, to and under the Purchased Assets, free and clear of all Liens, subject to Permitted Encumbrances, in accordance with this Agreement, in form and substance reasonably satisfactory to Buyer, and to assist Buyer in exercising all rights with respect thereto.

 

Section 1.12.      Deliveries by Buyer. At the Closing, Buyer shall deliver to Seller, the Shareholder and the Escrow Agent, as applicable:

 

(a)               the Initial Purchase Price in accordance with Section 1.6(b);

 

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(b)               each of the following documents, duly executed: (i) the Bill of Sale, Assignment and Assumption Agreement, (ii) the Escrow Agreement, (iii) the Employment Agreement, (iv) the Lease, (v) the Note, (vi) assignments with respect to the transfer of any Intellectual Property, (vii) the Consideration Agreement and (viii) the Consulting Agreement; and

 

(c)               such other documents as are required to be delivered by Buyer to Seller pursuant to this Agreement.

 

Section 1.13.      Buyer’s Obligations to Close. The obligations of the Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

 

(a)               The representations and warranties with respect to Seller contained in this Agreement shall have been true and correct when made and shall be true and correct as of the Closing Date.

 

(b)               The covenants and agreements contained in this Agreement to be performed or complied with by the Seller and the Shareholder on or before the Closing Date shall have been performed or complied with.

 

(c)               There shall not be in effect any order of a Governmental Entity restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement.

 

(d)               No Action shall be pending or threatened by or before any Governmental Entity against the Seller or the Buyer seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of Buyer, is likely to render it undesirable, impossible or unlawful to consummate such transactions.

 

(e)               [reserved].

 

(f)                The Seller and the Shareholder shall have delivered all documents, certificates and instruments required hereunder to be delivered by them by or at Closing, including the documents, certificates and instruments identified in Section 1.11.

 

(g)               [reserved].

 

(h)               The Seller and the Shareholder shall have confirmed in writing that customer Contracts representing no more than ten percent (10%) of the Seller’s LTM gross profit as of June 30, 2020 shall have terminated on or prior to the Closing.

 

(i)                 The Buyer shall have received the approval of the Parent Board.

 

(j)                 The Buyer shall have received the Financing.

 

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(k)               No action by the appropriate Governmental Entities shall have occurred or exists with respect to the certificates of occupancy covering all portions of the Leased Real Property that are improved and occupied that would adversely impact the continued use of such Leased Real Property in its current and contemplated manner, with no restrictions on such use.

 

Section 1.14.      Seller’s Obligations to Close. The obligations of the Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

 

(a)               The representations and warranties of the Buyer contained in this Agreement shall have been true and correct when made and shall be true and correct in all material respects as of the Closing.

 

(b)               The Buyer shall have executed, acknowledged (where appropriate) and delivered all documents, certificates and instruments required hereunder to be delivered by it at Closing, including the documents, certificates, instruments and consideration identified in Section 1.12.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER

 

Except as set forth in the disclosure schedule delivered by Seller to Buyer concurrently with the execution of this Agreement (the “Seller Disclosure Schedule”), Seller and the Shareholder hereby, jointly and severally, represent and warrant to Buyer as of the date hereof as follows:

 

Section 2.1.          Organization, Standing and Power.

 

(a)               Seller is a corporation duly organized, validly existing and in good standing under the Laws of the State of North Carolina. Seller has all requisite corporate power and authority necessary to enable it to use its name and to own, lease or otherwise hold and operate its properties and other assets and to carry on its business as it has been and is now currently being conducted. Seller is duly qualified or licensed to do business and is in good standing (with respect to jurisdictions that recognize that concept) in each jurisdiction in which the conduct or nature of its business or the ownership, leasing or operation of its properties or other assets makes such qualification, licensing or good standing necessary.

 

(b)               True, correct and complete copies of the Organizational Documents of Seller, as currently amended and in effect, have been made available to Buyer prior to the date hereof, and Seller is not in default under or in violation of any provision thereof.

 

(c)               Seller does not, and has never, owned, directly or indirectly, any capital stock or other equity interests in any Person (except for investments in securities not exceeding 1% of the issued and outstanding equity of any publicly held company). Seller is not subject to any obligation (by Law, contract or otherwise) to make any investment or otherwise acquire capital stock or other equity interests in any other Person.

 

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Section 2.2.          Authority. Seller has all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations under this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Seller and the consummation by Seller of the transactions contemplated by this Agreement and the Ancillary Agreements have been duly authorized by all necessary action on the part of Seller and no other proceedings on the part of Seller are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered, each of the Ancillary Agreements will have been, duly executed and delivered by Seller and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitutes (and in the case of the Ancillary Agreements, will constitute) a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or similar Laws affecting the rights of creditors generally and the availability of equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law) and any implied covenant of good faith and fair dealing (the “Bankruptcy and Equity Exception”).

 

Section 2.3.          Title to Purchased Assets. Seller has good, valid and marketable title to, a valid leasehold interest in, or other legal rights to possess or use, the Purchased Assets, free and clear of all Liens other than Permitted Encumbrances. The Purchased Assets (i) constitute all of the assets and properties, including all real property, tangible personal property and intangible personal property, used to conduct the Business as such business is currently conducted, and, are sufficient to conduct the Business from and after the Closing in the same manner as currently conducted by Seller and (ii) are in the exclusive possession and control of Seller and no Person other than Seller is entitled to possession of any portion of the Purchased Assets (except under those circumstances where the nature of the conduct of the Business in the ordinary course thereof requires possession and/or control thereof by third persons). Seller has conveyed to Buyer at and effective upon the Closing good, valid and marketable title to, and ownership of, all of its properties and assets constituting the Purchased Assets and the enforceable right to receive and/or use such Purchased Assets, free and clear of all Liens.

 

Section 2.4.          Noncontravention; Governmental Approval.

 

(a)               Except as contemplated by Section 1.10 of the Seller Disclosure Schedule, the execution, delivery and performance of this Agreement and the Ancillary Agreements by Seller do not and will not, and the consummation by Seller of the transactions contemplated by this Agreement and the Ancillary Agreements and compliance by Seller with the provisions of this Agreement and the Ancillary Agreements will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, modification, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties, rights or assets of Seller under, or require any consent or approval by, or any notice to, any person under, (i) the Organizational Documents of Seller, (ii) any loan or credit agreement, bond, debenture, note, mortgage, indenture, lease, supply agreement, license agreement, distribution agreement or other contract, agreement, obligation, commitment or instrument (each, including all amendments, modifications and supplements thereto, a “Contract”), to which Seller is a party or any of its properties, rights or assets is subject or (iii) any (A) federal, state, local or foreign statute, law (including common law), ordinance, rule or regulation (domestic or foreign) issued, promulgated or entered into by or with any Governmental Entity (each, a “Law”) applicable to Seller or any of its properties, rights or assets or (B) order, writ, injunction, decree, judgment, award, summons, notice of violation, directive, warning, notice or demand letter or request for information, settlement or stipulation issued, promulgated or entered into by or with any Governmental Entity (each, an “Order”) applicable to Seller or its properties, rights or assets; (iv) breach any Assumed Contract; or (v) result in the imposition or creation of any Lien upon or with respect to any of the Purchased Assets.

 

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(b)               No consent, approval, license, permit, order, qualification or authorization of, action by or in respect of, or registration, declaration or filing with any Governmental Entity is required by or with respect to Seller in connection with the execution, delivery and performance by Seller of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby. Except as contemplated by Section 1.10 of the Seller Disclosure Schedule, no consent, waiver, approval or authorization of, or action by, or any notice given to, any third party other than a Governmental Entity pursuant to a Seller Contract or Real Property Lease must be obtained or made by Seller in connection with the execution, delivery and performance by Seller of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby, including, without limitation, as a result of a change of control of Seller.

 

Section 2.5.          Capital Structure. Section 2.5 of the Seller Disclosure Schedule sets forth all of the issued and outstanding Shares of Seller as of the date of this Agreement, and such Shares constitute all of the issued, outstanding and authorized Equity Securities of Seller. The Shares of Seller are free of any restriction on the right to vote such Shares. Except as set forth in Section 2.5 of the Seller Disclosure Schedule, there are no options, convertible securities, warrants or convertible obligations of any nature to acquire Equity Securities of Seller.

 

Section 2.6.          Financial Statements; Liabilities.

 

(a)               Section 2.6(a) of the Seller Disclosure Schedule sets forth (i) the unaudited balance sheets of Seller as of December 31, 2018 and 2019 (the balance sheet as of December 31, 2019, the “2019 Balance Sheet”), (ii) the unaudited balance sheet of Seller as of June 30, 2020 (the “Reference Balance Sheet”), (iii) the unaudited statements of operations and cash flows of Seller for the years ended December 31, 2018 and 2019, (iv) the unaudited statements of operations and cash flows of Seller for the six months ended June 30, 2020 (the balance sheets and statements of operations and cash flows referred to in clauses (i) and (iii) above, together with any notes thereto, being collectively referred to as the “Annual Financial Statements”; the balance sheets and statements of operations and cash flows referred to in clauses (ii) and (iv) above, together with any notes thereto, being collectively referred to as the “Interim Financial Statements”; and the Annual Financial Statements and the Interim Financial Statements being collectively referred to as the “Financial Statements”). Except as set forth on Section 2.6(a) of the Seller Disclosure Schedule, the Interim Financial Statements have been prepared on the same basis as the Annual Financial Statements. The Financial Statements have been derived from the books and records of Seller, were not prepared in accordance with GAAP, have been prepared in accordance with the historical accounting principles of Seller applied on a consistent basis (except as may be set forth in the notes thereto or as otherwise noted therein), and present fairly, in all respects, the financial position and the results of operations and cash flows of Seller as of the respective dates thereof or for the periods then ended (subject, in the case of the Interim Financial Statements, to the absence of notes and normal year-end adjustments, the effect of which adjustments have not been and will not be material).

 

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(b)               Except as set forth in Section 2.6(b) the Seller Disclosure Schedule, there are no liabilities or obligations of Seller required to be recorded or disclosed under GAAP of any nature or type, whether or not absolute, accrued, contingent or otherwise, other than as and only to the extent reflected or reserved against in the Financial Statements.

 

(c)               Seller has no current intention to correct or restate, and to the Knowledge of Seller, there is not any basis to correct or restate any of the Financial Statements. Seller has not had any disagreement with any of its auditors regarding material accounting matters or policies during the past full fiscal year or during the current fiscal year-to-date.

 

Section 2.7.          Indebtedness. Section 2.7 of the Seller Disclosure Schedule sets forth as of the date of this Agreement a list separately identifying (a) each agreement, indenture or contract relating to any Indebtedness of Seller and (b) each guarantee by Seller of Indebtedness of another Person. Except as set forth on Section 2.7 of the Seller Disclosure Schedule, Seller has no outstanding Indebtedness.

 

Section 2.8.          Absence of Certain Changes or Events. Except as set forth in Section 2.8 of the Seller Disclosure Schedule, since December 31, 2019, (i) there has not been any change in the business, assets, financial position, operations, results of operations or prospects of Seller or the Business, other than any such changes that occurred in the ordinary course of business consistent with past practice, (ii) Seller has made all capital expenditures in the ordinary course of business consistent with past practice, and (iii) Seller has conducted the Business in the ordinary course of business consistent with past practice and has not:

 

(a)               mortgaged, pledged or subjected to lien, restriction or any other Lien any of the property, businesses or assets, tangible or intangible, of Seller;

 

(b)               paid any obligation or liability (absolute or contingent) other than current liabilities reflected in the 2019 Balance Sheet and current liabilities incurred since December 31, 2019 in the ordinary course of business consistent with past practice;

 

(c)               sold, transferred, leased to others or otherwise disposed of any of its assets (or committed to do any of the foregoing), or canceled, waived, released or otherwise compromised any debt or claim, or any right of significant value, except in the ordinary course of business consistent with past practice;

 

(d)               suffered any damage, destruction or loss (whether or not covered by insurance);

 

(e)               undertaken or committed to undertake any capital expenditures or capital additions or betterments for any single project or related series of projects other than (i) in the ordinary course of business consistent with past practice or (ii) those reflected on the Financial Statements;

 

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(f)                decreased the amount of any reserves for doubtful accounts receivable or written down or written up the value of any equipment or other asset, except in the ordinary course of business consistent with past practice;

 

(g)               instituted any litigation or any Action before any Governmental Entity relating to the Business or Seller or any of its properties or assets;

 

(h)               other than in the ordinary course of business consistent with past practice, (i) increased the compensation levels, remuneration or the method of determining the compensation of Employees or any bonus payment or similar arrangement with or for the benefit of any such Employee, (ii) increased benefits expense to Seller, any payments made or declared into any profit-sharing, pension, or other retirement plan for the benefit of Employees, (iii) executed, implemented, amended or terminated any Seller Benefit Plan or other compensation agreement pertaining to any Employee or (iv) agreed to increase the coverage or benefits available under any severance pay, termination pay, vacation pay, company awards, salary continuation for disability, sick leave, deferred compensation, share option or any other benefit relating to the profit or sales of Seller, bonus or other incentive compensation, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with employees;

 

(i)                 made any change in its accounting policies or principles or the methods by which such principles are applied for financial accounting purposes including, without limitation, with respect to the payments of accounts payable and collections of accounts receivable;

 

(j)                 made or changed any election concerning Taxes or Tax Returns, changed an annual accounting period, adopted or changed any accounting method, filed any amended return, entered into any closing agreement with respect to Taxes, settled any Tax claim or assessment, surrendered any right to claim a refund of Taxes or obtained or entered into any Tax ruling, agreement, contract, understanding, arrangement or plan;

 

(k)               amended (including but not limited to granted price concessions under), terminated, waived or cancelled any Seller Contract or amended, terminated, waived or cancelled any right or claim it had under any such Seller Contract;

 

(l)                 canceled any debts owed to it or claims held by it (including the settlement of any claims or litigation) other than in the ordinary course of its business consistent with past practice;

 

(m)             accelerated or delayed collection of accounts receivable in advance of or beyond their regular due dates or the dates when the same would have been collected except in the ordinary course of its business consistent with past practice;

 

(n)               delayed or accelerated payment of any account payable or other liability beyond or in advance of its due date or the date when such liability would have been paid except in the ordinary course of its business consistent with past practice; or

 

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(o)               entered into or become committed to enter into any Contract or transaction, except in the ordinary course of business consistent with past practice, and there are no material purchase commitments outstanding.

 

Section 2.9.          Litigation. Except as set forth in Section 2.9 of the Seller Disclosure Schedule, (a) there are no Actions pending or, to the Knowledge of Seller, threatened against or involving Seller or any of its assets, rights or properties, or, to the Knowledge of Seller, any present or former officer, director, shareholder or employee of Seller in their capacity as such and (b) neither Seller nor any of its assets, rights properties, nor, to the Knowledge of Seller, any present or former officer, director, shareholder or employee of Seller in their capacity as such, is or are subject to any Order.

 

Section 2.10.      Contracts.

 

(a)               Section 2.10(a) of the Seller Disclosure Schedule sets forth a list of each Contract to which Seller is a party or by which it is bound as of the date of this Agreement (collectively, the “Seller Contracts”) and that are:

 

(i)                 Contracts providing for severance, retention, change in control or other similar payments relating to the Employees;

 

(ii)              Contracts establishing any joint venture, partnership, strategic alliance, licensing arrangement, sharing of profits or other material collaboration;

 

(iii)            Contracts that limit, or purport to limit, the ability of Seller or, after the consummation of the transactions contemplated hereby, Buyer, to compete in any line of business or with any Person or in any geographic area or during any period of time or that require Seller or, after the consummation of the transactions contemplated hereby, Buyer, to deal exclusively with a given Person in respect of a given matter;

 

(iv)             Contracts for the sale of any Purchased Assets or the grant of any preferential rights to purchase any Purchased Assets or requiring the consent of any party to the transfer thereof;

 

(v)               Contracts related to an acquisition or sale of assets or other acquisition, divestiture, merger or similar transaction, in each case, involving consideration in excess of $100,000 and entered into during the five (5) years prior to the date hereof and containing representations, covenants, indemnities or other obligations that are still in effect;

 

(vi)             Contracts relating to the incurrence, assumption or guarantee of any Liability or imposing a Lien on any of the Purchased Assets, including indentures, guarantees, loan or credit agreements, sale and leaseback agreements, purchase money obligations incurred in connection with the acquisition of property, mortgages, pledge agreements, security agreements, or conditional sale or title retention agreements;

 

(vii)          Contracts (or group of related contracts and accounts such as being under common management) currently in existence or actively serviced resulting in estimated revenues or receipts to Seller in excess of $50,000 annually or $150,000 in the aggregate;

 

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(viii)        Contracts (or group of related contracts and accounts such as being under common management) currently in existence or actively serviced resulting in estimated payment obligations of more than $40,000 annually or $120,000 in the aggregate;

 

(ix)             royalty Contracts, licenses or any other Contracts relating to any Intellectual Property rights (excluding licenses pertaining to “off-the-shelf” commercially available Software used pursuant to shrink-wrap or click-through license agreements on reasonable terms for a licensee fee of no more than $10,000);

 

(x)               Contracts with material vendors;

 

(xi)             material Contracts with independent contractors or consultants (or similar arrangements) that are not cancelable without penalty or further payment and without more than thirty (30) days’ notice; and

 

(xii)          other Contracts in effect as of the date of this Agreement to which Seller is a party and that are material to the conduct of the Business, or the use or operation of the Purchased Assets or the Assumed Liabilities, as presently conducted.

 

(b)               Each Seller Contract is valid, binding and enforceable in accordance with its respective terms against Seller and each other party thereto, and in full force and effect (and will continue in full force and effect after giving effect to the sale of the Purchased Assets without breaching the terms thereof or resulting in the forfeiture or impairment of any rights thereunder or the accelerating of any obligations thereunder and without notice to, the consent, approval or act of, or the making of any filing with, any Person), subject to the Bankruptcy and Equity Exception, except to the extent that it has previously expired in accordance with its terms. Neither Seller nor any counterparty to any Seller Contract has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time or both, would constitute a default under the provisions of, or provide any basis for termination of, any Seller Contract. Except as set forth in Section 2.18(i) of the Seller Disclosure Schedules, no party to any Seller Contract has given Seller notice, orally or in writing, of its intention to cancel, terminate, change the scope of rights under, decrease its services or supplies to Seller or its usage of the services or products of Seller under, or fail to renew any Seller Contract and neither Seller nor any other party to any Seller Contract has repudiated in writing any provision thereof. Seller does not anticipate any termination or change to any Seller Contract as a result of the transactions contemplated hereby. Except as set forth in Section 2.18(i) of the Seller Disclosure Schedules, Seller is not currently renegotiating any Seller Contract or paying liquidated damages in lieu of performance thereunder. Except as set forth in Section 1.10 of the Seller Disclosure Schedules, each Seller Contract is subject to the Seller’s standard Terms and Conditions and, along with rights, remedies and obligations of the Seller thereunder, is freely assignable by the Seller without the consent of any counterparty.

 

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(c)               Seller has furnished Buyer, prior to the date hereof, with true, correct and complete list of Seller’s customer accounts that are currently in existance or actively serviced and has provided Buyer with true, correct and complete copies of each Seller Contract, to the extent such Contract exists and to the extent available, each together with all amendments, waivers or other changes thereto. Seller has otherwise disclosed to Buyer any missing Seller Contracts or otherwise has represented that services are being provided without a written contract.

 

Section 2.11.      Compliance with Laws; Permits.

 

(a)               Except as set forth on Section 2.11 of the Seller Disclosure Schedule, since December 31, 2019, (i) Seller is and has been in compliance with all Laws and Orders applicable to it, its properties, rights or assets or its business or operations and (ii) no Action has been filed or commenced or, to the Knowledge of Seller, threatened, against Seller alleging any failure to so comply. Seller is not a party to, or bound by, any Order that is material. All matters set forth on Section 2.11 of the Seller Disclosure Schedule have been resolved without any further obligation or liability of Seller.

 

(b)               Seller has in effect all approvals, authorizations, certificates, filings, franchises, licenses, exemptions, notices and permits of or with all Governmental Entities (collectively, “Permits”) necessary for it to own, lease or operate its properties and other assets and to carry on its business and operations as currently conducted and as were conducted through the most recently completed fiscal year. All Permits included in the Purchased Assets, if any, are in full force and effect and constitute all Permits required to permit Seller to operate or conduct the Business as currently conducted or to hold any interest in the Purchased Assets except to the extent the failure to be in full force and effect would not be material to the Business, Purchased Assets or Assumed Liabilities. There has occurred no default under, or violation of, any such Permit, and Seller is in compliance with the terms of the Permits. The consummation of the transactions contemplated by this Agreement and the Ancillary Agreements would not cause the revocation, modification or cancellation of any Permit.

 

(c)               None of Seller or any of its officers, directors, shareholders, employees, agents, advisors or Representatives, has, in the course of its actions for, or on behalf of, any of them (i) knowingly used any funds of Seller for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, (ii) unlawfully offered or provided, directly or indirectly, anything of value to (or received anything of value from) any foreign or domestic government employee or official or any other Person or (iii) violated any provision of the United States Foreign Corrupt Practices Act of 1977, as amended (the “Foreign Corrupt Practices Act”) or any other United States and foreign Laws concerning corrupting payments or practices, and each of such Persons is in compliance with the Foreign Corrupt Practices Act and any other United States and foreign Laws concerning corrupting payments or practices. Since January 1, 2016, Seller has not received any written notice that it has been investigated by any Governmental Entity with respect to, or given notice by a Governmental Entity of, any violation by the Seller of the Foreign Corrupt Practices Act or any other United States or foreign Laws concerning corrupting payments or practices. Seller has instituted and maintains policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance with the Foreign Corrupt Practices Act and any other United States or foreign Laws concerning corrupting payments or practices.

 

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(d)               No Action, Order or Law shall have been instituted or, to the Knowledge of Seller, threatened or proposed by any Governmental Entity that would have a material adverse impact on the Business.

 

Section 2.12.      Properties.

 

(a)               Seller does not own any interests in real property.

 

(b)               Section 2.12(b)(i) of the Seller Disclosure Schedule lists each real property leased, subleased, licensed or occupied by, or from, Seller (the “Leased Real Property”). Seller has delivered to Buyer true, correct and complete copies of all leases, subleases, licenses or other occupancy agreements or contracts (collectively, together with all amendments, modifications or supplements thereto, and assignments thereof, “Real Property Leases”) relating to the Leased Real Property or to which Seller is a party or by which Seller is bound. With respect to each Real Property Lease:

 

(i)                 Such Real Property Lease is legal, valid, binding, enforceable and in full force and effect against Seller, as applicable, and, to the Knowledge of Seller, the other party thereto;

 

(ii)              Neither the Seller, nor to the Knowledge of Seller, the other party to such Real Property Lease is in breach or default under such Real Property Lease and, to the Knowledge of Seller, no event has occurred or circumstance exists which, with the delivery of notice, the passage of time, or both, would constitute such a breach or default, or permit the termination, modification or acceleration of rent under such Real Property Lease;

 

(iii)            Neither the Seller, and to the Knowledge of Seller, the other party to such Real Property Lease, has received any notice of cancellation or termination from any landlord or subtenant under any of the Real Property Leases;

 

(iv)             Seller has paid or accrued its monthly rental, additional rent and all other monetary obligations due under each of the Real Property Leases through the last day of the month of this Agreement;

 

(v)               The full security deposit, if any is required, is held under each Real Property Lease by the other party thereto, or in the case where the Seller is the sublessor, by the Seller. No security deposit or portion thereof deposited with respect to such Real Property Lease has been applied in respect of a breach or default under such Real Property Lease which has not been re-deposited in full;

 

(vi)             Except as set forth in Section 2.12(b)(vi) of the Seller Disclosure Schedule, the other party to such Real Property Lease is not an Affiliate of and, to the Knowledge of Seller, does not otherwise have any economic interest in the Seller; and

 

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(vii)          The Seller has received all approvals of Governmental Entities (including licenses and Permits) required in connection with the ownership or lease of the Real Property, as applicable, and operation thereof.

 

(c)               The Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in any of the Leased Real Property. The Leased Real Property constitutes all of the land, buildings, structures, improvements, fixtures or other interests and rights in real property that are used or occupied by the Seller in connection with the Business. All of the Leased Real Property has access to public roads and to all utilities necessary for the operation of the Business. To the Knowledge of Seller, there is no pending or contemplated condemnation or eminent domain proceeding with respect to any Leased Real Property. The Seller is not a lessor, sublessor or grantor under any lease, sublease, consent, license or other instrument granting to another person or entity any right to the possession, use, occupancy or enjoyment of the Leased Real Property. There are no encroachments upon any of the parcels comprising the Leased Real Property (other than such encroachments as would not affect the usability or marketability of the applicable parcel of Leased Real Property) and no portion of any improvement encroaches upon any property not included within the Leased Real Property or upon the area of any easement affecting the Leased Real Property.

 

(d)               To the Knowledge of Seller, all of the Leased Real Property, fixtures and improvements thereon owned or leased by the Seller, are in good operating condition without structural defects. To the Knowledge of Seller, all mechanical and other building systems located on the Leased Real Property, are (i) in good operating condition, and no condition exists requiring material repairs, alterations or corrections, and (ii) suitable, sufficient and appropriate in all respects for their current use. None of the improvements located on the Leased Real Property or uses being made of the Leased Real Property constitute a legal non-conforming use or otherwise require any special dispensation, variance or special permit under any Laws. The Seller has delivered to Buyer true, correct and complete copies of all deeds, title exception documents (for example, easements, restrictive covenants), title reports, title polices (“Existing Title Policies”) and surveys (“Existing Surveys”) for the Leased Real Property in the Seller’s possession or control. No claim has been made under any of the Existing Title Policies or Existing Surveys. The Seller has delivered to Buyer true, correct and complete copies of any Order entered, issued, made or rendered by, or any Contract with, any Governmental Entity in connection with or relating to the Leased Real Property.

 

(e)               None of the Leased Real Property is now damaged or injured as a result of any fire, explosion, accident or other casualty that is not adequately insured against under the insurance policies maintained by the Seller with respect to the Leased Real Property.

 

(f)                To the Knowledge of the Seller, all reciprocal easement contracts, conditions and restrictions and similar public or private restrictive covenants to which the Leased Real Property is subject have not been violated. There exist no outstanding requirements or recommendations by (i) any insurance policy maintained by Seller currently insuring any Leased Real Property, (ii) any board of fire underwriters or other body exercising similar functions with respect to any Leased Real Property or (iii) the holder of any encumbrance on any Leased Real Property, in each such case that require or recommend any repairs or work of any material nature be performed on such Leased Real Property.

 

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(g)               Set forth in Section 2.12(g)(i) of the Seller Disclosure Schedule is a true, correct and complete list of all material plans and specifications relating to the Leased Real Property in the possession of the Seller. True, correct and complete copies of such material plans and specifications in the possession of the Seller have been furnished to Buyer. Except as set forth in Section 2.12(g)(ii) of the Seller Disclosure Schedule, to the Knowledge of Seller, no Leased Real Property is, or will be, subject to zoning, use or building code restrictions that would prohibit, and, to the Knowledge of Seller, no state of facts exist with respect to the Leased Real Property or will exist, that would prevent the continued leasing or use of such Leased Real Property after the Closing consistent with the current or contemplated use. Without limiting the foregoing, (i) to the Knowledge of Seller, there are no plans of any Governmental Entity to change the highway or road system in the vicinity of the Leased Real Property or to restrict or change access from any such highway or road to the Leased Real Property that could adversely affect access to any roads providing a means of ingress to or egress from the Leased Real Property, and (ii) to the Knowledge of Seller, there is no pending or proposed action to change or redefine the zoning classification of all or any portion of any of the Leased Real Property.

 

(h)               To the Knowledge of the Seller, no action seeking a reduction in real estate Taxes imposed upon the Leased Real Property or the assessed valuation thereof (or any portion thereof) (i) has been settled during the period in which the Leased Real Property has been leased by the Seller or (ii) is currently pending.

 

Section 2.13.      Intellectual Property.

 

(a)               Section 2.13(a)(i) of the Seller Disclosure Schedule sets forth a true and complete list of all registered and unregistered Intellectual Property that is owned by Seller and used in the operation of the Business (collectively, the “Owned IP”), including but not limited to: (i) for each Patent and Patent application, the Patent number or the Patent application number, as applicable; (ii) for each registered trademark and trademark application, the registration number or the trademark application serial number, as applicable, and the class of goods covered, along with all common law trademarks; (iii) for each registered copyright or copyright application, the registration number or the copyright application number, as applicable, as well as all common law copyrights; (iv) trade names; (v) registered Internet domain names; and (vi) social media sites.  Except as set forth in Section 2.13(a)(ii) of the Seller Disclosure Schedule, Seller owns the entire right, title and interest to all Owned IP free and clear of all Liens and no Person (other than the Seller), including any current or former member, stockholder, officer, consultant, manager, employee or vendor of the Seller or any of its Affiliates, has any ownership claim to, ownership right (whether or not currently exercisable) to, ownership interest in, or exclusive rights to any improvements made to, any Owned IP.  All renewal, application and other fees, and all other actions, required for the maintenance, registration or prosecution of any of the Owned IP prior to the Closing have been paid or taken off.  Without limiting the generality of the foregoing, all assignments from Persons necessary or appropriate to vest ownership in the Seller of any Owned IP have been obtained and properly recorded.  All of the Owned IP, the registrations and applications for registration of which are set forth on Section 2.13(a)(i) of the Seller Disclosure Schedule, are valid and in full force and effect.  To the Knowledge of the Seller, all of the other rights within the Owned IP are valid and subsisting.  The Seller is not subject to any Order that restricts or impairs the use of any Owned IP as currently used in the Business.  All filings for the Owned IP are in good standing.  Seller has not made any submission or suggestion to, and is not subject to any agreement with, any Person or standards body or other similar entity that would obligate the Seller or Buyer to grant licenses to any Person or otherwise impair or limit Seller’s control of any Intellectual Property.

 

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(b)               Section 2.13(b) of the Seller Disclosure Schedule sets forth a true and complete list of all Intellectual Property not owned by Seller and material or necessary to the conduct of the Business (the “Licensed IP”), together with all Contracts pursuant to which licenses of third party Intellectual Property are licensed to Seller (the “Transferred Licenses”).  Seller has the right to use the Licensed IP free and clear of all Liens.  The consummation of the transactions contemplated by this Agreement will not violate, result in the breach of, give rise to any right of modification, cancellation, termination, acceleration or suspension of, or require the authorization of, exemption by or consent of any Person under, any of the Transferred Licenses. Immediately following the Closing Date, the Buyer will be permitted to exercise all of the Seller’s rights under all Transferred Licenses, to the same extent the Seller would have been able to had the transactions contemplated by this Agreement not occurred and without being required to pay any additional amounts or consideration other than fees, royalties or payments which the Seller would otherwise be required to pay had such transactions not occurred.

 

(c)               The Owned IP, together with the Licensed IP, include all of the Intellectual Property used in or necessary to the conduct of the Business as currently conducted, and is not subject to any Liens.  Neither the execution, delivery or performance of this Agreement or any of the Ancillary Agreements nor the consummation of any of the transactions contemplated hereby or thereby will result in the release, disclosure or delivery of any Owned IP or Licensed IP, by or to any escrow agent or other Person, or in the grant, assignment or transfer to any other Person of any license or other right to any Owned IP or Licensed IP, or in the termination or modification of (or right to terminate or modify) any Owned IP or Licensed IP.

 

(d)               No Actions (including oppositions, interferences, cancellations, litigations or other proceedings) or Orders are pending or, to the Knowledge of Seller, have been threatened in the last three years (including cease and desist letters or requests for a license) against Seller with regard to any Intellectual Property.

 

(e)               The Seller has not received any opinion of counsel (whether internal or external, written or oral) relating to the patentability, infringement, validity or enforceability of any Owned IP.  The operation of Seller’s business as currently conducted does not improperly use any Intellectual Property and does not infringe, misappropriate or violate the Intellectual Property of any other Person. To the Knowledge of Seller, no entity is infringing, misappropriating or otherwise violating any Intellectual Property used in the operation of the Business.

 

(f)                Seller has provided Buyer with true, correct and complete copies of all Contracts relating to Intellectual Property used in the operation of the Business to which Seller is a party.  There has not been any unauthorized disclosure of any third party Intellectual Property by Seller or its officers or employees. None of the products or services offered by, on behalf of, or through Seller (whether by sale, license or otherwise) has been, or is, falsely, incorrectly or improperly marked or mismarked with any Intellectual Property.

 

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Section 2.14.      Tax Matters.

 

(a)               Except as set forth on Section 2.14 of the Seller Disclosure Schedules, the Company has:

 

(i)                 duly and timely filed, or caused to be filed, in accordance with applicable law all Company Tax Returns, each of which is true, correct and complete,

 

(ii)              duly and timely paid in full, or caused to be paid in full, all Company Taxes due and payable (whether or not shown on any Company Tax Return) on or prior to the Closing Date, and

 

(iii)            properly accrued in accordance with GAAP on its books and records a provision for the payment of all Company Taxes that are due, are claimed to be due, or may or will become due with respect to any Pre-Closing Period or the portion ending on the Closing Date.

 

(b)               No extension of time to file a Company Tax Return, which Company Tax Return has not since been filed in accordance with applicable law, has been filed. There is no power of attorney in effect with respect or relating to any Company Tax or Company Tax Return.

 

(c)               No Company Tax Return has ever been filed, and no Company Tax has ever been determined, on a consolidated, combined, unitary or other similar basis (including, but not limited to, a consolidated federal income Tax Return). There is no actual or potential theory or circumstance (including, but not limited to, as a transferee or successor, under Code Section 6901 or Treasury Regulation Section 1.1502-6, as a result of a Tax sharing agreement or other contract or by operation of law) under which the Company is or may be liable for any Tax determined, in whole or in part, by taking into account any income, sale, asset of or any activity conducted by any other Person.

 

(d)               Except as set forth on Section 2.14 of the Seller Disclosure Schedule, the Company has complied in all respects with all applicable law relating to the deposit, collection, withholding, payment or remittance of any Tax (including, but not limited to, Code Section 3402).

 

(e)               There is no lien for any Tax upon any asset or property of the Company (except for any statutory lien for any Tax not yet due).

 

(f)                No Proceeding is pending, threatened or proposed with regard to any Company Tax or Company Tax Return. No event or circumstance results in any significant risk that any such Proceeding will occur.

 

(g)               The statute of limitations applicable or relating to any Company Tax or any Company Tax Return has never been modified, extended or waived, nor has any request been made in writing for any such modification, extension or waiver.

 

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(h)               Any assessment, deficiency, adjustment or other similar item relating to any Company Tax or Company Tax Return has been reported to all Governmental Entities in accordance with applicable law.

 

(i)                 No jurisdiction where no Company Tax Return has been filed or no Company Tax has been paid has made or threatened to make a claim for the payment of any Company Tax or the filing of any Company Tax Return.

 

(j)                 The Company is not a party to any agreement with any Governmental Entity (including, but not limited to, any closing agreement within the meaning of Code Section 7121 or any analogous provision of applicable law). No private letter or other ruling or determination from any Governmental Entity relating to any Company Tax or Company Tax Return has ever been requested or received.

 

(k)               The Company is not a party to any contract, agreement or other arrangement that (i) results or could result in any amount that is not deductible under Code Section 162, Code Section 280G, or Code Section 404, or any similar provision of applicable law or (ii) is or could become subject to Code Section 409A or any similar provision of applicable law.

 

(l)                 The Company is not nor has it ever been a beneficiary or otherwise participated in any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4(b)(1).

 

(m)             The Company (i) does not have, and has never had, a permanent establishment in any country outside the United States and is not, and has never been, subject to Tax in a jurisdiction outside the United States, (ii) has never entered into a gain recognition agreement pursuant to Treasury Regulation Section 1.367(a)-8, and (iii) has never transferred an intangible the transfer of which would be subject to the rules of Code Section 367(d).

 

(n)               The Company is not a party to any joint venture, partnership or other agreement, contract or arrangement (whether written or oral) which could be treated as a partnership for federal income tax purposes.

 

(o)               The Company has (i) filed all reports and has created and retained all records required under Code Section 6038A with respect to its ownership by, and transactions with, related parties, and (ii) has disclosed on its U.S. federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662.

 

(p)               No asset of the Company is (i) required to be treated as being owned by any other Person pursuant to any provision of applicable law (including, but not limited to, the “safe harbor” leasing provisions of Code Section 168(f)(8), as in effect prior to the repeal of those “safe harbor” leasing provisions), (ii) subject to Code Section 168(g)(1)(A), or (iii) subject to a disqualified leaseback or long-term lease agreement as defined in Code Section 467.

 

(q)               The Company has not participated and is not participating in an international boycott within the meaning of Code Section 999.

 

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(r)                Any adjustment of Taxes of the Company made by the IRS, which adjustment is required to be reported to appropriate Governmental Authorities, has been so reported.

 

Section 2.15.      ERISA Compliance.

 

(a)               Section 2.15(a) of the Seller Disclosure Schedule sets forth a true, correct and complete list of all Seller Benefit Plans. Each Seller Benefit Plan has been administered in all respects in accordance with its terms. Seller (with respect to each Seller Benefit Plan) and each Seller Benefit Plan, are in compliance in all respects with the applicable provisions of ERISA, the Code, and all other applicable Laws.

 

(b)               Seller has made available to Buyer true, correct and complete copies of each Seller Benefit Plan and, to the extent applicable: (i) the most recent determination letter received from the IRS and any outstanding request for a determination letter; (ii) Forms 5500 for the three most recent plan years, including without limitation, all schedules thereto, all financial statements with attached opinions of independent accountants, and all actuarial reports; (iii) any written policies and/or procedures used in plan administration; (iv) current summary plan descriptions and any summaries of modifications; (v) any administrative service agreements, HIPAA business associate agreements, related trust agreements, annuity contracts and other funding instruments; (vi) with respect to any obligation relating to medical or other welfare benefits for retirees, any additional letters, memos, contracts or other written documentation relating to the obligation; (vii) with respect to each Seller Benefit Plan subject to Code Section 409A, any written policies and/or procedures used in plan administration; and (viii) any actuarial reports or funding statement prepared for any of the Seller Benefit Plans for the prior three (3) plan years.

 

(c)               All Seller Benefit Plans intended to be qualified within the meaning of Section 401(a) of the Code have received favorable determination letters from the IRS, to the effect that such Seller Benefit Plans are so qualified and exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination letter has been revoked (nor, to the Knowledge of Seller has revocation been threatened) and to the Knowledge of Seller, no event has occurred since the date of the most recent determination letter relating to any such Seller Benefit Plan that would reasonably be expected to adversely affect the qualification of such Seller Benefit Plan or increase the costs relating thereto.

 

(d)               No Multiemployer Plan exists, and neither Seller nor any Commonly Controlled Entity with respect to Seller has any liability in connection with any multiemployer plan (as defined in Section 3(37) of ERISA or Section 4001(a)(3) of ERISA).

 

(e)               Neither Seller nor any Commonly Controlled Entity has ever made any contributions to any pension benefit plan which is subject to the provisions of Title IV or otherwise has any liability under Title IV of ERISA. No condition exists that presents a risk to Seller or any Commonly Controlled Entity of incurring a liability under Title IV of ERISA. No event has occurred that would be reasonably expected to subject Seller or any Commonly Controlled Entity, to any Tax, fine, Lien, penalty or other liability imposed by ERISA, the Code, COBRA, HIPAA, or other applicable Laws, rules and regulations, and no such Tax, fine, Lien, penalty or other liability has been imposed. With respect to each Seller Benefit Plan, (i) there are no Actions by any Governmental Entity with respect to termination proceedings, (ii) there are no claims (except claims for benefits payable in the normal operation of the Seller Benefit Plans), suits or proceedings against or involving any Seller Benefit Plan or asserting any rights or claims to benefits under any Seller Benefit Plan that are pending, threatened or in progress, and (iii) to the Knowledge of Seller, there are not any facts that could give rise to any liability in the event of any such Action. Any employee and participant or other notices required by ERISA, HIPAA, COBRA, the Code, or any other state or federal law or any ruling or regulation of any state or federal administrative agency with respect to each Seller Benefit Plan has been appropriately and timely given.

 

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(f)                Each Seller Benefit Plan and related trust agreement, annuity contract or other funding instrument is legal, valid and binding and in full force and effect, and there are no defaults thereunder. None of the rights of Seller thereunder will be impaired by the consummation of the transactions contemplated by this Agreement, and all of the rights of Seller thereunder will be enforceable by Buyer at or after the Closing without the consent or agreement of any other party. Each Seller Benefit Plan (including any Seller Benefit Plan covering former employees and retirees of Seller) may be amended or terminated by Buyer on or at any time after the Closing Date, without liability to Seller or Buyer. Seller has no liability or obligation to provide life, medical, or other welfare benefits to former or retired employees, other than under COBRA.

 

(g)               With respect to each Seller Benefit Plan, (i) there has not occurred any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code), and (ii) there has not occurred a reportable event (as such term is defined in Section 4043(c) of ERISA).

 

(h)               All contributions with respect to each Seller Benefit Plan for all periods ending prior to the Closing Date (including periods from the first day of the current plan year to the Closing Date) will be made prior to the Closing Date by Seller in accordance with past practice and the recommended contribution in the applicable actuarial report. All contributions to the Seller Benefit Plans have been made on a timely basis in accordance with ERISA and the Code. All insurance premiums have been paid in full, subject only to normal retrospective adjustments in the ordinary course, with regard to the Seller Benefit Plans for policy years or other applicable policy periods ending on or before the Closing Date.

 

(i)                 The Seller has not terminated or taken action to terminate (in whole or in part) any employee benefit plans as defined in ERISA Section 3(3).

 

(j)                 None of the execution and delivery of this Agreement or the Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby (whether alone or in conjunction with any other event, including as a result of any termination of employment on or following the Closing) will (i) entitle any current or former officer, employee, manager, consultant or contractor of Seller to severance or termination pay or (ii) accelerate the time of payment or vesting, or trigger any payment or funding (through a grantor trust or otherwise) of, compensation or benefits under, increase the amount payable or trigger any other obligation pursuant to, any Seller Benefit Plan.

 

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(k)               Seller is not a party to any nonqualified deferred compensation plan, as defined in Section 409A of the Code and the applicable Treasury Regulations promulgated thereunder. No Employee or former employee of Seller is or has been subject to any Tax or penalty under Section 409A of the Code in connection with any such nonqualified deferred compensation plan which would be subject to the adverse tax consequences imposed by Section 409A(a)(1) of the Code and the applicable Treasury Regulations promulgated thereunder. Seller will not be required to make any payments of any nature whatsoever to any Person on account of such Person having adverse tax consequences in connection with amounts payable under Section 409A of the Code.

 

(l)                 Each person classified by Seller as an independent contractor satisfies and has satisfied the requirements of any applicable law to be so classified; Seller has fully and accurately reported such independent contractors’ compensation on IRS Forms 1099 when required to do so; and Seller has paid all independent contractors all monies due and owing to them. Seller has not misclassified any individual as an independent contractor or otherwise, as determined under applicable Law, for purposes of Seller Benefit Plans or for any other purpose.

 

Section 2.16.      Labor and Employment Matters.

 

(a)               Section 2.16(a) of the Seller Disclosure Schedule contains a list setting forth (i) the name, title, location, base salary or wages, bonus entitlement, annual vacation entitlement and accrued vacation of each present employee of Seller (the “Employees”) and (ii) any employee that is not working due to leave (other than approved vacation), short-or long-term disability or workers compensation claims (separately identifying as such and stating the reason for the leave, disability or claim). Section 2.16(a) of the Seller Disclosure Schedule identifies which of the Employees, as well as other consultants, agents and independent contractors, are covered by or subject to an employment, consulting, non-competition or severance agreement with Seller, and copies of all such agreements have been delivered to Buyer.

 

(b)               (i) None of the Employees is, or has ever been during the period of employment by Seller, represented by any labor union or covered by any collective bargaining agreement, (ii) to the Knowledge of Seller, there are no attempts of whatever kind and nature being made to organize any of the Employees and (iii) Seller has not (A) breached or otherwise failed to comply with any provision of any collective bargaining agreement, works council agreement or other labor union contract applicable to any of the Employees or (B) received written notice during the past three years from any Governmental Entity relating to or concerning any audit or investigation of Seller regarding any labor, employment, occupational health and safety or workplace safety and insurance/workers compensation laws, and to the Knowledge of Seller, no such audit or investigation is in progress or anticipated.

 

(c)               Seller is not delinquent in the payment of (i) any wages, salaries, commissions, bonuses or other compensation for all periods prior to the date hereof, or (ii) any amount which is due and payable to any state or state fund pursuant to any workers compensation statute, rule or regulation of any amount which is due and payable to any workers compensation claimant or any other party arising under or with respect to a claim that has been filed under any Law or administrative procedure. There is no reasonable basis for any claim by any Employee, candidate, or non-employee worker that they were subject to a wrongful discharge, or any employment discrimination or retaliation by Seller or its management, arising out of or relating to such individual’s race, sex, age, religion, national origin, ethnicity, handicap or any other protected characteristic or activity under applicable Laws; and Seller has not breached any promises, agreements or understandings made to or with any Employee, candidate or non-employee worker.

 

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(d)               Seller has not entered into any agreement, arrangement or understanding restricting its ability to terminate the employment of any or all of its Employees or non-employee workers at any time, for any lawful or no reason, without penalty or liability.

 

(e)               Seller is not liable for any payment to any trust or other fund governed by or maintained by or on behalf of any Governmental Entity, with respect to unemployment compensation benefits or social security or other benefits or obligations for Employees (other than routine payments to be made in the ordinary course of business consistent with past practice.

 

(f)                There are no personnel policies or work rules applicable to the Employees of Seller, other than policies and work rules set forth in employee manuals, true, correct and complete copies of which have previously been provided to Buyer.

 

(g)               Seller is in compliance with all Laws respecting labor, employment, employment practices and employment eligibility, including, but not limited to, Laws prohibiting discrimination in employment, and Laws regulating terms and conditions of employment, wages and hours, equal opportunity, immigration, occupational safety and health, collective bargaining, the classification of service providers as employees and/or independent contractors, and the payment of social security and other Taxes.

 

(h)               Seller has not received any correspondence from the Social Security Administration, IRS or any agency with the U.S. Department of Homeland Security regarding any Employee or Employee Social Security Number.

 

Section 2.17.      Environmental Matters.

 

(a)               Except for the matters set forth in Section 2.17 of the Seller Disclosure Schedule:

 

(i)                 To the Seller’s Knowledge, Seller possesses all Environmental Permits currently required under applicable Environmental Laws to operate its business, and within applicable statutes of limitation, has been in compliance with the terms and conditions of such Environmental Permits, and Seller has not received written notice that any Environmental Permits possessed by Seller will be revoked or suspended or will not be renewed;

 

(ii)              To the Seller’s Knowledge, the execution and delivery of this Agreement and each of the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby will not require any notification, registration, reporting, filing, investigation or remediation under any Environmental Law;

 

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(iii)            To the Seller’s Knowledge, Seller is currently in compliance, and within applicable statutes of limitation, has been in compliance, with all applicable Environmental Laws;

 

(iv)             (A) Seller has not received notice of any Action and is not subject to any Order that is open, pending, unresolved, or, to the Knowledge of Seller, threatened under any Environmental Law against Seller, and (B) neither Seller nor any predecessors in interest have any actual or potential liability under any Environmental Law that has not been resolved, including but not limited to any liability that Seller may have retained or assumed either contractually or by operation of law;

 

(v)               no property or facility currently owned, operated or leased by Seller or any predecessor in interest is listed or proposed for listing on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“CERCLA”), or on any comparable foreign or state list established under any Environmental Law;

 

(vi)             (A) there has been no Release of any Hazardous Material generated, used, owned, stored or controlled by Seller or any predecessor in interest, on, at, or under any property presently owned, leased or operated by Seller or any predecessor in interest or the property of any other Person, and (B) there are no Hazardous Materials located in, at, on, or under such facility or property, or at any other location (including, without limitation, any location where Seller has conducted the Business), in either case (A) or (B) that could reasonably be expected to require investigation, removal, remedial or corrective action by Seller or that would reasonably be likely to result in liabilities of, or losses, damages or costs (including, response costs, corrective action costs, damages for personal injury or property damage, or natural resource damages) to Seller under any Environmental Law;

 

(vii)          To the Seller’s Knowledge, no Lien has been recorded against any properties, assets or facilities owned or leased by Seller or at any location at which Seller has conducted the Business based upon any applicable Environmental Law or for costs incurred in response to any Release of Hazardous Substances; and

 

(viii)        (A) there has not been any underground or aboveground storage tank or other underground storage receptacle or related piping, or any impoundment or other disposal area in each case containing Hazardous Materials located on any facility owned, leased or operated by Seller except in compliance with Environmental Laws, and (B) no asbestos or polychlorinated biphenyls have been used or disposed of, or have been located at, on, or under such facility except in compliance with applicable Environmental Laws.

 

(b)               Seller has provided to Buyer and its authorized representatives all records and files, including but not limited to, all assessments, reports, studies, analyses, audits, tests and data in the possession of Seller concerning the existence of Hazardous Materials or any other environmental concern at properties, assets and facilities currently or formerly owned, operated or leased by Seller or any predecessor in interest, or concerning compliance by Seller with, or liability under, any Environmental Laws.

 

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Section 2.18.      Customers and Suppliers. Seller is not required to provide bonding or any other security arrangements in connection with any transactions with any of its customers or suppliers. Section 2.18 of the Seller Disclosure Schedule sets forth for Seller, with respect to the calendar years ended December 31, 2019 and 2018 and the six months ended June, 2020, a true, correct and complete list of the 20 largest customers (or related group of customers) and the 20 largest suppliers (or related group of suppliers) of Seller, based on the aggregate sales or purchases, as applicable, for the fiscal year ended December 31, 2019 and 2018 and the six months ended June 30, 2020, respectively (collectively, the “Material Customers and Suppliers”). Since January 1, 2019, (i) except as set forth in Section 2.18(i) of the Seller Disclosure Schedule, there has not been, and there is not currently pending, any dispute between the Company and any such Material Customer or Supplier; (ii) no Material Customer or Supplier has provided written notice that it intends to, and the Seller has no reason to believe of any Material Customer’s or Supplier’s intent to, terminate any agreement with the Seller or materially or adversely alter its relationship with the Seller or the Business; and (iii) the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements will not adversely affect the business relationship heretofore maintained by the Seller with any such Material Customer or Supplier.

 

Section 2.19.      Bank Accounts, Letters of Credit and Powers of Attorney. Section 2.19 of the Seller Disclosure Schedule lists (a) to the extent included in the Purchased Assets, all bank accounts, lock boxes and safe deposit boxes relating to the business and operations of Seller (including the name of the bank or other institution where such account or box is located and the name of each authorized signatory thereto), (b) to the extent remaining outstanding after the Closing, all letters of credit issued by financial institutions for the account of Seller (setting forth, in each case, the financial institution issuing such letter of credit, the maximum amount available under such letter of credit, the terms (including the expiration date) of such letter of credit and the party or parties in whose favor such letter of credit was issued), and (c) the name and address of each Person who has a power of attorney to act on behalf of Seller. Seller has heretofore delivered to Buyer true, correct and complete copies of each letter of credit and each power of attorney described in Section 2.19 of the Seller Disclosure Schedule.

 

Section 2.20.      Affiliate Transactions.

 

(a)               Except as set forth in Section 2.20 of the Seller Disclosure Schedule, (i) there are no existing Contracts, transactions, Indebtedness or other arrangements, or any related series thereof, between Seller on the one hand, and any of the directors, officers, shareholders or other Affiliates of Seller, or any of their respective Affiliates or family members, on the other hand (except for (A) amounts due on normal salaries and bonuses and in reimbursement of ordinary expenses in the ordinary course of business consistent with past practice and (B) any Seller Benefit Plan covering such person) and (ii) each of the Contracts, transactions, Indebtedness or other arrangements described in clause (i) was entered into in the ordinary course of business consistent with past practice, on commercially reasonable terms and conditions that are no less favorable to Seller or its Affiliates than arm’s length terms and can be terminated without penalty or liability to Seller. At or prior to the Closing, all such Contracts, transactions, Indebtedness and other arrangements set forth on Section 2.20 of the Seller Disclosure Schedule shall be terminated (except for (1) amounts due on normal salaries and bonuses and in reimbursement of ordinary expenses and (2) any Seller Benefit Plan covering such person) without any liability or obligation of Seller. No Employee or equity holder of Seller, or any of their respective relatives or spouses, is the direct or indirect owner of an interest in any Person which is a present competitor, supplier or customer of Seller (other than non-affiliated holdings in publicly-held companies).

 

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(b)               Except as set forth in Section 2.20(b) of the Seller Disclosure Schedule, no owner, equity holder, officer, Employee, agent or director of Seller or its Affiliates has any interest in Leased Real Property, Intellectual Property or other property of Seller.

 

Section 2.21.      Insurance. Section 2.21 of the Seller Disclosure Schedule sets forth separately for Seller: (a) the policies of insurance presently in force and, without restricting the generality of the foregoing, those covering Seller’s personnel, properties, buildings, machinery, equipment, furniture, fixtures and operations, specifying with respect to each such policy the name of the insurer, type of coverage, term of policy, limits of liability and annual premium; (b) Seller’s Losses, by year and by type of coverage, for the past three (3) years based on information received from Seller’s insurance carrier(s); (c) all outstanding insurance claims by Seller for damage to or Loss of property or income which have been referred to insurers or which Seller believes to be covered by commercial insurance; and (d) any agreements, arrangements or commitments by or relating to Seller under which Seller indemnifies any other Person or is required to carry insurance for the benefit of any other Person. True, correct and complete copies of all such policies of insurance have been provided to Buyer. Seller shall keep such insurance or comparable insurance in full force and effect through the Closing Date. Seller has complied in all respects with each such insurance policy to which it is a party and has not failed to give any notice or present any claim thereunder in a due and timely manner. The full policy limits (subject to deductibles provided in such policies) are available and unimpaired under each such policy and no insurer under any of such policies has a basis to void such policy on grounds of non-disclosure on the part of Seller thereunder. Each such policy is in full force and effect and will not in any way be affected by or terminate or lapse by reason of the transactions contemplated by this Agreement. In addition to and not in limitation of the foregoing, Section 2.21 of the Seller Disclosure Schedule contains the current annual premium paid by Seller for its officers’ and directors’ liability insurance and the insurance carrier providing such insurance and the dates through which each such premium is paid.

 

Section 2.22.      Accounts Receivable. All accounts receivable of Seller are properly included in the Financial Statements in accordance with GAAP. The accounts receivable appearing on the Reference Balance Sheet and all customer accounts receivable created since the date thereof through the Closing Date but excluding Employee accounts receivable (collectively, the “Receivables”) represent and will represent valid obligations owing to Seller and are fully collectible by Seller, subject to the reserve for doubtful accounts appearing on the Final Statement, if any, and are not subject to any counterclaims or setoffs. All Receivables and all trade accounts payable of Seller have arisen from bona fide transactions in the ordinary course of business consistent with past practice. The reserve for doubtful accounts, if any, established by Seller is adequate and consistent with the operation of Seller’s business in the ordinary course of business consistent with past practice. Seller has not collected, or accelerated the collection of, any Receivables in a manner that is inconsistent with the operation of their businesses in the ordinary course of business consistent with past practice. All Receivables are owned by Seller free and clear of all Liens.

 

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Section 2.23.      Products and Services.

 

(a)               All of (i) the products manufactured, sold, leased, and delivered by Seller and (ii) the services sold and delivered by Seller, have conformed in all respects with all applicable contractual commitments and all express and implied warranties, and Seller does not have any liability, damage, loss or claim (and there is no valid basis for any present or future Action against Seller that, if adversely determined, would give rise to any liability, damage, loss or claim) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for warranty claims set forth in the Reference Balance Sheet (and, for the avoidance of doubt, not merely in the notes thereto) as adjusted for the passage of time and the operations and transactions of the Business through the Closing Date in the ordinary course of business consistent with past practice. No (A) product manufactured, sold, leased, or delivered by Seller or (B) service sold or delivered by Seller is subject to any guaranty, warranty, or other indemnity beyond (1) the applicable standard terms and conditions of sale or lease (which have been provided to Buyer) or (2) any extended warranty/service and maintenance agreements.

 

(b)               Seller does not have any liability, damage, loss or claim (and there is no valid basis for any present or future Action against Seller that, if adversely determined, would give rise to any liability, damage, loss or claim) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by Seller or any service sold or delivered by Seller.

 

Section 2.24.      Guaranties. Seller is not a guarantor or otherwise responsible for any liability, damage, loss, claim or obligation (including Indebtedness) of any other Person.

 

Section 2.25.      Absence of Restrictions on Business Activities. There is no Contract or Order binding upon Seller or any of its properties, rights or assets which has or could reasonably be expected to have the effect of prohibiting or impairing the Purchased Assets or the Business as to be conducted immediately following the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements. The consummation of the transactions contemplated by this Agreement and the Ancillary Agreements will not result in the granting by Buyer or any of its Affiliates of any additional rights or licenses to any Intellectual Property to a third party (including any covenant not to sue). Seller has not agreed with any third party to any non-competition, non-solicitation, standstill or similar restriction on their respective businesses. Seller has not granted any exclusive rights of any kind.

 

Section 2.26.      Brokers and Other Advisors. Except as set forth in Section 2.26 of the Seller Disclosure Schedule, no broker, investment banker, financial advisor or other Person is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement and the Ancillary Agreements based upon arrangements made by or on behalf of Seller or any of its Affiliates.

 

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Section 2.27.      Fixed Assets.

 

(a)               Section 2.27(a)(i) of the Seller Disclosure Schedule sets forth a true, complete and correct list of all machinery, compactors, transportation equipment, vehicles, tools, equipment, furnishings, and fixtures owned by the Seller, with a description of the nature and amount of any Liens thereon (collectively, the “Owned Fixed Assets”). Section 2.27(a)(ii) of the Seller Disclosure Schedule sets forth a true, complete and correct list of all machinery, compactors, transportation equipment, vehicles, tools, equipment, furnishings, and fixtures leased or subject to a contract of purchase and sale, or lease commitment, by the Seller, with a description of the nature and amount of any Liens thereon (collectively, the “Licensed Fixed Assets” and, together with the Owned Fixed Assets, the “Fixed Assets”). Except as set forth on Section 2.27(a)(iii) of the Seller Disclosure Schedule, to the Knowledge of Seller, all Fixed Assets of the Seller, are (i) in good operating and serviceable condition (subject, in each case, to normal wear and tear and obsolescence; provided, that the foregoing wear, tear and obsolescence shall not disrupt the Business as presently being conducted), (ii) in a state of good maintenance and repair, ordinary wear and tear excepted, and is free from any known defects except as may be repaired by routine maintenance, and (iii) suitable for the uses for which they are intended and currently being used.

 

(b)               At the Closing, the Seller shall have good, valid and indefeasible title to each of the Owned Fixed Assets, and the valid and enforceable right to receive and/or use each of the Fixed Assets, in each case free and clear of any Liens, title defects, contractual restrictions, covenants or reservations of interests in title, other than Permitted Encumbrances.

 

(c)               Section 2.27(c) of the Seller Disclosure Schedule sets forth a true, complete and correct list of all leases of personal property involving annual payments in excess of six thousand dollars ($6,000) to which Seller is a party or by which any property or asset of Seller are bound (“Personal Property Leases”). Seller has delivered or otherwise made available to Buyer true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements thereto.

 

(d)               Seller has a valid leasehold interest under each of the Personal Property Leases which is an Assumed Contract under which it is a lessee. Seller is not in default under or material breach of any such Personal Property Lease, and Seller has not received any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by Seller under any of such Personal Property Leases and to the Knowledge of Seller, no other party is in default thereof, and no party to such Personal Property Leases has exercised any termination rights with respect thereto.

 

Section 2.28.      Affiliates. The sole Affiliate of Seller that owns assets used in connection with the Business is Elon Raven, LLC and the sole asset of Elon Raven, LLC which is used or usable in the Business is the real property which is an excluded asset.

 

Section 2.29.      Disclosure.

 

(a)               No representations or warranties by Seller in this Agreement or the Ancillary Agreements, including the Seller Disclosure Schedule, contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein or therein not misleading.

 

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(b)               Seller has furnished or caused to be furnished to Buyer true, correct and complete copies of all agreements, instruments and documents set forth in the Seller Disclosure Schedule or underlying a disclosure set forth in the Seller Disclosure Schedule. The Seller Disclosure Schedule is true, correct and complete.

 

(c)               Seller has made available true, correct and complete copies of each document that has been requested by and delivered to Buyer or its counsel in connection with their legal and accounting review of Seller.

 

(d)               The Seller has not failed to disclose to Buyer in this Agreement or in the Seller Disclosure Schedule any facts that to the Knowledge of Seller would reasonably be expected to have a Material Adverse Effect.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE SHAREHOLDER

 

The Shareholder hereby represents and warrants to Buyer as of the date hereof as follows:

 

Section 3.1.          Authority. The Shareholder has the legal capacity to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations under this Agreement and the Ancillary Agreements to which it is a party and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the applicable Ancillary Agreements by the Shareholder and the consummation by the Shareholder of the transactions contemplated by this Agreement and the applicable Ancillary Agreements have been duly authorized by all necessary action on the part of the Shareholder and no other proceedings on the part of the Shareholder are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered, each of the Ancillary Agreements will have been, duly executed and delivered by the Shareholder and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitutes (and in the case of the Ancillary Agreements, will constitute) a legal, valid and binding obligation of the Shareholder, enforceable against the Shareholder in accordance with its terms, subject to the Bankruptcy and Equity Exception.

 

Section 3.2.          Noncontravention; Governmental Approval.

 

(a)               The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Shareholder do not and will not, and the consummation by the Shareholder of the transactions contemplated by this Agreement and the Ancillary Agreements and compliance by the Shareholder with the provisions of this Agreement and the Ancillary Agreements will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, modification, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties, rights or assets of Seller under, or require any consent or approval by, or any notice to, any person under, (i) any Contract to which the Shareholder is a party or any of its properties, rights or assets is subject or (ii) any (A) Law applicable to the Shareholder or any of its properties, rights or assets or (B) Order applicable to the Shareholder or its properties, rights or assets.

 

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(b)               No consent, approval, license, permit, order, qualification or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to the Shareholder in connection with the execution, delivery and performance by Buyer of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby.

 

Section 3.3.          Brokers and Other Advisors. No broker, investment banker, financial advisor or other Person is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement and the Ancillary Agreements based upon arrangements made by or on behalf of the Shareholder or any of its Affiliates that Buyer would be liable for in connection with the transactions contemplated by this Agreement and the Ancillary Agreements.

 

Section 3.4.          Investor Status. The Shareholder (a) has such knowledge and experience in financial and business matters, knows of the high degree of risk associated with investments generally and particularly investments in the securities of companies such as Parent, and that the Shareholder is capable of evaluating the merits and risks of acquiring and holding the Parent Common Stock that may be issued as the Additional Consideration, (b) has been given the opportunity to (i) ask questions of, and receive answers from, Parent concerning matters pertaining to an investment in Parent and (ii) obtain any additional information which Parent can acquire without unreasonable effort or expense that is necessary to evaluate the merits and risks of an investment in Parent, (c) acknowledges that neither Parent nor any of its officers, directors, employees, agents or stockholders has made any representations, warranties or guaranties to the Shareholder with respect to an investment in Parent or rendered any investment advice to such Shareholder, (d) understands that the Parent Shares are being issued without registration under the Securities Act of 1933 (the “Securities Act”) under applicable state securities Laws (“Blue Sky Laws”) or under the securities Laws or Laws of similar import of any other country or jurisdiction, in reliance upon exemptions provided by the Securities Act, the Blue Sky Laws and such other securities Laws or Laws of similar import, and the regulations promulgated thereunder, (e) is the sole party in interest as to the shares of Parent Common Stock that may be acquired by the Shareholder under this Agreement and pursuant to the Consideration Agreement and is acquiring such shares of Parent Common Stock for the Shareholder’s own account, not with a view toward the resale or distribution thereof and with the intent of holding such shares indefinitely, (f) is aware that there is no assurance that Parent’s business or operations will be successful, and acknowledges that the shares of Parent Common Stock to be acquired hereunder may currently or in the future have no monetary value and acknowledges that he has been advised that an acquisition of the shares of Parent Common Stock involves a high degree of risk and is suitable only for persons of adequate financial means who have no need for liquidity with respect to the shares of Parent Common Stock and who can afford the risk of a complete loss of any value of the shares of Parent Common Stock and acknowledges that he meets such criteria, (g) understands the speculative nature of and risks involved in the proposed acquisition of shares of Parent Common Stock, (h) is able to bear the economic risk associated with the shares of Parent Common Stock for an indefinite period of time, and (i) is an “accredited investor” (as such term is defined in Regulation D promulgated under the Securities Act).

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES WITH RESPECT TO BUYER

 

Buyer hereby represents and warrants to Seller as of the date hereof as follows:

 

Section 4.1.          Organization, Standing and Power. Buyer has been duly organized, and is validly existing and in good standing (with respect to jurisdictions that recognize that concept) under the Laws of the State of Delaware and has all requisite power and authority necessary to consummate the transactions contemplated by this Agreement and the Ancillary Agreements.

 

Section 4.2.          Authority. Buyer has all requisite power and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its obligations under this Agreement and the Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Buyer and the consummation by Buyer of the transactions contemplated by this Agreement and the Ancillary Agreements have been duly authorized by all necessary action on the part of Buyer and no other proceedings on the part of Buyer are necessary to authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated hereby and thereby. This Agreement has been, and, when executed and delivered, each of the Ancillary Agreements will have been, duly executed and delivered by Buyer and, assuming the due authorization, execution and delivery by the other Parties hereto and thereto, constitutes (and in the case of the Ancillary Agreements, will constitute) a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to the Bankruptcy and Equity Exception.

 

Section 4.3.          Noncontravention; Governmental Approval.

 

(a)               The execution, delivery and performance of this Agreement and the Ancillary Agreements by Buyer do not and will not, and the consummation by Buyer of the transactions contemplated by this Agreement and the Ancillary Agreements and compliance by Buyer with the provisions of this Agreement and the Ancillary Agreements will not, conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of, or result in, termination, modification, cancellation or acceleration of any obligation or to the loss of a benefit under, or result in the creation of any Lien in or upon any of the properties, rights or assets of Buyer under, or require any consent or approval by, or any notice to, any person under, (i) the Organizational Documents of Buyer, (ii) any Contract to which Buyer is a party or any of its properties, rights or assets is subject or (iii) any (1) Law applicable to Buyer or any of its properties, rights or assets or (2) Order applicable to Buyer or its properties, rights or assets.

 

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(b)               No consent, approval, license, permit, order, qualification or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to Buyer in connection with the execution, delivery and performance by Buyer of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby.

 

Section 4.4.          Brokers and Other Advisors. No broker, investment banker, financial advisor or other Person is entitled to receive any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the transactions contemplated by this Agreement and the Ancillary Agreements based upon arrangements made by or on behalf of Buyer or any of its Affiliates.

 

Section 4.5.          Parent Common Stock. The Parent Common Stock that may be issued as the Additional Consideration, when issued in accordance with the terms of this Agreement and the Consideration Agreement, will be duly authorized, validly issued, fully paid and non-assessable and not subject to any preemptive rights and issued in compliance with all applicable securities laws and all other applicable Laws.

 

ARTICLE V

 

COVENANTS

 

Section 5.1.          Subsequent Actions. If at any time after the Closing, Buyer will consider or be advised that any bills of sale, instruments of conveyance, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm ownership (of record or otherwise) in Buyer, its right, title or interest in, to or under any or all of the Purchased Assets or otherwise to carry out this Agreement or the Ancillary Agreements, Seller and the Shareholder shall execute and deliver all bills of sale, instruments of conveyance, powers of attorney, assignments and assurances and take and do all such other actions and things as may be requested by Buyer in order to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in Buyer or otherwise to carry out this Agreement or the Ancillary Agreements. In addition to the foregoing, Seller acknowledges and agrees that for a period of up to 90 days from and after the Closing (the “Transition Period”), Seller shall (i) continue to process and pay vendor invoices and other contractual obligations that constitute Assumed Liabilities in the ordinary course of business, subject to Buyer’s input, (ii) collect and remit to Buyer, at least weekly, but net of any payments made by Seller to cover Assumed Liabilities as provided herein, all cash collected from any Receivables or otherwise related to the Purchased Assets that may be received by Seller or Shareholder during this Transition Period and (iii) ensure proper posting and reconciliation of all of the foregoing transactions to the general ledger for the Acquired Business.  To the extent Seller processes and pays any such vendor invoices and other contractual obligations that constitute Assumed Liabilities during the Transition Period, and any cash collected by Seller from any Receivables or otherwise is not sufficient to cover such payments, Buyer shall reimburse Seller for such payments no later than 10 days following the presentation of reasonable documentation relating to such payments.  To the extent Buyer collects on any Receivables that are more than 90 days past due as of the Closing within a period of six (6) months from the Closing Date, Buyer shall reimburse Seller for such cash collected, except to the extent such cash collected is accounted for in the Final Working Capital. Buyer and Seller further agree to use commercially reasonable efforts to work together to begin the process of sharing, transitioning and migrating data and accounts to Buyer with respect to the functions to be performed hereunder during the Transition Period.   During the Transition Period, Buyer shall have the right to inspect the books and records of Seller and Shareholder and any related bank accounts upon its reasonable request.

 

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Section 5.2.          Public Announcements. Seller shall not issue any press release or make any public announcement relating to the subject matter of this Agreement and the Ancillary Agreements without the prior written approval of the Buyer. Buyer shall notify the Seller before issuing, and give the Seller the opportunity to comment on, to the extent reasonably practicable, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Ancillary Agreements. The Parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement and the Ancillary Agreements shall be in the form heretofore agreed to by the Parties.

 

Section 5.3.          FIRPTA Certificate. At the Closing, Seller shall deliver to Buyer a certification of non-foreign status described in Treasury Regulation Section 1.1445-2(b)(2) with respect to Seller.

 

Section 5.4.          Taxes.

 

(a)               All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with consummation of the transactions contemplated by this Agreement shall be paid by Seller when due, and Seller will, at its own expense, file all necessary Company Tax Returns and other documentation with respect to all such Taxes, fees and charges, and, if required by applicable law, Buyer will, and will cause its Affiliates (if applicable) to, join in the execution of any such Company Tax Returns and other documentation.

 

(b)               Any Tax sharing or similar agreement with respect to or involving the Company shall be terminated as of the Closing Date, without liability to any party and shall have no further effect for any year (whether the current year, a future year or a past year). Any amounts payable under any Tax sharing or similar agreement shall be cancelled as of the Closing Date, without any liability to the Company or the Seller.

 

Section 5.5.          Non-Competition; Non-Solicitation; Non-Interference.

 

(a)               For a period of three (3) years from the Closing Date, none of Seller or the Shareholder shall, acting individually or as an owner, shareholder, member, partner, employee, or independent contractor of any Person other than Buyer or one of its Subsidiaries or Affiliates, and Seller and the Shareholder shall cause its Affiliates not to, directly or indirectly, (i) establish, own, manage, operate, control, acquire, finance, invest in or otherwise engage or participate in any business, operation or activity that competes with or is substantially similar to the Business (a “Competing Business”), (ii) enter the employ of, or render any personal services to or for the benefit of, or act as an agent or representative of, or receive remuneration in the form of salary, commissions or otherwise from, any entity which is engaged in a Competing Business or (iii) disclose any non-public information regarding the Business to a Competing Business, or use such information for the benefit of a Competing Business, provided, however, that the Seller, the Shareholder and their Affiliates may own, directly or indirectly, solely as a passive investment, securities of any business traded on any national securities exchange, provided the Seller, the Shareholder or any such Affiliate is not a controlling person of, or a member of a group that controls, such business and further provided that Seller or the Shareholder or its Affiliates do not, in the aggregate, directly or indirectly, own two percent (2%) or more of any class of securities of such business.

 

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(b)               For a period of three (3) years from the Closing Date, without the prior written consent of Buyer, none of Seller or the Shareholder shall, acting individually or as an owner, shareholder, member, partner, employee, or independent contractor of any Person other than Buyer or one of its subsidiaries or Affiliates, and Seller and the Shareholder shall cause its Affiliates not to, directly or indirectly, (i) hire, employ or otherwise engage the services of any employee of Seller that remains in the active employment of Buyer or its Subsidiaries (the “Continuing Employees”) or (ii) induce, solicit, recruit or encourage any Continuing Employee to leave the employ of Buyer or its Subsidiaries (or any successor (including by merger) to Buyer or any of its Subsidiaries (a “Successor”)), as applicable, or violate the terms of his or her contract or any other employment arrangement with such employer; provided, that nothing in this Section 5.5(b) shall prohibit Seller or the Shareholder from engaging in general solicitations to the public or general advertising not targeted at employees of Buyer or any of its Subsidiaries (or any Successor).

 

(c)               For a period of three (3) years from the Closing Date, none of Seller or the Shareholder shall, acting individually or as an owner, shareholder, member, partner, employee, or independent contractor of any Person other than Buyer or one of its subsidiaries or Affiliates, and Seller and the Shareholder shall cause its Affiliates not to, directly or indirectly, (i) interfere with the relationship between Buyer or any of its Subsidiaries (or any Successor) and any of the customers of the Business who were customers within the twelve (12) month period prior to the Closing, (ii) interfere with the relationship between Buyer or any of its Subsidiaries (or any Successor) and any of the suppliers of the Business who were suppliers within the twelve (12) month period prior to the Closing or (iii) solicit, divert or appropriate, or attempt to solicit, divert or appropriate any customers of the Business who were customers within the twelve (12) month period prior to the Closing, or any potential customers of the Business who were being actively solicited by Seller within the twelve (12) month period prior to the Closing.

 

(d)               The Parties hereto acknowledge that the covenants set forth in this Section 5.5 are an essential element of this Agreement and that, but for these covenants, the Parties hereto would not have entered into this Agreement. The Parties hereto acknowledge that, except as set forth herein, this Section 5.5 constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement or any other document contemplated by this Agreement.

 

(e)               It is the intention of the Parties hereto that if any of the restrictions or covenants contained in this Section 5.5 is held to cover a geographic area or to be for a length of time which is not permitted by applicable Law, or in any way construed to be too broad or to any extent invalid, such restrictions or covenants shall not be held to be null, void and of no effect, but to the extent such restrictions or covenants would be valid or enforceable under any applicable Law, if modified, a court of competent jurisdiction shall construe and interpret or modify this Section 5.5 to provide for a covenant having the maximum enforceable geographic area, time period and scope (not greater than those contained in this Section 5.5) that would be valid and enforceable under such applicable Law.

 

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Section 5.6.          Transferred Employees.

 

(a)               Subject to and in accordance with the provisions of this Section 5.6 and Sections 1.11(c) and 1.13(g), Buyer may, in its sole discretion, effective upon the Closing, offer full-time employment to the Employees who are employed by Seller as of the Closing Date on compensation and benefit terms substantially similar to those afforded by the Seller to such Employees immediately prior to Closing. Effective as of the Closing, Seller shall terminate and Buyer shall hire all of the Employees who accept such offer. Each of the Employees who actually becomes a full-time employee of Buyer upon the Closing is hereinafter referred to as a “Transferred Employee.”

 

(b)               The employment of each Transferred Employee by Seller shall end effective as of the close of business on the day before the Closing Date and the employment of the Transferred Employees by Buyer shall commence at or after 12:01 a.m., local time, on the day of the Closing Date.

 

(c)               Buyer shall have no responsibility for Employees of Seller who are not Transferred Employees. Seller shall be responsible for, among other things (i) payments due to all Employees of Seller (whether or not they become Transferred Employees) under any Law as a result of the execution, delivery and performance by the Seller of this Agreement and the consummation of the transaction contemplated herein and (ii) the payment of any termination or severance payments. Notwithstanding the foregoing, Buyer agrees to offer to any of Seller’s Employees who do not become Transferred Employees health insurance coverage as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), so long as the cost for such health insurance coverage is borne solely by such employees electing COBRA coverage.

 

Section 5.7.          Financing Efforts. Seller shall provide such cooperation in connection with the arrangement of the Financing as may be reasonably requested by Buyer, including, without limitation (a) reasonable participation on a timely basis and at Buyer’s sole expense (upon reasonable prior notice and during normal business hours) in meetings (including in person meetings and including senior management) and calls with prospective lenders, (b) furnishing Buyer and the financing sources with information reasonably requested to facilitate the Financing, including, without limitation, giving Buyer and the financing sources reasonable access to the offices, properties, books, records and other information of Seller, (c) providing such information and documentation about Seller as is reasonably requested by the financing sources to the extent required under applicable “know your customer” and anti-money laundering rules and regulations under the USA PATRIOT Act, (d) reasonably assisting Buyer in obtaining legal opinions, landlord waivers and estoppels, access agreements, non-disturbance agreements, customary payoff letters, lien releases, instruments of termination or discharge, in each case, as reasonably requested by Buyer or the financing sources, and at the sole expense of Buyer.

 

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Section 5.8.          Regulatory and Other Authorizations; Notices and Consents.

 

(a)               Seller shall use its commercially reasonable efforts to (i) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable under any applicable Law or otherwise to consummate the transactions contemplated by this Agreement as promptly as reasonably practicable; and (ii) obtain all of the consents contemplated by Section 1.10 of the Seller Disclosure Schedule and will cooperate fully with Buyer in promptly seeking to obtain all such consents. Buyer shall cooperate and use its commercially reasonable efforts to assist the Seller in giving such notices and obtaining such consents; provided, however, that Buyer shall have no obligation to give any guarantee or other consideration of any nature in connection with any such consent or to consent to any change in the terms of any agreement or arrangement which Buyer in its sole discretion may deem adverse to the interests of Buyer.

 

(b)               Buyer and Seller agree that, in the event that any consent, approval or authorization necessary or desirable to preserve for Seller any right or benefit under any lease, license, contract, commitment or other agreement or arrangement to which Seller is a party is not obtained prior to the Closing, the Seller will, subsequent to the Closing, cooperate with the Buyer in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, Seller shall use its commercially reasonable efforts to provide the Buyer with the rights and benefits of the affected lease, license, contract, commitment or other agreement or arrangement to the extent permitted under applicable Laws for the term of such lease, license, contract or other agreement or arrangement.

 

Section 5.9.        Reserved.

 

Section 5.10.      Reserved.

 

Section 5.11.      Reserved.

 

Section 5.12.      Reserved.

 

Section 5.13.      Name Change. Upon the Closing, Seller hereby irrevocably authorizes Buyer to file the Organizational Amendment with the Secretary of State of the State of North Carolina and in each state in which Seller is qualified to do business on Seller’s behalf. Furthermore, after the Closing, Seller shall discontinue the use of its current name (and any other tradenames currently utilized by Seller) and shall not subsequently change its name to or otherwise use or employ any name that includes the words “Green Remedies Waste and Recycling” or any variation thereof, without the prior written consent of Buyer. From and after the Closing, Seller covenants and agrees not to use or otherwise employ any of the trade names, corporate names, dba’s or similar Intellectual Property rights utilized by Seller in the conduct of the Business, which right are included in the Purchased Assets purchased hereunder.

 

Section 5.14.      Reserved.

 

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Section 5.15.      Post-Closing Cooperation.  For a period of two (2) years after the Closing, Seller shall cause its officers, employees, consultants, agents, accountants, attorneys and other Representatives to cooperate with Buyer and its Representatives in connection with the Buyer’s year-end audits, the transfer of Assumed Contracts to the Buyer, and the preparation of any reports required to be filed with the Securities and Exchange Commission or otherwise by Buyer, including, without limitation, providing any management representation letters reasonably requested by Buyer; provided that Seller shall not be required to incur any additional fees, expenses or personal liability (other than for fraud or gross negligence) in order to comply with this Section.

 

Section 5.16.      Parent Guarantee.  Parent unconditionally and irrevocably guarantees each and every representation, warranty, covenant, agreement and obligation of Buyer, and the full and timely performance of Buyer's obligations (including all payment obligations), in each case under the provisions of this Agreement. This is a guarantee of payment and performance and Parent acknowledges and agrees that this guarantee is full and unconditional, and no release or extinguishment of Buyer's obligations or liabilities (other than in accordance with the terms of this Agreement), whether by decree in any bankruptcy proceeding or otherwise, will affect the continuing validity and enforceability of this guarantee.

 

ARTICLE VI

 

INDEMNIFICATION

 

Section 6.1.          Escrow Fund. On the Closing Date, Buyer shall cause to be deposited with a mutully agreed upon escrow agent (the “Escrow Agent”), a portion of the Purchase Price equal to $500,000 (the “Escrow Fund”), such deposit to be governed by the terms set forth herein and in the Escrow Agreement.

 

Section 6.2.          Survival. All representations and warranties contained in Articles II, III and IV will survive the Closing and will remain in full force and effect until the date that is eighteen (18) months after the Closing Date, at which time they will terminate (and no claims with respect to such representations and warranties shall be made by any Person for indemnification under Sections 6.3 or 6.4 thereafter), except that (a) the Fundamental Representations (except as set forth in clause (b) below) shall survive the Closing indefinitely, and (b) the Special Representations shall survive the Closing until the six-month anniversary of the expiration of the applicable statute of limitations (after giving effect to any extensions or waivers thereof). A representation or warranty which is not a Fundamental Representation or a Special Representation is referred to herein as a “Non-Fundamental Representation”. All covenants and agreements that by their terms apply or are to be performed in whole or in part after the Closing will survive indefinitely or for the period provided in such covenants and agreements, if any, or until fully performed. All covenants and agreements that by their terms apply or are to be performed in their entirety on or prior to the Closing shall terminate at the Closing.

 

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Section 6.3.          Indemnification by Seller and the Shareholder.

 

(a)               After the Closing and subject to this Article VI, Seller and the Shareholder, jointly and severally, shall indemnify, defend and hold harmless Buyer and its Subsidiaries and its and their Affiliates, and their respective officers, directors, managers, shareholders, partners, employees, agents, advisors and Representatives (each, a “Buyer Indemnified Party”) against, and reimburse any Buyer Indemnified Party for, all Losses that such Buyer Indemnified Party suffers or incurs or becomes subject to as a result of, arising out of, relating to or in connection with:

 

(i)                 the inaccuracy or breach of any representation or warranty made by Seller or the Shareholder in this Agreement or any of the Ancillary Agreements (other than the representations and warranties made in Article III);

 

(ii)              any breach or failure by Seller or the Shareholder to perform any of their covenants or obligations contained in this Agreement or any of the Ancillary Agreements;

 

(iii)            any Excluded Liabilities;

 

(iv)             the operation of the Business prior to the Closing;

 

(v)               any and all Company Taxes for all periods ending on or before the Closing Date;

 

(vi)             any Environmental Claims and the investigation, remediation or correction of Environmental Conditions caused by, relating to or arising out of (A) any conditions prior to the Closing at properties currently or previously owned, leased or operated by Seller or any predecessors in interest, (B) the operations prior to the Closing of Seller or any predecessors in interest, including without limitation arising out of the disposal, Release or threatened Release of any Hazardous Substance owned, controlled or possessed by Seller or any predecessors in interest, and (C) any Release or threatened Release of any Hazardous Substance by a third party during periods prior to the Closing onto any Leased Real Property;

 

(vii)          any failure of Seller or any predecessors in interest to comply with Environmental Laws prior to the Closing, including the installation of any pollution control equipment or other equipment to bring their businesses into compliance with Environmental Law if such equipment is installed because their businesses were not in compliance with any Environmental Laws as of the Closing;

 

(viii)        any liability, obligation or legal responsibility arising under Environmental Laws assumed by Seller or any predecessors in interest prior to the Closing pursuant to the terms of any Contract, settlement or other written and legally binding arrangement between Seller or any predecessors in interest and any other Person;

 

(ix)             all actions, suits, proceedings, claims or demands incident to any of the foregoing or initiated to enforce the indemnification provisions herein; and

 

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(x)               any Losses incurred as a result of Seller’s failure to obtain the Required Consents.

 

(b)               After the Closing and subject to this Article VI, the Shareholder shall indemnify, defend and hold harmless the Buyer Indemnified Parties against, and reimburse any Buyer Indemnified Party for, all Losses that such Buyer Indemnified Party suffers or incurs or becomes subject to as a result of, arising out of, relating to or in connection with the inaccuracy or breach of any representation or warranty made by the Shareholder in Article III.

 

(c)               Notwithstanding anything to the contrary contained herein, except in the case of fraud, Seller shall not be required to indemnify, defend or hold harmless any Buyer Indemnified Party against, or reimburse any Buyer Indemnified Party for, any Losses under Section 6.3(a)(i) (other than Losses arising out of the breach of any Fundamental Representation)(the “Non-Fundamental Representation Losses”) unless and until such Non-Fundamental Representation Losses exceed $50,000 in the cumulative aggregate, after which point the Seller shall be liable for all indemnifiable Non-Fundamental Representation Losses incurred by the Buyer Indemnified Party up to an aggregate amount of $500,000, which shall not be limited to the Escrow Fund and shall be subject to the terms of Section 6.10 herein.

 

(d)               Notwithstanding anything to the contrary contained herein, in no event shall the rights of the Buyer Indemnified Parties under Sections 6.3(a) or 6.3(b) be limited by any knowledge of the Buyer Indemnified Parties or any disclosure made by Seller or the Shareholder.

 

(e)               In the case of any claim for indemnification of Losses (the “Fundamental and Special Representation Losses”) arising from a breach of any Fundamental Representation or Special Representation under Section 6.3(a)(i) of this Agreement, the aggregate cumulative liability of the Shareholder to indemnify the Buyer Indemnified Parties from and against any Fundamental and Special Representation Losses in excess of amounts satisfied from the Escrow Fund shall in all cases be limited to the portion of the Purchase Price received by the Shareholder (including amounts received pursuant to distributions from the Escrow Fund).

 

Section 6.4.          Indemnification by Buyer.

 

(a)               After the Closing and subject to this Article VI, Buyer shall indemnify, defend and hold harmless Seller and its Affiliates and Representatives (each, a “Seller Indemnified Party”) against, and reimburse any Seller Indemnified Party for, all Losses that such Seller Indemnified Party suffers or incurs or becomes subject to as a result of, arising out of, relating to or in connection with (i) the inaccuracy or breach of any representation or warranty made by Buyer in this Agreement or (ii) the Assumed Liabilities.

 

(b)               Notwithstanding anything to the contrary contained herein, in no event shall the rights of the Seller Indemnified Parties under Section 6.4(a) be limited by any knowledge of the Seller Indemnified Parties or any disclosure made by Buyer.

 

Section 6.5.          Escrow Period; Release of Escrow Fund. The Escrow Fund shall commence on the Closing Date and terminate (the “Escrow Termination Date”) on the date that is six (6) months from the Closing Date (the “Escrow Period”), subject to the limitations set forth in this Section 6.5. On the Escrow Termination Date, all assets then remaining in the Escrow Fund shall be released as set forth herein; provided, that assets representing the amount of any claim made pursuant to Section 6.6 or Section 1.7 during the Escrow Period shall be withheld and remain in the Escrow Fund pending resolution of such claim. Any portion of the Escrow Fund at the Escrow Termination Date for which there is no claim pursuant to this Article VI or pursuant to Section 1.7 (the “Remaining Escrow Amount”) shall be promptly delivered by the Escrow Agent in accordance with the terms of the Escrow Agreement to Seller.

 

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Section 6.6.          Claims Upon the Escrow Fund. Subject to the provisions of this Article VI, a Person that may be entitled to be indemnified under this Agreement (the “Indemnified Party”), other than in respect of a Third Party Claim, shall provide written notice to the Party or Parties liable for such indemnification (the “Indemnifying Party”) and the Escrow Agent, specifying in reasonable detail the individual items of Losses for which indemnification is being sought, the date each such item was paid, or properly accrued or arose, and the nature of the misrepresentation, breach of warranty or claim to which such item or category is related (the “Indemnity Notice”). The Indemnity Notice shall be delivered by the Indemnified Party to the Indemnifying Party and the Escrow Agent on or before the last day of the Escrow Period. If the Indemnifying Party, within a period of ten (10) days after the giving of the Indemnity Notice, shall not give written notice to the Indemnified Party and the Escrow Agent announcing its intention to contest such assertion of the Indemnified Party, such assertion of the Indemnified Party shall be deemed accepted and the amount of the Losses shall be deemed established. If, however, the Indemnifying Party contests the assertion of the Losses, within the 10-day period, the Indemnified Party shall have the right to bring suit to resolve the contested assertion. The Indemnified Party and the Indemnifying Party may agree in writing, at any time, as to the existence and the amount of the Losses, and upon the execution of such agreement, such Losses shall be deemed established.

 

Section 6.7.          Notification of Claims.

 

(a)               An Indemnified Party shall promptly notify the Indemnifying Party in writing to Buyer or to Seller and the Shareholder, as applicable, with a copy to the Escrow Agent, of any third party claim in respect of which indemnity may reasonably be sought under this Article VI, including any pending claim or demand by a third party that the Indemnified Party has determined has given or could reasonably give rise to a right of indemnification under this Agreement (including a pending claim or demand asserted by a third party against the Indemnified Party) (each, a “Third Party Claim”), describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or demand; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article VI except to the extent that the Indemnifying Party is materially prejudiced by such failure.

 

(b)               Upon receipt of a notice of a claim for indemnity from an Indemnified Party pursuant to Section 6.7(a) in respect of a Third Party Claim, the Indemnifying Party may, by notice to the Indemnified Party delivered within ten (10) Business Days of the receipt of notice of such Third Party Claim, assume the defense and control of any Third Party Claim, with its own counsel and at its own expense, provided the Indemnifying Party shall (i) acknowledge in writing its indemnity obligations under this Article VI in full for such Third Party Claim and pay such Third Party Claim in full, agree to defend such Third Party Claim and prosecute such defense diligently and (ii) allow the Indemnified Party a reasonable opportunity to participate in the defense of such Third Party Claim with its own counsel and at its own expense. The Indemnified Party may take any actions reasonably necessary to defend such Third Party Claim prior to the time that it receives a notice from the Indemnifying Party as contemplated by the immediately preceding sentence. Each of Seller, the Shareholder or Buyer (as the case may be), shall, and shall cause each of its Affiliates and Representatives to, cooperate fully with the Indemnifying Party in the defense of any Third Party Claim. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party (which shall not be unreasonably withheld or delayed), consent to a settlement, compromise or discharge of, or the entry of any judgment arising from, any Third Party Claim, and the Indemnifying Party shall (i) pay or cause to be paid all amounts arising out of such settlement or judgment concurrently with the effectiveness of such settlement or judgment (unless otherwise provided in such judgment), (ii) not encumber any of the assets of any Indemnified Party or agree to any restriction or condition that would apply to or affect any Indemnified Party or the conduct of any Indemnified Party’s business and (iii) obtain, as a condition of any settlement, compromise, discharge, entry of judgment (if applicable), or other resolution, a complete and unconditional release of each Indemnified Party from any and all liabilities in respect of such Third Party Claim. Provided that the Indemnifying Party has assumed the defense and control of a claim or demand in accordance with this Section 6.7(b), the Indemnified Party shall not settle, compromise or consent to the entry of any judgment with respect to such claim or demand or admit to any liability with respect to such claim or demand without the prior written consent of the Indemnifying Party (which shall not be unreasonably withheld or delayed). In the event that the Indemnifying Party does not assume the defense and control of any Third Party Claim in accordance with this Section 6.7(b), the Indemnified Party shall be entitled to defend and control such claim as it deems appropriate, without prejudice to any other rights of the Indemnified Party under this Article VI.

 

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Section 6.8.          Additional Indemnification Provisions.

 

(a)               Each of Seller, the Shareholder and Buyer agree that with respect to each indemnification obligation set forth in this Article VI: (i) all Losses shall be net of any Eligible Insurance Proceeds, and (ii) in no event shall an Indemnifying Party have any liability to an Indemnified Party for any punitive or special damages other than punitive or special damages payable to third parties in connection with a Third Party Claim.

 

(b)               Any amount payable by an Indemnifying Party pursuant to this Article VI shall be paid promptly and payment shall not be delayed pending any determination of Eligible Insurance Proceeds. In any case where an Indemnified Party recovers any Eligible Insurance Proceeds in respect of any Loss for which an Indemnifying Party has actually reimbursed it pursuant to this Article VI, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount of such Eligible Insurance Proceeds, but not in excess of the sum of (i) any amount previously paid by the Indemnifying Party to or on behalf of the Indemnified Party in respect of such claim and (ii) any amount expended by the Indemnifying Party in pursuing or defending any claim arising out of such matter.

 

(c)               If any portion of Losses to be reimbursed by the Indemnifying Party shall be covered, in whole or in part, by third party insurance coverage (including the insurance policies maintained for the benefit of Seller prior to the Closing), then any such insurance proceeds actually received by the Indemnified Party, net of costs reasonably incurred by the Indemnified Party in seeking such collection, shall be considered “Eligible Insurance Proceeds”, it being understood that such Indemnified Party shall use its reasonable efforts to make any such insurance claim.

 

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Section 6.9.          Tax Treatment of Indemnity Payments. Seller, the Shareholder and Buyer agree to treat any indemnity payment made pursuant to this Article VI as an adjustment to the Purchase Price for all income tax purposes. If, notwithstanding the treatment required by the preceding sentence, any indemnification payment under this Article VI (including this Section 6.9) is determined to be taxable to the Party receiving such payment by any Governmental Entity, the paying Party shall also indemnify the Party receiving such payment for any Taxes incurred by reason of the receipt of such payment and any Losses incurred by the party receiving such payment in connection with such Taxes (or any asserted deficiency, claim, demand, action, suit, proceeding, judgment or assessment, including the defense or settlement thereof, relating to such Taxes), which amount shall be determined by the Independent Accountant.

 

Section 6.10.      Right of Setoff. In the event of any dispute between the Seller and a Buyer Indemnified Party regarding any claims for indemnification under this Article VI, subject to the terms of this Section 6.10, the Buyer is hereby authorized to, at any time and from time to time following the occurrence of such dispute, upon prior written notice to the Seller, set off and apply in the following order, the Escrow, then the Note payable to the Seller pursuant to Section 1.6, then the Additional Consideration and finally any Earn-Out Payment pursuant to Section 1.9, against any amounts owing to a Buyer Indemnified Party pursuant to this Article VI.

 

 

ARTICLE VII

 

GENERAL PROVISIONS

 

Section 7.1.          Fees and Expenses. Except as expressly provided otherwise in this Agreement, all fees, costs and expenses, including fees and disbursements of counsel, financial advisers and accountants, incurred in connection with this Agreement, the sale of the Purchased Assets and the Ancillary Agreements shall be paid by the Party incurring such fees, costs or expenses.

 

Section 7.2.          Amendments. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of Buyer and Seller.

 

Section 7.3.          Waiver. Any agreement on the part of a Party to any waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of any Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights nor shall any single or partial exercise by any Party to this Agreement of any of its rights under this Agreement preclude any other or further exercise of such rights or any other rights under this Agreement.

 

Section 7.4.          Notices. Except for notices that are specifically required by the terms of this Agreement to be delivered orally, all notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given personally, by electronic mail or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses (or at such other address for a party as shall be specified by like notice):

 

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(a)               if to Seller:

 

Green Remedies Waste and Recycling, Inc.
P.O. Box 1599
Elon, North Carolina 27244-1599
E-mail: glallred@gmail.com

 

with a copy to:

 

Pittman & Steele, PLLC
Attention: Nathan Adams
1694 Westbrook Avenue
Post Office Box 2290
Burlington, North Carolina 27215
E-mail: nathan.adams@pittmansteelelaw.com

 

(b)               if to the Shareholder:

 

Alan Allred
P.O. Box 1599
Elon, North Carolina 27244-1599
E-mail: alan@greenremedieswaste.com

 

with a copy to

 

Pittman & Steele, PLLC
Attention: Nathan R. Adams
1694 Westbrook Avenue
Post Office Box 2290
Burlington, North Carolina 27215
E-mail: nathan.adams@pittmansteelelaw.com

 

(c)               if to Buyer:

 

Quest Resource Holding Corporation
3481 Plano Parkway
The Colony, Texas 75056
Attn: Laurie Latham
E-mail: LaurieL@questrmg.com

 

with a copy to:

 

Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, NY 10019
Attention: Elizabeth Gonzalez-Sussman, Esq. and Kenneth A. Schlesinger, Esq.
E-mail: egonzalez@olshanlaw.com; kschlesinger@olshanlaw.com

 

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Notices shall be deemed given upon receipt.

 

Section 7.5.          Interpretation. When a reference is made in this Agreement to an Article, a Section, an Exhibit or a Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. References to “this Agreement” shall include the Seller Disclosure Schedule. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The word “or” is not exclusive. The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply “if”. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. All Exhibits and Schedules annexed hereto or referred to herein, and the Seller Disclosure Schedule, are hereby incorporated in and made a part of this Agreement as if set forth in full herein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any Contract, instrument or Law defined or referred to herein means such Contract, instrument or Law as from time to time amended, modified or supplemented, including (in the case of Contracts or instruments) by waiver or consent and (in the case of Laws) by succession of comparable successor Laws and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. This Agreement is the product of negotiation by the Parties having the assistance of counsel and other advisers. It is the intention of the Parties that this Agreement not be construed more strictly with regard to one party than with regard to the others.

 

Section 7.6.          Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties (including by facsimile or other electronic image scan transmission).

 

Section 7.7.          Entire Agreement; Third-Party Beneficiaries. This Agreement (including the Exhibits and the Seller Disclosure Schedule) and the Ancillary Agreements (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof and thereof and (b) are not intended to and do not confer upon any person other than the Parties hereto any legal or equitable rights or remedies. Notwithstanding the foregoing clause (b), the provisions of Article VI shall be enforceable by the Indemnified Parties and other Persons referred to therein.

 

Section 7.8.          GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

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Section 7.9.          Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise by any of the Parties without the prior written consent of the other Parties, and any assignment without such consent shall be null and void; provided, however, that Buyer may assign its rights under this Agreement to any Affiliate, but such assignment shall not relieve Buyer of its obligations or liabilities under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.

 

Section 7.10.      Specific Enforcement; Consent to Jurisdiction.

 

(a)               The Parties agree that irreparable damage would occur and that the Parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Texas state court, without proof of actual damages or otherwise (and each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy), this being in addition to any other remedy to which they are entitled at law or in equity. The Parties further agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, nor to assert that a remedy of monetary damages would provide an adequate remedy.

 

(b)               In addition, each of the Parties hereto (i) consents to submit itself, and hereby submits itself, to the personal jurisdiction of any Texas state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and the Ancillary Agreements, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and agrees not to plead or claim any objection to the laying of venue in any such court or that any judicial proceeding in any such court has been brought in an inconvenient forum, (iii) agrees that it will not bring any action relating to this Agreement or the Ancillary Agreements or any of the transactions contemplated hereby and thereby in any court other than a Texas state court or, if under applicable Law exclusive jurisdiction is vested in the federal courts, any court of the United States located in the State of Texas and (iv) consents to service of process being made through the notice procedures set forth in Section 7.4.

 

(c)               Without limiting other means of service of process permissible under applicable Law, Seller and Buyer hereby agree that service of any process, summons, notice or document by U.S. registered mail to the respective addresses set forth in Section 7.4 shall be effective service of process for any suit or proceeding in connection with this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby.

 

Section 7.11.      Waiver of Jury Trial. Each Party hereto hereby waives, to the fullest extent permitted by applicable Law, any right it may have to a trial by jury in respect of any suit, action or other proceeding arising out of this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby. Each Party hereto (a) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such party would not, in the event of any action, suit or proceeding, seek to enforce the foregoing waiver and (b) acknowledges that it and the other Parties hereto have been induced to enter into this Agreement, by, among other things, the mutual waiver and certifications in this Section 7.11.

 

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Section 7.12.      Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, 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 to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated by this Agreement and the Ancillary Agreements are fulfilled to the extent possible.

 

Section 7.13.      Effect of Investigation. No information provided to or obtained by Buyer or any other investigation or knowledge acquired by Buyer, any other Buyer Indemnified Party or any of their respective Representatives, whether before or after the execution hereof, shall (a) operate as a waiver with respect to or otherwise affect any representation, warranty, covenant or agreement made or given (as modified by the Seller Disclosure Schedule delivered concurrently with the execution of this Agreement) by Seller or any condition to the obligations of Buyer, in each case, in this Agreement or any Ancillary Agreement or in any other instrument or document delivered in connection herewith or therewith, or (b) limit or otherwise affect the remedies available to Buyer hereunder (including, but not limited to, any Buyer Indemnified Party’s right to seek indemnification pursuant to Article VI hereof).

 

Section 7.14.      Definitions. As used in this Agreement, the terms set forth below shall have the following meanings:

 

Acquired Business” means the Business being acquired under this Agreement.

 

Actions” mean any criminal, civil or administrative actions, suits, claims, hearings, proceedings, arbitrations, mediations, audits, inquiries or investigations.

 

Additional Assets” means any additional assets acquired by the Buyer that are related to the Acquired Business and managed by the Shareholder.

 

Adjusted Gross Profit” or “Cash Adjusted Gross Profit” in respect of periods after December 31, 2019 means (i) Gross Profit, less (ii) Growth SG&A, less (iii) capital expense charges (“capital expense charges” are the capitalized costs and expenses determined in accordance with GAAP of acquiring and placing in service direct revenue producing assets with respect to the Acquired Business and any Additional Assets written off over a period of eighty-four months on a straight line basis commencing with the month in which revenue is first generated in respect thereof) or lease expense charges in the event any direct revenue producing assets are sold or otherwise transferred by Buyer and replaced with leased equipment, including without limitation in a sale-leaseback transaction, provided that any such third party lease expenses shall not exceed the capital expense charge for such asset (in all computations required under this Agreement, all leases shall be treated as operating and not capital leases consistent with Seller’s current practices).

 

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An “Affiliate” of any person means another person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first person. For the purposes of this definition, “Control” means, as to any person, the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise. The term “Controlled” shall have a correlative meaning.

 

Ancillary Agreements” mean, collectively, the Bill of Sale, Assignment and Assumption Agreement, Escrow Agreement, Employment Agreement, Lease, assignments with respect to the transfer of any Intellectual Property, the Note, the Consideration Agreement and the Consulting Agreement.

 

Business Day” means any day that is not a Saturday, Sunday or other day on which banking institutions are required or authorized by law to be closed in New York, New York.

 

CAGR” means compounded annual growth rate.

 

Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder as in effect on the date hereof.

 

Commonly Controlled Entity” means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code.

 

Company Tax” means any Tax, if and to the extent that the Company and any Subsidiary is or may be potentially liable under applicable law, under contract or on any other grounds (including, but not limited to, as a transferee or successor, under Code Section 6901 or Treasury Regulation Section 1.1502-6, as a result of any Tax sharing or other agreement, or by operation of law) for any such Tax.

 

Company Tax Return” means any return, election, declaration, report, schedule, information return, document, information, opinion, statement, or any amendment to any of the foregoing (including, without limitation, any consolidated, combined or unitary return) filed or required to be filed with any Governmental Entity, if, in any manner or to any extent, relating to or inclusive of the Company, any Subsidiary, or any Company Tax.

 

Current Assets” means (i) accounts receivable (excluding intercompany receivables) other than accounts receivables that are more than 90 days past due unless collected from and after the Closing Date until the date an Initial Statement is delivered by Buyer to Seller in accordance with Section 1.7 of this Agreement, and (ii) inventory of Seller, other than any such assets that are Excluded Assets (including, without limitation, cash).

 

Current Liabilities” means accounts payable and accrued expenses, including all Tax liabilities and all employee benefits accrued through the Closing Date, other than any such liabilities that are Excluded Liabilities.

 

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Earn-Out End Date” means the earlier of (i) December 31, 2022 and (ii) the last day of the fiscal quarter during which the Shareholder is terminated by Buyer upon Disability, Death or Without Cause or Shareholder terminates his employment for Good Reason (each as defined in the Employment Agreement) during the Initial Term (as defined in the Employment Agreement).

 

Environment” means all, or any part, of the air (including the air within buildings and natural or man-made structures above or below ground), sediment, soils, water and land.

 

Environmental Claims” means any and all directives, administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or requests for information by a Governmental Entity, proceedings, consent orders or consent agreements relating in any way to any Environmental Law, Hazardous Material or any Environmental Permit, including, without limitation, (i) any and all claims by Governmental Entities for enforcement, investigation, cleanup, removal, response, corrective, remedial, monitoring, or other actions, damages, fines or penalties pursuant to any applicable Environmental Law, and (ii) any and all claims by any one or more Persons seeking damages, contribution, indemnification, cost recovery, compensation, injunctive or other relief resulting from a Release or threatened Release of Hazardous Materials or arising from alleged injury or threat of injury to health, safety, property, natural resources or the Environment.

 

Environmental Condition” means any and all conditions and circumstances of any property, including, without limitation, any property currently or formerly owned, operated or leased by Seller, relating to or arising or resulting from a failure to comply with any applicable Environmental Law or Environmental Permit or from a Release or threatened Release of Hazardous Materials into the indoor or outdoor Environment.

 

Environmental Law” means CERCLA, the Resource Conservation and Recovery Act of 1976, as amended, and any Law now or previously in effect regulating, relating to, or imposing liability or standards of conduct concerning any Hazardous Material, drinking water, surface and groundwater, wetlands, landfills, open dumps, above ground storage tanks, underground storage tanks, solid waste, waste water, storm water run-off, waste emissions, wells, air emissions, water discharges, noise emissions, or otherwise relating to pollution or protection of the outdoor or indoor environment or health or safety as related to exposure to Hazardous Materials.

 

Environmental Permit” means any permit, license, approval, consent or other authorization by a Governmental Entity pursuant to any Environmental Law.

 

Equity Interests” means capital stock, partnership or membership interests or units (whether general or limited), subscription rights, conversion rights, exchange rights, stock appreciation rights, profit participation, and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity.

 

Equity Securities” means (i) Equity Interests, (ii) subscriptions, calls, warrants, options or commitments of any kind or character relating to, or entitling any Person to acquire, any Equity Interests and (iii) securities convertible into or exercisable or exchangeable for shares of Equity Interests.

 

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ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

Financing” means third party debt financing on commercially reasonable terms and conditions, including, without limitation, amounts and interest rate, acceptable to Buyer in its sole discretion.

 

Fundamental Representations” means the representations and warranties of Seller and the Shareholder made in Sections 2.1 (relating to Organization, Standing and Power), 2.2 (relating to authority), 2.3 (that portion thereof relating to title to assets), 2.4 (Noncontravention; Governmental Approvals), 2.6, 2.18, 2.20, 2.22, 2.26, 2.27 (in respect of matters concerning title), 3.1, 3.2, and 3.3.

 

FY 2019 Adjusted Gross Profit” or “FY 2019 Cash Adjusted Gross Profit” means the difference between 2019 revenues from sales of goods and services, including equipment rental income, and 2019 cost of goods sold, as determined in accordance with GAAP, plus depreciation, amortization and interest charges for 2019 to the extent included in such computation; provided, that, in the event that it is determined that any GAAP-related adjustments for 2019, including for property Taxes, as determined in connection with the audit of Seller’s financial statements for the year ended December 31, 2019, have not been deducted in the determination thereof, but are deducted in determining the Adjusted Gross Profit in respect of future periods, said sum shall be reduced by the amount which should have been deducted.

 

GAAP” means United States generally accepted accounting principles.

 

Governmental Entity” means any international, national, regional, state, local or other government, any court, administrative, regulatory or other governmental agency, commission or authority or any organized securities exchange.

 

Gross Profit” means, with respect to the Acquired Business and any Additional Assets, the difference between revenues from sales of goods and services, including equipment rental income, and cost of goods sold, as determined in accordance with GAAP, plus depreciation, amortization and interest charges to the extent included in such computation; provided that, with respect to any Additional Assets, (i) the contingent consideration paid or to be paid by the Buyer for such Additional Assets will be deducted from revenues and (ii) the baseline Gross Profit used for the valuation of such Additional Assets will be deducted. For clarity, Gross Profit with respect to the Acquired Business shall be determined following the completion of the audit of the Business for fiscal year 2019.

 

Growth SG&A” means, with respect to the Acquired Business and any Additional Assets, the sum of all direct selling and marketing expenses, including without limitation, any additional sales payroll and expenses related to travel, conferences and meals, and other general and administrative expenses of the Acquired Business and Additional Assets, mutually agreed upon by the Buyer and Seller that are incurred in connection with the growth of the Acquired Business and Additional Assets, to be determined as part of the Acquired Business’ budgeting process.

 

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Hazardous Material” means any element, compound, chemical, contaminant, pollutant, material, waste or other substance or constituent that is defined or regulated as such in, or for purposes of any Environmental Law, determined or identified as hazardous, toxic, biohazardous or dangerous under any applicable Environmental Law, or the Release of which is prohibited or regulated under any applicable Environmental Law, including, any asbestos, any petroleum, oil (including crude oil or any fraction thereof), any radioactive substance, any polychlorinated biphenyls, any toxin, chemical, infectious and medical waste, microbial matter, greenhouse gas and any other substance that may give rise to liability under any Environmental Law.

 

Indebtedness” shall mean as at any date of determination, the sum of the following items of Seller, without duplication: (i) obligations of Seller created, issued or incurred for borrowed money, including all fees and obligations thereunder (including interest and similar charges however denominated, late fees, and any prepayment or termination fees arising or which will arise out of the prepayment of such Indebtedness prior to its maturity and termination), (ii) obligations of Seller to pay the deferred purchase price or acquisition price of property or services, other than trade or accounts payable arising, and accrued expenses incurred, in the ordinary course of business consistent with past practice, (iii) the face amount of all letters of credit issued for the account of Seller and all drafts thereunder, (iv) capital lease obligations of Seller, if any, and (v) any obligation guaranteeing any Indebtedness or other obligations of any other Person (including any obligations under any keep well or support agreements).

 

Intellectual Property” shall mean all intellectual property rights, including without limitation Patents, inventions, technology, discoveries, utility models, processes, formulae and know-how, copyrights and copyrightable works (including software, databases, applications, code, systems, networks, website content, documentation and related items), trademarks, service marks, trade names, logos, domain names, corporate names, trade dress and other source indicators, and the goodwill of the business appurtenant thereto, trade secrets, customer data and other confidential or proprietary information, and applications for and registrations of the foregoing (including divisionals, provisionals, continuations, continuations-in-part, reissues, re-examinations, foreign counterparts and renewals).

 

IRS” means the United States Internal Revenue Service.

 

Knowledge of Seller” means, with respect to any matter in question, the actual knowledge, after due inquiry of the Employees of Seller with direct responsibility for the subject matter to which such knowledge relates.

 

Lien” means any mortgage, pledge, lien (statutory or other), defect of title, charge, option, restriction on transfer (such as a right of first offer or refusal), third-party right, conditional or installment sale agreement, encroachment, survey exception, encumbrance, liability, obligation, security interest or other claim of any kind or nature whatsoever; provided, however, that Liens shall exclude liens for Taxes which are not yet due and payable.

 

Loss” or “Losses”” means any and all losses, damages, costs, fees, expenses, debts, charges, liabilities, settlement payments, awards, judgments, penalties, fines, interest, obligations, and claims of any kind.

 

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Material Adverse Effect” means any event or circumstance that, individually or in the aggregate, has had or caused, or would reasonably be expected to have or cause, a material adverse effect on the condition (financial or otherwise), assets (including intangible assets), liabilities or operations of the Business, Purchased Assets or Assumed Liabilities.

 

Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 3(37) of ERISA or Section 4001(a)(3) of ERISA, and to which Seller, or any entity which is or was a Commonly Controlled Entity with Seller is making, is obligated to make, or has made or been obligated to make during the last six years, contributions on behalf of participants who are or were employed by any of them.

 

Organizational Documents” means, with respect to any Person, the articles or certificate of incorporation or organization and by-laws, the limited partnership agreement, the partnership agreement or the limited liability company agreement, or such other organizational documents of such Person, including those that are required to be registered or kept in the place of incorporation, organization or formation of such Person and which establish the legal personality of such Person.

 

Parent Board” means the Board of Directors of Parent.

 

Parent Common Stock” means shares of Parent’s common stock, par value $0.001 per share.

 

Past Due” means any customer accounts receivable more than thirty-one days past the due date specified on the invoice and vendor accounts payable over the longer of (i) thirty-one days past the invoice date; (ii) thirty-one days past the end of the applicable service period or (iii) the stated due date on the vendor invoice.

 

Patents” means worldwide patents, patent applications, invention disclosures, and other rights of invention, and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof and all reexamined patents or other applications or patents claiming the benefit of any of the foregoing.

 

Permitted Encumbrances” means (a) Liens for Taxes and other governmental charges and assessments which are not yet due and payable; (b) landlords’, workers’, carriers’ and mechanic and other like Liens incurred in the ordinary course of the Business with respect to amounts that are not Past Due and (c) zoning, building and land use Laws, ordinances, orders, decrees, restrictions and conditions imposed by any Governmental Entity that do not interfere with the present or proposed use of the properties they affect.

 

person” or “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity or a Governmental Entity.

 

Post-Closing Period” means any Tax period beginning on or after the Closing Date.

 

Pre-Closing Period” means any Tax period (or portion thereof) ending on or before the Closing Date.

 

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Release” means any spilling, leaking, pumping, pouring, emitting, emptying, injecting, depositing, disposing, discharging, dispersal, escaping, dumping, or leaching into the indoor or outdoor Environment.

 

Representatives” means, with respect to any person, such person’s directors, managers, shareholders, partners, officers, employees, agents and representatives, including any investment banker, financial advisor, attorney, accountant or other advisor, agent, representative or Affiliate.

 

Seller Benefit Plan” means (other than a Multiemployer Plan) each “employee pension benefit plan” (as defined in Section 3(2) of ERISA) (whether or not subject to ERISA), each “employee welfare benefit plan” (as defined in Section 3(1) of ERISA) (whether or not subject to ERISA) and any other plan, program, agreement, arrangement, policy, practice, contract, fund or commitment providing for pension, severance or retention benefits, profit-sharing, fees, bonuses, retention, stock ownership, stock options, stock appreciation, stock purchase, phantom stock or other stock-related benefits, incentive or deferred compensation, vacation benefits, life or other insurance (including any self-insured arrangements), health or medical benefits, dental benefits, employee assistance programs, salary continuation, unemployment benefits, disability or sick leave benefits, workers’ compensation benefits, tuition, company car, club dues, maternity, paternity or family leave, health care reimbursement, dependent care assistance, cafeteria plan, employment agreement, consulting agreement, retainer agreement, golden parachute agreement, benefit contingent upon a change in control, relocation or post-employment or retirement benefits (including compensation, pension, health, medical and life insurance benefits) or other form of benefits which is or has been maintained, administered, participated in or contributed to by Seller, which covers any employee or former employee of Seller by virtue of their current or former employment with Seller, or in connection with which Seller has any liability.

 

Seller Transaction Expenses” means all expenses of Seller and the Shareholder incurred or to be incurred in connection with the preparation and execution of this Agreement and the consummation of the transactions contemplated hereby to be consummated on or before the Closing, including fees and expenses incurred in connection with the repayment of Indebtedness, and fees and disbursements of the Seller’s attorneys, accountants, investment bankers and other advisors and service providers, payable by the Seller or the Shareholder and that, in each case, have not been paid as of the Closing Date.

 

Special Representations” means the representations and warranties of Seller and the Shareholder made in Sections 2.9 (Litigation); 2.14 (Tax Matters); 2.15 (ERISA Compliance); and 2.17 (Environmental Matters).

 

A “Subsidiary” of any person means another person, an amount of the voting securities, other voting rights or voting membership or partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the Equity Interests of which) is owned directly or indirectly by such first person.

 

Target Working Capital” means $506,998.

 

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Tax” means any tax, charge, deficiency, duty, fee, levy, toll or other amount (including, without limitation, any net income, gross income, profits, gross receipts, escheat, excise, property, sales, ad valorem, withholding, social security, retirement, excise, employment, unemployment, minimum, alternative, add-on minimum, estimated, severance, stamp, occupation, environmental, premium, capital stock, disability, windfall profits, use, service, net worth, payroll, franchise, license, gains, customs, transfer, recording, registration or other tax) assessed or otherwise imposed by any Governmental Entity or under applicable law, together with any interest, penalties or any other additions or increases.

 

Tax Return” means any return, election, declaration, report, schedule, information return, document, information, opinion, statement, or any amendment to any of the foregoing (including, without limitation, any consolidated, combined or unitary return) filed or required to be filed with any Governmental Entity.

 

Working Capital” means the Current Assets and Current Liabilities of Seller, determined in accordance with GAAP and excluding balance sheet cash.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

 

  QUEST RESOURCE MANAGEMENT GROUP, LLC
   
  By: /s/ Laurie L. Latham
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Senior Vice President and Secretary

 

  GREEN REMEDIES WASTE AND RECYCLING, INC.
   
  By: /s/ Alan D. Allred
    Name: Alan D. Allred
    Title: President

 

  SHAREHOLDER:
   
  /s/ Alan Allred
  ALAN ALLRED

 

  QUEST RESOURCE HOLDING CORPORATION
   
  By: /s/ Laurie L. Latham
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Senior Vice President and Secretary

 

62

 

UNSECURED SUBORDINATED PROMISSORY NOTE

 

Issue Date: October 19, 2020 Principal Amount: $2,684,250

 

FOR VALUE RECEIVED, Quest Resource Holding Corporation, a Nevada corporation (“Maker”), promises to pay to the order of Green Remedies Waste and Recycling, Inc., a North Carolina corporation (the “Holder”), the principal sum of $2,684,250 in accordance with and subject to the provisions of this unsecured subordinated promissory note (this “Note”), and to pay interest (as set forth in Section 2 hereof) to the Holder on the aggregate then outstanding principal amount of this Note in accordance with the provisions hereof.

 

This Note is issued pursuant to the terms of that certain Asset Purchase Agreement, dated as of October 19, 2020, among Maker, Holder, Alan Allred and Quest Resource Management Group, LLC (the “Purchase Agreement”).

 

Section 1.                Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

 

Bankruptcy Event” means any of the following events: (a) the Maker commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Maker, (b) there is commenced against the Maker any such case or proceeding that is not dismissed within sixty (60) days after commencement, (c) the Maker is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Maker suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within sixty (60) calendar days after such appointment, (e) the Maker makes a general assignment for the benefit of creditors, (f) the Maker calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Maker, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

Maturity Date” has the meaning set forth in Section 2(c).

 

Senior Debt” means (a) all principal, interest and other obligations at any time due and owing by Maker or its Affiliates to BBVA USA and certain lenders (collectively, the “Senior ABL Lenders”) parties to that certain Loan, Security and Guaranty Agreement, dated as of August 5, 2020 (as amended, modified, supplemented, waived, restated or refinanced from time to time, the “Senior ABL Credit Agreement”) or any other entities as evidenced under the Senior ABL Credit Agreement and other “Loan Documents” as such term is defined in the Senior ABL Credit Agreement (collectively, the “Senior ABL Documents”), or any of them, arising out of or incurred in connection with the Senior ABL Documents or other documents executed in connection with the obligations thereunder (and any indebtedness which refinances such principal, interest or other obligations), as modified, extended, renewed or restated, whether direct or contingent, and whether now existing or hereafter created, and including, without limitation, interest which accrues on the principal amount of the Senior ABL Credit Agreement indebtedness subsequent to the commencement of a legal proceeding, whether or not such interest is an allowed claim under applicable law; and (b) all principal, interest and other obligations at any time due and owing by Maker or its Affiliates to Monroe Capital Management Advisors, LLC and certain lenders (collectively, the “Term Loan Lenders”) parties to that certain Credit Agreement, dated as of the date hereof (as amended, modified, supplemented, waived, restated or refinanced from time to time, the “Term Loan Agreement”) or any other entities as evidenced under the Term Loan Agreement and other “Loan Documents” as such term is defined in the Term Loan Agreement (collectively, the “Term Loan Documents”), or any of them, arising out of or incurred in connection with the Term Loan Documents or other documents executed in connection with the obligations thereunder (and any indebtedness which refinances such principal, interest or other obligations), as modified, extended, renewed or restated, whether direct or contingent, and whether now existing or hereafter created, and including, without limitation, interest which accrues on the principal amount of the Term Loan Agreement indebtedness subsequent to the commencement of a legal proceeding, whether or not such interest is an allowed claim under applicable law.

 

 

Section 2.                Payment and Interest.

 

a)                  Interest. Interest on the aggregate outstanding principal amount of this Note shall accrue at the rate of three percent (3%) per annum (the “Stated Rate”).

 

b)                  Interest Calculations. Interest shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, fees and other amounts which may become due hereunder, has been made.

 

c)                  Payment. Commencing on January 1, 2020, the principal and accrued and unpaid interest shall be paid by Maker in quarterly installments, as set forth in the Amortization Schedule attached as Exhibit A, and continuing thereafter on the first day of each succeeding calendar quarter during the term of this Note (i.e., each January, April, July and October), through October 1, 2025 (“Maturity Date”), on which date all outstanding principal plus any unpaid accrued interest and fees shall be due and payable in full if not previously paid on such earlier date on which the entire outstanding principal amount of this Note is to be repaid as provided herein.

 

d)                  Optional Prepayment. At any time upon ten (10) days’ written notice to the Holder, the Maker may prepay any portion of the principal amount of this Note and any accrued and unpaid interest, without premium or penalty. All prepayments will be applied first to any accrued and unpaid interest and then, to the extent applicable, to the then outstanding principal amount of this Note in inverse order of maturity.

 

e)                  Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

 

2

 

Section 3.                Events of Default.

 

a)                  Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

 

i.any default in the payment of (x) the principal amount of this Note or (y) interest, fees and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on the Maturity Date or by acceleration or otherwise) which default is not cured within thirty (30) days following receipt of written notice from the Holder of such default;

 

ii.the failure of the Maker to observe or perform any other covenant or agreement contained in this Note or the Purchase Agreement which failure is not cured, if possible to cure, within twenty (20) Business Days after notice of such failure sent by the Holder to the Maker; or

 

iii.the Maker shall be subject to a Bankruptcy Event

 

b)                  Remedies Upon Event of Default. Upon any occurrence of an Event of Default which has not been cured within the applicable cure period, the Holder may by written notice to the Maker, declare this Note and the then outstanding principal amount of this Note, plus accrued but unpaid interest, and other amounts owing in respect thereof through the date of acceleration, immediately due and payable in cash.

 

c)                  Rights of Holder. Following such acceleration, the Holder need not provide, and the Maker hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to Section 3(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

3

 

Section 4.                Non-recourse. This Note may only be enforced against, and any claim, action, suit or other legal proceeding based upon, arising out of, or related to this Note, or the negotiation, execution or performance of this Note, may only be brought against the Maker and then only with respect to the specific obligations set forth herein. No past, present or future director, officer, employee, incorporator, manager, member, partner, shareholder, Affiliate, agent, attorney or other representative of the Maker, or of any Affiliate of any party hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of the Maker under this Note, or for any claim or action based on, in respect of or by reason of the transactions contemplated hereby.

 

Section 5.                Right of Setoff. Maker may, in its sole discretion and upon written notice to the Holder specifying in reasonable detail the basis thereof, setoff any amounts owing from Holder to Maker or any Buyer Indemnified Party under the Purchase Agreement that are not otherwise satisfied by the Escrow Fund against amounts payable under this Note. The exercise of such right of setoff by Maker will not constitute an Event of Default. Any setoff pursuant to this Section 5 shall be deemed a reduction to the then outstanding principal amount of this Note and Maker shall have the right to claw-back past interest paid on such principal reduction. Any setoff amounts as to which the setoff rights are exercised shall be applied to installments due under this Note in inverse order of maturity.

 

Section 6.                Subordination. Notwithstanding anything in this Note to the contrary, Maker and Holder hereby agree that in the event of any default or except as otherwise permitted under the Senior Debt, the indebtedness evidenced by this Note and the payment of principal thereof and interest thereon are subordinated in right of payment to the prior payment in full of all existing and future Senior Debt and that this subordination is for the benefit of the holders of Senior Debt.  By its acceptance of this Note, the Holder agrees to execute and deliver such documents with respect to the subordination of this Note as may be reasonably requested by the Maker.

 

Section 7.                Miscellaneous.

 

a)                  Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (i) when delivered by hand (with written confirmation of receipt); (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (iii) on the date sent by email 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; and (iv) on the date of delivery if mailed by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 7(a):

 

If to Maker:

Quest Resource Holding Corporation

3481 Plano Parkway

The Colony, Texas 75056
E-mail: LaurieL@questrmg.com
Attention: Laurie Latham

 

4

 

with a copy to:

Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019
E-mail: egonzalez@olshanlaw.com; kschlesinger@olshanlaw.com
Attention: Elizabeth Gonzalez-Sussman, Esq. and Kenneth Schlesinger, Esq.

 

If to Holder:

Green Remedies Waste and Recycling, Inc.
P.O. Box 1599
Elon, North Carolina 27244-1599

E-mail: glallred@gmail.com
Attention: Gary Allred

 

With a copy to:

Nathan R. Adams
Pittman & Steele, PLLC
1694 Westbrook Avenue (27215)

Post Office Box 2290
E-mail: nathan.adams@pittmansteelelaw.com

 

b)                  Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Maker, which is absolute and unconditional, to pay the principal, accrued interest and fees, as applicable, on this Note at the time, place and in the manner herein prescribed. This Note is a direct debt obligation of the Maker.

 

c)                  Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Maker shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Maker.

 

d)                  Governing Law; Jurisdiction; Waiver of Jury Trial.

 

(i)                 This Note shall be governed by and construed in accordance with the internal laws of the State of Texas without giving effect to any choice or conflict of law provision or rule (whether of the State of Texas or any other jurisdiction).

 

5

 

(ii)              Any legal suit, action or proceeding arising out of or based upon this Note or the transactions contemplated hereby may be instituted in the federal courts of the United States of America situated in the State of Texas or the courts of the State of Texas, 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.

 

(iii)            Each party acknowledges and agrees that any controversy which may arise under this Note 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 Note, or the transactions contemplated hereby. Each party to this Note 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 7(d)(iii).

 

e)                  Waiver. No provision of this Note may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Maker and the Holder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.

 

f)                   Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Maker covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Maker from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Maker (to the extent it may lawfully do so) hereby expressly waives all benefits 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 Holder, but will suffer and permit the execution of every such power as though no such law has been enacted.

 

6

 

g)                  Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Purchase Agreement and any of the other Ancillary Agreements at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. The Maker covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Maker therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Maker shall provide all information and documentation to the Holder that is reasonably requested by the Holder to enable the Holder to confirm the Maker’s compliance with the terms and conditions of this Note.

 

h)                  When all or any part of a due installment remains unpaid five (5) days after the day on which it became due, interest on the then unpaid balance of the principal, including the delinquent installment, will be paid at a rate of interest equal to the Default Interest Rate (as defined below), per annum, from the date on which the installment was due to and including the date on which such delinquent installment is paid. After the occurrence of an Event of Default, notwithstanding anything to the contrary contained herein, the unpaid principal balance of this Note shall bear interest at the Stated Rate for the first ten (10) Business Days after the Event of Default and thereafter, at the Default Interest Rate, per annum. For the purposes hereof, the Default Interest Rate shall mean the rate of five percent (5.0%) per annum.

 

i)                   Upon the occurrence of an Event of Default, the Holder of this Note may employ an attorney to enforce the Holder’s rights and remedies and the Maker, principal, surety, guarantor, and endorsers of this Note hereby agree to pay to the Holder reasonable attorneys’ fees plus all other reasonable expenses incurred by the Holder in exercising any of the Holder’s rights and remedies upon default.

 

j)                   Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

 

*********************

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

 

  Quest Resource Holding Corporation
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Senior Vice President and Secretary

 

 

8

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS IS AVAILABLE.

 

QUEST RESOURCE HOLDING CORPORATION

 

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: 11

 

Number of Shares of Common Stock: 500,000

 

Date of Issuance: October 19, 2020

 

Quest Resource Holding Corporation, a company organized under the laws of Nevada (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the holders identified on Schedule A hereto, or their permitted assigns (collectively, the “Holder”), is entitled, subject to the terms set forth below to purchase from the Company, at the Exercise Price (as defined below) then in effect, at any time or times on or after the date hereof (the “Issuance Date”) until the Expiration Date (as defined below), Five Hundred Thousand (500,000) fully paid nonassessable shares of Common Stock, subject to adjustment as provided herein (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this “Warrant”), shall have the meanings set forth in Section 18 hereof. This Warrant has been issued in connection with entry into that certain Credit Agreement, dated as of October 19, 2020, by and among the Company, as Holdings, Quest Resource Management Group, LLC and certain of its affiliates, as Borrowers, Holder, as Administrative Agent and Lead Arranger and the lenders party thereto (as amended, restated, supplemented, refinanced, extended or otherwise modified from time to time, the “Credit Agreement”).

 

-1-

 

1.                  EXERCISE OF WARRANT.

 

(a)               Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Issuance Date, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise all or part of this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash by wire transfer of immediately available funds or (B) if the provisions of Section 1(d) are applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, nor shall any ink-original signature or medallion guarantee (or other type of guarantee or notarization) with respect to any Exercise Notice be required. Execution and delivery of the Exercise Notice with respect to a number of Warrant Shares that is less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and the issuance of a new Warrant, on the same terms contained herein, evidencing the right to purchase the remaining number of Warrant Shares. On or before the first (1st) Trading Day following the date on which the Company has received the Exercise Notice, the Company shall transmit by electronic mail or facsimile an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day following the date on which the Company has received the Exercise Notice (the “Share Delivery Date”), so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to noon EST on the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice (provided that if the Aggregate Exercise Price has not been delivered by such date, the Share Delivery Date shall be two (2) Trading Days after the Aggregate Exercise Price (or notice of a Cashless Exercise) is delivered), the Company shall credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with The Depository Trust Company (“DTC”) through its Deposit / Withdrawal At Custodian system if the Company is then a participant in such system and either (x) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (y) the Warrant Shares are eligible for resale by the Holder pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee. The Company shall be responsible for all fees and expenses incurred in connection with the issuance of the Warrant Shares, including the fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any, including without limitation for same day processing. Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record and beneficial owner of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or a certificate is physically delivered. If this Warrant is physically delivered by Holder to the Company in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares available for exercise pursuant to this Warrant is greater than the number of Warrant Shares Holder seeks to acquire pursuant to the current exercise, then the Company shall as soon as practicable and in no event later than three (3) Trading Days after such exercise and at its own expense, issue a new Warrant (on the same terms contained herein and in accordance with Section 6(d)) representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay (or reimburse Holder for) any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms and subject to the conditions hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination; provided, however, that the Company shall not be required to delivery Warrant Shares with respect to an exercise prior to the Holder’s delivery of the Aggregate Exercise Price (or notice of Cashless Exercise) with respect to such exercise.

 

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(b)               Exercise Price. For purposes of this Warrant, “Exercise Price” means $1.50 per Warrant Share, subject to adjustment as provided herein.

 

(c)               Company’s Failure to Timely Deliver Securities. If for any reason or no reason at all the Company shall, on or prior to the Share Delivery Date, fail to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 1(a) above, for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s sole discretion, at the Holder’s option either (A) reimburse the Holder, in cash in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”), for the purchase (in an open market transaction or otherwise) by Holder of Common Stock equal to the amount of Common Stock that would have been issuable as Warrant Shares had the Company promptly delivered such Warrant Shares upon exercise of the Warrant upon exercise that the Holder anticipated receiving from the Company, at which point the Company’s obligation to transmit to the Holder the Warrant Shares shall terminate, or (B) promptly transmit to the Holder the Warrant Shares in accordance with the provisions of Section 1(a) above and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Notice and ending on the applicable Share Delivery Date. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely transmit to the Holder the Warrant Shares in accordance with the provisions of Section 1(a) above upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its Transfer Agent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, if the Company fails to deliver the applicable number of Warrant Shares upon an exercise pursuant to Section 1 by the Share Delivery Date, then the Holder shall have the right to rescind such exercise.

 

(d)               Cashless Exercise. At any time after the six month anniversary of the date of the Credit Agreement, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

 

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Net Number = (A x B) - (A x C)

D

 

For purposes of the foregoing formula:

 

  A = the total number of shares with respect to which this Warrant is then being exercised.
     
  B = the arithmetic average of the Closing Sale Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.
     
  C = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
     
  D = as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(d) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(d) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(d) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(d) hereof after the close of “regular trading hours” on such Trading Day.

 

Assuming the Holder has held the Warrant for at least six months in the case of such a Cashless Exercise, the Company agrees that the Holder is under no obligation to sell the Warrant Shares issuable upon the exercise of the Warrant prior to removing the legend and the Company will use its best efforts, including delivering an opinion to the Transfer Agent at its own expense, to ensure the foregoing. Notwithstanding anything contrary to this Section 1(d) of this Warrant, if Warrant Shares are issued in such a Cashless Exercise, the parties acknowledge and agree that, (i) for purposes of Rule 144 under the 1933 Act, the holding period of the Warrant being exercised may be tacked on to the holding period of the Warrant Shares and (ii) all Warrant Shares, when issued, will be issued without restrictive legends, will be freely tradable under the Securities Act by any person who is not an affiliate of the Company, and will not constitute “restricted securities” under Rule 144 promulgated under the Securities Act. The Company agrees not to take any position contrary to this Section 1(d).

 

(e)               Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 10 hereof.

 

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(f)                Limitations on Exercise. Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. Notwithstanding anything to the contrary set forth herein, by written notice to the Company, the Holder may, in its sole discretion, increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice and such percentage will be deemed the new Maximum Percentage for all purposes under this Warrant; provided, that any such increase will not be effective until the 61st day after such notice is delivered to the Company. For purposes of the preceding sentences, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including other warrants issued concurrently herewith) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission (the “SEC”), as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquired pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

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(g)               Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance, free from preemptive or any other contingent purchase rights (other than those of the Holder), under this Warrant a number of shares of Common Stock equal to at least 100% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock under this Warrant then outstanding (without regard to any limitations on exercise contained herein) (the “Required Reserve Amount”). At no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g) be reduced other than proportionally in connection with any exercise of this Warrant or such other event covered by Section 2 below.

 

(h)               Insufficient Authorized Shares. If, notwithstanding Section 1(g), and not in limitation thereof, at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if at any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C.

 

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2.                  ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a)               Adjustment Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Issuance 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) reclassify or subdivide (including by any stock split, stock dividend, recapitalization, substitutions, exchange or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution, reclassification or subdivision will be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 2(a) will become effective at the close of business on the date the subdivision or combination becomes effective. The provisions of this Section 2 will similarly apply to successive stock dividends, stock splits or combinations, reclassifications, exchanges, substitutions, or other events.

 

(b)               Certificate as to Adjustment. As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than ten (10) 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. 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 ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and 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.

 

3.                  FUNDAMENTAL TRANSACTIONS. Upon the occurrence of any Fundamental Transaction, each Warrant shall, immediately prior to the time of such Fundamental Transaction, be canceled (without any action of the Holder and regardless of any limitation or restriction on the exercisability of this Warrant that may otherwise be applicable) with the Holder entitled to receive the kind and number of shares of stock, securities, cash or other assets or consideration resulting from such transaction to which the Holder would have been entitled as a holder of the applicable number of Warrant Shares then issuable hereunder as a result of such exercise if the Holder had exercised this Warrant in full immediately prior to the time of such Fundamental 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).

 

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4.                  NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 of this Warrant, and will at all times in good faith carry out all of the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) 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, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).

 

5.                  WARRANT HOLDER NOT DEEMED A STOCKHOLDER; LEGEND.

 

(a)               No Stock Rights. Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, 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, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. 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. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

(b)               Legend. Except as otherwise provided in this Section 5(b), each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form (the “Securities Act Legend”):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES.

 

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The Warrant Shares shall not contain any legend (including the Securities Act Legend): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) if such Warrant Shares are eligible for sale under Rule 144 (including upon exercise of such Warrants in accordance with Section 1(d) herein), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). If all or any portion of this Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares, or if such Warrant Shares may be sold under Rule 144 or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) then such Warrant Shares shall be issued free of any Securities Act Legend. The Company agrees that following such time as such legend is no longer required under this Section 5(b) and upon the request of the Holder, the Company will, no later than three (3) Trading Days following the delivery by a Holder to the Company of Warrant Shares issued with a Securities Act Legend deliver or cause to be delivered to such Holder Warrant Shares free from any Securities Act Legend. The Company will use its best efforts, including delivering an opinion to the Transfer Agent at its own expense, to ensure any legend (including the Securities Act Legend) is removed in accordance with this Section 5(b).

 

6.                  REISSUANCE OF WARRANTS.

 

(a)               Registration of Warrant. The Company shall register this Warrant, upon the records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. The Company shall also register any transfer, exchange, reissuance or cancellation of any portion of this Warrant in the Warrant Register. No service charge shall be made to a Holder for any registration of transfer, but the Company may require payment of a sum sufficient to cover any transfer taxes required in connection with making of any such transfer.

 

(b)               Transfer of Warrant. This Warrant and the Warrant Shares may be offered for sale, sold, transferred or assigned without the prior consent of the Company, except as may otherwise be required by applicable securities laws. Subject to applicable securities laws, if this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company or its Transfer Agent, as directed by the Company, together with all applicable transfer taxes, whereupon the Company will, or will cause its Transfer Agent to, forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(e)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(e)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred. The acceptance of the new Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the new Warrant that the Holder has in respect of this Warrant.

 

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(c)               Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form (but without the obligation to post a bond) and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(e)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(d)               Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(e)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that the Company or its Transfer Agent, as directed by the Company, shall not be required to issue Warrants for fractional shares of Common Stock hereunder, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number.

 

(e)               Issuance of New Warrants. Whenever the Company or its Transfer Agent, as directed by the Company, is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall (i) be of like tenor with this Warrant, (ii) represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 6(b) or Section 6(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date and (iv) have the same rights and conditions as this Warrant.

 

7.                  NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in writing, (a) if delivered from within the domestic United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, electronic mail or facsimile or (b) if delivered from outside the United States, by International Federal Express, electronic mail or facsimile, and (c) will be deemed given (i) if delivered by first-class registered or certified mail domestic, three (3) Business Days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two (2) Business Days after so mailed and (iv) if delivered by electronic mail or facsimile, upon electronic confirmation of receipt, and will be delivered and addressed as follows:

 

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(i) if to the Company, to:

 

Quest Resource Holding Corporation

3481 Plano Parkway

The Colony, Texas 75056

Attention: Chief Financial Officer

Facsimile: (866) 492-7478

Email: LaurieL@questrmg.com

 

with a copy to:

 

Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, NY 10019

Attn: Elizabeth Gonzalez-Sussman and Kenneth Schlesinger

Facsimile: 212-451-2222

Email: egonzalez@olshanlaw.com and kschlesinger@olshanlaw.com

 

(ii) if to the Holder, to the address set forth on Schedule A.

 

with a copy to:

 

King & Spalding LLP

1185 6th Ave

New York, NY 10036

Attention: Carolyn Z. Alford

Email: czalford@kslaw.com

 

The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, upon the occurrence of each adjustment or readjustment pursuant to Section 2, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.

 

8.                  AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. 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 right, 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.

 

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9.                  GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth in Section 7(i) above or such other address as the Company subsequently delivers to the Holder and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

10.              DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations in writing (including via facsimile or email) within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit in writing (including via facsimile or email) (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

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11.              REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

12.              TRANSFER. This Warrant and the Warrant Shares may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by applicable securities laws.

 

13.              SEVERABILITY; CONSTRUCTION; HEADINGS. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). This Warrant shall be deemed to be jointly drafted by the Company and Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

14.              PIGGYBACK REGISTRATION RIGHTS.

 

(a)               Piggy-Back Registration Rights. If the Company proposes to file a registration statement under the 1933 Act (other than a registration statement on Form S-4 or S-8 (or any successor form)) with respect to any class of equity securities of the Company, whether or not for its own account, then the Company shall give written notice of such proposed filing to the Holder promptly (but in no event fewer than twenty (20) Business Days before the anticipated filing date), and such notice shall offer such Holder the opportunity to register such number of Warrant Shares as the Holder may request in writing within twenty (20) days after receipt of such written notice from the Company (which request shall specify the Warrant Shares intended to be disposed of by the Holder) (a “Piggy-Back Registration”). Upon the written request of any the Holder made within twenty (20) days after the receipt of any such notice (which request shall specify the number of Warrant Shares intended to be disposed of by the Holder and the intended method of disposition of, which shall be on the same terms and conditions as the securities of the Company or other security holder included in the registration statement), the Company shall, subject to the terms of this Warrant, effect the registration under the 1933 Act of all Warrant Shares which the Company has been so requested to register by the Holder on the same terms and conditions as the securities of the Company or other security holder included in the registration statement; provided, that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to the Holder and, thereupon, (i) in the case of a determination not to register shall be relieved of its obligation to register any Warrant Shares in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith) and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Warrant Shares, for the same period as the delay in registering such other securities.

 

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(b)               Inclusion in Registered Offering; Withdrawal. The Company shall cause the managing underwriter or underwriters, if any, of such proposed offering to permit the Warrant Shares requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other selling security holder included therein and to permit the sale or other disposition of such Warrant Shares in accordance with the intended method of distribution thereof; provided, however, that (i) the Holder shall not be required to make any representation other than that it is the owner of any Warrant and/or Warrant Shares of Holder that are being included in the offering and that it has full power and authority to transfer them pursuant such offering, and (ii) the total indemnification or other liability of the Holder thereunder shall be limited to the aggregate net cash proceeds received by Holder from the sale of such Warrant and/or the Warrant Shares in such offering. The Holder shall have the right to withdraw its request for inclusion of its Warrant Shares in any registration statement pursuant to these provisions by giving written notice to the Company of its request to withdraw no less than five (5) Business Days prior to the effective date of such registration statement.

 

(c)               Payment of Registration Expenses. The Company shall pay all Registration Expenses in connection with registration of Warrant Shares requested pursuant to this Section 14, and the Holder shall pay the underwriting discounts, commissions, and transfer taxes, if any, relating to the sale of the Holder’s Warrant Shares pursuant to this Section 14.

 

(d)               Underwriter Cut-Back; Priority in Piggy-Back Registrations. If a registration pursuant to this Section 14 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, the Company shall, if requested by the Holder and subject to the provisions of this Section 14, arrange for such underwriters to include all the Warrant Shares requested by the Holder to be offered and sold by the Holder among the securities to be distributed by such underwriters. If the managing underwriter of such underwritten offering shall, in writing, inform the Holder and the other holders of any of the Company’s other securities which shall have exercised registration rights in respect of such underwritten offering of its belief that the number of securities requested to be included in such registration would materially and adversely affect the success of such offering, then the Company shall be required to include in such registration statement only the amount of securities that it is so advised should be included in such registration. In such event:

 

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(i)                 in cases initially involving the registration for sale of securities for the Company’s own account, securities shall be registered in such offering in the following order of priority: (x) first, the securities that the Company proposes to register and (y) second, the securities that have been requested to be included in such registration by the Holder and by Persons entitled to exercise “piggy-back” registration rights pursuant to contractual commitments of the Company (pro rata on the amount of securities sought to be registered by the Holder and such Persons; it being expressly understood that the Company may not reduce the amount of Warrant Shares included in such registration unless it reduces the amount sought to be registered by such Persons on a pro rata basis); and

 

(ii)              in cases not initially involving the registration for sale of securities for the Company’s own account, securities shall be registered in such offering as follows: (x) first, the securities that have been requested to be included in such registration by the Holder and other Persons entitled to exercise registration rights pursuant to contractual commitments (pro rata based on the amount of securities sought to be registered by such Holders and Persons); provided, that the Company may exclude securities sought to be registered by the Holders if (A) such registration is pursuant to a contractual “demand” registration right existing on the date hereof and such right expressly requires the Company to exclude such securities, and (B) all securities which the Company proposes to register are first excluded and (y) second, the securities which the Company proposes to register.

 

(e)               Termination of Piggy-back Registration Rights. The Holder shall have the right to include the Warrant Shares in one or more Piggy-Back Registrations until (i) all of the Warrant Shares underlying the Warrants have been sold, or (ii) the Holder beneficially owns less than 1% of the outstanding Common Stock and such Warrant Shares may be sold under Rule 144 without limitation, including any limitation on volume and manner of sale restrictions, whichever shall first occur.

 

(f)                Market Stand Off. The Holder of Warrants and Warrant Shares agrees, that if requested by any managing underwriter in connection with any underwritten public offering of the Company’s securities in which Warrant Shares are being sold, it will enter into a customary “lock up” agreement pursuant to which it will agree not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell grant any option, right or warrant for the sale of or otherwise dispose of or transfer any Warrant Shares held by it for a period not to exceed (90) days following the consummation of any other underwritten public offering.

 

15.              REDEMPTION OF WARRANTS

 

(a)               Call Right. In the event that (i) Holder is unwilling, for any reason, to provide an Incremental Term Loan (as defined in the Credit Agreement) to the Company to finance future Permitted Acquisitions (as defined in the Credit Agreement) pursuant to the terms and conditions set forth in the Credit Agreement and (ii) the Company refinances the Loans and Credit Facilities under the Credit Agreement in full with another lender in connection with such Permitted Acquisition (the “Refinancing”), within one-hundred and twenty (120) calendar days following receipt of notice of the Holder’s refusal to so provide an Incremental Term Loan, the Company shall have the right, by written notice to the Holder, to require that Holder sell all (but not less than all) of this Warrant and/or Holder’s Warrant Shares for a purchase price equal to the greater of:

 

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(i)                 The Redemption Price; and

 

(ii)              The then-current number of Warrant Shares issuable upon a full exercise of this Warrant multiplied by the fifteen (15) Trading Day Weighted Average Price of the Company’s Common Stock, measured as of the period ending one (1) Business Day prior to the consummation of the Refinancing.

 

The date upon which such notice is delivered to Holder shall hereinafter be referred to as the “Call Demand Date”. The Redemption Price shall be payable to Holder in immediately available funds on or prior to the thirtieth (30th) day immediately following the Call Demand Date or such earlier date as determined by the Company (the “Call Payment Date”), upon surrender of this Warrant and/or the applicable Warrant Shares, as the case may be, to the Company, by wire transfer to any account in the United States of America specified by Holder by written notice to the Company. The Company’s right to require redemption of this Warrant and/or the Warrant Shares pursuant to this Section 15 shall be referred to herein as the Holder’s “Call Right”. If the Company shall fail to pay, or is restricted or prohibited from paying, for any reason whatsoever, the Redemption Price on the Call Payment Date in accordance with the terms of this Section 15, then the exercise of the Call Right shall be deemed null and void ab initio for all purposes retroactive to the Call Demand Date, and the Call Right shall lapse and be of no further force and effect from and after such date. For the avoidance of doubt, Holder shall be restricted from exercising the Warrant at any time from and after the Call Demand Date unless the Call Right is voided in accordance with the preceding sentence.

 

16.              REPRESENTATIONS AND WARRANTIES.

 

(a)               Representations and Warranties of the Company. The Company hereby represents and warrants to the Holder that:

 

(i)                 Reaffirmation of Credit Agreement Representations and Warranties. Each of the representations and warranties of the Company set forth in the Credit Agreement are true and correct as of the date hereof, each such representation and warranty being hereby incorporated by reference herein, mutatis mutandi, for all purposes.

 

(ii)              Organization; Authorization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada and has all requisite corporate power and authority to carry on its business as presently conducted or proposed to be conducted. The Company further represents and warrants to the Holder that it has taken all necessary corporate action and has obtained all necessary approvals, including NASDAQ listing approval, in connection with the issuance of this Warrant and the Warrant Shares issuable upon exercise thereof. The Company represents and warrants that no Company shareholder approval is required in connection with the issuance of this Warrant or the Warrant Share issuable upon exercise thereof. This Agreement and the Warrant, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general equitable principles.

 

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(iii)            Capitalization. The fully diluted capitalization of the Company as of immediately prior to the execution of this Agreement is equal to 22,134,775 shares of Common Stock, assuming the full grant of all shares of Common Stock reserved for issuance under stock incentive plans and the full exercise and conversion into Common Stock of all exercisable and convertible securities (other than convertible promissory notes that are convertible into shares of equity securities in connection with the Company’s next bona fide equity financing). The Company now has, and shall at all times shall keep reserved for issuance, free from preemptive or any other contingent purchase rights (other than those of the Holder), under this Warrant a number of shares of Common Stock reserved for issuance equal to the Required Reserve Amount. The Warrant sold and delivered in accordance with the terms hereof for the consideration expressed herein will be duly and validly issued, fully paid and nonassessable. The Warrant Shares have been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Warrant, will be duly and validly issued, fully paid and nonassessable.

 

(iv)             Non-Contravention. The execution and delivery of this Warrant does not, and the issuance of the Warrant Shares in accordance with the terms of this Warrant will not (A) violate the Company’s certificate of incorporation or by-laws, (B) violate any law or regulation applicable to the Company or order or decree of any court or public authority having jurisdiction over the Company, or (C) result in a breach of any mortgage, indenture, contract, agreement or undertaking to which the Company is a party or by which it is bound.

 

(b)               Representations and Warranties of the Holder. Holder hereby represents and warrants to the Company as follows:

 

(i)                 Organization and Qualification. Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation or incorporation, as applicable.

 

(ii)              Authority; Enforceability. Holder has all requisite power and authority to execute and deliver this Warrant and to perform its obligations hereunder and to consummate the transactions contemplated hereby, and all action required on the part of Holder for such execution, delivery and performance has been duly and validly taken. Assuming due execution and delivery by the Company, this Holder constitutes the legal, valid and binding obligation of Holder enforceable against Holder in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general equitable principles.

 

(iii)            Accredited Investor. Holder is an “accredited investor” (as defined in Regulation D under the 1933 Act). Except as otherwise contemplated by this Warrant, Holder is acquiring this Warrant and any Warrant Shares for investment for its own account and not with a view to any distribution thereof in violation of applicable securities laws.

 

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17.              TAX BASIS. The Company and the Holder agree pursuant to Treasury Regulation Section 1.273-2 that, for Federal income tax purposes, the purchase price for this Warrant is $765,678, allocated ratably among the Warrant Shares issued in connection herewith. The Company and the Holder agree that any other Warrant issued to Holder in connection with the Credit Agreement shall be valued using the same methodology as the methodology used to value this Warrant and such valuation shall be mutually agreeable to the Company and Holder. Neither the Company nor the Holder hereof shall voluntarily take any action inconsistent with the agreement set forth in this Section 17.

 

18.              CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)               1933 Act” means the Securities Act of 1933, as amended.

 

(b)               1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)               Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(d)               Attribution Parties” means, with respect to any Person, any other Person (including any other Persons with whom the first Person is deemed to be acting with together as a group) whose beneficial ownership would be aggregated with such first Person’s (including by aggregation with one or more other Attribution Parties) for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.

 

(e)               Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 10. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

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(f)                Bloomberg” means Bloomberg Financial Markets.

 

(g)               Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(h)               Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.

 

(i)                 Common Stock” means (i) the Company’s Common Stock, par value $0.001 per share, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.

 

(j)                 Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

 

(k)               Expiration Date” means March 19, 2028; provided, that the Holder shall have a reasonable amount of time, not to exceed one-hundred and eighty (180) days following the Expiration Date, to exercise this Warrant with respect to Warrant Shares exercisable by Holder in the one-hundred and eighty (180) days immediately prior to the Expiration Date.

 

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(l)                 Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its shares of Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50.1% of the outstanding shares of Common Stock, (y) 50.1% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50.1% of the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50.1% of the outstanding shares of Common Stock, (y) at least 50.1% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50.1% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its shares of Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50.1% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock, (y) at least 50.1% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock not held by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

(m)             Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

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(n)               Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

(o)               Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(p)               Principal Market” means The NASDAQ Capital Market.

 

(q)              Redemption Price” means (i)(A) $7.50 minus (B) the Exercise Price, multiplied by (ii) the then-current number of Warrant Shares issuable upon a full exercise of this Warrant.

 

(r)            Registration Expenses” means all expenses incident to the Company’s performance of or compliance with Section 14 of this Agreement, including, without limitation, (a) all SEC, stock exchange and FINRA registration and filing fees and expenses, (b) fees and expenses of compliance with securities or “blue sky” laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters in connection with “blue sky” qualifications), (c) fees and expenses of preparing, printing, filing, duplicating and distributing the registration statement and the related prospectus, (d) the cost of printing stock certificates, if any, (e) the cost and charges of any transfer agent and rating agency fees, (f) printing, messenger, telephone and delivery expenses, (g) fees and disbursements of counsel for the Company and all independent certified public accountants, (h) the fees and disbursements of underwriters customarily paid by issuers or sellers of securities (but not including any underwriting discounts or commissions or transfer taxes, if any, attributable to the sale of Warrant Shares by the Holders), and (i) reasonable fees and expenses of counsel for the Holder.

 

(s)                Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(t)                 Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.

 

(u)               Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as such market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 10 with the term “Weighted Average Price” being substituted for the term “Exercise Price.” All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

  QUEST RESOURCE HOLDING CORPORATION
     
  By:
  Name: Laurie L. Latham
  Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer

 

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS IS AVAILABLE.

 

QUEST RESOURCE HOLDING CORPORATION

 

WARRANT TO PURCHASE COMMON STOCK

 

Warrant No.: 12

 

Number of Shares of Common Stock: 350,000

 

Quest Resource Holding Corporation, a company organized under the laws of Nevada (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the holders identified on Schedule A hereto, or their permitted assigns (collectively, the “Holder”), is entitled, subject to the terms set forth below and on the exercise schedule set forth on Exhibit A, to purchase from the Company, at the Exercise Price (as defined below) then in effect, at any time or times on or after the Issuance Date (as defined in Exhibit A) until the Expiration Date (as defined below), Three Hundred and Fifty Thousand (350,000) fully paid nonassessable shares of Common Stock, subject to adjustment as provided herein (the “Warrant Shares”). Except as otherwise defined herein, capitalized terms in this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, this “Warrant”), shall have the meanings set forth in Section 18 hereof. This Warrant has been issued in connection with entry into that certain Credit Agreement, dated as of October 19, 2020, by and among the Company, as Holdings, Quest Resource Management Group, LLC and certain of its affiliates, as Borrowers, Holder, as Administrative Agent and Lead Arranger and the lenders party thereto (as amended, restated, supplemented, refinanced, extended or otherwise modified from time to time, the “Credit Agreement”).

 

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1.                  EXERCISE OF WARRANT.

 

(a)               Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Issuance Date, in whole or in part, by (i) delivery of a written notice, in the form attached hereto as Exhibit B (the “Exercise Notice”), of the Holder’s election to exercise all or part of this Warrant and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash by wire transfer of immediately available funds or (B) if the provisions of Section 1(d) are applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)). The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder, nor shall any ink-original signature or medallion guarantee (or other type of guarantee or notarization) with respect to any Exercise Notice be required. Execution and delivery of the Exercise Notice with respect to a number of Warrant Shares that is less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and the issuance of a new Warrant, on the same terms contained herein, evidencing the right to purchase the remaining number of Warrant Shares. On or before the first (1st) Trading Day following the date on which the Company has received the Exercise Notice, the Company shall transmit by electronic mail or facsimile an acknowledgment of confirmation of receipt of the Exercise Notice to the Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day following the date on which the Company has received the Exercise Notice (the “Share Delivery Date”), so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to noon EST on the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice (provided that if the Aggregate Exercise Price has not been delivered by such date, the Share Delivery Date shall be two (2) Trading Days after the Aggregate Exercise Price (or notice of a Cashless Exercise) is delivered), the Company shall credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with The Depository Trust Company (“DTC”) through its Deposit / Withdrawal At Custodian system if the Company is then a participant in such system and either (x) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (y) the Warrant Shares are eligible for resale by the Holder pursuant to Rule 144, and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee. The Company shall be responsible for all fees and expenses incurred in connection with the issuance of the Warrant Shares, including the fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC, if any, including without limitation for same day processing. Upon delivery of the Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the holder of record and beneficial owner of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or a certificate is physically delivered. If this Warrant is physically delivered by Holder to the Company in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares available for exercise pursuant to this Warrant is greater than the number of Warrant Shares Holder seeks to acquire pursuant to the current exercise, then the Company shall as soon as practicable and in no event later than three (3) Trading Days after such exercise and at its own expense, issue a new Warrant (on the same terms contained herein and in accordance with Section 6(d)) representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay (or reimburse Holder for) any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms and subject to the conditions hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination; provided, however, that the Company shall not be required to delivery Warrant Shares with respect to an exercise prior to the Holder’s delivery of the Aggregate Exercise Price (or notice of Cashless Exercise) with respect to such exercise.

 

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(b)               Exercise Price. For purposes of this Warrant, “Exercise Price” means $1.50 per Warrant Share, subject to adjustment as provided herein.

 

(c)               Company’s Failure to Timely Deliver Securities. If for any reason or no reason at all the Company shall, on or prior to the Share Delivery Date, fail to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 1(a) above, for such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Trading Days after the Holder’s request and in the Holder’s sole discretion, at the Holder’s option either (A) reimburse the Holder, in cash in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) (the “Buy-In Price”), for the purchase (in an open market transaction or otherwise) by Holder of Common Stock equal to the amount of Common Stock that would have been issuable as Warrant Shares had the Company promptly delivered such Warrant Shares upon exercise of the Warrant upon exercise that the Holder anticipated receiving from the Company, at which point the Company’s obligation to transmit to the Holder the Warrant Shares shall terminate, or (B) promptly transmit to the Holder the Warrant Shares in accordance with the provisions of Section 1(a) above and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, multiplied by (B) any trading price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Notice and ending on the applicable Share Delivery Date. Nothing shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely transmit to the Holder the Warrant Shares in accordance with the provisions of Section 1(a) above upon the exercise of this Warrant as required pursuant to the terms hereof. While this Warrant is outstanding, the Company shall cause its Transfer Agent to participate in the DTC Fast Automated Securities Transfer Program. In addition to the foregoing rights, if the Company fails to deliver the applicable number of Warrant Shares upon an exercise pursuant to Section 1 by the Share Delivery Date, then the Holder shall have the right to rescind such exercise.

 

(d)               Cashless Exercise. At any time after the six month anniversary of the date of the Credit Agreement, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the “Net Number” of shares of Common Stock determined according to the following formula (a “Cashless Exercise”):

 

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Net Number = (A x B) - (A x C)

D

 

For purposes of the foregoing formula:

 

  A = the total number of shares with respect to which this Warrant is then being exercised.
     
  B = the arithmetic average of the Closing Sale Prices of the Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.
     
  C = the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.
     
  D = as applicable: (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(d) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(d) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the Bid Price of the Common Stock as of the time of the Holder’s execution of the applicable Exercise Notice if such Exercise Notice is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter pursuant to Section 1(d) hereof, or (iii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to Section 1(d) hereof after the close of “regular trading hours” on such Trading Day.

 

Assuming the Holder has held the Warrant for at least six months in the case of such a Cashless Exercise, the Company agrees that the Holder is under no obligation to sell the Warrant Shares issuable upon the exercise of the Warrant prior to removing the legend and the Company will use its best efforts, including delivering an opinion to the Transfer Agent at its own expense, to ensure the foregoing. Notwithstanding anything contrary to this Section 1(d) of this Warrant, if Warrant Shares are issued in such a Cashless Exercise, the parties acknowledge and agree that, (i) for purposes of Rule 144 under the 1933 Act, the holding period of the Warrant being exercised may be tacked on to the holding period of the Warrant Shares and (ii) all Warrant Shares, when issued, will be issued without restrictive legends, will be freely tradable under the Securities Act by any person who is not an affiliate of the Company, and will not constitute “restricted securities” under Rule 144 promulgated under the Securities Act. The Company agrees not to take any position contrary to this Section 1(d).

 

(e)               Disputes. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 10 hereof.

 

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(f)                Limitations on Exercise. Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise. Notwithstanding anything to the contrary set forth herein, by written notice to the Company, the Holder may, in its sole discretion, increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice and such percentage will be deemed the new Maximum Percentage for all purposes under this Warrant; provided, that any such increase will not be effective until the 61st day after such notice is delivered to the Company. For purposes of the preceding sentences, the aggregate number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or warrants, including other warrants issued concurrently herewith) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with Section 13(d) of the 1934 Act. For purposes of determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission (the “SEC”), as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported Outstanding Share Number”). If the Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder’s beneficial ownership, as determined pursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be acquired pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the “Reduction Shares”) and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder for the Excess Shares. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or any portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

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(g)               Required Reserve Amount. So long as this Warrant remains outstanding, the Company shall at all times keep reserved for issuance, free from preemptive or any other contingent purchase rights (other than those of the Holder), under this Warrant a number of shares of Common Stock equal to at least 100% of the maximum number of shares of Common Stock as shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock under this Warrant then outstanding (without regard to any limitations on exercise contained herein) (the “Required Reserve Amount”). At no time shall the number of shares of Common Stock reserved pursuant to this Section 1(g) be reduced other than proportionally in connection with any exercise of this Warrant or such other event covered by Section 2 below.

 

(h)               Insufficient Authorized Shares. If, notwithstanding Section 1(g), and not in limitation thereof, at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for this Warrant then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding the foregoing, if at any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of the shares of its issued and outstanding shares of Common Stock to approve the increase in the number of authorized shares of Common Stock, the Company may satisfy this obligation by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C.

 

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2.                  ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a)               Adjustment Upon Dividend, Subdivision or Combination of Common Stock. If the Company shall, at any time or from time to time after the Issuance 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) reclassify or subdivide (including by any stock split, stock dividend, recapitalization, substitutions, exchange or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to any such dividend, distribution, reclassification or subdivision will be proportionately reduced and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately increased. If the Company at any time on or after the Issuance Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares issuable upon exercise of this Warrant shall be proportionately decreased. Any adjustment under this Section 2(a) will become effective at the close of business on the date the subdivision or combination becomes effective. The provisions of this Section 2 will similarly apply to successive stock dividends, stock splits or combinations, reclassifications, exchanges, substitutions, or other events.

 

(b)               Certificate as to Adjustment. As promptly as reasonably practicable following any adjustment of the Exercise Price, but in any event not later than ten (10) 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. 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 ten (10) Business Days thereafter, the Company shall furnish to the Holder a certificate of an executive officer certifying the Exercise Price then in effect and 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.

 

3.                  FUNDAMENTAL TRANSACTIONS. Upon the occurrence of any Fundamental Transaction, each Warrant shall, immediately prior to the time of such Fundamental Transaction, be canceled (without any action of the Holder and regardless of any limitation or restriction on the exercisability of this Warrant that may otherwise be applicable) with the Holder entitled to receive the kind and number of shares of stock, securities, cash or other assets or consideration resulting from such transaction to which the Holder would have been entitled as a holder of the applicable number of Warrant Shares then issuable hereunder as a result of such exercise if the Holder had exercised this Warrant in full immediately prior to the time of such Fundamental 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).

 

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4.                  NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, 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 of this Warrant, and will at all times in good faith carry out all of the provisions of this Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) 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, and (iii) shall, so long as any of the Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the Warrants, the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the Warrants then outstanding (without regard to any limitations on exercise).

 

5.                  WARRANT HOLDER NOT DEEMED A STOCKHOLDER; LEGEND.

 

(a)               No Stock Rights. Except as otherwise specifically provided herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of capital stock of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, 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, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. 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. Notwithstanding this Section 5, the Company shall provide the Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.

 

(b)               Legend. Except as otherwise provided in this Section 5(b), each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend in substantially the following form (the “Securities Act Legend”):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES.

 

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The Warrant Shares shall not contain any legend (including the Securities Act Legend): (i) while a registration statement covering the resale of such security is effective under the Securities Act, (ii) if such Warrant Shares are eligible for sale under Rule 144 (including upon exercise of such Warrants in accordance with Section 1(d) herein), or (iii) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC). If all or any portion of this Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Warrant Shares, or if such Warrant Shares may be sold under Rule 144 or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) then such Warrant Shares shall be issued free of any Securities Act Legend. The Company agrees that following such time as such legend is no longer required under this Section 5(b) and upon the request of the Holder, the Company will, no later than three (3) Trading Days following the delivery by a Holder to the Company of Warrant Shares issued with a Securities Act Legend deliver or cause to be delivered to such Holder Warrant Shares free from any Securities Act Legend. The Company will use its best efforts, including delivering an opinion to the Transfer Agent at its own expense, to ensure any legend (including the Securities Act Legend) is removed in accordance with this Section 5(b).

 

6.                  REISSUANCE OF WARRANTS.

 

(a)               Registration of Warrant. The Company shall register this Warrant, upon the records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. The Company shall also register any transfer, exchange, reissuance or cancellation of any portion of this Warrant in the Warrant Register. No service charge shall be made to a Holder for any registration of transfer, but the Company may require payment of a sum sufficient to cover any transfer taxes required in connection with making of any such transfer.

 

(b)               Transfer of Warrant. This Warrant and the Warrant Shares may be offered for sale, sold, transferred or assigned without the prior consent of the Company, except as may otherwise be required by applicable securities laws. Subject to applicable securities laws, if this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company or its Transfer Agent, as directed by the Company, together with all applicable transfer taxes, whereupon the Company will, or will cause its Transfer Agent to, forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 6(e)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 6(e)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred. The acceptance of the new Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the new Warrant that the Holder has in respect of this Warrant.

 

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(c)               Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form (but without the obligation to post a bond) and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 6(e)) representing the right to purchase the Warrant Shares then underlying this Warrant.

 

(d)               Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 6(e)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that the Company or its Transfer Agent, as directed by the Company, shall not be required to issue Warrants for fractional shares of Common Stock hereunder, but rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number.

 

(e)               Issuance of New Warrants. Whenever the Company or its Transfer Agent, as directed by the Company, is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant shall (i) be of like tenor with this Warrant, (ii) represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 6(b) or Section 6(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date and (iv) have the same rights and conditions as this Warrant.

 

7.                  NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in writing, (a) if delivered from within the domestic United States, by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, electronic mail or facsimile or (b) if delivered from outside the United States, by International Federal Express, electronic mail or facsimile, and (c) will be deemed given (i) if delivered by first-class registered or certified mail domestic, three (3) Business Days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express, two (2) Business Days after so mailed and (iv) if delivered by electronic mail or facsimile, upon electronic confirmation of receipt, and will be delivered and addressed as follows:

 

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(i) if to the Company, to:

 

Quest Resource Holding Corporation

3481 Plano Parkway

The Colony, Texas 75056

Attention: Chief Financial Officer

Facsimile: (866) 492-7478

Email: LaurieL@questrmg.com

 

with a copy to:

 

Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, NY 10019

Attn: Elizabeth Gonzalez-Sussman and Kenneth Schlesinger

Facsimile: 212-451-2222

Email: egonzalez@olshanlaw.com and kschlesinger@olshanlaw.com

 

(ii) if to the Holder, to the address set forth on Schedule A.

 

with a copy to:

 

King & Spalding LLP

1185 6th Ave

New York, NY 10036

Attention: Carolyn Z. Alford

Email: czalford@kslaw.com

 

The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, upon the occurrence of each adjustment or readjustment pursuant to Section 2, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each Holder of this Warrant a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.

 

8.                  AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder. 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 right, 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.

 

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9.                  GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth in Section 7(i) above or such other address as the Company subsequently delivers to the Holder and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

10.              DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations in writing (including via facsimile or email) within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two (2) Business Days submit in writing (including via facsimile or email) (a) the disputed determination of the Exercise Price to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

 

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11.              REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

12.              TRANSFER. This Warrant and the Warrant Shares may be offered for sale, sold, transferred or assigned without the consent of the Company, except as may otherwise be required by applicable securities laws.

 

13.              SEVERABILITY; CONSTRUCTION; HEADINGS. If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). This Warrant shall be deemed to be jointly drafted by the Company and Holder and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

14.              PIGGYBACK REGISTRATION RIGHTS.

 

(a)               Piggy-Back Registration Rights. If the Company proposes to file a registration statement under the 1933 Act (other than a registration statement on Form S-4 or S-8 (or any successor form)) with respect to any class of equity securities of the Company, whether or not for its own account, then the Company shall give written notice of such proposed filing to the Holder promptly (but in no event fewer than twenty (20) Business Days before the anticipated filing date), and such notice shall offer such Holder the opportunity to register such number of Warrant Shares as the Holder may request in writing within twenty (20) days after receipt of such written notice from the Company (which request shall specify the Warrant Shares intended to be disposed of by the Holder) (a “Piggy-Back Registration”). Upon the written request of any the Holder made within twenty (20) days after the receipt of any such notice (which request shall specify the number of Warrant Shares intended to be disposed of by the Holder and the intended method of disposition of, which shall be on the same terms and conditions as the securities of the Company or other security holder included in the registration statement), the Company shall, subject to the terms of this Warrant, effect the registration under the 1933 Act of all Warrant Shares which the Company has been so requested to register by the Holder on the same terms and conditions as the securities of the Company or other security holder included in the registration statement; provided, that if at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason either not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to the Holder and, thereupon, (i) in the case of a determination not to register shall be relieved of its obligation to register any Warrant Shares in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith) and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Warrant Shares, for the same period as the delay in registering such other securities.

 

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(b)               Inclusion in Registered Offering; Withdrawal. The Company shall cause the managing underwriter or underwriters, if any, of such proposed offering to permit the Warrant Shares requested to be included in a Piggy-Back Registration to be included on the same terms and conditions as any similar securities of the Company or any other selling security holder included therein and to permit the sale or other disposition of such Warrant Shares in accordance with the intended method of distribution thereof; provided, however, that (i) the Holder shall not be required to make any representation other than that it is the owner of any Warrant and/or Warrant Shares of Holder that are being included in the offering and that it has full power and authority to transfer them pursuant such offering, and (ii) the total indemnification or other liability of the Holder thereunder shall be limited to the aggregate net cash proceeds received by Holder from the sale of such Warrant and/or the Warrant Shares in such offering. The Holder shall have the right to withdraw its request for inclusion of its Warrant Shares in any registration statement pursuant to these provisions by giving written notice to the Company of its request to withdraw no less than five (5) Business Days prior to the effective date of such registration statement.

 

(c)               Payment of Registration Expenses. The Company shall pay all Registration Expenses in connection with registration of Warrant Shares requested pursuant to this Section 14, and the Holder shall pay the underwriting discounts, commissions, and transfer taxes, if any, relating to the sale of the Holder’s Warrant Shares pursuant to this Section 14.

 

(d)               Underwriter Cut-Back; Priority in Piggy-Back Registrations. If a registration pursuant to this Section 14 involves an underwritten offering of the securities so being registered, whether or not for sale for the account of the Company, the Company shall, if requested by the Holder and subject to the provisions of this Section 14, arrange for such underwriters to include all the Warrant Shares requested by the Holder to be offered and sold by the Holder among the securities to be distributed by such underwriters. If the managing underwriter of such underwritten offering shall, in writing, inform the Holder and the other holders of any of the Company’s other securities which shall have exercised registration rights in respect of such underwritten offering of its belief that the number of securities requested to be included in such registration would materially and adversely affect the success of such offering, then the Company shall be required to include in such registration statement only the amount of securities that it is so advised should be included in such registration. In such event:

 

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(i)                 in cases initially involving the registration for sale of securities for the Company’s own account, securities shall be registered in such offering in the following order of priority: (x) first, the securities that the Company proposes to register and (y) second, the securities that have been requested to be included in such registration by the Holder and by Persons entitled to exercise “piggy-back” registration rights pursuant to contractual commitments of the Company (pro rata on the amount of securities sought to be registered by the Holder and such Persons; it being expressly understood that the Company may not reduce the amount of Warrant Shares included in such registration unless it reduces the amount sought to be registered by such Persons on a pro rata basis); and

 

(ii)              in cases not initially involving the registration for sale of securities for the Company’s own account, securities shall be registered in such offering as follows: (x) first, the securities that have been requested to be included in such registration by the Holder and other Persons entitled to exercise registration rights pursuant to contractual commitments (pro rata based on the amount of securities sought to be registered by such Holders and Persons); provided, that the Company may exclude securities sought to be registered by the Holders if (A) such registration is pursuant to a contractual “demand” registration right existing on the date hereof and such right expressly requires the Company to exclude such securities, and (B) all securities which the Company proposes to register are first excluded and (y) second, the securities which the Company proposes to register.

 

(e)               Termination of Piggy-back Registration Rights. The Holder shall have the right to include the Warrant Shares in one or more Piggy-Back Registrations until (i) all of the Warrant Shares underlying the Warrants have been sold, or (ii) the Holder beneficially owns less than 1% of the outstanding Common Stock and such Warrant Shares may be sold under Rule 144 without limitation, including any limitation on volume and manner of sale restrictions, whichever shall first occur.

 

(f)                Market Stand Off. The Holder of Warrants and Warrant Shares agrees, that if requested by any managing underwriter in connection with any underwritten public offering of the Company’s securities in which Warrant Shares are being sold, it will enter into a customary “lock up” agreement pursuant to which it will agree not to directly or indirectly offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell grant any option, right or warrant for the sale of or otherwise dispose of or transfer any Warrant Shares held by it for a period not to exceed (90) days following the consummation of any other underwritten public offering.

 

15.              REDEMPTION OF WARRANTS

 

(a)               Call Right. In the event that (i) Holder is unwilling, for any reason, to provide an Incremental Term Loan (as defined in the Credit Agreement) to the Company to finance future Permitted Acquisitions (as defined in the Credit Agreement) pursuant to the terms and conditions set forth in the Credit Agreement and (ii) the Company refinances the Loans and Credit Facilities under the Credit Agreement in full with another lender in connection with such Permitted Acquisition (the “Refinancing”), within one-hundred and twenty (120) calendar days following receipt of notice of the Holder’s refusal to so provide an Incremental Term Loan, the Company shall have the right, by written notice to the Holder, to require that Holder sell all (but not less than all) of this Warrant and/or Holder’s Warrant Shares for a purchase price equal to the greater of:

 

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(i)                 The Redemption Price; and

 

(ii)              The then-current number of Warrant Shares issuable upon a full exercise of this Warrant multiplied by the fifteen (15) Trading Day Weighted Average Price of the Company’s Common Stock, measured as of the period ending one (1) Business Day prior to the consummation of the Refinancing.

 

The date upon which such notice is delivered to Holder shall hereinafter be referred to as the “Call Demand Date”. The Redemption Price shall be payable to Holder in immediately available funds on or prior to the thirtieth (30th) day immediately following the Call Demand Date or such earlier date as determined by the Company (the “Call Payment Date”), upon surrender of this Warrant and/or the applicable Warrant Shares, as the case may be, to the Company, by wire transfer to any account in the United States of America specified by Holder by written notice to the Company. The Company’s right to require redemption of this Warrant and/or the Warrant Shares pursuant to this Section 15 shall be referred to herein as the Holder’s “Call Right”. If the Company shall fail to pay, or is restricted or prohibited from paying, for any reason whatsoever, the Redemption Price on the Call Payment Date in accordance with the terms of this Section 15, then the exercise of the Call Right shall be deemed null and void ab initio for all purposes retroactive to the Call Demand Date, and the Call Right shall lapse and be of no further force and effect from and after such date. For the avoidance of doubt, Holder shall be restricted from exercising the Warrant at any time from and after the Call Demand Date unless the Call Right is voided in accordance with the preceding sentence.

 

16.              REPRESENTATIONS AND WARRANTIES.

 

(a)               Representations and Warranties of the Company. The Company hereby represents and warrants to the Holder that:

 

(i)                 Reaffirmation of Credit Agreement Representations and Warranties. Each of the representations and warranties of the Company set forth in the Credit Agreement are true and correct as of the date hereof, each such representation and warranty being hereby incorporated by reference herein, mutatis mutandi, for all purposes.

 

(ii)              Organization; Authorization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Nevada and has all requisite corporate power and authority to carry on its business as presently conducted or proposed to be conducted. The Company further represents and warrants to the Holder that it has taken all necessary corporate action and has obtained all necessary approvals, including NASDAQ listing approval, in connection with the issuance of this Warrant and the Warrant Shares issuable upon exercise thereof. The Company represents and warrants that no Company shareholder approval is required in connection with the issuance of this Warrant or the Warrant Share issuable upon exercise thereof. This Agreement and the Warrant, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general equitable principles.

 

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(iii)            Capitalization. The fully diluted capitalization of the Company as of immediately prior to the execution of this Agreement is equal to 22,134,775 shares of Common Stock, assuming the full grant of all shares of Common Stock reserved for issuance under stock incentive plans and the full exercise and conversion into Common Stock of all exercisable and convertible securities (other than convertible promissory notes that are convertible into shares of equity securities in connection with the Company’s next bona fide equity financing). The Company now has, and shall at all times shall keep reserved for issuance, free from preemptive or any other contingent purchase rights (other than those of the Holder), under this Warrant a number of shares of Common Stock reserved for issuance equal to the Required Reserve Amount. The Warrant sold and delivered in accordance with the terms hereof for the consideration expressed herein will be duly and validly issued, fully paid and nonassessable. The Warrant Shares have been duly and validly reserved for issuance, and upon issuance in accordance with the terms of the Warrant, will be duly and validly issued, fully paid and nonassessable.

 

(iv)             Non-Contravention. The execution and delivery of this Warrant does not, and the issuance of the Warrant Shares in accordance with the terms of this Warrant will not (A) violate the Company’s certificate of incorporation or by-laws, (B) violate any law or regulation applicable to the Company or order or decree of any court or public authority having jurisdiction over the Company, or (C) result in a breach of any mortgage, indenture, contract, agreement or undertaking to which the Company is a party or by which it is bound.

 

(b)               Representations and Warranties of the Holder. Holder hereby represents and warrants to the Company as follows:

 

(i)                 Organization and Qualification. Holder is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation or incorporation, as applicable.

 

(ii)              Authority; Enforceability. Holder has all requisite power and authority to execute and deliver this Warrant and to perform its obligations hereunder and to consummate the transactions contemplated hereby, and all action required on the part of Holder for such execution, delivery and performance has been duly and validly taken. Assuming due execution and delivery by the Company, this Holder constitutes the legal, valid and binding obligation of Holder enforceable against Holder in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting creditors’ rights generally and by general equitable principles.

 

(iii)            Accredited Investor. Holder is an “accredited investor” (as defined in Regulation D under the 1933 Act). Except as otherwise contemplated by this Warrant, Holder is acquiring this Warrant and any Warrant Shares for investment for its own account and not with a view to any distribution thereof in violation of applicable securities laws.

 

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17.              TAX BASIS. The Company and the Holder agree pursuant to Treasury Regulation Section 1.273-2 that, for Federal income tax purposes, the purchase price for this Warrant shall be valued using the same methodology as the methodology used to value the warrant issued to Holder on October 19, 2020, and such valuation shall be mutually agreeable to the Company and Holder. Neither the Company nor the Holder hereof shall voluntarily take any action inconsistent with the agreement set forth in this Section 17.

 

18.              CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:

 

(a)               1933 Act” means the Securities Act of 1933, as amended.

 

(b)               1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

(c)               Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

(d)               Attribution Parties” means, with respect to any Person, any other Person (including any other Persons with whom the first Person is deemed to be acting with together as a group) whose beneficial ownership would be aggregated with such first Person’s (including by aggregation with one or more other Attribution Parties) for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.

 

(e)               Bid Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange or trading market for such security, the bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply, the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 10. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

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(f)                Bloomberg” means Bloomberg Financial Markets.

 

(g)               Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(h)               Closing Sale Price” means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.

 

(i)                 Common Stock” means (i) the Company’s Common Stock, par value $0.001 per share, and (ii) any capital stock into which such Common Stock shall have been changed or any capital stock resulting from a reclassification of such Common Stock.

 

(j)                 Convertible Securities” means any securities (directly or indirectly) convertible into or exchangeable for Common Stock, but excluding Options.

 

(k)               Expiration Date” means March 19, 2028; provided, that the Holder shall have a reasonable amount of time, not to exceed one-hundred and eighty (180) days following the Expiration Date, to exercise this Warrant with respect to Warrant Shares exercisable by Holder in the one-hundred and eighty (180) days immediately prior to the Expiration Date.

 

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(l)                 Fundamental Transaction” means (A) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company or any of its “significant subsidiaries” (as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or have its shares of Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50.1% of the outstanding shares of Common Stock, (y) 50.1% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50.1% of the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50.1% of the outstanding shares of Common Stock, (y) at least 50.1% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50.1% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its shares of Common Stock, (B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x) at least 50.1% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock, (y) at least 50.1% of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock not held by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other stockholders of the Company to surrender their Common Stock without approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction.

 

(m)             Group” means a “group” as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.

 

(n)               Options” means any warrants or other rights or options to subscribe for or purchase Common Stock or Convertible Securities.

 

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(o)               Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

(p)               Principal Market” means The NASDAQ Capital Market.

 

(q)          Redemption Price” means (i)(A) $7.50 minus (B) the Exercise Price, multiplied by (ii) the then-current number of Warrant Shares issuable upon a full exercise of this Warrant.

 

(r)            Registration Expenses” means all expenses incident to the Company’s performance of or compliance with Section 14 of this Agreement, including, without limitation, (a) all SEC, stock exchange and FINRA registration and filing fees and expenses, (b) fees and expenses of compliance with securities or “blue sky” laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters in connection with “blue sky” qualifications), (c) fees and expenses of preparing, printing, filing, duplicating and distributing the registration statement and the related prospectus, (d) the cost of printing stock certificates, if any, (e) the cost and charges of any transfer agent and rating agency fees, (f) printing, messenger, telephone and delivery expenses, (g) fees and disbursements of counsel for the Company and all independent certified public accountants, (h) the fees and disbursements of underwriters customarily paid by issuers or sellers of securities (but not including any underwriting discounts or commissions or transfer taxes, if any, attributable to the sale of Warrant Shares by the Holders), and (i) reasonable fees and expenses of counsel for the Holder.

 

(s)                Subject Entity” means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.

 

(t)                 Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.

 

(u)               Weighted Average Price” means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market publicly announces is the official close of trading), as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as such market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the OTC Link or “pink sheets” by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 10 with the term “Weighted Average Price” being substituted for the term “Exercise Price.” All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.

 

[Signature Page Follows]

 

-21-

 

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

 

  QUEST RESOURCE HOLDING CORPORATION
     
  By:
  Name: Laurie L. Latham
  Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer

 

-22-

 

 

EXHIBIT A

 

WARRANT EXERCISE CALCULATION

 

The number of Warrant Shares into which this Warrant is exercisable shall be calculated as follows (such date upon which the Warrant Shares become exercisable, the “Issuance Date”), in each case, subject to the limitations set forth in Section 1(f) of this Warrant:

 

·350,000 Warrant Shares shall be exercisable on the earliest to occur of (i) the date any Delayed Draw Term Loan is drawn, (ii) the date that is twelve (12) months following the Closing Date, (iii) the date on which the full Delayed Draw Term Loan Facility has been drawn, (iv) the Term Loan Maturity Date, (v) the date of a Fundamental Transaction, (vi) prepayment in full of the Credit Facilities and (vii) a payment or bankruptcy event of default or acceleration of the obligations under the Credit Facilities by the Required Lenders.

 

Defined terms set forth in this Exhibit A but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement.

  

 

-23-

 

Execution Version

 

 

 

 

CREDIT AGREEMENT

 

dated as of October 19, 2020

 

among

 

QUEST RESOURCE HOLDING CORPORATION,

as Holdings

 

QUEST RESOURCE MANAGEMENT GROUP, LLC,

as a Borrower,

 

EACH OF ITS AFFILIATES PARTY HERETO,

as Borrowers,

 

THE VARIOUS FINANCIAL INSTITUTIONS PARTY HERETO,

as Lenders,

 

MONROE CAPITAL MANAGEMENT ADVISORS, LLC,

as Administrative Agent and Lead Arranger

 

 

 

 

 

Table of Contents

 

Page

SECTION 1 DEFINITIONS. 1
1.1 Definitions 1
1.2 Certain Interpretive Provisions 34
1.3 Accounting and Other Terms 35
1.4 Treatment of LLC Division 35
     
SECTION 2 COMMITMENTS OF THE LENDERS; BORROWING AND CONVERSION PROCEDURES. 36
2.1 Commitments 36
  2.1.1 Term Loan Commitments 36
  2.1.2 Incremental Facilities 36
2.2 Loan Procedures 38
  2.2.1 Various Types of Loans 39
  2.2.2 Borrowing Procedures 39
  2.2.3 [Reserved] 39
2.3 Commitments Several 39
2.4 Certain Conditions 40
2.5 Defaulting Lenders 40
     
SECTION 3 EVIDENCING OF LOANS. 40
3.1 Notes 40
3.2 Recordkeeping 41
     
SECTION 4 INTEREST. 41
4.1 Interest Rates 41
  4.1.1 Interest on Loans 41
  4.1.2 Default Rate 41
  4.1.3 Interest Payment Dates 41
4.2 Setting and Notice of LIBOR Rates 42
4.3 Computation of Interest 42
     
SECTION 5 FEES. 42
5.1 Unused Fee 42
5.2 Additional Fees 42
5.3 Applicable Premium and Exit Fee 42
5.4 Warrants. 42
  5.4.1 Warrant Original Issue Discount.  The Loan Parties, their Subsidiaries and Administrative Agent acknowledge and agree that the Loans and the Warrants are part of an “investment unit” within the meaning of Section 1273(c)(2) of the Code.  The Loan Parties, their Subsidiaries and Administrative Agent agree that for purposes of allocating a portion of the issue price of the investment unit to the Warrants in accordance with Treasury Regulation Section 1.1273-2(h)(1), the fair market value of the Closing Date Warrant is $765,678. The Loan Parties, their Subsidiaries and Administrative Agent agree that any other Warrant issued after the Closing Date to the Warrant Holder shall be valued using the same methodology as the methodology used to value the Closing Date Warrant and such valuation shall be mutually agreeable to the Holdings and the Warrant Holder. The Loan Parties, their Subsidiaries and Administrative Agent agree to file all tax returns consistently with this Section 5.4 and not take any position inconsistent therewith. 42

 

i

 

Table of Contents

(continued)

 

Page

 

SECTION 6 REDUCTION OR TERMINATION OF COMMITMENTS; PREPAYMENTS; REPAYMENTS. 43
6.1 Reduction or Termination of Commitments 43
  6.1.1 Voluntary Reduction or Termination of the Term B Loan Commitments 43
  6.1.2 All Reductions of Commitments 43
6.2 Prepayments 43
  6.2.1 Voluntary Prepayments 43
  6.2.2 Mandatory Prepayments 43
6.3 Manner of Prepayments 45
  6.3.1 All Prepayments 45
6.4 Repayments 45
  6.4.1 [Reserved] 45
  6.4.2 Term A Loans 45
  6.4.3 Term B Loans 45
       
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. 46
7.1 Making of Payments 46
7.2 Application of Certain Payments 46
7.3 Due Date Extension 47
7.4 Setoff 47
7.5 Proration of Payments 47
7.6 Taxes 48
     
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS. 51
8.1 Increased Costs 51
8.2 Basis for Determining Interest Rate Inadequate or Unfair 51
8.3 Changes in Law Rendering LIBOR Loans Unlawful 53
8.4 Right of Lenders to Fund through Other Offices 53
8.5 Mitigation of Circumstances; Replacement of Lenders 53
8.6 Conclusiveness of Statements; Survival of Provisions 54

 

ii

 

Table of Contents

(continued)

 

Page

 

SECTION 9 REPRESENTATIONS AND WARRANTIES. 55
9.1 Organization 55
9.2 Authorization; No Conflict 55
9.3 Validity and Binding Nature 55
9.4 Financial Condition 55
9.5 No Material Adverse Change 56
9.6 Litigation and Contingent Liabilities 56
9.7 Ownership of Properties; Liens 56
9.8 Equity Ownership 56
9.9 Pension Plans. 56
9.10 Investment Company Act 57
9.11 Compliance with Laws 57
9.12 Regulation U 57
9.13 Taxes 57
9.14 Solvency, etc 58
9.15 Environmental Matters 58
9.16 Insurance 59
9.17 Real Property 59
9.18 Information 59
9.19 Location of Bank Accounts 59
9.20 Burdensome Obligations 60
9.21 Intellectual Property 60
9.22 Material Contracts 60
9.23 Employee and Labor Matters 60
9.24 No Bankruptcy Filing 61
9.25 Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of Business; Chief Executive Office; FEIN 61
9.26 Locations of Collateral 61
9.27 Security Interests 61
9.28 No Default 62
9.29 Hedging Agreements 62
9.30 OFAC 62
9.31 Patriot Act 62
9.32 Related Agreements 62
9.33 Holdings 63
9.34 Customers and Suppliers 63
9.35 ABL Loan Documents 64
     
SECTION 10 AFFIRMATIVE COVENANTS. 64
10.1 Reports, Certificates and Other Information 64
  10.1.1 Annual Report 64
  10.1.2 Interim Reports 64
  10.1.3 Compliance Certificates 65

 

iii

 

Table of Contents

(continued)

 

Page

 

  10.1.4 Reports to the SEC and to Shareholders 65
  10.1.5 ABL Reports and Notices 65
  10.1.6 Notice of Default, Litigation, and ERISA Matters 65
  10.1.7 Real Estate 66
  10.1.8 Management Reports 66
  10.1.9 Projections 66
  10.1.10 Related Transaction Notices 67
  10.1.11 Material Contract Notices 67
  10.1.12 Information Systems 67
  10.1.13 Key Performance Indicators 67
  10.1.14 Other Information 68
10.2 Books, Records, and Inspections 68
10.3 Maintenance of Property; Insurance 68
10.4 Compliance with Laws; Payment of Taxes and Liabilities 69
10.5 Maintenance of Existence, etc 70
10.6 Use of Proceeds 70
10.7 Employee Benefit Plans 70
10.8 Environmental Matters 71
10.9 Further Assurances 71
10.10 Lender Meetings 72
10.11 Deposit Accounts 72
10.12 SBA PPP Loans 72
10.13 Post-Closing Items 73
     
SECTION 11 NEGATIVE COVENANTS 73
11.1 Debt 73
11.2 Liens 76
11.3 Restricted Payments 77
11.4 Mergers, Consolidations, Sales 78
11.5 Modification of Certain Documents; Organizational Form 79
11.6 Transactions with Affiliates 80
11.7 Inconsistent Agreements 80
11.8 Business Activities 81
11.9 Investments 81
11.10 Restriction of Amendments to Certain Documents 82
11.11 Fiscal Year 82
11.12 Financial Covenants 82
  11.12.1 Fixed Charge Coverage Ratio 82
  11.12.2 Senior Net Leverage Ratio 82
11.13 Compliance with Laws 83
11.14 Equity Interests of Subsidiaries 83
11.15 Tax Consolidation 83
11.16 Bill-and-Hold Sales, Etc 83

 

iv

 

Table of Contents

(continued)

 

Page

 

11.17 ABL Obligations 83
11.18 Optional Prepayments of ABL Term Loan. Not permit any Loan Parties or any of their Subsidiaries to make any voluntary prepayment of Term Loans (as defined in the ABL Loan Agreement) unless the following conditions have been satisfied: (a) no Default or Event of Default has occurred and is continuing or would immediately result therefrom (b) after giving effect to any such voluntary prepayment, Excess Availability is not less than $3,000,000 and (b) Borrower Representative has delivered a certificate to Administrative Agent certifying the satisfaction of the foregoing conditions. 83
11.19 Fiscal Year End. Not change, or permit any Subsidiary of any Loan Party to change, its fiscal year end. 83
11.20 OFAC. Not (i) Become a Person whose property or interests in property are blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Party and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001)), (ii) engage in any dealings or transactions prohibited by Section 2 of such executive order, or be otherwise associated with any such Person in any manner violative of such Section 2, or (iii) become a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order. 83
     
SECTION 12 EFFECTIVENESS; CONDITIONS OF LENDING, ETC. 84
12.1 Conditions to Effectiveness 84
  12.1.1 Agreement, Notes, and other Loan Documents 84
  12.1.2 Authorization Documents 84
  12.1.3 Consents, etc 84
  12.1.4 Letter of Direction 85
  12.1.5 Collateral and Diligence Questionnaire 85
  12.1.6 Opinions of Counsel 85
  12.1.7 Insurance 85
  12.1.8 Related Transaction 85
  12.1.9 Payment of Fees 85
  12.1.10 Debt to be Repaid 85
  12.1.11 Solvency Certificate 85
  12.1.12 Search Results; Lien Terminations 86
  12.1.13 Filings, Registrations, and Recordings 86
  12.1.14 Closing Certificate 86
  12.1.15 Financial Statements 86
  12.1.16 No Material Adverse Effect 86
  12.1.17 Minimum Consolidated EBITDA 86
  12.1.18 Closing Leverage 87

 

v

 

Table of Contents

(continued)

 

Page

 

  12.1.19 Diligence 87
  12.1.20 Subordination and Intercreditor Agreements 87
  12.1.21 Key Management 87
  12.1.22 Know-Your-Customer and Anti-Money Laundering 87
12.2 Conditions Precedent to all Loans 87
  12.2.1 Compliance with Warranties, No Default, etc 87
  12.2.2 Confirmatory Certificate 88
12.3 Conditions Precedent to each Term B Loan 88
  12.3.1 Use of Proceeds 88
  12.3.2 Financial Tests 88
  12.3.3 Minimum Amount 88
       
SECTION 13 EVENTS OF DEFAULT AND THEIR EFFECT. 88
13.1 Events of Default 88
  13.1.1 Non-Payment of the Loans, etc 88
  13.1.2 Non-Payment of Other Debt 88
  13.1.3 Other Material Obligations 89
  13.1.4 Bankruptcy, Insolvency, etc 89
  13.1.5 Non-Compliance with Loan Documents 89
  13.1.6 Representations; Warranties 89
  13.1.7 Pension Plans 89
  13.1.8 Judgments 90
  13.1.9 Invalidity of Loan Documents, etc 90
  13.1.10 Change of Control 90
  13.1.11 Uninsured Losses 90
  13.1.12 Business Disruption; Condemnation 90
  13.1.13 Repudiation of or Default under Guaranty and Collateral Agreement 90
  13.1.14 Criminal Forfeiture 91
  13.1.15 Intercreditor and Subordination Agreements 91
  13.1.16 Material Adverse Effect 91
13.2 Effect of Event of Default 91
13.3 Credit Bidding 91
13.4 Curative Equity 92
     
SECTION 14 AGENCY. 93
14.1 Appointment and Authorization 93
14.2 [Reserved] 93
14.3 Delegation of Duties 93
14.4 Exculpation 94
14.5 Reliance 94
14.6 Notice of Default 95
14.7 Credit Decision 95
14.8 Indemnification 95

 

vi

 

Table of Contents

(continued)

 

Page

 

14.9 Administrative Agent in Individual Capacities 96
14.10 Successor Administrative Agent 96
14.11 Collateral Matters 96
14.12 Restriction on Actions by Lenders 97
14.13 Administrative Agent May File Proofs of Claim 97
14.14 Other Agents; Arrangers and Managers 98
14.15 Protective Advances 98
     
SECTION 15 GENERAL. 99
15.1 Waiver; Amendments 99
15.2 Confirmations 100
15.3 Notices. 101
  15.3.1 Generally 101
  15.3.2 Electronic Communications 101
15.4 Computations 101
15.5 Costs, Expenses and Taxes 102
15.6 Assignments; Participations. 102
  15.6.1 Assignments. 102
  15.6.2 Participations 103
15.7 Register 104
15.8 GOVERNING LAW 104
15.9 Confidentiality 105
15.10 Severability 105
15.11 Nature of Remedies 106
15.12 Entire Agreement 106
15.13 Counterparts 106
15.14 Successors and Assigns 106
15.15 Captions 106
15.16 Customer Identification—USA Patriot Act Notice 106
15.17 INDEMNIFICATION BY LOAN PARTIES 106
15.18 Non-Liability of Lenders 107
15.19 FORUM SELECTION AND CONSENT TO JURISDICTION 108
15.20 WAIVER OF JURY TRIAL 108
15.21 Acknowledgement and Consent to Bail-In of Affected Financial Institutions 108
15.22 Acknowledgement Regarding any Supported QFCs 109
15.23 Certain ERISA Matters 109
15.24 ABL Intercreditor Agreement. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, (a) the Liens granted to the Administrative Agent in favor of the Lenders pursuant to this Agreement and the other Loan Documents and the exercise of any right related to any Collateral shall be subject, in each case, to the terms of the ABL Intercreditor Agreement, and (b) in the event of any conflict between the terms and provisions of this Agreement or any other Loan Document, on the one hand, and the terms and provisions of the ABL Intercreditor Agreement, on the other hand, the terms and provisions of the ABL Intercreditor Agreement shall continue. 110

 

vii

 

Table of Contents

(continued)

 

Page

       
SECTION 16 JOINT AND SEVERAL LIABILITY 111
16.1 Applicability of Terms 111
16.2 Joint and Several Liability 111
16.3 Benefits and Best Interests 111
16.4 Accommodations 111
16.5 Maximum Amount 111
16.6 Joint Liability Payments 112
16.7 Financial Condition 112
16.8 Administrative Agent Authorizations 112
16.9 Unconditional Obligations 113
16.10 Notices 113
16.11 No Impairment of Obligations or Limitation of Liability 113
16.12 Rights of Contribution and Indemnification 114
16.13 Subrogation 114
     
SECTION 17 APPOINTMENT OF BORROWER REPRESENTATIVE. 114
17.1 Appointment 114
17.2 Additional Appointments 114
17.3 Reliance 114
17.4 Termination or Change of Borrower Representative 115

 

viii

 

ANNEXES

 

Annex A Lenders and Pro Rata Shares
Annex B Addresses for Notices

 

SCHEDULES

 

Schedule 1.1 EBITDA
schedule 1.2 Ineligible Lenders
Schedule 9.6 Litigation and Contingent Liabilities
Schedule 9.8 Equity Ownership
Schedule 9.16 Insurance
Schedule 9.17 Real Property
Schedule 9.19 Deposit and Securities Accounts
Schedule 9.21 Intellectual Property
Schedule 9.22 Material Contracts
Schedule 9.25 Loan Party Information
Schedule 9.26 Locations of Collateral
Schedule 11.1 Existing Debt
Schedule 11.2 Existing Liens
Schedule 11.9 Investments
Schedule 12.1 Debt to be Repaid

 

EXHIBITS

 

Exhibit A Form of Note (Section 3.1)
Exhibit B Form of Compliance Certificate (Section 10.1.3)
Exhibit C Form of Assignment Agreement (Section 15.6.1)
Exhibit D Form of Notice of Borrowing (Section 2.2.2)

 

ix

 

Credit Agreement

 

This Credit Agreement dated as of October 19, 2020 (this “Agreement”) is entered into among QUEST RESOURCE HOLDING CORPORATION, a Nevada corporation (“Holdings”); QUEST RESOURCE MANAGEMENT GROUP, LLC, a Delaware limited liability company (the “Company”); each of the Affiliates of the Company that are or may from time to time become parties hereto (together with the Company, the “Borrowers”); the financial institutions that are or may from time to time become parties hereto (together with their respective successors and assigns, the “Lenders”); and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent for the Lenders.

 

The Company is a Wholly-Owned Subsidiary of Holdings. The Company will acquire substantially all of the assets of Green Remedies Waste and Recycling, Inc., a North Carolina corporation (“Green Remedies”), pursuant to the Closing Date Acquisition Agreement (that acquisition, the “Related Transaction”) and contribute such assets to the Company and its Subsidiaries.

 

The Company has requested that the Lenders make Loans to provide the funds required to finance a portion of the Related Transaction, to repay the Debt to be Repaid, and to provide for the ongoing general corporate purposes and working capital needs of Borrowers as further provided in this Agreement, up to an aggregate principal amount of $24,000,000 in the form of (a) Term A Loans to Borrowers on the Closing Date in an aggregate principal amount not to exceed $11,500,000 and (c) Term B Loans to Borrowers during the Term B Loan Availability Period in an aggregate principal amount not to exceed $12,500,000, and the Lenders are willing to do so on the terms and conditions set forth in this Agreement.

 

To secure the Loans and other Obligations, Borrowers and the other Loan Parties are granting to Administrative Agent, for the benefit of Administrative Agent and Lenders, a security interest in and lien upon substantially all of Borrowers’ and the other Loan Parties’ real and personal property.

 

In consideration of the mutual agreements contained in this Agreement, the parties hereby agree as follows:

 

Section 1DEFINITIONS.

 

1.1              Definitions. When used in this Agreement the following terms have the following meanings:

 

ABL Agent” means BBVA USA, or in the case of any replacement or refinancing of the ABL Loan Agreement permitted under the ABL Intercreditor Agreement, the person identified as the “ABL Agent” or comparable term pursuant to the such replacement or refinancing documentation.

 

ABL Intercreditor Agreement” means that certain Intercreditor Agreement, dated as of the Closing Date, by and among the ABL Agent and the Administrative Agent, as amended, modified, supplemented, restated, refinanced, refunded or replaced in whole or in part from time to time in accordance with the terms therein.

 

 

ABL Lenders” means the lender or group of lenders party to the ABL Loan Documents.

 

ABL Loan Agreement” means that certain Loan, Security and Guaranty Agreement, dated August 5, 2020 (as amended by that certain Joinder and First Amendment to Loan, Security and Guaranty Agreement (the “ABL Loan Agreement Amendment”) and as further amended, restated, supplemented or modified as permitted by the ABL Intercreditor Agreement) by and among the Company and Landfill Diversion Innovations, L.L.C., as borrowers, and BBVA USA, as a lender and as administrative agent and collateral agent for any other lenders party thereto from time to time.

 

ABL Loan Agreement Amendment” is defined in the definition of ABL Loan Agreement, as amended, restated, supplemented or modified as permitted by the ABL Intercreditor Agreement.

 

ABL Loan Documents” means the “Loan Documents” as defined in the ABL Loan Agreement or any comparable term.

 

ABL Obligations” means the “Obligations” as defined in the ABL Loan Agreement or any comparable term, not to exceed the amount of any Debt permitted pursuant to Section 11.1(k).

 

ABL Priority Collateral” is defined in the ABL Intercreditor Agreement.

 

Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the Equity Interests of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).

 

Administrative Agent” means Monroe Capital in its capacity as administrative agent for the Lenders under this Agreement and any successor thereto in that capacity.

 

Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

 

Affected Loan” is defined in Section 8.3.

 

Affiliate” of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with that Person, (b) any officer or director of that Person and (c) with respect to any Lender, any entity administered or managed by that Lender or an Affiliate or investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in commercial loans. A Person will be deemed to be “controlled by” any other Person if that other Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of that Person whether by contract or otherwise. Unless expressly stated otherwise in this Agreement, none of the following Persons will be deemed an Affiliate of any Loan Party: (i) Administrative Agent; (ii) any Lender or (iii) the Warrant Holder or any of its affiliates.

 

2

 

Affiliated Funds” means, with respect to any Person, a fund that is an Affiliate of that Person, that invests in portfolio companies and that is managed by that Person or by the same management company that manages that Person.

 

Agent Fee Letter” means the fee letter dated as of the date of this Agreement between Borrowers and Administrative Agent.

 

Agreement” is defined in the introductory clause of this Agreement.

 

Allocable Amount” is defined in Section 16.6.

 

Applicable Margin” means, as of any date of determination, the applicable rate per annum set forth in the following table that corresponds to the Senior Debt to EBITDA Ratio calculation as set forth in the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 10.1.3. For the period from the Closing Date through the date that Administrative Agent receives the Compliance Certificate for the Computation Period ending December 31, 2020, the Applicable Margin will be the rate per annum in the row styled “Level II”. In addition, at any time that an Event of Default has occurred and is continuing, the Applicable Margin will be the rate per annum in the row styled “Level V”:

 

Level Senior Debt to EBITDA Ratio

Applicable Margin

for LIBOR Loans

Applicable Margin

for Base Rate Loans

I < 2.00x 7.50% 5.50%
II ≥ 2.00x and < 2.50x 8.50% 6.50%
III ≥ 2.50x and < 3.00x 9.00% 7.00%
IV ≥ 3.00x and < 3.50x 9.50% 7.50%
V ≥ 3.50x 10.50% 8.50%
       

Except as otherwise set forth in this definition, the Applicable Margin will be based upon the most recent Compliance Certificate. Except as otherwise set forth in this definition, the Applicable Margin will be re-determined quarterly on the first day of the month following the date of delivery to Administrative Agent of the applicable Compliance Certificate pursuant to Section 10.1.3. If Borrowers fail to furnish or cause Borrower Representative to furnish any Compliance Certificate when that Compliance Certificate is due, then the Applicable Margin will be the rate per annum in the row styled “Level V” as of the first day of the month following the date on which that Compliance Certificate was required to be delivered until the date on which that Compliance Certificate is delivered, on which date (but not retroactively), without constituting a waiver of any Default or Event of Default occasioned by the failure to timely deliver that Compliance Certificate, the Applicable Margin will be set at the rate per annum based upon the calculations disclosed by that Compliance Certificate. If any information contained in any Compliance Certificate delivered pursuant to Section 10.1.3 is shown to be inaccurate, and that inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period than the Applicable Margin actually applied for that period, then (i) Borrowers shall promptly deliver or cause to be delivered to Administrative Agent and each Lender a correct Compliance Certificate for that period; (ii) the Applicable Margin will be determined as if the correct Applicable Margin (as set forth in the table above) were applicable for that period (irrespective of whether a correct Compliance Certificate is delivered); and (iii) Borrowers shall promptly (but in any event within two Business Days after delivery of that corrected Compliance Certificate or after demand by Administrative Agent) deliver to Administrative Agent full payment in respect of the accrued additional interest as a result of the increased Applicable Margin for that period, which payment Administrative Agent shall promptly apply to the affected Obligations.

 

3

 

Applicable Premium” is defined in the Agent Fee Letter.

 

Approved Fund” means (a) any Person (other than a natural person) engaged in making, purchasing, holding, or investing in commercial loans and similar extensions of credit and that is advised, administered, or managed by a Lender, an Affiliate of a Lender (or an entity or an Affiliate of an entity that administers, advises or manages a Lender); (b) with respect to any Lender that is an investment fund, any other investment fund that invests in loans and that is advised, administered or managed by the same investment advisor as that Lender or by an Affiliate of that investment advisor; and (c) any third party that provides “warehouse financing” to a Person described in clause (a) or (b) (and any Person described in clause (a) or (b) will also be deemed an Approved Fund with respect to any such third party providing warehouse financing).

 

Asset Disposition” means the sale, sale leaseback, lease, assignment, disposition, division, or other transfer for value by any Loan Party to any Person of any asset of that Loan Party (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing to any Loan Party) condemnation, confiscation, requisition, seizure or taking thereof) other than as permitted by clauses (iii), (iv), (v), (vi), (vii) and (viii) of Section 11.4.

 

Assignee” is defined in Section 15.6.1.

 

Assignment Agreement” is defined in Section 15.6.1.

 

Attorney Costs” means, with respect to any Person, all reasonable out-of-pocket invoiced fees and charges of any counsel to that Person and all court costs and similar legal expenses.

 

Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

 

Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

 

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Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. § 101 et seq.), as amended and in effect from time to time and the regulations issued from time to time thereunder.

 

Base Rate” means, for any day, a rate per annum equal to the highest of (a) the Prime Rate, (b) the sum of one-half of one percent (0.50%) per annum and the Federal Funds Rate, (c) the sum of (x) LIBOR calculated for each such day determined two (2) Business Days prior to such day (but for the avoidance of doubt, not less than one and one-quarter percent (1.25%) per annum), plus (y) the excess of the Applicable Margin for LIBOR Rate Loans over the Applicable Margin for Base Rate Loans, in each instance, as of such day and (d) three and one-quarter percent (3.25%) per annum. Any change in the Base Rate due to a change in any of the foregoing shall be effective on the effective date of such change in the “bank prime loan” rate, the Federal Funds Rate or LIBOR for an interest period of one (1) month.

 

Base Rate Loan” means any Loan which bears interest at or by reference to the Base Rate.

 

BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

 

Borrower” is defined in the introductory clause of this Agreement.

 

Borrower Representative” means the Company or any other Person appointed as “Borrower Representative” under and in accordance with Section 17.

 

Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, New York and, in the case of a Business Day that relates to a LIBOR Loan, on which dealings are carried on in the London interbank eurodollar market.

 

Capital Expenditures” means all expenditures that, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of the Company and its Subsidiaries, including expenditures in respect of Capital Leases, but excluding any such expenditures made in connection with the replacement, substitution, or restoration of assets to the extent financed (i) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored, (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (iii) with assets traded or exchanged for that replacement, substitution, or restoration of assets, or (iv) with Net Cash Proceeds from a sale, lease, assignment, disposition, or other transfer for value of the type specifically described in clause (a) of the definition of “Asset Disposition.”

 

Capital Lease” means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by that Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person and specifically excludes the effects of Accounting Standards Update 2016-02, Leases (Topic 842).

 

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CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act and applicable rules and regulations, as amended from time to time.

 

CARES Forgivable Uses” means uses of proceeds of SBA PPP Loans that are eligible for forgiveness under Section 1106 of the CARES Act.

 

CARES Payroll Costs” means “payroll costs” as defined in 15 U.S.C. 636(a)(36)(A)(viii) (as added to the Small Business Act by Section 1102 of the CARES Act).

 

Cash Equivalent Investment” means, at any time, (a) any evidence of Debt, maturing not more than one year after that time, issued or guaranteed by the United States Government or any agency thereof; (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least A-l by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc.; (c) any certificate of deposit, time deposit, or banker’s acceptance, maturing not more than one year after that time, or any overnight Federal Funds transaction that is issued or sold by any Lender or its holding company (or by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000); (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c)) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time that repurchase agreement is entered into of not less than 100% of the repurchase obligation of that Lender (or other commercial banking institution) thereunder; (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements; and (f) other short-term liquid investments approved in writing by Administrative Agent.

 

Change in Law” means the adoption or phase-in of, or any change in, in each case after the date of this Agreement, any applicable law, rule, or regulation, or any change in the interpretation or administration of any applicable law, rule, or regulation by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank, or comparable agency. For purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, or directives thereunder or issued in connection therewith, and 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 regulatory authorities, in each case pursuant to Basel III, will, in each case, be deemed to have been adopted and gone into effect after the date of this Agreement.

 

Change of Control” means the occurrence of any of the following events: (a)  any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (other than the Warrant Holders or any of its affiliates) (i) shall, directly or indirectly, have acquired beneficial ownership or control of (x) 35% or more on a fully diluted basis of (1) the voting interests in the Equity Interests in Holdings and/or (2) the economic interests in the Equity Interests in Holdings, or (ii) shall, directly or indirectly, have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings (b) except to the extent a merger or consolidation transaction is expressly permitted by Section 11.4 or a liquidation or dissolution of a domestic Wholly-Owned Subsidiary of a Borrower is expressly permitted by Section 11.4, Holdings ceases to, directly or indirectly, own and control 100% of each class of the outstanding Equity Interests of each Subsidiary of Holdings; (c) a "Change of Control" or comparable term as that term is defined in the ABL Loan Agreement occurs; (d) a change in the majority of the directors of Holdings during any 24 month period, unless approved by the majority of directors serving at the beginning of such period; (e) the sale or transfer of all or substantially all assets of any Borrower (other than as a result of a transaction permitted by Section 11.4); (f) Daniel Friedberg is no longer the chairman of the board of directors (or similar governing body) of Holdings performing the same or similar role that he is performing on the Closing Date; provided, that, to the extent Daniel Friedberg dies or becomes incapacitated and is no longer able serve in such capacity, the Borrowers shall have ninety (90) days to select a replacement reasonably satisfactory to the Administrative Agent; (g) Daniel Friedberg sells or otherwise transfers, directly or indirectly, any Equity Interests in Holdings (other than any transfer into an investment vehicle that is 100% owned and controlled Daniel Friedberg solely for estate planning purposes) to the extent that immediately after giving effect to such sale or transfer Daniel Friedberg would own and control, directly or indirectly, less than $2,000,000 of Equity Interests of Holdings (measured at the fair market value at the time of such sale or transfer); provided, however, that this clause (g) shall no longer apply upon the transfer or assignment of more than 50% of (1) the Term A Loans funded on the Closing Date and (2) the Term B Loan Commitment as of the Closing Date (or, if the Term B Loan Commitment is terminated or no longer available after the Closing Date, the outstanding principal amount of the Term B Loan), in each case, to Persons that were not Lenders on the Closing Date (other than transfers to any of Monroe Capital’s Affiliates and investment vehicles); or (h) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (other than the Warrant Holders or any of its affiliates) other than Daniel Friedberg has the power, directly or indirectly, to appoint more than one (1) director to the board of directors of Holdings.

 

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Closing Date” is defined in Section 12.1.

 

Closing Date Acquisition” means that acquisition by Holdings or its Subsidiaries of assets of Green Remedies pursuant to the Closing Date Acquisition Agreement.

 

Closing Date Acquisition Agreement” means that certain Asset Purchase Agreement, dated as of October 19, 2020 (as amended, restated, supplemented or otherwise modified as permitted hereunder), by and among the Company, Holdings, Green Remedies and Alan Allred.

 

Closing Date Seller Note” that certain Unsecured Subordinated Promissory Note executed by Holdings in favor of Green Remedies.

 

Closing Date Seller Note Subordination Agreement” means that certain Subordination Agreement, dated as of the Closing Date, between Green Remedies, the ABL Agent and the Administrative Agent and acknowledged by Holdings.

 

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Closing Date Transactions” means the execution, delivery and performance by Borrowers and the other Loan Parties of this Agreement, the ABL Loan Agreement Amendment, the Closing Date Acquisition Agreement and all other documents and agreements executed in connection with the execution of the foregoing, and all other transactions related to any of the foregoing and contemplated to have occurred on or as of the Closing Date, including the Closing Date Acquisition and the payment of premiums, fees and expenses in connection with the foregoing

 

Closing Date Warrant” is defined in the definition of Warrants.

 

Code” means the Internal Revenue Code of 1986.

 

Collateral” means “Collateral” (as defined in the Guaranty and Collateral Agreement) and any and all other property now or hereafter securing Obligations.

 

Collateral Access Agreement” means an agreement in form and substance reasonably satisfactory to Administrative Agent pursuant to which a mortgagee or lessor of real property on which collateral or books or records are stored or otherwise located, or a warehouseman, processor, or other bailee of inventory or other property owned by any Loan Party, acknowledges the Liens of Administrative Agent, waives or subordinates any Liens held by that Person on that property, and, in the case of any such agreement with a mortgagee or lessor, permits Administrative Agent reasonable access to and use of the applicable real property following the occurrence and during the continuance of an Event of Default to assemble, complete, and sell any Collateral stored or otherwise located on that real property.

 

Collateral and Diligence Questionnaire” means a collateral and diligence questionnaire executed and delivered to Administrative Agent by a Loan Party.

 

Collateral Documents” means, collectively, the Guaranty and Collateral Agreement, each Mortgage, each Mortgage-Related Document, each Collateral Access Agreement, each Control Agreement, each Intellectual Property Security Agreement, and any other agreement or instrument pursuant to which any Borrower, any Subsidiary or any other Person grants or purports to grant collateral to Administrative Agent for the benefit of Administrative Agent and the Lenders or otherwise relates to any such collateral.

 

Commitment” means, as to any Lender, that Lender’s commitment to make Loans under this Agreement. The initial amount of each Lender’s Commitment is set forth on Annex A.

 

Company” is defined in the recitals of this Agreement.

 

Competitor” means any Person that is a bona fide direct operating company competitor or vendor of, and in the same industry (or an industry offering a substitute product or service) and market as, the Borrowers and its Subsidiaries.

 

Compliance Certificate” means a Compliance Certificate in substantially the form of Exhibit B.

 

8

 

Computation Period” means each period of 4 consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter.

 

Consolidated EBITDA” means, for any period, the sum of (a) EBITDA for such period, plus, (b) to the extent a Permitted Acquisition or permitted Asset Disposition has been consummated during such period (each, a “Subject Transaction”), Consolidated EBITDA shall be calculated with respect to such period on a pro forma basis (which pro forma adjustments shall be certified by a Chief Financial Officer of the Company and may only be included in determining such compliance to the extent approved by Administrative Agent in its reasonable discretion) using the historical financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of Holdings and its Subsidiaries, which shall be reformulated as if such Subject Transaction, and any Debt incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Debt bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period); provided, that, notwithstanding anything to the contrary in this Agreement, any adjustments specified in this clause (b) shall be subject to the approval of Administrative Agent in its reasonable discretion for all purposes of this Agreement or shall be supported by a quality of earnings report from a reputable third party reasonably acceptable to the Administrative Agent (the foregoing calculation of Consolidated EBITDA in this clause (b), “Pro Forma EBITDA”); provided, that, in no event shall the aggregate amount of addbacks and adjustments set forth in clauses (a)(xv), (a)(xvi), (a)(xix) and (a)(xx) of the definition of EBITDA when combined with adjustments taken in calculating Pro Forma EBITDA exceed twenty percent (20%) of Consolidated EBITDA in any period (calculated after giving effect to any such addbacks and adjustments).

 

Consolidated Net Income” means, with respect to Holdings and its Subsidiaries for any period, in each case as determined in accordance with GAAP, the consolidated net income (or loss) of Holdings and its Subsidiaries for that period, excluding (a) any gains from Asset Dispositions; (b) any extraordinary gains; (c) the income (or loss) of any Loan Party during that period in which any other Person has a joint interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to that Loan Party during that period; (d) the income (or loss) of any Person during that period and accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with a Loan Party or that Person’s assets are acquired by a Loan Party; (e) the income of any Loan Party to the extent that the declaration or payment of dividends or similar distributions by that Loan Party of that income is not at the time permitted by operation of the terms of its organizational documents, its governing documents, or any agreement, instrument, judgment, decree, order, statute, rule; or governmental regulation applicable to that Loan Party; and (f) any gains from discontinued operations.

 

Contingent Liability” means, with respect to any Person, each obligation and liability of that Person and all such obligations and liabilities of that Person incurred pursuant to any agreement, undertaking or arrangement by which that Person: (a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection), including any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (b) guarantees the payment of dividends or other distributions upon the Equity Interests of any other Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor, (ii) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions, or otherwise), or to maintain solvency, assets, level of income, working capital, or other financial condition of any other Person, or (iii) to make payment to any other Person other than for value received; (d) agrees to lease property or to purchase securities, property, or services from any other Person with the purpose or intent of assuring the owner of that indebtedness or obligation of the ability of that other Person to make payment of the indebtedness or obligation; (e) to induce the issuance of, or in connection with the issuance of, any letter of credit for the benefit of any other Person; or (f) undertakes or agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability will (subject to any limitation set forth in this Agreement) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or other liability guaranteed or supported thereby.

 

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Control Agreement” means each deposit account control agreement or securities account control agreement, as applicable, entered into by a Loan Party, each depository institution or securities intermediary party thereto and Administrative Agent in form and substance reasonably satisfactory to Administrative Agent.

 

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

 

Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

Covered Party” has the meaning assigned to such term in Section 15.22.

 

Credit Facilities” means the credit facilities provided under this Agreement and the other Loan Documents.

 

Curative Equity” means the making of capital contributions to Holdings or the issuance of common Equity Interests by Holdings (other than Disqualified Equity Interests), in each case that are concurrently contributed to one or more Borrowers, for the purposes of, and in accordance with, Section 13.4.

 

10

 

Debt” of any Person means, without duplication, (a) all indebtedness of that Person for borrowed money; (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of that Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of that Person in accordance with GAAP; (d) all obligations of that Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business); (e) all indebtedness secured by a Lien on the property of that Person, whether or not that indebtedness has been assumed by that Person, but if that Person has not assumed or otherwise become liable for that indebtedness, then that indebtedness will be measured at the fair market value of the property securing that indebtedness at the time of determination; (f) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn), bankers’ acceptances, and similar obligations issued for the account of that Person; (g) all Hedging Obligations of that Person; (h) all Contingent Liabilities of that Person; (i) all Debt of any partnership of which that Person is a general partner; (j) all earn-outs and similar obligations; (k) all monetary obligations under any receivables factoring, receivable sale, or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet financing, or similar financing; and (l) any Disqualified Equity Interests of that Person or other equity instrument of that Person, whether or not mandatorily redeemable, that under GAAP is characterized as debt, whether pursuant to financial accounting standards board issuance No. 150 or otherwise.

 

Debt to be Repaid” means the Debt listed on Schedule 12.1.

 

Default” means any event that, if it continues uncured, will, with lapse of applicable cure or grace periods or notice or both, constitute an Event of Default.

 

Default Right” has the meaning assigned to that term in, and interpreted in accordance with, 12 C.F.R. § § 252.81, 47.2 or 382.1 as applicable.

 

Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Loans required to be funded by it under this Agreement within one Business Day of the date required to be funded by it under this Agreement; (b) has otherwise failed to pay over to Administrative Agent or any other Lender any other amount required to be paid by it under this Agreement within one Business Day of the date when due, unless the subject of a good faith dispute; (c) has, or has a parent company that has, (i) been deemed insolvent or become the subject of an Insolvency Proceeding, or (ii) become the subject of a Bail-In Action; (d) has notified any Borrower, Administrative Agent, or any Lender that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit; or (e) has failed to confirm within three Business Days of a request by Administrative Agent that it will comply with the terms of this Agreement relating to its obligations to fund Loans.

 

Disqualified Equity Interest” means any Equity Interest (other than the Warrants) that, by its terms (or by the terms of any security or other Equity Interest into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition, in each case before the date that is 180 days after the later of the Termination Date or the Revolving Credit Maturity Date (as defined in the ABL Credit Agreement), (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking-fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event are subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments); (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part; (c) provides for the scheduled payments of dividends in cash or (d)  is or becomes convertible into or exchangeable for Debt or any other Equity Interests that would constitute Disqualified Equity Interests.

 

11

 

Dollar” and the sign “$” mean lawful money of the United States of America.

 

EBITDA” means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income for such period (other than in the case of clauses (a)(xvi) and (a)(xviii)) and without duplication, the sum of:

 

(a)      

 

(i)                Interest Expense, net of interest income, plus

 

(ii)              income, profits or franchise tax expense, plus

 

(iii)           depreciation and amortization (including amortization of intangible assets and amortization of deferred financing fees or costs), plus

 

(iv)            transaction expenses not capitalized and incurred on or before the Closing Date or within one hundred eighty (180) days after the Closing Date in connection with the Closing Date Transactions and the Loans in an aggregate amount not to exceed $1,400,000, plus

 

(v)              non-recurring transaction fees, expenses and costs (including, without limitation, any of their respective advisors, legal counsels, agents or representatives) incurred in connection with the administration of, any amendment to or any consent or waiver under, the Loan Documents in an aggregate amount not to exceed $250,000 in any Fiscal Year, plus

 

(vi)            non-cash charges related to the impairment of goodwill, plus

 

(vii)          fees and expenses of Holdings payable in cash during such period to reimburse the costs and expenses of the board of directors (or other similar governing bodies) of Holdings; provided the aggregate amount of this clause (vii) shall not exceed $50,000 in any Fiscal Year, plus

 

(viii)       non-cash expenses related to compensation arrangements pursuant to the grant of stock or other equity interest-based compensation and any option plan, plus

 

(ix)            non-cash charges and expenses related to purchase accounting adjustments, plus

 

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(x)              other non-cash charges, expenses and losses (other than with respect to accounts receivable and/or inventory), plus

 

(xi)            non-recurring fees and transaction expenses not capitalized and incurred in connection with any consummated Permitted Acquisition (whether on or prior to the closing date of such Permitted Acquisition or within one hundred eighty (180) days after such closing date) in an aggregate amount not to exceed $500,000 per Fiscal Year, plus

 

(xii)          non-recurring fees and transaction expenses not capitalized and incurred in connection with any unconsummated Permitted Acquisition in an aggregate amount not to exceed $250,000 per Fiscal Year, plus

 

(xiii)        indemnification expenses that are actually reimbursed in cash by a third party and documented with notification to the Administrative Agent, plus

 

(xiv)        expenses incurred to replace or repair tangible assets of the Holdings and its Subsidiaries to the extent actually reimbursed or with respect to which Borrowers have determined that a reasonable basis exists for reimbursement (and for which the applicable insurer has not rejected the claim), in each case in cash by third party insurance and only to the extent that such amount is in fact reimbursed within one hundred eighty (180) days of such expenses being incurred (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such one hundred eighty (180) days), plus

 

(xv)          reasonable and documented integration costs in connection with Permitted Acquisitions in an aggregate amount not to exceed $250,000 per Fiscal Year, plus

 

(xvi)        general non-recurring and pro forma synergies, operating improvements, cost savings or restructurings (collectively, “Cost Savings”) of the business of Borrowers resulting from actions of Borrowers already taken and to the extent satisfactory to the Administrative Agent and Borrowers determine in good faith that such Cost Savings are reasonable and are factually supportable, as set forth in a certificate signed by the Senior Officer of the Borrowers or Holdings certifying that (1) such Cost Savings are expected to have a continuing impact and are reasonably identifiable and quantifiable (without duplication of the amount of actual benefits realized during such period from such action) and (2) such Cost Savings are reasonably anticipated to be realized within 6 months; plus

 

(xvii)      all non-cash charges of the Borrowers and Holdings relating to earn-outs and contingent acquisition consideration or changes in the valuation thereof to the extent related to Permitted Acquisitions; plus

 

(xviii)    cash proceeds from any business interruption insurance covering lost profits to the extent not already included in the calculation of Consolidated Net Income, plus

 

(xix)        non-recurring expenses or losses (other than with respect to lost profit, lost revenue or similar losses) attributable to the COVID-19 pandemic or a related epidemiological event in an aggregate amount not to exceed $250,000 during the term of this Agreement, plus

 

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(xx)          other extraordinary, unusual, or non-recurring expenses or losses not to exceed $250,000 in any Fiscal Year (or such greater amount to the extent approved in writing by Administrative Agent), plus

 

(xxi)        non-recurring transaction fees, expenses and costs (including, without limitation, any of their respective advisors, legal counsels, agents or representatives) incurred in connection with any transactions in the public markets in an aggregate amount not to exceed $250,000 in any Fiscal Year; plus

 

(xxii)      non-recurring reasonable, documented charges and expenses related to recruiting expenses (including relocation and moving expenses), signing bonuses, severance expenses, restructuring, business separation expenses, office relocation, moving, lease termination and other, related expenses, in an aggregate amount not to exceed $250,000 per fiscal year, plus

 

(xxiii)    costs and expenses for non-recurring IT related projects and upgrades not to exceed $750,000 (subject to the proviso at the end of this definition) in the aggregate during the term of this Agreement;

 

minus

 

(b)     to the extent included in determining the Consolidated Net Income of Holdings and its Subsidiaries, all non-cash gains;

 

provided, that, notwithstanding anything to the contrary contained herein (1) in no event shall the aggregate amount of addbacks and adjustments set forth in clauses (a)(xv), (a)(xvi), (a)(xix), (a)(xx), (a)(xxii) and (a)(xxiii) (but, solely with respect to clause (a)(xxiii), the only amounts included in such aggregate cap shall be amounts above $250,000) and in calculating Pro Forma EBITDA exceed 20% of Consolidated EBITDA in any period (calculated after giving effect to any such addbacks and adjustments) and (2) in any event, EBITDA shall not include (x) any addback resulting from any lost revenue, earnings, margins or associated costs and expenses due to the COVID-19 pandemic or other similar epidemiological event (other than those expressly set forth in clause (a)(xix) above), (y) any addback with respect to any write-down or write-off of inventory or accounts receivable or (z) any income or reduction in expense attributable to Debt funded under the CARES Act attributed to IAS whether acknowledged as grant income pursuant to IAS 20, or a contribution pursuant to ASC 958-605 or otherwise. Notwithstanding the foregoing, for each calendar month set forth in Schedule 1.1, EBITDA for all purposes shall be deemed to be the amount set forth in Schedule 1.1 opposed such month.

 

ECF Percentage” means, with respect to the Excess Cash Flow for any Fiscal Year, the following percentages, as applicable: (a) if the Senior Debt to EBITDA Ratio as of the last day of such Fiscal Year is less than 2.00 to 1.00 and Consolidated EBITDA is at least $5,000,000, 25%; and (b) otherwise, 50%.

 

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EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority; (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition; or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;

 

EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

Eligible Assignee” means any commercial bank, any finance company, any investment fund or other fund that invests in loans, or any Affiliate of any of the foregoing, other than those institutions identified as Ineligible Lenders.

 

Environmental Agreement” means each agreement of the Loan Parties with respect to any real estate subject to a Mortgage, pursuant to which Loan Parties agree to indemnify and hold harmless Administrative Agent and Lenders from liability under any Environmental Laws.

 

Environmental Claims” means all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release of Hazardous Substances or injury to the environment.

 

Environmental Laws” means all present or future federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative or judicial orders, consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authority, in each case relating to any matter arising out of or relating to public health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission, release, threatened release, control or cleanup of any Hazardous Substance.

 

Equity Interests” means, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of that Person’s equity capital, whether now outstanding or issued or acquired after the Closing Date, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership, interests in a trust, interests in other unincorporated organizations, or any other equivalent of any such ownership interest.

 

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

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Event of Default” means any of the events described in Section 13.1.

 

Excess Availability” means “Excess Availability” as such term is defined under the ABL Loan Agreement as in effect on the date hereof.

 

Excess Cash Flow” means, for any period, the remainder of (a) the sum of (i) EBITDA for such period, plus (ii) any net decrease in net working capital during such period, minus (b) the sum, without duplication, of the following amounts to the extent such payments are permitted under the Loan Documents and are made using Internally Generated Cash:

 

(i)                scheduled repayments of principal of all funded debt for borrowed money (other than (x) payments of revolving Debt that do not include a dollar-for-dollar commitment reduction and (y) payments of principal on the Closing Date Seller Note and any other unsecured subordinated promissory note issued in connection with a Permitted Acquisition or other Acquisition permitted hereunder) made during such period, plus

 

(ii)              unfinanced Capital Expenditures, plus

 

(iii)           to the extent added back to Consolidated Net Income in the determination of EBITDA, all income, profits and franchise taxes paid in cash, during such period, net of tax refunds, plus

 

(iv)            to the extent added back to Consolidated Net Income in the determination of EBITDA, all Interest Expense (including losses on hedging obligations) paid in cash by the Holdings and its Subsidiaries during such period net of interest income, plus

 

(v)              to the extent added back to Consolidated Net Income in the determination of EBITDA, non-recurring transaction fees, expenses and costs paid in cash during such period to Administrative Agent and the Lenders in connection with any amendment to or consent or waiver under this Agreement, plus

 

(vi)            to the extent added back to Consolidated Net Income in the determination of EBITDA, transaction expenses paid in cash not capitalized and incurred on or prior to the Closing Date or within one hundred eighty (180) days after the Closing Date in connection with this Agreement or the Closing Date Transactions, plus

 

(vii)          any net increase in net working capital during such period, plus

 

(viii)       the unfinanced portion of the purchase price (including, the unfinanced portion of any earn-out or other similar deferred purchase price obligation as and when made) paid in cash of any Permitted Acquisition, plus

 

(ix)            non-cash addbacks to EBITDA for prior periods to the extent paid in cash during such period, plus

 

(x)              any other expenses to the extent paid in cash and added back to Consolidated Net Income in the determination of EBITDA, plus

 

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(xi)            to the extent added back to Consolidated Net Income in the determination of EBITDA, non-recurring transaction fees, expenses and costs (including, without limitation, any of their respective advisors, legal counsels, agents or representatives) incurred in connection with any transactions in the public markets, plus

 

(xii)          unrealized Cost Savings to the extent added back to Consolidated Net Income in the determination of EBITDA.

 

For the avoidance of doubt, Excess Cash Flow shall exclude the portion of EBITDA that is attributable to any Person or line of business acquired pursuant to a Permitted Acquisition and that accrues prior to the closing date of such Permitted Acquisition.

 

Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Excluded Collateral” is defined in the Guaranty and Collateral Agreement.

 

Excluded Deposit Accounts” means (i) deposit accounts the balance of which consists exclusively of (A) withheld income taxes and federal, state or local employment taxes required to be paid to the Internal Revenue Service or state or local government agencies with respect to employees of any of the Loan Parties and their Subsidiaries and (B) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3 102 on behalf of or for the benefit of employees of any of the Loan Parties and their Subsidiaries; (ii) all segregated deposit accounts constituting (and the balance of which consists solely of funds set aside in connection with) payroll accounts, trust accounts, and accounts dedicated to the payment of accrued employee benefits, medical, dental and employee benefits claims to employees of any of the Loan Parties and their Subsidiaries and (iii) solely for the first 30 days following the Closing Date, the deposit account owned by Landfill Diversion Innovations, L.L.C. and held at Capital One with account number 00005732385225 so long as the cash balance in such account does not exceed $50,000 at any time.

 

Excluded Subsidiary” means any Subsidiary that is prohibited by requirements of applicable law, any contractual obligation or any organizational document (to the extent such contractual restriction exists on the Closing Date or on the date such Subsidiary becomes a direct or indirect Subsidiary of Holdings and not entered into in contemplation thereof or for the purposes of circumventing the requirements of the Loan Documents) from guaranteeing the Obligations or which would require approval, consent, license or authorization from a Governmental Authority (unless such approval, consent, license or authorization is received).

 

Excluded Taxes” means, with respect to any payment made to Administrative Agent, any Lender, or any other Person pursuant to the terms of this Agreement, the following: (a) Taxes based upon, or measured by, the recipient’s overall net income, overall net receipts, or overall net profits (including franchise Taxes imposed in lieu of any such Taxes and branch profits Taxes), in each case, that are (i) Other Connection Taxes, (ii) imposed in a jurisdiction in which the relevant recipient is organized, (iii) imposed in a jurisdiction in which the relevant recipient’s principal office is located, or (iv) imposed in a jurisdiction in which the relevant recipient’s lending office (or branch) in respect of which payments under this Agreement are made is located; and (b) any United States federal withholding Taxes imposed under FATCA.

 

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Exit Fee” is defined in the Agent Fee Letter.

 

FATCA” means Sections 1471 through 1474 of the Code, as of the date of the Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code.

 

Federal Funds Rate” means, for any day, a fluctuating interest rate equal for each day during the applicable period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for that day (or, if that day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if that rate is not so published for any day which is a Business Day, the average of the quotations for that day on those transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. Administrative Agent’s determination of the Federal Funds Rate will be binding and conclusive absent manifest error.

 

Financial Statements” means, collectively, (i) the audited financial statements of Holdings and its Subsidiaries and of Green Remedies for the fiscal year ending December 31, 2019 and (ii) the unaudited balance sheets and related statements of income and cash flows of Holdings and its Subsidiaries and Green Remedies for the Fiscal Quarter ended June 30, 2020 and the fiscal month ended August 30, 2020.

 

Fiscal Quarter” means a fiscal quarter of a Fiscal Year, which period is the 3-month period ending on the last day of each of March, June, September, and December of each year.

 

Fiscal Year” means the fiscal year of Holdings, which period will be the 12-month period ending on the last day of December of each year.

 

Fixed Charge Coverage Ratio” means, for any period, the ratio for such period of (a) (1) EBITDA, minus (2) the sum of (A) income taxes paid or payable in cash by Holdings and its Subsidiaries and (B) all Capital Expenditures paid for with Internally Generated Cash, to (b) the sum for such period of (i) cash Interest Expense, plus (ii) scheduled principal payments of Debt (excluding earn-out payments) plus (iii) Restricted Payments, other than earn-out payments, paid in cash. For the purposes of determining the applicable amount described in clauses (a)(2)(A) and (b) above, for any period ending prior to the first anniversary of the Closing Date, such amount shall be equal to the applicable amount paid (or, in the case of taxes, taxes payable or accrued) from the Closing Date through the date of determination multiplied by a fraction, the denominator of which is the number of days from the Closing Date through the date of determination and the numerator of which is 365 days (i.e., such amounts shall be annualized).

 

FRB” means the Board of Governors of the Federal Reserve System or any successor thereto.

 

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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 U.S. accounting profession) and the Securities and Exchange Commission, which are applicable to the circumstances as of the date of determination.

 

Green Remedies” is defined in the recitals of this Agreement.

 

Guarantor” means Holdings and each other Person that guarantees the Obligation of the Borrowers.

 

Guaranty” means each guaranty executed and delivered by any Guarantor, together with any joinders thereto and any other guaranty agreement executed by a Guarantor, in each case in form and substance satisfactory to Administrative Agent. The Guaranty and Collateral Agreement is a Guaranty.

 

Guaranty and Collateral Agreement” means the Guaranty and Collateral Agreement dated as of the date of this Agreement executed and delivered by each Loan Party, together with any joinders thereto and any other guaranty and collateral agreement executed by a Loan Party, in each case in form and substance reasonably satisfactory to Administrative Agent.

 

Hazardous Substances” means hazardous waste, hazardous substance, pollutant, contaminant, toxic substance, oil, hazardous material, chemical, or other substance regulated by any Environmental Law.

 

Hedging Agreement” means any interest rate, currency or commodity swap agreement, cap agreement, collar agreement, spot foreign exchange, forward foreign exchange, foreign exchange option (or series of options) and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.

 

Hedging Obligation” means, with respect to any Person, any liability of that Person under any Hedging Agreement determined (a) for any date on or after the date that Hedging Agreement has been closed out and termination value determined in accordance therewith, using that termination value; and (b) for any date prior to the date referenced in clause (a), using the amount determined as the mark-to-market value for that Hedging Agreement, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in that Hedging Agreement.

 

Holdings” is defined in the introductory clause of this Agreement.

 

Incremental Cap” is defined in Section 2.1.2.

 

Incremental Commitment” is defined in Section 2.1.2.

 

Incremental Effective Date” is defined in Section 2.1.2.

 

Incremental Facility” is defined in Section 2.1.2.

 

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Incremental Loan” is defined in Section 2.1.2.

 

Indemnified Liabilities” is defined in Section 15.17.

 

Indemnified Taxes” means all Taxes other than Excluded Taxes.

 

Ineligible Lenders” means (a) those Persons set forth on Schedule 1.2, (b) any Competitor designated by the Borrower Representative (specifying such Competitor’s exact legal name) as an “Ineligible Lender” in a written notice (including an update to Schedule 1.2) that has been approved by the Administrative Agent in its reasonable discretion after the effectiveness of this Agreement and not less than five (5) Business Days prior to such date of determination, but which shall not apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans and/or Commitments as permitted herein and (c) any Affiliate of an Ineligible Lender described in clauses (a) and (b) of this definition that, without independent verification, investigation, or inquiry, is easily and obviously identifiable as an affiliate of such Person on the basis of its name; provided that, notwithstanding anything to the contrary in this definition, any bank or other financial institution, any Person that is a bona fide debt, equity, or asset investment entity, any other Person that makes, purchases, holds, manages, advises, or trades any debt, equity, or asset investments in the ordinary course of business, Administrative Agent and its Affiliates and/or Related Funds, any Person that merely has an economic interest in any “Ineligible Lender” but has not been designated as an “Ineligible Lender” hereunder, and any Person that Company has removed from its status as an “Ineligible Lender” in any written notice approved by Administrative Agent and delivered to Lenders from time to time, are, in each case, hereby excluded from this definition; provide, that, no Person shall be an Ineligible Lender to the extent a Specified Event of Default has occurred and is continuing.

 

Insolvency Proceeding” means any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of a Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief, or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for that Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

 

Intellectual Property Security Agreement” is used as defined in the Guaranty and Collateral Agreement.

 

Interest Expense” means, for any period, as determined in accordance with GAAP, the consolidated interest expense of Holdings and its Subsidiaries for that period (including all imputed interest on Capital Leases).

 

Internally Generated Cash” means, with respect to any period, any cash of Holdings or any Subsidiary generated during such period as a result of such Person’s operations, excluding Net Cash Proceeds, Other Receipts, any cash generated from any issuance of Equity Interests (or cash generated from cash contributions to Holdings or any Subsidiary) and any cash proceeds received from an incurrence of Debt (other than cash proceeds of revolving loans under the ABL Loan Agreement) or any other liability.

 

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Investment” means, with respect to any Person, any investment in another Person, whether by acquisition of any debt or Equity Interest, by making any loan or advance, by becoming obligated with respect to a Contingent Liability in respect of obligations of that other Person (other than travel and similar advances to employees in the ordinary course of business) or by making an Acquisition.

 

Joint Liability Payment” is defined in Section 16.6.

 

Lender” is defined in the introductory clause of this Agreement.

 

Lender Party” is defined in Section 15.17.

 

LIBOR” means the higher of (a) the offered rate for deposits in U.S. dollars in the London interbank market for a one-month interest period publicly quoted from time to time by The Wall Street Journal (the “LIBOR Screen Rate”), as of 11:00 a.m. (London time) on the day which is two (2) business days prior to the first day of such month (which shall not be less than 0% per annum) and (b) one and one-quarter percent (1.25%) per annum. If the Service shall no longer report LIBOR interest rates, or such interest rates cease to exist, such rate will be the rate of interest per annum, as determined in good faith by the Administrative Agent at which deposits of Dollars in immediately available funds are offered at 11:00 A.M. (London, England time) two (2) Business Days prior to the first day in such one-month period by major financial institutions reasonably satisfactory to the Administrative Agent in the London interbank market for such interest period for the applicable principal amount on such date of determination.

 

LIBOR Determination Date” means, with respect to each LIBOR Loan, the date that is two Business Days before the date of initial advance of that LIBOR Loan; and (b) each subsequent date that is two Business Days before the last Business Day of each month occurring while that LIBOR Loan is outstanding.

 

LIBOR Loan” means any Loan which bears interest at a rate determined by reference to the LIBOR Rate.

 

LIBOR Office” means, with respect to any Lender, the office or offices of that Lender which will be making or maintaining the LIBOR Loans of that Lender under this Agreement. A LIBOR Office of any Lender may be, at the option of that Lender, either a domestic or foreign office.

 

LIBOR Rate” means the rate per annum equal to (i) LIBOR on each LIBOR Determination Date divided by (ii) a number determined by subtracting from 1.00 the then-stated maximum reserve percentage for determining reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D), or as LIBOR is otherwise determined by Administrative Agent in its sole and absolute discretion (including by way of substituting an alternative interest rate benchmark in the event that the LIBOR Rate is no longer available).

 

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LIBOR Screen Rate” is defined in the definition of LIBOR.

 

LIBOR Successor Rate” is defined in Section 8.2.

 

LIBOR Successor Rate Conforming Changes” means, with respect to any proposed LIBOR Successor Rate, any conforming changes to the definitions of Base Rate, Business Day, LIBOR Determination Date, LIBOR Rate and LIBOR Screen Rate, the timing and frequency of determining rates and making payments of interest and other related defined terms and provisions and administrative matters as may be necessary and appropriate, in the reasonable discretion of the Administrative Agent, to reflect the adoption of such LIBOR Successor Rate and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such LIBOR Successor Rate exists, in such other manner of administration as the Administrative Agent determines in consultation with the Borrower Representative).

 

Lien” means, with respect to any Person, any interest granted by that Person in any real or personal property, asset, or other right owned or being purchased or acquired by that Person (including an interest in respect of a Capital Lease) that secures payment or performance of any obligation and includes any mortgage, lien, encumbrance, title retention lien, charge, or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process, or otherwise.

 

Loan Account” means an account maintained under this Agreement by Administrative Agent on its books of account, and with respect to Borrowers, in which Borrowers will be charged with all Loans made to, and all other Obligations incurred by, any of the Borrowers.

 

Loan Documents” means this Agreement, the Notes, the Agent Fee Letter, each Collateral and Diligence Questionnaire, the Collateral Documents, the ABL Intercreditor Agreement, and all documents, instruments, and agreements delivered in connection with the foregoing, as any of the foregoing are amended or modified in accordance with their respective terms, excluding the Warrants, the Warrant Letter Agreement and any other documents related solely thereto.

 

Loan Party” means each Borrower and each Guarantor.

 

Loan” or “Loans” means, as the context may require, any of the Term Loans.

 

Margin Stock” means any “margin stock” as defined in Regulation U.

 

Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business, profitability, or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any of the Obligations under any Loan Document, (c) a material adverse effect upon any substantial portion of the Collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document or the ability of Administrative Agent to enforce or collect any Obligations or to realize upon any material portion of the Collateral, or (d) cancellation or termination of the agreements referenced in clauses (a) and (b) of the definition of “Voting Agreements”, other than by their terms.

 

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Material Contract” means, with respect to any Person, (a) the Related Agreements; (b) each contract or agreement to which that Person or any of its Subsidiaries is a party involving a customer of such Person that generates 15% or more of consolidated gross profit for such Person or its Subsidiaries in any Fiscal Year; (c) the Voting Agreements and (d) all other contracts or agreements as to which the breach, nonperformance, cancellation, or failure to renew by any party could reasonably be expected to have a Material Adverse Effect.

 

Monroe Capital” is defined in the introductory clause of this Agreement.

 

Mortgage” means a mortgage, deed of trust, leasehold mortgage or similar instrument granting Administrative Agent a Lien on real property of any Loan Party.

 

Mortgage-Related Documents” means with respect to any real property subject to a Mortgage, the following, in form and substance satisfactory to Administrative Agent: (a) a mortgagee title policy (or binder therefor) covering Administrative Agent’s interest under the Mortgage, in a form and amount and by an insurer acceptable to Administrative Agent, which must be fully paid on that effective date; (b) all assignments of leases, estoppel letters, attornment agreements, consents, waivers, and releases as Administrative Agent reasonably requires with respect to other Persons having an interest in the real estate; (c) a current, as-built survey of the real estate, containing a metes-and-bounds property description and certified by a licensed surveyor acceptable to Administrative Agent; (d) a life-of-loan flood hazard determination and, if the real estate is located in a flood plain, an acknowledged notice to borrower and flood insurance in an amount, with endorsements and by an insurer acceptable to Administrative Agent; (e) a current appraisal of the real estate, prepared by an appraiser acceptable to Administrative Agent, and in form and substance satisfactory to Required Lenders; (f) an environmental assessment, prepared by environmental engineers acceptable to Administrative Agent, and accompanied by all reports, certificates, studies, or data as Administrative Agent reasonably requires, which must all be in form and substance satisfactory to Required Lenders; and (g) an Environmental Agreement and all other documents, instruments, or agreements as Administrative Agent reasonably requires with respect to any environmental risks regarding the real estate.

 

Multiemployer Pension Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Borrower or any other member of the Controlled Group may have any liability.

 

Net Cash Proceeds” means:

 

(a)              with respect to any Asset Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance or by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by any Loan Party pursuant to that Asset Disposition net of (i) the direct costs relating to that sale, transfer or other disposition (including sales commissions and legal, accounting and investment banking fees); (ii) taxes paid or reasonably estimated by Borrowers to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements); and (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to that Asset Disposition (other than the Loans);

 

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(b)              with respect to any issuance of Equity Interests, the aggregate cash proceeds received by any Loan Party pursuant to that issuance, net of the direct costs relating to that issuance (including sales and underwriters’ commissions); and

 

(c)               with respect to any issuance of Debt, the aggregate cash proceeds received by any Loan Party pursuant to that issuance, net of the direct costs of that issuance (including up-front, underwriters’ and placement fees).

 

Non-Consenting Lender” is defined in Section 15.1(j).

 

Non-U.S. Lender” is defined in Section 7.6.4(a).

 

Note” means a promissory note substantially in the form of Exhibit A.

 

Notice of Borrowing” is defined in Section 2.2.2(a).

 

Obligations” means all obligations (monetary (including post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement and any other Loan Document, including Attorney Costs, all 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.

 

OFAC” is defined in Section 9.30.

 

Operating Lease” means any lease of (or other agreement conveying the right to use) any real or personal property by any Loan Party, as lessee, other than any Capital Lease.

 

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

 

Other Receipts” means any cash received by or paid to or for the account of any Loan Party consisting of (a) representation and warranty insurance in connection with an acquisition, (b) escrow amounts released in connection with an acquisition, and (c) any purchase price adjustment received in connection with any purchase.

 

Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under this Agreement or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement and the other Loan Documents, but excluding Excluded Taxes.

 

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Participant” is defined in Section 15.6.2.

 

Participant Register” is defined in Section 15.6.2.

 

Patriot Act” is defined in Section 15.16.

 

Payment in Full” means (a) the payment in full in cash of all Loans and other Obligations, other than contingent indemnification obligations for which no claims have been asserted; (b) the termination of all Commitments; and (c) the release of any claims of the Loan Parties against Administrative Agent and Lenders arising on or before the payment date.

 

Payment Conditions” means, with respect to any applicable transaction, (i) no Default or Event of Default shall exist immediately after giving effect to such transaction, (ii) the average of the Excess Availability amounts (calculated on a pro forma basis to include the making of any Loans in connection with such transaction or any credit extensions under the ABL Loan Agreement) for each Business Day in the thirty (30) day period prior to such transaction shall be greater than or equal to the greater of (x) $3,000,000 and (y) 20% of the Line Cap (as defined under the ABL Loan Agreement), (iii) Excess Availability (calculated as set forth above) on the date of such proposed transaction shall be greater than or equal to the greater of (x) $3,000,000 and (y) 20% of the Line Cap (as defined under the ABL Loan Agreement), (iv) the Fixed Charge Coverage Ratio (calculated on a pro forma basis after giving effect to such transaction) for the most recently ended trailing twelve calendar month period shall not be less than 1.10 to 1.00 (but, solely for purposes of determining whether payments on the Closing Date Seller Note are permitted, the minimum Fixed Charge Coverage Ratio required under such Section shall be 1.25 to 1.00), (v) before and after giving effect to such transaction, the Loan Parties are in compliance with each of the financial covenants set forth in Section 11.12 as of the last day of the most recent Fiscal Quarter for which financial statements have been delivered pursuant to Section 10.1.2(b) and (vi) so long as the ABL Obligations have not been paid in full and the ABL Loan Agreement and the commitments hereunder haver terminated, the “Payment Conditions” as defined in the ABL Loan Agreement have been satisfied.

 

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

 

Pension Plan” means a “pension plan,” as that term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA or the minimum funding standards of ERISA (other than a Multiemployer Pension Plan), and as to which any Borrower or any Subsidiary (including any contingent liability of any member of Borrowers’ 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 years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

Permitted Acquisition” means any Acquisition by any Borrower where:

 

(d)              the business, division or assets acquired are for use, or the Person acquired is engaged, in the same or a related, adjacent or vertically integrated line of business engaged in by the Loan Parties on the Closing Date;

 

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(e)              immediately before and after giving effect to that Acquisition, no Default or Event of Default exists;

 

(f)                the aggregate consideration (cash and non-cash) to be paid by the Loan Parties (including any Debt assumed or issued in connection therewith, the maximum amount payable in connection with any deferred purchase price obligation (including any earn-out obligation) and the value of any Equity Interests of any Loan Party issued to the seller in connection with that Acquisition) in connection with (i) that Acquisition (or any series of related Acquisitions) is less than $15,000,000, and (ii) all Acquisitions is less than $52,500,000;

 

(g)              the Senior Net Leverage Ratio on a pro forma basis immediately after giving effect to that Acquisition does not exceed (A) the maximum Senior Net Leverage Ratio permitted under Section 11.12 for the most recently ended Fiscal Quarter immediately prior to that Acquisition minus (B) 0.25; provided, however, that, notwithstanding the foregoing, with respect to the Permitted Acquisition to be funded with the proceeds of the Term B Loan, the Term B Loan Leverage Condition shall apply rather than this clause (g);

 

(h)              in the case of the Acquisition of any Person, that Acquisition is non-hostile and the board of directors or similar governing body of that Person has approved that Acquisition;

 

(i)                not less than 15 Business Days prior to that Acquisition (or any later date approved by Administrative Agent in its sole discretion), Administrative Agent has received an acquisition summary with respect to the Person and/or business, division or assets to be acquired, which summary must include a reasonably detailed description thereof (including financial information) and operating results (including financial statements for the most recent 12-month period for which they are available and as otherwise available), the terms and conditions, including economic terms, of the proposed Acquisition, and Borrowers’ calculation of pro forma Consolidated EBITDA relating thereto;

 

(j)                not less than five Business Days prior to that Acquisition (or any later date approved by Administrative Agent in its sole discretion), Administrative Agent has received complete executed or conformed copies of each material document, instrument and agreement to be executed in connection with that Acquisition together with all lien search reports and lien release letters and other documents as Administrative Agent reasonably requires to evidence the termination of Liens on the assets, business, or division to be acquired;

 

(k)              Borrowers’ computation of pro forma Consolidated EBITDA is reasonably satisfactory to Administrative Agent;

 

(l)                the business, division, assets or Person acquired generated positive EBITDA (calculated in a manner acceptable to Administrative Agent) for each of the twelve calendar months immediately preceding that Acquisition;

 

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(m)           the Loan Parties shall have satisfied the Payment Conditions after giving effect to that Acquisition;

 

(n)              Borrower Representative has provided Administrative Agent with pro forma forecasted balance sheets, profit and loss statements, and cash flow statements of Holdings and its Subsidiaries, all prepared on a basis consistent with Holdings’ and its Subsidiaries’ historical financial statements, subject to adjustments to reflect projected consolidated operations following the Acquisition;

 

(o)              Borrower Representative has provided Administrative Agent with reasonable calculations evidencing that on a pro forma basis created by adding the historical combined financial statements of Holdings and its Subsidiaries (including the combined financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the entity to be acquired (or the historical financial statements related to the division, business or assets to be acquired) pursuant to the Acquisition, subject to adjustments to reflect projected consolidated operations following the Acquisition, Holdings and its Subsidiaries are projected to be in compliance with the financial covenants for each of the twelve months ended one year after the proposed date of consummation of that Acquisition;

 

(p)              the provisions of Section 10.9 have been satisfied, including, without limitation, simultaneously with the closing of that Acquisition, the target company (if that Acquisition is structured as a purchase of equity) or a Borrower (if that Acquisition is structured as a purchase of assets or a merger and a Borrower is the surviving entity) executes and delivers to Administrative Agent (i) all documents necessary to grant to Administrative Agent a first-priority Lien (subject to the terms of the ABL Intercreditor Agreement) in all of the assets of each of the target company or surviving company and its Subsidiaries, subject to the terms of the ABL Intercreditor Agreement, each in form and substance reasonably satisfactory to Administrative Agent, and (ii) an unlimited Guaranty of the Obligations, or at the option of Administrative Agent in Administrative Agent’s absolute discretion, a joinder agreement satisfactory to Administrative Agent in which each of the target company or surviving company and its Subsidiaries becomes a borrower under this Agreement and assumes primary joint and several liability for the Obligations;

 

(q)              if the Acquisition is structured as a merger, a Borrower will be the surviving entity;

 

(r)               Administrative Agent has received a copy of the proposed capital structure after giving pro forma effect to such Acquisition;

 

(s)               to the extent readily available to Borrowers, Borrower Representative has provided Administrative Agent with all other information with respect to that Acquisition as reasonably requested by Administrative Agent (including, without limitation, all third-party due-diligence reports and quality-of-earnings reports); and

 

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(t)               concurrently with the consummation of that Acquisition, a Senior Officer of the Borrower Representative shall have delivered to the Administrative Agent a certificate stating that the foregoing conditions in this definition have been satisfied.

 

Permitted Lien” means a Lien expressly permitted under this Agreement pursuant to Section 11.2.

 

Person” means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

 

Prime Rate” means, for any day, the rate of interest in effect for that day equal to the prime rate in the United States as reported from time to time in The Wall Street Journal (or other authoritative source selected by Administrative Agent in its sole discretion), or as Prime Rate is otherwise determined by Administrative Agent in its sole and absolute discretion. Administrative Agent’s determination of the Prime Rate will be conclusive, absent manifest error. Any change in the Prime Rate will take effect at the opening of business on the day of that change. In the event The Wall Street Journal (or any other authoritative source) publishes a range of “prime rates,” the Prime Rate will be the highest of the “prime rates.”

 

Proceeding” means any investigation, inquiry, litigation, review, hearing, suit, claim, audit, arbitration, proceeding or action (in each case, whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any governmental authority or arbitrator.

 

Pro Rata Share” means:

 

(a)       with respect to a Lender’s obligation to make a Term A Loan and receive payments of interest, fees, and principal with respect thereto, (i) prior to the Term A Loan Commitment being terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term A Loan Commitment plus the unpaid principal amount of that Lender’s Term A Loans, by (B) the aggregate Term A Loan Commitment of all Lenders plus the unpaid principal amount of all Term A Loans of all Lenders; and (ii) from and after the time the Term A Loan Commitment has been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term A Loans by (B) the aggregate unpaid principal amount of all Term A Loans;

 

(b)       with respect to a Lender’s obligation to make Term B Loans and receive payments of interest, fees, and principal with respect thereto, (i) prior to the Term B Loan Commitment being terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term B Loan Commitment plus the unpaid principal amount of that Lender’s Term B Loans, by (B) the aggregate Term B Loan Commitment of all Lenders plus the unpaid principal amount of all Term B Loans of all Lenders; and (ii) from and after the time the Term B Loan Commitment has been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term B Loans by (B) the aggregate unpaid principal amount of all Term B Loans;

 

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(c)       with respect to a Lender’s obligation to make Incremental Loans and receive payments of interest, fees, and principal with respect thereto, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Incremental Loans by (B) the aggregate unpaid principal amount of all Incremental Loans; and

 

(d)       with respect to all other matters as to a particular Lender, (i) prior to the time that the Commitments have been terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term A Loan Commitment plus the aggregate unpaid principal amount of that Lender’s Term A Loans plus that Lender’s Term B Loan Commitment plus the aggregate unpaid principal amount of that Lender’s Term B Loans, by (B) the Term A Loan Commitment of all Lenders plus the aggregate unpaid principal amount all Term A Loans of all Lenders plus the aggregate Term B Loan Commitment of all Lenders plus the aggregate unpaid principal amount all Term B Loans of all Lenders; and (ii) if the Commitments have been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term A Loans plus the aggregate unpaid principal amount of that Lender’s Term B Loans plus the aggregate unpaid principal amount of that Lender’s Incremental Loans by (B) the aggregate unpaid principal amount of all Term A Loans of all Lenders plus the aggregate unpaid principal amount of all Term B Loans of all Lenders plus the aggregate unpaid principal amount of all Incremental Loans of all Lenders.

 

Protective Advances” is defined in Section 14.15.

 

PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

 

QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

 

QFC Credit Support” has the meaning assigned to such term in Section 15.22.

 

Qualified Equity Interest” means any Equity Interest issued by Holdings (and not by one or more of its Subsidiaries) that is not a Disqualified Equity Interest.

 

Regulation D” means Regulation D of the FRB.

 

Regulation U” means Regulation U of the FRB.

 

Related Agreements” means the Closing Date Acquisition Agreement and all agreements, instruments, and documents executed or delivered in connection with the Closing Date Acquisition Agreement and the Related Transaction.

 

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Related Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities, that is managed, advised, or administered by (a) a Lender, (b) an Affiliate of a Lender, or (c) an entity or affiliate of an entity that manages, administers, or advises a Lender.

 

Related Transaction” is defined in the recitals of this Agreement.

 

Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued thereunder as to which the PBGC has not waived the notification requirement of Section 4043(a), or the failure of a Pension Plan to meet the minimum funding standards of Section 412 of the Code (without regard to whether the Pension Plan is a plan described in Section 4021(a)(2) of ERISA) or under Section 302 of ERISA.

 

Required Lenders” means, at any time, Lenders whose Pro Rata Shares exceed 50% as determined pursuant to clause (d) of the definition of “Pro Rata Share”; provided that the Pro Rata Shares held or deemed held by, any Defaulting Lender will be excluded for purposes of making a determination of Required Lenders.

 

Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

 

Restricted Payment” is defined in Section 11.3.

 

SBA PPP Loans” means all the one-time loans (and any potential future loans under such similar program) obtained by any of the Borrowers incurred under 15 U.S.C. 636(a)(36) (as added to the Small Business Act by Section 1102 of the CARES Act) under the Small Business Act, as amended.

 

SEC” means the Securities and Exchange Commission or any other governmental authority succeeding to any of the principal functions thereof.

 

Scheduled Unavailability Date” means the specific date the administrator of the LIBOR Screen Rate or a governmental authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which LIBOR Screen Rate shall no longer be made available, or used for determining the interest rate of loans..

 

Senior Officer” means, with respect to any Loan Party, any of the president, chief executive officer, the chief financial officer, or the treasurer of that Loan Party.

 

Senior Net Leverage Ratio” means, as of any date of determination, the ratio of (a) Total Senior Debt as of such date to (b) Consolidated EBITDA for the most recently ended twelve month period, and if such date is not the last day of a Fiscal Quarter, for the most recently ended twelve month period for which financials have been delivered.

 

Specified Event of Default” means any Event of Default pursuant to Sections 13.1.1, 13.1.4 or 13.1.5 (but in the case of Section 13.1.5, solely with respect to a failure to comply with the provisions of Sections 10.1.1, 10.1.2, 10.1.3 and 11.12).

 

Specified Financial Covenant” is defined in Section 13.4(a).

 

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Specified Financial Covenant Default” is defined in Section 13.4(a).

 

Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company, or other entity of which that Person owns, directly or indirectly, outstanding Equity Interests having more than 50% of the ordinary voting power for the election of directors or other managers of that corporation, partnership, limited liability company, or other entity. Unless the context otherwise requires, each reference to Subsidiaries in this Agreement refers to Subsidiaries of Holdings.

 

Supported QFC” has the meaning assigned to such term in Section 15.22.

 

Taxes” means any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges, similar fees or withholdings imposed under applicable law and/or by any governmental authority that are in the nature of a tax, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to any of the foregoing.

 

Term A Loan” is defined in Section 2.1.1(a).

 

Term A Loan Commitment” means, as to any Lender, that Lender’s commitment to make Term A Loans under this Agreement. The amount of each Lender’s Term A Loan Commitment as of the Closing Date is set forth on Annex A. The initial aggregate amount of the Term A Loan Commitments of all Lenders is $11,500,000.

 

Term B Loan” is defined in Section 2.1.1(b).

 

Term B Loan Availability Period” means the period (i) beginning on and including the day after the Closing Date and (ii) ending on and including the earlier of (A) the date the aggregate Term B Loan Commitments are reduced to zero and (B) the date that is twelve (12) months after the Closing Date.

 

Term B Loan Commitment” means, as to any Lender, that Lender’s commitment to make Term B Loans under this Agreement. The amount of each Lender’s Term B Loan Commitment as of the Closing Date is set forth on Annex A. The initial aggregate amount of the Term B Loan Commitments of all Lenders is $12,500,000.

 

Term B Loan Leverage Condition” means, upon the incurrence of any Term B Loans, after giving effect to such incurrence on a pro forma basis for the most recently completed trailing twelve month period for which financial statements have been delivered under Section 10.1.2(b) (1) the Senior Net Leverage Ratio shall not exceed 3.60 to 1.00 and (2) the Borrowers shall be in compliance with the other financial covenants set forth in Section 11.12; provided, that (x) in no event shall the proceeds of any Term B Loans be netted in calculating the foregoing Senior Net Leverage Ratio and (y) solely for the purposes of calculating the Term B Loan Leverage Condition, the Senior Net Leverage Ratio will be measured without giving effect to any leverage incremental to the stated level for the applicable test period.

 

Term Loan” means, as the context may require, any Term A Loans, any Term B Loan and/or any Incremental Loan.

 

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Term Loan Priority Collateral” is defined in the ABL Intercreditor Agreement.

 

Termination Date” means the earlier to occur of (a) October 19, 2025, or (b) any other date on which the Commitments terminate pursuant to Section 6 or Section 13.

 

Termination Event” means, with respect to a Pension Plan that is subject to Title IV of ERISA, the following: (a) a Reportable Event; (b) the withdrawal of any Borrower or any other member of the Controlled Group from that Pension Plan during a plan year in which that Borrower or other member of the Controlled Group was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA; (c) the termination of that Pension Plan, the filing of a notice of intent to terminate the Pension Plan or the treatment of an amendment of that Pension Plan as a termination under Section 4041 of ERISA; (d) the institution by the PBGC of proceedings to terminate that Pension Plan; or (e) any event or condition that might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, that Pension Plan.

 

Total Plan Liability” means, at any time, the present value of all vested and unvested accrued benefits under all Pension Plans, determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.

 

Total Senior Debt” means all (a) Debt of Holdings and its Subsidiaries, determined on a consolidated basis in accordance with GAAP (excluding (u) contingent obligations in respect of Contingent Liabilities (except to the extent constituting (1) Contingent Liabilities in respect of Debt of a Person other than any Loan Party, or (2) Contingent Liabilities in respect of undrawn letters of credit), (v) Debt of any Borrower to any other Loan Party and Debt of any Subsidiary to any Borrower or to any other Subsidiary, (w) any Debt that is unsecured or contractually subordinated to the Obligations in form and substance reasonably satisfactory to the Administrative Agent, (x) obligations with respect to earn-out payments for Permitted Acquisitions until due and payable, and (y) obligations for any leased real property to the extent unsecured and not constituting debt for borrowed money) minus (b) unrestricted cash and Cash Equivalents of Holdings and its Subsidiaries in deposit accounts subject to Control Agreements in favor of the ABL Agent and the Administrative Agent not to exceed $1,000,000 (but excluding, for the avoidance of doubt, the cash proceeds of any Term B Loans or any Incremental Facilities) as of any applicable date of determination; provided, that for all purposes of calculating the Senior Net Leverage Ratio under the Loan Documents (other than (x) for the avoidance of doubt, calculation of the leverage ratio set forth in Section 12.1.19 and (y) any calculation of the Term B Loan Leverage Condition solely to the extent the Borrowers are in compliance with the financial covenant set forth in Section 11.12.2 as of the last day of the most recently ended twelve fiscal month period for which financial statements have been delivered on a pro forma basis and after giving full effect to the Revolver Averaging Mechanic (as defined below), the amount of outstanding revolving loans under the ABL Loan Agreement for purposes of clause (a) above shall be calculated by taking the average of such outstanding revolving loans at the end of each business day for the trailing ninety (90) day period (or, if prior to the date that is ninety (90) days following the Closing Date, the period from the Closing Date to the date the Senior Net Leverage Ratio is being tested) (the averaging of such outstanding revolving loans, the “Revolver Averaging Mechanic”).

 

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Type” is defined in Section 2.2.1.

 

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

 

UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

 

UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

 

Unfunded Liability” means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Pension Plans exceeds the fair market value of all assets allocable to those benefits, all determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.

 

Unused Fee” is defined in Section 5.1.

 

Unused Fee Rate” means 0.50% per annum.

 

U.S. Special Resolution Regimes” has the meaning assigned to such term in Section 15.22.

 

Voting Agreements” means (a) that certain Voting Agreement, dated as of April 11, 2019, by and among (i) Mitchell A. Saltz, Jeffery D. Forte, Brian Dick and each of their respective affiliates, (ii) Hampstead Park Capital Management, LLC and (iii) Holdings, (b) that certain Stock Grant Agreement, dated as of the date hereof, by and among Holdings and Green Remedies, in each case, as the same may be amended or otherwise modified as permitted hereunder and (c) any similar agreements or arrangements relating to voting matters and/or affecting the constitution of the board of directors of Holdings.

 

Warrant Holder” means Monroe Capital or any of its affiliates or controlled investment vehicles.

 

Warrant Letter Agreement” means that certain Letter Agreement, dated as of the date here, by and among Holdings and the Warrant Holder, as amended, restated, supplemented or otherwise modified from time to time as permitted thereunder.

 

Warrants” means, collectively (a) that certain Warrant to Purchase Common Stock, dated as of the Closing Date (the “Closing Date Warrant”), issued by Holdings to the Warrant Holder and (b) any further warrant issued by Holdings to the Warrant Holder.

 

Withholding Certificate” is defined in Section 7.6.4(a).

 

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Wholly-Owned Subsidiary” means, as to any Person, a Subsidiary all of the Equity Interests of which (except directors’ qualifying Equity Interests) are at the time directly or indirectly owned by that Person and/or another Wholly-Owned Subsidiary of that Person. Unless the context otherwise requires, each reference to Wholly-Owned Subsidiaries refers to Wholly-Owned Subsidiaries of Holdings.

 

Write-Down and Conversion Powers” means (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

1.2              Certain Interpretive Provisions.

 

(a)              The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

 

(b)              Section, Annex, Schedule and Exhibit references are to this Agreement unless otherwise specified.

 

(c)               The term “including” is not limiting and means “including without limitation.”

 

(d)              In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including.”

 

(e)              Unless otherwise expressly provided in this Agreement, (i) references to agreements (including this Agreement and the other Loan Documents) and other contractual instruments include all subsequent amendments, restatements, supplements, and other modifications thereto, but only to the extent that those amendments, restatements, supplements, and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions amending, replacing, supplementing, or interpreting that statute or regulation.

 

(f)                This Agreement and the other Loan Documents may use several different limitations, tests, or measurements to regulate the same or similar matters. All such limitations, tests, and measurements are cumulative and each is to be performed in accordance with its terms.

 

(g)              This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to Administrative Agent, Borrowers, the Lenders, and the other parties thereto and are the products of all parties. Accordingly, they are not to be construed against Administrative Agent or the Lenders merely because of Administrative Agent’s or Lenders’ involvement in their preparation.

 

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(h)              If any delivery due date specified in Section 10.1 for the delivery of reports, certificates, and other information required to be delivered pursuant to Section 10.1 falls on a day which is not a Business Day, then that due date will be extended to the immediately following Business Day.

 

(i)                A Default or Event of Default will be deemed to exist at all times during the period commencing on the date that Default or Event of Default occurs to the date on which that Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement, and an Event of Default will “continue” or be “continuing” until that Event of Default has been waived in writing by the Required Lenders.

 

1.3              Accounting and Other Terms.

 

(a)              Unless otherwise expressly provided in this Agreement, each accounting term used in this Agreement has the meaning given it under GAAP applied on a basis consistent with those used in preparing the Financial Statements and using the same inventory valuation method as used in the Financial Statements, except for any change required or permitted by GAAP if Borrowers’ certified public accountants concur in that change, the change is disclosed to Administrative Agent, and Section 11.12 is amended in a manner satisfactory to Administrative Agent to take into account the effects of the change.

 

(b)              All terms used in this Agreement which are defined in Article 8 or Article 9 of the UCC and which are not otherwise defined in this Agreement have the same meanings in this Agreement as set forth therein, except that terms used in this Agreement which are defined in the UCC as in effect in the State of New York on the date of this Agreement will continue to have the same meaning notwithstanding any replacement or amendment of that statute except as Administrative Agent may otherwise determine.

 

1.4              Treatment of LLC Division. Any restriction, condition or prohibition applicable to a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term set forth in the Loan Documents shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability companies, including any “Division” or other process or action permitted under Section 18-217 of Title 6 of the Delaware Code, as if it were a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term, as applicable. Any reference in any Loan Document to a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability companies (or the unwinding of such a division or allocation), as if it were a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term, as applicable, to, of or with a separate Person. Any division of a limited liability company shall constitute a separate Person under the Loan Documents (and each division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity). For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

 

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Section 2COMMITMENTS OF THE LENDERS; BORROWING and CONVERSION PROCEDURES.

 

2.1              Commitments. On and subject to the terms and conditions of this Agreement, each of the Lenders, severally and for itself alone, agrees to make loans to Borrowers as follows:

 

2.1.1                 Term Loan Commitments.

 

(a)              Each Lender with a Term A Loan Commitment agrees to make a loan to Borrowers (each such loan, a “Term A Loan”) on the Closing Date in that Lender’s Pro Rata Share of the aggregate Term A Loan Commitments of all Lenders. The Commitments of the Lenders to make Term A Loans will expire concurrently with the making of Term A Loans on the Closing Date. As of the Closing Date, Monroe Capital (or its Affiliates and/or Related Funds) will be the sole Lender of the Term A Loan (it being understood that this sentence shall not affect the rights of Monroe Capital to transfer or assign any of its Loans after the Closing Date as otherwise not prohibited hereunder).

 

(b)              Each Lender with a Term B Loan Commitment agrees to make one or more loans (each such loan, a “Term B Loan”) during the Term B Loan Availability Period in that Lender’s Pro Rata Share of the aggregate amounts that Borrower Representative requests from the Administrative Agent. The aggregate amount of all Term B Loans made will not exceed the aggregate Term B Loan Commitments of all Lenders. The Commitments of the Lenders to make Term B Loans will decrease concurrently with the making of Term B Loans on each applicable borrowing date by an amount equal to the aggregate amount of the Term B Loans made on that borrowing date. The Commitments of the Lenders to make Term B Loans will expire at the end of the Term B Loan Availability Period. As of the Closing Date, Monroe Capital (or its Affiliates and/or Related Funds) will hold all of the Term B Loan (it being understood that this sentence shall not affect the rights of Monroe Capital to transfer or assign any of its Loans after the Closing Date as otherwise not prohibited hereunder).

 

2.1.2                 Incremental Facilities.

 

(a)              Incremental Requests. The Borrowers may, by written notice to the Administrative Agent, request increases in the Term Loans (each, an “Incremental Commitment” and the term loans thereunder, an “Incremental Loan”; each Incremental Commitment are sometimes referred to herein individually as an “Incremental Facility” and collectively the “Incremental Facilities”) in Dollars; provided that no commitment of any Lender shall be increased without the consent of such Lender. Such notice shall set forth (x) the amount of the Incremental Commitment being requested (which shall be in a minimum amount of $5,000,000 and multiples of $1,000,000 in excess thereof) and which shall not exceed $40,000,000 in the aggregate (the “Incremental Cap”) and (y) the date (an “Incremental Effective Date”) on which such Incremental Facility is requested to become effective (which, unless otherwise agreed by the Administrative Agent, shall not be less than ten (10) Business Days from the date that the Administrative Agent received the request from the Borrower Representative).

 

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(b)              Conditions. No Incremental Facility shall become effective under this Section 2.1.2 unless, after giving effect to such Incremental Facility, the Loans to be made thereunder, and the application of the proceeds therefrom (but without giving effect to any netting of the proceeds thereof):

 

(i)                after giving pro forma effect to such Incremental Facility and the use of proceeds thereof (and assuming, in the case of an Incremental Facility, that the entire amount of such increase is funded) on the effective date thereof and other pro forma adjustments (including any related acquisitions, dispositions, incurrence and repayment of indebtedness and other transactions to be agreed), (1) no Default or Event of Default shall exist at the time of incurrence of such Incremental Facility, (2) the representations and warranties made by the Loan Parties in the Loan Documents shall be true and correct in all material respects (or in all respects if such representation or warranty contains any materiality qualifier, including references to “material,” “Material Adverse Effect” or dollar thresholds) after giving effect to such Incremental Facility (unless such representation or warranty is expressly made as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects (or in all respects if such representation or warranty contains any materiality qualifier, including references to “material,” “Material Adverse Effect” or dollar thresholds) as of such earlier date) and (3) the Borrowers are in compliance with the financial covenants set forth in Section 11.12 as of the last day of the most recently ended twelve fiscal month period for which financial statements have been delivered;

 

(ii)              the aggregate amount of all Incremental Facilities shall not exceed the Incremental Cap;

 

(iii)           the proceeds of any Incremental Facility shall be used solely for Permitted Acquisitions as expressly permitted by the existing Lenders;

 

(iv)            each Incremental Facility shall be on the same terms as those applicable to the existing Term Loans; and

 

(v)              the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying as to the foregoing.

 

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(c)               Required Amendments. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Facility, this Agreement and the other Loan Documents shall be amended to the extent (but only to the extent) necessary to reflect the existence of such Incremental Facility and the Loans evidenced thereby, and any joinder agreement or amendment may without the consent of the other Lenders effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrowers, to effectuate the provisions of this Section 2.1.2. The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Agreement and the other Loan Documents with the Loan Parties as may be necessary in order to establish any Incremental Facility and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrowers in connection with the establishment of any Incremental Facility, in each case, on terms consistent with this Section. From and after each Incremental Effective Date, the Loans and Commitments established pursuant to this Section 2.1.2 shall constitute Loans and Commitments under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from the guarantees and security interests created by the applicable Collateral Documents to the extent such Loans and Commitments are incurred on a pari passu basis in payment and security with the existing Term Loans. The Loan Parties shall take any actions reasonably required by the Administrative Agent to ensure and/or demonstrate that the Liens and security interests granted by the applicable Collateral Documents continue to be perfected under the UCC or otherwise after giving effect to the establishment of any such new Loans and Commitments, including, without limitation, compliance with Section 10.9. In addition, the Administrative Agent shall be entitled to receive such customary legal opinions and/or “know your customer” information as it (on behalf of itself or any Lender) shall reasonably require. Each of the parties hereto hereby agrees that the Administrative Agent may, in consultation with the Borrower Representative, take any and all action as may be reasonably necessary to ensure that all Incremental Loans are included in each Borrowing of outstanding Term Loans on a pro rata basis. This may be accomplished by allocating a portion of each such Incremental Loan to each outstanding Borrowing of Term Loans that are LIBOR Loans on a pro rata basis. In addition, the scheduled amortization payments under Section 6.4 required to be made after the making of any Incremental Loans shall be ratably increased by the aggregate principal amount of such Incremental Loans for all Lenders on a pro rata basis to the extent necessary to avoid any reduction in the amortization payments to which the Term Lenders were entitled before such recalculation.

 

(d)              Incremental Lenders. Each Incremental Facility will be made available only upon receiving credit commitments from existing Lenders and/or any additional banks, financial institutions and other institutional lenders or investors that will become Lenders in connection therewith that are arranged by and acceptable to the Administrative Agent in its sole discretion. The terms and conditions for any Incremental Facility will be subject to approval by the existing Lenders in their sole discretion and will be subject to, but not limited to, the ongoing compliance with the financial covenants set forth in Section 11.12. For the avoidance of doubt, Incremental Lenders shall not include Ineligible Lenders.

 

2.2              Loan Procedures.

 

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2.2.1                 Various Types of Loans. Each Loan may be divided into tranches which are, either a LIBOR Loan or, solely to the extent contemplated in Section 8.2(a) or Section 8.3, Base Rate Loan (each, a “Type” of Loan), as Borrower Representative specifies in the related Notice of Borrowing pursuant to Section 2.2.2. Base Rate Loans and LIBOR Loans may not be outstanding at the same time. All borrowings, conversions, and repayments of Loans will be effected so that each Lender will have a ratable share (according to its Pro Rata Share) of all Types of Loans.

 

2.2.2                 Borrowing Procedures.

 

(a)              Borrower Representative shall give written notice (each such written notice, a “Notice of Borrowing”) substantially in the form of Exhibit D to Administrative Agent and each Lender with an applicable Commitment of each proposed borrowing not later than 11:00 a.m. (New York city time) three Business Days prior to the proposed date of that borrowing. Each such notice will be effective upon receipt by Administrative Agent, will be irrevocable, and must specify the date, amount, and Type of borrowing (which shall be a LIBOR Loan unless the provision of LIBOR Loans becomes unlawful or is not otherwise available as described in Section 8.2(a) and Section 8.3). On the requested borrowing date, each Lender with an applicable Commitment shall provide Administrative Agent with immediately available funds, to Administrative Agent’s Account, covering that Lender’s Pro Rata Share of that borrowing so long as the applicable Lender has not received written notice that the conditions precedent set forth in Section 12 with respect to that borrowing have not been satisfied. After Administrative Agent’s receipt of the proceeds of the applicable Loans from Lenders with applicable Commitments, Administrative Agent shall make the proceeds of those Loans available to Borrowers on the applicable borrowing date by transferring to Borrowers immediately available funds equal to the proceeds received by Administrative Agent. Each borrowing must be on a Business Day. Each borrowing must be in an aggregate amount of at least $2,000,000 and an integral multiple of $500,000. Each Lender shall, upon request of Administrative Agent, deliver to Administrative Agent a list of all Loans made by that Lender, together with all information related thereto as Administrative Agent reasonably requests. Notwithstanding any provision of this Agreement to the contrary, Borrower Representative may not request, and Lenders will not be required to fund, any borrowing of any Loan that is not a LIBOR borrowing unless, subject to and as more particularly described in Section 8, LIBOR is unavailable or unlawful.

 

(b)              Unless payment is otherwise timely made by Borrowers, Administrative Agent may, at its option, charge when due any Obligations against any operating, investment or other account of any Borrower maintained with Administrative Agent or any of its Affiliates.

 

2.2.3                 [Reserved].

 

2.3              Commitments Several. The failure of any Lender to make a requested Loan on any date will not relieve any other Lender of its obligation (if any) to make a Loan on that date, but no Lender will be responsible for the failure of any other Lender to make any Loan to be made by that other Lender.

 

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2.4              Certain Conditions. No Lender will have an obligation to make any Loan if an Event of Default or Default exists.

 

2.5              Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions will apply for so long as that Lender is a Defaulting Lender:

 

2.5.1                 Fees will cease to accrue on the unfunded portion of the Term B Loan Commitment of the Defaulting Lender pursuant to Section 5.1.

 

2.5.2                 Any amount payable to a Defaulting Lender under this Agreement (whether on account of principal, interest, fees, or otherwise and including any amount that would otherwise be payable to that Defaulting Lender pursuant to Section 7.5 but excluding Section 8) will, in lieu of being distributed to that Defaulting Lender, be retained by Administrative Agent and, subject to any applicable requirements of law, be applied as follows at such time or times as Administrative Agent determines: (i) first, to the payment of any amounts owing by that Defaulting Lender to Administrative Agent under this Agreement; (ii) second, to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by Administrative Agent; (iii) third, if so determined by Administrative Agent and Borrowers, held as cash collateral for future funding obligations of the Defaulting Lender under this Agreement; (iv) fourth, pro rata, to the payment of any amounts owing to Borrowers or the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Borrower or any Lender against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; and (v) fifth, to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction. If any such payment is a prepayment of the principal amount of any Loans and made at a time when the conditions set forth in Section 12.2 are satisfied, then that payment will be applied solely to prepay the Loans of all Lenders that are not Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans of any Defaulting Lender.

 

2.5.3                 No Defaulting Lender will have any right to approve or disapprove any amendment, waiver, consent, or any other action the Lenders or the Required Lenders have taken or may take under this Agreement (including any consent to any amendment or waiver pursuant to Section 15.1), but any waiver, amendment, or modification requiring the consent of all Lenders or each directly affected Lender that affects a Defaulting Lender differently than other affected Lenders will require the consent of that Defaulting Lender.

 

Section 3EVIDENCING OF LOANS.

 

3.1              Notes. At a Lender’s request the Term Loans of that Lender may be evidenced by a Note, with appropriate insertions, payable to that Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a face principal amount equal to the principal amount of that Lender’s Term Loans plus, in the case of Term B Loans, the unfunded principal amount of that Lender’s Term B Loan Commitment.

 

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3.2              Recordkeeping. Administrative Agent, on behalf of each Lender, shall record in its records, the date and amount of each Loan made by each Lender and each repayment or conversion thereof. The aggregate unpaid principal amount so recorded will be rebuttably presumptive evidence of the principal amount of the Loans owing and unpaid. The failure to so record any such amount or any error in so recording any such amount will not, however, limit or otherwise affect the Obligations of Borrowers under this Agreement or under any Note to repay the principal amount of the Loans under this Agreement, together with all interest accruing thereon.

 

Section 4INTEREST.

 

4.1              Interest Rates.

 

4.1.1                 Interest on Loans. Borrowers agree to pay interest on the unpaid principal amount of each Loan for the period commencing on the date that Loan is made until that Loan is paid in full at a rate per annum equal to the sum of the LIBOR Rate from time to time in effect plus the Applicable Margin for LIBOR Loans; provided, that if the provision of LIBOR Loans becomes unlawful or unavailable as described in Section 8.2(a) or 8.3, then interest will be payable at a rate per annum equal to the Base Rate from time to time in effect plus the Applicable Margin for Base Rate Loans.

 

4.1.2                 Default Rate. Notwithstanding the foregoing, at any time an Event of Default exists, upon written notice of the Administrative Agent or the Required Lenders, the interest rate applicable to each Loan will be increased by 2.00% during the existence of an Event of Default (and, in the case of Obligations not bearing interest, those Obligations will, during the existence of an Event of Default, bear interest at the highest interest rate applicable to the Loans plus 2.00%), but any such increase may be rescinded by Required Lenders, notwithstanding Section 15.1. Notwithstanding the foregoing, upon the occurrence of an Event of Default under Sections 13.1.1 or 13.1.4, the increase provided for in this Section 4.1.2 will occur automatically. In no event will interest payable by Borrowers to any Lender under this Agreement exceed the maximum rate permitted under applicable law, and if any such provision of this Agreement is in contravention of any such law, then that provision will be deemed modified to limit that interest to the maximum rate permitted under that law.

 

4.1.3                 Interest Payment Dates. Accrued interest on each Loan is payable in arrears on the first Business Day of each month, upon a prepayment of that Loan, and at maturity. After maturity, and at any time an Event of Default exists, accrued interest on all Loans will be payable on demand. Each Borrower hereby authorizes Administrative Agent to, and Administrative Agent may, from time to time, charge the Loan Account with the amount of any interest payment due under this Agreement.

 

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4.2              Setting and Notice of LIBOR Rates. The LIBOR Rate will be determined by Administrative Agent. Each determination of the applicable LIBOR Rate by Administrative Agent will be conclusive and binding upon the parties to this Agreement, absent manifest error.

 

4.3              Computation of Interest. Interest will be computed for the actual number of days elapsed on the basis of a year of (a) 360 days for interest calculated at the LIBOR Rate and (b) 365/366 days for interest calculated at the Base Rate. The applicable interest rate for each Base Rate Loan will change simultaneously with each change in the Base Rate and the applicable interest rate for each LIBOR Loan will change simultaneously with each change in the LIBOR Rate.

 

Section 5FEES.

 

5.1              Unused Fee. Borrowers shall pay to Administrative Agent for the account of each Lender with a Term B Loan Commitment (except as provided in Section 2.5) an unused fee (the “Unused Fee”), for the period from the Closing Date to the earlier of (i) the Termination Date or (ii) the last day of the Term B Loan Availability Period, at the Unused Fee Rate in effect from time to time of that Lender’s Pro Rata Share (as adjusted from time to time) of the average daily unused amount of the Term B Loan Commitments. For purposes of calculating usage under this Section 5.1, the Term B Loan Commitments will be deemed used when initially drawn. That Unused Fee will be payable in arrears on the first Business Day of each month and on the earlier of the Termination Date or the last day of the Term B Loan Availability Period for any period then ending for which that Unused Fee has not have previously been paid. The Unused Fee will be computed for the actual number of days elapsed on the basis of a year of 360 days.

 

5.2              Additional Fees. Borrowers shall pay to Administrative Agent all fees as are mutually agreed to from time to time by Borrowers and Administrative Agent, including the fees set forth in the Agent Fee Letter.

 

5.3              Applicable Premium and Exit Fee. Without limiting the generality of Section 5.2, Borrowers shall pay to Administrative Agent, for the sole and separate account of Administrative Agent, each Applicable Premium and Exit Fee in accordance with the Agent Fee Letter.

 

5.4              Warrants.

 

5.4.1                 Warrant Original Issue Discount. The Loan Parties, their Subsidiaries and Administrative Agent acknowledge and agree that the Loans and the Warrants are part of an “investment unit” within the meaning of Section 1273(c)(2) of the Code. The Loan Parties, their Subsidiaries and Administrative Agent agree that for purposes of allocating a portion of the issue price of the investment unit to the Warrants in accordance with Treasury Regulation Section 1.1273-2(h)(1), the fair market value of the Closing Date Warrant is $765,678. The Loan Parties, their Subsidiaries and Administrative Agent agree that any other Warrant issued after the Closing Date to the Warrant Holder shall be valued using the same methodology as the methodology used to value the Closing Date Warrant and such valuation shall be mutually agreeable to the Holdings and the Warrant Holder. The Loan Parties, their Subsidiaries and Administrative Agent agree to file all tax returns consistently with this Section 5.4 and not take any position inconsistent therewith.

 

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Section 6Reduction or Termination of Commitments; PREPAYMENTS; Repayments.

 

6.1              Reduction or Termination of Commitments.

 

6.1.1                 Voluntary Reduction or Termination of the Term B Loan Commitments. Borrowers may from time to time on at least five Business Days’ prior written notice from Borrower Representative to Administrative Agent (which shall promptly advise each applicable Lender thereof) permanently reduce the Term B Loan Commitments. Any such reduction must be in an amount not less than $500,000 or a higher integral multiple of $100,000.

 

6.1.2                 All Reductions of Commitments. All reductions of the Term B Loan Commitments will reduce the Term B Loan Commitments ratably among the Lenders according to their respective Pro Rata Shares.

 

6.2              Prepayments.

 

6.2.1                 Voluntary Prepayments. Borrowers may from time to time prepay the Loans in whole or in part. Borrower Representative shall give Administrative Agent (which shall promptly advise each applicable Lender) notice of any such prepayment not later than (x) 11:00 a.m. (New York city time) on the day of that prepayment (which must be a Business Day) in respect of any Base Rate Loan and (y) 11:00 a.m. (New York city time) on the day three (3) Business Days prior to the date of that prepayment (which must be a Business Day) in respect of any LIBOR Loan, in each case, specifying the Loans to be prepaid and the date and amount of prepayment. Any such partial prepayment must be in an amount equal to $500,000 or a higher integral multiple of $100,000 (or such lesser amount equal to the total outstanding Loan).

 

6.2.2                 Mandatory Prepayments.

 

(a)              Term Loans. Borrowers shall make a prepayment of the Term Loans until paid in full upon the occurrence of any of the following at the following times and in the following amounts:

 

(i)                concurrently with the receipt by any Loan Party or its Subsidiaries of any Net Cash Proceeds from any Asset Disposition, in an amount equal to 100% of those Net Cash Proceeds; provided that, at the option of Borrower Representative (as elected by Borrower Representative in writing to Administrative Agent on or prior to the fifth Business Day after the date of receipt of such Net Cash Proceeds), and so long as no Default or Event of Default shall have occurred and be continuing, Borrowers may reinvest all or any portion of such Net Cash Proceeds in long-term assets used or useful in their business (such assets, “Additional Assets”) so long as such reinvestment is made within 180 days after the receipt of such Net Cash Proceeds (as certified by Borrower Representative in writing to Administrative Agent); provided further, that any Net Cash Proceeds not so reinvested shall be immediately applied to the prepayment of the Term Loans as set forth in this Section 6.2.2(a)(i) upon the expiration of such applicable period; provided, further, that to the extent that (1) the assets that were subject to the Asset Disposition constituted ABL Priority Collateral or Term Loan Priority Collateral, such Additional Assets shall also constitute ABL Priority Collateral or Term Loan Priority Collateral, respectively (and Borrowers or their Subsidiaries, as the case may be, shall promptly take such action (if any) as may be required to cause that portion of such reinvestment constituting ABL Priority Collateral or Term Loan Priority Collateral, as applicable, to be added to the ABL Priority Collateral or Term Loan Priority Collateral securing the ABL Obligations or the Obligations, as applicable), (2) any such Asset Disposition that consisted of or constituted any portion of Term Loan Priority Collateral, such Net Cash Proceeds shall be applied to the Obligations and (3) any such Asset Disposition is of assets solely constituting ABL Priority Collateral that are required to be applied to the ABL Obligations pursuant to the terms of the ABL Loan Agreement, then the Net Cash Proceeds of such Asset Disposition shall first be applied to the ABL Obligations as required under the ABL Loan Documents and then to the Obligations as required hereunder. To the extent the Net Cash Proceeds of any Asset Disposition are required to be applied to the ABL Obligations under the ABL Loan Agreement or the Intercreditor Agreement, upon the Payment in Full of the ABL Priority Debt (as defined in the ABL Intercreditor Agreement), such Net Cash Proceeds shall be applied to the Obligations as set forth in this Section 6.2.2(a)(i). Prior to entering into any Asset Disposition of assets which constitute Term Loan Priority Collateral, Borrowers shall provide not less than three (3) Business Days’ prior written notice thereof and the proceeds of such Assets Sale shall be deposited a deposit account subject to a Control Agreements whereby Administrative Agent has a first-priority security interest therein. If Administrative Agent does not receive prior written notice that Term Loan Priority Collateral is the subject of an Asset Disposition, then the Loan Parties shall be deemed to have represented and warranted to Administrative Agent on the date such Asset Disposition is consummated that none of the assets subject to such Asset Disposition constitute Term Loan Priority Collateral.

 

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(ii)              concurrently with the receipt by any Loan Party or any of its Subsidiaries of any Net Cash Proceeds from any issuance of Equity Interests of any Loan Party or any of its Subsidiaries, whether in connection with the issuance of any Curative Equity or otherwise (excluding any issuance of Equity Interests (A) pursuant to any employee or director option program, benefit plan or compensation program or agreement, (B) by a Subsidiary to any Borrower or another Subsidiary and (C) the Net Cash Proceeds of which are used substantially concurrently to fund a Permitted Acquisition), in an amount equal to 50% (or, in the case of Net Cash Proceeds in the form of Curative Equity, 100%) of those Net Cash Proceeds.

 

(iii)           concurrently with the receipt by any Loan Party or any of its Subsidiaries of any Net Cash Proceeds from any issuance of any Debt of any Loan Party or any of its Subsidiaries (excluding Debt permitted by Section 11.1), in an amount equal to 100% of those Net Cash Proceeds;

 

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(iv)            concurrently with the receipt by any Loan Party or any of its Subsidiaries of any Other Receipts, in an amount equal to 100% of those Other Receipts; provided that, so long as no Default or Event of Default shall have occurred and be continuing, Borrowers may reinvest the first $500,000 of such Other Receipts and up to 50% of any additional Other Receipts in the aggregate over the term of the Agreement in the applicable acquired business so long as such reinvestment is made within 180 days after the receipt of such Other Receipts (as certified by Borrower Representative in writing to Administrative Agent); provided further, that any Other Receipts not so reinvested shall be immediately applied to the prepayment of the Term Loans as set forth in this Section 6.2.2(a)(iv) upon the expiration of such applicable period; and

 

(v)              within five Business Days after the earlier of (A) the date that Fiscal Year-end financial statements are required to be delivered pursuant to Section 10.1.1, and (B) the date of Borrowers’ actual delivery of Fiscal Year-end financial statements delivered pursuant to Section 10.1.1 (commencing with the Fiscal Year ending on December 31, 2021), in an amount equal to the result of (A) the ECF Percentage of Excess Cash Flow for that Fiscal Year minus (B) the aggregate amount of all voluntary prepayments in respect of the outstanding principal balance of the Term Loan (including any Incremental Loans) made by Borrowers during such Fiscal Year.

 

6.3              Manner of Prepayments.

 

6.3.1                 All Prepayments. Any prepayment of Term Loans is subject to Section 5.3. Other than as specified in the last proviso of Section 6.2.2(a)(i), all prepayments of the Term Loans will be applied ratably to the Term Loans in the inverse order of maturity to the remaining installments thereof (including, without limitation, the final installment thereof). Except as otherwise provided by this Agreement, all principal payments in respect of the Loans will be applied first to repay outstanding Base Rate Loans and then to repay outstanding LIBOR Rate Loans.

 

6.4              Repayments.

 

6.4.1                 [Reserved].

 

6.4.2                 Term A Loans. Borrowers shall pay the principal amount of each Term A Loan of each Lender as follows: (a) in arrears in quarterly installments equal to 0.25% of the original principal amount of the Term A Loans on the Closing Date, each payable on the first Business Day of each Fiscal Quarter commencing on the first Business Day after the Fiscal Quarter ending December 31, 2020 and (b) a final installment equal to the remaining outstanding principal balance of the Term A Loans, payable on the Termination Date. Unless sooner paid in full, the outstanding principal balance of the Term A Loans must be paid in full on the Termination Date.

 

6.4.3                 Term B Loans. Borrowers shall pay the principal amount of each Term B Loan of each Lender as follows: (a) in arrears in quarterly installments equal to 0.25% of the original principal amount of the Term B Loans that have been funded since the Closing Date, each payable on the first Business Day of each Fiscal Quarter, commencing on the first Business Day of the Fiscal Quarter immediately following the Fiscal Quarter in which that Term B Loan is made to any Borrower and (b) a final installment equal to the remaining outstanding principal balance of the Term B Loans, payable on the Termination Date. Unless sooner paid in full, the outstanding principal balance of the Term B Loans must be paid in full on the Termination Date.

 

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Section 7MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.

 

7.1              Making of Payments.

 

7.1.1                 Borrowers shall make all payments of principal or interest on the Loans, and of all fees, to Administrative Agent in immediately available funds to Administrative Agent’s Account not later than 2:00 p.m. (New York city time) on the date due, and funds received after that time will be deemed to have been received by Administrative Agent on the following Business Day. Borrower shall make all payments to Administrative Agent and the Lenders without set-off, counterclaim, recoupment, deduction, or other defense. Subject to Section 2.5, Administrative Agent shall promptly remit to each Lender its share of all such payments received in collected funds by Administrative Agent for the account of that Lender. Notwithstanding the foregoing, Borrowers shall make all payments under Section 8.1 directly to the Lender entitled thereto.

 

7.2              Application of Certain Payments.

 

7.2.1                 So long as no Default or Event of Default has occurred and is continuing, (a) payments matching specific scheduled payments then due will be applied to those scheduled payments and (b) voluntary and mandatory prepayments will be applied as set forth in Sections 6.2 and 6.3.

 

7.2.2                 Subject to any written agreement among Administrative Agent and the Lenders:

 

(a)              All payments of principal and interest in respect of outstanding Loans, all payments of fees, and all other payments in respect of any other Obligations, will be allocated by Administrative Agent among Administrative Agent and the Lenders, as applicable, in proportion to their respective Pro Rata Shares or otherwise as provided in this Agreement or, in respect of payments not made on account of Loans, as designated by the Person making payment when the payment is made.

 

(b)              After the occurrence and during the continuance of an Event of Default, Administrative Agent may, and upon the direction of the Required Lenders shall, apply all payments in respect of any Obligations and all proceeds of the Collateral, subject to the provisions of this Agreement, as follows: (i) first, ratably to pay the Obligations in respect of any fees, expense reimbursements, indemnities and other amounts then due and payable to Administrative Agent until paid in full; (ii) second, ratably to pay the Obligations in respect of any fees (other than any Applicable Premium or Exit Fee) and indemnities then due and payable to the Lenders until paid in full; (iii) third, ratably (to Administrative Agent in accordance with Administrative Agent’s outstanding Protective Advances) to pay interest then due and payable in respect of Protective Advances until paid in full; (iv) fourth, ratably (to Administrative Agent in accordance with Administrative Agent’s outstanding Protective Advances) to pay principal of the Protective Advances until paid in full; (v) fifth, ratably to pay the Obligations in respect of any Applicable Premium or Exit Fee then due and payable until paid in full; and (vi) sixth, to the ratable payment of all other Obligations then due and payable.

 

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(c)               For purposes of Section 7.2.2(b), “paid in full” means payment in cash of all amounts owing under the Loan Documents (or, to the extent those Obligations are contingent, to provide cash collateral in respect of those Obligations in a manner and amount reasonably satisfactory to the Administrative Agent) according to the terms thereof, including loan fees, service fees, professional fees, interest (and specifically including interest accrued after, or that would have accrued but for, the commencement of any Insolvency Proceeding), default interest, interest on interest, and expense reimbursements, whether or not same would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.

 

(d)              In the event of a direct conflict between the priority provisions of this Section 7.2.2 and other provisions contained in any other Loan Document, it is the intention of the parties to this Agreement that all such priority provisions be read together and construed, to the fullest extent possible, to be in concert with each other. In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 7.2.2 will control and govern.

 

7.3              Due Date Extension. If any payment of principal or interest with respect to any of the Loans, or of any fees, falls due on a day which is not a Business Day, then that due date will be extended to the immediately following Business Day (unless, in the case of a LIBOR Loan, that immediately preceding Business Day is the first Business Day of a month, in which case that due date will be the immediately preceding Business Day), and, in the case of principal, additional interest will accrue and be payable for the period of any such extension.

 

7.4              Setoff. Each Borrower, for itself and each other Loan Party, agrees that Administrative Agent and each Lender have all rights of set-off and bankers’ lien provided by applicable law, and in addition thereto, each Borrower, for itself and each other Loan Party, agrees that at any time any Event of Default exists, Administrative Agent and each Lender may apply to the payment of any Obligations of each Borrower and each other Loan Party under this Agreement, whether or not then due, any and all balances, credits, deposits, accounts, or moneys of each Borrower and each other Loan Party then or thereafter with Administrative Agent or that Lender.

 

7.5              Proration of Payments. Except as provided in Section 2.5, if any Lender obtains any payment or other recovery (whether voluntary, involuntary, by application of offset, or otherwise), on account of principal of or interest on any Loan (but excluding (i) any payment pursuant to Section 8 or 15.6 and (ii) payments of interest on any Affected Loan) in excess of its applicable Pro Rata Share of payments and other recoveries obtained by all Lenders on account of principal of and interest on the Loans, then held by them, then that Lender shall purchase from the other Lenders such participations in the Loans held by them as are necessary to cause that purchasing Lender to share the excess payment or other recovery ratably with each of them, but if all or any portion of the excess payment or other recovery is thereafter recovered from that purchasing Lender, then that purchase will be rescinded and the purchase price restored to the extent of that recovery.

 

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7.6              Taxes.

 

7.6.1                 All payments under this Agreement or under the Loan Documents (including any payment of principal, interest, or fees) to, or for the benefit, of any Person will be made by Borrowers free and clear of and without deduction or withholding for, or account of, any Taxes now or hereafter imposed by any taxing authority, except as required by applicable law.

 

7.6.2                 If Borrowers make any payment under this Agreement or under any other Loan Document in respect of which any Borrower is required by applicable law to deduct or withhold any Indemnified Taxes, then Borrowers shall increase the payment under this Agreement or under any other Loan Document such that after the reduction for the amount of Indemnified Taxes withheld (and any Indemnified Taxes withheld or imposed with respect to the additional payments required under this Section 7.6.2), the amount paid equals the amount that was payable under this Agreement or under any other Loan Document without regard to this Section 7.6.2. To the extent Borrowers withhold any Taxes on payments under this Agreement or under any other Loan Document, Borrowers shall pay the full amount deducted to the relevant taxing authority within the time allowed for payment under applicable law and shall deliver to Administrative Agent within 30 days after Borrowers have made payment to that taxing authority a receipt issued by that taxing authority (or other evidence satisfactory to Administrative Agent) evidencing the payment of all amounts so required to be deducted or withheld from that payment.

 

7.6.3                 If any Lender or Administrative Agent or other recipient is required by law to make any payments of any Indemnified Taxes on or in relation to any amounts received or receivable under this Agreement or under any other Loan Document, or any Indemnified Tax is assessed against a Lender or Administrative Agent or other recipient with respect to amounts received or receivable under this Agreement or under any other Loan Document, Borrowers will indemnify that Person against (i) that Indemnified Tax and (ii) any Taxes imposed as a result of the receipt of the payment under this Section 7.6.3. A certificate prepared in good faith as to the amount of any such payment by that Lender or Administrative Agent or other recipient will, absent manifest error, be final, conclusive, and binding on all parties.

 

7.6.4                 (a) To the extent permitted by applicable law, each Lender that is not a United States person within the meaning of Code Section 7701(a)(30) (a “Non-U.S. Lender”) shall deliver to Borrower Representative and Administrative Agent on or prior to the Closing Date (or in the case of a Lender that is an Assignee, on the date of the assignment to that Lender) two accurate and complete original signed copies of IRS Form W-8BEN, W-8BEN-E, W-8ECI, or W-8IMY (or any successor or other applicable form prescribed by the IRS) certifying to that Lender’s entitlement to a complete exemption from, or a reduced rate in, United States withholding tax on interest payments to be made under this Agreement or with respect to any Loan. If a Lender that is a Non-U.S. Lender is claiming a complete exemption from withholding on interest pursuant to Code Sections 871(h) or 881(c), then that Lender shall deliver (along with two accurate and complete original signed copies of IRS Form W-8BEN or W-8BEN-E) a certificate in form and substance reasonably acceptable to Administrative Agent (any such certificate, a “Withholding Certificate”). In addition, each Lender that is a Non-U.S. Lender shall, from time to time after the Closing Date (or in the case of a Lender that is an Assignee, after the date of the assignment to that Lender) when a lapse in time (or change in circumstances occurs) renders the prior certificates delivered under this Agreement obsolete or inaccurate in any material respect, to the extent permitted under applicable law, deliver to Borrower Representative and Administrative Agent two new and accurate and complete original signed copies of an IRS Form W-8BEN, W-8BEN-E, W-8ECI, or W-8IMY (or any successor or other applicable forms prescribed by the IRS), and if applicable, a new Withholding Certificate, to confirm or establish the entitlement of that Lender or Administrative Agent to an exemption from, or reduction in, United States withholding tax on interest payments to be made under this Agreement or with respect to any Loan.

 

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(b)              Each Lender that is not a Non-U.S. Lender (other than any such Lender that is taxed as corporation for U.S. federal income tax purposes) shall provide two properly completed and duly executed copies of IRS Form W-9 (or any successor or other applicable form) to Borrower Representative and Administrative Agent certifying that that Lender is exempt from United States backup withholding Tax. To the extent that a form provided pursuant to this Section 7.6.4(b) is rendered obsolete or inaccurate in any material respect as result of change in circumstances with respect to the status of a Lender or Administrative Agent, then that Lender or Administrative Agent shall, to the extent permitted by applicable law, deliver to Borrower Representative and, as applicable, Administrative Agent revised forms necessary to confirm or establish the entitlement to that Lender’s exemption from United States backup withholding Tax.

 

(c)               No Borrower will be required to pay additional amounts to any Lender, or indemnify any Lender, under this Section 7.6 to the extent that any Borrower’s obligations would not have arisen but for the failure of that Lender to comply with Section 7.6.4(a) and/or in the case of a Non-U.S. Lender, the inability of such Lender to claim a complete exemption from U.S. withholding tax on interest under the Code (including, but not limited to, as a result of such Lender’s status under Code Section 881(c)(3)) or an applicable income tax treaty, except to the extent such inability results from a Change in Law occurring after the date such Lender acquired an interest in a Loan.

 

(d)              Each Lender shall indemnify Administrative Agent and hold Administrative Agent harmless for the full amount of any and all present or future Taxes and related liabilities (including penalties, interest, additions to Tax and expenses, and any Taxes imposed by any jurisdiction on amounts payable to Administrative Agent under this Section 7.6) which are imposed on or with respect to principal, interest, or fees payable to that Lender under this Agreement and which are not paid by Borrowers pursuant to this Section 7.6, whether or not those Taxes or related liabilities were correctly or legally asserted. This indemnification must be made within 30 days from the date Administrative Agent makes written demand therefor.

 

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7.6.5                 (a) If Administrative Agent or a Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes as to which it has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts pursuant to this Section 7.6, then Administrative Agent or that Lender, as applicable, shall pay over that refund to the Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrowers under this Section 7.6 with respect to the Indemnified Taxes giving rise to that refund), net of any Taxes imposed by reason of receipt of that refund and all out-of-pocket expenses of Administrative Agent or that Lender, as applicable, and without interest (other than any interest paid by the relevant governmental authority with respect to that refund, which interest must be paid to the Borrowers). Upon the request of Administrative Agent or any such Lender, Borrowers shall repay any amount paid to the Borrowers (plus any penalties, interest, or other charges imposed by the relevant governmental authority) to Administrative Agent or that Lender in the event Administrative Agent or that Lender is required to repay any such refund to any such governmental authority. Nothing in this Section 7.6.5 is to be construed to require Administrative Agent or any Lender to make available its tax returns (or any other information which it deems confidential) to any Borrower or any other Person.

 

(b) At the request of any Borrower and at the expense of the Borrowers, a Lender shall use reasonable efforts to cooperate with the Borrowers to obtain any available refund of any Indemnified Taxes as to which the Lender has been indemnified by the Borrowers or with respect to which the Borrowers have paid additional amounts, so long as such efforts would not, in the sole discretion of such Lender exercised in good faith, result in any additional costs or expenses or be otherwise disadvantageous to such Lender.

 

7.6.6                 If a payment made to a Lender under any Loan Document would be subject to U.S. federal income withholding Tax imposed by FATCA if that Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), then that Lender shall deliver to Administrative Agent (or, in the case of a Participant, to the Lender granting the participation only) at the time or times prescribed by law and at any other time or times reasonably requested by Administrative Agent (or, in the case of a Participant, the Lender granting the participation) all documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and all additional documentation reasonably requested by Administrative Agent (or, in the case of a Participant, the Lender granting the participation) as is necessary for Administrative Agent or Borrowers to comply with their obligations under FATCA and to determine that that Lender has complied with that Lender’s obligations under FATCA or to determine the amount to deduct and withhold from that payment. Solely for purposes of this Section 7.6.6, “FATCA” is deemed to include any amendments made to FATCA after the date of this Agreement.

 

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Section 8Increased Costs; Special Provisions for LIBOR Loans.

 

8.1              Increased Costs.

 

(a)              If any Change in Law (i) imposes, modifies, or deems applicable any reserve (including any reserve imposed by the FRB, but excluding any reserve included in the determination of the LIBOR Rate pursuant to Section 4), special deposit, or similar requirement against assets of, deposits with, or for the account of, or credit extended by, any Lender; or (ii) imposes on any Lender any other condition affecting its LIBOR Loans, its Note(s), or its obligation to make LIBOR Loans, and the result of anything described in clauses (i) and (ii) above is to increase the cost to (or to impose a cost on) that Lender (or any LIBOR Office of that Lender) of making or maintaining any Loan, or to reduce the amount of any sum received or receivable by that Lender (or its LIBOR Office) under this Agreement or under its Note(s) with respect thereto, then upon demand by that Lender (which demand must be accompanied by a statement setting forth the basis for that demand and a calculation of the amount thereof in reasonable detail, a copy of which must be furnished to Administrative Agent), Borrowers shall pay directly to that Lender such additional amount as will compensate that Lender for that increased cost or that reduction, so long as the applicable amounts have accrued on or after the day that is 180 days prior to the date on which that Lender first made demand therefor.

 

(b)              If any Lender reasonably determines that any change in, or the adoption or phase-in of, any applicable law, rule, or regulation regarding capital adequacy, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or the compliance by any Lender or any Person controlling any Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on that Lender’s or that controlling Person’s capital as a consequence of that Lender’s obligations under this Agreement to a level below that which that Lender or that controlling Person could have achieved but for that change, adoption, phase-in, or compliance (taking into consideration that Lender’s or that controlling Person’s policies with respect to capital adequacy) by an amount deemed by that Lender or that controlling Person to be material, then from time to time, upon demand by that Lender (which demand must be accompanied by a statement setting forth the basis for that demand and a calculation of the amount thereof in reasonable detail, a copy of which must be furnished to Administrative Agent), Borrowers shall pay to that Lender such additional amount as will compensate that Lender or that controlling Person for that reduction, so long as the applicable amounts have accrued on or after the day that is 180 days prior to the date on which that Lender first made demand therefor.

 

8.2              Basis for Determining Interest Rate Inadequate or Unfair.

 

(a)              Administrative Agent shall promptly notify the other parties of the following:

 

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(i)                Administrative Agent reasonably determines (which determination will be binding and conclusive on Borrowers) that by reason of circumstances affecting the interbank LIBOR market adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate; or

 

(ii)              the Required Lenders advise Administrative Agent that the LIBOR Rate as determined by Administrative Agent will not adequately and fairly reflect the cost to those Lenders of maintaining or funding LIBOR Loans (taking into account any amount to which those Lenders may be entitled under Section 8.1) or that the making or funding of LIBOR Loans has become impracticable as a result of an event occurring after the date of this Agreement which in the opinion of those Lenders materially affects those Loans.

 

(b)              So long as any circumstances described in a notice delivered pursuant to Section 8.2(a) continue, (i) no Lender will be required to make any LIBOR Loans or convert any Base Rate Loans into LIBOR Loans, and (ii) each such Loan will, unless then repaid in full, automatically convert to a Base Rate Loan.

 

(c)               Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if the Borrower Representative and the Administrative Agent determine in good faith (which determination shall be final and conclusive and binding upon all parties hereto, absent manifest error), or the Borrower Representative or Required Lenders notify the Administrative Agent (with, in the case of the Required Lenders, a copy to the Borrower Representative) that the Borrower Representative or Required Lenders (as applicable) have determined in good faith, that:

 

(i)                the circumstances described in Section 8.2(a)(i) are unlikely to be temporary,

 

(ii)              the administrator of the LIBOR Screen Rate or a governmental authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which LIBOR Screen Rate shall no longer be made available, or used for determining the interest rate of loans (such specific date, the “Scheduled Unavailability Date”), or

 

(iii)           syndicated loans currently being executed, or that include language similar to that contained in this Section 8.2, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace LIBOR Screen Rate,

 

then, reasonably promptly after such determination by the Administrative Agent or receipt by the Administrative Agent of such notice, as applicable, the Administrative Agent and the Borrower Representative may amend this Agreement to replace the LIBOR Screen Rate with an alternate benchmark rate that is generally accepted as the then prevailing market convention for determining a rate of interest for syndicated leveraged loans of this type in the United States at such time (including any mathematical or other adjustments to the benchmark (if any) incorporated therein or this Agreement to preserve pricing in effect at the time of selection of such alternate benchmark rate and other changes necessary to reflect the available interest periods for such alternate benchmark rate) (any such proposed rate, a “LIBOR Successor Rate”), together with any proposed LIBOR Successor Rate Conforming Changes and any such amendment shall become effective at 5:00 p.m. (New York city time) on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders do not accept such amendment.

 

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If no LIBOR Successor Rate has been determined and the circumstances under clause (c)(i) above exist or the Scheduled Unavailability Date has occurred (as applicable), the Administrative Agent will promptly so notify the Borrower Representative and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain LIBOR Loans shall be suspended, (to the extent of the affected LIBOR Loans), and (y) the LIBOR Rate component shall no longer be utilized in determining the Base Rate. Upon receipt of such notice, the Borrower Representative may revoke any pending request for a borrowing of, conversion to or continuation of LIBOR Loans (to the extent of the affected LIBOR Loans) or, failing that, will be deemed to have converted such request into a request for a borrowing of Base Rate Loans (subject to the foregoing clause (y)) in the amount specified therein.

 

Notwithstanding anything else herein, any definition of LIBOR Successor Rate shall provide that in no event shall such LIBOR Successor Rate be less than 1.25% per annum for purposes of this Agreement.

 

8.3              Changes in Law Rendering LIBOR Loans Unlawful. If, after the date of this Agreement, any change in, or the adoption of any new, law or regulation, or any change in the interpretation of any applicable law or regulation by any governmental authority or other regulatory body charged with the administration thereof, makes it (or in the good faith judgment of any Lender causes a substantial question as to whether it is) unlawful for any Lender to make, maintain, or fund LIBOR Loans, then that Lender shall promptly notify each of the other parties to this Agreement and, so long as those circumstances continue, (a) that Lender will not be required to make any LIBOR Loan or convert any Base Rate Loan into a LIBOR Loan (but that Lender shall, subject to the other terms of this Agreement, make Base Rate Loans concurrently with the making of or conversion of Base Rate Loans into LIBOR Loans by the Lenders which are not so affected, in each case in an amount equal to the amount of LIBOR Loans which would be made or converted into by that Lender at that time in the absence of those circumstances), and (b) each such LIBOR Loan will, unless then repaid in full, automatically convert to a Base Rate Loan. Each Base Rate Loan made by a Lender which, but for the circumstances described in the foregoing sentence, would be a LIBOR Loan (an “Affected Loan”) will remain outstanding for the period corresponding to the LIBOR Loans of which that Affected Loan would be a part absent those circumstances.

 

8.4              Right of Lenders to Fund through Other Offices. Each Lender may, if it so elects, fulfill its commitment as to any LIBOR Loan by causing a foreign branch or Affiliate of that Lender to make that Loan, but each such Loan will be deemed to have been made by that Lender and the obligation of Borrowers to repay that Loan will be to that Lender and will be deemed held by the Lender, to the extent of that Loan, for the account of that branch or Affiliate.

 

8.5              Mitigation of Circumstances; Replacement of Lenders.

 

(a)              Each Lender shall promptly notify Borrower Representative and Administrative Agent of any event of which it has knowledge that will result in, and will use reasonable commercial efforts available to it (and not, in that Lender’s sole judgment, otherwise disadvantageous to that Lender) to mitigate or avoid, (i) any obligation by Borrowers to pay any amount pursuant to Sections 7.6 or 8.1 or (ii) the occurrence of any circumstances described in Sections 8.2 or 8.3 (and, if any Lender has given notice of any such event described in clause (i) or (ii) and thereafter that event ceases to exist, that Lender shall promptly so notify Borrower Representative and Administrative Agent). Without limiting the foregoing, each Lender shall designate a different funding office if that designation will avoid (or reduce the cost to Borrowers of) any event described in clause (i) or (ii) and that designation will not, in that Lender’s sole judgment, be otherwise disadvantageous to that Lender.

 

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(b)              If Borrowers become obligated to pay additional amounts to any Lender pursuant to Sections 7.6 or 8.1, or any Lender gives notice of the occurrence of any circumstances described in Sections 8.2 or 8.3, or any Lender becomes a Defaulting Lender (any such affected Lender, an “Affected Lender”), then Borrower Representative may designate another financial institution that is acceptable to Administrative Agent in its reasonable discretion (a “Replacement Lender”) to purchase the Loans of that Lender and that Lender’s rights under this Agreement, without recourse to or warranty by, or expense to, that Lender, for a purchase price equal to the outstanding principal amount of the Loans payable to that Lender plus any accrued but unpaid interest on those Loans and all accrued but unpaid fees owed to that Lender and any other amounts owed to that Lender under this Agreement and any other Loan Document, and to assume all the obligations of that Lender under this Agreement. Upon any such purchase and assumption (pursuant to an Assignment Agreement), the applicable Lender will no longer be a party to this Agreement or have any rights under this Agreement (other than rights with respect to indemnities and similar rights applicable to that Lender prior to the date of that purchase and assumption) and will be relieved from all obligations to Borrowers under this Agreement, and the Replacement Lender will succeed to the rights and obligations of that Lender under this Agreement. In the event that an Affected Lender does not execute an Assignment Agreement pursuant to Section 15.6.1 within five (5) Business Days after receipt by such Affected Lender of notice of replacement pursuant to this Section 8.5(b) and presentation to such Affected Lender of an Assignment Agreement evidencing an assignment pursuant to this Section 8.5(b), the Administrative Agent shall be entitled (but not obligated) to execute such an Assignment Agreement on behalf of such Affected Lender, and any such Assignment Agreement so executed by the Borrower Representative, the Replacement Lender and Administrative Agent, shall be effective for purposes of this Section 8.5(b) and Section 15.6.1. Notwithstanding the foregoing, with respect to a Lender that is a Defaulting Lender, Administrative Agent may, but shall not be obligated to, obtain a Replacement Lender and execute an Assignment Agreement on behalf of such Defaulting Lender at any time with three (3) Business Days’ prior notice to such Lender (unless notice is not practicable under the circumstances) and cause such Lender’s Loans and Commitments to be sold and assigned, in whole or in part, at par. Upon any such assignment and payment and compliance with the other provisions of Section 15.6.1, such replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided, any rights of such Affected Lender to indemnification hereunder shall survive.

 

8.6              Conclusiveness of Statements; Survival of Provisions. Determinations and statements of any Lender pursuant to Sections 8.1, 8.2, or 8.3 will be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Section 8.1, and the provisions of Section 8.1 will survive repayment of the Obligations, cancellation of any Note(s), and termination of this Agreement.

 

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Section 9REPRESENTATIONS AND WARRANTIES.

 

To induce Administrative Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loans under this Agreement, Holdings and each Borrower represents and warrants to Administrative Agent and the Lenders that:

 

9.1              Organization. Each of the Loan Parties and their Subsidiaries is validly existing and in good standing under the laws of its jurisdiction of organization, and each of the Loan Parties and their Subsidiaries is duly qualified to do business in each jurisdiction where, because of the nature of its activities or properties, that qualification is required, except for any jurisdiction where the failure to so qualify could not reasonably be expected to have a Material Adverse Effect.

 

9.2              Authorization; No Conflict.

 

(a)              Each Loan Party is duly authorized to execute and deliver each Loan Document to which it is a party, each Borrower is duly authorized to borrow monies under this Agreement, and each Loan Party is duly authorized to perform its Obligations under each Loan Document to which it is a party.

 

(b)              The execution, delivery, and performance by each Loan Party of each Loan Document to which it is a party, and the borrowings by each Borrower under this Agreement, do not and will not (i) require any consent or approval of any governmental agency or authority (other than any consent or approval that has been obtained and is in full force and effect); (ii) conflict with (A) any provision of law, (B) the organizational documents or governing documents of any Loan Party, or (C) any agreement, indenture, instrument, or other document, or any judgment, order, or decree, that is binding upon any Loan Party or any of their respective properties; or (iii) require, or result in, the creation or imposition of any Lien on any asset of any Loan Party (other than Liens in favor of Administrative Agent created pursuant to the Collateral Documents).

 

9.3              Validity and Binding Nature. Each of this Agreement and each other Loan Document to which any Loan Party is a party is the legal, valid, and binding obligation of that Person, enforceable against that Person in accordance with its terms, subject to bankruptcy, insolvency, and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity.

 

9.4              Financial Condition. The Financial Statements, copies of each of which have been delivered to each Lender, were prepared in accordance with GAAP (subject, in the case of any such unaudited statements, to the absence of footnotes and to normal year-end adjustments) and present fairly in all material respects the consolidated financial condition of Holdings and its Subsidiaries and Green Remedies, as applicable, as at the dates covered in the Financial Statements and the results of their operations for the periods then ended.

 

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9.5              No Material Adverse Change. Since December 31, 2019, there has been no material adverse change in the financial condition, operations, assets, business, prospects, or properties of the Loan Parties and their Subsidiaries, taken as a whole.

 

9.6              Litigation and Contingent Liabilities. No litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to the Loan Parties’ knowledge, threatened against any of the Loan Parties and their Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, except as set forth in Schedule 9.6. Other than liability incident to any such litigation or proceedings, none of the Loan Parties and their Subsidiaries has any material contingent liabilities that are not listed in Schedule 9.6 or permitted by Section 11.1.

 

9.7              Ownership of Properties; Liens. Each of the Loan Parties and their Subsidiaries owns good title to and, in the case of owned real property, marketable title to, and in the case of leased real property, a valid leasehold interest in, all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges, and claims (including infringement claims with respect to any registered or issued patents, trademarks, service marks, and copyrights owned by that Loan Party and/or that Subsidiary), except as permitted by Section 11.2. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except filings evidencing Permitted Liens and filings for which copies of recorded termination statements have been delivered to Administrative Agent.

 

9.8              Equity Ownership. All issued and outstanding Equity Interests of each of the Loan Parties and their Subsidiaries are duly authorized and validly issued, fully paid, non-assessable, and free and clear of all Liens other than those in favor of Administrative Agent, second-priority Liens in favor of the ABL Agent and non-consensual Permitted Liens arising by operation of law, and all such Equity Interests were issued in compliance with all applicable state and federal laws concerning the issuance of securities. Schedule 9.8 sets forth the authorized Equity Interests of each of the Loan Parties and their Subsidiaries as of the Closing Date. All of the issued and outstanding Equity Interests of Borrowers are owned as set forth on Schedule 9.8 as of the Closing Date, and all of the issued and outstanding Equity Interests of each Wholly-Owned Subsidiary is, directly or indirectly, owned by Holdings. As of the Closing Date, except as set forth on Schedule 9.8, there are no pre-emptive or other outstanding rights, options, warrants, conversion rights, or other similar agreements or understandings for the purchase or acquisition of any Equity Interests of any of the Loan Parties and their Subsidiaries.

 

9.9              Pension Plans.

 

(a)              The Unfunded Liability of all Pension Plans does not in the aggregate exceed 20% of the Total Plan Liability for all such Pension Plans. Except as could not reasonably be expected to result in a Material Adverse Effect, each Pension Plan complies with all applicable requirements of law and regulations. No contribution failure under Section 430 of the Code, Section 303 of ERISA, or the terms of any Pension Plan has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or otherwise to have a Material Adverse Effect. There are no pending or, to the knowledge of any Loan Party, threatened claims, actions, investigations, or lawsuits against any Pension Plan, any fiduciary of any Pension Plan, or any Borrower or other any member of the Controlled Group with respect to a Pension Plan or a Multiemployer Pension Plan which could reasonably be expected to have a Material Adverse Effect. Neither any Borrower nor any other member of the Controlled Group has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Pension Plan or Multiemployer Pension Plan which would subject that Person to any material liability. Within the past five years, neither any Borrower nor any other member of the Controlled Group has engaged in a transaction that resulted in a Pension Plan with an Unfunded Liability being transferred out of the Controlled Group, except as could not reasonably be expected to have a Material Adverse Effect. No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan, except as could not reasonably be expected to have a Material Adverse Effect.

 

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(b)              (i) All contributions (if any) have been made to any Multiemployer Pension Plan that are required to be made by any Borrower or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable law; (ii) neither any Borrower nor any other member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Pension 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 reasonably be expected to result in a withdrawal or partial withdrawal from any such plan; and (iii) neither any Borrower nor any other member of the Controlled Group has received any notice that any Multiemployer Pension 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.

 

9.10         Investment Company Act. No Loan Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company,” within the meaning of the Investment Company Act of 1940.

 

9.11         Compliance with Laws. Each of the Loan Parties and their Subsidiaries is in compliance in all respects with the requirements of all laws and all orders, writs, injunctions, and decrees applicable to it or to its properties, except where (a) that requirement of law or order, writ, injunction, or decree is being contested in good faith by appropriate proceedings diligently conducted, or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

9.12         Regulation U. No Borrower is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.

 

9.13         Taxes. Each of the Loan Parties and their Subsidiaries has timely filed all material tax returns and reports required by law to have been filed by it and has paid all material Taxes and governmental charges due and payable with respect to each such return, except any such Taxes or charges that (a) are not delinquent, (b) remain payable without penalty or interest, or (c) are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on that Loan Party’s or that Subsidiary’s books. The Loan Parties and their Subsidiaries have made adequate reserves on their books and records in accordance with GAAP for all Taxes that have accrued but which are not yet due and payable. None of the Loan Parties and their Subsidiaries have participated in any transaction that relates to a year of the taxpayer (which is still open under the applicable statute of limitations) which is a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2) (irrespective of the date when the transaction was entered into).

 

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9.14         Solvency, etc. On the Closing Date, and immediately prior to and after giving effect to each borrowing under this Agreement and the use of the proceeds thereof and giving effect to the contribution rights set forth in Section 16, with respect to Holdings and each Borrower, individually, and the Loan Parties taken as a whole, (a) the fair value of its or their assets is greater than the amount of its or their liabilities (including disputed, contingent and unliquidated liabilities) as that value is established and liabilities evaluated in accordance with GAAP; (b) the present fair saleable value of its or their assets is not less than the amount that will be required to pay the probable liability on its or their debts as they become absolute and matured; (c) it is, and they are, able to realize upon its or their assets and pay its or their debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) it does not, and they do not, intend to, and it does not, and they do not, believe that it or they will, incur debts or liabilities beyond its or their ability to pay as those debts and liabilities mature; and (e) it is not, and they are not, engaged in or about to engage in business or a transaction for which its or their property would constitute unreasonably small capital.

 

9.15         Environmental Matters. The on-going operations of each of the Loan Parties and their Subsidiaries comply in all respects with all Environmental Laws, except for non-compliance that could not (if enforced in accordance with applicable law) reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. Each of the Loan Parties and their Subsidiaries has obtained, and maintained in good standing, all licenses, permits, authorizations, registrations, and other approvals required under any Environmental Law and required for their respective ordinary course operations, and for their reasonably anticipated future operations, and each of the Loan Parties and their Subsidiaries is in compliance with all terms and conditions thereof, except where the failure to do so could not reasonably be expected to result in material liability to any of the Loan Parties and their Subsidiaries and could not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. None of the Loan Parties and their Subsidiaries, and none of the properties or operations of the Loan Parties and their Subsidiaries, is subject to, and none of the Loan Parties and their Subsidiaries reasonably anticipates the issuance of, (a) any written order from or agreement with any federal, state, or local governmental authority, or (b) any judicial or docketed administrative or other proceeding respecting any Environmental Law, Environmental Claim, or Hazardous Substance that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. There are no Hazardous Substances or other conditions or circumstances existing with respect to any property, arising from operations prior to the Closing Date, or relating to any waste disposal of any Loan Party or any Subsidiary thereof that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. None of the Loan Parties and their Subsidiaries has any underground storage tanks that are not properly registered or permitted under applicable Environmental Laws or that at any time have released, leaked, disposed of or otherwise discharged Hazardous Substances that could reasonably be expected to result in material liability to any of the Loan Parties and their Subsidiaries.

 

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9.16         Insurance. Set forth on Schedule 9.16 is a complete and accurate summary of the property and casualty insurance program of the Loan Parties and their Subsidiaries as of the Closing Date (including the names of all insurers, policy numbers, expiration dates, amounts and types of coverage, annual premiums, exclusions, deductibles, self-insured retention, and a description in reasonable detail of any self-insurance program, retrospective rating plan, fronting arrangement, or other risk assumption arrangement involving any of the Loan Parties and their Subsidiaries). Each of the Loan Parties and their Subsidiaries and their respective properties are insured with what are reasonably believed by Borrowers to be financially sound and reputable insurance companies that are not Affiliates of the Loan Parties, in such amounts, with such deductibles, and covering such risks as are customarily carried by companies of similar size, engaged in similar businesses, and owning similar properties in localities where the Loan Parties and their Subsidiaries operate.

 

9.17         Real Property. Set forth on Schedule 9.17 is a complete and accurate list, as of the Closing Date, of the address of all real property owned or leased by any of the Loan Parties and their Subsidiaries, together with, in the case of leased property, the name and mailing address of the lessor of that property.

 

9.18         Information. All information (other than the projections and forecasts referred to below and information of a general economic or general industry nature) heretofore or contemporaneously with this Agreement furnished in writing by any of the Loan Parties and their Subsidiaries to Administrative Agent or any Lender for purposes of or in connection with this Agreement and the transactions contemplated by this Agreement is, and all written information (other than the projections and forecasts referred to below and information of a general economic or general industry nature) hereafter furnished by or on behalf of any of the Loan Parties and their Subsidiaries to Administrative Agent or any Lender pursuant to or in connection with this Agreement will be, when furnished, taken as a whole, true and accurate in all material respects and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made (after giving effect to all supplements and updates thereto that are made in accordance with the terms of the Loan Documents). All projections and forecasts provided by Borrowers are based on good faith estimates and assumptions believed by Borrowers to be reasonable as of the date of the applicable projections or forecasts; provided that actual results during the period or periods covered by any such projections and forecasts may differ materially from projected or forecasted results.

 

9.19         Location of Bank Accounts. Schedule 9.19 sets forth a complete and accurate list as of the Closing Date of all deposit, checking, and other bank accounts, all securities and other accounts maintained with any broker dealer or other securities intermediary, and all other similar accounts maintained by each Loan Party, together with a description thereof (including the bank, broker dealer, or securities intermediary at which each such account is maintained and the account number and the purpose thereof and whether such account is an Excluded Deposit Account or not).

 

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9.20         Burdensome Obligations. None of the Loan Parties and their Subsidiaries is a party to any agreement or contract or subject to any restriction contained in its organizational documents or its governing documents that could reasonably be expected to have a Material Adverse Effect.

 

9.21         Intellectual Property. Except as set forth on Schedule 9.21, each of the Loan Parties and their Subsidiaries owns or licenses or otherwise has the right to use all licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations, non-governmental licenses and permits, and other intellectual property rights that are necessary for the operation of its business, without infringement upon or conflict with the rights of any other Person with respect thereto, except for any infringements and conflicts that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Set forth on Schedule 9.21 is a complete and accurate list as of the Closing Date of all such material licenses, permits, patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, copyright applications, franchises, authorizations, non-governmental licenses and permits, and other intellectual property rights of each of the Loan Parties and their Subsidiaries. No slogan or other advertising device, product, process, method, substance, part, or other material now employed, or now contemplated to be employed, by any of the Loan Parties and their Subsidiaries infringes upon or conflicts with any rights owned by any other Person, and no claim or litigation regarding any of the foregoing is pending or threatened, except for any infringements and conflicts that could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To each Loan Party’s knowledge, no patent, invention, device, application, principle, or any statute, law, rule, regulation, standard, or code is pending or proposed, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

9.22         Material Contracts. Set forth on Schedule 9.22 is a complete and accurate list as of the Closing Date of all Material Contracts of each of the Loan Parties and their Subsidiaries, showing the parties and subject matter thereof and amendments and modifications thereto. Each such Material Contract (a) is in full force and effect and is binding upon and enforceable against each of the Loan Parties and their Subsidiaries that is a party thereto and, to each Loan Party’s knowledge, all other parties thereto in accordance with its terms; (b) has not been otherwise amended or modified; and (c) is not in default due to the action of any of the Loan Parties and their Subsidiaries or, to the knowledge of any Loan Party, any other party thereto.

 

9.23         Employee and Labor Matters. There is (a) no unfair labor practice complaint pending or, to the knowledge of any Loan Party, threatened against any Loan Party or any Subsidiary thereof before any governmental authority and no grievance or arbitration proceeding pending or threatened against any of the Loan Parties and their Subsidiaries that arises out of or under any collective bargaining agreement; (b) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened against any of the Loan Parties and their Subsidiaries; or (c) to the knowledge of each Loan Party, no union representation question existing with respect to the employees of any of the Loan Parties and their Subsidiaries and no union organizing activity taking place with respect to any of the employees of any of the Loan Parties and their Subsidiaries. None of the Loan Parties and their ERISA Affiliates has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act (“WARN”) or similar state law that remains unpaid or unsatisfied. The hours worked and payments made to employees of each of the Loan Parties and their Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable legal requirements, except to the extent any such violations could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. All material payments due from any of the Loan Parties and their Subsidiaries on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of that Loan Party or that Subsidiary, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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9.24         No Bankruptcy Filing. None of the Loan Parties and their Subsidiaries is contemplating either an Insolvency Proceeding or the liquidation of all or a major portion of that Loan Party’s or that Subsidiary’s assets or property, and no Loan Party has any knowledge of any Person contemplating an Insolvency Proceeding against any of the Loan Parties and their Subsidiaries.

 

9.25         Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of Business; Chief Executive Office; FEIN. Schedule 9.25 sets forth a complete and accurate list as of the Closing Date of (a) the exact legal name of each of the Loan Parties and their Subsidiaries; (b) the jurisdiction of organization of each of the Loan Parties and their Subsidiaries; (c) the organizational identification number of each Loan Party (or indicates that that Loan Party has no organizational identification number); (d) each place of business of each of the Loan Parties and their Subsidiaries; (e) the chief executive office of each of the Loan Parties and their Subsidiaries; and (f) the federal employer identification number of each Loan Party.

 

9.26         Locations of Collateral. There is no location at which any Loan Party has any Collateral (except for inventory or equipment in transit in the ordinary course of business) other than those locations listed on Schedule 9.26. Schedule 9.26 contains a true, correct, and complete list, as of the Closing Date, of the names and addresses of (i) each warehouse at which Collateral of each Loan Party is stored and (ii) each other location at which Collateral is stored having a fair market of at least $50,000 individually or $250,000 in the aggregate for all such locations (excluding Collateral in the form of immaterial cleaning equipment kept at customer locations in the ordinary course of business). None of the receipts received by any Loan Party from any warehouse states that the goods covered thereby are to be delivered to bearer or to the order of a named Person or to a named Person and that named Person’s assigns.

 

9.27         Security Interests. The Guaranty and Collateral Agreement creates in favor of Administrative Agent, for the benefit of Administrative Agent and the Lenders, a legal, valid, and enforceable security interest in the Collateral. Upon the filing of the UCC-1 financing statements described in Section 12.1.13 and the recording of the collateral assignments referred to in the Guaranty and Collateral Agreement in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, the security interests in and Liens on the Collateral granted under the Guaranty and Collateral Agreement will be perfected, first-priority (subject to Permitted Liens) (subject to the terms of the ABL Intercreditor Agreement) security interests, and no further recordings or filings are or will be required in connection with the creation, perfection, or enforcement of those security interests and Liens, other than (a) the filing of continuation statements in accordance with applicable law; (b) the recording of the collateral assignments referred to in the Guaranty and Collateral Agreement in the United States Patent and Trademark Office and the United States Copyright Office, as applicable, with respect to after-acquired U.S. patent and trademark applications and registrations and U.S. copyrights; and (c) the recordation of appropriate evidence of the security interest in the appropriate foreign registry with respect to all foreign intellectual property.

 

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9.28         No Default. No Default or Event of Default exists or would result from the incurrence by any Loan Party of any Debt under this Agreement or under any other Loan Document.

 

9.29         Hedging Agreements. None of the Loan Parties and their Subsidiaries is a party to, nor will it be a party to, any Hedging Agreement other than Hedging Agreements with the ABL Agent to the extent permitted by Section 11.1(k).

 

9.30         OFAC. Each of the Borrowers and their Subsidiaries is and will remain in compliance in all material respects with all U.S. economic sanctions laws, Executive Orders and implementing regulations as promulgated by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), and all applicable anti-money laundering and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. None of the Borrowers and their Subsidiaries and Affiliates is (a) a Person designated by the U.S. government on the list of the Specially Designated Nationals and Blocked Persons (the “SDN List”) with which a U.S. Person cannot deal with or otherwise engage in business transactions; (b) a Person who is otherwise the target of U.S. economic sanctions laws such that a U.S. Person cannot deal or otherwise engage in business transactions with that Person; or (c) controlled by (including, without limitation, by virtue of that Person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any Person on the SDN List or a foreign government that is the target of U.S. economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under U.S. law.

 

9.31         Patriot Act. Each of the Borrowers and their Subsidiaries and Affiliates are in compliance with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto; (b) the Patriot Act; and (c) other federal or state laws relating to “know your customer” and anti-money laundering rules and regulations. No part of the proceeds of any Loan will be used directly or indirectly for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.

 

9.32         Related Agreements.

 

(a)              The Loan Parties have furnished Administrative Agent true and correct copies of the Related Agreements.

 

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(b)              The Loan Parties have duly taken all necessary company action to authorize the execution, delivery, and performance of the Related Agreements and the consummation of transactions contemplated by the Related Agreements.

 

(c)               The Related Transaction will comply with all applicable legal requirements, and all necessary governmental, regulatory, creditor, shareholder, partner, and other material consents, approvals, and exemptions required to be obtained by the Loan Parties and, to each Loan Party’s knowledge, each other party to the Related Agreements in connection with the Related Transaction will be, prior to consummation of the Related Transaction, duly obtained and will be in full force and effect. As of the date of the Related Agreements, all applicable waiting periods with respect to the Related Transaction will have expired without any action being taken by any competent governmental authority which restrains, prevents or imposes material adverse conditions upon the consummation of the Related Transaction.

 

(d)              The execution and delivery of the Related Agreements did not, and the consummation of the Related Transaction will not, violate any statute or regulation of the United States (including any securities law) or of any state or other applicable jurisdiction, or any order, judgment, or decree of any court or governmental body binding on any Loan Party or, to any Borrower’s knowledge, any other party to the Related Agreements, or result in a breach of, or constitute a default under, any material agreement, indenture, instrument, or other document, or any judgment, order, or decree, to which any Loan Party is a party or by which any Loan Party is bound or, to any Borrower’s knowledge, to which any other party to the Related Agreements is a party or by which any such party is bound.

 

(e)              As of the Closing Date, no statement or representation made in the Related Agreements by any Loan Party or, to any Borrower’s knowledge, any other Person, contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading in any material respect.

 

9.33         Holdings. Holdings is not and has not, directly or indirectly, engaged in any business activities, does not hold and has not held any material assets, has not granted any Lien, and has not incurred any Debt, other than (a) acting as a holding company and transactions incidental thereto; (b) entering into the Loan Documents, the ABL Loan Documents and the transactions required in this Agreement or permitted in this Agreement to be performed by Holdings; (c) receiving and distributing the dividends, distributions, and payments permitted to be made to Holdings pursuant to Section 11.3; (d) entering into engagement letters and similar agreements with attorneys, accountants, and other professionals; and (e) issuing Equity Interests and performing its obligations under its organizational documents, its governing documents, and agreements with the holders of its Equity Interests.

 

9.34         Customers and Suppliers. There exists no actual or threatened termination, cancellation, or limitation of, or modification to or change in, the business relationship between (a) any of the Loan Parties and their Subsidiaries, on the one hand, and any customer or any group thereof, on the other hand, whose agreements with any of the Loan Parties and their Subsidiaries are individually or in the aggregate material to the business or operations of any of the Loan Parties and their Subsidiaries; or (b) of the Loan Parties and their Subsidiaries, on the one hand, and any supplier or any group thereof, on the other hand, whose agreements with any of the Loan Parties and their Subsidiaries are individually or in the aggregate material to the business or operations of any of the Loan Parties and their Subsidiaries. To the Loan Parties’ knowledge there exists no present state of facts or circumstances that could reasonably be expected to give rise to or result in any such termination, cancellation, limitation, modification or change.

 

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9.35         ABL Loan Documents. As of the Closing Date, the Borrowers have delivered to the Administrative Agent true and correct copies of the ABL Loan Documents. The ABL Loan Documents are in full force and effect as of the Closing Date and have not been terminated, rescinded or withdrawn as of such date. The execution, delivery and performance of the ABL Loan Agreement on the Closing Date does not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any governmental authority, other than consents or approvals that have been obtained and that are still in full force and effect. This Agreement, the other Loan Documents and the Obligations incurred hereunder and thereunder are permitted to be incurred by the ABL Loan Documents. Each Person that is a guarantor or a borrower under the ABL Loan Documents is a Loan Party hereunder.

 

Section 10AFFIRMATIVE COVENANTS.

 

Until Payment in Full, Holdings and each Borrower shall, unless at any time the Required Lenders otherwise expressly consent in writing, do the following:

 

10.1         Reports, Certificates and Other Information. Furnish or cause Borrower Representative to furnish to Administrative Agent and each Lender:

 

10.1.1             Annual Report. Promptly when available and in any event within 120 days after the close of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2020): (a) a copy of the annual audit report of Holdings and its Subsidiaries for that Fiscal Year, including consolidated balance sheets and statements of earnings and cash flows of Holdings and its Subsidiaries as at the end of that Fiscal Year, certified without adverse reference to going concern value and without qualification by independent auditors of recognized standing selected by Holdings and reasonably acceptable to Administrative Agent, together with a balance sheet of Holdings and its Subsidiaries as of the end of that Fiscal Year and statement of earnings and cash flows for Holdings and its Subsidiaries for that Fiscal Year, certified by a Senior Officer of Holdings.

 

10.1.2             Interim Reports. Promptly when available (a) and in any event within 30 days after the end of each month, consolidated balance sheets of Holdings and its Subsidiaries as of the end of that month, together with consolidated statements of earnings and a consolidated statement of cash flows for that month and for the period beginning with the first day of that Fiscal Year and ending on the last day of that month, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for that period of the current Fiscal Year, all certified by a Senior Officer of Holdings and (b) and in any event within 45 days after the end of each Fiscal Quarter, consolidated balance sheets of Holdings and its Subsidiaries as of the end of that Fiscal Quarter, together with consolidated statements of earnings and a consolidated statement of cash flows for that Fiscal Quarter and for the period beginning with the first day of that Fiscal Year and ending on the last day of that Fiscal Quarter, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for that period of the current Fiscal Year, together with a management discussion and analysis, all certified by a Senior Officer of Holdings.

 

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10.1.3             Compliance Certificates. Contemporaneously with the furnishing of a copy of each annual audit report pursuant to Section 10.1.1 and each set of quarterly statements pursuant to Section 10.1.2(b), a duly completed compliance certificate in the form of Exhibit B, with appropriate insertions, dated the date of that annual report or those statements and signed by a Senior Officer of Holdings, containing (a) a computation of each of the financial ratios and restrictions set forth in Section 11.12; (b) a certification to the effect that that Senior Officer has not become aware of any Default or Event of Default that has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it; and (c) a written statement of Holdings’ management setting forth a discussion of Holdings’ and its Subsidiaries’ financial condition, changes in financial condition, and results of operations.

 

10.1.4             Reports to the SEC and to Shareholders. Promptly upon the filing or sending thereof, copies of all regular, periodic, or special reports of any Loan Party filed with the SEC; copies of all registration statements of any Loan Party filed with the SEC (other than on Form S-8); and copies of all proxy statements or other communications made to security holders generally.

 

10.1.5             ABL Reports and Notices. When provided to the ABL Agent or as required under the ABL Loan Documents and otherwise upon request of the Administrative Agent, any financial reporting (including borrowing base certificates and statements of accounts), notice, financial information, data or other information given to the ABL Agent pursuant to the ABL Loan Documents (unless already provided to the Administrative Agent under the Loan Documents).

 

10.1.6             Notice of Default, Litigation, and ERISA Matters. Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by the Loan Parties and their Subsidiaries affected thereby with respect thereto:

 

(a)              the occurrence of a Default or an Event of Default;

 

(b)              the commencement of, or any material development in, any litigation or proceeding affecting any of the Loan Parties and their Subsidiaries or their respective property (i) in which the amount of damages claimed is $500,000 (or its equivalent in another currency or currencies) or more in the aggregate for all such litigations or proceedings; (ii) in which the relief sought is an injunction or other stay of the performance of this Agreement or any other Loan Document; or (iii) which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

 

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(c)               (i) the institution of any steps by any member of the Controlled Group or any other Person to terminate any Pension Plan; (ii) the failure of any member of the Controlled Group to make a required contribution to any Pension Plan (if that failure is sufficient to give rise to a Lien under Section 303(k) of ERISA) or to any Multiemployer Pension Plan; (iii) the taking of any action with respect to a Pension Plan that could result in the requirement that any Loan Party furnish a bond or other security to the PBGC or that Pension Plan; (iv) the occurrence of any event with respect to any Pension Plan or Multiemployer Pension Plan that could result in the incurrence by any member of the Controlled Group of any material liability, fine, or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Pension Plan); (v) any material increase in the contingent liability of any Loan Party with respect to any post-retirement welfare benefit plan or other employee benefit plan of any of the Loan Parties and their Subsidiaries; or (vi) any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an 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;

 

(d)              any cancellation or material change in any insurance maintained by any Loan Party;

 

(e)              any violation of, or non-compliance with, any material requirement of law by any Loan Party;

 

(f)                any notices of default under the ABL Loan Documents or any notice of any Enforcement Action (as defined int eh ABL Intercreditor Agreement); or

 

(g)              any other event (including (i) any violation of any Environmental Law or the assertion of any Environmental Claim, or (ii) the enactment or effectiveness of any law, rule, or regulation) that could reasonably be expected to have a Material Adverse Effect.

 

10.1.7             Real Estate. Promptly upon any of the Loan Parties and their Subsidiaries acquiring or leasing any real property after the Closing Date, an updated version of Schedule 9.17 showing information as of the date of delivery.

 

10.1.8             Management Reports. Promptly upon receipt thereof, copies of all detailed financial and management reports submitted to Holdings or any Borrower by independent auditors in connection with each annual or interim audit made by those auditors of the books of Holdings or any Borrower.

 

10.1.9             Projections. As soon as practicable, and in any event not later than (x) 30 days after the end of each Fiscal Year, preliminary financial projections for Holdings and its Subsidiaries for the then current Fiscal Year (including a business plan, monthly operating and cash flow budgets, income statements, balance sheets, a capital expenditures budget and a summary of assumptions made in the build-up of such financial projections), which remain subject to approval of the board of directors of Holdings, and (y) 60 days after the end of each Fiscal Year, final financial projections for Holdings and its Subsidiaries for the then current Fiscal Year (including a business plan, monthly operating and cash flow budgets, income statements, balance sheets, a capital expenditures budget and a summary of assumptions made in the build-up of such financial projections), which projections have been confirmed and approved of the board of directors of Holdings, in each case, prepared in a manner consistent with the projections delivered by Borrower Representative to Administrative Agent prior to the Closing Date or otherwise in a manner reasonably satisfactory to Administrative Agent, accompanied by a certificate of a Senior Officer of Borrower Representative to the effect that (a) the projections were prepared by Holdings in good faith; (b) Holdings has a reasonable basis for the assumptions contained in the projections, as of the date of delivery; and (c) the projections have been prepared in accordance with those assumptions (it being recognized by Administrative Agent and the Lenders that any projections and forecasts provided by the Company are based on good-faith estimates and assumptions believed by the Company to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ materially from projected or forecasted results).

 

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10.1.10        Related Transaction Notices. Promptly following receipt, copies of any material notices (including notices of default or acceleration) received in connection with the Related Transaction.

 

10.1.11        Material Contract Notices. Promptly following receipt, copies of any material notices (including notices of default) received in connection with any Material Contract.

 

10.1.12        Information Systems. Not less than three (3) months prior to the commencement of any program or process to implement a material change, consolidation or modification of a Loan Party’s information technology and/or enterprise resource planning software system, such Loan Party shall provide notice of such proposed change, consolidation or modification to Administrative Agent. From the commencement of such program or process through the completion of such change, consolidation or modification, the Borrowers shall provide Administrative Agent an update on the progress of such change, consolidation or modification concurrently with the delivery of the written statement required to be delivered pursuant to clause (iii) of Section 10.1.3 relating to the Borrowers’ financial condition, changes in financial condition and results of operations.

 

10.1.13        Key Performance Indicators. Contemporaneously with the furnishing of a copy of each set of monthly financial statements pursuant to Section 10.1.2(a), a report summarizing key performance indicators of Holdings and its Subsidiaries for the period then ending in form reasonably satisfactory to the Administrative Agent (and in any event shall include (without limitation) (1) any new material customers added or customers lost during the applicable month being measured along with the gross profit impact of such change on an annual basis and (2) the top 5 customers of Holdings and its Subsidiaries measured by trailing twelve month gross profit).

 

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10.1.14        Other Information. Promptly from time to time, all other information (including, without limitation, business or financial data, reports, appraisals and projections) concerning any of the Loan Parties and their Subsidiaries or their respective properties or business as any Lender or Administrative Agent reasonably requests.

 

10.2         Books, Records, and Inspections. Keep, and cause each of the Loan Parties and their Subsidiaries to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause each other Loan Party and each Subsidiary of each Loan Party to permit, any Lender or Administrative Agent or any representative, agent, or advisor thereof to inspect the properties and operations of the Loan Parties and their Subsidiaries during normal business hours; and permit, and cause each other Loan Party and each Subsidiary of each Loan Party to permit, at any reasonable time and with reasonable notice (or at any time without notice if an Event of Default exists), any Lender or Administrative Agent or any representative, agent, or advisor thereof to visit any or all of its offices, to discuss its financial matters with its officers and its independent auditors (and Holdings and each Borrower hereby authorizes all such independent auditors to discuss those financial matters with any Lender or Administrative Agent or any representative, agent, or advisor thereof), and to examine (and photocopy extracts from) any of its books or other records; and permit, and cause each other Loan Party and each Subsidiary of each Loan Party to permit, Administrative Agent and its representatives, agents, and advisors to inspect the inventory and other tangible assets of the Loan Parties and their Subsidiaries, to perform appraisals of the equipment of the Loan Parties and their Subsidiaries, to have access at all times to a virtual data room containing all contracts of the Loan Parties and their Subsidiaries, and to inspect, audit, conduct physical counts and perform valuations thereof, and to audit, check and make copies of and extracts from the books, records, computer data, computer programs, journals, orders, receipts, correspondence and other data relating to inventory, accounts, and any other Collateral. All such visits, inspections, appraisals or audits by Administrative Agent and its representatives, agents, and advisors will be at Borrowers’ expense, except that so long as no Default or Event of Default exists, Borrowers will not be required to reimburse Administrative Agent in any Fiscal Year for more than two (2) such visits, inspections, appraisals, or audits.

 

10.3         Maintenance of Property; Insurance.

 

(a)              Keep, and cause each of the Loan Parties and their Subsidiaries to keep, all property useful and necessary in the business of the Loan Parties and their Subsidiaries in good working order and condition, ordinary wear and tear excepted.

 

(b)              Maintain, and cause each of the Loan Parties and their Subsidiaries to maintain, with responsible insurance companies, all insurance coverage as may be required by any law or governmental regulation or court decree or order applicable to it, general liability insurance and business interruption insurance in such amounts and duration, and with such deductibles, as are acceptable to Administrative Agent in its reasonable determination, and all other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated, but which must insure against all risks and liabilities of the type identified on Schedule 9.16 and must have insured amounts no less than, and deductibles no higher than, those set forth on that schedule; and, upon request of Administrative Agent or any Lender, furnish to Administrative Agent or that Lender original or electronic copies of policies evidencing that insurance and a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by the Loan Parties and their Subsidiaries. Borrowers shall cause each issuer of an insurance policy in respect of any Loan Party to provide Administrative Agent with an endorsement (i) showing Administrative Agent as lender’s loss payee with respect to each policy of property or casualty insurance and naming Administrative Agent as an additional insured with respect to each policy of liability insurance; (ii) providing that at least 10 days’ notice will be given the Administrative Agent prior to cancellation of the policy for non-payment of premium and 30 days’ notice will be given to Administrative Agent prior to any cancellation of, material reduction or change in coverage provided by or other material modification to that policy for any other reason; and (iii) reasonably acceptable in all other respects to Administrative Agent. Each Loan Party shall execute and deliver to Administrative Agent a collateral assignment, in form and substance satisfactory to Administrative Agent, of each business interruption insurance policy maintained by that Loan Party.

 

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(c)               Unless Borrowers provide Administrative Agent with evidence of the insurance coverage required by this Agreement, Administrative Agent may purchase insurance at Borrowers’ expense, after notice to Borrower Representative, to protect Administrative Agent’s and the Lenders’ interests in the Collateral. This insurance may, but need not, protect any Loan Party’s interests. The coverage that Administrative Agent purchases might not pay any claim that is made against any Loan Party in connection with the Collateral. Borrowers may later cancel any insurance purchased by Administrative Agent, but only after providing Administrative Agent with evidence that Borrowers have obtained insurance as required by this Agreement. If Administrative Agent purchases insurance for the Collateral, Borrowers will be responsible for the costs of that insurance, including interest and any other charges that might be imposed 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 principal amount of the Loans owing under this Agreement. The costs of the insurance may be more than the cost of the insurance the Loan Parties might be able to obtain on their own.

 

(d)              All Collateral (other than (i) mobile goods and goods that are in transit in the ordinary course of business, (ii) equipment that is located at customer locations in the ordinary course of business to the extent the fair market value of such equipment does not exceed $50,000 individually and $250,000 in the aggregate for all such equipment (excluding immaterial cleaning equipment kept at customer locations in the ordinary course of business)), will at all times be kept by the Loan Parties at one or more of the business locations set forth in Schedule 9.26 hereto, as updated by the Loan Parties providing written notice to Administrative Agent of any new location on a quarterly basis together with the delivery of Compliance Certificates pursuant to Section 10.1.2(b).

 

10.4         Compliance with Laws; Payment of Taxes and Liabilities.

 

(a)              Comply, and cause each of the Loan Parties and their Subsidiaries to comply, in all respects with all applicable laws, rules, regulations, decrees, orders, judgments, licenses, and permits, except where failure to comply could not reasonably be expected to have a Material Adverse Effect;

 

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(b)              Without limiting Section 10.4(a), ensure, and cause each of the Loan Parties and their Subsidiaries to ensure, that no Person who owns a controlling interest in or otherwise controls any of the Loan Parties and their Subsidiaries is (i) listed on the SDN List maintained by OFAC and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order, or regulation; or (ii) a Person designated under Section 1(b), (c), or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation, or any other similar Executive Orders.

 

(c)               Without limiting Section 10.4(a), comply, and cause each of the Loan Parties and their Subsidiaries to comply, with all applicable Bank Secrecy Act and anti-money laundering laws and regulations.

 

(d)              Pay, and cause each of the Loan Parties and their Subsidiaries to pay, prior to delinquency, all material taxes and other governmental charges against it or any of its property, as well as claims of any kind which, if unpaid, could become a Lien on any of its property, but none of the Loan Parties and their Subsidiaries will be required under this Section 10.4(d) to pay any such tax or charge so long as that Loan Party or that Subsidiary is contesting the validity thereof in good faith by appropriate proceedings and has set aside on its books adequate reserves with respect thereto in accordance with GAAP, and, in the case of a claim that could become a Lien on any Collateral, those contest proceedings stay the foreclosure of that Lien or the sale of any portion of the Collateral to satisfy that claim.

 

10.5         Maintenance of Existence, etc. Maintain and preserve, and (subject to Section 11.4) cause each of the Loan Parties and their Subsidiaries to maintain and preserve, (a) its existence and good standing in the jurisdiction of its organization and (b) its qualification to do business and good standing in each jurisdiction where the nature of its business makes that qualification necessary (other than any such jurisdictions in which the failure to be qualified or in good standing could not reasonably be expected to have a Material Adverse Effect).

 

10.6         Use of Proceeds. Use the proceeds of (a) the Term A Loans solely (i) to repay the Debt to be Repaid, and, thereafter, (ii) to finance a portion of the Related Transaction (including funding of permitted earn-out payments and deferred purchase price in connection therewith), and (iii) to pay fees and expenses incurred in connection with the Related Transaction, this Agreement and the other Loan Documents, (b) the Term B Loans solely (i) to repay all amounts owing under a proposed target’s existing indebtedness for borrowed money in connection with a Permitted Acquisition, and, thereafter, (ii) to finance a portion of the consideration in connection with such Permitted Acquisition (including funding of permitted earn-out payments and deferred purchase price in connection therewith), and (iii) to pay fees and expenses incurred in connection with such Permitted Acquisition; and (c) Incremental Loans solely for Permitted Acquisitions as permitted by the existing Lenders; and, in each case, not use or permit any proceeds of any Loan to be used, either directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of “purchasing or carrying” any Margin Stock.

 

10.7         Employee Benefit Plans.

 

(a)              Maintain, and cause each other member of the Controlled Group to maintain, each Pension Plan in compliance with all applicable requirements of law and regulations.

 

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(b)              Make, and cause each other member of the Controlled Group to make, on a timely basis, all required contributions to any Multiemployer Pension Plan.

 

(c)               Not, and not permit any other member of the Controlled Group to, (i) seek a waiver of the minimum funding standards of ERISA, (ii) terminate or withdraw from any Pension Plan or Multiemployer Pension Plan or (iii) take any other action with respect to any Pension Plan that could reasonably be expected to entitle the PBGC to terminate, impose liability in respect of, or cause a trustee to be appointed to administer, any Pension Plan, unless the actions or events described in clauses (i), (ii), and (iii) individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.

 

10.8         Environmental Matters. If any release or threatened release or other disposal of Hazardous Substances occurs or has occurred on any real property or any other assets of any of the Loan Parties and their Subsidiaries, then Borrowers shall, or shall cause the applicable Loan Party or the applicable Subsidiary of a Loan Party to, cause the prompt containment and removal of those Hazardous Substances and the remediation of that real property or other assets as necessary to comply with all applicable Environmental Laws and to preserve in all material respects the value of that real property or other assets. Without limiting the generality of the foregoing, Borrowers shall, and shall cause the Loan Parties and their Subsidiaries to, comply with any applicable federal or state judicial or administrative order requiring the performance at any real property of any of the Loan Parties and their Subsidiaries of activities in response to the release or threatened release of a Hazardous Substance. To the extent that the transportation of Hazardous Substances is permitted by this Agreement, Holdings and Borrowers shall, and shall cause their Subsidiaries to, dispose of all Hazardous Substances, or of any other wastes, only at licensed disposal facilities operating in compliance with Environmental Laws.

 

10.9         Further Assurances. Take, and cause each other Loan Party to take, all actions as are necessary or as Administrative Agent or the Required Lenders reasonably request from time to time to ensure that the Obligations of each Loan Party under the Loan Documents are secured by a first-priority perfected Lien (subject to the terms of the ABL Intercreditor Agreement) in favor of Administrative Agent (subject to Permitted Liens) on all of the assets (other than Excluded Collateral) of each Loan Party (as well as all Equity Interests of each Borrower, each Subsidiary (other than Excluded Subsidiaries)) and guaranteed by each Loan Party (including, immediately upon the acquisition or creation thereof (or any longer period Administrative Agent agrees to in its sole discretion), any Subsidiary acquired or created after the Closing Date, but excluding Excluded Subsidiaries), in each case to the extent determined by Administrative Agent, in its sole discretion, not to be prohibited by applicable law and as Administrative Agent reasonably determines, including (i) the execution and delivery of guaranties, security agreements, pledge agreements, mortgages (including, without limitation, leasehold mortgages), deeds of trust (including, without limitation, leasehold deeds of trust), financing statements, opinions of counsel, and other documents, in each case in form and substance reasonably satisfactory to Administrative Agent, and the filing or recording of any of the foregoing; (ii) the delivery of certificated securities and other Collateral with respect to which perfection is obtained by possession; and (iii) with respect to any real property acquired by any Loan Party after the Closing Date, the delivery (to the extent requested by Administrative Agent) within 60 days after the date that real property was acquired (or any longer period Administrative Agent agrees to in its sole discretion) of a duly executed Mortgage with respect to that real property providing for a fully perfected Lien, in favor of Administrative Agent, in all right, title and interest of the applicable Loan Party in that real property, together with all Mortgage-Related Documents and a legal opinion of special counsel for the applicable Loan Party for the state in which that real property is located in form and substance reasonably acceptable to Administrative Agent. The Loan Parties and their Subsidiaries shall ensure that no Person is included (or added) as a guarantor or borrower under the ABL Loan Documents and no assets are included (or added) as collateral under the ABL Loan Documents unless such Person or assets, as applicable, are also included (or added substantially concurrently with such addition under the ABL Loan Documents) as a Loan Party or Collateral, as applicable, under the Loan Documents in accordance with this Section 10.9.

 

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10.10     Lender Meetings. Holdings and the Borrowers will, upon the request of Administrative Agent or Required Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held via a conference call or other teleconference at such time as may be agreed to by Borrower Representative and Administrative Agent (such consents not to be unreasonably withheld, conditioned or delayed).

 

10.11     Deposit Accounts. Unless Administrative Agent otherwise consents in writing, maintain, and cause each other Loan Party to maintain, all of their deposit accounts and securities accounts, other than Excluded Deposit Accounts, with an institution that has entered into one or more Control Agreements with Administrative Agent and the applicable Loan Party granting “control” (as defined in the UCC) of each applicable account to Administrative Agent. The Loan Parties shall not enter into any control agreement (or similar arrangement) with any secured party unless such agreement is a Control Agreement to which the Administrative Agent is party.

 

10.12     SBA PPP Loans.

 

(a)              Use of Proceeds. The Loan Parties will (i) use all of the proceeds of any SBA PPP Loan exclusively for CARES Forgivable Uses in the manner required under the CARES Act, as amended, to obtain forgiveness of the largest possible amount of such SBA PPP Loan and (ii) take all commercially reasonable steps to have the SBA PPP Loans forgiven pursuant to the CARES Act and use commercially reasonable efforts to conduct their business in a manner that maximizes the amount of the SBA PPP Loans that is forgiven. The Loan Parties acknowledge that as of the Closing Date, in order to obtain forgiveness of the largest possible amount of the SBA PPP Loans, the Loan Parties would not be allowed to use less than 60% of each SBA PPP Loan proceeds for CARES Payroll Costs, subject to amendment.

 

(b)              CARES Act. The Loan Parties and their use of the SBA PPP Loans will comply in all material respects with the applicable requirements of the CARES Act.

 

(c)               Notice. The Loan Parties will provide Administrative Agent with (i) prompt written notice (but in any event within two Business Days) of the failure of any SBA PPP Loan incurred by any of the Borrowers to qualify for contingent forgiveness under the CARES Act and (ii) if requested by Administrative Agent, copies of all correspondence sent to, and received from, the SBA or SBA 7(a) lender bank.

 

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10.13     Post-Closing Items. Within the time periods specified below after the Closing Date (or such longer period as the Administrative Agent may agree in its sole discretion), the Loan Parties shall complete, or cause the applicable Person to complete, the following undertakings and deliveries in a manner reasonably satisfactory to the Administrative Agent.

 

(a)              Insurance. No later than (x) 2 Business Days after the Closing Date, the Loan Parties shall have delivered updated insurance certificates indicating that Monroe Capital Management Advisors, LLC, as Administrative Agent, together with its successors and assigns, is named as additional insured on the certificate for liability coverage and as lender’s loss payee on the certificate for property or casualty insurance and (y) 10 Business Days after the Closing Date, the Borrowers shall cause each issuer of an insurance policy in respect of any Loan Party to provide Administrative Agent with an endorsement (i) showing Administrative Agent as lender’s loss payee with respect to each policy of property or casualty insurance and business interruption insurance and naming Administrative Agent as an additional insured with respect to each policy of liability insurance; and (ii) providing that 30 days’ notice will be given to Administrative Agent prior to any cancellation of, material reduction or change in coverage provided by or other material modification to that policy.

 

(b)              Stock Certificate. No later than 5 Business Days after the Closing Date, the Loan Parties shall have caused the original stock certificate of Quest Sustainability Services, Inc. to be delivered to Administrative Agent.

 

(c)               Control Agreements. No later than 30 days after the Closing Date, the Loan Parties shall deliver to the Administrative Agent the Control Agreements required pursuant to Section 10.11; and

 

(d)              Collateral Access Agreements. No later than 30 days after the Closing Date, the Loan Parties shall deliver to the Administrative Agent, a Collateral Access Agreement with respect to the leased locations at (x) 3481 Plano Parkway, The Colony, Texas 75056 and (y) 147 MacArthur Lane, Burlington, North Carolina 27217; provided, that, solely with respect to the leased location set forth in clause (y) above and only to the extent a collateral access agreement (or similar agreement) is not delivered to the ABL Agent, the Loan Parties shall only be required to use commercially reasonable to deliver such Collateral Access Agreement.

 

Section 11NEGATIVE COVENANTS

 

Until Payment in Full, Holdings and each Borrower shall, unless at any time the Required Lenders otherwise expressly consent in writing, do the following:

 

11.1         Debt. Not, and not permit any of the Loan Parties and their Subsidiaries to, create, incur, assume, or suffer to exist any Debt, except the following:

 

(a)              Obligations under this Agreement and the other Loan Documents;

 

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(b)              Debt of any of the Loan Parties (other than Holdings) and their Subsidiaries secured by Liens permitted by Section 11.2(d), and extensions, renewals, replacements, and refinancings thereof, so long as the aggregate amount of all such Debt at any time outstanding does not exceed $500,000;

 

(c)               Debt of any Loan Party to any other Loan Party, so long as (i) that Debt is evidenced by a demand note in form and substance reasonably satisfactory to Administrative Agent and pledged and delivered to Administrative Agent pursuant to the Collateral Documents as additional collateral security for the Obligations, and (ii) the obligations under that demand note are subordinated to the obligations of the Loan Parties under the Loan Documents (including the Obligations of Borrowers under this Agreement) in a manner reasonably satisfactory to Administrative Agent;

 

(d)              Debt arising in connection with endorsement of instruments for deposit in the ordinary course of business;

 

(e)              Debt of any Loan Party to any employee, officer, or director or any such Person’s spouse, estate, or estate-planning vehicle to repurchase Equity Interests from that Person upon the death, disability, or termination of employment of that employee, officer of director, so long as the aggregate amount of all such Debt at any time outstanding does not exceed $250,000;

 

(f)                unsecured Hedging Obligations consisting of commodity swap agreements of the Loan Parties (other than Holdings) and their Subsidiaries in an aggregate amount not to exceed $250,000 incurred for bona fide hedging purposes and not for speculation with respect to risks arising in the ordinary course of Borrowers’ business;

 

(g)              Debt described on Schedule 11.1 and any extension, renewal, replacement or refinancing thereof so long as the principal amount thereof is not increased;

 

(h)              the Debt to be Repaid (so long as that Debt is repaid on the Closing Date with the proceeds of the initial Loans under this Agreement);

 

(i)                Contingent Liabilities arising with respect to (i) customary indemnification obligations by any of the Loan Parties (other than Holdings) and their Subsidiaries in favor of purchasers in connection with dispositions permitted under Section 11.4, and (ii) the guaranty by any of the Loan Parties (other than Holdings) and their Subsidiaries of a lease, sublease, license, or sublicense entered into in the ordinary course of business by another Loan Party or any Subsidiary thereof;

 

(j)                unsecured Debt incurred in respect of netting services, overdraft protection, and other like services, in each case, incurred in the ordinary course of business;

 

(k)              so long as the ABL Debt (as defined in the ABL Intercreditor Agreement) is subject to the terms and conditions of the ABL Intercreditor Agreement, the ABL Debt (as defined in the ABL Intercreditor Agreement) in an aggregate principal amount outstanding under this clause (k) at any time not to exceed the ABL Cap (as defined in the ABL Intercreditor Agreement) at any time outstanding and any permitted Refinancing (as defined in the ABL Intercreditor Agreement) thereof; provided, that, any ABL Debt that exceeds the ABL Cap shall still be permitted hereunder to the extent it constitutes Excess ABL Debt (as defined in the ABL Intercreditor Agreement) under the ABL Intercreditor Agreement; and

 

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(l)                Debt owed to any person or entity providing property, casualty or liability insurance to any Borrower or any Subsidiary of any Borrower in connection with the financing of insurance premiums in the ordinary course of business to the extent not due and payable;

 

(m)           unsecured Debt of any Borrower or any of its Subsidiaries owing to banks or other financial institutions under corporate credit cards issued to officers and employees for business related expenses in the ordinary course of business in an aggregate amount not to exceed $375,000 at any time outstanding;

 

(n)              [reserved];

 

(o)              Debt in the form of Capital Lease obligations or purchase money obligations of any entity that becomes a Loan Party after the date hereof pursuant to a Permitted Acquisition; provided, that (x) such Debt exists at the time such entity becomes such a Subsidiary and is not created in contemplation of or in connection with such entity becoming such a Subsidiary, (y) such Debt is not guaranteed in any respect by any Borrower or Guarantor (other than by any such entity that guaranteed such Debt at the time such entity became a Subsidiary) and (z) such Debt in the aggregate does not exceed $750,000 at any time outstanding and any renewals, extensions, or refinancings thereof so long as the principal amount thereof is not increased;

 

(p)              Debt in an aggregate amount not to exceed $250,000 at any time outstanding in connection with surety or similar bonds, letters of credit and performance bonds obtained in the ordinary course of business of the Borrowers and their Subsidiaries;

 

(q)              deposits supporting the performance of operating leases in the ordinary course of business in an aggregate amount not to exceed $250,000 at any time outstanding;

 

(r)               unsecured Debt arising from agreements providing for customary adjustments of purchase price or similar obligations, or from guarantees securing the performance of any Borrower or any Subsidiary of any Borrower pursuant to such agreements, in connection with any Permitted Acquisitions;

 

(s)               unsecured cash obligations under incentive, non-compete, consulting, deferred compensation, or other similar arrangements, other than sales commissions, incurred by it in the ordinary course of business and consistent with past practices in an aggregate amount not to exceed $2,000,000 at any time outstanding;

 

(t)               (A) the Closing Date Seller Note to the extent subject to the Closing Date Seller Note Subordination Agreement, (B) other unsecured seller notes issued by Holdings of up to 150% of the EBITDA of the target for the most recently ended twelve month period for which financial statements have been delivered to Administrative Agent, in an aggregate amount not to exceed $12,000,000 at any time outstanding to the extent subject to a subordination agreement or other subordination arrangement in favor of the Obligations reasonably acceptable to Administrative Agent and subject to documentation and structure reasonably acceptable to the Administrative Agent and (C) other unsecured earn-outs owing by Holdings of up to 150% of the EBITDA of the target for the most recently ended twelve month period for which financial statements have been delivered to Administrative Agent, in an aggregate amount not to exceed $12,000,000 at any time outstanding the extent subject to a subordination agreement or other subordination arrangement in favor of the Obligations reasonably acceptable to Administrative Agent and subject to documentation and structure reasonably acceptable to the Administrative Agent;

 

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(u)              Debt consisting of SBA PPP Loans in an aggregate amount not to exceed $1,408,000 at any time outstanding; and

 

(v)              other unsecured Debt of the Loan Parties and their Subsidiaries not otherwise provided for herein in an aggregate amount not at any time exceeding $750,000 at any time outstanding; provided, to the extent any such indebtedness is in the form of seller notes, earn-out or similar obligations, such Debt shall only be issued by Holdings and shall be subject to a subordination agreement or other subordination arrangement in favor of the Obligations reasonably acceptable to Administrative Agent.

 

11.2         Liens. Not, and not permit any of the Loan Parties and their Subsidiaries to, create or permit to exist any Lien on any of its real or personal properties, assets, or rights of whatsoever nature (whether now owned or hereafter acquired), except the following:

 

(a)              Liens for taxes or other governmental charges (excluding any Lien imposed pursuant to any provisions of ERISA) not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings so long as such Lien would not reasonably be expected to materially adversely affect the Administrative Agent’s rights or the priority of the Administrative Agent’s Lien on any Collateral and, in each case, for which it maintains adequate reserves in accordance with GAAP and the execution or other enforcement of which is effectively stayed;

 

(b)              Liens arising in the ordinary course of business any of the Loan Parties (other than Holdings) and their Subsidiaries (such as (i) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (ii) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds, and similar obligations) for sums not overdue or being diligently contested in good faith by appropriate proceedings diligently prosecuted and not involving any advances or borrowed money or the deferred purchase price of property or services and, in each case (1) for which it maintains adequate reserves in accordance with GAAP and the execution or other enforcement of which is effectively stayed and (2) only so long as payment in respect of any such Lien is not at the time required and such Liens do not, in the aggregate, materially detract from the value of the assets of such Loan Party or any of its Subsidiaries or materially impair the use thereof in the operation of the business of such Loan Party or any of its Subsidiaries;

 

(c)               Liens described on Schedule 11.2 as of the Closing Date and renewals and extensions thereof on the assets currently subject to those Liens;

 

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(d)              subject to the limitation set forth in Section 11.1(b), the following: (i) Liens arising in connection with Capital Leases (and attaching only to the property being leased); (ii) Liens existing on property at the time of the acquisition thereof by any of the Loan Parties (other than Holdings) and their Subsidiaries (and not created in contemplation of that acquisition); and (iii) Liens that constitute purchase money security interests on any property securing debt incurred for the purpose of financing all or any part of the cost of acquiring that property, so long as any such Lien attaches to the applicable property within 20 days of the acquisition thereof and attaches solely to the property so acquired;

 

(e)              easements, rights of way, restrictions (including zoning restrictions), covenants, encroachments, and other similar real estate charges or encumbrances, minor defects or irregularities in title, and other similar real estate Liens granted in the ordinary course of business not interfering in any material respect with the ordinary conduct of the business of any Loan Party or any Subsidiary thereof;

 

(f)                leases, subleases, licenses, or sublicenses of the assets or properties of any of the Loan Parties and their Subsidiaries, in each case entered into in the ordinary course of business and not interfering in any material respect with the business of any of the Loan Parties and their Subsidiaries;

 

(g)              customary set-off rights against depository accounts permitted under this Agreement in favor of banks at which any of the Loan Parties and their Subsidiaries maintains any such depository accounts, so long as those set-off rights secure only the obligations of that Loan Party or that Subsidiary to pay ordinary course fees and bank charges;

 

(h)              Liens consisting of precautionary filings of UCC financing statements filed with respect to Operating Leases permitted under this Agreement and any interest of title of a lessor under any Operating Lease permitted under this Agreement;

 

(i)                Liens arising under the Loan Documents;

 

(j)                Liens arising from judgments in circumstances not constituting an Event of Default;

 

(k)              Liens securing the ABL Obligations permitted by Section 11.1(k) so long as such Liens are subject to the terms of the ABL Intercreditor Agreement; and

 

(l)                other Liens incurred in the ordinary course of business of the Loan Parties and their Subsidiaries with respect to obligations that do not in the aggregate exceed $500,000 at any time outstanding.

 

11.3         Restricted Payments. Not, and not permit any of the Loan Parties and their Subsidiaries to, (a) make any dividend or distribution to any holders of its Equity Interests (other than the Warrant Holders); (b) purchase or redeem any of its Equity Interests (other than Equity Interests held by the Warrant Holders); (c) pay any management fees, transaction-based fees, or similar fees to any of its equity holders or any Affiliate thereof; (d) make any payment on account of Debt that has been contractually subordinated in right of payment to the Obligations if that payment is not permitted at that time under the applicable subordination terms and conditions; (e) make any prepayment of any unsecured Debt or any Debt secured by a Lien that is junior or subordinated to the Liens securing the Obligations; or (f) set aside funds for any of the foregoing (any of the foregoing described in clauses (a) through (f), each a “Restricted Payment”), except that:

 

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(i)                any Subsidiary may pay dividends or make other distributions to a Loan Party and any Loan Party may pay dividends or make other distributions to any Loan Party or any Subsidiary of any Loan Party;

 

(ii)              in the event the Borrowers file a consolidated, combined, unitary or similar type income Tax return with Holdings, the Borrowers shall be permitted to make distributions to Holdings to permit Holdings to pay federal and state income Taxes when due and payable to the extent such Taxes are attributable to the income of the Borrowers and their Subsidiaries;

 

(iii)           the Loan Parties and their Subsidiaries may make payments for earn-outs and deferred purchase price payments in connection with Permitted Acquisitions in an aggregate amount not to exceed of up to 150% of the EBITDA of the target for the most recently ended twelve month period for which financial statements have been delivered to Administrative Agent, provided that immediately before and after giving effect to such payments the Payment Conditions are satisfied;

 

(iv)            in each case to the extent due and payable on a nonaccelerated basis, each Borrower may make regularly scheduled payments of interest in respect of subordinated Debt in the form of seller notes or earn-outs, provided, that (a) the Payment Conditions are satisfied and (b) and such payments are permitted under the applicable subordination agreement related thereto;

 

(v)              each Borrower and each of its Subsidiaries may make dividends or distributions payable solely in its Equity Interests;

 

(vi)            the Loan Parties and their Subsidiaries may make payments in the form of Equity Interests of Holdings as required by the Consideration Agreement (as defined in the Closing Date Acquisition Agreement as in effect on the date hereof) as in effect on the date hereof.

 

11.4         Mergers, Consolidations, Sales. Not, and not permit any of the Loan Parties and their Subsidiaries to, (a) be a party to any merger or consolidation; (b) change its state of incorporation or organization, its organization type or organization identification number or change its legal name; (c) sell, transfer, dispose of, convey, or lease any of its assets or Equity Interests (including the sale of Equity Interests of any Subsidiary); (d) sell or assign with or without recourse any receivables; (e) acquire all or any substantial part of the properties of any Person; or (f) purchase or otherwise acquire all or substantially all of the assets or any Equity Interests, or any partnership or joint venture interest in, any other Person or make any Acquisition, except the following:

 

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(i)                any merger or consolidation of a Loan Party or any Subsidiary of a Loan Party with another Loan Party or another Wholly-Owned Subsidiary of a Loan Party; provided, that a Loan Party shall be the surviving entity in any merger or consolidation involving a Loan Party, a Borrower shall be the surviving entity in any merger or consolidation involving a Borrower and Holdings shall be the surviving entity in any merger or consolidation involving Holdings;

 

(ii)              Permitted Acquisitions;

 

(iii)           dispositions of equipment that is substantially worn, damaged, or obsolete; provided, that, in the case of any disposition of equipment financed under the ABL Loan Agreement, the outstanding advance amount and all interest payable with respect thereto under the ABL Loan Agreement shall be paid to the Administrative Agent to be applied to the Term Loan (as defined in the ABL Loan Agreement) as set forth in the ABL Loan Agreement;

 

(iv)            the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business;

 

(v)              the lapse of registered patents, trademarks, copyrights and other intellectual property of any Loan Party or any of its Subsidiaries to the extent not economically desirable and useful in the conduct of its business;

 

(vi)            transfers of assets (a) to a Loan Party by (x) a Loan Party (other than Holdings, provided that the foregoing shall not limit Restricted Payments permitted by Section 11.3) or (y) a Subsidiary of a Loan Party (other than by a Borrower to such Subsidiary, provided that the foregoing shall not limit Restricted Payments permitted by Section 11.3 hereof) or (b) to a Borrower by a Borrower;

 

(vii)          sales of inventory in the ordinary course of business;

 

(viii)       dispositions of Cash Equivalent Investments;

 

(ix)            transfers of cash permitted by Section 11.9(m); and

 

(x)              so long as no Default or Event of Default exists and is continuing, other dispositions, not provided for in any other clause of this Section 11.4 in an aggregate amount not to exceed $500,000 during any consecutive twelve-month period.

 

Notwithstanding the foregoing, in no event shall any disposition or transfer be made to Quest Vertigent One, LLC other than pursuant to clause (ix) of this Section 11.4.

 

11.5         Modification of Certain Documents; Organizational Form.

 

(a)              Not permit the organizational documents or governing documents of any Loan Party to be amended or modified in any way that could reasonably be expected to be adverse to the interests of the Lenders (it being agreed that any change to the organizational or governing documents of Holdings related to the board of directors or voting rights of equityholders shall be deemed adverse to the interests of the Lenders) without the consent of the Lenders, which consent (other than with respect to any changes to the voting rights of equityholders) shall not be unreasonably withheld.

 

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(b)              Not change, or allow any Loan Party to change, its state of formation or its organizational form without providing the Administrative Agent at least ten (10) Business Days prior written notice.

 

(c)               Not amend, restate, supplement, waive, refinance, replace or otherwise modify any provision of any of the ABL Loan Documents except to the extent permitted by the ABL Intercreditor Agreement.

 

(d)              Not amend, restate, supplement, waive, refinance, replace or otherwise modify any provision of the Closing Date Seller Note unless permitted by the Closing Date Seller Note Subordination Agreement.

 

(e)              Without the prior written consent of the Administrative Agent, not amend, waive or otherwise modify any provision of the Closing Date Acquisition Agreement or the documents and instruments delivered in connection therewith if such amendment, waiver or modification would be material or adverse to the Administrative Agent or the Lenders.

 

11.6         Transactions with Affiliates. Not, and not permit any of the Loan Parties and their Subsidiaries to, enter into, or cause, suffer, or permit to exist any transaction, arrangement, or contract with any of its other Affiliates (other than the Loan Parties) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates (except to the extent expressly permitted by Sections 11.3 and 11.4(i)).

 

11.7         Inconsistent Agreements. Not, and not permit any of the Loan Parties and their Subsidiaries to, enter into any agreement containing any provision that would (a) be violated or breached by any borrowing by Borrowers under this Agreement or by the performance by any Loan Party of any of its Obligations under this Agreement or under any other Loan Document; (b) prohibit any Loan Party from granting to Administrative Agent and the Lenders a Lien on any of its assets; or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make other distributions to Holdings, any Borrower, or any other Subsidiary, or incur or pay any Debt (or modify, extend or renew any agreement evidencing Debt) owed to Holdings, any Borrower, or any other Subsidiary or to repay any intercompany Debt, (ii) make loans or advances to any Loan Party, or (iii) transfer any of its assets or properties to any Loan Party, other than (A) customary restrictions and conditions contained in agreements relating to the sale of all or a substantial part of the assets of any Subsidiary pending any such sale, so long as those restrictions and conditions apply only to the Subsidiary to be sold and that sale is permitted under this Agreement (but those); (B) restrictions or conditions imposed by any agreement relating to purchase money Debt, Capital Leases, and other secured Debt permitted by this Agreement, so long as those restrictions or conditions apply only to the property or assets securing that Debt; (C) customary provisions in leases and other contracts restricting the assignment thereof; and (D) restrictions and conditions set forth in the Loan Documents and the ABL Loan Documents.

 

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11.8         Business Activities; Holdings. (w) Not, and not permit any of the Loan Parties and their Subsidiaries to, engage in any line of business other than the businesses engaged in on the Closing Date and businesses reasonably related or reasonably complementary thereto, (x) not permit Holdings to engage in any trade or business other than acting as a holding company for the Equity Interests of the Loan Parties and any activities reasonably incidental thereto and (y) not permit Holdings to hold any cash or Cash Equivalent Investment that is not subject to a Control Agreement.

 

11.9         Investments. Not, and not permit any of the Loan Parties and their Subsidiaries to, make or permit to exist any Investment in any other Person, except the following:

 

(a)              contributions by Holdings, Borrowers, or any Subsidiary to the capital of any Borrower;

 

(b)              Investments constituting Debt permitted by Section 11.1;

 

(c)               Contingent Liabilities constituting Debt permitted by Section 11.1 or Liens permitted by Section 11.2;

 

(d)              Cash Equivalent Investments;

 

(e)              subject to Section 10.11, bank deposits in the ordinary course of business;

 

(f)                Permitted Acquisitions;

 

(g)              non-cash consideration received pursuant to the consummation of asset dispositions and Permitted Acquisitions, in each case permitted under this Agreement;

 

(h)              bank deposits established in the ordinary course of business in accordance with the Loan Documents;

 

(i)                Investments listed on Schedule 11.9 as of the Closing Date;

 

(j)                advances to officers, directors and employees of Holdings and its Subsidiaries in an aggregate amount not to exceed $100,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes in the ordinary course of business;

 

(k)              Investments by Holdings and its Subsidiaries in the Loan Parties (other than Holdings);

 

(l)                prepaid expenses and extensions of trade credit, in each case, in the ordinary course of business and consistent with past practices;

 

(m)           Investments of cash into Quest Vertigent One, LLC to be used solely for the purpose of paying consultant fees and general corporate expenses of Quest Vertigent One, LLC in an amount not to exceed $50,000 in any Fiscal Year; and

 

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(n)              other Investments not provided for in any other clause of this Section 11.9 in an aggregate amount not to exceed $250,000 so long as the Payment Conditions are satisfied immediately before and after giving effect to such Investment.

 

Notwithstanding the foregoing, in no event shall any Investment be made in Quest Vertigent One, LLC other than pursuant to clause (m) of this Section 11.09.

 

11.10     Restriction of Amendments to Certain Documents. Not amend or otherwise modify, or waive any rights under any Related Agreement or Material Contract, other than immaterial amendments, modifications, and waivers not adverse to the interests of Lenders.

 

11.11     Fiscal Year; Accounting Policies. Not, and not permit any of the Loan Parties and their Subsidiaries to (a) change its Fiscal Year or its method of determining Fiscal Quarters or fiscal months or (b) make any change in its accounting policies that is not required under GAAP.

 

11.12     Financial Covenants.

 

11.12.1        Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage Ratio for any Computation Period to be less than 1.10 to 1.00 for that Computation Period.

 

11.12.2        Senior Net Leverage Ratio. Not permit the Senior Net Leverage Ratio as of the last day of any Computation Period to exceed the applicable ratio set forth below for that Computation Period:

 

Computation 
Period Ending

Senior Net Leverage

 Ratio

   
December 31, 2020 3.25 to 1.00
   
March 31, 2021, June 30, 2021 and September 30, 2021 3.00 to 1.00
   
December 31, 2021 and March 31, 2022 2.75 to 1.00
   
June 30, 2022, September 30, 2022 and December 31, 2022 2.50 to 1.00
   
March 31, 2023 and the last day of each Fiscal Quarter thereafter 2.00 to 1.00

 

Notwithstanding anything herein to the contrary (x) with respect to any provision of the Loan Documents that references compliance or satisfaction with the Senior Net Leverage Ratio required by this Section 11.12.2 prior to December 31, 2020, such provision shall be deemed to refer to the Senior Net Leverage Ratio required as of December 31, 2020 and (y) the Borrowers and the Administrative Agent shall negotiate in good faith to reset the maximum Senior Net Leverage Ratios permitted under this Section 11.12.2 to reflect the impact of any Debt incurred in connection with any Permitted Acquisition as permitted hereunder.

 

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11.13     Compliance with Laws. Not, and shall not permit any of their Subsidiaries to, fail to comply with the laws, regulations and executive orders referred to in Sections 9.30 and 9.31.

 

11.14     Equity Interests of Subsidiaries. Not permit any Loan Parties (excluding Holdings) or any of their Subsidiaries to issue any additional Equity Interests, except to a Loan Party or other Subsidiary of a Loan Party and except for director’s qualifying Equity Interests to the extent required under applicable law. Not permit Holdings to issue any Disqualified Equity Interests.

 

11.15     Tax Consolidation. Not permit any Loan Party or any Subsidiary of any Loan Party to file or consent to the filing of any consolidated income tax return with any Person other than Holdings (or a present or future direct or indirect parent of Holdings), any other present or future Loan Party and/or any present or future Subsidiary of any Loan Party.

 

11.16     Bill-and-Hold Sales, Etc. Not permit any Loan Parties or any of their Subsidiaries to make a sale to any customer on a bill-and-hold, guaranteed sale, sale and return, sale on approval, repurchase or return or consignment basis.

 

11.17     ABL Obligations. Not permit any Loan Parties or any of their Subsidiaries to purchase or hold any of the ABL Obligations.

 

11.18     Optional Prepayments of ABL Term Loan. Not permit any Loan Parties or any of their Subsidiaries to make any voluntary prepayment of Term Loans (as defined in the ABL Loan Agreement) unless the following conditions have been satisfied: (a) no Default or Event of Default has occurred and is continuing or would immediately result therefrom (b) after giving effect to any such voluntary prepayment, Excess Availability is not less than $3,000,000 and (b) Borrower Representative has delivered a certificate to Administrative Agent certifying the satisfaction of the foregoing conditions.

 

11.19     Fiscal Year End. Not change, or permit any Subsidiary of any Loan Party to change, its fiscal year end.

 

11.20     OFAC. Not (i) Become a Person whose property or interests in property are blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Party and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001)), (ii) engage in any dealings or transactions prohibited by Section 2 of such executive order, or be otherwise associated with any such Person in any manner violative of such Section 2, or (iii) become a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.

 

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Section 12EFFECTIVENESS; CONDITIONS OF LENDING, ETC.

 

The effectiveness of this Agreement and the obligation of each Lender to make its Loans are subject to the following conditions precedent:

 

12.1         Conditions to Effectiveness. The effectiveness of this Agreement, and the obligation of the Lenders to make the Loans, are, in addition to the conditions precedent specified in Section 12.2 and Section 12.3, subject to satisfaction of the following conditions precedent (and the date on which all such conditions precedent have been satisfied or waived in writing by Administrative Agent and the Lenders is called the “Closing Date”), it being agreed that the request by Borrower Representative for the making of any initial Loan on the Closing Date will be deemed to constitute a representation and warranty by Borrowers that the conditions precedent set forth in this Section 12.1 will be satisfied at the time of the making of that Loan unless waived in writing by Administrative Agent:

 

12.1.1             Agreement, Notes, and other Loan Documents. Administrative Agent has received the following, each duly executed and dated as of the Closing Date (or any earlier date satisfactory to Administrative Agent), in form and substance satisfactory to Administrative Agent: (a) this Agreement; (b) to the extent requested by any Lender, one or more Notes made payable to that Lender; (c) the Guaranty and Collateral Agreement, together with all instruments, transfer powers, and other items required to be delivered in connection with the Guaranty and Collateral Agreement; (d) all other Loan Documents, (e) the ABL Loan Agreement Amendment, (f) the Closing Date Warrant and the Warrant Letter Agreement duly executed and delivered by the parties thereto and (g) the Closing Date Seller Note Subordination Agreement.

 

12.1.2             Authorization Documents. For each Loan Party, Administrative Agent has received the following, each in form and substance satisfactory to Administrative Agent: (a) that Person’s charter (or similar formation document), certified by the appropriate governmental authority; (b) good standing certificates in that Person’s state of incorporation (or formation) and in each other state in which that Person is qualified to do business if reasonably requested by Administrative Agent; (c) that Person’s bylaws (or similar governing document); (d) resolutions of its board of directors (or similar governing body) approving and authorizing that Person’s execution, delivery, and performance of the Loan Documents to which it is party and the transactions contemplated thereby; and (e) signature and incumbency certificates of that Person’s officers and/or managers executing any of the Loan Documents (which certificates Administrative Agent and each Lender may conclusively rely on until formally advised by a like certificate of any changes in any such certificate), all certified by its secretary or an assistant secretary (or similar officer) as being in full force and effect without modification.

 

12.1.3             Consents, etc. Administrative Agent has received certified copies of all documents evidencing any necessary company action, consents and governmental approvals (if any) required for the execution, delivery, and performance by the Loan Parties of the documents referred to in this Section 12.

 

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12.1.4             Letter of Direction. Administrative Agent has received a letter of direction containing funds flow information with respect to the proceeds of the Loans on the Closing Date, duly executed and dated as of the Closing Date, in form and substance satisfactory to Administrative Agent.

 

12.1.5             Collateral and Diligence Questionnaire. Administrative Agent has received a Collateral and Diligence Questionnaire completed and executed by each Loan Party, in form and substance satisfactory to Administrative Agent.

 

12.1.6             Opinions of Counsel. Administrative Agent has received opinions of counsel for each Loan Party, including local counsel reasonably requested by Administrative Agent, each duly executed and dated as of the Closing Date (or any earlier date satisfactory to Administrative Agent), in form and substance satisfactory to Administrative Agent.

 

12.1.7             Insurance. Administrative Agent has received evidence of the existence of insurance required to be maintained pursuant to Section 10.3(b), together with evidence that Administrative Agent has been named as a lender’s loss payee and an additional insured on all related insurance policies.

 

12.1.8             Related Transaction. The Closing Date Acquisition shall have been consummated in accordance in all material respects with the terms of the Closing Date Acquisition Agreement (without any amendment, modification or waiver of any of the provisions thereof that would be materially adverse to the Lenders in their capacities as Lenders without the consent of the Lenders, such consent not to be unreasonably withheld, conditioned or delayed). The Closing Date Acquisition Agreement, stock grant agreement, Closing Date Seller Note and other agreements related thereto shall be in form and substance satisfactory to Administrative Agent. All conditions precedent to the Closing Date Acquisition shall have been satisfied or waived with the written consent of the Administrative Agent (not to be unreasonably withheld or delayed).

 

12.1.9             Payment of Fees. The Borrowers shall have paid of all fees and expenses required to be paid on the Closing Date pursuant to this Agreement and the Agent Fee Letter from the proceeds of the initial funding under the Term A Loans, but with respect to legal fees, to the extent invoiced at least one day prior to the Closing Date.

 

12.1.10        Debt to be Repaid. Substantially concurrent with the funding of the Term A Loans on the Closing Date, Holdings shall have caused the Debt to be Repaid to have repaid in full (or have caused to be repaid) and provided to the Administrative Agent evidence of such repayment and the release of any guarantees and/or liens granted in connection therewith.

 

12.1.11        Solvency Certificate. Administrative Agent has received a solvency certificate, in form and substance satisfactory to Administrative Agent, executed by a Senior Officer of Holdings and the Borrower Representative.

 

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12.1.12        Search Results; Lien Terminations. Administrative Agent has received certified copies of Uniform Commercial Code search reports dated a date reasonably near to the Closing Date, listing all effective financing statements which name any Loan Party (under their present names and any previous names) as debtors, together with (a) copies of all such financing statements; (b) Uniform Commercial Code termination statements pertaining to previously terminated financing, lease, and/or consignment relationships for which financing statements remain of record, in each case as Administrative Agent reasonably requests; and (c) all other Uniform Commercial Code termination statements as Administrative Agent reasonably requests.

 

12.1.13        Filings, Registrations, and Recordings. Administrative Agent has received each document (including Uniform Commercial Code financing statements) required by the Collateral Documents or under law or reasonably requested by Administrative Agent to be filed, registered, or recorded in order to create in favor of Administrative Agent, for the benefit of Administrative Agent and the Lenders, a perfected Lien on the collateral described therein (but only to the extent that perfection may be achieved by such a filing, registration, or recording), prior to any other Liens (subject only to Permitted Liens), in proper form for filing, registration, or recording.

 

12.1.14        Closing Certificate. Administrative Agent has received (a) a certificate, in form and substance satisfactory to Administrative Agent, executed by a Senior Officer of Borrower Representative on behalf of Borrowers (i) certifying the matters set forth in Section 12.2.1 as of the Closing Date, (ii) certifying as to the occurrence of the closing of the Related Transaction and that the closing has been consummated in accordance with the terms of the Related Agreements without waiver of any material condition thereof and (iii) attaching final copies of the ABL Loan Agreement, the ABL Loan Agreement Amendment and the Closing Date Seller Note.

 

12.1.15        Financial Statements. The Borrowers shall have delivered the Financial Statements to the Administrative Agent. The Borrowers shall have delivered to the Administrative Agent a pro forma consolidated balance sheet of Holdings and its Subsidiaries, as of the most recently ended fiscal month for which financial statements are available for Holdings and its Subsidiaries, prepared after giving effect to the Closing Date Transactions as if the Closing Date Transactions has occurred as of such date; provided that such pro forma financial statements shall be prepared in good faith by Holdings.

 

12.1.16        No Material Adverse Effect. Since December 31, 2019, there shall not have occurred any change, effect, event, occurrence, state of facts, circumstance or development that, individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect.

 

12.1.17        Minimum Consolidated EBITDA. Holdings and its Subsidiaries shall have Consolidated EBITDA of $5,500,000 for the twelve months ended June 30, 2020 on a pro forma basis after giving effect to the Closing Date Transactions as if the Closing Date Transactions has occurred as of such date.

 

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12.1.18        Closing Leverage. The aggregate outstanding balance of the ABL Obligations and the Term A Loans funded on the Closing Date, minus unrestricted cash in which the ABL Agent and the Administrative Agent have perfected security interests (in an aggregate amount not to exceed $1,000,000), shall not be greater than 3.00 multiplied by Consolidated EBITDA.

 

12.1.19        Diligence. The Administrative Agent shall conduct a satisfactory due diligence call with key management of Green Remedies and shall be satisfied with the background checks of key management of Green Remedies.

 

12.1.20        Subordination and Intercreditor Agreements. The execution and delivery by the applicable parties thereto of (x) Closing Date Seller Note Subordination Agreement and any other subordination agreements with respect to other indebtedness remaining on the balance sheet of Holdings and its Subsidiaries on the Closing Date other than the ABL Obligations and (y) the ABL Intercreditor Agreement.

 

12.1.21        Key Management. Key management of the Guarantor and its subsidiaries (including the Initial Acquired Business) will have entered into customary agreements containing terms and conditions acceptable to Lender including among other things, non-competition, non-solicitation and confidentiality provisions.

 

12.1.22        Know-Your-Customer and Anti-Money Laundering. So long as requested at least five Business Days prior to the Closing Date, the Administrative Agent shall have received, at least three Business Days prior to the Closing Date, all documentation and other information required by regulatory authorities concerning Borrowers and Holdings under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the PATRIOT Act.

 

12.2         Conditions Precedent to all Loans. The obligation of each Lender to make each Loan is subject to the following further conditions precedent that:

 

12.2.1             Compliance with Warranties, No Default, etc. Both before and after giving effect to any borrowing, the following statements are true and correct:

 

(a)              the representations and warranties of each Loan Party set forth in this Agreement and the other Loan Documents are true and correct in all material respects (unless any such representation or warranty is by its terms qualified by concepts of materiality, in which case that representation or warranty is true and correct in all respects) with the same effect as if then made (except to the extent stated to relate to a specific earlier date, in which case that representation or warranty is true and correct in all material respects or in all respects, as applicable, as of that earlier date);

 

(b)              no Default or Event of Default has occurred and is continuing; and

 

(c)               with respect to the borrowing of any Incremental Loans, all other conditions for such borrowing set forth in Section 2.1.2 are satisfied.

 

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12.2.2             Confirmatory Certificate. If requested by Administrative Agent or any Lender, Administrative Agent has received (in sufficient counterparts to provide one to Administrative Agent and each Lender) a certificate dated the date of the requested Loan and signed by a duly authorized representative of Borrower Representative as to the matters set out in Section 12.2.1 (it being understood that each request by Borrower Representative for the making of a Loan will be deemed to constitute a representation and warranty by Borrowers that the conditions precedent set forth in Section 12.2.1 will be satisfied at the time of the making of that Loan), together with such other documents as Administrative Agent or any Lender may reasonably request in support thereof.

 

12.3         Conditions Precedent to each Term B Loan. The obligation of each Lender to make each Term B Loan is subject to the following further conditions precedent that:

 

12.3.1             Use of Proceeds. Administrative Agent is satisfied in its sole discretion that Borrowers will use the proceeds of that Term B Loan on or about the requested borrowing date in accordance with Section 10.6.

 

12.3.2             Financial Tests. Administrative Agent has received a certificate from a Senior Officer of the Borrower Representative certifying (with reasonably detailed calculations) that on any drawing date of the Term B Loans the Term B Loan Leverage Condition is satisfied.

 

12.3.3             Minimum Amount. The requested borrowing of the Term A Loans is in an amount equal to at least $2,000,000.

 

Section 13EVENTS OF DEFAULT AND THEIR EFFECT.

 

13.1         Events of Default. Each of the following will constitute an Event of Default under this Agreement:

 

13.1.1             Non-Payment of the Loans, etc. Default in the payment when due of the principal of any Loan; or default, and continuance thereof for five or more days, in the payment when due of any interest, fee, or other amount payable by Borrowers under this Agreement or under any other Loan Document.

 

13.1.2             Non-Payment of Other Debt. Any (a) “Event of Default” (as defined in the ABL Loan Agreement) or comparable event has occurred or the revolving commitments under the ABL Loan Documents are terminated for any reason or (b) default occurs under the terms applicable to any Debt of any Loan Party in an aggregate amount (for all such Debt so affected and including undrawn committed or available amounts and amounts owing to all creditors under any combined or syndicated credit arrangement) exceeding $750,000 and that default (i) consists of the failure to pay that Debt when due, whether by acceleration or otherwise, or (ii) accelerates the maturity of that Debt or permits the holder or holders thereof, or any trustee or agent for any such holder or holders, to cause that Debt to become due and payable (or require any Loan Party to purchase or redeem that Debt or post cash collateral in respect thereof) prior to its expressed maturity.

 

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13.1.3             Other Material Obligations. Default in the payment when due, or in the performance or observance of, any Material Contract.

 

13.1.4             Bankruptcy, Insolvency, etc. Any of the following occurs: (a) any Loan Party becomes insolvent or generally fails to pay, or admits in writing its inability or refusal to pay, debts as they become due; (b) any Loan Party applies for, consents to, or acquiesces in the appointment of a trustee, receiver, or other custodian for that Loan Party or any property thereof, or makes a general assignment for the benefit of creditors; (c) in the absence of any such application, consent, or acquiescence, a trustee, receiver, or other custodian is appointed for any Loan Party or for a substantial part of the property of any thereof and is not discharged within 45 days; (d) any Insolvency Proceeding, or any dissolution or liquidation proceeding, is commenced in respect of any Loan Party, and that Insolvency Proceeding or proceeding (i) is not commenced by that Loan Party, (ii) is consented to or acquiesced in by that Loan Party, or (iii) remains for 45 days undismissed; or (e) any Loan Party takes any action to authorize, or in furtherance of, any of the foregoing.

 

13.1.5             Non-Compliance with Loan Documents.

 

(a)              Failure by any Loan Party to comply with or to perform any covenant set forth in (x) Sections 10.1.6, 10.2, 10.3(b), 10.3(d), 10.5 (solely with respect to the Company and Holdings), 10.6, 10.9, 10.10, 10.11, 10.12, 10.13 or Section 10.13a) (subject, in the case of Section 11.12, to Section 13.4) and (y) Sections 10.1.1, 10.1.2, 10.1.3 and 10.1.8 and, with respect to this subclause (y), continuance of that failure described in this Section 13.1.5(a) for 2 or more Business Days.

 

(b)              Failure by any Loan Party to comply with or to perform any other provision of this Agreement or any other Loan Document (and not constituting an Event of Default under any other provision of this Section 13) and continuance of that failure described in this Section 13.1.5(b) for 30 or more days.

 

13.1.6             Representations; Warranties. Any representation or warranty made by any Loan Party in this Agreement or any other Loan Document is breached or is false or misleading in any material respect, or any schedule, certificate, financial statement, report, notice or other writing furnished by any Loan Party to Administrative Agent or any Lender in connection with this Agreement is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified.

 

13.1.7             Pension Plans. Any of the following occurs: (a) any Person institutes steps to terminate a Pension Plan if as a result of that termination Holdings, any Borrower, or any Subsidiary could be required to make a contribution to that Pension Plan, or could incur a liability or obligation to that Pension Plan, in excess of $750,000; (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA with respect to Holdings, any Borrower, or any Subsidiary; (c) the Unfunded Liability of all Pension Plans sponsored and maintained by any Borrower or any Subsidiary exceeds 20% of the Total Plan Liability for those plans, or (d) there occurs any withdrawal or partial withdrawal from a Multiemployer Pension Plan and the withdrawal liability (without unaccrued interest) to Multiemployer Pension Plans as a result of that withdrawal (including any outstanding withdrawal liability that Holdings, any Borrower, or any member of the Controlled Group have incurred on the date of that withdrawal) to which Holdings, any Borrower, or any Subsidiary is reasonably expected to incur exceeds $750,000.

 

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13.1.8             Judgments. One or more final judgments which exceed an aggregate of $750,000 are rendered against any Loan Party (not covered by insurance as to which the insurance company has acknowledged coverage in writing, so long as that insurance is paid to Borrowers within 30 days of the rendering of those judgments) and have not been paid, discharged or vacated or had execution thereof stayed pending appeal within 60 days after entry or filing of those judgments.

 

13.1.9             Invalidity of Loan Documents, etc. Any Loan Document ceases to be in full force and effect, or any Loan Party (or any Person by, through, or on behalf of any Loan Party) contests or challenges in any manner the validity, binding nature, or enforceability of any Loan Document.

 

13.1.10        Change of Control. A Change of Control occurs.

 

13.1.11        Uninsured Losses. Any material loss, theft, damage or destruction of any portion of the Collateral having a fair market value of $750,000, in the aggregate, if not fully covered (subject to such deductibles and self-insurance retentions as Administrative Agent shall have permitted) by insurance.

 

13.1.12        Business Disruption; Condemnation. There shall occur a cessation of a substantial part of the business of Loan Party which could reasonably be expected to have a Material Adverse Effect; or any Loan Party shall suffer the loss or revocation of any material license or permit now held or hereafter acquired by any Loan Party which loss could reasonably be expected to have a Material Adverse Effect; or any Loan Party shall be enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of its business affairs which injunction, restraint or other prevention could reasonably be expected to have a Material Adverse Effect; or any material lease or agreement pursuant to which any Loan Party leases, uses or occupies any property shall be canceled or terminated prior to the expiration of its stated term, the cancellation or termination of which could not reasonably be expected to have a Material Adverse Effect; or any portion of the Collateral shall be taken through condemnation or the value of such Property shall be impaired through condemnation which condemnation or impairment could reasonably be expected to have a Material Adverse Effect.

 

13.1.13        Repudiation of or Default under Guaranty and Collateral Agreement. Any Loan Party shall revoke or attempt to revoke the Guaranty and Collateral Agreement signed by such Loan Party or shall repudiate such Loan Party’s liability thereunder or shall be in default under the terms thereof.

 

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13.1.14        Criminal Forfeiture. Any Loan Party shall be criminally indicted or convicted under any law that could lead to a forfeiture of any property of any Loan Party.

 

13.1.15        Intercreditor and Subordination Agreements. The provisions of the ABL Intercreditor Agreement, the Closing Date Seller Note Subordination Agreement or any other intercreditor or subordination agreement in favor of the Administrative Agent in respect of the Obligations shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or the ABL Agent, any lender under the ABL Loan Agreement or any other person party to such agreements shall contest in any manner the validity or enforceability thereof or deny that it has any further obligation thereunder, or the Obligations for any reason shall not have the priority contemplated by this Agreement, the ABL Intercreditor Agreement, the Closing Date Seller Note Subordination Agreement or any other intercreditor or subordination described in this Section 13.1.14, respectively.

 

13.1.16        Material Adverse Effect. A Material Adverse Effect occurs.

 

13.2         Effect of Event of Default. If any Event of Default described in Section 13.1.4 occurs in respect of any Loan Party, then the Commitments will immediately terminate and the Loans and all other Obligations under this Agreement will become immediately due and payable, all without presentment, demand, protest, or notice of any kind. If any other Event of Default occurs and is continuing, then Administrative Agent may (and, upon the written request of the Required Lenders shall) declare, in a written notice to Borrower Representative, the Commitments to be terminated in whole or in part and/or declare all or any part of the Loans and all other Obligations under this Agreement to be due and payable, whereupon the Commitments will immediately terminate (or be reduced, as applicable) and/or the Loans and other Obligations under this Agreement will become immediately due and payable (in whole or in part, as applicable), all without presentment, demand, protest, or notice of any kind (other than as expressly provided for above in this sentence). Administrative Agent shall promptly advise Borrower Representative of any such declaration, but failure to do so will not impair the effect of any such declaration. If Administrative Agent has received a Cure Notice from the Borrower Representative, then Administrative Agent and the Required Lenders may not exercise any the foregoing remedies in this Section 13.2 with respect to that Specified Financial Covenant Default until the earlier of (i) the Cure Period has expired, and (ii) the date that Administrative Agent receives notice Borrowers will not cure that Specified Financial Covenant Default in accordance with Section 13.4; provided, that, during such period, such Specified Financial Covenant Default shall be deemed an Event of Default for all other purposes under this Agreement.

 

13.3         Credit Bidding. The Loan Parties and the Lenders hereby irrevocably authorize Administrative Agent, based upon the instruction of the Required Lenders, to Credit Bid and purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral at any sale thereof conducted by Administrative Agent in accordance with applicable law, based upon the instruction of the Required Lenders, under any provisions of the Uniform Commercial Code, as part of any sale or investor solicitation process conducted by any Loan Party, any interim receiver, receiver, receiver and manager, administrative receiver, trustee, agent, or other Person pursuant or under any insolvency laws, in each case subject to the following limitations: (i) the Required Lenders may not direct Administrative Agent in any manner that does not treat each of the Lenders equally, without preference or discrimination, in respect of consideration received as a result of any Credit Bid; (ii) the acquisition documents must be commercially reasonable and contain customary protections for minority holders, such as, among other things, anti-dilution and tag-along rights; (iii) the exchanged debt or equity securities must be freely transferable, without restriction (subject to applicable securities laws); and (iv) reasonable efforts must be made to structure the acquisition in a manner that causes the governance documents pertaining thereto to not impose any obligations or liabilities upon the Lenders individually (such as indemnification obligations). For purposes of this Section 13.3, the term “Credit Bid” means an offer submitted by Administrative Agent (on behalf of the Lenders), based upon the instruction of the Required Lenders, to acquire the property of any Loan Party or any portion thereof in exchange for and in full and final satisfaction of all or a portion (as determined by Administrative Agent, based upon the instruction of the Required Lenders) of the claims and Obligations under this Agreement and other Loan Documents.

 

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13.4         Curative Equity.

 

(a)              Subject to the limitations set forth in Section 13.4(d), Borrowers may cure (and will be deemed to have cured) an Event of Default arising out of a breach of any of the financial covenants set forth in Section 11.12 (each such financial covenant, a “Specified Financial Covenant”; each such Event of Default, a “Specified Financial Covenant Default”) if Borrowers receive the cash proceeds of Curative Equity within 10 Business Days after the earliest date on which each applicable Specified Financial Covenant is required to be tested for the applicable Computation Period pursuant to this Agreement (the “Cure Period”).

 

(b)              Borrowers shall provide Administrative Agent with irrevocable written notice during the Cure Period of their intent to cure the Specified Financial Covenant(s) with Curative Equity (the “Cure Notice”) and shall promptly notify Administrative Agent of their receipt of any proceeds of Curative Equity and shall make a prepayment of the Term Loans in accordance with Sections 6.2 and 6.3.

 

(c)              Upon receipt by the Borrowers of the Curative Equity (and application of the proceeds of such Curative Equity in accordance with Sections 6.2 and 6.3) and delivery of a certificate by Borrower Representative to Administrative Agent certifying as to the amount of the proceeds of any Curative Equity and that those proceeds have been applied in accordance with Section 13.4(b) in an amount equal to the amount which if applied to increase EBITDA for the Computation Period would result in the Borrowers being in pro forma compliance with the applicable Specified Financial Covenant(s) (which certificate shall also set forth the calculation of the applicable Specified Financial Covenant being cured in reasonable detail), then each applicable Specified Financial Covenant Default will be deemed cured with no further action required by the Required Lenders. Before the date of the delivery of that certificate, any Specified Financial Covenant Default that has occurred and is continuing will be deemed to be continuing, and, as a result, the Lenders will have no obligation to make additional loans or otherwise extend additional credit under this Agreement. If Borrowers do not cure a Specified Financial Covenant Default as provided in this Section 13.4, then that Specified Financial Covenant Default will continue unless waived in writing by the Required Lenders in accordance with this Agreement.

 

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(d)              To the extent that proceeds of Curative Equity are received with respect to any Fiscal Quarter, those proceeds will be deemed to be EBITDA for purposes of determining compliance with the Specified Financial Covenant(s) for that Fiscal Quarter and subsequent periods that include that Fiscal Quarter. Notwithstanding any provision of this Agreement to the contrary, (i) Borrowers’ rights under this Section 13.4 (A) may be exercised no more than four times during the term of this Agreement; (B) may be exercised no more than twice in any period of four Fiscal Quarters; (C) may not be exercised in two consecutive Fiscal Quarters and (D) may not be exercised if the amount of proceeds of the Curative Equity, together with the aggregate amount of proceeds of all prior Curative Equity, exceeds 20% of Consolidated EBITDA (calculated prior to giving effect to such Curative Equity) in any trailing twelve month period; (ii) the amount of proceeds of any Curative Equity may not be greater than or less than the amount required to cause Borrowers to be in compliance with each applicable Specified Financial Covenant(s) as at the end of the applicable Computation Period (without giving effect to any prepayment of Debt); and (iii) the proceeds of Curative Equity will be disregarded for purposes of determining EBITDA for any pricing, financial covenant-based conditions, or baskets with respect to the covenants contained in this Agreement and there will be no pro forma reduction in Debt with the proceeds of any Curative Equity for determining compliance with the Specified Financial Covenants or for determining any pricing, financial covenant-based conditions, or baskets with respect to the covenants contained in this Agreement, in each case in the Fiscal Quarter in which that Curative Equity is used and each Computation Period ending on the last day of the following three Fiscal Quarters.

 

Section 14Agency.

 

14.1         Appointment and Authorization. Each Lender hereby irrevocably (subject to Section 14.10) appoints, designates, and authorizes Administrative Agent to take any action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise any powers and perform any duties as are expressly delegated to it, as applicable, by the terms of this Agreement or any other Loan Document, together with all powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Administrative Agent will not have any duty or responsibility except those expressly set forth in this Agreement, nor will Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations, or liabilities are to be read into this Agreement or any other Loan Document or otherwise exist against Administrative Agent, as applicable. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement and in other Loan Documents with reference to Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, that term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

 

14.2         [Reserved].

 

14.3         Delegation of Duties. Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees, or attorneys-in-fact and is entitled to advice of counsel and other consultants or experts concerning all matters pertaining to those duties. Administrative Agent will not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct.

 

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14.4         Exculpation. None of Administrative Agent and its directors, officers, employees, and agents (a) will be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except to the extent resulting from its own gross negligence or willful misconduct in connection with its duties expressly set forth in this Agreement as determined by a final, non-appealable judgment by a court of competent jurisdiction), or (b) will be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any Affiliate of any Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement, or other document referred to or provided for in, or received by Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability, or sufficiency of this Agreement or any other Loan Document (or the creation, perfection, or priority of any Lien or security interest therein), or for any failure of any Borrower or any other party to any Loan Document to perform its Obligations under this Agreement or under any other Loan Documents. Administrative Agent is not and will not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document or to inspect the properties, books, or records of any of the Loan Parties and their Subsidiaries and Affiliates.

 

14.5         Reliance. Administrative Agent may rely, and will be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, electronic mail message, affidavit, letter, telegram, facsimile, telex or telephone message, statement, or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrowers), independent accountants, and other experts selected by Administrative Agent. Administrative Agent will be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless Administrative Agent first receives all advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, confirmation from the Lenders of their obligation to indemnify Administrative Agent against any and all liability and expense which might be incurred by Administrative Agent by reason of taking or continuing to take any such action. Administrative Agent will in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders and each such request and any action taken or failure to act pursuant thereto will be binding upon each Lender. For purposes of determining compliance with the conditions specified in Section 12, each Lender that has signed this Agreement will be deemed to have consented to, approved, or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless Administrative Agent has received written notice from that Lender prior to the proposed Closing Date specifying its objection thereto.

 

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14.6         Notice of Default. Administrative Agent will not be deemed to have knowledge or notice of the occurrence of any Event of Default or Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Administrative Agent for the account of the Lenders, unless Administrative Agent has received written notice from a Lender or a Borrower referring to this Agreement, describing that Event of Default or Default and stating that that notice is a “notice of default.” Administrative Agent shall promptly notify the Lenders of its receipt of any such notice. Administrative Agent shall take all such actions with respect to each such Event of Default or Default as requested by the Required Lenders in accordance with Section 13, but unless and until Administrative Agent has received any such request, Administrative Agent may (but will not be required to) take any action, or refrain from taking any action, with respect to any Event of Default or Default as Administrative Agent deems advisable or in the best interest of the Lenders.

 

14.7         Credit Decision. Each Lender acknowledges that Administrative Agent has not made any representation or warranty to it, and that no act by Administrative Agent hereafter taken, including any consent and acceptance of any assignment or review of the affairs of the Loan Parties, will be deemed to constitute any representation or warranty by Administrative Agent to any Lender as to any matter, including whether Administrative Agent has disclosed material information in its possession. Each Lender represents to Administrative Agent that it has, independently and without reliance upon Administrative Agent and based on documents and information as it has deemed appropriate, made its own appraisal of, and investigation into, the business, prospects, operations, property, financial and other condition, and creditworthiness of the Loan Parties, and made its own decision to enter into this Agreement and to extend credit to Borrowers under this Agreement. Each Lender also represents to Administrative Agent that it will, independently and without reliance upon Administrative Agent and based on documents and information as it deems appropriate at the time, continue to make its own credit analysis, appraisals, and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make all investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition, and creditworthiness of Borrowers. Except for notices, reports and other documents expressly required in this Agreement to be furnished to the Lenders by Administrative Agent, Administrative Agent will not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of any Borrower which may come into the possession of Administrative Agent.

 

14.8         Indemnification. Whether or not the transactions contemplated by this Agreement are consummated, each Lender shall indemnify upon demand Administrative Agent and its directors, officers, employees and agents (to the extent not reimbursed by or on behalf of Borrowers and without limiting the obligation of Borrowers to do so), according to its applicable Pro Rata Share, from and against any and all Indemnified Liabilities, except that no Lender will be liable for any payment to any such Person of any portion of the Indemnified Liabilities to the extent determined by a final, non-appealable judgment by a court of competent jurisdiction to have resulted from the applicable Person’s own gross negligence or willful misconduct. No action taken in accordance with the directions of the Required Lenders will be deemed to constitute gross negligence or willful misconduct for purposes of this Section 14.8. Without limitation of the foregoing, each Lender shall reimburse Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs and Taxes) incurred by Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to in this Agreement, to the extent that Administrative Agent is not reimbursed for any such expenses by or on behalf of Borrowers. The undertaking in this Section 14.8 will survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or modification, release or discharge of, any or all of the Collateral Documents, termination of this Agreement and the resignation or replacement of Administrative Agent.

 

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14.9         Administrative Agent in Individual Capacities. Monroe Capital and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Loan Parties and Affiliates as though Monroe Capital were not Administrative Agent under this Agreement and without notice to or consent of any Lender. Each Lender acknowledges that, pursuant to those activities, Monroe Capital or its Affiliates might receive information regarding Borrowers or their Affiliates (including information that is subject to confidentiality obligations in favor of any Borrower or any such Affiliate) and acknowledges that Administrative Agent will be under no obligation to provide any such information to them. With respect to their Loans (if any), Monroe Capital and its Affiliates have the same rights and powers under this Agreement as any other Lender and may exercise the same as though Monroe Capital were not Administrative Agent, and the terms “Lender” and “Lenders” include Monroe Capital and its Affiliates, to the extent applicable, in their individual capacities.

 

14.10     Successor Administrative Agent. Administrative Agent may resign as Administrative Agent upon 30 days’ notice to the Lenders. If Administrative Agent resigns under this Agreement, the Required Lenders shall, with (so long as no Event of Default exists) the consent of Borrower Representative (which may not be unreasonably withheld or delayed), appoint from among the Lenders a successor Administrative Agent for the Lenders. If no successor agent is appointed prior to the effective date of the resignation of Administrative Agent, Administrative Agent may appoint, after consulting with the Lenders and Borrower Representative, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent under this Agreement, that successor agent will succeed to all the rights, powers, and duties of the retiring Administrative Agent and the term “Administrative Agent” will mean that successor agent, and the retiring Administrative Agent’s appointment, powers and duties as Administrative Agent will be terminated. After any retiring Administrative Agent’s resignation under this Agreement as Administrative Agent, the provisions of this Section 14 and Sections 15.5 and 15.17 will inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation will nevertheless thereupon become effective and the Required Lenders shall perform all of the duties of Administrative Agent under this Agreement until such time, if any, as the Required Lenders appoint a successor agent as provided for above.

 

14.11     Collateral Matters. Each Lender authorizes and directs Administrative Agent to enter into the other Loan Documents for the benefit of Lenders. Each Lender hereby agrees that, except as otherwise set forth in this Agreement, any action taken by Administrative Agent or Required Lenders in accordance with the provisions of this Agreement or the other Loan Documents, and the exercise by Administrative Agent or Required Lenders of the powers set forth in this Agreement or therein, together with all other powers as are reasonably incidental thereto, will be authorized by, and binding upon, all Lenders. Administrative Agent is hereby authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender to take any action with respect to any Collateral or Loan Documents which may be necessary to perfect and maintain perfected the Liens upon the Collateral granted pursuant to this Agreement and the other Loan Documents. The Lenders irrevocably authorize Administrative Agent, at its option and in its discretion, to do any and all of the following: (a) to release any Lien granted to or held by Administrative Agent under any Collateral Document (i) upon Payment in Full; (ii) upon property sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement (including the release of any Guarantor in connection with any such disposition); or (iii) subject to Section 15.1, if approved in writing by the Required Lenders; or (b) to subordinate its interest in any Collateral to any holder of a Lien on that Collateral which is permitted by Section 11.2(d)(i), 11.2(d)(iii) or 11.2(k) (it being understood that Administrative Agent may conclusively rely on a certificate from Borrower Representative in determining whether the Debt secured by any such Lien is permitted by Section 11.1(b)). Upon request by Administrative Agent at any time, the Lenders will confirm in writing Administrative Agent’s authority to release, or subordinate its interest in, particular types or items of Collateral pursuant to this Section 14.11.

 

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14.12     Restriction on Actions by Lenders. Each Lender shall not, without the express written consent of Administrative Agent, and shall, upon the written request of Administrative Agent (to the extent it is lawfully entitled to do so), set-off against the Obligations, any amounts owing by that Lender to a Loan Party or any deposit accounts of any Loan Party now or hereafter maintained with that Lender. Each Lender shall not, unless specifically requested to do so in writing by Administrative Agent, take or cause to be taken any action, including the commencement of any legal or equitable proceedings, to foreclose any loan or otherwise enforce any security interest in any of the Collateral or to enforce all or any part of this Agreement or the other Loan Documents. All enforcement actions under this Agreement and the other Loan Documents against the Loan Parties or any third party with respect to the Obligations or the Collateral may be taken by only Administrative Agent (at the direction of the Required Lenders or as otherwise permitted in this Agreement) or by its agents at the direction of Administrative Agent.

 

14.13     Administrative Agent May File Proofs of Claim.

 

14.13.1        In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition, or other judicial proceeding relative to any Loan Party (including any Insolvency Proceeding), Administrative Agent (irrespective of whether the principal of any Loan is then due and payable as expressed in this Agreement or by declaration or otherwise and irrespective of whether Administrative Agent has made any demand on Borrowers) may, by intervention in any such proceeding or otherwise, do any and all of the following:

 

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(a)              file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, and all other Obligations that are owing and unpaid and to file any other documents as are necessary or advisable in order to have the claims of the Lenders and Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and Administrative Agent under Sections 5, 15.5, and 15.17) allowed in any such proceedings; and

 

(b)              collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same.

 

14.13.2        Any custodian, receiver, assignee, trustee, liquidator, sequestrator, or other similar official in any such proceeding is hereby authorized by each Lender to make all payments to Administrative Agent and, in the event that Administrative Agent consents to the making of such payments directly to the Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of Administrative Agent and its agents and counsel, and any other amounts due Administrative Agent under Sections 5, 15.5, and 15.17.

 

14.13.3        Nothing contained in this Agreement will be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

 

14.14     Other Agents; Arrangers and Managers. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,” “book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger,” if any, has any right, power, obligation, liability, responsibility, or duty under this Agreement other than, in the case of any Lender, those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified has or is deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action under this Agreement.

 

14.15     Protective Advances. Administrative Agent may, from time to time at any time that an Event of Default has occurred and is continuing, make all disbursements and advances (“Protective Advances”) that Administrative Agent, in its sole discretion, deems necessary or desirable to preserve, protect, prepare for sale or lease or dispose of the Collateral or any portion thereof, to enhance the likelihood or maximize the amount of repayment by the Loan Parties of the Loans and other Obligations or to pay any other amount chargeable to the Loan Parties pursuant to the terms of this Agreement and the other Loan Documents, including, without limitation, costs, fees and expenses as described in Section 15.5. Protective Advances are repayable on demand and will be secured by the Collateral and bear interest at a rate per annum equal to the rate then applicable to Base Rate Loans. Protective Advances constitute Obligations under this Agreement and may be charged to the Loan Account. No Protective Advance made by Administrative Agent and charged to the Loan Account will be deemed to constitute a Loan and no Lender will have any obligation to fund any amount to Administrative Agent as a result thereof. The Administrative Agent shall notify each Lender and the Borrower Representative in writing of each Protective Advance made by Administrative Agent, which notice must include a description of the purpose of that Protective Advance.

 

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Section 15GENERAL.

 

15.1         Waiver; Amendments.

 

(a)              No amendment, modification, or waiver of, or consent with respect to, any provision of this Agreement or the other Loan Documents will be effective unless it is in writing and acknowledged by Lenders having an aggregate Pro Rata Shares of not less than the aggregate Pro Rata Shares expressly designated in this Agreement with respect thereto or, in the absence of any such designation as to any provision of this Agreement, by the Required Lenders. Any amendment, modification, waiver, or consent will be effective only in the specific instance and for the specific purpose for which given.

 

(b)              The Agent Fee Letter may be amended, waived, consented to, or modified by the parties thereto.

 

(c)               No amendment, modification, waiver, or consent may extend or increase the Commitment of any Lender without the written consent of that Lender.

 

(d)              No amendment, modification, waiver, or consent may extend the date scheduled for payment of any principal (excluding mandatory prepayments) of or interest on the Loans or any fees payable under this Agreement without the written consent of each Lender directly affected thereby.

 

(e)              No amendment, modification, waiver, or consent may reduce the principal amount of any Loan, the rate of interest thereon, or any fees payable under this Agreement without the consent of each Lender directly affected thereby (except (i) for periodic adjustments of interest rates and fees resulting from a change in the LIBOR Rate and the Base Rate as provided for in this Agreement, and (ii) that Required Lenders may rescind any increase in the interest rate under and in accordance with Section 4.1.2).

 

(f)                No amendment, modification, waiver, or consent may do any of the following without the written consent of each Lender: (i) release any Borrower or any Guarantor from its obligations, other than as part of or in connection with any disposition permitted under this Agreement; (ii) release all or any substantial part of the Collateral granted under the Collateral Documents (except as permitted by Section 14.11); (iii) change the definitions of Pro Rata Share or Required Lenders, any provision of this Section 15.1, any provision of Section 13.3, or reduce the aggregate Pro Rata Share required to effect an amendment, modification, waiver, or consent.

 

(g)              No provision of Sections 6.2.2, 6.3, or 7.2.2(b) with respect to the timing or application of mandatory prepayments of the Loans may be amended, modified, or waived without the consent of Lenders having a majority of the aggregate Pro Rata Shares of the Term A Loans affected thereby, the Term B Loans affected thereby and the Incremental Loans affected thereby.

 

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(h)              No provision of Section 14 or other provision of this Agreement affecting Administrative Agent in its capacity as such may be amended, modified, or waived without the consent of Administrative Agent.

 

(i)                Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, Administrative Agent, Holdings, and Borrowers to do any of the following: (i) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term A Loans, the Term B Loans, the Term B Loan Commitments, and the accrued interest and fees in respect thereof and (ii) to include appropriately the Lenders holding any such additional credit facilities in any determination of the Required Lenders.

 

(j)                If, in connection with any proposed amendment, modification, waiver or termination requiring the consent of all Lenders, the consent of the Required Lenders is obtained but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained is referred to as a “Non-Consenting Lender”), then, so long as Administrative Agent or such other Person is not a Non-Consenting Lender, Administrative Agent and/or one or more Persons reasonably acceptable to Administrative Agent may (but will not be required to) purchase from that Non-Consenting Lender, and that Non-Consenting Lenders shall, upon Administrative Agent’s request, sell and assign to Administrative Agent and/or any such Person, all of the Loans and Commitments of that Non-Consenting Lender for an amount equal to the principal balance of all such Loans and Commitments held by that Non-Consenting Lender and all accrued interest, fees, expenses, and other amounts then due with respect thereto through the date of sale, which purchase and sale will be consummated pursuant to an executed Assignment Agreement. In the event that Non-Consenting Lender does not execute an Assignment Agreement pursuant to Section 15.6.1 within five (5) Business Days after receipt by such Non-Consenting Lender of notice of replacement pursuant to this Section 15.1(j) and presentation to such Non-Consenting Lender of an Assignment Agreement evidencing an assignment pursuant to this Section 15.1(j), the Administrative Agent shall be entitled (but not obligated) to execute such an Assignment Agreement on behalf of such Non-Consenting Lender, and any such Assignment Agreement so executed by the Borrower Representative, Administrative Agent and, to the extent applicable, any other Person purchasing such Loans and Commitments of the Non-Consenting Lender, shall be effective for purposes of this Section 15.1(j) and Section 15.6.1. Upon any such assignment and payment and compliance with the other provisions of Section 15.6.1, such replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided, any rights of such Non-Consenting Lender to indemnification hereunder shall survive.

 

15.2         Confirmations. Each Borrower and each holder of a Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing (with a copy of each such confirmation to Administrative Agent) the aggregate unpaid principal amount of the Loans then outstanding under that Note.

 

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15.3         Notices.

 

15.3.1             Generally. Except as otherwise provided in Sections 2.2.2, all notices under this Agreement must be in writing (including facsimile transmission) and must be sent to the applicable party at its address shown on Annex B or at any other address as the receiving party designates, by written notice received by the other parties, as its address for that purpose. Notices sent by facsimile transmission will be deemed to have been given when sent; notices sent by mail will be deemed to have been given three Business Days after the date when sent by registered or certified mail, postage prepaid; and notices sent by hand delivery or overnight courier service will be deemed to have been given when received. For purposes of Sections 2.2.2, Administrative Agent will be entitled to rely on telephonic instructions from any person that Administrative Agent in good faith believes is an authorized officer or employee of Borrower Representative, and Borrowers shall hold harmless Administrative Agent and each other Lender from any loss, cost, or expense resulting from any such reliance.

 

15.3.2             Electronic Communications.

 

(a)              Notices and other communications to any Lender under this Agreement may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by Administrative Agent, but the foregoing does not apply to notices to any Lender pursuant to Section 2.2 if that Lender has notified Administrative Agent and Borrower Representative that it is incapable of receiving notices under Section 2.2 by electronic communication. Administrative Agent or any of Holdings and Borrowers may, in its respective sole discretion, agree to accept notices and other communications to it under this Agreement by electronic communications pursuant to procedures approved by it, and approval of any such procedures may be limited to particular notices or communications.

 

(b)              Unless otherwise agreed by the sender and the intended recipient, (i) notices and other communications sent to an e-mail address will be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail, or other written acknowledgement); (ii) notices or communications posted to an Internet or intranet website will 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 the notice or communication is available and identifying the website address therefor; and (iii) for both clauses (i) and (ii) of this Section 15.3.2(b), any notice, e-mail or other communication that is not sent during the normal business hours of the intended recipient will be deemed to have been sent at the opening of business on the next Business Day for the intended recipient.

 

15.4         Computations. Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made, for the purpose of this Agreement, that determination or calculation will, to the extent applicable and except as otherwise specified in this Agreement, be made in accordance with GAAP, consistently applied, but if Borrower Representative notifies Administrative Agent that Borrowers wish to amend any covenant in Section 10 or 11.12 (or any related definition) to eliminate or to take into account the effect of any change in GAAP on the operation of that covenant (or if Administrative Agent notifies Borrower Representative that the Required Lenders wish to amend Section 10 or 11.12 (or any related definition) for that purpose), then Borrowers’ compliance with that covenant will be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either the applicable notice under this Section 15.4 is withdrawn or the applicable covenant (or related definition) is amended in a manner satisfactory to Borrowers and the Required Lenders.

 

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15.5         Costs, Expenses and Taxes. Each Borrower, jointly and severally, shall pay on demand all reasonable out-of-pocket costs and expenses of Administrative Agent (including, without limitation, Attorney Costs, Taxes and Other Taxes) in connection with the preparation, execution, syndication, delivery and administration (including perfection and protection of any Collateral and the costs of IntraLinks (or other similar service), if applicable) of this Agreement, the other Loan Documents, and all other documents provided for in this Agreement or delivered or to be delivered under or in connection with this Agreement (including any amendment, supplement, or waiver to any Loan Document), whether or not the transactions contemplated hereby or thereby are consummated, including, without limitation, all out-of-pocket costs and expenses incurred pursuant to Section 10.2, and all out-of-pocket costs and expenses (including, without limitation, Attorney Costs, Taxes, and any Other Taxes) incurred by Administrative Agent and each Lender after an Event of Default in connection with the collection of the Obligations or the enforcement of this Agreement the other Loan Documents or any such other documents or during any workout, restructuring, or negotiations in respect thereof. In addition, each Loan Party shall pay, and shall save and hold harmless Administrative Agent and the Lenders from all liability for, any fees of Borrowers’ auditors in connection with any reasonable exercise by Administrative Agent and the Lenders of their rights pursuant to Section 10.2. All Obligations provided for in this Section 15.5 will survive repayment of the Loans, cancellation of the Notes, and termination of this Agreement.

 

15.6         Assignments; Participations.

 

15.6.1             Assignments.

 

(a)              Any Lender may at any time assign to one or more Persons (any such Person, an “Assignee”) all or any portion of that Lender’s Loans and Commitments, with the prior written consent of Administrative Agent, and, so long as no Event of Default exists, Borrower Representative (which consent of Borrower Representative may not be unreasonably withheld or delayed), but (i) no such consent of any kind is required for an assignment (A) by a Lender to a Lender or an Affiliate of a Lender or an Approved Fund, (B) to an Eligible Assignee, or (C) prior to the completion of the primary syndication of the Commitments as determined by Monroe Capital, and (ii) no assignment may be made to a Loan Party or an Affiliate of a Loan Party. Except as Administrative Agent otherwise agrees, any such assignment must be in a minimum aggregate amount equal to $1,000,000 (which minimum will be $250,000 if the assignment is to an Affiliate of the assigning Lender) or, if less, the remaining Commitment and Loans held by the assigning Lender. Borrowers and Administrative Agent will be entitled to continue to deal solely and directly with the assigning Lender in connection with the interests so assigned to an Assignee until Administrative Agent has received and accepted an effective assignment agreement in substantially the form of Exhibit C (an “Assignment Agreement”) executed, delivered, and fully completed by the applicable parties thereto and a processing fee of $3,500. No assignment may be made to any Person if at the time of that assignment Borrowers would be obligated to pay any greater amount under Section 7.6 or Section 8 to the Assignee than Borrowers are then obligated to pay to the assigning Lender under that section (and if any assignment is made in violation of the foregoing, Borrowers will not be required to pay any such greater amounts). Any attempted assignment not made in accordance with this Section 15.6.1 will be treated as the sale of a participation under Section 15.6.2. Borrower Representative will be deemed to have granted its consent to any assignment requiring its consent under this Agreement unless Borrower Representative has expressly objected to that assignment within five Business Days after notice thereof.

 

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(b)              From and after the date on which the conditions described above have been met, (i) the Assignee will be deemed automatically to have become a party to this Agreement and, to the extent that rights and obligations under this Agreement have been assigned to that Assignee pursuant to the Assignment Agreement, will have the rights and obligations of a Lender under this Agreement, and (ii) the assigning Lender, to the extent that rights and obligations under this Agreement have been assigned by it pursuant to that Assignment Agreement, will be released from its rights (other than its indemnification rights) and obligations under this Agreement. Upon the request of the Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, Borrowers shall execute and deliver to Administrative Agent for delivery to the Assignee (and, as applicable, the assigning Lender) one or more Notes in accordance with Section 3.1 to reflect the amounts assigned to that Assignee and the amounts, if any, retained by the assigning Lender. Each such Note will be dated the effective date of the applicable assignment. Upon receipt by Administrative Agent of any such Note, the assigning Lender shall return to Borrower Representative any applicable prior Note held by it.

 

(c)               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 that Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 15.6.1 will not apply to any such pledge or assignment of a security interest. No such pledge or assignment of a security interest will release a Lender from any of its obligations under this Agreement or substitute any such pledgee or assignee for that Lender as a party to this Agreement.

 

15.6.2             Participations. Any Lender may at any time sell to one or more Persons participating interests in its Loans, Commitments or other interests under this Agreement (any such Person, a “Participant”). In the event of a sale by a Lender of a participating interest to a Participant, (a) that Lender’s obligations under this Agreement will remain unchanged for all purposes; (b) Borrowers and Administrative Agent shall continue to deal solely and directly with that Lender in connection with that Lender’s rights and obligations under this Agreement; and (c) all amounts payable by Borrowers will be determined as if that Lender had not sold that participation and will be paid directly to that Lender. No Participant will have any direct or indirect voting rights under this Agreement except with respect to any event described in Section 15.1 expressly requiring the unanimous vote of all Lenders or, as applicable, all affected Lenders. Each Lender agrees to incorporate the requirements of the preceding sentence into each participation agreement which that Lender enters into with any Participant. Borrowers agree that if amounts outstanding under this Agreement are due and payable (as a result of acceleration or otherwise), each Participant will 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, but that right of set-off is subject to the obligation of each Participant to share with the Lenders, and the Lenders shall share with each Participant, as provided in Section 7.5. Participant will be entitled to the benefits of Section 7.6 and Section 8 as if it were a Lender (but on the date of the participation no Participant will be entitled to any greater compensation pursuant to Section 7.6 or Section 8 than would have been paid to the participating Lender on that date if no participation had been sold, and each Participant must comply with Section 7.6.4(a) as if it were an Assignee). Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrowers, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”), which Participant Register shall be made available to the Borrowers and the Administrative Agent. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

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15.7         Register. Administrative Agent shall maintain, and deliver a copy to Borrower Representative upon written request, a copy of each Assignment Agreement delivered and accepted by it and register (the “Register”) for the recordation of names and addresses of the Lenders and the Commitment of each Lender from time to time and whether that Lender is the original Lender or the Assignee. No assignment will be effective unless and until the Assignment Agreement is accepted and registered in the Register. All records of transfer of a Lender’s interest in the Register will be conclusive, absent manifest error, as to the ownership of the interests in the Loans. Administrative Agent will not incur any liability of any kind with respect to any Lender with respect to the maintenance of the Register. It is the intention that the Loans and Commitments be treated as registered obligations and in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code, and that the right, title, and interest of the Lenders in and to those Loans and Commitments be transferable only in accordance with the terms of this Agreement.

 

15.8         Governing Law. This Agreement and each Note is a contract made under and governed by the internal laws of the State of New York applicable to contracts made and to be performed entirely within that state, without regard to conflict-of-laws principles.

 

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15.9         Confidentiality. As required by federal law and Administrative Agent’s policies and practices, Administrative Agent may need to obtain, verify, and record certain customer identification information and documentation in connection with opening or maintaining accounts, or establishing or continuing to provide services. Administrative Agent and each Lender shall use commercially reasonable efforts (equivalent to the efforts Administrative Agent or that Lender applies to maintain the confidentiality of its own confidential information) to maintain as confidential all information provided to them by any Loan Party and designated as confidential, except that Administrative Agent and each Lender may disclose any information as follows: (a) to Persons employed or engaged by Administrative Agent or that Lender or that Lender’s Affiliates or Approved Funds in evaluating, approving, structuring, or administering the Loans and the Commitments; (b) to any assignee or participant or potential assignee or participant that has agreed to comply with the covenant contained in this Section 15.9 (and any such assignee or participant or potential assignee or participant may disclose any such information to Persons employed or engaged by them as described in clause (a) of this Section 15.9); (c) as required or requested by any federal or state regulatory authority or examiner, or any insurance industry association, or as reasonably believed by Administrative Agent or that Lender to be compelled by any court decree, subpoena, or legal or administrative order or process, but Administrative Agent or that Lender, as applicable, shall (i) use reasonable efforts to give the applicable Loan Party written notice prior to disclosing the information to the extent permitted by that requirement, request, court decree, subpoena, or legal or administrative order or process, and (ii) disclose only that portion of the confidential information as Administrative Agent or that Lender reasonably believes, or as counsel for Administrative Agent or that Lender, as applicable, advises Administrative Agent or that Lender, that it must disclose pursuant to that requirement; (d) as Administrative Agent or that Lender reasonably believes, or on the advice of Administrative Agent’s or that Lender’s counsel, is required by law; (e) in connection with the exercise of any right or remedy under the Loan Documents or in connection with any litigation to which Administrative Agent or that Lender is a party; (f) to any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to that Lender; (g) to that Lender’s independent auditors and other professional advisors as to which that information has been identified as confidential; or (h) if that information ceases to be confidential through no fault of Administrative Agent or any Lender. Notwithstanding the foregoing, Borrowers consent to the publication by Administrative Agent or any Lender of a tombstone or similar advertising material relating to the financing transactions contemplated by this Agreement, and Administrative Agent reserves the right to provide to industry trade organizations information necessary and customary for inclusion in league table measurements. If any provision of any confidentiality agreement, non-disclosure agreement, or other similar agreement between any Borrower and any Lender conflicts with or contradicts this Section 15.9 with respect to the treatment of confidential information, then this Section 15.9 will supersede all such prior or contemporaneous agreements and understandings between the parties.

 

15.10     Severability. Whenever possible each provision of this Agreement is to be interpreted so as to be effective and valid under applicable law, but if any provision of this Agreement is prohibited by or invalid under applicable law, that provision will be ineffective to the extent of that prohibition or invalidity, without invalidating the remainder of that provision or the remaining provisions of this Agreement.

 

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15.11     Nature of Remedies. All Obligations of the Loan Parties and rights of Administrative Agent and the Lenders expressed in this Agreement or in any other Loan Document are in addition to and not in limitation of those provided by applicable law. No failure to exercise, and no delay in exercising, on the part of Administrative Agent or any Lender, any right, remedy, power, or privilege under this Agreement will operate as a waiver thereof, and no single or partial exercise of any right, remedy, power, or privilege under this Agreement will preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.

 

15.12     Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the parties to this Agreement and supersedes all prior or contemporaneous agreements and understandings of all such Persons, verbal or written, relating to the subject matter hereof and thereof (except as relates to the fees described in Section 5.2) and any prior arrangements made with respect to the payment by the Loan Parties of (or any indemnification for) any fees, costs, or expenses payable to or incurred (or to be incurred) by or on behalf of Administrative Agent or the Lenders.

 

15.13     Counterparts. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts. Each such counterpart will be deemed to be an original, but all such counterparts will together constitute but one and the same Agreement. Receipt of an executed signature page to this Agreement by facsimile or other electronic transmission will constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by the Lenders will be deemed to be originals.

 

15.14     Successors and Assigns. This Agreement binds Borrowers, the Lenders, Administrative Agent, and their respective successors and assigns and will inure to the benefit of Borrowers, the Lenders, and Administrative Agent and the successors and assigns of the Lenders and Administrative Agent. No other Person is or is intended to be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. No Loan Party may assign or transfer any of its rights or Obligations under this Agreement without the prior written consent of Administrative Agent and each Lender.

 

15.15     Captions. Section captions used in this Agreement are for convenience only and do not affect the construction of this Agreement.

 

15.16     Customer Identification—USA Patriot Act Notice. Each Lender and Monroe Capital (each for itself and not on behalf of any other party) hereby notifies the Loan Parties that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”), it is required to obtain, verify, and record information that identifies the Loan Parties, which information includes the name and address of the Loan Parties and other information that will allow that Lender or Monroe Capital, as applicable, to identify the Loan Parties in accordance with the Patriot Act.

 

15.17     Indemnification by Loan Parties. In consideration of the execution and delivery of this Agreement by Administrative Agent and the Lenders and the agreement to extend the Commitments provided under this Agreement, each of Holdings and each Borrower hereby agrees to indemnify, exonerate, and hold harmless Administrative Agent, each Lender and each of the officers, directors, employees, Affiliates, agents, and Approved Funds of Administrative Agent and each Lender (each, a “Lender Party”) from and against any and all actions, causes of action, suits, losses, liabilities, damages, and expenses, including Attorney Costs (collectively, the “Indemnified Liabilities”), incurred by the Lender Parties or any of them as a result of, or arising out of, or relating to (a) any tender offer, merger, purchase of capital securities, purchase of assets (including the Related Transaction) or other similar transaction financed or proposed to be financed in whole or in part, directly or indirectly, with the proceeds of any of the Loans; (b) the use, handling, release, emission, discharge, transportation, storage, treatment or disposal of any Hazardous Substance at any property owned or leased by any Loan Party; (c) any violation of any Environmental Laws with respect to conditions at any property owned or leased by any Loan Party or the operations conducted thereon; (d) the investigation, cleanup or remediation of offsite locations at which any Loan Party or their respective predecessors are alleged to have directly or indirectly disposed of Hazardous Substances; or (e) the execution, delivery, performance, or enforcement of this Agreement or any other Loan Document by any of the Lender Parties, in each case except for any such Indemnified Liabilities arising on account of the applicable Lender Party’s gross negligence or willful misconduct as determined by a final, non-appealable judgment by a court of competent jurisdiction. If and to the extent that the foregoing undertaking is unenforceable for any reason, each of Holdings and each Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. All obligations provided for in this Section 15.17 will survive repayment of the Loans, cancellation of the Notes, any foreclosure under, or any modification, release, or discharge of, any or all of the Collateral Documents and termination of this Agreement.

 

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15.18     Non-Liability of Lenders.

 

(a)              The relationship between Borrowers on the one hand and the Lenders and Administrative Agent on the other hand is solely that of borrower and lender. Neither Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Loan Party arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Loan Parties, on the one hand, and Administrative Agent and the Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. Neither Administrative Agent nor any Lender undertakes any responsibility to any Loan Party to review or inform any Loan Party of any matter in connection with any phase of any Loan Party’s business or operations. Each of Holdings and each Borrower agrees, on behalf of itself and each other Loan Party, that neither Administrative Agent nor any Lender has any liability to any Loan Party (whether sounding in tort, contract or otherwise) for losses suffered by any Loan Party in connection with, arising out of, or in any way related to the transactions contemplated and the relationship established by the Loan Documents, or any act, omission, or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that those losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought.

 

(b)              No Lender Party will be liable for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement. No Lender Party will have any liability with respect to, and each of Holdings and each Borrower, on behalf of itself and each other Loan Party, hereby waives, releases, and agrees not to sue for, any special, punitive, exemplary, indirect, or consequential damages relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date).

 

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(c)               Each Loan Party acknowledges that it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party. No joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Loan Parties and the Lenders.

 

15.19     Forum Selection and Consent to Jurisdiction. Any litigation based hereon, or arising out of, under, or in connection with this Agreement or any other Loan Document, will be brought and maintained exclusively in the courts of the State of New York or in any federal court sitting in the borough of Manhattan, but nothing in this Agreement will be deemed or operate to preclude Administrative Agent from bringing suit or taking other legal action in any other jurisdiction. Each of Holdings and each Borrower hereby expressly and irrevocably submits to the jurisdiction of the courts of the State of New York and of the federal courts sitting in the borough of Manhattan for the purpose of any such litigation as set forth above. Each of Holdings and each Borrower 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. Each of Holdings and each Borrower hereby expressly and irrevocably waives, to the fullest extent permitted by law, any objection that it now has or hereafter might 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.

 

15.20     Waiver of Jury Trial. Each Borrower, Holdings, Administrative Agent, and each Lender hereby waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under this Agreement, any Note, any other Loan Document, and any amendment, instrument, document, or agreement delivered or which might in the future be delivered in connection with this Agreement or therewith or arising from any lending relationship existing in connection with any of the foregoing, and agrees that any such action or proceeding will be tried before a court and not before a jury.

 

15.21     Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement, or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by (a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and (b) the effects of any Bail-in Action on any such liability, including, if applicable: (i) a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in that Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or (iii) the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of the applicable Resolution Authority.

 

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15.22     Acknowledgement Regarding any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States): In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

15.23     Certain ERISA Matters.

 

(a)              Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any other Loan Party, that at least one of the following is and will be true:

 

(i)                such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more benefit plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments or this Agreement,

 

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(ii)              the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement,

 

(iii)           (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement, or

 

(iv)            such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

 

(b)              In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party ahereto, for the benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrowers or any other Loan Party, that the Administrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

 

15.24     ABL Intercreditor Agreement. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, (a) the Liens granted to the Administrative Agent in favor of the Lenders pursuant to this Agreement and the other Loan Documents and the exercise of any right related to any Collateral shall be subject, in each case, to the terms of the ABL Intercreditor Agreement, and (b) in the event of any conflict between the terms and provisions of this Agreement or any other Loan Document, on the one hand, and the terms and provisions of the ABL Intercreditor Agreement, on the other hand, the terms and provisions of the ABL Intercreditor Agreement shall continue.

 

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Section 16JOINT AND SEVERAL LIABILITY

 

16.1         Applicability of Terms. Each Borrower and each Person comprising a Borrower hereby acknowledges and agrees that all of the representations, warranties, covenants, obligations, conditions, agreements, and other terms contained in this Agreement are applicable to and binding upon each Person comprising a Borrower unless expressly otherwise stated in this Agreement.

 

16.2         Joint and Several Liability. Each Borrower is jointly and severally liable for all of the Obligations of each other Borrower, regardless of which Borrower actually receives the proceeds or other benefits of the Loans or other extensions of credit under this Agreement or the manner in which Borrowers, Administrative Agent, or any Lender accounts therefor in their respective books and records.

 

16.3         Benefits and Best Interests. Each Borrower acknowledges that it will enjoy significant benefits from the business conducted by each other Borrower because of, inter alia, their combined ability to bargain with other Persons including without limitation their ability to receive the Loans and other credit extensions under this Agreement and the other Loan Documents which would not have been available to any Borrower acting alone. Each Borrower has determined that it is in its best interest to procure the credit facilities contemplated under this Agreement, with the credit support of each other Borrower as contemplated by this Agreement and the other Loan Documents.

 

16.4         Accommodations. Each of Administrative Agent and the Lenders have advised each Borrower that it is unwilling to enter into this Agreement and the other Loan Documents and make available the credit facilities extended hereby or thereby to any Borrower unless each Borrower agrees, among other things, to be jointly and severally liable for the due and proper payment of the Obligations of each other Borrower. Each Borrower has determined that it is in its best interest and in pursuit of its purposes that it so induce the Lenders to extend credit pursuant to this Agreement and the other documents executed in connection with this Agreement (a) because of the desirability to each Borrower of the credit facilities under this Agreement and the interest rates and the modes of borrowing available under this Agreement and under those other documents; (b) because each Borrower might engage in transactions jointly with other Borrowers; and (c) because each Borrower might require, from time to time, access to funds under this Agreement for the purposes set forth in this Agreement. Each Borrower, individually, expressly understands, agrees, and acknowledges that the credit facilities contemplated under this Agreement would not be made available on the terms of this Agreement in the absence of the collective credit of all the Borrowers, and the joint and several liability of all the Borrowers. Accordingly, each Borrower acknowledges that the benefit of the accommodations made under this Agreement to the Borrowers, as a whole, constitutes reasonably equivalent value, regardless of the amount of the indebtedness actually borrowed by, advanced to, or the amount of credit provided to, or the amount of collateral provided by, any one Borrower.

 

16.5         Maximum Amount. To the extent that applicable law otherwise would render the full amount of the joint and several obligations of any Borrower under this Agreement and under the other Loan Documents invalid or unenforceable, that Person’s obligations under this Agreement and under the other Loan Documents will be limited to the maximum amount that does not result in any such invalidity or unenforceability, but each Borrower’s obligations under this Agreement and under the other Loan Documents will be presumptively valid and enforceable to their fullest extent in accordance with the terms hereof or thereof, as if this Section 16 were not a part of this Agreement.

 

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16.6         Joint Liability Payments. To the extent that any Borrower makes a payment under this Section 16 of all or any of the Obligations (a “Joint Liability Payment”) that, taking into account all other Joint Liability Payments then previously or concurrently made by any other Borrower, exceeds the amount that Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by those Joint Liability Payments in the same proportion that that Person’s Allocable Amount (as determined immediately prior to those Joint Liability Payments) bore to the aggregate Allocable Amounts of each Borrower as determined immediately prior to the making of those Joint Liability Payments, then, following payment in full in cash of the Obligations (other than contingent indemnification Obligations not then asserted) and the termination of the Commitments, that Borrower will be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of that excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to the applicable Joint Liability Payments. As of any date of determination, the “Allocable Amount” of any Borrower is equal to the maximum amount of the claim that could then be recovered from that Borrower under this Section 16 without rendering that claim voidable or avoidable under § 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act, or similar statute or common law.

 

16.7         Financial Condition. Each Borrower assumes responsibility for keeping itself informed of the financial condition of each other Borrower, and any and all endorsers and/or guarantors of any instrument or document evidencing all or any part of each other Borrower’s Obligations, and of all other circumstances bearing upon the risk of nonpayment by each other Borrower of its Obligations, and each Borrower agrees that neither Administrative Agent nor any Lender has or will have any duty to advise that Borrower of information known to Administrative Agent or any Lender regarding any such condition or any such circumstances or to undertake any investigation not a part of its regular business routine. If Administrative Agent or any Lender, in its sole discretion, undertakes at any time or from time to time to provide any such information to a Borrower, neither Administrative Agent nor any Lender will be under any obligation to update any such information or to provide any such information to that Borrower or any other Person on any subsequent occasion.

 

16.8         Administrative Agent Authorizations. Subject to Section 15.1, Administrative Agent is hereby authorized to, at any time and from time to time, to do any and all of the following: (a) in accordance with the terms of this Agreement, renew, extend, accelerate, or otherwise change the time for payment of, or other terms relating to, Obligations incurred by any Borrower or any other Loan Party, otherwise modify, amend or change the terms of any promissory note or other agreement, document or instrument now or hereafter executed by any Borrower or any other Loan Party and delivered to Administrative Agent or any Lender; (b) accept partial payments on an Obligation incurred by any Borrower; (c) take and hold security or collateral for the payment of an Obligation incurred by any Borrower under this Agreement or for the payment of any guaranties of an Obligation incurred by any Borrower or other liabilities of any Borrower and exchange, enforce, waive, and release any such security or collateral; (d) apply any such security or collateral and direct the order or manner of sale thereof as Administrative Agent, in its sole discretion, determines; and (e) settle, release, compromise, collect, or otherwise liquidate an Obligation incurred by any Borrower and any security or collateral therefor in any manner, without affecting or impairing the obligations of any other Borrower. In accordance with the terms of this Agreement, Administrative Agent has the exclusive right to determine the time and manner of application of any payments or credits, whether received from a Borrower or any other source, and any such determination will be binding on each Borrower. In accordance with the terms of this Agreement, all such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of an Obligation incurred by any Borrower as Administrative Agent determines in its sole discretion without affecting the validity or enforceability of the Obligations of any other Borrower. Nothing in this Section 16 modifies any right of any Borrower or any Lender to consent to any amendment or modification of this Agreement or the other Loan Documents in accordance with the terms hereof or thereof.

 

112

 

16.9         Unconditional Obligations. Each Borrower hereby agrees that, except as otherwise expressly provided in this Agreement, its obligations under this Agreement are and will be unconditional, irrespective of (a) the absence of any attempt to collect an Obligation incurred by any Borrower from any Borrower or any guarantor or other action to enforce the same; (b) failure by Administrative Agent to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for an Obligation incurred by any Borrower; (c) any Insolvency Proceeding by or against any Borrower or any other Loan Party, or Administrative Agent’s or any Lender’s election in any such proceeding of the application of § 1111(b)(2) of the Bankruptcy Code; (d) any borrowing or grant of a security interest by any Borrower as debtor-in-possession under § 364 of the Bankruptcy Code; (e) the disallowance, under § 502 of the Bankruptcy Code, of all or any portion of Administrative Agent’s or any Lender’s claim(s) for repayment of any of an Obligation incurred by any Borrower; or (f) any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor unless that legal or equitable discharge or defense is that of a Borrower in its capacity as a Borrower.

 

16.10     Notices. Any notice given by Borrower Representative under this Agreement will constitute and be deemed to be notice given by all Borrowers, jointly and severally. Notice given by Administrative Agent or any Lender to Borrower Representative under this Agreement or pursuant to any other Loan Documents in accordance with the terms of this Agreement or of any applicable other Loan Document will constitute notice to each Borrower. The knowledge of any Borrower will be imputed to all Borrowers and any consent by Borrower Representative or any Borrower will constitute the consent of, and will bind, all Borrowers.

 

16.11     No Impairment of Obligations or Limitation of Liability. This Section 16 is intended only to define the relative rights of Borrowers and nothing set forth in this Section 16 is intended to or will impair the obligations of Borrowers, jointly and severally, to pay any amounts as and when the same become due and payable in accordance with the terms of this Agreement or any other Loan Documents. Nothing contained in this Section 16 limits the liability of any Borrower to pay the credit facilities made directly or indirectly to that Borrower and accrued interest, fees, and expenses with respect thereto for which that Borrower is primarily liable.

 

113

 

16.12     Rights of Contribution and Indemnification. The parties to this Agreement acknowledge that the rights of contribution and indemnification under this Section 16 constitute assets of each Borrower to which any such contribution and indemnification is owing. The rights of any indemnifying Borrower against the other Borrowers under this Section 16 will be exercisable upon the full and payment of the Obligations and the termination of the Commitments.

 

16.13     Subrogation. No payment made by or for the account of a Borrower, including, without limitation, (a) a payment made by that Borrower on behalf of an Obligation of another Borrower or (b) a payment made by any other Person under any guaranty, will entitle that Borrower, by subrogation or otherwise, to any payment from that other Borrower or from or out of property of that other Borrower and that Borrower shall not exercise any right or remedy against that other Borrower or any property of that other Borrower by reason of any performance of that Borrower of its joint and several obligations under this Agreement, until, in each case, the termination of the Commitments and payment in full of all Obligations (other than contingent indemnification Obligations not then asserted).

 

Section17       Appointment of Borrower Representative.

 

17.1         Appointment. Each Borrower hereby irrevocably (until Payment in Full or a change pursuant to Section 17.4) appoints and constitutes Borrower Representative as its agent to request and receive the proceeds of advances in respect of the Loans (and to otherwise act on behalf of that Borrower pursuant to this Agreement and the other Loan Documents) from the Lenders in the name or on behalf of that Borrower. Administrative Agent may disburse those proceeds to the bank account of Borrower Representative (or any other Borrower) without notice to any other Borrower or any other Loan Party.

 

17.2         Additional Appointments. Each Borrower hereby irrevocably (until Payment in Full or a change pursuant to Section 17.4) appoints and constitutes the Borrower Representative as its agent to (a) receive statements of account and all other notices from Administrative Agent with respect to the Obligations or otherwise under or in connection with this Agreement and the other Loan Documents, (b) execute and deliver Compliance Certificates and all other notices, certificates and documents to be executed and/or delivered by any Borrower under this Agreement or the other Loan Documents; and (c) otherwise act on behalf of that Borrower pursuant to this Agreement and the other Loan Documents.

 

17.3         Reliance. The authorizations contained in this Section 17 are coupled with an interest and are irrevocable until Payment in Full or a change pursuant to Section 17.4, and Administrative Agent may rely on any notice, request, information supplied by the Borrower Representative, every document executed by the Borrower Representative, every agreement made by the Borrower Representative or other action taken by the Borrower Representative in respect of any Borrower or other Loan Party as if the same were supplied, made or taken by that Borrower or Loan Party. Without limiting the generality of the foregoing, the failure of one or more Borrowers or other Loan Parties to join in the execution of any writing in connection with this Agreement will not relieve any Borrower or other Loan Party from obligations in respect of that writing.

 

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17.4         Termination or Change of Borrower Representative. No purported termination of or change in the appointment of Borrower Representative as agent will be effective without the prior written consent of Administrative Agent.

 

[Signature pages follow]

 

115

 

The parties are signing this Credit Agreement as of the date stated in the introductory clause.

 

  QUEST RESOURCE HOLDING
  CORPORATION, as Holdings
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer
     
  QUEST RESOURCE MANAGEMENT GROUP,
  LLC, as a Borrower
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  QUEST SUSTAINABILITY SERVICES, INC.,
  as a Borrower
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  LANDFILL DIVERSION INNOVATIONS,
  L.L.C., as a Borrower
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  YOUCHANGE, INC.,
  as a Borrower
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  QUEST VERTIGENT CORPORATION,
  as a Borrower
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer

 

Signature page to Credit Agreement

 

  QUEST VERTIGENT ONE, LLC,
  as a Borrower
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  GLOBAL ALERTS, LLC,
  as a Borrower
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer

 

Signature page to Credit Agreement

 

 

MONROE CAPITAL MANAGEMENT

ADVISORS, LLC, as Administrative Agent

   
  By: /s/ Alex Parmacek
  Name: Alex Parmacek
  Title: Vice President

 

Signature page to Credit Agreement

 

  MONROE CAPITAL CORPORATION,
  in its capacity as a Lender
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
  MONROE CAPITAL INCOME PLUS CORPORATION,
  in its capacity as a Lender
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
  MC INCOME PLUS FINANCING SPV LLC,
  in its capacity as a Lender
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
 

MONROE CAPITAL PRIVATE CREDIT FUND III

FINANCING SPV LLC,

  in its capacity as a Lender
         
    By:

MONROE CAPITAL PRIVATE CREDIT

FUND III LP,

      as Designated Manager
         
    By:

MONROE CAPITAL PRIVATE CREDIT

FUND III LLC,

      its general partner
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President

 

Signature page to Credit Agreement

 

  MONROE CAPITAL PRIVATE CREDIT FUND III LP,
  in its capacity as a Lender
         
    By:

MONROE CAPITAL PRIVATE CREDIT

FUND III LLC,

      its general partner
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
 

MONROE CAPITAL PRIVATE CREDIT FUND II

(UNLEVERAGED) LP,

  in its capacity as a Lender
         
    By:

MONROE CAPITAL PRIVATE CREDIT

FUND III LLC,

      its general partner
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
  MONROE PRIVATE CREDIT FUND A LP,
  in its capacity as a Lender
         
    By: MONROE PRIVATE CREDIT FUND A LLC,
      its general partner
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President

 

Signature page to Credit Agreement

 

 

MONROE PRIVATE CREDIT FUND A FINANCING

SPV LLC,

  in its capacity as a Lender
         
    By: MONROE PRIVATE CREDIT FUND A LP,
      as Designated Manager
         
    By: MONROE PRIVATE CREDIT FUND A LLC,
      its general partner
         
      By: /s/ Alex Parmacek  
      Name: Alex Parmacek
      Title: Vice President
         
  MONROE CAPITAL PRIVATE CREDIT FUND I LP,
  in its capacity as a Lender
         
    By: MONROE CAPITAL PRIVATE CREDIT FUND I LLC,
      its general partner
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
  MONROE CAPITAL PRIVATE CREDIT FUND VT LP,
  in its capacity as a Lender
         
    By:

MONROE CAPITAL PRIVATE CREDIT

FUND VT LLC,

      its general partner
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President
         
  MC FINANCING SPV I, LLC,
  in its capacity as a Lender
         
      By: /s/ Alex Parmacek
      Name: Alex Parmacek
      Title: Vice President

 

Signature page to Credit Agreement

 

 

JOINDER AND FIRST AMENDMENT TO LOAN, SECURITY AND GUARANTY AGREEMENT

 

THIS JOINDER AND FIRST AMENDMENT TO LOAN, SECURITY AND GUARANTY AGREEMENT (this “Amendment”) is made and entered into as of October 19, 2020 (the “First Amendment Effective Date”), by and among BBVA USA, an Alabama banking corporation (“BBVA”), individually as a Lender, as administrative agent (in such capacity, “Administrative Agent”) for itself and any other financial institution which is or becomes a party hereto as a lender (each such financial institution, including BBVA, a “Lender” and collectively the “Lenders”), and as collateral agent (in such capacity, “Collateral Agent”) for the Lenders, Quest Resource Management Group, LLC, a Delaware limited liability company (“Quest”), Landfill Diversion Innovations, L.L.C., a Delaware limited liability company (“Landfill”, and together with Quest, jointly and severally, each as a “Borrower” and collectively the “Borrowers”), Quest Resource Holding Corporation, a Nevada corporation (“Holdings”), Quest Sustainability Services, Inc., a Delaware corporation (F/K/A Earth911, Inc.) (“Parent”, and together with Holdings, jointly and severally, each as an “Existing Guarantor” and collectively the “Existing Guarantors”), Youchange, Inc., an Arizona corporation (“Youchange”), Quest Vertigent Corporation, a Nevada corporation (“Vertigent”), Quest Vertigent One, LLC, a Delaware limited liability company (“Vertigent One”), and Global Alerts, LLC, a Delaware limited liability company (“Global Alerts”, and together with Youchange, Vertigent and Vertigent One, jointly and severally, each as a “New Guarantor” and collectively the “New Guarantors”; the Existing Guarantors, together with the New Guarantors, jointly and severally, each a “Guarantor” and collectively, the “Guarantors”).

 

RECITALS

 

A.     Borrowers, Existing Guarantors, Lenders, Collateral Agent, and Administrative Agent are parties to (i) that certain Loan, Security and Guaranty Agreement, dated as of August 5, 2020 (as amended hereby and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”) and (ii) the other Loan Documents (as defined in the Loan Agreement, and in each case as amended hereby and as may be further amended, restated, supplemented or otherwise modified from time to time).

 

B.      Quest is acquiring substantially all of the assets of Green Remedies Waste and Recycling, Inc., a North Carolina corporation (“Green Remedies”) and will, pursuant to that certain Asset Purchase Agreement, dated as of the date hereof, by and among Quest, Holdings, Green Remedies and Alan Allred (as amended, restated, supplemented or otherwise modified from time to time, the “Green Remedies Acquisition Agreement” and the transactions contemplated thereby, the “Green Remedies Acquisition”).

 

C.      In order to finance the Green Remedies Acquisition, the Borrowers and the Guarantors are entering into that certain Credit Agreement, date as of the date hereof, by and among the Borrowers, the Guarantors, the lenders party thereto and Monroe Capital Management Advisors, LLC, as the agent for the lenders party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “Acquisition Term Loan Agreement”).

 

D.     Borrowers and the Existing Guarantors have requested each New Guarantor be joined as a “Guarantor” under the Loan Agreement and the other Loan Documents and that Administrative Agent and the Lenders amend the Loan Agreement and the other Loan Documents in order to permit the Green Remedies Acquisition, the Acquisition Term Loan Agreement and the other transactions contemplated thereby as more particularly set forth herein.

 

E.      Administrative Agent and the Lenders have agreed to make certain amendments to the Loan Agreement subject to the terms and conditions hereinafter set forth.

 

 

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

AGREEMENT

 

ARTICLE I
Definitions

 

1.01           Capitalized terms used in this Amendment are defined in the Loan Agreement, as amended hereby, unless otherwise stated.

 

ARTICLE II
Amendments

 

2.01           Amendments to the Loan Agreement. The Loan Agreement is hereby amended (a) to delete the red or green stricken text (indicated textually in the same manner as the following examples: stricken text and stricken text) and (b) to add the blue or green double-underlined text (indicated textually in the same manner as the following examples: double-underlined text and double-underlined text), in each case, as set forth in the marked copy of the Loan Agreement attached hereto as Annex A and incorporated herein and made a part hereof for all purposes.

 

2.02           Amendments to the Schedules to the Loan Agreement. The Schedules to the Loan Agreement are hereby supplemented by adding Schedules 1.1 (Deemed EBITDA), 1.2 (Ineligible Lenders), 8.1.24 (Material Contracts), 9.2.1 (Debt), 9.2.2 (Permitted Liens), and 9.2.9 (Investments) and by supplementing the existing Schedules with the Schedules attached hereto as Exhibit A. By acknowledging and agreeing to this Amendment, the undersigned hereby agrees that the Schedules may be attached to the Loan Agreement and made a part thereof for all purposes.

 

2.03           Amendment to Exhibit 9.1.3 Form of Compliance Certificate to the Loan Agreement. Exhibit 9.1.3 of the Loan Agreement is hereby amended and restated in its entirety with the amended and restated Form of Compliance Certificate attached hereto as Exhibit B. By acknowledging and agreeing to this Amendment, the undersigned hereby agrees that the amended and restated Compliance Certificate attached as Exhibit B may be attached to the Loan Agreement and made a part thereof for all purposes.

 

ARTICLE III
Joinder of New Guarantors to Loan Documents

 

3.01           In consideration of each New Guarantor becoming a “Guarantor” under the terms of the Loan Agreement and the other Loan Documents and in consideration of the value of the synergistic benefits received by each New Guarantor as a result of the interdependence of the businesses of Existing Guarantors and each New Guarantor, each New Guarantor hereby agrees that effective as of the date hereof, it hereby joins in, and is and shall be deemed to be, a “Guarantor” under, the Loan Agreement and each of the other applicable Loan Documents. Each New Guarantor has assumed the obligations of a “Guarantor” under the Loan Agreement and the other Loan Documents, and each New Guarantor shall perform, comply with and be subject to and bound by each of the terms, agreements, covenants and conditions of: (a) the Loan Agreement, on a joint and several basis with the Existing Guarantors, and (b) each of the other Loan Documents which are stated to apply to or are made by a “Guarantor,” on a joint and several basis with Existing Guarantors, in each case of clauses (a) through (b), as such Loan Document is in effect as of the date hereof, with the same force and effect as if such New Guarantor were an original signatory to the Loan Agreement and each of the other Loan Documents to which a “Guarantor” is a party or by which a “Guarantor” is bound. To secure the prompt and complete payment, performance and observance when due (whether at stated maturity, by acceleration or otherwise) of all Obligations, and each New Guarantor hereby grants to Administrative Agent, for the benefit of itself and each Lender, a continuing Lien upon all of such New Guarantor’s Collateral, whether now owned or existing or hereafter created, acquired or arising and wheresoever located.

 

-2-

 

3.02           Further, without limiting the generality of the foregoing, each New Guarantor hereby represents and warrants that: (i) each of the representations and warranties with respect to a Loan Party set forth in the Loan Agreement and the other Loan Documents (including but not limited to Article VIII of the Loan Agreement) are true and correct as to such New Guarantor on and as of the date hereof as if made on and as of the date hereof by such New Guarantor (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct in all respects on and as of the specific date or times referred to in said representations and warranties), and (ii) each New Guarantor has heretofore received a true and correct copy of the Loan Agreement and each of the other Loan Documents (including any modifications thereof or supplements or waivers thereto) as in effect on the date hereof.

 

3.03           In furtherance of the foregoing, each reference to a “Guarantor” in the Loan Agreement and each other Loan Document shall be deemed to include each of the undersigned New Guarantors.

 

3.04           Each New Guarantor is simultaneously delivering to Administrative Agent and the Lenders the other documents required under the Loan Agreement.

 

ARTICLE IV
Conditions Precedent

 

4.01           Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to Administrative Agent and the Lenders:

 

(a)               Administrative Agent shall have received (i) this Amendment duly executed by each party hereto, and (ii) fully executed copies of each of the additional documents, instruments and agreements listed on the Closing Checklist attached hereto as Exhibit C (other than those items, if any, designated therein as “Post-Closing”), each in form and substance acceptable to Administrative Agent.

 

(b)               Administrative Agent and each lender shall have received all expenses (including, without limitation, the fees, charges and disbursements of counsel for Administrative Agent and each Lender) as set forth in Section 3.7 of the Loan Agreement which are due and payable as of the First Amendment Effective Date.

 

(c)               Administrative Agent shall have received an extension fee in the amount of $42,500.00, which amount shall be deemed fully earned on the First Amendment Effective Date and nonrefundable.

 

(d)               The representations and warranties of the Loan Parties in the Loan Documents, as each is amended hereby, shall be true and correct in all material respects (or, as to any representations and warranties which are subject to a materiality or Material Adverse Effect qualifier, true and correct in all respects) as of the First Amendment Effective Date (except for representations and warranties that expressly relate to an earlier date or for such changes as provided in Section 8.2 of the Loan Agreement).

 

-3-

 

(e)               No Default or Event of Default shall have occurred and be continuing or would result from this Amendment.

 

(f)                No event shall have occurred and no condition shall exist which has had or could be reasonably expected to have a Material Adverse Effect.

 

ARTICLE V
Consent and Limited Waiver, Ratifications, Representations and Warranties

 

5.01           Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The Loan Parties, Administrative Agent and each Lender agree that the Loan Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

 

5.02           Representations and Warranties. Each Loan Party hereby represents and warrants to Administrative Agent and the Lenders that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite organizational action on the part of such Person and will not violate the organizational or governing documents of such Person; (b) the representations and warranties of the Loan Parties in the Loan Documents, as each is amended hereby, are true and correct in all material respects as of the First Amendment Effective Date (except that any representation or warranty which by its terms is made as of a specified date is true and correct in all material respects only as of such specified date, and that any representation or warranty which is subject to any materiality or Material Adverse Effect qualifier is true and correct in all respects); (c) no Default or Event of Default under the Loan Agreement, as amended hereby, has occurred and is continuing; and (d) Each Loan Party is in material compliance with all covenants and agreements contained in the Loan Agreement and the other Loan Documents, as amended hereby.

 

ARTICLE VI
Miscellaneous Provisions

 

6.01           Survival of Representations and Warranties. All representations and warranties made in the Loan Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Administrative Agent or any Lender or any closing shall affect the representations and warranties or the right of Administrative Agent or any Lender to rely upon them.

 

6.02           Reference to Loan Agreement. Each of the Loan Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement and such other Loan Documents to the Loan Agreement shall mean a reference to the Loan Agreement, as amended hereby, and any reference in the Loan Agreement and such other Loan Documents to any other Loan Document amended by the provisions of this Amendment shall mean a reference to such other Loan Documents, as amended hereby.

 

-4-

 

6.03           Expenses of Administrative Agent and Lenders. The provisions of Section 3.7 and Section 13.2 of the Loan Agreement are hereby incorporated by reference herein, mutatis mutandis.

 

6.04           Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

 

6.05           Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Administrative Agent, each Lender and each Loan Party and their respective successors and assigns, except that each Loan Party may not assign or transfer any of its rights or obligations hereunder without the prior written consent of Administrative Agent.

 

6.06           Counterparts; Electronic Signatures. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. This Amendment may be executed by facsimile transmission or other electronic means, which facsimile or other electronic signatures shall be considered original executed counterparts, and each party to this Amendment agrees that it will be bound by its own facsimile or other electronic signature and that it accepts the facsimile or other electronic signature of each other party to this Amendment.

 

6.07           Effect of Waiver. No consent or waiver, express or implied, by Administrative Agent or any Lender to or for any breach of or deviation from any covenant or condition by any Loan Party shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty.

 

6.08           Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

 

6.09           Applicable Law. This Agreement and all other Loan Documents executed pursuant hereto shall be deemed to have been made and to be performable in and shall be governed by and construed in accordance with the laws of the State of Texas.

 

6.10           Final Agreement. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE LOAN PARTIES AND ADMINISTRATIVE AGENT.

 

[Signature pages follow.]

 

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IN WITNESS WHEREOF, this Amendment has been executed on the date first written above, to be effective as the respective date set forth above.

 

  BBVA USA, as Administrative Agent, Collateral Agent and as a Lender
     
  By: /s/ Jason Nichols
    Name: Jason Nichols
    Title: Senior Vice President
     
  BBVA USA, as Issuing Bank
     
  By: /s/ Jason Nichols
    Name: Jason Nichols
    Title: Senior Vice President

 

[Signature Page to the Joinder and First Amendment to Loan Agreement]

 

BORROWERS: QUEST RESOURCE MANAGEMENT GROUP, LLC
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
   
  LANDFILL DIVERSION INNOVATIONS, L.L.C.
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
   
GUARANTORS: QUEST RESOURCE HOLDING CORPORATION
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer
   
  QUEST SUSTAINABILITY SERVICES, INC., A DELAWARE CORPORATION (F/K/A EARTH911, INC.)
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer

 

[Signature Page to Joinder and First Amendment to Loan, Security and Guaranty Agreement]

 

GUARANTORS (CONTINUED): YOUCHANGE, INC.
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
   
  QUEST VERTIGENT CORPORATION
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
   
  QUEST VERTIGENT ONE, LLC
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
   
  GLOBAL ALERTS, LLC
   
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer

 

[Signature Page to Joinder and First Amendment to Loan, Security and Guaranty Agreement]

 

 

Annex A

 

Loan Agreement

 

 

 

_______________________________________

 

QUEST RESOURCE MANAGEMENT GROUP, LLC

 

Landfill Diversion Innovations, L.L.C.

 

__________________________________________________

 

___________________________________________
__________________________________________________

 

LOAN, SECURITY AND GUARANTY AGREEMENT

 

Dated: August 5, 2020

 

$17,000,000

 

__________________________________________________
__________________________________________________

 

__________________________________________________

 

BBVA USA,
Individually and as Administrative Agent and Collateral Agent
for any Lender which is or becomes a party hereto

 

__________________________________________________

 

BBVA USA, as Sole Arranger and Sole Bookrunner

 

 

 

Table of Contents

 

Page

  

ARTICLE I. DEFINED TERMS 1
1.1 Definitions 1
1.2 Other Terms 42
1.3 Certain Matters of Construction 43
1.4 Changes in GAAP 43
1.5 Divisions 43
1.6 Notification and Limitation of Liability – LIBOR and Related Matters 44
     
ARTICLE II. CREDIT FACILITY 44
2.1 Revolving Credit Loans 44
2.2 Letters of Credit 45
2.3 Term Loan 49
2.4 Accordion 50
     
ARTICLE III. INTEREST, FEES AND CHARGES 51
3.1 Interest. 51
3.2 Computation of Interest and Fees 52
3.3 Fee Letter 53
3.4 Letter of Credit Fees 53
3.5 Unused Line Fees 53
3.6 [Reserved]. 53
3.7 Reimbursement of Expenses 53
3.8 Bank Charges 54
3.9 Appraisals; Field Examinations 54
3.10 Payment of Charges 55
3.11 Taxes. 55
3.12 Acknowledgement and Consent to Bail-In of EEA Financial Institutions 57
     
ARTICLE IV. LOAN ADMINISTRATION 58
4.1 Procedures for Borrowing and LIBOR Option 58
4.2 Payments 61
4.3 Mandatory and Optional Prepayments. 62
4.4 Application of Payments and Collections. 64
4.5 All Loans to Constitute One Obligation 66
4.6 Loan Account 66
4.7 Statements of Account 66
4.8 Increased Costs. 66
4.9 Ineffective Interest Rate; Benchmark Replacement. 68
4.10 Sharing of Payments, Etc 72
4.11 Defaulting Lender 72
     
ARTICLE V. TERM AND TERMINATION 75
5.1 Term of Agreement 75
5.2 Termination 75

 

i

 

Table of Contents

(continued)

 

Page

  

ARTICLE VI. SECURITY INTERESTS 76
6.1 Security Interest in Collateral. 76
6.2 Other Collateral 78
6.3 Lien Perfection; Further Assurances 78
6.4 Lien on Realty 78
     
ARTICLE VII. COLLATERAL ADMINISTRATION 79
7.1 General. 79
7.2 Administration of Accounts 80
7.3 [Reserved] 83
7.4 Administration of Eligible Machinery and Equipment 83
7.5 Payment of Charges 83
     
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES 83
8.1 General Representations and Warranties 83
8.2 Continuous Nature of Representations and Warranties 94
8.3 Survival of Representations and Warranties 94
     
ARTICLE IX. COVENANTS AND CONTINUING AGREEMENTS 94
9.1 Affirmative Covenants 94
9.2 Negative Covenants 102
     
ARTICLE X. CONDITIONS PRECEDENT 113
10.1 Initial Loans 113
10.2 Conditions Precedent to All Loans and Credit Accommodations 116
     
ARTICLE XI. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT 116
11.1 Events of Default 116
11.2 Acceleration of the Obligations 119
11.3 Other Remedies 119
11.4 Setoff and Sharing of Payments 120
11.5 Remedies Cumulative; No Waiver 121
11.6 Curative Equity 121
     
ARTICLE XII. AGENTS 122
12.1 Authorization and Action 122
12.2 Agents’ Reliance, Etc 123
12.3 BBVA and Affiliates 124
12.4 Lender Credit Decision 124
12.5 Indemnification 124
12.6 Rights and Remedies to Be Exercised by Administrative Agent Only 125
12.7 Agency Provisions Relating to Collateral 125
12.8 Resignation of Agent; Appointment of Successor 125
12.9 Audit and Examination Reports; Disclaimer by Lenders 126

 

ii

 

Table of Contents

(continued)

 

Page

  

12.10 Administrative Agent’s Right to Purchase Commitments 127
12.11 Intercreditor Agreement 127
     
ARTICLE XIII. MISCELLANEOUS 127
13.1 Power of Attorney 127
13.2 INDEMNITY 128
13.3 Amendment and Waivers. 129
13.4 Severability 130
13.5 Right of Sale; Assignment; Participations 131
13.6 Cumulative Effect; Conflict of Terms 133
13.7 Execution in Counterparts 133
13.8 Notices and Communications. 134
13.9 Consent 135
13.10 Credit Inquiries 135
13.11 Time of Essence 135
13.12 Entire Agreement 135
13.13 Interpretation 135
13.14 Confidentiality 136
13.15 GOVERNING LAW; CONSENT TO JURISDICTION, FORUM AND SERVICE OF PROCESS 136
13.16 WAIVERS BY THE LOAN PARTIES 137
13.17 Advertisement 137
13.18 Patriot Act Notice 137
13.19 ENTIRE AGREEMENT 138
13.20 Intercreditor Agreement 138
     
ARTICLE XIV. CROSS-GUARANTY BY BORROWERS 138
14.1 Cross-Guaranty 138
14.2 Waivers by Borrowers 138
14.3 Benefit of Guaranty 139
14.4 Waiver of Subrogation, Etc 139
14.5 Election of Remedies 139
14.6 Limitation 140
14.7 Contribution with Respect to Guaranty Obligations. 140
14.8 Liability Cumulative 141
14.9 Keepwell 141
     
ARTICLE XV. GUARANTY 141
15.1 Guaranty of the Obligations 141
15.2 Contribution by Guarantors 141
15.3 Payment by Guarantors 142
15.4 Liability of Guarantors Absolute 143
15.5 Waivers by Guarantors 144

 

iii

 

Table of Contents

(continued)

 

Page

  

15.6 Guarantors’ Rights of Subrogation, Contribution, etc 145
15.7 Subordination of Other Obligations 146
15.8 Continuing Guaranty 146
15.9 Authority of Guarantors or Borrowers 146
15.10 Financial Condition of Borrowers 146
15.11 Bankruptcy, etc 147

 

iv

 

LIST OF EXHIBITS AND SCHEDULES

 

Exhibit 2.1 Form of Revolving Credit Note
Exhibit 2.3 Form of Term Loan Note
Exhibit 3.11 Form of U.S. Tax Compliance Certificate
Exhibit 9.1.3 Form of Compliance Certificate
Exhibit 9.1.4 Form of Borrowing Base Certificate
Exhibit 13.5 Form of Assignment and Acceptance
   
Schedule 1 Commitment Schedule
Schedule 1.2 Ineligible Lenders
Schedule 6.1 Commercial Tort Claims
Schedule 7.1.1 Business Locations
Schedule 8.1.1 Jurisdictions in which any Borrower is Authorized to do Business
Schedule 8.1.4 Capital Structure
Schedule 8.1.5 Names; Organization
Schedule 8.1.13 Brokers’ Fees
Schedule 8.1.14 Patents, Trademarks, Copyrights and Licenses
Schedule 8.1.16 Environmental
Schedule 8.1.17 Contracts Restricting Right to Incur Debts
Schedule 8.1.18 Litigation
Schedule 8.1.20 Pension Plans
Schedule 8.1.22 Labor Relations
Schedule 8.1.23 Leases
Schedule 9.2.2 Existing Debt
Schedule 9.2.4 Existing Liens
Schedule 9.2.10 Existing Investments
Schedule 9.2.14 Existing Restrictive Agreements

 

v

 

LOAN, SECURITY AND GUARANTY AGREEMENT

 

THIS LOAN, SECURITY AND GUARANTY AGREEMENT (this “Agreement”) is made as of August 5, 2020, by and among BBVA USA, an Alabama banking corporation (“BBVA”), individually as a Lender, as administrative agent (in such capacity, “Administrative Agent”) for itself and any other financial institution which is or becomes a party hereto as a lender (each such financial institution, including BBVA, is referred to hereinafter individually as a “Lender” and collectively as the “Lenders”), and as collateral agent (in such capacity, “Collateral Agent”) for the Lenders, Quest Resource Management Group, LLC, a Delaware limited liability company (“Quest”), Landfill Diversion Innovations, L.L.C., a Delaware limited liability company (“Landfill”, and together with Quest and each hereafter arising Subsidiary of any Borrower and each other Person joined hereto as a “Borrower”, individually a “Borrower” and collectively “Borrowers”), and each of Quest Resource Holding Corporation, a Nevada corporation (“Holdings”), Quest Sustainability Services, Inc., a Delaware corporation (F/K/A Earth911, Inc.) (“Parent”), Youchange, Inc., an Arizona corporation (“Youchange”), Quest Vertigent Corporation, a Nevada corporation (“Vertigent”), Quest Vertigent One, LLC, a Delaware limited liability company (“Vertigent One”), and Global Alerts, LLC, a Delaware limited liability company (“Global Alerts”, and together with Holdings, Parent, Youchange, Vertigent and Vertigent One, individually a “Guarantor” and collectively, “Guarantors”).

 

Article I. DEFINED TERMS

 

1.1              Definitions. When and if used herein: (a) the terms Account, Certificated Security, Chattel Paper, Commercial Tort Claims, Deposit Account, Document, Electronic Chattel Paper, Equipment, Financial Asset, Fixture, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter of Credit Rights, Payment Intangibles, Proceeds, Security, Security Entitlement, Software, Supporting Obligations, Tangible Chattel Paper and Uncertificated Security have the respective meanings assigned thereto under the UCC; (b) all terms reflecting Collateral having the meanings assigned thereto under the UCC shall be deemed to mean such Property, whether now owned or hereafter created or acquired by any Loan Party or in which such Loan Party now has or hereafter acquires any interest; and (c) the following terms shall have the following meanings (terms defined in the singular to have the same meaning when used in the plural and vice versa):

 

ABL Priority Collateral” – as defined in the Intercreditor Agreement.

 

Account Debtor” – any Person who is or may become obligated under or on account of any Account, Contract Right, Chattel Paper or General Intangible.

 

Accounts Side Letter” – that certain Accounts Side Letter, dated as of the Closing Date, by and among the Loan Parties, the Administrative Agent and the Lenders.

 

Acquisition” – any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of 50% of the Equity Interests of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).

 

 

 

Acquisition Term Agent” – Monroe Capital Management Advisors, LLC, in its capacity as agent under the Acquisition Term Loan Agreement for the Acquisition Term Lenders, including its successors and assigns in such capacity from time to time.

 

Acquisition Term Debt” – the Term Loan Debt (as defined in the Intercreditor Agreement).

 

Acquisition Term Lenders” – the lender or group of lenders identified in the Acquisition Term Loan Agreement.

 

Acquisition Term Loan Agreement” – that certain Credit Agreement, dated as of the First Amendment Effective Date, by and among the Acquisition Term Agent, the Acquisition Term Lenders, the borrowers and the other loan parties party thereto (as such agreement may be amended, restated, supplemented, or otherwise modified from time to time in accordance with the Intercreditor Agreement).

 

Acquisition Term Loan Documents” – the “Loan Documents” as defined in the Acquisition Term Loan Agreement, and in each case together with any other instrument or agreement entered into, now or in the future, by any Loan Party evidencing or in connection with the Acquisition Term Debt, as amended, restated, supplemented or otherwise modified pursuant to the terms of the Intercreditor Agreement or other similar intercreditor agreement.

 

Acquisition Term Loan Priority Collateral” – has the meaning given to Term Loan Priority Collateral in the Intercreditor Agreement.

 

Administrative Agent” – as defined in the preamble to this Agreement and any successor in that capacity appointed pursuant to Section 12.8.

 

Affiliate” of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with that Person, (b) any officer or director of that Person and (c) with respect to any Lender, any entity administered or managed by that Lender or an Affiliate or investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in commercial loans. A Person will be deemed to be “controlled by” any other Person if that other Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of that Person whether by contract or otherwise. Unless expressly stated otherwise in this Agreement, none of the following Persons will be deemed an Affiliate of any Loan Party: (i) Administrative Agent; (ii) any Lender or (iii) the Warrant Holder or any of its affiliates.

 

Agent” – each of Administrative Agent and Collateral Agent, both individually and collectively.

 

Aggregate Loan Commitment” – with respect to any Lender, the amount of such Lender’s Revolving Credit Commitment plus such Lender’s Term Loan Commitment.

 

2 

 

Aggregate Payments” – as defined in Section 15.2.

 

Aggregate Percentage” – with respect to each Lender, the percentage equal to the quotient of (i) such Lender’s Aggregate Loan Commitment divided by (ii) the total of all Aggregate Loan Commitments.

 

Aggregate Revolving Extensions” – at any time, the sum of (i) the outstanding principal balance of all Revolving Credit Loans plus (ii) the LC Amount.

 

Agreement” – as defined in the preamble to this Agreement, including all Exhibits and Schedules thereto, as each of the same may be amended, restated, supplemented or otherwise modified from time to time.

 

Anti-Terrorism Laws” – any laws relating to terrorism or money laundering, including the Patriot Act.

 

Applicable Law” – all laws, rules, regulations and governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law, common law and equitable principles, and all provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities.

 

Applicable Margin” – (i) as to Revolving Credit Loans, from the Closing Date to, but not including, the first Adjustment Date (as hereinafter defined) the percentages set forth below as Level II and thereafter as hereinafter specified, and (ii) as to the Term Loan, 2.75% as to LIBOR Term Loans and 1.75% as to Base Rate Term Loans.

 

The Applicable Margin as to Revolving Credit Loans will be adjusted on the first day of each fiscal quarter, commencing on October 1, 2020 (each such date an “Adjustment Date”), effective prospectively, by reference to the applicable “Financial Measurement” (as defined below) for the quarter most recently ending in accordance with the following:

 

Level   Financial Measurement   LIBOR Revolving Credit Loans   Base Rate Revolving Credit Loans
I   greater than 66.7%   1.75%   .75%
II   equal to or less than 66.7% and greater than 33.3%   2.00%   1.00%
III   equal to or less than 33.3%   2.25%   1.25%

 

For purposes hereof, “Financial Measurement” shall mean the Quarterly Average Excess Availability for Applicable Margin Percentage.

 

Asset Disposition” – the sale, sale leaseback, lease, assignment, disposition, division, or other transfer for value by any Loan Party to any Person of any asset of that Loan Party (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing to any Loan Party) condemnation, confiscation, requisition, seizure or taking thereof) other than as permitted by clauses (iii), (iv), (v), (vi), (vii) and (viii) of Section 9.2.4.

 

3 

 

Assignment and Acceptance Agreement” – an assignment and acceptance agreement in substantially the form of Exhibit 13.5 hereto pursuant to which a Lender assigns to another Lender all or any portion of any of such Lender’s Revolving Credit Commitment or Term Loan Commitment, as permitted pursuant to the terms hereof.

 

Bail-In Action” – the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

Bail-In Legislation” – with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

Bank” – BBVA USA, an Alabama banking corporation.

 

Bankruptcy Code” – Title 11 of the United States Code, as amended from time to time.

 

Base Rate” – for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the Prime Rate, and (c) the sum of (i) LIBOR calculated for such day based on an Interest Period of one (1) month determined two (2) Business Days prior to such day, plus (ii) 1.00%; provided, that in no event shall the Base Rate be less than zero percent. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or LIBOR shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Federal Funds Rate or LIBOR, respectively.

 

Base Rate Loans” – the Base Rate Revolving Credit Loan and/or the Base Rate Term Loan.

 

Base Rate Revolving Credit Loan” – any Revolving Credit Loan for the periods when the rate of interest applicable to such Revolving Credit Loan is calculated by reference to the Base Rate.

 

Base Rate Term Loan” – that portion of the Term Loan for the periods when the rate of interest applicable to such portion of the Term Loan is calculated by reference to the Base Rate.

 

BBVA” – as defined in the preamble to this Agreement.

 

Borrower(s)” – as defined in the preamble to this Agreement and each other Person who is joined as a “Borrower” hereto.

 

Borrower Representative” – Quest.

 

Borrowing Base” – as at any date of determination thereof, an amount equal to the sum of:

 

4 

 

(i)       90% of the net amount of Eligible Accounts; plus

 

(ii)       90% of the net amount of Eligible Unbilled Accounts; provided that the amount included in the Borrowing Base pursuant to this clause (ii) shall not at any time constitute more than 33.33% of the aggregate total Revolving Credit Commitment; minus

 

(iii)       Reserves.

 

For purposes hereof, the net amount of Eligible Accounts or Eligible Unbilled Accounts at any time shall be the face amount of such Eligible Accounts or Eligible Unbilled Accounts less any and all returns, rebates, discounts (which may, at Collateral 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.

 

The Collateral Agent may, in its discretion, reduce the advance rate set forth above, including, without limitation, by one percentage point for every percentage point that Dilution exceeds three percent (3%) by reference to the most recent field examination or reduce one or more of the other elements used in computing the Borrowing Base.

 

Borrowing Base Certificate” – a certificate by a responsible officer of Borrower Representative, on its own behalf and on behalf of all other Loan Parties, substantially in the form of Exhibit 9.1.4 setting forth the calculation of the Borrowing Base, including a calculation of each component thereof, all in such detail as shall be reasonably satisfactory to Collateral Agent. All calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate shall originally be made by the Loan Parties and certified to Collateral Agent; provided that Collateral Agent shall have the right to review and adjust, in the exercise of its reasonable credit judgment, any such calculation after giving notice thereof to the Loan Parties, (1) to reflect its reasonable estimate of declines in value of any of the Collateral described therein, and (2) to the extent that Collateral Agent determines that such calculation is not in accordance with this Agreement.

 

Business Day” – any day excluding Saturday, Sunday and any day which the Administrative Agent is closed for business and, when used in connection with LIBOR Loans, shall also exclude any day on which commercial banks are closed for dealings in U.S. dollar deposits in the London interbank market.

 

Capital Expenditures” – all expenditures that, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of Quest and its Subsidiaries, including expenditures in respect of Capital Leases, but excluding any such expenditures made in connection with the replacement, substitution, or restoration of assets to the extent financed (i) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored, (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (iii) with assets traded or exchanged for that replacement, substitution, or restoration of assets, or (iv) with Net Cash Proceeds from a sale, lease, assignment, disposition, or other transfer for value of the type specifically described in clause (a) of the definition of “Asset Disposition.”

 

5 

 

Capital Lease” – with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by that Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person and specifically excludes the effects of Accounting Standards Update 2016-02, Leases (Topic 842).

 

CARES Act” – the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act and applicable rules and regulations, as amended from time to time.

 

CARES Forgivable Uses” – uses of proceeds of SBA PPP Loans that are eligible for forgiveness under Section 1106 of the CARES Act.

 

CARES Payroll Costs” – “payroll costs” as defined in 15 U.S.C. 636(a)(36)(A)(viii) (as added to the Small Business Act by Section 1102 of the CARES Act).

 

Cash Dominion” – as defined in subsection 7.2.4.

 

Cash Equivalent Investments” – at any time, (a) any evidence of Debt, maturing not more than one year after that time, issued or guaranteed by the United States Government or any agency thereof; (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least A-l by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc.; (c) any certificate of deposit, time deposit, or banker’s acceptance, maturing not more than one year after that time, or any overnight Federal Funds transaction that is issued or sold by any Lender or its holding company (or by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000); (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c)) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time that repurchase agreement is entered into of not less than 100% of the repurchase obligation of that Lender (or other commercial banking institution) thereunder; (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements; and (f) other short-term liquid investments approved in writing by Administrative Agent.

 

CERCLA” – the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq.).

 

Change in Law” – the adoption of any Applicable Law (whether or not having the force of law), or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Administrative Agent or any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency. Notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law” regardless of the date enacted, adopted or issued.

 

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Change of Control” means the occurrence of any of the following events: (a) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (other than the Warrant Holders or any of its affiliates) (i) shall, directly or indirectly, have acquired beneficial ownership or control of (x) 35% or more on a fully diluted basis of (1) the voting interests in the Equity Interests in Holdings and/or (2) the economic interests in the Equity Interests in Holdings, or (ii) shall, directly or indirectly, have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Holdings (b) except to the extent a merger or consolidation transaction is expressly permitted by Section 9.2.4 or a liquidation or dissolution of a domestic Wholly-Owned Subsidiary of a Borrower is expressly permitted by Section 9.2.4, Holdings ceases to, directly or indirectly, own and control 100% of each class of the outstanding Equity Interests of each Subsidiary of each other Loan Party; (c) a "Change of Control" or comparable term as that term is defined in the Acquisition Term Loan Agreement occurs; (d) a change in the majority of the directors of Holdings during any 24 month period, unless approved by the majority of directors serving at the beginning of such period; (e) the sale or transfer of all or substantially all assets of any Borrower (other than as a result of a transaction permitted by Section 9.2.4); (f) Daniel Friedberg is no longer the chairman of the board of directors (or similar governing body) of Holdings performing the same or similar role that he is performing on the First Amendment Effective Date; provided, that, to the extent Daniel Friedberg dies or becomes incapacitated and is no longer able serve in such capacity, the Borrowers shall have ninety (90) days to select a replacement reasonably satisfactory to the Administrative Agent; (g) Daniel Friedberg sells or otherwise transfers, directly or indirectly, any Equity Interests in Holdings (other than any transfer into an investment vehicle that is 100% owned and controlled Daniel Friedberg solely for estate planning purposes) to the extent that immediately after giving effect to such sale or transfer Daniel Friedberg would own and control, directly or indirectly, less than $2,000,000 of Equity Interests of Holdings (measured at the fair market value at the time of such sale or transfer); provided, however, that this clause (g) shall only apply so long as it applies in the Acquisition Term Loan Agreement; or (h) any Person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) (other than the Warrant Holders or any of its affiliates) other than Daniel Friedberg has the power, directly or indirectly, to appoint more than one (1) director to the board of directors of Holdings.

 

Charges” – as defined in subsection 3.1.3.

 

Closing Date” – the date on which all of the conditions precedent in Section 10 are satisfied or waived and the initial Loan is made or the initial Letter of Credit is issued under this Agreement.

 

Code” – the Internal Revenue Code of 1986.

 

Collateral” – all of the Property and interests in Property described in Section 6, and all other Property and interests in Property that now or hereafter secure the payment and performance of any of the Obligations.

 

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Collateral Agent” – as defined in the preamble to this Agreement and any successor in that capacity appointed pursuant to Section 12.8.

 

Commodity Exchange Act” – the Commodity Exchange Act (7 U.S.C. §1 et seq.), as amended from time to time, and any successor statute.

 

Competitor” means any Person that is a bona fide direct operating company competitor or vendor of, and in the same industry (or an industry offering a substitute product or service) and market as, the Borrowers and its Subsidiaries.

 

Compliance Certificate” – a Compliance Certificate in substantially the form of Exhibit A to the First Amendment.

 

Computation Period” – each period of four (4) consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter.

 

Computer Hardware and Software” – all of any Borrower’s rights (including rights as licensee and lessee) with respect to (i) computer and other electronic data processing hardware, including all integrated computer systems, central processing units, memory units, display terminals, printers, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories, peripheral devices and other related computer hardware; (ii) all Software and all software programs designed for use on the computers and electronic data processing hardware described in clause (i) above, including all operating system software, utilities and application programs in any form (source code and object code in magnetic tape, disk or hard copy format or any other listings whatsoever); (iii) any firmware associated with any of the foregoing; and (iv) any documentation for hardware, Software and firmware described in clauses (i), (ii) and (iii) above, including flow charts, logic diagrams, manuals, specifications, training materials, charts and pseudo codes.

 

Connection Income Taxes” – Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

Consolidated” – the consolidation in accordance with GAAP of the accounts or other items as to which such term applies.

 

Consolidated EBITDA” – for any period, the sum of (a) EBITDA for such period, plus, (b) to the extent a Permitted Acquisition or permitted Asset Disposition has been consummated during such period (each, a “Subject Transaction”), Consolidated EBITDA shall be calculated with respect to such period on a pro forma basis (which pro forma adjustments shall be certified by a Chief Financial Officer of Quest and may only be included in determining such compliance to the extent approved by Administrative Agent in its reasonable discretion) using the historical financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of Holdings and its Subsidiaries, which shall be reformulated as if such Subject Transaction, and any Debt incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Debt bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period); provided, that, notwithstanding anything to the contrary in this Agreement, any adjustments specified in this clause (b) shall be subject to the approval of Administrative Agent in its reasonable discretion for all purposes of this Agreement or shall be supported by a quality of earnings report from a reputable third party reasonably acceptable to the Administrative Agent (the foregoing calculation of Consolidated EBITDA in this clause (b), “Pro Forma EBITDA”); provided, that, in no event shall the aggregate amount of addbacks and adjustments set forth in clauses (a)(xv), (a)(xvi), (a)(xix) and (a)(xx) of the definition of EBITDA when combined with adjustments taken in calculating Pro Forma EBITDA exceed twenty percent (20%) of Consolidated EBITDA in any period (calculated after giving effect to any such addbacks and adjustments).

 

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Consolidated Net Income” – with respect to Holdings and its Subsidiaries for any period, in each case as determined in accordance with GAAP, the consolidated net income (or loss) of Holdings and its Subsidiaries for that period, excluding (a) any gains from Asset Dispositions; (b) any extraordinary gains; (c) the income (or loss) of any Loan Party during that period in which any other Person has a joint interest, except to the extent of the amount of cash dividends or other distributions actually paid in cash to that Loan Party during that period; (d) the income (or loss) of any Person during that period and accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with a Loan Party or that Person’s assets are acquired by a Loan Party; (e) the income of any Loan Party to the extent that the declaration or payment of dividends or similar distributions by that Loan Party of that income is not at the time permitted by operation of the terms of its organizational documents, its governing documents, or any agreement, instrument, judgment, decree, order, statute, rule; or governmental regulation applicable to that Loan Party; and (f) any gains from discontinued operations.

 

Contingent Liability” – with respect to any Person, each obligation and liability of that Person and all such obligations and liabilities of that Person incurred pursuant to any agreement, undertaking or arrangement by which that Person: (a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection), including any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (b) guarantees the payment of dividends or other distributions upon the Equity Interests of any other Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor, (ii) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions, or otherwise), or to maintain solvency, assets, level of income, working capital, or other financial condition of any other Person, or (iii) to make payment to any other Person other than for value received; (d) agrees to lease property or to purchase securities, property, or services from any other Person with the purpose or intent of assuring the owner of that indebtedness or obligation of the ability of that other Person to make payment of the indebtedness or obligation; (e) to induce the issuance of, or in connection with the issuance of, any letter of credit for the benefit of any other Person; or (f) undertakes or agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability will (subject to any limitation set forth in this Agreement) be deemed to be the outstanding principal amount (or maximum permitted principal amount, if larger) of the indebtedness, obligation or other liability guaranteed or supported thereby.

 

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Contract Right” – any right of any Borrower to payment under a contract for the sale or lease of goods or the rendering of services, which right is at the time not yet earned by performance.

 

Contributing Guarantor” – as defined in Section 15.2.

 

Control Agreement” – each deposit account control agreement or securities account control agreement, as applicable, entered into by a Loan Party, each depository institution or securities intermediary party thereto and Administrative Agent in form and substance reasonably satisfactory to Administrative Agent.

 

Controlled Group” – all members of a controlled group of corporations, all members of a controlled group of trades or businesses (whether or not incorporated) under common control and all members of an affiliated service group which, together with any Loan Party or any Subsidiary of a Loan Party, are treated as a single employer under Section 414 of the Code or Section 4001 of ERISA.

 

Curative Equity” – the making of capital contributions to Holdings or the issuance of common Equity Interests by Holdings (other than Disqualified Equity Interests), in each case that are concurrently contributed to one or more Borrowers, for the purposes of, and in accordance with, Section 11.6.

 

Cure Date” – if an Excess Availability Triggering Event has occurred, the date on which another Excess Availability Triggering Event has not occurred for ninety (90) consecutive calendar days.

 

Debt” – of any Person, without duplication, (a) all indebtedness of that Person for borrowed money; (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of that Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of that Person in accordance with GAAP; (d) all obligations of that Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business); (e) all indebtedness secured by a Lien on the property of that Person, whether or not that indebtedness has been assumed by that Person, but if that Person has not assumed or otherwise become liable for that indebtedness, then that indebtedness will be measured at the fair market value of the property securing that indebtedness at the time of determination; (f) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn), bankers’ acceptances, and similar obligations issued for the account of that Person; (g) [reserved]; (h) all Contingent Liabilities of that Person; (i) all Debt of any partnership of which that Person is a general partner; (j) all earn-outs and similar obligations; (k) all monetary obligations under any receivables factoring, receivable sale, or similar transactions and all monetary obligations under any synthetic lease, tax ownership/operating lease, off-balance sheet financing, or similar financing; (l) any Disqualified Equity Interests of that Person or other equity instrument of that Person, whether or not mandatorily redeemable, that under GAAP is characterized as debt, whether pursuant to financial accounting standards board issuance No. 150 or otherwise; and (m) Derivative Obligations.

 

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Debt to be Repaid” – the Debt listed on Schedule 9.2.1.

 

Default” – an event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default.

 

Default Rate” – as defined in subsection 3.1.2.

 

Defaulting Lender” – subject to Section 4.11, any Lender that (i) has failed to (a) fund all or any portion of its Loans within two (2) Business Days of the date such Loans were required to be funded hereunder, or (b) pay to Administrative Agent, Issuing Bank or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit) within two (2) Business Days of the date when due, (ii) has notified the Loan Parties, Administrative Agent or Issuing Bank in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable Default or Event of Default, shall be specifically identified in such writing or public statement) cannot be satisfied), (iii) has failed, within three (3) Business Days after written request by Administrative Agent or the Loan Parties, to confirm in writing to Administrative Agent and the Loan Parties that it will comply with its prospective funding obligations hereunder; provided, that such Lender shall cease to be a Defaulting Lender pursuant to this clause (iii) upon receipt of such written confirmation by Administrative Agent and the Loan Parties, or (iv) has, or has a direct or indirect parent company that has, (a) become the subject of a proceeding under any Insolvency Law or (b) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other Governmental Authority acting in such a capacity or (c) become the subject of a Bail-In Action; provided, that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (i) through (iv) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 4.11) upon delivery of written notice of such determination to the Loan Parties, Issuing Bank and each Lender.

 

Derivative Obligations” – every obligation of a Person under any forward contract, futures contract, exchange contract, swap, option or other financing agreement or arrangement (including, without limitation, caps, floors, collars and similar agreement), the value of which is dependent upon interest rates, currency exchange rates, commodities or other indices.

 

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Derivative Obligations Provider” – Administrative Agent, Bank, any Lender or any Affiliate of Administrative Agent, Bank or any Lender to whom a Derivative Obligation is owed from any Loan Party.

 

Derivative Obligations Reserve” – the aggregate amount of Reserves established by Collateral Agent from time to time in respect of Derivative Obligations.

 

Dilution” – as of any date of determination, a percentage, which is the result of dividing (a) actual bad debt write-downs, discounts, advertising allowances, credits, and any other items with respect to the accounts determined to be dilutive by the Collateral Agent in its discretion during the applicable period by (b) the Borrowers’ gross sales during such period (excluding extraordinary items) plus the amount of clause (a).

 

Disqualified Equity Interest” – any Equity Interest (other than the Warrants) that, by its terms (or by the terms of any security or other Equity Interest into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition, in each case before the date that is 180 days after the Revolving Credit Maturity Date, (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking-fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event are subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Revolving Credit Commitments); (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part; (c) provides for the scheduled payments of dividends in cash or (d)  is or becomes convertible into or exchangeable for Debt or any other Equity Interests that would constitute Disqualified Equity Interests.

 

Distribution” – in respect of any Person means and includes: (i) the payment of any dividends or other distributions on Equity Interests and (ii) the redemption or acquisition of Equity Interests of such Person, as the case may be, unless made contemporaneously from the net proceeds of the sale of Equity Interests.

 

EBITDA” – for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income for such period (other than in the case of clauses (a)(xvi) and (a)(xviii)) and without duplication, the sum of:

 

(a)       

 

(i)                 Interest Expense, net of interest income, plus

 

(ii)              income, profits or franchise tax expense, plus

 

(iii)            depreciation and amortization (including amortization of intangible assets and amortization of deferred financing fees or costs), plus

 

(iv)             transaction expenses not capitalized and incurred on or before the First Amendment Effective Date or within one hundred eighty (180) days after the First Amendment Effective Date in connection with the Green Remedies Transactions in an aggregate amount not to exceed $1,400,000, plus

 

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(v)           non-recurring transaction fees, expenses and costs (including, without limitation, any of their respective advisors, legal counsels, agents or representatives) incurred in connection with the administration of, any amendment to or any consent or waiver under, the Loan Documents in an aggregate amount not to exceed $250,000 in any Fiscal Year, plus

 

(vi)           non-cash charges related to the impairment of goodwill, plus

 

(vii)          fees and expenses of Holdings payable in cash during such period to reimburse the costs and expenses of the board of directors (or other similar governing bodies) of Holdings; provided the aggregate amount of this clause (vii) shall not exceed $50,000 in any Fiscal Year, plus

 

(viii)        non-cash expenses related to compensation arrangements pursuant to the grant of stock or other equity interest-based compensation and any option plan, plus

 

(ix)           non-cash charges and expenses related to purchase accounting adjustments, plus

 

(x)            other non-cash charges, expenses and losses (other than with respect to accounts receivable and/or inventory), plus

 

(xi)           non-recurring fees and transaction expenses not capitalized and incurred in connection with any consummated Permitted Acquisition (whether on or prior to the closing date of such Permitted Acquisition or within one hundred eighty (180) days after such closing date) in an aggregate amount not to exceed $500,000 per Fiscal Year, plus

 

(xii)          non-recurring fees and transaction expenses not capitalized and incurred in connection with any unconsummated Permitted Acquisition in an aggregate amount not to exceed $250,000 per Fiscal Year, plus

 

(xiii)          indemnification expenses that are actually reimbursed in cash by a third party and documented with notification to the Administrative Agent, plus

 

(xiv)         expenses incurred to replace or repair tangible assets of the Holdings and its Subsidiaries to the extent actually reimbursed or with respect to which Borrowers have determined that a reasonable basis exists for reimbursement (and for which the applicable insurer has not rejected the claim), in each case in cash by third party insurance and only to the extent that such amount is in fact reimbursed within one hundred eighty (180) days of such expenses being incurred (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within such one hundred eighty (180) days), plus

 

(xv)           reasonable and documented integration costs in connection with Permitted Acquisitions in an aggregate amount not to exceed $250,000 per Fiscal Year, plus

 

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(xvi)         general non-recurring and pro forma synergies, operating improvements, cost savings or restructurings (collectively, “Cost Savings”) of the business of Borrowers resulting from actions of Borrowers already taken and to the extent satisfactory to the Administrative Agent and Borrowers determine in good faith that such Cost Savings are reasonable and are factually supportable, as set forth in a certificate signed by the Senior Officer of the Borrowers or Holdings certifying that (1) such Cost Savings are expected to have a continuing impact and are reasonably identifiable and quantifiable (without duplication of the amount of actual benefits realized during such period from such action) and (2) such Cost Savings are reasonably anticipated to be realized within 6 months; plus

 

(xvii)      all non-cash charges of the Borrowers and Holdings relating to earn-outs and contingent acquisition consideration or changes in the valuation thereof to the extent related to Permitted Acquisitions; plus

 

(xviii)    cash proceeds from any business interruption insurance covering lost profits to the extent not already included in the calculation of Consolidated Net Income, plus

 

(xix)         non-recurring expenses or losses (other than with respect to lost profit, lost revenue or similar losses) attributable to the COVID-19 pandemic or a related epidemiological event in an aggregate amount not to exceed $250,000 during the term of this Agreement, plus

 

(xx)           other extraordinary, unusual, or non-recurring expenses or losses not to exceed $250,000 in any Fiscal Year (or such greater amount to the extent approved in writing by Administrative Agent), plus

 

(xxi)         non-recurring transaction fees, expenses and costs (including, without limitation, any of their respective advisors, legal counsels, agents or representatives) incurred in connection with any transactions in the public markets in an aggregate amount not to exceed $250,000 in any Fiscal Year; plus

 

(xxii)      non-recurring reasonable, documented charges and expenses related to recruiting expenses (including relocation and moving expenses), signing bonuses, severance expenses, restructuring, business separation expenses, office relocation, moving, lease termination and other, related expenses, in an aggregate amount not to exceed $250,000 per fiscal year, plus

 

(xxiii)    costs and expenses for non-recurring IT related projects and upgrades not to exceed $750,000 (subject to the proviso at the end of this definition) in the aggregate during the term of this Agreement;

 

minus

 

(b)      to the extent included in determining the Consolidated Net Income of Holdings and its Subsidiaries, all non-cash gains;

 

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provided, that, notwithstanding anything to the contrary contained herein (1) in no event shall the aggregate amount of addbacks and adjustments set forth in clauses (a)(xv), (a)(xvi), (a)(xix), (a)(xx), (a)(xxii) and (a)(xxiii) (but, solely with respect to clause (a)(xxiii), the only amounts included in such aggregate cap shall be amounts above $250,000) and in calculating Pro Forma EBITDA exceed 20% of Consolidated EBITDA in any period (calculated after giving effect to any such addbacks and adjustments) and (2) in any event, EBITDA shall not include (x) any addback resulting from any lost revenue, earnings, margins or associated costs and expenses due to the COVID-19 pandemic or other similar epidemiological event (other than those expressly set forth in clause (a)(xix) above), (y) any addback with respect to any write-down or write-off of inventory or accounts receivable or (z) any income or reduction in expense attributable to Debt funded under the CARES Act attributed to IAS whether acknowledged as grant income pursuant to IAS 20, or a contribution pursuant to ASC 958-605 or otherwise. Notwithstanding the foregoing, for each calendar month set forth in Schedule 1.1 to the First Amendment, EBITDA for all purposes shall be deemed to be the amount set forth in Schedule 1.1 to the First Amendment opposed such month.

 

EEA Financial Institution” – (i) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (ii) any entity established in an EEA Member Country which is a parent of an institution described in clause (i) of this definition, or (iii) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (i) or (ii) of this definition and is subject to consolidated supervision with its parent.

 

EEA Member Country” – any of the member states of the European Union, Iceland, Liechtenstein and Norway.

 

EEA Resolution Authority” – any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

Eligible Account” – an Account arising in the ordinary course of the business of any of the Borrowers from the sale of goods or rendition of services which Collateral Agent, in its reasonable credit judgment, deems to be an Eligible Account. Without limiting the generality of the foregoing, no Account shall be an Eligible Account if:

 

(i)       it arises out of a sale made or services rendered by a Borrower to a Subsidiary of a Loan Party or an Affiliate of a Loan Party or to a Person controlled by an Affiliate of a Loan Party; or

 

(ii)       it remains unpaid more than ninety (90) days after the original invoice date shown on the invoice; or

 

(iii)       the total unpaid Accounts of (a) any Account Debtor which has a rating of “BBB” or better from S&P exceeds 40% of the total value of total Accounts, but only to the extent of such excess or (b) any other Account Debtor exceeds 25% of the total value of total Accounts, but only to the extent of such excess; or

 

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(iv)       any covenant, representation or warranty contained in this Agreement with respect to such Account has been breached; or

 

(v)       the Account Debtor is also a creditor or supplier of a Loan Party or any Subsidiary of a Loan Party, or the Account Debtor has disputed liability with respect to such Account, or the Account Debtor has made any claim with respect to any other Account due from such Account Debtor to a Loan Party or any Subsidiary of a Loan Party, or the Account otherwise is or may become subject to right of setoff by the Account Debtor; provided that any such Account shall be eligible to the extent such amount thereof exceeds such contract, dispute, claim, setoff or similar right; or

 

(vi)       the Account Debtor has commenced a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or made an assignment for the benefit of creditors, or a decree or order for relief has been entered by a court having jurisdiction in the premises in respect of the Account Debtor in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other petition or other application for relief under the federal bankruptcy laws, as now constituted or hereafter amended, has been filed against the Account Debtor, or if the Account Debtor has failed, suspended business, ceased to be Solvent, or consented to or suffered a receiver, trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its assets or affairs; or

 

(vii)       it arises from a sale made or services rendered to an Account Debtor outside the United States, unless the sale is either (a) to an Account Debtor located in Ontario or any other province of Canada in which the Personal Property Security Act has been adopted in substantially the same form as currently in effect in Ontario so long as the aggregate amount does not exceed $500,000 or (b) backed by a letter of credit from an issuer acceptable to Collateral Agent; or

 

(viii)       (a) it arises from a sale to the Account Debtor on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, or any other repurchase or return basis; or (b) it is subject to a reserve established by a Borrower for potential returns or refunds, to the extent of such reserve or (c) it arises from a sale to an Account Debtor that is subject to cash-on-delivery terms; or

 

(ix)       the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless the applicable Borrower assigns its right to payment of such Account to Collateral Agent, in a manner satisfactory to Collateral Agent, in its reasonable credit judgment, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C. §203 et seq., as amended); or

 

(x)       it is not at all times subject to Administrative Agent’s duly perfected, first-priority security interest or is subject to a Lien that is not a Permitted Lien; or

 

(xi)       the goods giving rise to such Account have not been delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been performed by the applicable Borrower and accepted by the Account Debtor or the Account otherwise does not represent a final sale; or

 

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(xii)       the applicable Borrower has not sent a bill or invoice for the goods or services giving rise to such Account to the applicable Account Debtor; or

 

(xiii)       the Account is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment; or

 

(xiv)       the applicable Borrower has made any agreement with the Account Debtor for any extension, compromise, settlement or modification of the Account or deduction therefrom, except for discounts or allowances which are made in the ordinary course of business for prompt payment and which discounts or allowances are reflected in the calculation of the face value of each invoice related to such Account; or

 

(xv)       50% or more of the Accounts owing from the Account Debtor are not Eligible Accounts hereunder; or

 

(xvi)       the applicable Borrower has made an agreement with the Account Debtor to extend the time of payment thereof; or

 

(xvii)       it represents service charges, late fees or similar charges; or

 

(xviii)       the relevant underlying documentation relating to such Account and payment of such Account provides or otherwise specifies that all or any portion of the payment regarding such Account is to be made by a Borrower to or is for the benefit of any vendor of or contractor for such Borrower creates an express trust on such Borrower for the benefit of any vendor of or contractor for such Borrower or any express obligation on such Borrower to pay all or any portion of the payment of the Account to any vendor of or contractor for such Borrower; provided that any such Account shall be eligible to the extent of any such amount thereof which exceeds such express trust or express obligation; or

 

(xix) it is an Account owing from an Account Debtor located in a state where the applicable Borrower is not qualified to do business so long as such failure to so qualify prevents such Borrower from bringing an action in such state to seek judicial recovery of such Account; or

 

(xxi)       it arises from the sale or lease of Equipment until such time as such sale and lease agreement has been reviewed by Administrative Agent and confirmation that such any such Account that arises from such sale or lease of Equipment constitutes ABL Priority Collateral under the Intercreditor Agreement; or

 

(xx)       it is not otherwise acceptable to Collateral Agent in its reasonable credit judgment.

 

The amount of Eligible Accounts owed by an account debtor to such Borrower shall be reduced by the amount of all “contra accounts” and other obligations owed by any Borrower to such account debtor and by the aggregate amount of all cash received in respect of such account but not yet applied by Borrowers to reduce the amount of such Eligible Accounts. Accounts which are at any time Eligible Accounts, but which subsequently fail to meet any of the foregoing requirements shall, at such time, cease to be Eligible Accounts.

 

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Eligible Machinery and Equipment” – as of any date of determination, all Equipment that:

 

(i) is owned by a Borrower free and clear of all Liens other than (a) Liens in favor of Administrative Agent securing the Obligations and (b) Permitted Liens;

 

(ii) is installed in a facility owned or leased by the applicable Borrower in the United States and, if installed at a leased location, either (a) a satisfactory landlord waiver has been delivered to Administrative Agent (except if such Equipment is leased or rented or will be leased or rented to a customer of a Borrower and located at such customer’s location so long as if and when such lease or rental occurs Borrower has provided to Administrative Agent the address where such Equipment is located) or (b) Reserves reasonably satisfactory to Collateral Agent have been established with respect thereto;

 

(iii) is in good operating condition (ordinary wear and tear excepted);

 

(iv) is not obsolete or surplus Equipment;

 

(v) is covered by casualty and liability insurance required by this Agreement;

 

(vi) is subject to a first-priority perfected Lien in favor of Administrative Agent;

 

(vii) does not consist of automobiles or other Equipment subject to a certificate of title statute;

 

(viii) has an estimated remaining useful life of at least five years;

 

(ix) as to which an appraisal has been completed (which may be a desktop or other similar, short-form appraisal, to the extent determined by Collateral Agent) on such Equipment, prepared by an appraiser retained by Collateral Agent; and

 

(x) either (i) consists of compactors or revenue-producing Equipment or (ii) such other Equipment Administrative Agent approves in its reasonable discretion.

 

Eligible Unbilled Accounts” – an Account of any Borrower (i) for which the applicable Borrower intends to send a bill or invoice for the goods or services giving rise to such Account within thirty (30) days of the date of the applicable Borrowing Base Certificate, (ii) which would otherwise constitute an Eligible Account but for the fact that such Account does not comply with clause (ii), (iii), (xii) or (xv) of the definition thereof, and (iii) the eligibility of which to be billed within such period of thirty (30) days is not subject to completion of any further performance by the applicable Borrower.

 

Environmental Agreement” – each agreement of the Loan Parties with respect to any real estate subject to a Mortgage, pursuant to which Loan Parties agree to indemnify and hold harmless Administrative Agent and Lenders from liability under any Environmental Laws.

 

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Environmental Claims” – all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release of Hazardous Substances or injury to the environment.

 

Environmental Laws” – all present or future federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative or judicial orders, consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authority, in each case relating to any matter arising out of or relating to public health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission, release, threatened release, control or cleanup of any Hazardous Substance.

 

Environmental Notice” – a notice (whether written or oral) from any Governmental Authority or other Person with credible knowledge of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint, summons, citation, order, claim, demand or request for correction, remediation or otherwise.

 

Environmental Release” – a release as defined in CERCLA or under any other Environmental Law.

 

Equity Interests” – with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of that Person’s equity capital, whether now outstanding or issued or acquired after the Closing Date, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership, interests in a trust, interests in other unincorporated organizations, or any other equivalent of any such ownership interest.

 

ERISA” – the Employee Retirement Income Security Act of 1974, as amended, and any successor statute, and all rules and regulations from time to time promulgated thereunder.

 

EU Bail-In Legislation Schedule” – the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

Event of Default” – means any of the events described in Section 11.1.

 

Excess Availability” – on any specific date, an amount equal to (a) the Line Cap, minus (b) the Aggregate Revolving Extensions, plus (c) unrestricted cash in accounts of any Borrower maintained with Administrative Agent or any Affiliate of Administrative Agent in which Administrative Agent has a first-priority perfected Lien pursuant to an executed Control Agreement in form and substance satisfactory to Administrative Agent, in its reasonable discretion, provided that for the purpose of this definition, the amount in this clause (c) shall be equal to PEG Balance (but in any event not to exceed $1,000,000, as such amount may be increased by the Administrative Agent in its sole discretion); provided, however, trade payables greater than 60 days old shall only be included as a Reserve for the purposes of reducing the Borrowing Base in determining the amount of the Line Cap for this definition on the Closing Date only.

 

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Excess Availability for Applicable Margin” – on any specific date, an amount equal to (a) the Line Cap, minus (b) the Aggregate Revolving Extensions.

 

Excess Availability Triggering Event” – at any time in which Excess Availability is less than the greater of (i) twenty percent (20%) of the Revolving Credit Commitment and (ii) twenty percent (20%) of the Borrowing Base for five consecutive Business Days.

 

Excess Derivative Obligations” – Derivative Obligations in excess of the Derivative Obligations Reserve.

 

Exchange Act” – the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

Excluded Deposit Accounts” means (i) deposit accounts the balance of which consists exclusively of (A) withheld income taxes and federal, state or local employment taxes required to be paid to the Internal Revenue Service or state or local government agencies with respect to employees of any of the Loan Parties and their Subsidiaries and (B) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3 102 on behalf of or for the benefit of employees of any of the Loan Parties and their Subsidiaries; (ii) all segregated deposit accounts constituting (and the balance of which consists solely of funds set aside in connection with) payroll accounts, trust accounts, and accounts dedicated to the payment of accrued employee benefits, medical, dental and employee benefits claims to employees of any of the Loan Parties and their Subsidiaries and (iii) solely for the first 30 days following the Closing Date, the deposit account owned by Landfill and held at Capital One with account number 00005732385225 so long as the cash balance in such account does not exceed $50,000 at any time.

 

Excluded Property” – (i) any rights or interest in any contract, lease, permit, license, or license agreement covering real or personal property of any Loan Party if (A) under the terms of that contract, lease, permit, license, or license agreement or applicable law with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under the terms of that contract, lease, permit, license, or license agreement (other than to the extent any such contract, lease, permit, license or license agreement has been entered into in contemplation hereof or as a means of circumventing the requirements under this Agreement or under the other Loan Documents) and (B) that prohibition or restriction has not been waived or the consent of the other party to that contract, lease, permit, license, or license agreement has not been obtained; (ii) any asset with respect to which the costs of obtaining, perfecting, or maintaining a security interest in that asset exceeds the fair market value thereof or the benefit to the Lenders and the Issuing Bank afforded thereby (as determined by Administrative Agent in consultation with Borrower Representative), (iii) any United States intent-to-use trademark application, but only to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability of that intent-to-use trademark application under applicable federal law; and (iv) pledges or deposits permitted to be made in connection with Permitted Liens; provided, however, if any Excluded Property does not constitute Excluded Collateral (as defined in the Acquisition Term Loan Agreement), it shall not constitute Excluded Property hereunder.

 

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The exclusions of clauses (i) and (ii) of this definition do not (and are not to be construed to) apply to the extent that (i) any described prohibition or restriction is ineffective under the applicable anti-assignment provisions (including Section 9 406, 9 407, 9 408, or 9 409) of the UCC or other applicable law, or (ii) any consent or waiver has been obtained that would permit Administrative Agent’s security interest or lien to attach notwithstanding the prohibition or restriction on the pledge of the applicable contract, lease, permit, license, or license agreement

 

The exclusions of clauses (i) and (ii) of this definition do not (and are not to be construed to) limit, impair, or otherwise affect any of Administrative Agent’s or any Lenders continuing security interests in and liens upon any rights or interests of any Loan Party in or to (x) monies due or to become due under or in connection with any described contract, lease, permit, license or license agreement (including any accounts or Equity Interests), or (y) any proceeds from the sale, license, lease, or other dispositions of any such contract, lease, permit, license or license agreement.

 

With respect to any intent-to-use trademark application excluded from the Collateral in accordance with clause (iii) of this definition, upon submission to and acceptance by the United States Patent and Trademark Office of a statement of use or an amendment to allege use pursuant to 15 U.S.C. § 1060(a) or any successor provision, that intent-to-use trademark application will be considered Collateral.]

 

Excluded Subsidiary” – any Subsidiary that is prohibited by requirements of applicable law, any contractual obligation or any organizational document (to the extent such contractual restriction exists on the Closing Date or on the date such Subsidiary becomes a direct or indirect Subsidiary of Holdings and not entered into in contemplation thereof or for the purposes of circumventing the requirements of the Loan Documents) from guaranteeing the Obligations or which would require approval, consent, license or authorization from a Governmental Authority (unless such approval, consent, license or authorization is received).

 

Excluded Swap Obligation” – with respect to any Loan Party, any guarantee of any Swap Obligations if, and only to the extent that and for so long as, all or a portion of the guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guarantee of such Loan Party or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

 

Excluded Taxes” – (i) taxes imposed on the income of Administrative Agent or any Lender by the jurisdiction of Administrative Agent’s or such Lender’s applicable lending office or any political subdivision thereof, (ii) franchise taxes imposed by the jurisdiction under the laws of which Administrative Agent or any Lender is organized or doing business or any political subdivision thereof, (iii) any withholding taxes attributable to a Lender’s failure to comply with subsection 3.11.3 and (iv) any United States federal withholding taxes imposed under FATCA.

 

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Fair Share” – as defined in Section 15.2.

 

Fair Share Contribution Amount as defined in Section 15.2.

 

FATCA” – Sections 1471, 1472, 1473 and 1474 of the Code, or any regulations promulgated thereunder or published administrative guidance implementing such sections.

 

Federal Funds Rate” – for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided 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 as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to BBVA USA on such day on such transactions as determined by the Administrative Agent.

 

Fee Letter” – as defined in Section 3.3.

 

Fee Payment Date” – the first Business Day of each month.

 

Fee Period” – (a) initially, the period from the Closing Date up to but not including the first Fee Payment Date, and (b) thereafter, each period from a Fee Payment Date up to but not including the next subsequent Fee Payment Date.

 

First Amendment” – that certain First Amendment to Loan, Security and Guaranty Agreement, dated as of the First Amendment Effective Date, by and among the Borrowers, the Guarantors, the Administrative Agent, the Collateral Agent and the Lenders party thereto from time to time.

 

First Amendment Effective Date” – October [__], 2020.

 

Fiscal Quarter” – a fiscal quarter of a Fiscal Year, which period is the 3-month period ending on the last day of each of March, June, September, and December of each year.

 

Fiscal Year” – the fiscal year of Holdings, which period will be the 12-month period ending on the last day of December of each year.

 

Fixed Charge Coverage Ratio” – for any period, the ratio for such period of (a) (1) EBITDA, minus (2) the sum of (A) income taxes paid or payable in cash by Holdings and its Subsidiaries and (B) all Capital Expenditures paid for with Internally Generated Cash, to (b) the sum for such period of (i) cash Interest Expense, plus (ii) scheduled principal payments of Debt (excluding earn-out payments) plus (iii) Restricted Payments, other than earn-out payments, paid in cash. For the purposes of determining the applicable amount described in clauses (a)(2)(A) and (b) above, for any period ending prior to the first anniversary of the First Amendment Effective Date, such amount shall be equal to the applicable amount paid (or, in the case of taxes, taxes payable or accrued) from the First Amendment Effective Date through the date of determination multiplied by a fraction, the denominator of which is the number of days from the First Amendment Effective Date through the date of determination and the numerator of which is 365 days (i.e., such amounts shall be annualized).

 

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Foreign Lender” – any Lender that is not a “United States person” as defined in Section 7701(a)(30) of the Code.

 

Fronting Exposure” – at any time there is a Defaulting Lender, with respect to the Issuing Bank, such Defaulting Lender’s Revolving Credit Lender’s Pro Rata Percentage of the outstanding LC Obligations with respect to Letters of Credit issued by the Issuing Bank other than LC Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Revolving Credit Lenders or cash collateralized in accordance with the terms hereof.

 

Funding Guarantor” – as defined in Section 15.2.

 

GAAP” – generally accepted accounting principles in the United States of America in effect from time to time.

 

Governmental Authority” – the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

 

Green Remedies” – Green Remedies Waste and Recycling, Inc., a North Carolina corporation.

 

Green Remedies Acquisition” – the acquisition by Quest or Holdings of assets of Green Remedies pursuant to the Green Remedies Acquisition Agreement.

 

Green Remedies Acquisition Agreement” – that certain Asset Purchase Agreement, dated as of October [___], 2020 (as amended, restated, supplemented or otherwise modified as permitted hereunder), by and among Quest, Holdings, Green Remedies and Alan Allred.

 

Green Remedies Seller Note” – that certain Unsecured Subordinated Promissory Note, dated as of the First Amendment Effective Date, executed by Holdings in favor of Green Remedies, in an original principal amount equal to $[______].

 

Green Remedies Seller Note Subordination Agreement” – that certain Subordination Agreement, dated as of the First Amendment Effective Date, between Green Remedies, the Agent and the Acquisition Term Agent and acknowledged by Holdings.

 

Green Remedies Transactions” – the execution, delivery and performance by Borrowers and the other Loan Parties of the First Amendment, the Acquisition Term Loan Agreement, the Green Remedies Acquisition Agreement and all other documents and agreements executed in connection with the execution of the foregoing, and all other transactions related to any of the foregoing and contemplated to have occurred on or as of the First Amendment Effective Date, including the Green Remedies Acquisition and the payment of premiums, fees and expenses in connection with the foregoing.

 

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Guaranteed Obligations” – as defined in Section 15.1.

 

Guarantors” – Holdings, Parent, Global Alerts, Vertigent, Vertigent One, Youchange, and each other Person who now or hereafter guarantees payment or performance of the whole or any part of the Obligations.

 

Guaranty Agreements” – each guaranty agreement (including this Agreement) executed by a Guarantor in favor of Administrative Agent guaranteeing payment or performance of the whole or any part of the Obligations, in each case as amended, restated, supplemented or otherwise modified from time to time.

 

Hazardous Substances” – hazardous waste, hazardous substance, pollutant, contaminant, toxic substance, oil, hazardous material, chemical, or other substance regulated by any Environmental Law.

 

Hedging Agreement” – any interest rate, currency or commodity swap agreement, cap agreement, collar agreement, spot foreign exchange, forward foreign exchange, foreign exchange option (or series of options) and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.

 

Hedging Obligation” means, with respect to any Person, any liability of that Person under any Hedging Agreement determined (a) for any date on or after the date that Hedging Agreement has been closed out and termination value determined in accordance therewith, using that termination value; and (b) for any date prior to the date referenced in clause (a), using the amount determined as the mark-to-market value for that Hedging Agreement, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in that Hedging Agreement.

 

Holdings” – as defined in the preamble to this Agreement.

 

IBA” – as defined in Section 1.6.

 

Indemnified Person” – as defined in Section 13.2.

 

Indemnified Taxes” – as defined in subsection 3.11.1.

 

Ineligible Lenders” means (a) those Persons set forth on Schedule 1.2, (b) any Competitor designated by the Borrower Representative (specifying such Competitor’s exact legal name) as an “Ineligible Lender” in a written notice (including an update to Schedule 1.2) that has been approved by the Administrative Agent in its reasonable discretion after the effectiveness of this Agreement and not less than five (5) Business Days prior to such date of determination, but which shall not apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans and/or Commitments as permitted herein and (c) any Affiliate of an Ineligible Lender described in clauses (a) and (b) of this definition that, without independent verification, investigation, or inquiry, is easily and obviously identifiable as an affiliate of such Person on the basis of its name; provided that, notwithstanding anything to the contrary in this definition, any bank or other financial institution, any Person that is a bona fide debt, equity, or asset investment entity, any other Person that makes, purchases, holds, manages, advises, or trades any debt, equity, or asset investments in the ordinary course of business, Administrative Agent and its Affiliates and/or Related Funds, any Person that merely has an economic interest in any “Ineligible Lender” but has not been designated as an “Ineligible Lender” hereunder, and any Person that Company has removed from its status as an “Ineligible Lender” in any written notice approved by Administrative Agent and delivered to Lenders from time to time, are, in each case, hereby excluded from this definition; provide, that, no Person shall be an Ineligible Lender to the extent a Specified Event of Default has occurred and is continuing.

 

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Initial Closing Date Transactions” – the initial incurrence of the Loans and other Obligations hereunder and under the other Loan Documents.

 

Insolvency Law” – collectively, the Bankruptcy Code, and any other insolvency, debtor relief or debt adjustment or similar law (whether state, provincial, territorial, federal or foreign).

 

Insolvency Proceeding” – any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief, or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

 

Intellectual Property” – all past, present and future: trade secrets, know-how and other proprietary information; trademarks, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs) and copyright registrations or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible property embodying the copyrights, unpatented inventions (whether or not patentable); patent applications and patents; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

 

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Intellectual Property Security Agreement” – any intellectual property collateral assignment pursuant to which any Loan Party grants to Administrative Agent, for the benefit of Lenders, a Lien on such Loan Party’s interest in its Intellectual Property as security for the Obligations, in each case as may be amended, restated, supplemented or otherwise modified from time to time.

 

Intercreditor Agreement” – that certain Intercreditor Agreement, dated as of the First Amendment Effective Date, by and among the Acquisition Term Agent, the Administrative Agent and the Loan Parties party thereto, as amended, modified, supplemented, restated, refinanced, refunded or replaced in whole or in part from time to time in accordance with the terms therein.

 

Interest Expense” – for any period, as determined in accordance with GAAP, the consolidated interest expense of Holdings and its Subsidiaries for that period (including all imputed interest on Capital Leases).

 

Interest Payment Date” – (a) (i) as to any Base Rate Revolving Credit Loan, the first Business Day of each month, and (ii) as to any Base Rate Term Loan, the first Business Day of each month, and (b) as to any LIBOR Loan, the last day of each Interest Period for such LIBOR Loan, and in addition, where the applicable Interest Period exceeds three months, the date every three months after the beginning of such Interest Period. If an Interest Payment Date falls on a date that is not a Business Day, such Interest Payment Date shall be deemed to be the immediately succeeding Business Day.

 

Interest Period” – relative to any LIBOR Loans: (a) initially, the period beginning on (and including) the date on which such LIBOR Loan is made or continued as, or converted into, a LIBOR Loan and ending on (but excluding) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in each case as Borrower Representative may select in its notice pursuant to Section 4.1; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such LIBOR Loan and ending one, two, or three months thereafter, as selected by Borrower Representative in accordance with Section 4.1; provided, however, that (i) all Interest Periods of the same duration which commence on the same date shall end on the same date; (ii) Interest Periods commencing on the same date for LIBOR Loans comprising part of the same advance under this Agreement shall be of the same duration; (iii) Interest Periods for LIBOR Loans in connection with which Borrowers have or may incur Derivative Obligations with Administrative Agent shall be of the same duration as the relevant periods set under the applicable underlying agreements; (iv) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day unless such day falls in the next calendar month, in which case such Interest Period shall end on the first preceding Business Day; and (v) no Interest Period may end later than the termination of this Agreement.

 

Internally Generated Cash” – with respect to any period, any cash of Holdings or any Subsidiary generated during such period as a result of such Person’s operations, excluding Net Cash Proceeds, Other Receipts, any cash generated from any issuance of Equity Interests (or cash generated from cash contributions to Holdings or any Subsidiary) and any cash proceeds received from an incurrence of Debt or any other liability.

 

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Investment” – with respect to any Person, any investment in another Person, whether by acquisition of any debt or Equity Interest, by making any loan or advance, by becoming obligated with respect to a Contingent Liability in respect of obligations of that other Person (other than travel and similar advances to employees in the ordinary course of business) or by making an Acquisition.

 

Issuer Documents” – with respect to any Letter of Credit, the LC Application, and any other document, agreement and instrument entered into by the Issuing Bank and any Borrower (or any Subsidiary) or in favor of the Issuing Bank and relating to such Letter of Credit.

 

Issuing Bank” – Administrative Agent, Bank or any other Affiliate of Administrative Agent or a Lender that issues a Letter of Credit hereunder.

 

Judgments” – as defined in subsection 11.1.14.

 

Landfill” – as defined in the preamble to this Agreement.

 

LC Amount” – at any time, the aggregate undrawn available amount of all Letters of Credit then outstanding plus the amount of LC Obligations that have not been reimbursed by Borrowers or funded with a Revolving Credit Loan.

 

LC Application” – an application, in such form as the Issuing Bank may specify from time to time, requesting the Issuing Bank to issue or amend a Letter of Credit.

 

LC Fee Payment Date” – the last day of each March, June, September and December and the Revolving Termination Date.

 

LC Obligations” – any Obligations that arise from any draw against any Letter of Credit.

 

LC Participants” – the collective reference to all the Revolving Credit Lenders other than the Issuing Bank.

 

LC Reimbursement Obligation” – the obligation of the Borrowers to reimburse the Issuing Bank pursuant to subsection 2.2.4 for amounts drawn under Letters of Credit.

 

LC Sublimit” – an amount not to exceed ten percent (10%) of the Revolving Credit Maximum Amount.

 

Lender(s)” – as defined in the preamble to this Agreement and each other Person who becomes a “Lender” hereunder, whether by assignment or otherwise.

 

Letter of Credit” – any standby letter of credit issued by Issuing Bank for the account of any Loan Party.

 

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LIBOR” – relative to any Interest Period for LIBOR Loans, a rate per annum obtained by dividing (a) the London Interbank Offered Rate, as determined by ICE Benchmark Administration Limited (or any successor or substitute therefor acceptable to Administrative Agent) for U.S. Dollar deposits with a term equivalent to such Interest Period as obtained by the Administrative Agent from Reuter’s, Bloomberg or another commercially available source as may be designated by the Administrative Agent from time to time (the “Screen Rate”), two (2) Business Days before the first day of such Interest Period, by (b) a number equal to 1.00 minus the LIBOR Reserve Percentage. Notwithstanding the foregoing, LIBOR shall not in any event be less than zero percent (0.00%).

 

LIBOR Loan Prepayment Fee” – as defined in subsection 4.1.9.

 

LIBOR Loans” – the LIBOR Revolving Credit Loans and/or the LIBOR Term Loans.

 

LIBOR Option” – the option granted pursuant to Section 4.1 to have the interest on all or any portion of the principal amount of the Revolving Credit Loans or any Term Loan Advance based on LIBOR.

 

LIBOR Reserve Percentage” – for any day, the percentage, as determined in good faith by the Administrative Agent, which is in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) representing the maximum reserve requirement (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to Eurocurrency funding (currently referred to as “Eurocurrency liabilities”) of a member bank in such System.

 

LIBOR Revolving Credit Loan” – any Revolving Credit Loan for the periods when the rate of interest applicable to such Revolving Credit Loan is calculated by reference to LIBOR.

 

LIBOR Term Loan” – any portion of the Term Loan for the periods when the rate of interest applicable to such portion of the Term Loan is calculated by reference to LIBOR.

 

Lien” – with respect to any Person, any interest granted by that Person in any real or personal property, asset, or other right owned or being purchased or acquired by that Person (including an interest in respect of a Capital Lease) that secures payment or performance of any obligation and includes any mortgage, lien, encumbrance, title retention lien, charge, or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process, or otherwise.

 

Line Cap” – at any time, the lesser of (i) the Revolving Credit Maximum Amount and (ii) the Borrowing Base.

 

Loan Account” – as defined in Section 4.6.

 

Loan Documents” – this Agreement, the Intercreditor Agreement, the Other Agreements and the Security Documents, in each case as amended, restated, supplemented or otherwise modified from time to time.

 

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Loan Parties” – means collectively, Borrowers and Guarantors and Loan Party means any one of them.

 

Loan Party Materials” – as defined in subsection 13.8.2.

 

Loans” – all loans and advances of any kind made by Administrative Agent, any Lender, or any Affiliate of Administrative Agent or any Lender, pursuant to this Agreement.

 

Majority Lenders” – as of any date, Lenders holding more than 50% of the Term Loan and Revolving Credit Commitments determined on a combined basis and following the termination of the Revolving Credit Commitments, Lenders holding more than 50% of the outstanding Loans and LC Obligations; provided that (i) if there are two or more Lenders which are not Affiliates, then at least two Lenders which are not Affiliates shall be required to constitute Majority Lenders and (ii) the Loans, Revolving Credit Commitments and LC Obligations held by any Defaulting Lender shall be excluded for purposes of determining Majority Lenders.

 

Margin Stock” – as defined in Regulation U of the Board of Governors.

 

Material Adverse Effect” – (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business, profitability, or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any of the Obligations under any Loan Document, (c) a material adverse effect upon any substantial portion of the Collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document or the ability of Administrative Agent to enforce or collect any Obligations or to realize upon any material portion of the Collateral, or (d) cancellation or termination of the agreements referenced in clauses (a) and (b) of the definition of “Voting Agreements”, other than by their terms.

 

Material Contract” – with respect to any Person, (a) the Related Agreements; (b) each contract or agreement to which that Person or any of its Subsidiaries is a party involving a customer of such Person that generates 15% or more of consolidated gross profit for such Person or its Subsidiaries in any Fiscal Year; (c) the Voting Agreements and (d) all other contracts or agreements as to which the breach, nonperformance, cancellation, or failure to renew by any party could reasonably be expected to have a Material Adverse Effect.

 

Maximum Rate” – as defined in subsection 3.1.3.

 

Moody’s” – Moody’s Investors Service, Inc., and its successors.

 

Mortgages” – each mortgage, security deed or deed of trust executed by a Borrower in favor of Administrative Agent, for the benefit of itself and Lenders, by which such Borrower grants to Administrative Agent, as security for the Obligations, a Lien upon the real Property of such Borrower described therein.

 

Mortgage-Related Documents” – with respect to any real property subject to a Mortgage, the following, in form and substance satisfactory to Administrative Agent: (a) a mortgagee title policy (or binder therefor) covering Administrative Agent’s interest under the Mortgage, in a form and amount and by an insurer acceptable to Administrative Agent, which must be fully paid on that effective date; (b) all assignments of leases, estoppel letters, attornment agreements, consents, waivers, and releases as Administrative Agent reasonably requires with respect to other Persons having an interest in the real estate; (c) a current, as-built survey of the real estate, containing a metes-and-bounds property description and certified by a licensed surveyor acceptable to Administrative Agent; (d) a life-of-loan flood hazard determination and, if the real estate is located in a flood plain, an acknowledged notice to borrower and flood insurance in an amount, with endorsements and by an insurer acceptable to Administrative Agent; (e) a current appraisal of the real estate, prepared by an appraiser acceptable to Administrative Agent, and in form and substance satisfactory to Administrative Agent; (f) an environmental assessment, prepared by environmental engineers acceptable to Administrative Agent, and accompanied by all reports, certificates, studies, or data as Administrative Agent reasonably requires, which must all be in form and substance satisfactory to Administrative Agent; and (g) an Environmental Agreement and all other documents, instruments, or agreements as Administrative Agent reasonably requires with respect to any environmental risks regarding the real estate.

 

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Multiemployer Plan” – a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Borrower or any other member of the Controlled Group may have any liability.

 

Net Cash Proceeds”:

 

(a)               with respect to any Asset Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance or by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by any Loan Party pursuant to that Asset Disposition net of (i) the direct costs relating to that sale, transfer or other disposition (including sales commissions and legal, accounting and investment banking fees); (ii) taxes paid or reasonably estimated by Borrowers to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements); and (iii) amounts required to be applied to the repayment of any Debt secured by a Lien on the asset subject to that Asset Disposition (other than the Loans);

 

(b)               with respect to any issuance of Equity Interests, the aggregate cash proceeds received by any Loan Party pursuant to that issuance, net of the direct costs relating to that issuance (including sales and underwriters’ commissions); and

 

(c)               with respect to any issuance of Debt, the aggregate cash proceeds received by any Loan Party pursuant to that issuance, net of the direct costs of that issuance (including up-front, underwriters’ and placement fees).

 

NOLV” – the net orderly liquidation value of Equipment, expressed as a dollar value for Equipment, to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent appraisal of Borrower’s Equipment performed by an appraiser and on terms satisfactory to Collateral Agent in its reasonable discretion.

 

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Notes” – the Revolving Credit Notes and the Term Loan Notes.

 

Obligations” – all Loans, LC Obligations, reimbursement and other obligations with respect to Letters of Credit and all other advances, debts, liabilities, obligations, covenants and duties, together with all interest, fees and other charges thereon (including all interest, fees and other charges accruing after the commencement of any Insolvency Proceeding), of any kind or nature, present or future, owing, arising, due or payable from any Borrower or any other Loan Party to Administrative Agent, any Lender, Issuing Bank, Bank or any of their respective Affiliates, arising under this Agreement or any of the other Loan Documents, whether direct or indirect (including those acquired by assignment), absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising and however acquired, including without limitation all Product Obligations; provided, that Obligations of any Loan Party shall not include any Excluded Swap Obligations solely of such Loan Party.

 

Obligee Guarantor” – as defined in Section 15.7.

 

Operating Lease” – any lease of (or other agreement conveying the right to use) any real or personal property by any Loan Party, as lessee, other than any Capital Lease.

 

Organizational I.D. Number” – with respect to any Person, the organizational identification number assigned to such Person by the applicable governmental unit or agency of the jurisdiction of organization of such Person.

 

Other Agreements” – each Borrowing Base Certificate, each Compliance Certificate, and any and all agreements, instruments and documents (other than this Agreement and the Security Documents), heretofore, now or hereafter executed by any Loan Party, any Subsidiary of a Loan Party or any other third party and delivered to Administrative Agent, any Lender or any Affiliate of any Agent or any Lender in respect of the transactions contemplated by this Agreement, including, without limitation, all agreements, instruments and documents relating to Product Obligations.

 

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

 

Other Receipts” – any cash received by or paid to or for the account of any Loan Party consisting of (a) representation and warranty insurance in connection with an acquisition, (b) escrow amounts released in connection with an acquisition, and (c) any purchase price adjustment received in connection with any purchase.

 

Overadvance” – as defined in subsection 2.1.2.

 

Paid in Full” – as defined in the Intercreditor Agreement.

 

Parent” – as defined in the preamble to this Agreement.

 

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Participant” – as defined in subsection 13.5.2.

 

Participation Register” – as defined in subsection 13.5.2.

 

Patriot Act” – the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

 

Payment Conditions” – with respect to any applicable transaction, (i) no Default or Event of Default shall exist immediately after giving effect to such transaction, (ii) the average of the Excess Availability amounts (calculated on a pro forma basis to include the making of any Loans or the issuance of any Letters of Credit in connection with such transaction) for each Business Day in the thirty (30) day period prior to such transaction shall be greater than or equal to the greater of (x) $3,000,000 and (y) 20% of the Line Cap, (iii) Excess Availability (calculated as set forth above) on the date of such proposed transaction shall be greater than or equal to the greater of (x) $3,000,000 and (y) 20% of the Line Cap, (iv) the Fixed Charge Coverage Ratio (calculated on a pro forma basis after giving effect to such transaction) for the most recently ended trailing twelve calendar month period shall not be less than 1.10 to 1.00 (but, solely for purposes of determining whether payments on the Closing Date Seller Note are permitted, the minimum Fixed Charge Coverage Ratio required under such Section shall be 1.25 to 1.00), (v) before and after giving effect to such transaction, the Loan Parties are in compliance with each of the financial covenants set forth in Section 9.2.12 as of the last day of the most recent Fiscal Quarter for which financial statements have been delivered pursuant to Section 9.1.3, and (vi) so long as the Acquisition Term Debt has not received Payment in Full (as defined in the Intercreditor Agreement), the payment conditions set forth in the Acquisition Term Loan Agreement have been satisfied.

 

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

 

PEG Balance” – with respect to any particular date, the amount held in the Borrowers’ main operating account held with the Administrative Agent.

 

Pension Plan” – a “pension plan,” as that term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA or the minimum funding standards of ERISA (other than a Multiemployer Pension Plan), and as to which any Borrower or any Subsidiary (including any contingent liability of any member of Borrowers’ 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 years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

Permitted Acquisition” means any Acquisition by any Loan Party (other than Holdings) where:

 

(d)               the business, division or assets acquired are for use, or the Person acquired is engaged, in the same or a related, adjacent or vertically integrated line of business engaged in by the Loan Parties on the First Amendment Effective Date;

 

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(e)               immediately before and after giving effect to that Acquisition, no Default or Event of Default exists;

 

(f)                the aggregate consideration (cash and non-cash) to be paid by the Loan Parties (including any Debt assumed or issued in connection therewith, the maximum amount payable in connection with any deferred purchase price obligation (including any earn-out obligation) and the value of any Equity Interests of any Loan Party issued to the seller in connection with that Acquisition) in connection with (i) that Acquisition (or any series of related Acquisitions) is less than $15,000,000, and (ii) all Acquisitions is less than $52,500,000;

 

(g)               in the case of the Acquisition of any Person, that Acquisition is non-hostile and the board of directors or similar governing body of that Person has approved that Acquisition;

 

(h)               not less than 15 Business Days prior to that Acquisition (or any later date approved by Administrative Agent in its sole discretion), Administrative Agent has received an acquisition summary with respect to the Person and/or business, division or assets to be acquired, which summary must include a reasonably detailed description thereof (including financial information) and operating results (including financial statements for the most recent 12-month period for which they are available and as otherwise available), the terms and conditions, including economic terms, of the proposed Acquisition, and Borrowers’ calculation of pro forma Consolidated EBITDA relating thereto;

 

(i)                 not less than five Business Days prior to that Acquisition (or any later date approved by Administrative Agent in its sole discretion), Administrative Agent has received complete executed or conformed copies of each material document, instrument and agreement to be executed in connection with that Acquisition together with all lien search reports and lien release letters and other documents as Administrative Agent reasonably requires to evidence the termination of Liens on the assets, business, or division to be acquired;

 

(j)                 the Senior Net Leverage Ratio on a pro forma basis immediately after giving effect to that Acquisition does not exceed (A) the maximum Senior Net Leverage Ratio permitted under Section 9.2.12(ii) for the most recently ended Fiscal Quarter immediately prior to that Acquisition minus (B) 0.25; provided, however, that, notwithstanding the foregoing, with respect to the Permitted Acquisition to be funded with the proceeds of the Term B Loan (as defined under the Acquisition Term Loan Agreement), the Term B Loan Leverage Condition (as defined under the Acquisition Term Loan Agreement) shall apply rather than this clause (g);

 

(k)               Borrowers’ computation of pro forma Consolidated EBITDA is reasonably satisfactory to Administrative Agent;

 

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(l)                 the business, division, assets or Person acquired generated positive EBITDA (calculated in a manner acceptable to Administrative Agent) for each of the twelve calendar months immediately preceding that Acquisition;

 

(m)             the Loan Parties shall have satisfied the Payment Conditions after giving effect to that Acquisition;

 

(n)               [Reserved]

 

(o)               Borrower Representative has provided Administrative Agent with pro forma forecasted balance sheets, profit and loss statements, and cash flow statements of Holdings and its Subsidiaries, all prepared on a basis consistent with Holdings’ and its Subsidiaries’ historical financial statements, subject to adjustments to reflect projected consolidated operations following the Acquisition;

 

(p)               Borrower Representative has provided Administrative Agent with reasonable calculations evidencing that on a pro forma basis created by adding the historical combined financial statements of Holdings and its Subsidiaries (including the combined financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the entity to be acquired (or the historical financial statements related to the division, business or assets to be acquired) pursuant to the Acquisition, subject to adjustments to reflect projected consolidated operations following the Acquisition, Holdings and its Subsidiaries are projected to be in compliance with the financial covenants for each of the twelve months ended one year after the proposed date of consummation of that Acquisition;

 

(q)               the provisions of Section 9.1.8 have been satisfied, including, without limitation, simultaneously with the closing of that Acquisition, the target company (if that Acquisition is structured as a purchase of equity) or a Loan Party (other than Holdings) (if that Acquisition is structured as a purchase of assets or a merger and a Loan Party (other than Holdings) is the surviving entity) executes and delivers to Administrative Agent (i) all documents necessary to grant to Administrative Agent a first-priority Lien (subject to the Intercreditor Agreement) in all of the assets of each of the target company or surviving company and its Subsidiaries, subject to the terms of the Intercreditor Agreement, each in form and substance reasonably satisfactory to Administrative Agent, and (ii) an unlimited guaranty of the Obligations, or at the option of Administrative Agent in Administrative Agent’s absolute discretion, a joinder agreement satisfactory to Administrative Agent in which each of the target company or surviving company and its Subsidiaries becomes a borrower under this Agreement and assumes primary joint and several liability for the Obligations;

 

(r)                if the Acquisition is structured as a merger, a Loan Party (other than Holdings) will be the surviving entity;

 

(s)                Administrative Agent has received a copy of the proposed capital structure after giving pro forma effect to such Acquisition;

 

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(t)                 to the extent readily available to Borrowers, Borrower Representative has provided Administrative Agent with all other information with respect to that Acquisition as reasonably requested by Administrative Agent (including, without limitation, all third-party due-diligence reports and quality-of-earnings reports);

 

(u)               solely for the purposes of determining whether any assets acquired in connection with such Acquisition shall be included in the Borrowing Base, Administrative Agent shall be satisfied with the results of a field exam, conducted at the Loan Parties’ expense, prior to the inclusion of any Accounts of the target company in the Borrowing Base; and

 

(v)               concurrently with the consummation of that Acquisition, a Senior Officer of the Borrower Representative shall have delivered to the Administrative Agent a certificate stating that the foregoing conditions in this definition have been satisfied.

 

Permitted Liens” – a Lien expressly permitted under this Agreement pursuant to Section 9.2.2.

 

Person” – an individual, partnership, corporation, limited liability company, joint stock company, land trust, business trust, or unincorporated organization, or a government or agency or political subdivision thereof.

 

Plan” – an employee benefit plan now or hereafter maintained for employees of any Loan Party or any of their Subsidiaries that is covered by Title IV of ERISA.

 

Platform” – as defined in subsection 13.8.2.

 

Pledge Agreements” – each pledge agreement executed by the Loan Parties or any one of them, as applicable, granting in favor of Administrative Agent, for the benefit of itself and Lenders, a Lien on the Equity Interests of the Subsidiaries of such Loan Party or Loan Parties, in each case as amended, restated, supplemented or otherwise modified from time to time.

 

Prime Rate” – the rate of interest quoted in the print edition of The Wall Street Journal, Money Rates Section as the Prime Rate (currently defined as the base rate on corporate loans posted by at least 75% of the nation’s thirty (30) largest banks), as in effect from time to time. If multiple Prime Rates are quoted in the Money Rates Section of The Wall Street Journal, then the highest Prime Rate will be the Prime Rate hereunder. In the event that the Prime Rate is no longer published by The Wall Street Journal in the “Money Rates” or similar table, then the Administrative Agent may select an alternative published index based upon comparable information as a substitute Prime Rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.

 

Pro Rata Percentage” – (i) with respect to each Revolving Credit Lender, the percentage equal to its Revolving Credit Commitment divided by the aggregate of all Revolving Credit Commitments and (ii) with respect to each Term Loan Lender, the percentage equal to its Term Loan Commitment divided by the aggregate of all Term Loan Commitments.

 

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Proceeding” – any investigation, inquiry, litigation, review, hearing, suit, claim, audit, arbitration, proceeding or action (in each case, whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any governmental authority or arbitrator.

 

Product Obligations” – every obligation of any Borrower or any other Loan Party under and in respect of any one or more of the following types of services or facilities extended to such Borrower or any other Loan Party by Bank, Administrative Agent, any Lender or any of their respective Affiliates: (i) credit cards, (ii) cash management or related services including the automatic clearing house transfer of funds for the account of such Borrower or any other Loan Party pursuant to agreement or overdraft, (iii) treasury management, including controlled disbursement services, (iv) Derivative Obligations, (v) commercial cards (including so-called “procurement cards” or “P-cards”), and (vi) supply chain financing and supply chain finance services (including, without limitation, trade payable services and supplier accounts receivable purchases).

 

Projections” – for Holdings and its Subsidiaries forecasted Consolidated (i) balance sheets, (ii) profit and loss statements, (iii) cash flow statements, and (iv) capitalization statements, prepared on a consistent basis with the historical financial statements of Holdings and its Subsidiaries, together with appropriate supporting details and a statement of underlying assumptions.

 

Property” – any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

Qualified ECP Guarantor” – in respect of any Swap Obligations, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Qualified Equity Interest” – any Equity Interest issued by Holdings (and not by one or more of its Subsidiaries) that is not a Disqualified Equity Interest.

 

Quarterly Average Excess Availability for Applicable Margin” – for any fiscal quarter, the average of the Excess Availability for Applicable Margin amounts for each Business Day during such fiscal quarter.

 

Quarterly Average Excess Availability for Applicable Margin Percentage” – for any fiscal quarter, Quarterly Average Excess Availability for Applicable Margin for such fiscal quarter divided by the Revolving Credit Maximum Amount as at the end of such fiscal quarter.

 

Quest” – as defined in the preamble to this Agreement.

 

Recipient” – (a) the Administrative Agent, (b) any Lender and (c) the Issuing Bank, as applicable.

 

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Register” – as defined in subsection 13.5.5.

 

Regulation U” – Regulation U of the FRB.

 

Related Agreements” – the Green Remedies Acquisition Agreement and all agreements, instruments, and documents executed or delivered in connection with the Green Remedies Agreement and the Green Remedies Acquisition.

 

Related Parties” – with respect to any specified Person, such Person’s Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

 

Report” – as defined in Section 12.9.

 

Reportable Event” – a reportable event as defined in Section 4043 of ERISA and the regulations issued thereunder as to which the PBGC has not waived the notification requirement of Section 4043(a), or the failure of a Pension Plan to meet the minimum funding standards of Section 412 of the Code (without regard to whether the Pension Plan is a plan described in Section 4021(a)(2) of ERISA) or under Section 302 of ERISA.

 

Requested Increase Amount” – as defined in subsection 2.4.1.

 

Requested Increase Effective Date” – as defined in subsection 2.4.1.

 

Reserves” – reserves in such amounts, and with respect to such matters, as Collateral Agent shall deem necessary or appropriate in its reasonable credit judgment exercised in good faith, against the Borrowing Base or Excess Availability, including without limitation with respect to (i) price adjustments, damages, unearned discounts, returned products or other matters for which credit memoranda are issued in the ordinary course of any Loan Party’s business; (ii) other sums chargeable against Borrowers’ Loan Account as Revolving Credit Loans under any section of this Agreement and any sales tax accruals as of the Closing Date until paid in full and evidence of the payment of such sales tax owing has been delivered to the Administrative Agent; (iii) amounts owing by any Loan Party to any Person to the extent secured by a Lien on, or trust over, any Property of any Loan Party which constitutes Collateral; (iv) amounts owing by any Loan Party in connection with Product Obligations (provided, on the Closing Date, Administrative Agent is not including a reserve for commercial cards, but reserves the right to add at any time in its reasonable discretion), including, without limitation, the Derivative Obligations Reserve; (v) rent for locations at which books, records, or Equipment is stored and as to which Administrative Agent has not received a satisfactory landlord’s agreement or bailee letter, as applicable; and (vi) such other specific events, conditions or contingencies as to which Collateral Agent, in its reasonable credit judgment exercised in good faith, determines reserves should be established from time to time hereunder; provided, that, notwithstanding the foregoing, Collateral Agent shall not establish any Reserves in respect of any matters relating to any items of Collateral that have been taken into account in determining Eligible Accounts or Eligible Unbilled Accounts, as applicable.

 

Restricted Payment” – as defined in Section 9.2.3.

 

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Restrictive Agreement” – an agreement (other than a Loan Document) that conditions or restricts the right of any Loan Party or any Subsidiary of any Loan Party to incur or repay Debt, to grant Liens on any assets, to declare or make Distributions, to modify, extend or renew any agreement evidencing Debt, or to repay any intercompany Debt.

 

Revolving Commitment Period” – the period after (and not including) the Closing Date to, but not including, the Revolving Termination Date.

 

Revolving Credit Commitment” – with respect to any Lender, the amount of such Lender’s Revolving Credit Commitment pursuant to subsection 2.1.1, as set forth next to such Lender’s name on Schedule 1 hereto, or any Assignment and Acceptance Agreement executed by such Lender.

 

Revolving Credit Commitments” – the aggregate amount of such commitments of all Lenders.

 

Revolving Credit Lender” – a Lender with a Revolving Credit Commitment.

 

Revolving Credit Loan” – a Loan made by any Revolving Credit Lender pursuant to Section 2.1, including (unless the context otherwise requires) Overadvances.

 

Revolving Credit Maturity Date” – April 19, 2025.

 

Revolving Credit Maximum Amount” – $15,000,000, as such amount may be increased or reduced from time to time pursuant to the terms hereof.

 

Revolving Credit Notes” – any promissory notes executed by Borrowers in favor of each Revolving Credit Lender that requests a Revolving Credit Note to evidence its Revolving Credit Loans, which shall be in the form of Exhibit 2.1 to this Agreement, together with any replacement or successor notes therefor.

 

Revolving Daily Unused Fee Amount” – for any day, (a) the Revolving Daily Unused Fee Rate for such day, multiplied by (b) the actual amount of such day by which the Revolving Credit Commitment exceeds the Aggregate Revolving Extensions.

 

Revolving Daily Unused Fee Rate” – for any day, (a) an annual fixed rate of 0.25%, if on such day the quotient of the Aggregate Revolving Extensions divided by the Revolving Credit Commitment is greater than or equal to 50% or (b) an annual fixed rate of 0.375%, if on such day the quotient of the Aggregate Revolving Extensions divided by the Revolving Credit Commitment is less than 50%.

 

Revolving Termination Date” – the Revolving Credit Maturity Date or such earlier date on which the Revolving Credit Commitments shall terminate or be terminated in full as provided herein.

 

S&P” – Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

 

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SBA PPP Loans” – all the one-time loans (and any potential future loans under such similar program) obtained by any of the Borrowers incurred under 15 U.S.C. 636(a)(36) (as added to the Small Business Act by Section 1102 of the CARES Act) under the Small Business Act, as amended.

 

Schedule of Accounts” – as defined in subsection 7.2.1.

 

Screen Rate” – has the meaning set forth in the definition of “LIBOR” herein.

 

SEC” – the Securities and Exchange Commission or any other governmental authority succeeding to any of the principal functions thereof.

 

Security Documents” – the Control Agreements, the Guaranty Agreements, the Pledge Agreements, the Mortgages, the Intellectual Property Security Agreement and all other instruments and agreements now or at any time hereafter securing the whole or any part of the Obligations, in each case as amended, restated, supplemented or otherwise modified from time to time.

 

Senior Net Leverage Ratio” – as of any date of determination, the ratio of (a) Total Senior Debt as of such date to (b) Consolidated EBITDA for the most recently ended twelve month period, and if such date is not the last day of a Fiscal Quarter, for the most recently ended twelve month period for which financials have been delivered.

 

Senior Officer” – with respect to any Loan Party, any of the president, chief executive officer, the chief financial officer, or the treasurer of that Loan Party.

 

Side Letter” – that certain Side Letter, dated as of the Closing Date, by and among the Loan Parties, the Administrative Agent and the Lenders.

 

Solvent” – as to any Person, that such Person (i) owns Property whose fair saleable value is greater than the amount required to pay all of such Person’s Debt (including contingent debts), (ii) is able to pay all of its Debt as such Debt matures and (iii) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage.

 

Specified Event of Default” means any Event of Default pursuant to Sections 11.1.1, 11.1.3 or 11.1.9 (but in the case of Section 11.1.3, solely with respect to a failure to comply with the provisions of Sections 9.1.3, 9.1.4 and 9.2.12).

 

Specified Financial Covenant” – as defined in Section 11.6(a).

 

Specified Financial Covenant Default” – as defined in Section 11.6(a).

 

Subordinated Debt” – Debt of any Loan Party or any Subsidiary of any Loan Party that is subordinated to the Obligations in a manner satisfactory to Administrative Agent, and contains terms, including without limitation, payment terms, satisfactory to Administrative Agent.

 

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Subsidiary” – with respect to any Person, a corporation, partnership, limited liability company, or other entity of which that Person owns, directly or indirectly, outstanding Equity Interests having more than 50% of the ordinary voting power for the election of directors or other managers of that corporation, partnership, limited liability company, or other entity. Unless the context otherwise requires, each reference to Subsidiaries in this Agreement refers to Subsidiaries of Holdings. Unless the context otherwise requires, each reference to Subsidiaries in this Agreement refers to Subsidiaries of Holdings.

 

Swap Obligation” – with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 

Taxes” – any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges, similar fees or withholdings imposed under applicable law and/or by any governmental authority that are in the nature of a tax, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to any of the foregoing.

 

Term” – as defined in Section 5.1.

 

Term Loan” – the Loan described in subsection 2.3.

 

Term Loan Advances” – as defined in subsection 2.3.1.

 

Term Loan Commitment” – with respect to any Lender, the amount of such Lender’s Term Loan Commitment pursuant to subsection 2.3, as set forth next to such Lender’s name on Schedule 1 hereto or any Assignment and Acceptance Agreement executed by such Lender, minus all Term Loan payments paid to such Lender.

 

Term Loan Daily Unused Fee Amount” – for any day during the Term Loan Draw Period, (a) (i) the Term Loan Daily Unused Fee Rate for such day, multiplied by (ii) the actual amount of such day by which the Term Loan Commitment exceeds the Term Loans made hereunder, or (b) $0 for any day after the Term Loan Draw Period.

 

Term Loan Daily Unused Fee Rate” – for any day, (a) an annual fixed rate of 0.25%, if on such day the quotient of Term Loans made hereunder divided by the Term Loan Commitment is greater than or equal to 50%, or (b) an annual fixed rate of 0.375%, if on such day the quotient of Term Loans made hereunder divided by the Term Loan Commitment is less than 50%.

 

Term Loan Draw Period” – the period from the Closing Date up to an including the third anniversary of the Closing Date.

 

Term Loan Lender” – a Lender with a Term Loan Commitment.

 

Term Loan Maturity Date” – April 19, 2025.

 

Term Loan Notes” – any promissory notes executed by Borrowers in favor of each Term Loan Lender that requests a Term Loan Note to evidence its Term Loans, which shall be in the form of Exhibit 2.3 to this Agreement, together with any replacement or successor notes therefor.

 

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Termination Event” – with respect to a Pension Plan that is subject to Title IV of ERISA, the following: (a) a Reportable Event; (b) the withdrawal of any Borrower or any other member of the Controlled Group from that Pension Plan during a plan year in which that Borrower or other member of the Controlled Group was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA; (c) the termination of that Pension Plan, the filing of a notice of intent to terminate the Pension Plan or the treatment of an amendment of that Pension Plan as a termination under Section 4041 of ERISA; (d) the institution by the PBGC of proceedings to terminate that Pension Plan; or (e) any event or condition that might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, that Pension Plan.

 

Total Credit Facility” – prior to the expiration of the Term Loan Draw Period, $17,000,000 and thereafter, the sum of the Revolving Credit Maximum Amount and the Term Loan Advances outstanding, as increased or reduced from time to time pursuant to the terms hereof.

 

Total Plan Liability” – at any time, the present value of all vested and unvested accrued benefits under all Pension Plans, determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.

 

Total Senior Debt” – all (a) Debt of Holdings and its Subsidiaries, determined on a consolidated basis in accordance with GAAP (excluding (u) contingent obligations in respect of Contingent Liabilities (except to the extent constituting (1) Contingent Liabilities in respect of Debt of a Person other than any Loan Party, or (2) Contingent Liabilities in respect of undrawn letters of credit), (v) Debt of any Borrower to any other Loan Party and Debt of any Subsidiary to any Borrower or to any other Subsidiary, (w) any Debt that is unsecured or contractually subordinated to the Obligations in form and substance reasonably satisfactory to the Administrative Agent, (x) obligations with respect to earn-out payments for Permitted Acquisitions until due and payable, and (y) obligations for any leased real property to the extent unsecured and not constituting debt for borrowed money) minus (b) unrestricted cash and Cash Equivalent Investments of Holdings and its Subsidiaries in deposit accounts subject to Control Agreements in favor of the Acquisition Term Agent and the Administrative Agent not to exceed $1,000,000 (but excluding, for the avoidance of doubt, the cash proceeds of any Term B Loans (as defined in the Acquisition Term Loan Agreement) or any Incremental Facilities (as defined in the Acquisition Term Loan Agreement)) as of any applicable date of determination; provided, that for all purposes of calculating the Senior Net Leverage Ratio under the Loan Documents, the amount of outstanding Revolving Credit Loans for purposes of clause (a) above shall be calculated by taking the average of such outstanding Revolving Credit Loans at the end of each business day for the trailing ninety (90) day period (or, if prior to the date that is ninety (90) days following the Closing Date, the period from the First Amendment Effective Date to the date the Senior Net Leverage Ratio is being tested) (the averaging of such outstanding revolving loans, the “Revolver Averaging Mechanic”).

 

Type of Organization” – with respect to any Person, the kind or type of entity by which such Person is organized, such as a corporation or limited liability company.

 

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UCC” – the Uniform Commercial Code as in effect in the State of Texas on the date hereof, as it may be amended or otherwise modified.

 

Unfunded Liability” – the amount (if any) by which the present value of all vested and unvested accrued benefits under all Pension Plans exceeds the fair market value of all assets allocable to those benefits, all determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.

 

Unused Line Fee” – as defined in Section 3.5.

 

U.S. Lender” – any Lender that is a “United States person” as defined in Section 7701(a)(30) of the Code.

 

U.S. Tax Compliance Certificate” – as defined in subsection 3.11.3.

 

Voting Agreements” – (a) that certain Voting Agreement, dated as of April 11, 2019, by and among (i) Mitchell A. Saltz, Jeffery D. Forte, Brian Dick and each of their respective affiliates, (ii) Hampstead Park Capital Management, LLC and (iii) Holdings, (b) that certain Stock Grant Agreement, dated as of the First Amendment Effective Date, by and among Holdings and Green Remedies, in each case, as the same may be amended or otherwise modified as permitted hereunder and (c) any similar agreements or arrangements relating to voting matters and/or affecting the constitution of the board of directors of Holdings.

 

Warrant Holder” – Monroe Capital or any of its affiliates or controlled investment vehicles.

 

Warrant Letter Agreement” means that certain Letter Agreement, dated as of the date hereof, by and among Holdings and the Warrant Holder, as amended, restated, supplemented or otherwise modified from time to time as permitted thereunder.

 

Warrants” – collectively (a) that certain Warrant to Purchase Common Stock, dated as of the First Amendment Effective Date, issued by Holdings to the Warrant Holder and (b) any further warrant issued by Holdings to the Warrant Holder.

 

Wholly-Owned Subsidiary” – as to any Person, a Subsidiary all of the Equity Interests of which (except directors’ qualifying Equity Interests) are at the time directly or indirectly owned by that Person and/or another Wholly-Owned Subsidiary of that Person. Unless the context otherwise requires, each reference to Wholly-Owned Subsidiaries refers to Wholly-Owned Subsidiaries of Holdings.

 

Write-Down and Conversion Powers” – with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

 

1.2              Other Terms. All other terms contained in this Agreement shall have, when the context so indicates, the meanings provided for by the UCC to the extent the same are used or defined therein. Accounting terms not otherwise specifically defined herein shall be construed in accordance with GAAP consistently applied.

 

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1.3              Certain Matters of Construction. The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and list of exhibits and schedules appear as a matter of convenience only and shall not affect the interpretation of this Agreement. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. All references to any of the Loan Documents shall include any and all modifications thereto and any and all extensions or renewals thereof.

 

1.4              Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio, requirement or covenant in this Agreement or any related definition, and either the Loan Parties or Majority Lenders shall so request, Administrative Agent, the Lenders and the Loan Parties shall negotiate in good faith to amend such ratio, requirement, covenant or definition to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Majority Lenders); provided that, until so amended, (i) such ratio, requirement, covenant or definition shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Loan Parties shall provide to Administrative Agent and Lenders financial statements and other documents required under this Agreement setting forth a reconciliation between calculations of such ratio, requirement, covenant or definition made before and after giving effect to such change in GAAP.

 

1.5              Divisions. Any restriction, condition or prohibition applicable to a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term set forth in the Loan Documents shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability companies, including any “Division” or other process or action permitted under Section 18-217 of Title 6 of the Delaware Code, as if it were a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term, as applicable. Any reference in any Loan Document to a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability companies (or the unwinding of such a division or allocation), as if it were a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale or transfer, or similar term, as applicable, to, of or with a separate Person. Any division of a limited liability company shall constitute a separate Person under the Loan Documents (and each division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity). For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

 

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1.6              Notification and Limitation of Liability – LIBOR and Related Matters. The interest rate on LIBOR Loans is determined by reference to LIBOR, which is derived from the London Interbank Offered Rate, and the London Interbank Offered Rate is currently administered by ICE Benchmark Administration Limited (“IBA”). The U.K. Financial Conduct Authority announced in July 2017 that, after December 31, 2021, it would no longer persuade or compel contributing banks to make rate submissions to IBA. As a result, it is possible that the London Interbank Offered Rate may no longer be available after such date or may no longer be deemed an appropriate reference rate upon which to determine the interest rate on LIBOR Loans. Section 4.9 provides a mechanism for (a) determining an alternative rate of interest in the event that LIBOR (or any then-current Benchmark, as defined in Section 4.9) or any component thereof is no longer available or in the other circumstances set forth in that Section and (b) modifying this Agreement to give effect to such alternative rate of interest. Neither the Administrative Agent nor BBVA USA individually, nor any Affiliate of BBVA USA, warrants or accepts any responsibility for, or shall have any liability with respect to, (i) the administration or submission of, or any other matter related to, the London Interbank Offered Rate, LIBOR (or any component thereof) or any such other Benchmark (or any component thereof) or, in each case, with respect to any alternative or successor rate thereto or replacement rate thereof, including, without limitation, whether any such alternative, successor or replacement reference rate, as it may or may not be adjusted pursuant to this Agreement, will have the same value as, or be economically equivalent to, LIBOR or any such other Benchmark that is replaced, or (ii) the effect, implementation or composition of any Benchmark Replacement Conforming Changes, as defined in Section 4.9. References herein to a component of, or a published component used in the calculation of, LIBOR are deemed to include the Screen Rate.

 

Article II. CREDIT FACILITY

 

Subject to the terms and conditions of, and in reliance upon the representations and warranties made in, this Agreement and the other Loan Documents, Lenders agree to make a Total Credit Facility of up to $17,000,000 as increased or decreased from time to time pursuant to the terms hereof, available upon Borrowers’ request therefor, as follows:

 

2.1              Revolving Credit Loans.

 

2.1.1                    Revolving Credit Commitments. Each Revolving Credit Lender agrees, severally and not jointly, to make Revolving Credit Loans to Borrowers from time to time during the Revolving Commitment Period, as requested by Borrower Representative, on its own behalf and on behalf of all other Borrowers in the manner set forth in subsection 4.1.1 hereof, up to a maximum principal amount at any time outstanding equal to the lesser of (i) such Revolving Credit Lender’s Revolving Credit Commitment and (ii) the product of such Revolving Credit Lender’s Pro Rata Percentage and the amount of the Line Cap at such time, minus, in each case, the product of such Revolving Credit Lender’s Pro Rata Percentage and an amount equal to the sum of the LC Amount. Within the foregoing limits, Borrowers may borrow, repay and reborrow Revolving Credit Loans. The Revolving Credit Loans shall be secured by all of the Collateral.

 

2.1.2                    Overadvances. Insofar as (i) Borrower Representative, on its own behalf and on behalf of all other Borrowers, may request and Administrative Agent (as provided below) may be willing in its sole and absolute discretion to make Revolving Credit Loans to Borrowers or (ii) Administrative Agent, in its sole discretion, makes Revolving Credit Loans on behalf of Lenders, if Administrative Agent, in its reasonable credit judgment, deems that such Revolving Credit Loans are necessary or desirable (a) to protect all or any portion of the Collateral, (b) to enhance the likelihood, or maximize the amount of, repayment of the Loans and the other Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to this Agreement, including without limitation costs, fees and expenses as described in Sections 3.7 and 3.8, in each case, at a time when the unpaid balance of Revolving Credit Loans plus the LC Amount exceeds, or would exceed with the making of any such Revolving Credit Loan, the Borrowing Base (such Loan or Loans being herein referred to individually as an “Overadvance” and collectively, as “Overadvances”), Administrative Agent shall enter such Overadvances as debits in the Loan Account. All Overadvances shall be repaid on demand, shall be secured by the Collateral and shall bear interest as provided in this Agreement for Revolving Credit Loans generally. Any Overadvance made pursuant to the terms hereof shall be made by all Revolving Credit Lenders ratably in accordance with their respective Pro Rata Percentages. The foregoing notwithstanding, (i) unless otherwise consented to by Majority Lenders, Overadvances shall not be outstanding for more than sixty (60) consecutive days, and (ii) unless otherwise consented to by all Lenders, no Overadvances shall be permitted to the extent that such Overadvances would cause the Aggregate Revolving Extensions to exceed the Revolving Credit Maximum Amount.

 

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2.2              Letters of Credit.

 

2.2.1                    Letters of Credit Commitment.

 

(i)                 Subject to the terms and conditions hereof, the Issuing Bank, in reliance on the agreements of the other Revolving Credit Lenders set forth in subsection 2.2.3(i), agrees to issue Letters of Credit for the account of any Borrower on any Business Day during the Revolving Commitment Period in such form as may be approved from time to time by the Issuing Bank; provided that the Issuing Bank shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (A) the LC Amount shall exceed the LC Sublimit, or (B) the principal amount of all Revolving Credit Loans then outstanding plus the LC Amount, shall not exceed the Line Cap.

 

(ii)              Each Letter of Credit shall (A) be denominated in U.S. Dollars, (B) have a face amount of at least $50,000 (unless otherwise agreed by the Issuing Bank), and (C) expire no later than the earlier of (1) the first anniversary of its date of issuance and (2) the date that is ten (10) Business Days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (2) above).

 

(iii)            The Issuing Bank shall not at any time be obligated to issue any Letter of Credit if:

 

(a)               the issuance of such Letter of Credit would conflict with, or cause the Issuing Bank or any Revolving Credit Lender to exceed any limits imposed by, any Applicable Law;

 

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(b)               any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Applicable Law applicable to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Bank in good faith deems material to it;

 

(c)               any Revolving Credit Lender is at that time a Defaulting Lender, unless the Issuing Bank has entered into arrangements, including the delivery of cash collateral for Letters of Credit, satisfactory to the Issuing Bank (in its sole discretion) with the Borrowers or such Lender to eliminate the Issuing Bank’s actual or potential Fronting Exposure (after giving effect to subsection 4.11.2) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other LC Obligations as to which the Issuing Bank has actual or potential Fronting Exposure, as it may elect in its sole discretion; or

 

(d)               the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank.

 

(iv)             The Issuing Bank shall act on behalf of the Revolving Credit Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the Issuing Bank shall have all of the benefits and immunities (i) provided to the Administrative Agent in Section 12 with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the documents associated therewith as fully as if the term “Administrative Agent” as used in Section 12 included the Issuing Bank with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the Issuing Bank.

 

(v)               References herein to “issue” and derivations thereof with respect to Letters of Credit shall also include extensions or modifications of any outstanding Letters of Credit, unless the content otherwise requires.

 

2.2.2                    Procedure for Issuance of Letters of Credit. Borrower Representative may from time to time request that the Issuing Bank issue a Letter of Credit by delivering to the Issuing Bank at its address for notices specified herein an LC Application therefor, completed to the satisfaction of the Issuing Bank, and such other certificates, documents and other Issuer Documents and information as the Issuing Bank may request. Upon receipt of any LC Application, the Issuing Bank will process such LC Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Bank be required to issue any Letter of Credit earlier than three (3) Business Days after its receipt of the LC Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by the Issuing Bank and any Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to the applicable Borrower promptly following the issuance thereof. The Issuing Bank shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit (including the amount thereof).

 

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2.2.3                    LC Participations.

 

(i)                 The Issuing Bank irrevocably agrees to grant and hereby grants to each LC Participant, and, to induce the Issuing Bank to issue Letters of Credit hereunder, each LC Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Bank, on the terms and conditions hereinafter stated, for such LC Participant’s own account and risk an undivided interest equal to such LC Participant’s Revolving Credit Lender’s Pro Rata Percentage in the Issuing Bank’s obligations and rights under and in respect of each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Bank thereunder. Each LC Participant unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit for which the Issuing Bank is not reimbursed in full by the Borrowers in accordance with the terms of this Agreement, such LC Participant shall pay to the Issuing Bank upon demand at the Issuing Bank’s address for notices specified herein an amount equal to such LC Participant’s Revolving Credit Lender’s Pro Rata Percentage of the amount of such draft, or any part thereof, that is not so reimbursed.

 

(ii)              If any amount required to be paid by any LC Participant to the Issuing Bank pursuant to subsection 2.2.3(i) in respect of any unreimbursed portion of any payment made by the Issuing Bank under any Letter of Credit is paid to the Issuing Bank within three (3) Business Days after the date such payment is due, such LC Participant shall pay to the Issuing Bank on demand an amount equal to the product of (A) such amount, times, (B) the daily average Federal Funds Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Bank, times, (C) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any LC Participant pursuant to subsection 2.2.3(i) is not made available to the Issuing Bank by such LC Participant within three (3) Business Days after the date such payment is due, the Issuing Bank shall be entitled to recover from such LC Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Revolving Credit Loans. A certificate of the Issuing Bank submitted to any LC Participant with respect to any amounts owing under this Section 2.2 shall be conclusive in the absence of manifest error.

 

(iii)            Whenever, at any time after the Issuing Bank has made payment under any Letter of Credit and has received from any LC Participant its pro rata share of such payment in accordance with subsection 2.2.3(i), the Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Bank), or any payment of interest on account thereof, the Issuing Bank will distribute to such LC Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Bank shall be required to be returned by the Issuing Bank, such LC Participant shall return to the Issuing Bank the portion thereof previously distributed by the Issuing Bank to it.

 

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(iv)             Each LC Participant’s obligation to purchase participating interests pursuant to subsection 2.2.3(i) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such LC Participant or any Borrower may have against the Issuing Bank, any Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 10; (C) any adverse change in the condition (financial or otherwise) of any Loan Party; (D) any breach of this Agreement or any other Loan Document by any Borrower, any other Loan Party or any other Lender; or (E) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

 

2.2.4                    Reimbursement Obligation of the Borrower. If any draft is paid under any Letter of Credit, the Borrowers shall reimburse the Issuing Bank for the amount of (i) the draft so paid and (ii) any taxes, fees, charges or other out-of-pocket costs or expenses incurred by the Issuing Bank in connection with such payment, not later than 12:00 Noon (Central time), on (A) the Business Day that the Borrower Representative receives notice of such draft, if such notice is received on such day prior to 10:00 A.M (Central time), or (B) if clause (A) above does not apply, the Business Day immediately following the day that the Borrower Representative receives such notice. Each such payment shall be made to the Issuing Bank at its address for notices referred to herein in U.S. Dollars and in immediately available funds. Interest shall be payable on any such amounts from the date on which the relevant draft is paid until payment in full at (x) until the Business Day next succeeding the date of the relevant notice, the interest rate for Base Rate Revolving Credit Loans and (y) thereafter, the Default Rate.

 

2.2.5                    Obligations Absolute. The Borrowersobligations under this Section 2.2 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim, recoupment or defense to payment that any Borrower may have or have had against the Issuing Bank, any beneficiary of a Letter of Credit or any other Person. The Borrowers also agree with the Issuing Bank that the Issuing Bank shall not be responsible for, and the BorrowersLC Reimbursement Obligations under subsection 2.2.4 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of any Borrower against any beneficiary of such Letter of Credit or any such transferee. The Issuing Bank shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Issuing Bank. The Borrowers agree that any action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit or the related drafts or Issuer Documents, if done in the absence of gross negligence or willful misconduct, shall be binding on the Borrowers and shall not result in any liability of the Issuing Bank to any Borrower.

 

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2.2.6                    Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Bank shall promptly notify the Borrower Representative of the date and amount thereof. The responsibility of the Issuing Bank to the Borrowers in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with such Letter of Credit.

 

2.2.7                    Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

2.3              Term Loan.

 

2.3.1                    Term Loan Commitments. Subject to the terms and conditions of this Agreement and the other Loan Documents, each Term Lender agrees, severally and not jointly, so long as no Default or Event of Default exists, to make one or more advances to Borrower from time to time during the Term Loan Draw Period (each a “Term Loan Advance”, and all such Term Loan Advances the “Term Loan”) in an aggregate principal amount not to exceed eighty percent (80%) of the hard cost (excluding taxes, shipping, delivery, handling, installation and other so-called “soft” costs) evidenced by an invoice not more than six (6) months prior to the date of the proposed advance of Eligible Machinery and Equipment of Borrower specifically identified by Borrower as constituting the basis for the requested Term Loan Advance, which Equipment must constitute Eligible Machinery and Equipment and which Equipment must not have been specifically identified by Borrower with an earlier existing Term Loan Advance; provided, however, that the aggregate amount advanced for all such Term Loan Advances shall not exceed $2,000,000. Amounts repaid with respect to the Term Loan may not be reborrowed.

 

2.3.2                    Procedures. Borrower shall comply with the following procedures in requesting a Term Loan Advance:

 

(i)                 All requests for a Term Loan Advance must be in writing to Administrative Agent and must include a description of the relevant Equipment, the amount of the requested Term Loan Advance, and all other documents, agreements and information as reasonably required by Administrative Agent.

 

(ii)              Each Term Loan Advance must be in a minimum amount of at least $250,000.

 

(iii)            All requests for a Term Loan Advance must be made in advance of and provide sufficient time for the Administrative Agent to receive an appraisal satisfactory to it in its reasonable discretion prior to the requested date of such Term Loan Advance.

 

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(iv)             All requests for a Term Loan Advance must be made during the Term Loan Draw Period.

 

2.4              Accordion. Subject to the terms and conditions of this Section 2.4, from and after the Closing Date, the Revolving Credit Maximum Amount may be increased at any time (but on no more than two occasions) until the Revolving Credit Maturity Date in an aggregate amount not to exceed $10,000,000 and in increments of $5,000,000 (or in such lesser amount as required to draw the full remaining amount):

 

2.4.1                    Not more than ninety (90) days and not less than thirty (30) days prior to the proposed effective date of such increase in the Revolving Credit Maximum Amount, the Borrowers may make a written request for such increase to the Administrative Agent, who shall notify each Revolving Credit Lender. Each request by the Borrowers pursuant to the immediately preceding sentence shall specify a proposed effective date of such increase (the “Requested Increase Effective Date”), the aggregate amount of such requested increase (the “Requested Increase Amount”), and shall constitute an invitation to each Revolving Credit Lender to increase its Revolving Credit Commitment by its Pro Rata Percentage of such Requested Increase Amount.

 

2.4.2                    Each Revolving Credit Lender, acting in its sole discretion and with no obligations to increase its Revolving Credit Commitment pursuant to this Section 2.4, shall, within ten (10) days after the Borrowers’ request, provide a preliminary indication to the Borrowers and the Administrative Agent with respect to such proposed Revolving Credit Commitment increase, and within thirty (30) days after the Borrowers’ request, provide written notice to the Borrowers and the Administrative Agent of its final decision. Any such Revolving Credit Lender may accept all of its Pro Rata Percentage of such increase, a portion of such increase, or decline to accept any of such increase in the Revolving Credit Commitment. If any Revolving Credit Lender shall not have responded affirmatively within such ten (10) day period, such Revolving Credit Lender shall be deemed to have rejected the Borrowers’ request for an increase in the Revolving Credit Commitment in full. Promptly following the conclusion of such ten (10) day period, the Administrative Agent shall notify the Borrowers of the results of such request to the Revolving Credit Lenders to so increase the Revolving Credit Commitment by the Requested Increase Amount.

 

2.4.3                    If the aggregate amount of the increase in the Revolving Credit Commitments which the Revolving Credit Lenders have accepted in accordance with subsection 2.4.2 is less than the Requested Increase Amount, the Administrative Agent shall provide notice to the other Revolving Credit Lenders, and the other Revolving Credit Lenders shall have a five (5) day period in which to provide the Administrative Agent written notice to provide the remaining Requested Increase Amount. If two or more Revolving Credit Lenders offer to provide the remaining Requested Increase Amount, such Revolving Credit Lenders shall divide such amount in accordance with their Pro Rata Percentage prior to giving effect to the increase to the Revolving Credit Maximum Amount.

 

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2.4.4                    The effectiveness of all such increases in the Revolving Credit Maximum Amount are subject to the satisfaction of the following conditions:

 

(i)                 the Administrative Agent shall have approved the Requested Increase Amount;

 

(ii)              the Borrowers shall have delivered a Revolving Credit Note including the Requested Increase Amount to any Revolving Credit Lender providing such increase;

 

(iii)            the Borrowers shall have paid the fees set forth in the Fee Letter and any other fees and other amounts under this Agreement and the other Loan Documents;

 

(iv)             the representations and warranties of each Loan Party and its Subsidiaries in the Loan Documents shall be true and correct in all material respects (or, as to any representations and warranties which are subject to a materiality or Material Adverse Effect qualifier, true and correct in all respects) on the date hereof, and upon giving effect to, any funding of the Requested Increase Amount (except for representations and warranties that expressly relate to an earlier date);

 

(v)               no Default or Event of Default exists or would result after giving effect to the funding of such Requested Increase Amount;

 

(vi)             since the Closing Date, there has not been any material adverse change in the business, assets, financial condition, income, performance or operations of any Loan Party and no event or condition exists which would be reasonably likely to result in any Material Adverse Effect;

 

(vii)          the Borrowers shall have delivered a certificate of a responsible officer of the Borrowers as to the matters set forth in clauses (iv)-(vi) of this subsection 2.4.4.

 

2.4.5                    Schedule 1 shall be updated to reflect any increase of the Revolving Credit Maximum Amount as set forth in this Section 2.4.

 

2.4.6                    Notwithstanding anything to the contrary herein, no Ineligible Lender shall provide any Requested Increase Amount.

 

Article III. INTEREST, FEES AND CHARGES

 

3.1              Interest.

 

3.1.1                    Rates of Interest. Interest shall accrue on the principal amount of the Base Rate Loans outstanding at the end of each day at a fluctuating rate per annum equal to the Applicable Margin then in effect plus the Base Rate; provided that in no event shall the Applicable Margin then in effect plus the Base Rate at any time be less than the Applicable Margin plus two percent (2%) per annum. Such rate of interest shall increase or decrease by an amount equal to any increase or decrease in the Base Rate, effective as of the opening of business on the day that any such change in the Base Rate occurs. If Borrower Representative, on its own behalf and on behalf of all other Borrowers, exercises the LIBOR Option as provided in Section 4.1, interest shall accrue on the principal amount of the LIBOR Loans outstanding at the end of each day at a rate per annum equal to the Applicable Margin then in effect plus LIBOR applicable to each LIBOR Loan for the corresponding Interest Period; provided that in no event shall the Applicable Margin then in effect plus LIBOR applicable to such LIBOR Loan at any time be less than the Applicable Margin then in effect plus one percent (1%) per annum.

 

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3.1.2                    Default Rate of Interest. At the option of Administrative Agent, upon and after the occurrence of an Event of Default, and during the continuation thereof, all Obligations shall bear interest or earn fees at a rate per annum equal to 2.0% plus the rate otherwise applicable thereto (the “Default Rate”).

 

3.1.3                    Maximum Interest. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or any extension of credit under the Loan Documents, together with all fees, charges and other amounts that are treated as interest on such Loan or extension of credit under Applicable Law (collectively, “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by any Lender, Agent or Issuing Bank in accordance with Applicable Law, the rate of interest payable hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate. To the extent lawful, the interest and Charges that would have been paid in respect of such Loan or extension of credit but were not paid as a result of the operation of this subsection shall be cumulated and the interest and Charges payable to such Lender, Agent or Issuing Bank shall be increased (but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate for each day to the date of repayment, shall have been received by such Lender, Agent or Issuing Bank. Any amount collected by such Lender, Agent or Issuing Bank that exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or extension of credit or refunded to Borrowers so that at no time shall the interest and Charges paid or payable in respect of such Loan or extension of credit exceed the maximum amount collectible at the Maximum Rate. To the extent Chapter 303 of the Texas Finance Code is relevant to such Lender, Agent or Issuing Bank for purposes of determining the Maximum Rate, such Lender, Agent or Issuing Bank may elect to determine the Maximum Rate under the Texas Finance Code pursuant to the “weekly ceiling” from time to time in effect, as referred to in Chapter 303 of the Texas Finance Code; subject, however, to any right such Lender, Agent or Issuing Bank subsequently may have under Applicable Law to change the method of determining the Maximum Rate.

 

3.2              Computation of Interest and Fees. Interest with respect to Base Rate Loans, LIBOR Loans, Letter of Credit fees and Unused Line Fees hereunder shall be calculated daily and shall be computed on the actual number of days elapsed over a year of 360 days and a 30-day month (unless computation would result in an interest rate in excess of the Maximum Rate, in which event the computation is made on the basis of a year of 365 or 366 days, as the case may be).

 

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3.3              Fee Letter. Borrowers shall pay to Administrative Agent certain fees and other amounts in accordance with the terms of the fee letter between Borrowers and Administrative Agent (the “Fee Letter”).

 

3.4              Letter of Credit Fees. Borrowers shall pay to Administrative Agent (i) for the ratable benefit of Revolving Credit Lenders, a per annum fee equal to the Applicable Margin then in effect for LIBOR Revolving Credit Loans multiplied by the aggregate undrawn available amount of such Letters of Credit outstanding from time to time during the term of this Agreement, (ii) for the benefit of Issuing Bank, all normal and customary charges associated with the issuance, processing and administration thereof, which fees and charges shall be deemed fully earned upon issuance of each such Letter of Credit or as advised by Administrative Agent or Issuing Bank, and (iii) for the benefit of Issuing Bank, a per annum fronting fee equal to 0.125% of the aggregate face amount of such Letters of Credit outstanding from time to time during the term of this Agreement. Such fees and charges shall be payable in arrears on each LC Fee Payment Date or as advised by Administrative Agent or Issuing Bank and shall not be subject to rebate or proration upon the termination of this Agreement for any reason.

 

3.5              Unused Line Fees.

 

3.5.1                    On each Fee Payment Date, Borrowers shall pay to Administrative Agent, for the ratable benefit of Lenders, a commitment fee equal to the sum of the Revolving Daily Unused Fee Amounts for each day of the Fee Period immediately preceding such Fee Payment Date. On the Revolving Termination Date, Borrowers shall pay to Administrative Agent, for the ratable benefit of Lenders, a commitment fee equal to the sum of the Revolving Daily Unused Fee Amounts for each day of the period from the immediately preceding Fee Payment Date up to but not including the Revolving Termination Date.

 

3.5.2                    On each Fee Payment Date, Borrowers shall pay to Administrative Agent, for the ratable benefit of Lenders, a commitment fee equal to the sum of the Term Loan Daily Unused Fee Amounts for each day of the Fee Period immediately preceding such Fee Payment Date. On the Term Loan Termination Date, Borrowers shall pay to Administrative Agent, for the ratable benefit of Lenders, a commitment fee equal to the sum of the Term Loan Daily Unused Fee Amounts for each day of the period from the immediately preceding Fee Payment Date up to but not including the Term Loan Termination Date.

 

3.5.3                    The fees in this Section shall be due and payable in arrears on each Fee Payment Date, the Revolving Termination Date, and the Term Loan Termination Date.

 

3.6              [Reserved].

 

3.7              Reimbursement of Expenses. If, at any time or times regardless of whether or not an Event of Default then exists, (i) any Agent incurs legal or accounting expenses or any other costs or out-of-pocket expenses in connection with (a) the negotiation and preparation of this Agreement or any of the other Loan Documents, any amendment of or modification of this Agreement or any of the other Loan Documents, or any syndication or attempted syndication of the Obligations (including, without limitation, printing and distribution of materials to prospective Lenders and all costs associated with bank meetings, but excluding any closing fees paid to Lenders in connection therewith) or (b) the administration of this Agreement or any of the other Loan Documents and the transactions contemplated hereby and thereby, or (ii) any Agent or any Lender incurs legal or accounting expenses or any other costs or out-of-pocket expenses in connection with (a) any litigation, contest, dispute, suit, proceeding or action (whether instituted by any Agent, any Lender, any Borrower or any other Person) relating to the Collateral, this Agreement or any of the other Loan Documents or any Borrower’s, any of its Subsidiaries’ or any Guarantor’s affairs, (b) any attempt to enforce any rights of Administrative Agent or any Lender against any Borrower or any other Person which may be obligated to Administrative Agent or any Lender by virtue of this Agreement or any of the other Loan Documents or (c) any attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose of or realize upon the Collateral, including, without limitation, any excise, property, sales, and use taxes imposed by any state, federal, or local authority on any of the Collateral or in respect of the sale thereof; then all such legal and accounting expenses, other costs and out-of-pocket expenses of Administrative Agent or any Lender, as applicable, shall be charged to Borrowers; provided, that, in the case of each of clauses (i) and (ii), any such legal expenses shall be limited to one counsel for Administrative Agent and one local counsel in each appropriate jurisdiction, if necessary, and, in the case of clause (ii), one additional counsel for all Lenders other than Administrative Agent. All amounts chargeable to Borrowers under this Section 3.7 shall be Obligations secured by all of the Collateral, shall be payable on demand to Administrative Agent or such Lender, as the case may be, and shall bear interest from the date such demand is made until paid in full at the rate applicable to Base Rate Revolving Credit Loans from time to time. Borrowers shall also reimburse Administrative Agent for expenses incurred by any Agent to the extent and in the manner provided in Sections 3.8 and 3.9 hereof.

 

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3.8              Bank Charges. Borrowers shall pay to Administrative Agent, on demand, any and all fees, costs or expenses which Administrative Agent or any Lender pays to a bank or other similar institution arising out of or in connection with (i) the forwarding to any Borrower or any other Person on behalf of any Borrower, by Administrative Agent or any Lender, of proceeds of Loans made to Borrowers pursuant to this Agreement and (ii) the depositing for collection by Administrative Agent or any Lender of any check or item of payment received or delivered to Administrative Agent or any Lender on account of the Obligations.

 

3.9              Appraisals; Field Examinations. Each Loan Party will permit, and will cause each Subsidiary to permit, each Agent and its representatives to (i) conduct field examinations with respect to the Collateral and (iii) after the outstanding principal balance of the Term Loan exceeds $500,000, obtain full or desktop appraisals (or updates of existing appraisals) of all Equipment of each Loan Party or Subsidiary in form and substance satisfactory to Collateral Agent from an appraiser selected and engaged by Collateral Agent, provided that, no more than one appraisal and two field examinations during any calendar year will be at Borrowers’ cost and expense, unless (i) an Excess Availability Triggering Event has occurred and until such Cure Date, or (ii) a Default or an Event of Default exists, in which case one additional appraisal (for the avoidance of doubt, permitted regardless of the then outstanding principal balance of the Term Loan) and one additional field examination per calendar year will be at Borrowers’ cost and expense. Administrative Agent may, in its discretion upon prior notice to Borrowers, provide for the payment of such amounts by making appropriate Revolving Credit Loans to Borrowers and charging Borrowers’ Loan Account therefor.

 

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3.10          Payment of Charges. All amounts chargeable to Borrowers under this Agreement shall be Obligations secured by all of the Collateral, shall be, unless specifically otherwise provided, payable on demand and shall bear interest from the date demand was made or such amount is due, as applicable, until paid in full at the rate applicable to Base Rate Revolving Credit Loans from time to time.

 

3.11          Taxes.

 

3.11.1                No Deductions. Any and all payments or reimbursements made hereunder shall be made free and clear of and without deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, other than Excluded Taxes (collectively, “Indemnified Taxes”). If Applicable Law requires a deduction for any such Indemnified Taxes from or in respect of any sum payable hereunder to Administrative Agent, Issuing Bank or any Lender, then the sum payable hereunder shall be increased as may be necessary so that, after all required deductions are made, Administrative Agent, Issuing Bank or such Lender receives an amount equal to the sum it would have received had no such deductions been made.

 

3.11.2                Indemnification for Taxes. The Loan Parties shall jointly and severally indemnify Administrative Agent, Issuing Bank and each Lender, within ten (10) days after demand therefor, for the full amount of any Indemnified Taxes payable or paid by Administrative Agent, Issuing Bank or such Lender or required to be withheld or deducted from a payment to Administrative Agent, Issuing Bank or such Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability prepared in good faith and delivered to the Loan Parties by Issuing Bank or a Lender (with a copy to Administrative Agent), or by Administrative Agent on its own behalf or on behalf of Issuing Bank or a Lender, shall be conclusive absent manifest error. Notwithstanding any contrary provision in this Agreement, the obligation of the Loan Parties under this Section 3.11 shall survive the payment in full of the Obligations and the termination of this Agreement.

 

3.11.3                Status of Lenders. Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to any payments made hereunder or under any other Loan Document shall deliver to Borrowers and Administrative Agent, at the time or times reasonably requested by the Loan Parties or Administrative Agent, such properly completed and executed documentation reasonably requested by the Loan Parties or Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Loan Parties or Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Loan Parties or Administrative Agent as will the Loan Parties, Borrowers or Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting the generality of the foregoing:

 

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(i)                 each U.S. Lender shall deliver to the Loan Parties and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such U.S. Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Loan Parties or Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding;

 

(ii)              each Foreign Lender shall deliver to the Loan Parties and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Loan Parties or Administrative Agent), whichever of the following is applicable:

 

(a)               in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party, executed originals of IRS Form W-8BEN (or any successor forms) establishing an exemption from, or reduction of, U.S. federal withholding, and such other documentation as required by the Code;

 

(b)               executed originals of IRS Form W-8ECI (or any successor forms);

 

(c)               in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 871(h) or Section 881I of the Code, (x) certificates substantially in the form of Exhibit 3.11 (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN (or any successor form); or

 

(d)               to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY (or any successor form), accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification documents (or successor forms) from each beneficial owner, as applicable; provided, that if the Foreign Lender is a partnership (and not a participating lender) and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, a U.S. Tax Compliance Certificate may be provided by such Foreign Lender on behalf of each such direct and indirect partner;

 

(iii)            any Foreign Lender shall, to the extent it is legally eligible to do so, deliver to the Loan Parties and Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Loan Parties or Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Loan Parties or Administrative Agent to determine the withholding or deduction required to be made; and

 

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(iv)             if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Loan Parties and Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Loan Parties or Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Loan Parties or Administrative Agent as may be necessary for the Loan Parties and Administrative Agent to comply with their obligations under FATCA, to determine whether such Lender has complied with such Lender’s obligations under FATCA and/or to determine the amount, if any, to deduct and withhold from such payment.

 

Each Lender agrees that if any documentation it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall promptly update such documentation or promptly notify the Loan Parties and Administrative Agent in writing of its inability to do so. Notwithstanding any other provisions of this subsection 3.11.3, a Lender shall not be required to deliver any documentation that such Lender is not legally eligible to deliver.

 

3.12          Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Documents, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(i)                 the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

 

(ii)              the effects of any Bail-In Action on any such liability, including, if applicable:

 

(a)               a reduction in full or in part or cancellation of any such liability;

 

(b)               a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(c)               the variation of the terms of such liability in connection with the exercise of the write-down and conversion powers of any EEA Resolution Authority.

 

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Article IV. LOAN ADMINISTRATION

 

4.1              Procedures for Borrowing and LIBOR Option. Borrowings under the credit facility established pursuant to Section 2 hereof shall be as follows:

 

4.1.1                    Loan Requests. Requests for a Revolving Credit Loan shall be made, or shall be deemed to be made, in the following manner:

 

(i)                 Borrower Representative, on its own behalf and on behalf of all other Borrowers, may give Administrative Agent notice of its intention to borrow, in which notice Borrower Representative shall specify the amount of the proposed borrowing of a Revolving Credit Loan (which shall be no less than $500,000 or an integral multiple of $100,000 in excess thereof in the case of Base Rate Revolving Credit Loans) and the proposed borrowing date, which shall be a Business Day, no later than 11:00 a.m. (Central time) on the proposed borrowing date (or in accordance with subsection 4.1.7 or 4.1.8, as applicable, in the case of a request for a LIBOR Loan). There shall be no minimum borrowing amount for Base Rate Revolving Credit Loans during the period of time Cash Dominion is in effect. Notwithstanding the foregoing, a notice of its intention to borrow shall not be required to be delivered if the Borrowers and Administrative Agent have implemented automatic sweep to line functionality such that Revolving Credit Loans are automatically funded to the Borrowers’ operating account to fund the payments of disbursements from such operating account.

 

(ii)              On the date on which any amount required to be paid under this Agreement, whether as interest, repayment of LC Obligations pursuant to Section 2.2, or for any other Obligation, becomes due and payable, Borrower Representative, on its own behalf and on behalf of all other Borrowers, shall be deemed irrevocably to have made a request for a Revolving Credit Loan on such due date in the amount required to pay such interest or other Obligation.

 

4.1.2                    Disbursement. The proceeds of each Revolving Credit Loan requested pursuant to subsection 4.1.1(i) shall be disbursed by Administrative Agent in lawful money of the United States of America in immediately available funds, in the case of the initial requested borrowing, in accordance with the terms of the written disbursement letter from Borrower Representative, on its own behalf and on behalf of all other Borrowers, and in the case of each subsequent requested borrowing, by wire transfer to such bank account as may be agreed upon by Borrowers and Administrative Agent from time to time or elsewhere if pursuant to a written direction from Borrower Representative. The proceeds of each Revolving Credit Loan that is deemed requested pursuant to subsection 4.1.1(ii) shall be disbursed by Administrative Agent in lawful money of the United States of America in immediately available funds by way of direct payment of the relevant interest or other Obligation. If at any time any Loan is funded by Administrative Agent or Lenders in excess of the amount requested or deemed requested by Borrowers, Borrowers agree to repay the excess to Administrative Agent immediately upon the earlier to occur of (a) any Borrower’s discovery of the error and (b) notice thereof to Borrowers from Administrative Agent or any Lender.

 

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4.1.3                    Payment by Lenders. Administrative Agent shall give to each Lender prompt written notice by facsimile, e-mail or otherwise of the receipt by Administrative Agent from Borrower Representative of any request for a Revolving Credit Loan. Each such notice shall specify the requested date and amount of such Revolving Credit Loan, whether such Revolving Credit Loan shall be subject to the LIBOR Option, and the amount of each Lender’s advance thereunder (in accordance with its applicable Pro Rata Percentage). Each Lender shall, not later than 12:00 p.m. (Central time) on such requested date, wire to a bank designated by Administrative Agent the amount of that Lender’s Pro Rata Percentage of the requested Revolving Credit Loan. The failure of any Lender to make the Revolving Credit Loans to be made by it shall not release any other Lender of its obligations hereunder to make its Revolving Credit Loan. Neither Administrative Agent nor any other Lender shall be responsible for the failure of any other Lender to make the Revolving Credit Loan to be made by such other Lender. The foregoing notwithstanding, Administrative Agent, in its sole discretion, may from its own funds make a Revolving Credit Loan on behalf of any Lender. In such event, the Lender on behalf of whom Administrative Agent made the Revolving Credit Loan shall reimburse Administrative Agent for the amount of such Revolving Credit Loan made on its behalf, on a weekly (or more frequent, as determined by Administrative Agent in its sole discretion) basis. On each such settlement date, Administrative Agent will pay to each Lender the net amount owing to such Lender in connection with such settlement, including without limitation amounts relating to Loans, fees, interest and other amounts payable hereunder. The entire amount of interest attributable to such Revolving Credit Loan for the period from the date on which such Revolving Credit Loan was made by Administrative Agent on such Lender’s behalf until Administrative Agent is reimbursed by such Lender, shall be paid to Administrative Agent for its own account.

 

4.1.4                    Authorization. Borrowers hereby irrevocably authorize Administrative Agent, in Administrative Agent’s sole discretion, to advance to Borrowers, and to charge to BorrowersLoan Account hereunder as a Revolving Credit Loan (which shall be a Base Rate Revolving Credit Loan), a sum sufficient to pay all interest accrued on the Obligations during the immediately preceding month or quarter, as the case may be, and to pay all fees, costs and expenses and other Obligations at any time owed by any Borrower to Administrative Agent or any Lender hereunder.

 

4.1.5                    [Reserved].

 

4.1.6                    Method of Making Requests. As an accommodation to Borrowers, unless a Default or an Event of Default is then in existence, (i) Administrative Agent shall permit telephonic or electronic requests for Revolving Credit Loans to Administrative Agent, (ii) Administrative Agent and Issuing Bank may, in their discretion, permit electronic transmittal of requests for Letters of Credit to them, and (iii) Administrative Agent may, in Administrative Agent’s discretion, permit electronic transmittal of instructions, authorizations, agreements or reports to Administrative Agent. Unless Borrower Representative, on its own behalf and on behalf of all other Borrowers specifically directs Administrative Agent or Issuing Bank in writing not to accept or act upon telephonic or electronic communications from any Borrower, neither Administrative Agent nor Issuing Bank shall have any liability to Borrowers for any loss or damage suffered by any Borrower as a result of Administrative Agent’s or Issuing Bank’s honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically and purporting to have been sent to Administrative Agent or Issuing Bank by any Borrower, and neither Administrative Agent nor Issuing Bank shall have any duty to verify the origin of any such communication or the authority of the Person sending it. Each telephonic request for a Revolving Credit Loan or Letter of Credit accepted by Administrative Agent and Issuing Bank, if applicable, hereunder shall be promptly followed by a written confirmation of such request from Borrower Representative to Administrative Agent and Issuing Bank, if applicable.

 

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4.1.7                    LIBOR Loan Request. By delivering a borrowing request to Administrative Agent on or before 10:00 a.m., Central time, on a Business Day, Borrower Representative, on its own behalf and on behalf of each other Borrower, may from time to time irrevocably request, on not less than three nor more than five Business Days’ notice, that a LIBOR Loan be made in a minimum amount of $500,000 and integral multiples of $100,000, with an Interest Period of one, two, three or six months. On the terms and subject to the conditions of this agreement, each LIBOR Loan shall be made available to Borrowers no later than 11:00 a.m. Central time on the first day of the applicable Interest Period by deposit to the account of the applicable Borrower as shall have been specified in its borrowing request. In no event shall Borrowers be permitted to have outstanding at any one time LIBOR Loans with more than six different Interest Periods.

 

4.1.8                    Continuation and Conversion Elections. By delivering a continuation/conversion notice to Administrative Agent on or before 10:00 a.m., Central time, on a Business Day, Borrower Representative, on its own behalf and on behalf of each other Borrower, may from time to time irrevocably elect, on not less than three nor more than five Business Days’ notice, that all, or any portion in an aggregate minimum amount of $500,000 and integral multiples of $100,000, of any LIBOR Loan be converted on the last day of an Interest Period into a LIBOR Loan with a different Interest Period, or continued on the last day of an Interest Period as a LIBOR Loan with a similar Interest Period, provided, however, that no portion of the outstanding principal amount of any LIBOR Loans may be converted to, or continued as, LIBOR Loans when any Default or Event of Default has occurred and is continuing, and no portion of the outstanding principal amount of any LIBOR Loans may be converted to LIBOR Loans of a different duration if such LIBOR Loans relate to any Derivative Obligations. If any Default or Event of Default has occurred and is continuing, or in the absence of delivery of a continuation/conversion notice with respect to any LIBOR Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, each maturing LIBOR Loan shall automatically be continued as a Base Rate Loan.

 

4.1.9                    Voluntary Prepayment of LIBOR Loans. LIBOR Loans may be prepaid upon the terms and conditions set forth herein. For LIBOR Loans in connection with which Borrowers have or may incur Derivative Obligations, additional obligations may be associated with prepayment, in accordance with the terms and conditions of the applicable underlying agreements relating to such Derivative Obligations. Borrower Representative, on its own behalf and on behalf of each other Borrower, shall give Administrative Agent, no later than 10:00 a.m., Central time, at least four (4) Business Days’ notice of any proposed prepayment of any LIBOR Loan, specifying the proposed date of payment of such LIBOR Loan, and the principal amount to be paid. Each partial prepayment of the principal amount of any such LIBOR Loan shall be in a minimum amount of $500,000 and integral multiples of $100,000 and accompanied by the payment of all charges outstanding on such LIBOR Loans and of all accrued interest on the principal repaid to the date of payment. Borrowers acknowledge that prepayment or acceleration of a LIBOR Loan during an Interest Period applicable thereto shall result in Lenders incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities. Therefore, all full or partial prepayments of LIBOR Loans shall be accompanied by, and Borrowers hereby promise to pay, on each date a LIBOR Loan is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise, in addition to all other sums then owing, an amount equal to the loss, cost and expense incurred by each Lender attributable to such event (including any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund its LIBOR Loans and any loss, expense or liability relating to any currency swap entered into by such Lender to fund such LIBOR Loan, but excluding loss of anticipated profits) (“LIBOR Loan Prepayment Fee”). A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this subsection 4.1.9 shall be delivered to Borrower Representative (with a copy to Administrative Agent) and shall be conclusive and binding absent manifest error.

 

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4.2              Payments. The Obligations shall be payable as follows:

 

4.2.1                    Principal.

 

(i)                 Revolving Credit Loans. Principal on account of Revolving Credit Loans shall be payable by Borrowers to Administrative Agent for the ratable benefit of Lenders immediately upon the earliest of (i) the occurrence of an Event of Default in consequence of which Administrative Agent or Majority Lenders elect to accelerate the maturity and payment of the Obligations, or (ii) termination of this Agreement pursuant to Section 5 hereof; provided, however, that, if an Overadvance shall exist at any time, Borrowers shall, on demand, repay the Overadvance. Each payment by Borrowers on account of principal of the Revolving Credit Loans shall be applied first to Base Rate Revolving Credit Loans and then to LIBOR Revolving Credit Loans.

 

(ii)              Term Loan. Beginning on the first day of the second full month following each Term Loan Advance, and on the first day of each month thereafter, principal payable on account of such Term Loan Advance shall be paid in equal monthly installments equal to an amount sufficient to fully amortize the aggregate outstanding principal balance of such Term Loan Advance over an assumed term ending on the date which is sixty (60) months after the first payment on such Term Loan Advance. The entire remaining principal amount then outstanding, together with any and all other amounts due in respect of the Term Loan, shall be due and payable on the Term Loan Maturity Date.

 

4.2.2                    Interest Provisions. Interest on the outstanding principal amount of any Loan shall be payable on each applicable Interest Payment Date.

 

4.2.3                    Costs, Fees and Charges. Costs, fees and charges payable pursuant to this Agreement shall be payable by Borrowers to Administrative Agent, as and when provided to Administrative Agent, Issuing Bank or a Lender, as applicable, or to any other Person designated by Administrative Agent, Issuing Bank or such Lender in writing.

 

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4.2.4                    Other Obligations. The balance of the Obligations requiring the payment of money, if any, shall be payable by Borrowers to Administrative Agent for distribution to Issuing Bank and Lenders, as applicable, as and when provided in this Agreement or the other Loan Documents.

 

4.2.5                    LIBOR Loans. If the application of any payment made in accordance with the provisions of this Agreement would result in the prepayment, in whole or in part, of a LIBOR Loan prior to the last day of the Interest Period for such LIBOR Loan, Borrowers shall pay to each Lender on the date of each such prepayment any applicable LIBOR Loan Prepayment Fees of such Lender; provided, that, if no Event of Default has occurred and is continuing at the time such payment is to be applied, the amount of such prepayment shall not be applied to such LIBOR Loan, but will, at Borrowers’ option, be held by Administrative Agent in a non-interest-bearing account at Bank, which account is in the name of Administrative Agent and from which account only Administrative Agent can make any withdrawal, in each case to be applied as such amount would otherwise have been applied hereunder at the earlier to occur of (i) the last day of the relevant Interest Period or (ii) the occurrence of an Event of Default, in which case, the LIBOR Loan Prepayment Fees shall be payable upon the occurrence of such Event of Default.

 

4.3              Mandatory and Optional Prepayments.

 

4.3.1                    Proceeds of Sale, Loss, Destruction or Condemnation of Collateral. Concurrently with the receipt by any Loan Party or its Subsidiaries of any Net Cash Proceeds from any Asset Disposition, in an amount equal to 100% of those Net Cash Proceeds; provided that, at the option of Borrower Representative (as elected by Borrower Representative in writing to Administrative Agent on or prior to the fifth Business Day after the date of receipt of such Net Cash Proceeds), and so long as no Default or Event of Default shall have occurred and be continuing, Borrowers may reinvest all or any portion of such Net Cash Proceeds in long-term assets used or useful in their business (such assets, “Additional Assets”) so long as such reinvestment is made within 180 days after the receipt of such Net Cash Proceeds (as certified by Borrower Representative in writing to Administrative Agent); provided further, that any Net Cash Proceeds not so reinvested shall be immediately applied to the prepayment of the Loans as set forth in this Section 4.3.1 upon the expiration of such applicable period; provided, further, to the extent that (1) the assets that were subject to the Asset Disposition constituted ABL Priority Collateral or Acquisition Term Loan Priority Collateral, such Additional Assets shall also constitute ABL Priority Collateral or Acquisition Term Loan Priority Collateral, respectively (and Borrowers or their Subsidiaries, as the case may be, shall promptly take such action (if any) as may be required to cause that portion of such reinvestment constituting ABL Priority Collateral or Acquisition Term Loan Priority Collateral, as applicable, to be added to the ABL Priority Collateral or Acquisition Term Loan Priority Collateral securing the Obligations or the Acquisition Term Debt, as applicable), (2) any such Asset Disposition that consisted of or constituted any portion of ABL Priority Collateral, such Net Cash Proceeds shall be applied to the Obligations, and (3) any such Asset Disposition is of assets solely constituting Acquisition Term Loan Priority Collateral that are required to be applied to the Acquisition Term Debt pursuant to the terms of the Acquisition Term Loan Agreement, then the Net Cash Proceeds of such Asset Disposition shall first be applied to the Acquisition Term Debt as required under the Acquisition Term Loan Documents until the Acquisition Term Debt is Paid in Full and then to the Obligations as required hereunder. To the extent the Net Cash proceeds of any Asset Disposition are required to be applied to the Acquisition Term Debt under this Section 4.3.1 or the Intercreditor Agreement, upon the payment in full of the Acquisition Term Debt, such Net Cash Proceeds shall be applied to the Obligations as set forth in this Section 4.3.1. To the extent that the Collateral sold, lost, destroyed or condemned consists of ABL Priority Collateral other than Accounts, the applicable prepayment shall be applied first, to the installments of principal due under the Term Loan ratably, to be applied to future installment payments in inverse order of maturity until paid in full, and second to repay outstanding principal of Revolving Credit Loans without a reduction of the Revolving Credit Commitments. To the extent that the Collateral sold, lost, destroyed or condemned consists of Accounts, the applicable prepayment shall be applied to reduce the outstanding principal balance of the Revolving Credit Loans, without a reduction of the Revolving Credit Commitments. Prior to entering into any Asset Disposition of assets which constitute Acquisition Term Loan Priority Collateral, Borrowers shall provide not less than three (3) Business Days’ prior written notice thereof and identify if any such proceeds are being delivered to the deposit accounts subject to Control Agreements whereby Administrative Agent has a first-priority security interest therein. If Administrative Agent does not receive prior written notice that proceeds of Acquisition Term Loan Priority Collateral is being sent to such deposit accounts, Administrative Agent may presumptively rely that all cash received into the deposit account is subject to a first priority security interest, is ABL Priority Collateral, and can be applied to the Revolving Credit Loans as set forth herein.

 

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4.3.2                    Term Loan. If at any time the amount of the aggregate outstanding principal amount of the Term Loan exceeds 85% of NOLV of the Borrowers’ Eligible Machinery and Equipment, the Borrowers shall pay to Administrative Agent, for the ratable benefit of the Term Loan Lenders, as a mandatory prepayment of the Term Loan, the amount by which the aggregate outstanding principal amount of the Term Loan exceeds 85% of NOLV of the Borrowers’ Eligible Machinery and Equipment.

 

4.3.3                    Proceeds from Additional Debt. Subject to the Intercreditor Agreement, if any Borrower receives proceeds of any additional Debt incurred by such Borrower (other than Debt permitted pursuant to subsection 9.2.2), Borrowers shall pay to Administrative Agent, for the ratable benefit of Lenders, when and as received by such Borrower and as a mandatory prepayment of the Obligations, a sum equal to 100% of the net proceeds to such Borrower of the incurrence of such Debt. Any such prepayment shall be applied to repay outstanding principal of Revolving Credit Loans without a reduction of the Revolving Credit Commitments.

 

4.3.4                    Excess Revolving Credit Extensions. If at any time the Aggregate Revolving Extensions exceed the Line Cap at such time (except as a result of Overadvances permitted under subsection 2.1.2), Borrowers shall immediately repay the Revolving Credit Loans and/or cash collateralize the Letters of Credit in an aggregate amount equal to such excess.

 

4.3.5                    Optional Reductions of Revolving Credit Commitments. Borrowers may, at their option from time to time but not more than once in any 12-month period upon not less than three (3) Business Days’ prior written notice to Administrative Agent, permanently reduce ratably in part, the unused portion of the Revolving Credit Commitments, provided, however, that (i) each such optional reduction shall be in an amount of $2,000,000 or integral multiples of $1,000,000 in excess thereof and (ii) the aggregate of all optional reductions to the Revolving Credit Commitments may not exceed $5,000,000 during the Term. Except for charges under subsection 4.1.9, such prepayments shall be without premium or penalty.

 

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4.3.6                    Optional Prepayments. Borrowers may, at their option from time to time upon not less than three (3) days prior written notice to Administrative Agent, prepay installments of the Term Loan. Each such prepayment shall be applied to the installments of principal due under the Term Loan in the order of application designated by Borrower; provided, that, Borrower shall only be required to make such prepayments to the extent that, after giving effect thereto, Excess Availability would be at least $3,000,000. Except for charges under subsection 4.1.9, such prepayments shall be without premium or penalty.

 

4.3.7                    Proceeds from Equity Interests. Subject to the Intercreditor Agreement, if any Loan Party or any of its Subsidiaries receives any Net Cash Proceeds from any issuance of Equity Interests of any Loan Party or any of its Subsidiaries, whether in connection with the issuance of any Curative Equity or otherwise (excluding any issuance of Equity Interests (A) pursuant to any employee or director option program, benefit plan or compensation program or agreement, (B) by a Subsidiary to any Borrower or another Subsidiary and (C) the Net Cash Proceeds of which are used substantially to fund a Permitted Acquisition), concurrently with such receipt in an amount equal to 50% (or, in the case of Net Cash Proceeds in the form of Curative Equity, 100%) of those Net Cash Proceeds.

 

4.3.8                    Other Receipts. Subject to the Intercreditor Agreement, if any Loan Party or any of its Subsidiaries receives any Other Receipts, concurrently with such receipt in an amount equal to 100% of those Other Receipts; provided that, so long as no Default or Event of Default shall have occurred and be continuing, Borrowers may reinvest the first $500,000 of such Other Receipts and up to 50% of any additional Other Receipts in the aggregate over the term of this Agreement in the applicable acquired business so long as such reinvestment is made within 180 days after the receipt of such Other Receipts (as certified by Borrower Representative in writing to Administrative Agent); provided further, that any Other Receipts not so reinvested shall be immediately applied to the prepayment of the Term Loans upon the expiration of such applicable period.

 

4.3.9                    Mandatory Prepayments under Acquisition Term Loan Agreement. Notwithstanding anything in Sections 4.3.3, 4.3.7 and 4.3.8 to the contrary, until the Payment in Full (as defined in the Acquisition Term Loan Agreement), no mandatory prepayment under Sections 4.3.3, 4.3.7 and 4.3.8 shall be required to be made, except with respect to any portion (if any) of any proceeds that are declined by the holders of the Acquisition Term Loans in accordance with the terms thereof.

 

4.4              Application of Payments and Collections.

 

4.4.1                    Collections. All items of payment received by Administrative Agent by 12:00 noon, Central time, on any Business Day shall be deemed received on that Business Day. All items of payment received after 12:00 noon, Central time, on any Business Day, in Administrative Agent’s discretion, shall be deemed received on the following Business Day. If as the result of collections of Accounts as authorized by subsection 7.2.4 hereof or otherwise, a credit balance exists in the Loan Account, such credit balance shall not accrue interest in favor of Borrowers, but shall be disbursed to Borrowers or otherwise at Borrower Representative’s direction in the manner set forth in subsection 4.1.2, upon Borrower Representative’s request at any time, so long as no Default or Event of Default then exists. Administrative Agent may at its option, offset such credit balance against any of the Obligations upon and during the continuance of an Event of Default.

 

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4.4.2                    Apportionment, Application and Reversal of Payments. Principal and interest payments shall be apportioned ratably among Lenders (according to the unpaid principal balance of the Loans to which such payments relate held by each Lender). Prior to the occurrence of an Event of Default, all proceeds of Collateral shall be applied by Administrative Agent against the outstanding Obligations as otherwise provided in this Agreement. Anything contained herein or in any other Loan Document to the contrary notwithstanding but subject in all respects to the Intercreditor Agreement, all payments and collections received in respect of the Obligations and all proceeds of the Collateral received, in each instance, by Administrative Agent or any Lender after the occurrence and during the continuance of an Event of Default and the resultant declaration that all Obligations are immediately due and payable shall be remitted to Administrative Agent and distributed as follows:

 

(i)                 first, to the payment of any outstanding costs and expenses incurred by any Agent in monitoring, verifying, protecting, preserving or enforcing the Liens on the Collateral, and in protecting, preserving or enforcing rights under this Agreement or any of the other Loan Documents, and payable by Borrowers under this Agreement, including, without limitation, under Sections 3.7, 3.9 and 13.2 hereof (such funds to be retained by the applicable Agent for its own account unless it has previously been reimbursed for such costs and expenses by Lenders, in which event such amounts shall be remitted to Lenders to reimburse them for payments theretofore made to such Agent);

 

(ii)              second, to the payment of any outstanding interest or fees due under the Loan Documents to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof;

 

(iii)            third, (a) to payment of all Product Obligations and (b) to the payment of principal on the Revolving Credit Loans, the Term Loan, unpaid reimbursement obligations in respect of Letters of Credit, together with amounts to be held by Administrative Agent as collateral security for any outstanding Letters of Credit pursuant to subsection 11.3.5 hereof, amounts owing with respect to Derivative Obligations (other than Excess Derivative Obligations), the aggregate amount paid to, or held as collateral security for, Lenders (and their Affiliates, as applicable in the case of Derivative Obligations) to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof;

 

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(iv)             fourth, to the payment of all other unpaid Obligations and all other indebtedness, obligations, and liabilities of the Loan Parties to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof; and

 

(v)               finally, to Borrowers or otherwise as required by law or court order.

 

Except as otherwise specifically provided for herein, Borrowers hereby irrevocably waive the right to direct the application of payments and collections at any time received by Administrative Agent or any Lender from or on behalf of Borrowers or any Guarantor, and Borrowers hereby irrevocably agree that Administrative Agent shall have the continuing exclusive right to apply and reapply any and all such payments and collections received at any time by Administrative Agent or any Lender against the Obligations in the manner described above. In the event that the amount of any Derivative Obligation is not fixed and determined at the time proceeds of Collateral are received which are to be allocated thereto, the proceeds of Collateral so allocated shall be held by Administrative Agent as collateral security (in a non-interest bearing account) until such Derivative Obligation is fixed and determined and then the same shall (if and when, and to the extent that, payment of such liability is required by the terms of the relevant contractual arrangements) be applied to such liability.

 

4.5              All Loans to Constitute One Obligation. The Loans and LC Obligations shall constitute one general Obligation of Borrowers and shall be secured by Administrative Agent’s Lien upon all of the Collateral.

 

4.6              Loan Account. Administrative Agent shall enter all Loans as debits to a loan account (the “Loan Account”) and shall also record in the Loan Account all payments made by Borrowers on any Obligations and all proceeds of Collateral which are finally paid to Administrative Agent, and may record therein, in accordance with customary accounting practice, other debits and credits, including interest and all charges and expenses properly chargeable to Borrowers.

 

4.7              Statements of Account. Administrative Agent will account to Borrower Representative monthly with a statement of Loans, charges and payments made pursuant to this Agreement during the immediately preceding month, and such account rendered by Administrative Agent shall be deemed final, binding and conclusive upon Borrowers absent demonstrable error unless Administrative Agent is notified by Borrowers in writing to the contrary within thirty (30) days of the date each accounting is received by Borrowers. Such notice shall be deemed an objection only to those items specifically objected to therein.

 

4.8              Increased Costs.

 

4.8.1                    Increased Costs Generally. If any Change in Law shall:

 

(i)                 impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except, to the extent applicable, any reserve requirement reflected in LIBOR) or the Issuing Bank;

 

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(ii)              subject any Lender or the Issuing Bank to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (ii) through (iv) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(iii)            impose on any Lender or the Issuing Bank or, to the extent applicable, the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to, continuing or maintaining any Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, the Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, the Issuing Bank or other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Issuing Bank or other Recipient, the Borrowers will pay to such Lender, the Issuing Bank or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Bank or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

 

4.8.2                    Capital Requirements. If any Lender or the Issuing Bank determines that any Change in Law affecting such Lender or Issuing Bank or any lending office of such Lender or such Lender’s or the Issuing Bank’s holding company, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Revolving Credit Commitment of such Lender or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

 

4.8.3                    Certificates for Reimbursement. A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in subsection 4.8.1 or 4.8.2 and delivered to the Borrowers, shall be conclusive absent manifest error. The Borrowers shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

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4.8.4                    Delay in Requests. Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrowers shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs incurred or reductions suffered more than nine (9) months prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrowers of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine (9) month period referred to above shall be extended to include the period of retroactive effect thereof).

 

4.9              Ineffective Interest Rate; Benchmark Replacement.

 

4.9.1                    If the Administrative Agent shall have determined with respect to LIBOR or any other then-current Benchmark that (i) adequate and reasonable means do not exist for ascertaining such Benchmark, (ii) such Benchmark does not adequately and fairly reflect the effective cost to the Lenders of making or maintaining a Loan based on such Benchmark, or (iii) the making, maintenance or funding of a Loan based on such Benchmark has been made impractical or unlawful, then, and in any such event (unless such event constitutes a Benchmark Transition Event), Administrative Agent may so notify Borrower and as of the date of such notification (y) any request hereunder for the conversion of any Loan to, or continuation of any Loan as, a Loan based on such Benchmark shall be ineffective and any such Loan shall be continued as or converted to, as the case may be, a Base Rate Loan and (z) if any request is made hereunder for a Loan based on such Benchmark, such Loan shall be made as a Base Rate Loan, in each case unless and until Administrative Agent shall have determined that such circumstances shall no longer exist and shall have revoked such notice.

 

4.9.2                    Notwithstanding anything to the contrary in this Agreement or any other Loan Document, if, with respect to LIBOR or any other then-current Benchmark, the Administrative Agent shall have determined that:

 

(i)                 the circumstances set forth in subsection 4.9.1(iii) have arisen and such circumstances are unlikely to be temporary; or

 

(ii)              the administrator for such Benchmark (or for a published component used in the calculation thereof) (the “Administrator”) has discontinued its administration and publication of such Benchmark (or such component), permanently or indefinitely, provided that, at the time of such discontinuation, there is no successor administrator that will continue to provide such Benchmark (or such component); or

 

(iii)            a public statement or publication of information has been made by or on behalf of the Administrator announcing that the Administrator has ceased or will cease to provide such Benchmark (or a published component used in the calculation thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide such Benchmark (or such component); or

 

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(iv)             a public statement or publication of information has been made by or on behalf of the regulatory supervisor for the Administrator, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the Administrator, a resolution authority with jurisdiction over the Administrator or a court or an entity with similar insolvency or resolution authority over the Administrator, which states that the Administrator has ceased or will cease to provide such Benchmark (or a published component used in the calculation thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

 

(v)               a public statement or publication of information has been made by or on behalf of the regulatory supervisor for the Administrator announcing that such Benchmark (or a published component used in the calculation thereof) is no longer representative; or

 

(vi)             syndicated credit facilities similar to the credit facility or facilities under this Agreement being executed at such time, or that include language similar to that contained in this subsection 4.9.2, are being executed or amended, as the case may be, to incorporate or adopt a new benchmark interest rate to replace such Benchmark (or a published component used in the calculation thereof) and (in the case of this clause (vi)) the Administrative Agent has elected to treat such circumstance as a Benchmark Transition Event hereunder,

 

(each of clauses (i) through (vi) above being referred to herein as a “Benchmark Transition Event”) then the Administrative Agent and the Borrower may amend this Agreement to replace LIBOR or such other then-current Benchmark, as applicable, with a Benchmark Replacement. Notwithstanding anything to the contrary in Section 13.3, any such amendment with respect to a Benchmark Transition Event (A) pursuant to any of clauses (i) through (v) above will become effective without any further action or consent of any other party to this Agreement at 5:00 p.m. Central time on the fifth (5th) Business Day after the Administrative Agent has posted or otherwise made available such proposed amendment to all Lenders and the Borrower so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Majority Lenders or (B) pursuant to clause (vi) above will become effective without any further action or consent of any other party to this Agreement on the date that Lenders comprising the Majority Lenders have delivered to the Administrative Agent written notice that such Majority Lenders accept such amendment. No replacement of a Benchmark with a Benchmark Replacement pursuant to this subsection 4.9.2 will occur prior to the applicable Benchmark Transition Start Date.

 

In connection with the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.

 

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The Administrative Agent will promptly notify the Borrower and the Lenders of (i) any occurrence of a Benchmark Transition Event and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or Lenders pursuant to this Section 4.9, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section 4.9.

 

Upon notice to the Borrower by the Administrative Agent in accordance with Section 13.8 of the commencement of a Benchmark Unavailability Period and until a Benchmark Replacement shall be determined in accordance with this subsection 4.9.2, (y) any request hereunder for the conversion of any Loan to, or continuation of any Loan as, a Loan based on the then-current Benchmark shall be ineffective and any such Loan shall be continued as or converted to, as the case may be, a Base Rate Loan, and (z) if any request is made hereunder for a Loan based on the then-current Benchmark, such Loan shall be made as a Base Rate Loan. During any Benchmark Unavailability Period, any component of the Base Rate based upon the then-current Benchmark will not be used in any determination of the Base Rate.

 

4.9.3                    For purposes of this Section 4.9:

 

Administrator” has the meaning specified in subsection 4.9.2.

 

Benchmark” means LIBOR or a Benchmark Replacement that is in effect hereunder, as applicable.

 

Benchmark Replacement” means the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body and/or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the then-current Benchmark (or any applicable component thereof) for syndicated credit facilities similar to the credit facility or facilities hereunder denominated in U.S. Dollars and (b) the Benchmark Replacement Adjustment (which, in each case, may include a rate that is published on an information service as selected by the Administrative Agent from time to time, and may be updated periodically); provided that the Benchmark Replacement shall incorporate or be subject to any floor corresponding to any floor on or related to the Benchmark that is being replaced; provided, further, that any Benchmark Replacement must be administratively feasible as determined by Administrative Agent.

 

Benchmark Replacement Adjustment” means, with respect to any replacement under this Agreement of the then-current Benchmark with an alternative benchmark rate for each applicable Interest Period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark (or any applicable component thereof) with an alternative benchmark rate, as applicable, by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark (or any applicable component thereof) with an alternative benchmark rate, as applicable, at such time for U.S. syndicated credit facilities denominated in U.S. Dollars (which, in each case, may include an adjustment or method for calculating or determining such an adjustment that is published on an information service as selected by the Administrative Agent from time to time, and may be updated periodically).

 

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Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate”, the definition of “Interest Period,” the definition of “LIBOR Reserve Percentage” (it being understood that such a factor may be applied in respect of a Benchmark Replacement), or the timing and frequency of determining rates and making payments of interest and other administrative matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

 

Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark (or any applicable component thereof):

 

(a)               in the case of clause (i) of subsection 4.9.2, the date selected by the Administrative Agent; or

 

(b)               in the case of clauses (ii), (iii) or (iv) of subsection 4.9.2, the later of:

 

A.                the date of the public statement or publication of information referenced therein (if applicable) and

 

B.                 the date on which the Administrator permanently or indefinitely ceases to provide such Benchmark (or component); or

 

(c)               in the case of clause (v) of subsection 4.9.2, the date of the public statement or publication of information referenced therein; or

 

(d)               in the case of clause (vi) of subsection 4.9.2, the date specified by the Administrative Agent by notice to the Borrower and the Lenders.

 

Benchmark Transition Event” has the meaning specified in subsection 4.9.2.

 

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Benchmark Transition Start Date” means (a) in the case of a Benchmark Transition Event pursuant to any of clauses (i) through (v) of subsection 4.9.2, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication) and (b) in the case of a Benchmark Transition Event pursuant to any clause (vi) of subsection 4.9.2, the date specified by the Administrative Agent by notice to the Borrower and the Lenders.

 

Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to any then-current Benchmark and solely to the extent that such Benchmark has not been replaced with a Benchmark Replacement, the period (y) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes under this Agreement and the other Loan Documents in accordance with subsection 4.9.2 and (z) ending at the time that a Benchmark Replacement has replaced such Benchmark for all purposes under this Agreement and the other Loan Documents pursuant to subsection 4.9.2.

 

Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

 

4.10          Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of any Loan made by it in excess of its ratable share of payments on account of Loans made by all Lenders, such Lender shall forthwith purchase from each other Lender such participation in such Loan as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each other Lender; provided that, if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lenders the purchase price to the extent of such recovery, together with an amount equal to such Lender’s ratable share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Borrowers agree that any Lender so purchasing a participation from another Lender pursuant to this Section 4.10 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount of such participation. Notwithstanding anything to the contrary contained herein, all purchases and repayments to be made under this Section 4.10 shall be made through Administrative Agent.

 

4.11          Defaulting Lender. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

 

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4.11.1                The Unused Line Fee shall cease to accrue on the Revolving Credit Commitment of such Lender so long as it is a Defaulting Lender (except to the extent it is payable to an Issuing Bank pursuant to subsection 4.11.2(v) below);

 

4.11.2                If any Letters of Credit are outstanding at the time a Lender becomes a Defaulting Lender then:

 

(i)                 (A) the exposure under all or any part of any Letters of Credit shall be reallocated among the applicable non-Defaulting Lenders that are Revolving Credit Lenders in accordance with their respective Pro Rata Percentages but only to the extent the sum of all such non-Defaulting Lenders’ Revolving Credit Loans outstanding, plus the LC Amount, does not exceed the total of all such non-Defaulting Lenders’ Revolving Credit Commitments; and (B) with respect to any such exposure so reallocated, each applicable non-Defaulting Lender shall be deemed to have irrevocably and unconditionally purchased from the Issuing Bank an undivided interest and participation in the portion of each Letter of Credit so reallocated, in accordance with the applicable provisions of Section 2.2. Subject to Section 3.12, no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a non-Defaulting Lender as a result of such non-Defaulting Lender’s increased exposure following such reallocation;

 

(ii)              if the reallocations described in clause (i) above cannot, or can only partially, be effected, Borrowers shall within one (1) Business Day following notice by Administrative Agent (after giving effect to any partial reallocation pursuant to clause (i) above) cash collateralize Letters of Credit in an amount equal to the product of such Defaulting Lender’s Pro Rata Percentage times the total LC Amount;

 

(iii)            if any portion of the Letters of Credit is cash collateralized pursuant to clause (ii) above, Borrowers shall not be required to pay the Letter of Credit fee described in clause (i) of Section 3.4 with respect to such portion so long as it is cash collateralized;

 

(iv)             if any portion of the exposure under Letters of Credit of such Defaulting Lender is reallocated to the non-Defaulting Lenders pursuant to clause (i) above, then the Letter of Credit fee described in clause (i) of Section 3.4 with respect to such portion so reallocated to each such non-Defaulting Lender shall be paid to such non-Defaulting Lender; and

 

(v)               if any portion of the exposure under Letters of Credit of such Defaulting Lender is neither cash collateralized nor reallocated pursuant to this subsection 4.11.2, then, without prejudice to any rights or remedies of Issuing Bank or any Lender hereunder, the Unused Line Fee that otherwise would have been payable to such Defaulting Lender (with respect to the portion of such Defaulting Lender’s Revolving Credit Commitment that was utilized by such Letters of Credit) and the Letter of Credit fee described in clause (i) of Section 3.4 payable with respect to such Letters of Credit shall be payable to Issuing Bank until such Letters of Credit are fully cash collateralized and/or reallocated.

 

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4.11.3                So long as any Lender is a Defaulting Lender, no Issuing Bank shall be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Revolving Credit Commitments of the non-Defaulting Lenders and/or cash collateralized in accordance with subsection 4.11.2, and participations in any such newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in accordance with their respective Pro Rata Percentages (and Defaulting Lenders shall not participate therein).

 

4.11.4                Any amount payable to a Defaulting Lender hereunder (whether on account of principal, interest, fees or otherwise but excluding subsection 13.5.6) may, in lieu of being distributed to such Defaulting Lender, be retained by Administrative Agent in a segregated non-interest bearing account and, subject to any Applicable Law, be applied at such time or times as may be determined by Administrative Agent (i) first, to the payment of any amounts owing by such Defaulting Lender to Administrative Agent hereunder, (ii) second, pro rata, to the payment of any amounts owing by such Defaulting Lender to Issuing Bank hereunder, (iii) third, to the funding of any Loan or the funding or cash collateralization of any participation in any Letter of Credit in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by Administrative Agent, (iv) fourth, if so determined by Administrative Agent and Borrowers, held in such account as cash collateral for future funding obligations of the Defaulting Lender under this Agreement, (v) fifth, pro rata, to the payment of any amounts owing to Borrowers or the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Borrower or any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement and (vi) sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided, that if such payment is a prepayment of the principal amount of any Loans or LC Obligations in respect of which a Defaulting Lender has funded its participation obligations, such payment shall be applied solely to prepay the Loans of, and LC Obligations owed to, all non-Defaulting Lenders pro rata prior to being applied to the prepayment of any Loans of, or LC Obligations owed to, any Defaulting Lender.

 

4.11.5                In the event that Administrative Agent, Borrowers and Issuing Bank agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the exposure of the Lenders under the Letters of Credit shall be readjusted to reflect the inclusion of such Lender’s Revolving Credit Commitment and on such date such Lender shall purchase at par such of the Revolving Credit Loans of the other Lenders as Administrative Agent shall determine may be necessary in order for such Lender to hold such Revolving Credit Loans in accordance with its Pro Rata Percentage. The rights and remedies against a Defaulting Lender under this Section 4.11 are in addition to other rights and remedies that Borrowers, Administrative Agent, Issuing Bank and the non-Defaulting Lenders may have against such Defaulting Lender. The arrangements permitted or required by this Section 4.11 shall be permitted under this Agreement, notwithstanding any limitation on Liens or the pro rata sharing provisions or otherwise.

 

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Article V. TERM AND TERMINATION

 

5.1              Term of Agreement. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any Default or Event of Default, this Agreement shall be in effect through and including [______], 2025 (the “Term”), unless terminated as provided herein.

 

5.2              Termination.

 

5.2.1                    Termination by Lenders. Administrative Agent may, and at the direction of Majority Lenders shall, terminate this Agreement without notice after the occurrence and during the continuance of an Event of Default.

 

5.2.2                    Termination by Borrowers. Upon at least three (3) Business Days’ prior written notice to Administrative Agent and Lenders, Borrowers may, at their option, terminate this Agreement; provided, however, that no such termination shall be effective until Borrowers have paid or collateralized to Administrative Agent’s reasonable satisfaction all of the Obligations (including any obligations in connection with Derivative Obligations of any Loan Party but excluding indemnity Obligations for which no claim has been made) in immediately available funds, all Letters of Credit have expired, terminated or have been cash collateralized or supported by a backstop letter of credit, in the case of any such cash collateralization or backstop letter of credit, at 103% of the face amount thereof to Administrative Agent’s reasonable satisfaction and Borrowers have complied with subsection 4.1.9. 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 or issue or procure any Letters of Credit on or after the termination date stated in such notice; provided, that a notice of termination may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrowers (by notice to Administrative Agent on or prior to the specified effective date) if such condition is not satisfied.

 

5.2.3                    Effect of Termination. All of the Obligations shall be immediately due and payable upon the termination date stated in any notice of termination of this Agreement, or, if later, upon the expiration of the Term. All undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Loan Documents shall survive any such termination and Administrative Agent shall retain its Liens in the Collateral and Administrative Agent and each Lender shall retain all of its rights and remedies under the Loan Documents notwithstanding such termination until all Obligations (other than indemnity Obligations for which no claim has been made) have been discharged or paid, in full, in immediately available funds, including, without limitation, all Obligations under subsection 4.1.9 resulting from such termination and all Letters of Credit have expired, terminated or have been cash collateralized or supported by a backstop letter of credit, in the case of any such cash collateralization or backstop letter of credit, at 103% of the face amount thereof to Administrative Agent’s reasonable satisfaction. Notwithstanding the foregoing or the payment in full of the Obligations, Administrative Agent shall not be required to terminate its Liens in the Collateral unless, with respect to any loss or damage Administrative Agent may incur as a result of dishonored checks or other items of payment received by Administrative Agent from any Borrower or any Account Debtor and applied to the Obligations, Administrative Agent shall, at its option, (i) have received a written agreement satisfactory to Administrative Agent, executed by any Borrower and by any Person whose loans or other advances to Borrowers are used in whole or in part to satisfy the Obligations, indemnifying Administrative 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 Administrative Agent, in its reasonable discretion, may deem necessary to protect Administrative Agent and each Lender from any such loss or damage.

 

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Article VI. SECURITY INTERESTS

 

6.1              Security Interest in Collateral.

 

6.1.1                    Grant of Security Interest by Borrowers. To secure the prompt payment and performance to Administrative Agent and each Lender of the Obligations, each Borrower hereby grants to Administrative Agent for the benefit of itself and each Lender a continuing Lien upon all of such Borrower’s assets, including all of the following Property and interests in Property of such Borrower (other than Excluded Property), whether now owned or existing or hereafter created, acquired or arising and wheresoever located:

 

(i)                 Accounts;

 

(ii)              Certificated Securities;

 

(iii)            Chattel Paper;

 

(iv)             Commercial Tort Claims, including, without limitation, any Commercial Tort Claims set forth on Schedule 6.1 hereto;

 

(v)               Computer Hardware and Software and all rights with respect thereto, including any and all licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements, additions or model conversions of any of the foregoing;

 

(vi)             Contract Rights;

 

(vii)          Deposit Accounts;

 

(viii)        Documents;

 

(ix)             Equipment;

 

(x)               Financial Assets;

 

(xi)             Fixtures;

 

(xii)          General Intangibles, including Payment Intangibles;

 

(xiii)        Goods (including all of its Equipment, Fixtures and Inventory), and all accessions, additions, attachments, improvements, substitutions and replacements thereto and therefor;

 

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(xiv)         Instruments;

 

(xv)           Intellectual Property;

 

(xvi)         Inventory;

 

(xvii)      Investment Property;

 

(xviii)    money (of every jurisdiction whatsoever);

 

(xix)         Letter of Credit Rights;

 

(xx)           Payment Intangibles;

 

(xxi)         Security Entitlements;

 

(xxii)      Supporting Obligations;

 

(xxiii)    Uncertificated Securities; and

 

(xxiv)     to the extent not included in the foregoing, all other personal property of any kind or description;

 

together with all books, records, writings, databases, information and other property relating to, used or useful in connection with, or evidencing, embodying, incorporating or referring to any of the foregoing, and all Proceeds, products, offspring, rents, issues, profits and returns of and from any of the foregoing.

 

6.1.2                    Grant of Security Interest by Holdings. To secure prompt payment and performance to Administrative Agent and each Lender of the Obligations, Holdings hereby grants to Administrative Agent, for the benefit of itself and each Lender, a continuing Lien upon all Equity Interests, whether certificated or uncertificated, in Parent and in each other immediate Subsidiary of Holdings which becomes a Loan Party hereunder, whether now owned or existing or hereafter created, together with all books, records, evidence of ownership and other property relating to, used or useful in connection with or evidencing the foregoing, and all Proceeds of the foregoing. Reference is hereby made to that certain Pledge Agreement, dated on or about the date hereof, executed by Holdings, in favor of Administrative Agent, for further provisions of this grant by Holdings of a security interest in such Equity Interests and Administrative Agent’s rights and remedies in connection therewith.

 

6.1.3                    Grant of Security Interest by Parent. To secure prompt payment and performance to Administrative Agent and each Lender of the Obligations, Parent hereby grants to Administrative Agent, for the benefit of itself and each Lender, a continuing Lien upon all Equity Interests, whether certificated or uncertificated, in Quest, whether now owned or existing or hereafter created, together with all books, records, evidence of ownership and other property relating to, used or useful in connection with or evidencing the foregoing, and all Proceeds of the foregoing. Reference is hereby made to that certain Pledge Agreement, dated on or about the date hereof, executed by Parent, in favor of Administrative Agent, for further provisions of this grant by Parent of a security interest in such Equity Interests and Administrative Agent’s rights and remedies in connection therewith.

 

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6.2              Other Collateral.

 

6.2.1                    Commercial Tort Claims. The Borrowers shall promptly notify Administrative Agent in writing upon any Borrower incurring or otherwise obtaining a Commercial Tort Claim after the Closing Date against any third party and, upon request of Administrative Agent, promptly enter into an amendment to this Agreement and do such other acts or things deemed appropriate by Administrative Agent to give Administrative Agent a security interest in any such Commercial Tort Claim. The Borrowers represent and warrant that as of the date of this Agreement, except as set forth on Schedule 6.1 hereto, to their knowledge, no Borrower possesses any Commercial Tort Claims.

 

6.2.2                    Other Collateral. The Borrowers shall promptly notify Administrative Agent in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Deposit Accounts, Investment Property, Letter of Credit Rights or Electronic Chattel Paper and, upon the request of Administrative Agent, promptly execute such other documents, and do such other acts or things deemed appropriate by Administrative Agent to deliver to Administrative Agent control with respect to such Collateral; promptly notify Administrative Agent in writing upon acquiring or otherwise obtaining any Collateral after the date hereof consisting of Documents or Instruments and, upon the request of Administrative Agent, will promptly execute such other documents, and do such other acts or things deemed appropriate by Administrative Agent to deliver to Administrative Agent possession of such Documents which are negotiable and Instruments, and, with respect to nonnegotiable Documents, to have such nonnegotiable Documents issued in the name of Administrative Agent; and with respect to Collateral in the possession of a third party, other than Certificated Securities and Goods covered by a Document, obtain an acknowledgment from the third party that it is holding the Collateral for the benefit of Administrative Agent.

 

6.3              Lien Perfection; Further Assurances. The Loan Parties authorize the filing of such UCC-1 financing statements as are required by the UCC and shall execute such other instruments, assignments or documents as are necessary to perfect Administrative Agent’s Lien upon any of the Collateral and shall take such other action as may be required to perfect or to continue the perfection of Administrative Agent’s Lien upon the Collateral, including, without limitation, as to the Borrowers, the filing of UCC-1 financing statements that indicate the Collateral (i) as all assets of such Borrower or words of similar effect, or (ii) as being of an equal or lesser scope, or with greater or lesser detail, than as set forth in Section 6.1, on such Borrower’s behalf. Each Loan Party also hereby ratifies its authorization for Administrative Agent to have filed in any jurisdiction any such UCC-1 financing statements or amendments thereto if filed prior to the date hereof. At Administrative Agent’s request, each Loan Party shall also promptly execute or cause to be executed and shall deliver to Administrative Agent any and all documents, instruments and agreements deemed necessary by Administrative Agent, to give effect to or carry out the terms or intent of the Loan Documents.

 

6.4              Lien on Realty. The due and punctual payment and performance of the Obligations shall also be secured by the Lien created by the Mortgages upon all real Property of the Borrowers described therein. If any Borrower shall acquire at any time or times hereafter any interest in other real Property (other than Excluded Property), such Borrower agrees promptly to execute and deliver to Administrative Agent, for its benefit and the benefit of Lenders, as additional security and Collateral for the Obligations, a Mortgage covering such real Property, which Mortgage shall be reasonably satisfactory in form and substance to Administrative Agent. Each Mortgage shall be duly recorded (at the Loan Parties’ expense) in each office where such recording is required to constitute a valid Lien on the real Property covered thereby. In respect of any real Property subject to a Mortgage, the Borrowers shall deliver to Administrative Agent, at the Borrowers’ expense, each of the other Mortgage-Related Documents.

 

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Article VII. COLLATERAL ADMINISTRATION

 

7.1              General.

 

7.1.1                    Location of Collateral. Set forth on Schedule 7.1.1 hereto are (i) each Loan Party’s chief executive office, (ii) the locations at which each Borrower maintains its books and records relating to Accounts and General Intangibles, (iii) each other business location of the Loan Parties and (iv) each location (including bailees, warehouses, consignees and similar parties) at which Collateral, other than Inventory in transit and motor vehicles are located. All Collateral, other than Inventory in transit and motor vehicles, will at all times be kept by the Loan Parties at one or more of the business locations set forth in Schedule 7.1.1 hereto, as updated by the Loan Parties providing prior written notice to Administrative Agent of any new location.

 

7.1.2                    Insurance of Collateral. The Borrowers shall at all times maintain and pay for insurance upon all Collateral wherever located and with respect to the business of the Borrowers, covering casualty, hazard, public liability, workers’ compensation and such other risks in such amounts and with such insurance companies as are reasonably satisfactory to Administrative Agent. The Borrowers shall provide that such policies shall include satisfactory endorsements, naming Administrative Agent as a lender loss payable or additional insured, as appropriate, as its interest may appear. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give not less than ten (10) days’ prior written notice to Administrative Agent in the event of cancellation of the policy for nonpayment of premium and not less than thirty (30) days’ prior written notice to Administrative Agent in the event of cancellation of the policy for any other reason whatsoever and a clause specifying that the interest of Administrative Agent shall not be impaired or invalidated by any act or neglect of any Borrower, any of their Subsidiaries or the owner of the Property or by the occupation of the premises for purposes more hazardous than are permitted by such policy. If an Event of Default has occurred and is continuing, all proceeds of business interruption insurance (if any) of the Borrowers shall be remitted to Administrative Agent for application to the outstanding balance of the Revolving Credit Loans. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent shall, subject to the Intercreditor Agreement, have the sole right to file claims under any property and general liability insurance policies in respect of the Collateral, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

 

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Unless the Borrowers provide Administrative Agent with evidence of the insurance coverage required by this Agreement, Administrative Agent may purchase insurance at the Borrowers’ expense to protect Administrative Agent’s interests in the Properties of the Borrowers. This insurance may, but need not, protect the interests of the Borrowers. The coverage that Administrative Agent purchases may not pay any claim that any Borrower makes or any claim that is made against any Borrower in connection with such Property. The Borrowers may later cancel any insurance purchased by Administrative Agent, but only after providing Administrative Agent with evidence that the Borrowers have obtained insurance as required by this Agreement. If Administrative Agent purchases insurance, the Borrowers will be responsible for the costs of that insurance, including interest and any other charges Administrative Agent may impose in connection with the placement of 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 that the Borrowers may be able to obtain on their own.

 

7.1.3                    Protection of Collateral. Neither Administrative Agent nor any Lender shall be liable or responsible in any way for the safekeeping of any of the Collateral or for any loss or damage thereto (except for reasonable care in the custody thereof while any Collateral is in Administrative Agent’s or any Lender’s actual possession) or for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency or other person whomsoever, but the same shall be at the Loan Parties’ sole risk.

 

7.2              Administration of Accounts.

 

7.2.1                    Records, Schedules and Assignments of Accounts. The Borrowers shall keep records that are accurate and complete, in all material respects, of their Accounts and all payments and collections thereon and shall submit to Collateral Agent on such periodic basis as Collateral Agent shall request, in its reasonable credit judgment, a sales and collections report for the preceding period, in form acceptable to Collateral Agent, in its reasonable credit judgment, and consistent with the reports currently prepared by the Borrowers with respect to such information/acceptable to Collateral Agent. Concurrently with the delivery of each Borrowing Base Certificate described in subsection 9.1.4, or more frequently as requested by Collateral Agent or during the existence of an Event of Default, from and after the date hereof, the Borrowers shall deliver to Collateral Agent a detailed aged trial balance of all of their Accounts and a detailed description with respect to any unbilled Accounts, specifying the names, addresses (updated on an annual basis), face values, dates of invoices and due dates for each Account Debtor obligated on an Account so listed in a form consistent with reports currently prepared by the Borrowers with respect to such information (“Schedule of Accounts”), and upon Collateral Agent’s written request therefor, copies of proof of delivery and the original copy of all documents, including, without limitation, repayment histories and present status reports relating to the Accounts so scheduled and such other matters and information relating to the status of then existing Accounts as Collateral Agent shall request, in its reasonable credit judgment. If requested by Collateral Agent in writing, upon the occurrence and during the continuation of an Event of Default, the Borrowers shall execute and deliver to Collateral Agent formal written assignments of all of their Accounts weekly or daily, which shall include all Accounts that have been created since the date of the last assignment, together with copies of invoices or invoice registers related thereto and a detailed description with respect to any unbilled Accounts.

 

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7.2.2                    Discounts; Allowances; Disputes. If any Borrower grants any discounts, allowances or credits that are not shown on the face of the invoice for the Account involved, the Borrowers shall report such discounts, allowances or credits, as the case may be, to Collateral Agent as part of the next required Schedule of Accounts.

 

7.2.3                    Account Verification. Any of Collateral Agent’s officers, employees or agents shall have the right, at any time or times if an Event of Default has occurred and is continuing, in the name of Collateral Agent, any designee of Collateral Agent or any Borrower, to verify the validity, amount or any other matter relating to any Accounts by mail, telephone, electronic communication or otherwise. The Borrowers shall cooperate fully with Collateral Agent in an effort to facilitate and promptly conclude any such verification process.

 

7.2.4                    Maintenance of Blocked Accounts. Within ninety (90) days of the Closing Date, or such later date as shall be agreed to by Administrative Agent, in its sole discretion (provided, that, with respect to the deposit accounts designated as Payables Accounts in the Accounts Side Letter, each located at Citizens Bank, Quest and the other Loan Parties shall have 90 days following the date at which the Administrative Agent establishes an integrated payables arrangement for such accounts to move such accounts to the Administrative Agent), Quest and the other Loan Parties will maintain their primary depository, blocked account and cash management relationship with Administrative Agent or its affiliate. The Administrative Agent shall have control of all deposit and securities accounts of all Borrowers pursuant to executed Control Agreements and other executed documentation as shall be required by Administrative Agent, in its reasonable discretion, such documentation to be in form and substance satisfactory to Administrative Agent and delivered to Administrative Agent, it being understood and agreed that, other than with respect to any Excluded Deposit Account, the Term Loan Collateral Account (as defined in the Intercreditor Agreement) and deposit accounts designated as Springing Accounts in the Accounts Side Letter, Quest and the other Borrowers will cause or direct all cash to be transferred daily to Administrative Agent, and maintained in, accounts subject to Control Agreements whereby Administrative Agent has a first-priority security interest (except the Term Loan Collateral Account (as defined in the Intercreditor Agreement)) in such accounts and all amounts held therein. If an Excess Availability Triggering Event occurs or an Event of Default has occurred and is continuing, Administrative Agent shall at all times require (a)(i) that all such cash and proceeds of the Collateral (other than Acquisition Term Loan Priority Collateral) be swept on a daily basis to an account of Administrative Agent to be applied by Administrative Agent to (ii) repay outstanding Revolving Credit Loans, LC Obligations, other amounts then due and payable and solely to the extent such proceeds are derived from ABL Priority Collateral consisting of equipment, to repay the Acquisition Term Debt, and (iii) if a Default or Event of Default exists, to cash collateralize outstanding Letters of Credit in an amount equal to 103% of the face amount thereof and (b) send notices as required under the Control Agreements to trigger full dominion of all such deposit accounts (“Cash Dominion”) which shall continue until the Default or Event of Default has been waived or Cure Date. Unless an Excess Availability Triggering Event or a Default or Event of Default has occurred and is continuing, the Administrative Agent waives Cash Dominion except for the Collection Accounts designated in the Accounts Side Letter. Prior to entering into any Term Loan Collateral Account (as defined in the Intercreditor Agreement), Borrowers shall provide at least ten (10) Business Days’ prior written notice thereof and shall deliver a form of Control Agreement whereby the Administrative Agent has a second-priority security interest in such deposit account and the cash held therein. With respect to any deposit accounts not maintained with Administrative Agent or its affiliate, Borrowers shall maintain Control Agreements whereby Administrative Agent has a first-priority security interest in such deposit accounts, and all amounts held therein reasonably acceptable to Administrative Agent with such banks as may be selected by the Borrowers and be reasonably acceptable to Administrative Agent; provided, that Administrative Agent hereby agrees that it shall not institute or otherwise require a Control Agreement and/or springing or blocked account agreement with regard to any Excluded Deposit Account or the Term Loan Collateral Account (as defined in the Intercreditor Agreement) maintained by any Borrower. Administrative Agent shall have control over and a Lien on all funds deposited in any springing or blocked account (other than Excluded Deposit Accounts), for the ratable benefit of Lenders, and, with respect to deposit accounts not maintained with Administrative Agent or its affiliate, the Borrowers shall obtain the agreement by such banks in favor of Administrative Agent to waive any recoupment, setoff rights, and any security interest in, or against, the funds so deposited (except to the extent of any such bank’s customary fees). Such lockbox and blocked account arrangements shall include irrevocable instructions directing such banks to remit all payments or other remittances received in the blocked accounts on a daily basis to an account of Administrative Agent for application on account of the Obligations to the extent provided for herein. At any time Cash Dominion is in existence, Administrative Agent shall have the right to issue to any such banks irrevocable instructions directing such banks to remit all payments or other remittances received in the blocked accounts to an account of Administrative Agent for application on account of the Obligations as provided herein. Administrative Agent assumes no responsibility for such lockbox and blocked account arrangements, including, without limitation, any claim of accord and satisfaction or release with respect to deposits accepted by any bank thereunder.

 

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7.2.5                    Collection of Accounts; Proceeds of Collateral. Each Borrower agrees that all invoices rendered and other requests made by any Borrower for payment in respect of Accounts shall contain a written statement directing payment in respect of such Accounts to be paid to a lockbox or blocked account established pursuant to subsection 7.2.4. To expedite collection, each Borrower shall endeavor in the first instance to make collection of its Accounts for Administrative Agent. All remittances received by any Borrower in respect of Accounts, together with the proceeds of any other ABL Priority Collateral (and after the Acquisition Term Debt has been Paid in Full, any Collateral), shall be held as Administrative Agent’s property, for its benefit and the benefit of Lenders, by such Borrower as trustee of an express trust for Administrative Agent’s benefit and such Borrower shall immediately deposit the same in a blocked account established pursuant to subsection 7.2.4. Administrative Agent retains the right at all times after the occurrence and during the continuance of a Default or an Event of Default to notify Account Debtors that the Borrowers’ Accounts have been assigned to Administrative Agent and to collect the Borrowers’ Accounts directly in its own name, or in the name of Administrative Agent’s agent, and to charge the collection costs and expenses, including attorneys’ fees, to the Borrowers.

 

7.2.6                    Taxes. If an Account includes a charge for any tax payable to any Governmental Authority, Administrative Agent is authorized, in its sole discretion, to pay the amount thereof to the proper Governmental Authority for the account of the Borrowers and to charge the Borrowers therefor, except for taxes that (i) are being actively contested in good faith and by appropriate proceedings and with respect to which the Borrowers maintain reasonable reserves on its books therefor and (ii) would not reasonably be expected to result in any Lien other than a Permitted Lien. In no event shall Administrative Agent or any Lender be liable for any taxes to any Governmental Authority that may be due by any Borrower.

 

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7.3              [Reserved].

 

7.4              Administration of Eligible Machinery and Equipment. The Borrowers shall keep records of their Eligible Machinery and Equipment which shall be complete and accurate in all material respects itemizing and describing the kind, type, quality, quantity and book value of its Eligible Machinery and Equipment, and the Borrowers shall, and shall cause each of their Subsidiaries to, furnish Administrative Agent with a current schedule containing the foregoing information on at least an annual basis and more often if reasonably requested by Administrative Agent. Promptly after the request therefor by Administrative Agent, the Borrowers shall deliver to Administrative Agent any and all evidence of ownership, if any, of any of their Eligible Machinery and Equipment.

 

7.5              Payment of Charges. All amounts chargeable to the Loan Parties under Section 7 hereof shall be Obligations secured by all of the Collateral, shall be payable on demand and shall bear interest from the date such advance was made until paid in full at the rate applicable to Base Rate Revolving Credit Loans from time to time.

 

Article VIII. REPRESENTATIONS AND WARRANTIES

 

8.1              General Representations and Warranties. To induce Administrative Agent and each Lender to enter into this Agreement and to make advances hereunder, the Loan Parties represent and warrant to Administrative Agent and each Lender, on a joint and several basis, that:

 

8.1.1                    Qualification. Each Loan Party and each of their Subsidiaries is a corporation, limited partnership or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. Each Loan Party and each of their Subsidiaries is duly qualified and is authorized to do business and is in good standing as a foreign limited liability company, limited partnership or corporation, as applicable, in each state or jurisdiction listed on Schedule 8.1.1 hereto and in all other states and jurisdictions in which the failure of any Borrower to be so qualified could reasonably be expected to have a Material Adverse Effect.

 

8.1.2                    Power and Authority. Each Loan Party and each of their Subsidiaries is duly authorized and empowered to enter into, execute, deliver and perform this Agreement and each of the other Loan Documents to which it is a party. The execution, delivery and performance of this Agreement and each of the other Loan Documents have been duly authorized by all necessary corporate or other relevant action and do not and will not: (i) require any consent or approval of the shareholders, partners or members, as the case may be, of any Loan Party or any of the shareholders, partners or members, as the case may be, of any Subsidiary of any Loan Party; (ii) contravene any Loan Party’s or any of its Subsidiaries’ charter, articles or certificate of incorporation, partnership agreement, articles or certificate of formation, by-laws, limited liability agreement, operating agreement or other organizational documents (as the case may be); (iii) violate, or cause any Loan Party or any of its Subsidiaries to be in default under, any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award in effect having applicability to such Loan Party or any of its Subsidiaries, the violation of which could reasonably be expected to have a Material Adverse Effect; (iv) result in a breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which any Loan Party or any of its Subsidiaries is a party or by which it or its Properties may be bound or affected, the breach of or default under which could reasonably be expected to have a Material Adverse Effect; or (v) result in, or require, the creation or imposition of any Lien (other than Permitted Liens) upon or with respect to any of the Properties now owned or hereafter acquired by any Loan Party or any of its Subsidiaries.

 

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8.1.3                    Legally Enforceable Agreement. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will be, a legal, valid and binding obligation of each Loan Party and each of its Subsidiaries party thereto, enforceable against it in accordance with its respective terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

 

8.1.4                    Capital Structure. Schedule 8.1.4 hereto states, as of the date hereof, (i) the number, nature and holder of all outstanding Equity Interests of each Loan Party and each Subsidiary of any Loan Party, and (ii) the name of each Loan Party’s and each of its Subsidiaries’ joint venture relationships and the nature of the relationship. Each Loan Party has good title to all of the Equity Interests it purports to own of each of such Subsidiaries, free and clear in each case of any Lien other than Permitted Liens. All such Equity Interests have been duly issued and are fully paid and non-assessable. As of the date hereof, there are no outstanding options to purchase, or any rights or warrants to subscribe for, or any commitments or agreements to issue or sell any Equity Interests or obligations convertible into, or any powers of attorney relating to any Equity Interests of any Loan Party or any of its Subsidiaries. Except as set forth on Schedule 8.1.4, as of the date hereof, there are no outstanding agreements or instruments binding upon any of any Loan Party’s or any of its Subsidiaries’ partners, members or shareholders, as the case may be, relating to the ownership of its Equity Interests.

 

8.1.5                    Names; Organization. Within the five (5) years prior to the Closing Date, neither any Loan Party nor any of their respective Subsidiaries has been known as or has used any legal, fictitious or trade names except those listed on Schedule 8.1.5 hereto. Within the five (5) years prior to the Closing Date, except as set forth on Schedule 8.1.5, neither any Loan Party nor any of their respective Subsidiaries has been the surviving entity of a merger or consolidation or has acquired all or substantially all of the assets of any Person. The exact legal name, jurisdiction of incorporation or organization, Type of Organization and Organizational I.D. Number of each Loan Party and each of their respective Subsidiaries is set forth on Schedule 8.1.5.

 

8.1.6                    Title to Properties; Priority of Liens. Each Loan Party and each of its Subsidiaries has good, indefeasible and marketable title to and fee simple ownership of, or valid and subsisting leasehold interests in, all of its real Property, and good title to all of the Collateral and all of its other Property, in each case, free and clear of all Liens except Permitted Liens. Each Loan Party and each of its Subsidiaries has paid or discharged all lawful claims which, if unpaid, might become a Lien against any of such Loan Party’s or such Subsidiary’s Properties that is not a Permitted Lien. The Liens granted to Administrative Agent under Section 6 hereof in the Collateral are first-priority (subject to the Intercreditor Agreement) Liens, subject only to Permitted Liens.

 

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8.1.7                    Accounts. Administrative Agent may rely, in determining which Accounts are Eligible Accounts or Eligible Unbilled Accounts, on all statements and representations made by the with respect to any Account or Accounts. With respect to each of the Borrower’s Accounts, whether or not such Account is an Eligible Account or an Eligible Unbilled Account, unless otherwise disclosed to Administrative Agent in writing:

 

(i)                 It is genuine and in all respects what it purports to be, and it is not evidenced by a judgment;

 

(ii)              It arises out of a completed, bona fide sale and delivery of goods or rendition of services by a Borrower, in the ordinary course of its business and in accordance with the terms and conditions of all purchase orders, contracts or other documents relating thereto and forming a part of the contract between such Borrower and the Account Debtor;

 

(iii)            It is for a liquidated amount maturing as stated in the duplicate invoice covering such sale or rendition of services, a copy of which (other than in the case of an Eligible Unbilled Account) has been furnished or is available to Administrative Agent;

 

(iv)             There are no facts, events or occurrences which in any way impair the validity or enforceability of any Accounts or tend to reduce the amount payable thereunder from the face amount of the invoice and statements delivered or made available to Administrative Agent with respect thereto;

 

(v)               To the best of such Borrower’s knowledge, the Account Debtor thereunder (a) had the capacity to contract at the time any contract or other document giving rise to the Account was executed and (b) such Account Debtor is Solvent; and

 

(vi)             To the best of such Borrower’s knowledge, there are no proceedings or actions which are threatened or pending against the Account Debtor thereunder which might result in any material adverse change in such Account Debtor’s financial condition or the collectability of such Account.

 

8.1.8                    Equipment. The Equipment of each Borrower is in good operating condition and repair, and all necessary replacements of and repairs thereto shall be made so that the operating efficiency thereof shall be maintained and preserved, reasonable wear and tear expected. No Borrower will permit any Equipment to become affixed to any real Property leased to any Borrower so that an interest arises therein under the real estate laws of the applicable jurisdiction unless the landlord of such real Property has executed a landlord waiver or leasehold mortgage in favor of and in form reasonably acceptable to Administrative Agent, and the Borrowers will not permit any of the Equipment of any Borrower to become an accession to any personal Property other than Equipment that is subject to first-priority Liens (subject to the terms of the Intercreditor Agreement) in favor of Administrative Agent, subject to Permitted Liens.

 

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8.1.9                    Financial Statements; Fiscal Year. The Financial Statements, copies of which have been delivered to each Lender, were prepared in accordance with GAAP (subject, in the case of any such unaudited statements, to the absence of footnotes and to normal year-end adjustments) and present fairly in all material respects the consolidated financial condition of Holdings and its Subsidiaries and Green Remedies, as applicable, as at the dates covered in the Financial Statements and the results of their operations for the periods then ended. As of the First Amendment Effective Date, since December 31, 2019, there has been no material adverse change in the financial condition, operations, assets, business, prospects, or properties of the Loan Parties and their Subsidiaries, taken as a whole. As of the date hereof, the fiscal year of Holdings and each of its Subsidiaries ends on December 31 of each year.

 

8.1.10                Full Disclosure. The financial statements referred to in subsection 8.1.9 hereof do not, nor does this Agreement or any other written statement of the Loan Parties to Administrative Agent or any Lender, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading. There is no fact which the Loan Parties have failed to disclose to Administrative Agent or any Lender in writing which could reasonably be expected to have a Material Adverse Effect.

 

8.1.11                Solvent Financial Condition. On the First Amendment Effective Date, and immediately prior to and after giving effect to each borrowing under this Agreement and the use of the proceeds thereof, with respect to Holdings, individually, and the Loan Parties taken as a whole, (a) the fair value of its or their assets is greater than the amount of its or their liabilities (including disputed, contingent and unliquidated liabilities) as that value is established and liabilities evaluated in accordance with GAAP; (b) the present fair saleable value of its or their assets is not less than the amount that will be required to pay the probable liability on its or their debts as they become absolute and matured; (c) it is, and they are, able to realize upon its or their assets and pay its or their debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) it does not, and they do not, intend to, and it does not, and they do not, believe that it or they will, incur debts or liabilities beyond its or their ability to pay as those debts and liabilities mature; and (e) it is not, and they are not, engaged in or about to engage in business or a transaction for which its or their property would constitute unreasonably small capital.

 

8.1.12                Taxes. Each Loan Party and each of its Subsidiaries has filed all federal, state and local tax returns and other reports relating to taxes it is required by law to file, and has paid, or made provision for the payment of, all taxes, assessments, fees, levies and other governmental charges upon it, its income and Properties as and when such taxes, assessments, fees, levies and charges are due and payable, unless and to the extent any thereof are being actively contested in good faith and by appropriate proceedings, and each Loan Party and each of its Subsidiaries maintains reasonable reserves on its books therefor. The provision for taxes on the books of each Loan Party and each of its Subsidiaries is adequate for all years not closed by applicable statutes, and for the current fiscal year.

 

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8.1.13                Brokers. Except as shown on Schedule 8.1.13 hereto, there are no claims for brokerage commissions, finder’s fees or investment banking fees in connection with the transactions contemplated by this Agreement or any other Initial Closing Date Transactions.

 

8.1.14                Patents, Trademarks, Copyrights and Licenses. Each Borrower owns, possesses or licenses or has the right to use all the patents, trademarks, service marks, trade names, copyrights, licenses and other Intellectual Property necessary for the present and planned future conduct of its business without any known conflict with the rights of others, except for such conflicts as could not reasonably be expected to have a Material Adverse Effect. All such patents, trademarks, service marks, trade names, copyrights, licenses and other similar rights are listed on Schedule 8.1.14 hereto. No claim has been asserted to any Borrower which is currently pending that their use of their Intellectual Property or the conduct of their business does or may infringe upon the Intellectual Property rights of any third party. To the knowledge of the Borrowers and except as set forth on Schedule 8.1.14 hereto, as of the date hereof, no Person is engaging in any activity that infringes in any material respect upon any Borrower’s material Intellectual Property. Except as set forth on Schedule 8.1.14, each Borrower’s (i) material patents, trademarks, service marks and copyrights are registered with the U.S. Patent and Trademark Office or in the U.S. Copyright Office, as applicable and (ii) material license agreements and similar arrangements relating to its Inventory (a) permit, and do not restrict, the assignment by any Borrower to Administrative Agent, or any other Person designated by Administrative Agent, of all of such Borrower’s rights, title and interest pertaining to such license agreement or such similar arrangement and (b) would permit the continued use by such Borrower, or Administrative Agent or its assignee, of such license agreement or such similar arrangement and the right to sell Inventory subject to such license agreement for a period of no less than 6 months after a default or breach of such agreement or arrangement. The consummation and performance of the transactions and actions contemplated by this Agreement and the other Loan Documents, including, without limitation, the exercise by Administrative Agent of any of its rights or remedies under Section 11, will not result in the termination or impairment of any of such Borrower’s ownership or rights relating to its Intellectual Property, except for such Intellectual Property rights the loss or impairment of which could not reasonably be expected to have a Material Adverse Effect. Except as listed on Schedule 8.1.14 and except as could not reasonably be expected to have a Material Adverse Effect, (i) no Borrower is in breach of, or default under, any term of any license or sublicense with respect to any of its Intellectual Property and (ii) to the knowledge of the Borrowers, no other party to such license or sublicense is in breach thereof or default thereunder, and such license is valid and enforceable.

 

8.1.15                Governmental Consents. Each Loan Party and each of its Subsidiaries has, and is in good standing with respect to, all governmental consents, approvals, licenses, authorizations, permits, certificates, inspections and franchises necessary to continue to conduct its business as heretofore or proposed to be conducted by it and to own or lease and operate its Properties as now owned or leased by it, except where the failure to possess or so maintain such rights could not reasonably be expected to have a Material Adverse Effect.

 

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8.1.16                Compliance with Laws; Environmental.

 

(i)                 Each Loan Party and each of its Subsidiaries has duly complied, and its Properties, business operations and leaseholds are in compliance with, the provisions of all federal, state, local and foreign laws, rules and regulations applicable to such Loan Party or such Subsidiary, as applicable, its Properties or the conduct of its business, except for such non-compliance as could not reasonably be expected to have a Material Adverse Effect, and there have been no citations, notices or orders of non-compliance issued to any Loan Party or any of its Subsidiaries under any such law, rule or regulation, except where such non-compliance could not reasonably be expected to have a Material Adverse Effect. Each Loan Party and each of its Subsidiaries has established and maintains an adequate monitoring system to insure that it remains in compliance in all material respects with all federal, state, local and foreign rules, laws and regulations applicable to it. No Inventory has been produced in violation of the Fair Labor Standards Act (29 U.S.C. §201 et seq.), as amended.

 

(ii)              The on-going operations of each of the Loan Parties and their Subsidiaries comply in all respects with all Environmental Laws, except for non-compliance that could not (if enforced in accordance with applicable law) reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. Each of the Loan Parties and their Subsidiaries has obtained, and maintained in good standing, all licenses, permits, authorizations, registrations, and other approvals required under any Environmental Law and required for their respective ordinary course operations, and for their reasonably anticipated future operations, and each of the Loan Parties and their Subsidiaries is in compliance with all terms and conditions thereof, except where the failure to do so could not reasonably be expected to result in material liability to any of the Loan Parties and their Subsidiaries and could not reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. None of the Loan Parties and their Subsidiaries, and none of the properties or operations of the Loan Parties and their Subsidiaries, is subject to, and none of the Loan Parties and their Subsidiaries reasonably anticipates the issuance of, (a) any written order from or agreement with any federal, state, or local governmental authority, or (b) any judicial or docketed administrative or other proceeding respecting any Environmental Law, Environmental Claim, or Hazardous Substance that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. There are no Hazardous Substances or other conditions or circumstances existing with respect to any property, arising from operations prior to the First Amendment Effective Date, or relating to any waste disposal of any Loan Party or any Subsidiary thereof that could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect. None of the Loan Parties and their Subsidiaries has any underground storage tanks that are not properly registered or permitted under applicable Environmental Laws or that at any time have released, leaked, disposed of or otherwise discharged Hazardous Substances that could reasonably be expected to result in material liability to any of the Loan Parties and their Subsidiaries.

 

8.1.17                Restrictions. Neither any Loan Party nor any of its Subsidiaries is a party or subject to any contract or agreement which restricts its right or ability to incur Debt, other than as set forth on Schedule 8.1.17 hereto, none of which prohibits the execution of or compliance with this Agreement or the other Loan Documents by any Loan Party or any of its Subsidiaries, as applicable.

 

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8.1.18                Litigation. Except as set forth on Schedule 8.1.18 hereto, there are no actions, suits, proceedings or investigations pending, or to the knowledge of the Loan Parties, threatened, against or affecting any Loan Party or any of its Subsidiaries, or the business, operations, Properties, prospects, profits or condition of any Loan Party or any of its Subsidiaries which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither any Loan Party nor any of its Subsidiaries is in default with respect to any order, writ, injunction, judgment, decree or rule of any Governmental Authority, which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

8.1.19                No Defaults. No event has occurred and no condition exists which would, upon or after the execution and delivery of this Agreement or any Loan Party’s performance hereunder, constitute a Default or an Event of Default.

 

8.1.20                Pension Plans.

 

(i)                 The Unfunded Liability of all Pension Plans does not in the aggregate exceed 20% of the Total Plan Liability for all such Pension Plans. Except as could not reasonably be expected to result in a Material Adverse Effect, each Pension Plan complies with all applicable requirements of law and regulations. No contribution failure under Section 430 of the Code, Section 303 of ERISA, or the terms of any Pension Plan has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or otherwise to have a Material Adverse Effect. There are no pending or, to the knowledge of any Loan Party, threatened claims, actions, investigations, or lawsuits against any Pension Plan, any fiduciary of any Pension Plan, or any Borrower or other any member of the Controlled Group with respect to a Pension Plan or a Multiemployer Pension Plan which could reasonably be expected to have a Material Adverse Effect. Neither any Borrower nor any other member of the Controlled Group has engaged in any prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Pension Plan or Multiemployer Pension Plan which would subject that Person to any material liability. Within the past five years, neither any Borrower nor any other member of the Controlled Group has engaged in a transaction that resulted in a Pension Plan with an Unfunded Liability being transferred out of the Controlled Group, except as could not reasonably be expected to have a Material Adverse Effect. No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan, except as could not reasonably be expected to have a Material Adverse Effect.

 

(ii)              (a) All contributions (if any) have been made to any Multiemployer Pension Plan that are required to be made by any Borrower or any other member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable law; (b) neither any Borrower nor any other member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Pension 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 reasonably be expected to result in a withdrawal or partial withdrawal from any such plan; and (c) neither any Borrower nor any other member of the Controlled Group has received any notice that any Multiemployer Pension 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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8.1.21                Trade Relations. There exists no actual or, to the Loan Parties’ knowledge, threatened termination, cancellation or limitation of, or any modification or change in, the business relationship between any Loan Party or any of its Subsidiaries and any customer or any group of customers whose purchases individually or in the aggregate are material to the business of the Loan Parties and their Subsidiaries, or with any material supplier, except in each case, where the same could not reasonably be expected to have a Material Adverse Effect, and there exists no present condition or state of facts or circumstances which would prevent any Loan Party or any of its Subsidiaries from conducting such business after the consummation of the transactions contemplated by this Agreement in substantially the same manner in which it has heretofore been conducted.

 

8.1.22                Labor Relations. Except as described on Schedule 8.1.22 hereto, as of the date hereof, neither any Loan Party nor any of its Subsidiaries is a party to any collective bargaining agreement. There are no material grievances, disputes or controversies with any union or any other organization of any Loan Party’s or any of its Subsidiaries’ employees, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization, except those that could not reasonably be expected to have a Material Adverse Effect.

 

8.1.23                Leases. Schedule 8.1.23 hereto is a complete listing of all capitalized leases of the Loan Parties and their Subsidiaries and all real property leases of the Loan Parties and their Subsidiaries. Each Loan Party and each of its Subsidiaries is in full compliance with all of the terms of each of its respective capitalized and operating leases, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect.

 

8.1.24                Material Contracts. Set forth on Schedule 8.1.24 to the First Amendment is a complete and accurate list as of the First Amendment Effective Date of all Material Contracts of each of the Loan Parties and their Subsidiaries, showing the parties and subject matter thereof and amendments and modifications thereto. Each such Material Contract (a) is in full force and effect and is binding upon and enforceable against each of the Loan Parties and their Subsidiaries that is a party thereto and, to each Loan Party’s knowledge, all other parties thereto in accordance with its terms; (b) has not been otherwise amended or modified; and (c) is not in default due to the action of any of the Loan Parties and their Subsidiaries or, to the knowledge of any Loan Party, any other party thereto.

 

8.1.25                Related Businesses. As of the Closing Date, the Loan Parties are engaged in the business of providing businesses with one-step management programs to reuse, recycle and dispose of a wide variety of waste streams and recyclables generated by their business. These operations require financing on a basis such that the credit supplied can be made available from time to time to the Loan Parties, as required for the continued successful operation of the Loan Parties taken as a whole. Each Loan Party and each Subsidiary of each Loan Party expects to derive benefit (and the board of directors or equivalent governing body of each Loan Party and each Subsidiary of each Loan Party has determined that such Loan Party or Subsidiary may reasonably be expected to derive benefit), directly or indirectly, from a portion of the credit extended by Lenders hereunder, both in its separate capacity and as a member of the group of companies, since the successful operation and condition of each Loan Party and each Subsidiary of each Loan Party is dependent on the continued successful performance of the functions of the group as a whole. Each Loan Party acknowledges that, but for the agreement of each of the other Loan Parties to execute and deliver this Agreement, Administrative Agent and Lenders would not have made available the credit facilities established hereby on the terms set forth herein.

 

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8.1.26                Not a Regulated Entity. No Loan Party is an “investment company” or a “person directly or indirectly controlled by or acting on behalf of an investment company” within the meaning of the Investment Company Act of 1940.

 

8.1.27                Margin Stock. No Loan Party or any of their Subsidiaries is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No Loan proceeds or Letters of Credit will be used by the Loan Parties to purchase or carry, or to reduce or refinance any Debt incurred to purchase or carry, any Margin Stock or for any related purpose governed by Regulations T, U or X of the Federal Reserve Board of Governors.

 

8.1.28                Foreign Assets Control Regulations and Anti-Money Laundering.

 

(i)                 No Loan Party nor any Subsidiary is (i) a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Party and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) a Person who engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner violative of such Section 2, or (iii) a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.

 

(ii)              Each of the Loan Parties and their Subsidiaries are in compliance, in all material respects, with the Patriot Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

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8.1.29                EEA Financial Institution. No Borrower is an EEA Financial Institution.

 

8.1.30                Hedging Agreements. None of the Loan Parties and their Subsidiaries is a party to, nor will it be a party to, any Hedging Agreement, except as permitted under Section 9.2.1(vi).

 

8.1.31                OFAC. Each of the Borrowers and their Subsidiaries is and will remain in compliance in all material respects with all U.S. economic sanctions laws, Executive Orders and implementing regulations as promulgated by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), and all applicable anti-money laundering and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. None of the Borrowers and their Subsidiaries and Affiliates is (a) a Person designated by the U.S. government on the list of the Specially Designated Nationals and Blocked Persons (the “SDN List”) with which a U.S. Person cannot deal with or otherwise engage in business transactions; (b) a Person who is otherwise the target of U.S. economic sanctions laws such that a U.S. Person cannot deal or otherwise engage in business transactions with that Person; or (c) controlled by (including, without limitation, by virtue of that Person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any Person on the SDN List or a foreign government that is the target of U.S. economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under U.S. law.

 

8.1.32                Patriot Act. Each of the Borrowers and their Subsidiaries and Affiliates are in compliance with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended) and any other enabling legislation or executive order relating thereto; (b) the Patriot Act; and (c) other federal or state laws relating to “know your customer” and anti-money laundering rules and regulations. No part of the proceeds of any Loan will be used directly or indirectly for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.

 

8.1.33                Related Agreements.

 

(i)                 The Loan Parties have furnished Administrative Agent true and correct copies of the Related Agreements.

 

(ii)              The Loan Parties have duly taken all necessary company action to authorize the execution, delivery, and performance of the Related Agreements and the consummation of transactions contemplated by the Related Agreements.

 

(iii)            The Related Transaction will comply with all applicable legal requirements, and all necessary governmental, regulatory, creditor, shareholder, partner, and other material consents, approvals, and exemptions required to be obtained by the Loan Parties and, to each Loan Party’s knowledge, each other party to the Related Agreements in connection with the Related Transaction will be, prior to consummation of the Related Transaction, duly obtained and will be in full force and effect. As of the date of the Related Agreements, all applicable waiting periods with respect to the Related Transaction will have expired without any action being taken by any competent governmental authority which restrains, prevents or imposes material adverse conditions upon the consummation of the Related Transaction.

 

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(iv)             The execution and delivery of the Related Agreements did not, and the consummation of the Related Transaction will not, violate any statute or regulation of the United States (including any securities law) or of any state or other applicable jurisdiction, or any order, judgment, or decree of any court or governmental body binding on any Loan Party or, to any Borrower’s knowledge, any other party to the Related Agreements, or result in a breach of, or constitute a default under, any material agreement, indenture, instrument, or other document, or any judgment, order, or decree, to which any Loan Party is a party or by which any Loan Party is bound or, to any Borrower’s knowledge, to which any other party to the Related Agreements is a party or by which any such party is bound.

 

(v)               As of the Closing Date, no statement or representation made in the Related Agreements by any Loan Party or, to any Borrower’s knowledge, any other Person, contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading in any material respect.

 

8.1.34                Holdings. Holdings is not and has not, directly or indirectly, engaged in any business activities, does not hold and has not held any material assets, has not granted any Lien, and has not incurred any Debt, other than (a) acting as a holding company and transactions incidental thereto; (b) entering into the Loan Documents and the transactions required in this Agreement or permitted in this Agreement to be performed by Holdings; (c) receiving and distributing the dividends, distributions, and payments permitted to be made to Holdings pursuant to Section 9.2.3; (d) entering into engagement letters and similar agreements with attorneys, accountants, and other professionals; and (e) issuing Equity Interests and performing its obligations under its organizational documents, its governing documents, and agreements with the holders of its Equity Interests.

 

8.1.35                Customers and Suppliers. There exists no actual or threatened termination, cancellation, or limitation of, or modification to or change in, the business relationship between (a) any of the Loan Parties and their Subsidiaries, on the one hand, and any customer or any group thereof, on the other hand, whose agreements with any of the Loan Parties and their Subsidiaries are individually or in the aggregate material to the business or operations of any of the Loan Parties and their Subsidiaries; or (b) of the Loan Parties and their Subsidiaries, on the one hand, and any supplier or any group thereof, on the other hand, whose agreements with any of the Loan Parties and their Subsidiaries are individually or in the aggregate material to the business or operations of any of the Loan Parties and their Subsidiaries. To the Loan Parties’ knowledge there exists no present state of facts or circumstances that could reasonably be expected to give rise to or result in any such termination, cancellation, limitation, modification or change.

 

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8.1.36                Acquisition Term Loan Documents. As of the First Amendment Effective Date, the Borrowers have delivered to the Administrative Agent true and correct copies of the Acquisition Term Loan Documents. The Acquisition Term Loan Documents are in full force and effect as of the First Amendment Effective Date and have not been terminated, rescinded or withdrawn as of such date. The execution, delivery and performance of the Acquisition Term Loan Agreement on the First Amendment Effective Date does not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any governmental authority, other than consents or approvals that have been obtained and that are still in full force and effect. This Agreement, the other Loan Documents and the Obligations incurred hereunder and thereunder are permitted to be incurred by the Acquisition Term Loan Documents. Each Person that is a guarantor or a borrower under the Acquisition Term Loan Documents is a Loan Party hereunder.

 

8.2              Continuous Nature of Representations and Warranties. Each representation and warranty contained in this Agreement and the other Loan Documents shall be continuous in nature and shall remain accurate, complete and not misleading at all times during the term of this Agreement, except for changes in the nature of any Loan Party’s or one of any Loan Party’s Subsidiary’s business or operations that would render the information in any Schedule attached hereto or to any other Loan Document either inaccurate, incomplete or misleading, so long as Majority Lenders have consented to such changes, such changes are expressly permitted by this Agreement or such changes do not have or evidence a Material Adverse Effect. Without limiting the generality of the foregoing, each Loan request made or deemed made pursuant to subsection 4.1.1 hereof shall constitute a reaffirmation, as of the date of each such Loan request, of each representation or warranty made or furnished to Administrative Agent or any Lender by or on behalf of any Loan Party or any Subsidiary of any Loan Party in this Agreement, any of the other Loan Documents, or any instrument, certificate or financial statement furnished in compliance with or in reference thereto.

 

8.3              Survival of Representations and Warranties. All representations and warranties of the Loan Parties contained in this Agreement or any of the other Loan Documents shall survive the execution, delivery and acceptance thereof by Administrative Agent and each Lender and the parties thereto and the closing of the transactions described therein or related thereto.

 

Article IX. COVENANTS AND CONTINUING AGREEMENTS

 

9.1              Affirmative Covenants. During the Term, and thereafter for so long as there are any Obligations outstanding (other than indemnity Obligations for which no claim has been made), the Loan Parties covenant that they shall:

 

9.1.1                    Visits and Inspections; Lender Meeting. Permit (i) representatives of each Agent, and during the continuation of any Default or Event of Default any Lender, from time to time, as often as may be reasonably requested, but only during normal business hours, to visit and inspect the Properties of each Loan Party and each of its Subsidiaries, inspect, audit and make extracts from its books and records, and discuss with its officers, its employees and its independent accountants, each Loan Party’s and each of its Subsidiaries’ business, assets, liabilities, financial condition, business prospects and results of operations and (ii) auditors engaged pursuant to Section 3.9 (whether or not personnel of any Agent), from time to time, as often as may be reasonably requested, but only during normal business hours, to visit and inspect the Properties of each Loan Party and each of its Subsidiaries, for the purpose of completing audits pursuant to Section 3.9. Each Agent, if no Default or Event of Default then exists, shall give the Loan Parties reasonable prior notice of any such inspection or audit. Without limiting the foregoing, the Loan Parties will participate and will cause their key management personnel to participate in a meeting with Administrative Agent and Lenders periodically during each year (except that during the continuation of an Event of Default such meetings may be held more frequently as requested by Administrative Agent or Majority Lenders), which meeting(s) shall be held at such times and such places as may be reasonably requested by Administrative Agent. The Collateral Agent may, at Borrowers’ expense, conduct up to two visits per year; provided, that, if a Default or Event of Default has occurred and is continuing, or if an Excess Availability Triggering Event has occurred and prior to the Cure Date, the Collateral Agent may perform an additional visit at Borrowers’ expense.

 

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9.1.2                    Notices.

 

(i)                 Notify Administrative Agent, for itself and on behalf of Lenders, in writing, promptly after a Loan Party’s obtaining knowledge thereof, of any of the following that affects a Loan Party: (a) the threat or commencement of any proceeding or investigation, whether or not covered by insurance, if an adverse determination could reasonably be expected to have a Material Adverse Effect; (b) any pending or threatened labor dispute, strike or walkout, or the expiration of any material labor contract; (c) the existence of any Default or Event of Default; (d) any judgment in an amount exceeding $500,000; (e) the assertion of any claim in respect of material Intellectual Property, if an adverse resolution could reasonably be expected to have a Material Adverse Effect; (f) any violation or asserted violation of any (1) Anti-Terrorism Law or (2) any other Applicable Law if an adverse resolution could reasonably be expected to have a Material Adverse Effect; (g) any Environmental Release by a Loan Party or on any Property owned, leased or occupied by a Loan Party; or receipt of any Environmental Notice; (h) the discharge of or any withdrawal or resignation by Loan Parties’ independent accountants; (i) any material change in accounting or financial reporting practices; (j) the filing of any documentation with the IRS or any other Governmental Authority outside the ordinary course of business, or (k) actual termination, cancellation or material limitation of or any actual material negative modification in or material change in the business relationship or agreements with any Account Debtor whose business with Borrowers constitutes more than 20% of Borrowers’ total revenue.

 

(ii)              Promptly notify Administrative Agent in writing of the occurrence of any event or the existence of any fact which renders any representation or warranty in this Agreement or any of the other Loan Documents inaccurate, incomplete or misleading in any material respect as of the date made or remade. In addition, the Loan Parties agree to provide Administrative Agent with prompt written notice of any change in the information disclosed in any Schedule hereto, as required under this Agreement, in each case after giving effect to the materiality limits and Material Adverse Effect qualifications contained therein.

 

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(iii)            No later than five (5) Business Days prior to the earlier of the execution date or the effective date thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification under or pursuant to the Acquisition Term Loan Documents or any other documentation evidencing Debt from any other lender.

 

(iv)             Promptly upon delivery of or receipt of the same, any notices of default under the Acquisition Term Loan Documents or any notices of any Enforcement Action (as defined in the Intercreditor Agreement).

 

(v)               On the First Amendment Effective Date, fully executed and assembled Acquisition Term Loan Documents.

 

9.1.3                    Financial Statements. Keep, and cause each of their Subsidiaries to keep, adequate records and books of account with respect to its business activities in which proper entries are made in accordance with customary accounting practices reflecting all its financial transactions; and cause to be prepared and furnished to Administrative Agent and each Lender, the following, all to be prepared in accordance with GAAP applied on a consistent basis:

 

(i)                 not later than one hundred twenty (120) days after the close of each fiscal year of Holdings, unqualified (except for a qualification for a change in accounting principles with which the accountant concurs) audited financial statements of Holdings and its Subsidiaries as of the end of such year, on a Consolidated basis, certified by a firm of independent certified public accountants of recognized standing reasonably acceptable to Administrative Agent (it being acknowledged by Administrative Agent that Semple, Marchal & Cooper, LLP is acceptable) and, within a reasonable time thereafter a copy of any management letter issued in connection therewith;

 

(ii)              [Reserved];

 

(iii)            not later than forty-five (45) days after the end of each Fiscal Quarter, consolidated balance sheets of Holdings and its Subsidiaries as of the end of that Fiscal Quarter, together with consolidated statements of earnings and a consolidated statement of cash flows for that Fiscal Quarter and for the period beginning with the first day of that Fiscal Year and ending on the last day of that Fiscal Quarter, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for that period of the current Fiscal Year, together with a management discussion and analysis, all certified by a Senior Officer of Holdings;

 

(iv)             not later than thirty (30) days after the end of each month hereafter, unaudited interim financial statements of Holdings and its Subsidiaries (balance sheet, income statement and cash flow statement without notes) as of the end of such month and of the portion of the fiscal year then elapsed, on a Consolidated and consolidating basis, presenting the financial position and results of operations of Holdings and its Subsidiaries for such month and period subject to changes from audit and year-end, quarterly or monthly adjustments;

 

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(v)               together with each delivery of financial statements pursuant to clause (i) of this subsection 9.1.3, and on a quarterly basis excluding the fourth fiscal quarter (within forty-five (45) days of the end of each fiscal quarter), a management report (a) setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year and the corresponding figures from the most recent Projections for the current fiscal year delivered pursuant to subsection 9.1.7 and (b) identifying the reasons for any significant variations;

 

(vi)             together with each delivery of financial statements pursuant to clauses (i) and (iii) of this subsection 9.1.3, or more frequently if reasonably requested by Administrative Agent, Holdings shall cause to be prepared and furnished to Administrative Agent a Compliance Certificate in the form of Exhibit 9.1.3 hereto (a “Compliance Certificate”). The Compliance Certificate shall include (a) a certification to the effect that that Senior Officer has not become aware of any Default or Event of Default that has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it, and (b) a written statement of Holdings’ management setting forth a discussion of Holdings’ and its Subsidiaries’ financial condition, changes in financial condition, and results of operations;

 

(vii)          together with each delivery of financial statements pursuant to clause (i) of this subsection 9.1.3, and on a quarterly basis excluding the fourth fiscal quarter (within forty-five (45) days of the end of each fiscal quarter), a management report setting forth the individual consolidating amounts for Holdings and its Subsidiaries and eliminations that reconcile to the financial statements pursuant to clause (i) of this subsection 9.1.3;

 

(viii)        promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports which any Loan Party has made available to holders of its public Equity Interests and copies of any regular, periodic and special reports or registration statements which any Loan Party or any of its Subsidiaries files with the Securities and Exchange Commission or any Governmental Authority which may be substituted therefor or any national securities exchange;

 

(ix)             upon request of Administrative Agent, copies of any annual report to be filed with ERISA in connection with each Plan;

 

(x)               any other data or information required to be provided to the Acquisition Term Agent or any Acquisition Term Lenders of any Loan Party, at the same time such data or information is provided to the Acquisition Term Agent or Acquisition Term Lenders, as applicable;

 

(xi)             on a quarterly basis (within forty-five (45) days of the end of each fiscal quarter), a detailed list of Eligible Machinery and Equipment and an address for such Eligible Machinery and Equipment (if such Eligible Machinery and Equipment is not located at a Borrower’s location for which the Borrowers have delivered the Administrative Agent a collateral access agreement in favor of the Administrative Agent in form and substance satisfactory to the Administrative Agent); and

 

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(xii)          such other data and information (financial and otherwise) as Administrative Agent or any Lender, from time to time, may reasonably request, bearing upon or related to the Collateral or the Loan Parties’ or any of their Subsidiaries’ financial condition or results of operations.

 

9.1.4                    Borrowing Base Certificates.

 

(i)                 On or before the last day of each month from and after the date hereof, the Borrowers shall deliver to Collateral Agent, in form acceptable to Collateral Agent, a Borrowing Base Certificate as of the last day of the immediately preceding month, with such supporting materials as Collateral Agent shall reasonably request. If Collateral Agent shall request at any time (i) an Event of Default has occurred and is continuing or (ii) following an Excess Availability Triggering Event and continuing until the Cure Date or following the occurrence of a Default or Event of Default and so long as it is continuing, the Borrowers shall execute and deliver to Collateral Agent Borrowing Base Certificates on or before the third (3rd) Business Day of each week, provided that any referenced amounts with respect to unbilled Accounts will continue to be updated monthly.

 

(ii)              Together with each delivery of a Borrowing Base Certificate, the Borrower Representative shall deliver to Collateral Agent, in the form reasonably acceptable to Collateral Agent, a detailed accounts receivable and accounts payable aging of the Borrowers' accounts aged by invoice date, account roll- forward with supporting details supplied from sales journals, collection journals, credit registers and any other records, unbilled accrued receivables report, unapplied deposits report, unbilled accrued payables reports, deferred revenue report, detailed list of Eligible Accounts and Eligible Unbilled Accounts,  access to review new major contracts (MSAs and scope of work arrangements), sales tax accruals and a reconciliation to Borrower's general ledger and the Borrowing Base Certificate delivered by the Borrower as of such date and to such Borrower's most recent financial statements and all with supporting information and materials as Collateral Agent shall reasonably request.

 

9.1.5                    Landlord, Processor and Storage Agreements. Provide Administrative Agent with access to review all agreements between any Loan Party or any of its Subsidiaries and any landlord which owns or is the lessee of any premises at which any books and records and may, from time to time, be kept. In the event the Borrowers do not provide Administrative Agent with a landlord waiver with respect to any such leased location, the Borrowers acknowledge that Collateral Agent may, in Collateral Agent’s reasonable credit judgment, establish a Reserve in the amount of three months’ rent for such location. In the event the Term Lender receives a collateral access agreement from Borrowers, Borrowers shall promptly deliver to the Administrative Agent a collateral access agreement in favor of the Administrative Agent in form and substance satisfactory to the Administrative Agent.

 

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9.1.6                    Guarantor Financial Statements. Deliver or cause to be delivered to Administrative Agent financial statements, if any, for each Guarantor (to the extent not consolidated with the financial statements delivered to Administrative Agent under subsection 9.1.3) in form and substance satisfactory to Administrative Agent at such intervals and covering such time periods as Administrative Agent may request.

 

9.1.7                    Projections. No later than thirty (30) days after the end of each fiscal year of Holdings, deliver to Administrative Agent (i) the Projections of each of Holdings and each of its Subsidiaries for the forthcoming fiscal year, month by month and (ii) any such other projections as required to be delivered under the Acquisition Term Loan Agreement.

 

9.1.8                    Subsidiaries. Cause each Subsidiary of each Loan Party (other than an Excluded Subsidiary) hereafter acquired or created, to execute and deliver to Administrative Agent a joinder agreement in form and substance reasonably acceptable to Administrative Agent whereby such Subsidiary would become either an additional Borrower or Guarantor hereunder, the determination as to whether such Subsidiary shall be a Borrower or a Guarantor to be made by Administrative Agent, in its sole discretion. A Subsidiary which becomes a Borrower hereunder shall by such joinder become a party to this Agreement as a “Borrower” and subject to the terms, conditions and provisions of this Agreement, which shall include, without limitation, a grant to Administrative Agent pursuant to subsection 6.1.1 hereof of a first-priority (subject to the Intercreditor Agreement) Lien the Collateral (subject only to Permitted Liens) on all of its Properties of the types described in subsection 6.1.1; provided, however, prior to the inclusion of any Accounts of such Borrower in the Borrowing Base, Administrative Agent shall be satisfied with the results of a field exam, conducted at the Loan Parties’ expense, as to such Accounts. A Subsidiary which becomes a Guarantor hereunder shall by such joinder become a party to this Agreement as a “Guarantor” and subject to the terms, conditions and provisions of this Agreement, and in addition to but not in limitation of the foregoing, shall grant to Administrative Agent, for the benefit of itself and each Lender, a continuing Lien upon all Equity Interests, whether certificated or uncertificated, in each of its Subsidiaries which are Loan Parties, and comply with the provisions of subsection 6.1.3 hereof as if it were an original party to this Agreement, except that the reference to “Parent” shall be construed to be a reference to such Guarantor and the reference to “Quest” shall be construed to be a reference to such Subsidiary and the reference to “Pledge Agreement” shall be construed to be a reference to the Pledge Agreement in form and substance satisfactory to Administrative Agent, Guarantor shall be required to execute in connection with becoming a Guarantor hereunder.

 

9.1.9                    Deposit and Brokerage Accounts. For each deposit account or brokerage account that any Borrower at any time opens after the Closing Date, the Borrowers shall cause the depository bank or securities intermediary, as applicable, to enter into a Control Agreement and/or blocked account agreement in accordance with subsection 7.2.4, except to the extent any such agreement is not required thereunder.

 

9.1.10                Use of Proceeds. The Revolving Credit Loans and Term Loans shall be used solely for (i) the satisfaction of existing Debt of the Borrowers to Citizens Bank, National Association, (ii) the Loan Parties’ general operating capital needs and general corporate purposes in a manner consistent with the provisions of this Agreement and all Applicable Law, (iii) other purposes permitted under this Agreement, and (iv) to pay costs and fees in connection with the Closing Date Transactions.

 

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9.1.11                Compliance with Laws. Comply with all (i) Anti-Terrorism Laws and (ii) other Applicable Laws if the failure to comply with such other Applicable Laws could reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, if any Environmental Release occurs at or on any Properties of any Loan Party or Subsidiary, it shall act promptly and diligently to investigate and report to Administrative Agent and all appropriate Governmental Authorities the extent of, and to make appropriate remedial action to eliminate, such Environmental Release, whether or not directed to do so by any Governmental Authority.

 

9.1.12                Payment of Obligations. Pay, discharge or otherwise satisfy as the same shall become due and payable (i) all material Tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, which, if unpaid, could reasonably be expected to result in the creation of a Lien upon its Property, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained and (ii) all material lawful claims which, if unpaid, would by law become a Lien upon its property, unless such claims would not become a Lien on the Collateral and the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained.

 

9.1.13                Preservation of Existence. Preserve, renew and maintain in full force and effect its legal existence under the Applicable Law of the jurisdiction of its organization, other than as a result of a transaction expressly permitted hereunder.

 

9.1.14                Maintenance of Properties, Permits, Etc. (i) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order, repair and condition, ordinary wear and tear and casualty or condemnation excepted, and make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice, (ii) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect, and (iii) preserve or renew all of its registered patents, trademarks, service marks and copyrights, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

 

9.1.15                SBA PPP Loans.

 

(i)                 Use of Proceeds. The Borrowers will (i) use all of the proceeds of any SBA PPP Loan exclusively for CARES Forgivable Uses in the manner required under the CARES Act, as amended, to obtain forgiveness of the largest possible amount of such SBA PPP Loan and (ii) take all commercially reasonable steps to have the SBA PPP Loans forgiven pursuant to the CARES Act and use commercially reasonable efforts to conduct their business in a manner that maximizes the amount of the SBA PPP Loans that is forgiven. The Borrowers acknowledge that as of the Closing Date, in order to obtain forgiveness of the largest possible amount of the SBA PPP Loans, the Borrowers would not be allowed to use less than 60% of each SBA PPP Loan proceeds for CARES Payroll Costs, subject to amendment.

 

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(ii)              CARES Act. The Borrowers and their use of the SBA PPP Loans will comply in all material respects with the applicable requirements of the CARES Act.

 

(iii)            Notice. The Borrowers will provide the Bank with (i) prompt written notice (but in any event within two Business Days) of the failure of any SBA PPP Loan incurred by any of the Borrowers to qualify for contingent forgiveness under the CARES Act and (ii) if requested by the Bank, copies all correspondence sent to, and received from, the SBA or SBA 7(a) lender bank.

 

9.1.16                Equipment Rental/Lease Agreements. To the extent that any Equipment constitutes Eligible Machinery and Equipment that is rented or leased to a Borrower’s customer and is located at such customer’s location and with respect to all master service agreements or other contracts relating to any Eligible Account, use commercially reasonable efforts to ensure that any such rental lease or master service agreement is assignable to Borrower’s financing sources.

 

9.1.17                Subcontractor Liens. (i) use commercially reasonable efforts to prevent any contractor or subcontractor from obtaining or enforcing a lien with respect to any contract to which any Loan Party is a party and (ii) promptly notify the Administrative Agent if (x) any Loan Party fails to pay any uncontested amounts to a subcontractor under any contract when due after any applicable cure period or (y) any subcontractor obtains a lien with respect to any contract to which any Loan Party is a party.

 

9.1.18                Information Systems. Not less than three (3) months prior to the commencement of any program or process to implement a material change, consolidation or modification of a Loan Party’s information technology and/or enterprise resource planning software system, such Loan Party shall provide notice of such proposed change, consolidation or modification to Administrative Agent. From the commencement of such program or process through the completion of such change, consolidation or modification, the Borrowers shall provide Administrative Agent an update on the progress of such change, consolidation or modification concurrently with the delivery of the written statement required to be delivered pursuant to clause (b) of Section 9.1.3(vi) relating to the Borrowers’ financial condition, changes in financial condition and results of operations.

 

9.1.19                Key Performance Indicators. Contemporaneously with the furnishing of a copy of each set of monthly financial statements pursuant to Section 9.1.3(iv), a report summarizing key performance indicators of Holdings and its Subsidiaries for the period then ending in form reasonably satisfactory to the Administrative Agent (and in any event shall include (without limitation) (1) any new material customers added or customers lost during the applicable month being measured along with the gross profit impact of such change on an annual basis and (2) the top 5 customers of Holdings and its Subsidiaries measured by trailing twelve month gross profit).

 

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9.2              Negative Covenants. Until payment in full of the Obligations, Holdings and each Borrower shall, unless at any time the Administrative Agent otherwise expressly consents in writing, do the following:

 

9.2.1                    Debt. Not, and not permit any of the Loan Parties and their Subsidiaries to, create, incur, assume, or suffer to exist any Debt, except the following:

 

(i)                 Obligations under this Agreement and the other Loan Documents;

 

(ii)              Debt of any of the Loan Parties (other than Holdings) and their Subsidiaries secured by Liens permitted by Section 9.2.2, and extensions, renewals, replacements, and refinancings thereof, so long as the aggregate amount of all such Debt at any time outstanding does not exceed $500,000;

 

(iii)            Debt of any Loan Party to any other Loan Party, so long as (i) that Debt is evidenced by a demand note in form and substance reasonably satisfactory to Administrative Agent and pledged and delivered to Administrative Agent pursuant to the Security Documents as additional collateral security for the Obligations, and (ii) the obligations under that demand note are subordinated to the obligations of the Loan Parties under the Loan Documents (including the Obligations of Borrowers under this Agreement) in a manner reasonably satisfactory to Administrative Agent;

 

(iv)             Debt arising in connection with endorsement of instruments for deposit in the ordinary course of business;

 

(v)               Debt of any Loan Party to any employee, officer, or director or any such Person’s spouse, estate, or estate-planning vehicle to repurchase Equity Interests from that Person upon the death, disability, or termination of employment of that employee, officer of director, so long as the aggregate amount of all such Debt at any time outstanding does not exceed $250,000;

 

(vi)             unsecured Hedging Obligations consisting of commodity swap agreements of the Loan Parties (other than Holdings) and their Subsidiaries in an aggregate amount not to exceed $250,000 incurred for bona fide hedging purposes and not for speculation with respect to risks arising in the ordinary course of Borrowers’ business;

 

(vii)          Debt described on Schedule 9.2.1 and any extension, renewal, replacement or refinancing thereof so long as the principal amount thereof is not increased;

 

(viii)        the Debt to be Repaid (so long as that Debt is repaid on the First Amendment Effective Date with the proceeds of the Acquisition Term Debt);

 

(ix)             Contingent Liabilities arising with respect to (i) customary indemnification obligations by any of the Loan Parties (other than Holdings) and their Subsidiaries in favor of purchasers in connection with dispositions permitted under Section 9.2.9, and (ii) the guaranty by any of the Loan Parties (other than Holdings) and their Subsidiaries of a lease, sublease, license, or sublicense entered into in the ordinary course of business by another Loan Party or any Subsidiary thereof;

 

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(x)               unsecured Debt incurred in respect of netting services, overdraft protection, and other like services, in each case, incurred in the ordinary course of business;

 

(xi)             so long as the Acquisition Term Debt is subject to the terms and conditions of the Intercreditor Agreement, the Acquisition Term Debt in an aggregate principal amount outstanding under this clause (xi) at any time not to exceed the Term Loan Cap (as defined in the Intercreditor Agreement) at any time outstanding and any permitted Refinancing (as defined in the Intercreditor Agreement) thereof; provided, that, any Acquisition Term Debt that exceeds the Term Loan Cap shall still be permitted hereunder to the extent it constitutes Excess Term Loan Debt (as defined in the Intercreditor Agreement) under the Intercreditor Agreement;

 

(xii)          Debt owed to any person or entity providing property, casualty or liability insurance to any Borrower or any Subsidiary of any Borrower in connection with the financing of insurance premiums in the ordinary course of business to the extent not due and payable;

 

(xiii)        unsecured Debt of any Borrower or any of its Subsidiaries owing to banks or other financial institutions under corporate credit cards issued to officers and employees for business related expenses in the ordinary course of business in an aggregate amount not to exceed $375,000 at any time outstanding;

 

(xiv)         [Reserved];

 

(xv)           Debt in the form of Capital Lease obligations or purchase money obligations of any entity that becomes a Loan Party after the date hereof pursuant to a Permitted Acquisition; provided, that (x) such Debt exists at the time such entity becomes such a Subsidiary and is not created in contemplation of or in connection with such entity becoming such a Subsidiary, (y) such Debt is not guaranteed in any respect by any Borrower or Guarantor (other than by any such entity that guaranteed such Debt at the time such entity became a Subsidiary) and (z) such Debt in the aggregate does not exceed $750,000 at any time outstanding and any renewals, extensions, or refinancings thereof so long as the principal amount thereof is not increased;

 

(xvi)         Debt in an aggregate amount not to exceed $250,000 at any time outstanding in connection with surety or similar bonds, letters of credit and performance bonds obtained in the ordinary course of business of the Borrowers and their Subsidiaries;

 

(xvii)      deposits supporting the performance of operating leases in the ordinary course of business in an aggregate amount not to exceed $250,000 at any time outstanding;

 

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(xviii)    unsecured Debt arising from agreements providing for customary adjustments of purchase price or similar obligations, or from guarantees securing the performance of any Borrower or any Subsidiary of any Borrower pursuant to such agreements, in connection with any Permitted Acquisitions;

 

(xix)         cash obligations under incentive, non-compete, consulting, deferred compensation, or other similar arrangements, other than sales commissions, incurred by it in the ordinary course of business in an aggregate amount not to exceed $2,000,000 at any time outstanding;

 

(xx)           (A) the Green Remedies Seller Note to the extent subject to the Green Remedies Seller Note Subordination Agreement, (B) other unsecured seller notes issued by Holdings of up to 150% of the EBITDA of the target for the most recently ended twelve month period for which financial statements have been delivered to Administrative Agent, in an aggregate amount not to exceed $12,000,000 at any time outstanding to the extent subject to a subordination agreement or other subordination arrangement in favor of the Obligations reasonably acceptable to Administrative Agent and subject to documentation and structure reasonably acceptable to the Administrative Agent and (C) other unsecured earn-outs owing by Holdings of up to 150% of the EBITDA of the target for the most recently ended twelve month period for which financial statements have been delivered to Administrative Agent, in an aggregate amount not to exceed $12,000,000 at any time outstanding the extent subject to a subordination agreement or other subordination arrangement in favor of the Obligations reasonably acceptable to Administrative Agent and subject to documentation and structure reasonably acceptable to the Administrative Agent;

 

(xxi)         Debt consisting of SBA PPP Loans in an aggregate amount not to exceed $1,408,000 at any time outstanding; and

 

(xxii)      other unsecured Debt of the Loan Parties and their Subsidiaries not otherwise provided for herein in an aggregate amount not at any time exceeding $750,000 at any time outstanding; provided, to the extent any such Debt is in the form of seller notes, earn-out or similar obligations, such Debt shall only be issued by Holdings and shall be subject to a subordination agreement or other subordination arrangement in favor of the Obligations reasonably acceptable to Administrative Agent.

 

9.2.2                    Liens. Not, and not permit any of the Loan Parties and their Subsidiaries to, create or permit to exist any Lien on any of its real or personal properties, assets, or rights of whatsoever nature (whether now owned or hereafter acquired), except the following:

 

(i)                 Liens for taxes or other governmental charges (excluding any Lien imposed pursuant to any provisions of ERISA) not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings so long as such Lien would not reasonably be expected to materially adversely affect the Administrative Agent’s rights or the priority of the Administrative Agent’s Lien on any Collateral and, in each case, for which it maintains adequate reserves in accordance with GAAP and the execution or other enforcement of which is effectively stayed;

 

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(ii)              Liens arising in the ordinary course of business any of the Loan Parties (other than Holdings) and their Subsidiaries (such as (i) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law and (ii) Liens in the form of deposits or pledges incurred in connection with worker’s compensation, unemployment compensation and other types of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds, and similar obligations) for sums not overdue or being diligently contested in good faith by appropriate proceedings diligently prosecuted and not involving any advances or borrowed money or the deferred purchase price of property or services and, in each case (1) for which it maintains adequate reserves in accordance with GAAP and the execution or other enforcement of which is effectively stayed and (2) only so long as payment in respect of any such Lien is not at the time required and such Liens do not, in the aggregate, materially detract from the value of the assets of such Loan Party or any of its Subsidiaries or materially impair the use thereof in the operation of the business of such Loan Party or any of its Subsidiaries;

 

(iii)            Liens described on Schedule 9.2.2 as of the First Amendment Effective Date and renewals and extensions thereof on the assets currently subject to those Liens;

 

(iv)             subject to the limitation set forth in Section 9.2.1(ii), the following: (i) Liens arising in connection with Capital Leases (and attaching only to the property being leased); (ii) Liens existing on property at the time of the acquisition thereof by any of the Loan Parties (other than Holdings) and their Subsidiaries (and not created in contemplation of that acquisition); and (iii) Liens that constitute purchase money security interests on any property securing debt incurred for the purpose of financing all or any part of the cost of acquiring that property, so long as any such Lien attaches to the applicable property within twenty (20) days of the acquisition thereof and attaches solely to the property so acquired;

 

(v)               easements, rights of way, restrictions (including zoning restrictions), covenants, encroachments, and other similar real estate charges or encumbrances, minor defects or irregularities in title, and other similar real estate Liens granted in the ordinary course of business not interfering in any material respect with the ordinary conduct of the business of any Loan Party or any Subsidiary thereof;

 

(vi)             leases, subleases, licenses, or sublicenses of the assets or properties of any of the Loan Parties and their Subsidiaries, in each case entered into in the ordinary course of business and not interfering in any material respect with the business of any of the Loan Parties and their Subsidiaries;

 

(vii)          customary set-off rights against depository accounts permitted under this Agreement in favor of banks at which any of the Loan Parties and their Subsidiaries maintains any such depository accounts, so long as those set-off rights secure only the obligations of that Loan Party or that Subsidiary to pay ordinary course fees and bank charges;

 

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(viii)        Liens consisting of precautionary filings of UCC financing statements filed with respect to Operating Leases permitted under this Agreement and any interest of title of a lessor under any Operating Lease permitted under this Agreement;

 

(ix)             Liens arising under the Loan Documents;

 

(x)               Liens arising from judgments in circumstances not constituting an Event of Default;

 

(xi)             Liens securing the Acquisition Term Debt to the extent permitted by Section 9.2.1(xi) so long as such Liens are subject to the terms of the Intercreditor Agreement; and

 

(xii)          other Liens incurred in the ordinary course of business of the Loan Parties and their Subsidiaries with respect to obligations that do not in the aggregate exceed $500,000 at any time outstanding.

 

9.2.3                    Restricted Payments. Not, and not permit any of the Loan Parties and their Subsidiaries to, (a) make any dividend or distribution to any holders of its Equity Interests; (b) purchase or redeem any of its Equity Interests; (c) pay any management fees, transaction-based fees, or similar fees to any of its equity holders or any Affiliate thereof; (d) make any payment on account of Debt that has been contractually subordinated in right of payment to the Obligations if that payment is not permitted at that time under the applicable subordination terms and conditions; (e) make any prepayment of any unsecured Debt or any Debt secured by a Lien that is junior or subordinated to the Liens securing the Obligations; or (f) set aside funds for any of the foregoing (any of the foregoing described in clauses (a) through (f), each a “Restricted Payment”), except that:

 

(i)                 any Subsidiary may pay dividends or make other distributions to a Loan Party and any Loan Party may pay dividends or make other distributions to any Loan Party or any Subsidiary of any Loan Party;

 

(ii)              in the event the Borrowers file a consolidated, combined, unitary or similar type income Tax return with Holdings, the Borrowers shall be permitted to make distributions to Holdings to permit Holdings to pay federal and state income Taxes when due and payable to the extent such Taxes are attributable to the income of the Borrowers and their Subsidiaries;

 

(iii)            the Loan Parties and their Subsidiaries may make payments for earn-outs and deferred purchase price payments in connection with Permitted Acquisitions in an aggregate amount not to exceed of up to 150% of the EBITDA of the target for the most recently ended twelve month period for which financial statements have been delivered to Administrative Agent, provided that immediately before and after giving effect to such payments the Payment Conditions are satisfied;

 

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(iv)             in each case to the extent due and payable on a nonaccelerated basis, each Borrower may make regularly scheduled payments of interest in respect of subordinated Debt in the form of seller notes or earn-outs, provided, that (a) the Payment Conditions are satisfied, and (b) such payments are permitted under the applicable subordination agreement related thereto, and

 

(v)               each Borrower and each of its Subsidiaries may make dividends or distributions payable solely in its Equity Interests;

 

(vi)             each Borrower and each of its Subsidiaries may make cash payments under the Warrant solely to the extent such payments are permitted under the Intercreditor Agreement; and

 

(vii)          the Loan Parties and their Subsidiaries may make payments in the form of Equity Interests of Holdings as required by the Consideration Agreement (as defined in the Green Remedies Acquisition Agreement as in effect on the date hereof) as in effect on the date hereof.

 

9.2.4                    Mergers, Consolidations, Sales. Not, and not permit any of the Loan Parties and their Subsidiaries to, (a) be a party to any merger or consolidation; (b) change its state of incorporation or organization, its organization type or organization identification number or change its legal name; (c) sell, transfer, dispose of, convey, or lease any of its assets or Equity Interests (including the sale of Equity Interests of any Subsidiary); (d) sell or assign with or without recourse any receivables; (e) acquire all or any substantial part of the properties of any Person; or (f) purchase or otherwise acquire all or substantially all of the assets or any Equity Interests, or any partnership or joint venture interest in, any other Person or make any Acquisition, except the following:

 

(i)                 any merger or consolidation of a Loan Party or any Subsidiary of a Loan Party with another Loan Party or another Wholly-Owned Subsidiary of a Loan Party; provided, that a Loan Party shall be the surviving entity in any merger or consolidation involving a Loan Party, a Borrower shall be the surviving entity in any merger or consolidation involving a Borrower and Holdings shall be the surviving entity in any merger or consolidation involving Holdings;

 

(ii)              Permitted Acquisitions;

 

(iii)            dispositions of equipment that is substantially worn, damaged, or obsolete; provided that in the case of any disposition of equipment financed hereunder, the outstanding advance amount and all interest payable with respect thereto shall be paid to the Administrative Agent to be applied to the Term Loan as set forth herein;

 

(iv)             the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business;

 

(v)               the lapse of registered patents, trademarks, copyrights and other intellectual property of any Loan Party or any of its Subsidiaries to the extent not economically desirable and useful in the conduct of its business;

 

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(vi)             transfers of assets (a) to a Loan Party by (x) a Loan Party (other than Holdings, provided that the foregoing shall not limit Restricted Payments permitted by Section 9.2.3) or (y) a Subsidiary of a Loan Party (other than by a Borrower to such Subsidiary, provided that the foregoing shall not limit Restricted Payments permitted by Section 9.2.3 hereof) or (b) to a Borrower by a Borrower;

 

(vii)          sales of inventory in the ordinary course of business;

 

(viii)        dispositions of Cash Equivalent Investments;

 

(ix)             transfers of cash permitted by Section 9.2.9(xiii); and

 

(x)               so long as no Default or Event of Default exists and is continuing, other dispositions, not provided for in any other clause of this Section 9.2.4 in an aggregate amount not to exceed $500,000 during any consecutive twelve-month period.

 

Notwithstanding the foregoing, in no event shall any disposition or transfer be made to Quest Vertigent One, LLC other than pursuant to clause (ix) of this Section 9.2.4.

 

9.2.5                    Modification of Certain Documents; Organizational Form.

 

(i)                 Not permit the organizational documents or governing documents of any Loan Party to be amended or modified in any way that could reasonably be expected to be adverse to the interests of the Lenders (it being agreed that any change to the organizational or governing documents of Holdings related to the board of directors or voting rights of equityholders shall be deemed adverse to the interests of the Lenders).

 

(ii)              Not change, or allow any Loan Party to change, its state of formation or its organizational form without providing the Administrative Agent at least ten (10) Business Days’ prior written notice.

 

(iii)            Not amend, restate, supplement, waive, refinance, replace or otherwise modify any provision of any of the Acquisition Term Loan Documents except to the extent permitted by the Intercreditor Agreement.

 

(iv)             Not amend, restate, supplement, waive, refinance, replace or otherwise modify any provision of the Green Remedies Seller Note unless permitted by the Green Remedies Seller Note Subordination Agreement.

 

(v)               Without the prior written consent of the Administrative Agent, not amend, waive or otherwise modify any provision of the Green Remedies Acquisition Agreement or the documents and instruments delivered in connection therewith if such amendment, waiver or modification would be material or adverse to the Administrative Agent or the Lenders.

 

9.2.6                    Transactions with Affiliates. Not, and not permit any of the Loan Parties and their Subsidiaries to, enter into, or cause, suffer, or permit to exist any transaction, arrangement, or contract with any of its other Affiliates (other than the Loan Parties) which is on terms which are less favorable than are obtainable from any Person which is not one of its Affiliates (except to the extent expressly permitted by Sections 9.2.3 and 9.2.4(i)).

 

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9.2.7                    Inconsistent Agreements. Not, and not permit any of the Loan Parties and their Subsidiaries to, enter into any agreement containing any provision that would (a) be violated or breached by any borrowing by Borrowers under this Agreement or by the performance by any Loan Party of any of its Obligations under this Agreement or under any other Loan Document; (b) prohibit any Loan Party from granting to Administrative Agent and the Lenders a Lien on any of its assets; or (c) create or permit to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends or make other distributions to Holdings, any Borrower, or any other Subsidiary, or incur or pay any Debt (or modify, extend or renew any agreement evidencing Debt) owed to Holdings, any Borrower, or any other Subsidiary or to repay any intercompany Debt, (ii) make loans or advances to any Loan Party, or (iii) transfer any of its assets or properties to any Loan Party, other than (A) customary restrictions and conditions contained in agreements relating to the sale of all or a substantial part of the assets of any Subsidiary pending any such sale, so long as those restrictions and conditions apply only to the Subsidiary to be sold and that sale is permitted under this Agreement (but those); (B) restrictions or conditions imposed by any agreement relating to purchase money Debt, Capital Leases, and other secured Debt permitted by this Agreement, so long as those restrictions or conditions apply only to the property or assets securing that Debt; (C) customary provisions in leases and other contracts restricting the assignment thereof; and (D) restrictions and conditions set forth in the Loan Documents and the ABL Loan Documents.

 

9.2.8                    Business Activities; Holdings. (x) Not, and not permit any of the Loan Parties and their Subsidiaries to, engage in any line of business other than the businesses engaged in on the First Amendment Effective Date and businesses reasonably related or reasonably complementary thereto, and (y) not permit Holdings to engage in any trade or business other than acting as a holding company for the Equity Interests of the Loan Parties and any activities reasonably incidental thereto. Holdings shall not hold any cash or Cash Equivalent Investment that is not subject to a Control Agreement.

 

9.2.9                    Investments. Not, and not permit any of the Loan Parties and their Subsidiaries to, make or permit to exist any Investment in any other Person, except the following:

 

(i)               contributions by Holdings, Borrowers, or any Subsidiary to the capital of any Borrower;

 

(ii)              Investments constituting Debt permitted by Section 9.2.1;

 

(iii)            Contingent Liabilities constituting Debt permitted by Section 9.2.1 or Liens permitted by Section 9.2.2;

 

(iv)             Cash Equivalent Investments;

 

(v)               subject to Section 9.1.11, bank deposits in the ordinary course of business;

 

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(vi)             Permitted Acquisitions;

 

(vii)          non-cash consideration received pursuant to the consummation of asset dispositions and Permitted Acquisitions, in each case permitted under this Agreement;

 

(viii)        bank deposits established in the ordinary course of business in accordance with the Loan Documents;

 

(ix)           Investments listed on Schedule 9.2.9 as of the First Amendment Effective Date;

 

(x)            advances to officers, directors and employees of Holdings and its Subsidiaries in an aggregate amount not to exceed $100,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes in the ordinary course of business;

 

(xi)           Investments by Holdings and its Subsidiaries in the Loan Parties (other than Holdings);

 

(xii)          prepaid expenses and extensions of trade credit, in each case, in the ordinary course of business and consistent with past practices;

 

(xiii)        Investments of cash into Quest Vertigent One, LLC to be used solely for the purpose of paying consultant fees and general corporate expenses of Quest Vertigent One, LLC in an amount not to exceed $50,000 in any Fiscal Year; and

 

(xiv)         other Investments not provided for in any other clause of this Section 11.9 in an aggregate amount not to exceed $250,000 so long as the Payment Conditions are satisfied immediately before and after giving effect to such Investment.

 

Notwithstanding the foregoing, in no event shall any Investment be made in Quest Verging One, LLC other than pursuant to clause (xiii) of this Section 9.2.9.

 

9.2.10                Restriction of Amendments to Certain Documents. Not amend or otherwise modify, or waive any rights under any Warrants, Related Agreement or Material Contract, other than immaterial amendments, modifications, and waivers not adverse to the interests of Administrative Agent or Lenders.

 

9.2.11                Fiscal Year; Accounting Policies. Not, and not permit any of the Loan Parties and their Subsidiaries to (a) change its Fiscal Year or its method of determining Fiscal Quarters or fiscal months or (b) make any change in its accounting policies that is not required under GAAP.

 

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9.2.12                Financial Covenants.

 

(i)                 Fixed Charge Coverage Ratio. Not permit the Fixed Charge Coverage Ratio for any Computation Period to be less than 1.10 to 1.00 for that Computation Period.

 

(ii)              Senior Net Leverage Ratio. Not permit the Senior Net Leverage Ratio as of the last day of any Computation Period to exceed the applicable ratio set forth below for that Computation Period:

 

Computation 
Period Ending

Senior Net Leverage

Ratio

   
December 31, 2020 3.25 to 1.00
March 31, 2021, June 30, 2021 and September 30, 2021 3.00 to 1.00
December 31, 2021 and March 31, 2022 2.75 to 1.00
June 30, 2022, September 30, 2022 and December 31, 2022 2.50 to 1.00
March 31, 2023 and the last day of each Fiscal Quarter thereafter 2.00 to 1.00

 

Notwithstanding anything herein to the contrary (x) with respect to any provision of the Loan Documents that references compliance or satisfaction with the Senior Net Leverage Ratio required by this Section 9.2.12(ii) prior to December 31, 2020, such provision shall be deemed to refer to the Senior Net Leverage Ratio required as of December 31, 2020 and (y) the Borrowers and the Administrative Agent shall negotiate in good faith to reset the maximum Senior Net Leverage Ratios permitted under this Section 9.2.12(ii) to reflect the impact of any Debt incurred in connection with any Permitted Acquisition as permitted hereunder.

 

9.2.13                Compliance with Laws. Not, and shall not permit any of their Subsidiaries to, fail to comply with the laws, regulations and executive orders referred to in Sections 8.1.31 and 8.1.32.

 

9.2.14                Equity Interests of Subsidiaries. Not permit any Loan Parties (excluding Holdings) or any of their Subsidiaries to issue any additional Equity Interests, except to a Loan Party or other Subsidiary of a Loan Party and except for director’s qualifying Equity Interests to the extent required under applicable law. Not permit Holdings to issue any Disqualified Equity Interests.

 

9.2.15                Tax Consolidation. Not permit any Loan Party or any Subsidiary of any Loan Party to file or consent to the filing of any consolidated income tax return with any Person other than Holdings (or a present or future direct or indirect parent of Holdings), any other present or future Loan Party and/or any present or future Subsidiary of any Loan Party.

 

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9.2.16                Bill-and-Hold Sales, Etc. Not permit any Loan Parties or any of their Subsidiaries to make a sale to any customer on a bill-and-hold, guaranteed sale, sale and return, sale on approval, repurchase or return or consignment basis.

 

9.2.17                Acquisition Term Debt. Not permit any Loan Parties or any of their Subsidiaries to purchase or hold any of the Acquisition Term Debt.

 

9.2.18                Fiscal Year End. Not change, or permit any Subsidiary of any Loan Party to change, its fiscal year end.

 

9.2.19                OFAC. Not (i) Become a Person whose property or interests in property are blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Party and Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support Terrorism (66 Fed. Reg. 49079(2001)), (ii) engage in any dealings or transactions prohibited by Section 2 of such executive order, or be otherwise associated with any such Person in any manner violative of such Section 2, or (iii) become a Person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.

 

9.2.20                Prepayments.

 

(i)                 Voluntary Prepayments. Not make any voluntary prepayment on the Acquisition Term Debt unless the following conditions have been satisfied: (a) no Default or Event of Default has occurred and is continuing or would immediately result therefrom, (b) after giving effect to any such voluntary prepayment, Excess Availability (as defined under the Intercreditor Agreement) is not less than $3,000,000, and (c) Borrower Representative has delivered a certificate to Administrative Agent certifying the satisfaction of the foregoing conditions.

 

(ii)              Mandatory Prepayments. Not make any mandatory prepayment in respect of Excess Cash Flow (as defined in the Acquisition Term Loan Agreement) on the Acquisition Term Debt unless the following conditions have been satisfied: (a) no Default or Event of Default has occurred and is continuing or would immediately result therefrom, (b) after giving effect to any such voluntary prepayment, Excess Availability (as defined under the Intercreditor Agreement) is not less than $750,000, and (c) Borrower Representative has delivered a certificate to Administrative Agent certifying the satisfaction of the foregoing conditions; provided, however, provided, that, to the extent the Loan Parties were not permitted to make such mandatory prepayment described above because such conditions were not met, then the Loan Parties shall be permitted to make such payments on the next Business Day that such conditions are satisfied so long as for the 30 day period ending on the date of such prepayment, Excess Availability (as defined in the Intercreditor Agreement) has exceeded the sum of $750,000.

 

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Article X. CONDITIONS PRECEDENT

 

10.1          Initial Loans. Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without affecting in any manner the rights of Agents or any Lender under the other sections of this Agreement, no Lender shall be required to make the Loans, nor shall Issuing Bank be required to issue any Letter of Credit to be made or issued on the Closing Date unless and until each of the following conditions has been and continues to be satisfied or waived by Majority Lenders:

 

10.1.1                Documentation. Administrative Agent shall have received, in form and substance satisfactory to Administrative Agent and its counsel, a duly executed copy of this Agreement and the other Loan Documents, together with such additional documents, instruments, opinions and certificates as Administrative Agent and its counsel shall require in connection therewith from time to time, all in form and substance satisfactory to Administrative Agent and its counsel.

 

10.1.2                [Reserved].

 

10.1.3                No Litigation. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain or prohibit, or to obtain damages in respect of, or which is related to or arises out of, this Agreement or the consummation of the Initial Closing Date Transactions.

 

10.1.4                Closing Date – Minimum Excess Availability and Consolidated EBITDA. Administrative Agent shall have received evidence that the Borrowers have (i) Excess Availability of not less than $3,000,000 and (ii) Consolidated EBITDA of at least $2,000,000 for the trailing twelve month period calculated on a consolidated basis for Holdings and its Subsidiaries as of June 30, 2020.

 

10.1.5                Repayment of Existing Debt. (i) Administrative Agent shall have received evidence that all Debt (including any commitments therefor) not permitted under subsection 9.2.2 shall have been terminated and all outstanding amounts therefor shall have been paid in full pursuant to documentation in form and substance satisfactory to Administrative Agent and (ii) satisfactory arrangements shall have been made for the termination of all Liens granted in connection therewith.

 

10.1.6                Material Adverse Effect. As of the Closing Date, since December 31, 2019, there has not been any material adverse change in the business, assets, financial condition, income, performance or operations of any Loan Party and no event or condition exists which would be reasonably likely to result in any Material Adverse Effect.

 

10.1.7                UCC Filings and Lien Perfection. Administrative Agent shall have received acknowledgments of all filings, notifications or recordations necessary to perfect its Liens in the Collateral, as well as UCC, intellectual property and other Lien searches and other evidence satisfactory to Administrative Agent that such Liens are the only Liens upon the Collateral, except Permitted Liens. Administrative Agent shall have received all possessory collateral required to be delivered to Administrative Agent pursuant to the Loan Documents, duly endorsed in a manner satisfactory to Administrative Agent indicating Administrative Agent’s security interest therein.

 

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10.1.8                Officer’s Certificate. Administrative Agent shall have received a certificate, in form and substance satisfactory to it, from a duly authorized officer of the Loan Parties certifying that (a) each Loan Party is now and, after giving effect to the initial Loans to be made and the initial Letters of Credit to be issued hereunder and the consummation of each other Closing Date Transaction, will be, Solvent; (b) no Default or Event of Default exists or would result after giving effect to the Initial Closing Date Transactions; (c) the representations and warranties set forth in Section 8 are true and correct; and (d) the Loan Parties have complied with all agreements and conditions to be satisfied by them under the Loan Documents.

 

10.1.9                Resolutions, Organizational Documents, Incumbency Certificate. Administrative Agent shall have received a certificate of a duly authorized officer of each Loan Party, certifying (a) that attached copies of such Loan Party’s Organizational Documents are true and complete, and in full force and effect, without amendment except as shown, (b) that an attached copy of resolutions authorizing execution and delivery of the Loan Documents 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 (c) to the title, name and signature of each Person authorized to sign the Loan Documents. Administrative Agent may conclusively rely on this certificate until it is otherwise notified by the applicable Loan Party in writing.

 

10.1.10            Legal Opinion. Administrative Agent shall have received a written opinion of Olshan Frome Wolosky LLP, counsel to the Loan Parties, each in form and substance satisfactory to Administrative Agent.

 

10.1.11            Good Standing Certificates. Administrative Agent shall have received copies of the charter documents of each Loan Party, certified as appropriate by the Secretary of State or another official of such Loan Party’s jurisdiction of organization. Administrative Agent shall have received good standing certificates for each Loan Party, issued by the Secretary of State or other appropriate official of (a) such Loan Party’s jurisdiction of organization and (b) each jurisdiction where such Loan Party’s conduct of business or ownership of Property necessitates qualification, except where failure to maintain such qualification could not reasonably be expected to result in a Material Adverse Effect.

 

10.1.12            Insurance. Administrative Agent shall have received evidence of the insurance and additional insured, lender loss payable and other endorsements required hereunder and under the other Loan Documents, and certificates of such insurance policies and/or endorsements naming Administrative Agent, all in form and substance reasonably satisfactory to Administrative Agent.

 

10.1.13            Due Diligence Financial Statements and Projections. Administrative Agent shall have completed its business, financial and legal due diligence of Loan Parties, including:

 

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(i)                 Administrative Agent or its Affiliates shall have conducted a field examination of the Borrowers’ assets, liabilities, cash management systems, books and records, and the results of such field examination shall be reasonably satisfactory to Administrative Agent in all respects;

 

(ii)              Administrative Agent shall have received copies of (a) the internally prepared monthly financial statements of Holdings and its Subsidiaries on a Consolidated basis for the calendar month ending May 31, 2020, (b) the audited Consolidated financial statements of Holdings and its Subsidiaries for the fiscal year ended December 31, 2019, (c) the Projections of Holdings and its Subsidiaries (1) on a monthly basis for the fiscal year ending December 31, 2020, and (2) on an annual basis for the fiscal years ending December 31, 2021 through December 31, 2024, and (d) evidence and materials satisfactory to Administrative Agent demonstrating after giving effect to the Initial Closing Date Transactions, pro forma compliance with all covenants of this Agreement; and

 

(iii)            Administrative Agent shall have received its internal credit committee approval.

 

10.1.14            Payment of Fees. The Loan Parties shall have paid all fees and expenses, including the reasonable and documented fees and expenses of legal counsel, to be paid to Administrative Agent and Lenders on the Closing Date.

 

10.1.15            Borrowing Base Certificate. Collateral Agent shall have received a Borrowing Base Certificate prepared as of the Closing Date or as of such other date as Collateral Agent may elect.

 

10.1.16            Third Party Waivers and Consents. Administrative Agent shall have received, in form and substance reasonably satisfactory to Administrative Agent, all consents, waivers, acknowledgments and other agreements from third persons (including, without limitation, customs brokers) and Governmental Authorities which Administrative Agent may deem necessary in order to permit, protect and perfect its Lien upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Loan Documents.

 

10.1.17            USA PATRIOT Act. The Lenders shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act.

 

10.1.18            Deposit and Lockbox Accounts. The Loan Parties shall have (i) opened their main depository account with BBVA and (ii) opened lockbox and blocked account agreements reasonably acceptable to the Administrative Agent, including a springing deposit account Control Agreement with the Administrative Agent in favor of the Administrative Agent.

 

10.1.19            Perfection Certificate. Administrative Agent shall have received a Questionnaire and Perfection Certificate duly executed by the Loan Parties, in form and substance acceptable to the Agent.

 

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10.2          Conditions Precedent to All Loans and Credit Accommodations. No Lender shall be required to make any Loan, nor shall Issuing Bank be required to issue any Letter of Credit unless and until the following conditions are satisfied:

 

10.2.1                No Default or Event of Default. No Default or Event of Default shall exist at the time of, or result from, such funding, issuance or grant; and

 

10.2.2                Representations and Warranties. The representations and warranties of each Loan Party and its Subsidiaries in the Loan Documents shall be true and correct in all material respects (or, as to any representations and warranties which are subject to a materiality or Material Adverse Effect qualifier, true and correct in all respects) on the date of, and upon giving effect to, such funding, issuance or grant (except for representations and warranties that expressly relate to an earlier date or for such changes as provided in Section 8.2).

 

Article XI. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT

 

11.1          Events of Default. The occurrence of one or more of the following events shall constitute an “Event of Default”:

 

11.1.1                Payment of Obligations. The Loan Parties shall fail to pay any of the Obligations hereunder or under any Note (i) consisting of principal on the due date thereof or (ii) consisting of interest, fees or any other amount, within five (5) days after the due date thereof (in each instance, whether due at stated maturity, on demand, upon acceleration or otherwise).

 

11.1.2                Misrepresentations. Any representation, warranty or other statement made or furnished to Administrative Agent or any Lender by or on behalf of any Loan Party in this Agreement, any of the other Loan Documents or any instrument, certificate or financial statement furnished in compliance with or in reference thereto proves to have been false or misleading in any material respect when made, furnished or reaffirmed pursuant to Section 8.2 hereof.

 

11.1.3                Breach of Specific Covenants. Any Loan Party shall fail or neglect to perform, keep or observe any covenant contained in any of the following Sections or subsections: 6.2 (Other Collateral), 6.3 (Lien Perfection; Further Assurances), 7.1.1 (Location of Collateral), 7.1.2 (Insurance of Collateral), 7.2.4 (Maintenance of Blocked Accounts), 7.2.5 (Collection of Accounts; Proceeds of Collateral), 9.1.1 (Visits and Inspections; Lender Meeting), 9.1.3 (Financial Statements), 9.1.4 (Borrowing Base Certificates), 9.1.5 (Landlord, Processor and Storage Agreements), 9.1.7 (Projections), 9.1.8 (Subsidiaries), 9.1.9 (Deposit and Brokerage Accounts), 9.1.10 (Use of Proceeds), 9.1.13 (Preservation of Existence), 9.1.14 (Maintenance of Properties, Permits, Etc.), 9.1.15 (SBA PPP Loans), 9.1.16 (Acquisition Term Debt), or 9.2 (Negative Covenants) hereof on the date that the Loan Parties are required to perform, keep or observe such covenant.

 

11.1.4                Breach of Other Covenants. The Loan Parties shall fail or neglect to perform, keep or observe any covenant contained in this Agreement (other than a covenant which is dealt with specifically elsewhere in Section 11.1 hereof) or any other Loan Document and the breach of such other covenant is not cured to Administrative Agent’s satisfaction within thirty (30) days after the sooner to occur of any Loan Party’s receipt of notice of such breach from Administrative Agent or the date on which such failure or neglect first becomes known to any officer of any Loan Party.

 

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11.1.5                Acquisition Term Loan Documents. After giving effect to any applicable cure periods, any event of default shall have occurred under any of the Acquisition Term Loan Documents.

 

11.1.6                Other Material Obligations. There shall occur any default in the payment when due, or in the performance or observance of, any Material Contract.

 

11.1.7                Other Defaults. There shall occur any default or event of default on the part of any Loan Party under any agreement, document or instrument to which such Loan Party is a party or by which such Loan Party or any of its Property is bound, evidencing or relating to any Debt (other than the Obligations) with an outstanding principal balance in excess of $750,000, if the payment or maturity of such Debt is or could be accelerated in consequence of such event of default or demand for payment of such Debt is made or could be made in accordance with the terms thereof.

 

11.1.8                Uninsured Losses. Any material loss, theft, damage or destruction of any portion of the Collateral having a fair market value of $750,000, in the aggregate, if not fully covered (subject to such deductibles and self-insurance retentions as Administrative Agent shall have permitted) by insurance.

 

11.1.9                Insolvency and Related Proceedings. An Insolvency Proceeding is commenced by a Loan Party; a Loan Party makes an offer of settlement, extension or composition to its unsecured creditors generally; a trustee is appointed to take possession of any substantial Property of or to operate any of the business of a Loan Party; or an Insolvency Proceeding is commenced against a Loan Party and such Loan Party consents to institution of the proceeding, the petition commencing the proceeding is not timely contested by such Loan Party, the petition is not dismissed within forty-five (45) days after filing, or an order for relief is entered in the proceeding.

 

11.1.10            Business Disruption; Condemnation. There shall occur a cessation of a substantial part of the business of Loan Party which could reasonably be expected to have a Material Adverse Effect; or any Loan Party shall suffer the loss or revocation of any material license or permit now held or hereafter acquired by any Loan Party which loss could reasonably be expected to have a Material Adverse Effect; or any Loan Party shall be enjoined, restrained or in any way prevented by court, governmental or administrative order from conducting all or any material part of its business affairs which injunction, restraint or other prevention could reasonably be expected to have a Material Adverse Effect; or any material lease or agreement pursuant to which any Loan Party leases, uses or occupies any Property shall be canceled or terminated prior to the expiration of its stated term, the cancellation or termination of which could not reasonably be expected to have a Material Adverse Effect; or any portion of the Collateral shall be taken through condemnation or the value of such Property shall be impaired through condemnation which condemnation or impairment could reasonably be expected to have a Material Adverse Effect.

 

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11.1.11            Change of Control. A Change of Control shall occur.

 

11.1.12            Uninsured Losses. Any material loss, theft, damage or destruction of any portion of the Collateral having a fair market value of $750,000 in the aggregate, if not fully covered (subject to such deductibles and self-insurance retentions as Administrative Agent shall have permitted) by insurance.

 

11.1.13            ERISA. A Reportable Event shall occur which, in Administrative Agent’s determination, constitutes grounds for the termination by the Pension Benefit Guaranty Corporation of any Plan or for the appointment by the appropriate United States district court of a trustee for any Plan, or any Plan shall be terminated or any such trustee shall be requested or appointed, or if any Loan Party is in “default” (as defined in Section 4219I(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from such Loan Party’s complete or partial withdrawal from such Plan and any such event could reasonably be expected to have a Material Adverse Effect.

 

11.1.14            Challenge to Agreement. Any Loan Party shall challenge or contest in any action, suit or proceeding the validity or enforceability of this Agreement or any of the other Loan Documents, the legality or enforceability of any of the Obligations or the perfection or priority of any Lien granted to Administrative Agent or this Agreement or any of the other Loan Documents, Obligations or perfection or priority of any Lien granted to Administrative Agent shall cease to actually be legal and enforceable (other than as a result of any action or inaction by Administrative Agent or any Lender).

 

11.1.15            Repudiation of or Default under Guaranty Agreement. Any Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by such Guarantor or shall repudiate such Guarantor’s liability thereunder or shall be in default under the terms thereof.

 

11.1.16            Criminal Forfeiture. Any Loan Party shall be criminally indicted or convicted under any law that could lead to a forfeiture of any Property of any Loan Party.

 

11.1.17            Judgments. Any money judgment, writ of attachment or similar process (collectively, “Judgments”) is issued or rendered against any Loan Party, or any of their respective Property (i) in the case of money judgments, in an amount of $750,000 or more for all such judgments, attachments or processes in the aggregate, in each case in excess of any applicable insurance with respect to which the insurer has admitted liability, and (ii) in the case of non-monetary Judgments, such Judgment or Judgments (in the aggregate) could reasonably be expected to have a Material Adverse Effect, in each case which Judgment is not stayed, released or discharged within thirty (30) days.

 

11.1.18            Material Adverse Effect. Any event occurs which reasonably could be expected to have a Material Adverse Effect.

 

11.1.19            Intercreditor Agreement. The provisions of the Intercreditor Agreement, the Green Remedies Seller Note Subordination Agreement or any other intercreditor or subordination agreement in favor of the Administrative Agent in respect of the Obligations shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or the Acquisition Term Agent, any lender under the Acquisition Term Loan Agreement or any other person party to such agreements shall contest in any manner the validity or enforceability thereof or deny that it has any further obligation thereunder, or the Obligations for any reason shall not have the priority contemplated by this Agreement, the Intercreditor Agreement, the Green Remedies Seller Note Subordination Agreement or any other intercreditor or subordination described in this Section 11.1.19, respectively.

 

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11.2          Acceleration of the Obligations. Upon or at any time after the occurrence and during the continuance of an Event of Default, (i) the Revolving Credit Commitments shall, at the option of Administrative Agent or Majority Lenders, be terminated and/or (ii) Administrative Agent or Majority Lenders may declare all or any portion of the Obligations at once due and payable without presentment, demand protest or further notice by Administrative Agent or any Lender, and the Loan Parties shall forthwith pay to Administrative Agent the full amount of such Obligations, provided that, upon the occurrence of an Event of Default specified in subsection 11.1.7 hereof, the Revolving Credit Commitments shall automatically be terminated and all of the Obligations shall become automatically due and payable, in each case without declaration, notice or demand by Administrative Agent or any Lender.

 

11.3          Other Remedies. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent shall have and may exercise from time to time the following other rights and remedies:

 

11.3.1                All of the rights and remedies of a secured party under the UCC or under other Applicable Law, and all other legal and equitable rights to which Administrative Agent or Lenders may be entitled, all of which rights and remedies shall be cumulative and shall be in addition to any other rights or remedies contained in this Agreement or any of the other Loan Documents, and none of which shall be exclusive.

 

11.3.2                The right to take immediate possession of the Collateral, and to (i) require each Loan Party and each of its Subsidiaries to assemble the Collateral, at the Loan Parties’ expense, and make it available to Administrative Agent at a place designated by Administrative Agent which is reasonably convenient to both parties, and (ii) enter any premises where any of the Collateral shall be located and to keep and store the Collateral on such premises until sold (and if such premises are owned by any Loan Party or Subsidiary of a Loan Party, the Loan Parties shall not, and shall not permit any of their Subsidiaries to, charge Administrative Agent for such entry and storage).

 

11.3.3                The right to sell or otherwise dispose of all or any Collateral in its then current condition, or after any further manufacturing or processing thereof, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as Administrative Agent, in its sole discretion, may deem advisable. Administrative Agent may, at Administrative Agent’s option, disclaim any and all warranties regarding the Collateral in connection with any such sale. The Loan Parties agree that ten (10) days’ prior written notice of any public or private sale or other disposition of Collateral shall be reasonable notice thereof, and such sale shall be at such locations as Administrative Agent may designate in such notice. Administrative Agent shall have the right to conduct such sales on any Loan Party’s or any of its Subsidiaries’ premises, without charge therefor, and such sales may be adjourned from time to time in accordance with Applicable Law. Administrative Agent shall have the right to sell, lease or otherwise dispose of the Collateral, or any part thereof, for cash, credit or any combination thereof, and Administrative Agent, on behalf of Lenders, may purchase all or any part of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Obligations. The proceeds realized from the sale of any Collateral shall be applied in accordance with subsection 4.4.2. If any deficiency shall arise, the Loan Parties shall remain jointly and severally liable to Administrative Agent and Lenders therefor.

 

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11.3.4                Administrative Agent is hereby granted a license or other right to use, without charge, each Loan Party’s and each of its Subsidiaries’ labels, patents, copyrights, licenses, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any Property of a similar nature, as it pertains to the Collateral, in completing, advertising for sale and selling any Collateral and each Loan Party’s and each of its Subsidiaries’ rights under all licenses and all franchise agreements shall inure to Administrative Agent’s benefit.

 

11.3.5                Administrative Agent may, at its option, require the Loan Parties to deposit with Administrative Agent funds equal to 103% of the LC Amount and, if the Loan Parties fail to promptly make such deposit, Administrative Agent may advance such amount as a Revolving Credit Loan (whether or not an Overadvance is created thereby). Each such Revolving Credit Loan shall be secured by all of the Collateral and shall constitute a Base Rate Revolving Credit Loan. Any such deposit or advance shall be held by Administrative Agent as a reserve to fund future drawings against such Letters of Credit. At such time as all Letters of Credit have been drawn upon or expired, any amounts remaining in such reserve shall be applied against any outstanding Obligations, or, if all Obligations have been indefeasibly paid in full, returned to the Loan Parties.

 

11.4          Setoff and Sharing of Payments. In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, during the continuance of any Event of Default, each Lender is hereby authorized by the Loan Parties at any time or from time to time, with prior written consent of Administrative Agent and with reasonably prompt subsequent notice to the Loan Parties (any prior or contemporaneous notice to the Loan Parties being hereby expressly waived) to setoff and to appropriate and to apply any and all (i) balances held by such Lender at any of its offices for the account of any Loan Party or any of its Subsidiaries (regardless of whether such balances are then due to a Loan Party or its Subsidiaries), and (ii) other property at any time held or owing by such Lender to or for the credit or for the account of any Loan Party or any of its Subsidiaries, against and on account of any of the Obligations. Except with respect to setoff amounts applied to Product Obligations, any Lender exercising a right to setoff shall, to the extent the amount of any such setoff exceeds its Pro Rata Percentage of the amount set off, purchase for cash (and the other Lenders shall sell) interests in each such other Lender’s pro rata share of the Obligations as would be necessary to cause such Lender to share such excess with each other Lender in accordance with their respective Pro Rata Percentages. Each Loan Party agrees, to the fullest extent permitted by law, that any Lender may exercise its right to setoff with respect to amounts in excess of its pro rata share of the Obligations and upon doing so shall deliver such excess to Administrative Agent for the benefit of all Lenders in accordance with the Pro Rata Percentages.

 

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11.5          Remedies Cumulative; No Waiver. All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings of the Loan Parties contained in this Agreement and the other Loan Documents, or in any document referred to herein or contained in any agreement supplementary hereto or in any schedule or in any Guaranty Agreement or Pledge Agreement given to Administrative Agent or any Lender or contained in any other agreement between any Lender and the Loan Parties or between Administrative Agent and the Loan Parties heretofore, concurrently, or hereafter entered into, shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants, conditions, or agreements of the Loan Parties herein contained. The failure or delay of Administrative Agent or any Lender to require strict performance by the Loan Parties of any provision of this Agreement or to exercise or enforce any rights, Liens, powers, or remedies hereunder or under any of the aforesaid agreements or other documents or security or Collateral shall not operate as a waiver of such performance, Liens, rights, powers and remedies, but all such requirements, Liens, rights, powers, and remedies shall continue in full force and effect until all Loans and other Obligations owing or to become owing from the Loan Parties to Administrative Agent and each Lender have been fully satisfied. None of the undertakings, agreements, warranties, covenants and representations of the Loan Parties contained in this Agreement or any of the other Loan Documents and no Default or Event of Default by the Loan Parties under this Agreement or any other Loan Documents shall be deemed to have been suspended or waived by Lenders, unless such suspension or waiver is by an instrument in writing specifying such suspension or waiver and is signed by a duly authorized representative of Administrative Agent and directed to the Loan Parties.

 

11.6          Curative Equity.

 

(a)       Subject to the limitations set forth in Section 11.6(d), Borrowers may cure (and will be deemed to have cured) an Event of Default arising out of a breach of any of the financial covenants set forth in Section 9.2.12 (each such financial covenant, a “Specified Financial Covenant”; each such Event of Default, a “Specified Financial Covenant Default”) if Borrowers receive the cash proceeds of Curative Equity within ten (10) Business Days after the earliest date on which each applicable Specified Financial Covenant is required to be tested for the applicable Computation Period pursuant to this Agreement (the “Cure Period”).

 

(b)       Borrowers shall provide Administrative Agent with irrevocable written notice during the Cure Period of their intent to cure the Specified Financial Covenant(s) with Curative Equity (the “Cure Notice”) and shall promptly notify Administrative Agent of their receipt of any proceeds of Curative Equity and application of the proceeds of such Curative Equity in accordance with Section 4.3 so long as any payments on the Acquisition Term Debt result in a permanent reduction in Acquisition Term Debt.

 

(c)       Upon receipt by the Borrowers of the Curative Equity (and application of the proceeds of such Curative Equity in accordance with Section 4.3) and delivery of a certificate by Borrower Representative to Administrative Agent certifying as to the amount of the proceeds of any Curative Equity and that those proceeds have been applied in accordance with Section 11.6(b) in an amount equal to the amount which if applied to increase EBITDA for the Computation Period would result in the Borrowers being in pro forma compliance with the applicable Specified Financial Covenant(s) (which certificate shall also set forth the calculation of the applicable Specified Financial Covenant being cured in reasonable detail), then each applicable Specified Financial Covenant Default will be deemed cured with no further action required by the Administrative Agent. Before the date of the delivery of that certificate, any Specified Financial Covenant Default that has occurred and is continuing will be deemed to be continuing, and, as a result, the Lenders will have no obligation to make additional loans or otherwise extend additional credit under this Agreement. If Borrowers do not cure a Specified Financial Covenant Default as provided in this Section 11.6, then that Specified Financial Covenant Default will continue unless waived in writing by the Administrative Agent in accordance with this Agreement.

 

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(d)       To the extent that proceeds of Curative Equity are received with respect to any Fiscal Quarter, those proceeds will be deemed to be EBITDA for purposes of determining compliance with the Specified Financial Covenant(s) for that Fiscal Quarter and subsequent periods that include that Fiscal Quarter. Notwithstanding any provision of this Agreement to the contrary, (i) Borrowers’ rights under this Section 11.6 (A) may be exercised no more than four times during the term of this Agreement; (B) may be exercised no more than twice in any period of four Fiscal Quarters; (C) may not be exercised in two consecutive Fiscal Quarters and (D) may not be exercised if the amount of proceeds of the Curative Equity, together with the aggregate amount of proceeds of all prior Curative Equity, exceeds 20% of Consolidated EBITDA (calculated prior to giving effect to such Curative Equity) in any trailing twelve month period; (ii) the amount of proceeds of any Curative Equity may not be greater than or less than the amount required to cause Borrowers to be in compliance with each applicable Specified Financial Covenant(s) as at the end of the applicable Computation Period (without giving effect to any prepayment of Debt); and (iii) the proceeds of Curative Equity will be disregarded for purposes of determining EBITDA for any pricing, financial covenant-based conditions, or baskets with respect to the covenants contained in this Agreement and there will be no pro forma reduction in Debt with the proceeds of any Curative Equity for determining compliance with the Specified Financial Covenants or for determining any pricing, financial covenant-based conditions, or baskets with respect to the covenants contained in this Agreement, in each case in the Fiscal Quarter in which that Curative Equity is used and each Computation Period ending on the last day of the following three Fiscal Quarters.

 

Article XII. AGENTS

 

12.1          Authorization and Action. Each Lender hereby appoints and authorizes Administrative Agent and Collateral Agent to take such action on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to such Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. Each Lender hereby acknowledges that Agents shall not have by reason of this Agreement assumed a fiduciary relationship in respect of any Lender. In performing its functions and duties under this Agreement, each Agent shall act solely as agent of Lenders and shall not assume, or be deemed to have assumed, any obligation toward, or relationship of agency or trust with or for, the Loan Parties. As to any matters not expressly provided for by this Agreement and the other Loan Documents (including without limitation enforcement and collection of the Notes), each Agent may, but shall not be required to, exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Majority Lenders (or a greater or lesser number of Lenders as required in this Agreement), whenever such instruction shall be requested by such Agent or required hereunder, or a greater or lesser number of Lenders if so required hereunder, and such instructions shall be binding upon all Lenders; provided that each Agent shall be fully justified in failing or refusing to take any action which exposes such Agent to any liability or which is contrary to this Agreement, the other Loan Documents or Applicable Law, unless such Agent is indemnified to its satisfaction by the other Lenders against any and all liability and expense which it may incur by reason of taking or continuing to take any such action. If any Agent seeks the consent or approval of Majority Lenders (or a greater or lesser number of Lenders as required in this Agreement), with respect to any action hereunder, such Agent shall send notice thereof to each Lender and shall notify each Lender at any time that Majority Lenders (or such greater or lesser number of Lenders) have instructed such Agent to act or refrain from acting pursuant hereto.

 

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12.2          Agents’ Reliance, Etc. Neither Agent nor any of its respective Related Parties shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, each Agent and its Related Parties: (i) may treat each Lender party hereto as the holder of Obligations until such Agent receives written notice of the assignment or transfer of such Lender’s portion of the Obligations signed by such Lender and in form reasonably satisfactory to Agent; (ii) 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 in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranties or representations to any Lender and shall not be responsible to any Lender for any recitals, statements, warranties or representations made in or in connection with this Agreement or any other Loan Documents; (iv) shall not have any duty beyond such Agent’s customary practices in respect of loans in which such Agent is the only lender, to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents on the part of the Loan Parties, to inspect the property (including the books and records) of the Loan Parties, to monitor the financial condition of the Loan Parties or to ascertain the existence or possible existence or continuation of any Default or Event of Default; (v) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (vi) shall not be liable to any Lender for any action taken, or inaction, by such Agent upon the instructions of Majority Lenders (or a greater or lesser number of Lenders as required in this Agreement) pursuant to Section 12.1 hereof or refraining to take any action pending such instructions; (vii) shall not be liable for any apportionment or distributions of payments made by it in good faith pursuant to Section 4 hereof; (viii) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate, message or other instrument or writing (which may be by telephone, facsimile, telegram, cable, e-mail transmission or telex) believed in good faith by it to be genuine and signed or sent by the proper party or parties; and (ix) may assume that no Event of Default has occurred and is continuing, unless such Agent has actual knowledge of the Event of Default, has received notice from the Loan Parties or the Loan Parties’ independent certified public accountants stating the nature of the Event of Default, or has received notice from a Lender stating the nature of the Event of Default and that such Lender considers the Event of Default to have occurred and to be continuing. In the event any apportionment or distribution described in clause (vii) above is determined to have been made in error, the sole recourse of any Person to whom payment was due but not made shall be to recover from the recipients of such payments any payment in excess of the amount to which they are determined to have been entitled.

 

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12.3          BBVA and Affiliates. With respect to its commitment hereunder to make Loans, BBVA shall have the same rights and powers under this Agreement and the other Loan Documents as any other Lender and may exercise the same as though it were not an Agent; and the terms “Lender,” “Lenders” or “Majority Lenders” shall, unless otherwise expressly indicated, include BBVA in its individual capacity as a Lender. BBVA and its Affiliates may lend money to, and generally engage in any kind of business with, the Loan Parties, and any Person who may do business with or own Equity Interests of any Loan Party, all as if BBVA were not an Agent and without any duty to account therefor to any other Lender.

 

12.4          Lender Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on the financial statements referred to herein and such other 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 any 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 action under this Agreement. No Agent shall have any duty or responsibility, either initially or on an ongoing basis, to provide any Lender with any credit or other similar information regarding the Loan Parties.

 

12.5          Indemnification. Lenders agree to indemnify Agents (to the extent not reimbursed by the Loan Parties), in accordance with their respective Aggregate Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted by such Agent under this Agreement; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse each Agent promptly upon demand for its ratable share, as set forth above, of any out-of-pocket expenses (including attorneys’ fees) incurred by such Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiation, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement and each other Loan Document, to the extent that such Agent is not reimbursed for such expenses by the Loan Parties. If after payment and distribution of any amount by any Agent to Lenders, any Lender or any other Person, including the Loan Parties, any creditor of any Loan Party, a liquidator, administrator or trustee in bankruptcy, recovers from such Agent any amount found to have been wrongfully paid to such Agent or disbursed by such Agent to Lenders, then Lenders, in accordance with their respective Aggregate Percentages, shall reimburse such Agent for all such amounts. The obligations of Lenders under this Section 12.5 shall survive the payment in full of all Obligations and the termination of this Agreement.

 

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12.6          Rights and Remedies to Be Exercised by Administrative Agent Only. Each Lender agrees that, except as set forth in Section 11.4, no Lender shall have any right individually (i) to realize upon the security created by this Agreement or any other Loan Document, (ii) to enforce any provision of this Agreement or any other Loan Document, or (iii) to make demand under this Agreement or any other Loan Document.

 

12.7          Agency Provisions Relating to Collateral. Each Lender authorizes and ratifies each Agent’s entry into this Agreement and the Security Documents for the benefit of Lenders. Each Lender agrees that any action taken by any Agent with respect to the Collateral in accordance with the provisions of this Agreement or the Security Documents, and the exercise by any Agent of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all Lenders. Administrative Agent is hereby authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender to take any action with respect to any Collateral or the Loan Documents which may be necessary to perfect and maintain perfected Administrative Agent’s Liens upon the Collateral, for its benefit and the ratable benefit of Lenders. Lenders hereby irrevocably authorize Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by Administrative Agent upon any Collateral (i) upon termination of this Agreement and payment and satisfaction of all Obligations; or (ii) constituting property being sold or disposed of if the Loan Parties certify to Administrative Agent that the sale or disposition is made in compliance with subsection 9.2.8 hereof (and Administrative Agent may rely conclusively on any such certificate, without further inquiry); or (iii) constituting property in which no Loan Party owned any interest at the time the Lien was granted or at any time thereafter; or (iv) in connection with any foreclosure sale or other disposition of Collateral after the occurrence and during the continuation of an Event of Default; or (v) if approved, authorized or ratified in writing by Administrative Agent at the direction of all Lenders. Upon request by Administrative Agent at any time, Lenders will confirm in writing Administrative Agent’s authority to release particular types or items of Collateral pursuant hereto. No Agent shall have any obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by any Loan Party or is cared for, protected or insured or has been encumbered or that the Liens granted to Administrative Agent herein or pursuant to the Security Documents have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of its rights, authorities and powers granted or available to each Agent in this Section 12.7 or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, each Agent may act in any manner it may deem appropriate, in its sole discretion, but consistent with the provisions of this Agreement, including given each Agent’s own interest in the Collateral as a Lender and that no Agent shall have any duty or liability whatsoever to any Lender.

 

12.8          Resignation of Agent; Appointment of Successor. Each Agent may resign as Administrative Agent or Collateral Agent by giving not less than thirty (30) days’ prior written notice to Lenders and the Loan Parties. If Administrative Agent shall resign under this Agreement, then, (i) subject to the consent of the Loan Parties (which consent shall not be unreasonably withheld and which consent shall not be required during any period in which a Default or an Event of Default exists), Majority Lenders shall appoint from among Lenders a successor Administrative Agent for Lenders or (ii) if a successor Administrative Agent shall not be so appointed and approved within the thirty (30) day period following Administrative Agent’s notice to Lenders and the Loan Parties of its resignation, then Administrative Agent shall appoint a successor agent who shall serve as Administrative Agent until such time as Majority Lenders appoint a successor agent, subject to the Loan Parties’ consent as set forth above. Upon its appointment, such successor agent shall succeed to the rights, powers and duties of Administrative Agent and the term “Administrative Agent” shall mean such successor effective upon its appointment, and the former Administrative Agent’s rights, powers and duties as Administrative Agent shall be terminated without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. If Collateral Agent shall resign under this Agreement, then Administrative Agent shall assume the rights, powers and duties of Collateral Agent hereunder; provided, that, Administrative Agent may, in its discretion, appoint another Lender as the successor Collateral Agent, in which case such successor Collateral Agent shall assume the rights, powers and duties of Collateral Agent hereunder. After the resignation of any Agent hereunder, the provisions of this Section 12 shall inure to the benefit of such former Agent and such former Agent shall not by reason of such resignation be deemed to be released from liability for any actions taken or not taken by it while it was an Agent under this Agreement.

 

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12.9          Audit and Examination Reports; Disclaimer by Lenders. By signing this Agreement, each Lender:

 

(i)                 is deemed to have requested that each Agent furnish such Lender, promptly after it becomes available, a copy of each audit or examination report (each a “Report” and collectively, “Reports”) prepared by or on behalf of such Agent;

 

(ii)              expressly agrees and acknowledges that Agents (i) do not make any representation or warranty as to the accuracy of any Report and (ii) shall not be liable for any information contained in any Report;

 

(iii)            expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that any Agent or other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties’ books and records as well as on representations of the Loan Parties’ personnel;

 

(iv)             agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except to its participants, or use any Report in any other manner, in accordance with the provisions of Section 13.14; and

 

(v)               without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (a) to hold each Agent and any such other Lender preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to the Loan Parties, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, any loan or other obligation of the Loan Parties; and (b) to pay and protect, and indemnify, defend and hold each Agent and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses and other amounts (including attorneys’ fees and expenses) incurred by such Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

 

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12.10      Administrative Agent’s Right to Purchase Commitments. Administrative Agent shall have the right, but shall not be obligated, at any time upon written notice to any Lender and with the consent of such Lender, which may be granted or withheld in such Lender’s sole discretion, to purchase for Administrative Agent’s own account all of such Lender’s interests in this Agreement, the other Loan Documents and the Obligations, for the face amount of the outstanding Obligations owed to such Lender, including without limitation all accrued and unpaid interest and fees.

 

12.11      Intercreditor Agreement. Each Lender hereby authorizes and directs the Administrative Agent to enter into the Intercreditor Agreement on its behalf, perform the Intercreditor Agreement on its behalf and take any actions thereunder as determined by the Administrative Agent to be necessary or advisable to protect the interest of the Lenders, and each Lender agrees to be bound by the terms of the Intercreditor Agreement.

 

Article XIII. MISCELLANEOUS

 

13.1          Power of Attorney. Each Loan Party hereby irrevocably designates, makes, constitutes and appoints Administrative Agent (and all Persons designated by Administrative Agent) as such Loan Party’s true and lawful attorney (and agent-in-fact), solely with respect to the matters set forth in this Section 13.1, and Administrative Agent, or Administrative Agent’s agent, may, without notice to any Loan Party and in any Loan Party’s or Administrative Agent’s name, but at the cost and expense of the Loan Parties:

 

13.1.1                At such time or times as Administrative Agent or such agent, in its sole discretion, may determine, endorse any Loan Party’s name on any checks, notes, acceptances, drafts, money orders or any other evidence of payment or proceeds of the Collateral which come into the possession of Administrative Agent or under Administrative Agent’s control.

 

13.1.2                At such time or times upon or after the occurrence and during the continuance of an Event of Default, as Administrative Agent or its agent in its sole discretion may determine: (i) demand payment of the Accounts from the Account Debtors, enforce payment of the Accounts by legal proceedings or otherwise, and generally exercise all of any Loan Party’s rights and remedies with respect to the collection of the Accounts; (ii) settle, adjust, compromise, discharge or release any of the Accounts or other Collateral or any legal proceedings brought to collect any of the Accounts or other Collateral; (iii) sell or assign any of the Accounts and other Collateral upon such terms, for such amounts and at such time or times as Administrative Agent deems advisable, and at Administrative Agent’s option, with all warranties regarding the Collateral disclaimed; (iv) take control, in any manner, of any item of payment or proceeds relating to any Collateral; (v) prepare, file and sign any Loan Party’s name to a proof of claim in bankruptcy or similar document against any Account Debtor or to any notice of lien, assignment or satisfaction of lien or similar document in connection with any of the Collateral; (vi) receive, open and dispose of all mail addressed to any Loan Party and notify postal authorities to change the address for delivery thereof to such address as Administrative Agent may designate; (vii) endorse the name of any Loan Party upon any of the items of payment or proceeds relating to any Collateral and deposit the same to the account of Administrative Agent on account of the Obligations; (viii) endorse the name of any Loan Party upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Accounts, Inventory and any other Collateral; (ix) use any Loan Party’s stationery and sign the name of any Loan Party to verifications of the Accounts and notices thereof to Account Debtors; (x) use the information recorded on or contained in any data processing equipment and Computer Hardware and Software relating to the Accounts, Inventory, Equipment and any other Collateral; (xi) make and adjust claims under policies of insurance; and (xii) do all other acts and things necessary, in Administrative Agent’s determination, to fulfill any Loan Party’s obligations under this Agreement.

 

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The power of attorney granted hereby shall constitute a power coupled with an interest and shall be irrevocable.

 

13.2          Indemnity. EACH LOAN PARTY SHALL INDEMNIFY EACH ARRANGER, EACH AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER AND THE ISSUING BANK, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNIFIED PERSON”) AGAINST, AND HOLD EACH INDEMNIFIED PERSON HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, AND DISBURSEMENTS (INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNIFIED PERSON), INCURRED BY ANY INDEMNIFIED PERSON OR ASSERTED AGAINST ANY INDEMNIFIED PERSON BY ANY THIRD PARTY OR BY ANY BORROWER OR ANY OTHER LOAN PARTY ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (II) ANY LOAN OR LETTER OF CREDIT OR THE USE OR PROPOSED USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF MATERIALS OF ENVIRONMENTAL CONCERN ON OR FROM ANY PROPERTY OWNED OR OPERATED BY ANY LOAN PARTY OR ANY OF ITS SUBSIDIARIES, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO ANY LOAN PARTY OR ANY OF ITS SUBSIDIARIES, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER BROUGHT BY A THIRD PARTY OR BY ANY LOAN PARTY OR ANY OF ITS SUBSIDIARIES OR ANY LOAN PARTY’S OR ANY OF ITS SUBSIDIARIES’ DIRECTORS, MANAGERS, EQUITY OWNERS OR CREDITORS, AND REGARDLESS OF WHETHER ANY INDEMNIFIED PERSON IS A PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNIFIED PERSON NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, INCLUDING ITS OWN ORDINARY NEGLIGENCE, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PERSONS OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PERSONS; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PERSON, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON. Without limiting the generality of the foregoing, these indemnities shall extend to any claims asserted against any Indemnified Person by any Person under any Environmental Laws by reason of any Loan Party’s or any other Person’s failure to comply with laws applicable to solid or hazardous waste materials or other toxic substances. Notwithstanding any contrary provision in this Agreement, the obligation of the Loan Parties under this Section 13.2 shall survive the payment in full of the Obligations and the termination of this Agreement.

 

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13.3          Amendment and Waivers.

 

13.3.1                No amendment or waiver of any provision of this Agreement or any other Loan Document (including without limitation any Note), nor consent to any departure by the Loan Parties therefrom, shall in any event be effective unless the same shall be in writing and signed by Majority Lenders and the Loan Parties, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that this Section shall not apply to amendments to this Agreement that have been made pursuant to Section 4.9; provided further that no amendment, waiver or consent shall be effective to:

 

(i)                 (a) increase any Lender’s Revolving Credit Commitment or Term Loan Commitment; (b) reduce the principal of, interest on, or fees due in respect to any amount payable hereunder to any Lender; or (c) postpone any date fixed for any payment of principal of, or interest on, any amounts payable hereunder to any Lender, in each case, without the written consent of each Lender directly affected thereby;

 

(ii)              (a) amend the number of Lenders that shall be required for Lenders or any of them to take any action hereunder; (b) except as otherwise expressly permitted herein or in any other Loan Document, release or discharge any Person liable for the performance of any obligations of any Loan Party hereunder or under any of the Loan Documents; (c) amend the definition of the term Majority Lenders; (d) amend this Section 13.3; (e) amend subsection 4.4.2; or (f) except as otherwise expressly permitted herein or in any other Loan Document, release any substantial portion of the Collateral except to the extent expressly permitted by this Agreement or the Intercreditor Agreement, in each case, without the written consent of each Lender;

 

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(iii)            change any definitions or any other provision in a manner that would alter the nature of the secured position of any Derivative Obligation Provider or its entitlement to a pro rata allocation among Lenders of assets upon termination or acceleration of Obligations, without the written consent of each Lender and Derivative Obligation Provider directly affected thereby; or

 

(iv)             affect the rights or duties of any Agent or Issuing Bank (as applicable) under this Agreement or any other Loan Document, without the written consent of such Agent or Issuing Bank (as applicable).

 

13.3.2                Notwithstanding the foregoing provisions of this Section 13.3:

 

(i)                 no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except to the extent the consent of such Lender would be required under clause (i) of subsection 13.3.1;

 

(ii)              technical and conforming modifications to the Loan Documents may be made with the consent of the Loan Parties and Administrative Agent to the extent necessary to integrate any Requested Increase Amount in accordance with Section 2.4; and

 

(iii)            Administrative Agent and the Loan Parties may amend any Loan Document to correct an obvious, immaterial or administrative error or omission, or to effect administrative changes that are not adverse to any Lender, and such amendment shall become effective without any further consent of any other party to such Loan Document if the same is not objected to in writing by Majority Lenders within five (5) Business Days following receipt of notice thereof.

 

13.3.3                If a fee is to be paid by the Loan Parties in connection with any waiver or amendment hereunder, the agreement evidencing such amendment or waiver may, at the discretion of Administrative Agent (but shall not be required to), provide that only Lenders executing such agreement by a specified date may share in such fee (and in such case, such fee shall be divided among the applicable Lenders on a pro rata basis without including the interests of any Lenders who have not timely executed such agreement).

 

13.4          Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement shall be prohibited by or invalid under Applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

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13.5          Right of Sale; Assignment; Participations. This Agreement, the Other Agreements and the Security Documents shall be binding upon and inure to the benefit of the successors and assigns of each Loan Party, Administrative Agent and each Lender; provided, however, that, no Loan Party may sell, assign or transfer any interest in this Agreement, any of the other Loan Documents, or any of the Obligations, or any portion thereof, including, without limitation, such Loan Party’s rights, title, interests, remedies, powers and duties hereunder or thereunder. The Loan Parties hereby consent to any Lender’s participation, sale, assignment, transfer or other disposition, at any time or times hereafter, of this Agreement and any of the other Loan Documents, or of any portion hereof or thereof, including, without limitation, such Lender’s rights, title, interests, remedies, powers and duties hereunder or thereunder subject to the terms and conditions set forth in this Section 13.5; provided, that no such participation, sale, assignment, transfer or other disposition shall be made to (i) a Defaulting Lender, (ii) any Loan Party or any Subsidiary of a Loan Party, (iii) an Affiliate of a Loan Party or (iv) any direct competitor of any Loan Party or any Subsidiary of a Loan Party.

 

13.5.1                Sales; Assignments. Each Lender hereby agrees that, with respect to any sale or assignment (i) no such sale or assignment shall be for an amount of less than $5,000,000, (ii) each such sale or assignment shall be made on terms and conditions which are customary in the industry at the time of the transaction, (iii) each such sale or assignment shall include an equal percentage of the Revolving Credit Commitments and Term Loan Commitments of the assigning Lender, (iv) with respect to each such assignment to a Person that is not a Lender or an Affiliate of a Lender, (a) Administrative Agent, (b) in the case of assignments of Revolving Credit Commitments and Issuing Bank, and (c) in the absence of a Default or Event of Default, Borrower Representative shall have consented thereto, such consent not to be unreasonably withheld or delayed, (v) the assigning Lender shall pay to Administrative Agent a processing and recordation fee of $3,500; provided, that, Administrative Agent may waive such fee in its discretion, (vi) no sale or assignment shall be made to any Ineligible Lender and (vii) Administrative Agent, the assigning Lender and the assignee Lender shall each have executed and delivered an Assignment and Acceptance Agreement. After such sale or assignment has been consummated (x) the assignee Lender thereupon shall become a “Lender” for all purposes of this Agreement and (y) the assigning Lender shall have no further liability for funding the portion of Revolving Credit Commitments assumed by such other Lender.

 

13.5.2                Participations. Any Lender may grant participations in its extensions of credit hereunder to any other Lender or other lending institution (a “Participant”), provided that (i) no such participation shall be for an amount of less than $5,000,000, (ii) no Participant shall thereby acquire any direct rights under this Agreement, except that each Participant shall be entitled to the benefits of Section 3.11 (subject to the requirements and limitations therein, including the requirements of subsection 3.11.3 (it being understood that the documentation required under subsection 3.11.3 shall be delivered to the originating Lender)), subsection 4.1.9 and Section 4.8 to the same extent as if it were a Lender and had acquired its interest by assignment; provided however that such Participant (a) shall be subject to the provisions of subsection 13.5.6 as if it were an assignee and (b) shall not be entitled to receive any greater payment under Section 3.11, subsection 4.1.9 or Section 4.8, with respect to any participation, than its originating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation, (iii) no Participant shall be granted any right to consent to any amendment, except to the extent any of the same pertain to (a) reducing the aggregate principal amount of, or interest rate on, or fees applicable to, its participation interest or (b) extending the final stated maturity of its participation interest or the stated maturity of any portion of any payment of principal of, or interest or fees applicable to, any of its participation interest; provided that the rights described in this subclause (b) shall not be deemed to include the right to consent to any amendment with respect to or which has the effect of requiring any mandatory prepayment of any portion of any Loan or any amendment or waiver of any Default or Event of Default, (iv) no sale of a participation in extensions of credit shall in any manner relieve the originating Lender of its obligations hereunder, (v) the originating Lender shall remain solely responsible for the performance of such obligations, (vi) the Loan Parties and Administrative Agent shall continue to deal solely and directly with the originating Lender in connection with the originating Lender’s rights and obligations under this Agreement and the other Loan Documents, and (vii) all amounts payable by the Loan Parties hereunder shall be determined as if the originating Lender had not sold any such participation. Each Lender, acting for this purpose as an agent of Borrowers, shall maintain at its offices a record of each agreement or instrument effecting any participation and a register (each a “Participation Register”) meeting the requirements of 26 C.F.R. §5f.103-1(c) for the recordation in book entry form of the names and addresses of its Participants and their rights with respect to principal amounts (and stated interest) of each Participant’s interest in the Loans from time to time. The entries in each Participation Register shall be conclusive absent manifest error.

 

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13.5.3                Certain Agreements of the Loan Parties. The Loan Parties agree that (i) they will use their best efforts to assist and cooperate with each Lender in any manner reasonably requested by such Lender to effect the sale of participation in or assignments of any of the Loan Documents or any portion thereof or interest therein, including, without limitation, assisting in the preparation of appropriate disclosure documents and making members of management available at reasonable times to meet with and answer questions of potential assignees and Participants; and (ii) subject to the provisions of Section 13.14 hereof, such Lender may disclose credit information regarding the Loan Parties to any potential Participant or assignee.

 

13.5.4                Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided 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.

 

13.5.5                Register. Administrative Agent, acting for this purpose as an agent of Borrowers, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register (the “Register”) for the recordation in book entry form of the names and addresses of the Lenders, and the commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time. The entries in the Register shall be conclusive absent manifest error. The Register shall be available for inspection by Borrowers, at any reasonable time and from time to time upon reasonable prior notice. Notwithstanding anything to the contrary contained in this Agreement, the Loans are registered obligations for tax purposes and the right, title and interest of the Lenders in and to such Loans shall be transferable only in accordance with the terms of this Agreement. This subsection 13.5.5 shall be construed so that the Loans are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code.

 

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13.5.6                Replacement of Lenders. If (i) any Lender requests compensation under Section 4.8, or (ii) a Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.11, or (iii) any Lender, whose consent is required in connection with any proposed amendment, waiver, or consent hereunder that requires the consent of all Lenders or all affected Lenders and as to which the consent of Majority Lenders is obtained, does not consent to such proposed amendment, waiver, or consent, or (iv) any Lender is a Defaulting Lender, then the Loan Parties may, at their sole expense and effort (including any processing and recordation fee required to be paid in accordance with this Section 13.5), upon notice to such Lender and Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in this Section 13.5), all of its interests, rights and obligations under this Agreement to an assignee selected by the Loan Parties that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (a) the Loan Parties shall have received the prior written consents of Administrative Agent and, in the event of an assignment of Revolving Credit Commitments and Issuing Bank, which consents shall not unreasonably be withheld, (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the assignee (to the extent of such outstanding principal, accrued interest and fees) or the Loan Parties (in the case of all other amounts), (c) in the case of any such assignment resulting pursuant to clause (i) or (ii) above, such assignment will result in a material reduction in such compensation or payments, (d) in the case of any such assignment resulting pursuant to clause (iii) above, all such non-consenting Lenders shall be replaced and, at the time of such replacement, each such new Lender consents to the proposed amendment, waiver, or consent and (e) the assignor under an assignment pursuant to this subsection 13.5.6 need not execute an Assignment and Acceptance Agreement. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Loan Parties to require such assignment and delegation cease to apply.

 

13.6          Cumulative Effect; Conflict of Terms. The provisions of the Other Agreements and the Security Documents are hereby made cumulative with the provisions of this Agreement. Except as otherwise provided in any of the other Loan Documents by specific reference to the applicable provision of this Agreement, if any provision contained in this Agreement is in direct conflict with, or inconsistent with, any provision in any of the other Loan Documents, the provision contained in this Agreement shall govern and control.

 

13.7          Execution in Counterparts. This Agreement 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 to be an original and all of which counterparts taken together shall constitute but one and the same instrument. Any executed counterpart of this Agreement delivered by fax or as a PDF file contained in an e-mail transmission to the other parties hereto shall constitute an original counterpart of this Agreement.

 

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13.8          Notices and Communications.

 

13.8.1                Notices. Except as otherwise provided herein, all notices, requests and demands to or upon a party hereto, to be effective, shall be in writing, and shall be sent by certified or registered mail, return receipt requested, by personal delivery against receipt, by overnight courier or by facsimile and, unless otherwise expressly provided herein, shall be deemed to have been validly served, given, delivered or received immediately when delivered against receipt, three (3) Business Days after deposit in the mail, postage prepaid, one (1) Business Day after deposit with an overnight courier or, in the case of facsimile notice, when sent with respect to machine confirmed, addressed as follows:

 

  (A) If to Administrative Agent: BBVA USA
8080 North Central Expressway, Suite 1500
Dallas, TX 75206
Attention: Jason Nichols
Phone: (214) 346-2749
Facsimile: (972) 705-8952
     
  With a copy to: Dorsey & Whitney LLP
300 Crescent Ct, Suite 400
Dallas, Texas 75201
Attention: Jamie G. Whatley
Facsimile: (214) 292-8850
     
  (B) If to the Loan Parties: Quest Resource Management Group, LLC
3481 Plano Parkway
The Colony, Texas 75056
Attention: Laurie L. Latham
Phone: (972) 464-0011
Facsimile: (866) 492-7478
     
  With a copy to: Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, NY 10019
Attention: Jason S. Saltsberg
Phone: (212) 451-2320
Facsimile: (212) 451-2222
     
 

(C) If to any Lender, at its address indicated on the administrative detail forms delivered to Administrative Agent.

 

or to such other address as each party may designate for itself by notice given in accordance with this Section 13.8; provided, however, that any notice, request or demand to or upon Administrative Agent or a Lender pursuant to subsection 4.1.1 or 5.2.2 hereof shall not be effective until received by Administrative Agent or such Lender.

 

13.8.2                The Platform. Each Loan Party hereby acknowledges that Administrative Agent will make available to the Lenders and Issuing Bank materials and/or information provided by or on behalf of the Loan Parties hereunder (collectively, “Loan Party Materials”) by posting Loan Party Materials on Debt Domain, SyndTrak, IntraLinks or another similar electronic system (the “Platform”). THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” ADMINISTRATIVE AGENT AND ITS RELATED PARTIES DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE LOAN PARTY MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE LOAN PARTY MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT IN CONNECTION WITH THE LOAN PARTY MATERIALS OR THE PLATFORM. In no event shall any Agent or any of its Related Parties have any liability to any Loan Party, any Lender, any Issuing Bank or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of a Loan Party’s or Agent’s transmission of the Loan Party Materials through the internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent or any of its Related Parties; provided, however, that in no event shall any Agent or any of its Related Parties have any liability to any Loan Party, any Lender, any Issuing Bank or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

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13.9          Consent. Whenever Administrative Agent’s, Collateral Agent’s, Majority Lenders’ or all Lenders’ consent is required to be obtained under this Agreement, any of the Other Agreements or any of the Security Documents as a condition to any action, inaction, condition or event, except as otherwise specifically provided herein, Administrative Agent, Collateral Agent, Majority Lenders or all Lenders, as applicable, shall be authorized to give or withhold such consent in its or their sole and absolute discretion and to condition its or their consent upon the giving of additional Collateral security for the Obligations, the payment of money or any other matter.

 

13.10      Credit Inquiries. The Loan Parties hereby authorize and permit Administrative Agent and each Lender to respond to usual and customary credit inquiries from third parties concerning any Loan Party or any of its Subsidiaries.

 

13.11      Time of Essence. Time is of the essence of this Agreement, the Other Agreements and the Security Documents.

 

13.12      Entire Agreement. This Agreement and the other Loan Documents, together with all other instruments, agreements and certificates executed by the parties in connection therewith or with reference thereto, embody the entire understanding and agreement between the parties hereto and thereto with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and inducements, whether express or implied, oral or written.

 

13.13      Interpretation. No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted to the disadvantage of any party hereto by any Governmental Authority by reason of such party having or being deemed to have structured or dictated such provision.

 

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13.14      Confidentiality. Each Agent and each Lender shall hold all nonpublic information obtained pursuant to the requirements of this Agreement in accordance with such Agent’s and such Lender’s customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure reasonably required by a prospective participant or assignee in connection with the contemplated participation or assignment or as required or requested by any Governmental Authority or representative thereof or pursuant to legal process and shall require any such participant or assignee to agree to comply with this Section 13.14.

 

13.15      GOVERNING LAW; CONSENT TO JURISDICTION, FORUM AND SERVICE OF PROCESS.

 

13.15.1            GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY APPLICABLE LAW THAT WOULD CAUSE THE APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.

 

13.15.2            CONSENT TO JURISDICTION, FORUM AND SERVICE OF PROCESS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY LOAN PARTY, ADMINISTRATIVE AGENT OR ANY LENDER, EACH LOAN PARTY HEREBY CONSENTS AND AGREES THAT ANY STATE COURT SITTING IN DALLAS COUNTY, TEXAS, OR, AT ADMINISTRATIVE AGENT’S OPTION, THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE LOAN PARTIES ON THE ONE HAND AND ADMINISTRATIVE AGENT OR ANY LENDER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. EACH LOAN PARTY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH LOAN PARTY HEREBY WAIVES ANY OBJECTION WHICH ANY LOAN PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH LOAN PARTY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE LOAN PARTIES AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF BY A LOAN PARTY OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF ADMINISTRATIVE AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY ADMINISTRATIVE AGENT OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

 

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13.16      WAIVERS BY THE LOAN PARTIES. EACH LOAN PARTY WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH ADMINISTRATIVE AGENT AND EACH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY ADMINISTRATIVE AGENT OR ANY LENDER ON WHICH THE LOAN PARTIES MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER ADMINISTRATIVE AGENT OR ANY LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO ADMINISTRATIVE AGENT’S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING ADMINISTRATIVE AGENT TO EXERCISE ANY OF ADMINISTRATIVE AGENT’S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; (v) NOTICE OF ACCEPTANCE HEREOF; AND (vi) EXCEPT AS PROHIBITED BY APPLICABLE LAW, ANY RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. EACH LOAN PARTY ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO ADMINISTRATIVE AGENT’S AND EACH LENDER’S ENTERING INTO THIS AGREEMENT AND THAT ADMINISTRATIVE AGENT AND EACH LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH THE LOAN PARTIES. EACH LOAN PARTY WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

13.17      Advertisement. The Loan Parties hereby authorize Administrative Agent to publish the name and logo of any Loan Party and the amount and transaction details of the credit facility provided hereunder in any “tombstone” or comparable advertisement or other marketing materials which Administrative Agent elects to publish.

 

13.18      Patriot Act Notice. Administrative Agent and Lenders hereby notify the Loan Parties that pursuant to the requirements of the Patriot Act, Administrative Agent and Lenders are required to obtain, verify and record information that identifies each Loan Party, including its legal name, address, tax ID number and other information that will allow Administrative Agent and Lenders to identify it in accordance with the Patriot Act. Administrative Agent and Lenders will also require information regarding each personal guarantor, if any, and may require information regarding any Loan Party’s management and owners, such as legal name, address, social security number and date of birth.

 

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

 

13.20      Intercreditor Agreement. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, (a) the Liens granted to the Administrative Agent in favor of the Lenders pursuant to this Agreement and the other Loan Documents and the exercise of any right related to any Collateral shall be subject, in each case, to the terms of the Intercreditor Agreement, and (b) in the event of any conflict between the terms and provisions of this Agreement or any other Loan Document, on the one hand, and the terms and provisions of the Intercreditor Agreement, on the other hand, the terms and provisions of the Intercreditor Agreement shall continue.

 

Article XIV. CROSS-GUARANTY BY BORROWERS.

 

14.1          Cross-Guaranty. Each Borrower hereby agrees that such Borrower is jointly and severally liable for, and hereby absolutely and unconditionally guarantees to Administrative Agent and Lenders and their respective successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all Obligations owed or hereafter owing to Administrative Agent and Lenders by each other Borrower. Each Borrower agrees that its guaranty obligation hereunder is a continuing guaranty of payment and performance and not of collection, that its obligations under this Section 14 shall not be discharged until payment and performance, in full, of the Obligations has occurred, and that its obligations under this Section 14 shall be absolute and unconditional, irrespective of, and unaffected by, (i) the genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Agreement, any other Loan Document or any other agreement, document or instrument to which any Borrower is or may become a party; (ii) the absence of any action to enforce this Agreement (including this Section 14) or any other Loan Document or the waiver or consent by Administrative Agent and Lenders with respect to any of the provisions thereof; (iii) the existence, value or condition of, or failure to perfect its Lien against, any security for the Obligations or any action, or the absence of any action, by Administrative Agent and Lenders in respect thereof (including the release of any such security); (iv) the insolvency of any Loan Party; or (v) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor. Each Borrower shall be regarded, and shall be in the same position, as principal debtor with respect to the Obligations guaranteed hereunder.

 

14.2          Waivers by Borrowers. Each Borrower expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Administrative Agent or Lenders to marshal assets or to proceed in respect of the Obligations guaranteed hereunder against any other Loan Party, any other party or against any security for the payment and performance of the Obligations before proceeding against, or as a condition to proceeding against, such Borrower. It is agreed among each Borrower, Administrative Agent and Lenders that the foregoing waivers are of the essence of the transaction contemplated by this Agreement and the other Loan Documents and that, but for the provisions of this Section 14 and such waivers, Administrative Agent and Lenders would decline to enter into this Agreement.

 

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14.3          Benefit of Guaranty. Each Borrower agrees that the provisions of this Section 14 are for the benefit of Administrative Agent and Lenders and their respective successors, transferees, endorsees and assigns, and nothing herein contained shall impair, as between any other Borrower and Administrative Agent or Lenders, the obligations of such other Borrower under the Loan Documents.

 

14.4          Waiver of Subrogation, Etc. Notwithstanding anything to the contrary in this Agreement or in any other Loan Document, and except as set forth in Section 14.7, each Borrower hereby expressly and irrevocably waives any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification or set off and any and all defenses available to a surety, guarantor or accommodation co-obligor. Each Borrower acknowledges and agrees that this waiver is intended to benefit Administrative Agent and Lenders and shall not limit or otherwise affect such Borrower’s liability hereunder or the enforceability of this Section 14, and that Administrative Agent, Lenders and their respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section 14.4.

 

14.5          Election of Remedies. If Administrative Agent or any Lender may, under Applicable Law, proceed to realize its benefits under any of the Loan Documents giving Administrative Agent or such Lender a Lien upon any Collateral, whether owned by any Borrower or by any other Person, either by judicial foreclosure or by non-judicial sale or enforcement, Administrative Agent or any Lender may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section 14. If, in the exercise of any of its rights and remedies, Administrative Agent or any Lender shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Borrower or any other Person, whether because of any Applicable Laws pertaining to “election of remedies” or the like, each Borrower hereby consents to such action by Administrative Agent or such Lender and waives any claim based upon such action, even if such action by Administrative Agent or such Lender shall result in a full or partial loss of any rights of subrogation that each Borrower might otherwise have had but for such action by Administrative Agent or such Lender. Any election of remedies that results in the denial or impairment of the right of Administrative Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations. In the event Administrative Agent or any Lender shall bid at any foreclosure or trustee’s sale or at any private sale permitted by law or the Loan Documents, Administrative Agent or such Lender may bid all or less than the amount of the Obligations and the amount of such bid need not be paid by Administrative Agent or such Lender but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether Administrative Agent, Lender or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 14, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Administrative Agent or any Lender might otherwise be entitled but for such bidding at any such sale.

 

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14.6          Limitation. Notwithstanding any provision herein contained to the contrary, each Borrower’s liability under this Section 14 (which liability is in any event in addition to amounts for which such Borrower is primarily liable under any other provision of this Agreement) shall be limited to an amount not to exceed as of any date of determination the greater of: (i) the net amount of all Loans advanced to any other Borrower under this Agreement and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower; and (ii) the amount that could be claimed by Administrative Agent and Lenders from such Borrower under this Section 14 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law after taking into account, among other things, such Borrower’s right of contribution and indemnification from each other Borrower under Section 14.7.

 

14.7          Contribution with Respect to Guaranty Obligations.

 

14.7.1                To the extent that any Borrower shall make a payment under this Section 14 of all or any of the Obligations (other than Loans made to that Borrower for which it is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments then previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payment in the same proportion that such Borrower’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each Borrower as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Obligations and termination of the Revolving Credit Commitments, such Borrower shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

 

14.7.2                As of any date of determination, the “Allocable Amount” of any Borrower shall be equal to the maximum amount of the claim that could then be recovered from such Borrower under this Section 14 without rendering such claim voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law.

 

14.7.3                This Section 14.7 is intended only to define the relative rights of Borrowers and nothing set forth in this Section 14.7 is intended to or shall impair the obligations of Borrowers, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Agreement, including Section 14.1. Nothing contained in this Section 14.7 shall limit the liability of any Borrower to pay the Loans made directly or indirectly to that Borrower and accrued interest, fees and expenses with respect thereto for which such Borrower shall be primarily liable.

 

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14.7.4                The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of Borrowers to which such contribution and indemnification is owing.

 

14.7.5                The rights of the indemnifying Borrowers against other Loan Parties under this Section 14.7 shall be exercisable upon the full and indefeasible payment of the Obligations and the termination of the Revolving Credit Commitments.

 

14.8          Liability Cumulative. The liability of Borrowers under this Section 14 is in addition to and shall be cumulative with all liabilities of each Borrower to Administrative Agent and Lenders under this Agreement and the other Loan Documents to which such Borrower is a party or in respect of any Obligations or obligation of the other Borrowers, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

 

14.9          Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations hereunder or under the Security Documents in respect of Swap Obligations; provided, that each Qualified ECP Guarantor shall only be liable under this Section 14.9 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 14.9, or otherwise hereunder or under the Security Documents, voidable under applicable requirements of law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. The obligations of each Qualified ECP Guarantor under this Section 14.9 shall remain in full force and effect until the guarantees in respect of Swap Obligations have been discharged, or otherwise released or terminated in accordance with the terms of this Agreement. Each Qualified ECP Guarantor intends that this Section 14.9 constitute, and this Section 14.9 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Article XV. GUARANTY

 

15.1          Guaranty of the Obligations. Subject to the provisions of Section 15.2, Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to Administrative Agent and Lenders the due and punctual payment in full of all Obligations (other than Excluded Swap Obligations) when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code) (collectively, the “Guaranteed Obligations”).

 

15.2          Contribution by Guarantors. All Guarantors desire to allocate among themselves (collectively, the “Contributing Guarantors”), in a fair and equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a “Funding Guarantor”) under this Guaranty such that its Aggregate Payments exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in an amount sufficient to cause each Contributing Guarantor’s Aggregate Payments to equal its Fair Share as of such date. “Fair Share” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor, to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by, (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. “Fair Share Contribution Amount” means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any comparable applicable provisions of state law; provided, solely for purposes of calculating the “Fair Share Contribution Amount” with respect to any Contributing Guarantor for purposes of this Section 15.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. “Aggregate Payments” means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including, without limitation, in respect of this Section 15.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 15.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 15.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third-party beneficiary to the contribution agreement set forth in this Section 15.2.

 

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15.3          Payment by Guarantors. Subject to Section 15.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which Administrative Agent or any Lender may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of any Borrower to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), Guarantors will upon demand pay, or cause to be paid, in cash, to Administrative Agent, for the benefit of itself and the Lenders, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for any Borrower’s becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against such Borrower for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to Agent and Lenders as aforesaid.

 

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15.4          Liability of Guarantors Absolute. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows:

 

15.4.1                this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety;

 

15.4.2                Administrative Agent may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between any Borrower and Administrative Agent or any Lender with respect to the existence of such Event of Default;

 

15.4.3                the obligations of each Guarantor hereunder are independent of the obligations of Borrowers and the obligations of any other guarantor (including any other Guarantor) of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against such Guarantor whether or not any action is brought against any Borrower or any of such other guarantors and whether or not any Borrower is joined in any such action or actions;

 

15.4.4                payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor’s liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Administrative Agent or any Lender is awarded a judgment in any suit brought to enforce any Guarantor’s covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor’s liability hereunder in respect of the Guaranteed Obligations;

 

15.4.5                Administrative Agent and/or Lenders, upon such terms as they deem appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor’s liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of Administrative Agent for the benefit of itself and the Lenders in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Administrative Agent may have against any such security, in each case as Administrative Agent in its discretion may determine consistent herewith or any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against any Borrower or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Loan Documents; and

 

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15.4.6                this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Loan Documents, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Loan Documents or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Loan Document, or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Loan Documents or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though Administrative Agent or Lenders might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) Administrative Agent’s or Lenders’ consent to the change, reorganization or termination of the corporate structure or existence of any Borrower and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which any Borrower may allege or assert against Administrative Agent or any Lender in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations.

 

15.5          Waivers by Guarantors. Each Guarantor hereby waives, for the benefit of Administrative Agent and each Lender: (a) any right to require Administrative Agent or any Lender, as a condition of payment or performance by such Guarantor, to (i) proceed against any Borrower, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from any Borrower, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account, securities account or commodities account or credit on the books of Administrative Agent or any Lender in favor of any Borrower or any other Person, or (iv) pursue any other remedy in the power of Administrative Agent or any Lender whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of any Borrower or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of any Borrower or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon Administrative Agent’s or any Lender’s errors or omissions in the administration of the Guaranteed Obligations; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor’s obligations hereunder, (ii) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that Administrative Agent or any Lender protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Borrowers and notices of any of the matters referred to in Section 15.4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof.

 

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15.6          Guarantors’ Rights of Subrogation, Contribution, etc. Until the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Credit Commitment shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against any Borrower or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against any Borrower with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that Administrative Agent or any Lender now has or may hereafter have against any Borrower, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by Administrative Agent or any Lender. In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Credit Commitment shall have terminated and all Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including, without limitation, any such right of contribution as contemplated by Section 15.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against any Borrower or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights Administrative Agent or any Lender may have against any Borrower, to all right, title and interest Administrative Agent or Lender may have in any such collateral or security, and to any right Administrative Agent or any Lender may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Administrative Agent and Lenders and shall forthwith be paid over to Administrative Agent to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof.

 

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15.7          Subordination of Other Obligations. Any indebtedness of any Borrower or any Guarantor now or hereafter held by any Guarantor (the “Obligee Guarantor”) is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Administrative Agent and Lenders and shall forthwith be paid over to Administrative Agent to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof.

 

15.8          Continuing Guaranty. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Credit Commitment shall have terminated and all Letters of Credit shall have expired or been cancelled. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations.

 

15.9          Authority of Guarantors or Borrowers. It is not necessary for Administrative Agent or any Lender to inquire into the capacity or powers of any Guarantor or any Borrower or the officers, directors or any agents acting or purporting to act on behalf of any of them.

 

15.10      Financial Condition of Borrowers. Any Loan may be made to Borrowers or continued from time to time, without notice to or authorization from any Guarantor regardless of the financial or other condition of Borrowers at the time of any such grant or continuation. Neither Administrative Agent nor any Lender shall have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor’s assessment, of the financial condition of any Borrower. Each Guarantor has adequate means to obtain information from each Borrower on a continuing basis concerning the financial condition of such Borrower and its ability to perform its obligations under the Loan Documents, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Borrowers and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of Administrative Agent or any Lender to disclose any matter, fact or thing relating to the business, operations or conditions of any Borrower now known or hereafter known by Administrative Agent or any Lender.

 

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15.11      Bankruptcy, etc. So long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent of Administrative Agent, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against any Borrower or any other Guarantor.

 

15.11.1            The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of any Borrower or any other Guarantor or by any defense which any Borrower or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding.

 

15.11.2            Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in Section 15.11.1 above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Administrative Agent and Lenders that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve any Borrower of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Administrative Agent and Lenders, or allow the claim of Administrative Agent and Lenders in respect of, any such interest accruing after the date on which such case or proceeding is commenced.

 

15.11.3            In the event that all or any portion of the Guaranteed Obligations are paid by any Borrower, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Administrative Agent or any Lender as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder.

 

(Signature Page Follows)

 

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(Signature Page to Loan, Security and Guaranty Agreement)

 

IN WITNESS WHEREOF, this Agreement has been duly executed on the day and year specified at the beginning of this Agreement.

 

BORROWERS:   QUEST RESOURCE MANAGEMENT GROUP, LLC
       
    By:  
      Name: Laurie L. Latham
      Title: Chief Financial Officer, Secretary, and Treasurer
       
       
  LANDFILL DIVERSION INNOVATIONS, L.L.C.
       
    By:  
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Secretary, and Treasurer
       
       
GUARANTORS:   QUEST RESOURCE HOLDING CORPORATION
       
    By:  
      Name: Laurie L. Latham
      Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer
       
       
    QUEST SUSTAINABILITY SERVICES, INC., A DELAWARE CORPORATION (F/K/A EARTH911, INC.)
       
    By:  
      Name: Laurie L. Latham
      Title: Chief Financial Officer, Secretary, and Treasurer

 

 

 

GUARANTORS (CONTINUED):   YOUCHANGE, INC.
       
    By:  
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Secretary, and Treasurer
       
       
    QUEST VERTIGENT CORPORATION
       
    By:  
                Name: Laurie L. Latham
    Title: Chief Financial Officer, Secretary, and Treasurer
       
       
    QUEST VERTIGENT ONE, LLC
       
    By:         
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Secretary, and Treasurer
       
       
    GLOBAL ALERTS, LLC
     
    By:
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Secretary, and Treasurer

 

 

 

    BBVA USA, as Administrative Agent, Collateral Agent and as a Lender
       
    By:   
      Name: Jason Nichols
Title: Senior Vice President
       
       
    BBVA USA, as Issuing Bank
       
    By:   
      Name: Jason Nichols
Title: Senior Vice President
       

 

 

 

 

 

 

CONSIDERATION AGREEMENT

 

This Consideration Agreement (this “Agreement”) is made as of October 19, 2020 (the “Effective Date”) by and between Quest Resource Holding Corporation, a Nevada corporation (the “Company”), Green Remedies Waste and Recycling, Inc., a North Carolina corporation (the “Investor”), and Alan Allred (the “Underlying Shareholder”). Capitalized terms used herein but not otherwise defined shall have the meaning ascribed to such terms in the Purchase Agreement (as defined herein).

 

WHEREAS, the Company and the Investor, together with the Underlying Shareholder and Quest Resource Management Group, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Quest”), are parties to that certain Asset Purchase Agreement, dated October __, 2020 (the “Purchase Agreement”), pursuant to which the Investor agreed to sell to Quest, and Quest agreed to purchase from the Investor, substantially all of the assets of the Investor (the “Transaction”);

 

WHEREAS, as part of the consideration for the Transaction, the Company has agreed to pay Investor $2,684,250 in either cash or shares of its common stock, par value $0.001 per share (the “Common Stock”), or any combination thereof, in its sole discretion, in accordance with the terms of this Agreement;

 

WHEREAS, the parties hereto desire to enter into this Agreement to provide for, among other things, the payment or issuance of the Consideration (as defined herein) pursuant to the Purchase Agreement and the rights and obligations of the Investor to the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants and representations set forth below, the Company and the Investor agree as follows:

 

1.                  Consideration. As part of the consideration for the Transaction, effective as of the Closing, the Company hereby agrees to pay to the Investor, subject to the terms and conditions set forth in this Agreement, $2,684,250 (the “Consideration”), payable either in cash or shares of Common Stock (the “Shares”) or any combination thereof in two equal installments, to be paid or issued on the following dates (each, a “Payment Date”): fifty percent (50%) of the Consideration to be paid or issued on the first anniversary of the Closing Date; and fifty percent (50%) of the Consideration to be paid or issued at the second anniversary of the Closing Date. To the extent the Company elects to pay the Consideration in Shares, whether in whole or in part, on any Payment Date, the provisions of Sections 2, 3, 4, 5, 6, 7 and 10 herein shall apply.

 

2.                  Issuance and Computation of the Shares.

 

(a)               The number of Shares to be issued at each Payment Date shall be computed based on a per Share price equal to the volume weighted average price of the Common Stock on the Nasdaq Capital Market (or if the Shares are not traded on the Nasdaq Capital Market, the OTC Bulletin Board or the principal trading market of the Shares) during the thirty (30) consecutive trading days ending on the trading day prior to each Payment Date, rounded down to the nearest whole share (the “Market Price”).

 

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(b)               On each Payment Date, the Company shall issue to the Investor one or more certificates in the name of the Investor, or notify the Investor of the issuance of Shares in book-entry form to be held in a book-entry account maintained by the Company’s transfer agent evidencing ownership of the Shares, for that number of the Shares to be issued to the Investor calculated based on the Market Price of such Shares.

 

3.                  Cap. Notwithstanding anything herein to the contrary, the Company may, in its sole discretion, elect not to issue any Shares hereunder to the extent that the issuance of such Shares would cause the Company to exceed five percent (5%) of the outstanding number of shares of Common Stock on the applicable Payment Date (the “Cap”). In the event that the Company does not issue the Shares equal to the full Consideration that would otherwise be issuable pursuant to this Section 3 as a result of the Cap, the Company shall pay to the Investor, in immediately available funds by wire transfer to an account designated in writing by the Investor, an amount in cash equal to the value of the Consideration payment payable hereunder, less the aggregate value of the Shares actually issued to the Investor (calculated based on the Market Price of such Shares).

 

4.                  Legends. The Shares will reflect a restrictive notation or legend, as applicable, until such time that the Shares are not so restricted under the Securities Act of 1933 (the “Securities Act”), together with any other notations or legends required by the applicable state securities laws or otherwise, if any:

 

“These shares of stock have not been registered under the Securities Act of 1933, and have been acquired for investment and not with a view to, or in connection with, the sale or distribution thereof. No such transfer may be effected without an effective registration statement related thereto or an opinion of counsel in a form satisfactory to the Company that such registration is not required under the Securities Act of 1933.”

 

5.                  Voting Agreement. From and after the Effective Date and for three years following the date the Underlying Shareholder ceases to be employed by the Company, each of the Investor and Underlying Shareholder agrees to vote all Shares it or any of their respective Affiliates beneficially own (within the meaning of Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended), whether acquired hereunder or otherwise (collectively, the “Voting Shares”), at each meeting of the stockholders of the Company or any action taken by written consent and shall take all other necessary or desirable actions within its control, and the Company shall take all necessary and desirable actions within its control (including calling special board and stockholder meetings), as follows:

 

(a)               in favor of directors nominated and recommended for election by the Parent Board; provided that a majority of the Parent Board must be “independent” within the meaning of the rules of Nasdaq;

 

(b)               against any stockholder nomination or proposal not approved or recommended by the Parent Board;

 

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(c)               in accordance with the recommendations of the Parent Board on all other proposals as the Parent Board sets forth in the proxy statements of the Company; provided, that (x) if both Institutional Shareholders Services Inc. and Glass Lewis & Co., LLC recommend a vote in opposition to the Parent Board’s recommendation (other than with respect to the election of directors or an Extraordinary Matter), or (y) a proposal relates to an Extraordinary Matter, the Investor shall be free to vote the Voting Shares freely so long as the Investor does not publicly disclose such vote.

 

For purposes of this Agreement, “Extraordinary Matter” means any merger, stock-for-stock transactions, or other event resulting in the Company’s stockholders retaining less than 50% of the equity interests and voting power of the surviving entity’s then outstanding equity securities; any recapitalization or restructuring; any spin-off or sale or transfer of all or substantially all of the Company’s assets in one or a series of transactions; or any other business combination of the Company that requires a stockholder vote. Notwithstanding anything contained herein to the contrary, the obligations under this Section 5 are only binding on the Investor, Underlying Shareholder and any of their respective Affiliates.

 

6.                  Investment Representations. The Investor represents, warrants and covenants as follows:

 

(a)               The Investor is acquiring the Shares for the Investor’s own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Shares in violation of the Securities Act, or any rule or regulation under the Securities Act.

 

(b)               The Investor has been given the opportunity to (i) ask questions of, and receive answers from, the Company concerning matters pertaining to an investment in the Company and (ii) obtain any additional information which the Company can acquire without unreasonable effort or expense that is necessary to evaluate the merits and risks of an investment in the Company.

 

(c)               The Investor has such knowledge and experience in financial and business matters, knows of the high degree of risk associated with investments generally and particularly investments in the securities of companies such as the Company, and is capable of evaluating the merits and risks of acquiring and holding the Shares issued as the Consideration.

 

(d)               The Investor is aware that there is no assurance that the Company’s business or operations will be successful, and acknowledges that the Shares to be issued hereunder may currently or in the future have no monetary value and acknowledges that it has been advised that an acquisition of the Shares involves a high degree of risk and is suitable only for persons of adequate financial means who have no need for liquidity with respect to the Shares and who can afford the risk of a complete loss of any value of the Shares and acknowledges that it meets such criteria.

 

(e)               The Investor understands the speculative nature of and risks involved in the acquisition of the Shares.

 

(f)                The Investor is able to bear the economic risk of holding such Shares for an indefinite period.

 

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(g)               The Investor acknowledges that neither the Company nor any of its officers, directors, employees, agents or stockholders has made any representations, warranties or guaranties to the Investor with respect to an investment in the Company or rendered any investment advice to the Investor.

 

(h)               The Investor acknowledges that the Company has encouraged the Investor to consult the Investor’s own adviser to determine the tax consequences of acquiring the Shares at this time.

 

(i)                 The Investor understands that (i) the Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least six months or one year (depending on whether the Company is subject to the reporting obligations of the Securities Exchange Act of 1934, as amended) and even then will not be available unless applicable terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Shares under the Securities Act.

 

(j)                 The Investor is an “accredited investor” (as such term is defined in Regulation D promulgated under the Securities Act).

 

7.                  Piggyback Registration Rights. The Company shall notify Investor in writing at least ten (10) days prior to filing any registration statement under the Securities Act for purposes of effecting a public offering of securities of the Company relating to secondary offerings of securities of the Company, (but excluding registration statements on Form S-8 or on Form S-4, or any successor forms) and will afford Investor an opportunity to include in such registration statement all or any part of the Shares issued under this Agreement or shares of Common Stock issued in satisfaction of any Earn-Out Payment (collectively, the “Registerable Shares”) then held by Investor. If the Investor desires to include in any such registration statement all or any part of such Registerable Shares, the Investor shall, within five (5) days after receipt of the above-described notice from the Company, so notify the Company in writing, and in such notice shall inform the Company of the number of Registerable Shares Investor wishes to include in such registration statement. If Investor decides not to include all of its Registerable Shares in any registration statement thereafter filed by the Company, Investor shall nevertheless continue to have the right to include any Registerable Shares in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth in the first two sentences herein.

 

8.                  Right of Setoff. The Company may, in its sole discretion and upon written notice to the Investor specifying in reasonable detail the basis thereof, setoff any amounts owing from the Investor to the Company or any Buyer Indemnified Party under the Purchase Agreement that are not otherwise satisfied by the Escrow Fund against the Consideration issuable under this Agreement.

 

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9.                  Withholding Taxes. The Investor acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Investor any federal, state or local taxes of any kind required by law to be withheld with respect to the acquisition of the Shares by the Investor. The Investor has reviewed with the Investor’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Investor is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Investor understands that the Investor (and not the Company) shall be responsible for the Investor’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

10.              Miscellaneous.

 

(a)               Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

 

(b)               Waiver. Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company.

 

(c)               Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and the Investor and their respective heirs, executors, administrators, legal representatives, successors and assigns.

 

(d)               Notice. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (i) when delivered by hand (with written confirmation of receipt); (ii) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (iii) on the date sent by email 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; and (iv) on the date of delivery if mailed by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10(d):

 

If to the Company:

Quest Resource Holding Corporation

3481 Plano Parkway

The Colony, Texas 75056
E-mail: LaurieL@questrmg.com
Attention: Laurie L. Latham

 

with a copy to:

Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019
E-mail: egonzalez@olshanlaw.com; kschlesinger@olshanlaw.com
Attention: Elizabeth Gonzalez-Sussman, Esq. and Kenneth Schlesinger, Esq.

 

 

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If to the Investor:

Green Remedies Waste and Recycling, Inc.
P.O. Box 1599
Elon, North Carolina 27244-1599

E-mail: glallred@gmail.com
Attention: Gary Allred

 

With a copy to: Pittman & Steele, PLLC
1694 Westbrook Avenue
Post Office Box 2290
Burlington, North Carolina 27215
E-mail: dorn.pittman@pittmansteelelaw.com and nathan.adams@pittmansteelelaw.com
Attention: Dorn Pittman, Esq. and Nathan R. Adams, Esq.

 

(e)               Pronouns. Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

 

(f)                Entire Agreement; Governing Law. This Agreement constitutes the entire agreement between the Company and the Investor with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and the Investor with respect to the subject matter hereof, and this Agreement may not be modified adversely to the Investor’s interest except by means of a writing signed by the Company and Investor. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas without reference to conflict of law provisions.

 

(g)               Investor’s Acknowledgments. The Investor acknowledges that the Investor: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Investor’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; and (iv) is fully aware of the legal and binding effect of this Agreement.

 

[Remainder of Page Intentionally Left Blank]

 

6

 

IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first set forth above.

 

 

COMPANY:

 

QUEST RESOURCE HOLDING CORPORATION

   
  By: /s/ Laurie L. Latham
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Senior Vice President and Secretary

 

 

INVESTOR:

 

GREEN REMEDIES WASTE AND RECYCLING, INC.

   
  By: /s/ Alan D. Allred
    Name: Alan D. Allred
    Title: President

 

  UNDERLYING SHAREHOLDER:
   
  /s/ Alan Allred
  ALAN ALLRED

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Employment Agreement”), is made and entered into as of October 19, 2020 (the “Commencement Date”), by and between Quest Resource Management Group, LLC, a Delaware limited liability company (the “Company”), and Alan Allred (the “Executive”).

 

In consideration of the mutual covenants and agreements set forth below and in consideration of the Purchase Agreement, it is hereby covenanted and agreed by the Company and the Executive as follows:

 

1.                  Employment, Duties and Employment Term.

 

(a)               During the Employment Term, Executive shall serve as a Vice President of the Multi-Family Division of the Company and will report to the Chief Executive Officer (“CEO”) of the Company and shall perform the duties assigned to him by the CEO and/or the Board.

 

(b)               During the Employment Term, Executive shall devote substantially all of Executive’s business time, energy, business judgment, knowledge and skill and Executive’s best efforts to the performance of Executive’s duties with the Company; provided, that the foregoing shall not prevent Executive from (i) serving on the boards of directors of non-profit organizations, (ii) participating in charitable, civic, educational, professional, community or industry affairs, and (iii) managing Executive’s passive personal investments (including the winding down of Green Remedies) so long as such activities, individually or in the aggregate, do not interfere or conflict with Executive’s duties hereunder or create a potential business or fiduciary conflict.

 

(c)               The Company agrees to employ Executive pursuant to the terms of this Agreement, and Executive agrees to be so employed, for the Initial Term. Following the end of the Initial Term, the term of this Agreement shall be automatically extended for successive one (1)-year periods (each such period, an “Extension Term”), provided, however, that either party hereto may elect not to extend this Agreement by giving written notice to the other party at least sixty (60) days prior to the end of the Initial Term or an Extension Term, as applicable.  Notwithstanding the foregoing, Executive’s employment hereunder may be earlier terminated in accordance with the express terms and conditions hereof. Following the expiration of the Employment Term, Executive’s employment will be entirely “at-will,” and will not be covered by this Agreement (except for the applicable restrictive covenant provisions, which are intended to survive expiration of the Agreement in all cases).

 

2.       Compensation. Subject to the terms and conditions of this Employment Agreement, during the Employment Term, the Executive shall be compensated by the Company for his services as follows:

 

(a)               Base Salary. The Company shall pay to Executive an annual base salary of $175,000 (the “Base Salary”), less applicable withholdings and deductions, in accordance with the Company’s normal payroll procedures. Such Base Salary shall be reviewed periodically by the Board and may be increased if the nature of the services provided by Executive changes or increases.

 

 

(b)               Bonus. The Executive shall receive a guaranteed annual bonus of $65,000 (the “Bonus”), less applicable withholdings and deductions, which shall be prorated for his first year of employment. The Bonus shall be paid at the same time that other year-end or cash incentive bonuses to executives are paid so long as Executive is employed at the time such bonuses are paid, subject to Section 4 herein. The Bonus payout will generally be made following the conclusion of the fiscal year audit, which typically occurs no later than March 31 of the following year.

 

(c)               Equity Awards. Executive shall be eligible to receive a discretionary annual grant in the form of an option to purchase shares of the Company’s Common Stock as would equal $25,000, pursuant to the Company’s 2012 Incentive Compensation Plan, as amended from time to time (the “Equity Plan”), and a grant agreement (each such grant, an “Option Award”). Such options shall be in accordance with the terms of the Equity Plan and a grant agreement and at the discretion of the Board. The number of options to be granted pursuant to the Option Award shall be calculated based on a per share price equal to the closing price of the Company’s Common Stock on the grant date and will vest over three years.

 

(d)               Benefits; Perquisites. The Executive shall be eligible to participate in eligible group medical, dental and 401(k) plans maintained by the Company on substantially the same terms and conditions as other executives of the Company. The Executive shall be entitled to vacation in accordance with the Company’s standard vacation policy extended to employees of the Company generally, at levels commensurate with Executive’s position. The Executive shall be entitled to any other benefits and perquisites, including an auto allowance, on substantially the same terms and conditions as may be awarded to the executives of the Company from time to time. The Executive shall be entitled to prior service credit for his employment with Green Remedies for the purpose of participation in the plans described in this Section.

 

(e)               Expenses. The Executive shall be reimbursed by the Company for all reasonable business expenses incurred or paid by the Executive during the Employment Term in the performance of his services under this Employment Agreement in accordance with the Company’s reimbursement policy and to the extent that such expenses do not exceed the amounts allocable for such expenses in budgets that are approved from time to time by the Company. In order that the Company reimburse the Executive for such allowable expenses, the Executive shall furnish to the Company, in a timely fashion, the appropriate documentation required by the Internal Revenue Code in connection with such expenses and shall furnish such other documentation and accounting as the Company may from time to time reasonably request.

 

3.       Termination.

 

(a)       Termination at the Company’s Election.

 

(i)                 For Good Cause. At the election of the Company, Executive’s employment may be terminated for Good Cause immediately upon written notice to Executive.

 

(ii)              Upon Disability, Death or Without Cause. At the election of the Company, Executive’s employment may be terminated without Cause: (A) should Executive become Disabled, (B) upon Executive’s death (“Death”); or (C) upon thirty (30) days’ written notice to Executive for any other reason or for no reason at all (“Without Cause”).

 

 

(b)       Termination by Executive. Notwithstanding anything contained elsewhere in this Employment Agreement to the contrary,

 

(i)       Executive may terminate his employment hereunder at any time and for any reason whatsoever or for no reason at all in Executive’s sole discretion by giving thirty (30) days’ written notice to the Company (“Voluntary Resignation”) in which event the Company may accelerate the date of termination at any time prior to the expiration of the thirty (30) day period; and

 

(ii)        Executive may terminate his employment hereunder for Good Reason.

 

4.       Payments Upon Termination of Employment.

 

(a) Result of Termination by Employer for Good Cause or by Employee’s Voluntary Resignation. Upon the termination of the Executive’s employment, the Company shall pay or provide to Executive: (i) his Base Salary accrued up to and including the date of termination or resignation, paid within thirty (30) days or at such earlier time required by applicable law; (ii) accrued, unused vacation time, paid in accordance with the Company’s written policies and applicable law; (iii) unreimbursed expenses, paid in accordance with this Employment Agreement and the Company’s written policies; and (iv) accrued benefits under any Company benefit plan, paid pursuant to the terms of such benefit plan (collectively, the “Accrued Compensation”). The Accrued Compensation shall be in addition to all other rights and remedies of the Executive as a consequence of such termination and the Executive shall not be required to mitigate the amount of any damages by seeking other employment or otherwise.

 

(b) Result of Termination by Employer Without Good Cause or by Employee for Good Reason. In the event that Employer terminates Employee’s employment with Employer other than for Good Cause or Employee terminates Employee’s employment with Employer for Good Reason, (A) Employer shall pay Employee’s base salary for a period of 12 months following the effective date of such termination; (B) Employer shall pay to Employee an amount equal to the average of Employee’s cash bonus paid for each of the two fiscal years immediately preceding Employee’s termination, such amount to be paid and received upon the effective date of the termination (provided such termination constitutes a “separation from service” from Employer within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)), and (C) Employer shall either (i) provide coverage under Employer’s medical plan, to the extent provided for Employee on the date of termination on the effective date of the termination, such benefits to be received over a period of 12 months after the effective date of the termination or (ii) provide reimbursement for the COBRA premium for such coverage through the earlier of the 12-month period after the effective date of the termination or the COBRA eligibility period. The amounts payable under Sections 4(b)(A), (B), and, if applicable, (C), shall be paid on Employer’s regular payroll schedule commencing on the first such payment date coincident with or following Employee’s “separation from service” from Employer within the meaning of Section 409A of the Code, and shall be treated as a series of separate payments under Treasury Regulations Section l.409A-2(b)(2)(iii).

 

 

5.                  Restrictive Covenants. The Executive acknowledges and agrees that (i) the Executive has a major responsibility for the operation, development and growth of the Company’s Multi-Family business; (ii) the Executive’s work for the Company will bring him into close contact with Confidential Information (defined below) of the Company and its clients; and (iii) the agreements and covenants contained in this Section are essential to protect the legitimate business interests of the Company and that the Company will not enter into this Employment Agreement but for such agreements and covenants. Accordingly, the Executive covenants and agrees to the following:

 

(a)               Confidential Information.

 

(i)       Executive understands that during his employment, he may have access to unpublished and otherwise confidential information both of a technical and non-technical nature, relating to the business of the Company or any of its parents, subsidiaries, divisions, affiliates (collectively, “Affiliated Entities”), or clients, including without limitation any of their actual or anticipated business, research or development, any of their technology or the implementation or exploitation thereof, including without limitation information Executive and others have collected, obtained or created, information pertaining to clients, accounts, vendors, prices, costs, materials, processes, codes, material results, technology, system designs, system specifications, materials of construction, trade secrets or equipment designs, including information disclosed to the Company or any of its Affiliated Entities by others under agreements to hold such information confidential (collectively, the “Confidential Information”). Executive agrees to observe all policies and procedures of the Company and its Affiliated Entities concerning such Confidential Information. Executive further agrees not to disclose or use, either during his employment or at any time thereafter, any Confidential Information for any purpose, including without limitation any competitive purpose, unless authorized to do so by the Company in writing, except that he may disclose and use such information in the good faith performance of his duties for the Company. Executive’s obligations under this Employment Agreement will continue with respect to Confidential Information, whether or not his employment is terminated, until such information becomes generally available from public sources through no fault of Executive or any representative of Executive. Notwithstanding the foregoing, however, Executive shall be permitted to disclose Confidential Information as may be required by a subpoena or other governmental order, provided that he first notifies the Company of such subpoena, order or other requirement and that the Company has the opportunity to obtain a protective order or other appropriate remedy and “Confidential Information” does not include information that is or becomes generally available to the public other than as a result of a disclosure by the Executive in violation of this Agreement.

 

(ii)       During Executive’s employment, upon the Company’s request, or upon the termination of his employment for any reason, Executive will promptly deliver to the Company all documents, records, files, notebooks, manuals, letters, notes, reports, customer and supplier lists, cost and profit data, e-mail, apparatus, laptops, computers, smartphones, tablets or other PDAs, hardware, software, drawings, blueprints, and any other material of the Company or any of its Affiliated Entities or clients, including all materials pertaining to Confidential Information developed by Executive or others, and all copies of such materials, whether of a technical, business or fiscal nature, whether on the hard drive of a laptop or desktop computer, in hard copy, disk or any other format, which are in his possession, custody or control.

 

 

(b)               Non-Competition; Non-Solicitation.

 

(i)                 During the longer of (A) Executive’s employment with the Company or its Affiliated Entities and for twenty-four (24) months following the termination thereof for any reason (the “Restricted Period”) or (B) three years from the Commencement Date, the Executive shall not, within the Territory (as defined below) directly or indirectly, (i) establish, own, manage, operate, control, acquire, finance, invest in or otherwise engage or participate in any business, operation or activity that competes with or is substantially similar to the Company (a “Competing Business”), (ii) enter the employ of, or render any personal services to or for the benefit of, or act as an agent or representative of, or receive remuneration in the form of salary, commissions or otherwise from, any entity which is engaged in a Competing Business or (iii) disclose any non-public information regarding the Business to a Competing Business, or use such information for the benefit of a Competing Business, provided, however, that Executive may own, directly or indirectly, solely as a passive investment, securities of any business traded on any national securities exchange (“Public Business”), provided Executive is not a controlling person of, or a member with control of a group that controls, such “Public Business”, which for purposes of this Agreement, “control” shall mean more than 10% of the outstanding securities of such Public Business; and Shareholder is not excluded from directly or indirectly, owning, controlling, acquiring, financing, or investing in any business that is not a “Competing Business” (“Non-Competing Business”) and upon termination of Employment may fully participate without limitation in any business, operation or activity of any “Non-Competing Business”. For the sake of clarity, a “Non-Competing Business” may engage in, but not be limited to, business that would qualify as a subcontractor or supplier of services or products utilized by Company, whether or not Company utilizes products or services from such “Non-Competing Business” and Executive shall be required to notify the Company’s CEO thirty (30) days in advance of any participation in any Non-Competing Business to allow Company the opportunity to object based on any actual or potential conflict of interest.

 

(ii)              Throughout the Restricted Period, the Executive shall not solicit for business or accept the business of, any person or entity who is, or was at any time within the previous twelve (12) months, a Customer (as defined below) of the Company or any of its Affiliated Entities.

 

(iii)            Throughout the Restricted Period, the Executive shall not, directly or indirectly, employ, solicit, for employment, or otherwise contract for or hire, the services of any individual who is then an employee or service provider of or consultant to the Company or any of its Affiliated Entities or who was an employee of the Company or any of its Affiliated Entities during the twelve (12) month period preceding the termination of his employment.

 

(iv)             Throughout the Restricted Period, the Executive shall not take any action that could reasonably be expected to have the effect of encouraging or inducing any employee, consultant, service provider, representative, officer, or director of the Company or any of its Affiliated Entities to cease their relationship with the Company or any of its Affiliated Entities for any reason.

 

(v)               For purposes of this Employment Agreement, the term “Territory” shall mean throughout the area comprising the Company’s or any of its Affiliated Entities, as applicable, market for its services and products within which area Executive was materially concerned during the twelve (12) month period prior to the termination of Executive’s employment.

 

 

(vi)             For purposes of this Employment Agreement, the term “Customer(s)” shall mean any individual, corporation, partnership, business or other entity, whether for-profit or not-for-profit, public, privately held, or owned by the United States government that is a business entity or individual with whom the Company or any of its Affiliated Entities has done business or with whom Executive has actively negotiated with during the twelve (12) month period preceding the termination of Executive’s employment.

 

(vii)          Executive and the Company agrees that in the event a court determines the length of time, territory or activities prohibited under this Employment Agreement are too restrictive to be enforceable, the court may reduce the scope of the restriction to the extent necessary to make the restriction enforceable.

 

6.                  Representations, Warranties and Covenants of the Executive.

 

(a)               No Restrictive Covenants. Executive represents and warrants to the Company that he is not subject to any agreement restricting his ability to enter into this Employment Agreement and fully carry out his duties and responsibilities hereunder. Executive hereby indemnifies and holds the Company harmless against any losses, claims, expenses (including reasonable attorneys’ fees), damages or liabilities incurred by the Company as a result of a breach of the foregoing representation and warranty.

 

(b)               Assignment of Intellectual Property.

 

(i)                 Executive will promptly disclose to the Company any idea, invention, discovery or improvement, whether patentable or not (“Creations”), conceived or made by him alone or with others at any time during his employment with the Company. Executive agrees that the Company owns any such Creations, and Executive hereby assigns and agrees to assign to the Company all moral and other rights he has or may acquire therein and agrees to execute any and all applications, assignments and other instruments relating thereto which the Company deems necessary or desirable. These obligations shall continue beyond the termination of his employment with respect to Creations and derivatives of such Creations conceived or made during his employment with the Company. The Company and Executive understand that the obligation to assign Creations to the Company shall not apply to any Creation which is developed entirely on his own time without using any of the Company’s equipment, supplies, facilities, and/or Confidential Information (“Executive Creations”) unless such Creation (i) relates in any way to the business or to the current or anticipated research or development of the Company or any of its Affiliated Entities, or (ii) results in any way from his work at the Company.

 

(ii)              In any jurisdiction in which moral rights cannot be assigned, Executive hereby waives any such moral rights and any similar or analogous rights under the applicable laws of any country of the world that Executive may have in connection with the Creations, and to the extent such waiver is unenforceable, hereby covenants and agrees not to bring any claim, suit or other legal proceeding against the Company or any of its Affiliated Entities claiming that Executive’s moral rights to the Creations have been violated.

 

 

(iii)            Executive agrees to reasonably cooperate with the Company, both during and after his employment with the Company, with respect to the procurement, maintenance and enforcement of copyrights, patents, trademarks and other intellectual property rights (both in the United States and foreign countries) relating to such Creations. Executive shall sign all papers, including, without limitation, copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights and powers of attorney, which the Company, acting reasonably, may deem necessary or desirable in order to protect its rights and interests in any Creations. Executive further agrees that if the Company is unable, after reasonable effort, to secure Executive’s signature on any such papers, any officer of the Company shall be entitled to execute such papers as his agent and attorney-in-fact and Executive hereby irrevocably designates and appoints each officer of the Company as his agent and attorney-in-fact to execute any such papers on his behalf and to take any and all actions as the Company may deem necessary or desirable in order to protect its rights and interests in any Creations, under the conditions described in this paragraph, all to the exclusion of Executive’s Creations.

 

7.                  Remedies. The Executive acknowledges that the Company would be irreparably injured by a violation of the covenants contained in Sections 5 or 6, and agrees that the Company shall be entitled to an injunction restraining the Executive from any actual or threatened breach of the covenants contained in Sections 5 or 6, or to any other appropriate equitable remedy without bond or other security being required. Any such relief shall be in addition to and not in lieu of any appropriate relief in the way of monetary damages that the parties may seek in arbitration.

 

8.                  Waiver of Breach. The waiver by either the Company or the Executive of a breach of any provision of this Employment Agreement shall not operate as or be deemed a waiver of any subsequent breach by either the Company or the Executive. Any waiver must be in writing

 

9.                  Notice. Any notice to be given hereunder by a party hereto shall be in writing and shall be deemed to have been given when received or, when deposited in the U.S. mail, certified or registered mail, postage prepaid:

 

(a)to the Executive addressed as follows:

 

Alan Allred

P.O. Box 1599

Elon, North Carolina 27244-1599

 

With a copy to:

 

Nathan R. Adams

Pittman & Steele, PLLC

1694 Westbrook Avenue

Post Office Box 2290

Burlington, North Carolina 27215

 

 

(b)to the Company addressed as follows:

 

Quest Resource Management Company, LLC

3481 Plano Parkway

The Colony, Texas 75056

Attention: Laurie L. Latham

 

with copies to:

 

Olshan Frome Wolosky LLP
1325 Avenue of the Americas
New York, New York 10019
Attention: Elizabeth Gonzalez-Sussman, Esq. and Kenneth Schlesinger, Esq.

 

10.              Amendment. This Employment Agreement may not be amended orally in any manner or in writing without the written consent of the Company and the Executive. No provision of this Employment Agreement may be waived, delayed, modified, terminated or otherwise impaired without the prior written consent of the Company and the Executive.

 

11.              Applicable Law. The provisions of this Employment Agreement shall be construed in accordance with the internal laws of the State of Texas.

 

12.              Assignment; Successors and Assigns, etc. This Employment Agreement is a personal contract and Executive may not sell, transfer, assign, pledge or hypothecate his rights, interests and obligations hereunder. Except as otherwise herein expressly provided, this Employment Agreement shall be binding upon and shall inure to the benefit of Executive and his personal representatives and shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

13.              Enforceability. If any portion or provision of this Employment Agreement (including, without limitation, any portion or provision of any section of this Employment Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Employment Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Employment Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

14.              Counterparts. This Employment Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party. Facsimile or .pdf signatures shall have the same force and effect as original signatures.

 

15.              Arbitration. All disputes and disagreements arising from, relating to, or otherwise connected with this Employment Agreement, the breach of this Employment Agreement, the enforcement, interpretation or validity of this Employment Agreement, or the employment relationship (including any wage claim, claim for wrongful termination, or any claim based upon any statute, regulation, or law, including those dealing with employment discrimination or retaliation, sexual harassment, civil rights, age, or disability) that the Company may have against you or that you may have against the Company, including the determination of the scope or applicability of this Employment Agreement to arbitrate, shall be settled by arbitration administered by the Judicial Arbitration and Mediation Services (“JAMS”) pursuant to its Comprehensive Arbitration Rules and Procedures applicable at the time the arbitration is commenced. A copy of the current version of the JAMS Rules will be made available to you upon request. The Rules may be amended from time to time and are also available online https://www.jamsadr.com/rules-employment-arbitration/. Arbitration shall take place in Dallas, Texas and shall be conducted before a single arbitrator selected by and in accordance with the rules and procedures of the JAMS. The decision of the arbitrator shall be final and binding on the parties. Judgment on any award may be entered in any court having competent jurisdiction, and application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. The expenses of the arbitration (including any arbitrator fees) shall be borne equally by the Executive and the Company. Each of the parties shall bear the fees and expenses of its own legal counsel.

 

 

16.              Entire Agreement. This Employment Agreement and the agreements and instruments referred to herein embodies the entire agreement and understanding of the parties hereto in respect of the Executive’s employment with the Company contemplated by this Employment Agreement and supersedes all prior agreements, arrangements and understandings, oral or written, express or implied, between the parties with respect to such employment.

 

17.       Tax Matters.

 

(a)                Withholding. The Company may withhold from any and all amounts payable under this Agreement or otherwise such federal, state and local taxes as may be required to be withheld pursuant to any applicable law or regulation.

 

(b)                Section 409A Compliance.

 

(i)                 The intent of the parties is that payments and benefits under this Agreement comply with Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. In no event whatsoever shall the Company or its subsidiaries be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.

 

(ii)               A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”

 

(iii)             To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all such expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, or the date prescribed herein for reimbursement, if earlier, (B) any right to such reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

 

 

(iv)              For purposes of Code Section 409A, Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

(v)                Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

 

18.       Defined Terms. In addition to other terms defined herein, the following capitalized words and phrases shall have the meaning ascribed thereto below. Terms which are used, but not defined herein, shall have the meaning ascribed thereto by the Purchase Agreement.

 

“Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange Act.

 

“Board” means the Board of Directors of Quest Resource Holding Corporation, the parent company of the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended, and rules and regulations issued thereunder. References to any Section of the Code shall also refer to any successor provision thereto.

 

“Company” means Quest Resource Management Company, LLC.

 

“Disabled” means that Executive, by reason of any medically determinable physical or mental impairment, becomes unable to perform, with or without reasonable accommodation, the essential functions of his job for the Company hereunder and such incapacity has continued for a total of ninety (90) consecutive days or for any one hundred eighty (180) days in a period of three hundred sixty-five (365) consecutive days.

 

“Employment Term” means the period of the Executive’s employment under this Agreement. For the avoidance of doubt, Employment Term includes the Initial Term and any Extension Term.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

 

“Good Cause” for termination shall mean that Executive: (A) pleads “guilty” or “no contest” to or is indicted for or convicted of a felony under federal or state law or a crime under federal or state law which involves Executive’s fraud or dishonesty; (B) in carrying out his duties, engages in conduct that constitutes gross negligence or willful misconduct; (C) fails to reasonably perform the responsibilities of his position which are communicated to him; (D) engages in misconduct that causes material harm to the reputation of the Company or the Executive’s credibility and reputation no longer conform to the standard of the Company’s executives; or (E) materially breaches any term of this Employment Agreement or written policy of the Company, provided that for subsections (C) through (E), if the breach reasonably may be cured, Executive has been given at least thirty (30) days after Executive’s receipt of written notice of such breach from the Company to cure such breach. Whether or not such breach has been cured will be determined in the judgment of the Board acting in good faith.

 

“Good Reason” means, without the Executive’s express written consent and subject to the conditions set forth in this definition, the following:

 

(a)               the occurrence of any of the following events at any time:

 

(i)                 a breach by the Company of any provision of this Employment Agreement or the Purchase Agreement other than an isolated, insubstantial and inadvertent breach not occurring in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive;

 

(ii)              the reduction by the Company in the Executive’s Base Salary as in effect as of the date of this Agreement or as the same shall be increased from time to time other than as a result of an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of written notice thereof given by the Executive;

 

(iii)            a material reduction in the Executive’s annual bonus opportunity (including an adverse change in performance criteria or a decrease in the Executive’s ultimate target bonus opportunity); or

 

(iv)             the transfer of the Executive’s primary work location to a location that is more than twenty-five (25) miles from the Executive’s primary work location in Burlington, North Carolina.

 

Notwithstanding the foregoing, the occurrence of an event that would otherwise constitute Good Reason hereunder shall cease to be an event constituting Good Reason if the Executive fails to provide the Company with written notice of the occurrence of any of the foregoing within the 90-day period immediately following the date on which the Executive first becomes aware (or reasonably should have become aware) of the occurrence of such event.

 

“Green Remedies” means Green Remedies and Recycling, Inc., a North Carolina corporation.

 

“Initial Term” means the period of time commencing on the Commencement Date and continuing through the Earn-Out End Date.

 

 

“Multi-Family” means the Purchased Business acquired by the Company pursuant to the Purchase Agreement as it may be developed for the benefit of the Company by the Executive from time to time including the achievement of the Earnout.

 

“Person” means any individual, partnership, limited liability company, joint venture, corporation, company, firm, group or other entity.

 

“Purchase Agreement” means the Asset Purchase Agreement of even date herewith among the Company, Green Remedies, Alan Allred and Quest Resource Holding Corporation.

 

“Purchased Business” means the business of Green Remedies of providing solid waste management services on a brokerage and/or service basis for the commercial and community/multifamily housing markets in the United States of America.

 

“Termination” and any derivative of that term means the Executive’s separation from service with the Company (as defined in Section 409A of the Code).

 

“Termination Date” means the date of the Executive’s Termination.

 

[Remainder of page intentionally left blank]

 

 

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

 

  /s/ Alan Allred
  Alan Allred
       
       
  Quest Resource Management Company, LLC
       
  By: /s/ Laurie L. Latham
    Name: Laurie L. Latham
    Title: Chief Financial Officer, Senior Vice President and Secretary

 

 

INTERCREDITOR AGREEMENT

 

This INTERCREDITOR AGREEMENT (this “Agreement”) is dated as of October 19, 2020, and entered into by and between BBVA USA, in its capacity as agent under the ABL Documents, including its permitted successors and assigns in such capacity from time to time (“ABL Agent”), and MONROE CAPITAL MANAGEMENT ADVISORS, LLC, in its capacity as agent under the Term Loan Documents, including its permitted successors and assigns in such capacity from time to time (“Term Loan Agent”).

 

RECITALS

 

WHEREAS Quest Resource Management Group, LLC, a Delaware limited liability company (“Quest”), Landfill Diversion Innovations, L.L.C., a Delaware limited liability company (“Landfill”, and together with Quest, collectively, “Borrowers” and each a “Borrower”), provided, that, to the extent the borrowers under the Term Loan Agreement are different from the Borrowers under the ABL Credit Agreement, the term “Borrowers” shall refer to the borrowers under either agreement, as applicable) the lenders party thereto, and ABL Agent, have entered into that certain Loan, Security and Guaranty Agreement dated as of August 5, 2020 (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, the “ABL Credit Agreement”) providing for a term loan and a revolving credit facility pursuant to which such lenders have or may, from time to time, make loans and provide other financial accommodations to Borrowers. The obligations of Borrowers to repay such loans and other financial accommodations under the ABL Credit Agreement are guaranteed by Quest Resource Holding Corporation, a Nevada corporation (“Holdings”), Quest Sustainability Services, Inc., a Delaware corporation (F/K/A Earth911, Inc.) (“Parent”), Youchange, Inc., an Arizona corporation (“Youchange”), Quest Vertigent Corporation, a Nevada corporation (“Vertigent”), Quest Vertigent One, LLC, a Delaware limited liability company (“Vertigent One”), Global Alerts, LLC, a Delaware limited liability company (“Global Alerts”), and together with Youchange, Vertigent, Vertigent One, Parent and Holdings and any other Person that guaranties any of the ABL Debt, the “Guarantors”) and together with the Borrowers, the “Loan Parties”);

 

WHEREAS, the Loan Parties, the lenders party thereto, and Term Loan Agent have entered into that certain Credit Agreement dated as of the date hereof (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, the “Term Loan Agreement”) pursuant to which such lenders have agreed to make loans and financial accommodations to Borrowers. The obligations of Borrowers to repay such notes and other amounts under the Term Loan Agreement are guaranteed by the Loan Parties;

 

WHEREAS, the obligations of Loan Parties under the ABL Documents are to be secured (a) on a first priority basis by Liens on the ABL Priority Collateral, and (b) on a second priority basis by Liens on the Term Loan Priority Collateral;

 

WHEREAS, the obligations of Borrowers and the Guarantors under the Term Loan Documents are to be secured (a) on a first priority basis by Liens on the Term Loan Priority Collateral, and (b) on a second priority basis by Liens on the ABL Priority Collateral; and

 

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WHEREAS, ABL Agent, for itself and on behalf of the ABL Claimholders, and Term Loan Agent, for itself and on behalf of the Term Loan Claimholders, desire to enter into this Agreement to (a) confirm the relative priority of their respective security interests in the assets of Borrowers and the Guarantors, (b) provide for the application, in accordance with such priorities, of proceeds of such assets and properties, and (c) address certain other matters.

 

AGREEMENT

 

In consideration of the foregoing, the mutual covenants and obligations herein set forth, and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

SECTION 1.  Definitions; Rules of Construction.

 

1.1              Defined Terms. Any terms (whether capitalized or lower case) used in this Agreement that are defined in the UCC shall be construed and defined as set forth in the UCC unless otherwise defined herein; provided, that to the extent that the UCC is used to define any term used herein and if such term is defined differently in different Articles of the UCC, the definition of such term contained in Article 9 of the UCC shall govern. As used in the Agreement, the following terms shall have the following meanings:

 

ABL Agent” has the meaning set forth in the preamble to this Agreement.

 

ABL Cap” means, as of any date of determination, the result of:

 

(a)               the sum of (which amount, to the extent permitted in accordance with the terms of this Agreement, shall be increased by the amount of all interest, fees, costs, expenses, indemnities, and other amounts accrued or charged with respect to any ABL Debt (other than Excess ABL Debt) as and when the same accrues or becomes due and payable, irrespective of whether the same is added to the principal amount of the ABL Debt and including the same as would accrue and become due but for the commencement of an Insolvency Proceeding, whether or not such amounts are allowed or allowable, in whole or in part, in any such Insolvency Proceeding):

 

(i)                 $18,700,000, plus

 

(ii)              the amount of incremental Revolving Credit Commitments (as defined in the ABL Credit Agreement) actually utilized pursuant to Section 2.4 of the ABL Credit Agreement multiplied by 110%, provided, that, in no event shall the amount under this subsection (ii) exceed $11,000,000;

 

(iii)            the amount of Bank Product Obligations in an amount not to exceed $2,000,000 and Derivative Obligations in an amount not to exceed $1,500,000, plus

 

(iv)             the ABL DIP Amount,

 

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minus

 

(b)               the sum of:

 

(i)                 the aggregate amount of all permanent reductions of the revolving credit commitments under the ABL Credit Agreement, including those accompanied by permanent repayments and prepayments of the principal amount of the revolving loan obligations (other than the permanent reduction of revolving credit commitments replaced dollar for dollar with a Refinancing thereof), plus

 

(ii)              the aggregate amount of all permanent repayments and prepayments of the principal amount of term loan obligations under the ABL Credit Agreement (other than payments of such term loan obligations in connection with a Refinancing thereof).

 

ABL Cash Collateral” has the meaning set forth in Section 6.2(a).

 

ABL Claimholders” means, as of any date of determination, the holders of the ABL Debt at that time, including (a) ABL Agent, (b) the ABL Lenders, (c) the Issuing Bank (as defined in the ABL Credit Agreement), and (d) any of their respective Affiliates holding ABL Debt.

 

ABL Collateral” means the assets of each and every Grantor, whether real, personal or mixed, with respect to which a Lien is granted (or purported to be granted) as security for any ABL Debt, including all Proceeds and products thereof.

 

ABL Collateral Documents” means the ABL Security Documents and any other agreement, document, or instrument pursuant to which a Lien is granted (or purported to be granted) securing any ABL Debt or under which rights or remedies with respect to such Liens are governed.

 

ABL Credit Agreement” has the meaning set forth in the recitals to this Agreement.

 

ABL Debt” means all Obligations (as defined in the ABL Credit Agreement), and all other amounts owing, due, or secured under the terms of the ABL Credit Agreement or any other ABL Document, whether now existing or arising hereafter, including all principal, premium, interest, fees, attorneys’ fees, costs, charges, expenses, reimbursement obligations, obligations with respect to loans, Letters of Credit, Bank Product Obligations, obligations to provide cash collateral in respect of Letters of Credit or Bank Product Obligations or indemnities in respect thereof, any other indemnities or guarantees, and all other amounts payable under or secured by any ABL Document (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Grantor, or that would have accrued or become due under the terms of the ABL Documents but for the effect of the Insolvency Proceeding and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding), in each case whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured. For the avoidance of doubt, the foregoing shall constitute “ABL Debt” notwithstanding any limitations on, restrictions of, or agreements by, Grantors in the Term Loan Documents with respect to the incurrence of any ABL Debt (whether as a result of Overadvances (as defined in the ABL Credit Agreement) or otherwise).

 

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ABL Default” means any “Event of Default”, as such term is defined in any ABL Document.

 

ABL Deficiency Claim” means any portion of the ABL Priority Debt consisting of an allowed unsecured claim under Section 506(a) of the Bankruptcy Code (or any similar provision under any other law governing an Insolvency Proceeding).

 

ABL DIP Amount” means, after the commencement of an Insolvency Proceeding, the incremental principal amount of ABL DIP Financing, not to exceed 10% of the sum of the principal amount of the ABL Debt and all unfunded commitments to extend ABL Debt under the ABL Credit Agreement, in each case, outstanding immediately prior to the commencement of an Insolvency Proceeding.

 

ABL DIP Financing” has the meaning set forth in Section 6.2(a).

 

ABL DIP Financing Conditions” means (a) that (i) Term Loan Agent retains its Liens with respect to the Collateral that existed as of the date of the commencement of the applicable Insolvency Proceeding (including Proceeds thereof arising after the commencement of such Insolvency Proceeding), (ii) as to the Term Loan Priority Collateral that existed as of the date of the commencement of such Insolvency Proceeding (including Proceeds thereof arising after such commencement of the Insolvency Proceeding), Term Loan Agent’s Liens with respect to such Term Loan Priority Collateral remain senior and prior to the Liens (inclusive of any Liens securing the ABL DIP Financing) of ABL Agent with respect to such Term Loan Priority Collateral, (iii) as to Term Loan Priority Collateral acquired by the applicable Grantor after the commencement of such Insolvency Proceeding (excluding identifiable Proceeds of Term Loan Priority Collateral existing prior to the commencement of applicable Insolvency Proceeding), if a Lien with respect to such Collateral is granted to secure the ABL DIP Financing, then Term Loan Agent obtains a Lien with respect to such Collateral and the Liens with respect to such Collateral securing the ABL DIP Financing are junior and subordinate to the Liens of Term Loan Agent with respect to such Collateral and the Term Loan Agent is not restricted from seeking, and the ABL Agent does not object to, a replacement or additional Lien as adequate protection as permitted by Section 6.5; (b) in the case of ABL DIP Financing, that the aggregate principal amount of such ABL DIP Financing does not exceed the ABL DIP Amount, and the aggregate outstanding principal amount of other ABL Priority Debt outstanding as of the commencement of the Insolvency Proceeding plus the ABL DIP Amount does not exceed the ABL Cap, (c) that the proposed ABL Cash Collateral order or ABL DIP Financing documentation does not expressly require the sale of all or substantially all of the Collateral prior to a default under such order or documentation, (d) the ABL Agent does not seek to obtain a priming Lien of any of the Term Loan Priority Collateral, (e) that the proposed cash collateral use or ABL DIP Financing does not compel any Grantor to seek conformation of a specific plan of reorganization for which all or substantially all of the material terms are set forth in the cash collateral order or documentation governing such ABL DIP Financing and (f) that the ABL DIP Financing is otherwise subject to the terms of this Agreement.

 

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ABL Documents” means the ABL Collateral Documents, the ABL Credit Agreement, and each of the other Loan Documents (as that term is defined in the ABL Credit Agreement).

 

ABL Equipment” means all equipment of the Grantors described in reasonable detail on Exhibit A (which will be updated automatically when an updated Exhibit A is sent by the ABL Agent to the Term Loan Agent) hereto, the purchase of which was financed at least 80% from the proceeds of the term loan included in ABL Debt.

 

ABL Lenders” means the “Lenders” as that term is defined in the ABL Credit Agreement (including each Issuing Bank (as defined in the ABL Credit Agreement)).

 

ABL Priority Collateral” means all of each and every Grantor’s right, title, and interest in and to the following types of property of such Grantor, wherever located and whether now owned by such Grantor or hereafter acquired (including, for the avoidance of doubt, any such assets that, but for the application of Section 552 of the Bankruptcy Code (or any provision of any other Bankruptcy Law), would constitute ABL Priority Collateral):

 

(a)       all accounts;

 

(b)       all inventory;

 

(c)       all ABL Equipment;

 

(d)       all instruments, documents, chattel paper (including all tangible and electronic chattel paper) and other contracts, in each case to the extent governing, evidencing, substituting for, arising from or constituting Proceeds of any accounts, and all documents of title (including any warranty thereunder) evidencing ABL Equipment;

 

(e)       all deposit accounts and securities accounts, and cash and cash equivalents included in such deposit accounts or securities accounts, but excluding identifiable Proceeds of Term Loan Priority Collateral and the Term Loan Collateral Account, and including identifiable Proceeds of ABL Priority Collateral contained in the Term Loan Collateral Account;

 

(f)       all guaranties, contracts of suretyship, trade-credit insurance, letters of credit, letter-of-credit rights, security and other credit enhancements (including repurchase agreements), and supporting obligations, in each case in respect of accounts, including identifiable deposits by and property of account debtors or other persons securing the obligations of account debtors in respect of accounts;

 

(g)       all proceeds of commercial tort claims arising solely from claims for loss solely with respect to ABL Equipment;

 

(h)       all claims under policies of casualty and liability insurance arising solely from a loss of, or damage to, ABL Priority Collateral and all trade credit insurance;

 

(i)       all substitutions, replacements, accessions, products, rents or Proceeds of any of the foregoing, in any form, of any kind or nature of any or all of the foregoing.

 

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For purposes of clarification, and notwithstanding anything to the contrary set forth in this Agreement, (i) Intellectual Property and, subject to Section 3.11, any and all Proceeds thereof shall not constitute ABL Priority Collateral, but instead shall constitute Term Loan Priority Collateral, (ii) any inventory that is or becomes branded, or produced through the use or other application of, any Intellectual Property, whether pursuant to the exercise of rights pursuant to Section 3.9 or otherwise, shall constitute ABL Priority Collateral, and no Proceeds arising from any Disposition of any such inventory shall be, or be deemed to be, attributable to Term Loan Priority Collateral and (iii) Equity Interests of any Grantor or any Subsidiary thereof and any and all Proceeds thereof shall not constitute ABL Priority Collateral but instead shall constitute Term Loan Priority Collateral.

 

ABL Priority Debt” means all ABL Debt other than Excess ABL Debt.

 

ABL Retained Interest” has the meaning set forth in Section 10.7.

 

ABL Secured Claim” means any portion of the ABL Priority Debt not constituting an ABL Deficiency Claim.

 

ABL Security Documents” means the “ABL Credit Agreement” and the “Security Documents” as that term is defined in the ABL Credit Agreement.

 

Agent” means ABL Agent or Term Loan Agent, as the context requires.

 

Agreement” has the meaning set forth in the preamble hereto.

 

Bank Product Obligations” means the “Product Obligations,” as that term is defined in the ABL Credit Agreement as in effect on the date hereof.

 

Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as in effect from time to time, or any successor statute.

 

Bankruptcy Law” means, as applicable, the Bankruptcy Code and any other federal, state, provincial or foreign law for the relief of debtors or affecting creditors’ rights generally.

 

Books” means books and records of each Grantor (including each Grantor’s Records indicating, summarizing, or evidencing such Grantor’s assets (including the Collateral) or liabilities, each Grantor’s Records relating to such Grantor’s business operations or financial condition, including customer lists, invoices, credit memos, purchase and file orders, and each Grantor’s goods or general intangibles related to such items).

 

Borrower” and “Borrowers” have the meanings set forth in the recitals to this Agreement.

 

Business Day” means any day other than a Saturday, Sunday, or day on which banks in New York, New York are authorized or required by law to close.

 

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Claimholders” means the ABL Claimholders and the Term Loan Claimholders, or any one of them.

 

Collateral” means all of the assets of each and every Grantor, whether real, personal or mixed, moveable or immoveable, constituting ABL Collateral or Term Loan Collateral.

 

Collateral Documents” means the ABL Collateral Documents or the Term Loan Collateral Documents, as the context requires.

 

Debt” means the ABL Debt or the Term Loan Debt, as the context requires.

 

Disposition” or “Dispose” means the sale, assignment, transfer, license, lease (as lessor), exchange, or other disposition (including any sale and leaseback transaction) of any property by any person (or the granting of any option or other right to do any of the foregoing).

 

Enforcement Action” means

 

(a)       the taking of any action to enforce any Lien in respect of the Collateral, including the institution of any foreclosure proceedings or the noticing of any public or private sale or other disposition pursuant to Article 9 of the UCC, Bankruptcy Code or other applicable law, or the taking of any action in an attempt to vacate or obtain relief from a stay or other injunction restricting any other action described in this definition,

 

(b)       the exercise of any right or remedy provided to a secured creditor with respect to Collateral under the ABL Documents or the Term Loan Documents (excluding any exercise of dominion of funds under a control agreement but including, in either case, any delivery of any notice to seek to obtain payment directly from any account debtor of any Grantor or any depositary bank, securities intermediary, or other person obligated on any Collateral of any Grantor, the making of any test verifications of accounts by reaching out to account debtors or notification to any account debtor of any assignment of any account, the taking of any action or the exercise of any right or remedy in respect of the Collateral, or the exercise of any right of setoff or recoupment with respect to obligations owed to any Grantor), under applicable law, at equity, in an Insolvency Proceeding or otherwise, including the acceptance of Collateral in full or partial satisfaction of an obligation,

 

(c)       the Disposition of all or any portion of the Collateral, by private or public sale or any other means, in connection with the exercise of enforcement rights relating to the Collateral,

 

(d)       the solicitation of bids from third parties to conduct the Disposition of all or a material portion of the Collateral, in connection with, or in anticipation of, the exercise of enforcement rights relating to the Collateral,

 

(e)       the engagement or retention of sales brokers, marketing agents, investment bankers, accountants, appraisers, auctioneers, or other third parties for the purpose of valuing, marketing, or Disposing of all or a material portion of the Collateral within a commercially reasonable period of time, following the occurrence and during the continuance of an “Event of Default” under the ABL Credit Agreement or Term Loan Agreement, as applicable,

 

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(f)       the exercise of any other enforcement right relating to the Collateral (including the exercise of any voting rights relating to any Equity Interests composing a portion of the Collateral) whether under the ABL Documents, the Term Loan Documents, under applicable law of any jurisdiction, in equity, in an Insolvency Proceeding, or otherwise (including the commencement of applicable legal proceedings or other actions with respect to the Collateral to facilitate the actions described in the preceding clauses), or

 

(g)       the pursuit of ABL Default Dispositions or Term Loan Default Dispositions relative to all or a material portion of the Collateral to the extent undertaken and being diligently pursued in good faith to consummate the Disposition of such Collateral within a commercially reasonable time.

 

Notwithstanding the foregoing, an “Enforcement Action” shall not include (a) the imposition of a default rate or late fee, (b) the filing of a proof of claim in any Insolvency Proceeding, (c) the acceleration of the ABL Debt or the Term Loan Debt or (d) the exercise of any other rights and remedies of an unsecured creditor in a manner consistent with the terms of this Agreement.

 

Enforcement Notice” means a written notice delivered by either ABL Agent or Term Loan Agent to the other stating (a) that an ABL Default or a Term Loan Default, as applicable, has occurred and is continuing under the ABL Credit Agreement or the Term Loan Agreement, as applicable, and specifying the nature of the relevant event of default, and (b) that an Enforcement Period has commenced with respect to the applicable Priority Collateral.

 

Enforcement Period” means the period of time following the receipt by either ABL Agent or Term Loan Agent of an Enforcement Notice from the other and continuing until the earliest of (a) in case of an Enforcement Period commenced by Term Loan Agent, the Payment in Full of Term Loan Debt, (b) in the case of an Enforcement Period commenced by ABL Agent, the Payment in Full of ABL Priority Debt, or (c) ABL Agent or Term Loan Agent (as applicable) terminates, or agrees in writing to terminate, the Enforcement Period (including in connection with a waiver or cure of the event of default that gave rise to such Enforcement Notice).

 

Equity Interests” means, with respect to a Person, all of the shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock (or other ownership or profit interests or units), preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the United States Securities and Exchange Commission under the Securities Exchange Act of 1934).

 

Excess ABL Debt” means the sum of (a) the portion of the ABL Debt that is in excess of the ABL Cap, plus (b) the portion of interest, costs, expenses and fees that accrues or is charged with respect to that portion of the principal amount of the loans and Letters of Credit described in clause (a) of this definition.

 

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Excess Availability” means, on any specific date, an amount equal to (a) the Line Cap (as defined in the ABL Credit Agreement as in effect on the date hereof), minus (b) the Aggregate Revolving Extensions (as defined in the ABL Credit Agreement as in effect on the date hereof), plus (c) unrestricted cash accounts of any Grantor in which ABL Agent or Term Loan Agent has a first-priority perfected Lien.

 

“Excess Term Loan Debt” means the sum of (a) the portion of the Term Loan Debt that is in excess of the Term Loan Cap, plus (b) the portion of interest, costs, expenses and fees that accrues or is charged with respect to that portion of the principal amount of the loans described in clause (a) of this definition.

 

Final Order” means an order of a court of competent jurisdiction as to which the time to appeal, petition for certiorari, or move for re-argument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for re-argument or rehearing shall then be pending or, in the event that an appeal, writ of certiorari, or re-argument or rehearing thereof has been filed or sought, such order shall have been affirmed or confirmed by the highest court to which such order was appealed, or from which certiorari, re-argument or rehearing was sought and the time to take any further appeal, petition for certiorari or move for re-argument or rehearing shall have expired; provided, that the possibility that a motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure or any analogous rule under the Federal Rules of Bankruptcy Procedure or applicable state court rules of civil procedure, may be filed with respect to such order shall not cause such order not to be a Final Order.

 

Governmental Authority” means the government of the United States of America, or any other nation, any political subdivision thereof, whether state, provincial, or local, and any agency, authority, instrumentality, regulatory body, court, central bank, or other entity exercising executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of or pertaining to government.

 

Grantors” means Parent, each Borrower and each Guarantor, and each other person that may, from time to time, execute and deliver an ABL Collateral Document or a Term Loan Collateral Document as a “debtor,” “grantor,” “obligor,” or “pledgor” (or the equivalent thereof) or that may, from time to time, be (or whose assets may be) subject to a judgment lien in favor of any of the ABL Claimholders or any of the Term Loan Claimholders in respect of the ABL Debt or the Term Loan Debt, as applicable, and “Grantor” means any one of them.

 

Guarantors” has the meaning set forth in the recitals to this Agreement and “Guarantor” means any one of them.

 

Inalienable Interests” has the meaning set forth in Section 4.4.

 

Insolvency Proceeding” means:

 

(a)       any voluntary or involuntary case or proceeding under any Bankruptcy Law with respect to any Grantor; or any filing by any Grantor of a notice of intention to make a proposal;

 

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(b)       any other voluntary or involuntary insolvency or bankruptcy case or proceeding, or any interim receivership or other receivership, liquidation or other similar case or proceeding with respect to any Grantor or with respect to a material portion of its assets;

 

(c)       any liquidation, dissolution, or winding up of any Grantor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy;

 

(d)       any assignment for the benefit of creditors or any other marshaling of assets or liabilities of any Grantor; or

 

(e)       any event analogous to any of the foregoing in any jurisdiction.

 

Investment Property” means any and all investment property (as that term is defined in the UCC).

 

Intellectual Property” means all past, present and future: trade secrets, know-how and other proprietary information; trademarks, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business relating thereto and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer programs) and copyright registrations or applications for registrations which have heretofore been or may hereafter be issued throughout the world and all tangible property embodying the copyrights, unpatented inventions (whether or not patentable); patent applications and patents; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

 

Junior Agent” means, with respect to the ABL Priority Collateral, Term Loan Agent, and with respect to the Term Loan Priority Collateral, ABL Agent.

 

Junior Claimholders” means, with respect to the ABL Priority Collateral, the Term Loan Claimholders, and with respect to the Term Loan Priority Collateral, the ABL Claimholders.

 

Junior Collateral” means, with respect to the ABL Debt, all Collateral other than ABL Priority Collateral, and with respect to the Term Loan Debt, all Collateral other than Term Loan Priority Collateral.

 

Junior Debt” means, with respect to the ABL Priority Collateral, the Term Loan Debt and the Excess ABL Debt, and with respect to the Term Loan Priority Collateral, the ABL Debt and the Excess Term Loan Debt.

 

Junior 507(b) Claims” has the meaning set forth in Section 6.5(f).

 

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Junior Lenders” means, with respect to the ABL Priority Collateral, the Term Lenders, and with respect to the Term Loan Priority Collateral, the ABL Lenders.

 

Letters of Credit” means the “Letters of Credit” as that term is defined in the ABL Credit Agreement.

 

Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a capital lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.

 

Loan Documents” means ABL Documents or Term Loan Documents, as the context requires.

 

Loan Parties” has the meaning set forth in the recitals to this Agreement.

 

Monroe Capital” means Monroe Capital Management Advisors, LLC and its affiliates and controlled investment vehicles.

 

Ordinary Course Collections” has the meaning set forth in Section 4.1.

 

Payment Conditions” means with respect to any applicable transaction, (i) no Default (as defined under the ABL Credit Agreement as in effect on the date hereof) and no ABL Default shall exist immediately after giving effect to such transaction, (ii) after giving effect to such payment, Excess Availability shall exceed $3,000,000, (iii) the Fixed Charge Coverage Ratio (as defined under the ABL Credit Agreement as in effect on the date hereof) for the most recently ended trailing twelve calendar month period shall not be less than 1.10 to 1.00, and (iv) before and immediately after giving effect to such transaction, the Loan Parties are in compliance with each of the financial covenants set forth in Section 9.2.12 of the ABL Credit Agreement as in effect on the date hereof as of the last day of the most recent Fiscal Quarter for which financial statements have been delivered.

 

Payment in Full of ABL Priority Debt” means, except to the extent otherwise expressly provided in Section 5.5 or in Section 6.8:

 

(a)               payment in full in cash or immediately available funds of all of the ABL Priority Debt (other than outstanding Letters of Credit, Bank Product Obligations and unasserted contingent indemnification and reimbursement obligations);

 

(b)               termination or expiration of all commitments, if any, of the ABL Lenders to extend credit to Borrowers;

 

(c)               termination of, providing cash collateral (in an amount not to exceed 103% of the face amount of outstanding Letters of Credit) or the making of other arrangements reasonably satisfactory to the ABL Agent in respect of, all outstanding Letters of Credit that compose a portion of the ABL Priority Debt;

 

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(d)               termination of (and paying the outstanding amount due in respect of), or, at Agent’s election, providing cash collateral in respect of Bank Product Obligations in an amount not greater than 103% of, all Bank Product Obligations then outstanding and termination of (and paying the outstanding amount due in respect of) Derivative Obligations;

 

(e)               termination of and paying the outstanding amount due in respect of Derivative Obligations (as defined in the Credit Agreement as in effect on the date hereof);

 

(f)                providing cash collateral to ABL Agent in such amount as ABL Agent reasonably determines is reasonably necessary to secure the ABL Claimholders in respect of any asserted or threatened (in writing) claims, demands, actions, suits, proceedings, investigations, liabilities, fines, costs, penalties, or damages for which any of the ABL Claimholders may be entitled to indemnification or reimbursement by any Grantor pursuant to the indemnification and reimbursement provisions in the ABL Documents.

 

Payment in Full of Priority Debt” means, (a) if the Term Loan Priority Debt constitutes the Priority Debt, the Payment in Full of Term Loan Priority Debt, and (b) if the ABL Priority Debt constitutes the Priority Debt, the Payment in Full of ABL Priority Debt.

 

Payment in Full of Term Loan Priority Debt” means, except to the extent otherwise expressly provided in Section 5.5 or in Section 6.8:

 

(g)               payment in full in cash or immediately available funds of all of the Term Loan Priority Debt (other than unasserted contingent indemnification and reimbursement obligations);

 

(h)               termination or expiration of all commitments, if any, of the Term Lenders to extend credit to Borrowers; and

 

(i)                 providing cash collateral to Term Loan Agent in such amount as Term Loan Agent reasonably determines is reasonably necessary to secure the Term Loan Claimholders in respect of any asserted or threatened (in writing) claims, demands, actions, suits, proceedings, investigations, liabilities, fines, costs, penalties, or damages for which any of the Term Loan Claimholders may be entitled to indemnification or reimbursement by any Grantor pursuant to the indemnification and reimbursement provisions in the Term Loan Documents.

 

person” means any natural person, corporation, trust, business trust, joint venture, joint stock company, association, company, limited liability company, partnership, Governmental Authority, or other entity.

 

Pledged Collateral” has the meaning set forth in Section 5.4(a).

 

Priority Agent” means, with respect to the ABL Priority Collateral, ABL Agent, and with respect to the Term Loan Priority Collateral, Term Loan Agent.

 

Priority Collateral” means, with respect to the ABL Debt, all ABL Priority Collateral, and with respect to the Term Loan Debt, all Term Loan Priority Collateral.

 

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Priority Claimholders” means, with respect to the ABL Priority Collateral, the ABL Claimholders, and with respect to the Term Loan Priority Collateral, the Term Loan Claimholders, in each case subject to the reciprocal rights set forth in Section 9.16.

 

Priority Debt” means, with respect to the ABL Priority Collateral, the ABL Priority Debt, and with respect to the Term Loan Priority Collateral, the Term Loan Priority Debt.

 

Priority Lenders” means, with respect to the ABL Priority Collateral, the ABL Lenders, and with respect to the Term Loan Priority Collateral, the Term Lenders.

 

Proceeds” means (a) all “proceeds,” as defined in Article 9 of the UCC, of the Collateral and (b) whatever is recovered when Collateral is Disposed of, voluntarily or involuntarily, including any additional or replacement Collateral provided during any Insolvency Proceeding and any payment or property received in an Insolvency Proceeding on account of any “secured claim” (within the meaning of Section 506(b) of the Bankruptcy Code).

 

Purchase Notice” has the meaning set forth in Section 10.1.

 

Records” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

 

Recovery” has the meaning set forth in Section 6.8.

 

Refinance” means, in respect of any indebtedness, to refinance, extend, renew, supplement, restructure, replace, refund, amend and restate, or repay, or to issue other indebtedness in exchange or replacement for such indebtedness, in whole or in part, whether with the same or different lenders, arrangers, or agents provided that the Liens securing such indebtedness are subject to this Agreement. “Refinanced” and “Refinancing” shall have correlative meanings.

 

Seller Subordination Agreement” means that certain Subordination Agreement, dated as of the date hereof, by and among the ABL Agent, the Term Loan Agent and the Subordinated Creditor (as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with such agreement).

 

Senior 507(b) Claims” has the meaning set forth in Section 6.5(e).

 

Standstill Notice” means a written notice from ABL Agent to Term Loan Agent or from Term Loan Agent to ABL Agent, as applicable, identified by its terms as a “Standstill Notice” for purposes of this Agreement and stating that an ABL Default or Term Loan Default, as applicable, has occurred and is continuing.

 

Standstill Period” means the period of 180 consecutive days commencing on the date on which ABL Agent or Term Loan Agent, as applicable, receives the applicable Standstill Notice from the other Agent.

 

Subordinated Creditor” means Green Remedies Waste and Recycling, Inc., a North Carolina corporation, and its successors and assigns.

 

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Subsidiary” of a person means a corporation, partnership, limited liability company, or other entity as to which that person directly or indirectly owns or controls the Equity Interests having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

 

Term Lender” means the “Lenders” as that term is defined in the Term Loan Agreement.

 

Term Loan Agent” has the meaning set forth in the preamble to this Agreement.

 

Term Loan Agreement” has the meaning set forth in the recitals to this Agreement.

 

Term Loan Cap” means, as of any date of determination, the result of:

 

(a)       the sum of (which amount, to the extent permitted in accordance with this Agreement, shall be increased by the amount of all interest, fees, costs, expenses, indemnities, and other amounts accrued or charged with respect to any of the Term Loan Debt (other than Excess Term Loan Debt) as and when the same accrues or becomes due and payable, irrespective of whether the same is added to the principal amount of the Term Loan Debt and including the same as would accrue and become due but for the commencement of an Insolvency Proceeding, whether or not such amounts are allowed or allowable, in whole or in part, in any such Insolvency Proceeding):

 

(i)       $14,375,000,

 

(ii)       125% of the principal amount of the Term B Loans (as defined in the Term Loan Agreement) actually funded but in no event in excess of $15,625,000,

 

(iii)       125% of the principal amount of the Incremental Loans (as defined in the Term Loan Agreement) actually funded, but in no event in excess of $50,000,000 plus

 

(iv)       the Term Loan DIP Amount,

 

minus

 

(b) the aggregate amount of all permanent repayments and prepayments of the principal amount of Term Loan obligations under the Term Loan Agreement (other than payments of such Term Loan obligations in connection with a Refinancing thereof).

 

Term Loan Cash Collateral” has the meaning set forth in Section 6.2(b).

 

Term Loan Claimholders” means, as of any date of determination, the holders of the Term Loan Debt at that time, including (a) Term Loan Agent, and (b) the Term Lenders.

 

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Term Loan Collateral” means all of the assets of each and every Grantor, whether real, personal, or mixed, with respect to which a Lien is granted (or purported to be granted) as security for any Term Loan Debt, including all Proceeds and products thereof.

 

Term Loan Collateral Account” shall mean any deposit account established after the date hereof by any Grantor and the Term Loan Agent to hold Proceeds of Term Loan Priority Collateral.

 

Term Loan Collateral Documents” means the Term Loan Security Agreement, the Term Loan Mortgages, and any other agreement, document, or instrument pursuant to which a Lien is granted (or purported to be granted) securing any Term Loan Debt or under which rights or remedies with respect to such Liens are governed.

 

Term Loan Debt” means all Obligations (as that term is defined in the Term Loan Agreement) and all other amounts owing, due, or secured under the terms of the Term Loan Agreement or any other Term Loan Document, whether now existing or arising hereafter, including all principal, premium, interest, fees, attorneys’ fees, costs, charges, expenses, reimbursement obligations, obligations with respect to loans, indemnities, guarantees, and all other amounts payable under or secured by any Term Loan Document (including, in each case, all amounts accruing on or after the commencement of any Insolvency Proceeding relating to any Grantor, or that would have accrued or become due under the terms of the Term Loan Documents but for the effect of the Insolvency Proceeding and irrespective of whether a claim for all or any portion of such amounts is allowable or allowed in such Insolvency Proceeding), in each case whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidated or unliquidated, secured or unsecured. For the avoidance of doubt, the foregoing shall constitute “Term Loan Debt” notwithstanding any limitations on, restrictions of, or agreements by, Grantors in the ABL Documents with respect to the incurrence of any Term Loan Debt (whether as a result of incremental facilities or otherwise).

 

Term Loan Default” means any “Event of Default”, as such term is defined in any Term Loan Document.

 

Term Loan Deficiency Claim” means any portion of the Term Loan Priority Debt consisting of an allowed unsecured claim under Section 506(a) of the Bankruptcy Code (or any similar provision under any other law governing an Insolvency Proceeding).

 

Term Loan DIP Amount” means, after the commencement of an Insolvency Proceeding, the aggregate outstanding principal amount of Term Loan DIP Financing not to exceed 10% of the sum of the principal amount of the Term Loan Debt and all unfunded commitments to extend Term Loan Debt under the Term Loan Agreement, in each case, outstanding immediately prior to the commencement of an Insolvency Proceeding.

 

Term Loan DIP Financing” has the meaning set forth in Section 6.2(b).

 

Term Loan DIP Financing Conditions” means (a) that (i) ABL Agent retains its Liens with respect to the Collateral that existed as of the date of the commencement of the applicable Insolvency Proceeding (including Proceeds thereof arising after the commencement of such Insolvency Proceeding), (ii) as to the ABL Priority Collateral that existed as of the date of such commencement of such Insolvency Proceeding (including Proceeds thereof arising after the commencement of such Insolvency Proceeding), ABL Agent’s Liens with respect to such ABL Priority Collateral remain senior and prior to the Liens (inclusive of any Liens securing the Term Loan DIP Financing) of Term Loan Agent with respect to such ABL Priority Collateral, and (iii) as to ABL Priority Collateral acquired by the applicable Grantor after the commencement of Insolvency Proceeding (excluding identifiable Proceeds of ABL Priority Collateral existing prior to the commencement of such Insolvency Proceeding), if a Lien with respect to such Collateral is granted to secure the Term Loan DIP Financing, then ABL Agent obtains a Lien with respect to such Collateral and the Liens with respect to such Collateral securing the Term Loan DIP Financing are junior and subordinate to the Liens of ABL Agent with respect to such Collateral, and the ABL Agent is not restricted from seeking, and the Term Loan Agent does not object to, a replacement or additional Lien as adequate protection as permitted by Section 6.5; (b) in case of Term Loan DIP Financing, the aggregate principal amount of such Term Loan DIP Financing does not exceed the Term Loan DIP Amount and the aggregate principal amount of the Term Loan DIP Financing plus the outstanding principal amount of other Term Loan Priority Debt does not exceed the Term Loan DIP Amount, (c) that the interest rate, advance rates and fees are commercially reasonable under the circumstances, (d) the Term Loan Agent does not seek to obtain a priming Lien on any ABL Priority Collateral, (e) that the proposed cash collateral use or Term Loan DIP Financing does not compel any Grantor to seek conformation of a specific plan of reorganization for which all or substantially all of the material terms are set forth in the cash collateral order or documentation governing such Term Loan DIP Financing and (f) that the Term Loan DIP Financing is otherwise subject to the terms of this Agreement.

 

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Term Loan Documents” means the Term Loan Collateral Documents, the Term Loan Agreement, and each of the other “Loan Documents” (as that term is defined in the Term Loan Agreement).

 

Term Loan Mortgages” means each mortgage, deed of trust, and any other document or instrument under which any Lien on real property owned or leased by any Grantor is granted to secure any Term Loan Debt or under which rights or remedies with respect to any such Liens are governed.

 

“Term Loan Priority Collateral” means all of each and every Grantor’s right, title and interest in and to Term Loan Collateral that does not constitute ABL Priority Collateral (including, for the avoidance of doubt, any such assets that, but for the application of Section 552 of the Bankruptcy Code (or any similar provision of any other Bankruptcy Law), would constitute ABL Priority Collateral), wherever located and whether now owned or hereafter acquired, including the following:

 

(a)       all Equipment (excluding the ABL Equipment);

 

(b)       all Intellectual Property;

 

(c)       all general intangibles;

 

(d)       all commercial tort claims, other than commercial tort claims arising solely from claims for loss or damage solely with respect to ABL Equipment;

 

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(e)       all Equity Interests of each Grantor and each Subsidiary thereof;

 

(f)       all instruments, chattel paper (including all tangible and electronic chattel paper) and documents and contracts (in each case, other than such items constituting ABL Priority Collateral) and all payment intangibles;

 

(g)       all insurance (and all claims under all policies of insurance) of any kind relating to any of the Term Loan Priority Collateral (other than trade-credit insurance constituting ABL Priority Collateral);

 

(h)       Books;

 

(i)       all identifiable Proceeds of any Term Loan Priority Collateral;

 

(j)       the Term Loan Collateral Account and all cash and cash equivalents held therein (other than identifiable proceeds of ABL Priority Collateral);

 

(k)       all investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts, or commodity accounts) and all monies, credit balances, deposits, and other property of Grantor now or hereafter held, or received by, or in transit to, an Term Loan Claimholder, any bank, securities intermediary, depository, or other institution from or for the account of any Grantor, whether for safekeeping, pledge, custody, transmission, collection, or otherwise, in each case, (other than such items that constitute ABL Priority Collateral);

 

(l)       all claims under policies of business interruption insurance, all proceeds of business interruption insurance of any Grantor, and all tax refunds received by any Grantor;

 

(m)       all interests in real property (“Land”), including fee and leasehold interests, and all the buildings, structures, improvements and fixtures of every kind or nature now or hereafter situated on such real property (“Improvements”); and all easements, tenements, rights-of-way, vaults, gores of land, streets, ways, alleys, passages, sewer rights, water courses, water rights, timber, crops, mineral rights, development rights, utility commitments, water and wastewater taps, living unit equivalents, capital improvement project contracts, letters of credit, and utility construction agreements with any governmental authority, including municipal utility districts, or with any utility companies (and all refunds and reimbursements thereunder), and powers and appurtenances in any way belonging, relating or appertaining to any of the Land or Improvements, or which hereafter shall in any way belong, relate or be appurtenant thereto, whether now owned or hereafter acquired (“Appurtenances”); any and all leases, licenses and other occupancy agreements now or hereafter affecting the Land, Improvements or Appurtenances, together with all security therefor and guaranties thereof and all monies payable thereunder, and all books and records owned by any Grantor which contain evidence of payments made under such leases, licenses and other occupancy agreements and all security given therefor (collectively, the “Term Loan Real Property Collateral”); and

 

(n)       all substitutions, replacements, accessions, products and Proceeds of any of the foregoing, in any form, including insurance proceeds and all claims against third parties for loss or damage to, or destruction of, or other voluntary conversion (including claims in respect of condemnation or expropriation) of any kind or nature of any or all of the foregoing.

 

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Term Loan Priority Debt” means all Term Loan Debt other than Excess Term Loan Debt.

 

Term Loan Secured Claim” means any portion of the Term Loan Priority Debt not constituting a Term Loan Deficiency Claim.

 

Term Loan Security Agreement” means the Guaranty and Collateral Agreementas that term is defined in the Term Loan Agreement.

 

Triggering Event” means with respect to the purchase option in favor of the Term Note Claimholders (other than Monroe Capital) any of the following events: (a) the acceleration of  the ABL Priority Debt and termination of the commitments to advance further revolving loans under the ABL Credit Agreement, (b) ABL Agent’s taking of any Enforcement Action with respect to all or a material portion of the ABL Priority Collateral, (c) the occurrence of a Term Note Default as a result of a failure to make principal or interest payments of any Term Note Debt when due under the terms of the Term Note Documents, and (d) the commencement of an Insolvency Proceeding with respect to any Grantor.

 

UCC” means the Uniform Commercial Code (or any similar or comparable legislation) as in effect in any applicable jurisdiction.

 

Use Period” means the ninety (90) day period beginning on the earlier of (i) the date on which the ABL Agent provides Term Loan Agent with written notice that it intends to exercise its use and access rights with respect to the Term Loan Priority Collateral and (ii) the 5th Business Day after Term Loan Agent provides the ABL Agent with written notice that Term Collateral Agent has obtained possession or control, as applicable, of such Term Loan Priority Collateral; provided, that if any stay or other order has occurred by operation of law or has been entered by a court of competent jurisdiction that prohibits or limits any of the ABL Agent from commencing and continuing to undertake Enforcement Actions or to Dispose of the ABL Priority Collateral, such Use Period described above shall be tolled during the pendency of such stay or other order and the Use Period shall be so extended.

 

Warrant” has the meaning set forth in the Term Loan Agreement.

 

1.2              Construction. The definitions of terms in this Agreement shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine, and neuter forms. The words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” The term “or” shall be construed to have, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” Unless the context requires otherwise:

 

(a)               except as otherwise provided herein, any definition of or reference to any agreement, instrument, or other document herein shall be construed as referring to such agreement, instrument, or other document as from time to time amended, supplemented, modified or otherwise Refinanced in accordance with the terms of this Agreement;

 

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(b)               any reference to a definition in an ABL Document shall be construed to also refer to any comparable term in any agreement, instrument, or other document the debt under which Refinances the ABL Debt;

 

(c)               any reference to a definition in a Term Loan Document shall be construed to also refer to any comparable term in any agreement, instrument, or other document the debt under which Refinances the Term Loan Debt;

 

(d)               any reference to any agreement, instrument, or other document herein “as in effect on the date hereof” shall be construed as referring to such agreement, instrument, or other document without giving effect to any amendment, restatement, supplement, modification, or Refinancing thereto or thereof occurring after the date hereof;

 

(e)               any definition of, or reference to, ABL Debt or the Term Loan Debt herein shall be construed as referring to the ABL Debt or the Term Loan Debt (as applicable) as from time to time amended, supplemented, modified or Refinanced in accordance with the terms of this Agreement;

 

(f)                any definition of, or reference to, ABL Collateral or Term Loan Collateral herein shall not be construed as referring to any amounts recovered by a Grantor, as a debtor in possession, or a trustee for the estate of a Grantor, under Section 506(c) of the Bankruptcy Code (or by comparable Persons under any other Bankruptcy Law);

 

(g)               any reference herein to any person shall be construed to include such person’s successors and assigns and as to any Grantor shall be deemed to include a receiver, trustee, or debtor-in-possession on behalf of any of such person or on behalf of any such successor or assignee of such person;

 

(h)               except as otherwise expressly provided herein, any reference to ABL Agent agreeing to or having the right to do, or refraining from or having the right to refrain from doing, an act shall be construed as binding upon each of the ABL Claimholders, any reference to ABL Agent shall be construed as referring to ABL Agent, for itself and on behalf of the other ABL Claimholders, any reference to Term Loan Agent agreeing to or having the right to do, or refraining from or having the right to refrain from doing, an act shall be construed as binding upon each of the Term Loan Claimholders, any reference to Term Loan Agent shall be construed as referring to Term Loan Agent for itself and on behalf of the other Term Loan Claimholders, any reference to the ABL Claimholders shall be construed as including ABL Agent, and any reference to the Term Loan Claimholders shall be construed as referring to Term Loan Agent;

 

(i)                 the words “herein,” “hereof,” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof;

 

(j)                 all references herein to Sections shall be construed to refer to Sections of this Agreement; and

 

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(k)               the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts, and contract rights.

 

SECTION 2.  Lien Priorities.

 

2.1              Relative Priorities.

 

(a)               Notwithstanding the date, time, method, manner, or order of grant, attachment, or perfection of any Liens in the Collateral securing the Term Loan Debt or of any Liens in the Collateral securing the ABL Debt (including, in each case, notwithstanding whether any such Lien is granted (or secures Debt relating to the period) before or after the commencement of any Insolvency Proceeding) and notwithstanding any contrary provision of the UCC or any other applicable law, the Term Loan Documents or the ABL Documents or the or any defect or deficiencies in, or failure to attach or perfect, the Liens securing the ABL Debt or the Term Loan Debt, or any other circumstance whatsoever, ABL Agent and Term Loan Agent hereby agree that:

 

(i)                 any Lien with respect to the ABL Priority Collateral securing any ABL Priority Debt, whether such Lien is now or hereafter held by or on behalf of, or created for the benefit of, any of the ABL Claimholders or any agent or trustee therefor, regardless of how or when acquired, whether by grant, possession, statute, operation of law, subrogation, or otherwise, shall be senior in all respects and prior to any Lien with respect to the ABL Priority Collateral securing (A) any Term Loan Debt or (B) any Excess ABL Debt;

 

(ii)              any Lien with respect to the ABL Priority Collateral securing any Term Loan Debt, now or hereafter held by or on behalf of, or created for the benefit of, any of the Term Loan Claimholders or any agent or trustee therefor, regardless of how or when acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be (A) junior and subordinate in all respects to all Liens with respect to the ABL Priority Collateral securing any ABL Priority Debt, (B) other than the extent to which such Lien secures Excess Term Loan Debt, senior in all respects and prior to any Lien with respect to the ABL Priority Collateral securing any Excess ABL Debt and (C) to the extent such Lien secures Excess Term Loan Debt, junior and subordinate to all Liens with respect to the ABL Priority Collateral securing Excess ABL Debt;

 

(iii)            any Lien with respect to the Term Loan Priority Collateral securing any Term Loan Priority Debt, whether such Lien is now or hereafter held by or on behalf of, or created for the benefit of, any of the Term Loan Claimholders or any agent or trustee therefor, regardless of how or when acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be senior in all respects and prior to any Lien with respect to the Term Loan Priority Collateral securing (A) any ABL Debt or (B) any Excess Term Loan Debt;

 

(iv)             any Lien with respect to the Term Loan Priority Collateral securing any ABL Debt now or hereafter held by or on behalf of, or created for the benefit of, any of the ABL Claimholders or any agent or trustee therefor, regardless of how or when acquired, whether by grant, possession, statute, operation of law, subrogation or otherwise, shall be (A) junior and subordinate in all respects to all Liens with respect to the Term Loan Priority Collateral securing any Term Loan Priority Debt, (B) other than the extent to which such Lien secures Excess ABL Debt, senior in all respects and prior to any Lien with respect to the Term Loan Priority Collateral securing any Excess Term Loan Debt and (C) to the extent such Lien secures Excess ABL Debt, junior and subordinate to all Liens with respect to the Term Loan Priority Collateral securing Excess Term Loan Debt; and

 

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(b)               The foregoing priorities with respect to the Collateral securing any Term Loan Debt or any Excess ABL Debt, in each case, shall be effective for all purposes, whether or not such Liens are subordinated to any Lien securing any other obligation of any Grantor or any other person (but only to the extent that such subordination is permitted pursuant to the terms of the ABL Credit Agreement and the Term Loan Debt Agreement, or as contemplated in Section 6.2).

 

2.2              Prohibition on Contesting Liens or Claims. Each of Term Loan Agent and ABL Agent agrees that it will not (and hereby waives any right to), directly or indirectly, contest, or support any other person in contesting, in any proceeding (including any Insolvency Proceeding), the extent, validity, attachment, perfection, priority, or enforceability of a Lien held by or on behalf of any of the ABL Claimholders in the Collateral (or the extent, validity, allowability, or enforceability of any ABL Debt secured thereby or purported to be secured thereby) or by or on behalf of any of the Term Loan Claimholders in the Collateral (or the extent, validity, allowability, or enforceability of any Term Loan Debt secured thereby or purported to be secured thereby), as the case may be, or the provisions of this Agreement; provided, that nothing in this Agreement shall be construed to prevent or impair the rights of ABL Agent or Term Loan Agent to enforce the terms of this Agreement, including the provisions of this Agreement relating to the priority of the Liens securing the ABL Debt and the Term Loan Debt as provided in Sections 2.1 and 3.

 

2.3              New Liens.

 

(a)               So long as no Insolvency Proceeding has been commenced by or against any Grantor, the parties hereto agree that no Grantor shall:

 

(i)                 grant or permit any additional Liens on any asset that is not Collateral to secure any Term Loan Debt unless such Grantor gives ABL Agent at least 5 Business Days prior written notice thereof and unless such notice also offers to grant a Lien on such asset to secure the ABL Debt concurrently with the grant of a Lien thereon in favor of Term Loan Agent; or

 

(ii)              grant or permit any additional Liens on any asset that is not Collateral to secure any ABL Debt unless such Grantor gives Term Loan Agent at least 5 Business Days prior written notice thereof and unless such notice also offers to grant a Lien on such asset to secure the Term Loan Debt concurrently with the grant of a Lien thereon in favor of ABL Agent.

 

(b)               To the extent that the foregoing provisions are not complied with for any reason, without limiting any other rights and remedies available to the Claimholders, each Agent agrees that any amounts received by or distributed to any of the Claimholders pursuant to or as a result of Liens granted in contravention of this Section 2.3 shall be subject to Section 4.2.

 

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2.4              Similar Liens and Agreements.

 

(a)               The parties hereto agree that it is their intention that the ABL Collateral and the Term Loan Collateral be identical except as provided in Section 6 hereof and subject to Section 2.4(b) below. In furtherance of the foregoing and of Section 9.8, the parties hereto agree, subject to the other provisions of this Agreement:

 

(i)                 upon reasonable request by ABL Agent or Term Loan Agent, to cooperate in good faith (and to direct their counsel to cooperate in good faith) from time to time in order to determine the specific items included in the ABL Collateral and the Term Loan Collateral and the steps taken or to be taken to perfect their respective Liens thereon and the identity of the respective parties obligated under the ABL Documents and the Term Loan Documents; and

 

(ii)              that the ABL Collateral Documents and Term Loan Collateral Documents and guarantees for the ABL Debt and the Term Loan Debt, shall be, in all material respects, the same forms of documents other than with respect to the priorities of the Liens granted thereunder.

 

(b)               The foregoing to the contrary notwithstanding, each of the parties agrees that to the extent that ABL Agent or Term Loan Agent obtains a Lien in an asset (of a type that is not included in the types of assets included in the Collateral as of the date hereof or which would not constitute Collateral without a grant of a security interest or lien separate from the ABL Documents or Term Loan Documents, as applicable, as in effect immediately prior to obtaining such Lien on such asset) which the other party to this Agreement elects, by written notice to the Agent obtaining such Lien, not to obtain after receiving prior written notice thereof in accordance with the provisions of Section 2.3, the Collateral securing the ABL Debt and the Term Loan Debt will not be identical, and the provisions of the documents, agreements and instruments evidencing such Liens also will not be substantively similar, and any such difference in the scope or extent of perfection with respect to the Collateral resulting therefrom are hereby expressly permitted by this Agreement.

 

SECTION 3.  Exercise of Remedies.

 

3.1              Exercise of Remedies with respect to the ABL Priority Collateral. Until the Payment in Full of ABL Priority Debt has occurred, whether or not any Insolvency Proceeding has been commenced by or against any Grantor, the Term Loan Claimholders will not exercise or seek to exercise any rights, powers, or remedies with respect to any ABL Priority Collateral (including taking any Enforcement Action with respect to any ABL Priority Collateral); provided, that (i) if a Term Loan Default has occurred and is continuing, Term Loan Agent may take Enforcement Actions with respect to any ABL Priority Collateral after the expiration of the applicable Standstill Period (it being understood that if at any time after the delivery of a Standstill Notice that commences a Standstill Period, no Term Loan Default is continuing, Term Loan Agent may not take Enforcement Actions with respect to any ABL Priority Collateral until the expiration of a new Standstill Period commenced by a new Standstill Notice relative to the occurrence of a new Term Loan Default that had not occurred as of the date of the delivery of the earlier Standstill Notice), and (ii) in no event shall Term Loan Agent or any other Term Loan Claimholder exercise any rights or remedies with respect to the ABL Priority Collateral if, notwithstanding the expiration of the Standstill Period, ABL Agent or any other ABL Claimholder shall have commenced prior to the expiration of the Standstill Period (or thereafter but prior to the commencement of any Enforcement Action by Term Loan Agent with respect to all or any material portion of the ABL Priority Collateral) and be diligently pursuing in good faith an Enforcement Action with respect to all or any material portion of the ABL Priority Collateral.

 

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3.2              Exercise of Remedies With Respect to the Term Loan Priority Collateral. Until the Payment in Full of the Term Loan Priority Debt has occurred, whether or not any Insolvency Proceeding has been commenced by or against any Grantor, the ABL Claimholders will not exercise or seek to exercise any rights, powers, or remedies with respect to any Term Loan Priority Collateral (including taking any Enforcement Action with respect to any Term Loan Priority Collateral); provided, that (i) if an ABL Default has occurred and is continuing, ABL Agent may take Enforcement Actions with respect to any Term Loan Priority Collateral after the expiration of the applicable Standstill Period (it being understood that if at any time after the delivery of a Standstill Notice that commences a Standstill Period, no ABL Default is continuing, ABL Agent may not take Enforcement Actions with respect to any Term Loan Collateral until the expiration of a new Standstill Period commenced by a new Standstill Notice relative to the occurrence of a new ABL Default that had not occurred as of the date of the delivery of the earlier Standstill Notice), and (ii) in no event shall ABL Agent or any other ABL Claimholder exercise any rights or remedies with respect to the Term Loan Priority Collateral if, notwithstanding the expiration of the Standstill Period, Term Loan Agent or any other Term Loan Claimholder shall have commenced prior to the expiration of the Standstill Period (or thereafter but prior to the commencement of any Enforcement Action by ABL Agent with respect to all or any material portion of the Term Loan Priority Collateral) and be diligently pursuing in good faith an Enforcement Action with respect to all or any material portion of Term Loan Priority Collateral.

 

3.3              Exclusive Enforcement Rights.

 

(a)               Until the Payment in Full of ABL Priority Debt has occurred, whether or not any Insolvency Proceeding has been commenced by or against any Grantor, the ABL Claimholders shall have the exclusive right to take Enforcement Actions with respect to the ABL Priority Collateral (and in connection therewith, make determinations regarding the release or Disposition thereof or any restrictions with respect thereto) without any consultation with or the consent of any of the Term Loan Claimholders. Until the Payment in Full of Term Loan Priority Debt has occurred, whether or not any Insolvency Proceeding has been commenced by or against any Grantor, the Term Loan Claimholders shall have the exclusive right to take Enforcement Actions with respect to the Term Loan Priority Collateral (and in connection therewith, subject to Section 3.9 (but without affecting their rights to freely release, restrict, or make a Disposition thereof in accordance with such section), make determinations regarding the release or Disposition thereof or any restrictions with respect thereto) without any consultation with or the consent of any of the ABL Claimholders.

 

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(b)               In connection with (i) any Enforcement Action with respect to the ABL Priority Collateral, the ABL Claimholders may enforce the provisions of the ABL Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion, or (ii) any Enforcement Action with respect to the Term Loan Priority Collateral, the Term Loan Claimholders may enforce the provisions of the Term Loan Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to Dispose of Collateral, to incur expenses in connection with such Disposition, and to exercise all the rights and remedies of a secured creditor under applicable law.

 

(c)               The provisions of clauses (a) and (b) above shall be subject in all respects to the provisions of Section 3.1 and Section 3.2.

 

3.4              Permitted Actions. Anything to the contrary in this Section 3 notwithstanding, any Claimholder may:

 

(a)               if an Insolvency Proceeding has been commenced by or against any Grantor, file a claim or statement of interest with respect to any Debt and the Collateral securing such Debt;

 

(b)               take any action in order to create, perfect or preserve its Lien in and to the Collateral, to prevent the running of any applicable statute of limitation or similar restriction on claims or to assert a compulsory cross-claim or counterclaim against any Person;

 

(c)               before or after the commencement of an Insolvency Proceeding, file any necessary responsive or defensive pleadings (i) in opposition to any motion, claim, adversary proceeding, or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of (A) in the case of a claim of an ABL Claimholder, the ABL Claimholders, or (B) in the case of a claim of a Term Loan Claimholder, the Term Loan Claimholders, or (ii) asserting rights available to unsecured creditors of the applicable Grantor, in each case in accordance with and not in contravention of the terms of this Agreement;

 

(d)               during an Insolvency Proceeding, vote on any plan of reorganization, scheme or arrangement, or liquidation (or similar arrangement affecting creditors’ rights generally) and make any filings and motions therein that are, in each case, not in contravention of the provisions of this Agreement, with respect to (i) in the case of an ABL Claimholder, the ABL Debt, and (ii) in the case of a Term Loan Claimholder, the Term Loan Debt, and (in each case) the Collateral;

 

(e)               in the case of a Junior Agent, join (but not exercise any control with respect to) any judicial foreclosure proceeding or other judicial lien enforcement proceeding with respect to the Priority Collateral of the Priority Agent initiated by such Priority Agent to the extent that any such action could not reasonably be expected, in any material respect, to restrain, hinder, limit, delay for any material period or otherwise interfere with an Enforcement Action by such Priority Agent (it being understood that neither the Junior Agent nor any Junior Claimholder shall be entitled to receive any Proceeds from the Priority Collateral unless otherwise expressly permitted herein);

 

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(f)                subject to Section 3.6(a), inspect, appraise or value the Collateral (and to engage or retain investment bankers or appraisers for the purposes of appraising or valuing the Collateral) or to receive information or reports concerning the Collateral, in each case pursuant to the terms of the ABL Documents or Term Loan Documents, as applicable, or applicable law;

 

(g)               subject to Section 3.6(a), take any action to seek and obtain specific performance or injunctive relief to compel a Grantor to comply with (or not to violate or breach) an obligation under the ABL Documents or Term Loan Documents, as applicable; provided that such action does not include any action by a Junior Claimholder to seek specific performance or injunctive relief against any Priority Claimholder or the Disposition of any such Priority Claimholder’s Priority Collateral in contravention of the other provisions of this Agreement;

 

(h)               bid for Collateral at any public or private sale thereof, provided that (i) such Claimholder does not challenge the bid of the Priority Agent for its Priority Collateral other than by the submission of a competing cash bid, (ii) each Priority Lender may subject to the terms of its Collateral Documents offset its Priority Debt against the purchase price for the Priority Collateral and (iii) if such sale includes Junior Collateral and Priority Collateral, the Junior Lenders may only bid cash with respect to the Priority Collateral; provided, that the cash portion of any such bid need not exceed the amount of the ABL Priority Debt or the Term Loan Priority Debt, as applicable, in respect of such Priority Collateral; and

 

(i)                 enforce the terms of any subordination agreement with any Person (other than a Grantor) with respect to debt of a Grantor that is subordinated to the ABL Debt or the Term Loan Debt provided (i) prior written notice of such action is provided to each Agent, (ii) no such action includes any Enforcement Action, (iii) any payment or other property received by such Claimholder, to the extent resulting from a payment or other transfer of property or an interest in property of any Grantor, shall be deemed to be Proceeds of Collateral subject to the other terms of this Agreement and (iv) any other payments received by such Claimholder in connection with such action shall otherwise be subject to the terms of such subordination agreement with any other Person, any related subordination agreement with either or both of the Agents and this Agreement.

 

3.5              Retention of Proceeds.

 

(a)               Subject to the provisions of Section 3.5(c) below, until the Payment in Full of ABL Priority Debt has occurred, the Term Loan Claimholders shall not be permitted to retain any identifiable Proceeds of ABL Priority Collateral in connection with any Enforcement Action, and any such Proceeds received or retained will be subject to Section 4.2.

 

(b)               Subject to the provisions of Section 3.5(c) below, until the Payment in Full of Term Loan Priority Debt has occurred, the ABL Claimholders shall not be permitted to retain any identifiable Proceeds of Term Loan Priority Collateral in connection with any Enforcement Action, and any such Proceeds received or retained in any other circumstance will be subject to Section 4.2.

 

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(c)               Notwithstanding anything contained in this Agreement to the contrary, in the event of any Disposition or series of related Dispositions that includes ABL Priority Collateral and Term Loan Priority Collateral, if the ABL Agent and Term Loan Agent are unable to agree in writing upon an allocation of Proceeds of such Collateral which does not result in Payment in Full of ABL Priority Debt and the Payment in Full of Term Loan Priority Debt, the ABL Agent and the Term Loan Agent shall use commercially reasonable efforts in good faith to negotiate a proper allocation of the Proceeds received in connection with such Disposition as between the ABL Priority Collateral and Term Loan Priority Collateral and if no such agreement occurs, then such allocations will be as determined by a Final Order.

 

3.6              Non-Interference. Subject to any specific provision of this Agreement to the contrary, each of Term Loan Agent and ABL Agent hereby:

 

(a)               agrees that it not take or cause to be taken any action, the purpose or effect of which is to make any Lien on any Priority Collateral that secures any Junior Debt pari passu with or senior to, or to give any Junior Secured Party any preference or priority relative to, the Liens on the Priority Collateral securing the Priority Debt;

 

(b)               agrees that, subject to Sections 3.1 and 3.2, the Junior Claimholders will not take any action that would restrain, hinder, limit, delay, or otherwise interfere with any Enforcement Action by the Priority Agent with respect to its Priority Collateral, including any Disposition of such Priority Collateral, whether by foreclosure or otherwise;

 

(c)               waives, subject to Sections 3.1 and 3.2, any and all rights that any Junior Claimholder may have as a junior lien creditor or otherwise to object to the manner in which the Priority Agent or the Priority Claimholders seek to enforce or collect their Debt or the Liens securing such Debt granted in any of the Priority Collateral, regardless of whether any action or failure to act by or on behalf of such Priority Agent or the Priority Claimholders is adverse to the interest of the Junior Agent or the Junior Claimholders;

 

(d)               waives any and all rights that any Junior Claimholder may have to oppose, object to, or seek to restrict the Priority Agent or any Priority Claimholder from exercising their rights to set off or credit bid its Debt; and

 

(e)               acknowledges and agrees that no covenant, agreement, or restriction contained in its Collateral Documents or any other of its Loan Documents (other than this Agreement) shall be deemed to restrict in any way the rights and remedies of the Priority Agent or the Priority Claimholders with respect to their Priority Collateral as set forth in this Agreement and such Priority Agent’s Loan Documents.

 

3.7              Unsecured Creditor Remedies. Except as set forth in Sections 2.2, 3.6, and 6, the Agents and the other Claimholders may exercise rights and remedies as unsecured creditors generally against any Grantor in accordance with the terms of the applicable Loan Documents and applicable law so long as doing so is not in contravention of the terms of this Agreement; provided, that in the event that any Claimholder becomes a judgment Lien creditor in respect of Collateral as a result of its enforcement of its rights as an unsecured creditor with respect to its Debt, such judgment Lien shall be subject to the terms of this Agreement for all purposes as the other Liens securing such Debt.

 

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3.8              Notice of Exercise. Each Agent shall endeavor to provide reasonable prompt written notice to the other Agent of its initial material Enforcement Action, but failure to do so shall not result in a breach of this Agreement.

 

3.9              Inspection and Access Rights.

 

(a)               Prior to the Payment in Full of ABL Priority Debt, if the Term Loan Collateral Agent obtains possession or physical control of any Term Loan Priority Collateral, Term Loan Agent shall promptly (and in any event within five Business Days) notify ABL Agent in writing of that fact, and ABL Agent shall promptly notify Term Loan Agent (and in any event within five Business Days) in writing of whether ABL Agent desires to exercise its access rights under this Section 3.9. Upon delivery of such notice by ABL Agent to Term Loan Agent, the parties shall confer in good faith to coordinate with respect to ABL Agent’s exercise of such access rights.

 

(b)               Without limiting any rights any of the ABL Claimholders may otherwise have under applicable law or by agreement and whether or not any of the Term Loan Claimholders has commenced and is continuing to undertake any Enforcement Action prior to the Payment in Full of ABL Priority Debt, ABL Agent or any other person (including any of the ABL Claimholders) acting with the consent, or on behalf, of ABL Agent, shall have an irrevocable, non-exclusive right to have access to, and a royalty-free license and right to use the Term Loan Priority Collateral (including, without limitation, machinery and equipment (including computers and processors), Intellectual Property and general intangibles) during the Use Period (i) during normal business hours on any Business Day, to access the ABL Priority Collateral that (A) is stored or located in or on, (B) has become an accession with respect to (within the meaning of Section 9-335 of the UCC), or (C) has been commingled with (within the meaning of Section 9-336 of the UCC), Term Loan Priority Collateral, and (ii) in order to assemble, inspect, copy or download information stored on, take actions to perfect its Lien on, process raw materials or work-in-process into finished Inventory, take possession of, move, package, prepare and advertise for sale or disposition, store, collect, take reasonable actions to protect, secure and otherwise enforce the rights of ABL Agent in and to the ABL Priority Collateral, or otherwise deal with the ABL Priority Collateral in accordance with applicable law, in each case, subject to clause (c) below, without liability to any of the Term Loan Claimholders and without the involvement of, or interference or restriction by any of the Term Loan Claimholders; provided, however, that this Section 3.9 shall not require that ABL Agent’s use of the Term Loan Priority Collateral be on an exclusive basis. This Agreement will not restrict the rights of Term Loan Agent to sell, assign or otherwise transfer the related Term Loan Priority Collateral prior to the expiration of the Use Period if (but only if) the purchaser, assignee or transferee thereof agrees to be bound by the provisions of this Section 3.9.

 

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(c)               During the period of actual occupancy, use or control by ABL Agent (or its respective employees, agents, advisers and representatives) of any Term Loan Priority Collateral pursuant to this Section 3.9, ABL Agent shall be obligated to (x) repair at expense any physical damage (ordinary wear and tear excepted) to such Term Loan Priority Collateral caused by such occupancy, use or control of or by ABL Claimholders or their agents, representatives or designees, and to leave such Term Loan Priority Collateral or other assets or property in substantially the same condition as it was at the commencement of such occupancy, use or control, ordinary wear and tear excepted, and (y) pay to the applicable landlord (or the Term Loan Agent if such Term Loan Agent has already paid such landlord), on a monthly basis all utilities, insurance, rent (at the then current rental rate) and all other maintenance and operating costs of such Term Loan Priority Collateral during the Use Period for any premises that the ABL Agent accesses, or on which tangible ABL Priority Collateral is stored (other than Books), to the extent that such rent or other amounts are not timely paid by a Grantor. In furtherance of the foregoing, ABL Agent shall indemnify, defend and hold harmless the Term Loan Agent and the other Term Loan Claimholders for any claims or causes of action, losses, expenses and damages (including all reasonable fees and charges of any counsel to the Term Loan Claimholders and all court costs an similar legal expenses) caused by the actions of the ABL Claimholders during the Use Period (or any of their respective employees, agents, advisers and representatives). The undertaking in this Section 3.9(c) will survive the Payment in Full of the Term Loan Priority Debt, termination of this Agreement and the resignation or replacement of the Term Loan Agent under the Term Loan Agreement.

 

(d)               Consistent with the definition of the term “Use Period,” if any order or injunction is issued or stay is granted or is otherwise effective by operation of law prior to the Payment in Full of ABL Priority Debt that prohibits ABL Agent from exercising any of its rights hereunder, then the Use Period granted to ABL Agent under this Section 3.9 shall be stayed during the period of such prohibition and shall continue thereafter for the number of days remaining as required under this Section 3.9. The rights of Term Loan Agent under this Section 3.9 during the Use Period shall continue notwithstanding such foreclosure, sale or other disposition by ABL Agent.

 

(e)               Notwithstanding the termination of the Use Period, ABL Agent shall have the right to Dispose of any inventory that is branded or becomes branded, or produced through the use or other application of, any Intellectual Property, whether pursuant to the exercise by the ABL Agent of its rights pursuant to this Section 3.9 or otherwise, and to use such branded trademarks and tradenames in connection with the advertising and marketing of such Dispositions; and all such branded inventory shall constitute ABL Priority Collateral, and no Proceeds arising from any Disposition of any such ABL Priority Collateral shall be, or be deemed to be, attributable to Term Loan Priority Collateral.

 

3.10          Sharing of Information and Access. In the event that ABL Agent shall, in the exercise of its rights under the ABL Collateral Documents or otherwise, receive possession or control of any Books, ABL Agent shall, upon request from Term Loan Agent and as promptly as practicable thereafter, provide such Books to Term Loan Agent; ABL Agent may retain copies of such Books to use and to transfer in connection with the sale of any ABL Priority Collateral. Term Loan Agent will permit the ABL Agent to make copies of any Books and take possession of all documents of title for ABL Equipment necessary in connection with the sale of any ABL Priority Collateral.

 

3.11          Tracing of and Priorities in Proceeds. Until the Payment in Full of ABL Priority Debt occurs, except with respect to (1) Term Loan Priority Collateral, (2) reasonably identifiable Proceeds thereof, (3) other Proceeds of Term Loan Priority Collateral identified by the Term Loan Agent to the ABL Agent in writing and (4) cash and cash equivalents held in the Term Loan Collateral Account (other than identifiable Proceeds of ABL Priority Collateral), the ABL Claimholders are hereby permitted to treat all cash, cash equivalents, money, collections and payments as ABL Priority Collateral to the extent deposited in or credited to any other Grantor’s deposit account or securities account that constitutes ABL Priority Collateral; provided, this consent shall not inure to the benefit of any of the Grantors or be deemed a waiver of or modification of any provision of the Term Loan Documents, including any provision requiring application of such Proceeds to repayment of the Term Loan Debt or otherwise in the manner provided for in the Term Loan Documents or any default or event of default that may result from any Grantor’s failure to comply with such requirements.

 

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SECTION 4.  Proceeds.

 

4.1              Application of Proceeds.

 

(a)               Except as otherwise provided in Section 2.1, any ABL Priority Collateral, or Proceeds thereof, received in connection with any Enforcement Action or in connection with any Insolvency Proceeding involving a Grantor shall (at such time as such ABL Priority Collateral or Proceeds or other amounts have been monetized) be applied:

 

(i)                 first, to the payment in full in cash of costs and expenses of ABL Agent in connection with such Enforcement Action or Insolvency Proceeding,

 

(ii)              second, to the Payment in Full of ABL Priority Debt, and in the case of payment of any revolving loans (other than pursuant to ABL DIP Financing except in connection with the consummation of a plan of reorganization), together with a concurrent permanent reduction of the ABL Priority Debt,

 

(iii)            third, to the payment in full in cash of costs and expenses of Term Loan Agent in connection with such Enforcement Action or Insolvency Proceeding,

 

(iv)             fourth, to the Payment in Full of Term Loan Priority Debt,

 

(v)               fifth, to the payment in full in cash of the Excess ABL Debt in accordance with the ABL Documents, and

 

(vi)             sixth, to the payment in full in cash of the Excess Term Loan Debt in accordance with the Term Loan Documents.

 

(b)               Notwithstanding the foregoing, if any Enforcement Action with respect to any Priority Collateral produces non-cash Proceeds, then if the Payment in Full of the Priority Debt related thereto has not occurred, such non-cash Proceeds shall be held by the Priority Agent as additional collateral and, at such time as such non-cash Proceeds are monetized by the Priority Agent, shall be applied in the order of application set forth above. The Priority Agent shall have no duty or obligation to Dispose of such non-cash Proceeds and may Dispose of such non-cash Proceeds or continue to hold such non-cash Proceeds, in each case, in its discretion; provided, that any non-cash Proceeds received by ABL Agent (other than any non-cash Proceeds received on account of any Term Loan Secured Claim) may be distributed by ABL Agent to the ABL Claimholders in full or partial satisfaction of ABL Priority Debt in an amount reasonably determined by ABL Agent acting at the direction of the requisite ABL Claimholders or as a court of competent jurisdiction may direct pursuant to a Final Order, including an order confirming a plan of reorganization in an Insolvency Proceeding. Prior to the Payment in Full of ABL Priority Debt, no receipt and application of any Collateral, or Proceeds thereof, received in the ordinary course of business or as a result of the exercise of dominion of funds under a control agreement (such Collateral, and the Proceeds thereof, “Ordinary Course Collections”) shall constitute an Enforcement Action for purposes of this Agreement unless the ABL Claimholders as a result of an ABL Default fail to fund advances or revolving loans to the Grantors (whether or not the conditions to funding are satisfied) for more than 5 consecutive Business Days unless Term Loan Agent otherwise consents to a different application. Ordinary Course Collections received by ABL Agent may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, pursuant to the ABL Credit Agreement.

 

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(c)               Except as otherwise provided in Section 2.1, any Term Loan Priority Collateral, or Proceeds thereof, received in connection with any Enforcement Action or in connection with any Insolvency Proceeding involving a Grantor shall (at such time as such Term Loan Priority Collateral or Proceeds or other amounts have been monetized) be applied:

 

(i)                 first, to the payment in full in cash of costs and expenses of Term Loan Agent in connection with such Enforcement Action or Insolvency Proceeding,

 

(ii)              second, to the Payment in Full of Term Loan Priority Debt,

 

(iii)            third, to the payment in full in cash of costs and expenses of ABL Agent in connection with such Enforcement Action or Insolvency Proceeding,

 

(iv)             fourth, to the Payment in Full of ABL Priority Debt, and in the case of payment of any revolving loans (other than pursuant to ABL DIP Financing except in connection with the consummation of a plan of reorganization), together with a concurrent permanent reduction of the ABL Priority Debt,

 

(v)               fifth, to the payment in full in cash of the Excess Term Loan Debt in accordance with the Term Loan Documents,

 

(vi)             sixth, to the payment in full in cash of the Excess ABL Debt in accordance with the ABL Documents.

 

(d)               Notwithstanding the foregoing, if any Enforcement Action with respect to the Term Loan Priority Collateral produces non-cash Proceeds, then such non-cash Proceeds shall be held by the Priority Agent as additional collateral and, at such time as such non-cash Proceeds are monetized, shall be applied by the Priority Agent in the order of application set forth above. Term Loan Agent shall have no duty or obligation to Dispose of such non-cash Proceeds and may Dispose of such non-cash Proceeds or continue to hold such non-cash Proceeds, in each case, in its discretion; provided, that any non-cash Proceeds received by Term Loan Agent (other than any non-cash Proceeds received on account of any ABL Secured Claim) may be distributed by Term Loan Agent to the Term Loan Claimholders in full or partial satisfaction of Term Loan Priority Debt in an amount reasonably determined by Term Loan Agent acting at the direction of the requisite Term Loan Claimholders or as a court of competent jurisdiction may direct pursuant to a Final Order, including an order confirming a plan of reorganization in an Insolvency Proceeding.

 

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(e)               In the event that the ABL Agent or any other ABL Claimholder receives any payment or proceeds from the Subordinated Creditor pursuant to the terms of the Seller Subordination Agreement, so long as proceeds of ABL Priority Collateral was not utilized to pay the Subordinated Creditors, then such payment or proceeds shall immediately be turned over to the Term Loan Agent and applied in accordance with Section 4.1(c).

 

4.2              Turnover.

 

(a)               Unless and until the Payment in Full of ABL Priority Debt has occurred (irrespective of whether any Insolvency Proceeding has been commenced by or against any Grantor) and except as otherwise provided in Section 2.1, any ABL Priority Collateral, or Proceeds thereof (including assets or Proceeds subject to Liens referred to in the final sentence of Section 2.3) received by any of the Term Loan Claimholders in connection with an Enforcement Action with respect to the Collateral by any of the Term Loan Claimholders, shall be segregated and held in trust and forthwith paid over to ABL Agent in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. ABL Agent is hereby authorized to make any such endorsements as agent for the Term Loan Claimholders and this authorization is coupled with an interest and is irrevocable until the Payment in Full of ABL Priority Debt.

 

(b)               Unless and until the Payment in Full of ABL Priority Debt has occurred and except as otherwise expressly provided in Sections 6.5 or 6.9, if a Grantor (or any of its assets) is the subject of an Insolvency Proceeding and if any distribution is received by the Term Loan Claimholders (or any of them) on account of their Term Loan Secured Claims in respect of their interest in the ABL Priority Collateral in connection with such Insolvency Proceeding (unless such distribution is made under a confirmed plan of reorganization of such Grantor that is accepted by the requisite affirmative vote of each class composed of the secured claims of the ABL Claimholders or otherwise provides for the Payment in Full of ABL Priority Debt), then such distribution shall be segregated and held in trust and forthwith paid over to ABL Agent for the benefit of the ABL Claimholders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. Notwithstanding anything in this Agreement to the contrary, Term Loan Claimholders may receive and retain any cash, debt, or equity securities on account of Term Loan Deficiency Claims or in respect of any other portion of their Term Loan Secured Claims that are not on account of their interest in the ABL Priority Collateral.

 

(c)               Unless and until the Payment in Full of Term Loan Priority Debt has occurred (irrespective of whether any Insolvency Proceeding has been commenced by or against any Grantor) and except as otherwise provided in Section 2.1, any Term Loan Priority Collateral, or Proceeds thereof (including assets or Proceeds subject to Liens referred to in the final sentence of Section 2.3 received by any of the ABL Claimholders in connection with an Enforcement Action with respect to the Collateral by any of the ABL Claimholders, shall be segregated and held in trust and forthwith paid over to Term Loan Agent for the benefit of the Term Loan Claimholders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. Term Loan Agent is hereby authorized to make any such endorsements as agent for the ABL Claimholders and this authorization is coupled with an interest and is irrevocable until the Payment in Full of Term Loan Priority Debt.

 

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(d)               Unless and until the Payment in Full of Term Loan Priority Debt has occurred and except as otherwise expressly provided in Sections 6.5 or 6.9, if a Grantor (or any of its assets) is the subject of an Insolvency Proceeding and if any distribution is received by the ABL Claimholders (or any of them) on account of their ABL Secured Claims in respect of their interest in the Term Loan Priority Collateral in connection with such Insolvency Proceeding (unless such distribution is made under a confirmed plan of reorganization of such Grantor that is accepted by the requisite affirmative vote of each class composed of the secured claims of the Term Loan Claimholders or otherwise provides for the Payment in Full of Term Loan Priority Debt), then such distribution shall be segregated and held in trust and forthwith paid over to Term Loan Agent for the benefit of the Term Loan Claimholders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. Notwithstanding anything in this Agreement to the contrary, ABL Claimholders may receive and retain any cash, debt, or equity securities on account of ABL Deficiency Claims or in respect of any other portion of their ABL Secured Claims that are not on account of their interest in the Term Loan Priority Collateral.

 

(e)               Term Loan Agent agrees that if, at any time, all or part of any payment with respect to any ABL Priority Debt secured by any ABL Priority Collateral previously made shall be rescinded for any reason whatsoever, it will upon request promptly pay over to ABL Agent any payment received by it in respect of any such ABL Priority Collateral and shall promptly turn any such ABL Priority Collateral then held by it over to ABL Agent, and the provisions set forth in this Agreement will be reinstated as if such payment had not been made, until the payment and satisfaction in full of such ABL Priority Debt.

 

(f)                ABL Agent agrees that if, at any time, all or part of any payment with respect to any Term Loan Priority Debt secured by any Term Loan Priority Collateral previously made shall be rescinded for any reason whatsoever, it will upon request promptly pay over to Term Loan Agent any payment received by it in respect of any such Term Loan Priority Collateral and shall promptly turn any such Term Loan Priority Collateral then held by it over to Term Loan Agent, and the provisions set forth in this Agreement will be reinstated as if such payment had not been made, until the payment and satisfaction in full of such Term Loan Priority Debt.

 

4.3              No Subordination of the Relative Priority of Claims. Anything to the contrary contained herein notwithstanding, the subordination of the Liens of the Term Loan Claimholders in respect of the ABL Priority Collateral to the Liens of the ABL Claimholders therein and of the Liens of the ABL Claimholders in respect of the Term Loan Priority Collateral to the Liens of the Term Loan Claimholders therein as set forth herein is with respect to the priority of their respective Liens in and to the Collateral held by or on behalf of them only and shall not constitute a subordination in right of payment of the Term Loan Debt to the ABL Debt or a subordination in right of payment of the ABL Debt to the Term Loan Debt.

 

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4.4              Non-Lienable Assets. Notwithstanding anything to the contrary contained herein (including Section 4.3), if any assets, licenses, rights, or privileges of any Grantor are incapable of being the subject of a Lien in favor of a secured party including because of restrictions under applicable law, the nature of the rights or interests of such Grantor, or the absence of a consent to such Lien by a third party, and irrespective of whether the applicable collateral documents attempt (or purport) to encumber such assets, licenses, rights, or privileges (the “Inalienable Interests”), then ABL Agent and Term Loan Agent agree that any distribution or recovery that the ABL Claimholders or the Term Loan Claimholders may receive with respect to, or that is allocable to, the value of any such Inalienable Interests, or any Proceeds thereof, whether received in their capacity as unsecured creditors or otherwise, shall be turned over and applied in accordance with Section 4.1 and 4.2 as if such distribution or recovery were, or were on account of, Collateral or the Proceeds of Collateral. With respect to Inalienable Interests that would be of the same type as the ABL Priority Collateral if such Inalienable Interests were able to be included in the Collateral, until the Payment in Full of ABL Priority Debt occurs, Term Loan Agent hereby appoints ABL Agent, and any officer or agent of ABL Agent, with full power of substitution, as the attorney-in-fact of each of the Term Loan Claimholders for the limited purpose of carrying out the provisions of this Section 4.4 and taking any action and executing any instrument that ABL Agent may reasonably deem necessary or advisable to accomplish the purposes of this Section 4.4, which appointment is irrevocable and coupled with an interest. With respect to Inalienable Interests that would be of the same type as the Term Loan Priority Collateral if such Inalienable Interests were able to be included in the Collateral, until the Payment in Full of Term Loan Priority Debt occurs, ABL Agent hereby appoints Term Loan Agent, and any officer or agent of Term Loan Agent, with full power of substitution, the attorney-in-fact of each of the ABL Claimholders for the limited purpose of carrying out the provisions of this Section 4.4 and taking any action and executing any instrument that Term Loan Agent may reasonably deem necessary or advisable to accomplish the purposes of this Section 4.4, which appointment is irrevocable and coupled with an interest.

 

4.5              Application of Payments. Subject to the other terms of this Agreement, all payments received (not in violation of this Agreement) by (a) the ABL Claimholders may be applied, reversed, and reapplied, in whole or in part, to the ABL Priority Debt to the extent provided for in the ABL Documents, and (b) the Term Loan Claimholders may be applied, reversed, and reapplied, in whole or in part, to the Term Loan Priority Debt to the extent provided for in the Term Loan Documents.

 

4.6              Revolving Nature of ABL Debt. Term Loan Agent, acknowledges and agrees that the ABL Credit Agreement includes a revolving commitment and that the amount of the ABL Debt that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed subject to the terms hereof.

 

4.7              Voluntary and Mandatory Prepayments of the Term Loan Debt. Neither Borrowers nor any Guarantor shall make any (a) voluntary prepayment of the Term Loan Debt or the term debt included in ABL Debt, unless (i) no Default (as defined in the ABL Credit Agreement) and no ABL Default has occurred and is continuing or would immediately result therefrom, (ii) with respect to a voluntary prepayment of term debt included in the ABL Debt, no Default (as defined in the Term Loan Agreement) and no Term Loan Default has occurred and is continuing or would immediately result therefrom and (iii) after giving effect to any such voluntary prepayment, Excess Availability exceeds $3,000,000, or (b) mandatory prepayment of the Term Loan Debt from Excess Cash Flow (as defined in the Term Loan Agreement in effect on the date hereof) unless (i) no Default (as defined in the ABL Credit Agreement) and no ABL Default has occurred and is continuing or would immediately result therefrom, and (ii) after giving effect to such voluntary prepayment, Excess Availability exceeds $750,000; provided, that, to the extent Loan Parties were not permitted to make a mandatory prepayment described in this clause (b) because such conditions were not met, then the Loan Parties shall be obligated to make (and the Term Loan Claimholders shall be permitted to accept) such payments on the next Business Day that such conditions are satisfied so long as for the 30 day period ending on the date of such prepayment, Excess Availability has exceeded the sum of $750,000. In accepting any prepayment, all ABL Claimholders and all Term Loan Claimholders shall be permitted to rely on a certificate from Holdings certifying as to the satisfaction of the applicable condition regarding Excess Availability, and to the extent Excess Availability is in fact less than the required levels above, the ABL Claimholders and the Term Loan Claimholders shall have no obligation to turn over any such prepayment and no liability for accepting such prepayment when accepted in reliance on such certificate.

 

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4.8              Payments on Warrant Obligations. Neither the Borrowers nor any Guarantor shall make any cash payment under the Warrants or the Warrant Letter (as defined in the Term Loan Agreement) including, without limitation, in connection with the exercise of either of the Warrants and/or a sale to Holdings of the corresponding Equity Interests (as defined in the Term Loan Credit Agreement) issuable in connection therewith, pursuant to a sale of any Warrant to Holdings, pursuant to a payment of the Buy-In Price (as defined in any Warrant) or similar obligations, in each case, unless the Payment Conditions have been satisfied.

 

SECTION 5.  Releases; Dispositions; Other Agreements.

 

5.1              Releases.

 

(a)               Prior to the Payment in Full of any Priority Debt and subject to the other specific provisions of this Agreement including Section 5.1(e), the Priority Agent shall have the exclusive right to make determinations regarding the release or Disposition of any Priority Collateral pursuant to the terms of the applicable Documents or in accordance with the provisions of this Agreement, in each case without any consultation with or consent of any of the Junior Claimholders.

 

(b)               If, in connection with an Enforcement Action by the Priority Agent as provided for in Section 3 and prior to the Payment in Full of the related Priority Debt, the Priority Agent releases any of its Liens on any part of the Priority Collateral (or such Liens are released by operation of law), then the Liens of the Junior Agent on such Priority Collateral, shall be automatically, unconditionally, and simultaneously released to the extent, and only to the extent, the Priority Agent has released its Liens in such Priority Collateral.

 

(c)               If, in connection with any Disposition of any Priority Collateral permitted under the terms of the ABL Documents and the Term Loan Documents, each as in effect as of the date hereof, the Priority Agent releases any of its Liens on the portion of the Priority Collateral that is the subject of such Disposition, then the Liens of the Junior Agent on such Priority Collateral shall be automatically, unconditionally, and simultaneously release so long as the net cash Proceeds of any such Default Disposition are applied in accordance with Section 4.1(a) (as if they were Proceeds received in connection with an Enforcement Action).

 

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(d)               In the event of any private or public Disposition of all or any material portion of the Priority Collateral by one or more Grantors with the consent of the Priority Agent after the occurrence and during the continuance of an Event of Default (and prior to the Payment in Full of the Priority Debt), including any Disposition contemplated by Section 9-620 of the UCC, which Disposition is conducted by such Grantors with the consent of the Priority Agent in connection with good faith efforts by the Priority Agent to collect the Priority Debt through the Disposition of Priority Collateral (any such Disposition, an “Default Disposition”), then the Liens of the Junior Agent shall be automatically, unconditionally, and simultaneously released so long as (i) such Default Disposition is conducted by the applicable Grantor(s) in a commercially reasonable manner (as if such Disposition were a disposition of collateral by a secured party in accordance with the UCC) and in accordance with applicable law, (ii) the Priority Agent also releases its Liens on such Priority Collateral, and (iii) the net cash Proceeds of any such Default Disposition are applied in accordance with Section 4.1(a) (as if they were Proceeds received in connection with an Enforcement Action).

 

(e)               To the extent that the Liens of the Junior Agent in and to any Priority Collateral are to be released as provided in this Section 5.1,

 

(i)                 The Junior Agent shall promptly, upon the written request of the Priority Agent, at the joint and several expense of the Grantors, execute and deliver such release documents and confirmations of the authorization to file UCC amendments, in each case, as the Priority Agent may reasonably require in connection with such Disposition to evidence and effectuate such release; provided, that any such release or UCC amendment by the Junior Agent shall not extend to or otherwise affect any of the rights, if any, of Agent to the Proceeds from any such Disposition of any Collateral,

 

(ii)              from and after the time that the Liens of the Priority Agent in and to such Priority Collateral are released, the Junior Agent shall be automatically and irrevocably deemed to have authorized the Priority Agent to file UCC amendments releasing the Priority Collateral subject to such Disposition,

 

(iii)            the Junior Claimholders shall be deemed to have consented under the applicable Documents to such Disposition to the same extent as the consent of the Priority Claimholders, and

 

(iv)             in accordance with the provisions of applicable law, the Liens of the Junior Agent shall automatically attach to any Proceeds of any Collateral subject to any such Disposition to the extent not used to repay Priority Debt.

 

(f)                Until the Payment in Full of the applicable Priority Debt occurs, the Junior Agent hereby irrevocably constitutes and appoints the Priority Agent and any officer or agent of the Priority Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Junior Agent or in the Priority Agent’s own name, from time to time in the Priority Agent’s discretion, for the purpose of carrying out the terms of this Section 5.1, to take any and all appropriate action with respect to the Priority Collateral and to execute and deliver any and all documents and instruments with respect thereto that may be necessary to accomplish the purposes of this Section 5.1, including any financing statement amendments (form UCC-3) or any other endorsements or other instruments of transfer or release with respect to the Priority Collateral; provided that all such actions must be made without recourse or warranty to the Junior Claimholders and the expenses of the Junior Agent shall have been reimbursed by the Grantors.

 

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(g)               To the extent any Claimholders (i) have released any Lien on their Collateral or any Grantor with respect to their Debt, and any such Liens or obligations are later reinstated, or (ii) obtain any new Liens from any Grantor or obtain a guaranty from any Grantor of their Debt, then other Claimholders shall be entitled to obtain a Lien on any such Collateral, subject to the terms (including the lien subordination provisions) of this Agreement, and a guaranty from such Grantor of their Debt, as the case may be.

 

5.2              Insurance.

 

(a)               Unless and until the Payment in Full of ABL Priority Debt has occurred: (i) ABL Agent shall have the sole and exclusive right, subject to the rights of Grantors under the ABL Documents, to adjust and settle any claim under any insurance policy (other than business interruption) or any trade credit insurance policy in each case, in respect of the ABL Priority Collateral in the event of any loss thereunder (collectively, the “ABL Insured Claims”); and (ii) all proceeds of any such insurance policy (other than business interruption) or any trade credit insurance policy with respect to an insured claim on ABL Priority Collateral shall be paid, subject to the rights of Grantors under the ABL Documents and the Term Loan Documents, first to ABL Claimholders and Term Loan Claimholders in accordance with the priorities set forth in Section 4.1, until paid in full in cash, and second, to the Grantors, such other person as may be entitled thereto, or as a court of competent jurisdiction may otherwise direct. If any Term Loan Claimholders shall, at any time, receive any proceeds of any such insurance policy or any trade credit insurance policy in contravention of this Section 5.2(a), it shall pay such proceeds over to ABL Agent in accordance with the terms of Section 4.2.

 

(b)               Unless and until the Payment in Full of Term Loan Priority Debt has occurred: (i) the Term Loan Claimholders shall have the sole and exclusive right, subject to the rights of Grantors under the Term Loan Documents, to adjust and settle any claim under any insurance policy in the event of any loss thereunder and to approve any award granted in any condemnation, expropriation or similar proceeding (or any deed in lieu of condemnation and/or expropriation) other than ABL Insured Claims and (ii) all proceeds of any such insurance policy and any such award (or any payments with respect to a deed in lieu of condemnation and/or expropriation) shall be paid, subject to the rights of Grantors under the Term Loan Documents and the ABL Documents, first to the Term Loan Claimholders and the ABL Claimholders in accordance with the priorities set forth in Section 4.1, until paid in full in cash, and second, to the Grantors, such other person as may be entitled thereto, or as a court of competent jurisdiction may otherwise direct. If any ABL Claimholders shall, at any time, receive any proceeds of any such insurance policy or any such award or payment in contravention of this Section 5.2(b), it shall pay such proceeds over to Term Loan Agent in accordance with the terms of Section 4.2.

 

(c)               In the event that any Proceeds are derived from any insurance policy that covers ABL Priority Collateral and Term Loan Priority Collateral, ABL Agent and Term Loan Agent will work jointly and in good faith to collect, adjust or settle (subject to the rights of the Grantors under the ABL Documents and the Term Loan Documents) any claim under the relevant insurance policy.

 

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(d)               To effectuate the foregoing, Grantors shall provide ABL Agent and Term Loan Agent with separate lender’s loss payable endorsements naming themselves as loss payee and additional insured, as their interests may appear, with respect to policies which insure Collateral hereunder.

 

(e)               Notwithstanding anything contained in this Agreement to the contrary, in the event that any Proceeds derived from any insurance policy includes both ABL Priority Collateral and Term Loan Priority Collateral, if the ABL Agent and Term Loan Agent are unable to agree in writing upon an allocation of such Proceeds which does not result in Payment in Full of ABL Priority Debt and the Payment in Full of Term Loan Priority Debt, then the ABL Agent and the Term Loan Agent shall use commercially reasonable efforts in good faith to negotiate a proper allocation of such Proceeds as between ABL Priority Collateral and Term Loan Priority Collateral and if no such agreement occurs, then such allocations will be as determined by a Final Order.

 

5.3              Amendments; Refinancings.

 

(a)               The ABL Documents may be amended, supplemented, waived or otherwise modified in accordance with their terms and the ABL Debt may be Refinanced, in each case without notice to, or the consent of, the Term Loan Claimholders, all without affecting the lien subordination or other provisions of this Agreement; provided, that, in the case of a Refinancing, the holders of such Refinancing debt shall have bound themselves (in a writing addressed to Term Loan Agent) to the terms of this Agreement; provided further, that any such amendment, supplement, modification, waiver or Refinancing shall not, without the prior written consent of Term Loan Agent (which it shall be authorized to consent to based upon an affirmative vote of the Term Loan Claimholders holding no more than a majority of the debt under the Term Loan Agreement):

 

(i)                 contravene the provisions of this Agreement;

 

(ii)              increase the “Applicable Margin” or similar component of the interest rate (including any “floor”) by more than 3.00 percentage points per annum (excluding increases resulting from (A) increases in the underlying reference rate not caused by an amendment, supplement, modification or Refinancing of the ABL Credit Agreement, (B) the application of the pricing grid set forth in the ABL Credit Agreement as in effect on the date hereof, or (C) the accrual of interest at the default rate set forth in the ABL Credit Agreement as in effect on the date hereof);

 

(iii)            change to earlier dates any dates upon which payments of principal or interest are due thereon or extend the scheduled final maturity date of the ABL Debt beyond the scheduled maturity date of the Term Debt set forth in the Term Loan Documents;

 

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(iv)             modify (or have the effect of a modification of) the mandatory prepayment, redemption or defeasance provisions of the ABL Credit Agreement or any ABL Document in a manner that makes them more restrictive to Grantors than as in effect on the date hereof (other than such modifications that permit payments to permanently reduce the Term Loan Debt or with respect to a Disposition of ABL Priority Collateral after an ABL Default); or

 

(v)               change any covenants, defaults, or events of default under the ABL Credit Agreement or any other ABL Document (including the addition of covenants, defaults, or events of default not contained in the ABL Credit Agreement or other ABL Documents as in effect on the date hereof) to restrict any Grantor from making payments of the Term Loan Debt that would otherwise be permitted under the ABL Documents as in effect on the date hereof.

 

(b)               The Term Loan Documents may be amended, supplemented, waives or otherwise modified in accordance with their terms and the Term Loan Debt may be Refinanced, in each case without notice to, or the consent of, any of the ABL Claimholders, all without affecting the lien subordination or other provisions of this Agreement; provided, that, in the case of a Refinancing, the holders of such Refinancing debt shall have bound themselves (in a writing addressed to ABL Agent) to the terms of this Agreement; provided further, that any such amendment, supplement, modification, or waiver or Refinancing shall not, without the prior written consent of ABL Agent (which it shall be authorized to consent to based upon an affirmative vote of the ABL Claimholders holding no more than a majority of the ABL Debt):

 

(i)                 contravene the provisions of this Agreement;

 

(ii)              increase the “Applicable Margin” or similar component of the cash pay portion of any interest rate by more than 3.00 percentage points per annum (excluding increases resulting from (A) increases in the underlying reference rate not caused by an amendment, supplement, modification or Refinancing of the Term Loan Agreement, (B) the application of the pricing grid set forth in the Term Loan Agreement as in effect on the date hereof, or (C) the accrual of interest at the default rate set forth in the Term Loan Credit Agreement as in effect on the date hereof);

 

(iii)            change to earlier dates any dates upon which payments of principal or interest are due thereon or shorten the final maturity date of the Term Debt to be due within six (6) months of the scheduled maturity date of the ABL Debt;

 

(iv)             change any covenants, defaults, or events of default under the Term Loan Agreement or any other Term Loan Document (including the addition of covenants, defaults, or events of default not contained in the Term Loan Agreement or other Term Loan Documents as in effect on the date hereof) to restrict any Grantor from making payments of the ABL Debt that would otherwise be permitted under the Term Loan Documents as in effect on the date hereof; or

 

(v)               modify (or have the effect of a modification of) the mandatory prepayment, redemption or defeasance provisions of the Term Loan Agreement or any Term Loan Document in a manner that makes them more restrictive to Grantors (other than such modifications that permit payments to permanently reduce the ABL Debt or with respect to a Disposition of Term Loan Priority Collateral after a Term Loan Default has occurred and is continuing).

 

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5.4              Bailee for Perfection.

 

(a)               ABL Agent and Term Loan Agent each agree to hold that part of the Collateral that is in its possession (or in the possession of its agents or bailees), to the extent that possession is necessary to perfect a Lien thereon under the UCC or other applicable law (such possessory Collateral being referred to as the “Pledged Collateral”), as gratuitous bailee and as a non-fiduciary representative for Term Loan Agent or ABL Agent, as applicable, solely for the purpose of perfecting the security interest granted under the Term Loan Documents or the ABL Documents, as applicable, subject to the terms and conditions of this Section 5.4. Term Loan Agent hereby appoints ABL Agent as its gratuitous bailee and non-fiduciary representative for the purposes of perfecting their security interest in all Pledged Collateral in which ABL Agent has a perfected security interest under the UCC. ABL Agent hereby appoints Term Loan Agent as its gratuitous bailee and non-fiduciary representative for the purposes of perfecting their security interest in all Pledged Collateral in which Term Loan Agent has a perfected security interest under the UCC. Each of ABL Agent and Term Loan Agent hereby accept such appointments pursuant to this Section 5.4 Subject to Sections 2.1 and 4 and unless and until the Payment in Full of ABL Priority Debt, Term Loan Agent agrees to promptly notify ABL Agent of any Pledged Collateral constituting ABL Priority Collateral held by it or by any other Term Loan Claimholder, and, immediately upon the request of ABL Agent to deliver to ABL Agent any such Pledged Collateral, together with any necessary endorsements (or otherwise allow ABL Agent to obtain possession of such Pledged Collateral) for Disposition and distribution of Proceeds in accordance with Sections 2 and 4. Subject to Sections 2.1 and 4 and unless and until the Payment in Full of Term Loan Priority Debt and payment in full in cash of all Excess Term Loan Debt, ABL Agent agrees to promptly notify Term Loan Agent of any Pledged Collateral constituting Term Loan Priority Collateral held by it or by any other ABL Claimholder, and, immediately upon the request of Term Loan Agent to deliver to Term Loan Agent any such Pledged Collateral held by it or by any other ABL Claimholder, together with any necessary endorsements (or otherwise allow Term Loan Agent to obtain possession of such Pledged Collateral) for Disposition and distribution of Proceeds in accordance with Sections 2.1 and 4.

 

(b)               ABL Agent shall have no obligation whatsoever to any of the Term Loan Claimholders to ensure that the Pledged Collateral is genuine or owned by any of Grantors or to preserve rights or benefits of any person except as expressly set forth in this Section 5.4. Term Loan Agent shall have no obligation whatsoever to any of the ABL Claimholders to ensure that the Pledged Collateral is genuine or owned by any of Grantors or to preserve rights or benefits of any person except as expressly set forth in this Section 5.4. The duties or responsibilities of ABL Agent under this Section 5.4 shall be limited solely to holding the Pledged Collateral as bailee and non-fiduciary representative in accordance with this Section 5.4 and delivering any Pledged Collateral in its possession (or in the possession of its agents or bailees) upon a Payment in Full of ABL Priority Debt as provided in Section 5.6. The duties or responsibilities of Term Loan Agent under this Section 5.4 shall be limited solely to holding the Pledged Collateral as bailee and non-fiduciary representative in accordance with this Section 5.4 and delivering any Pledged Collateral in its possession (or in the possession of its agents or bailees) as provided in Section 5.6.

 

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(c)               ABL Agent, in acting pursuant to this Section 5.4, shall not have, or be deemed to have, a fiduciary relationship in respect of any of the Term Loan Claimholders. Term Loan Agent, in acting pursuant to this Section 5.4, shall not have, or be deemed to have, a fiduciary relationship in respect of any of the ABL Claimholders.

 

5.5              When Payment in Full of ABL Priority Debt or Payment in Full of Term Loan Priority Debt Deemed to Not Have Occurred.

 

(a)               If any Borrower enters into any Refinancing of the ABL Debt that is intended to be secured by the ABL Priority Collateral on a first priority basis, then a Payment in Full of ABL Priority Debt shall be deemed not to have occurred for all purposes of this Agreement, and the obligations under such Refinancing of such ABL Debt shall be treated as ABL Debt for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth herein, and ABL Agent under the ABL Documents effecting such Refinancing shall be ABL Agent for all purposes of this Agreement. ABL Agent under such ABL Documents shall agree (in a writing addressed to Term Loan Agent) to be bound by the terms of this Agreement.

 

(b)               If Borrowers enter into any Refinancing of the Term Loan Debt that is intended to be secured by the Term Loan Priority Collateral on a first priority basis, then a Payment in Full of Term Loan Priority Debt shall be deemed not to have occurred for all purposes of this Agreement, and the obligations under such Refinancing of such Term Loan Debt shall be treated as Term Loan Debt for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth herein, and Term Loan Agent under the Term Loan Documents effecting such Refinancing shall be Term Loan Agent for all purposes of this Agreement. Term Loan Agent under such Term Loan Documents shall agree (in a writing addressed to ABL Agent) to be bound by the terms of this Agreement.

 

5.6              Transfer of Pledged Collateral; Other Actions.

 

(a)               Subject to Sections 2.1 and 4 and upon the Payment in Full of ABL Priority Debt, ABL Agent hereby agrees to the extent permitted by applicable law, upon the written request of Term Loan Agent (with all costs and expenses in connection therewith to be for the account of Term Loan Agent and to be paid by Grantors):

 

(i)                 ABL Agent shall, without recourse or warranty, take commercially reasonable steps to transfer the possession of the Pledged Collateral, if any, then in its possession to Term Loan Agent, except in the event and to the extent (A) such Collateral is sold, liquidated, or otherwise disposed of by any of the ABL Claimholders or by a Grantor as provided herein in full or partial satisfaction of any of the ABL Priority Debt or (B) it is otherwise required by any order of any court or other governmental authority or applicable law; and

 

(ii)              in connection with the terms of any collateral access agreement, whether with a landlord, processor, warehouseman, or other third party or any control agreement, ABL Agent shall notify the other parties thereto that it no longer has rights as secured party thereunder.

 

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(b)               Subject to Sections 2.1 and 4 and upon the Payment in Full of the Term Loan Priority Debt, the Term Loan Agent hereby agrees to the extent permitted by applicable law, upon the written request of the ABL Agent (with all costs and expenses in connection therewith to be for the account of ABL Agent and to be paid by Grantors):

 

(i)                 Term Loan Agent shall, without recourse or warranty, take commercially reasonable steps to transfer the possession of the Pledged Collateral, if any, then in its possession to ABL Agent, except in the event and to the extent (A) such Collateral is sold, liquidated, or otherwise disposed of by any of the Term Loan Claimholders or by a Grantor as provided herein in full or partial satisfaction of any of the Term Loan Priority Debt or (B) it is otherwise required by any order of any court or other governmental authority or applicable law; and

 

(ii)              in connection with the terms of any collateral access agreement, whether with a landlord, processor, warehouseman, or other third party or any control agreement, Term Loan Agent shall notify the other parties thereto that it no longer has rights as secured party thereunder.

 

(c)               The foregoing provisions shall not impose on any of the ABL Claimholders or any of the Term Loan Claimholders any obligations that would conflict with prior perfected claims therein in favor of any other Person or any order or decree of any court or other governmental authority or any applicable law or give rise to risk of legal liability.

 

SECTION 6.  Insolvency Proceedings.

 

6.1              Enforceability and Continuing Priority. This Agreement shall be applicable both before and after the commencement of any Insolvency Proceeding and all converted or succeeding cases in respect thereof. The relative rights of the Claimholders in or to any distributions from or in respect of any Collateral, or Proceeds of Collateral, shall continue after the commencement of any Insolvency Proceeding. Accordingly, the provisions of this Agreement are intended to be and shall be enforceable as a subordination agreement within the meaning of Section 510 of the Bankruptcy Code (or any similar Bankruptcy Law).

 

6.2              Financing.

 

(a)               Until the Payment in Full of ABL Priority Debt, if any Grantor shall be subject to any Insolvency Proceeding and if ABL Agent consents to the use of cash collateral (as such term is defined in Section 363(a) of the Bankruptcy Code (or similar Bankruptcy Law)) constituting ABL Priority Collateral (herein, “ABL Cash Collateral”), or consents to such Grantor obtaining financing from any of the ABL Claimholders, provided under Section 364 of the Bankruptcy Code or any similar provision of any other Bankruptcy Law secured solely by a Lien on such ABL Priority Collateral (such financing, an “ABL DIP Financing”), and if such ABL Cash Collateral use or ABL DIP Financing, as applicable, meets the applicable ABL DIP Financing Conditions, then Term Loan Agent unconditionally agrees that it will consent as a secured creditor to such ABL Cash Collateral use and will raise no objection as a secured creditor to such ABL DIP Financing, as applicable, and, if ABL DIP Financing is involved, Term Loan Agent will subordinate its Liens in the ABL Priority Collateral (and in any other assets (other than Term Loan Priority Collateral) of the Grantors that may serve as collateral (including avoidance actions or the proceeds thereof) for such ABL DIP Financing) to the Liens securing such ABL DIP Financing so long as the Term Loan Agent is not prohibiting from seeking adequate protection as contemplated by Section 6.5. Term Loan Agent agrees that it shall not, and nor shall any of the Term Loan Claimholders, directly or indirectly, provide, offer to provide, or support any DIP Financing secured by a Lien on the ABL Priority Collateral senior to or pari passu with the Liens securing the ABL Priority Debt. If, in connection with any ABL Cash Collateral use or ABL DIP Financing, any Liens on the ABL Priority Collateral held by the ABL Claimholders to secure the ABL Debt are subject to a surcharge or are subordinated to an administrative priority claim, a professional fee “carve-out,” or fees owed to the United States Trustee, then the Liens on the ABL Priority Collateral of the Term Loan Claimholders securing the Term Loan Priority Debt shall also be subordinated to such interest or claim and shall remain subordinated to the Liens on the ABL Priority Collateral of the ABL Claimholders consistent with this Agreement. The foregoing to the contrary notwithstanding but subject to Section 2.2, the Term Loan Claimholders may oppose or raise any objections to such use of ABL Cash Collateral or ABL DIP Financing that could be raised by a creditor of Grantors whose claims are not secured by Liens on ABL Priority Collateral, provided that such opposition or objections are not based on their status as secured creditors.

 

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(b)               Until the Payment in Full of Term Loan Priority Debt, if any Grantor shall be subject to any Insolvency Proceeding and if Term Loan Agent consents to the use of cash collateral (as such term is defined in Section 363(a) of the Bankruptcy Code (or similar Bankruptcy Law)) constituting Term Loan Priority Collateral (herein, “Term Loan Cash Collateral”), or consents to such Grantor obtaining financing from the Term Loan Claimholders provided under Section 364 of the Bankruptcy Code or any similar provision of any other Bankruptcy Law secured by a Lien on such Term Loan Priority Collateral (such financing, a “Term Loan DIP Financing”), and if such Term Loan Cash Collateral use or Term Loan DIP Financing, as applicable, meets the applicable Term Loan DIP Financing Conditions, then ABL Agent unconditionally agrees that it will consent as a secured creditor to such Term Loan Cash Collateral use and will raise no objection as a secured creditor to such Term Loan DIP Financing, as applicable, and, if Term Loan DIP Financing is involved, ABL Agent will subordinate its Liens in the Term Loan Priority Collateral (and in any other assets other than ABL Priority Collateral of the Grantors that may serve as collateral (including avoidance actions or the proceeds thereof) for such Term Loan DIP Financing) to the Liens securing such Term Loan DIP Financing so long as the ABL Agent is not prohibiting from seeking adequate protection as contemplated by Section 6.5. ABL Agent agrees that it shall not, and nor shall any of the ABL Claimholders, directly or indirectly, provide, offer to provide, or support any DIP Financing secured by a Lien on the Term Loan Priority Collateral that is senior to or pari passu with the Liens securing the Term Loan Priority Debt. If, in connection with any Term Loan Cash Collateral use or Term Loan DIP Financing, any Liens on the Term Loan Priority Collateral held by the Term Loan Claimholders to secure the Term Loan Debt are subject to a surcharge or are subordinated to an administrative priority claim, a professional fee “carve-out,” or fees owed to the United States Trustee, then the Liens on the Term Loan Priority Collateral of the ABL Claimholders securing the ABL Debt shall also be subordinated to such interest or claim and shall remain subordinated to the Liens on the Term Loan Priority Collateral of the Term Loan Claimholders consistent with this Agreement. The foregoing to the contrary notwithstanding but subject to Section 2.2, the ABL Claimholders may oppose or raise any objections to use of Term Loan Cash Collateral or Term Loan DIP Financing that could be raised by a creditor of Grantors whose claims are not secured by Liens on Term Loan Priority Collateral, provided that such opposition or objections are not based on their status as secured creditors.

 

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(c)               All Liens granted to ABL Agent or Term Loan Agent in any Insolvency Proceeding, whether as adequate protection or otherwise, are intended by the parties to be and shall be deemed to be subject to the Lien priorities in Section 2.1 and the other terms and conditions of this Agreement.

 

6.3              Sales. Each Junior Agent agrees that it will consent to, and will not object or oppose, or support, directly or indirectly, any other person seeking to object or oppose, a motion by a Grantor that is supported by the Priority Agent to Dispose of any of its Priority Collateral free and clear of the Liens of the Junior Agent under Section 363 or 1129 of the Bankruptcy Code (or under any similar provision of any applicable Bankruptcy Law) if (a) the Priority Agent has consented to the sale of such Collateral free and clear of the Liens of the Priority Agent, (b) such motion does not impair, subject to the priorities set forth in this Agreement, the rights of the Junior Claimholders under Section 363(k) of the Bankruptcy Code or similar provision of any applicable Bankruptcy Law (so long as the right of the Junior Claimholders to offset their claims against the purchase price only arises after the Priority Debt has been paid in full in cash), and (c) either (i) pursuant to court order, the Liens of the Junior Agent attach to the net Proceeds of the Disposition with the same priority and validity as the Liens held by such Junior Agent on such Priority Collateral, and the Liens remain subject to the terms of this Agreement, or (ii) the Proceeds of the Disposition are applied to permanently reduce the ABL Priority Debt or Term Loan Priority Debt, as applicable, in accordance with Section 4.1. The foregoing to the contrary notwithstanding but subject to Section 2.2, the Junior Claimholders may oppose or raise any objections to such Disposition of such Priority Collateral that could be raised by a creditor of Grantors whose claims are not secured by Liens on such Priority Collateral, provided that such opposition or objections are not based on their status as secured creditors (without limiting the foregoing, the Junior Claimholders may not oppose or raise any objections based on rights afforded by Sections 363(e) and (f) of the Bankruptcy Code to secured creditors (or any comparable provision of any other Bankruptcy Law) with respect to the Liens granted to the Junior Agent in respect of such assets).

 

6.4              Relief from the Automatic Stay. Until the Payment in Full of Priority Debt has occurred, Junior Agent agrees not to (a) seek (or support any other person seeking) relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any Priority Collateral, without the prior written consent of Priority Agent; provided, that Junior Agent may seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of such Priority Collateral if and to the extent that Priority Agent has obtained relief from or modification of such stay in respect of the Priority Collateral, or (b) oppose any request by the Priority Agent or any Priority Claimholder to seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any Priority Collateral.

 

6.5              Adequate Protection. In any Insolvency Proceeding involving a Grantor,

 

(a)               each Junior Claimholder agrees that it shall not object to or contest, or support any other person objecting or contesting (and instead shall be deemed to have hereby irrevocably, absolutely, and unconditionally waived any right to do so):

 

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(i)                 any request by any Priority Claimholder with respect to any Priority Collateral prior to the applicable Payment in Full of Priority Debt, for “adequate protection” (within the meaning of such term under the Bankruptcy Code and any similar concept under applicable Bankruptcy Law) of its interest in the Priority Collateral, including a request for replacement or additional Liens on post-petition assets of the same type as such Priority Collateral; provided, any ABL Claimholder, solely in its capacity as a Priority Claimholder, may object to adequate protection in the form of cash payments to the extent such payment is sought to be paid from ABL Priority Collateral or the Proceeds thereof and any Term Loan Claimholder, solely in its capacity as a Priority Claimholder, may object to adequate protection in the form of cash payments to the extent such payment is sought to be paid from Term Loan Priority Collateral or the Proceeds thereof;

 

(ii)              as applicable any (A) objection by any Priority Claimholder to any motion, relief, action, or proceeding based on such Priority Claimholders claiming a lack of adequate protection with respect to its Liens in their Priority Collateral, or (B) request by any of the Priority Claimholders for relief from the automatic stay with respect to its Priority Collateral.

 

(b)               if any Priority Claimholder is granted adequate protection with respect to its rights in the Priority Collateral in the form of an additional or replacement Lien with respect to assets of the type included in such Priority Collateral, then Priority Agent agrees that Junior Agent shall also be entitled to seek, without objection from the Priority Claimholders, adequate protection in the form of an additional or replacement Lien with respect to the assets that are the subject of the Priority Claimholder’s additional or replacement Lien, which additional or replacement adequate protection Lien of the Junior Agent, if obtained, shall be subordinate to the adequate protection Liens in and to such assets securing the Priority Debt on the same basis as the other Liens securing the Junior Debt on the Junior Priority Collateral are subordinated to the Liens on the Priority Collateral securing the Priority Debt under this Agreement;

 

(c)               no Junior Claimholder may seek adequate protection with respect to its rights in the Priority Collateral except for adequate protection in the form of an additional or replacement Lien in and to existing or future assets of Grantors, and Junior Agent agrees that Priority Agent shall also be entitled to seek, without objection from the Junior Claimholders, a senior adequate protection Lien in and to such existing or future assets of Grantors as security for the Priority Debt and that any adequate protection Lien in and to the Priority Collateral securing the Junior Debt shall be subordinated to such senior adequate protection Lien in and to the Priority Collateral securing the Priority Debt on the same basis as the other Liens securing the Junior Debt are subordinated to the Liens on the Priority Collateral securing the Priority Debt under this Agreement;

 

(d)               any adequate protection granted in favor of any Priority Claimholder in the form of a superpriority or other administrative expense claim and any claim in favor of any Priority Claimholder arising under Section 507(b) of the Bankruptcy Code (or similar Bankruptcy Law) (“Senior 507(b) Claims”), shall be pari passu with the grant of adequate protection in favor of the other Priority Claimholders in the form of a superpriority or other administrative expense claim and any Senior 507(b) Claims in favor of such other Priority Claimholders;

 

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(e)               any claim arising under Section 507(b) of the Bankruptcy Code in favor of any Junior Claimholder shall be pari passu with the claims arising under Section 507(b) of the Bankruptcy Code (or similar Bankruptcy Law) in favor of the other Junior Claimholders (collectively, “Junior 507(b) Claims”), all Junior 507(b) Claims shall be junior and subordinate in right of payment to the Senior 507(b) Claims, and the holders of the Junior 507(b) Claims agree that, in connection with any plan of reorganization in such Insolvency Proceeding, such Junior 507(b) Claims may be paid in any combination of cash, securities, or other property having a present value equal to the amount of such Junior 507(b) Claims as of the effective date of confirmation of such plan;

 

(f)                No Junior Claimholder shall object to, oppose, or challenge the determination of the extent of any Liens held by any of the Priority Claimholders, the value of Collateral securing any claims of Priority Claimholders under Section 506(a) of the Bankruptcy Code or any claim by any Priority Claimholder for allowance of Priority Debt consisting of post-petition interest, fees, or expenses.

 

6.6              Specific Sections of the Bankruptcy Code. The Junior Claimholders shall not object to, oppose, support any objection, or take any other action to impede, the right of any Priority Claimholder to make an election under Section 1111(b)(2) of the Bankruptcy Code (or similar provision of Bankruptcy Law). The Junior Claimholders waive any claim they may hereafter have against any Priority Claimholder arising out of the election by any Priority Claimholder of the application of Section 1111(b)(2) of the Bankruptcy Code (or similar provision of Bankruptcy Law). The Junior Claimholders agree that they will not, directly or indirectly, assert or support the assertion of, and hereby waive any right that they may have to assert or support the assertion of any claim under Section 506(c) or the “equities of the case” exception of Section 552(b) of the Bankruptcy Code (or similar provisions of Bankruptcy Law) as against any Priority Claimholder or with respect to any of the Priority Collateral to the extent securing the Priority Debt; provided, that nothing herein shall restrict the holder of any DIP Financing from having, or seeking to have, such DIP Financing repaid, in whole or in part, from the proceeds of the assertion of any claim under Section 506(c) of the Bankruptcy Code (or any similar provision of any other Bankruptcy Law).

 

6.7              No Waiver; Limitation.

 

(a)               Subject to Sections 3.1(a), 3.2(a), and the other provisions of Section 6, nothing contained herein shall prohibit or in any way limit any Agent or any other Claimholder from objecting in any Insolvency Proceeding involving a Grantor to any action taken by the other Agent or any other Claimholder, including the seeking by the other Agent or any other Claimholder of adequate protection or the assertion by the other Agent or any other Claimholder of any of its rights and remedies under the Term Loan Documents or the ABL Documents, as applicable.

 

6.8              Avoidance Issues. If any Claimholder is required in any Insolvency Proceeding or otherwise to turn over, disgorge, or otherwise pay to the estate of any Grantor any amount paid in respect of the Debt of such Claimholder (or if any Claimholder elects to do so upon the advice of counsel) (a “Recovery”), then such Claimholder shall be entitled to a reinstatement of the applicable Debt with respect to all such amounts, and all rights, interests, priorities, and privileges recognized in this Agreement shall apply with respect to any such Recovery. If this Agreement shall have been terminated prior to such Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the parties hereto from such date of reinstatement.

 

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6.9              Plan of Reorganization.

 

(a)               If, in any Insolvency Proceeding involving a Grantor, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed pursuant to a confirmed plan of reorganization or similar dispositive restructuring plan, compromise or arrangement, both on account of ABL Debt and on account of Term Loan Debt, then, to the extent the debt obligations distributed on account of the ABL Debt and on account of the Term Loan Debt are secured by Liens upon the same property, the provisions of this Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.

 

(b)               The provisions of Section 1129(b)(1) of the Bankruptcy Code (or similar Bankruptcy Law) notwithstanding, the Claimholders agree that they will not propose, support, or vote in favor of any plan of reorganization, compromise, arrangement or similar proposal of a Grantor that is inconsistent with the priorities or other provisions of this Agreement.

 

SECTION 7.  Reliance; Waivers; Etc.

 

7.1              Reliance. Other than any reliance on the terms of this Agreement, ABL Agent acknowledges that it and each of the other ABL Claimholders have, independently and without reliance on any of the Term Loan Claimholders, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into each of the ABL Documents and be bound by the terms of this Agreement and they will continue to make their own credit decision in taking or not taking any action under the ABL Documents or this Agreement. Other than any reliance on the terms of this Agreement, Term Loan Agent acknowledges that it and each of the other Term Loan Claimholders have, independently and without reliance on any of the ABL Claimholders, and based on documents and information deemed by them appropriate, made their own credit analysis and decision to enter into each of the Term Loan Documents and be bound by the terms of this Agreement and they will continue to make their own credit decision in taking or not taking any action under the Term Loan Documents or this Agreement.

 

7.2              No Warranties or Liability. ABL Agent acknowledges and agrees that none of the Term Loan Claimholders have made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectability, or enforceability of any of the Term Loan Documents, the ownership of any Collateral, or the perfection or priority of any Liens thereon. Except as otherwise expressly provided herein, the Term Loan Claimholders will be entitled to manage and supervise their respective loans and extensions of credit under the Term Loan Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate. Term Loan Agent acknowledges and agrees that none of the ABL Claimholders has made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectability, or enforceability of any of the ABL Documents, the ownership of any Collateral, or the perfection or priority of any Liens thereon. Except as otherwise expressly provided herein, the ABL Claimholders will be entitled to manage and supervise their respective loans and extensions of credit under the ABL Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate. The Term Loan Claimholders shall have no duty to the ABL Claimholders, and the ABL Claimholders shall have no duty to the Term Loan Claimholders, to act or refrain from acting in a manner that allows, or results in, the occurrence or continuance of an event of default or default under any agreements with any Grantor (including the ABL Documents and the Term Loan Documents), regardless of any knowledge thereof which they may have or be charged with.

 

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7.3              No Waiver of Lien Priorities.

 

(a)               No right of any of the Claimholders, any Agent or any of them to enforce any provision of this Agreement or any Loan Document shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Grantor or by any act or failure to act by any other Claimholder or any Agent, or by any noncompliance by any person with the terms, provisions, and covenants of this Agreement, any of the Loan Documents, regardless of any knowledge thereof which any Agent or any other Claimholder may have (or be otherwise charged with).

 

(b)               Without in any way limiting the generality of the foregoing provisions of Section 7.3(a) (but subject to any rights of Grantors under the ABL Documents and subject to the provisions of Section 5.3(a)), the ABL Claimholders may, at any time and from time to time in accordance with the ABL Documents or applicable law, without the consent of, or notice to, any of the Term Loan Claimholders, without incurring any liabilities to any of the Term Loan Claimholders and without impairing or releasing the Lien priorities and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of any of the Term Loan Claimholders is affected, impaired, or extinguished thereby) do any one or more of the following without the prior written consent of Term Loan Agent:

 

(i)                 change the manner, place, or terms of payment or change or extend the time of payment of, or amend, renew, exchange, increase, or alter, the terms of any of the ABL Debt or any Lien on any ABL Collateral or guarantee thereof or any liability of any Grantor, or any liability incurred directly or indirectly in respect thereof (including any increase in or extension of the ABL Debt, without any restriction as to the tenor or terms of any such increase or extension) or otherwise amend, renew, exchange, extend, modify, or supplement in any manner any Liens held by any of the ABL Claimholders, the ABL Debt, or any of the ABL Documents;

 

(ii)              sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order all or any part of the ABL Priority Collateral or any liability of any Grantor to any of the ABL Claimholders, or any liability incurred directly or indirectly in respect thereof;

 

(iii)            settle or compromise any ABL Debt or any other liability of any Grantor or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including the ABL Debt) in any manner or order; and

 

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(iv)             exercise or delay in or refrain from exercising any right or remedy against any Grantor or any other person, elect any remedy and otherwise deal freely with any Grantor or any ABL Priority Collateral and any guarantor or any liability of any Grantor to any of the ABL Claimholders or any liability incurred directly or indirectly in respect thereof.

 

(c)               Except as otherwise provided herein, Term Loan Agent also agrees that the ABL Claimholders shall have no liability to any of the Term Loan Claimholders, and Term Loan Agent hereby waives any claim of the Term Loan Claimholders against any of the ABL Claimholders arising out of any and all actions which any of the ABL Claimholders may, pursuant to the terms hereof, take, permit, or omit to take with respect to:

 

(i)                 the ABL Documents;

 

(ii)              the collection of the ABL Debt; or

 

(iii)            the foreclosure upon, or sale, liquidation, or other disposition of, or the failure to foreclose upon, or sell, liquidate, or otherwise dispose of, any ABL Priority Collateral.

 

Term Loan Agent agrees that the ABL Claimholders have no duty to the Term Loan Claimholders in respect of the maintenance or preservation of the ABL Priority Collateral, the ABL Debt, or otherwise.

 

(d)               Without in any way limiting the generality of the provisions of Section 7.3(a) (but subject to any rights of Grantors under the Term Loan Documents and subject to the provisions of Section 5.3(b)) the Term Loan Claimholders may, at any time and from time to time in accordance with the Term Loan Documents or applicable law, without the consent of, or notice to, any of the ABL Claimholders, without incurring any liabilities to any of the ABL Claimholders and without impairing or releasing the Lien priorities and other benefits provided in this Agreement (even if any right of subrogation or other right or remedy of any of the ABL Claimholders is affected, impaired, or extinguished thereby) do any one or more of the following without the prior written consent of ABL Agent:

 

(i)                 change the manner, place, or terms of payment or change or extend the time of payment of, or amend, renew, exchange, increase, or alter, the terms of any of the Term Loan Debt or any Lien on any Term Loan Collateral or guarantee thereof or any liability of any Grantor, or any liability incurred directly or indirectly in respect thereof (including any increase in or extension of the Term Loan Debt, without any restriction as to the tenor or terms of any such increase or extension) or otherwise amend, renew, exchange, extend, modify, or supplement in any manner any Liens held by the Term Loan Claimholders, the Term Loan Debt, or any of the Term Loan Documents;

 

(ii)              subject to Section 3.9, sell, exchange, release, surrender, realize upon, enforce or otherwise deal with in any manner and in any order any part of the Term Loan Priority Collateral or any liability of any Grantor to any Term Loan Claimholder, or any liability incurred directly or indirectly in respect thereof;

 

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(iii)            settle or compromise any Term Loan Debt or any other liability of any Grantor or any security therefor or any liability incurred directly or indirectly in respect thereof and apply any sums by whomsoever paid and however realized to any liability (including the Term Loan Debt) in any manner or order; and

 

(iv)             exercise or delay in or refrain from exercising any right or remedy against any Grantor or any other person, elect any remedy and otherwise deal freely with any Grantor or any Term Loan Priority Collateral and any guarantor or any liability of any Grantor to any Term Loan Claimholder or any liability incurred directly or indirectly in respect thereof.

 

(e)               Except as otherwise provided herein, ABL Agent also agrees that the Term Loan Claimholders shall have no liability to any of the ABL Claimholders, and ABL Agent hereby waives any claim of the ABL Claimholders against any of the Term Loan Claimholders arising out of any and all actions which any of the Term Loan Claimholders may, pursuant to the terms hereof, take, permit or omit to take with respect to:

 

(i)                 the Term Loan Documents;

 

(ii)              the collection of the Term Loan Debt; or

 

(iii)            the foreclosure upon, or sale, liquidation, or other disposition of, or the failure to foreclose upon, or sell, liquidate, or otherwise dispose of, any Term Loan Priority Collateral.

 

ABL Agent agrees that the Term Loan Claimholders have no duty to the ABL Claimholders in respect of the maintenance or preservation of the Term Loan Priority Collateral, the Term Loan Debt, or otherwise.

 

(f)                Until the Payment in Full of ABL Priority Debt and the Payment in Full of Term Loan Priority Debt, each of Term Loan Agent and ABL Agent agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead, or otherwise assert, or otherwise claim the benefit of, any marshaling, appraisal, valuation, or other similar right that may otherwise be available under applicable law with respect to the other Agent’s Priority Collateral or any other similar rights a junior secured creditor may have under applicable law.

 

7.4              Obligations Unconditional. For so long as this Agreement is in full force and effect, all rights, interests, agreements, and obligations of the ABL Claimholders and the Term Loan Claimholders, respectively, hereunder shall remain in full force and effect irrespective of:

 

(a)               any lack of validity or enforceability of any ABL Documents or any Term Loan Documents;

 

(b)               except as otherwise expressly restricted in this Agreement, any change in the time, manner, or place of payment of, or in any other terms of, all or any of the ABL Debt or Term Loan Debt, or any amendment or waiver or other modification, including any increase in the amount thereof, whether by course of conduct or otherwise, of the terms of any ABL Document or any Term Loan Document;

 

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(c)               except as otherwise expressly restricted in this Agreement, any exchange of any security interest in any Collateral or any other collateral, or any amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the ABL Debt or Term Loan Debt or any guarantee thereof;

 

(d)               the commencement of any Insolvency Proceeding in respect of any Grantor; or

 

(e)               any other circumstances which otherwise might constitute a defense available to any Grantor in respect of the ABL Debt or the Term Loan Debt.

 

SECTION 8.  Representations and Warranties.

 

8.1              Representations and Warranties of Each Party. Each party hereto represents and warrants to the other parties hereto as follows:

 

(a)       Such party is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder.

 

(b)       This Agreement has been duly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms.

 

(c)       The execution, delivery, and performance by such party of this Agreement (i) do not require any consent or approval of, registration or filing with or any other action by any governmental authority and (ii) will not violate any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or by-laws of such party or any order of any governmental authority or any provision of any indenture, agreement or other instrument binding upon such party.

 

8.2              Representations and Warranties of Each Agent. ABL Agent and Term Loan Agent each represents and warrants to the other that it has been authorized by the ABL Claimholders or the Term Loan Claimholders, as applicable, under the ABL Credit Agreement or the Term Loan Agreement, as applicable, to enter into this Agreement and that each of the agreements, covenants, waivers, and other provisions hereof is valid, binding, and enforceable against the ABL Lenders or Term Lenders, as applicable, as fully as if they were parties hereto.

 

8.3              Survival. All representations and warranties made by one party hereto in this Agreement shall be considered to have been relied upon by the other party hereto and shall survive the execution and delivery of this Agreement, regardless of any investigation made by any such other party.

 

SECTION 9.  Miscellaneous.

 

9.1              Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of any of the ABL Documents or any of the Term Loan Documents, the provisions of this Agreement shall govern and control.

 

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9.2              Effectiveness; Continuing Nature of this Agreement; Severability. This Agreement shall become effective when executed and delivered by the parties hereto. This is a continuing agreement of lien subordination and the ABL Claimholders may continue, at any time and without notice to any Term Loan Claimholder, to extend credit and other financial accommodations to or for the benefit of any Grantor constituting ABL Debt in reliance hereof. Each Agent hereby waives any right it may have under applicable law to revoke this Agreement or any of the provisions of this Agreement. The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency Proceeding. Any provision of this Agreement that is prohibited or unenforceable shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All references to any Grantor shall include such Grantor as debtor and debtor-in-possession and any receiver or trustee for such Grantor in any Insolvency Proceeding. Subject to the terms of this Agreement that provide for reinstatement of Debt, this Agreement shall terminate and be of no further force and effect:

 

(a)               with respect to the ABL Claimholders and the ABL Debt, on the date of Payment in Full of ABL Priority Debt; and

 

(b)               with respect to the Term Loan Claimholders and the Term Loan Debt, on the date of Payment in Full of the Term Loan Priority Debt.

 

9.3              Amendments; Waivers. No amendment, modification, or waiver of any of the provisions of this Agreement shall be effective unless the same shall be in writing signed on behalf of the ABL Agent (or its authorized agent) and the Term Loan Agent (or its authorized agent) and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time.

 

9.4              Information Concerning Financial Condition of Parent and its Subsidiaries. The ABL Claimholders, on the one hand, and the Term Loan Claimholders, on the other hand, shall each be responsible for keeping themselves informed of (a) the financial condition of Parent and its Subsidiaries and all endorsers or guarantors of the ABL Debt or the Term Loan Debt and (b) all other circumstances bearing upon the risk of nonpayment of the ABL Debt or the Term Loan Debt. The ABL Claimholders shall have no duty to advise the Term Loan Claimholders of information known to them regarding such condition or any such circumstances or otherwise. The Term Loan Claimholders shall have no duty to advise the ABL Claimholders of information known to them regarding such condition or any such circumstances or otherwise. In the event any of the ABL Claimholders or any of the Term Loan Claimholders, in its sole discretion, undertakes at any time or from time to time to provide any such information to any other party to this Agreement, it shall be under no obligation:

 

(a)               to make nor shall it be deemed to have made, and the ABL Claimholders and the Term Loan Claimholders, as the case may be, shall not be under any obligation to make nor shall they be deemed to have made, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness, or validity of any such information so provided;

 

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(b)               to provide any additional information or to provide any such information on any subsequent occasion;

 

(c)               to undertake any investigation; or

 

(d)               to disclose any information, which pursuant to accepted or reasonable commercial practices, such party wishes to maintain confidential or is otherwise required to maintain confidential.

 

9.5              Subrogation. (a) With respect to any payments or distributions in cash, property, or other assets that any Term Loan Claimholder pays over to ABL Agent under the terms of this Agreement, such Term Loan Claimholders shall be subrogated to the rights of the ABL Claimholders, and (b) with respect to any payments or distributions in cash, property, or other assets that any ABL Claimholder pays over to Term Loan Agent under the terms of this Agreement, such ABL Claimholders shall be subrogated to the rights of the Term Loan Claimholders; provided, that (x) the Term Loan Claimholders shall not assert or enforce any such rights of subrogation they may acquire as a result of any payment hereunder until the Payment in Full of all ABL Priority Debt has occurred, and (y) the ABL Claimholders hereby agree not to assert or enforce any such rights of subrogation they may acquire as a result of any payment hereunder until the Payment in Full of all Term Loan Priority Debt has occurred.

 

9.6              SUBMISSION TO JURISDICTION; WAIVERS.

 

(a)               ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY ARISING OUT OF OR RELATING HERETO SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN ANY FEDERAL COURT SITING IN THE BOROUGH OF MANHATTAN. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY:

 

(i)                 ACCEPTS GENERALLY AND UNCONDITIONALLY THE JURISDICTION AND VENUE OF SUCH COURTS;

 

(ii)              waives, to the fullest extent permitted by law, any objection that it now has or hereafter might have to the laying of venue of any such litigation brought in any such court referred to above and WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;

 

(iii)            AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY registered mail, postage prepaid, or by personal service within or without the State of New York; AND

 

(iv)             AGREES THAT SERVICE AS PROVIDED IN CLAUSE (iii) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.

 

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(b)               EACH OF THE PARTIES HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER. 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 HEREOF, 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 ITS 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 (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 9.6(b) AND EXECUTED BY ABL AGENT AND TERM LOAN AGENT), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

9.7              Notices. All notices permitted or required under this Agreement shall be sent to Term Loan Agent and ABL Agent, as the case may be. Unless otherwise specifically provided herein, any notice hereunder shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service or electronic mail and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or electronic mail, or 5 Business Days after depositing it in the United States mail with postage prepaid and properly addressed. For the purposes hereof, the addresses of the parties hereto shall be the addresses set forth in the applicable Loan Documents or as may be designated by such party in a written notice to all of the other parties.

 

9.8              Further Assurances. ABL Agent and Term Loan Agent each agrees to take such further action and shall execute and deliver such additional documents and instruments (in recordable form, if requested) as ABL Agent or Term Loan Agent may reasonably request to effectuate the terms of and the Lien priorities contemplated by this Agreement, all at the expense of Borrowers (to the extent required under the ABL Credit Agreement or Term Loan Agreement, as applicable). In furtherance of the foregoing, (a) ABL Agent agrees that, if there is a Refinancing of the Term Loan Debt and if the agent or other representative of the holders of the indebtedness that Refinances the Term Loan Debt so requests, it will execute and deliver either an acknowledgement of the joinder of such agent or representative to this Agreement or an agreement with such agent or representative identical to this Agreement (subject to changing names of parties, documents and addresses, as appropriate) in favor of any such agent or representative, and (b) Term Loan Agent agrees that if there is a Refinancing of the ABL Debt and if the agent or other representative of the holders of the indebtedness that Refinances the ABL Debt so requests, it will execute and deliver either an acknowledgement of the joinder of such agent or representative to this Agreement or an agreement with such agent or representative identical to this Agreement (subject to changing names of parties, documents and addresses, as appropriate) in favor of any such agent or representative.

 

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9.9              APPLICABLE LAW. THIS AGREEMENT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT-OF-LAWS PRINCIPLES.

 

9.10          Binding on Successors and Assigns. This Agreement shall be binding upon ABL Agent, the ABL Claimholders, Term Loan Agent, the Term Loan Claimholders, and their respective successors and assigns.

 

9.11          Headings. Section 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.

 

9.12          Counterparts. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement or any document or instrument delivered in connection herewith by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement or such other document or instrument, as applicable.

 

9.13          No Third Party Beneficiaries. This Agreement and the rights and benefits hereof shall inure to the benefit of each of the parties hereto and its respective successors and assigns and shall inure to the benefit of and bind each of the ABL Claimholders and the Term Loan Claimholders. Except as provided in the preceding sentence, in no event shall any Grantor be a third party beneficiary of any other provision of this Agreement.

 

9.14          Provisions Solely to Define Relative Rights. The provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the ABL Claimholders, on the one hand, and the Term Loan Claimholders on the other hand. Except as set forth in Section 9.13, no Grantor or any other creditor thereof shall have any rights hereunder and no Grantor may rely on the terms hereof. Nothing in this Agreement shall impair, as between Grantors and the ABL Claimholders, or as between Grantors and the Term Loan Claimholders, the obligations of Grantors to pay principal, interest, fees and other amounts as provided in the ABL Documents and the Term Loan Documents, respectively. Nothing in this Agreement shall create vary or modify the rights or duties of the ABL Claimholders, inter se, under the ABL Documents or the rights or duties of the Term Loan Claimholders, inter se, under the Term Loan Documents.

 

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9.15          Integration. This Agreement reflects the entire understanding of the parties with respect to the subject matter hereof and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

 

9.16          Reciprocal Rights. The parties agree that the provisions of Sections 2.3, 2.4(b), 3, 4.2, 5.1, 5.2, 5.3, 5.4, 5.6, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9(b) and 9.5, including, as applicable, the defined terms referenced therein (but only to the extent used therein), which govern the relationship, and certain rights, restrictions, and agreements, between the ABL Claimholders with respect to the ABL Debt, on the one hand, and the Term Loan Claimholders with respect to the Term Loan Debt, on the other hand, (a) with respect to the ABL Priority Collateral shall, from and after the Payment in Full of ABL Priority Debt apply to and govern, mutatis mutandis, (i) until the Payment in Full of the Term Loan Priority Debt, the relationship between the Term Loan Claimholders as Priority Claimholders with respect to the Term Loan Priority Debt, on the one hand, and the ABL Claimholders as Junior Claimholders with respect to the Excess ABL Debt, on the other hand and (ii) after Payment in Full of the Term Loan Priority Debt, the relationship between the ABL Claimholders as Priority Claimholders with respect to the Excess ABL Debt, on the one hand, and the Term Loan Claimholders as Junior Claimholders with respect to the Excess Term Loan Debt, on the other hand and (b) with respect to the Term Loan Priority Collateral shall, from and after the Payment in Full of the Term Loan Priority Debt, apply to and govern, mutatis mutandis, (i) until the Payment in Full of the ABL Priority Debt, the relationship between the ABL Claimholders as Priority Claimholders with respect to the ABL Priority Debt, on the one hand, and the Term Loan Claimholders as Junior Claimholders with respect to the Excess Term Loan Debt, on the other hand and (ii) after Payment in Full of the ABL Priority Debt, the relationship between the Term Loan Claimholders as Priority Claimholders with respect to the Excess Term Loan Debt, on the one hand, and the ABL Claimholders as Junior Claimholders with respect to the Excess ABL Debt, on the other hand.

 

SECTION 10.  Term Claimholder Purchase Option.

 

10.1          The Term Loan Claimholders (acting in their individual capacity or through one or more affiliates) shall have the right, but not the obligation (each Term Loan Claimholder having a ratable right to make an offer to the purchase, with each Term Loan Claimholder’s right to purchase being automatically proportionately increased by the amount not purchased by another Term Loan Claimholder), upon not less than 5 Business Days prior written notice from (or on behalf of) such Term Loan Claimholders which, other than with respect to Monroe Capital (it being understood and agreed that Monroe Capital shall have the option to exercise the purchase option under this Section 10 at any time), cannot be exercised until twelve (12) months after the date of this Agreement unless a Triggering Event has occurred (a “Purchase Notice”) to ABL Agent to acquire from the ABL Claimholders at any time all (but not less than all) of the right, title, and interest of the ABL Claimholders in and to the ABL Priority Debt and the ABL Documents. The Purchase Notice, if given, shall be irrevocable.

 

10.2          If one or more Term Loan Claimholders elect to exercise their right under this Section 10, then not more than 5 Business Days after the receipt by ABL Agent of the Purchase Notice, the ABL Claimholders shall sell to the purchasing Term Loan Claimholders and the purchasing Term Loan Claimholders shall purchase from the ABL Claimholders, the ABL Priority Debt.

 

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10.3          On the date of such purchase and sale, the purchasing Term Loan Claimholders shall

 

(a)               pay to ABL Agent, for the benefit of the ABL Claimholders, as the purchase price therefor, the full amount of all the ABL Priority Debt then outstanding and unpaid, other than (i) indemnification obligations for which no claim or demand for payment has been made at such time, and (ii) ABL Priority Debt cash collateralized in accordance with clause (b) below,

 

(b)               furnish cash collateral to ABL Agent in such amounts as ABL Agent determines is reasonably necessary to secure ABL Agent and the ABL Claimholders in respect of (A) any issued and outstanding Letters of Credit (but not in any event in an amount greater than 103% of the aggregate undrawn amount of such Letters of Credit) (such cash collateral to be applied to the reimbursement of any drawing under a Letter of Credit as and when such drawing is paid and, if a Letter of Credit expires undrawn, the cash collateral held by ABL Agent in respect of such Letter of Credit shall be remitted to the Term Loan Agent for the benefit of the purchasing Term Loan Claimholders), (B) Bank Product Obligations (such cash collateral shall be applied to the reimbursement of the Bank Product Obligations as and when such obligations become due and payable and, at such time as all of the Bank Product Obligations are paid in full, the remaining cash collateral held by ABL Agent in respect of Bank Product Obligations shall be remitted to the Term Loan Agent for the benefit of the purchasing Term Loan Claimholders) and terminate and pay all obligations associated with an Derivatives Obligations (as defined in the ABL Credit Agreement), and (C) any asserted or threatened (in writing) claims, demands, actions, suits, proceedings, investigations, liabilities, fines, costs, penalties, or damages that are the subject of the indemnification provisions of the ABL Credit Agreement (such cash collateral shall be applied to the reimbursement of such obligations as and when they become due and payable and, at such time as all of such obligations are paid in full, the remaining cash collateral held by ABL Agent in respect of indemnification obligations shall be remitted to the Term Loan Agent for the benefit of the purchasing Term Loan Claimholders), and

 

(c)               to the extent not paid by the Grantors, pay to ABL Agent and the other ABL Claimholders the amount of all expenses to the extent earned or due and payable in accordance with the terms of ABL Documents against presentation of a documented invoice in reasonable detail (including, to the extent earned or due and payable in accordance with the terms of the ABL Documents, the reimbursement of attorneys’ fees, financial examination expenses, and appraisal fees, but excluding, solely for purposes of this Section 10.3(c), any amount in respect of indemnification or reimbursement rights under any ABL Documents not yet due and payable); provided that if all or any portion of the amount paid to ABL Agent and the other ABL Claimholders in respect of any such indemnification or reimbursement right under any ABL Documents exceeds the amount in fact required to be paid to ABL Agent and/or the other ABL Claimholders in respect of any such indemnification or reimbursement right under any ABL Documents, whether pursuant to a Final Order, a final settlement agreement or otherwise, ABL Agent and the other ABL Claimholders shall pay to Term Loan Agent (whether for its own account and/or the account of other Term Loan Claimholders, as determined by Term Loan Agent) an amount equal to such excess).

 

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10.4          Such purchase price and cash collateral shall be remitted by wire transfer of federal funds to such bank account of ABL Agent as ABL Agent may designate in writing to Term Loan Agent for such purpose. Interest shall be calculated to but excluding the Business Day on which such purchase and sale shall occur if the amounts so paid by the purchasing Term Loan Claimholders to the bank account designated by ABL Agent are received in such bank account prior to 2:00 p.m., New York, New York time, and interest shall be calculated to and including such Business Day if the amounts so paid by the purchasing Term Loan Claimholders to the bank account designated by ABL Agent are received in such bank account later than 2:00 p.m., New York, New York time.

 

10.5          Such purchase shall be effected by the execution and delivery of an assignment and acceptance agreement substantially in the form attached hereto as Exhibit B.

 

10.6          In the event that any one or more of the Term Loan Claimholders exercises and consummates the purchase option set forth in this Section 10, (i) ABL Agent shall have the right, but not the obligation, to immediately resign under the ABL Credit Agreement, and (ii) the purchasing Term Loan Claimholders shall have the right, but not the obligation, to require ABL Agent to immediately resign under the ABL Credit Agreement. If ABL Agent shall resign under this Section 10.6, to the extent permitted by applicable law, upon the written request of Term Loan Agent (with all costs and expenses in connection therewith to be for the account of Term Loan Agent and to be paid by Grantors) ABL Agent shall, without recourse or warranty, take commercially reasonable steps to transfer the possession of the Collateral, if any, then in its possession to Term Loan Agent.

 

10.7          In the event that any one or more of the Term Loan Claimholders exercises and consummates the purchase option set forth in this Section 10, (i) the ABL Claimholders shall retain their indemnification and reimbursement rights under the ABL Credit Agreement for actions or other matters arising on or prior to the date of such purchase, and (ii) and in the event that, at the time of such purchase, there exists Excess ABL Debt, the consummation of such purchase option shall not, at the option of the Term Loan Claimholders, include (nor shall the purchase price be calculated with respect to) such Excess ABL Debt (clauses (i) and (ii), the “ABL Retained Interest”).

 

10.8          In the event that an ABL Retained Interest exists, each ABL Claimholder shall, at the request of the purchasing Term Loan Claimholders, execute an amendment to the ABL Credit Agreement acknowledging that such ABL Retained Interest consisting of Excess ABL Debt is a last-out tranche, payable after Payment in Full of all ABL Priority Debt and payment in full of all of the Term Loan Debt. Interest with respect to such ABL Retained Interest consisting of Excess ABL Debt shall continue to accrue and be payable in accordance with the terms of the ABL Documents, the ABL Retained Interest shall continue to be secured by the Collateral, and the ABL Retained Interest shall be paid (or cash collateralized, as applicable) in accordance with the terms of the ABL Credit Agreement and this Agreement. Each ABL Claimholder shall continue to have all rights and remedies of a lender under the ABL Credit Agreement and the other ABL Documents; provided, that no ABL Claimholder shall have any right to vote on or otherwise consent to any amendment, waiver, departure from, or other modification of any provision of any ABL Document except that the consent of ABL Agent shall be required for (i) those matters that require the agreement of all lenders under the ABL Credit Agreement to reduce interest or principal and (ii) matters in contravention of the provisions and priorities set forth in this Agreement with respect to the ABL Retained Interest.

 

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10.9        Notwithstanding anything set forth herein to the contrary, with respect to any cash management administered by ABL Agent, in the event that the Purchase Option is exercised by any Term Loan Claimholder (other than Monroe Capital), the parties agree that ABL Agent shall be permitted, if it elects in its sole discretion, to continue to provide cash management and Bank Products to the Loan Parties during a 90 day transition period while such cash management is transitioned to another financial institution. With respect to any deposit account control agreements, the ABL Agent agrees to deliver a “Notice of Termination” (or similar notice) to the depositary bank at which such deposit account is maintained indicating that such deposit account control agreement is terminated with respect to the ABL Agent except with respect to the ABL Retained Interest and Term Loan Agent is the controlling agent or similar term for purposes of the deposit account control agreement. All Bank Products offered by ABL Agent during such transition period shall be subject to customary bank product agreements and customary Liens encumbering deposits or other funds maintained with ABL Agent (including the right of set off) and which are within the general parameters customary in the banking industry.

 

58

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

  BBVA USA,
  as ABL Agent
     
  By: /s/ Jason Nichols
  Name:   Jason Nichols
  Its Authorized Signatory
     
 

MONROE CAPITAL MANAGEMENT

ADVISORS, LLC,

  as Term Loan Agent
     
  By: /s/ Alex Parmacek
  Name: Alex Parmacek
  Title: Vice President

 

Signature Page to Intercreditor Agreement

 

  ACKNOWLEDGED AND ACCEPTED BY:
   
 

QUEST RESOURCE HOLDING

CORPORATION

     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
     
 

QUEST RESOURCE MANAGEMENT

GROUP, LLC

     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
     
  QUEST SUSTAINABILITY SERVICES, INC.
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
     
 

LANDFILL DIVERSION INNOVATIONS,

L.L.C.

     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
     
  YOUCHANGE, INC.
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer

 

Signature Page to Intercreditor Agreement

 

  QUEST VERTIGENT CORPORATION
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
     
  QUEST VERTIGENT ONE, LLC
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer
     
  GLOBAL ALERTS, LLC
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer

 

Signature Page to Intercreditor Agreement

 

ACKNOWLEDGMENT AND AGREEMENT

 

Parent and each of its undersigned Subsidiaries each hereby acknowledges that is has received a copy of the Intercreditor Agreement to which this Acknowledgement is attached (as in effect on the date hereof, the “Initial Intercreditor Agreement”) and agrees to recognize all rights granted by the Initial Intercreditor Agreement to the ABL Claimholders and the Term Loan Claimholders, waives the provisions of Section 9-615(a) of the UCC in connection with the application of Proceeds of Collateral in accordance with the provisions of the Initial Intercreditor Agreement, agrees that it will not do any act in violation of any express restriction or prohibition in the Initial Intercreditor Agreement. Parent and each of its undersigned Subsidiaries each further acknowledge and agree that they are not an intended beneficiary or third party beneficiary under the Initial Intercreditor Agreement, as amended, restated, supplemented, or otherwise modified hereafter. Notwithstanding the foregoing, this Acknowledgment shall not apply to any amendment or modification of the Initial Intercreditor Agreement that (x) amends or modifies any of the covenants or obligations of any Grantor contained in the Initial Intercreditor Agreement in a manner adverse to such Grantor or (y) imposes additional covenants or contractual obligations on any Grantor. It is hereby agreed and understood that, by this Acknowledgement, Parent and each of Parent’s Subsidiaries is only bound by the Initial Intercreditor Agreement, and shall not be bound by any amendments, supplements or waivers thereto unless such Person has consented in writing to any such amendments, supplements or waivers.

 

ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST WRITTEN ABOVE:

 

  QUEST RESOURCE HOLDING CORPORATION
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer
     
  QUEST RESOURCE MANAGEMENT GROUP, LLC
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary and Treasurer

 

Acknowledgment Page to Intercreditor Agreement

 

  LANDFILL DIVERSION INNOVATIONS, L.L.C.
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  QUEST SUSTAINABILITY SERVICES, INC.
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  YOUCHANGE, INC.
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  QUEST VERTIGENT CORPORATION
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  QUEST VERTIGENT ONE, LLC
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer
     
  GLOBAL ALERTS, LLC
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Chief Financial Officer, Secretary, and Treasurer

 

Acknowledgment Page to Intercreditor Agreement

 

QUEST RESOURCE HOLDING CORPORATION

3481 Plano Parkway

The Colony, Texas 75056

 

October 19, 2020

 

 

Re:Letter Agreement

 

Ladies and Gentlemen:

 

We refer to (a) that certain Credit Agreement, dated as of October 19, 2020, by and among Quest Resource Holding Corporation (together with its Affiliates, the “Company”), as Holdings, Quest Resource Management Group, LLC and certain of its affiliates, as Borrowers, Monroe Capital Management Advisors, LLC, a Delaware limited liability company, as Administrative Agent and Lead Arranger and the lenders party thereto (as amended, restated, supplemented, refinanced, extended or otherwise modified from time to time, the “Credit Agreement”) and (b) those certain Warrants to Purchase Shares of Common Stock (each a “Warrant” and collectively, the “Warrants”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms either in the Credit Agreement in effect from time to time, and if the Credit Agreement is Paid in Full, then immediately prior to such Payment in Full, or the Warrants, as applicable.

 

This letter agreement (this “Letter Agreement”) confirms our agreement that, in connection with and effective as of your execution of the Credit Agreement and our issuance of the Warrants the Company shall grant the following contractual rights to the holders of the Warrants (the “Holders”):

 

1.Minimum Net Warrant Proceeds. On the date that is ten (10) days following the later to occur of (a) the Holders’ full exercise of the Warrants for all Warrant Shares issuable in connection therewith and (b) the second anniversary of the Closing Date (such date set forth in clause (i) or (ii), the “Measurement Date”), the Company shall make a payment in cash to the Holders, based on each Holder’s pro rata portion of the Warrant Shares issued to such Holder, in an aggregate amount equal to the greater of (i) $0 and (ii)(A) $1,000,000, minus (B) the Net Warrant Proceeds (if any) received by the Holders after the Closing Date but prior to the Measurement Date (the “Minimum Proceeds”); provided, that in order for the Holders to receive such Minimum Proceeds, the Holders agree to sell all Warrant Shares underlying the Warrants at the same time. The Company may make such payment either from cash on hand or from the net cash proceeds from the issuance of equity interests of the Company.

 

 

2.Net Warrant Proceeds. For purposes of this Letter Agreement, “Net Warrant Proceeds” shall mean (a) all cash proceeds received by the Holders solely in connection with the sale of Warrant Shares issued upon exercise of the Warrants, minus (b) all costs relating to the exercise of the Warrants or the sale or transfer of the applicable Warrant Shares exercisable in connection therewith, including, without limitation, payment of the Aggregate Exercise Price and any reasonable legal, accounting or other fees, expenses or commissions as a result of the exercise of the Warrants or the sale or transfer of the applicable Warrant Shares. For the avoidance of doubt, Net Warrant Proceeds shall not include or take into account any proceeds received by the Holders under the Credit Agreement, any Credit Document or otherwise in a Holder’s capacity as a lender to the Borrowers or any of their subsidiaries. Notwithstanding anything set forth herein to the contrary, in the event the sale of Warrant Shares issued upon exercise of the Warrants would result in Net Warrant Proceeds of less than the Minimum Proceeds, as determined by the Weighted Average Price of such Warrant Shares in an open market transaction for the ten (10) Trading Days prior to such contemplated sale, the Holders agree to grant the Company a right of first refusal to repurchase the Warrants (or the Warrant Shares if the Warrants have been exercised in full) for the Minimum Proceeds, before the Holders are permitted to sell the Warrant Shares.

 

3.Termination. The Letter Agreement, unless otherwise terminated prior to such date by mutual agreement of the Company and Holders, shall survive the termination of the Credit Agreement and the Warrants until all required payments by the Company to Holders pursuant to Section 1 hereof have been validly paid in full. 

 

4.Breach By Affiliates. The Company shall be fully responsible and liable for any breach of this Agreement by its Affiliates as though such Affiliates were parties hereto and directly undertook the same obligations as the Company hereunder.

 

5.Assignment. A Holder may assign its rights under this Letter Agreement, in full or in part, (i) in connection with the assignment to a third party of any right, title or interest in any portion of the Warrants or Warrant Shares or (ii) to any Affiliate of Holder; provided, that such Holder provides the Company with written notice of such assignment. For clarity, multiple separate assignments of separate rights under this Letter Agreement to different third parties or Affiliates of a Holder are permitted. The Company may not assign or transfer any of its rights or obligations under this Letter Agreement without the prior written consent of Holders. Any purported assignment in violation of this Section 5 shall be void.

 

 

6.Governing Law; Jurisdiction. This Letter Agreement shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Letter Agreement shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to the Company at the address set forth in the Warrants or such other address as the Company subsequently delivers to the Holders and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude the Holders from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holders, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court ruling in favor of the Holders. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THE LETTER AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

7.Miscellaneous. Upon execution of this Letter Agreement, the terms of this Letter Agreement shall be binding upon, and in full force and effect, against the Company. In the event of a conflict between the provisions of this Letter Agreement and the Warrants or the Credit Agreement, the provisions of this Letter Agreement shall control. This Letter Agreement may be executed in counterparts, each of which shall be an original, with the same effect as if the signatures were upon the same instrument.

 

8.Severability; Construction. If any provision of this Letter Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Letter Agreement so long as this Letter Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s). This Letter Agreement shall be deemed to be jointly drafted by the Company and Holders and shall not be construed against any person as the drafter hereof.

 

 

9.Confidentiality. The Company and Holders each acknowledge that the existence and the terms of this Letter Agreement and any oral or written information exchanged between the parties in connection with the preparation and performance this Letter Agreement are regarded as confidential information. Each party hereto shall maintain the confidentiality of all such confidential information, and without obtaining the written consent of the other parties hereto, shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder.

 

[Remainder of Page Intentionally Left Blank]

 

 

  Very truly yours,
     
  QUEST RESOURCE HOLDING CORPORATION
     
  By: /s/ Laurie L. Latham
  Name: Laurie L. Latham
  Title: Senior Vice President, Chief Financial Officer, Secretary, and Treasurer

 

[Signature Page to Warrant Side Letter]

 

 

   

 

Quest Resource Holding Corporation

Acquires Green Remedies, Strengthening Presence in Strategic Markets

 

The Colony, TX, October 20, 2020 - Quest Resource Holding Corporation (Nasdaq: QRHC) ("Quest"), a national leader in environmental waste and recycling services, announced today that it has acquired the assets of Green Remedies Waste and Recycling Inc., a leading provider of independent environmental services located in Elon, NC. The acquisition is part of Quest’s wholly owned subsidiary, Quest Resource Management Group, and will strengthen its presence across key markets, particularly the multi-family housing segment.

 

The total consideration of the acquisition at close is $16.2 million, with approximately two thirds of the consideration to be paid in cash at closing and the remaining third to be delivered through a combination of common stock and a subordinated seller note. An additional 4% to 14% of consideration may be earned through an earn out tied to future performance over the next three years. During the Trailing Twelve Month (TTM) period ending on June 30, 2020, Green Remedies is estimated to have produced net income of $2.5 million and Adjusted EBITDA of $2.8 million, after adjustments for depreciation of $270,000 and interest expense of $30,000. The transaction is expected to be accretive on a free cash flow per share basis.

 

Quest President and Chief Executive Officer S. Ray Hatch, said, "Green Remedies will add incremental volume to our existing market verticals and will establish a significant beachhead in the multi-family housing market. Like Quest, they provide waste and recycling services on an “asset-light” basis. They have built very strong customer loyalty and have an impressively strong market presence with national and regional companies headquartered in the Southeastern United States. We expect to integrate their vendor network, add their customers to our client management and finance systems, and bring additional value for our entire base of combined customers. We look forward to working with Green Remedies’ very successful and entrepreneurial team as we integrate their organization into Quest."

 

Alan Allred, Green Remedies’ President and Chief Executive Officer, said, "Taking care of our customers is our priority and has been the key to our success. Quest’s strong reputation for providing exceptional service was an important consideration in our decision to join forces. By joining Quest, our customers gain access to our combined larger national, regional, and local vendor network and broader scope of services with superb customer support capabilities. I am excited to continue to serve our customers’ needs as part of the Quest management team.”

 

Dan Friedberg, Quest’s Board Chairman added, “Quest is committed to growing long-term shareholder value and to supporting our customers’ sustainability goals. Thanks to the efforts of our entire team, we have built a highly scalable platform that can broadly support the needs of our customers. Our plan continues to focus on growing our existing customer relationships, adding customers organically, and acquiring synergistic, customer-oriented companies; all further enabling us to grow our capabilities, profits, and service levels.”

 

 

The acquisition will be financed primarily from a term loan arranged by Monroe Capital with $11.5 million drawn at closing. In addition, Quest potentially has access to more than $50 million in additional term debt financing, subject to the terms and conditions of the Monroe Capital term loan agreement, through a combination of a delayed draw term loan and an accordion facility to support Quest’s growth plans.

 

Additional details of the Transaction will be available in the Company’s Form 8-K, which will be filed with the Securities and Exchange Commission.

 

Use of Non-GAAP Financial Measure

This press release includes EBITDA which is a non-GAAP financial measure. EBITDA is calculated as earnings before interest, taxes, depreciation and amortization. The Company believes this non-GAAP measure provides useful information to shareholders regarding the business of Green Remedies.

 

About Green Remedies Waste and Recycling

Green Remedies is an environmental and waste expert providing independent national solid waste and recycling services, including risk management support, and developing environmentally responsible solutions for our clients. Green Remedies is dedicated to superior customer support and service. For more information visit www.GreenRemediesWaste.com.

 

About Quest Resource Holding Corporation

Quest is a provider of waste and recycling services to customers from across multiple industry sectors that are typically larger, multi-location businesses across the United States and Canada. In addition, Quest’s programs and services enable customers to address their environmental and sustainability goals and responsibilities. Quest provides information that tracks and reports the environmental results of Quest’s services, provides actionable data to improve business operations, and enables customers to address their environmental and sustainability goals and responsibilities. For more information visit www.QuestRMG.com.

 

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which provides a "safe harbor" for such statements in certain circumstances. The forward-looking statements include, but are not limited to, our belief we have operations in place to sustainably support profitability while consistently providing excellent customer service; our belief that our outlook for growth from our existing customer base remains strong and our pipeline of new business is growing; our belief that our efforts have positioned us well to grow gross profit; our expectation profitability will continue to grow at an even faster pace, at our current business levels, coupled with the operating leverage inherent in our business model; and our belief that the financial measures contained in this press release facilitate operating performance comparisons from period to period. These statements are based on our current expectations, estimates, projections, beliefs, and assumptions. Such statements involve significant risks and uncertainties. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties that may apply to our business and the ownership of our securities. Our forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required by law to do so.

 

Investor Relations Contact:

Three Part Advisors, LLC - Joe Noyons 817.778.8424

 

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